Thanks to the rapid development of mobile multimedia applications, the small and medium-sized display industry is entering a new period of rapid growth, with demand expected to surge from this year through 2010. Larger panels are fuelling the growth, led by the increasing popularity of 1.8/2.2-inch or even larger 2.4-inch mobile phone panels. Expanding applications for display panels, including digital cameras, and the demand for higher resolution screens are also fuelling the demand.

TPO is well positioned to benefit from this growing momentum. With our technological capability and production capacity, we are aggressively pursuing and working closely with strategic and select customers to expand our market share. We aim to ship 170 million modules in 2007 and at least 250 million units in 2008. We are confident that we can attain the goal we have set during our merger with Philips Mobile Display System (MDS) of becoming the world's No. 1 small and medium-sized panel maker next year.

In the front-end, we are working on further increasing our array capacity, including via strategic alliances in the back-end module front, we plan to increase monthly capacity to reach 26 million pieces by Q4 2008. TPO Nanjing LCM 2 is set to start production in Q1 2008, and total output of Nanjing plant is expected to reach 18 million units per month by Q4 2008. To ensure efficient capacity utilization, we will consider the best product mix to secure the highest output at the lowest cost in making production decisions.

As a member of the Compal Group, TPO can leverage off the group's vertically integrated manufacturing base/product line to support its operations. Aside from in-house color filter production, we can rely on Top-Com Electronics for backlight units; International Semiconductor Technology Ltd for driver IC testing service; and SWENC for touch panels. As vertical integration in LCD production is rather complete, our next target is to increase LED backlight production. Our focus now is on increasing production capacity of backlight units.

It's been almost a year since the merger with Philips MDS in June 2006. We have met our goals of enlarging our customer base, building up our team and enhancing our intellectual property portfolio. We have successfully expanded our customer base, gained the confidence of global brands/vendors, and become a panel supplier to major set makers covering a diverse range of applications worldwide. We have also gradually integrated Philips MDS system into TPO and built up a solid team. More important, aided by the IP portfolio we have inherited from Philips, we have removed major obstacles, ceased all IP disputes and secured our position in the field of IP.

We will pursue the following policies to further enhance merger synergy:

1. Central Invoice System: Centralize all billing systems by placing them all under headquarters' management.
2. Lower operating costs by closing down inefficient sites.
3. Further integrate and systematize IT resources.
4. Share resources among all operation sites.

Selecting the right person to oversee all these operations and responsibilities is crucial to the success of any business. I have entrusted the position of chief executive officer and president of TPO to William, who I believe will bring a new vision to TPO, creating a world-class enterprise through his expertise in supply chain management, manufacturing, quality assurance system and cost management.