Ministry of Finance Taiwan Financial Services Conference Investor Presentation March 2005

2 ACHIEVEMENTS IN THE BANKING SECTOR Decrease in Total Number of BanksReduction in System NPL Ratio 1 Increase in Profitability (Pre-tax ROAE) Broad-based NPL consistent with international NPL definition

3 TAIWAN BANKING MARKET RANKS THIRD IN ASIA (excluding Japan) 2003 Total Banking System Assets (US$ bn) China Hong Kong South Korea India Singapore Malaysia Thailand Indonesia Taiwan Philippines 3,290

4 BANKING SECTOR: IMPROVEMENT & RECOVERY *Based on exchange rate of US$1=NT$33 **Domestic banks only ***First 9 months; before 2001 NPL ratio is in narrow base – not include surveillance loans Source:Bureau of Monetary Affairs, Central Bank Total Loan Assets* USD billion Banking Sector NPL Ratio** (%) *** ***

5 BANKS IN TAIWAN Private Banks (34) Wholly Government Owned (4) 1.Bank of Taiwan 2.Central Trust 3.Export-Import Bank 4.Land Bank of Taiwan Government Affiliated (9) 1.Bank of Kaohsiung 2.Chang Hwa Bank 3.Farmers Bank 4.First 5.Hua Nan 6.Mega (CTB + ICBC) 7.Taiwan Business Bank 8.Taiwan Cooperative 20%≤Gov’t Ownership <100%: Gov’t Ownership < 20%: 1.Bank of Overseas Chinese 18.Hsinchu International 19.Hwa Tai Bank 20.IBT 21.Industrial Bk of Taiwan 22.Jih Sun Bank 23.Kao Shing Commercial Bank 24.Lucky Bank 25.Macoto Bank 26.Shanghai Commercial 27.Shin Kong Bank 28.Sunny Bank 29.Ta Chong 30.Taichung Commercial 31.Tainan Business Bank 32.Taishin 33.Taitung Business Bk 34.Union Bank Bank of Panshin Bank SinoPac Bowa Bank Cathay United CDIB Chinatrust Chinese Bank Chinfon Bank Chung Shing Bank Cosmos Bank Cota Bank Enterprise Bank of Hualien EnTie Bank E Sun FEIB Fubon Taipei Bank Fuh Hwa Bank

6 GOVERNMENT BANKS DOMINATE MARKET SHARE Source: CBC (September 30, 2004) Government Affiliated 40.3% Wholly Government Owned 18.9% Private 40.8% Banking Assets by Category Top 10 Banks Ranked by Share of Total Assets

7 PRIVATE BANKS MORE PROFITABLE Source: CBC (September 30, 2004) Private bank Government-affiliated bank LEADING BANKS BY NET INCOME & NET INCOME SHARE

8 BANKING SECTOR REMAINS FRAGMENTED Top Five Banks by Market Share (%) Number of Bank Branches per 10,000 People Mean 60%Mean 1.95 Over 400 financial institutions in Taiwan *Note: All data shown in bar graphs above are for 2003

9 TAIWAN IS WORLD LEADER IN OTHER INDUSTRIES KEY CONGLOMERATES BY INDUSTRY SECTOR Foundry TSMC UMC Petrochemical Formosa EMS Hon Hai TFT Au Optronics Chi Mei ASE SPIL Semiconductor Testing & Packaging Hardware ODM Asustek Quanta Steel China Steel Footwear Pou Chen

10 KEEPING PACE WITH REGIONAL COUNTERPARTS Top 20 Banks in Non-Japan Asia by Market Capitalization 1 (US$ million) Only 1 Taiwan bank in Top 10 Only 4 Taiwan banks in Top 20 1.As of February 15, Taiwan Financial Institutions

11 BUILDING BLOCKS: BOLSTERING COMPETITIVENESS Financial Sector Privatization Financial Sector Reform Financial Sector Consolidation Enhancing Sector Competitiveness Encouraging consolidation through policy change Increasing competitiveness through conducive regulation Creating sector transparency through foreign investment

12 CREATING NATIONAL CHAMPIONS World-standard Management to Fuel Performance Improvements Vision for the Future 兆豐金融集團 Mega Holding Group National Champion Improve ProfitabilityIncrease Size & ScaleStartFinish Line

13 STEPPING STONES: PRIVATIZATION OF GOVERNMENT BANKS Bank of Taiwan Land Bank of Taiwan Central Trust of China Taiwan Coop Bank Chang Hwa Bank Farmers Bank of China Taiwan Business Bank First FHC Hua Nan FHC Mega FHC Bank of Overseas Chinese Taiwan Development and Trust Corporation Part 1Part 2Part 3 100% - 50% 50% - 20% 20%

14 PROGRESS: REFORM ACTIVITY Bank of Overseas Chinese Chang Hwa Bank Chang Hwa Bank Taiwan Development and Trust Transfer of majority ownership from government to the private sector Private placement to foreign investors Sale of core banking assets to another bank Taiwan Cooperative Bank Listed on Taiwan Stock Exchange & prepare for privatization in 1Q/05

15 POTENTIAL MODELS FOR CONSOLIDATION Government-Related Bank Private Bank Government-Related Bank 3 3 Foreign Investors Government-Related Bank 4 4 Private Bank Foreign Investors

16 FOREIGN INVESTMENT STRUCTURES Sale (control stake vs. minority stake) Joint venture Strategic investment Financial investment

Conclusions

Questions & Answers