Manulife has agreed to purchase 100% of Fuhwa Securities ITC (a wholly-owned subsidiary of Yuanta Financial Holdings) for NT$31 per share (2.03 P/BV 1H ’08), or NT$930 million. The transaction is scheduled to take place in October 2008. The offer price is subject to the following adjustments:

1) Yuanta is scheduled to buy back approximately NT$76 million worth of interest only (IO) strips from Fuhwa ITC.
2) Change in NAV: The sale price is to be adjusted for earnings gain/loss up to the purchase date.
3) Change in AUM: Since Fuhwa ITC’s AUM was a determining factor in the agreed upon price, any increase/decrease in AUM up to the purchase date will impact the sale price. The AUM for Fuhwa ITC as the end of July 2008 was NT$41 billion.

Backgroun
Yuanta Financial Holdings has ownership of two investment trust company (ITC) subsidiaries resulting from the merger between Yuanta Core Pacific Securities and Fuhwa Financial Holding Company in April 2007. According to the Securities Investment Trust and Consulting Act, Yuanta FHC can only hold one ITC license. Yuanta’s board has determined that the sale of one license is the most beneficial option for shareholders.

Ernst & Young was retained as the independent accounting firm to estimate the company’s fair value. The income approach was used as the primary method for evaluating the fair value, while the market approach used for additional verification. The estimated fair price per share was NT$27.64 to 31.70, or 1.81 to 2.07 times price to book value (1H’08). Using the market approach, P/BV was between 1.36 to 2.93 times for other Taiwan ITC transactions in the last 4 years.