The domestic economy, as impacted by the financial turmoil, faced with the serious slump, only after the recovery measures were taken by the government, gradually recovered. In addition, the economy among emerging countries remained steady, which helped to boost our country’s export, and led us to the road of recovery. However, according to the estimate from the Directorate-General of Budget, Accounting & Statistics, Executive Yuan, Taiwan’s economy growth rate was -1.8%, which was the lowest rate ever since the statistics of GNP was released by the government. With regard to the domestic financial environment, it was entailed by the consequences of financial crisis, the credit market sentiment was weak, the margin was lower due to the competitions from the banking industry, plus the provisions reserved for structured notes, the revenues from banking industry remained low. Fortunately, the market has gradually recovered since the second half of 2009, the revenues of banking sector were back on track.

Facing the steep competition in the banking sector, the Bank will focus on the strategies of business development under well-managed risks. In addition to offering well-designed service by Corporate Banking and Retail Banking business units for generating more profits, the Bank will also continually conduct reorganization plans and improvement of the operation procedures, such as to establish the operational centralization platforms for accounting of credit business, bill collections, remittances and accounting operations, in order to upgrade the operation efficiency and lower the operating costs. Although the Bank suffered the loss in the second quarter in 2009 due to the structured notes losses, the Bank still demonstrated the excellent performance through effort of all the employees and presented a great result, which was the first time in a row of three years the Bank reported operating profits.

With regards to EnTie’s business and operations, at the end of December 2009, the Bank booked deposits of NT$241.4 billion, reflecting an increase of NT$24.3 billion or a growth of 11%, compared with the previous year. The year-end outstanding loans amounted to NT$186.3 billion, representing an increase of NT$ 5.8 billion or a growth of 3% compared to the previous year. Among which, the outstanding of mortgage loans increased greatly, reflecting a growth of 18% YOY, the asset quality was well and the ratio of total nonperforming loans was only 0.74%. In terms of revenue and profitability, EnTie’s pre-provision accumulated earnings for the year amounted to NT$1.5 billion, and an after-tax net income of NT$0.07 billion after provisions, earnings per share before income tax for the year 2009 amounted to NT$ 0.32 and earnings per share after income tax was NT$0.04, reflecting an improvement, compared with the previous year’s net loss of NT$ 5.8 billion after provisions, the Bank reported operating profits. On September 30th, 2009, Taiwan Ratings assigned the Bank a long-term rating of twBBB+ and the short-term rating of twA-2, with “stable” outlook.

Looking ahead of 2010, the global economy is expected to show a moderate recovery, but the economy continued to show weakness in the major industrial countries, in particular, high unemployment rate would drag on the economic recovery. According to Global Insight's latest forecast, the world's economic growth could be 3.2% in 2010.

In terms of the domestic economy, due to significant improvement of the global environment, the export volumes increased and job market improved, plus the cross-strait economic cooperation framework agreement (ECFA) is expected to be signed this year, it shall help to increase the cross-strait economic growth and interactions. Based on the forecast from the Directorate-General of Budget, Accounting & Statistics, Executive Yuan, the annual economic growth of Taiwan could be 4.72% in 2010. With regard to domestic financial markets, as the economy gradually improves, corporate capital spending and the number of syndication loan increases, which will help banks increase revenue of the core business, coupled with the decrease of risk in the reserve for non-performing loans, banks profits should be expected to increase. The Memorandum of Understanding (MOU) between China and Taiwan had been signed at the end of 2009, it shall accelerate the globalization of the financial sector and enhance its competitiveness through the cooperation from cross-strait financial institutions.

Facing with such new chapter, even though the Bank hasn’t had any “China” plan in mind at this moment, but the preparation for better earnings is under way: the Bank’s loan to deposit ratio has down to 0.84% at the end of 2009, the bad debt coverage maintains at 99.81%, capital adequacy ratio reaches to 10.95%, which has helped the Bank to become one of banks with cleanest assets and adequate capital. The issuance proposal of four billion subordinated financial debentures which plans to supplement the Bank’s Tier-2 capital also had been approved by Financial Supervisory Commission. The Bank will issue the debentures based on the business needs in the future. The business plans of the Bank are as follows:

1. Corporate Banking Business: Actively expand assets base and continue to disperse risk, stress the development of structured deals, focus on medium-size enterprise.
2. Consumer Finance Business: Under complete and centralized risk control structure, choose the target customer selectively, increases the asset growth of consumer loans, change the profit composition of consumer finance business.
3. Wealth Management Business: Through the extended scale, insist on customer segmentation’s wealth management service, substantiate sales compliance for wealth management business and strengthen development of sales of insurance products.
4. Financial Markets Business: Increase the product line and strengthen investment profits, also provide financial products and service to be more customer–oriented to respond to market trends.

Although there are full of competitions and challenges in the banking sector, the Bank’s outlook is still positive. With the strong capital structure, the Bank will strive for the growth at “full speed”, and reaches overall success under the solid capital structure and manageable risks.

We appreciate the supports from our shareholders and customers for such long time. With your support, the Bank is able to achieve stable development under such steep business environment. We would like to express our heartfelt appreciations and hope that shareholders and customers could continuously offer suggestions and give supports to the Bank.