൴֏ˠ Spokesman щ NameĈJames ShihޙؖЩĈ߉ ᖚჍĈઘᓁགྷந TitleĈExecutive Vice President ࿪ྖĈ(02)2536-295102)2536-2951)2536-29512536-2951 TelĈ(02) 2536-2951 E-mail [email protected] ࿪̄ฎІܫቐĈ[email protected] Ĉ Acting Spokesman ΃ந൴֏ˠ NameĈJames Y.G.Chen ؖЩĈౘ̯ซ TitleĈExecutive Vice President ᖚჍĈઘᓁགྷந TelĈ(02) 2536-2951 ࿪ྖĈ(02)2536-295102)2536-2951)2536-29512536-2951 E-mailĈ[email protected] ࿪̄ฎІܫቐĈ[email protected] Addresses of Chang Hwa Bank Head Office ᓁҖгӬ Ŝ Taichung: 38,Tsu Yu Rd., Sec. 2,Taichung,Taiwan, R.O.C. Ŝ έ̚Ĉέ̚ᦦҋϤྮ˟߱38ཱི Tel: (04) 2222-2001 ࿪ྖĈ(04)2222-2001 Ŝ Taipei: 57, Chung Shan N. Rd., Sec. 2,Taipei,Taiwan, Ŝ έΔĈέΔᦦ̋̚Δྮ˟߱57ཱི R.O.C. ࿪ྖĈ(02)2536-2951 Tel: (02) 2536-2951 Web Site: http://www.chb.com.tw ᅙҖშӬĈhttp://www.chb.com.tw Stock Registration Offices of Chang Hwa Bank Ᏹந۵ை࿅͗፟ၹ Ŝ Name: Shareholders' Service Section, Secretariat Division .Ŝ ЩჍĈၓ̼ᅙҖ৪३఍۵ચࡊ Address: 38,Tsu Yu Rd., Sec. 2,Taichung,Taiwan, R.O.C гӬĈέ̚ᦦҋϤྮ˟߱38ཱི Tel: (04) 2222-2001 ࿪ྖĈ(04)2222-2001 Ŝ Name:Taipei Service Center of Shareholders' Service Ŝ ЩჍĈၓ̼ᅙҖ৪३఍۵ચࡊ Section, Secretariat Division ,ચ͕̚ Address: 57, Chung Shan N. Rd., Sec. 2,Taipei,TaiwanڇāāāέΔ гӬĈέΔᦦ̋̚Δྮ˟߱57ཱི R.O.C. ࿪ྖĈ(02)2536-2951 Tel: (02) 2536-2951 შӬĈhttp://www.chb.com.tw Web Site: http://www.chb.com.tw Credit Rating Agency ܫϡෞඈ፟ၹ Moody's Taiwan Corporation ϡෞඈ۵Њѣࢨ̳ΦܫЩჍĈ᎗࢚ AddressĈRm. 1813, 18F,333, Keelung Rd., Sec 1, 110 333 18 1813 гӬĈέΔᦦ ૄษྮ˘߱ ཱི ሁ ވ Taipei, 110 Taiwan ࿪ྖĈ(02) 2757-7125 Tel: 886-2-2757-7125 ็ৌĈ(02) 2757-7129 Fax: 886-2-2757-7129 ᘪᙋົࢍर CPA-auditor of the Financial Report னЇົࢍर Present CPA ؖЩĈችԈேăਃၷᐌ NameĈHung-Hsiang Tsai, Long-Swei Won ࢍरְચٙ CompanyĈDeloitte & ToucheົܫચٙЩჍĈ๔ຽிְ 3߱156ཱི12ሁ AddressĈ12th Floor, Hung-TaiPlaze 156 MinSheng EastྮڌડϔϠ̋ڗгӬĈέΔξ105 Rd., Sec. 3 Taipei 105,Taiwan, R.O.C. ࿪ྖĈ(02)2545-9988 TelĈ(02)2545-9988 შӬĈwww.deloitte.com.tw Web SiteĈwww.deloitte.com.tw ݈Їົࢍर Exiting CPA Ї NameĈYen Juanlu,Yu-Jen ChenފؖЩĈ֩ӕ៨ăౘ ચٙЩჍĈ࡭ᅈົࢍरְચٙ CompanyĈDiwan, Ernst & Youngְ гӬĈέΔξ110ૄษྮ1߱333ཱི9ሁ AddressĈ9th Floor, Keelung Rd., Sec. 1,Taipei 110,Taiwan, ࿪ྖĈ(02)2720-4000 R.O.C. შӬĈwww.dey.com.tw TelĈ(02)2720-4000720-4000 Web SiteĈwww.dey.com.twy.com.tw ಞٙЩჍ̈́ Names of Exchanges Where Overseas Securities Areٽଭൕ෴኱̝Ϲדঔγѣᆊᙋ Listed and Methods of Inquiry None. ߤྙ͞ёĈ൑Ą Ĉ ANNUAL REPORT 2006 1 ϫāᐂ Contents ώҖְ̂ࡔ 04 ಡӘ३ڌ࡭۵ 06 ३ځᓏޘטטᅙҖ̰ొଠ 12 16 Ⴞ၅ˠߤ८ಡӘ 18 ᅙҖᖎ̬ நಡӘڼΦ̳ 19 19 ˘ăᅙҖ௡ᖐ ă཭ְ̈́Ⴞ၅ˠྤफ़˟ 24 நྻүଐԛڼă̳Φˬ 54 αăົࢍर̳෱ྤੈ̝೬ᜨăົࢍरՀೱଐԛ̈́׎΁ 62 ă۵ᝋតજଐԛ̣ 63 ม̢ࠎᙯܼˠྤफ़ڌă޺۵ּͧΚ݈˩̂۵̱ 64 ăტЪ޺۵ּͧ˛ 65 66 ๒ྤଐԛ ă۵Њ̈́۵Ӏ˘ 66 ̚ ൴ҖଐԛדᏉๅܛර 71 ˟ă ϔ 73 ˬăপҾ۵൴Җଐԛ ઼ ˝ 76 αăঔγх੉ጴᙋ൴Җଐԛ ăࣶ̍ᄮ۵ᝋጴᙋᏱநଐԛ̣ 76 ˩ ̣ Ꮙ፟ၹܛឰ׎΁צᔉٕ׀ѐ 76 ̱ă ą 76 ˛ăྤܛྻϡࢍထેҖଐԛ ѐ ڶಡ 77 ᒉྻໄ 77 ˘ăຽચ̰ट 93 ˟ăଂຽࣶ̍ 2 94 ˬăЋຽయЇ̈́྽ᇇҖࠎ 94 αăྤੈన౯ 94 ̣ă౻ྤᙯܼ ăࢦࢋݵࡗ̱ 98 થݡᙷݭ̈́࠹ᙯྤੈ̼ד୧ּϦኛ८ࣞᏱந̝ᙋ̼ד୧ּٕ̙જயᙋ̼דᏉྤயᙋܛֶޘѐܕă౵˛ 98 ڶੑચໄ 99 ੑચಡܑ׀Ъ 150 ᄃࢲᐍგநְีژᑭ੅̶̝ڍགྷᒉඕ̈́ڶېੑચ 160 ڶăੑચໄ˘ 160 ڍăགྷᒉඕ˟ 160 161 ˬăனܛ߹ณ 161 αă౵ܕѐޘࢦ̂ྤώ͚΍၆ੑચຽચ̝ᇆᜩ ᖼԸྤ߆ඉă׎ᒔӀٕᓪຫ̝͹ࢋࣧЯăԼචࢍ൪̈́Ϗֽ˘ѐԸྤࢍ൪ޘѐܕă౵̣ 163 ෞҤژăࢲᐍგந̶̱ 163 טăП፟఍நᑕត፟˛ 176 ˣă ׎΁ࢦࢋְี 176 পҾ੃ྶְี 177 177 ˘ăᙯܼЋຽ࠹ᙯྤफ़ Ᏹநଐԛדăռ๒ѣᆊᙋ˟ 178 Җଐԛે̝דၟҌѐಡΏОͤ͟ռ๒ѣᆊᙋ̈́ޘѐܕă౵ˬ 179 αă̳̄Φ޺ѣٕ఍̶ώҖ۵ைଐԛ 179 ีְځă׎΁υࢋྃ·ᄲ̣ 179 ᆊॾѣࢦ̂ᇆᜩְ̝ีדᝋৈٕᙋڌௐ36୧ௐ2ีௐ2ഠٙؠ၆۵ڱٽϹדăᙋ̱ 180 181 ᓁҖ઼̰̈́γ̶͚፟ၹ̶Ҷဦ 182 ᓁҖ̶͚̈́፟ၹ˘ᜓܑ 7KH%DQN V6LJQL¿FDQW(YHQWV 06 Letter to Shareholders 12 Internal Control System Statement 6XSHUYLVRUV $XGLW5HSRUW %DQN2YHUYLHZ 5HSRUWRI&RUSRUDWH*RYHUQDQFH 19 A. Organization 24 B. Board of Directors and SuperYisors &7KH3UDFWLFHRI&RUSRUDWH*RYHUQDQFH 62 D. Disclosure of the Accountant’s Fee, Changes of Accountants, and Other Matters 63 E. The Changes in Shareholding 64 F. Related Party Transaction 65 G. Omnibus Shareholding Ratio 66 Capital Raising $6KDUHVDQG'LYLGHQGV 72 B. Issuance of Financial Bonds 74 C. Issuance of Preferred Shares ANNUAL REPORT 2006 76 D. The Issuance of Global Depositary Receipt 76 E. The Progress of Employees' Stock Warrant 76 F. Merging of Entrusted for Other Financial Institutions *3ODQIRU&DSLWDO,QYHVWPHQWDQG8WLOL]DWLRQ 2SHUDWLRQV2YHUYLHZ 77 A. Business Categories 93 B. Employee &(QWHUSULVH%HQFKPDUNDQG(WKLFDO%HKDYLRU 94 D. IT Equipment 3 95 E. Labor Relations 98 F. Important Contract *6HFXULWL]DWLRQ&RPPRGLWLHVDQG7KHLU5HOHYDQW,QIRUPDWLRQ/DXQFKHGLQ$FFRUGDQFHZLWK)LQDQFLDO$VVHW 6HFXULWL]DWLRQ$FWRUWKH5HDO(VWDWH6HFXULWL]DWLRQ$FWDQGZLWK$SSURYDORIWKH&RPSHWHQW$XWKRULW\ 99 Financial Statement 150 Consolidated Financial Statement 160 Financial Conditions and Operating Results 160 A. Financial Status 160 B. Analysis of Operating Results 161 C. Cash Flow 161 D. The Material Effect on Financial Structure from Substantial Capital Expenditure in the Last Few Years (7KH5HLQYHVWPHQW3ROLF\IRU/DVW)LVFDO<HDUWKH0DMRU5HDVRQVIRULWV3UR¿WVRU/RVVHVDQG,PSURYHPHQWDQG ,QYHVWPHQW3ODQIRU1H[W<HDU )$QDO\VLV (YDOXDWLRQRI5LVN0DQDJHPHQW 176 G. Emergency Response Mechanisms +2WKHU,PSRUWDQW(YHQWV 177 Special Items 177 A. Information Regarding the Bank's Subsidiaries %3URJUHVVRI3ULYDWH3ODFHPHQWRI6HFXULWLHV &7KH%DQNKDV&DUULHG2XWD3ULYDWH3ODFHPHQWRI6HFXULWLHVGXULQJWKH0RVW5HFHQW)LVFDO<HDURUGXULQJWKH Current Fiscal Year up to the Date of Printing of the Annual Report 179 D. The Bank's Subsidiaries' Shareholding or Disposal of the Bank's Shares 179 E. Additional Disclosure ) 3XUVXDQWWR,WHP3DUDJUDSK$UWLFOHRI6HFXULW\DQG([FKDQJH$FWWKH,QFLGHQFH([HUWLQJ0DWHULDO,QÀXHQFH onShareholders' Rights or Security Prices +HDG2I¿FH %UDQFKHV 'LUHFWRU\RI+HDG2I¿FH %UDQFKHV ώҖְ̂ࡔ The Bank's Significant Events ŕ ̂և̶Җฟ၌ The Opening Ceremony of Tatu Branch. ̚ ර ϔ ઼ ˝ ˩ ̣ ŕ າߋဥ޵ ѐ Celebration of Lunar New Year. ą ѐ ಡ 4 ฟ၌܅඙Ş Attractive Sidelight of the Opening Ceremony. ŕ 2006Бϔநੑ౾ᜓົ߿જ܅඙ Attractive Sidelight of 2006 Expo on Wealth Management. ŕ ᝌሄᏐ̄ᓁજࣶęԧߏநੑ̈ыһ The little Sentries of Wealth Management. ANNUAL REPORT 2006 5 έΔŞ 101઼ᅫ൳੼ᔈ Tapei 101 International Climbing Contest. 2006Ş Бϔநੑ౾ᜓົ߿જ܅඙ Attractive Sidelight of 2006 Expo on Wealth Management. ŕ ၓᅙགྷ׏࡚ᓏᜬजჯ˵ৼ͌ѐЪભဥ The Concert of Vienna Youth Choir. ಡӘ३ڌ࡭۵ Letter to Shareholders There were a number of disturbances such as disputes between the US and IRAN regarding development of nuclear weapons, missile tests by North Korea and the Israeli attacks on Lebanon in 2006. Fortunately, these crises were all quickly defused. In the meantime, steady economic expansion in the US, Japan, Europe and emerging Asia such as China and India has continued to drive the world economy. Global Insight Inc. (GII) (2007/02) has placed the 2006 global economic growth around 3.9% higher than 3.4% of 2005, and provides concrete proof of the solid performance of the global economy during the year. As for future prospect, the weakening US economy is often highlighted, but it will most likely steer clear of ̚ a hardlanding type of scenario. Furthermore, rapid ර and sustained growth in China, India, Russia and other ϔ ઼ emerging economies, together with the strong recovery in ˝ v v ˩ Europe, ha e for the most part offset the negati e impacts ̣ caused by the softening of the US economy. As a result, ѐ ą major international organizations are forecasting just a mild ѐ ಡ 董事長：張伯欣 slowdown in 2007; for example, GII (2007/02) has predicted Chairman of the Board: PoShin Chang the 2007 global economic growth rate at 3.5%. Domestically, our economy was hindered in 2006 by the ۋࡁ൴ڠ࡚Ͽ८זצаᜪ2006ѐБ஧གྷᑻܑனĂᔵ൒ 6 ᛉăΔᔹྏडࢳᇅ̈́ͽҒЕԽᑝጌ့͐ඈࡎ൴ְІ̒ᕘĂ credit card/cash card crises, leading to lackluster domestic consumption and weak momentum in private sector ਕдൺഇ̰ར၌Ă൒҃д઼࡚ă͟ώăለ߷ͽ̈́ౌضҭٙ spending and investment. Fortunately, sustained growth in ඈֲ߷າᎸགྷᑻវഀঈ޺ᜈᘦઉᕖૺ۞૲જޘăО઼̚ global economy has helped drive the further expansion of Ăֹ଀Б஧གྷᑻ̪ѣ࠹༊ᐹள۞ܑனĄॲፂᒖ஧౅ෛ፟ external trade, resulting in very encouraging foreign trade˭ ၹ(GII)(2007/02)޽΍Ă2006ѐБ஧གྷᑻјܜதܐҤࣃࠎ statistics. The DirectorateGeneral of Budget, Accounting v (ᚊ۞˘ and Statistics, Executi e Yuan, R.O.C. (DGBAS) (2007/02ܪ2005ѐ۞3.4%ĂΞჍ଀˯ߏܑனٺ3.9%Ăர੼ has placed its estimate of the yearly economic growth rate ѐĄ at 4.62%. ׎གྷᑻ֕ٺण୕ϏֽĂጐგ઼࡚གྷᑻ݈ഀিऴĂҭϤ Global economic expansion is expected to slow down ăܻᘲ೻̈́׎ in 2007, but the growth rate will still be higher than theޘഈШർ඾ౙ۞࣒ϒĂГΐ˯઼̚ăОܧ๕֭ Ăለ߷གྷᑻೇ൩˧ longterm average. Moreover, strong global demands forܜ΁֝ి૦੓۞າᎸགྷᑻវᘦؠԣిᆧ electronic products will continue to propel steady growth in ቤ۞࢑ࢬᇆᜩĄЯѩ઼ᅫٸ྽ϺૻĂ಼̂ቤ኏˞઼࡚གྷᑻ our foreign trade. With the ill effects of the credit card/cash Ч͹ࢋ࿰ീ፟ၹ࠰ᄮࠎ2007ѐБ஧གྷᑻ֕๕૟ரࠎᔌቤĂ card crises gradually subsiding, together with the boosts GII(2007/02)࿰Ҥ2007ѐБ஧གྷᑻјܜதࠎ3.5%Ą provided by the booming equity and housing markets ᗕΙࢲᇷĂϔมঐ෱ܑன̙ and by the improving employment conditions, domesticٺགྷᑻ͞ࢬĂ2006ѐϤ઼̰ consumption is on target for a stable recovery. In addition, ྽ֶ൒˧ܜБ஧གྷᑻјضĂঐ෱̈́Ըྤ׌̂જਕ̙ॎĂָٙ strong momentum in privatesector investment growth ᕖૺĂγ෶࠹ᙯ޽ᇾܑனሤඛĄ͹ٽᘦઉĂ૲જԧ઼થݡ෶ is being generated by increases in production capacity ࢍ఍࿰ീ(2007/02)Бѐགྷᑻјܜத4.62%Ą and elevation of technology development among hitech companies. The DGBAS (2007/02) has forecasted our economy to grow by a very satisfactory 4.30% in 2007. Our bank has identified the following major strategic goals for 2007: enhancement of ROE; ņConsolidation of Corporate Banking & Breakthrough in Consumer BankingŇ achieved through multiplechannel strategies and effective marketing; focusing on profitoriented products; stabilization of operating expenses; implementation of performance based personnel policies, where the right person is placed at the right position through performance evaluations; compliance with the new capital adequacy requirements and establishment of an independent and professional risk management mechanism. ANNUAL REPORT 2006 As a centenarian bank that is currently at the 101st year of its existence, we are adopting ņSmile & Reach OutŇ as our new corporate slogan to reflect our commitment to the provision of the most comprehensiveservices to all our customers through realizing our fundamental business values of service, efficiency and innovation. We will 董事兼總經理：陳淮舟董事兼總經理：陳淮舟 Director & PresidentĈ Julius Chen demonstrate our utmost determination and ambition by developing our bank as an international player with clear ഇπӮ 7ܜٺ࿰ീ2007ѐ઼ᅫഀঈᕖૺՎአᔵቤĂଘ̪੼ competitiveadvantages and by repaying our shareholders ᔌ๕Ăΐ˯Б஧࿪̄யݡᅮՐ̪ইĂԧ઼γ෶ᕖૺΞ୕ჯ޺ for their longstanding support with rewarding business πᘦćдᗕΙड़ᑕు႙πिĂ۵ξăٗξ߿ඛͷಶຽԼචඈ performances.