Cheng Loong Corp.

In 2007, global economy was slightly worse compared to a year ago. The U.S. led subprime mortgage crisis has affected the economies of the world, and the effects of the crisis were yet to be fully realized for some nations. Some developing countries had strong economic growth, and led to a moderate global economic growth. Due to higher energy and raw material costs, economic growth and domestic demand in Taiwan were still weak.
Paper industry in Taiwan continued facing the international oil price to climb, led energy, paper pulp, raw material and freight costs – all in high level. In addition domestic market condition shadowy and so on influences, further reduces the domestic paper industry profit. Although plants gradually implemented various paper the price hikes; several adjustments of selling prices in the beginning of the year were still insufficient to cover the cost increases. In the last half of 2007, the domestic sales of both industrial and agricultural products presented weak in the peak season due to several disasters caused by typhoons. Throughout 2007, CLC (Cheng Loong Corporation ) continued to improve the management diligently, strengthen global operation management and display group synergy.
In 2007, our net sales reached NT$ 23.55 billion, up 9.1%, and exceeding the full year target by 6.1%. Net income for 2007 was NT$ 604.74 million, a decline of 21.6% over the same period of the previous year.

	Volume	2007/2006 Growth rate	Performance/ Target
Production
Paper & Paperboard	1,266,482(tonnes)	-0.1%	97.1%
Converting Products	451,000(000 m2)	-3.8%	95.1%
Sales
Paper & Paperboard	922,154(tonnes)	-0.3%	97.3%
Converting Products	551,780(000 m2)	7.2%	101.7%

During 2007, we continued to expand the containerboard and converting business, increasing production and sales in China and Southeast Asia, and restructuring our investment business in China. This led to an achievement of significant growth in our overseas assets, revenues and profits. We persisted with our efforts to improve our ERP system, simplify its processes, and develop peripheral system applications in order to accelerate and enhance our policy decision making. We also restructured group’s organization to improve its efficiency. In addition, we are devoted to research and innovation, and were awarded “Excellent Enterprise Innovation Award” by the Ministry of Economic Affairs for RFID and packaging design. Furthermore, we kept TPM (Total Productive Maintenance) activities for better production performance. All of our factories have excellent Energy Saving Performance. Moreover, we won nationwide awards including “The Industrial Greenhouse Gas Reduction Award” from the Ministry of Economic Affairs and “The Occupational Safety and Health Award” from Council of Labor Affairs. All these achievements show our ambition for excellence and competitiveness improvement.
Outlook for 2008, it is expected that global economic momentum may decrease in 2008. In addition, the political situation is unstable due to the president election, and globalization competitions also threaten the domestic industry. The economy of Taiwan is expected to slow down. To face the rapidly changing environment in 2008, we crafted the operational policies as follows:

In addition to implement these policies, we will continue to expand our overseas business as well as improve performance management, strengthen operation management, and cooperate with our overseas subsidiaries to create an outstanding performance.
Finally, we would like to express our sincere appreciation to our shareholders for your continued support to CLC. Thank you and all the best!