Organizational Change
A merger of Chinatrust Commercial and Chinatrust Bills Finance Corp. was proposed to optimize sharing of resources and bring down risk and costs. Based on an October 29, 2007 proposal by the CTCB board that already secured regulatory approval, Chinatrust Commercial will be the surviving entity. The exercise is due to be completed in April 2008.

CTCB・s aggressive development of a trading platform for equity-related derivatives paid off in 2006 when it was licensed to deal in short sales and share swaps. This was followed by the establishment of a proprietary futures dealing department in 2007, making CTCB the first local bank to become a proprietary futures dealer. With its full range of equity-related derivatives, CTCB is well-poised to help clients hedge against risks and optimize their allocation of assets. Further, CTCB is in the process of applying to start a branch in Singapore so as to extend its reach of wealth management and overseas financing. In turn, CTCB expects to emerge an even more competitive player in the regional banking market.

Business Plan & Actual Accomplishments
As globalization sweeps across borders, CTCB has vigorously sought to expand its international network of services. It is committed to serving Taiwan businesses in need of financing and other clients who want to place their wealth under more rewarding management. Its dedication to product innovation and corporate reengineering has paid off handsomely. Just one year after the storm revolving round credit and cash card payment defaults, the bank generated pretax profit of NT$13.256 billion, net profit of NT$11.102 billion (18.43% short of the budgeted amount mainly due to higher expenses related to bad loans), and a 12.8% return on equity.

Research & Development
Over the years, CTCB has spared no funds in enhancing its information technology infrastructure. In addition to the financial information system required to develop online banking, special emphasis has been placed on strengthening IT processes related to corporate banking. A summary of these and other R&D accomplishments is as follows:
A. Upgrade and maintain electronic trading systems; install domestic and overseas trading platforms.
B. Issue the electronic wallet-like icashwave Q-pay credit card. It is a joint offering in conjunction with President Chain Store Corp., operator of the 7-Eleven chain of convenience stores.
C. Employ academics who specialize in financial algorithm as consultants in devising pricing models for multi-asset options and distributed computing techniques.
D. Continuously innovate core systems on the corporate banking front to ensure the fullness and timeliness of information; focus on risk control and customer services so as to expand overseas markets.

Business Plan for 2008
A. Guidelines
1. Bolster CTCB・s premier brand and market leadership in Taiwan; develop a segmented strategy and business model that highlights customer value.
2. Provide customers with optimal products, tailor-made services, and preferential interest rates commensurate with their credit history; join forces with more third-party organizations for cross-industry alliances to grow business.
3. Strengthen consolidation of various operations, such as deposits from and loans to corporate clients and their cash management; enable potential clients to turn to CTCB for upgraded services and thus usher in a greater contribution to revenue and earnings.
4. Undertake a region-specific development strategy that draws on high-caliber teams of marketing professionals; copy the model of success from region to region.
5. Make inroads into India, Indonesia and other emerging markets for syndicated loans and structured financing; use CTCB・s prospective branch in Singapore as a further stepping stone toward building an international distribution network.
B. Objectives
1. Provide well-rounded products and premium services to clients in the Greater China market beyond Taiwan and Hong Kong.
2. Promote public awareness of CTCB as the preferred banking partner for general banking services and wealth management.
3. Establish and put into practice a corporate philosophy that truly caters to what customers need; uphold CTCB・s leading status in such critical areas as wealth management, syndicated loans, foreign exchange, and forex derivatives.
4. Become Taiwan・s foremost supplier of payment services and small personal unsecured loans.
C. Key Policies
1. Rigorously enforce infrastructure layout for financial, risk management, and information systems to sustain overall expansion.
2. Attain more precise, efficient pre-lending credit check-up; reduce credit risks by focusing on creditworthy customers and solid collateral.
3. Continuously uphold Base II compliance; enhance risk awareness and devise action plans.
4. Consolidate CTCB・s corporate culture that centers on customer value; become more aggressively involved in community services.
Impact of Competitive Conditions, Legal Framework, Macro Environment
Taiwan・s financial supervisory mechanism has substantially matured in tandem with the continual innovation of commodities of late. Statutes were relaxed as markets were opened up to new competition. Still, the introduction of the Consumer Debt Clearance Act and bills on financial services and financing companies poses a challenge to CTCB as it strives to grow further in an already fiercely contested market. Moreover, international banks and private-equity funds have accelerated their entry into the Taiwan market by acquiring local financial institutions. While the acquired entities mostly specialize in consumer banking, the new foreign owners aggressively seek to capitalize their own core competence in corporate banking. Thus, Taiwan・s financial services industry is being left no choice but to confront a new era of competition across the Asia-Pacific region. Overall, the local financial services market has gradually recovered from a destructive consumer credit crisis. Credit and cash card operations have now returned to a normal profit-making pattern. Banks are also placing greater emphasis on credit check-up, risk management, and asset quality. In particular, foreign institutions are applying to Taiwan their ample experience in product development and risk pricing. All these favorable developments should help the Taiwan market break away from the irrational price war of the past.

Latest Credit Ratings

Future Development

In line with changes in competitive conditions and the legal framework and macro environment, CTCB is ready to undertake and pursue the following:

A. Become a financial services institution that customers can rely on; ready a full spectrum of services to satisfy a broad variety of customers.
B. Take the lead to innovate products and services and build a stronger international presence, securing CTCB・s status as the foremost banking partner for ethnic-Chinese everywhere.
C. Consolidate customers・ risk information and bolster in-house risk control capacity to effectively enhance overall risk management.
D. Sponsor the arts and cultural activities and care for the less fortunate to qualify as a responsible corporate citizen.

As the financial services industry and broader marketplace continue to undergo drastic changes, CTCB is committed to gearing its business toward fully meeting customer needs. It will continue to expand internationally and undertake M&As when and if it sees fit in order to become even more competitive. The ultimate goal is to carve out a premium position for CTCB so that ethnic-Chinese around the world will think of no other institution when it comes to choosing their best banking partner.

Charles L.F. Lo
Chairman