preface - csa.org.t annual report-2006.pdf · as for market performance, the 2006 was a year of...

PREFACE

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The Taiwan Securities Association (TSA) has just celebrated its 50th Anniversary at the end of 2006. For this event, it collected historic photos and documents to compile a special edition of the "Securities Yearbook" as evidence of the development of Taiwan's securities market over the past five decades. Meanwhile, it held a celebration reception at the Grand Hotel on Dec. 26, attended by Premier Su Tseng-chang, prominent market pioneers, and hundreds of other distinguished guests. While sharing the glee of the joyful occasion, they expressed their sincere wishes and expectations for us to continue our efforts for pursuing an even greater progress of Taiwan securities market and the Association itself in next 50 years.

As for market performance, the 2006 was a year of substantial gains as the TAIEX soared 19.5% to closed at 7,823 and the GreTai Securities market jumped 23.5% to push its index up 163.9 points. The average daily transactions of the two markets expanded to NT$117.05 billion, up 13.15% from the NT$89 billion of the previous year. All these impressive figures reflected the political stability, general economic recovery, and continued growth of enterprises in Taiwan. While investors regain their confidence, the securities regulatory agencies and related institutions actually have made great contributions to promote market efficiency.

Thanks to the guidance of the board of directors and supervisors, engagement of member company representatives, and efforts of our working staff, the Association successfully implemented its work plans and tasks for 2006. A great number of the recommendations proposed by the Association have been adopted by the regulatory agencies and related institutions as new market rules. The following is the brief of the major ones:

A. Proposed amendment to Article 60 of the Securities and Exchange Law (SEL) as the legal base for specialized brokerage houses to offer wealth management service

B. Enabled securities firms to offer securities borrowing and lending services as well as the financing service associated with margin trading and short selling

C. Enabled securities firms to offer securities investment consulting services and manage the discretionary accounts on behalf of clients

D. Removed the requirement that securities firms should send client's monthly transaction report by double-registered mail for the clients whose monthly transactions exceed N$50 million

E. Removed the requirement that the margin trading and short sales brokers should be full-time employees at securities firms

F. Negotiated with the Taiwan Stock Exchange Corp. (TSEC) for a discount of 12% off for the TSEC-charged service fee, normally at a rate of 0.0065%, for the transactions during the break from appropriating provisions as compensation funds. The favorable rate took effect in November 2006.

G. Removed the rule that prohibited the dealing division of a securities firm from purchasing or selling the warrants issued by its securities firm within one month earlier or after the warrant issuance date

H. Drafted revision to the Association's self-discipline rules to restrict the number of the employees transferred from counterparts at one securities firm

I. Enabled the futures dealing division of a securities firm to trade foreign futures J. Developed an electronic foreign securities transaction reporting system and provided the electronic

forms to member companies to help streamline the transaction reporting procedure and reduce its cost

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K. Eased the rule on financial derivatives application that an application for financial derivatives trading will be regarded approved if the GreTai Securities Market (GTSM) has not rejected it within ten working days after the application is filed

L. Enabled the dealing division of a securities firm to trade the MSCI Taiwan Index Futures on Singapore International Mercantile Exchange (SIMEX) or to purchase the beneficiary certificates of the property-backed securities during their IPO (initial public offer) period

M. Recommended to lower the co-efficient of foreign securities and financial derivatives in the formula for calculating the capital adequacy ratio (CAR) of a securities firm, a move favorable for securities firms to promote international business

N. Revised the Association's underwriting rules for an IPO project to have greater flexibility in adjusting the ratios of the shares offered at fixed prices to those offered for public subscription, a move to strengthen the price-finding function of the share-offering process and protect the interest of subscribers.

O. Defined the KYC (Know Your Customer) procedure as the reference to the securities firmed engaged on an overseas private placement project in a hope to help promote the overall service quality of Taiwanese securities firms on the international market

P. Arranged 213 classes for the Association's on-job securities training programs in 2006, participated by 16,792 persons in total

Q. Completed the computerized test question database and opto-electronic scoring systems for those who attempt to take the certification tests for securities brokers and business representatives of wealth management service. The computerized facilities will contribute to a fair and open training process and result in a highly efficient and cost-effective scoring procedure.

R. Drafted a training program for the wealth management workers at securities firms so as to strengthen their professional expertise and make companies control risk more efficiently

While looking forward, the Association will continue to strengthen the role it plays as the bridge for communications between regulatory agencies and member companies, help remove the barricades in the way of market reform, and help securities firms provide diverse services and products to strengthen their operations. To fulfill these goals, the Association has proposed the following major tasks for the year ahead:

A. To push the Legislative Yuan to pass the Trust Law amendment bill so as to pave the legal base for securities firms to run trust business

B. To recommend the Taxation Agency to exclude the rewards for securities and futures brokers from the "wage category" as defined under the Labor Pension Regulations so that their employers won't have to reserve 6% of the rewards as their pension funds

C. To recommend the regulatory agency to follow the negative-listing approach for governing the securities market as a means to activate the securities and futures markets in Taiwan

D. To request the regulatory agency to allow day trading on cash stock as a means to boost market transaction and promote market efficiency for healthy development of the market

E. To request the regulatory agency to take earlier actions to solve the warrant tax conflict based on the principle of income-expense balance and the basic rules for levying taxes on income. For a warrant issuer, its income subject to the income tax should be the net amount after deducting risk-hedging cost. The Association will propose an amendment to the Income Tax codes and push the Legislative Yuan to pass it soon and at the same time suggest that the previous warrant issuance projects in dispute should be resolved through negotiations.

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F. To request that the tax on structured notes should levied in a consistent way no matter the traders are individuals, securities firms, or insurance companies. There are three tax alternatives for structured notes: to levy tax on the fixed income yielded by the investments on structures notes at a rate of 10% as the tax on interest income, to waive the capital gains tax for trading structured notes as it's waived for other financial derivatives, or to levy transaction tax on structured notes transactions as other securities products.

G. To recommend the central bank to allow securities firms to trade the OTC Index Options denominated by foreign currencies

H. To suggest that the regulatory agency should only refer to Article 60 of the Securities and Exchange Law concerning the requirements for the establishment of new securities firm, in addition to its execution measures when it reviews the applications filed by securities firms for operating new field or new category of business and won't have to refer to other documents such as the government′s administrative decrees or the regulations of other securities-related institutions (like their criteria for making ratings of securities firm's internal control). Meanwhile, the Association will also suggest that the regulatory agency should not accept the anonymous letters, check the accused companies based on anonymous impeachment, or promptly impose penalty on the accused company in the process of litigation.

I. To recommend the Ministry of Economic Affairs (MOEA) to review Article 20-1 of the Statue for Industrial Upgrading to waive transaction tax on corporate bond and financial debenture as a means to activate the bond market in Taiwan and facilitate the fund-raising channels for Taiwanese enterprises

J. To continue the research projects on how to strengthen the rationality of private placement procedure, simplify the process of underwriting, promote a firm commitment basis for IPO projects as a means to pursue higher market efficiency

K. To propose new CAR (capital adequacy ratio) calculation formula for securities firms and help them make trail calculation of the formula, and work with the TSEC to define a proper co-efficient for the new CAR formula so as to make Taiwan's practice in compliance with the new Basel II requirements

L. To help securities firms strengthen working ethics, professional expertise, risk-control knowledge, and foreign language skills of their employees

M. To provide professional talents training courses as a means to help securities firms sharpen their competitive edge

N. To recommend the securities and futures regulatory agency to sign a memorandum of understanding (MOU) with its counterpart in Chinese mainland

O. To request the regulatory agency to raise the limit on the foreign and mainland investments by a securities firm from the current 20% and 10% of its paid-in capital, respectively, to 30% each

P. To request the regulatory agency to ease the restriction that a Taiwanese securities firm, when it makes investments on a counterpart in Chinese mainland, should hold at least 25% of the total outstanding shares issued by the invested company

Chairman

I. Introduction

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INTRODUCTION

A. History a. After receiving the approval notification from the Ministry of the Interior (MOI) on January 26,

1998, the preparatory office of the Association held three meetings in February and March of 1998 to discuss the procedure for founding the Association. It started to recruit members on February 27, 1998.

b. The Association held its first members' meeting on April 4, 1998 to elect the directors and supervisors who afterwards elected their chairman and chief supervisors, respectively.

c. The Association became a national organization following the two mergers with Taipei Securities Dealers Association on July 31, 1999 and the Kaohsiung Securities Dealers Association on December 31, 1999. Its membership included 156 securities firms and bank's securities divisions as of the end of 2006, which operated a total of 1,046 branch offices in addition to their headquarters offices.

B. Missions and Objectives: a. Missions:

(a) To protect the interests of investors (b) To promote the national economic development (c) To coordinate the relations among member companies (d) To pursue the commonwealth of the society

b. Objectives:

(a) To promote the functions of the securities markets in line with the national economic development policies

(b) To conduct surveys, keep record of statistics, publish securities journals, as well as keep contact with the securities firms in Taiwan and abroad

(c) To do research on the government′s policies and regulations on the securities industry, and make suggestions to the regulatory agencies for policy adjustment or regulation revisions

(d) To execute self-discipline rules on member companies, help them improve their operations, and strengthen communications and coordination among members

(e) To make and publish the regulations governing the member companies of the same business sectors

(f) To strengthen the Association's membership and functions so as to help boosting the business development of member companies

(g) To inspect and correct the operations of member companies (h) To arrange on-job training programs and activities for member companies (i) To hold charity and social activities for member companies (j) To protect the interests and rights of member companies (k) To discipline the member companies which violate the Association's rules (l) To help coordinate or mediate the disputes among member companies or between member

companies and their clients (m) To set the fair transaction rules as the guidelines of member companies

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INTRODUCTION

(n) To help member companies apply, renew or change licenses and offer the relevant services (o) To join the international organizations as a means to help promote Taiwan's foreign relations

through private channels (p) To take the projects commissioned by government agencies or other institutions (q) To join the social events organized by other institutions (r) To help protect investors' interests involved with securities transactions (s) To help prevent trading default, market manipulation, charge of improper service fees and other

fraudulent behaviors (t) To arrange qualification tests for the employees of the securities industry (u) To provide other services at the government's request or members' suggestions

C. Directors and Supervisors: a. The third board of directors (December 31, 2006):

Chairman Hung-Wen Chien Chairman, Mega Securities Co., Ltd Standing director Long-Chi Jong Chairman, Chinatrust Securities Co., Ltd

Standing director Lee-Chiou Chang President, Yuanta Core Pacific Securities Co., Ltd. Standing director Chung-Chien Kuo Executive Vice President, Waterland Securities Co.

Standing director Kung-Liang Yeh Chairman, Fubon Securities Co., Ltd. Standing director Jung-Chi Lee Chairman, Cosmos Securities

Standing director Cheng-Yau Chen Chairman, Yield Chance Securities Inc.

Standing director Po-Yung Lu Board member, Taiwan International Securities Co.

Standing director Ray-Hung Dai President, Jih Sun Securities

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INTRODUCTION

Standing director Hung-Chi Lee President, Deutsche Securities Asia, Taiwan branch

Standing director Guh-Bin Huang Executive Director, Polaris Securities Co. Ltd.

Director Ching-Hua Hsu Manager, Taiwan Business Bank Director Jui-Li Hsu President, Entai Securities Director Cheng-En Chang Chairman, Kuanz Ho Securities Director Che-Chen Wei Special Assistant to Chairman, Taiwan International Securities

Director Chen-Chun Fan Vice President, Masterlink Securities

Director Chao-Kun Chen Chairman, Sunrise Securities

Director Chen-Ming Chu Vice Chairman, Yung Shin Securities Co., Ltd.

Director Chin-Lung Tseng Chairman, KGI Securities Co. Ltd.

Director Cheng-Ching Wu Chairman, Fubon Bills Financing

Director Chih-Ming Kao President, Merrill Lynch Securities, Taiwan branch

Director Agnes Chen President, Citigroup Global Market, Taiwan branch Director Ho-Sheng Wang President, Cosmos Bills Financing

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INTRODUCTION

Director Yung-Cheng Chen Chairman, Fong Yin Securities

Director Chung-Shieh Chuang Senior Vice President, Sun Fund Securities

Director Chih-Liang Chang President, Daiwa Securities

Director Juei-Mao Hsu President, IBT Securities

Director Shu-Yuan Mai President, Fushan Securities Director Chan-Hsiung Lu Director, Power World Securities

Director Hui-Cheng Shen Vice President, Ta Ching Securities

Director Rong-Wen Yang Vice Chairman, Chuan Tai Securities

Director Ming-Ta Wang President, Bridge Stone Securities

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INTRODUCTION

b. The third board of supervisors (December 31, 2006): Chief supervisor Min-Juh Hwang Chairman, SinoPac Securities Corp.

Standing supervisors Ching-Tsun Liu Vice Chairman, Capital Securities

Standing supervisors Chun-Kuang Chiu Chairman, Feng Long International Securities

Supervisor Hsien-Chang Weng Special Assistant to Chairman, Taiwan International Securities

Supervisor Huei-Yao Chuang Chairman, Ta Chan Securities

Supervisor Jim-Yuh Huang President, Oriental Securities

Supervisor Uen-Pin Lee President, Concord Securities Supervisor Kuo-Chiang Han President, Chinatrust Bills Financing

Supervisor Kuei-Tseng Wang Chairman, Reliance Securities

Supervisor June-Chun Chuang Chairman, New Hundred King Securities

II. Association Structure

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ASSOCIATIONSTRUCTURE

A. Organizational Chart

General Meeting of Members

Board of Supervisors

Board of Directors

Chairman

Tendering Group

Brokerage Business Committee Dealing Business Committee Discipline Committee R&D Committee Risk Management Committee Education and Training Committee Finance Committee International Affairs Committee Mainland Affairs Committee Financial Futures Committee Foreign Brokers Committee New Financial Product Committee Foreign Investor Affairs Committee Public Affairs Committee Underwriting Committee Bond Market Committee Tax and Accounting Committee e-commerce Business Commission Assets Management Committee Shareholder Service Committee

Secretary General

Deputy Secretary General

Business Development Division

Broker Business Department

Education and Training Department

International Affairs Department

Administrative Division

Secretariat

Finance Department

Planning Department

Information Management Department

Kaohsiung Office

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B. General Meeting of Members The general meeting is the Association's supreme decision-making body, participated by

representatives dispatched by member companies based on the following criteria: a. A company focused on the underwriting business can designate one representative b. A company focused on the dealing business can designate one representative c. A company focused on the brokerage business can designate one representative d. A company engaged in two or three of the businesses mentioned above can designate two or

three representatives.

There were 284 representatives of member companies at the end of 2006.

C. Board of Directors The board of directors is a standing policy-making body in charge of defining the directions and

policies for the Association's operations. It's composed of 33 directors, including the chairman and 11 standing directors.

D. Board of Supervisors The board of supervisors is the superintending agency of the Association, responsible for

inspecting the Association's financial conditions and its execution of policies made by the board of directors. It has the right to impeach the board of directors if the board fails to fulfill its duties. The committee is composed of 11 supervisors, including the three standing supervisors. The chief supervisor is elected from the three standing supervisors.

E. Committees and Working Group The Association's administrative force is divided into 20 committees in charge of brokerage,

dealing, self-discipline, R&D, education & training, finance, international affairs, mainland affairs, financial futures, new financial derivatives, foreign brokers, public relations, underwriting, bond market, foreign securities brokerage, tax & accounting, risk management, electronic business, assets management, and shareholder service. The committees, which provide administrative support to the board of directors, are engaged on securities market research, drafting proposals, and working out solutions for the Association to deal with the various problems involved with its member companies.

In addition, there is a tendering group in charge the big procurement projects under a mission to help reduce the Association's operational costs through integration of major procurement projects.

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a. Committees and Working Group

Committee Title Company Name

Brokerage Business Committee Convener Sunrise Securities Chao-kun Chen

Dealing Business Committee Convener Oriental Securities Chin-yueh Huang

Discipline Committee Convener Polaris Securities Guh-bin Huang

R&D Committee Convener Waterland Securities Chung-chien Kuo

Risk Control Committee Convener Chinatrust Securities Long-chi Jong

Education and Training Committee Convener Bridge Stone Securities Ming-ta Wang

Financial Committee Convener Taiwan Business Bank Ching-hua Hsu

International Affairs Committee Convener KGI Securities Chin-long Tseng

Mainland Affairs Committee Convener Taiwan Securities Kuang-hsiung Wu

Financial Futures Committee Convener Fubon Securities Gorden Yeh

Foreign Brokers Committee Convener Deutsche Bank Asia, Taipei Branch Hong-chi Lee

New Financial Product Committee Convener Yuanta Core Pacific Securities Hsiang-shan Lin

Foreign Investor Affairs Committee Convener Citigroup Global Market, Taipei Branch

Kwei-hsiou Chen-Lin

Public Affairs Committee Convener Capital Securities Chig-tsun Liu

Underwriting Committee Convener Yuanta Core Pacific Securities Lee-chiou Chang

Bond Market Committee Convener Yuanta Core Pacific Securities Li-ming Wu

Tax and Accounting Committee Convener Polaris Securities Guh-bin Huang

e-commerce Business Committee Deputy Convener Bridge Stone Securities Ming-ta Wang

Wealth Management Committee Convener Mega Securities Ming-chieh Chang

Shareholder Service Committee Convener Taiwan Integrative

Shareholder Service Company

Tai-ping Chunag

Tendering Group Convener Da-ting Securities Cheng-yao Chen

b. Responsibilities of Each Committee and the Tendering Group Brokerage Business Committee: (a) Provide member companies with the brokerage-related information, coordinate conflicts

among members, and search for areas of improvement in the market (b) Provide brokerage-related services to investors (c) Make the annual work plan for the committee (d) Handle other brokerage-related businesses.

Dealing Business Committee: (a) Provide member companies with the latest dealing-related information, coordinate conflicts

among members, and search for areas of improvement in current regulations (b) Provide dealing-related services to investors

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(c) Make the annual work plan for the committee (d) Handle other dealing-related businesses

Discipline Committee: (a) Draft the self-discipline rules and discipline member companies with the rules (b) Define working ethics for member companies (c) Correct the malfunctions of member companies (d) Coordinate conflicts among members or between member companies and investors (e) Set the regulations on the management and application of the self-discipline fund (f) Make the annual work plan for the committee (g) Handle other related issues

R&D Committee: (a) Conduct the research and propose amendments to the laws (b) Conduct the research related to the businesses of member companies (c) Search for new businesses for member companies (d) Arrange seminars and conferences (e) Make the annual work plan for the committee (f) Handle other related issues Risk Management Committee: (a) Conduct research and help member companies improve their risk control mechanism (b) Propose risk-control regulations for securities firms (c) Provide member companies with the latest risk-control information, coordinate conflicts among

them and help them make improvement (d) Make the annual work plan for the committee (e) Handle other related issues Education & Training Committee: (a) Propose training programs for member companies (b) Arrange activities such as company visits, lectures, speeches, sports, and other leisure activities (c) Compile and publish publications (d) Arrange qualification tests (e) Set rules on the promotional activities of member companies (f) Disseminate investment-related information to investors (g) Make the annual work plan for the committee (h) Handle other related issues. Finance Committee: (a) Collect and manage annual membership fees and other income (b) Audit the Association's financial report and other expenditure statements (c) Propose the budgets for the association's businesses and activities

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(d) Make the annual work plan for the committee (e) Handle other related issues International Affairs Committee: (a) Do research on the internationalization and liberalization of Taiwan's securities market (b) Collect and analyze international market information (c) Promote interaction between the Association and international organizations (d) Make the annual work plan for the committee (e) Handle other related issues Mainland Affairs Committee: (a) Promote information exchange between the capital markets across the Taiwan Straits (b) Arrange visits and other interaction activities between the securities industries of Taiwan and

Chinese mainland (c) Make the annual work plan for the committee and handle other related issues Financial Futures Committee: (a) Coordinate and strengthen communications about the financial futures business among member

companies (b) Promote public education on financial futures trading (c) Make the annual work plan for the committee (d) Handle other related issues Foreign Investor Affairs Committee: (a) Coordinate and strengthen the foreign securities brokerage business among member companies (b) Provide relevant services to investors (c) Make the annual work plan for the committee (d) Handle other related issues New Financial Product Committee: (a) Convene internal meetings and attend outside meetings for gathering the information about the

regulations and market systems for new financial products (b) Promote the development of new financial products in Taiwan:

1. Gather the latest information about new financial products 2. Hold seminars on new financial products

Foreign Brokers Committee: (a) Coordinate and strengthen communications among foreign securities firms in Taiwan (b) Coordinate and strengthen communications between the Association and other related

institutions about foreign investor affairs (c) Help boost foreign investment in Taiwan's securities market (d) Make the annual work plan for the committee

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(e) Handle other related issues. Public Relations Committee: (a) Promote the interest of member companies through cooperation with other related institutions (b) Organize social activities for the Association and other related institutions (c) Arrange public hearings involved with the interests of member companies (d) Make advertisements and arrange petitions for the interests of member companies (e) Make the annual work plan for the committee (f) Handle other related issues Underwriting Committee: (a) Coordinate and strengthen communications about the underwriting business among member

companies (b) Provide relevant services to investors (c) Make the annual plan for the committee (d) Handle other related issues Bond Market Committee: (a) Coordinate and strengthen communications about the bond market affairs among member

companies (b) Provide relevant services to investors (c) Make the annual work plan for the committee (d) Handle other related issues Tax and Accounting Committee: (a) Conduct research about the tax and accounting rules on new financial products (b) Conduct research about the tax and accounting rules on securities companies (c) Coordinate and strengthen communications about tax and accounting affairs among member

companies (d) Make the annual work plan for the committee (e) Handle other related issues E-commerce Committee: (a) Propose e-commerce rules for the securities industry and help member companies develop

online businesses (b) Work with relevant institutions about the e-commerce affairs (c) Coordinate about the e-commerce affairs among member companies (d) Make the annual work plan for the committee (e) Handle the related issues Wealth Management Committee: (a) Conduct research on wealth management issues and propose recommendations to the

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regulatory agencies for their reference (b) Conduct research on the related regulations on wealth management (c) Coordinate wealth management matters among members and make suggestions for

improvement (d) Make the annual work plan for the committee (e) Handle the related issues Shareholder Service Committee: (a) Coordinate share registry matters among members and make suggestions for improvement (b) Conduct research on how to help member companies improve, simplify, streamline, and reduce

costs for the share registry matters (c) Arrange seminars and meetings to have in-depth discussion on share registry issues (d) Make the annual work plan for the committee (e) Handle other related issues Tendering Group: (a) Negotiate with the providers for the Association's major procurement projects (b) Handle other price-negotiation issues

F. Administrative Division The Association affairs division, headed by the secretary general and two deputy secretary-generals, is

the executive body divided into two departments in charge of administrative affairs and business development. The administrative division is composed of secretariat affairs section, financial section, computer section and strategic planning section. The business development department constitutes the business & service section, education & training section and international affairs section.

a. Administrative Division:

(a) Secretariat: to help arrange the general meeting of members, the meetings of board of directors and supervisors and provide administrative supports to the Association's other affairs such as public relations, new member registration, withdrawal of members, changes of members' representatives, management of documents, personnel records, member records, letters, official notices, financial reports, chops, among others.

(b) Finance department: to collect membership fees and service fees, check and pay the bills or reimbursement for expenditures, allocate budgets, manage Association's debts, raise funds, make financial report, check Association's procurement bills, among others.

(c) Information management department: to develop and manage the computer system supportive to the business development of member companies such as underwriting, bond transactions, contract management, regulation revisions and so on.

(d) Planning department: to do research on securities regulations, new securities-related businesses, the Association's structure and rules, and other relevant research topics

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b. Business Development Division: (a) Broker business department: to help member companies develop businesses in accordance with

the government's policies and the Association's rules such as brokerage for both local and foreign securities transaction, securities investments, futures trading, location inspection for new branch offices, new company registration, company withdrawals, and so on

(b) Education & training department: to arrange qualification tests, on-job training programs, wealth management qualification training, social activities as well as public education, provide investor service, compile the Association's publications, and so on.

(c) International affairs department: to coordinate and strengthen communications with international organizations, collect and analyze international market information, and help promote internationalization and liberalization of Taiwan's securities market.

c. The Kaohsiung office: to arrange training programs, seminars and social activities for the member

companies in southern Taiwan. d. Administrative Executives:

Title Name

Acting Secretary General Ching-fang Yu

Deputy Secretary General Kun-nan Yang

Director of Secretariat Mei-kuen Wang

Director of Finance Department Ku-hsin Chen

Director of Planning Department Yu-kuen Weng

Director of Information Management Department Ting-yao Shih

Director of Broker Business Department Ming-jen Ruan

Director of Education and Training Department Chih-hsien Huang

Acting Director of International Affairs Department Yu-kuen Weng (Acting)

Director of Kaoshiung office Chin-peiYang

III. 2006 Highlights

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2006 HIGHLIGHTS

The Association, in an attempt to help member companies expand their business, reduce operational costs, and strengthen competitiveness, made recommendations in reflection of members′ opinions and demand to the regulatory agencies. Following is the summary of the major proposals proceeded in 2006:

A. Underwriting, Bond, and Electronic Business a. Underwriting

(a) In order to encourage the participation of individual investors on the primary market, the Association proposed amendment to the IPO (initial public offering) book-building process that the securities firm acting as an IPO project manager should offer 10-20% of the total shares of the IPO project approved by the Taiwan Stock Exchange Corporation (TSEC) or GreTai Securities Market (GTSM) for public subscription. Execution: The Association reported the proposed amendment to the regulatory agency and afterwards announced the amendment to the “TSA Regulations Governing Securities Underwriting and Re-sales by Securities Firms,” the “TSA Self-discipline Rules Governing the Securities Firms as the Advisor to a Company for Its Securities Issuance Project,” and the “TSA Regulations Governing the Book Building Process for an IPO (Initial Public Offering) Project” (TSA No. 09500000144, Jan. 17, 2006).

(b) In line with the government′s policy for streamlining the management of “private placement” of

the securities in an IPO project and strengthen its functions, the Association proposed a revision to the securities firm assessment criteria and add to it with one more item of the efficiency of an underwriter in managing the funds appropriated to support a private placement project. Execution: The Association reported the proposed revision to the regulatory agency and afterwards announced the revision to the “TSA Self-discipline Rules Governing the Securities Firms as the Advisor to a Company for its Securities Issuance project,” the “TSA Key Points for the Assessment Report on the Issuing Company and its Underwriter of a Securities Issuance Project,” and the “TSA Regulations Governing the Procedure for Reviewing the Underwriter′s Report on a Securities Issuance Project” (TSA No. 09500000063, Jan. 6; No. 0950001964, Oct. 31, 2006).

(c) To help Taiwanese underwriters to vie for overseas business opportunities, the Association

drafted a collaboration model for Taiwanese underwriters to team up as an underwriting consortium so as to strengthen their competitiveness to vie for large fund-raising projects on the international market. Execution: The Association notified member companies of the drafted collaboration model for their reference. (TSA No. 0950000086, Jan. 10, 2006)

(d) The Association revised its underwriting regulations in accordance with the new amendment to

the Securities and Exchange Law (TEL) published on Jan. 11, 2006.

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2006 HIGHLIGHTS

Execution: The Association reported the revisions to the regulatory agency and afterwards announced the revision to the “TSA Regulations Governing Securities Underwriting and Re-sales by Securities Firms,” and the “Procedure for Reviewing the Underwriting Contracts Proposed by Securities Firms.” (TSA No. 0950000763, April 21; No. 0950001270, July 14, 2006)

(e) The Association proposed amendments to the current book building system as a means to

strengthen its price-finding function, raise the rationality of its pricing formula, and protect the interest of investors. From Oct. 1, 2006, any IPO project has the flexibility to adjust the percentage of the shares for book building in a range of 10% to 30% and the percentage of the shares for public subscription in the same range. Meanwhile, the date of listing should be set on the fifth working day following the IPO date and that would accordingly shorten the period between the dates of IPO and listing to six business days so as to help reduce the risk of both underwriters and investors. Execution: 1. The Association reported the amendments to the regulatory agency and afterwards announced

the amendments to the “TSA Regulations Governing Securities Underwriting and Re-sales by Securities Firms,” the “TSA Self-discipline Rules Governing the Securities Firms as the Advisor to a Company for Its Securities Issuance project,” and the “TSA Requirements on an IPO Public Notice Made by the Securities Firm as an IPO Manager,” the “TSA Regulations Governing the Pricing Method for Private Placement,” the “TSA Regulations Governing the Procedure of Public Subscription,” and the “TSA Regulations Governing the Procedure for Securities Firms to Apply for Approval on its Underwriting Contract.” (TSA No. 0950001154, June 30: No. 0950001759, Sept. 26, 2006)

2. The Association, in a bid to promote the publicity of the amendment, made posters and booklets about the new policy and distributed them to members companies which accordingly displayed the booklets as free publications and placed the posters on the bulletins in the lobby of their headquarters and branch offices. In addition, the Association held nine seminars on the new policy on August 14-29, participated by a total of 1,450 persons.

(f) To promote the attractions of Taiwan-issued securities on the international market, the

Association proposed the KYC（Know Your Customer）guidance concerning the standard procedure and minimum requirement for Taiwanese companies to follow when they offer shares for public subscription on the international market. Execution: The Association reported the proposed KYC（Know Your Customer）guidance to the regulatory agency and afterwards notified member companies of the guidance on Dec. 20 (TSA No. 0950002273) and at the same time required them to add it into the “Standard procedure for the ‘Best Practice’ securities firms in assessing overseas underwriting cases” as well as add it as one of the major items required for their internal auditing control. The securities firms should regularly check if their operations fully follow the KYC guidance and, if any improvement or corrections are needed, trace up their proceeding and keep records.

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2006 HIGHLIGHTS

(g) The Association, in accordance with the instructions of the regulatory agency, proposed several measures to strengthen the quality of Taiwanese underwriters. Execution: The Association reported the proposed measures to the regulatory agency (TSA No. 0950000726, April 19; No. 0950001703, Sept. 19) and afterwards received the instructions of the Securities and Futures Bureau (SFB No. 0950003229, July 4; No. 0950145484, Oct. 3) under which the Association will, in compliance with the “TSA Regulations Governing the Owners and Employees of Securities Firms,” require member companies to arrange underwriting training courses for at least six hours per person every year, and submit the annual program records to the Association. It will start in 2007 and each member will, under the Association′s the principles of self-discipline, design the training program′s curriculum on their own.

(h) The Association reviewed 195 cases of underwriting contract applications filed by member

companies in 2006. (i) The Association randomly checked the paperwork of the securities firms working as the advisor

to a company in a plan for raising fund through securities issuance. (j) The Association monitored the practices of member companies in the business of securities

underwriting and re-sale.

b. Bond (a) In accordance with the instructions of the Financial Supervisory Commission (FSC) and the

decisions reached by the Banking Bureau at a meeting on the “Management of the Split of Financial Debentures” held on Feb. 17, 2006, the Association proposed the requirements for split of common corporate bond and financial debenture as the guidelines for the underwriters and issuing companies. Execution: The Association reported the proposed guidelines to the regulatory agency and afterwards announced it on Jan. 25 (TSA No. 0950000204) and made an amendment on April 4 (TSA No. 0950000636) to the “TSA Self-discipline Rules Governing the Securities Firms as the Advisor to a Company for Its Securities Issuance Project.”

(b) In a bid to boost the market of interest rate futures, the Association made a suggestion to the

National Treasury Agency under the Ministry of Finance that the dates of the additional issuance of government bond and the issuance of 10-year government bond should cope with the settlement dates of interest rate futures as a means to strengthen the “price discovery” and “risk-hedging” functions of the bond market in Taiwan and by the way make the market better match the international practices. Execution: The Association received a reply from the National Treasury Agency on June 7 (NTA No. 09503055740) that it would refer to the suggestion for future policy revision.

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2006 HIGHLIGHTS

c. Electronic Business (a) The Association recommended the TSEC to revise its regulations governing the monitoring on

the information security of securities firms to ease the requirements for clients to sign recommendation contract with their securities firms and to remove the items irrelevant to information security. Execution: The Association received a notification from the TSEC on Feb. 15 (TSEC No. 0950300123) that it would consider to make the revision and remove the irrelevant items.

(b) The Association made a proposal for integrating the electronic certification reporting system for

securities firms, futures companies and other relevant institutions in a bid to help securities firms reduce costs and promote their operational efficiency. Execution: After the TWCA completed the integrated electronic certification reporting system and its new pricing proposal by the end of April 2006, the TSEC notified securities firms of the new electronic service system on Nov. 21 (TSEC No. 0950651761) and required them to start to follow the new system on Dec. 18, 2006.

(c) The Association required the TWCA to postpone its new pricing proposal for two months, and at

the same time negotiated with the TWCA for favorable rates prior to the execution of the new pricing proposal. Execution: 1. The Association reached an agreement with the TWCA at the following points:

(1)The new pricing proposal would begin on May 1, 2006, postponed from the original date on April 7

(2)The new pricing scheme would be gradually implemented in three phases (3)The securities firms which had paid for 30,001 electronic certificates (EC) or more in

advance for the year ahead have the rights to negotiate with the TWCA for partially refund. 2. The Association forwarded the agreement to member companies on April 21 (TSA No.

0950000741) and the formal copy was afterwards sent by TWCA to each securities firm on April 28 (TWCA No. 0952000550).

(d) The Association proposed that the investor who have gained the electronic certificate (EC) for

online trading would be able to use their approved EC for various other contracts or letter of agreement between them and securities firms so as to simplify the procedure for investors to sign documents with their securities firms. Execution: The TSEC held a seminar on May 16 to discuss the “Electronic Certificate (EC) for Securities Investors” and the detailed execution measures, and afterwards notified the Association on May 22 (TSEC No. 09502006981) that it would follow the Association′s suggestion on the electronic certificate (EC) issue.

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2006 HIGHLIGHTS

(e) The Association required the settlement division of the Taiwan Depository & Clearing Corporation (TDCC) to help member companies to make their passbook printers compatible to the terminals of the TDCC′s new settlement system. Execution: After the negotiation between TDCC′s settlement division and the PR2 Printer supplier, the latter agreed to offer a favorable price of its PR2 Printer to the member companies at NT$50,000 per unit, down from the original NT$66,000.

(f) The Association recommended the securities-related institutions to work out the common items

for their regular check on the information security of securities firms as a means to reduce the burdens of the securities firms. Execution: The TSEC, in accordance with the consensus reached at a meeting on the “Standard items for outside institutions to check the information security of securities firms” held on June 29 as well as the official document issued by the TDCC on July 27 (TDCC No. 09500452730), notified the Association of the two major points of their decision: 1. The Taiwan Stock Exchange Corp. (TSEC), GreTai Securities Market (GTSM), and the Taiwan Futures Exchange (TFE) will continue to check the information security management of securities firms once a year. 2. The TDCC′s settlement division will maintain its tutorial course for the securities firms, once for every two years for each business unit of a securities firm and a full day for each time. The tutorial course will be waived for the securities firms which pass the regular information security check made by outside institutions.

(g) The Association, in a bid to allow member companies to have sufficient time in assessing the cost

and time needed for them to develop the mobile securities trading system, required the TSEC to postpone the beginning date of the mobile electronic authoritarian system to Jan. 1, 2007 and make a formal announcement of it so that the securities firms would refer to the new schedule when they sign any contract or letter of memorandum with the trading system security companies. Execution: The TSEC agreed to postpone the proposed system to Jan. 1, 2007 (TSEC No. 0950015890, July 14; TESC No. 0950033741, Dec. 28, 2006).

B. Brokerage, Dealing, Financial Futures, New Financial Products, Monitor- ing Overseas Securities Brokerage and Foreign Bond Transaction, and Self-Discipline of Member Companies a. Brokerage

(a) The Association proposed an amendment to the regulations governing the securities firms offering the brokerage service for government-approved beneficiary certificates after their IPO (initial public offering) period. (TSA No. 0950000011, Jan. 2, 2006) Execution: The proposal was adopted by the Financial Supervisory Commission (FSC) which made a

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2006 HIGHLIGHTS

reply to the Association on May 1 (FSC No. 09500020910): “As for the sales and redemption of beneficiary certificates, the securities firms should follow the ‘Procedures for Issuance, Sales, and Redemption of Beneficiary Certificates,’ the ‘Rules Governing Mutual Fund Transactions on the Internet,’ and other relevant regulations issued by the Securities Investment Trust and Consulting Association (SITCA).”

(b) In order to reduce the transitional settlement accounts and simplify the settlement procedure

between securities firms and banks, the Association proposed the single-window system under which any securities firm could open only one settlement account with a bank to handle all the securities transactions dealt by any business units of the securities firm. (TSA No. 0950000308, Feb. 16, 2006) Execution: The proposal was adopted by the TSEC which replied on May 30 (TSEC No. 0950009887), “The bank designated by a securities firm as its settlement bank can settle all the securities transactions made by any business unit of the securities firm, effective from June 1, 2006.”

(c) For an investor who opens more than one trading accounts at different branches of the same

securities firm, the Association recommended the securities firm to list all his or her transactions at one single transaction report for the investor. (TSA No. 0950000773, April 24) Execution: The suggestion was adopted by the TSEC which made a reply to the Association on August 31 (TSEC No. 0950022347), “The TSEC agrees that a securities firm can make one single transaction report to cover all the transactions of one single investor who holds more than one trading accounts at different business units of the securities firm.”

(d) The Association recommended to ease the restriction that the persons working at the securities

borrowing and lending department of one securities firm should be full-time employees. (TSA No. 0950001040, June 8, 2006) Execution: The recommendation was adopted by the FSC which published an amendment to the “Regulations Governing Margin Purchase and Short Sale of Securities by Securities Firms,” Article 4, Paragraph 1 (FSC No. 0950004751, Oct. 23).

(e) In order to help securities firms save manpower and mailing cost, the Association recommended

removing of the requirement that the securities firms should send the monthly transaction report by double-registered mail to the client whose monthly transitions exceed NT$50 million (TSA No. 0950001049, June 9, 2006). Execution: The recommendation was adopted by the FSC which made a reply to the Association on Oct. 16 (FSC No. 0950004726), “For the investors whose monthly transactions exceed NT$50 million, the securities firms can send their monthly transaction reports to them by double-registered mail,

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2006 HIGHLIGHTS

or forward the monthly transaction reports by e-mail to those who have acquired the TWCA-approved electronic certificate (EC). The securities firm, however, has to require mandatory reply by the clients to confirm their receiving of the electronic monthly transaction reports. If the securities firm has not received the e-mail reply from the clients within two working days, it world have to mail the hard copy of the monthly transaction report to the client by double-registered mail.”

(f) The Association recommended the regulatory agency to open Taiwan Depositary Receipt (TDR)

for margin purchase and short sale. Execution: The proposal was adopted by the FSC which published an amendment to the “Standards Governing Margin Purchase and Short Sale of Securities,” Article 2, Paragraph 6 (FSC No. 0950004518, Sept. 29, 2006).

(g) The Association recommended the opening of the securities financing business to the securities

firms which should follow the relevant regulations to apply for approval for operating the securities financing business.

(h) The Association required that member companies, after the TSEC makes a formal announcement

to open securities financing business to the securities firms, should follow the relevant regulations to apply for license for doing the new business.

(i) The Association negotiated with the TSEC for a discount of 12% off for the TSEC transaction fee

charged at a rate of 0.0065% of each transaction amount during the period of the suspension of making any withdrawals or deposits for the compensation fund. The discount rate took effect in November 2006.

b. Dealing

(a) The Association recommended the TSEC and GTSM to remove the restrictions on the dealing department of the securities firm as any call (put) warrant issuer from trading the call (put) warrant issued by the securities firm itself within the first month following the issuance date and the last month prior to the expiration date. Execution: The recommendation was adopted by the TSEC which announced an amendment on Jan. 20 (TSA No. 0950001470) to Article 17 of the “TSEC Regulations Governing the Dealing Department of Securities Firm in Trading Call (put) Warrant” that the dealing department of the securities firm as a call (put) warrant issuer should, in compliance with the company′s requirement for effective internal control, trade the call (put) warrant issued by its own company for the purpose of risk hedging under the condition that its trading of the warrant will not impose adverse effect on the interest of investors or distort the market mechanism in determining the warrant price. Meanwhile, the GTSM also announced an amendment on Jan. 24 (GTSM No. 0950002038) to Article 23 of the “GTSM Regulations Governing the Dealing Department of

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2006 HIGHLIGHTS

Securities Firm in Trading Call (put) Warrant” that the dealing department of the securities firm as a call (put) warrant issuer should, in compliance with the company′s requirement for effective internal control, trade the call (put) warrant issued by its own company for the purpose of risk hedging under the condition that its trading of the warrant will not impose adverse effect on the interest of investors or distort the market mechanism in determining the warrant price.

(b) The Association recommended the Securities and Futures Bureau under the FSC to allow

securities dealers to purchase the beneficiary certificates of real-estate securities during the IPO (initial public offering) period. Execution: The suggestion was adopted by the FSC which issued the announcement on Feb. 23 (FSC No. 0940157605): “In accordance with the Securities and Exchange Law, Article 15, Paragraph 2, securities dealers can purchase the beneficiary certificates of real estate securities during the period of public offering...”

(c) The Association recommended the Securities and Futures Bureau under the FSC to allow

securities dealers to change their office location due to the adjustment of their businesses. Execution: The suggestion was adopted by the FSC which issued the announcement on May 19 (FSC No. 0950111028): “Provided that it won't influence the company′s internal auditing and operation, the securities dealers, in compliance with the TSEC′s regulations on the location and facilities of the business units of securities firms, can apply for establishing a new office, relocating its office, or expanding the current office space.”

(d) The Association recommended the GTSM to remove the requirement for securities firms to fill

out the “quotation of price” form prior to making transaction as stated in the “GTSM Regulations Governing Securities Transactions by Securities Firms,” Article 72. Execution: The suggestion was adopted by the GTSM which issued the announcement on May 22 (GTSM No. 0950012296) that the GTSM revised Article 72 of the “GTSM Regulations Governing Securities Transactions by Securities Firms” as well as the “GTSM Standards for Internal Control of Securities Firm” and at the same time abolish the “GTSM Key Points for Securities Firms in Reporting the Procurement of Computer.” These amendments took effect upon the announcement.

(e) The Association held the annual on-job training seminar for securities dealers on November 10,

featuring the theme of “Introduction of the Futures on Interest Rates and Exchange Rates” for this year.

c. Financial Futures

(a) The Association recommended the Taiwan Futures Exchange (TFE) to adjust the pricing formula

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2006 HIGHLIGHTS

for the cash settlements of 10-year government bond futures. (TSA No. 0950001576, Sept. 1, 2006) Execution: The TFE replied on Sept. 26 (TFE No. 09500085750): “In order to allow futures traders not to be worried about the high cost for them to sell government bond futures, the TFE on Sept. 19 announced a revision to the pricing formula for cash settlement of government bond futures, effective from the settlement date of the government bond futures expired in Dec. 2006. Under the new pricing formula, the government bond futures can be settled at the theoretically lowest price on the last trading day or the price based on transactions of the last trading day, whichever higher.”

(b) The Association recommended the government to allow the securities firms with a futures

dealing division to trade foreign futures. (TSA No. 0950001584, Sept. 1, 2006) Execution: The suggestion was adopted by the FSC which announced the relevant regulations on Oct. 18 (FSC No. 0950132780; FSC No. 0950004696).

(c) The Association recommended the regulatory agency to allow futures introducing brokers and

the securities firms with a futures brokerage division to combine the futures transaction report and securities transaction report of the same client into one copy. (TSA No. 0950000757, April 21; No.0950001722, Sept. 21, 2006) Execution: The suggestion was adopted by the FSC which notified the Association of its decision on Oct. 27 (FSC No. 0950145899) and the Association afterwards notified all its members of the new policy.

(d) The Association recommended the TFE to compile the index of 10-year government bond and

launch the index futures on 10-year government bond. (TSA No. 0950001581, Sept. 1, 2006) Execution: The TFE made a reply to the Association (TFE No. 09500081830, Oct. 14): “(1) Considering that the GTSM has launched the index of 10-year government bond and the index of Taiwan government bond, the TFE will make research on the feasibility for launching futures on the two indexes. (2) The TFE has included the research proposal into its major work plans to propose the index futures on government bond and the TFE has conducted an R&D project on this issue.”

(e) The Association recommended the TFE to (1) propose the withdrawal mechanism for the

inactive futures which have been traded in slim transaction for a long period of time, and (2) propose new futures on the index of conventional industries and the GreTai securities market index. (TSA No. 0950001869, Oct. 17, 2006) Execution: The TFE made a reply to the Association on November 1 (TFE No. 09500092210): “(1) The TFE has been proceeding an R&D project on the withdrawal mechanism. (2) The TFE will refer

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2006 HIGHLIGHTS

to the TSA's suggestions when it plans for launching new products for the futures market.”

d. New Financial Products (a) The Association worked with the “New Financial Products and Tax Group” under the Ministry of

Finance for promoting the development of new financial products. (b) The Association recommended the regulatory agency to allow securities firms to trade with banks

on the options with identical underlying shares as or related to those of the warrants issued by themselves. (TSA No. 0950000174, Jan. 20, 2006) Execution: The suggestion was adopted by the TSEC and the TGSM which accordingly made an announcement on the new policy. (TSEC No. 0950010511, May 22, 2006; TGSM No. 0950012297, May 30, 2006)

(c) The Association suggested that the applications of securities firms for operating new financial

derivatives should be considered to have been approved if they do not receive rejection notification from the GTSM within 10 days after their filing of the application. (TSA No. 0950000340, Feb. 21, 2006) Execution: The suggestion was adopted by the TGSM which accordingly announced an amendment to the “TGSM Regulations Governing Financial Derivatives Transactions by Securities Firms,” Article 5. (GTSM No. 0950023992, Sept. 5, 2006)

(d) The Association suggested that securities firms, while trading financial derivatives, should make

the transactions with qualified professional institutional investors. (TSA No. 0950000967, May 26, 2006) Execution: The suggestion was adopted by the TGSM which accordingly announced an amendment to Article 42 of the “TGSM Regulations Governing Financial Derivatives Transactions by Securities Firms.” (GTSM No. 0950400667, Sept. 25, 2006)

(e) The Association agreed at the TSEC-proposed rule that the warrant issuer should use its time

deposits at bank as the pledge for its warrant issuance. (TSA No. 0950000964, May 26, 2006) Execution: The TSEC and TGSM both made a formal announcement about the new rule (TSEC No. 09503003430, June 14; GTSM No. 0950014690, June 23, 2006).

e. Monitoring Overseas Securities Brokerage and Foreign Bond Transactions

(a) The Association makes the initial review of member companies' application for the licenses of foreign securities brokerage, creation of new market, as well as transaction confirmation, and then forwards their applications to the regulatory agencies. In 2006, there were four companies

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2006 HIGHLIGHTS

(Deutsche Securities Asia Taipei Office, President Securities, First Bank Securities, and Dah Chong Securities) which gained the licenses for foreign securities brokerage, while Primasia Securities was in the process of filing the application. As of the end of 2006, a total of 39 member companies have gained the licenses for doing foreign securities brokerage.

(b) The Association compiled the statistics of the foreign securities transactions made through the

brokerage services of member companies in 2006 and made a list of monthly transactions as follows:

Foreign securities transactions in Taiwan Unit: NT$

Month Transaction amount

January NT$51,021,235,399

February NT$42,813,384,274

March NT$52,706,940,419

April NT$60,559,815,524

May NT$51,435,939,814

June NT$42,140,225,824

July NT$33,853,119,358

August NT$42,071,645,597

September NT$43,408,120,112

October NT$49,936,701,596

November NT$56,849,620,319

December NT$64,196,888,077

Total NT$590,993,636,313

(c) The Association regularly checked the operations of member companies in the business of

foreign securities brokerage.

(d) The Association makes initial review on the applications filed by member companies for doing brokerage for foreign bond transactions, and then forwards the applications to the regulatory agency. In 2006, no member companies filed such applications. As of the end of 2006, there was only one company which had offered the brokerage service for foreign bond transactions.

(e) The Association compiled the statistics of foreign bond transactions through the brokerage of

Taiwanese securities firms in 2006 and made a list of the monthly transactions as follows:

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2006 HIGHLIGHTS

The Foreign bond transactions in Taiwan Unit; NT$ Month Transaction amount

January

February NT$10,544,026,466

March NT$8,911,073,783

April NT$6,053,843,943

May NT$8,493,494,554

June NT$3,973,658,234

July NT$3,786,362,671

August NT$6,621,974,441

September NT$7,568,784,325

October NT$9,619,103,643

November NT$8,059,617,954

December NT$10,544,026,466

Total NT$41,762,459,651

(f) In accordance with the newly published Offshore Fund Management Act, the Association

proposed the “TSA Standards for Member Companies to Make Internal Control of Their Offshore Fund Business” and forwarded the formal copy to member companies for their reference. (TSA No. 0950001379, August. 2, 2006)

(g) In order to streamline the procedure for securities firms to file monthly report about their foreign

bond brokerage business, the Association completed the “Electronic System for Foreign Securities Transaction Report by Securities Firms” in October and offers various electronic forms to be used for the report to member companies.

(h) The Association recommended the FSC to allow securities firms to offer the brokerage service

for foreign bond transactions and to refer to the credit rating criteria for financial institutions while setting the credit ratings for the index-linked or structured notes, i.e., to have the credit rating of the bond issuer or the bond itself as the two major items of the credit rating criteria for the index-linked or structured notes (TSA No. 0950000805, April 26, 2006). Execution: The suggestion was adopted by the FSC which confirmed its adoption of the suggestion on July 18 (FSC No. 0950116074) and the Association accordingly notified member companies of the new policy on July 20 (TSA No. 0950001295).

(i) Regarding the requirement for the foreign securities firm's Taipei branch to submit the record of

the meeting of the company's board of directors as one of the required documents for their license applications for creating new markets for its brokerage service or acting as an agent of another securities firm in Taiwan, the Association recommended the FSC to allow the applicant to use an

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2006 HIGHLIGHTS

official document authorized by the company's headquarters or the persons with the authorizing power to substitute the record of the meeting of the company's board of directors. (TSA No. 0950001316, July 25, 2006) Execution: The suggestion was adopted by the FSC which made a formal confirmation to the Association on Sept. 11 (FSC No. 0950001664), and the Association afterwards forwarded its confirmation letter to member companies (TSA No. 0950001664, Sept. 14, 2006).

f. Self-Disciplines of Members Companies

(a) The Association convened meetings of the Self-discipline Committee to re-examine the Association's self-discipline rules as well as discuss feasible adjustments and other related issues.

(b) The Association convened coordination meetings to mediate conflicts among members. (c) The Association help mediate the dispute about the head-hunting among member companies or

the price competition on the service fee or brokerage fee among member companies. (d) In order to correct the serious rule violation behaviors of member companies, the Association

issued warning letters to them and forwarded copies of the letters to the regulatory agencies. (e) The Association proposed amendments to its self-discipline rules to strengthen the self-discipline

practice of members. In 2006, it announced the member self-discipline pact to limit the ratio of the employees transferred from counterparts to all the working staff at one member company.

(f) The Association proposed revisions to its rules governing the quota and credibility checking of

the securities traded through the brokerage of member companies. It reported the revisions to the regulatory agency and afterwards made a formal announcement of the revisions which took effect upon the announcement.

(g) The Association proposed the model contract between a securities firm and its clients for

securities lending and borrowing. It reported the proposed model contract to the regulatory agency and afterwards made a formal announcement about the model contract for member companies to follow.

(h) The Association made suggestion to the regulatory agency that the penalty on certain employees

of one securities firm for their law violation behaviors should not influence the securities firm′s applications for other warrant issuance projects, filed by either the headquarters office or any branch office of the same securities firm. Execution: The Securities and Futures Bureau (SFB) under the FSC replied on Feb. 13 (SFB No. 0950103922): “The SFB will refer to it when making relevant policies in the future.”

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2006 HIGHLIGHTS

(i) The Association recommended that the regulatory agency should only refer to Article 60 of the Securities and Exchange Law on the requirements for the establishment of new securities firm, as well as its execution measures when it reviews the applications filed by securities firms for operating new field or new category of business and do not have to refer other documents such as the government′s administrative decrees or the regulations of other securities-related institutions (like their criteria for making ratings of securities firm′s internal control). Meanwhile, the Association also suggested that the regulatory agency should not accept the anonymous letters, check the accused companies based on anonymous impeachment, or promptly impose penalty on the accused company in the process of litigation. Execution: The FSC made a reply to the Association on Dec. 22 (FSC No. 0950156371): “The FSC will keep it as its reference and refer to it when making relevant policies in the future.”

C. International, Foreign Brokers, and Mainland Affairs a. International Affairs

The Association organized and participated several major international conferences in 2006: (a) The Association organized a business inspection trip for member companies to visit the Dubai

International Financial Center in April. (b) The Association led a delegation of Taiwanese securities firms to attend the 11th Asia Securities

Forum in May. (c) The Association, on behalf of Taiwan′s securities industry, participated the 32nd Annual

Conference of the International Organization of Securities Commissions (IOSCO) held in Hong Kong in June.

(d) The Association organized a business trip for the representatives of the Association and the

Taiwan Integrative Shareholder Service Company to visit the electronic proxy voting company in Tokyo in August.

(e) The Association organized a delegation of Taiwan′s securities firms to attend the 19th Annual

Conference of the International Council of Securities Associations (ICSA) held in Tokyo in June. (f) The International Affairs Committee under the Association arranged a business inspection trip to

Hanoi, Vietnam in November.

b. Foreign Broker Affairs (a) The Association recommended the TSEC to allow securities firms to provide Direct Market

Access (DMA) transaction service. Execution:

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2006 HIGHLIGHTS

The TSEC made an announcement on May 29 to allow securities firms to offer DMA transaction service (TSEC No. 0950010646), effective from June 1, 2006

(b) The Association recommended the TSEC to waive the requirement that the investors who make

transactions through DMA account should sign on a letter of authorization with their securities firms for opening electronic trading account. Execution: The suggestion was adopted by the FSC which informed the Association of its decision on June 30. (FSC No. 09501147216)

(c) The Association recommended the TSEC to allow securities firms to offer Omnibus Trading

Account service to investors. Execution: The suggestion was adopted by the TSEC. From Feb. 20, 2006, investors would be able to trade stocks through their Omnibus Trading Account which is designed to allow investors to make all their transactions through an integrated account in compliance with the principle of fair pricing.

(d) The Association proposed both the Chinese and English versions of the letter of authorization and

letter of statement for opening the Omnibus Trading Account at a securities firms and forwarded copies of each to member companies for their reference.

(e) In order to make its self-discipline rules better fit the demand of member companies, the

Association proposed an amendment to the “TSA Self-discipline Rules on Securities Firms in Investigating Investor′s Credibility and Setting Transaction Quota for an Investor,” by revising Article 23, Paragraph 1, adding Article 23, Paragraph 2, and making a proviso for Article 24, Paragraph 1. Execution: The Securities and Futures Bureau (SFB) under the FSC replied on Oct. 26 that it would refer to it when making relevant policies in the future. (SFB No. 0950142196)

c. Mainland Affairs

(a) The Association recommended the Securities and Futures Bureau (SFB) to allow Taiwanese securities firms to make investment on mainland-based commercial banks. (TSA No. 0950000147, Jan. 18, 2006) Execution: The Association is still waiting for the responses from the SFB.

(b) The Association recommended the Securities and Futures Bureau (SFB) to remove the

requirement that the Taiwanese securities firm, which makes investment on a counterpart in China, should hold at least 25% of the total outstanding shares issued by the invested mainland-based company. (TSA No. 0950000168, Jan. 19, 2006)

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2006 HIGHLIGHTS

Execution: The Securities and Futures Bureau (SFB) under the FSC replied on Feb. 13 that it would keep record of the suggestion and make a research on its feasibility. (SFB No. 0950103343)

(c) The Association recommended the Securities and Futures Bureau (SFB) to relax the requirement

that a Taiwanese securities firm, with attempt to make investment on a counterpart in the mainland, should acquire the shares issued by the invested mainland-based company through a 100%-ownd subsidiary directly invested by the securities firm. (TSA No. 0950000907, May 17, 2006) Execution: The Association has not received any response from the SFB.

(d) The Association recommended the Securities and Futures Bureau (SFB) to raise the ceiling

amount of a Taiwanese securities firm′s investment on a foreign securities firm or a mainland-based securities firm from the current 20% or 10%, respectively, of its total share capital to 30% for each. (TSA No. 0950001421, Aug. 10, 2006) Execution: The Securities and Futures Bureau (SFB) under the FSC replied on Feb. 13 that it would keep record of the suggestion and make a research on its feasibility. (SFB No. 0950103343)

●Cross-straits interactions

(a) A delegation of the Securities Association of China visited the Association on Oct. 24, 2006. (b) The Association organized a business inspection trip to Beijing and Shanghai, China on Oct.

31-Nov. 4, 2006. (c) Legislator Chih-hui Shen accompanied Mr. Lee Shu-guan, a law professor at Zhen-fa

University in China, to visit the Association on Dec. 5, 2006. (d) The Association applied to the regulatory agency for organizing a trip to visit the Securities

Association of Beijing.

D. Research and Development a. Risk Management: the Association completed several major tasks as follows:

(a) The Association proposed a revision to the drafted “Standards for Internal Control of Securities Firms, Futures Companies, and Related Institutions.” A part of the proposal has been adopted by the regulatory agency.

(b) In a bid to help member companies promote their international business, the Association

proposed a revision to the government′s current regulations on the foreign securities and international financial derivatives parameters for the calculation of the capital adequacy ratio (CAR) of a securities dealer in a bid to raise the rationality of the pricing formulas for the bonds denominated by foreign currency and the financial derivatives associated to foreign interest rates and foreign bonds. The Association has reached consensus with the TSEC and GTSM on the proposal which was later forwarded by the TSEC to the regulatory agency.

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2006 HIGHLIGHTS

(c) In order to cope with the requirements of the Basel II Accord, the TSEC drafted a proposal for adjustment in the capital adequacy ratio (CAR) calculation formula for securities firms and reported it to the SFB for approval. The securities firms will have to make trial calculation of the new formula and complete the trial calculation within nine months after the SFB's approval.

(d) In accordance with the decisions reached at the TSEC's meeting on how to assure the quality of

the information disclosed by securities firms in compliance with the new Basel II requirements, the Association proposed the key points for the CAR-related information disclosed by securities firms.

b. Tax and Accounting: the Association completed several major tasks for improving the tax and

accounting systems for member companies as follows: (a) The Association recommended the Taxation Agency under the Ministry of Finance (MOF) to

exclude investors' capital gains generated through securities investment from the income subject to the minimum income tax, which is scheduled to take effect on January 1, 2009. It's to prevent Taiwanese investors remit their capital to offshore trading accounts and to reduce the impact of the minimum income tax on the operations of Taiwanese securities firms.

(b) The Association continued to help securities firms working to meet the requirements of the

Financial Accounting Standards No. 34. Besides the fair pricing principle, the Association called for a comprehensive review of all the relevant taxation principles and recommended the regulatory agency to work out a full package of tax codes in compliance with the fair pricing principle in a bid to promote the overall financial market efficiency and prevent any unfairness occurring to securities firms.

c. Wealth Management: the Association completed several major tasks in 2006 as follows:

(a) The Association joined the TSEC in proposing a wealth management working staff registration system which will be integrated into the existing registration system for the employees of securities firms so as to streamline the registration procedure for the wealth management working staff.

(b) In order to help specialized securities brokers enhance their competitiveness and expand the field

of their business, the Association has talked with the FSC for several times and urged it to allow specialized securities brokers to offer wealth management service. The FSC finally announced an amendment to Items 2 and 7 of the “TSA Regulations on Wealth Management by Securities Firms” to allow specialized securities brokers to offer wealth management service.

(c) The Association joined the TSEC and GTSM in proposing a simplified procedure and the related

execution measures for securities firms to handle the opening of trading accounts, investigation of new client's credibility, and bidding for securities transaction at one time. The proposed simplified procedure is now under the review of the regulatory agency.

36

2006 HIGHLIGHTS

(d) To help securities firms solve the problems concerning their wealth management service, the Association proposed the “Wealth Management Account” as an integrated account for all the transactions made by the same client of a securities firm and proposed the “TSA Requirements Governing the Management of Securities Firms on the Wealth Management Account.” The Association has discussed with the regulatory agency about this issue for several times and will keep communicating with the regulatory agency for consensus on this issue.

E. Education, Training, and Research a. Education and Training

(a) The Association continued to arrange the qualification training courses for wealth management specialists. Meanwhile, it developed the computerized testing system and opto-electronic scoring system for the on-job training courses for the wealth management working staff at securities firms. The new testing and scoring system, which commenced operations on July 1, 2006, greatly helped streamline the course arrangement and test-scoring procedure.

(b) The Association set up an ad hoc group to help member companies propose the “TSA Labor

Safety and Hygiene Standards for Securities Firms” and arranged training courses for company executives and emergency management staff. All the courses were completed by the end of September.

(c) The Association proposed a training program for the wealth management staff at securities firms

and has reported the proposal to the regulatory agency. The FSC replied on Feb. 21: “The FSC has been informed of the proposed program.” (FSC No. 0950103055)

(d) The Association proposed various training program for the employees at different divisions of the

securities firms and has reported the proposal to the regulatory agency. The Securities and Futures Bureau (SFB) under the FSC replied on Feb. 21: “The SFB has been informed of the proposed program.” (SFB No. 0950142717)

(e) The Association continued to revise the training program for the wealth management staff at

securities firms and has reported the proposal to the regulatory agency. The FSC replied on Sept. 13: “The FSC has been informed of the proposed program.” (FSC No. 0950142720)

(f) In order to make the requirements for foreigners to apply for Taiwanese securities brokerage

license applicable to the Taiwanese with an attempt to acquire an offshore securities brokerage license, the Association proposed an amendment to the “TSA Requirements on the Securities Qualification Tests” and the “TSA Requirements on Foreign Participants of Taiwan's Securities Qualification Tests.” The Association has reported the proposal to the FSC which afterwards informed the Association on Oct. 13 that the proposal was in the process of its review. (FSC No. 0950145960)

37

2006 HIGHLIGHTS

(g) The Association proposed to relax the requirements on the participants of the TSA-arranged pre-job raining courses. The proposal was adopted by the regulatory agency which informed the Association on Dec. 27 that it would refer to the decisions reached at a meeting held by the Securities and Futures Institute (SFI) for discussing this issue on Nov. 13. (FSC No. 0950005912)

(h) The Association proposed to add two categories of basic financial market knowledge and

working ethics to the securities qualification tests for foreigners and at the same time proposed an amendment to the "TSA Requirements on Foreign Participants of Taiwan's Securities Qualification Tests." The FSC informed the Association on Dec. 28 that the proposal was in the process of its review. (FSC No. 0950159887)

(i) On-job training and investor education:

To help member companies strengthen the quality of their working staff, the Association arranged various qualification training courses in 2006 as follows:

Program Coursesin 2004

Participants in 2004

Coursesin 2005


Courses in 2006


A On-job training 91 7,499 123 11,274 127 11,830 1 Basic course for brokers 8 821 7 543 4 428

2 Advanced course for brokers 60 5,397 92 9,278 90 8,872

3 Advanced courses for stock traders 1 65 1 42 2 161

4 Advanced courses for underwriters 3 195 2 142 2 136

5 Advanced courses for auditors 4 231 5 228 1 107

6 Training courses for margin transition brokers 0 0 0 0 1 40

7 Other advanced courses 10 294 14 935 19 1,259

8 Courses for middle-level executives 3 138 2 106 7 651

9 Courses for Senior executives 2 358 0 0 1 176

B Courses on legal affairs and self-discipline 7 56 5 36 6 61

C Corporate governance 22 1,540 15 1,254 23 1,651

D Lectures on special topics 21 1,498 1 60 6 616

E Seminars 2 1,694 13 2,322 0 0

F Special training for qualification tests 2 41 1 22 0 0

1 Stock broker 1 14 1 22 0 0 2 Futures broker 0 0 0 0 0 0

3 Brokers at foreign securities firms 0 0 0 0 0

4 Bond brokers 1 27 0 0 0

38

2006 HIGHLIGHTS

Program Coursesin 2004


Coursesin 2005


Courses in 2006


G Labor safety courses - - - - 31 1,337

H Wealth management training for qualification tests

0 0 0 0 20 1,297

Total 145 12,328 159 14,968 213 16,792 (j) Qualification tests

The Association commissioned the Securities and Futures Institute (SFI) to hold the qualification tests for securities brokers, dealers, and underwriters, opened to both local citizens and foreigners. The tests and participants in 2006 were indicated as follows:

Test type Category No. of

registered persons

No. of participants

No. of absentees

Ratio of participants

No. of persons

passing the test

Ratio of persons

passing the test

Courses for senior brokers (Jan.-July) 6,909 4,203 2,706 60.83% 1,343 31.95%

Special subject for Senior brokers

(Aug.-Dec) 7,385 4,586 2,799 62.10% 1,316 28.70%

Courses for brokers

(Jan.-July) 9,200 6,829 2,371 74.23% 1,342 19.65%

Special subject (Aug.-Dec) 8,732 6,638 2,094 76.02% 1,266 19.07%

Securities transaction law

and practice 310 246 64 79.35% 109 44.31%

Written test

Sub-total 32,536 22,502 10,034 69.16% 5,376 23.89%

Courses for senior brokers (Jan.-July) 2,859 2,130 729 74.50% 651 30.56%

Special subject for Senior brokers

(Aug.-Dec) 3,321 2,451 870 73.80% 1,233 50.31%

Courses for brokers

(Jan.-July) 2,836 2,378 458 83.85% 515 21.66%

Special subject (Aug.-Dec) 2,522 2,068 454 82.00% 545 26.35%

Securities transaction law

and practice 122 108 14 88.52% 69 63.89%

Computerized tests

Sub-total 11,660 9,135 2,525 78.34% 3,013 32.98%

Courses for senior brokers 34 33 1 97.06% 18 54.55%

Courses for brokers 0 0 0 0 0 0 Tests for

foreigners

Sub-total 34 33 1 97.06% 18 54.55%

Total 44,230 31,670 12,560 71.60% 8,407 26.55%

39

2006 HIGHLIGHTS

(k) Investor education: 1. Published the Securities Journal－6,300 copies for four issues, and disseminated them to

member companies and the related institutions 2. Published 130,000 copies of the handbook “The Accesses to Market Information” and

distributed them to member companies and related institutions 3. Published 15,000 copies of the digest of the securities transaction law as the materials for

on-job training and public education (l) Management of the advertisements made by securities firms:

The member companies filed a total of 297 advertisement projects to the Association for its review in 2006.

b. Research and Development

The Association completed four major research projects in 2006 as follows: (a) The feasibility of the dual-pricing system for the underwriting on a firm commitment basis. (b) How to govern the foreign securities brokers which also serve as introducing brokers for the

investors of foreign securities (c) The pricing mechanism for convertible bonds (d) The feasibility for applying the settlement systems of Euroclear and Clearstream to the public

subscription system in Taiwan

F. Social Activities a. The Association organized 12 trips for member companies to visit Spain and other countries in

2006 b. 2006 Golf Tournament:

The Association joined the Taiwan Stock Exchange (TSE), GreTai Securities market (GTSM) and Taiwan Securities Central Depositary (TSCD) in holding the 2006 Golf Tournament in Yangmei Golf Court on May 6, participated by 147 persons.

c. The 20th Table Tennis Tournament:

The Association, together with the Taiwan Stock Exchange (TSE), GreTai Securities market (GTSM) and Taiwan Securities Central Depositary (TSCD), held the 20th Table Tennis Tournament for the securities industry in the gym of the National Taiwan Normal University on November 11-18, participated by over 300 people.

40

2006 HIGHLIGHTS

G. Proposals Under Assessment of Relevant Government Agencies

Issue Regulatory agency

1

To raise the quota for the subscription by the underwriter of an IPO project for the GTSM Emerging Stock from the current 1% to 3% and raise the minimum total amount subscribed by the underwriter to be at least 500,000 shares. If it exceeds 1.5 million shares, the underwriter should make a report of its subscription to the regulatory agency.

GTSM*

2 To allow securities firms, for the sake of business expansion, to set up other offices for its underwriting division in addition to the existing offices in headquarters and branches.

SFB*

3 To ease the requirement that the foreign securities dealers can only trade the securities listed on foreign securities exchanges to include the securities which have acquired a certain high level of credit ratings.

SFB

4 To require a securities-issuing company to make a clear statement about the underwriting fees on its prospectus for an IPO project as a means to prevent price-slashing competitions among underwriters

SFB

5 To move the dates for a company to apply to the TSEC or GTSM for IPO approval ahead to the dates right after the meeting of the company's board of directors so as to shorten the preparatory period of a company prior to its listing.

SFB

6 To waive the EC (electronic certificate) requirement for the securities firms which have gained the approval for offering electronic transaction services through the Internet, direct lines, or other specified channels

TSEC

7 To allow day traders to trade the stocks they have purchased or sold on the same day as a means to activate market transaction, raise market efficiency, and promote the long-term healthy development of the securities market

SFB

8 To list all the transactions by one investor on various foreign securities, bonds, and structured notes on one single report for the investor SFB

9 To allow an introducing broker or a futures broker working at the futures division of a securities firm to assume an executive position at his or her division SFB

10 To allow the employees working at the futures division of a securities firm to also serve as futures brokers if they have gained the licenses SFB

11 To revise the requirement for a securities firm to appropriate 2% of its service fee income as the provisions for transaction defaults instead of being based on transaction amount.

SFB

12 To allow the working staff at the settlement division of a securities firm to help handle credit-checking, stock deposit, and other financial issues of the branch offices of the same securities firm

SFB

13 To allow venture capital and bill financing companies to authorize securities firms to trade stocks on behalf of them within a price range during a certain period of time

TSEC

14 To allow securities firms to attribute the mistakes on their brokerage report to the false information provided by their institutional clients of banks or insurance companies

TSEC

15 To allow the working staff at a securities firm to make margin transactions TSEC

16 To allow securities firms to take the orders of their clients for purchasing or selling stocks at market price as a means to meet the different demand of investors and activate the overall market transaction

TSEC

41

2006 HIGHLIGHTS


17 To revise the requirements on the office location and facilities of securities firms TSEC

18 To revise the risk warning mechanism for securities firms TSEC

19 To allow the futures brokerage division and futures dealing division of a securities firm to share the same futures trading room TFA

20 To remove the requirement on the transaction price report of the dealing division of a securities firm as stated in the "TSEC Requirements on Operations of Securities Firms," Article 99, Paragraph 1

TSEC

21 To revise Article 74 of the "Securities and Transaction Law" to make it non-applicable to exceptional cases SFC

22 To allow securities firms to sell the securities in process of registration so as to prevent transaction default SFC

23 To revise Article 38 of the "Financial Holding Company Law" so as to allow the dealing division of the securities firm owned by a financial holding company to do arbitrage trading as a means to allow greater flexibility for its operations

Banking Bureau

24 To lower the price for cash settlement of stock options to be the same as the price for stock settlement TFE

25 To revise the “Regulations Governing the Foreign Securities Transactions by Securities Firms” to allow the persons under 20 of age and the foreigners residing overseas to open trading accounting with Taiwan′s securities firms.

Regulatory agencies

26

To revise the “Regulations Governing the Foreign Securities Transactions by Securities Firms” so as to allow an institutional investor with a daily transaction of less than NT$5 million made through its trading account at the same securities firm would be able to follow the simplified procedure for individual investors for applying for a new trading account at the securities firm through the Internet, mail, or other means.

Regulatory agencies

27

To allow an investor who commissions a securities firm to make investments on foreign mutual funds on behalf of him can authorize the securities firm to purchase the mutual funds on a regular scheme--to purchase a fixed amount of mutual funds every month

Regulatory agencies

28

To simplify the procedure for securities firms to report the change in its personnel engaged on foreign securities trading to skip the requirement for the securities firm to file the qualification report about the new working staff to the Association so that the securities firm will be able to complete new personnel registration, personnel change, and withdrawal of the records of the outgoing employees at one time while it submits all the relevant documents to the Association.

Regulatory agencies

29 To allow securities brokers to offer brokerage service for the transactions on the foreign currency-denominated Taiwan Stock Options traded on the OTC market. CBC*

30 To raise the maximum amount of the warrants held by the warrant issuer and those held by its related persons and employees from the current 30% and 35% to 50% and 55%, respectively.

TSEC, GTSM

31 To allow securities firms to have greater flexibility on warrant issuance by offering three more alternative ratios of the warrants to be exercised, 1:0.5, 1:0.2, and 1:0.01, in addition to the current two ratios of 1:1 and 1:0.1.

TSEC, GTSM

32 To apply the market risk assessment formula for the financial derivatives such as structured notes, stock options or option swap to the warrant and options as a means to prevent overvaluation of the market risks of the warrant or options

TSEC, GTSM

42

2006 HIGHLIGHTS


33 To levy the same securities transaction tax on structured notes as common stocks FSC, MOF

34

To forward the joint proposal of the Taiwan Academy of Banking and Finance (TABF), Taiwan Insurance Institute (TII), and Securities and Futures Institute (SFI) for launching the qualification tests for the advanced wealth management specialists to the related financial associations for their review and comments. The Securities and Futures Bureau under the Financial Supervisory Commission (FSC) replied that it would follow the suggestion. (FSB No. 0950142720, Sept. 13, 2006)

SFB, FSC

35

To post the qualification certificates issued to the qualified securities brokers on the Internet. The SFI replied on Dec. 29 that it′s not necessary for now, but will refer to it as well as the practices of foreign countries when it proposes relevant policies in the future

SFI

* GTSM denotes the GreTai Securities Market; TSEC denotes the Taiwan Stock Exchange Corporation; FSC

denotes the Financial Supervisory Commission; SFB denotes Securities and Futures Bureau; TFA denotes Taiwan Futures Association TFE denotes Taiwan Futures Exchange; CBC denotes the Central Bank of China; SFI denotes the Securities and Futures Institute; MOF denotes the Ministry of Finance.

IV. Future Plans

43

FUTURE PLANS

Taiwan has deeply impressed other countries around the world with its "economic miracle" for decades. In recent years, its capital market grew especially fast, and the securities firms actually made great contributions behind the scene. The Association, which has just celebrated its 50th anniversary, accompanies each securities firm during the course of its growth and transition. We have undergone various stages of drastic economic changes as well as the challenges of global competition. The Association will maintain its enthusiasm and activism to serve member companies to help them develop business smoothly, cope with the changing market situation, and act in line with the government's policy under the goal of promoting the overall progress of Taiwan securities market.

In order to promote the competitiveness of Taiwan securities firms, the Association, together with its

member companies, continuously works with the government to push for market reform. In recent years, the government has eased many securities-related regulations to significantly broaden the business field of securities firms such as the policies to allow securities firms to trade financial derivatives, to relax the requirements for setting up offshore business posts, to revise the regulations governing the investments of foreign investors on Taiwan securities market, and so on. All of these measures are favorable for securities firms to diversify their business and explore into new foreign market under their global strategies. In January 2006, President Chen Shui-bian announced a revision to the Securities and Exchange Law (SEL) which is very critical to help securities firms to further expand their business at home market and abroad.

The major ones among the new policies include: 1. to life the ban on securities firms from operating

non-securities business or making investment on other securities firms; 2. to allow the members of the board of directors, supervisors, and managers of a securities firm to serve in the same position at other securities firms, futures companies, insurance companies, bill financing companies, and banks which are affiliates or subsidiaries of their securities firm and have issued stocks for public trading on the securities market; 3. to allow greater flexibility for the process of underwriting; 4. to allow securities firms to act as an agent or introductory broker for securities lending or borrowing or for the financing services needed for securities lending or borrowing, or to manage the fund for securities lending or borrowing on behalf of clients.

The Financial Supervisory Commission (FSC), since its establishment in July 2004, has been working

with a vision to develop Taiwan as a regional financial center in Asia. That's also the goal of the Association. While continuing to implement its current working plans and strengthen its member services, the Association is aimed at helping securities firms to promote their business as full-service companies and explore into the profitable niches of the worldwide market based on the current healthy development of their three core businesses of brokerage, dealing, and underwriting. The following are the major tasks for the Association to fulfill in the following years:

A. Business Expansion: a. To support the regulatory agency's policy for developing an integrated "Financial Service Act"

which will cover all financial and securities laws and regulations, and to continue making recommendations to the regulatory agencies for easing the restrictions on securities firms and removing improper market control measures as a means to help securities firms operate with greater flexibility and lower cost.

b. To recommend the regulatory agency to adopt the "negative list" approach under which the

securities firms can operate all kinds of securities-related businesses except for those on the "negative list," and to relax its requirements on the well-disciplined securities firms in a bid to create a favorable situation for securities firms to develop creative services, promote business, and strengthen their competitiveness.

c. To help securities firms diversify their business into other financial sectors such as foreign exchange,

trust, and so on.

d. To support the government's efforts in developing a fair and rational taxation system for new financial products so as to encourage securities firms to develop new financial products.

44

FUTURE PLANS

e. To recommend the regulatory agency, while maintaining the existing relevant regulations, to allow a securities firm to make investments, through its subsidiaries, affiliates, affiliates, or itself, on the foreign securities which have obtained a certain high level of credit ratings so as to enable securities firms to pursue higher efficiency in their investments on foreign securities

f. To help the government resolve the disputes about warrant tax.

B. Investment Banking: a. To continue proposing reforms on the existing underwriting system in a bid to help promote the

competitiveness of Taiwanese underwriters.

b. to encourage securities firms to serve with foreign companies and overseas Taiwanese enterprises to apply for listing in Taiwan as a means to develop Taiwan as a fund-raising center in Asia.

C. Globalization: a. To recommend the regulatory agency to raise the ratio of the paid-in capital of a securities firm to be

used for foreign and mainland investments, and to allow securities firms to make investments on mainland-based securities firms and securities investment trust companies through either indirect or indirect approach so as to enable Taiwanese securities firms to compete against foreign competitors under fair conditions in China.

b. To help securities firms explore market opportunities in the market of overseas Chinese community.

c. To promote a healthy market system for Taiwan's capital market, strengthen the efficiency of market transactions, and raise of service quality of securities firms so as to encourage foreigners to make more investments in Taiwan.

d. To recommend the regulatory agency to allow Taiwanese securities firms to trade the securities on

the primary markets of foreign countries so as to help securities firms broaden their foreign securities business and boost the internationalization of Taiwan's securities industry.

e. To support the efforts of international organizations for their control on cross-border money laundry

and anti-terrorist attacks as well as join their bilateral or multi-lateral negations as a means to absorb knowledge and experience on international financial practices.

f. To help Taiwanese financial institutions expand international business.

g. To recommend regulatory agency to reduce their interventions on foreign investments in Taiwan and to make favorable policies to encourage foreign participation on Taiwan's financial market.

h. To propose dialogues between foreign securities firms and the regulatory agency on how to develop

a fair, rational, open, and efficient business environment favorable to foreign investors. i. To recommend the regulatory agency to ease the regulations on Taiwan's financial market and make

improvement on the securities market to bid for an upgrading of Taiwan's status as a developed market in the FTSE index as a means to encourage more foreign investments on Taiwan securities market.

D. Image Promotion: a. To help securities firms strengthen their practices of "corporate governance" and internal "risk-control"

as a means to encourage investors' confidence.

45

FUTURE PLANS

b. To be active in participating various social and charity activities as a means to promote the image of securities firms.

c. To help member companies raise their profitability by strengthening their core businesses based on

their own advantages.

d. To help securities firms develop strategic alliances among each other as a means to expand their marketing network and provide full services.

e. To help securities firms strengthen their electronic business as a means to promote their transaction

efficiency and service quality.

f. To exclude the personal capital gains generated from overseas securities investment from the personal income subject to the minimum income tax in Taiwan.

E. Self-Discipline a. To prevent price-slashing competitions among securities firms on the brokerage fees, underwriting

fees, and others.

b. To prevent securities firms from making head-hunting from counterparts.

c. To encourage securities firms to fully compliant to securities-related laws and regulations.

d. To encourage securities firms to be honest when they make any promotional campaigns or advertisements in a bid to protect the interest of investors.

F. Securities Talents Training a. To become an advanced talent training institution which, in addition to provide securities

qualification training, provides a full range of courses on leadership, global vision, foreign languages and so on for cultivating full-fledge financial talents and managers.

b. To promote the collaboration among government agencies, industrial associations, universities, and

the companies of securities, futures, securities investment trust, securities investment consulting companies, insurance, and banks as a means to cultivate multi-talents experts for the financial and securities industries.

c. The Association inaugurated its Education and Training Center in 2002 under the directions and

supervisions of the chairman and the members of the Education and Training Committee, and has since integrated its training courses and tests as well as streamlined registration procedure during the following two years of 2003-2004. It launched an online registration system in July 2005 and developed a computerized scoring system in July 2006. The significant progress in both software and hardware progress provide a sound foundation for the Association to continue promoting its training programs in the future, with the major tasks for its education and training programs as the follows: (a) To integrate the data management system of the working staff at securities firms, futures

companies, and securities investment trust companies: The Association will continue to provide and integrate the qualification tests, registration, training courses, personnel management for the employees at securities firms, futures companies, securities investment trust companies, and so on.

(b) To become a professional talent training center: While encountering the higher tension of

competition resulting from the implementation of the Financial Holding Company Law and Taiwan's entry into the WTO, the Association will help member companies strengthen their competitiveness through providing professional training courses for their employees, featured by

46

FUTURE PLANS

the following two major advantages: 1. To promote the compliance of working ethics: The courses are aimed at training the

employees at securities firms to serve with correct working attitude and ethics 2. To meet the demand for qualification tests: To cope with the higher market demand for

wealth management talents following the policy to allow securities firms to offer wealth management services, the Association has been proposing relevant courses to help people pass the qualification test and acquire the license. The courses widely cover all relevant fields such as securities, futures, banking, insurance, foreign exchange, trust, real estate, tax as well as career planning for wealth management specialist.

(c) To arrange investment seminars or lectures for the public as a means to strengthen the securities,

financial, and assets management knowledge of investors.

(d) To integrate the qualification authorization institutions for the securities industry in Taiwan and promote their interaction with foreign counterparts for developing mutual recognition mechanism between Taiwanese and foreign qualification authorization institutions.

G. Cross-Border Information Exchange a. To continue participating international securities conferences and activities, promoting interaction

and information exchange between Taiwan's and foreign capital markets, and referring to the market systems for securities issuance, transactions, and regulations of the foreign markets with profound experiences and traditions.

b. To develop information exchange mechanism with foreign securities organizations as a means to

promote the circulation of new financial information among countries.

c. To strengthen the contact and interactions among members for mutual help and by the way to develop a closer relationship between the Association and its members.

d. To be active in participating the annual conferences of the major international securities

organizations as a means to fulfill a member's obligation and strengthen the relationship with those which the Association has not joined as a member.

e. To develop closer cooperative relations with international securities organizations as well as actively

participate their activities and take the opportunity to introduce Taiwan's securities market development to foreigners.

H. Investor Protection a. To strengthen public education as a means to help investors build up correct financial and securities

investment knowledge

b. To strengthen working ethics education of securities workers for better protection of investors.

c. To propose a new item, "The creditors of a financial institution can't request attachment or the exercise of other rights on the clients of the debtor financial institution" for the "Financial Service Act."

The Association, since established five decades ago, has been committed to strengthening its

operations and member services in a hope to promote healthy development of the securities industry and market in Taiwan. In the future, the Association will continue to promote its services and make contributions under the principles of "professional, Innovation, Activism, and Enthusiasm." We invite the supports and cooperation of all member companies and let's work together for the goal of developing Taiwan as a regional financial center in Asia, promoting the international image of Taiwan's securities industry, and pursuing the common interest of the society as a whole.

Statistics on member companies

47

APPENDIX

Area No. of Headquarters No. of Branch Total

Keelung City 0 11 11

Taipei County 6 138 144

Taipei City 118 277 395

Taoyuan County 4 44 48

Taoyuan City 1 29 30

Hsinchu County 0 14 14

Hsinchu City 1 38 39

Miaoli County 0 12 12

Miaoli City 2 7 9

Taichung County 4 35 39

Taichung City 3 76 79

Changhua County 1 27 28

Changhua City 0 14 14

Nantou County 1 10 11

Yunlin County 1 20 21

Chiayi County 1 4 5

Chiayi City 1 25 26

Tainan County 1 27 28

Tainan City 2 55 57

Kaohsiung County 1 22 23

Kaohsiung City 5 107 112

Pingtung County 0 8 8

Pingtung City 0 13 13

Taitung County 0 1 1

Taitung City 1 4 5

Hualien County 0 2 2

Hualien City 1 5 6

Ilan County 1 12 13

Ilan city 0 5 5

Penghu County 0 2 2

Kinmen County 0 2 2

Total 156 1,046 1,202

Business outlines of member companies

48

APPENDIX

TSE OTC market

TSEC Code Member company

Securities firms (S)/bank’s securities

division (B)

Under- writing Dealing Brokerage Dealing Brokerage

Margin- trading,

short selling

Foreign securities

1 0140 Enterprise Bank of Hualien B v v

2 0160 Fidelity Securities S v

3 0500 China Development Industrial Bank B v v

4 0540 Industrial Bank of Taiwan B v

5 0550 Deutsche Bank Taipei Office B v v

6 0570 Ta Chong Bank B v

7 0580 Taitung Business Bank B v

8 0590 Bank of Panhsin B v

9 0600 BNP Paribas Taiwan B v v

10 0610 Macoto Bank B v

11 0620 Taishin International Bank B v

12 0630 Hua Nan Commercial Bank B v v

13 0650 Bank SinoPac B v

14 0660 Cosmos Bank, Taiwan B v

15 0670 Fuhwa Bank B v

16 0680 E.Sun Commercial Bank B v v

17 0690 Cosmos Commercial Bank B v

18 0700 Citibank, N.A., Taipei Branch B v

19 0710 International Commercial Bank of China B v v

20 0720 ABN AMRO Bank N.V., Taipei Branch B v

21 0730 JP Morgan Chase & Co., Taipei Branch B v

22 0740 Taipei Bank B v v v

23 0750 First Bank B v v v

24 0760 Cathay United Bank B v v

25 0770 Bowa Bank B v

26 0780 Standard Chartered Bank B v v

27 0790 Bank of Overseas Chinese B v v

28 0800 HSBC Securities, Taipei Branch v v

29 0810 National Farmers′ Bank B v

30 0820 UBS AG, Taipei Branch B v v

31 1010 Central Trust of China B v v v v v

32 1020 Taiwan Cooperative Bank B v v v v v

33 1030 Land Bank of Taiwan B v v v v v

34 1040 Bank of Taiwan B v v v v v

35 1090 IBT Securities S v v v v v v v

36 1110 Taiwan Business Bank B v v v v

37 1160 Jih-Sun Secuieies S v v v v v v v

38 1230 Chang Hwa Bank B v v v v v

39 1260 Fortune Securities S v v v v v v

40 1360 Macquarie Securities, Taipei Branch S v v v


49

APPENDIX



division (B)

Under- writing TSE OTC market

Margin- trading,

short selling

Foreign securities

41 1380 Credit Lonnais Securities, Taipei Branch S v v

42 1400 ABN AMRO Asia, Taipei Branch S v v v

43 1440 Merrill Lynch Securities Taiwan Branch S v v v v

44 1470 Morgan Stanley & Co. International Limited, Taipei Branch S v v v v v v v

45 1480 Goldman Sachs, Taipei Branch S v v v v

46 1520 Credit Suisse First Boston Taipei Branch S v v

47 1530 Deutsche Securities Asia, Taipei Branch S v v v v v v

48 1540 Leman Brothers Inc., Taiwan Branch S v v v v

49 1560 Monura Securities, Taiwan branch S v v v

50 1570 Societe Generale Securities, Taipei Branch S v v v v

51 1590 Citigroup Global Markets Inc., Taipei Branch S v v v

52 1650 UBS Securities (Singapore), Taipei branch S v v v v v

53 1970 Prudential Securities S v v

54 2110 China United Trust & Investment Corp. B v v v

55 2120 Asia Trust and Investment Corp. B v v v

56 2180 Oriental Securities Corp. S v v v v v v v

57 2230 The Shanghai Commercial & Savings Bank B v v

58 2240 Chinatrust Commercial Bank B v

59 3010 Mega International Bills Finance B v

60 3020 China Bills Finance Corp. B v

61 3030 International Bills Finance B v v

62 3040 Grand Bills Finance Corp. B v

63 3060 Union Bills Finance Corp. B v

64 3090 Dah Chung Bills Finance Corp. B v v

65 3100 Taiwan Finance Corp. B v

66 3110 China Trust Bills Finance Corp. B v

67 3130 Ta Ching Bills Finance Corp. B v

68 3140 Hua Nan Bills Finance Corp. B v v

69 3150 Taishin Bills Finance B v v

70 3160 Great Chinese Bills Finance B v

71 4010 Fu Hwa Bills Finance B v v

72 4020 Global Securities Finance B v v

73 4030 Fubon Securities Financing B v v

74 4050 EnTei Securities Financing B v v

75 4990 Postal Office Banking B v

76 5050 Ta Chan Securities S v v v v v v

77 5110 Full Long Securities S v v v v v


50

APPENDIX



division (B)


Margin- trading,

short selling

Foreign securities

78 5180 Pacific Securities S v v v v v v v

79 5260 Ta Ching Securities S v v v v v v

80 5270 Capital Securities S v v v v v v v

81 5320 Golden Gate Securities S v v v

82 5380 First Bank Securities S v v v v v v v

83 5460 Pao Shin Securities S v v v

84 5500 Fong-Yin Securities S v v v v v

85 5510 SinoPac Securities S v v v v v v v

86 5600 Yung Shin Securities S v v v v

87 5650 China Securities S v v v v v v v

88 5660 Fortune Securities S v v v

89 5690 Fong Shing Securities S v v v v

90 5720 Grand Cathay Securities S v v v v v v v

91 5820 Taiwan International Securities S v v v v v v v

92 5850 President Securities S v v v v v v v

93 5860 Ying Yi Securities S v v v

94 5870 Kuang Long Securities S v v v

95 5920 MasterLink Securities S v v v v v v v

96 5960 Jee Mach Securities S v v v

97 6010 Primasia Securities (Taiwan) S v v v v v v

98 6110 Taichung Commercial Bank B v v v v

99 6150 Winner Securities S v v v

100 6160 China Trust Securities S v v v v v v

101 6200 Ever Advance Securities S v v v

102 6210 New Hundred King Securities S v v v

103 6380 Kuanz Ho Securities S v v v

104 6450 Yung Chuan Securities S v v v

105 6460 Dah Chang Securities S v v v v

106 6480 Sun Securities S v v v v v v v

107 6530 Ta-Chong Securities S v v v v v v v

108 6620 Chuan Tai Securities S v v v

109 6640 Hsinchu International Bank B v v v v

110 6660 Ho Shin Securities S v v v

111 6910 Reliance Securities S v v v v v v

112 6950 Fushan Securities S v v v

113 7000 Barits International Securities S v v v v v v v

114 7020 Shin Fan Securities S v v v

115 7030 Concord International Securities S v v v v v v

116 7070 Feng Long International Securities S v v v

117 7080 Bridge Stone Securities S v v v

118 7120 An Tai Securities S v v v


51

APPENDIX



division (B)


Margin- trading,

short selling

Foreign securities

119 7360 Sunrise Securities S v v v

120 7530 Full Sun Securities S v v v

121 7670 Chin Kang Securities S v v v

122 7690 Ching Shing Securities S v v v

123 7750 Pei Cheng Securities S v v v

124 7780 Fu Shing Securities S v v v

125 7790 Waterland Securities S v v v v v v

126 7900 King Fong Securities S v v v

127 8150 Tong Shing Securities S v v v

128 8380 Antay Securities S v v v

129 8400 Tainan Business Bank B v

130 8440 J.P. Morgan Securities S v v v v

131 8450 Concord Securities S v v v v v v v

132 8490 Wan Tai Securities S v v v

133 8520 Chung Nourn Securities S v v v

134 8560 Shing Kwang Securities S v v v

135 8580 Union Bank B v v v v

136 8660 Vantone Securities S v v v

137 8690 Power World Securities S v v v v v v

138 8700 Citibank Securities (Taiwan) Ltd. S v v v v

139 8710 Wealy Securities S v v v

140 8740 Sun Fund Securities S v v v v v v v

141 8750 Bank of Kaohsiung B v v

142 8770 DA-DIN Securities S v v v

143 8800 Team Pro Securities Company S v v v

144 8840 E.SUN Securities S v v v v v v

145 8850 Shing Fong Securities S v v v

146 8880 Kuo Sun Securities S v v v v v v

147 8890 Daiwa Global Securities S v v v v v v v

148 8900 BNP Securities S v v v

149 8920 J.P. Morgan Fleming Securities S v v v v

150 8960 HSBC Securities HK, S v v v v v v

151 9300 Hua Nan Securities S v v v v v v v

152 9400 Taiwan Securities Co, Ltd S v v v v v v v

153 9500 Fuhwa Securities S v v v v v v v

154 9600 Fubon Securities S v v v v v v v

155 9700 Polaris Securities S v v v v v v v

156 9800 Yuanta Core Pacific Securities S v v v v v v v

Projects of securities underwriting through book-building process in 2006

52

APPENDIX

Issuers Security Underwriting Type of securities

Offered amount

Period (month/date) Price (NT$)

001 104 Corporation Fuhwa Securities Co., Ltd. common stock 3582000 01/06 - 01/11 92 - 95

002 Topco Scientific Co., Ltd. Taiwan Securities Co., Ltd. common stock 4830000 01/10 - 01/13 70 - 75

003 Awea Mechantronic Co., Ltd. KGI Securities Co., Ltd. CB* 2430 01/06 - 01/09 101% - 110%

004 Integrated Service Technology Inc. KGI Securities Co., Ltd. CB 2700 01/13 - 01/16 101% - 110%

005 Taiwan Oasis Technology Co., Ltd. First Bank Securities Co., Ltd. CB 3600 01/17 - 01/20 101% - 05%

006 Tai-Saw Technology Co., Ltd. Grand Cathay Securities Co., Ltd. common stock 5930000 01/17 - 01/20 35 - 40

007 Cheng Lie Navigation Co., Ltd. Taiwan International Securities Co., Ltd.

common stock 20672000 01/17 - 01/20 21 - 24

008 Sunflex Tech. Co., Ltd. Grand Cathay Securities Co., Ltd. common stock 2546000 01/17 - 01/20 30 - 35

009 Topoint Technology Co., Ltd. Taiwan International Securities Co., Ltd. CB 3800 01/23 - 01/24 101% - 110%

010 E-TON SOLAR TECH. CO., Ltd. Hua Nan Securities Co., Ltd. common stock 2515000 02/07 - 02/10 210 - 225

011 QST International Corp. President Securities Corporation common stock 4725000 02/06 - 02/09 14 - 18

012 TAK Technology Co., Ltd. Taiwan Securities Co., Ltd. common stock 5180000 02/08 - 02/10 12 - 15

013 Foxlink Image Technology Mega Securities Co., Ltd. common stock 10500000 02/14 - 02/16 40 - 45

014 Inotera Memories, Inc. Grand Cathay Securities Co., Ltd. common stock 180000000 02/20 - 02/22 33 - 35

015 Arima Communications Corp. Taiwan Securities Co., Ltd. CB 6000 02/27 - 03/02 101% - 105%

016 Formosa Epitaxy Incorporation Sinopac Securities Co., Ltd. common stock 22950000 03/03 - 03/08 13 - 16

017 Formosa Epitaxy Incorporation Sinopac Securities Co., Ltd. CB 4350 03/03 - 03/08 101% - 110%

018 Tera Autotech Corporation Sinopac Securities Co., Ltd. common stock 8670000 03/02 - 03/06 100 - 120

019 Nan Ya Printed Circuit Board Corporation Capital Securities Co., Ltd. common

stock 71400000 03/09 - 03/14 240 - 260

020 Elite Advanced Laser Corporation Fubon Securities Co., Ltd. common stock 8572000 03/16 - 03/20 26 - 29

021 Actron Technology Corporation Fubon Securities Co., Ltd. common stock 4249000 03/20 - 03/23 75 - 80

022 Yao Sheng Electronic Co., Ltd. Waterland Securities Co., Ltd. common stock 6156000 03/23 - 03/28 16.5 - 20

023 Welldone Company Polaris Securities Co., Ltd. CB 1350 03/23 - 03/28 101% - 105%

024 Laser Tek Taiwan Co.,Ltd. Ta Chong Securities Co., Ltd. CB 3500 03/31 - 04/03 100 - 105

025 PixArt Imaging Inc. Mega Securities Co., Ltd. common stock 9149000 04/04 - 04/07 85 - 100

026 Highlight Tech Corp. Polaris Securities Co., Ltd. CB 1105 04/10 - 04/12 101% - 105%

027 Wha Yu Industrial Co.,Ltd. Taiwan Securities Co., Ltd. common stock 4383000 04/10 - 04/13 31 - 34

028 Skardin Industrial Corporation Sinopac Securities Co., Ltd. common stock 4522000 04/11 - 04/14 80 - 120

029 Harmony Electronics Corp Mega Securities Co., Ltd. common stock 7838000 04/24 - 04/27 22 - 24

030 Sunnic Technology & Merchandise Inc. Taiwan International Securities Co., Ltd.

common stock 3720000 04/27 - 05/03 18 - 20


53

APPENDIX


Offered amount


031 Feei Cherng Enterprise Co., Ltd KGI Securities Co., Ltd. common stock 4883000 04/28 - 05/02 98 - 102

032 Microbio Co.,Ltd. Mega Securities Co., Ltd. common stock 8820000 05/08 - 05/10 10 - 14

033 Cheertek Incorporation Taiwan Securities Co., Ltd. CB 2675 05/18 - 05/22 101% - 110%

034 Zenitron Corporation Capital Securities Co., Ltd. CB 4250 05/19 - 05/23 101% - 105%

035 Zenitron Corporation Capital Securities Co., Ltd. common stock 14450000 05/19 - 05/23 22 - 27

036 Pontex Polyblend Co.,Ltd Capital Securities Co., Ltd. common stock 26775000 05/26 - 05/30 15 - 20

037 Tekcore Co., Ltd. Hua Nan Securities Co., Ltd. common stock 5696000 05/30 - 06/02 21 - 25

038 Holux Technology Inc. Sinopac Securities Co., Ltd. common stock 2486000 05/29 - 06/01 36 - 44

039 Kaori Heat Treatment Co., Ltd. Mega Securities Co., Ltd. common stock 3249000 06/01 - 06/05 12 - 15

040 Highwealth Construction Corp. Sinopac Securities Co., Ltd. CB 9000 06/07 - 06/09 100,000 - 110,000

041 CviLux Corporation Grand Cathay Securities Co., Ltd. CB 2250 06/09 - 06/14 101% - 105%

042 Yeou Yih Steel Co., Ltd. Hua Nan Securities Co., Ltd. common stock 5922000 06/13 - 06/16 10 - 12

043 International Games System Co., Ltd. Fubon Securities Co., Ltd. common stock 4068000 06/19 - 06/21 115 - 120

044 Advanced Analog Technology Inc Taiwan Securities Co., Ltd. common stock 2125000 06/20 - 06/23 190 - 210

045 Hota Industrial Mfg. Co., Ltd. Taiwan Securities Co., Ltd. CB 11887 06/22 - 06/26 101% - 105%

046 Holux Technology Inc. Sinopac Securities Co., Ltd. common stock 2763000 06/23 - 06/27 32 - 40

047 Vivotek Inc. Mega Securities Co., Ltd. common stock 4819000 06/27 - 06/29 56 - 60

048 Microelectronics Technology Inc. Capital Securities Co., Ltd. common stock 15000000 07/05 - 07/10 10.5 - 14.5

049 Yemchio.Co.Ltd. Capital Securities Co., Ltd. CB 850 07/05 - 07/07 101% - 105%

050 Weikeng Industrial Co., Ltd. Yuanta Core Pacific Securities Co., Ltd. CB 5950 07/05 - 07/10 101% - 105%

051 J-Three International Holding Co., Ltd. Capital Securities Co., Ltd. CB 3590 07/13 - 07/17 101% - 105%

052 Ene Technology Inc. Taiwan Securities Co., Ltd. CB 1785 07/26 - 07/28 101% - 110%

053 Walton Advanced Engineering Inc. Fubon Securities Co., Ltd. common stock 10499000 07/28 - 08/01 12.5 - 14

054 Hi Sharp Electronics Co., Ltd. Hua Nan Securities Co., Ltd. common stock 3882000 08/08 - 08/10 16 - 20

055 CoAsia Micro electronics Corp. Mega Securities Co., Ltd. CB 4750 08/07 - 08/09 101% - 110%

056 Solar Applied Materials Technology Corp. Mega Securities Co., Ltd. CB 4250 08/09 - 08/11 101% - 115%

057 Firich Enterprises Co., Ltd. Mega Securities Co., Ltd. CB 3400 08/14 - 08/16 101% - 110%

058 ITEQ Corporation China Trust Securities Co.,Ltd. CB 850 08/15 - 08/18 100,000 - 105,000

059 Bin Chuan Enterprise Co., Ltd. Taiwan Securities Co., Ltd. CB 2550 08/17 - 08/22 101% - 120%

060 Tung Ho Steel Enterprise Corp. Sinopac Securities Co., Ltd. CB 25500 08/18 - 08/23 101% - 115%


54

APPENDIX


Offered amount


061 Orient Europharma Co., Ltd. Capital Securities Co., Ltd. CB 900 08/21 - 08/23 101% - 105%

062 Jiin Ming Industry CO.,LTD Grand Cathay Securities Co., Ltd. common stock 8268000 08/23 - 08/25 42 - 48

063 Contrel Technology Co., Ltd Taiwan International Securities Co., Ltd.

common stock 12048000 08/30 - 09/01 70 - 75

064 Alpha Microelectronics Corp. Capital Securities Co., Ltd. common stock 5889000 08/31 - 09/05 13.5 - 16.5

065 Hsin Yung Chien Co., Ltd. Yuanta Core Pacific Securities Co., Ltd.

common stock 4494000 09/01 - 09/06 33 - 38

066 Elite Material Co., Ltd. Taiwan Securities Co., Ltd. CB 3400 09/01 - 09/05 101% - 110%

067 MetaTech (AP) Inc. MasterLink Securities Co., Ltd. CB 1020 09/05 - 09/08 101% - 110%

068 ThinFlex Corporation Sinopac Securities Co., Ltd. CB 2550 09/12 - 09/14 101% - 110%

069 Cheng Uei Precision Industry Co., Ltd. Fubon Securities Co., Ltd. CB 42500 09/13 - 09/15 120% - 140%

070 Epistar Corporation KGI Securities Co., Ltd. CB 17000 09/13 - 09/18 105% - 120%

071 Globalsat Technology Corporation Yuanta Core Pacific Securities Co., Ltd.

common stock 3402000 09/20 - 09/25 60 - 70

072 Hsin Kuang Steel Co. Ltd. Capital Securities Co., Ltd. CB 5100 09/22 - 09/26 101% - 120%

073 Everlight Electronics Co., Ltd. Horizon Securities Co., Ltd. CB 12750 09/26 - 09/29 101% - 120%

074 Innolux Display Corporation Fubon Securities Co., Ltd. common stock 182000000 09/27 - 09/29 38 - 41

075 Maxtek Technology Co., Ltd. Taiwan International Securities Co., Ltd.

common stock 7164000 09/28 - 10/02 35 - 40

076 Grand Hall Enterprise Co., Ltd. Fubon Securities Co., Ltd. CB 1620 09/29 - 10/03 105% - 110%

077 Taiwan Semiconductor Co., Ltd. KGI Securities Co., Ltd. CB 2700 10/02 - 10/04 101% - 110%

078 Taiwan Semiconductor Co., Ltd. KGI Securities Co., Ltd. CB 4250 10/02 - 10/04 101% - 107%

079 United Alloy-Tech Co., Ltd. China Trust Securities Co., Ltd. common stock 3240000 10/02 - 10/04 14.85 - 16.00

080 United Alloy-Tech Co., Ltd. China Trust Securities Co.,Ltd. CB 450 10/02 - 10/04 100,000 - 105,000

081 Yeun Chyang Industrial Co.,Ltd. Sinopac Securities Co., Ltd. CB 2550 10/03 - 10/05 101% - 110%

082 Singatron Enterprise Co.,Ltd. MasterLink Securities Co., Ltd. CB 4750 10/04 - 10/12 100,000 - 110,000

083 Sunonwealth Electric Machine Industry Taiwan Securities Co., Ltd. CB 3600 10/11 - 10/13 101% - 120%

084 Visual Photonics Epitaxy Co., Ltd. Polaris Securities Co., Ltd. CB 2850 10/19 - 10/23 101% - 110%

085 Wafer Works Corp. Taiwan Securities Co., Ltd. CB 27000 10/20 - 10/24 101% - 130%

086 Pan Jit International Inc. Taiwan Securities Co., Ltd. CB 2560 10/24 - 10/26 101% - 115%

087 Unity Opto Technology Co., Ltd. Mega Securities Co., Ltd. common stock 20150000 10/25 - 10/27 20 - 30

088 TXC Corporation Yuanta Core Pacific Securities Co., Ltd. CB 7100 10/26 - 10/30 101% - 110%

089 Hu Lane Associate Inc. Sinopac Securities Co., Ltd. common stock 2440000 10/27 - 11/01 33 - 35

090 Asustek Computer Inc. Fubon Securities Co., Ltd. CB 105000 10/26 - 10/30 120% - 145%


55

APPENDIX


Offered amount


091 Hon Hai Precision Ind. Co., Ltd. Taiwan Securities Co., Ltd. CB 15300 11/01 - 11/01 135% - 150%

092 Super Dragon Technology Co., Ltd. Hua Nan Securities Co., Ltd. common stock 4860000 11/02 - 11/07 43 - 48

093 I-Sheng Electric Wire & Cable Co., Ltd. Sinopac Securities Co., Ltd. CB 5100 11/10 - 11/15 101% - 110%

094 Shenmao Technology Inc. Fubon Securities Co., Ltd. CB 5250 11/13 - 11/15 101% - 105%

095 Shun On Electronic Co., Ltd. Capital Securities Co., Ltd. common stock 8895000 11/14 - 11/16 18.5 - 21.5

096 Shih Wei Navigation Co., Ltd. Capital Securities Co., Ltd. CB 4250 11/16 - 11/20 101% - 105%

097 Transcend Information, Inc. Yuanta Core Pacific Securities Co., Ltd. CB 12750 11/16 120% - 135%

098 Nanya Technology Corp. Fubon Securities Co., Ltd. CB 85000 11/17 120% - 130%

099 Jiin Ming Industry Co.,Ltd. Grand Cathay Securities Co., Ltd. CB 5400 11/21 - 11/22 101% - 120%

100 Chang Wah Electron Materials Inc. Capital Securities Co., Ltd. CB 13780 11/21 - 11/24 105% - 120%

101 Wonderful Hi-Tech Co., Ltd. Sinopac Securities Co., Ltd. CB 4500 11/24 101% - 105%

102 Supreme Electronics Co., Ltd. Taiwan International Securities Co., Ltd.

common stock 17060000 11/23 15.5 - 18.5

103 Everskill Technology Co., Ltd. Mega Securities Co., Ltd. CB 11208 11/30 - 12/01 101% - 120%

104 Taiwan Mask Corp. KGI Securities Co., Ltd. CB 10200 12/06 - 12/08 101% - 115%

105 Arima Opto electronics Corp. Grand Cathay Securities Co., Ltd. CB 17000 12/06 - 12/08 115% - 125%

106 China Metal Rroducts Co., Ltd. Mega Securities Co., Ltd. CB 3400 12/07 - 12/11 101% - 105%

107 Longwell Company China Trust Securities Co.,Ltd. CB 1350 12/08 - 12/11 100,000 - 105,000

108 Longwell Company China Trust Securities Co.,Ltd. CB 2975 12/08 - 12/11 100,000 - 105,000

109 Min Aik Technology Co., Ltd. Yuanta Core Pacific Securities Co., Ltd. CB 5525 12/08 - 12/12 105% - 120%

110 Amtran Technology Co.,Ltd. Grand Cathay Securities Co., Ltd. CB 12750 12/11 - 12/13 110% - 125%

111 Hwang Chang General Contractor Co., Ltd. Polaris Securities Co., Ltd. CB 3825 12/15 - 12/19 101% - 105%

112 Taiwan Nano Electro-Optical Technology Co., Ltd. MasterLink Securities Co., Ltd. common

stock 20202000 10/18 - 10/23 25 - 28

113 Global Unichip Corp. Mega Securities Co., Ltd. common stock 9400000 10/23 - 10/26 36 - 40

114 Li Cheng Enterprise Co., Ltd. Taiwan Securities Co., Ltd. common stock 4098000 10/30 - 11/02 10.5 - 12

115 Forcecon Technology Co., Ltd. Sinopac Securities Co., Ltd. common stock 2516000 12/05 - 12/08 45 - 55

116 Wholetech System Hitech Limited Taiwan International Securities Co., Ltd.

common stock 3570000 12/26 - 12/29 25 - 28

117 Syncmold Enterprise Corp. Fubon Securities Co., Ltd. common stock 3730000 12/28 -

01/03(2007) 123 - 128

* CB denotes convertible bond.

IPO Projects for Public Subscription in 2006

56

APPENDIX

Securities firm Type of securities Lead manager Sales

amount

Offered price (NT$)

Date of lot-drawing

Winner percentage

1 Creative Sensor Inc. TSEC CI* Sinopac Securities Co., Ltd. 990 43.00 01/02 0.76%

2 Tien Liang BioTech Co., Ltd. OTC CI** Fuhwa Securities Co., Ltd. 532 24.50 01/17 1.13%

3 Epitech Technology Corp. TSEC CI Sinopac Securities Co., Ltd. 4250 22.00 01/23 3.11%

4 A-Data Technology Co., Ltd. OTC CI Fubon Securities Co., Ltd. 563 84.00 01/25 0.99%

5 Lesenphant Co., Ltd. TSEC CI Sinopac Securities Co., Ltd. 2267 16.00 02/06 3.77%

6 High-Tek Harness Enterprise Co., Ltd. OTC CI Polaris Securities Co., Ltd. 595 38.00 02/08 4.61%

7 Inpaq Technology Co., Ltd. OTC CI Taiwan Securities Co., Ltd. 349 53.00 02/10 0.80%

8 Tong-Tai Machine Tool Co., Ltd. TSEC CI Taiwan Securities Co., Ltd. 1020 29.00 02/13 0.78%

9 Ta Chen Stainless Pipe Co., Ltd. TSEC CI President Securities Corporation 5100 14.00 02/14 3.40%

10 Sunflex Tech. Co., Ltd. OTC listing Grand Cathay Securities Co., Ltd. 243 31.00 02/14 1.02%

11 Cheng Lie Navigation Co., Ltd. OTC listing Taiwan International Securities Co., Ltd. 1968 21.00 02/15 8.41%

12 Shenmao Technology Inc. OTC CI MasterLink Securities Co., Ltd. 366 85.00 02/16 0.90%

13 Entery Industrial Co., Ltd. OTC CI Sinopac Securities Co., Ltd. 680 40.00 02/20 9.88%

14 WAH HONG INDUSTRIAL CORP. OTC CI Taiwan Securities Co., Ltd. 510 145.00 02/20 0.49%

15 E-TON SOLAR TECH. CO., LTD OTC listing Hua Nan Securities Co., Ltd. 265 218.00 02/27 0.04%

16 QST International Corp. OTC listing President Securities Corporation 450 15.00 03/02 1.91%

17 L & K Engineering Co., Ltd. TSEC CI President Securities Corporation 1360 50.00 03/02 2.45%

18 Global Mixed-Mode Technology Inc. OTC CI Taiwan Securities Co., Ltd. 170 126.00 03/07 0.18%

19 Foxlink Image Technology OTC CI Mega Securities Co., Ltd. 1000 42.00 03/07 0.57%

20 Universal Vision Biotechnology Co., Ltd. OTC CI Taiwan International Securities Co.,

Ltd. 298 40.00 03/08 1.33%

21 WanShih Electronic Co., Ltd. OTC CI Jih Sun Securities Co., Ltd. 850 30.00 03/09 100.00%

22 Inotera Memories, Inc. TSEC listing Grand Cathay Securities Co., Ltd. 18000 33.00 03/09 7.88%

23 Eva Airways Corporation TSEC CI Sinopac Securities Co., Ltd. 30600 12.00 03/13 49.49%

24 Depo Auto Parts Industrial Co., Ltd. TSEC CI Sinopac Securities Co., Ltd. 850 116.00 03/17 3.24%

25 Waffer Technology Corp. TSEC CI Capital Securities Co., Ltd. 1275 30.00 03/21 1.28%

26 EnTie Commercial Bank TSEC CI President Securities Corporation 27600 10.00 03/21 100.00%

27 Nan Ya Printed Circuit Board Corporation TSEC listing Capital Securities Co., Ltd. 6800 250.00 03/29 3.36%

28 Elite Advanced Laser Corporation TSEC listing Fubon Securities Co., Ltd. 859 26.50 04/03 0.72%

29 Actron Technology Corporation OTC listing Fubon Securities Co., Ltd. 405 80.00 04/17 0.22%

30 PixArt Imaging Inc. OTC listing Mega Securities Co., Ltd. 872 90.00 04/25 0.36%

31 Wha Yu Industrial Co., Ltd. OTC listing Taiwan Securities Co., Ltd. 418 33.00 05/04 0.40%

32 Skardin Industrial Corporation OTC listing Sinopac Securities Co., Ltd. 476 90.00 05/09 0.42%

33 Harmony Electronics Corp. OTC listing Mega Securities Co., Ltd. 747 23.00 05/17 1.10%

34 Feei Cherng Enterprise Co., Ltd. OTC listing KGI Securities Co., Ltd. 466 101.00 05/22 58.00%

35 Yieh Hsing Enterprise Co., Ltd. TSEC CI Capital Securities Co., Ltd. 24681 3.60 05/24 8.93%


57

APPENDIX


amount

Offered price (NT$)

Date of lot-drawing

Winner percentage

36 Kinsus Interconnect Technology Corp. TSEC CI Fubon Securities Co., Ltd. 4250 96.00 05/25 3.15%

37 Sunnic Technology & Merchandise Inc. OTC listing Taiwan International Securities Co., Ltd. 355 18.00 05/26 1.18%

38 Microbio Co., Ltd. OTC listing Mega Securities Co., Ltd. 840 12.00 06/01 1.33%

39 Topoint Technology Co., Ltd. OTC CI Taiwan International Securities Co., Ltd. 850 45.00 06/01 1.03%

40 Pan Asia Chemical Co. OTC CI Ta Chong Securities Co., Ltd. 5430 25.00 06/05 2.88%

41 Kcore Co., Ltd. OTC listing Hua Nan Securities Co., Ltd. 633 23.00 06/19 0.62%

42 Kaori Heat Treatment Co., Ltd. OTC listing Mega Securities Co., Ltd. 361 13.00 06/22 4.74%

43 Highlight Tech Corp. OTC CI Taiwan Securities Co., Ltd. 748 35.00 06/23 100.00%

44 Youngtek Electronics Corporation OTC CI Yuanta Core Pacific Securities Co., Ltd. 680 71.00 06/28 52.10%

45 Tang Eng Iron Works Co., Ltd. OTC listing Taiwan International Securities Co., Ltd. 11499 13.52 06/29 6.79%

46 United Orthopedic Corporation OTC CI Jih Sun Securities Co., Ltd. 765 11.50 06/30 100.00%

47 Yeou Yih Steel Co., Ltd. OTC listing Hua Nan Securities Co., Ltd. 564 10.50 06/30 5.31%

48 International Games System Co., Ltd. OTC listing Fubon Securities Co., Ltd. 388 120.00 07/04 0.55%

49 Cal-Comp Electronics (Thailand) Pub Co., Ltd. TSEC CI Sinopac Securities Co., Ltd. 220000 4.50 07/06 100.00%

50 Advanced Analog Technology Inc. OTC listing Taiwan Securities Co., Ltd. 203 195.00 07/11 0.43%

51 Holux Technology Inc. OTC listing Sinopac Securities Co., Ltd. 277 35.00 07/11 0.46%

52 Key Ware Electronics Co., Ltd. OTC CI Horizon Securities Co., Ltd. 1700 13.80 07/12 11.98%

53 Advanced-Connectek Inc. OTC CI Sinopac Securities Co., Ltd. 1700 20.00 07/17 35.97%

54 Vivotek Inc. OTC listing KGI Securities Co., Ltd. 459 58.00 07/17 0.56%

55 I-Chiun Precision Industry Co., Ltd. TSEC CI Mega Securities Co., Ltd. 1530 32.00 07/17 6.21%

56 Taiwan Surface Mounting Technology Corp. OTC CI Mega Securities Co., Ltd. 1105 65.00 07/27 2.50%

57 Shin Zu Shing Co., Ltd. OTC CI Taiwan Securities Co., Ltd. 425 120.00 08/02 1.14%

58 Optimum Care International Tech. Inc. OTC CI Jih Sun Securities Co., Ltd. 1190 11.10 08/02 3.72%

59 Kenmec Mechanical Engineering Co., Ltd. OTC CI Fubon Securities Co., Ltd. 1700 38.00 08/10 100.00%

60 Poya Co., Ltd. OTC CI China Trust Securities Co.,Ltd. 680 21.90 08/15 4.33%

61 Walton Advanced Engineering, Inc. OTC listing Fubon Securities Co., Ltd. 1000 14.00 08/15 2.25%

62 Cheertek Incorporation TSEC CI Taiwan Securities Co., Ltd. 850 26.00 08/18 3.01%

63 Solar Applied Materials Technology Corp. OTC CI Mega Securities Co., Ltd. 850 65.00 08/22 1.20%

64 Hi Sharp Electronics Co., Ltd. OTC listing Hua Nan Securities Co., Ltd. 370 18.00 08/25 1.22%

65 Global Brands Manufacture Limited OTC CI Mega Securities Co., Ltd. 2805 45.50 08/25 11.45%

66 J-Three International Holding Co., Ltd. OTC CI Capital Securities Co., Ltd. 1063 13.00 08/30 2.67%

67 Aeco Technology Co., Ltd. TSEC CI Mega Securities Co., Ltd. 2720 11.50 09/06 17.00%

68 Radium Life Tech. Co., Ltd. TSEC CI President Securities Corporation 5984 22.85 09/07 12.81%

69 Sino-American Silicon Products Inc. OTC CI Yuanta Core Pacific Securities Co., Ltd. 1700 46.00 09/15 0.94%


58

APPENDIX


amount

Offered price (NT$)

Date of lot-drawing

Winner percentage

70 Contrel Technology Co., Ltd. OTC listing Taiwan International Securities Co., Ltd. 1148 73.00 09/15 2.46%

71 Jiin Ming Industry Co., Ltd. OTC listing Grand Cathay Securities Co., Ltd. 788 42.00 09/15 1.63%

72 Alpha Micro electronics Corp. OTC listing Capital Securities Co., Ltd. 561 15.00 09/15 0.76%

73 Yemchio Co., Ltd. OTC CI Capital Securities Co., Ltd. 850 13.50 09/15 100.00%

74 Forward Electronics Co., Ltd. OTC CI Jih Sun Securities Co., Ltd. 2975 17.00 09/19 82.68%

75 Hsin Yung Chien Co., Ltd. OTC listing Yuanta Core Pacific Securities Co., Ltd. 429 35.00 09/20 0.99%

76 Fine Blanking & Tool Co., Ltd. OTC CI Yuanta Core Pacific Securities Co., Ltd. 563 32.00 09/25 2.10%

77 Nichidenbo Corporation OTC CI Yuanta Core Pacific Securities Co., Ltd. 680 36.00 10/12 0.81%

78 Globalsat Technology Corporation OTC listing Yuanta Core Pacific Securities Co., Ltd. 324 66.00 10/12 0.27%

79 Dynapack International Technology Corporation OTC CI Capital Securities Co., Ltd. 1063 46.00 10/13 1.15%

80 Innolux Display Corporation TSEC listing Fubon Securities Co., Ltd. 18000 41.00 10/16 7.20%

81 Shieh Yih Machinery Industry Co., Ltd. OTC CI Sinopac Securities Co., Ltd. 1275 15.50 10/18 3.16%

82 Maxtek Technology Co., Ltd. TSEC listing Taiwan International Securities Co., Ltd. 683 38.00 10/18 0.82%

83 MetaTech (AP) Inc. OTC CI MasterLink Securities Co., Ltd. 510 14.00 10/18 1.68%

84 Yeun Chyang Industrial Co., Ltd. TSEC CI Sinopac Securities Co., Ltd. 2975 21.00 10/19 1.34%

85 Iteq Corporation OTC CI China Trust Securities Co.,Ltd. 1020 21.00 10/19 1.31%

86 Taiwan Nano Electro-Optical Technology Co., Ltd. TSEC listing MasterLink Securities Co., Ltd. 4490 28.00 10/25 2.72%

87 Global Unichip Corp. TSEC listing Mega Securities Co., Ltd. 3135 40.00 10/30 1.85%

88 Tak Technology Co., Ltd. OTC CI Capital Securities Co., Ltd. 1063 18.00 11/03 2.46%

89 Li Cheng Enterprise Co., Ltd. OTC listing Taiwan Securities Co., Ltd. 912 12.00 11/06 2.76%

90 Powertip Tech. Corp. OTC CI Oriental Securities Co., Ltd. 2550 10.00 11/15 8.10%

91 Polaris Securities Co., Ltd. TSEC CI Fubon Securities Co., Ltd. 35000 12.00 11/20 3.69%

92 Edimax Technology Co., Ltd. TSEC CI Taiwan International Securities Co., Ltd. 425 13.20 11/28 1.35%

93 Motech Industries Inc OTC CI Yuanta Core Pacific Securities Co., Ltd. 255 420.00 12/05 0.64%

94 Chain Chon Industrial Co., Ltd. OTC CI Taiwan Securities Co., Ltd. 2125 16.80 12/11 1.30%

95 Forcecon Technology Co., Ltd. OTC listing Sinopac Securities Co., Ltd. 720 55.00 12/12 0.69%

96 Taiwan Cooperative Bank TSEC CI Capital Securities Co., Ltd. 178590 19.50 12/18 19.73%

97 Huang Hsiang Construction Corporation TSEC CI Sinopac Securities Co., Ltd. 1530 47.00 12/20 0.98%

98 Taiwan Business Bank TSEC CI President Securities Corporation 109860 9.65 12/21 29.93%

99 Wafer Works Corp. OTC CI Taiwan Securities Co., Ltd. 1275 42.00 12/25 0.62%

* TSEC CI denotes capital increase by a TSEC-listed company ** OTC CI denotes capital increase by an OTC-listed company

English digest of special edition for TSA 50th Anniversary

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Glorious History, Bright Outlook English digest of the special edition for TSA 50th Anniversary

I. Preface Taiwan's securities market dates back to 1953 when the government, under the policy for farmers to

have framing land of their own, collected the farming land from their landlords and issued property-backed bonds and stocks of four state-run companies—Taiwan Cement, Taiwan Paper, Taiwan Tea, and Taiwan Mining—as compensations for them. As the market circulation of these bonds, stocks, as well as the government bonds issued by Taiwan Provincial Government gradually expanded, it brought about the growing business of securities brokerage. That's the initial development of Taiwan's GreTai securities market.

In order to strengthen its management of securities market transactions, the government promulgated

the "Act on Management of Securities Firms in Taiwan" on Jan. 29, 1954, imposing the earliest securities regulations announced by the central government after it moved to Taiwan. At that time, the securities companies generally considered it necessary for them to organize an association. The Taipei Securities Dealers Association, after its application was approved, was accordingly founded in February 1956, under the four primary missions for supporting government's economic policies, encouraging savings of the private sector, activating market transactions, and boosting investments on manufacturing companies. Its inaugural meeting, presided over by Mr. Mu-kwei Ying, was held at a branch office of Hua Nan Commercial Bank. The meeting finalized the charter of the Association and annual budget for the first year, as well as elected nine members of the board of directors and three supervisors who afterwards convened their first joint meeting next day on Feb. 24 and elected Mr. Ying-ching Chu as chairman. That's the beginning of the Taipei Securities Dealers Association (TSDA).

The TSDA was later renamed as "Taipei Securities Brokers Association" in July 1962, and restructured as the "Taipei Securities Firms Association" in accordance with Taipei Government's instruction in July 1967 when Taipei City was upgraded to be directly under the jurisdiction of central government. It was the sole association of securities firms in Taiwan until Jan. 31, 1989 when Kaohsiung Securities Firms Association was inaugurated. At that time, there were two securities associations in Taiwan, respectively representing the securities firms in northern and southern Taiwan. The two associations, however, were under dual governance by central government and the city government of their location. The situation of overlapped governance and regulations sometimes undermined their operations. Association Chairman Hung-wen Chien therefore took initiative to push for amendment to the Commercial Association Act as the legal base for integration of the two associations which finally merged into one as a national association called "Chinese Securities Association" (CSA) on April 4, 1998, following the promulgation of the revised Commercial Association Act On Nov. 10, 1997.

The CSA was the first national commercial association established after the revision to the Commercial

Association Act. It was able to smoothly deal with all association's issues shortly after its establishment primarily thanks to the efforts of its predecessor, the Taipei Securities Firms Association, which, before the

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formal operations of the CSA, had been acting as a national association to handle various nationwide business and later help push for two mergers between the national association with two local securities associations in southern and northern Taiwan on July 31 and Dec. 31, 1999, respectively.

As for market development and reform, the securities association, since the first meeting of its board of

directors in February 1956, had continuously proposed various recommendations concerning market development to the government and played an active role behind each major event of the securities market over the past five decades.

Under their efforts, the Taiwan Stock Exchange Corporation (TSEC) was finally founded on Oct. 23,

1961 and commenced operations on Feb. 9, 1962, marking a critical step for the development of a centralized securities-trading market system in Taiwan. Later, it set up an ad hoc group to initiate the draft of the "Securities and Exchange Law (SEL) in April 1964. The Association and the TSEC in 1976 formed a joint committee engaged on developing an electric system market transaction information reporting system to replace the traditional means which used manual force to put on transaction information on black board. In 1977, the Association recommended the government to develop a standardized format of "share transfer notification" applicable to all stock certificates which were issued by different companies and differed in share price, certificate size, paper quality, as well as the means of printing previously. It later contributed to the standard format of stock certificates.

In 1980, the Association made a recommendation to the government for establishing Taiwan's first

securities financing company and at the same time convened a meeting with representatives of the regulatory agency and the TSEC to discuss how to develop an electronic securities trading system. They afterwards set up an ad hoc joint group to work for the development of an electronic securities trading system, an important move to prepare Taiwan for entering an age of computerized securities transaction.

On Nov. 1, 1989, the Taiwan Securities Central Depositary Company (TSCD) was established under a

mission for raising the efficiency in transaction settlement and passbook-entry process as a means to reduce the risks involved with settlement defaults. On Aug. 2, 1993, an automatic-matching trading system was commenced for the first-category stocks, unveiling the age of an automatic price-competition trading system for Taiwan's securities market. On Nov. 1, 1994, the ROC OTC Securities Exchange (ROSE), which was later renamed as GreTai Securities Market (GTSM), was inaugurated as an upgraded institution from the Association's former OTC Transaction Service Center, making another important milestone of the development of Taiwan's OTC securities market.

Meanwhile, the market transactions expanded along with the progress of market system. The Taiex climbed above the 1,000-point mark for the first time on Oct. 17, 1986, topped 5,000 points on June 9, 1988, and continued to break the 10,000-point level on June 20, 1989, reflecting the thriving stock market in Taiwan and leading to the proliferation of securities brokerage houses during the same period of time.


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On Feb. 12, 1990, the market hit historic high in both market index and daily transaction amount while the Taiex soared to 12,682.41 points and the daily transactions exceeded NT$100 billion for the first time. Later, the daily transactions expanded to the historic high of NT$326.463 billion on Jan. 11, 2000.

As for investor protection, the Association in 1964 gained the government's approval to provide the

service of broadcasting daily market transaction information. In October 1975, the Association formed the "Securities Research and Development Institute" and "Securities Investor Protection Association." In July 1983, it supported the regulatory agency and the TSEC to set up the "United Investor Service Center" to provide the service for answering investors' questions and inquiry. Starting from April 1989, the Association applied the computerized lot-drawing system to ensure an open and fair procedure for dealing with public subscriptions for the securities under private-placement projects.

The Association appropriated NT$300 million as the "Securities Investor Protection Fund" in

September 1993 and donated another NT$200 million to the newly-established "Securities and Futures Investor Protection Center (SFIPC)" founded in December 2002 to ensure protection of the rights and interest of investors. Later, it made another donation of NT$4.25 million to the SFIPC for its project of information integration in Aug. 1994.

The Association also offered financial supports to the Securities and Futures Institute (SFI) such as the

contribution of NT$20 million for its "Fund for Internationalization" in May 1996 and another NT$22.45 million in December 1997 to support its project for developing a database to embrace the questions of the previous securities certification tests.

When the government announced to levy capital gains tax on the income generated from securities

transactions, the Association took active actions to communicate with the Ministry of Finance (MOF) and asked it for reconsidering this policy on the concerns for reducing its impact and preventing market crisis. Among its recommendations, the four major ones were: 1. It's improper for the government to make the prompt decision for levying the new tax and, if it's impossible to suspend the tax under the situations at that time, the government had better refer to the practice of the Statue for Encouraging Investments which imposed deadlines for temporary measures and postpone the proposed new securities transaction income tax until 1990; 2. to separate securities transaction income from other income of an investor so as to make them in two different income categories subject to different taxes; 3. to simplify the procedure and techniques for levying the proposed securities transaction income tax; 4. to raise the quota used to encourage securities investment.

While celebrating its 50th anniversary last year, the Association received congratulatory messages from

many foreign institutions such as the International Council of Securities Associations (ICSA), Securities Industry and Financial Markets Association, (SIFMA), Japan Securities Dealers Association (JSDA), and Hong Kong Stockbrokers Association Ltd.(HKSA). Besides, its celebration reception was joined by hundreds of distinguished guests including Premier Tseng-chang Su, Financial Supervisory Commission

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Chairman Jun-chi Shih, Securities and Futures Bureau Director Dang-jieh Wu, Taiwan Stock Exchange Chairman Gordon Chen, GreTai Securities Market Chairman Duang-yen Lu, Taiwan Securities Central Depositary Chairman Ching-cheng Yeh, Taiwan Futures Exchange Chairman Rong-yi Wu, Taiwan Financial Service Roundtable Chairman Hung-wen Chien, Securities and Futures Institute Chairman Kung-hwa Ding, Securities and Futures Investor Protection Center Chairman Jaw-Chyuan Chu, among others.

In recent years, the Association was engaged on a series of plans contributing to systematic and

sustained development of market reform and innovation. It continuously works with the regulatory agency and securities-related institutions to help securities firms pursue progress with new ideas and innovative services. Meanwhile, the Association will promote financial innovation and rational taxation for healthy development of Taiwan's securities market and help Taiwanese securities firms strengthen themselves with international competitiveness. Association Chairman Hung-Wen Chien has led the Association completed many significant tasks for market reform during his tenure such as the development of a rational mechanism for securities-related institutions to determine the rates of their service fees collected from securities firms. In addition, the Association's predecessor, the Taipei Securities Firms Association, also made lots of significant achievements under Chien's leadership. When Chien served with the association as the chairman of its 10th board of directors, the association became a formal member of the International Council of Securities Associations (ICSA) on September 16, 1996, marking a critical step for the internationalization of Taiwan's securities market. In early 1998, it pushed for the establishment of the national Chinese Securities Association (It was later renamed as Taiwan Securities Association), paving a sound ground for future development of Taiwan's securities market and the Association itself.

In the hope for helping readers have deeper understanding of the history of Taiwan's securities market,

the Association compiled a special edition of "TSA 50th Anniversary" which, in addition to the reports on various celebration activities, has detailed introduction of the different stages of Taiwan's securities market development. While it arouse us to think of the memorable past, we sincerely invite everybody to work together with us to create a better future for Taiwan's securities market in the following 50 years or even more years ahead.


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II. TSA 50th anniversary highlights A. Special edition for TSA 50th Anniversary

To compile a special edition for the 50th anniversary, the Association formed an ad hoc editorial committee to take on this task. Although working within a short period of time of only two months, committee members made all-out efforts to fulfill the significant historic mission. They visited major Taipei libraries, newspaper agencies, and publishing companies to search for historic records. They also made inquiry letters to seek assistance of the Department of National Treasury, publicly traded companies, Household Registration Offices of Taipei City, Taipei City Department of Social Welfare, Household Registration Offices of Taichung City, other securities-related authorities, member companies of the TSA, and so on. They also solicited the help of senior securities workers for photo identification and for information on the TSA′s previous names and locations. They retrieved photographs of past events and former chairmen. They also conducted visits to different locations that were once part of the TSA, under the assistance of related government authorities, in the hope of finding more TSA-related information from occupants of these locations or their offspring. All this represented the TSA′s effort for compiling a special publication which provides complete, comprehensive, and truthful historic records and information.

The 50th anniversary special edition contains over 300 pages, categorized into the following sections:

History, Business Development, Service, Outlooks, Appendix, and Appreciation. The first page contains a congratulatory message from the current TSA chairman, as well as the photos of past chairmen. Then comes a series of articles on the following: development of the Association, important milestones, changes in the number of member companies, and current structure, plus old photographs of the Association.

The History section contains articles on the origin and development of securities-related organizations

and government supervisory agencies, the TSA′s past chairmen, and the development of Taiwan′s securities market over the past 50 years. Of note is a detailed guide, beginning on Page 82 of the publication, to covers the major securities-related events in Taiwan starting in 1949, presented in both text and graphics. It makes the special edition a valuable and collectible publication on Taiwan′s securities development. The Business Development and Service sections discuss the various projects and services launched during the terms of past boards of directors and supervisors. The Outlooks and Appendix sections feature the special theme of "Visions for Another 50 Years" in a hope to encourage further collaboration between industry players, government agencies and academics to strengthen Taiwan′s securities market. The sections include forward-looking messages from heads of securities-related organizations, photos of TSA activities, and charts tracking the past performances of the market, for the reference of securities officials.

The following is a description of major developments and events in different stages of Taiwan′s securities

history: a. The stage of beginning: the initial development of market system, 1950-1986

(a) In February 1950, the government issued the Patriotic Government Bond, marking the first securities issue of the primary market of Taiwan's securities market

(b) In February 1950, In February 1954, the government promulgated the "Act on Management of

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Securities Firms in Taiwan" (c) In March 1954, Taiwan Cement, Taiwan Paper, Taiwan Tea, and Taiwan Mining issued stocks (d) On Feb. 23, 1956, the Taipei Securities Dealers Association was established (before the upgrading

of Taipei City), marking the initial development of Taiwan's OTC securities market (e) In September 1960, the Securities and Futures Commission was established, under the jurisdiction

of the Ministry of Economic Affairs (f) In February 1962, the Taiwan Stock Exchange Corporation(TSEC) commenced operations, an

important milestone for the development of a centralized securities-trading market system in Taiwan

(g) In November 1964, the Association gained the government's approval to provide the service of broadcasting daily market transaction information

(h) In April 1968, the Securities and Exchange Law took effect upon announcement, imposing mandatory requirement for securities firms to join the securities association as members

(i) In July 1980, Fu Hua Securities Financing Company was established as the first of its kind to introduce securities margin trading and short selling services to investors in Taiwan

(j) In February 1981, the MOEA announced the policy that a company with a pain-in capital of NT$200 million or more should issue shares for public trading

(k) In April 1982, the government announced the standard format of stock certificates at a standard face value of NT$10 per share

(l) In April 1984, the Securities and Futures Investor Protection Center (SFIPC) was inaugurated (m) In August 1985, the TSEC commenced the operations of its computerized trading system,

marking the beginning of the age of computerized securities trading in Taiwan

b. The stage of growth: proliferation of new securities firms, 1986-1990 (a) In October 1986, the Taiex topped 1,000 points for the first time (b) In May 1988, the government lifted the ban on establishment of new securities firms (c) In September 1988, the Ministry of Finance announced to resume securities transaction income

tax, causing deep plummeting of the stock market in the following 19 consecutive days (d) In November 1989, the Taiwan Securities Central Depositary Co. commenced operations (e) In February 1990, the Taiex hit the historic high of 12,682.41 points (f) In 1990, the number of securities firms amounted to historic high of 381

c. The stage of solidification: advancement of market system, 1991-1995 (a) In March 1991, Jordan Fleming gained the government's approval to become the first approved

foreign institutional investor to make direct investments on Taiwan's securities market (b) In 1993, the government published the "Foreign Futures Transaction Act" (c) In August 1993, Taiwan′s securities market began to operate under the automatic pricecompetition

trading system (d) In January 1994, the Securities Investor and Futures Trader Protection Act was promulgated (e) In November 1994, the Securities and Futures Investor Protection Center (SFIPC) was inaugurated (f) In February 1995, passbook-entry settlement became applicable to all investors

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d. The stage of transition: market internationalization, expansion, and diversification, 1996 to present (a) In April 1996, the Taiex was included into Dow Jones global market index (b) In September 1996, the Association became a formal member of the International Council of

Securities Associations (ICSA) (c) In September 1996, the TSEC followed a new settlement system under which the TSEC will set

up a fund for solving the problems involved with settlement default (d) In June 1997, the "Futures Transaction Act" took effect upon announcement (e) In January 1998, ASE Test issued its Taiwan Depositary Receipts (TDR) in Singapore, marking

the first TDR issue on the international market (f) In April 1998, the Association was expanded to be a national association (g) In July 1998, Taiwan Futures Exchange (TFE) commenced operations (h) In March 2000, a management committee was set up to manage the National Financial Stabilization

Fund at a value of NT$500 billion upon the establishment of the committee (i) In January 2001, the stock trading hours were adjusted to from 9:00 am to 1:30 pm and the Saturday

session was terminated at the same time (j) In January 2002, the GTSM started to host the trading of newly-emerging stocks (k) In June 2002, the Legislative Yuan passed the third reading of the "Securities Investor and Futures

Trader Protection Act" and introduced the judicial system of class-action lawsuit and arbitration to Taiwan

(l) In January 2003, the TSEC started to disclose the daily transaction information of the top five stocks everyday as a move to strengthen market information transparency

(m) In February 2003, Taiwan Registered Investor Service Corp. was inaugurated (n) In September 2004, the Financial Times Securities Exchange (FTSE) upgraded Taiwan market

from the Developed Market Observatory List to Developed Market List (o) In January 2005, the government announced a new underwriting system which removed the daily

price limit for the newly-listed shares within the first five trading days following listing and at the same time introduced the "over subscription measure" for private placement projects as a means to help stabilize the market prices of the newly-issued shares

(p) In May 2005, the Taiwan Financial Service Roundtable (TFSR) was established (q) In January 2006, Taiwan bond market was included Lehman Brothers global bond index (r) In January 2006, the government announced a new policy under which securities firms are allowed

to manage the trading accounts of their clients and use funds at the accounts to trade stocks or make securities borrowing or lending on behalf of the clients

B. Anniversary Reception

For the celebration of its 50th anniversary, the TSA formed five working committees -- Media Contact, Decoration, Programming, General Affairs, and Video -- in preparation for the anniversary reception. A highlight of the reception was an introduction on the development of Taiwan′s securities market over the past 50 years in both still and dynamic presentations. Dynamic presentation included video clips on the evolution of Taiwan′s securities market. Still presentations included display of periodicals and old archived photographs.

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Among those who gave remarks on Taiwan′s securities development at the reception were: Pei-ying Pai and Chang-pang Chang, former chairmen of the Securities and Futures Commission under the Ministry of Finance, and Yi-fu Lin, seventh chairman of TSA. Other honorary guests included Premier Tseng-chang Su, Securities and Futures Bureau Director General Dang-jieh Wu, and others. Also highlighting the reception were musical performances by renowned vocalist Chung-teh Hsu, singer Ching-chun Hsu, and dance performances by aborigine students of Nanao Elementary School in Ilan County. The event was held as a way for the TSA to express its gratitude for the efforts and contributions made by government agencies and securities-related organizations over the past 50 years. The TSA is committed to pursuing continued growth and achievement to make Taiwan′s securities market even better for the next 50 years.

The following are detailed information of the celebration reception: a. Time,Venue, and program of the celebration reception:

Time: December 26, 2006, 13:30 – 16:20 Venue: 12th floor Conference Hall, the Grand Hotel Contents of event: ◆Target audience: heads of government supervisory agencies; chairmen, presidents and members

of securities-related organizations; chairmen and members of TSA, TSA consultants, and TSA employees. About 350 people in total.

◆Rundown of program:

Time Program

Cocktail reception

Drink-mixing performance 13:30-14:20

Presentation on securities market review and outlook

Drum performance

Remarks by distinguished guests

Special ritual for 50th anniversary celebration

Singing and musical performances

Presentation on securities market development

Salute to securities experts

Dance performances

Remarks by Chairman Hung-wen Chien

14:20-16:20

Singing of “Happy Birthday” by everyone in audience

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b. Major activities and titbits (a) Cocktail reception and drink-mixing performance: Prior to the formal beginning of the cocktail

reception, the Association served delicate food and arranged a special drink-mixing performance to lighten up the ambiance so that all guests would have cheerful mood to appreciate the video presentation on securities market development and other performances during the reception.

(b) Presentation on securities market development: The Association made a special video presentation of a brief review on the development of Taiwan's securities market over the past five decades and the bright prospect of the market in the future.

(c) Drum performance: The "Partite of Triumph" performed by YU GU FUN Drum Group presented a combination of "strength" and "beauty" of the Chinese folk art, signifying the glorious history of Taiwan's securities market over the past five decades.

(d) Remarks by distinguished guests: Premier Tseng-chang Su attended the occasion and gave remarks to encourage everybody to continue working for an even better future for Taiwan's securities and financial markets.

(e) Special ritual for 50th anniversary celebration: The reception was opened with a special ritual of dangling auspicious lanterns on the ceiling and an ascending podium where stood the host and distinguished guests amid orchid flowers. Besides, the wall of the banquet hall was decorated with the fabrics in the bright reddish color of the Association's logo. All this symbolized a rising and bright future of the securities market, the Association, and all other related organizations.

(f) Singing and musical performances: Internationally renowned vocalist Chung-teh Hsu deeply touched the heart of every guest when he performed the old Taiwanese folk songs with his mellow and solid voice. Meanwhile, popular signer Ching-chun Hsu, famous for her clear, mysterious, and emotive voice, pleased everybody while she sang four popular songs of "A Rosy Life," "Sweet Love," "Memory," and "You Make Me Smile."

(g) Salute to prominent securities experts: At the celebration of its 50th anniversary, the Association took the opportunity to present plaques of gratitude to three securities pioneers – former Securities and Futures Commission Chairmen Pai-ying Pai and Pang-chang Chang and former TSA Chairman Yi-fu Lin – in recognition of their great contributions to the development in different stages of Taiwan's securities market.

(h) Dance performances: The students of Nanao Elementary School in the Tayal aboriginal tribe of Ilan County were invited to make aboriginal dance and singing performances under the theme of "Let's Dance at Harvest Festival" in celebration of the Association's fruitful 50 years with the openhearted passion of the Tayal people.

(i) Remarks by Chairman Hung-wen Chien: While TSA Chairman Hung-wen Chieng spoke as the reception host, he expressed his gratitude and respect on behalf of Taiwan's securities industry to the senior securities pioneers and experts for their contributions and his sincere appreciation to all distinguished guests for their participation at the reception.

(j) Singing of “Happy Birthday” by everyone in audience: The reception came to an end amid the cozy candlelight on a giant birthday cake and the cheerful singing of "Happy Birthday" and "Happy Voyage" by everyone in audience. The 50th anniversary celebration signifies a great milestone of the Association as a perfect ending of its past 50 years and the beginning of another

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critical period of next 50 years ahead. c. Exhibition: An exhibition was held in conjunction with the reception to display the historic records,

old archived photographs, as well as the TSA 50th Anniversary Special Edition as the evidence of the development in all stages of Taiwan's securities market.

d. Charity donations: The Association, since established, has supported various social charity activities.

In the 1990s, it donated NT$5 million to the Red Cross Society as the relief fund for the flood disaster in Chinese mainland. Later, it contributed another NT$6 million for the severe typhoon damage in 1994, and NT$10.05 million for the devastating 921 earthquake in 1999, among others. At its 50th anniversary celebration reception, it announced another donation of NT$500,000 for Nanao Elementary School in Ilan County as the lunch subsidy for the aboriginal students at the remote area.

preface - csa.org.t annual report-2006.pdf · as for market performance, the 2006 was a year of...

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