Taiwan Securities Association. I. Introduction of TSA. 1. History. 2. Objectives and Missions. II. TSA Organization. 1. TSA Organization Chart

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1 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. Expand Scope of Securities Firms' Services IV. Self-Regulation of Securities Firms Enhancement V. Proactively Participating in International Activities VI. Enhancement of Investor' s Education VII. Main Objectives for 2011 Appendix

2 Message from the Chairman FOREWORD It's been over two years since the global financial crisis, its devastating effect to the global economy is finally waning off, and the global economy is on its way to recovery. Looking back to 2010 and the performance of the Taiwan stock exchange market, the stock index of the first half of the year was affected by slow economic recovery, the European credit crisis, the suppression of Chinese housing prices by the government, and various factors such as the tightening of monetary policy, all of which had an impact on securities firms' earnings. The second half of the year saw a second round of quantitative easing (QE2) from the United States, which achieved a good flow of capital in global markets. Along with continuously strong growth in the Chinese economy, and benefiting from ECFA which further binds the cross strait economy, stock index and securities firms earnings grew steadily. Taiwan Stock Exchange Capitalization Weighted Stock Index (TAIEX) increased from 8,188 to 8,972 for the year, an increase of 9.57%; GreTai Securities Market Capitalization Weighted Stock Index (GTEX) dropped from 150 to 143, a decrease of 4.67%. Combined market capitalization increased from NTD 23,460 billion to 26,600 billion, an increase of 13.38%. Annual gross earnings of 88 specialized securities firms was 34,994 million, an average of 1.02 EPS. Foreign securities firms had an average of 2.34 EPS while domestic securities firms only had an average of 0.94 EPS, indicating the operational environment of securities firms can still be improved significantly. In the past year, the Taiwan Securities Association (TSA) has assisted in developing Securities Association in Taiwan, R.O.C. the securities market, improving securities firms competitiveness, and striving to benefit members through the following accomplishments : I. Securities Market Efficiency Improvement Brokerage : (1) Update three templates, including "Fund Account Opening Master Agreement", and a total revision of "Discretionary Account Authorization Master Agreement", for businesses to align themselves with and lessen headaches for securities firms. (2) Recommendations for adjusting content of consignment trading, which simplifies operation procedure of securities firms. (3) Recommendations for regulation amendment of fund transfer for trustee buying/changing trading stock or processing stock, which prevents potential loss for both securities firms and investors. Underwriting: > > > > > In order to fully implement supply/demand adjusting mechanism of the underwriting market, and relieve unbalanced supply/demand after TDR listing, TSA amended "Rules Governing Underwriting and Resale of Securities by Securities Firms" regulation regarding underwriter selling own subscription of initial TDR offering to adjusting market supply/demand; adjusts maximum and quantity level of public subscription; simplifies securities underwriter subscription operation. Risk Management: Assist in second phase implementation of new system for securities firms' capital sufficiency and integration between remuneration and internal audit/control system for securities firms, reduce execution difficulties of internal audit/control and loss of talent within the firms. Set up International Investor Alerts section in TSA website, reduce risks for both securities firms and investors. II. Securities Industry Services Expansion Wealth Management: Authorities agreed to securities firms operating wealth management services through trusts; there are eight firms which passed the Financial Supervisory Commission review and acquired licenses by the end of December 2010.

3 Securities Association > > > > > in Taiwan, R.O.C. Securities: Authorities agreed that securities dealers without securities lending facility may lend securities from securities firms with securities lending facility; securities dealers may trade foreign stock through the securities brokering department of parent company and securities firms may trade or receive orders to trade Hong Kong red chip stock and 100% Chinese capital ETF; expand the scope of securities industry services; uplift the competitiveness of securities firms. III. Lower Securities Firms Operational Cost TSA actively negotiated a mutual agreement with the Ministry of Finance to resolve tax controversies of the tax on hedging warrants offered by securities firms; TWSE and GreTai Securities Market (GTSM) both agreed to TSA's demands and will reduce cost of warrant listings from TSA recommendations to TWSE for adjustment in survey of non-trading account, add reporting channel for securities firms to provide transaction report to non-electronic transaction clients, and adjust securities lending fee payment method for securities firms, has all been accepted; furthermore, the Depository also decreased its book-entry transfer charge to securities firms. All abovementioned accepted recommendations have effectively reduced operational cost and increased sales revenue for securities firms. IV. Enhancement of Self-Regulation of Securities Firms In order to further safeguard investors' rights, TSA updated "Self-Regulation Rules of Securities Firms Engaging in Consigned Trading of Foreign Securities" by amending related aspects and publishing punitive measures taken against securities firms and their personnel for breaching regulations on the TSA website to enhance self-regulation of securities firms. V. Uplift International Competitiveness of Securities Firms TSA participated and attended international conferences, including International Council of Securities Associations (ICSA), Asia Securities Forum (ASF), International Forum for Investor Education (IFIE), International Organization of Securities Commissions (IOSCO), Asia Forum for Investor Education (AFIE). Since 26th September 2007, TSA has signed Memorandums of Understanding (MOU) with self-regulatory securities organizations in twelve nations; through such exchange and cooperation, members would benefit from global awareness of the Taiwan securities industry and explore business opportunities with other nations. Prospects for the 2011 Taiwan securities market will be luminously presented with a brand new blueprint. TSA would continuously endeavor to revamp the securities market and develop the competitiveness of Taiwan securities industry and market: 1. Enhance cross-strait securities exchange; actively assist securities firms developing the Chinese market. 2. Conduct R&D with related parties to develop new products and services; provide investors with more options in order to achieve maximum benefits for securities firms. 3. Proactively assist businesses to promote exchanger-cosigned trading, underwriting and wealth management services; enhance self-regulation of the association. 4. Practice with and assist businesses to comply with the draft Financial Consumer Protection Law, Personal Data Protection Law, International Financial Reporting Standards (IFRS), Corporate Governance Best-Practice Principles for TWSE/GTSM Listed Companies, Corporate Social Responsibility Best Practice Principles for TWSE/GTSM-Listed Companies. 5. Promote warrants and participate in system planning by establishing a warrant market information platform; endeavor to acquire stock transactions required for liquidity providers of warrants to conduct hedging, which is Securities Transactions Tax-free. 6. Strive to acquire securities sources of securities lending services allowed for securities firms. 7. Assist authorities to promote new services of securities and policies, which would increase market efficiency and lower operational cost of market participants. With the 100 th anniversary of Taiwan, under an optimistic outlook in the economic sector, political sector, and fundamental sector, the "Golden Ten Years" of Taiwan has begun. I wish everybody has a good Chinese year ahead, be successful and have a prosperous future. chairman

4 PassionProfessionalismEfficiencyInnovation TSA Organization I Introduction of TSA II TSA Organization 1. History 1. TSA Organization Chart (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 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 Brokerage Business Committee Dealing Business Committee General Assembly of the Members Board of Supervisors commenced to solicit membership from 27 February (2) On 4 April 1998, the TSA convened its first meeting members. f. Strengthening the organization structure of the Association to facilitate its development. Discipline Committee R&D Committee Board of Directors for the first General Assembly of the Members to elect its directors and supervisors, who afterwards elected the chairman and chief supervisor for the g. Rectifying operational defects by the members. h. Conducting professional training or seminars for employees of member companies. Risk Management Committee Education & Training Committee Association. (3) The Association became a national securities association following its merger with the Taipei Securities Dealers Association on July 31, 1999 and i. Organizing charity or public welfare activities for the members. j. Safeguarding the legal rights and interests of members. Finance Committee International Affairs Committee Mainland Affairs Committee Chairman then the Kaohsiung Securities Dealers Association on December 31, By the end of 2010, members of the TSA included 152 headquarters and k. Executing disciplinary actions in case of any violation by the members. l. Mediating or arbitrating disputes among members or Financial Futures Committee Brokerage of Foreign Securities Committee Secretary General 1,032 branches. 2. Objectives and Missions (1) Objectives a. Protecting the interest of investors 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. New Financial Products Committee Foreign Brokers Committee Public Affairs Committee Underwriting Committee Deputy Secretary General b. Facilitating national economic development c. P r o m o t i n g c o o p e r a t i o n a m o n g m e m b e r 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. o. Participating in international securities organizations and contributing to the improvement of Taiwan's international relationship through non-governmental 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 profitmaking 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. Bond Market Committee Taxation and Accounting Committee E-Commerce Business Committee Wealth Management Committee Shareholder Service Committee Auditing Committee Investor Education Committee Overseas Management Strategy Committee Tendering Committee Business Service Dept. Business Development Division Education & Training Dept. International Affairs Dept. Kaohsiung Office Secretariat Administrative Division Finance Dept. Planning Dept. Information Management Dept Annual Report 2010 Annual Report 7

5 PassionProfessionalismEfficiencyInnovation TSA Organization 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. The TSA and Securities Association of China (SAC) jointly hosted a cross-strait securities seminar (Capital Market in Multiple Layers) on 27 th July Chairman Hwang of the TSA led the visit to the Taiwan Affairs Office of the State Council PRC in China on 17 th Nov Board of Directors 4. Board of Supervisors 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. 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 integration of various business proposals,so as to ensure smooth business operation of the Association. The TSA held its fifth-year first committee meeting in the Howard Hotel on 30 th March 2010, and Min-Juh Hwang was elected as the Chairman. 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 costsaving for the Association Annual Report 2010 Annual Report 9

6 PassionProfessionalismEfficiencyInnovation Expand Scope of Securities Firms' Services III Expand Scope of Securities Firms Services 1. Securities firms to offer wealth management services through trusts According to the Financial Supervisory Commission, which announced the amended regulation of "Directions for the Conduct of Wealth Management Business by Securities Firms", securities firms are allowed to offer "Money Trusts" and "Securities Trusts" services in wealth management business through trusts, using the following three types of management: "Non-discretionary Individually Managed", "Non-discretionary Collectively Managed", and "Semi-discretionary Individually Managed". TSA assisted securities firms in applying and acquiring approvals and licenses. There were nine securities firms which applied for wealth management business through trusts by the end of December 2010; eight of them passed Financial Supervisory Commission review Shenzhen Securities Association visit TSA. and were approved, and two amongst them had licenses issued by FSC. Offering of such services would expand the business scope of securities firms and improve their operating earnings. 2. Issuing warrants linked to foreign stock or index Authorities allowed securities firms to issue warrants linked to foreign stock or index in April 2010, warrants issuers to list Hong Kong stock warrants trading in September 2010, 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. provide investors with diversified options of warrants, and expanded securities firms' scope of warrants issuing. TSA Chairman Huang and executive members visited Japan Securities Dealer Association (JSDA) on 13 th Dec Annual Report 2010 Annual Report 11

7 PassionProfessionalismEfficiencyInnovation Expand Scope of Securities Firms' Services 5. Securities Firms may trade or receive orders to trade Hong Kong red chip stock and ETF with 100% Chinese capital Executive members of the TSA visited Singapore on 30 th Nov 2010 and initiated contact with the Taiwan Ambassador in Singapore, diplomats and local Taiwan businessmen. 3. Scope of securities lending for securities dealers without securities lending facility TSA believes securities lending services of securities firms are mature and stable after careful evaluation, in order to satisfy diversified trading of securities dealers with a need to lend securities from securities firms with securities lending facility to make operation more flexible and conduct risk management for securities dealers. Authorities agreed to securities dealers without lending facility to lend securities from securities firms with lending facility and set up their operational parameters on July 6, Allow securities dealer to trade foreign stock through securities brokering department of their parent company In order to reduce securities dealers' foreign stock trading costs and prevent exposure of transaction details, authorities have agreed to allow securities dealers to trade foreign stock through securities brokering department of their parent company on 13th July Dealers shall set up independent accounts which shall not engage in transactions with client trading accounts; they are also required to put through orders electronically with strict control of trading orders based on time of order, to prevent conflicts of interest with their clients. The TSA members toured Zhongyuan, China in In order to increase securities firms' international competitiveness and satisfy investors' needs, TSA recommended to allow securities firms to trade or consignment trade stock from the China region, Hong Kong region, and other non-china regions with Chinese capital. Authorities announced on 2nd March 2010 that the following securities are allowed to be traded by domestic securities firms : 1. Securities issued by Chinese capital in Hong Kong Hang Seng Index; 2. Red chip stock ; 3. ETF with securities in Chinese securities market and securities of Chinese Government or companies issued or managed in Hong Kong. 6. Securities firms may trade convertible bonds and global depositary receipt (GDR) issued abroad by domestic corporations In order to allow securities firms to benefit from globalization and service development, TSA recommended authorities to allow securities firms to trade non-underwriting convertible bonds and GDR issued abroad by domestic corporations, as well as receive orders to trade convertible bonds issued abroad by domestic corporations; the recommendations were accepted and announced on 2nd March 2010 and on 9th September 2010, respectively. The TSA members toured Austria and Czech in Annual Report 2010 Annual Report 13

8 PassionProfessionalismEfficiencyInnovation Proactively Participating in International Activities IV Self-Regulation of Securities Firms Enhancement V Proactively Participating in International Activities 1. U p d a t e T S A " S e l f - R e g u l a t i o n o f Securities Firms Accepting Orders to Trade Foreign Securities" and amend related regulations Under authorities instruction, in order to safeguard investors' rights further, TSA reviewed self-regulatory regulations of securities firms in terms of client knowledge, credit check, risk disclosure and order process control of receiving order to trade foreign securities, updated TSA "Self-Regulation of Securities Firms Accepting Orders to Trade Foreign Securities", amended TSA "Guideline of Securities Firms Recommending Trading Foreign Securities to Clients", and removed TSA "Collective Governance of Risk Disclosure for Members Receiving Orders to Trade Foreign Securities Service". 2. R e s t a t e S e c u r i t i e s F i r m s S h a l l Implement Know Your Client Evaluation Process In order for securities firms to fully implement the "Know Your Client (KYC)" evaluation process under authorities instruction, TSA along with TWSE and GTSM targeted the following six areas and thoroughly followed through their KYC process (including credit check, product suitability and client suitability): capital and securities margin trading, derivative financial products, foreign securities, securities lending, credit lending, and foreign emerging stock. TSA chairman Huang and executive members visited Japan Secunties Dealer Association (JSDA) on 13 th Dec TSA sent correspondence to members in December 2010 to restate that securities firms shall fully implement the KYC evaluation process and separate professional investors from non-professional investors according to regulations; securities firms shall investigate within their ability and acquire reasonable statements from investors as supporting evidence in order to match suitable investment trades. 3. Publish Punitive Measures Taken Against Securities Firms and Their Employees on TSA website Under authorities' instruction, in order to let the general public understand punitive measures applicable to securities firms, any punitive measure beyond rectification taken against securities firms or their employees by authorities will be published on the TSA website backdating to January International conference attendance Time Location Conference 11 th ~14 th Jan London, UK Second IOSCO SROCC Training Seminar and Mid-year General Meeting 3 rd ~4t th Feb Seoul, Korea First Asia Forum for Investor Education (AFIE) 6 th ~10 th Mar London, UK TWSE Joint Business Solicitation 8 th ~15 th May Istanbul, Turkey 23 rd ICSA annual meeting th ~10 th Jun Montreal, Canada 35 th IOSCO annual meeting th Oct~2 nd Nov Tokyo, Japan 6t th ASF Training Seminar 8 th ~9 th Nov Cairo, Egypt IOSCO and IFIE Global Investor Education conference th Nov~2 nd Dec Singapore 12 th ~16 th Dec Tokyo, Japan 2. Cross-Strait Activities Executive members visiting and tour Singapore Taipei Industrial and Commerce Association Executive members visiting and toured Japan Securities Association Time Location Conference 9 th ~12 th Apr Hainan BFA annual meeting th ~28 th Apr Shanghai Shanghai Finance Forum th May Taipei Sichuan financial study group visit 7 th ~9 th Jun Shanghai 3 rd Taiwan Business Forum 20 th ~22 nd Jun Fuzhou 2 nd Strait Forum Cross Strait Financial Cooperation Development Seminar 26 th ~31 st Jul Taipei Cross Strait Capital Market Joint Seminar with SAC 13 th ~21 st Aug Taipei Shenzhen Securities Association visit 16 th ~18 th Sep Nanjing Ning-Tai Financial High Level Conference 27 th ~29 th Sep Beijing 15 th ASF th ~18 th Nov Hangzhou 2 nd Zhe-Tai Financial Exchange Cooperation Forum The TSA members toured Kurobe, Japan in The TSA members toured the South of France in th Nov~1 st Dec Zhengzhou 2010 Dahe Wealth Forum annual meeting and Yu-Tai Financial Summit Forum Annual Report 2010 Annual Report 15

9 PassionProfessionalismEfficiencyInnovation Enhancement of Investor's Education VI Enhancement of Investor s Education 1. Subsidize personal investment and finance general knowledge classes hosted by non-finance faculty in tertiary education institutes. A total of 23 lectures had their proposals approved in 2010 (9 were sponsored by TWSE and 2 were sponsored by GTSM); a total of 1,657 non-finance faculty student attended general knowledge classes. 2. Give speeches of correct investment and finance concepts to secondary education institutes. Cooperating with authorities in promoting investment and finance education, TSA accepted applications from secondary education institutes to appoint qualified lecturers to promote correct investment and finance concepts to secondary education students during morning assembly or weekly assembly time. For the year 2010, a total of 2,078 students from five schools participated, including Taibei High School, Haicin Vocational High School of Technology and Commerce, Hujiang Sichuan financial study group visit TSA. High School, Kainan High School of Commerce and Industry and Jingwen High School. 3. Participate in International Investment and Finance Education Meeting. AFIE: TSA chairman Min-Juh Hwang, on 3 rd February 2010, lead "Investment and Finance Knowledge Education Committee" vice convener Chin-Tan Huang and team leader Chih-Hsien Huang, to join the AFIE meeting held in Seoul, Korea. 3. TSA is a formal member of various international securities organizations, including the International Council of Securities Associations (ICSA), Asia Securities Forum (ASF), International Forum for Investor Education (IFIE), International Organization of Securities Commissions (IOSCO) and Asia Forum for Investor Education (AFIE). TSA is also a member of the counseling committee of AFIE. 4. Since 26 th September 2007, TSA has signed Memorandums of Understanding with twelve nations, including Japan, Korea, Thailand, Vietnam, Mongolia, Germany, Poland, Australia, Indonesia, UK and Hong Kong. Through frequent exchange with these areas, TSA would explore cooperating opportunities for Taiwan securities industry with other nations. IFIE: Investment and Finance Knowledge Education Committee vice convener of TSA took part in the IFIE meeting held in Cairo, Egypt. The TSA representative attended the ICSA 23 rd annual meeting in Istanbul, Turkey, on 8 th May Annual Report 2010 Annual Report 17

10 PassionProfessionalismEfficiencyInnovation Enhancement of Investor's Education TSA's chairman Huang attended 2010 investment education forum promoting Asia "AFIE" on 3rd February TSA's chairman Huang attended the International press conference of 2010 investment education forum promoting Asia "AFIE" on 3rd February Publish investment and finance promotional material. In order to increase the correct investment and finance knowledge of investors and students, TSA has put together the "Securities and Me" and "Explore Securities Market" promotional booklets, which are expected to be published in early ECFA Promotions (1) Cooperating with Taiwan Financial Services Roundtable to host "ECFA Financial Aspects" conference: a total of four in Hsinchu, Taichung, Tainan and Kaohsiung, respectively; over 600 securities industry people and investors attended. (2) Actively implementing ECFA promotional work to securities industry. a. Invited TWSE, GTSM, Taiwan Futures Exchange (TAIFE), TDCC, Chinese National Futures Association (CNFA) and Securities Investment Trust & Consulting Association (SITCA) - six organizations in total - to discuss promotional plans for ECFA. b. Organizing promotional material : editing and printing of joint correspondence, promotion instruction, promotional pamphlet for industry staff, ECFA promotional abstract, sending ECFA promotional DVD from Ministry of Economic Affairs, designing promotional operation feedback system to authorities and reporting to authorities regarding to execution of the promotion. c. Training of securities firms' ECFA seed lecturers : 818 sales supervisors from eight securities firms were trained, including President Securities, Taiwan International Securities, Ta Chong Securities, KGI Securities, Yuanta Securities, China Bills Finance Corporation, Ta Chong Securities, MasterLink Securities. d. Track and trace promotional executions of securities firms : member securities firms have held 467 promotional seminars nationwide with a huge response: approximately 27,000 people participated. Additional promotional methods were used, such as articles, website links, printing on bills/invoices, promotional material at counters, TV wall promotions, transaction hall displays, investor seminars, blogs, s, and promotional clips from DVD, to reach investors with ECFA issues; executions were well done Annual Report 2010 Annual Report 19

11 PassionProfessionalismEfficiencyInnovation Main Objectives for 2011 VII Main Objectives for Enhance cross strait securities exchange; actively assist securities firms to develop Chinese market. 2. Conduct R&D with related parties to develop new products and services; provide investors with more options in order to achieve maximum benefit for securities firms. 3. Proactively assist businesses to promote foreign stock exchange, underwriting, and wealth management services; enhance self-regulation of the association. 4. Practice with and assist businesses to comply with the draft Financial Consumer Protection Law, Personal Information Protection Act, International Financial Reporting Standards (IFRS), Corporate Governance Best- Practice Principles for TWSE/GTSM Listed Companies, Corporate Social Responsibility Best Practice Principles for TWSE/GTSM-Listed Companies. Secretary General Chuang of the TSA attended the Asia Securities Forum held in Beijing from 27 th ~ 29 th of September Promote warrants and participate in system planning by establishing a warrant market information platform; endeavor to acquire stock transaction required for liquidity providers of warrants to conduct hedging, which is Securities Transactions Tax-free. 6. Strive to acquire securities sources of securities lending services allowed for securities firms. 7. Assist authorities to promote new services of securities and policies, which would increase market efficiency and lower operational cost of market participants. TSA took part in the 2011 Second IOSOC SROCC Training Seminar and Mid-year Generd Meeting held in London Annual Report 2010 Annual Report 21

12 PassionProfessionalismEfficiencyInnovation Appendix Appendix Securities Firms Operating Profit/Loss Analysis (Jan~Dec 2010) (In NTD Millions) Count Securities companies Current turnover Current expenses Current earnings Paid up capital Shareholders' equity Current profit (%) EPS ($) ROE (%) Turnover market share Net worth per share 86 Securities Firms Total 347, ,836 34, , , General 338, ,442 32, , , Professional Brokerage Domestic Securities Firms 9,253 6,395 2,858 12,952 24, , ,523 30, , , General 321, ,439 29, , , Professional Brokerage Foreign Securities Firms 3,795 3, ,582 14, ,064 17,314 4,750 20,346 39, General 16,606 14,002 2,603 16,976 29, Professional Brokerage First 20 Securities Firms 5,458 3,311 2,147 3,370 9, , ,111 27, , , Analysis Report Background: (1) TSA has 152 members at the end of This securities firms operating profit/loss analysis report only included 84 securities firms that filed monthly returns to TWSE for calculating operation profit/ loss figures between Jan ~ Dec (2) The first half of 2010 was affected by slow economic recovery, the European credit crisis, and China policy manipulation, and around the world most stock exchanges fell; the second half of 2010 was affected by QE2 from the United States, global funding floods and the rapid growth of emerging countries; most major stock exchanges rose, apart from the Chinese stock market, which continued to fall as a result of policy manipulation 2. Average earning per share of all securities firms (EPS) was 1.02 for year 2010 (1) Year 2010, TWSE index increased 9.6% from 8,188 to 8972; combined market capitalization (including GTSM) increased 12.4% from NTD 2.3 trillion to 2.58 trillion; daily average (TSE : billion / OTC 22.4 billion), marginally higher than same period of previous year (2009) of TSE billion / OTC 20.9 billion. TWSE index performed impressively by remaining bullish, at a record high since the financial crisis. (2) Average EPS for 84 securities firms is while year 2009 average EPS for all securities firms was ; 76 firms made profit and 8 firms were at loss. Average EPS for general securities firms is , lower than average EPS for professional securities brokers of Average EPS for foreign securities firms is , overshadowing average EPS for domestic securities firms of Average EPS for first 20 (capital wise) domestic securities firms is , marginally lower than industry average. 3. Taiwan target economic growth is 4.92% for year 2011 The Directorate-General of Budget, Account and Statistics (DGBAS) of the Executive Yuan announced its domestic economic outlook; GDP growth rate was 10.82% for year 2010 and was mainly strengthened by the simultaneous growth of domestic demand (consumption, investment) and export. The forecast of GDP growth for year 2011 is 4.92%. GDP per capita is expected to breach the USD 20,000 level. Minister Christina Liu of the Council for Economic Planning and Development (CEPD) pointed out that economic momentum of year 2011 would be double-powered by domestic demand and export, activating ten golden years. Carried forward by the domestic and foreign economic outlook, we believe domestic securities market and firms would perform better. and market system flaws Annual Report 99 23

13 PassionProfessionalismEfficiencyInnovation Securities firms operating profit/loss comparison chart for previous two years Securities firms accumulative operating income comparison In NTD Million 400, , , , , , , , , , , , , , , , , , ,000 79,313 61, , ,779 39,631 97,537 51, ,620 26,941 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total securities firms operating income: billion for year 2010, billion for year TWSE index had a limited upward trend in year 2010; securities brokering earnings were suppressed but annual earnings outperformed year Securities firms accumulative operating profit/loss comparison In NTD Million 38,964 40, ,489 34, ,048 30,000 23,925 24,846 34,994 29,849 26,580 20,000 16,689 17,219 23,972 9,612 17,985 10,000 4,794 14, ,014 7,779 7,029 8, , ,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total securities firms operating profit/ loss: billion for year 2010, billion for year Total securities firms average earnings per share: 1.02 for year 2010, 1.18 for year Securities firms return on shareholders equity comparison Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total securities firms return on shareholders equity: 7.29% for year 2010, 8.55% for year Best overall ROE performance in recent years was 11.22% in year Securities firms net value per share comparison NTD Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total securities firms net value per share: for year 2010, for year Total securities firms book value per share maintained stable growth along with TWSE index at 13 range Annual Report