Corporation Press Release 2021/01/05 Corporate Planning & Strategy Department

Taiwan Stock Exchange 2020 Year-end Press Conference

Good afternoon, everyone: Thank you all for participating in the Taiwan Stock Exchange (TWSE) 2020 Year-end Press Conference despite your busy schedule. I sincerely appreciate your prolonged support of and guidance on the company’s business. Meanwhile, I would like to take this opportunity to share the development of the stock exchange market over the past year and our future work plans.

1. Taiwan stocks have made historical achievements Last year (2020), the world was greatly affected by COVID-19. With the success of the pandemic prevention in Taiwan, listed companies have demonstrated their perseverance and resilience, and the overall economic growth reached 2.54%. In light of the accomplishments, Taiwan has won the honor to be one of the few growing economies in 2020 by the Economist report. Based on a solid economic foundation, the Taiwanese has made a number of historical achievements. The TWSE Capitalization Weighted Stock Index closed at 14,732.53 points as of the end of 2020, an increase of 22.8% from the end of 2019. The market capitalization of listed companies reached NT$44.9 trillion, and the total trading value for the year was NT$49.2 trillion, with the average daily trading value exceeding NT$200 billion for the first time. With high stock market liquidity, the profits of securities firms jumped to NT$49.8 billion in the first 11 months of 2020, and securities transaction taxes reached NT$130.8 billion (estimated to be around NT$147 billion for the entire year), enabling the public to share the economic prosperity.

Table 1. Overview of Taiwan Stock Exchange Market 2020 2019 2018 2017 2016 2015 Closing Index 14,732.53 11,997.14 9,727.41 10,642.86 9,253.50 8,338.06 Total Market Capitalization (trillion 24.5 44.9 36.4 29.3 31.8 27.2 NTD) Total Trading Value (trillion NTD) 49.2 29.1 32.2 25.8 18.9 22.5 Average Daily Trading Value (100 922.3 2,007.5 1,200.7 1,302.1 1,048.7 775.2 million NTD) Turnover Ratio of Trading Value 77.6 123.3 80.4 92.6 78.4 64.6 (%) P/E Ratio 22.4 19.6 12.7 15.7 16.5 13.5 Dividend Yield (%) 3.0 3.8 4.8 4.0 4.4 4.6 Securities Firms' Net Income After (January- 40.73 29.49 39.70 19.37 26.02 Tax (billion NTD) November) 49.84 2020 2019 2018 2017 2016 2015 (January- 82.0 Securities Transaction Tax (billion November) 101.2 91.2 90.0 70.9 NTD) 130.8

2. The implementation of two important trading rules have achieved remarkable results Although most of the global stock market was severely affected by the pandemic in March 2020, a continuous trading system that had been studied and discussed for nearly 10 years was still implemented as planned. Fortunately, it was successfully launched on March 23, 2020 and operated stably with adequate preparation and comprehensive supporting measures. Since the implementation, the trading efficiency has been greatly improved, the number of placing orders increased by nearly 50%, and the trading value and the amount of shares traded have increased by more than 80%, which has greatly contributed to the increase of the price and volume of Taiwan's stock market.

Table 2. Changes in Trading Before and After Implementation of Continuous Trading System (Monthly Average Excluding Warrants) Number of Number of 1,000- Number of 1,000- Trading Value Period Orders (10 share Lot in Order share Lot Traded (100 million thousand) (million) (million) NTD) Before January 2019 to 23,589 6,461 2,126 107 Implementation February 2020 After April 2020 to 42,487 9,652 3,489 196 Implementation December 2020 Change Rate (%) 49 64 84 80

Since the implementation of intraday odd lot trading on October 26, 2020, it has become significantly more active than after-hours trading. The trading value is more than three times as much as in the past, and the number of trading accounts have also increased from 218,000 to 616,000-- age group of 21-30- year-old increased the most significantly by 3.1-fold, indicating the new measure is welcomed among young people. The majority of the investment in stocks was concentrated on high-priced and financial stocks, which also led to a sharp increase in the number of shareholders for each company in this regard. Take TSMC, which ranked first in terms of trading volume and value, as an example, the number of its shareholders increased from 455,000 at the beginning of the year to 611,000 as of the end of 2020; Largan at the second place in trading value witnessed an increase from 14,000 to 48,000 in the number of its shareholders. The significant change of shareholder structure also applied to the financial industry.

Table 3. The Number of Natural Persons with Trading Accounts in Each Age Group Before and After Implementation of Intraday Odd Lot Trading Growth Rate Age Group Before Implementation After Implementation 2019 (Monthly Average) November 2020 (%) Total Accounts 217,812 615,776 183 20 or under 8,748 22,959 162 21–30 27,746 114,932 314 31–40 49,083 150,421 206 41–50 54,009 147,517 173 51-60 40,238 101,263 152 61 or above 37,988 78,684 107

Table 4. Intraday Odd Lot Trading Volume (from October 26, 2020 to December 29, 2020) Average Number of Shareholders in Daily Daily 2020 (thousand persons) Name of Average Trading Rankings Beginning Beginning Company (thousand Volume of Year of Year NTD) (thousand shares) No. 1 in both trading TSMC 229,088 455 455 472 volume and value No. 2 in trading value Largan 80,849 24 14 14 No. 5 in trading E.SUN 3,109 344 344 123 volume FHC No. 10 in trading First 1,375 391 391 volume Financial 66 Holding Total Intraday Odd Lot Trading 665,411 5,712

3. Listed companies demonstrated a high degree of resilience Under the impact of the pandemic, listed companies have demonstrated their perseverance and actively adjusted production capacity and sales channels to turn this crisis into business opportunities. Therefore, last year's revenue will be maintained at the level of NT$32 trillion or above (NT$29.7 trillion for the first 11 months). Additionally, the pre-tax net income in the first three quarters grew by 8.1% against the trend, of which domestic listed companies grew by 8.5%, while foreign listed companies were obviously affected and declined by 5.6%.

Table 5. Profitability of Listed Companies 2020 2019 2018 2017 2016 2015 Operating Income (January- (trillion NTD) November) 32.72 32.95 30.56 28.51 28.63 29.69 Pre-tax Net (Q1-Q3) Income (trillion 2.38 2.62 2.65 2.27 2.21 2.00 NTD) Net Income After (Q1-Q3) 1.86 2.06 2.09 1.79 1.74 Tax (trillion NTD) 1.57

To observe the revenue and profitability of individual industry, it is clearly found that they are highly correlated with the rise of stock prices. The electronics- related industries, main dominance of Taiwan’s capital market, accounted for around 66% of the entire listed companies' revenues. With a strong potential of a positive growth of their revenues and profits of 2020, the performance of stock prices were relatively excellent. In particular, the semiconductor industry had 20% growth in revenue, profit increased by as high as 60%, and the stock prices rose by more than 60%, contributing to the outstanding performance in the overall electronics industry. The profits of the industries, including computers and peripheral equipment as well as electronic products distribution, increased by 20% and the stock prices also rose significantly. This has indicated the resilient fundamentals of listed companies played an important role as a strong backing of the stock prices. The current dividend yield of Taiwan’s capital market is 3%, which is still at the top of the world's major securities markets.

Table 6. The Performance of Industries with Growing Profits Q1-Q3 2020 Index Return Jan. To Nov. in 2020 Net Income After Tax in 2020 Operating Revenues

Amount Change Rate Amount Change Rate Rise/Fall (%) (billion NTD) (%) (billion NTD) (%) Semiconductor 2,869.6 22.1 500.5 61.0 62.7 Computers and Peripheral 6,236.7 4.8 117.7 42.0 Equipment 22.9 Electronic Products 1,722.1 8.9 22.8 24.6 Distribution 22.9 Electronic 1,552.6 3.2 95.7 13.1 Parts/Components 32.8 Communications and 767.5 -0.0 42.1 4.5 Internet 4.7 Electrical and Cable 177.2 -11.5 9.7 84.1 33.7 Biotechnology and Medical 123.3 10.1 5.8 26.2 Care 4.8 Shipping and 727.8 -15.2 16.0 9.2 Transportation 58.4 Financial and Insurance 2,714.7 0.1 359.2 0.1 -1.2

4. Younger and sharply increased number of investors The outstanding performance of the capital market has attracted investors to participate more actively. Last year, the number of new accounts opened reached 670,000, contributed the total number of stock accounts to 11.24 million, accounting for 47.3% of the total population. It indicated one out of every two Taiwanese citizens engaged in stock market investment on average, bringing the number of stock investors to a record high of 4.38 million. In terms of the age of investors, of people with a stock account in all age groups has generally increased in proportion. Particularly, in the 20- to 30-year-old age group, the proportion has rapidly grown from 25.4% five years ago to 36.1% with a substantial increase to 1.23 million people.

In recent years, TWSE has been actively developing a friendly environment for younger generation with limited investable fund. Since the implementation of the periodic payment plan in 2017, the investment amount has hit a record high year by year and reached NT$17.13 billion last year, surpassing the accumulated amount of the previous three years. In addition, the launch and issuance of warrants and ETFs and the implementation of intraday odd lot trading had created more diversified investing channels and less burden for people with limited capacity to be involved. The gradual participation of young people in the stock market is expected to bring new momentum to Taiwan’s capital market and ease aging pressure in the investor structure.

Table 7. Account Opening and Age Structure of Natural Persons / Investment Amount of Periodic Payment Plan 2020 2019 2018 2017 2016 2015 Total Number of People with a Stock 1,124 1,057 1,024 999 977 961 Account (10 thousand persons) Number of People with a New Opened 67 33 25 22 16 16 Account (10 thousand persons) Total Number of Natural Persons with a 1,115 1,049 1,016 992 970 954 Stock Account (10 thousand persons) Number of People Engaging in Trading (10 438 334 326 312 276 289 thousand persons) The Proportion of the Number of Natural Persons 47.3 44.5 43.1 42.1 41.2 40.6 with a Stock Account (% of Total Population ) 0–19 6.8 5.7 5.4 5.2 5.2 5.4 Age 20–30 36.1 29.2 27.0 25.8 25.2 25.4 31–40 53.1 49.9 49.2 49.1 49.5 50.2 Group 41–50 61.6 60.5 60.1 59.7 59.2 58.8 (%) 51-60 61.8 60.4 59.5 58.7 57.9 57.1 61 or above 62.7 60.8 59.2 57.6 55.9 54.0 Investment Amount via Periodic 17.13 6.15 3.38 1.21 - - Payment Plan (billion NTD)

5. Stocks held by foreign investors continued to hit a record high The high yield and excellent performance of the corporate governance of Taiwan’s listed companies are the main reasons to attract foreign investment. Taiwan was highly recognized in the 2020 CG watch rankings by the Asian Corporate Governance Association (ACGA) last year as it ranked 4th among 12 Asian countries, the best achievement over the years. Meanwhile, Taiwan has maintained among the top in the three major ESG indices in the world. Subject to the implementation of the continuous trading system last year, Taiwan's stock market has been fully aligned with the international standard, attracting more foreign investment. The percentage of market value held by foreign investors has increased from 16.3% in 2000 to 45% year by year.

According to historical experience, when major global political and economic strikes, foreign investors were more likely to withdraw their funds from Taiwan. In the past, foreign investors have oversold Taiwan stocks four times in history, which would inevitably affect the domestic investors’ confidence and further drag the stock market indices down. Take March 2020 as an example, when the global pandemic broke out, foreign investors oversold nearly NT$360 billion of Taiwanese stocks and led to 2,800 points plummet of the stock price in just 10 days. During the first 10 months of 2020, foreign investors oversold stocks in the amount of more than NT$700 billion, hitting a record high. However, domestic investors continued to invest in and foreign investors returned after the market surged. In 2020, the oversold of NT$539.5 billion from foreign investors and a rose of TAIEX 22.8% indicated a high degree of confidence from the domestic investors’ pool toward Taiwanese capital market. It has relatively reduced the impact of foreign investment on the domestic market and the positive phenomenon will also benefit the stable development of Taiwanese capital market.

Table 8. Oversold Amount by Foreign Investors and the Return of TAIEX 2020 2018 2011 2008 Percentage of Market Value Held 45.0 40.0 32.3 30.4 by Foreign Investors (%) Oversold Amount by Foreign 539.5 355.1 277.6 470.0 Investors ( billion NTD) Return of TAIEX (%) 22.8 -8.6 -21.2 -46.0

6. Future Work Plans i. Build a complete initial public offering mechanism Affected by the pandemic last year, the application process for initial public offering (IPO) was delayed; therefore, only 19 companies applied for IPO, which was slightly lower than the number of the past years. While most of the companies submitted their applications after the economic situation stabilized in the second half of the year, the number of companies that were listed last year was only 12 ( plus 6 have been reviewed and approved but have not yet been listed). According to the Capital Market Blueprint released by the competent authority last December, to strengthen the function of the primary market and motivate companies with key core technologies and innovation capabilities or innovative business models to enter and raise funds, TWSE plans to launch the Taiwan Innovation Board (TIB) in the third quarter of 2021.With the adapting the market capitalization as the core listing standards, the TIB is with more potential to satisfy the needs of business operation. By constructing a more comprehensive listing mechanism, Taiwan’s capital market is expected to play a key role in supporting business growth.

Table 9. Number of Newly Listed and Companies Applying for Listing 2020 2019 2018 2017 2016 2015 Number of Newly 12 19 29 21 24 24 Listed Companies 2020 2019 2018 2017 2016 2015 Number of Companies Applying 19 20 26 26 30 30 for Listing

ii. Implement a market-making mechanism to raise the trading liquidity TWSE has implemented a mechanism for listed companies to delist from the stock market since last April. It has set a three-year improvement period to assist companies with poor operating performance in making active improvements, so as to strengthen the foundation of the capital market. This year, TWSE will introduce a stock market maker mechanism for potential high-quality and low-liquidity stocks. At present, many securities firms have expressed their willingness to participate as a market maker. Via the plan of launching at the end of June, it is expected that trading will be more active to support the momentum of the whole market.

iii. Advance supervision of listed companies The Financial Supervisory Commission (FSC) released the “Corporate Governance 3.0—Sustainable Development Blueprint” last August as a policy guideline for the implementation of corporate governance in the next three years. TWSE will proactively cooperate with the implementation via enhancing corporate governance, increasing supervision intensity, and strengthening the functions of underwriters and certified public accountants (CPAs). To better utilize digital technology for supervision, it will also adopt artificial intelligence, big data, and other technologies to extensively collect information, analyze abnormal trading patterns and signs, establish early warning indicators, and integrate the strength of intermediary agencies, such as CPAs and underwriters, to enhance the supervision efficiency.

iv. Strengthen information security The securities trading system is one of Taiwan's key information systems. The establishment of a safe and efficient trading system has always been TWSE's core business, and TWSE has been able to maintain the normal operations of the system for a long time and eliminate unexpected issues in a timely manner. The introduce fo the continuous trading system has created a great increase of the number of transactions together brought up a more diversified trading patterns and heavier load for the information system. In the future, TWSE will continue to expand capacity, adjust the system load to the best condition, and work together with associated securities institutions to establish a computer information security incident response team so as to enhance the resilience of information security protection in an all-round manner.

v. Strengthen investor education There is no investment without risks. Investors must be clearly aware of their own investment targets and risk tolerance capacity. As the current percentage of electronic orders placed is over 70%, and there are many young investors and new joiners in the stock market, TWSE will open more digital learning classes additionally to the existing physical ones, incorporate digital animation and videos, and include diverse online learning resources, such as online activities, as a supplement, to attract investors' attention and achieve the best educational effect.

7. Conclusion Generally, major global economic forecasting agencies are mostly optimistic about the economy of 2021. However, the continuous escalation of COVID-19 still poses a daunting challenge to the global capital market. To cope with future unexpected changes and risks, we have no choice but to continuously improve the foundation of our Taiwan’s capital market. We will keep working harder and looking forward to the continued assistance and advice from all market participants, so as to shape a better condition of TWSE's business. Finally, I would like to express my appreciation towards all media press for your support of TWSE. As we are about to enter the Year of the Ox, I, on behalf of TWSE, wish all of you good luck, prosperity, and peace! I also hope that Taiwan’s capital market will show the spirit of Taiwanese cattle to persevere and grow strongly and stably.

(The aforementioned data is preliminary statistical data, and the final data is subject to the official statistical data published by each unit.)