Since our founding in 1959, China Development Financial Holding Corporation ('CDFH') has played a pioneering role in Taiwan's economic development. By proactively rendering investment and financing services to key strategic industries at different stages in the island's growth in tandem with the government's policies, we have made immense contributions in driving Taiwan's prosperity and industrial development. With an integrated platform of financial services on offer (covering principal investments, institutional banking, investment banking, fixed income, equities and wealth management) subsequent to our transformation into a financial holding company and the acquisition of certain subsidiaries, we genuinely stand out as a unique player among domestic financial holding companies, which are more focused on retail financing or insurance. As CDFH takes further strides to evolve into a regional investment bank, we have become a preferred partner in financial services for customers who look to expand their business in the Greater China region.

With a stable source of revenue developed on the back of a growing customer base, CDFH delivered positive results in 2007 despite testing market conditions underpinned by the subprime lending crisis that had dealt a severe blow to global stocks and a home market marred by the credit crisis involving certain financial institutions. For 2007, we reported net income of approximately NT$7.61 billion and EPS of NT$0.66, while return on total assets and return on shareholders' equity were 4.57% and 5.06%, respectively. In terms of business segments, our principal investment business maintained stable growth in 2007 with solid performance as it remained a dominant force in the industry. Aside from reporting growth in its loan business, our institutional banking department also actively developed the corporate restructuring business as well as further enhanced cross-selling to our existing clientele. The performance of our fixed income and equities businesses fell short of expectations in the wake of a weakened global financial market in the latter half of the year. On the Investment Banking side, Grand Cathay Securities Corporation ('GCSC') boasted internationally acclaimed underwriting capabilities and professional qualities as it made dedicated efforts in the investment banking business. For two years in a row (2006 and 2007), GCSC has walked away with the "Best Bond House in Taiwan" awards from three financial magazines, namely The Asset, Asiamoney and Finance Asia, underlying international media recognition of its outstanding performance in the bond market.

A significant slowdown in global economic growth is expected in 2008 as subprime spill-over continues to take effect on day-to-day economic activities while weakened sentiments are reported in the Euro Zone as well as Japan. Driving force for growth in emerging economies remains strong, nevertheless, as rising economic powerhouses such as China and India add new vitality to the global economy. Domestically, political stability is anticipated post the conclusion of the presidential election. Certain fine-tuning and adjustments in our business strategies will as a result be inevitable, as the impacts of these market changes at home and abroad are being felt.

To begin with, we will work towards improvements in our risk management profile. In addition to ongoing reinforcement of a corporate culture that emphasizes risk management, we will continue to implement internal risk control measures in compliance with the Basel Accord, with a view to attaining top-tier international standards in risk management performance. For our operations in principal investments, we intend to focus on emerging markets such as Greater China and India while working closely with leading international private equity funds for greater exposure to investments in "non-core regions" as well as co-investment opportunities in large-scale international transactions. As for our institutional banking and fixed income businesses, we will seek to establish presence in the financial hubs and fast-growing economies in the Asia-Pacific region in answer to the growing needs of our Taiwanese customers, a move which will also enhance our international profile. In terms of our investment banking, global equities and wealth management businesses, we have plans for the swift expansion of our overseas securities-related businesses through the realignment of our existing overseas platforms with strong professional teams. To support our overseas business expansion, we will cultivate operational strengths commensurate with a leading regional investment bank by continuous recruitment and train-up of high-caliber people in the financial business with an emphasis on international exposures and global vision, complemented by competitive remuneration packages and a strong culture on team building.

It is true that competition in the financial market never eases off; it can only grow to become more ferocious each day. That being said, CDFH is committed to the role of brokering the advent of Taiwanese companies to the Asia-Pacific and world markets in adherence to our long-standing objective of providing customized and complete financial services, leveraging with prudence our strengths in resources and favorable fundamentals. As such, we have every confidence that CDFH will be the best partner for customers seeking business growth.