Foreword Message from the Chairman. I. Introduction of TSA. 1. History 2. Objectives and Missions. II. TSA Organization

Transcription

1 Taiwan Securities Association CONTENTS Foreword Message from the Chairman I. Introduction of TSA 1. History 2. Objectives and Missions II. TSA Organization 1. TSA Organization Chart 2. General Assembly of the Members 3. Board of Directors 4. Board of Supervisors 5. Committees 6. Administrative Divisions III. Work Report 1. Major accomplishments in The 2010 focus Appendices 1. Major Events 2. Profitability analysis of securities companies 3. Comparison of Business Performance by Securities Firms during the Recent Two Years

2 Message from the Chairman FOREWORD The last year (2009) had been a year shadowed by the global financial crisis and economic impacts. While the Taiwan stock market was buried deep in the aftermath of the financial crisis during the first quarter, expansionary fiscal and monetary policies were being enforced all over the world, policies were also introduced in Taiwan to ensure financial stability, expansion of domestic demand, export growth, and employment etc, which eventually led the economy to its recovery. The stock market also responded to the inflow of capital, improved cross-strait relations, and the recovery of industry fundamentals, and climbed out of its slump. At the end of 2009, the Taiwan Stock Exchange Capitalization Weighted Stock Index (TAIEX) closed at 8,188, being 78.35% higher than its 2008 year-end level, while the GreTai Securities Market Capitalization Weighted Stock Index (GTEX) closed at , a % improvement over the previous year. The daily trading volumes of both markets averaged to a total of $ billion, being 17.83% higher than the 2008 average; market capitalization stood at $22,947.8 billion or 83.90% higher compared to The EPS across 85 security companies averaged $1.18, which was a tremendous improvement over the -$0.20 in 2008, this was also the best performance we have seen since 2007 ($1.62). The business foundation of our security company remained strong and had demonstrated great improvements. The Taiwan Securities Association is committed to serve its members and to ensure market discipline. Ever since my appointment as the Chairman on 30 Mar 2007, I have been fully dedicated to raise the competitiveness of our nation's securities industry, and encouraged all our colleagues to perform services with "passion, professionalism, efficiency, and innovation". We have set goals to reduce the operating costs of security companies and improve market efficiency in the short term, expand the business coverage of security companies while ensuring discipline among members in the medium term, and raise our global competitiveness over the long term.

3 Securities Association in Taiwan, R.O.C. For the past year, Taiwan Securities Association had achieved the following accomplishments through persistent efforts to serve our members and raise the competitiveness of our securities industry: I. Integration of Taiwan's capital market During the previous year, the Association had contributed to the establishment of the "Financial Investment Services and Capital Market Act" together with the local authority and several other institutions. The Act was intended to remove obstacles among financial service providers across different industries by integrating all regulations and business activities within the capital market, thereby allowing security companies to directly compete in other fields while improving the effectiveness of financial supervisory and enhancing the protection of investors' interests. However in view of the impacts of the global financial crisis, the authority had decided to complete the capital market reform in phases; industry participants will continue their segregated businesses while the market reform takes place progressively in line with the spirit of The Act through revised supervisory measures. II. Security companies are permitted to perform wealth management services through trusts Through the persistent efforts of The Association, the Financial Supervisory Commission announced the amended version of its "Guidelines to the Wealth Management Services of Security companies" on 28 Sep 2009, which permitted security companies to hold money trust and securities trust licenses, and perform wealth management services through three forms of trust: "single purpose trust", "collective trust", and "specified purpose trust". The usage of entrusted assets are targeted mainly at security-related instruments including money market instruments such as bank deposits and treasury bills etc, domestic securities, foreign investments, futures and financial derivatives etc. The introduction of these services will enable security companies to better satisfy the diverse financial needs and goals of their wealth management customers, and raise their competitive advantage in wealth management. III. Improved the worldwide competitiveness of security companies The Association is actively involved in international conferences including the International Organization of Securities Commission (IOSCO), International Councils of Securities Association (ICSA), Asia Securities Forum (ASF), and International Forum for Investor Education (IFIE);

4 > > > > > Taiwan Securities Association meanwhile The Association had signed memorandums of understanding (MOU) with the Association of Stockbroking Companies Malaysia, International Capital Market Association (ICMA), and Hong Kong Securities Association. Since Sep 2007, The Association had signed MOU with securities self-discipline organizations from 12 countries. We believe that through international exchange and cooperation, we may help members explore cross-border business opportunities and raise the worldwide significance of the Taiwan market. IV. Reduced the operating costs and facilitated the business development of security companies Recommendations made to the Taiwan Depository & Clearing Corporation by The Association to establish a dedicated inquiry system had been adopted. Security companies are estimated to handle 70-80% fewer execution commands and save $60 million of operating costs per year. The Association had coordinated with Taiwan Depository & Clearing Corporation to perform physical settlements for members stationed in remote locations, thereby saving $5 million in cost per year. The Ministry of Finance permitted that if investors had arranged for proxy payment of commission charges with their security brokers, security companies may declare 2% sales tax on the amounts net of commissions charged by the upstream broker for the purchase or sale of foreign securities. The Ministry of Finance and The Ministry of Economic Affairs had continued the 7-year exemption of securities transaction tax on corporate bonds and financial bonds. V. Improved the efficiency of the security market and enhanced self-discipline across brokerage companies For the brokerage business, The Association is working with Taiwan Stock Exchange to introduce the T+2 DVP settlement that reduces operational risks and facilitates more efficient flow of cash and securities. For the underwriting business, Taiwan Stock Exchange had agreed to the recommendations of The Association to relax the ownership dispersion requirements imposed on public listed companies, as an attempt to entice the local listing of foreign corporations. The local authority had also agreed that underwriters may, during the first 10 trading days after the initial listing of Taiwan depository receipts, sell its subscribed units depending on security performance in order to maintain market efficiency. In the area of risk management, The Association is assisting in the implementation of capital adequacy to security companies, and ensuring the compliance of Basel II "Capital Adequacy" (Pillar I) and "Risk Supervision" (Pillar II). The Association is also in discussion with Taiwan

5 Securities Association in Taiwan, R.O.C. Financial Services Roundtable to establish "Regulations Governing Offshore Structured Products" and "Supervision and Management Guidelines for Structured Products". Furthermore, to resolve the unauthorized publication of research reports produced by security companies, and the market mayhem caused by such conducts, The Association has made available a "Security company's elaboration on quoted statements" section within its website for security companies to openly elaborate on their comments quoted by the media. The Association had also enhanced selfdiscipline through the establishment of several principles such as "Self-Discipline Guidelines to the Promotion of Wealth Management Services for Security companies" and the amendment of "Self- Discipline Guidelines to the Guidance of Security Issuance for Underwriters" etc. In 2010, Taiwan Securities Association remains dedicated to serve its members by bridging the communication with the local authority, seeking industry-wide consensus, and strive to maximize the competitiveness of the entire market and its participants: (1) Align with the worldwide supervisory development following the global financial crisis. Assist in the risk management enhancements of security companies and their protection of investors' interests. (2) Research with the authority for the position and future prospects of security companies. Introduce security-integrated services and improve the competitiveness of security companies. (3) Research for the position and future prospects of The Association. Revise the relevant rules to enforce self-discipline within The Association. (4) Promote security exchange between China and Taiwan with the signing of MOU and ECFA. Assist in the exploration of market opportunities in China. (5) Consolidate settlement/clearance funds. Revise the existing collective settlement responsibility system. (6) Collaborate with Taiwan Stock Exchange and the GreTai Securities Market to promote warrants. We target to raise the weight of daily average warrant transactions from 0.4% (2009) to 5.0% of the entire securities market trading volume was a prosperous year for Taiwan's security market and its participants. However, we must learn our lessons from the global financial crisis to carefully yet actively carry out our capital market reform and our road to globalization. Following our experience with the financial turmoil, Taiwan's capital market will be reborn and rise up to embrace new challenges in 2010 with unmatched momentum as long as we believe that nothing is impossible. Chairman

6 Passion Professionalism Efficiency Innovation I Introduction of TSA 1. History (1) On 26 January 1998, the Ministry of the Interior officially approved the establishment of the Taiwan Securities Association (TSA). Three preparatory meetings have since been convened during the period of February to March The TSA commenced to solicit membership from 27 February (2) On 4 April 1998, the TSA convened its first meeting for the first General Assembly of the Members to elect its directors and supervisors, who afterwards elected the chairman and chief supervisor for the Association. (3) The Association became a national securities association following its merger with the Taipei Securities Dealers Association on July 31, 1999 and then the Kaohsiung Securities Dealers Association on December 31, By the end of 2009, members of the TSA included 150 headquarters and 1,0004 branches. 2. Objectives and Missions (1) Objectives a. Protecting the interest of investors b. Facilitating national economic development c. Promoting cooperation among member companies d. Pursuing mutual benefits (2) Missions a. Supporting economic development of the country; facilitating the full-functioning of the securities market. b. Operations in connection with the coordination, investigation, statistics and consulting service, R&D and publications, etc. in the domestic and overseas securities market. c. Assisting the government in the promotion, research and recommendation of economic policies and securities-related regulations. d. Encouraging self-regulation by members to achieve operational improvement; facilitating the communication and coordination among members. e. Establishment and compilation of business regulations in connection with the common operations of members. f. Strengthening the organization structure of the Association to facilitate its development. g. Rectifying operational defects by the members. h. Conducting professional training or seminars for employees of member companies. i. Organizing charity or public welfare activities for the members. j. Safeguarding the legal rights and interests of members. k. Executing disciplinary actions in case of any violation by the members. l. Mediating or arbitrating disputes among members or between members and investors. m. Establishing operational regulations or fair trade rules for members. n. Providing services to members with regard to the application, change, replacement of certificates or licenses, as well as other services. o. Participating in international securities organizations and contributing to the improvement of Taiwan's international relationship through nongovernmental activities. p. Providing additional services entrusted by government organizations or civil associations. q. Participating in social activities. r. Ensuring fair trades in the securities market and protecting the investors. s. Preventing frauds, price manipulation, inadequate fee charge, and other behaviors involving undue profit-making in the securities market. t. Administering the qualification tests and registration of associated persons in securities firms. u. Other matters required by law or recommended by members as appropriate. 06 Taiwan Securities Association 2009 Annual Report

7 TSA Organization II TSA Organization 1. TSA Organization Chart Brokerage Business Committee Dealing Business Committee Discipline Committee R&D Committee Risk Management Committee Education & Training Committee Finance Committee International Affairs Committee Mainland Affairs Committee Financial Futures Committee Brokerage of Foreign Securities Committee New Financial Products Committee Foreign Brokers Committee Public Affairs Committee Underwriting Committee General Assembly of the Members Board of Directors Chairman Secretary General Deputy Secretary General Board of Supervisors Bond Market Committee Taxation and Accounting Committee E-Commerce Business Committee Wealth Management Committee Business Development Division Administrative Division Shareholder Service Committee Auditing Committee Investor Education Committee Overseas Management Strategy Committee Tendering Committee Business Service Dept. Education & Training Dept. International Affairs Dept. Kaohsiung Office Secretariat Finance Dept. Planning Dept. Information Management Dept. Taiwan Securities Association 2009 Annual Report 07

8 Passion Professionalism Efficiency Innovation 2. General Assembly of the Members The General Assembly of the Members is the supreme decision-making body of the TSA. Members of the Association are required to appoint representatives to attend the General Assembly, who shall be referred as "Member Representatives". The number of member representatives for each member shall be determined in accordance with the following criteria: (1) Members engaged in underwriting business should appoint one member representative. (2) Members engaged in securities dealing business should appoint one member representative. (3) Members engaged in securities brokerage business should appoint one member representative. (4) Members engaged in two or three items described above should appoint two or three member representatives. As at 31 December 2009, the TSA has a total of 275 member representatives. 3. Board of Directors The board of directors is an executive unit of the Association. It is also an executive unit responsible for planning and facilitating the overall operation of the Association. At present, there are 33 directors in TSA's board of directors, including 11 executive directors and a chairperson. 4. Board of Supervisors The Board of Supervisors is the supervising unit of the Association, responsible for supervising and rectifying, if necessary, the operations and financial management of the Association administered by the board of directors. The TSA has 11 supervisors now, including 3 executive supervisors and a chief supervisor. 5. Committees The TSA has a total of 24 committees currently, including brokerage business, dealing business, discipline, R&D, education & training, finance, international affairs, mainland affairs, financial futures, new financial products, foreign brokers, public affairs, underwriting, bond market, brokerage of foreign securities, taxation and accounting, risk management, e-commerce, wealth management, shareholder service, auditing, investor education, overseas management strategy and tendering committees. In accordance with the articles of the Association, the committees shall be supporting units of the board of directors, responsible for R&D in the securities market as well as recommendation and 08 Taiwan Securities Association 2009 Annual Report

9 TSA Organization integration of various business proposals, so as to ensure smooth business operation of the Association. Also, TSA has established a tendering group responsible for the negotiation of major procurement projects, aiming to achieve a centralized control of major expenses and cost-saving for the Association. 6. Administrative Divisions Administrative divisions of the Association play key roles in managing the operations of the Association. The TSA's administrative divisions are supervised by a secretary general and two deputy secretary generals. There are two divisions under their management, respectively, the administrative division and business development division. The administrative division is further divided into four departments, respectively, secretariat, finance, information management and planning; while the business development division consists of three departments including business service, education and training and international affairs departments. The TSA's Kaohsiung office takes charge of all the training programs, member coordination, seminars and forums, as well as other related issues for TSA members in the southern part of Taiwan. Taiwan Securities Association 2009 Annual Report 09

10 Passion Professionalism Efficiency Innovation III Work Report The Association received the Excellence Award during the 2008 "Nationwide Taiwan Industrial, Commercial, and Professional Associations Performance Review" held by the Ministry of Internal Affairs on 6 Nov This marked the sixth consecutive award The Association had been honored with since 2003, and represented the authority's acknowledgement for the operations of The Association as well as services to its members. Under the leadership of the chairman, The Association strives to achieve the following objectives with "passion, professionalism, efficiency, and innovation": 1. Short term goal: reduce the operating costs of security companies, improve the operations of the security market to achieve high market efficiency. 2. Medium term goal: expand the business scope of security companies, improve the profitability of security companies while enhancing self-discipline among members. 3. Long term goal: raise the world competitiveness of security companies, assist in their transformation into multi-dimensional investment banks through the integration of capital market regulations and the implementation of effective supervisory mechanisms. The Association had made many practical accomplishments with the help of its colleagues and members, the summary of which are listed below: 1. Major accomplishments in 2009 (1) Reduced the operating costs of security companies 1. Maintained the exemption of securities transaction tax to corporate bond and financial bond transactions. TSA signed the MOU with ICMA in London, UK, on September 7 th 2. Reduced security companies' costs of handling execution commands. 3. Resolved issues related to the physical settlements of members stationed in remote locations. 4. Removed regulatory requirements that stock purchases and stock sales must be printed in different colors. 5. Waived the printing of order placement history for non-electronic transactions. 6. Commission charges collected on behalf of upstream brokers were exempted from the 2% sales tax. 7. Widened the scope of businesses permitted to securities and futures specialists. 8. Waived the regulatory requirement that security companies must provide special earnings reserves when these reserves were used to offset previous losses. 10 Taiwan Securities Association 2009 Annual Report

11 Work Report TSA signed the MOU with ASCM in Kuala Lumpur, Malaysia, on April 9 th TSA signed the MOU with HKSA in Hong Kong, China, on November 24 th 9. Reduced the training hours of risk management personnel. 10. Developed a "Training Certificate Online Access System". 11. Strived for reasonable allocation of joint education promotion expenses. (2) Improved the operations of the security market 1. Flexibly adjusted the volumes of Taiwan depository receipt (TDR) issuance. 2. Relaxed the thresholds of forced conversion, subscription, and recall clauses applicable to convertible corporate bonds and corporate bonds with embedded options. 3. R e l a x e d t h e o w n e r s h i p d i s p e r s i o n requirements for public listed preference shares. 4. Recommended for the temporary relaxation of convertible bond issuance. 5. Relaxed the regulatory requirements of ordinary share and convertible bond issuance. 6. Introduced new underwriting methods to preference shares. 7. Created guidelines relating to the underwriting of corporate bonds (or preference share) with standalone options. 8. Deleted Section 54 of the "Rules Governing the Trading of Securities". 9. Resolved the inconvenience of trading, settling and clearing corporate bonds with embedded conditions. 10. Simplified the audit and supervision procedures conducted by security company headquarters to their branches. 11. Audit reports that are more than two years old may be stored in digital form. 12. All anti-money laundering matters associated with the wealth management services of security companies are handled by the Head of Legal & Compliance. Taiwan Securities Association 2009 Annual Report 11

12 Passion Professionalism Efficiency Innovation 13. Waiver of certificate authority for orders placed through Direct Market Access. 14. Simplified the procedures for amending personal information of electronic trading account customers. 15. Electronic trading account customers may reset passwords using certificate authority. 16. Introduced the DVP T+2 settlement system. 17. Adjusted the effective timing of cash capital. 18. The waiver of advance deposits for shares placed on alert under certain circumstances. 19. Permitted the continual use of accounts with settlement defaults, after the default had been discharged. 20. Permitted the opening of multiple default processing accounts under the same security company. 21. Waived the requirement for a security brokerage company to verify the sufficiency of shares in the depository account plus any physical shares deposited, when executing sell orders for insurance companies and banks without depository. 22. Waiver for the transmit ion of proxy security trading agent details for FIA accounts. 23. Collaborated in the establishment of "Regulations Governing Offshore Structured Products" and "Supervision and Management Guidelines for Structured Products". 24. Clarified the account opening restrictions for insiders of brokerage companies of foreign securities when investing in the domestic security market. 25. Established rules of cooperation with brokerage companies of foreign securities. 26. Permitted customers to sell securities one business day after the termination of financial derivatives. 27. Improved the electronic batch reporting of warrant transactions. 28. Reduced the parameters used in capital adequacy calculations. The Chairman of TSA, Dr. Min-Juh Hwang, the President of TWSE, Mr. Samuel J.S. Hsu and the President of GTSM, Mr. Yui-Chun Wu at the AGM of IOSCO The Vice Chairman of TSA, Mr. Kwang-Hsiung Wu (middle) attended the AGM of ASF 12 Taiwan Securities Association 2009 Annual Report

13 Work Report 29. Adopted the Delta-Plus analysis as reference to the risk management review of security companies. 30. Involved in the amendments of "RISK M A N A G E M E N T B E S T - P R A C T I C E PRINCIPLES FOR SECURITIES FIRMS" and "Risk Management Progress Evaluation for Securities Firms". (3) Expanded the business scope of security companies 1. Security brokerage companies are permitted to act as distributors of futures funds. 2. Security companies may perform wealth management services through trust. 3. Relaxed the regulatory restrictions for the investment of structured products by insurance companies. (4) Enhanced members' self-discipline 1. Created the "IPO compliance checklist for lead underwriter (recommending security company)". 2. Added conditions for corporate bond issuance. 3. Specified that the outcome of price stability measures undertaken by the underwriter will not be returned to security issuers. 4. A d d e d c o m m i s s i o n c o v e n a n t s t o t h e underwriting agreement. 5. Reviewed foreign structured products. 6. Trust companies may open more than two accounts for the trading of foreign securities. 7. Relaxed the requirements for an ordinary investor to be regarded as a professional investor. 8. Relaxed the restrictions to security dealing companies' buy/sell quotations. 9. Established "Principles relating to the clarification on research reports quoted by media". 10. Established Self-Discipline Guidelines to the Promotion of Wealth Management Services for Security companies. The Chairman of TSA, Dr. Min-Juh Hwang pictured with the Commissioner of FSC, Dr. Tzong-Rong Tsai (right), the Chairman of TWSE, Dr. Chi Schive (second from left) and the President of ICMA, Mr. Rene' Karsenti (left) TSA paid a visit to RHB Investment Bank Berhad in Kuala Lumpur, Malaysia Taiwan Securities Association 2009 Annual Report 13

14 Passion Professionalism Efficiency Innovation 11. Relaxed regulatory requirements on legal training; condensed the 4-day, 2 hours per day course into one single day. (5) Extended international relations 1. Involvements of international conventions Time Venue Conference 01/13-21 Tokyo, Japan The 4 th ASF Training Conference 03/02-03 Washington D.C., U.S.A The 2009 IFIE and IOSCO Investors Education Conference 03/17-19 Hainan, China 2009 Boao Forum for Asia 05/05-09 Beijing and Shanghai, China Site inspection of China's security institutions 05/10-12 Washington D.C., U.S.A The 22 nd ICSA Annual Conference 06/07-14 Tel Aviv-Yafo, Israel The 34 th IOSCO Annual Conference 08/12-16 Kuala Lumpur, Malaysia 09/06-11 London, UK Seminar "Corporate Investment and Public Listing in Taiwan" Overseas Taiwan Investment Forum and promotion for the local listing of foreign corporations 10/11-13 Sydney, Australia The 14 th Asia Securities Forum 10/22 Tokyo, Japan The 2009 IFIE and JSDA Investors Education Conference 12/03-10 Tokyo, Japan The 5 th ASF Training Conference 2. Signing of MOUs with securities industry associations around the world time venue description 04/09 Kuala Lumpur, Malaysia 09/07 London, UK 11/24 Hong Kong, China Signed the MOU with the Association of Stockbroking Companies Malaysia (ASCM) Signed the MOU with the International Capital Market Association (ICMA) Signed the MOU with the Hong Kong Stockbrokers Association Ltd. (HKSA) 14 Taiwan Securities Association 2009 Annual Report

15 Work Report The Honorary Chairman of TSA, Mr. Hung- Wen Chien led the delegation to HSBC, Australia The Vice Chairman of TSA, Mr. Kwang-Hsiung Wu (middle) led the delegation to Osaka Stock Exchange, Japan (6) Investors education 1. To assist in the promotion of accurate financial concepts to investors and enable campus instructors' teaching capability on the finance subject, The Association had organized "Capital Market Workshops" in accordance with the 2006 and 2009 curriculum announced by the Ministry The Executive Director of TSA, Mr. Kang- Chi Chou led the delegation to Macquarie Securities Group, Australia of Education. This workshop was intended to enable teachers to teach students the right finance concepts, and a total of 278 high school teachers had attended the workshop. 2. Promoted investment education Printed the monthly and quarterly periodicals of Taiwan Securities Association and distributed to security companies, securities-related institutions, academic groups, libraries, and the authority. The electronic copies of these publications were made available for download from The Association's website. The member representatives of TSA paid a visit to Hongta Securities, Kunming, China Taiwan Securities Association 2009 Annual Report 15

16 Passion Professionalism Efficiency Innovation The Executive Director of TSA, Mr. Guh-Bin Huang and Mr. Kung-Liang Yeh led the delegation to JSDA Osaka office, Japan The member representatives of TSA paid a visit to Shenying & Wanguo Securities, Shanghai, China Created the on-job training materials for wealth management personnel. Topics included "Basic financial planning", "Employee welfare and pension planning", "Risk management and insurance planning", "Leases, taxes, and asset transfer". Subsidized the organization of "personal investment finance overview courses" by non-finance departments of tertiary institutions. These subsidies were intended to help promote the right financial concepts to tertiary students. A total of 1,127 students participated in these courses. Promoted education on investment and finance in accordance with government policies. Subsidized the teaching of proper investment and financial concepts during high school morning gatherings. A total of 5 schools had applied for the subsidy. Collaborated with Chinese Association of Business and Intangible Assets Evaluation to conduct practical business valuation courses for underwriter sales staffs and accounting personnel. Joined the seminars organized by the Chinese Society for Training and Education to improve the depth and scope of the various courses conducted by The Association. Following the approval of the Ministry of Education in Aug 2009, The Association had become the teachers training center for "Exploring the Stock Market". (7) Training and education of industry participants 1. Training and education of industry participants Name of course No. of courses Participants No. of courses Participants No. of courses Participants On-job training 92 7, , ,872 Basic Advanced 78 6, , , Taiwan Securities Association 2009 Annual Report

17 Work Report Name of course No. of courses Participants No. of courses Participants No. of courses Participants Security brokerage 60 5, , ,079 Security Dealing Security underwriting Share financing Share administration Wealth management Foreign investors (5) 53 (13) 88 (7) 74 Other personnel training Middle and senior management , ,227 Middle management 10 1, , ,282 Senior management , ,109 Senior executives Legal discipline Professional training Corporate governance Professional training Risk management Professional training Business personnel , Business conference Investors education Finance seminar at campus ,950 Labor safety personnel training Wealth management sales personnel Eligibility workshop Wealth management staff Eligibility exams , , , ,027 Total , , ,173 Taiwan Securities Association 2009 Annual Report 17

18 Passion Professionalism Efficiency Innovation 2. Eligibility exams The Securities and Futures Institute had conducted the "2009 Securities Business Personnel Professional Eligibility Exam" on behalf of The Association. Statistics related to the enrolments and results of the Securities Business Personnel Eligibility Exam are detailed below: Enrolments and results of the 2009 Securities Business Personnel Eligibility Exam Method exam Exam category Enrolments Present Absence Present % Qualified Qualified % Senior Securities Specialist 12,932 8,119 4, , Securities Specialist 14,754 11,614 3, , Paper exam The Securities Exchange Act and Real Practices 1,317 1, Subtotal 29,003 20,775 8, , Senior Securities Specialist 6,427 4,885 1, , Computer exam Securities Specialist 4,962 4, , The Securities Exchange Act and Real Practices 1, Subtotal 12,449 9,946 2, , Senior Securities Specialist Foreigners' exam Securities Specialist * * * * * * Subtotal Total 41,474 30,741 10, , Taiwan Securities Association 2009 Annual Report

19 Work Report The member representatives of TSA at Yunnan Dali, China The member representatives of TSA in front of Sydney Opera House, Australia 2. The 2010 focus (1) Align with the worldwide supervisory development following the global financial crisis. Assist in the risk management enhancements of security companies and their protection of investors' interests. (2) Research with the authority for the position and future prospects of security companies. Introduce security-integrated services and improve the competitiveness of security companies. (3) Research for the position and future prospects of The Association. Revise the relevant rules to enforce self-discipline within The Association. (4) Promote security exchange between China and Taiwan with the signing of MOU and ECFA. Assist in the exploration of market opportunities in China. (5) Consolidate settlement/clearance funds. Revise the existing collective settlement responsibility system. 1. Consolidate settlement/clearance funds across different markets. 2. Maintain the consolidated fund balance at NTD5 billion. Return excess funds to security companies. 3. Revise the existing method of collecting settlement/clearance fund contributions. (6) Collaborate with Taiwan Stock Exchange and the GreTai Securities Market to promote warrants. We target to raise the weight of daily average warrant transactions from 0.4% (2009) to 5.0% of the entire securities market trading volume. The association shall strive to: 1. Introduce callable bull/bear contracts. 2. Permit the offsetting of warrant transactions. 3. Relax warrant listing requirements. 4. Enhance the education of warrant trading. Taiwan Securities Association 2009 Annual Report 19

20 Passion Professionalism Efficiency Innovation Appendix Major events January To reduce the operating costs of security companies through practical operations, The Association 1.01 had dismissed its securities postal unit since 1 Jan 2009 and requested the assistance of Taiwan Depository and Clearing Corporation in the postal operations of security companies. On 8 Jan the Taiwan Stock Exchange convened a meeting to discuss the use of its $60 million public interests funds into securities personnel training. During the meeting, The Association gave its 1.08 best effort to persuade the use of the entire budget to benefit security companies and their staffs by extending the subsidy period, fully subsidizing courses organized by The Association, and removing the $20 million cap imposed on The Association, Taiwan Academy of Banking and Finance, and the Securities and Futures Institute. Chairman Hwang of The Association, along with the Financial Investment Services and Capital Market Act development team, Professor Chou Shing-Yi, Professor Lin Ren-Kuang, Professor 1.14 Chiu Hsien-Bi, and lawyer Chuang Yue-Ching of Tsar & Tsai Law Firm et.al visited the Financial Supervisory Commission to brief Chairman Sean Chen, Vice Chairman Li Ji-Ju, Vice Chairman Wu Tang-Jie and the senior committees on the topic: "The Necessity of the Financial Investment Services and Capital Market Act" The Association signed up to join the international organization XBRL, and consented to act as the convener of XBRL Taiwan Branch. Announced the amendment to Section 3 of The Association's "Guidelines on Information to be Published in Securities Underwriting Contracts", The Association's "Declaration of underwriting 1.22 contracts for securities firms", and The Association's "Rules Governing Underwriting and Resale of Securities by Securities Firms". These amendments were effective from the date of the announcement. 20 Taiwan Securities Association 2009 Annual Report

21 Appendix February To improve the quality and efficiency of education and training conducted by The Association, provide more convenient enrolment access to the human resources departments of member companies, 2.06 and to facilitate faster understanding in each training session, The Association had consolidated the questions that were frequently asked during training courses, provided clarifications and printed into Q&A booklets for easy reference. Announced the amendment of The Association's "Guidelines for Information to be Published in Assessments of Securities Underwriters for Offering and Issuance of Securities by Foreign Issuers", "Assessment and Audit Procedures for Security Underwriters to the Issuance of Securities by Foreign 2.10 Securities Issuers", the appendix of "Rules for Information to be Published in Securities Underwriter Evaluation Reports on Offering and Issuance of Securities by Securities Issuers", "Audit Procedures of Securities Underwriter Evaluation Reports on Offering and Issuance of Securities by Securities Issuers" and its appendix. These amendments were effective from the date of announcement. The Financial Supervisory Commission agreed to the recommendations made by The Association and amended Section 3 of the "Regulations Governing Information to be Published in Order Tickets, 2.11 Trade Reports, and Reconciliation Statements Prepared by Securities Brokers Upon Receiving Orders to Buy or Sell Securities" to remove the requirement that the buy/sell reports must be printed in different colors. Security companies may consolidate investors' transactions into one single report for cost-saving purposes. This amendment was announced and implemented on 11 Feb Announced the amendment to Section 61 of The Association's "Rules Governing Underwriting and Resale of Securities by Securities Firms"; effective from the date of announcement Published the "2008 common errors found during audits on security firms". Members were urged to enhance their internal control and internal audit practices Vice Chairman Wu Kuang-Hsiung of The Association attended the Second Shanghai Financial Forum from 16 to 19 Feb and visited the Chinese financial authority. Taiwan Securities Association 2009 Annual Report 21

22 Passion Professionalism Efficiency Innovation The Department of Secondary Education, Ministry of Education convened the conference: "The Continuing education of high school teachers of citizens and society "; the Department of Technological and Vocational Education, the Central Region Office of the Ministry of Education, 2.17 the Education Bureau of Taipei and Kaohsiung City Governments, and teachers of the citizens and society subject from 22 cities and counties were all invited to participate. The Association conducted briefings and discussions on capital market studies in hope to contribute to the education of the nation's teachers, pass on proper financial knowledge to their students, and ensure the protection of investors' interests from school education. Announced the amendments to Section 8 of The Association's "Directions Governing the Underwriting 2.18 Procedures to be Followed by Underwriters in Conducting an Initial Listing on a Stock Exchange or Over-the-Counter Market", effective from the date of announcement. Announced the amendment of The Association's "Rules for Information to be Published in Securities Underwriter Evaluation Reports on Offering and Issuance of Securities by Foreign Securities Issuers" , "Assessment and Audit Procedures for Security Underwriters to the Issuance of Securities by Foreign Securities Issuers" 3-6, and Section 4-1 of "Rules Governing Underwriting and Resale of Securities by Securities Firms"; effective from the date of announcement. Taiwan Securities Association and Taiwan Stock Exchange established memorandums of 2.24 understanding with Taiwan Academy of Banking and Finance, Securities and Futures Institute and several other units for the training of security market talents. March The Association organized workshops for senior executives of security companies, with guests 3.02 from government authorities. The lead economic counselor Liu Yi-Ru of Chinatrust discussed "How security companies should respond to the 2008 financial crisis". 22 Taiwan Securities Association 2009 Annual Report

23 Appendix The Association advised to the Taiwan Depository and Clearing Corporation to permit document delivery of security and depository matters between security companies and the Taiwan Depository and Clearing Corporation through direct mail, for the purpose of reducing operating costs. This 3.09 proposal was agreed by the Taiwan Depository and Clearing Corporation and the authority, and was effective since 9 Mar To facilitate the implementation of new practices, The Association appointed its staffs to act as witnesses at Taiwan Depository and Clearing Corporation from 5 Jan 2009 to 6 Mar President Hu Ji-Zhi of Guosen Securities China, along with his senior management staffs, visited 3.10 The Association and exchanged opinions relating to the joint development of the security markets between China and Taiwan. To facilitate financial and security exchanges between Taiwan and Hong Kong, Hong Kong Securities Association (HKSA) visited Taiwan in a group of 37, led by Chairman Li Yiu-Sun. The Association 3.20 arranged HKSA's visit to the Taiwan Stock Exchange, Taiwan Futures Exchange, Taiwan Depository & Clearing Corporation, Sinopac Securities, Hantec Securities Consultants Ltd and other industry participants on 20 Mar The Association convened the third members' general meeting under the fourth Chairman, and awarded committees' excellence of performance during the meeting. April Announced the amendments to The Association's "Rules Governing Underwriting and Resale of 4.01 Securities by Securities Firms" and "Rules of Self-Discipline to Underwriters Guiding the Security Issuance" with regards to the underwriting of preference shares; effective from the date of announcement. The Executive Yuan passed the amendments to the Income Tax Law, in an attempt to apply 4.01 consistent taxation basis across a wide range of financial products including securitized products, short term notes, structured products, and bond repurchases. From 2010 onwards, a separation tax of 10% will be applicable to individual investors on all these products. Taiwan Securities Association 2009 Annual Report 23

24 Passion Professionalism Efficiency Innovation The Association, the Chinese Futures Association, and the Securities Investment Trust & Consulting 4.02 Association organized the conference: "Exploration of the Chinese Market by securities, futures, investment trusts, and consulting industries" jointly with Taiwan Competitiveness Forum and the National Policy Foundation Announced the amendments to Sections 16 and 20 of The Association's "Rules of Self-Discipline to Underwriters Guiding the Security Issuance", effective from the date of announcement Chairman Hwang Min-Juh of The Association signed a MOU with the Association of Stockbroking Companies Malaysia (ASCM). The Association accompanied Korea Financial Investment Association (KOFIA) to their visit to 4.15 Committee Sean Chen of the Financial Supervisory Commission. Both parties exchanged their opinions toward capital market reforms. May Convener Shih Kang and Officer Chu Kuei-Ting of the Research and Development Committee of The 5.10 Association attended the ICSA annual meeting in Washington D.C., USA from 10 May to 12 May, Announced the amendments to Sections 30-2 and 31 of The Association's "Rules of Self-Discipline to Underwriters Guiding the Security Issuance", effective from the date of announcement. To held corporations raise capital, security issuers declaring fund usages as repaying convertible 5.27 corporate bonds with embedded put options maturing before 31 Dec 2009 were exempted from Section 4 of The Association's "Rules of Self-Discipline to Underwriters Guiding the Security Issuance of Securities Issuers" with regards to the calculation of outstanding shares. 24 Taiwan Securities Association 2009 Annual Report

25 Appendix June 6.07 Chairman Hwang Min-Juh and the Head of International Affairs, Hsu Bing-Chun of The Association attended the 34th IOSCO annual meeting in Tel-Aviv, Israel from 7 Jun to 14 Jun. Announced the amendments to Sections 25 and 37 of The Association's "Rules of Self-Discipline 6.11 to Underwriters Guiding the Security Issuance of Securities Issuers", effective from the date of announcement. Announced the amendments to Sections 4-1 and 5 of The Association's "Rules Governing the 6.17 Book Building Method of Security Issuance by Securities Underwriters"; effective from the date of announcement. The Association organized the seminar: "Adaptation of Internal Financial Reporting Standards (IFRS) in Taiwan", and invited accountant Huang Jin-Ze of PricewaterhouseCoopers to discuss 6.23 the implications of IFRS adaptation in Taiwan. This seminar was held to facilitate members' understanding and early responses to the differences between IFRS and the current accounting standards in Taiwan. July A group of 12 visitors led by General Manager Wen De-Jun of Guosen Securities departed from the Wuhan City of Hubei Province, China and visited The Association on 9 Jul. Both parties shared their experiences on the prospects, business operations, and regulatory restrictions of security industries 7.09 in China and Taiwan. The visitors were especially interested in how Taiwan's security companies broaden the foundation of their profitability and how The Association plays its role to ensure selfdiscipline across the industry. This meeting is believed to be helpful to our future exchanges and cooperations. The Managing Director of The Association, and the Chairman of Dah Chang Securities, Chuang 7.17 Huei-Yao had turned Dah Chang Securities profitable through exceptional leadership and contributed greatly to the development of the securities and futures markets. He received the Excellent Enterprise Leader Award in "The Tenth Securities and Futures Achievement Award" held on 17 Jul. Taiwan Securities Association 2009 Annual Report 25

26 Passion Professionalism Efficiency Innovation August Typhoon Morakot swept through Taiwan causing major disasters all over Taiwan, and the disaster area was in need of immediate help. The Association responded to the government's rescue efforts 8.11 through acts of care and donated $5 million into the "Ministry of Internal Affairs Relief Account". The Association also mobilized its staffs to donate their one day income as empathy to the suffered, and to rally more care from the society to help them through the crisis. The Association organized the conference: "The Integration and Supervision of Capital Markets between China and Taiwan The Forming of a West Strait Economics Zone" on 21 Aug. The Association invited the Head of WISE, Xiamen University, Hong Yongmiao, and Professor Cheng 8.21 Ming to conduct speeches on "Ideas of a cross-strait economic district and financial experiment interpreting the development of a West Strait Economics Zone" and "Strategic research on the cooperation and supervision of cross-strait security industries under a new framework". Approximately 110 industry participants were present and the responses were overwhelming. Secretary General Wang Hong-Song of Beijing Arbitration Commission visited Chairman Hwang of 8.27 The Association and exchanged opinions related to the trading and arbitration of security industries in China and Taiwan. Both parties had also exchanged security regulations and arbitration cases from both sides and assured of their future co-operation. Announced the amendments to The Association's "2009 Standards of Internal Control Policies 8.27 of Security Firms Consigned for the Trading of Foreign Securities" and Sections 18 and 43 of "Operations for the Re-Consignment of Foreign Security Trading by Security Firms". September 9.07 Chairman Hwang Min-Juh of The Association signed a MOU with International Capital Market Association (ICMA) in London. Announced amendments to Section 4 of The Association's "Principles for the Trading of Foreign 9.09 Securities by Security Firms" and the relevant internal control and internal audit standards; effective from the date of announcement. 26 Taiwan Securities Association 2009 Annual Report

27 Appendix Announced the amendments to The Association's "Rules for Information to be Published in Securities Underwriter Evaluation Reports on Offering and Issuance of Securities by Foreign Securities Issuers", "Assessment and Audit Procedures for Security Underwriters to the Issuance of Securities by Foreign 9.22 Securities Issuers", "Rules for Information to be Published in Securities Underwriter Evaluation Reports on Offering and Issuance of Securities by Securities Issuers", and "Assessment and Auditing Procedures for Securities Underwriters Consigned to Prepare Underwriter Assessment Reports for Offerings and Issuance of Securities by Issuers". October Former Vice Chairman Wu Kuang-Hsiung, Secretary General Lin Ying-Zhe, and Senior Officer Hsu Bing-Chun of The Association attended the 14th Asia Securities Forum held in Sydney, Australia. Announced the amendments to The Association's "Rules Governing Underwriting and Resale of Securities by Securities Firms", "Rules of Self-Discipline to Underwriters Guiding the Security Issuance", "Rules for Information to be Published in Securities Underwriter Evaluation Reports on Offering and Issuance of Securities by Securities Issuers", and "Assessment and Auditing Procedures for Securities Underwriters Consigned to Prepare Underwriter Assessment Reports for Offerings and Issuance of Securities by Issuers", effective from the date of announcement. The Association held the "Securities Dealing Conference", and invited Senior Deputy General Manager Kao Tze-Jun of the Strategic Trading Department of Yuanta Securities to conduct a speech on "The past, present, and future of futures trading". The short term interest rate indicator, the essential benchmark for pricing and valuing interest ratesensitive financial products, has entered into a new era. The Taiwan Bills Index Rate (TAIBIR), developed by Bills Finance Association and compiled by Taiwan Depository and Clearing Corporation, was officially in service under the witness of: Chairman Sean Chen of the Financial Supervisory Commission, The Executive Yuan, Chairman Chang Hsiu-Lien of the Bankers Association, Chairman Hwang Min-Juh of the Taiwan Securities Association, and other financial industry participants. Taiwan Securities Association 2009 Annual Report 27