2004 in Review
The year of 2004 had been characterized by the skyrocketing of prices in oil and other raw materials, the sustained depreciation of the US Dollar, the upward adjustment of interest rates by the FED of USA for four times, the presidential election in the USA, and the macro economic policy adjustment in Mainland China, which made the global economy stagnant. Influenced by global economic climate, domestic economy in Taiwan has been troubled by the political disputes deriving from the presidential election and the tension between the two sides of the Taiwan Strait. Economic growth has been retarded. The Central Bank of China flexed its arms in foreign exchange operation much more liberally than before for soothing the domestic economy and the fluctuation of commodity prices. This helped to stabilize the domestic economy and contributed to economic growth of 4.11%. In the domestic financial market, the government has established the Executive Yuan Financial Supervisory Commission for the efficient exercise of supervision over the financial sector from July 1 onward. The government encouraged financial institutions to undergo merger and acquisition and demanded the banking sector to continue to clean up bad debts and hold down non-performing loan ratio for improving the asset quality of the financial sector. In addition, the government also fortified its capacity in monitoring the solicitation of funds by listed companies in the capital market for preventing the improper use of capital by such companies. In an environment where keen competition is the order of day, the gravity of development in the domestic financial market will still rely on the proactive mergers and acquisitions of financial institutions for broadening their scope of operations and for the research and development of innovative financial products. In the country, many financial holding companies spent their effort in mergers and acquisitions, integration of resources, building up the platform for cross-industry marketing and enhancing their mechanism in risk management.

Integration of Resources, Expansion of Operations, and Synergy
For the company, 2004 was the third year of operation since its establishment. This is also the year that the company sought to proactively integrate its resources, reengineer its organization, expand its operations and enhance synergy. In extending its business locations, the group had 112 offices as of the end of 2004, or 16 more offices than that in 2003. Now, the group covers the whole country with its business network. For the categories of operation, subsidiary Fuhwa Securities and Fuhwa Futures jointly established the Fuhwa Managed Futures Co., Ltd for making the financial group complete in providing financial services, including securities finance, securities, banking, futures, managed futures, investment trust, capital management, venture capital, financial consulting, asset management and insurance agency services. In addition, the cultural and educational foundation was also proactively involved in social charity. As for the reengineering of the organization, the company started to plan for the operation through functional organization since 2003, and had structured the operations on July 1 2004 through its Corporate Finance Unit, Consumer Banking Unit, Wealth Management Unit and Investment Unit as well as the Risk Management Center and Operation Center. By actively utilizing the horizontal structure of the functional bodies and the mechanism of business linkage, the group further enhances its integration of operations to generate synergy.

Significant Improvement of Subsidiaries in Credit Rating
As of the end of 2004, the group had paid-in capital of NT$30.064 billion, with total assets amounting to NT$51.667 billion and total shareholders equity amounting to NT$41.894 billion. The net value per share was NT$13.93. The consolidated capital adequacy rate of Fuhwa Financial Group was 129.18% whilst that of Fuhwa Securities Finance Co., Ltd. was 940.65%, of Fuhwa Securities Co., Ltd. was 228.79%, of Fuhwa Commercial Bank Co., Ltd. was 9.07%. They all meet the requirements of competent authority and are regarded as stable and healthy. With the full support of the group in management and business, Fuhwa Bank has enjoyed sustained growth in business and profitability. It spent full effort in cleaning up bad debts for improving its asset quality. As such, the non-performing loan ratio of the bank was 3.51% in the broad sense and 2.93% in the narrow sense as of the end of 2004. Fuhwa Securities is healthy in financial position. It has fortified its core business of securities brokerage under the support of the group and through mergers and acquisitions. It has persisted in the growth in market share. Fuhwa Securities Finance has also been healthy in financial position and profitability, and has won the leading position in the securities sector in the country. Seeing the yield of synergy by the group, Taiwan Ratings assigned the long-term credit rating of Fuhwa Bank, Fuhwa Securities and Fuhwa Securities Finance from the previous "twBBB" to "twA-", a significant upgrade of 2 ranks, and the outlook on the long-term rating is "stable".

Group Yielded Synergy
Fuhwa financial group has yielded synergy through the operation of its functional organization in grasping the trend of new financial products, the construction of common marketing platforms and the effort made in training the employees. The group is able to provide full-range services to its clients, enhance its advantages in business and hence the overall competitiveness of the financial group. The operation plan of 2004 yielded results, with most of the subsidiaries enjoying growth in earnings per share with Fuhwa Bank and Fuhwa Investment Trust in particular at growth rate of 32% and 131% respectively. Fuhwa Venture Capital was used for investing in companies with outstanding performance and high potential for growth, which in turn contributed incomes to the funds. In the execution of budget and operational plans in 2004, the financial holding group yielded synergy through the professional divisions and cooperations across the whole group and the integration of group resources. Similarly, the horizontal and vertical integration of different businesses and management systems helped to strengthen the competitive power of the group. Under the effort of all members, the group has enjoyed substantial growth as shown by various indicators on performance. The revenue of the year amounted to NT$3.302 billion with earnings after taxation at NT$3.388 billion and earnings per share of NT$1.23 after taxation. The budget achievement ratio for earnings after taxation was 96.87% with return on equity at 8.80%.

Further Expansion in the Financial Sector
The summary of the operational plan for 2005 has a gravity on the integration of group resources and the research and development of new products. By way of joint marketing and the integration of different domains in financial services, the group will have service locations spreading across northern, central and southern Taiwan as well as the offshore island of Kinmen and Hong Kong for providing the best financial services of its kind to our clients. As for the operation plans for the key subsidiary, Fuhwa Securities Finance aims at cutting the cost of operations, tightening the control over credit risk and conducting business more professionally and efficiently. Fuhwa Securities will give full support to other subsidiaries in business expansion and for the balanced development of different operations with an emphasis on the innovation of new products and the training of professionals in the field for thicker market share. Fuhwa Bank seeks to improve the organization and channel marketing at all levels in both quality and quantity. Fuhwa Futures will focus on strengthening the capacity of introducing brokers in business development and assisting them to build up a convenient trade information network, to expand the facilities in information transmission and trade, to develop a strategic trading network platform for upgrading the quality of business and services as dictated by the market trend of cut-throat competition. Fuhwa Securities Investment Trust will further launch fund products that could meet the needs of investors, including overseas mutual funds, fixed income funds and private placement funds. This arm of Fuhwa will also provide discretionary account services for meeting the diverse needs of investors who seek to engage in different modes of investments.

The Prospects
Fuhwa Financial Holdigs will make the best use of its established territory in financial services, our professional management team and our capacity in product innovation to continue supervising the integration, interchanges and support of the subsidiaries. The company will also persist to expand its territory in the financial sectors through new establishment, mergers and acquisitions and stocks transfer to incorporate partners in good standing depending on the situation and economic outlook for the development of the financial industry as a whole. These will optimize the economic efficiency of the group for emerging as the most complete and professional financial services group. May we all wish you good health and much success in business.