ANNUAL REPORT 2007ANNUAL REPORT 2007

Chinatrust Financial Holding Co., Ltd.

LOOKING FORWARD WITH VISION, CLARITY AND CARE

nan iinc ding Co., Ltddtd.

Chinatrust Financial Holding Co., Ltd.

Financial Highlights

Letter to Shareholders

Company Profile

The Organization

Business Overview

Social Responsibility

Financial Report

Special Notes

01

02

10

22

30

46

50

62

ITEM

FOR THE YEAR

(Loss) Income before Income Tax

Net (loss) Income

AT THE YEAR END

Total Assets

Stockholders' Equity

PER SHARE

Earnings per share-before income tax

Earnings per share-after income tax

Stockholders' Equity per Share-common stock

Group Capital Adequacy Ratio

Return on Equity-after income tax

Return on Assets-after income tax

(14,758)

(10,200)

1,706,521

123,318

(2.02)

(1.46)

11.513

121.11%

(11.82%)

0.68%

(453)

(313)

52,354

3,783

(0.06)

(0.04)

0.35

20,541

16,120

1,714,591

145,597

2.83

2.20

14.814

139.44%

15.88%

1.02%

625

491

52,195

4,432

0.09

0.07

0.45

1. U.S. Dollars amounts are converted at the prevailing exchange rate on Dec.31, 2006 of NT $32.596=US$12. U.S. Dollars amounts are converted at the prevailing exchange rate on Dec.31, 2005 of NT $32.850=US$13. (123,317,876-30,000,000-1,432,290)/7,986,0834. (145,597,270-40,000,000-612,000-8,630)/7,090,749

2006 Consolidated2007 Consolidated

NT$ USD NT$ USD

In millions, except per share date

This annual report is a simplified version of its full conrent.Please referthe annual report in Chinese or visit our website atwww.chinatrust.com.twfor complete discourse required by the regulations.

Financial Hightl ights

1

2

Letter To Shareholders

In 2006, the global economy was challenged by hikes in crude oil prices and interest rates,

yet at the same time witnessed a booming European economy and robust growth in China

and other emerging markets. Forecasts by leading international institutions, such as GII, IMF,

EIU, and the United Nations in August, September, and October, revealed that the global

economic outlook for 2006 was reviving, with a growth range of about 3.8 to 5.1 percent.

Meanwhile, due to continued relaxed monetary policies in many countries, there was an abun-

dance of liquidity, which led to rising prices in financial stocks, bonds, raw materials and real

estates and therefore making global financial assets market prosperous.

Unfortunately, the situation in Taiwan’s financial industry was not as positive. Taiwanese

banks went through a period of cutthroat competition a few years ago, which forced them to

adopt more lenient loan policies. The inevitable result was significant damage to financial

institutions, particularly because of the “dual card crisis” in 2006. In turn, banks adopted

increasingly stringent policies for granting unsecured loans. In an attempt to solve the insol-

vency problem caused by over-extended credit, Taiwanese government developed an “Inter-

bank Debt Relief Program” to address these liabilities, which gradually helped bring the

consumer credit crisis under control. On the other hand, banks committed themselves to

writing off bad debts and improving asset quality, which helped move Taiwan’s consumer

finance market closer to normalization.

Faced with such a competitive marketplace, Chinatrust has adopted a bank-centric strategy,

featuring an innovative range of financial products and services that are more customer-

oriented. Attributed to the concerted efforts of its management and entire staff, Chinatrust

Financial Holding Co., Ltd. (CFHC), as in the past, has been able to continuously grow share-

holder value. Although it reported the first loss in company history in 2006, as a result of the

consumer credit crisis, the bank persevered with the strategies of “Strengthening

Asset Quality”, and “Diversifying Profit Sources”. Through it all, CFHC managed to achieve a

remarkable performance both in corporate banking as well as in wealth management, while

making vast improvements in unsecured loans asset quality. All of these have cemented a

stronger foundation for CFHC, and paved the way for a brighter future.

3

Adjusting profit sources, diversifying operating risk

Taiwanese corporations have increasingly tried to develop their business in overseas markets

over the past few years. Overbanking in Taiwan and an over-supply of funds led to reduced

profits from the domestic corporate loans sector. To cope with the rapidly changing economic

climate, Chinatrust Commercial Bank (CTCB), a subsidiary of the CFHC, embarked on an

aggressive project several years ago to diversify its financial undertakings. CTCB tried to reduce

its dependence on the lending business by generating additional fee income. Meanwhile, it

made a concerted effort to diversify its operating risks in the hope of delivering investment

returns for shareholders amidst a challenging financial industry climate with

tough competition.

In corporate banking services, CTCB took advantage of its enormous

customer base to boost its Cross-Sell Ratio. It started to build closer tie

with its customers through more comprehensive financial services, and

augment its revenue from sources other than loans to achieve a win-win

payoff. Attributed to this foresight and strategy, CTCB produced

strong non-spread income in 2006; virtually triple the spead

income. Moreover, CTCB remained the leader in the factoring

and syndication businesses. In the years ahead, CTCB will

continue to offer a variety of products and focus on

“Customer-Oriented” services.

When it comes to retail banking, CTCB remains the leader

in Taiwan. It has been awarded the ultimate accolade of

“Taiwan’s Best Private Bank” by “Euromoney” for three

consecutive years (2004, 2005, and 2006). This honor is

further evidence of how much clients and the market have

approved of and supported CTCB’s wealth management

services. CTCB has also launched its “Financial Advisory

System” in 2006, which offered one of the most

analytical and effective asset allocation services to its VIP clients.

the hope of delivering investment

stry climate with

ts enormous

ld closer tie

ervices, and

eve a win-win

uced

d

ng

er

ents.

6

Over the past twenty-two years, through the “Light up a Life” fund-raising charity

campaign, the foundation has contributed to 28 social welfare organizations. With over $480

million raised for charity so far, Chinatrust Charity Foundation has helped put a smile on the

faces of nearly 80,000 children.

In 2006, Chinatrust Commercial Bank won the bid to run Taiwan’s official public lottery.

CTCB has pledged to contribute NT$2 billion to the government every year to run this public

welfare program. The public lottery business offers thousands of job opportunities to under-

privileged people island-wide. Today, the lottery business is run through over 5,000 computer-

ized outlets and more than 12,000 traditional and instant lottery outlets.

Growing earnings, creating sharholder value and

aiming to be a top-notch international financial institution

Chinatrust will focus on the following areas in 2007:

Cultivate company culture and create value to customers.

Improve asset quality and implement risk-based pricing policies.

Expand presence in Greater China and accelerate overseas business expansion.

Enhance brand value and strengthen corporate governance.

Fulfill corporate responsibilities by showing greater support to underprivileged citizens.

CFHC is committed to lead the industry by best practices and capture opportunities from

new businesses and markets. Starting from the strength of our home base in Taiwan, China-

trust will continue to penetrate into the Greater China region, expand in Asia, and extend its

network on the globe. Through our dedication and unyielding efforts, we envisage a world-

class brand for Chinatrust and create sustainable value for shareholders.

Jeffrey L.S. Koo

Chairman

7

8

Letter To Shareholders

Chinatrust Financial Holding Company

Chinatrust Financial Holding Company (hereafter “the Company” or “CFHC”) was founded

on May 17, 2002 to provide integrated services to its customers and to establish an interna-

tional and multi-faceted financial entity. With Chinatrust Commercial Bank (CTCB) as the

flagship organization, Chinatrust Securities Company (Chinatrust Securities) and Chinatrust

Insurance Brokers Company (Chinatrust Insurance) were amalgamated into a single new orga-

nization in the initial phase.

Subsequently, other subsidiaries of CFHC, Chinatrust Venture Capital Corp. (Chinatrust VC),

Chinatrust Asset Management Company (Chinatrust Asset), Chinatrust Bills Finance Corpora-

tion (Chinatrust Bills), Chinatrust Security Company (Chinatrust Security), and the Taiwan

Lottery Corporation (TLC), were also included within the Company. The business activities of

member companies are classified into three major categories, namely retail banking, consumer

finance, and institutional banking. This integrated matrix structure, comprising both divisions

and subsidiaries, will enable resource sharing and cross selling among each unit. It will also

ensure the provision of multi-faceted finacial services to customers.

also ensure the provision of multi-faceted financial services to customers.

The main objectives of CFHC include the following:

To establish CFHC as the leading and most trustworthy financial institution.

To provide the most comprehensive and one-stop financial services that lead to complete

customer satisfaction.

To be the leader and pioneer in providing new financial products and solutions, and serve

as a bellwether in the financial sector.

To be the best run Chinese financial institution in the world.

Chinatrust Financial Holding Company will continue to uphold its tenet “to maximize value

for its shareholders”. The company will map out its strategic business plans, strengthen its

competitiveness, and provide more convenient the industry, as well as the best run Chinese

financial institution in the world..

9

Foreign currency

National

Moody’s

Standard & Poor’s

Fitch

Taiwan Ratings

Fitch (twn)

Long term

-

BBB

A-

twAA-

AA (twn)

Short term

-

A-3

F2

twA-1

F1+ (twn)

Stable

Positive

Negative

Stable

Negative

Issuer Rating: Baa1

-

Individual: B/CSupport: 5

Credit Worthiness: Very Strong

Individual: B/CSupport: 5

2006.12.01

2006.10.04

2006.11.22

2006.10.04

2006.11.22

Types of credit rating

Names of credit rating agencies Credit rating level Outlook Additional notes

Credit Rating Chinatrust Financial Holding Company

Items Name of agencies

Honor/Awards Chinatrust Financial Holding Company

Asia’s Best Companies 2006 - The Best Managed Company, Best Corporate

Governance & Best Investor Relations in Taiwan, Best Investment Bank in Taiwan & FinanceAsia

Effective date

Chinatrust Commercial Bank

Originally known as the China Securities Investment Corporation (CSIC), the bank was

established back in 1966, and became the Chinatrust Commercial Bank, or CTCB, in 1992. Its

extensive range of services include savings deposits, loans, guarantees, foreign exchange,

OBU, trusts, credit/debit cards, securities, bonds, financial derivatives, factoring, safe

deposit boxes, electronic banking, and others.

To expand its operations, CFHC acquired Grand Commercial Bank in December of 2003,

while its subsidiary CTCB acquired Fengshan Credit Cooperative in October 2004. As of

December 31, 2006, CTCB had 111 domestic outlets and 71 overseas outlets, with 3,399

domestic ATMs. Total deposit balances reached NT$1.24 trillion, while total assets exceeded

NT$1.6 trillion, thereby firmly positioning it on top of the list of all non-government banks

in Taiwan.

16

17

20

Management Team

Jason Wang Current Position: Chief Strategic Officer-Chinatrust Financial Holding Company Executive Vice President-Chinatrust Commercial BankSignificant Experience: Senior Vice President-Chinatrust Commercial BankEducation: Master of Public Finance, National Chengchi University.

Jack T.K. Cheng Current Position: Chief Credit Officer-Chinatrust Financial Holding Company Executive Vice President-Chinatrust Commercial BankSignificant Experience: Senior Vice President-Chinatrust Commercial BankEducation: Bachelor of Business Administration, National TaiwanUniversity.

Julie L. Yang Current Position: General Auditor-Chinatrust Financial Holding Company Executive Vice President-Chinatrust Commercial BankSignificant Experience: Senior Vice President-Chinatrust Commercial BankEducation: MBA, The City University of N.Y. Baruch College, USA

Charles L.F. Lo Current Position: President of Consumer Finance Group-Chinatrust Financial Holding Co.Chairman & President of Retail Banking Group-Chinatrust Commercial Bank Representative of R.O.C. Product Development & Marketing Committee-VISA Int’l Organization.Significant Experience: President-Chinatrust Financial Holding Co. Education:Bachelor of Economics, National Chung Hsing University.Bachelor of Economics, National Chung

James J. Sheu Current Position: President & Chief Risk Officer-Chinatrust Financial Holding Co. Deputy President-Chinatrust Commercial Bank.Significant Experience: Executive Vice President-Chinatrust Commercial Bank. Education: MBA, Wharton Graduate Division of

Oliver Shang Current Position: President of Retail Group-Chinatrust Financial Holding Co.Executive Vice President-Chinatrust Commercial BankChairman-Taiwan Lottery Corp.Significant Experience: Chief Administrative Officer-Chinatrust Financial Holding Co.Senior Vice President-Chinatrust Commercial BankEducation: MBA, University of Delaware, U.S.A.

Connie Lin Current Position: Chief Human Resources Officer-Chinatrust Financial Holding Co.Senior Vice President-Chinatrust Commercial Bank. Significant Experience: Vice President-Chinatrust Commercial Bank Education: Shin-Ming High School of Commerce

Chinatrust’s amangement team has long been recognized international. Foreign ownership accounted for over 50% of our common shares at the end of 2006. this raito was the highest among domestic financial institutions.

54

(453)

(313)

52,354

3,783

(0.06)

(0.04)

0.35

2006 2007

Expressed in Thousand of New Taiwan Dollars

LIABILITES AND STOCKHOLDERS EQUITY Amount Amount %

Liabilites

Deposit from Central Bank and other Bank

Earnings per share-before income tax

Earnings per share-after income tax

Stockholders' Equity per Share-common stock

Group Capital Adequacy Ratio

Return on Equity-after income tax

Return on Assets-after income tax

Financial liabilites measured at fair value through profit or loss

Stockholders' Equity per Share-common stock

Total liabilities

Deposit from Central Bank and other Bank

Earnings per share-before income tax

TOTAL LIABILITIES AND SHOCKHOLDERS’ EQUITY

$ 27,456,799

1,204,227,308

28,345,123

116,345,566

23.455,456

27,456,799

1,204,227,308

28,345,123

116,345,566

3,456.455,456

27,456,799

1,204,227,308

$ 3,456.455,456

$ 27,456,799

1,204,227,308

28,345,123

116,345,566

23.455,456

27,456,799

1,204,227,308

28,345,123

116,345,566

3,456.455,456

27,456,799

1,204,227,308

$ 3,456.455,456

(58)

-

216

14

15

13

16

5

(20)

1

12

(24)

(15)

Change inDecember 31, 2007 & 2006

1. U.S. Dollars amounts are converted at the prevailing exchange rate on Dec.31, 2006 of NT $32.596=US$12. U.S. Dollars amounts are converted at the prevailing exchange rate on Dec.31, 2005 of NT $32.850=US$13. (123,317,876-30,000,000-1,432,290)/7,986,0834. (145,597,270-40,000,000-612,000-8,630)/7,090,7495. U.S. Dollars amounts are converted at the prevailing exchange rate on Dec.31, 2006 of NT $32.596=US$16. U.S. Dollars amounts are converted at the prevailing exchange rate on Dec.31, 2005 of NT $32.850=US$17. (123,317,876-30,000,000-1,432,290)/7,986,0838. (145,597,270-40,000,000-612,000-8,630)/7,090,749

Consolidated Balance Sheet CHINATRUST FINANCIAL HOLDING COMPANY LIMITED AND SUBSIDIARIES

55

(453)

(313)

52,354

3,783

(0.06)

(0.04)

0.35

2006 2007

Expressed in Thousand of New Taiwan Dollars

LIABILITES AND STOCKHOLDERS EQUITY Amount Amount %

Liabilites

Deposit from Central Bank and other Bank

Earnings per share-before income tax

Earnings per share-after income tax

Stockholders' Equity per Share-common stock

Group Capital Adequacy Ratio

Return on Equity-after income tax

Return on Assets-after income tax

Financial liabilites measured at fair value through profit or loss

Stockholders' Equity per Share-common stock

Total liabilities

Deposit from Central Bank and other Bank

Earnings per share-before income tax

Earnings per share-after income tax

Stockholders' Equity per Share-common stock

Group Capital Adequacy Ratio

Return on Equity-after income tax

Return on Assets-after income tax

Financial liabilites measured at fair value through profit or loss

Stockholders' Equity per Share-common stock

Return on Equity-after income tax

Return on Assets-after income tax

Financial liabilites measured at fair value through profit or loss

Stockholders' Equity per Share-common stock

Subtotal Stockholders’ Equity for Parent Company

Miority interest

Total Shareholder’s Equity

Commitments and contingencies

TOTAL LIABILITIES AND SHOCKHOLDERS’ EQUITY

$ 27,456,799

1,204,227,308

28,345,123

116,345,566

23.455,456

27,456,799

1,204,227,308

28,345,123

116,345,566

3,456.455,456

27,456,799

1,204,227,308

28,345,123

116,345,566

23.455,456

27,456,799

1,204,227,308

28,345,123

116,345,566

3,456.455,456

116,345,566

23.455,456

27,456,799

1,204,227,308

28,345,123

116,345,566

3,456.455,456

$ 3,456.455,456

$ 27,456,799

1,204,227,308

28,345,123

116,345,566

23.455,456

27,456,799

1,204,227,308

28,345,123

116,345,566

3,456.455,456

27,456,799

1,204,227,308

28,345,123

116,345,566

23.455,456

27,456,799

1,204,227,308

28,345,123

116,345,566

3,456.455,456

116,345,566

23.455,456

27,456,799

1,204,227,308

28,345,123

116,345,566

3,456.455,456

$ 3,456.455,456

(58)

-

216

14

15

13

16

5

(20)

1

12

(24)

(15)

54

34

(160)

2

13

(33)

-

12

3

15

-

Change inDecember 31, 2007 & 2006

Consolidated Balance Sheet CHINATRUST FINANCIAL HOLDING COMPANY LIMITED AND SUBSIDIARIES

Chinatrust Financial Holding Company18F, 3 Sung Shou Road, Taipei, Taiwan ROC.Tel: 886 2 72 22 20 02www.chinatrustgroup.com.tw

Chinatrust Commercial Bank3 Sung Shou Road, Taipei, Taiwan ROC.Tel: 886 2 72 22 20 02www.chinatrust.com.tw

Chinatrust Securities Company10F, 3 Sung Shou Road, Taipei, Taiwan ROC.Tel: 886 2 87 80 88 67www.win168.com.tw

Chinatrust Insurance Brokers Company13F, 16 Young-ji Road, Taipei, Taiwan ROC.Tel: 886 2 27 68 05 05www.ctbrokage.com.tw

Chinatrust Venture Capital Corporation3 Sung Shou Road, Taipei, Taiwan ROC.Tel: 886 2 27 22 20 02www.chinatrustgroup.com.tw/group/investment.htm

Chinatrust Asset Management Company3 Sung Shou Road, Taipei, Taiwan ROC.Tel: 886 2 72 22 20 02www.chinatrust.com.tw

Chinatrust Bills Finance Corporation11F, 98 Nanking E. Road, Sec 2, Taipei, Taiwan ROC.Tel: 886 2 25 22 22 22www.ctbf.com.tw

Chinatrust Security Company15F, 3 Sung Shou Road, Taipei, Taiwan ROC.Tel: 886 2 72 22 20 02www.chinatrust.com.tw/group/safe.htm

Taiwan Lottery Corporation9F, 133 Minsheng E. Road, Sec 4, Taipei, Taiwan ROC.Tel: 886 2 21 75 19 15www.taiwanlottery.com.tw

Des

igne

d: h

ttp:

//w

ww

.new

york

desi

gn.c

om.tw

China Trust Holding Co., Ltd. Annual Report 2007