_English Translation_ FUBON INSURANCE CO._ LTD. FINANCIAL by linzhengnd

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									                   (English Translation)

             FUBON INSURANCE CO., LTD.
              FINANCIAL STATEMENTS
             DECEMBER 31, 2004 AND 2003

     (with Independent Accountants’ Report Thereon)




Address: No. 237, Sec. 1, Chien Kuo S. Road, Taipei, Taiwan

               Telephone: 886-2-2706-7890
                                    (English Translation)

                             FUBON INSURANCE CO., LTD.


                             DECEMBER 31, 2004 AND 2003


                                  Contents                    Page

    Independent Accountants’ Report                             1
    Balance Sheets                                             2–3
    Statements of Income                                        4
    Statements of Changes in Stockholders’ Equity               5
    Statements of Cash Flows                                    6
    Notes to Financial Statements
  I. Organization                                               7
 II. Summary of Significant Accounting Policies               7 – 11
 III. Reason and Effect of Changes In Accounting Principles     11
 IV. Details of Major Accounts                                12 – 28
 V. Related Party Transactions and Balances                   28 – 33
 VI. Pledged Assets                                             33
VII. Significant Commitments and Contingencies                  34
VIII. Significant Disaster Loss                                 34
 IX. Significant Subsequent Events                              34
 X. Notes To Disclosure Events                                  34
 XI. Segment Financial Information Disclosure                   34
 XII. Other                                                   35 ~ 49
                              INDEPENDENT ACCOUNTANTS’ REPORT

The Board of Directors
Fubon Insurance Co., Ltd.

We have audited the accompanying balance sheets of Fubon Insurance Co., Ltd. as of December 31,
2004 and 2003 and the related statements of income, changes in stockholders’ equity and cash flows
for the years ended. These financial statements are the responsibility of the Company’s management.
Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards and “Rules
Governing Certified Public Accountants’ Certification of Financial Statements” of 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, based on our audits, the financial statements referred to above present fairly, in all
material respects, the financial position of Fubon Insurance Co., Ltd. as of December 31,2004 and
2003, and the results of its operations and cash flows for the years ended in conformity with the
“Regulations Governing the Preparation of Financial Statements by Security Issuers”, “Principles of
Preparing Financial Reports for Non-Life Insurance Companies” and the generally accepted
accounting principles in the Republic of China.




Taipei, Taiwan, R.O.C.
January 26, 2005


                                                   Notice to Readers

The accompanying financial statements are intended only to present the financial position, results of operations and cash
flows in accordance with the 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.


                                                          -1-
                                                 (English Translation)
                                          FUBON INSURANCE CO., LTD.
                                                 BALANCE SHEETS
                                          DECEMBER 31 , 2004 AND 2003
                                   (Expressed in Thousands of New Taiwan Dollars)

                                                                                       2004               2003
ASSETS
Current Assets
 Cash and cash equivalents (Note II, IV.1 & V)                                   $      8,848,008     $   11,086,798
 Short-term investments - net (Note II, IV.2 & V)                                      11,862,996         12,002,443
 Notes receivable - net (Note II& IV.3)                                                   968,069            925,718
 Accrued income                                                                           260,376            230,074
 Premiums receivable - net (Note II, IV.3 & V)                                          2,983,750          2,692,180
 Claims recoverable (Note II& IV.4)                                                     1,203,483          1,325,203
 Due from other insurance companies (Note II & IV.5)                                      494,116          1,034,298
 Other receivable (NoteV)                                                                 623,050            470,207
 Deferred income tax assets - current (Note II & IV.18)                                    25,335              5,551
 Other financial asset - current (Note II& X.2)                                            44,302             44,594
 Prepayments                                                                               63,996             90,760
 Other current assets                                                                       8,825              9,090
     Total Current Assets                                                              27,386,306         29,916,916

Long-Term Investments (NoteII, IV.6 & IV.7)
 Long-term equity investment - equity method                                              158,496            168,755
 Long-term equity investment - cost method                                              5,867,998          8,228,510
 Long-term bonds investment                                                            14,994,118          9,436,857
 Investment in real estate                                                              6,279,122          6,341,695
    Total Long-Term Investments                                                        27,299,734         24,175,817

Property and Equipment (Note II & IV.7)
Cost
Land                                                                                      714,953            713,459
Buildings and equipment                                                                 1,208,912          1,204,437
Transportation equipment                                                                   62,208             69,110
Miscellaneous equipment                                                                   520,695            579,178
                                                                                        2,506,768          2,566,184
Less:Accumulated depreciation                                                    (        795,487)    (      758,674)
Leased asset - net                                                                          2,297              2,939
Construction-in-progress                                                                        -              1,260
Net Property and Equipment                                                              1,713,578          1,811,709
Intangible Asset
  Goodwill (Note II & IV.8)                                                                   8,836          12,049
    Net Intangible Asset                                                                      8,836          12,049
Other Assets
 Prepaid pension cost (Note II & IV.10)                                                    87,756             98,150
 Guarantee deposits (Note IV.1 & IV.6)                                                  3,691,165          3,632,205
 Overdue receivable (Note IV.1 & IV.9)                                                          -                  -
 Contributed reinsurance liability reserve                                                  6,404              6,538
 Other deferred charges (Note II)                                                          18,576             41,668
    Total Other Assets                                                                  3,803,901          3,778,561
TOTAL ASSETS                                                                     $     60,212,355     $   59,695,052

                          The accompanying notes are an integral part of the financial statements.
                                                           -2-
                                                     (English Translation)
                                              FUBON INSURANCE CO., LTD.
                                                     BALANCE SHEETS
                                              DECEMBER 31, 2004 AND 2003
                                       (Expressed in Thousands of New Taiwan Dollars)



                                                                                               2004               2003
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
 Repurchase bonds payable (Note II & IV.11)                                               $    3,844,538     $    3,147,809
 Commission payable                                                                              535,766            487,014
 Notes payable                                                                                     5,689                   -
 Indemnity payments payable (Note II & IV.12)                                                     72,736            116,774
 Reinsurance indemnity payables                                                                         -           131,461
 Reinsurance payable                                                                           1,960,620          1,492,200
 Due to other insurance companies                                                                614,330            941,965
 Other payables (Note V)                                                                       1,196,956          1,100,211
 Advanced receipts                                                                             1,300,199          1,080,246
 Other current payable                                                                           127,623            109,108
    Total Current Liabilities                                                                  9,658,457          8,606,788

Long-Term Liabilities
 Reserve for land value increment tax                                                               9,263             9,263
 Long-term capital lease liabilities                                                                     -            1,700
Total Long-Term Liabilities                                                                         9,263            10,963

Reserves (Note IV.13)
 Unearned premium reserve                                                                      9,322,698          8,600,310
 Other liability reserve                                                                         751,791            706,933
 Special claim reserve                                                                         7,157,004          6,968,369
 Claims reserve                                                                                3,007,849          2,287,182
    Total Reserves                                                                            20,239,342         18,562,794

Other Liabilities
 Deferred income tax liabilities - non current (Note II & IV.18)                                  21,939             24,537
 Guarantee deposits received                                                                      46,351             35,210
 Reinsurance liability reserve received                                                          620,661            612,732
    Total Other Liabilities                                                                      688,951            672,479
Total Liabilities                                                                             30,596,013         27,853,024

Stockholders' Equity
 Capital stock (Note IV.14)                                                                   20,000,000         20,000,000
 Capital reduction awaiting government approval (Note IV.15)                              (    1,821,604)                  -
 Capital surplus-additional paid-in capital (Note IV.16)                                       8,318,907          9,152,521
 Legal reserve (Note IV.18)                                                                      389,264            163,836
 Special reserve (Note IV.18)                                                                    515,838            787,230
 Accumulated earnings (Note IV.18)                                                             2,405,230          2,254,279
 Unrealized loss on long-term equity investments (Note II & IV.6)                         (      191,293)    (      515,838)
    Total Stockholders' Equity                                                                29,616,342         31,842,028
COMMITMENTS AND CONTINGENCIES (Note VII)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                $   60,212,355     $   59,695,052

                              The accompanying notes are an integral part of the financial statements.
                                                               -3-
                                                      (English Translation)
                                             FUBON INSURANCE CO., LTD.
                                               STATEMENTS OF INCOME
                                  FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
                                      (Expressed in Thousands of New Taiwan Dollars)

                                                                                                  2004                   2003

Operating Revenues
 Interest income (Note V)                                                                 $            980,400     $            836,751
 Gross written premium (Note V)                                                                     24,356,166               23,204,212
 Reinsurance commission income                                                                       1,970,579                1,824,623
 Recovered reinsurance claims                                                                        5,102,641                4,645,911
 Recovered policyholders' reserve                                                                    8,600,310                8,374,711
 Recovered special reserve                                                                             605,740                  490,352
 Recovered claims reserve                                                                              438,737                  129,893
 Income from future contract                                                                               263                         -
 Investment income                                                                                   1,372,926                  937,616
 Income from real estate investment (Note V)                                                           295,226                  222,474
 Other operating income                                                                                  6,163                    2,169
    Total Revenue                                                                                   43,729,151               40,668,712
Operating Costs
 Interest expenses (Note V)                                                                             37,994                   53,544
 Ceded reinsurance premium                                                                          11,742,789               12,035,797
 Commission expenses (Note V)                                                                        2,304,696                1,945,347
 Benefits and claims                                                                                11,968,797               10,155,140
 Policyholders' reserve                                                                              9,405,978                8,837,843
 Special reserve                                                                                       794,375                  996,408
 Stability fund                                                                                         46,789                   44,612
 Claims reserve                                                                                        473,693                  438,737
 Loss from investments accounted under equity-method (Note IV.5)                                        10,260                    7,322
 Other operating costs                                                                                 314,979                  197,246
    Total Cost                                                                                      37,100,350               34,711,996
Gross Profit                                                                                         6,628,801                5,956,716
Operating Expenses (Notes V and X.1)
 Operating expenses                                                                                  3,222,076               3,364,440
 Administrative expenses                                                                               503,898                 466,077
 Training expenses                                                                                       9,352                   6,360
    Total Operating Expenses                                                                         3,735,326               3,836,877
Operating Income (Loss)                                                                              2,893,475               2,119,839
Non-Operating Income
 Gain on disposal of fixed assets                                                                          4,990                 8,139
 Exchange gain                                                                                                 -               156,789
 Miscellaneous income                                                                                     58,865               114,057
    Total Non-Operating Income                                                                            63,855               278,985
Non-Operating Expenses
 Loss on disposal of fixed assets                                                                          187                      37
 Exchange loss                                                                                          90,443                        -
 Miscellaneous expenses                                                                                 80,137                  58,800
    Total Non-Operating Expenses                                                                       170,767                  58,837
Income Before Income Tax                                                                             2,786,563               2,339,987
Income Tax (Expense) Benefit (Note II and IV.18)                                          (           312,811)     (            85,708)
Net Income                                                                                $          2,473,752     $          2,254,279

                                                                                           Before      After        Before      After
                                                                                            Tax        Tax           Tax        Tax
Primary earnings per share (in New Taiwan dollars) (Note IV.19)                           $ 1.39      $ 1.23       $ 1.17      $ 1.13



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

                                                                -4-
                                                                                                       (English Translation)
                                                                                                FUBON INSURANCE CO., LTD.
                                                                                   STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                                                                     FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
                                                                                         (Expressed in Thousands of New Taiwan Dollars)



                                                                                                                                       Retained Earnings
                                                                                      Capital
                                                                                    reduction                                                                              Unrealized Loss
                                                                                     awaiting                                                                              on Long-Term
                                                                                   government         Capital                               Special       Unappropriated       Equity
                                                               Capital Stock        approval          Surplus       Legal Reserve           Reserve         Earnings        Investments           Total

Balance, January 1, 2003                                       $ 20,000,000    $              -   $ 9,152,521       $         28,347    $    255,120      $   1,354,895    ($    787,230)    $   30,003,653
Allocation for legal reserve                                              -                   -                 -         135,489                     -   (     135,489)                -                 -
Allocation for special reserve                                            -                   -                 -                 -          532,110      (     532,110)                -                 -
Cash dividend                                                             -                   -                 -                 -                   -   (     687,296)                     (     687,296)
Unrealized valuation losses on
 long-term equity investments                                             -                   -                 -                 -                   -               -          271,392           271,392
Net income from January 1, 2003 to December, 2003                         -                   -                 -                 -                   -       2,254,279                 -         2,254,279
Balance, December 31, 2003                                     $ 20,000,000    $              -   $ 9,152,521       $     163,836       $    787,230      $   2,254,279    ($    515,838)    $   31,842,028


Balance, January 1, 2004                                       $ 20,000,000    $              -   $ 9,152,521       $     163,836       $    787,230      $   2,254,279    ($    515,838)    $   31,842,028
Allocation for legal reserve                                              -                   -                 -         225,428                     -   (     225,428)                -                 -
Recovery of special reserve                                               -                   -                 -                 -     (    271,392)           271,392                 -                 -
Cash dividend                                                             -                   -                 -                 -                   -   (   2,289,240)                -    (   2,289,240)
Allocation for employee's bonus                                           -                   -                 -                 -                   -   (      11,003)                -    (      11,003)
Recovery of unrealized valuation
 losses on long-term equity investments                                   -                   -                 -                 -                   -               -          324,545           324,545
Cancelled treasury stock of Fubon Financial Holding Co., Ltd
(Note IV.15)                                                              -    (    1,821,604)    (    833,614)                                           (      68,522)                     (   2,723,740)
Net income from January 1, 2004 to December 31, 2004                      -                   -                 -                 -                   -       2,473,752                 -         2,473,752
Balance, December 31, 2004                                     $ 20,000,000    ($ 1,821,604)      $ 8,318,907       $     389,264       $    515,838      $   2,405,230    ($    191,293)    $   29,616,342


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




                                                                                                                        -5-
                                                            (English Translation)
                                                    FUBON INSURANCE CO., LTD.
                                                   STATEMENTS OF CASH FLOWS
                                         FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
                                             (Expressed in Thousands of New Taiwan Dollars)

                                                                                                                2004              2003
Cash flows from operating activities
Net income                                                                                             $         2,473,752    $    2,254,279
Adjustments to reconcile net income to net cash
 provided by (used in) operating activities:
 Provision for bad debts and operating losses                                                                       62,639           198,543
 Depreciation                                                                                                      178,747           176,288
 Amortization                                                                                                       44,268            39,711
 (Gain) on disposal of fixed assets and disposal real estate investment                                (             4,417)   (        8,102)
 (Gain)loss on disposal long-term investment                                                           (            68,102)          180,434
 Loss from investments accounted under equity-method                                                                10,260             7,322
 Amortization of premium on long-term bonds investment                                                              87,622           106,177
 Stealage losses                                                                                                         3               294
 Gain from recovery of short-term investment                                                                             -    (     892,763)
 Decrease in short-term investments                                                                                139,447         1,755,627
 Increase in notes receivable                                                                          (            10,702)   (       65,396)
 (Increase) decrease in accrued income                                                                 (            30,302)            2,672
 Increase in premium receivable                                                                        (          288,934)    (     494,935)
 Decrease in reinsurance recoverable                                                                               121,720           568,655
 Decrease in due from other insurance companies                                                                    158,059           968,549
 Increase in other receivables                                                                         (          152,843)    (       89,423)
 Decrease (increase) in other financial assets - current                                                               292    (       16,811)
 Decrease (increase) in prepayments                                                                                 26,764    (       21,526)
 (Increase) in deferred income tax assets - current                                                    (            19,784)           17,894
 Increase in other current assets                                                                                      265            12,724
 Decrease (increase) prepayments for pension benefits                                                               10,394    (        7,302)
 (Increase) in overdue receivable                                                                      (            42,436)   (       40,721)
 (Increase) decrease in deferred income tax liabilities - non current                                  (             2,598)           24,537
 Increase in notes payable                                                                                           5,689                 -
 Increase in commission payable                                                                                     48,752           119,482
 (Decrease) in indemnity payments payable                                                              (            44,038)   (       23,831)
 Decrease in reinsurance indemnity payable                                                             (          131,461)    (        6,024)
 Increase (decrease) in reinsurance payable                                                                        468,420    (     284,023)
 Increase in other payables                                                                                         96,745            58,120
 Increase (decrease) in advanced receipts                                                                          219,953    (     152,894)
 Increase in other current liabilities                                                                              18,515             3,136
 (Decrease) in non-current income tax assets                                                                             -            75,011
 Increase in reserves for operations                                                                             1,676,548         1,368,560
 Net cash flows provided by operating activities                                                                 5,053,237         5,834,264
Cash flows from investing activities
 Purchase of property and equipment                                                                    (            21,899)   (      49,119)
 Sale of property and equipment                                                                                     14,447           27,252
 Purchase of real estate                                                                               (            12,704)   (     229,000)
 Sale of real estate                                                                                                 6,527                -
 Purchase of long-term equity bonds and investments                                                    (        10,030,017)   (   9,449,056)
 Sale of long-term equity bonds and investments                                                                  3,827,074        1,823,683
 Matured redemption of long-term bond investments                                                                        -        1,946,212
 Liquidating dividend revenue of long-term investments                                                                   -           87,730
 Repayment of shares from cancellation of capital stock of the invested companies                                        -           33,333
 Unrealized exchang valuation gain on long-term investment                                                         533,934           49,665
 (Increase) decrease in refundable deposits                                                            (             5,416)           4,403
 Decrease in contributed reinsurance liabilities reserve                                                               134            1,222
 Increase in deferred charges                                                                          (            17,963)   (       7,410)
 Net cash used in investing activities                                                                 (         5,705,883)   (   5,761,085)
Cash flows from financing activities
 Increase (decrease) in repurchase bonds payable                                                                   696,729    (    2,449,353)
 Decrease in long-term lease obligations payable                                                       (             1,700)   (          987)
  Increase in guarantee deposits paid                                                                               11,141               927
 Increase in reinsurance liability reserve received                                                                  7,929            66,275
 Distribution of cash dividend                                                                         (         2,289,240)   (      687,296)
 Distribution of employee's bonus                                                                      (            11,003)                -
Net cash used in financing activities                                                                  (         1,586,144)   (    3,070,434)
Net decrease in cash and cash equivalents                                                              (         2,238,790)   (    2,997,255)
Cash and cash equivalents, beginning of year                                                                    11,086,798        14,084,053
Cash and cash equivalents, end of year                                                                 $         8,848,008    $   11,086,798
Supplemental disclosures of cash flow information
 Cash paid for interest during the year                                                                $            37,211    $       54,051
 Cash paid for income tax during the year                                                              $           305,355    $       67,519
Investing and financing activities not affecting cash flows
  Reclassification of long-term investment to short-term investment                                    $                 -    $    5,623,103
  Real estate investment to fixed asset                                                                $                 -    $       92,655
  Long-term liabilities - current portion                                                              $                 -    $          987

                                     The accompanying notes are an integral part of the financial statements.
                                                                 -6-
                                              (English Translation)
                                         FUBON INSURANCE CO., LTD.
                                       NOTES TO FINANCIAL STATEMENTS
                                          DECEMBER 31, 2004 AND 2003
                                 (Expressed in thousands of New Taiwan Dollars)

I.    ORGANIZATION

      Fubon Insurance Co., Ltd. (the old Fubon) was founded in 1961 and primarily engaged in the business of
      property and casualty insurance. The enactment of the Financial Holding Company Act in Taiwan in 2001
      provides an opportunity to create Fubon Group as the holding entity of the main financial services company
      that had been operating under the Fubon brand. Therefore, a new Fubon Insurance (the Company) was
      established on December 19, 2001. Substantially, all assets and liabilities as well as the related operations of
      the Old Fubon were transferred to the New Fubon, and the Old Fubon was renamed as Fubon Financial
      Holding Co., Ltd.

      On July 23, 2002, the Company obtained approval from the Ministry of Finance to decrease its capital by
      $10,000,000. The Board of Directors approved August 1, 2002 as the capital decrease date and completed the
      capital decrease registration process.

      The Company’s ultimate parent company was Fubon Financial Holding Co., Ltd. As of December 31, 2004
      and 2003, the Company had a total manpower of 2,265 and 2,196 employees, respectively.

II.   SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES

      The Company’s financial statements were prepared in conformity with the “Regulations Governing the
      Preparation of Financial Statements by Security Issuers”, “Principles of Preparing Financial Reports for
      Non-Life Insurance Companies” and R.O.C. generally accepted accounting principles. The significant
      accounting principles are as follows.

      Cash equivalents

      Cash equivalents include all highly liquid investments with an insignificant rate of risk and with original
      maturities of three months or less from the date of acquisition.

      Short-term investments

      Marketable securities are recorded at cost when acquired and are stated at the lower of aggregate cost or
      market value on the balance sheet date.

      Bonds and convertible bonds are recorded at cost when acquired and are stated at the lower of aggregate cost
      or aggregate market value on the balance sheet date.

      The market value for open-end funds is determined by the net asset value per share announced by the
      investment management companies.

      Beneficiary certificates are recorded at cost when acquired and are stated at the lower of aggregate cost or
      market value on the balance sheet date. The cost of beneficiary certificates sold is determined by the
      weighted-average cost method.

      Stock dividends from these investments are treated as an increase in the number of shares. The cost of
      marketable equity securities sold is determined by the weighted-average cost method.




                                                         -7-
                                              (English Translation)
                                         FUBON INSURANCE CO., LTD.
                                       NOTES TO FINANCIAL STATEMENTS
                                          DECEMBER 31, 2004 AND 2003
                                 (Expressed in thousands of New Taiwan Dollars)

II.   SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (CONT’D)

      The cost of bonds sold is determined by the weighted-average method and are stated at the lower of aggregate
      cost or aggregate market value on the balance sheet date.

      Allowance for doubtful accounts

      Allowance for doubtful accounts on notes receivable, premium receivable, receivable in arrears, policy loan
      and collateral loans is provided for based on the results of review of collectibility of the balances and the
      allowance provision rates prescribed by the relevant regulations and Tai Tsai-Hsuei No.0920454036 issued by
      the Ministry of Finance. In compliance with the Value-Added and Non-Value-Added Business Tax Law, the
      provision for writing off overdue loans or setting aside allowance for bad debts based on 3% of sales is
      discontinued if because the percentage of overdue loans of Fubon Insurance is lower than 1%.

      Other financial assets

      These are other accounts receivable stood for the certified ownership, cash receipt or the right of the other
      financial merchandise contract of the Company from other entity ,and the estimation based on the accrued
      principal.

      Bonds purchased/sold under agreements to resell/ repurchase

      These transactions are defined involving the sale or purchase of bonds coupled with an agreement to
      repurchase or resell the same or substantially identical bonds at a stated price. Any of these transaction is
      considered a financing transaction if the risk and reward are transferred to the seller.

      Under the financing criterion, the transaction under resale agreement is recorded at purchase price and is listed
      as an asset on the balance sheet. On the resale date, the difference between the purchase price and the resale
      price is accounted for as interest income.

      Under the financing criterion, the transaction under repurchase agreement is recorded at selling price and
      listed as a liability on the balance sheet. On repurchase date, the difference between the selling price and
      repurchase price is accounted for as interest expense.

      Long-term equity investments

      Long-term investments in listed companies are stated at the lower of cost or market value, if the Company
      owns less than 20% of the voting stock and lacks significant operational influence over the investees,
      Unrealized loss thereon is recorded as a reduction in shareholders’ equity. Long-term investments in non-listed
      companies, that represent less than 20% of the investee’s common stock ownership, are stated at cost.
      However, the investment is written down to reflect the market value and the resulting loss is recognized in the
      period of such a write-down if there is evidence indicating that a decline in the market value of such
      investment is other than temporary. Stock dividends are not recognized as income but treated as an increase in
      the number of shares held. Upon sale of long-term equity investments (accounted for under cost method), the
      difference between the weighted-average cost and selling price is accounted for as the resulting gain or loss.




                                                          -8-
                                               (English Translation)
                                          FUBON INSURANCE CO., LTD.
                                        NOTES TO FINANCIAL STATEMENTS
                                           DECEMBER 31, 2004 AND 2003
                                   (Expressed in thousands of New Taiwan Dollars)

II.   SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (CONT’D)

      In accordance with the regulations of the Securities and Futures Commission, the Company adopted the
      Statement of Financial Accounting Standards No.30 “Accounting for Treasury Stock” for the accounting of
      parent company’s stock starting from January 1,2002.The parent company’s stock included in the long-term
      investment portfolio is excluded in determining the lower of aggregate cost or market value, unless the market
      value of the parent company’s stock is lower than cost.

      Investments in equity securities are accounted for under the equity method if the Company owns 20% or more
      of the investee’s voting shares and has significant operational influence over the investee. If the investee
      increase or decrease their outstanding shares, the investment proportion will change, because the cooperator
      don’t subscribe to shares in accordance with the original investment proportion, then it will also
      cause the investment book value change. It will adjust additional paid-in capital and investment
      account.

      When the investee reduce the capital stock and repay the shares, the Company will recognize as the
      investment cost callback, calculate the cost per share again, and record the change of the shares.

      When the Company reclassified portion of long-term investments to short-term investments or portion of
      short-term investments to long-term investments. Realized investment loss will be recognized, if under market
      value.

      Long-term bond investments

      Long-term bond investments, which are intended to be held for over one year, are stated at cost. Premiums and
      discounts are amortized over the period when the Company intends to hold the debt investment. Additionally,
      overseas bonds are translated into NT dollars at regulated exchange rates. The resulting foreign exchange
      gains or losses are included in current operating results.

      When the Company reclassified portion of long-term investments to short-term investments or portion of
      short-term investments to long-term investments. Realized investment loss will be recognized, if under market
      value.

      Investments in real estate

      Investments in real estate are stated at cost when acquired. The cost of an investment in real estate and its
      corresponding revaluation surplus and accumulated depreciation are written off in the books upon retirement
      or disposal. The gain or loss resulting from disposal of an investment in real estate is classified as an operating
      gain or loss.

      Depreciation is calculated using the straight-line method based on the “Table of Estimated Useful Lives of
      Fixed Assets” published by the Executive Yuan of the ROC government (the “Government”).

      After the end of its estimated useful life, if a depreciable real estate is still in use, depreciation is determined
      according to its newly estimated remaining useful life.




                                                           -9-
                                              (English Translation)
                                         FUBON INSURANCE CO., LTD.
                                       NOTES TO FINANCIAL STATEMENTS
                                          DECEMBER 31, 2004 AND 2003
                                 (Expressed in thousands of New Taiwan Dollars)

II.   SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (CONT’D)

      Property and equipment

      Property and equipment are carried at cost or cost plus appreciation, less accumulated depreciation. Upon
      revaluation of land and depreciable assets, the net appreciation or increment is credited to capital surplus,
      which is used only for offset against any deficit and capitalization. Improvements costs and major renovation
      costs of properties are capitalized, while repairs and maintenance costs are expensed immediately.
      Depreciation on depreciable assets, leasing assets and idle assets is calculated using straight-line method, over
      the estimated useful lives. The useful adopted for leasehold improvements is the shorter of the lease period or
      economic useful life. When the economic useful lives have expired, property and equipment which are still in
      use are depreciated based on the residual value. The useful lives of property and equipment are as follows:

        Buildings                               3-55 years
        Transportation equipment                  5-6 years
        Computers and other equipments           3-8 years
      Any gains/(losses) on disposal of property and equipment are charged to non-operating revenue/(expense).

      Goodwill

      Goodwill resulting from the acquisition of the business and related assets and liabilities of Royalty Sun
      Affiliates Co., Ltd., Taiwan Branch and Hartford Fire Insurance Co., Ltd., Taiwan Branch is amortized on a
      straight-line basis over five years. Goodwill is evaluated at balance sheet date and any loss thereon is recorded
      as non-operating expense or extraordinary loss.

      Deferred charges

      The computer software is stated at cost and amortized over three years using the straight-line method.

      Insurance premium revenues and expenses

      Revenue from direct written premiums is recognized when the policy becomes effective and the policy related
      expenses are recognized as incurred.

      Revenue from reinsurance premiums assumed and reinsurance commission expenses are recognized upon
      assumption of reinsurance. Claim expenses for assumed reinsurance policies are recognized when notified to
      make claim payments. At the end of each quarter, adjustments are made on reserves based on past experience.

      Pension

      The Company adopted the Statement of Financial Accounting Standards (SFAS) No. 18 “Accounting for
      Pension Costs” which requires actuarial valuation of pension assets or obligations and pension cost. The
      excess amount between accumulated benefit obligation and pension plan assets state as minimum
      liability, and then disclose the correlated benefit obligation.




                                                         - 10 -
                                          (English Translation)
                                     FUBON INSURANCE CO., LTD.
                                   NOTES TO FINANCIAL STATEMENTS
                                      DECEMBER 31, 2004 AND 2003
                             (Expressed in thousands of New Taiwan Dollars)

II. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (CONT’D)

  Foreign currency transactions

  Foreign currency transactions are recorded at effective exchange rate when the transactions occur. Gains or
  losses resulting from settlement of foreign currency assets and liabilities at rates different from those at which
  these assets and liabilities are recorded are credited or charged to income in the period of actual conversion or
  settlement. At year-end, the balances of foreign currency assets and liabilities are restated based on year-end
  exchange rates and the resulting exchange gains or losses are credited or charged to current income.

  Income tax

  The Company adopted the FASB Statement No. 22 “Accounting for Income Tax” which requires the
  intra-period tax allocations in addition to computing current period income tax payable/(refund). Furthermore,
  it requires recognition of deferred income tax liabilities on future taxable temporary differences, and deferred
  income tax assets on future deductible temporary differences, prior year’s loss carry-forwards and investment
  tax credits. The realization of deferred income tax assets is further assessed and a valuation allowance if
  needed, is provided accordingly. Adjustment of prior year’s income tax expense is recorded as current period
  income tax expense in the year of adjustment.

  Deferred income tax assets and liabilities are classified as current or non-current in accordance with the
  underlying assets or liabilities. Deferred income taxes not relating to assets or liabilities are classified as
  current or non-current based on the length of the expected realizable or reversible period.

  The parent company of the Company, Fubon Finance Holding Co., Ltd., was selected as the tax payer to
  declare a combined final business income tax and an additional 10% surtax on undistributed earnings in
  compliance with Article 49 of the Finance Holding Company Law.

  The adjustment items of prior period tax are state as the tax expense adjustment item of this year.

  The taxpayer to declare a combined final business income tax and an additional 10% surtax on undistributed
  earnings stated as current period expense after the date of the earning distribution decided by shareholder's
  meeting.

  Derivatives

  (a) Foreign Exchange Forward Contracts

      Assets and liabilities covered by forward currency exchange contracts which are entered into for trading
      purposes, are recorded at specified rate at the contract due date. On settlement date, the realized foreign
      exchange gains or losses are included in the operating results. If the settlement date is after the balance
      sheet date, the forward currency exchange contracts are converted into New Taiwan dollars at local
      prevailing exchange rate on the balance sheet date, and the resulting unrealized foreign exchange gains or
      losses are included in the current operating results.

      The balances of receivables and payables arising from forward contracts and swap agreements are offset
      on the balance sheet date and the difference is shown either as an asset or liability.




                                                      - 11 -
                                              (English Translation)
                                         FUBON INSURANCE CO., LTD.
                                       NOTES TO FINANCIAL STATEMENTS
                                          DECEMBER 31, 2004 AND 2003
                                 (Expressed in thousands of New Taiwan Dollars)

II.   SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (CONT’D)

      (b) Futures

          Since there is no physical transfer of notional principals for trading interest swaps, only memo entries are
          made on the contract date. Interest revenue and expense of hedged items are adjusted by the differences in
          interest for non-trading interest swaps.

      (c) Option

          Premium is reflected as assets or liabilities when paid or collected. Differences in the market value of
          premium on the balance sheet date are stated as gain or loss. Gain or loss resulting from the exercise of
          options is recognized as transaction gain or loss.

      (d) Interest Swaps

          Since there is no physical transfer of notional principals for trading interest swaps, only memo entries are
          made on the contract date. Interest revenue and expense of hedged items are adjusted by differences in
          interest for non-trading interest swaps.

      (e) Cross Currency Swap

         The traction, cross currency swap (ccs), is not for trading, foreign currency assets and liabilities are
         recorded at spot exchange rate on the effective date. The balance between spot exchange rate on the
         effective date and forward interest rate are amortized and recorded at expense or income in the period of
         the contract. On the balance sheet date, the balance cause of the transaction stated at spot exchange rate
         recorded at the current period expense. The interest-calculated based on the period of the contract and
         interest rate is also recorded at the current period expense.

          The related accounts receivable and payable derived from foreign exchange forward contracts, interest
          swaps, and cross currency swap tractions will revise on the balance sheet date, and the balance recorded at
          the other financial asset-currents or other current liabilities.

      Marketable securities of debt-credit

      The Company carries on the debit and credit sides of the marketable securities through the stock exchange
      corporation. Fix the price and trade at competitive price borrow calculation formula, certificate of expenses,
      adopt day by day chasing pens, multiplied by the quantity of guarantee and multiplied by and made a deal rate
      again for the closing price of every day of marketable securities that is marked, to borrow certificate expenses
      total is by dealer in securities on return certificate receipts and payments after finishing.



III. REASON AND EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES:

      None.




                                                         - 12 -
                                              (English Translation)
                                         FUBON INSURANCE CO., LTD.
                                       NOTES TO FINANCIAL STATEMENTS
                                          DECEMBER 31, 2004 AND 2003
                                   (Expressed in thousands of New Taiwan Dollars)
IV. DETAILS OF MAJOR ACCOUNTS

     1. CASH AND CASH EQUIVALENTS

          The details of this account were as follows:

                                                                                2004               2003
          Cash on hand                                                  $              792     $          470
          Cash in bank                                                          2,663,579          2,566,733
          Marketable securities                                                 6,203,232          8,538,962
          Less: Statutory deposits                                      (            19,595)   (     19,367)
          Total                                                         $       8,848,008      $ 11,086,798



          The Company invested the structured deposit amounted to $300,000 in the year of 2004,the
          maturity date are on October,2007, November ,2008,and April,2009 respectively.. As the contract
          stated, if bank allows the depositor to terminate the transaction prior to its maturity date, bank
          shall cause to be fair market value of the transaction as at the early termination less any costs,
          losses and damages which are incurred by bank and its affiliates in discharging any such related
          hedge or other arrangement, all as determined by bank in its sole and absolute discretion.

          Marketable securities comprised of treasury, commercial paper and bankers’ acceptances due in
          three months from investment date. Certain time deposits were pledged as statutory deposits.
          Please refer to Note VI for further details.

     2.    SHORT-TERM INVESTMENTS – NET

           The details of this account were as follows:

                                                    2004                 2003

           Costs:                                   Cost                Cost
            Equity shares of listed company    $   5,898,263        $   5,240,413
            Beneficiary certificates               2,581,510            2,381,782
            Corporate bonds                         232,622                 50,954
            Government bonds                       1,817,216            3,503,586
            Bonds sold under agreement
             to repurchase                          350,416                      -
            Overseas investments                    982,969              825,708

             Total                             $ 11,862,996         $ 12,002,443
           Market value                        $ 12,958,929         $ 12,791,341




2.   SHORT-TERM INVESTMENTS – NET (CONT’D)
     Included in these short-term investments are Fubon’s discretionary investment trust fund intended for
                                                           - 13 -
                                      (English Translation)
                                 FUBON INSURANCE CO., LTD.
                               NOTES TO FINANCIAL STATEMENTS
                                  DECEMBER 31, 2004 AND 2003
                           (Expressed in thousands of New Taiwan Dollars)
investment purposes. This fund is currently being managed by Fubon Securities Investment Trust Co., Ltd.
under Fubon Insurance’s one-year Discretionary Investment Service Contract with Fubon Securities
Investment Trust Co., Ltd. The fund activities are limited to investment in securities being traded on the
Taiwan Stock Exchange and Taiwan OTC Exchange, securities being underwritten subject to approval by the
SFC, government bonds, corporate bonds and other investments approved by the SFC. Idle funds are placed in
bank deposits and others approved by the SFC. The investment manager is appointed and agreed by both
parties and operates in accordance with Article 146-1 of the Insurance Law. In accordance with this law, the
calculation of investment fund trustee’s compensation, fees and expenses, method and schedule of payment
conform to the following:

          -   Calculation of compensation, fees and expenses :
              Calculated daily based on the daily net asset value times the agreed fee ratio.
          -   Method of payment :
              Remittance to Fubon Securities Investment Trust Co., Ltd. from Fubon Insurance’s custodial
              institution.
          -   Schedule of payment :
          -   Every fifth working day of the following month.
The agreed fee ratio is 0.35% adjusted by operating performance. As of the year of 2004 and 2003, the market
values of these investments were as follows:

                                                                    2004               2003
Bank deposits                                                  $      61,983       $    119,421
Marketable securities                                                340,255            514,156
Investment in bonds sold under agreement to repurchase               532,164                  -
                                                               $      934,402      $    633,577


As of December 31, 2004, Fubon Insurance lent shares of the short-term investment were as follows:

Lent marketable securities                                   Shares                 Period
Mega                                                            23,000          93.8.20-94.2.18
Quanta Display Inc.                                               3,960         93.9.10-94.2.18


The investment revenue thereon was charged based on daily market value times at the contract stated
interesting rate during the loaning period.




                                                 - 14 -
                                           (English Translation)
                                      FUBON INSURANCE CO., LTD.
                                    NOTES TO FINANCIAL STATEMENTS
                                       DECEMBER 31, 2004 AND 2003
                              (Expressed in thousands of New Taiwan Dollars)

3.   NOTES AND PREMIUMS RECEIVABLES - NET

     A. Notes Receivable

                                                                      2004                  2003
     Notes receivable                                         $         980,424         $     969,721
     Less: Allowance for bad and doubtful debts               (          12,355)        (      44,003)
     Net                                                      $        968,069          $    925,718

     B. Premiums Receivable

                                                                      2004                  2003
     Premiums receivable                                      $       3,034,817         $   2,745,884
     Less: Allowance for bad and doubtful debts               (          51,067)        (       53,704)
     Net                                                      $       2,983,750         $   2,692,180


4.   REINSURANCE RECOVERY RECEIVABLES

     Reinsurance recovery receivables consisted of receivables from reinsurance loss recovery from other
     reinsurance companies. Certain reinsurance losses were recovered and those unrecovered amounted to
     $1,203,483 and $1,325,203 as of December 31, 2004 and 2003, respectively.

     The determined but not paid indemnity payments payable amounted to $98,772 and $56,655 as the year of
     2004 and 2003, respectively. The related recovery receivables have been recognized as deduction of
     indemnity payments payable. Please refer to Note IV.12 for details.

5.   ACCOUNTS RECEIVABLE WITH OTHER OTEHR INSURERS

                                                                         2004                      2003
     Accounts receivable to other insurers                        $          548,604        $      1,034,298
     Less: Allowance for bad and doubtful debts                   (           54,488)                      -
     Net                                                          $          494,116        $      1,034,298




                                                     - 15 -
                                                    (English Translation)
                                               FUBON INSURANCE CO., LTD.
                                             NOTES TO FINANCIAL STATEMENTS
                                                DECEMBER 31, 2004 AND 2003
                                      (Expressed in thousands of New Taiwan Dollars)

6.    LONG -TERM INVESTMENTS

     (1) LONG -TERM EQUITY INVESTMENTS:
                                                                   2004                       2003
                          Investee                            Amount         %           Amount       %
A.Accounted under the equity method:
   1. Fubon Venture Capital Co., Ltd.                    $         75,306    20.00   $      78,761    20.00
   2. Sino Star Venture Capital Co., Ltd.                          83,190    20.83          89,994    20.83
    Sub - total                                                   158,496                  168,755
B.Accounted under the cost method:
   1. WK Technology Fund                                           74,750     3.07          74,750     3.07
   2. Taiwan Aerospace Corp.                                       65,528     1.25          65,528     1.25
   3. China Trust Venture Capital                                  66,667    16.67          66,667    16.67
   4. China Alliance Venture Fund                                 120,000    16.67         120,000    16.67
   5. Win Win Venture Capital Co., Ltd.                                 -        -          37,100    11.25
   6. Teng Feng Venture Capital Investment Corp.                   50,000     4.67          50,000     4.67
   7. Kuo Chiao Venture Capital Investment Corp.                   60,000    10.00          60,000    10.00
   8. Hsin Yu Energy Development Co., Ltd.                         28,880     0.98          28,880     1.02
   9. FAT Venture Capital Co., Ltd.                                50,000     3.33          50,000     3.33
  10. Primus Technology Fund                                       54,000     9.43          54,000     9.43
  11. Yi Hua Venture Capital Investment Corp.                      30,000     2.44          30,000     2.44
  12. Taiwan High Speed Rail Co., Ltd.                          1,154,007     1.28       1,154,007     1.49
  13. Chin Tau Electronic Co., Ltd.                                85,000     1.70          85,000     1.70
  14. Tai Mao Development Co., Ltd.                                50,400     1.25          50,400     1.25
  15. Taiwan Fixed Network Co., Ltd.                            1,059,350     1.90       1,584,350     1.90
  16. Fu Yu Venture Capital Investment Co., Ltd.                   30,000     2.22          30,000     2.22
  17. China Technology Venture Capital Co., Ltd.                   12,500     3.73          12,500     3.73
  18. Arco Communication Co., Ltd.                                  9,480     0.25           9,480     0.25
  19. Trans Asia Telecommucations Co., Ltd.                        73,700     0.58          91,056     0.58
  20. Taiwan Da-Long Industrial Corp. Ltd.                         19,000     0.82          19,000     0.98
  21. Cashbox Co., Ltd.                                           214,804     5.83          48,375     0.83
  22. Wua Wei Venture Capital Co., Ltd.                            10,000     1.00          10,000     1.00
  23. Phalanx Biotech Corp.                                        25,969     3.00          15,000     3.13
  24. Pacific Venture Capital Co., Ltd.                            41,500     3.33          41,500     3.33
  25.MOTOTECH Co., Ltd.                                                 -        -           1,020     0.02
  26.Vision Venture Co., Ltd.                                      20,000     2.16               -        -
  27.TAIWAN HI-TECH Co., Ltd.                                       2,455     0.88           2,455     0.93
  28.Wellypower Optronics CO. LTD.                                 11,506     0.79          11,506     0.79
  29.Taiwan High Speed Rail Co., Ltd. Preferred Stock             350,610        -               -        -
    Sub-total                                                   3,770,106                3,802,574
C.Accounted under the Cost-market method:
   1. TECO Electric & Machinary Co., Ltd.                         663,275     1.19         663,275     1.21
   2. Sampo Corporation                                            21,564     0.08          21,564     0.10
   3. Kuoyang Const. Co., Ltd.                                     12,940     0.70          24,258     1.33
   4. Lite-On Technology Co., Ltd.                                347,703     0.22         296,967     0.16
   5. Chung Hwa Telecom Co., Ltd.                               1,228,703     0.27       1,196,970     0.26
   6. KGI Securities Co., Ltd.                                     15,000     0.04          15,000     0.07
    Sub-total                                                   2,289,185                2,218,034
 Less: Unrealized loss on long-term investments          (        191,293)           (     515,838)
    Sub-total                                                   2,097,892                1,702,196
    Fair value                                                  2,097,892                1,702,196
D.Invest Holding Co.
   1. Fubon Financial Holding Co., Ltd.                                 -        -       2,723,740     1.10
 Less: Unrealized loss on long-term investments                         -                        -
    Sub-total                                                           -                2,723,740
     Total                                               $      5,867,998            $   8,228,510




                                                             - 16 -
                                            (English Translation)
                                       FUBON INSURANCE CO., LTD.
                                     NOTES TO FINANCIAL STATEMENTS
                                        DECEMBER 31, 2004 AND 2003
                                 (Expressed in thousands of New Taiwan Dollars)


6.   Long–Term Investments (Cont’d)

     In the year of 2004 and 2003, the total investment loss from long-term equity investments based on investees’
     financial statements audited by other certified public accountants were $10,260 and $7,322, respectively.

     The Company recognized valuation losses on long-term equity investment because the repayment of shares
     from cancellation of capital stock of the invested companies, the list were as follows:
                                                       Repayment       Make up
                                                        of shares    for earning        Valuation
                                                          from           from            losses on
                                                       cancellation cancellation        long-term
                                        Investment      of capital    of capital           equity
            2004 Investee Co.               Cost          stock          stock          investment Note
     Win Win Venture Capital Co., Ltd.       37,100         6,678         -                  30,422    1
     Trans Asia Telecommucations
      Co., Ltd.                              91,056       17,356          -              -
     Taiwan Fixed Network Co., Ltd.       1,584,350      525,000          -              -
     Kuoyang Const. Co., Ltd.                24,258        -             11,318              11,318

                                                      Repayment       Make up
                                                       of shares     for earning     Valuation
                                                         from           from          losses on
                                                      cancellation   cancellation    long-term
                                         Investment    of capital     of capital        equity
             2003 Investee Co.              Cost         stock          stock        investment       Note
     Win Win Venture Capital Co., Ltd.      100,000       33,333          -               -            -

     According to the law of the financial holding company state that the Company have held the stock of the head
     company for three years, the Company have to cancelled treasury stock of Holding Co., Ltd. As the above
     mentioned, the Company have held the stock of Fubon Holding Co., Ltd. amounted to $2,723,740,and predict
     to cancelled treasury stock amounted to $1,821,604.It have been recognized to the related account. Please
     refer to Note IV.14 for details.

     As of the year of 2004, Fubon Insurance lent 360 million shares of Kuoyang Const. Co., Ltd., a listed
     company, for the period from September 28, 2004 to March 1, 2005. The investment revenue thereon was
     charged based on daily market value times 6.0% during the loaning period.

     Note1

     It is because Win Win Venture Capital Co., Ltd. was dismissed on November, 2004,the Company recognized
     permanent losses on long-term investment $30,422.




                                                       - 17 -
                                           (English Translation)
                                      FUBON INSURANCE CO., LTD.
                                    NOTES TO FINANCIAL STATEMENTS
                                       DECEMBER 31, 2004 AND 2003
                              (Expressed in thousands of New Taiwan Dollars)

6.   Long-Term Investments (Cont’d)

     (2) Long–Term Bonds Investment

                                                                         2004               2003
         Government Bonds                                        $        7,229,446    $    3,984,557
         Finacial Bonds                                                     800,000           500,000
         Corporate Bonds                                                  1,053,880                 -
         Foreign Corporate Bonds                                          6,262,051         5,271,428
         Foreign Treasury Bonds                                             936,741           766,232
         Structured Bonds                                                 2,294,040         2,443,136
         Sub-total                                                       18,576,158        12,965,353
         Less: Statutory deposits                                        (3,582,040)       (3,528,496)
         Total                                                   $       14,994,118    $    9,436,857


       In 2003, the Company reclassified portion of long-term government bonds to short-term investments
       amounting to $5,623,103. Realized investment loss was recognized $84,184, under market value.

       The Company invested in foreign structured bonds and recognized at cost. As the contract    mentioned, if
       the Company held structured bonds to maturity date, it will receive interest revenue based on the
       better profit between the promissory interest rate and the fluctuant portion of the linked price index on
       maturity date.

     (3) REAL ESTATE INVESTMENT

         The details of this account were as follows:

                                                                          2004             2003
          Cost
           Land                                                      $    3,503,929    $   3,554,652
           Reserve for land revaluation increment                            18,331           18,331
           Buildings                                                      3,358,731        3,304,280
          Sub-total                                                       6,880,991        6,877,263
          Accumulated depreciation
           Buildings                                                        601,869          535,568
          Sub - total                                                       601,869          535,568
          Net-book value                                             $    6,279,122    $   6,341,695

         Please refer to Note IV.7 “Property and Equipment” section for the details of insurance coverage of this
         real estate investment.




                                                        - 18 -
                                             (English Translation)
                                        FUBON INSURANCE CO., LTD.
                                      NOTES TO FINANCIAL STATEMENTS
                                         DECEMBER 31, 2004 AND 2003
                      (Expressed in thousands of New Taiwan Dollars)
6.    LONG–TERM INVESTMENTS (CONT’D)
      (3) REAL ESTATE INVESTMENT (CONT’D)

         As of the year of 2004, total rental income for the next five years were as follows:

      Years                                                              Amounts

      2005                                                       $          321,283
      2006                                                                  260,059
      2007                                                                  176,779
      2008                                                                  116,733
      2009                                                                   28,345
      Total                                                      $          903,199


7.    PROPERTY AND EQUIPMENT

      As the year of 2004 and 2003, the total insurance coverage for the real estate investment and property and
      equipment amounted to $3,043,267 and $2,523,204, respectively.
      As the year of 2004 and 2003, no real estate investment and property were used as collateral for loan or
      security to third parties.

8. GOODWILL

     The Company entered into transfer of business agreements with Royalty Sun Affiliates Co., Ltd, Taiwan Branch
     and Hartford Fire Insurance Co., Ltd. Taiwan Branch. Under these agreements, the Company paid $146,973 to
     acquire the business and net assets worth $130,908 and $16,065 worth of goodwill was recognized thereon,
     which is being amortized by using straight-line method over 5 years. The goodwill amortization for the years
     ended 2004 and 2003 both amounted to $3,213 and the unamortized balance amounted to $8,836 and $12,049,
     as the year of 2004 and 2003, respectively.

9.   OVERDUE RECEIVABLES

                                                                           2004                 2003

      Overdue receivables                                            $        42,513      $       35,420
      Less: Allowance for bad and doubtful debts                     (        42,513)     (       35,420)
       Total                                                         $                -   $            -




                                                        - 19 -
                                              (English Translation)
                                         FUBON INSURANCE CO., LTD.
                                       NOTES TO FINANCIAL STATEMENTS
                                          DECEMBER 31, 2004 AND 2003
                                (Expressed in thousands of New Taiwan Dollars)

10. PENSION

   Based on the actuary report, the funding status of pension plan was reconciled with accrued pension liabilities
   of December 31, 2004 and 2003 as follows:



                                                                             2004                  2003
    Benefit obligation
     Vested benefit obligation                                              ($314,897)            ($263,363)
        Non-vested obligation                                                (554,035)             (567,757)
        Accumulated benefit obligation                                       (868,932)             (831,120)
        Additional benefit based on future salaries                          (284,706)             (293,787)
        Projected benefit obligation                                        (1,153,638)           (1,124,907)
        Market related value of plan assets                                   925,266               852,855
        Funding assets                                                       (228,372)             (272,052)
        Unrecognized net obligation at transition                             119,175               132,416
        Unrecognized prior service cost                                        17,325                18,633
      Unrecognized loss                                                       179,628               219,153
    Prepaid pension cost                                                $      87,756         $      98,150

   1.      As of December 31, 2004 and 2003, the vested benefits on the Company’s pension plan amounted to
           408,849 thousand dollars and 351,198 thousand dollars, respectively.

   2.      The following were the components of net pension cost:


                                                                            2004                  2003
           Service cost                                             $         73,362      $         61,634
           Interest cost                                                      39,372                37,471
           Actual return on plan assets                             (         31,407)     (         32,594)
           Amortization and deferred amounts                                  20,475                14,549
           Net pension cost                                         $        101,802      $          81,060

   3.       Actuarial assumptions for the computation of pension cost were as follows:

                                                                            2004                   2003
           Discounting rate                                                 3.5%                   3.5%
           Growth rate in compensation levels                               2.5%                   2.5%
           Expected long-term rate of return
            on plan assets                                                  3.5%                   3.5%




                                                      - 20 -
                                          (English Translation)
                                     FUBON INSURANCE CO., LTD.
                                   NOTES TO FINANCIAL STATEMENTS
                                      DECEMBER 31, 2004 AND 2003
                              (Expressed in thousands of New Taiwan Dollars)

10. PENSION (CONT’D)

   4.   Pension fund movements in 2004 and 2003 were as follows:


                                                                 2004                   2003
         Beginning balance                                 $       852,855          $     780,077
         Add: Current contribution                                  91,408                 88,362
                Interest revenue                                      9,781                16,563
         Less : Current payment                                    (28,778)               (32,147)
         Ending balance                                    $          925,266       $    852,855


11. BONDS SOLD UNDER AGREEMENTS TO REPURCHASE

   The details of this account were as follows:

                                                               2004                     2003
    Government bonds sold under
     agreements to repurchase                        $           3,844,538      $         3,147,809
    Maturity dates                                   2005.1.3 ~ 2005.1.13       2004.1.2 ~ 2004.1.16
    Annual interest rates                              0.965% ~ 1.50%            0.825% ~ 0.925%


12. INDEMNITY PAYABLE

                                                               2004                     2003
    Indemnity payable                                 $           171,508       $           173,429
    Less: Reinsurance recovery receivable             (            98,772)      (            56,655)
     Total                                            $               72,736    $           116,774



   Indemnity payable resulted from unpaid claims for direct written premium. Based on the Reinsurance
   Recovery Clause, reinsurance recovery receivable is recognized as a deduction thereof.




                                                  - 21 -
                                          (English Translation)
                                     FUBON INSURANCE CO., LTD.
                                   NOTES TO FINANCIAL STATEMENTS
                                      DECEMBER 31, 2004 AND 2003
                              (Expressed in thousands of New Taiwan Dollars)


13. RESERVE FOR OPERATIONS AND LIABILITIES

                                                                   2004                    2003
    Unearned premium reserve                                  $      9,322,698      $       8,600,310
    Other liability reserve                                            751,791                706,933
    Special claim reserve                                            7,157,004              6,968,369
    Claims reserve                                                   3,007,849              2,287,182
     Total                                                    $    20,239,342       $     18,562,794



   Reserves for operations included the following reserves:

   1. Unearned premium reserve

     In accordance with Tai-Tsai Pao No. 0910077032 and Article 5 of the principle of providing insurance
     reserves announced by the Ministry of Finance on December 24, 2002, the method of providing unearned
     premium reserves is certified by a valuation actuary and approved by the Ministry of Finance.

     Pursuant to the “Rule on Accounting Treatment for Mandatory Third-Party Liability Automobile
     Insurance”, the provision for unearned premium reserve on mandatory third-party liability motor insurance
     is determined by multiplying the retained pure gross premium by a prescribed rate.

   2. Special claim reserve

     Special claim reserve refers to the “special reserve” as defined in the Insurance Law. The Company
     provides provision for special claim reserve for each type of policies according to the Insurance Law.
     Related provision and release of special claim reserve are defined as follows:

     a. Provision for special claim reserve is determined by the reserve formula issued by the Ministry of
        Finance.

     b. If the actual claims and claims adjustment expenses for a particular type of insurance are less than the
        expected amounts determined by the Ministry of Finance, an additional special reserve equal to 30% of
        the amount of the difference is provided.

     c. If the actual claims and claims adjustment expenses exceed the expected amount, the difference is
        released from the special claim reserve.

     d. The total amount of special claim reserve for a particular type of insurance at the end of year may not
        exceed its net earned premiums for such year; if the amount excess 60% must be released from its
        reserves and treated as income of the Company.




                                                    - 22 -
                                             (English Translation)
                                        FUBON INSURANCE CO., LTD.
                                      NOTES TO FINANCIAL STATEMENTS
                                         DECEMBER 31, 2004 AND 2003
                                 (Expressed in thousands of New Taiwan Dollars)


13. RESERVE FOR OPERATIONS AND LIABILITIES (CONT’D)

      2.   Special claim reserve

           e. For compulsory car insurance policy, additional special claim reserve is provided according to the
              regulations of the Ministry of Finance. Any remaining amount of total retained earned pure premium,
              reinsurance commissions, incurred but not reported claims (IBNR) reserve release and interest of
              prior year’s special claim reserve after deducting the total amount of retained loss incurred and
              provision for IBNR reserve, is provided as additional special claim reserve.

           f. The provision for special claim reserve on compulsory car insurance is kept in time deposits. This
              special claim reserve can only be used to cover pure premium loss.

      3.   Claims reserves

            Based on the “Insurance Industry Provision of Reserve for Indemnity” issued by the Ministry of
            Finance, reserves for claims are defined as follows:

            a. Provision for reported but unpaid claims reserve is estimated based on historical information and
               circumstances surrounding each claim for each type of insurance.

            b. Provision for IBNR reserve is determined by earned premiums for each type of insurance in
               accordance with regulations issued by the Ministry of Finance (MOF). The provision for claims
               reserve is released at the end of every year when such provision is made.
            c. Under the new regulations issued by the MOF in 1994, the provision for IBNR reserve on
               compulsory car insurance is computed based on net earned premium.

      4.   Other liability reserve

           In accordance with the MOF notification, provision for other liability reserve is determined by
           multiplying the total fire payback insurance premiums (based on an actuarial report) by a prescribed rate.

14. STOCKHOLDERS’ EQUITY

      As the year of 2004 and 2003, the Company had authorized and issued capital of $20,000,000.


15.   CAPITAL REDUCTION AWAITING GOVERNMENT APPROVAL

      According to the law of the financial holding company state that the Company had held the stock of the head
      company for three years, the Company have to cancel treasury stock of Holding Co., Ltd.The company held
      91,080 stock shares of Fubon Holding Co., Ltd., the book value amounted to $2,723,740 under the cost
      method. The Company predict to cancel treasury stock amounted to $1,821,604, reverse additional paid in
      capital amounted to $833,614, and retained earning amounted to $68,522, however, this project need to obtain
      the approval from Ministry of Finance. Therefore this account is recognize capital stock to be
      cancelled.




                                                        - 23 -
                                     (English Translation)
                                FUBON INSURANCE CO., LTD.
                              NOTES TO FINANCIAL STATEMENTS
                                 DECEMBER 31, 2004 AND 2003
                          (Expressed in thousands of New Taiwan Dollars)

16. CAPITAL SURPLUS

    As the year of 2004 and 2003, the details of this account were as follows:

                                                                2004                   2003

     Additional paid-in capital                           $      8,318,907       $      9,152,521



    The Company Law of the Republic of China requires that capital surplus shall be used exclusively to
    cover losses if the legal reserve is not sufficient to cover such losses, or to increase capital.
    Capitalization of capital surplus generated from stock premium is limited to certain amounts and
    percentages prescribed under SFC regulations.

17. RETAINED EARNINGS AND EARNINGS APPROPRIATED

    (1) Legal reserve
        The Company’s Articles of Incorporation requires that 10% of the annual income after tax less
        losses of prior years shall be appropriated as legal reserve. The legal reserve is provided until the
        accumulated reserve balance equals the total issued capital stock. The legal reserve may be used to
        cover accumulated losses. If the balance of the reserve exceeds 50% of issued capital, half of such
        legal reserve balance may be capitalized.

    (2) Special reserve
        In accordance with SFC regulation, a special reserve equal to current year shareholders’ equity
        contra account,(i.e. unrealized loss on long-term equity investments and cumulative translation
        adjustments), is provided from current years net income and prior years’ unappropriated retained
        earnings. If a reversal of shareholders’ equity contra account occurs, the reversed portion of the
        special reserve could be distributed as dividends.

    (3) Undistributed retained earnings appropriated
        Under the Company’s Articles of Incorporation, 10% of the Company’s net income after deduction
        of income tax and cumulative prior years’ losses (if any), should be set aside as legal reserve before
        payment of interest of 6% on capital. The remaining balance, after distributing 0.1% ~ 5% as
        employees’ bonus, may be distributed as dividend according to the resolution of the shareholders’
        meeting.

        All retained earnings of 2003 had been allocated for legal reserve, recovery of special reserve, and
        allocated for employees’ bonus of $11,003 and cash dividend of $2,289,240. The distribution of
        retained earnings in 2003 had been approved by the directors and the distribution date was May
        7,2004.




                                                - 24 -
                                            (English Translation)
                                       FUBON INSURANCE CO., LTD.
                                     NOTES TO FINANCIAL STATEMENTS
                                        DECEMBER 31, 2004 AND 2003
                              (Expressed in thousands of New Taiwan Dollars)

18.   INCOME TAX

      1.   The Company’s income tax rate was 25%. The components of income tax account were as follows:

                                                                               2004                   2003
           Current income tax expense                                  $        385,614           $    252,968
           Deferred income tax expense
            Unrealized foreign exchange (gain) loss                (             18,899)                17,426
            Allowance for bad debts                                (                884)                   468
            Prepaid pension                                        (              2,598)                 1,825
            Loss on long-term stock investment                                        -                 19,808
            Reverse allowance bad debt without
              supporting document                                                     -                 77,915
            Investment tax credit                                  (             71,915)                     -
            10% sur-tax on undistributed retained earnings                            -                 27,588
           Adjustment on prior year's income tax                                 21,493       (        312,290)
            Income tax expense (benefit)                               $        312,811           $     85,708

      2.   The differences between the income tax expense calculated on financial income and income tax
           provision were shown as follows:

                                                                                2004                  2003

           Tax on financial income                                         $     696,630          $    584,987
           Tax effect of tax exempt securities transaction gains           (     150,325)              106,104
           Tax effect of tax exempt cash dividend                          (     181,420)         (    121,201)
           Tax effect of tax exempt loss on sale of land                             102                     -
           Tax effect of subject to separate tax rate
              interest income                                              (       4,319)         (      4,174)
           Tax effect of unrealized exchange loss (gain)                          18,899          (     17,425)
           Tax effect of prepaid pension cost                                      2,598          (      1,825)
           Tax effect of allowance for bad debts                                     884          (     10,806)
           Tax effect of allowance for short-term
             investment recovery gain                                                     -       (    223,191)
           Investment tax credit                                                          -       (     61,332)
           Tax effect of investment loss
             accounted under the equity method                                     2,565                 1,831
                                                                           $     385,614          $    252,968




                                                      - 25 -
                                        (English Translation)
                                   FUBON INSURANCE CO., LTD.
                                 NOTES TO FINANCIAL STATEMENTS
                                    DECEMBER 31, 2004 AND 2003
                           (Expressed in thousands of New Taiwan Dollars)

18. INCOME TAX (CONT’D)

 3.    The components of deferred income tax assets (liabilities) were as follows:
                                                                  2004                            2003
       Total deferred income tax assets                          $         29,949     $             29,064
       Total deferred income tax liabilities                     $         26,553     $             48,050

       Temporary differences resulting in deferred
        income tax assets and liabilities:
         Unrealized exchange gain                                $         18,457     $             94,052
         Allowance for bad debts                                 $        119,795     $            116,258
         Prepaid pension cost                                    $         87,755     $             98,150

  4.   The classification of deferred income tax assets and liabilities were as follows:

                                                                         2004                     2003

       Deferred income tax assets - current                      $         29,949         $         29,064
       Deferred income tax liabilities - current             (              4,614)    (             23,513)
       Net                                                                 25,335                    5,551

       Deferred income tax assets - non current                  $               -        $              -
       Deferred income tax liabilities - non-current                       (21,939)                (24,537)

  5. The R.O.C. tax authorities have assessed the Company’s income tax returns through 2001.The
     Company’s income tax return has been consolidated to Fubon Financial Holding Company since2002.

  6.   Imputed tax information:

                                                                          2004                      2003
       Undistributed earnings
        Before 1997                                                  $            -           $             -
        After 1998                                                        2,473,752                 2,254,279
       Total                                                         $    2,473,752           $     2,254,279
       Shareholders' deductible income tax account                   $       10,293           $         9,302
       Percentage of tax credit                                               8.16%                     0.41%




                                                   - 26 -
                                        (English Translation)
                                   FUBON INSURANCE CO., LTD.
                                 NOTES TO FINANCIAL STATEMENTS
                                    DECEMBER 31, 2004 AND 2003
                             (Expressed in thousands of New Taiwan Dollars)

18.   INCOME TAX (CONT’D)

      The Company has been combined into Fubon Financial Holding Co., Ltd. in filing income tax returns.
      The balance of income tax payable was $243,306, reclassified as payable to affiliated parties (recorded
      under other payable), for the year ended of 2004.

      For the year ended of 2004, the reconciliation of current income expense, deferred income tax expense,
      deferred income tax assets, and income tax payable calculated in conformity with R.O.C. SFAS No. 22,
      "Accounting for Income Tax", to the related balances calculated for combined corporate income tax
      return filing with Fubon Financial Holding Co., Ltd. was as follows:

                                                                                       2004

                                                                                                            Income tax
                                                      Current              Deferred      Deferred             payable
                                                    income tax            income tax    income tax          (payable to
                                                      expense               expense      liabilities     affiliated parties)
      Amounts calculated under SFAS No. 22            (385,614)                 -               -                        -
      Difference adjustments                                  -                 -               -                        -
      Amounts calculated for combined
      corporate income tax return filing              (385,614)                 -               -                        -



19. EARNINGS PER SHARE

      The Company’s capital structure was simple in 2004 and 2003, and the calculation of earnings
      per share was also shown as follows:

      Adjusted basic earnings per share:
                                                                               2004
                                                              Amount                                Earnings Per Share
                                                                                Outstanding
                                                                                 Number of
                                           Before                 After           Shares            Before       After
                                            Tax                   Tax          (Denominator)         Tax         Tax

      Basic earnings per share
       Net income of
         common stock                  $   2,786,563      $ 2,473,752               2,000,000          1.39        1.23




                                                     - 27 -
                                         (English Translation)
                                    FUBON INSURANCE CO., LTD.
                                  NOTES TO FINANCIAL STATEMENTS
                                     DECEMBER 31, 2004 AND 2003
                              (Expressed in thousands of New Taiwan Dollars)

19.   EARNINGS PER SHARE (CONT’D)

                                                                          2003
                                                               Amount                       Earnings Per Share
                                                                           Outstanding
                                                                            Number of
                                            Before              After        Shares        Before           After
                                             Tax                Tax       (Denominator)     Tax             Tax

       Basic earnings per share
        Net income of
          common stock                  $   2,339,987       $ 2,254,279      2,000,000           1.17         1.13

20.   INFORMATION ON DERIVATIVE TRANSACTIONS

      1. Derivative Financial Instruments
      (1) Species and goal

           Forward contract ;Interest swap; and swap arbitrage contract
           The goal of the above derivative transactions is evade the exchange risk.

      (2) Contract amount and credit risk

                                                     2004                                 2003
                                        Contract            Fair value       Contract            Fair value
           Financial instrument          price               amount           price               amount

       Forward contracts - USD       USD 236,000        NTD 225,821       USD 215,000       NTD 37,745

       Interst swap                  NTD 200,000        NTD 4,851         NTD        -      NTD         -

       Swap arbitrage-USD            USD 20,000         NTD 34,036        NTD        -      NTD         -

           The financial institution with which the Company had contracted has good credit rating. Therefore,
           the possibility of default risk is very low.

      (3) Market value risk

           The Company signed forward contracts for hedging purposes only, therefore, the market value risk
           is not significant.

      (4) Liquidity risk, cash flow, amount, period and uncertainty of future cash demand.

           The working capital of the Company is deemed adequate to meet future cash demand, hence
           financing risk is not expected. Also, the exchange rate on forward contract is fixed, hence no
           material cash flow risk is expected.




                                                      - 28 -
                                    (English Translation)
                               FUBON INSURANCE CO., LTD.
                             NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2004 AND 2003
                       (Expressed in thousands of New Taiwan Dollars)

16. INFORMATION ON DERIVATIVE TRANSACTIONS (CONT’D)


  (5)   The purpose of derivative financial instrument held by the Company

        The derivative financial instrument held by the Company is purposely for non-trading. Signing
        forward contract is simply to hedge the risk from foreign currency exchange rate fluctuations. The
        Company signed forward currency contracts with banks to hedge the risk of exchange loss
        resulting from foreign currency investment.

  (6)   Derivative financial instruments

        Forward contract                                             2004                 2003

        Receivable on forward contracts sold                     $   7,730,315        $   7,325,206
        Premium on forward contracts                                    23,522               17,809
        Payable on forward contracts                         (       7,532,412)   (       7,305,270)

        Net other (payable) receivable                           $    221,425         $     37,745


        Interest swap contract                                       2004                 2003

        Receivable on interst swap                               $    200,000         $           -
        Payable on interst swap                              (        200,000)                    -
        Net other (payable) receivable                           $           -        $           -


        Swap arbitrage contract                                      2004                 2003

        Receivable on swap arbitrage                             $   1,915,158        $           -
        Payable on swap arbitrage                            (       1,883,103)                   -
        Net other financial asset                                $     32,055         $           -




17. INFORMATION ON DERIVATIVE TRANSACTIONS (CONT’D)

                                               - 29 -
                                 (English Translation)
                            FUBON INSURANCE CO., LTD.
                          NOTES TO FINANCIAL STATEMENTS
                             DECEMBER 31, 2004 AND 2003
                     (Expressed in thousands of New Taiwan Dollars)

2.   Fair value of financial instruments

                                                                        2004
                                                             Carrying
                                                             Amount            Fair Value
     Financial instruments
     Non-derivatives
     Assets
      Cash and cash equivalents                          $    8,848,008    $    8,848,008
      Short-term investments - net                           11,862,996        12,958,929
      Notes receivable - net                                    968,069           968,069
      Accrued income                                            260,376           260,376
      Premium receivable - net                                2,983,750         2,983,750
      Reinsurance recoverable                                 1,203,483         1,203,483
      Other receivables                                         623,050           623,050
      Due from other insurance companies                        494,116           494,116
      Other financial assets - current                           12,247            44,594
      Long-term equity investments - equity method              158,496           158,496
      Long-term equity investments - cost method              5,867,998         5,867,998
      Long-term bonds investment                             14,994,118        18,869,420
      Refundable deposits                                     3,691,165         3,691,165
      Contributed reinsurance liability reserve                   6,404             6,404
     Liabilities
      Repurchase bonds payable                                3,844,538          3,844,538
      Commission payable                                        535,766            535,766
      Notes payable                                               5,689              5,689
      Indemnity payable                                          72,736             72,736
      Reinsurance payable                                     1,960,620          1,960,620
      Due to other insurance companies                          614,330            614,330
      Other payable                                           1,196,956          1,196,956
      Capital lease liabilities                                  46,351             46,351
      Reinsurance liability reserve received                    620,661            620,661




                                           - 30 -
                                    (English Translation)
                               FUBON INSURANCE CO., LTD.
                             NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2004 AND 2003
                        (Expressed in thousands of New Taiwan Dollars)

17. INFORMATION ON DERIVATIVE TRANSACTIONS (CONT’D)

   2. Fair value of financial instruments

                                                                         2003
                                                             Carrying
                                                             Amount             Fair Value
       Financial instruments
       Non-derivatives
       Assets
        Cash and cash equivalents                         $ 11,086,798      $ 11,086,798
        Short-term investments - net                        12,002,443        12,791,341
        Notes receivable - net                                 925,718           925,718
        Accrued income                                         230,074           230,074
        Premium receivable - net                             2,692,180         2,692,180
        Reinsurance recoverable                              1,325,203         1,325,203
        Due from other insurance companies                   1,034,298         1,034,298
        Other receivables                                      432,462           432,462
        Other financial assets - current                        44,594            27,783
        Long-term equity investments                         8,397,265         8,620,881
        Long-term bonds investment                           9,436,857         9,703,009
        Refundable deposits                                  3,632,205         3,632,205
        Contributed reinsurance liability reserve                6,538             6,538
       Liabilities
        Repurchase bonds payable                              3,147,809           3,147,809
        Commission payable                                      487,014             487,014
        Indemnity payable                                       116,774             116,774
        Indemnity reinsurance payable                           131,461             131,461
        Reinsurance payable                                   1,492,200           1,492,200
        Due to other insurance companies                        941,965             941,965
        Other payable                                         1,100,211           1,100,211
        Capital lease liabilities                                 1,700               1,700
        Guarantee deposits received                              35,210              35,210
        Reinsurance liability reserve received                  612,732             612,732




                                              - 31 -
                                             (English Translation)
                                        FUBON INSURANCE CO., LTD.
                                      NOTES TO FINANCIAL STATEMENTS
                                         DECEMBER 31, 2004 AND 2003
                                 (Expressed in thousands of New Taiwan Dollars)


20. INFORMATION ON DERIVATIVE TRANSACTIONS (CONT’D)

     3.    Methods and assumptions used to estimate the fair value market value of financial instruments:

           (1) The fair market value of short-term financial instruments was estimated in accordance with the
               carrying amount. The expiration period of any short-term financial instrument was relatively close,
               therefore, the fair market value was calculated by the carrying amount. This method was used to
               value cash and cash equivalents, accounts receivable, refundable deposits, short-term loans,
               short-term bills payable, accounts payable.

           (2)   If market price was known for a security, then market price was used as the security’s fair market
                 value. When market price was unknown, then financial and other statistics were used to estimate
                 fair market value.

           (3)   The carrying value of a long-term investment was evaluated by applying the equity or cost method
                 on the investee’s financial reports or other reports certified by a CPA. Net equity value or market
                 value was used to estimate fair market value.

           (4)   Long-term liabilities include long-term bills payable which were issued with a discount.
                 Accordingly, the fair market value was determined based on the face amount of the bills payable
                 less discount.

           (5)   For non-transaction financial derivative contracts denominated in foreign currencies, the fair
                 market value thereof assumes contract termination on the balance sheet date and was calculated
                 based upon the cash receivable or payable. In general, it included unrealized gain or loss on
                 outstanding contracts for the current period. Most of the Company’s derivative instruments have
                 valuation reports from financial institutions as references.

4. Group concentrations of credit risk exist if the transacting party is an individual or a number of counter-parties
   which engage in similar activities or activities in the same region or share other similar economic characteristics
   that would cause their ability to meet contractual obligations with changes in economic or other conditions. As
   of December 31, 2004 and 2003, the Company did not have any contract with concentrations of credit risk.




                                                         - 32 -
                                           (English Translation)
                                      FUBON INSURANCE CO., LTD.
                                    NOTES TO FINANCIAL STATEMENTS
                                       DECEMBER 31, 2004 AND 2003
                              (Expressed in thousands of New Taiwan Dollars)

V. RELATED PARTY TRANSACTIONS

  1.   Names and relationship of related parties

       Names of related parties                    Relationship with the Company

       Fubon Financial Holding Co., Ltd.           Parent company

       Fubon Commercial Bank Co., Ltd.             The same parent company

       Fubon Securities Co., Ltd.                  The same parent company

       Fubon Securities Investment Trust Co., Ltd. The same parent company

       Fubon Life Assurance Co., Ltd.              The same parent company

       Taipei Bank Co., Ltd                        The same parent company
       Fubon Direct Marketing Consulting Co., Ltd. The same parent company
       Fubon Bank (Hong Kong) Limited              The same parent company

       Fubon Assets Management Co., Ltd.           The same parent company

       Fubon Financial Holding Venture Capital     The same parent company
       Co. Ltd.
       Fubon Venture Capital Consulting            The same parent company

       Co., Ltd.

       Fubon Bills Finance Co., Ltd.               Has a significant influence on the Company’s
                                                   operation

       Fubon Real Estate Management Co., Ltd.      Has a significant influence on the Company’s operation

       Fubon Futures Co., Ltd.                     Has a significant influence on the Company’s operation

       Taiwan Cellular Co., Ltd.                   Has a significant influence on the Company’s operation

       Fubon Insurance Agent Co., Ltd.             Has a significant influence on the Company’s operation

       Guang-Xing Printing Co., Ltd.               Has a significant influence on the Company’s operation
       Taiwan Fixed Network Co. Ltd.               Has a significant influence on the Company’s    operation




                                                   - 33 -
                                          (English Translation)
                                     FUBON INSURANCE CO., LTD.
                                   NOTES TO FINANCIAL STATEMENTS
                                      DECEMBER 31, 2004 AND 2003
                             (Expressed in thousands of New Taiwan Dollars)

V. RELATED PARTY TRANSACTIONS(CONT’D)

  1.   Names and relationship of related parties

       Names of related parties                    Relationship with the Company

       Sino Star Venture Capital Co. Ltd.          Has a significant influence on the Company’s operation

       Fubon Investment Services Co., Ltd.         Has a significant influence on the Company’s operation

       Fubon Land Co., Ltd                         Has a significant influence on the Company’s operation

       Tao Yin Co., Ltd.                           Has a significant influence on the Company’s operation

       Ming Tong Co., Ltd.                         Has a significant influence on the Company’s operation

       Fubon Securities Finance Co., Ltd.          Has a significant influence on the Company’s operation

       Fubon Art Foundation.                       Has a significant influence on the Company’s operation
       Chung Hsing Construction Co., Ltd.          Has a significant influence on the company’s operation

       Fubon Construction Management Co., Ltd.     Has a significant influence on the company’s operation

       Fubon Technology Consulting Co., Ltd        Has a significant influence on the company’s operation

       Fubon Culture and Education Foundation      Has a significant influence on the company’s operation

       Fubon Charity Foundation.                   Has a significant influence on the company’s operation

       Fubon Construction Co., Ltd                 Has a significant influence on the Company’s operation
       Quanta Display Inc.                         Has a significant influence on the Company’s operation




                                                   - 34 -
                                             (English Translation)
                                        FUBON INSURANCE CO., LTD.
                                      NOTES TO FINANCIAL STATEMENTS
                                         DECEMBER 31, 2004 AND 2003
                                  (Expressed in thousands of New Taiwan Dollars)



V. RELATED PARTY TRANSACTIONS(CONT’D)

     1. Names and relationship of related parties

          Names of related parties                    Relationship with the Company

          TransAsia Telecommunications Co., Ltd       Has a significant influence on the Company’s operation

          TECO Electric & Machinery Co., Ltd.         Has a significant influence on the Company’s operation

          Wua Wei Venture Capital Co., Ltd.            Has a significant influence on the Company’s operation

          China Alliance Venture Fund                 Has a significant influence on the Company’s operation

          Fubon Venture Capital Co., Ltd.             Has a significant influence on the Company’s operation

          FAT Venture Capital Co., Ltd.                Has a significant influence on the Company’s operation

          Kuo Chiao Venture Capital Investment Corp. Has a significant influence on the Company’s operation

          Phalanx Biotech Corp.                        Has a significant influence on the Company’s operation

          Primus Technology Fund                       Has a significant influence on the Company’s operation

          Teng Feng Venture Capital Investment Corp. Has a significant influence on the Company’s operation

          Taiwan High Speed Rail Co., Ltd.             Has a significant influence on the Company’s operation

          Taiwan Aerospace Corp.                       Has a significant influence on the Company’s operation

          WK Technology Fund                           Has a significant influence on the Company’s operation

          Other related parties                        Directors, supervisors, managers and their
                                                       close relatives, etc.

V.   RELATED PARTY TRANSACTIONS (CONT’D)
     2.     Significant transactions with related parties for the year of 2004 and 2003 are summarized as
            follows:
          (1) Premium revenue and premium receivable

               2004




                                                      - 35 -
                                           (English Translation)
                                      FUBON INSURANCE CO., LTD.
                                    NOTES TO FINANCIAL STATEMENTS
                                       DECEMBER 31, 2004 AND 2003
                              (Expressed in thousands of New Taiwan Dollars)

                                                                                   Premium         Premium
                                                                                   Revenue        Receivable
             Names of related parties
             Fubon Commercial Bank Co., Ltd.                                       $     23,510   $       -
             Taiwan Cellular Co., Ltd.                                                  113,325           -
             Taiwan Fixed Network Co. Ltd                                                10,593           -
             Others (accounts with balances of less than $10,000)                     14,315          7,794
                                                                                   $ 161,743      $   7,794


2003

                                                                                   Premium         Premium
                                                                                   Revenue        Receivable
             Names of related parties
             Fubon Commercial Bank Co., Ltd.                                       $     26,188   $   5,177
             Taiwan Cellular Co., Ltd.                                                   11,549           -
             Taipei Bank Co., Ltd                                                        11,763           -
             Others (accounts with balances of less than $10,000)                         7,723       4,522
                                                                                   $     57,223   $   9,699
                                                                                                               The
             terms of transactions were similar to those of non-related parties.

       (2)    Rental revenue and refundable deposit

              2004
                                                                                        Rental    Refundable
                                                                                       revenue     deposit
             Names of related parties
             Fubon Commercial Bank Co., Ltd.                                       $     92,951   $       -
             Fubon Securities Co., Ltd.                                                  26,761           -
             Fubon Life Assurance Co., Ltd.                                              24,559           -
             Fubon Direct Marketing Consulting Co., Ltd.                                 13,727           -
             Fubon Futures Co., Ltd.                                                     11,601           -
             Others (accounts with balances of less than $10,000)                     14,166          5,261
                                                                                   $ 183,765      $   5,261

V.   RELATED PARTY TRANSACTIONS (CONT’D)

              2003




                                                      - 36 -
                                  (English Translation)
                             FUBON INSURANCE CO., LTD.
                           NOTES TO FINANCIAL STATEMENTS
                              DECEMBER 31, 2004 AND 2003
                       (Expressed in thousands of New Taiwan Dollars)

                                                                          Rental    Refundable
                                                                         revenue     deposit
      Names of related parties
      Fubon Commercial Bank Co., Ltd.                                $     67,229   $    2,505
      Fubon Securities Co., Ltd.                                           17,380        3,964
      Fubon Life Assurance Co., Ltd.                                       25,828        4,842
      Fubon Direct Marketing Consulting Co., Ltd.                          14,006        1,833
      Others (accounts with balances of less than $10,000)                 33,022        3,545
                                                                     $ 157,465      $ 16,689

     All of the above leases were operating leases. The terms of transactions were similar to those of
     non-related parties.

(3). Marketing expenses

      Names of related parties                                        2004            2003
      Fubon Direct Marketing Consulting Co., Ltd.                   $ 123,012       $ 165,044

(4) Service expenses

      Names of related parties                                           2004           2003
      Fubon Real Estate Management Co., Ltd.                        $     22,248    $    30,650


(5). Commission expenses

       Names of related parties                                       2004             2003
       Fubon Insurance Agent Co., Ltd.                              $  10,336        $   1,377




                                             - 37 -
                                           (English Translation)
                                      FUBON INSURANCE CO., LTD.
                                    NOTES TO FINANCIAL STATEMENTS
                                       DECEMBER 31, 2004 AND 2003
                               (Expressed in thousands of New Taiwan Dollars)


V.   RELATED PARTY TRANSACTIONS (CONT’D)

        (6). Insurance expenses

              Names of related parties                                   2004           2003
              Fubon Life Assurance Co., Ltd.                        $      37,019   $     23,221



        (7) Printing expenses

              Names of related parties                                  2004            2003
              Guang-Xing Printing Co., Ltd.                     $         22,533    $     24,134



        (8). Other transactions with other related parties


              Items                                                     2004            2003
              Consulting service expenses                       $          5,600    $      8,400
              Securities and exchange expenses                             1,087           5,473
              Investment fund trustee's management fee                     3,709           4,198
              Service fee                                                 19,617          13,613
              Donation                                                    14,918           4,878
              Telecommunication service                                    7,237          12,625
              Bank charge                                                    752             525
                                                                $         52,920    $     49,712




                                                       - 38 -
                                        (English Translation)
                                   FUBON INSURANCE CO., LTD.
                                 NOTES TO FINANCIAL STATEMENTS
                                    DECEMBER 31, 2004 AND 2003
                            (Expressed in thousands of New Taiwan Dollars)



V. RELATED PARTY TRANSACTIONS (CONT’D)

      (9) The Company purchased certain investment funds from Fubon Securities Investment Trust Co., Ltd.
          as follows:

                                                                            2004                   2003
          Names of funds
          Fubon Precision Fund                                        $             -        $       101,388
          Fubon Supreme Fund                                                        -                 57,759
          Fubon OTC Fund                                                            -                281,620
          Fubon Fund                                                                -                369,890
          Fubon Value Fund                                                          -                 23,935
          Fubon Technology Fund                                                     -                 62,233
          Fubon High Grow-up Fund                                                   -                 49,780
          Fubon Asia-Technology Fund                                                -                 35,000
          Fubon Internet Fund                                                       -                 32,600
          Fubon Champion Fund                                                       -                 32,577
          Fubon Global Precision Fund                                               -                 90,000
          Fubon Ju-I No.2 Fund                                                      -              1,245,000
          Fubon Fu Tai Fund                                                   380,000                      -
          Fubon Chi Hsiang No.1 Fund                                        1,000,000                      -
          Fubon Chi Hsiang No.2 Fund                                           50,000                      -
          Fubon Chi Hsiang No.3 Fund                                          500,000                      -
                                                                      $     1,930,000        $     2,381,782



   (10)   Other accounts (payable) receivable:


                                                               2004                              2003

                                                      Amount               %            Amount            %
          Other receiable - Fubon Financial
           Holding Co., Ltd.                      $      104,053          16.70         $ 104,053       13.32
          Other payable - Fubon Financial
           Holding Co., Ltd.                           (243,306)          (20.33)        (213,037)      (19.36)
                                                 ($    139,253)            (3.63)        (108,984)        (6.04)

          The Company’s income tax return has consolidated to Fubon Financial Holding Co., Ltd since
          2002.The income tax payable were $243,306 and $213,037 for 2004 and 2003 respectively. The
          income tax refundable was $104,053 for 2002.




                                                      - 39 -
                                             (English Translation)
                                        FUBON INSURANCE CO., LTD.
                                      NOTES TO FINANCIAL STATEMENTS
                                         DECEMBER 31, 2004 AND 2003
                                (Expressed in thousands of New Taiwan Dollars)


V. RELATED PARTY TRANSACTIONS (CONT’D)

   (11)      Deposits with related parties:

                            Names of related parties                           2004                   2003

              Fubon Commercial Bank Co., Ltd.                          $        351,566           $     600,886
              Taipei Bank Co., Ltd.                                              34,056                  33,488
                                                                       $        385,622           $     634,374



      (12) Venture capital investment

                          Names of related parties                             2004                   2003
              Fubon Venture Capital Co., Ltd.                              $     75,306       $          78,761
              WK Technology Fund                                                 74,750                  74,750
              China Alliance Venture Fund                                       120,000                 120,000
              Teng Feng Venture Capital Investment Corp.                         50,000                  50,000
              Kuo Chiao Venture Capital Investment Corp.                         60,000                  60,000
              FAT Venture Capital Co., Ltd.                                      50,000                  50,000
              Primus Technology Fund                                             54,000                  54,000
              Wua Wei Venture Capital Co., Ltd.                                  10,000                  10,000
                                                                           $    494,056       $         497,511



          (13) Bonds transactions with related parties:

               a. Bonds sold under agreement to repurchase

                2004
                                                                                              Bonds sold
                                                   Selling           Interest               under repurchase
                   Names of related parties         price            expenses                  agreement
                   Fubon Securities Co., Ltd.    $ 6,604,786       $       1,992          $           311,203

                2003
                                                                                                Bonds sold
                                                       Selling              Interest          under repurchase
                    Names of related parties            price              expenses              agreement
                   Fubon Securities Co., Ltd.    $ 12,171,872      $             4,398    $              200,171




                                                          - 40 -
                                        (English Translation)
                                   FUBON INSURANCE CO., LTD.
                                 NOTES TO FINANCIAL STATEMENTS
                                    DECEMBER 31, 2004 AND 2003
                            (Expressed in thousands of New Taiwan Dollars)

V. RELATED PARTY TRANSACTIONS (CONT’D)

       b. Bonds purchased under agreement to resell

            2004
                                                                                       Bonds purchased
                                                                                             under
                Names of related parties   Purchase price Interest revenue              resell agreement
             Fubon Securities Co., Ltd.      $ 3,869,409 $             597            $           200,390
             Fubon Commercial Bank Co., Ltd.   3,873,069             1,128                               -
             Fubon Bills Finance Co., Ltd.        40,000                10                               -
                                             $ 7,782,478 $           1,735            $           200,390
                                                                                                                 2003
                                                                                          Bonds purchased
                                                                                               under
                Names of related parties      Purchase price       Interest revenue       resell agreement
             Fubon Securities Co., Ltd.       $ 1,550,460          $           273    $                      -
             Fubon Bills Finance Co., Ltd.         721,289                      247                          -
                                              $ 2,271,749          $           520    $                      -

       c. Bonds transactions
             Names of related parties                                  2004                     2003
             Fubon Securities Co., Ltd.                        $          700,000         $         400,000



      (14) Short-term notes transactions with related parties:

            2004
                Names of related parties        2004 Total transactions 2004.12.31 Short-term notes
             Fubon Bills Finance Co., Ltd.      $            4,291,833 $                   184,359

            2003
               Names of related parties         2003 Total transactions 2003.12.31 Short-term notes
            Fubon Bills Finance Co., Ltd.      $              5,827,178 $                 199,829




                                                   - 41 -
                                            (English Translation)
                                       FUBON INSURANCE CO., LTD.
                                     NOTES TO FINANCIAL STATEMENTS
                                        DECEMBER 31, 2004 AND 2003
                                (Expressed in thousands of New Taiwan Dollars)

V. RELATED PARTY TRANSACTIONS (CONT’D)

         (15). Derivative financial instruments (net of receivable and payable on forward contracts sold)
                        Names of related parties                   2004                    2003
               Fubon Commercial Bank Co., Ltd.               $          42,087       $          17,860



         (16) Deposits for futures transactions

                        Names of related parties                    2004                     2003
                 Fubon Futures Co., Ltd.                        $       19,904       $                 -



VI.   ASSETS PLEDGED OR MORTGAGED

      A. As the year of 2004 and 2003, the assets pledged or mortgaged were as follows:

          Assets                                                     2004                    2003
          Government bonds                                      $      3,582,040         $   3,528,496
          Time deposit                                                    19,595                19,367
                                                                $      3,601,635         $   3,547,863



      B. Pursuant to the requirements of Articles #141 and 142 of the Insurance Law, government bonds with book
         value of $3,486,448 and $3,404,248as of the years ended of 2004 and 2003, respectively, were deposited
         with the Central Bank of China as guarantee for the insurance business.

VII. COMMITMENTS AND CONTINGENCIES

         As the year of 2004, the Company had several insurance disputes and was required to pay indemnities
         amounting to approximately $1,216,076, of which approximately $792,289 were reinsured. The
         difference relating to their claim had been accrued. These cases have not been resolved with District Court
         of Appeal as the year of 2004.




                                                       - 42 -
                                            (English Translation)
                                       FUBON INSURANCE CO., LTD.
                                     NOTES TO FINANCIAL STATEMENTS
                                        DECEMBER 31, 2004 AND 2003
                                (Expressed in thousands of New Taiwan Dollars)



VIII. SIGNIFICANT DISASTER LOSS

            None.


IX.   SIGNIFICANT SUBSEQUENT EVENT

            None.


X.    OTHERS

      1      Summary of personal expenses, depreciation, depletion and amortization:

                                       2004                                       2003
                         Operating   Operating                     Operating    Operating
                          Costs      Expenses        Total          Costs       Expenses          Total

Personal expenses:
 Salaries                $       -   $ 1,780,991   $1,780,991      $       -   $ 1,797,626      $1,797,626
 Insurance                       -      129,601      129,601               -      123,486         123,486
 Pension                         -      101,802      101,802               -       81,080          81,080
 Others                          -       42,402       42,402               -       40,998          40,998
Depreciation                     -      178,747      178,747               -      176,288         176,288
Depletion                        -             -               -           -                -             -
Amortization                     -       44,268       44,268               -       39,711          39,711




                                                      - 43 -
                                                           (English Translation)
                                                      FUBON INSURANCE CO., LTD.
                                                    NOTES TO FINANCIAL STATEMENTS
                                                       DECEMBER 31, 2004 AND 2003
                                             (Expressed in thousands of New Taiwan Dollars)

X.          OTHERS (CONT’D)

  2     The significant influence on invested company:

      Item            Type         Premium       Reinsurance    Reinsurance      Retention        Unearned        Unearned     Earned Notes
                                   Revenue        Premium        Premium         premium        premium allot     premium     retention
                                                                   ceded                         rate reserve     Recovery    premium
Non-Compulsory Residential fire       230,055              -          13,392            216,663         117,550       111,294   210,407
insurance      savings
               insurance
               Long-term              (58,776)             -            445         (59,221)          2,861,630     3,125,843   204,992
                 residentia fire
                 Commercial          3,101,262         56,158      1,892,604       1,264,816           619,321       667,250 1,312,745
                 fire insurance
                 Long-term             (4,678)             -              -             (4,678)        210,198       252,609     37,733
                 commercial
                 fire insurance
                 Inland marine        266,465             28         157,955            108,538          53,233       22,290     77,595
                 insurance
                 Marine cargo         850,936          46,234        409,727            487,443        145,195       102,288    444,536
                 insurance
                 Marine hull          189,931            445         167,431             22,945          11,221       20,392     32,116
                 insurance
                 Fishing vessel       165,811          21,647        140,599             46,859          23,752       21,494     44,601
                 insurance
                 Aviation             610,938            475         572,001             39,412          23,471       22,007     37,948
                 insurance
                 Private             3,745,256         47,157      1,509,480       2,282,933          1,168,018      916,310 2,031,225
                 passenger auto
                 physical
                 Commercial           101,912            826          40,572             62,166          29,402       23,411     56,175
                 auto physical
                 damage
                 Private             2,175,927         25,805        677,444       1,524,288           765,348       703,403 1,462,343
                 passenger auto
                 insurance
                 Commercial           977,743           5,950        409,714            573,979        296,100       274,286    552,165
                 passenger auto
                 insurance
                 Personal             983,664          23,790        356,371            651,083        309,457       187,095    528,721
                 liability
                 insurance
                 Professional         286,189           3,805        224,616             65,378          29,910       12,992     48,460
                 liability
                 insurance
                 Engineering         2,117,007         64,970      1,679,341            502,636        468,713       329,568    363,491
                 insurance
                 Nuclear                     -          9,356         12,486            (3,130)         (5,944)        3,562      6,376
                 insurance
                 Fidelity and          86,937           4,931         68,414             23,454          12,469       13,326     24,311
                 surety
                 insurance
                 Credit               820,028             19         168,254            651,793        299,812        30,949    382,930
                 insurance
                 Other property       163,949           6,581        131,482             39,048          20,735       28,380     46,693
                 insurance
                 Accident            1,639,103             -         613,002       1,026,101           551,513       359,203    833,791
                 insurance
                 Commercial           729,142              -         648,867             80,275          17,623      123,145    185,797
                 earthquake
                 insurance
                 Personal             289,118           6,117         89,771            205,464          66,628       61,080    199,916
                 multiple
                 insurance
                 Commercial            41,776            182           1,832             40,126          21,157       20,715     39,684
                 multiple
                 insurance
                 Typhoon and          620,835            (50)        563,504             57,281          12,966       45,974     90,289
                 flood fire
                 insurance
                 Foreign                     -        287,870         53,694            234,176        109,835       112,338    236,679
                 reinsurance
Sub-total                           20,130,530        612,296     10,602,998      10,139,828          8,239,313     7,591,204 9,491,719




                                                                               - 44 -
                                                       (English Translation)
                                                  FUBON INSURANCE CO., LTD.
                                                NOTES TO FINANCIAL STATEMENTS
                                                   DECEMBER 31, 2004 AND 2003
                                      (Expressed in thousands of New Taiwan Dollars)

X.       OTHERS (CONT’D)

2004
Item               Type          Premium        Reinsurance    Reinsurance           Retention     Allot unearned      Recover      Retention     Notes
                                 Revenue        Premium         Premium              premium          premium          unearned     of earned
Compulsory    Compulsory            1,497,502          177,056    ceded
                                                                     488,590             1,185,968     reserve
                                                                                                            410,919    premium
                                                                                                                            404,374 premium
                                                                                                                                        1,179,423
third party   private
liability     passenger auto         386,187            26,782          125,910           287,059            125,876         128,739     289,922
              Compulsory
              commercial
              auto liability
              Compulsory            1,220,248          111,266          365,573           965,941            546,590         475,993     895,344
              motorcycle
              liability
              Compulsory             159,772            34,527          159,718            34,581                 -               -       34,581
              earthquake
Sub-total                           3,263,709          349,631         1,139,791         2,473,549         1,083,385       1,009,106    2,399,270



Total                            23,394,239          961,927        11,742,789        12,613,377         9,322,698       8,600,310 11,890,989


2003
       Item        Type          Premium        Reinsurance        Reinsurance       Retention         Unearned        Unearned       Earned     Notes
                                 Revenue         Premium            Premium          premium         premium allot     premium       retention
                                                                      ceded                           rate reserve     Recovery      premium
Non-          Residential fire       230,055                  -           13,392           216,663          117,550     reserve
                                                                                                                             111,294     210,407
Compulsory    savings
insurance     insurance             (58,776)                  -              445          (59,221)         2,861,630       3,125,843     204,992
              Long-term
              residentia fire
              Commercial fire      3,101,262            56,158         1,892,604         1,264,816          619,321         667,250     1,312,745
              insurance
              Long-term              (4,678)                  -                  -         (4,678)          210,198         252,609        37,733
              commercial fire
              insurance
              Inland marine          266,465                  28         157,955           108,538           53,233          22,290        77,595
              insurance
              Marine cargo           850,936            46,234           409,727           487,443          145,195         102,288      444,536
              insurance
              Marine hull            189,931              445            167,431            22,945           11,221          20,392        32,116
              insurance
              Fishing vessel         165,811            21,647           140,599            46,859           23,752          21,494        44,601
              insurance
              Aviation               610,938              475            572,001            39,412           23,471          22,007        37,948
              insurance
              Private              3,745,256            47,157         1,509,480         2,282,933         1,168,018        916,310     2,031,225
              passenger auto
              physical damage
              Commercial             101,912              826             40,572            62,166           29,402          23,411        56,175
              auto physical
              damage
              Private              2,175,927            25,805           677,444         1,524,288          765,348         703,403     1,462,343
              passenger auto
              insurance
              Commercial             977,743             5,950           409,714           573,979          296,100         274,286      552,165
              passenger auto
              Personal               983,664            23,790           356,371           651,083          309,457         187,095      528,721
              liability
              insurance




                                                                         - 45 -
                                                       (English Translation)
                                                  FUBON INSURANCE CO., LTD.
                                                NOTES TO FINANCIAL STATEMENTS
                                                   DECEMBER 31, 2004 AND 2003
                                      (Expressed in thousands of New Taiwan Dollars)

 X.         OTHERS (CONT’D)

        Item         Type       Premium         Reinsurance       Reinsurance       Retention         Unearned        Unearned       Earned     Notes
                                Revenue          Premium           Premium          premium         premium allot     premium       retention
                                                                     ceded                           rate reserve     Recovery      premium
Non-           Fidelity and           83,388            5,078            63,993            24,473            13,326    reserve8,369      19,516
Compulsory     surety
insurance      insurance             364,230                 13         131,420          232,823             30,949         78,384         280,258
               Credit
               insurance
               Other property        167,163            9,346           125,975            50,534            28,380         15,874          38,028
               insurance
               Accident            1,166,187                 4          383,301          782,890            359,203        320,779         744,466
               insurance
               Commercial            875,846                 -          601,231          274,615            123,145          5,511         156,981
               earthquake
               insurance
               Personal              360,896            5,666           196,745          169,817             61,080          8,045         116,782
               multiple
               insurance
               Commercial             41,009                 55                 2          41,062            20,715         21,777          42,124
               multiple
               insurance and
               Typhoon               715,729            1,190           545,532          171,387             45,974         28,435         153,848
               flood fire
               Foreign                    -           243,053                -           243,053            112,338        136,556         267,271
               reinsurance
Sub-total                        19,227,002          660,226        11,024,621         8,802,607          7,591,204      7,329,887      8,541,290




Item                 Type       Premium        Reinsurance        Reinsurance       Retention       Allot unearned    Recover         Retention of Notes
                                Revenue        Premium             Premium          premium            premium        unearned        earned
                                                                     ceded                              reserve       premium         premium
                                                                                                                       reserve
Compulsory     Compulsory          1,447,834         167,283           454,333          1,160,784           404,374        450,136        1,206,546
third party    private
liability      passenger auto
insurance      liability
               Compulsory           365,184           35,431           110,742           289,873            128,739        110,490         271,624
               commercial
               auto liability
               Compulsory          1,091,502         106,337           309,330           888,509            475,993        484,198         896,714
               motorcycle
               liability
               Compulsory           136,786           26,627           136,771            26,642                 -               -          26,642
               earthquake
Sub-total                          3,041,306         335,678          1,011,176         2,365,808         1,009,106       1,044,824       2,401,526


Total                           22,268,308         935,904         12,035,797       11,168,415          8,600,310       8,374,711     10,942,816




                                                                         - 46 -
                                                    (English Translation)
                                               FUBON INSURANCE CO., LTD.
                                             NOTES TO FINANCIAL STATEMENTS
                                                DECEMBER 31, 2004 AND 2003
                                    (Expressed in thousands of New Taiwan Dollars)
X.   OTHERS (CONT’D)

     3.   Disclosure of retention of earned gross premium based on compulsory and non-compulsory
     insurance

          2004
                                                                     Reinsurance        Claims
              Item                 Type               Claims                                         Self-claim       Note
                                                                        Claim          Recovered
          Non-         Residential fire savings          14,694                    -         3,672      11,022
          Compulsory   insurance
          insurance
                       Long-term residentia fire        25,751                     -        1,307         24,444
                       insurance
                       Commercial fire insurance       356,385              190,034      (140,664)       687,083
                       Long-term commercial fire        (21,418)                   -      (22,613)         1,195
                       insurance
                       Inland marine insurance         136,805                 631        107,642         29,794
                       Marine cargo insurance          538,648               16,450       291,916        263,182
                       Marine hull insurance           272,526               13,604       241,706         44,424

                       Fishing vessel insurance        139,031               20,387       110,930         48,488
                       Aviation insurance              226,194                 (409)      184,482         41,303

                       Private passenger auto         2,112,087              26,260       879,931      1,258,416
                       physical damage insurance
                       Commercial auto physical         95,778                 742         41,033         55,487
                       damage insurance
                       Private passenger auto         1,231,171              15,158       511,280        735,049
                       insurance
                       Commercial passenger auto       620,972                3,991       283,093        341,870
                       insurance
                       Personal liability insurance    377,452               21,813       123,425        275,840

                       Professional liability           34,766                 780         27,256          8,290
                       insurance
                       Engineering insurance           951,906                2,123       791,051        162,978

                       Nuclear insurance                       -                   -            -                 -
                       Fidelity and surety              37,634                8,758        31,201         15,191
                       insurance
                       Credit insurance                527,808                  11        159,742        368,077
                       Other property insurance          7,113                3,492         9,343          1,262

                       Accident insurance              519,885                     -      222,631        297,254
                       Commercial earthquake             8,594                 500        (13,216)        22,310
                       insurance
                       Personal multiple insurance      19,395                 531         13,635          6,291

                       Commercial multiple              26,659                    1          580          26,080
                       insurance
                       Typhoon and flood fire          112,043                7,890        22,703         97,230
                       insurance
                       Foreign reinsurance                     -            218,161        16,250        201,911
          Sub-total                                   8,371,879             550,908     3,898,316     5,024,471




                                                                   - 47 -
                                                 (English Translation)
                                            FUBON INSURANCE CO., LTD.
                                          NOTES TO FINANCIAL STATEMENTS
                                             DECEMBER 31, 2004 AND 2003
                                  (Expressed in thousands of New Taiwan Dollars)

X.   OTHERS (CONT’D)
                                                                Reinsurance       Claims
            Item                 Type            Claims                                        Self-claim   Note
                                                                   Claim         Recovered
        Compulsory    Compulsory private          1,171,146          170,553        502,704       838,995
        third party   passenger auto liability
        liability
        insurance
                      Compulsory commercial        494,541              39,055      225,423       308,173
                      auto liability
                      Compulsory motorcycle       1,047,294            123,101      476,198       694,197
                      liability
                      Compulsory earthquake               -               321              -          321

        Sub-total                                 2,712,981            333,030     1,204,325    1,841,686
                                                 11,084,860            883,938     5,102,641    6,866,157
        Total




                                                              - 48 -
                                                      (English Translation)
                                                 FUBON INSURANCE CO., LTD.
                                               NOTES TO FINANCIAL STATEMENTS
                                                  DECEMBER 31, 2004 AND 2003
                                      (Expressed in thousands of New Taiwan Dollars)

X.   OTHERS(CONT’D)

     2003
                                                                       Reinsurance        Claims
                Item                 Type               Claims                                         Self-claim     Note
                                                                          Claim          Recovered
            Non-         Residential fire savings          20,252                    -       (1,821)      22,073
            Compulsory   insurance
            insurance
                         Long-term residentia fire        23,791                     -       (1,658)        25,449
                         insurance
                         Commercial fire insurance       920,742               48,370       268,062        701,050
                         Long-term commercial fire        31,346                     -        9,887         21,459
                         insurance
                         Inland marine insurance          67,220                 523         56,164         11,579
                         Marine cargo insurance          338,502               10,676       150,045        199,133
                         Marine hull insurance            59,388                 (286)       44,369         14,733

                         Fishing vessel insurance        182,860               27,188       164,103         45,945
                         Aviation insurance              293,077                 703        271,611         22,169

                         Private passenger auto         1,886,789              11,277       850,258      1,047,808
                         physical damage insurance
                         Commercial auto physical         88,409                1,112        44,406         45,115
                         damage insurance
                         Private passenger auto         1,154,764               5,592       520,873        639,483
                         insurance
                         Commercial passenger auto       540,949                6,072       267,749        279,272
                         insurance
                         Personal liability insurance    434,293               12,601       243,230        203,664

                         Professional liability           46,286                1,186        35,772         11,700
                         insurance
                         Engineering insurance           612,771              (27,871)      494,167         90,733

                         Nuclear insurance                       -                26              -            26
                         Fidelity and surety              15,610                8,542        22,422          1,730
                         insurance
                         Credit insurance                441,077                    1       256,814        184,264
                         Other property insurance         54,119               (1,363)       34,011         18,745

                         Accident insurance              189,994                     -       34,797        155,197
                         Commercial earthquake          (229,328)                    -     (233,806)         4,478
                         insurance
                         Personal multiple insurance      72,154               (4,362)       20,708         47,084

                         Commercial multiple               (6,558)              1,571        (8,088)         3,101
                         insurance
                         Typhoon and flood fire           (31,611)              4,398       (17,602)        (9,611)
                         insurance
                         Foreign reinsurance                     -             73,433             -         73,433
            Sub-total                                   7,206,896             179,389     3,526,473     3,859,812




                                                                     - 49 -
                                                    (English Translation)
                                               FUBON INSURANCE CO., LTD.
                                             NOTES TO FINANCIAL STATEMENTS
                                                DECEMBER 31, 2004 AND 2003
                                     (Expressed in thousands of New Taiwan Dollars)

X.    OTHERS (CONT’D)

                                                                   Reinsurance       Claims
               Item                 Type            Claims                                        Self-claim   Note
                                                                      Claim         Recovered
           Compulsory    Compulsory private         1,011,682           153,205        446,727       718,160
           third party   passenger auto liability
           liability
           insurance
                         Compulsory commercial        450,820              42,357      189,230       303,946
                         auto liability
                         Compulsory motorcycle        991,759             119,032      483,481       627,310
                         liability
                         Compulsory earthquake               -                  -             -            0

           Sub-total                                2,454,261             314,594     1,119,438    1,649,416
                                                    9,661,157             493,983     4,645,911    5,509,228
           Total


4    Disclosure of each dangerous unit’s retention limit:

          The details of each dangerous unit’s retention limit were as follows:
             (1) Fire insurance: $3,600,000
             (2) Marine insurance:
                   a. Fishing vessels insurance: $50,000
                   b. Marine physical damages insurance: USD $2.5 million.
                   c. Inventory insurance: USD $20 million.
             (3) Aviation insurance:
                   a. Physical insurance: USD $3 million
                   b. Liability insurance: USD $5 million
             (4) New insurance:
                   a. Liability insurance: $3,600,000
                   b. Professional insurance: $3,600,000
                   c. Other property insurance: $3,600,000
                   d. Fidelity and surety insurance: $3,600,000
                   e. Injure insurance: $3,600,000
                   f. Credit insurance: $3,600,000
                   g Commercial multiple insurance: $3,600,000
                   h. Personal multiple insurance: $3,600,000
             (5) Engineer insurance:
                   a. Engineer insurance: $4,500,000
                   b. Engineer bond insurance: $4,500,000
                   c. Nuclear insurance: $4,500,000




                                                                 - 50 -
                                               (English Translation)
                                          FUBON INSURANCE CO., LTD.
                                        NOTES TO FINANCIAL STATEMENTS
                                           DECEMBER 31, 2004 AND 2003
                                  (Expressed in thousands of New Taiwan Dollars)

X.    OTHERS (CONT’D)

               (6). Motor insurance:
                   a. Physical loss insurance: $6,000
                   b. Third party liability insurance: $ 100,000
                   c. Passenger liability insurance: $ 135,000


 4    Reserves accrued and recovered for compulsory motor and motorcycle insurance:
     2004
                       Type             Beginning Provision Recovered            End        Note
            Unearned premium reserve
            Compulsory auto liability
            insurance                     533,113      536,795     (533,113)    536,795
            Compulsory motorcycle
            liability insurance           475,993      546,590     (475,993)    546,590
            Special reserve
            Compulsory auto liability
            insurance                    1,803,491            -     (47,635)   1,755,856
            Compulsory motorcycle
            liability insurance           (179,840)           -    (138,953)    (318,793)
            Claim reserve
            Compulsory auto liability
            insurance                     231,035       242,070    (231,035)     242,070
            Compulsory motorcycle
            liability insurance           135,912       136,306    (135,912)     136,306
            Total                        2,999,704    1,461,761 (1,562,641) 2,898,824

     2003
                       Type             Beginning Provision Recovered            End        Note
            Unearned premium reserve
            Compulsory auto liability
            insurance                     560,008      533,113     (560,008)    533,113
            Compulsory motorcycle
            liability insurance           482,970      475,993     (482,970)    475,993
            Special reserve
            Compulsory auto liability
            insurance                    1,724,068      157,816      35,231    1,917,115
            Compulsory motorcycle
            liability insurance           (150,656)           -      69,461      (81,195)
            Claim reserve
            Compulsory auto liability
            insurance                     277,645       231,034    (277,645)    231,034
            Compulsory motorcycle
            liability insurance           145,745       135,911    (145,745)    135,911
            Total                        3,039,780    1,533,867 (1,361,676) 3,211,971




                                                          - 51 -
                                                       (English Translation)
                                                  FUBON INSURANCE CO., LTD.
                                                NOTES TO FINANCIAL STATEMENTS
                                                   DECEMBER 31, 2004 AND 2003
                                         (Expressed in thousands of New Taiwan Dollars)

  6           RECLASSIFICATION

              Certain accounts in 2003 financial statements have been reclassified to conform to the presentations
              adopted in 2004. The result of reclassification did not have any significant impact on the 2003 financial
              statements

XI.    NOTES TO DISCLOSURE EVENTS

      1.      Information on significant transactions

               (1)       Funds lent to others: Not applicable
               (2)       Checks endorsed for others: None
               (3)       The position of holding securities:
                                                                      December 31, 2004
  Holding        Type and       Relationship    Account      Shares (in    Book Value     Percentage    Market            Note
 Company         name of         Account                    thousands)                       (%)       price/Net
                 security                                                                               value of
                                                                                                         equity
    Fubon      FHLMC 5.625%          -         Long-term          11,000       349,732        -            379,251       Foreign
  Insurance                                       bond                                                               corporation bond
                                               investment
      〃        FHLMC 5.5%            -            〃                7,000       221,944        -           239,874          〃

      〃        FHLMC 5.125%          -            〃                2,000        63,204        -            64,144          〃

      〃        FHLMC 5.25%           -            〃                5,000       155,501        -           160,075          〃

      〃        FHLB FLOAT            -            〃                8,000       254,731        -           255,336 Structured bond

      〃        LLOYDS TSB            -            〃                2,000        63,796        -            63,834          〃
               BANK FLOAT
      〃        ROYAL BK OF           -            〃                5,000       159,585        -           159,585          〃
               SCOTLAND
               FLOAT(06/23/1
               3)

      〃        ROYAL BK OF           -            〃                5,000       159,585        -           159,563          〃
               SCOTLAND
               FLOAT(07/1/13)
      〃        BNP PARIBAS           -            〃                7,000       223,388        -           223,419          〃
               FLOAT
      〃        BCEE                  -            〃                5,000       159,585        -           159,585          〃
               FLOAT(07/11/1
               3)

      〃        LLOYDS TSB            -            〃                5,000       159,585        -           159,585          〃
               BANK FLOAT
      〃        CBA                   -            〃                5,000       159,585        -           148,190          〃
               FLOAT(07/18/1
               3)
      〃        CBA                   -            〃                5,000       159,585        -           159,585          〃
               FLOAT(04/13/1
               4)
      〃        DEUTSCHE              -            〃                5,000       157,253        -           159,585          〃
               BANK FLOAT
      〃        BGL                   -            〃                5,000       159,585        -           159,585          〃
               FLOAT(04/28/1
               4)




                                                                     - 52 -
                                                  (English Translation)
                                             FUBON INSURANCE CO., LTD.
                                           NOTES TO FINANCIAL STATEMENTS
                                              DECEMBER 31, 2004 AND 2003
                                      (Expressed in thousands of New Taiwan Dollars)

XI.   NOTES TO DISCLOSURE EVENTS (CONT’D)

                                                               December 31, 2004
  Holding     Type and      Relationship   Account    Shares (in    Book Value     Percentage    Market          Note
 Company      name of        Account                 thousands)                       (%)       price/Net
              security                                                                           value of
                                                                                                  equity
      〃     ROYAL BK OF          -           〃              2,000        64,036        -             67,162 Foreign financial
            SCOTLAND 6%                                                                                            bond
      〃     CITIGROUP            -           〃              4,000       129,208        -            142,387         〃
            6.5%
      〃     AIG 6.3%             -           〃              2,000        63,806        -             70,443       Foreign
                                                                                                              corporation bond
      〃     AIG 4.25%            -           〃              2,000        60,705        -             61,778         〃

      〃     MORGAN               -           〃              2,000        63,962        -             70,798         〃
            STANLEY 6.6%
      〃     CSFB(USA)INC         -           〃              8,000       261,646        -            274,486         〃
            6.125%
      〃     GOLDMAN              -           〃              5,000       175,737        -            177,203       Foreign
            SACHS 6.6%                                                                                        corporation bond
      〃     MORGAN               -           〃              8,000       260,123        -            261,701         〃
            STANLEY 5.3%
      〃     GOLDMAN              -           〃              4,000       132,809        -            134,501         〃
            SACHS 5.7%
      〃     GE 5.45%             -           〃             12,000       395,233        -            402,763         〃

      〃     GOLDMAN              -           〃              3,000        97,531        -             96,952         〃
            SACHS 5.25%
      〃     BANK OF              -           〃             10,000       309,631        -            317,801 Foreign financial
            AMERICA                                                                                                bond
            4.75%

      〃     VERIZON              -           〃              2,000        61,137        -             61,804       Foreign
            4.625%                                                                                            corporation bond
      〃     WELLS FARGO          -           〃              5,000       156,977        -            160,774 Foreign financial
            4.95%                                                                                                  bond
      〃     HUTCHISON            -           〃             10,000       322,319        -            326,445       Foreign
            WHAMP 5.45%                                                                                       corporation bond
      〃     CSFB 5.125%          -           〃              3,000        95,337        -             97,306         〃

      〃     MERRILL              -           〃              9,000       279,066        -            287,282         〃
            LYNCH 5.00%
      〃     CITIGROUP            -           〃              3,000        92,226        -             97,286 Foreign financial
            5.125%                                                                                                 bond
      〃     WELLS FARGO          -           〃              3,000        88,912        -             94,205         〃
            4.625%
      〃     CITIBANK             -           〃              3,000        95,751        -             95,975         〃
            4.50%
      〃     FHR 2600 MK          -           〃              6,000       191,652        -            191,768       Foreign
                                                                                                              corporation bond
      〃     FHR 03? 43 EU        -           〃              3,000        95,811        -             96,703         〃

      〃     FHR 2614 GK          -           〃              6,000       191,352        -            190,862         〃

      〃     FHR 2627 CP          -           〃              6,000       190,784        -            181,455         〃

      〃     FHR 2626 PE          -           〃              6,000       190,156        -            181,438         〃

      〃     FHR 2648 CB          -           〃              3,772       119,754        -            117,212         〃

      〃     FNR 03? 81 MC        -           〃              2,000        62,557        -             63,516         〃

      〃     FHR 2686 MH          -           〃              2,000        63,974        -             65,578         〃




                                                               - 53 -
                                                   (English Translation)
                                              FUBON INSURANCE CO., LTD.
                                            NOTES TO FINANCIAL STATEMENTS
                                               DECEMBER 31, 2004 AND 2003
                       (Expressed in thousands of New Taiwan Dollars)
XI.   NOTES TO DISCLOSURE EVENTS(CONT’D)

                                                                December 31, 2004
  Holding     Type and       Relationship   Account    Shares (in    Book Value     Percentage    Market            Note
 Company      name of         Account                 thousands)                       (%)       price/Net
              security                                                                            value of
                                                                                                   equity
      〃     FHR 2686 QH           -           〃              4,000       126,830        -            131,155         〃

      〃     FHR 2662 PH           -           〃              5,000       160,553        -           165,568          〃

      〃     FHR 2831 DS           -           〃              2,875        89,911        -            92,050          〃

      〃     FHR 2852 SQ           -           〃              5,000       159,581        -           157,766          〃

      〃     FHR 2665 SX           -           〃             10,000       319,162        -           300,286          〃

      〃     DEUTSCHE              -           〃              5,000       159,585        -           159,585 Structured bond
            BANK AG
            FLOAT((11/19/1
            6)

      〃     UBS                   -           〃             10,000       318,193        -           316,042          〃
            AGIERSEY
            BRANCH
            FLOAT(11/15/1
            6)
      〃     FHR 2878 SD           -           〃              4,982       158,920        -           160,615        Foreign
            7.07%                                                                                              corporation bond
      〃     FNR 04? 90 ZU         -           〃             14,638       462,634        -           466,411          〃
            6.00%
      〃     FHR 04? 87 SK         -           〃              7,600       240,788        -           236,968          〃
            6.00%
      〃     ROYAL BK OF           -           〃              5,000       124,780        -           124,780          〃
            SCOTLAND
            FLOAT(10/27/1
            4)

      〃     ANZ FLOAT             -           〃              5,000       125,287        -           125,242          〃
            (05/21/14)
      〃     AIG (05/27/09)        -           〃              5,000       127,772        -           126,340          〃

      〃     A85305                -           〃           200,000        253,069        -           256,362      Government
                                                                                                                    bond
      〃     A85302                -           〃           500,000        635,592        -           630,040          〃

      〃     A86101                -           〃           100,000        105,494        -           109,335          〃

      〃     A86102                -           〃           224,000        236,346        -           245,433          〃

      〃     A86104                -           〃           150,000        159,015        -           163,770          〃

      〃     A91108                -           〃           450,000        472,857        -           474,847          〃

      〃     A91111                -           〃           800,000        795,013        -           806,015          〃

      〃     A92107                -           〃          1,200,000      1,198,037       -          1,218,512         〃

      〃     A92110                -           〃           550,000        554,263        -           570,761          〃

      〃     C86101                -           〃           129,100        134,727        -           139,073          〃

      〃     C86102                -           〃             50,000        53,017        -            55,039          〃

      〃     C87101                -           〃           150,000        152,029        -           153,716          〃

      〃     C88101                -           〃           300,000        305,253        -           311,033          〃

      〃     C89101                -           〃           300,000        312,008        -           324,250          〃

      〃     C89102                -           〃           200,000        208,989        -           219,013          〃

      〃     C90102                -           〃           350,000        342,625        -           379,383          〃




                                                               - 54 -
                                                            (English Translation)
                                                       FUBON INSURANCE CO., LTD.
                                                     NOTES TO FINANCIAL STATEMENTS
                                                        DECEMBER 31, 2004 AND 2003
                         (Expressed in thousands of New Taiwan Dollars)
XI.   NOTES TO DISCLOSURE EVENTS(CONT’D)

                                                                           December 31, 2004
       Holding     Type and          Relationship    Account      Shares (in    Book Value      Percentage     Market         Note
      Company      name of            Account                    thousands)                        (%)        price/Net
                   security                                                                                    value of
                                                                                                                equity
         〃       Zigsheng                 -            〃             200,000        201,556 -                     201,556   Corporation
                 collateral bonds                                                                                              bond
         〃       Les enphants             -            〃             150,000        150,772 -                    150,783        〃
                 collateral bonds
         〃       Standard                 -            〃             100,000        101,253 -                    101,223        〃
                 chem&pharm
                 collateral bonds
         〃       Silicon                  -            〃             100,000        100,299 -                    100,299        〃
                 application co.
                 collateral bonds
         〃       Tai power                -            〃             500,000        500,000 -                    499,986        〃
                 corporation bond
         〃       First Bank               -            〃             500,000        500,000 -                    499,982 Financial bond
                 Financial Bonds
         〃       Sinopac bank             -            〃             200,000        200,000 -                    200,000        〃
                 second financial
                 bond
         〃       E.sun bank               -            〃             100,000        100,000 -                    100,000        〃
                 second financial
                 bond
         〃       Fubon Venture     Parent company   Long-term          10,000        75,306              20       75,306 Non listed
                 Capital Co., Ltd.                    equity                                                             company
                                                    investment
         〃       Sino Star             〃               〃               10,000        83,190           20.83       83,190        〃
                 Venture Capital
                 Co., Ltd.
         〃       WK Technology Substantive             〃                7,468        74,750            3.07       74,750        〃
                 Fund            related person
         〃       Taiwan                  〃             〃                6,553        65,528            1.25       65,528        〃
                 Aerospace Corp.
         〃       China Trust             〃             〃                6,667        66,667           16.67       66,667        〃
                 Venture Capital
         〃       Arco                    〃             〃                  323         9,480            0.24        9,480        〃
                 Communication
                 Co., Ltd.
         〃       China Alliance          〃             〃               12,000       120,000           16.67      120,000        〃
                 Venture Fund
         〃       Teng Feng               〃             〃                5,000        50,000            4.67       50,000        〃
                 Venture Capital
                 Investment Corp.
         〃       Kuo Chiao               〃             〃                6,000        60,000              10       60,000        〃
                 Venture Capital
                 Investment Corp.
         〃       Taiwan Da-Long          〃             〃                  520        19,000            0.82       19,000        〃
                 Industrial Corp.
                 Ltd.
         〃       Hsin Yu Energy          〃             〃                2,440        28,880            0.98       28,880        〃
                 Development
                 Co., Ltd.
         〃       FAT Venture             〃             〃                5,000        50,000            3.33       50,000        〃
                 Capital Co., Ltd.
         〃       Primus                  〃             〃                5,000        54,000            9.43       54,000        〃
                 Technology
                 Fund
         〃       Yi Hua Venture          〃             〃                3,000        30,000            2.44       30,000        〃
                 Capital
                 Investment Corp.




                                                                          - 55 -
                                                      (English Translation)
                                                 FUBON INSURANCE CO., LTD.
                                               NOTES TO FINANCIAL STATEMENTS
                                                  DECEMBER 31, 2004 AND 2003
                                         (Expressed in thousands of New Taiwan Dollars)

XI.   NOTES TO DISCLOSURE EVENTS(CONT’D)

                                                                   December 31, 2004
  Holding     Type and          Relationship   Account    Shares (in    Book Value      Percentage        Market          Note
 Company      name of            Account                 thousands)                        (%)           price/Net
              security                                                                                    value of
                                                                                                           equity
      〃     Taiwan High             〃            〃           116,268       1,154,007           1.28         1,154,007      〃
            Speed Rail Co.,
            Ltd.
      〃     Chin Tau                〃            〃              8,500        85,000             1.7           85,000       〃
            Electronic Co.,
            Ltd.
      〃     Tai Mao                 〃            〃              4,200        50,400            1.25           50,400       〃
            Development
            Co., Ltd.

      〃     Pacific Venture         〃            〃              4,000        41,500            3.33           41,500       〃
            Capital Co., Ltd.
      〃     Trans Asia              〃            〃              2,060        73,700            0.58           73,700       〃
            Telecommucatio
            ns Co., Ltd.
      〃     Taiwan Fixed            〃            〃           122,500       1,059,350            1.9        1,059,350       〃
            Network Co.,
            Ltd.
      〃     Fu Yu Venture           〃            〃              3,000        30,000            2.22           30,000       〃
            Capital
            Investment Co.,
            Ltd.
      〃     China                   〃            〃              1,250        12,500            3.73           12,500       〃
            Technology
            Venture Capital
            Co., Ltd.
      〃     Wua Wei                 〃            〃              1,000        10,000                  1        10,000       〃
            Venture Capital
            Co., Ltd.
      〃     Phalanx Biotech         〃            〃              2,344        25,969                  3        25,969       〃
            Corp.
      〃     Vision Venture          〃            〃              2,000        20,000            2.16           20,000
            Capital Co., Ltd.
      〃     Cashbox Co.,            〃            〃              5,750       214,804            5.83          214,804       〃
            Ltd.
      〃     Taiwan HI-              〃            〃                228         2,455            0.88            2,455       〃
            TECH. CORP
      〃     WELLYPOWER              〃            〃                627        11,056            0.79           11,506       〃
            OPTRONICS
            CORPORA
            CORP.
      〃     Taiwan High             〃            〃             37,700       350,610 -                        350,610       〃
            Speed Rail Co.,
            Ltd.-preferred
            stock

      〃     TECO Electric &         〃            〃             23,734       663,275            1.19          236,863 Listed company
            Machinary Co.,
            Ltd.
      〃     Sampo                   〃            〃              1,014        21,564            0.08            7,367       〃
            Corporation
      〃     Kuoyang Const.          〃            〃              2,121        12,940             0.7           29,466       〃
            Co., Ltd.




                                                                  - 56 -
                                                                  (English Translation)
                                                             FUBON INSURANCE CO., LTD.
                                                           NOTES TO FINANCIAL STATEMENTS
                                                              DECEMBER 31, 2004 AND 2003
                                                  (Expressed in thousands of New Taiwan Dollars)

XI.         NOTES TO DISCLOSURE EVENTS(CONT’D)

                                                                                              December 31, 2004
   Holding              Type and       Relationship        Account               Shares (in         Book Value               Percentage              Market         Note
  Company               name of         Account                                 thousands)                                      (%)                 price/Net
                        security                                                                                                                     value of
                                                                                                                                                      equity
          〃         Lite-On                   〃                〃                         5,555                 347,703                       0.22       181,915 List company
                    Technology Co.,
                    Ltd.

          〃         Chung Hwa                 〃                〃                      26,000                  1,228,703                      0.27         1,628,900      〃
                    Telecom Co.,
                    Ltd. Securities
                    KGI                                                                      911                15,000                       0.04           13,381       〃
          〃                                   〃                〃
                    Co., Ltd.


                  (4) Accumulation of buying and selling same securities over $100,000 or 20% of capital:
                                                                   January 1,2004                  Purchase                                       Disposal                       December 31
               Type and                Trading                 Shares (in       Amount       Shares (in        Amount       Shares (in        Amount Book Value- Gain (Loss) Shares ,2004
                                                                                                                                                                                    (in Amount
  Holding                               Party     Relations-   thousand)                     thousands)                     thousands)                   Note 2  on disposal thousands
               name of      Account
 Company                                             hip                                                                                                          securities     )
                security
              Foreign
              bonds
Fubon         FHLMC       Long-term       _           _                                  -         5,000         165,572                 -            -       10,071         -   5,000 155,501
Insurance     5.25%       bond
                          investment
      〃       FHLMC6.75        〃          _           _            10,000         361,798                 -       10,252        10,000          398,221      372,050   37,167        -       -
              %(03/15/31)
      〃       FHLMC5.12        〃          _           _             5,000         171,896                 -        3,797         5,000          168,866      175,693    1,006        -       -
              5%(08/20/12
      〃       DEUTSCHE         〃          _           _             3,000         101,934                 -        2,892         3,000          101,076      104,826     876         -       -
              BANK
              FLOAT(10/
              22/12)
      〃       ROYAL BK         〃          _           _                     -            -         3,000         101,256         3,000          101,923      101,256     667         -       -
              OF
              SCOTLAND
              FLOAT(05/
              13/14)
      〃       LBW              〃          _           _             5,000         169,890                 -             -        5,000                -      169,890         -       -       -
              FLOAT
      〃       BCEE             〃          _           _             5,000         169,890                 -             -        5,000                -      169,890         -       -       -
              FLOAT(03/
              31/15)
      〃       BCEE             〃          _           _                     -            -         5,000         169,920         5,000                -      169,920         -       -       -
              FLOAT(04/
              0914)
      〃       CBA              〃          _           _             5,000         169,550                 -        4,828         5,000          161,023      174,378     303         -       -
              FLOAT(12/
              30/13)
      〃       CBA              〃          _           _                     -            -         5,000         169,920                 -            -       10,335         -   5,000 159,585
              FLOAT(04/
              13/14)
      〃       BGL              〃          _           _                     -            -         5,000         169,920         5,000          168,460      169,920    1,460        -       -
              FLOAT(04/
              21/14)
      〃       DEUTSCHE         〃          _           _                     -            -         5,000         167,436                 -            -       10,183         -   5,000 157,253
              BANK
              FLOAT




                                                                                              - 57 -
                                                           (English Translation)
                                                      FUBON INSURANCE CO., LTD.
                                                    NOTES TO FINANCIAL STATEMENTS
                                                       DECEMBER 31, 2004 AND 2003
                                             (Expressed in thousands of New Taiwan Dollars)

XI.     NOTES TO DISCLOSURE EVENTS(CONT’D)
                                                                   January 1,2004                   Purchase                            Disposal                     December 31 ,2004
                                      Trading                   Shares (in       Amount       Shares (in   Amount       Shares (in   Amount    Book       Gain       Shares (in Amount
 Holding Type and name of              Party                    thousand)                     thousands)                thousands)            Value-    (Loss) on thousands
                            Account             Relations-hip
Company      security                                                                                                                         Note 2     disposal        )
                                                                                                                                                        securities
   〃     BGL                  〃          _           _                       -            -        5,000    169,920              -          -    10,335            -     5,000   159,585
         FLOAT(04/28/14)
   〃     WALL FARGO           〃          _           _                2,000        67,412          3,000    101,629              -          -    12,064          -      5,000   156,977
         4.95%
   〃     HUTCHISON            〃          _           _                       -            -       10,000    344,329              -          -    22,010          -     10,000   322,319
         WHAMP 5.45%
   〃     CSFB (USA) INC       〃          _           _                       -            -        3,000    101,512              -          -     6,175          -      3,000    95,337
         5.125%
   〃     MERRILL LYNCH        〃          _           _                       -            -        9,000    297,139              -          -    18,073          -      9,000   279,066
         5.00%
   〃     MORGAN               〃          _           _                3,000       127,826              -            -        3,000    130,645   127,826      2,819          -          -
         STANLEY DW
         5.75%
   〃     PROCTER &            〃          _           _                3,000       130,618              -            -        3,000    127,332   130,618     -3,286          -          -
         GAMBLE 5.75%
   〃     BARCLAYS             〃          _           _                3,000       130,626              -            -        3,000    132,981   130,626      2,355          -          -
         BANK 5.75%
   〃     TESCO 5.25%          〃          _           _                3,000       129,547              -            -        3,000    130,255   129,547        708          -          -

   〃     FHR 2831 DS          〃          _           _                       -            -        5,000    167,213          2,125     70,101    77,302      1,233      2,875    89,911

   〃     FHR 2852 SQ          〃          _           _                       -            -        5,000    169,920              -          -    10,339          -      5,000   159,581

   〃     FHR 2665 SX          〃          _           _                       -            -       10,000    339,840              -          -    20,678          -     10,000   319,162

   〃     RABOBANK             〃          _           _              10,000        339,618              -            -       10,000    339,776   339,618        158          -          -
         FLOAT
   〃     DEUTSCHE             〃          _           _                       -            -        5,000    165,585              -          -     6,000          -      5,000   159,585
         BANK AG FLOAT
         (11/19/16)
   〃     UBS AGIERSEY         〃          _           _                       -            -       10,000    328,731              -          -    10,538          -     10,000   318,193
         BRANCH
         FLOAT(11/15/16)
   〃     FHR 2878 SD          〃          _           _                       -            -        5,000    168,874             18        576     9,954          1      4,982   158,920
         7.07%
   〃     FNR 40? 90 ZU        〃          _           _                       -            -       14,900    482,635            262     11,667    20,001        112     14,638   462,634
         6.00%
   〃     FHR 04? 87 SK        〃          _           _                       -            -        7,600    245,088              -          -     4,300          -      7,600   240,788
         6.00%
   〃     ROYAL BK OF          〃          _           _                       -            -        5,000    124,780              -          -          -         -      5,000   124,780
         SCOTLAND
         FLOAT (10/27/14)
   〃     ANZ FLOAT            〃          _           _                       -            -        5,000    127,266              -          -     1,979          -      5,000   125,287
         (05/21/14)
   〃     AIG (05/27/09)       〃          _           _                       -            -        5,000    127,772              -          -          -         -      5,000   127,772

         Bonds                           _           _

   〃     A91108               〃          _           _                       -            -      450,000    473,965              -          -     1,108          -   450,000    472,857

   〃     A91111               〃          _           _             250,000        249,983        550,000    545,030              -          -          -         -   800,000    795,013

   〃     A92107               〃          _           _             250,000        246,919        950,000    951,118              -          -          -         - 1,200,000 1,198,037

   〃     A92110               〃          _           _                       -            -      550,000    554,280              -          -       17           -   550,000    554,263

   〃     C93101               〃          _           _                       -            -      500,000    500,000              -          -          -         -   500,000    500,000

   〃     A91104               〃          _           _                       -            -      150,000    157,203              -          -      470           -   150,000    156,733

   〃     C93102               〃          _           _                       -            -      150,000    150,000              -          -          -         -   150,000    150,000




                                                                                   - 58 -
                                                                    (English Translation)
                                                               FUBON INSURANCE CO., LTD.
                                                             NOTES TO FINANCIAL STATEMENTS
                                                                DECEMBER 31, 2004 AND 2003
                                                   (Expressed in thousands of New Taiwan Dollars)

XI.     NOTES TO DISCLOSURE EVENTS (CONT’D)
                                                                 January 1,2004                   Purchase                                                                                   December 31 ,2004
                                                                                                                                                 Disposal
                                      Trading
             Type and                                        Shares (in       Amount      Shares (in        Amount       Shares (in       Amount          Book     Gain (Loss)              Shares (in       Amount
 Holding                               Party     Relation-
             name of       Account                           thousand)                    thousands)                     thousands)                     Value-Note on disposal             thousands)
Company                                            ship                                                                                                     2       securities
              security
   〃       Long-term                     _          _
           equity
           investment
   〃                    Long-term        _          _             1,250          48,375           7,500      278,500             3,000        121,350          112,071             9,279           5,750      214,804
           Cashbox Co., equity
           Ltd.         investment
   〃       Taiwan Fixed      〃           _          _           175,000       1,584,350               -              -        52,500          525,000          525,000                 -         122,500 1,059,350
           Network Co.,
           Ltd.
   〃       Taiwan High       〃           _          _            37,700         350,610               -              -                -             -                -                 -          37,700      350,610
           Speed Rail
           Co., Ltd.-
           preferred
   〃       Fubon holding     〃           _          _            91,080       2,723,740               -              -        91,080                -      2,723,740                   -                 -            -
           company


                                                                   January 1,2004                    Purchase                                                                                       December 31 ,2004
                                                                                                                                                        Disposal
                                       Trading
             Type and
  Holding                               Party    Relationshi Shares (in        Amount          Shares (in    Amount        Shares (in          Amount          Book Value- Gain (Loss)            Shares (in     Amount
              name of      Account                           thousand)                        thousands)                   thousands)                            Note 2    on disposal           thousands)
 Company                                              p
              security                                                                                                                                                      securities
    〃     Corporation                        _          _
          bonds
    〃     Zigsheng        Long-term          _          _                 -               -      200,000       201,867                    -                -             311                 -       200,000       201,556
          collateral      bond
    〃     Les enphants        〃              _          _                 -               -      150,000       150,927                    -                -             155                 -       150,000       150,772
          collateral
    〃     Standard            〃              _          _                 -               -      100,000       101,357                    -                -             104                 -       100,000       101,253
          chem&pharm
          collateral
    〃     Silicon             〃              _          _                 -               -      100,000       100,449                    -                -             150                 -       100,000       100,299
          application co.
    〃     Tai power                          _          _                 -               -      500,000       500,000                    -                -               -                 -       500,000       500,000
          corporation



       (5)          Acquisition of property and equipment over $100,000 or 20% of capital: None.
       (6)          Disposal of property and equipment over $100,000 or 20% of capital: None
       (7)          Sales and purchase with related party over $100,000 or 20% of capital: None
        (8)         Account receivable with related party over $100,000 or 20% of capital

                               Trading            Relationship         Account                  Turnover                  Overdue Receivable                        After balance Allowance for
                               Company                                balance of                                                                                    sheet amount    bad-debt
                                                                                                                         Amount                  Method
                                                                     related party
           Fubon           Fubon Fnancial Parent                       $104,053                        -                     -                                                 -                         -
           Insurance       HoldingCo.,Ltd. Company
           Company



        (9)         Information on derivative transactions: Please refer to Note IV. 17




                                                                                                - 59 -
                                                    (English Translation)
                                               FUBON INSURANCE CO., LTD.
                                             NOTES TO FINANCIAL STATEMENTS
                                                DECEMBER 31, 2004 AND 2003
                                      (Expressed in thousands of New Taiwan Dollars)


   2.        Disclosure on investment business

       (1)     The significant influence on invested company:

  Investee          Address     Major              Held by the Company        Income or Income(loss Original Investment
  Company                      Business                                         (loss) of ) recognized
                                                                                investee       from
                                             Shares    Percentage Book Value   company       investee  2004,1.1 2004.12.31
                                                          (%)                               company
   Fubon       3 F No.108,    Investing in      10,000          20    $75,911       -14,250 -2,850      $100,000 $100,000
  Venture      Sec. 1, Tun    foreign and
 Capital Co., Hua S. Road,       domestic
     Ltd         Taipei,       technology
                 Taiwan         industries
  Sino Star    3 F No.108,    Investing in      10,000       20.83       $87,883     -10,134   -2,111   $100,000 $100,000
  Venture      Sec. 1, Tun    foreign and
 Capital Co. Hua S. Road,        domestic
     Ltd         Taipei,       technology
             (2)        Funds lent to others: Not applicable

             (3)        Checks endorsed for others: None

             (4)       The position of holding securities: None

             (5)      Accumulation of buying and selling same securities over $100,000 or 20% of capital:
             (6)       Acquisition of property and equipment over $100,000 or 20% of capital: None.
             (7)       Disposal of property and equipment over $100,000 or 20% of capital: None
             (8)       Sales and purchase with related party over $100,000 or 20% of capital: None
             (9)       Account receivable with related party over $100,000 or 20% of capital: None
             (10) Information on derivative transactions: None


  3.         Disclosure on investment in Mainland China:

                   The Company planned to invest USD23.5 million to set up Soochow Fubon Insurance Company in
                   Mainland China. The investment project has been approved by the Investment Commission, Ministry
                   of Economic Affairs as of March 31, 2003, but has not been accomplished yet at the year of 2004.

XII. SEGMENT FINANCIAL INFORMATION DISCLOSURE

    Non-applicable.




                                                               - 60 -

								
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