CONTENTS Annual Report 2011

TAIWAN

02 Message from the Chairman and the President

Business Report 05 Statistical Highlights Foreword 07 07 The Securities Market in 2011 08 Business Achievements in 2011 12 Objectives for 2012 27 Exchange Information Board Members 31 31 The Organization 32 Market Activities The Executives 33 Major Events in 2011 35 35 Listing Changes in 2011 39 Market Performance 41

Financial Review Report of Independent Accountants 43 43 Balance Sheets 44 Income Statements 46 essage from the Chairman and M the President 02 03 The year 2011 was a tumultuous time with global financial markets experiencing rough and jarring conditions. The deterioration of the European sovereign debt crisis and lowering of U.S. sovereign debt ratings by S&P affected 's , which saw a fall in the Capitalization Weighted Stock Index (TAIEX) as compared with 2010. On the final trading day, the closing was 7,072.08 points, with a 21.18% loss for the year. The average daily trading value throughout the year fell 5.7% from NT$112.43 billion in 2010, to NT$106.06 billion in 2011. The value of shares traded during the year fell 7.2% to NT$26.20 trillion, a fall of NT$2.02 trillion compared to last year.

Although the stock market was impacted by the instability of global financial circumstances, with the support of shareholders and the dedicated work of our staff, new milestones were once again attained in 2011. The number

Annual Report 2011 of companies listed on TWSE reached 824 (including 34 Taiwan Depositary Receipts, TDRs), 18 Exchange Traded Funds (ETFs) and 6,869 new warrants were issued.

Over the past year, TWSE worked diligently with regulators to drive the stock market in the direction of greater liberalization and internationalization. A series of enhancement measures were adopted in both the primary and 3. Expediting Financial Product Innovation and Meeting Diversified Investment Needs secondary markets in order to augment operating efficiency and service quality, as well as bringing TWSE in line with international practices. These measures are outlined below: In 2011, three domestic ETFs were listed on TWSE, including two ETFs tracking domestic securities and one ETF tracking foreign securities. At the same time, TWSE continuously improved the issuing and trading systems of offshore 1. Encouraging Qualified Domestic and Foreign Companies to List on TWSE and ETFs, in addition to implementing mechanisms to facilitate the participation of foreign institutions in Taiwan's offshore Expanding the Scale of the Securities Market ETFs market; information was collected from various countries regarding listing regulations for offshore ETFs, supervisory information exchange, market-making mechanisms and information disclosure to develop supporting measures. The effectiveness of this measure was seen in 2011, with a record of 46 new companies listed, 25 local (including transfers from GreTai Securities Market to TWSE) and 21 foreign. There were 12 primary listings by foreign companies, TWSE achieved a new record with 13,831 new warrants listed, an increase of 3,788 from 2010, and transaction double the number in 2010. There were also nine secondary listings (TDRs) by foreign companies, calling attention to values continued to climb in a hot market environment. Warrant issuers have been allowed to apply for the issuance of STOCK EXCHANGE STOCK Taiwan as a fundraising platform for foreign companies. derivatives with lower limits (bull contracts) and derivatives with upper limits (bear contracts) since July 1, 2011. 2. Promoting the Internationalization of Market Systems and 4. Strengthening International Cooperation and Communication and Enhancing Service Quality and Efficiency Raising the Visibility of the Taiwan Capital Market

Throughout 2011, TWSE devoted itself to furthering market development, raising service efficiency and aligning with TWSE remains active in international organizations such as the World Federation of Exchanges (WFE), Asian and international practice. TWSE continued to work with listed companies to encourage fully disclosure, while also working Oceanian Stock Exchanges Federation (AOSEF), International Organization of Securities Commissions (IOSCO), Global with TDR issuers to implement and strengthen synchronized information transparency. In April 2011, a real-time Association of Central Counterparties (CCP12) and the World Financial Information Conference (WFIC). AMemorandum system for obtaining material news from TDR primary exchanges was officially completed and online. In promoting of Understanding (MOU) on the sharing of regulatory information was signed with the Hong Kong Exchanges and XBRL financial reporting adoption by listed companies, TWSE has achieved complete uptake with all listed companies Clearing Limited in May 2011. Throughout the year, TWSE also visited Shanghai, Hong Kong and to hold seminars and subsidiaries of financial holding companies using the XBRL format in unconsolidated and consolidated financial to promote TWSE listing advantages to foreign companies. TWSE also attended government investment activities in

TAIWAN reports. In addition, in support of the 2013 adoption of the IFRS system in Taiwan, TWSE has continued to monitor the , Southeast Asia and Japan to accelerate foreign investment in Taiwan, and arranged interviews with local media to implementation of this transfer by listed companies and proactively coordinated various advocacy measures to assist strengthen the international visibility of Taiwan's capital market. companies in this adjustment. Looking forward, TWSE is committed to promoting the internationalization of the capital market, actively building an TWSE remains committed to internationalizing its trading and clearing systems, promoting active market trading and internationally competitive fundraising platform and becoming a regional fundraising center. TWSE will continually increasing the transparency of trading information. In 2011, both market integrity and efficiency were enhanced by enhance information transparency, strengthen cross border regulatory cooperation, and reinforce overseas marketing to services shortening the latency for index and statistical information disclosure to 15 seconds. This included disclosing increase Taiwan market visibility. In the area of market reforms, TWSE will endeavor to promote corporate governance closing information, allowing foreign individual investors to open accounts, adjusting the rate of and corporate social responsibility, while continuing to boost trading system flexibility to enable sound market operation. handling fees to 0.0052% and proposing to allow off-market trading. TWSE will also facilitate the development of new products by planning the introduction of overseas listing products and providing innovative offerings to satisfy the needs of investors for global asset allocation. To stay on the cutting edge of information technology, TWSE completed the promotion of a Network Integration Service and the FIX Communications Integration in June 2011; this step strengthened the integration of information resources Facing a rapidly changing international economic environment and the global capital market, TWSE will take steps to for securities and futures operators. The planning and establishment of a trading system was completed to enable the establish a stable environment for overseas companies and funds, based on a fair, efficient and safe market. TWSE securities market in comprehensively promoting continuous trading. Moreover, adjustments were made to engine room remains committed to advancing Taiwan as an international fundraising platform with distinct competitive advantages, system monitoring and online facilities management in December 2011 to reinforce the services and management of IT and to guiding Taiwan's capital market in the new era of globalization. systems. Simultaneously, the active planning of a new computer center in Banqiao was conducted to provide a secure

environment for computer system processes and fulfill the future development needs of the securities market. Chairman President 04 Statistical Highlights 05

Unit: NT$1,000/1,000 shares

Stocks 2011 (247 trading days) 2010 (251 trading days)

Annual Report 2011 Total Trading Value 26,197,407,640 28,218,675,690

Average Daily Trading Value 106,062,379 112,425,003

Total Trading Volume 650,941,011 817,567,480

Average Daily Trading Volume 2,635,389 3,257,241

Taiwan Depositary Receipts

Total Trading Value 142,183,965 261,905,819

Beneficiary Certificates

ETF Trading Value 360,761,572 199,576,486

Closed-end Funds Trading Value 500,450 222,026

STOCK EXCHANGE STOCK Beneficiary Securities

Total Trading Value 10,640,696 5,011,850

Warrants

Total Trading Value 284,679,372 204,945,028

Corporate Bonds

Total Trading Value 0 0

TAIWAN TAIEX* 7,072.08 8,972.50 Total Listed Companies* 790 758 Total Listed Shares* 602,676,687 581,128,050 Aggregate Capital of Issued Shares* 6,152,380,513 5,927,948,679 Aggregate Market Value of Issued Shares* 19,216,183,278 23,811,416,303 Number of Securities Brokers* 89 90 Number of Securities Dealers* 44 44

* Year-end 06 Business Report 07 Annual Report 2011 STOCK EXCHANGE STOCK Foreword

As the impact of the international financial tsunami was felt around the world, Taiwan's economy displayed incredible results in 2010. Throughout the year, the economy grew by 10.82%, the highest rate in over 20 years. In the first half of 2011, the Taiwan economy continued to strengthen steadily with an average rate of 5.58%, performing better than the U.S., Japan and other developed countries in Europe, and demonstrating more stability than many developing countries such as South and Singapore. Sudden changes in the second half of the year saw global financial markets thrown into turmoil by the deterioration of the European sovereign debt crisis and the lowering of the U.S. sovereign debt rating by S&P. Furthermore, prolonged flooding in affected Taiwan's technology industry.

TAIWAN As global economic conditions deteriorated, Taiwan's economy also felt the impact. The economic growth rate decreased to 4.03%, a significant fall of 6.79% from 2010.

The confidence of Taiwanese investors was affected by the instability of global financial markets and the TAIEX fell by 21.18% on the final trading day of 2011 compared to 2010. The total market capitalization of listed stocks dropped NT$4.59 trillion, and was oversold by NT$27 billion by foreign and mainland area investors. Faced with this grim situation, TWSE regrouped its efforts to expand the market scale. In 2011, there was a total of 46 newly listed local and foreign companies (including TDRs, but no GTSM transfers/FHCs), pushing to a new high from 39 companies in 2010. When comparing the number of newly listed companies on various global exchanges, only Taiwan, Japan and Shanghai showed growth amid recession, demonstrating that Taiwan's role as a center and platform for international fundraising is gaining momentum.

Looking ahead, TWSE will continue to promote the internationalization of the capital market, develop Taiwan into a regional fundraising center, enable sound market measures, accelerate international alignment, facilitate the development of new and diversified financial products, strengthen the service and management of IT systems and increase international competitiveness. TWSE embraces the future with a confident outlook that the Taiwan stock market still has its best years yet to come. The Securities Market in 2011

08 1 Listing 09 In 2011, there were 39 primary listings and 7 delistings. 12 government bonds and 3 ETFs were listed, while 9 government bonds were delisted. 13,831 new call (put) warrants were listed, while 12,657 were delisted. 9 new TDRs were listed, while 1 was delisted.

The status of securities listed on TWSE in 2011 is as follows:

Annual Report 2011 Item 2011 2010 Change

Number 790 758 32 Listed Stocks No. of Listed Companies Trading Volume (billion shares) Trading Value (NT$ billion) No. of Securities Brokerage Firms Shares 602,676,688 (1,000 shares) 581,128,050 (1,000 shares) 21,548,638 (1,000 shares)

790 790 790 790 990 990 990 990 997 997 997 997 800 800 800 800 1200 120012001200 35000 350003500035000 1000 100010001000978 965978 978982965978 965982965 982 982 Listed 741 758 741 758741 741758 758 33,043 33,04333,04333,043 Number 97 94 3 718 718 718 718 1,089 1,0891,0891,089 Government 698 698 698 698 700 700 700 700 30000 300003000029,68030000 29,68029,68029,680 Outstanding 4,656,000,000 (NT$1,000) 4,348,000,000 (NT$1,000) 308,000,000 (NT$1,000) 1000 100010001000 28,219 28,21928,21928,219 Bonds 800 800 800 800 600 600 600 600 887 887 887 887 26,115 26,11526,19726,11526,11526,19726,19726,197 818 818 818 81825000 250002500025000 800 800779800 800779 779 779 500 500 500 500 Exchange 600 600 600 600 Number 18 15 3 651 651 65120000651 200002000020000 Traded 400 400 400 400 600 600 600 600 Funds (ETF) Unit 3,804,899 (1,000 units) 2,231,174 (1,000 units) 1,573,725 (1,000 units) STOCK EXCHANGE STOCK 15000 150001500015000 300 300 300 300 400 400 400 400 400 400 400 400 10000 100001000010000 200 200 200 200 200 200 200 200 Close-End Number 1 1 0 200 200 200 200 100 100 100 100 5000 500050005000 Funds Unit 500,000 (1,000 units) 500,000 (1,000 units) 0 (1,000 units) 97 9597 97919597 95909195 91899091 90 8990 89 89 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2007 2008 20092007 2010200820072011200720092008 200820102009Year200920112010 20102011Year2011YearYear2007 2008 20092007 2010200820072011200720092008 200820102009Year200920112010 20102011Year2011YearYear 2007 2008 20092007 2010200820072011200720092008 200820102009Year200920112010 20102011Year2011YearYear 2007 20082007 2007200920082007 2008201020092008 2009201120102009Year201020112010 2011Year2011YearYear HeadquartersHeadquartersHeadquartersHeadquartersBranches BranchesBranchesBranches Beneficiary Number 7 7 0 Securities Unit 5,369,739 (1,000 units) 5,369,739 (1,000 units) 0 (1,000 units) TAIWAN Call (Put) Number 6,869 5,695 1,174 Warrants Unit 101,991,150 (1,000 units) 65,611,300 (1,000 units) 36,379,850 (1,000 units)

Depositary Number 34 26 8 Receipts Unit 3,612,970 (1,000 units) 3,666,202 (1,000 units) -53,233 (1,000 units) 2 Trading 2. Securities Firms

As of the end of 2011, 91 securities firms had contracts with TWSE to operate in the market. 38 of these only engaged in brokerage operations; 41 ran a combination of brokerage, proprietary dealing and underwriting businesses, with 35 1. Stock Price Movements and Trading Volumes of these also offering margin-financing services. The number of brokerage branches established in Taiwan was 997. 10 In 2011, the TAIEX closed at 7,072.08 points on the last day of trading compared to 8,972.50 points in 2010, a loss 11 of 1,900.42 points and a fall of 21.18%. With over 247 trading days in the year, the range between TAIEX's year-high and year-low was 2,512.02 points. The value of shares traded during the year fell 7.16% to approximately NT$26.20 trillion, a drop of NT$2.21 trillion compared to the NT$28.22 trillion worth of shares traded last year. Trading volume Performance of TAIEX index from Jan. to Dec. 2011 was 650.94 billion shares, a 20.38% fall less when than last year. Points

The total trading value for beneficiary certificates was NT$500 million, a upsurge of 125.40% compared to last 9,300.00 9,025.30 9,145.35 (1/3) (1/28) year. Trading volume was 64 million units, a 120.94% growth over last year. 9,100.00

8,900.00

The total trading value for call (put) warrants was NT$284.6 billion, an advance of 38.91% compared to last year. 8,700.00 Annual Report 2011 Trading volume was 296.82 billion units, a 45.44% improvement from last year. 8,500.00

8,300.00

The total trading value for TDRs was NT$142.1 billion, a decrease of 45.71% compared to last year. Trading 8,100.00 volume was 11.08 billion units, a decline of 37.06% compared to last year. 7,900.00

7,700.00 The total trading value for ETFs was NT$361 billion, an increase of 80.76% compared to last year. Trading 7,500.00 volume was 9.27 billion units, a rise of 67.69% compared to last year. 7,072.08 7,300.00 (12/30) 7,100.00 The total trading value for beneficiary securities (real estate asset investment trust funds) was NT$10.6 billion, an increase of 112.31% compared to last year. Trading volume was 767 million units, an increase of 60.52% 6,900.00 compared to last year. 6,700.00 6,633.33 (12/19) 6,500.00 1/3 1/19 2/14 3/3 3/21 4/8 4/26 5/13 5/31 6/17 7/5 7/21 8/8 8/24 9/9 9/28 10/17 11/2 11/18 12/6 12/22 Date STOCK EXCHANGE STOCK

2011 Securities Trading Summary

Item 2011 2010 Change

The Five Most Active Stocks in 2011 (NT$ billion) The Five Biggest Industries in Terms of Market Capitalization in end-2011 (NT$ billion) TAIEX (last day of trading) 7,072 8,972 -21.2% 1,9641,964 3,3703,370 Trading value (NT$ million) 26,197,407 28,218,676 -7.2% 2,0002,000 3,5003,500 (17.54%)(17.54%) Listed Stocks Trading volume (million shares) 650,941 817,567 -20.4% 1,8001,800 3,0003,000 1,5291,529 Daily average price (NT$ million) 106,062 112,425 -5.7% 1,6001,600 2,4612,461 (12.81%)(12.81%) 1,4001,400 2,5002,500

TAIWAN 1,9211,921 1,2001,200 2,0002,000 (10%)(10%) Trading value (NT$ million) 360,762 199,576 80.8% 1,6101,610 ETFs 1,0001,000 916916 886886 (8.38%)(8.38%) Daily average price (NT$ million) 1,461 795 83.8% 1,3151,315 1,5001,500 800800 788788 780780 (6.84%)(6.84%) 676676 600600 1,0001,000 Call (Put) Trading value (NT$ million) 284,679 204,945 38.9% 428428 400400 Warrants 318318 Daily average price (NT$ million) 1,153 817 41.1% 5,005,00 200200 105105 Trading ValueTrading Value 0 0 Market CapitalizationMarket Capitalization 0 0 IndustriesIndustries Trading value (NT$ million) 142,184 261,906 -45.7% High TechHigh Tech Hon HaiHon Hai MediaMedia TaiwanTaiwan WintekWintek SemiconductorsSemiconductorsFinanceFinanceCommunicationsCommunicationsPlasticPlastic ComputerComputer TDRs ComputerComputer PrecisionPrecision Tek.Tek. SemiconductorSemiconductor &Insurance&Insurance NetworksNetworks AccessoriesAccessories Daily average price (NT$ million) 576 1,043 -44.8% ManufacturingManufacturing (2) Events held Overseas: TWSE visited Shanghai, Hong Kong and Japan to host the Franchises Returning to List in Taiwan Forum, TDRs Listing Seminar and Japanese Companies Listing in Taiwan Forum. TWSE also visited local qualified companies and promoted the listing of such foreign companies in Taiwan.

(3) Events to promote investment in Taiwan: In adherence with the Council for Economic Planning and 12 Development's (CEPD) Ten Key Service Industries-Themed Monthly Activities, TWSE hosted the Strengthening 13 the Construction of a Fundraising Platform for the High-technology and Innovative Industries Forum, arranging a variety of topics to advocate policies and exchange opinions with participants. TWSE participated in the CEPD's investment promotion delegation to Japan in response to the government's global investment promotions, attracting Japanese companies to invest in Taiwan and promoting business exchanges and cooperation between Taiwan and Japan. TWSE also participated eight times in the Ministry of Economic Affairs' (MOEA) 2011 Taiwan Business Alliance, touring large cities in and various locations in Southeast Asia to host approximately 20 Taiwan business forums while visiting many local Taiwan-invested companies.

c) Tangible Results of Promotion

Annual Report 2011 Business Achievements in 2011 (1) A total of 27 domestic issuers successfully listed on TWSE, of which 25 submitted listing applications in 2011.

Under the guidance of the regulator, TWSE implemented various operational measures in accordance with its (2) Throughout the year, 16 foreign companies submitted primary listing applications in Taiwan, with 12 newly listed. A further 15 TDR issuance applications were submitted for secondary listings, with 9 TDRs newly listed. annual plan to promote the healthy development of the securities market. Major achievements were as follows:

2. Strengthening of Governance and Services 1 Listing for Listed Companies

a) Enhancing the Verification and Public Disclosure of Material Information

STOCK EXCHANGE STOCK 1. Expanding the Scale of the Securities Market: Encouraging Domestic and (1) 30,243 pieces of material information were verified Foreign Companies to List in Taiwan and disclosed to the public. TWSE also made 852 material information checks and hosted 154 press a) Amending Regulations conferences on material information. (1) TWSE amended its relevant regulations and enhanced transparency in the information disclosure of listed (2) Regulations related to material information were companies, protected investor rights, assisted companies in establishing integrity in corporate culture and amended, raising the upper penalty limit for setting up a remuneration committee, while expanding the eligible rules and facilitating the access to capital violation of material information regulations to market entry for agricultural-based enterprises. NT$5 million. (2) TWSE amended its regulations regarding the review of listing applications, the supervision of listings, information (3) Implementing and strengthening TDR issuers' synchronized information disclosure: When filing listing disclosure and margin trading. These amendments simplified the review process for foreign companies applying applications to TWSE, TDR issuers shall ensure that a material information synchronized reporting system has TAIWAN for primary listing, allowed foreign primary listed companies to buy back listed shares, strengthened the investor been established, and provide a letter of commitment for submitting documents to their primary listed exchange/ information inquiry system and allowed a no par value or par value not limitation of NT$10 per share for the regulatory authorities and TWSE at the same time. foreign primary listed shares in Taiwan, (4) On May 12, an MOU on the sharing of regulatory information was signed with the Hong Kong Exchanges and b) Promoting Advocacy Clearing Limited as a foundation for mutual information sharing. (1) Events held in Taiwan: TWSE hosted the 2011 Intermediaries Forum, 2010 Underwriters, Accountants and (5) TWSE commissioned Reuters to establish a System to Obtain Real-Time Primary Market Material Information Lawyers Award Ceremony, Underwriters Promotional Event, Strengthening the Construction of a Fundraising for TDRs, going online from April. Platform for the High-technology and Innovative Industries Forum, Listed Company Responsible Persons Forum and Listed Company-related Business Event, Overseas Companies Forum, Listed Companies Performance (6) TWSE invited secondary listing companies and depositary institutions to attend three training courses on the Report Event, Listed Company Expo and TDR Forum. These events enhanced intermediaries’ understanding handling of TDR material information as well as financial reports. of laws while recognizing outstanding performance and significant contributions to the capital market, provided channels of assistance to help companies solve issues during their listing applications, and established a (7) The handling of the earthquake situation in Japan: On the day of the 331 earthquake hitting Japan, TWSE platform for communication between foreign companies and investors. Visibility of foreign-listed companies in immediately informed listed companies to make self-evaluation as to their circumstances. Where conditions the Taiwan capital market was increased and the confidence of the investing public was also boosted, while seriously affected company operations, shareholders' rights and security prices, listed companies were asked advocating policies and conducting discussion on important market issues. All the above served as a future to release material information in accordance with Article 2-49 of the TWSE Procedures for Verification and direction in policies for promoting business. Disclosure of Material Information. (4) Short-term third-stage goal – For financial statements in the fourth quarter of 2011, the classification standards of a third stage of footnotes were deliberated. The proposal of a classification standard working group was 14 discussed, and footnote classification standards developed according to the outcome of meeting discussions, 15 while adjusting XBRL reporting tools and systems. Moreover, in order to enhance the understanding of all companies of the third-stage report content addition of financial statement footnotes in the form section, seven training seminars were held from December 2011 to January 2012.

(5) In accordance with the 2013 implementation of IFRS, TWSE conducted the translation of IFRS classification standards and, in June 2011, completed the translation of the four major statements and 2,268 labels in the financial statement footnotes, while providing a report to the regulators after a successful review submitted to IASB, and placed on the IFRS Download Area as a reference for all.

d) Promoting the Adoption of International Accounting Principles in Taiwan (IFRS) Annual Report 2011 b) Enhancing the Efficacy of Corporate Governance (1) On March 2011, the first listed company questionnaire survey was conducted to assist the regulators to (1) From April 12 to April 15, 2011, the regulators, with MOEA, hosted a forum on Corporate Operation and understand the progress of listed companies in adjusting to IFRS information systems. Furthermore, experts Social Responsibility, undertaken by TWSE and GreTai Securities Market (GTSM). This forum allowed the from industry, government and academia were invited to convene a meeting on how to assist companies in IFRS administration to listen to thoughts and suggestions from companies while expounding upon government policy conversion of information systems; after which, a Guide to the Assessment of Practices in the Adjustment of initiatives. A manual of forum minutes was published and a Corporate Social Responsibility webpage area was Information Systems was compiled. created for the reference and exchange of companies and related parties. (2) From April 2011, TWSE published a monthly IFRS conversion planning progress schedule for the preparation (2) TWSE amended the related articles of TWSE's Rules Governing Review of Securities Listings, for enforcement of IFRS conversion progress control and online publication for TWSE-listed, GTSM-listed, emerging company from June 9. These amendments were conducted in tune with the added Article 14-6 of the Securities and and chartered financial industries. TWSE conducted a monthly inspection of execution progress and submitted a Exchange Act (the Act), stating that listed companies should establish a remuneration committee; and the report to the regulators, focusing on companies who were seriously behind in schedule. TWSE also collected the announcement published by the in accordance with the authority given by the Act, stipulating "Regulations published conversion planning information from FHCs, and investment trust consultants, providing these to Governing the Appointment and Exercise of Powers by the Remuneration Committee of a Company Whose the regulators. Stock is Listed on the Stock Exchange or Traded Over the Counter".

STOCK EXCHANGE STOCK (3) In July 2011, seven events for Persons in Charge of Companies Implementing IFRS Events were held, in the (3) TWSE conferred the Award to Excellent Disclosure of Corporate Social Responsibility Report on listed hope that through face-to-face communication with people in charge, companies will produce IFRS financial companies: In response to the strongly advocated international trend for corporate social responsibility and to statements in 2013. encourage listed companies to pay greater attention to the compilation of corporate social responsibility reports, TWSE commissioned external scholars and experts to select 10 listed companies with outstanding performance (4) TWSE commissioned Professor Yann-ching Tsai's study team to conduct a Research Project on the Full Adoption in disclosing corporate social responsibility report. The recipients of the award were recognized on November of International Financial Reporting Standards, 26, 2011 at the 2011 Listed Companies Expo, one of the TWSE 50th anniversary celebration activities, converting the 2010 financial statements of including Corp., Lite-On Technology Corp., United Microelectronics Corp., Taiwan Semiconductor five listed companies, such as TSMC, into the Manufacturing Co. (TSMC), Asustek Computer Inc., AU Optronics (AUO), , Wistron Corp., IFRS statement. The project was completed in CTCI Corp., and Sinyi Realty, Inc. (in order of stock code). September 2011, and not only was it promoted in the IFRS First Year Commencement Event, it c) Promoting the Adoption of XBRL to file Financial and Business Information is also available for reference in the IFRS Area. TAIWAN (1) In accordance with the complete adoption of XBRL-only reporting in all 2010 financial statements, TWSE has (5) In August 2011, TWSE and GTSM co-hosted amended regulations, with a public announcement under process, discussed and formulated the launch of the the IFRS potential talent study camp and Market Observation Post System, GTSM and conglomerate database in addition to analyzed management conducted relevant courses to train domestic reports on the related effects of information integration on production. These actions addressed many matters IFRS talent. related to system changes. (6) In September 2011, TWSE and GTSM co- (2) Short-term first-stage goal – From the fourth quarter of 2010, all financial statements were published using hosted the IFRS First Year Commencement XBRL format with the new addition of financial statement footnotes in the text section. For the fourth quarter of Event to show companies the determination of the government in meeting implementation expectations for IFRS 2010 and first quarter of 2011 all listed companies and FHC subsidiaries completed parent company financial accounting principles in Taiwan, while internationally promoting the first year of Taiwan entering IFRS. statement publications (a total of 796 and 778) and consolidated financial statement publications (732 and 726). (7) In 2011, three second sub-group consultation meetings were held, and focused mainly on adjusting IFRS (3) Short-term second-stage goal – For financial statements in the second quarter of 2011, accounting policies were accounting items and codes, collecting the challenges that companies may encounter when entering IFRS and classified with more detail and divided into sections and labels, the contents of each section were made public discussing related solutions, updating the compiled content of the main differences between IFRS and ROC GAAP and were developed according to classification standards. At the same time, in conjunction with the adjustment and producing Financial Statement Differences and Influences from International Insurance Companies Conversion. of reporting tools and systems, a training video was recorded and placed on WEBPRO for online learning for all the companies. The majority of listed companies and FHC subsidiaries have completed 2011 second-quarter (8) Throughout 2011, TWSE and GTSM co-hosted 15 IFRS training and promotional events for TWSE-listed, GTSM- individual and consolidated financial statement publications (790 and 739, respectively). listed and emerging companies. 2 Trading

1. Market Reforms 16 a) Adjusting the Auction Reference Price at Market Opening 17 The adjustment of the auction reference price at market opening has been implemented since March 28, 2011 to allow investors handling price fluctuations in daily reportable transactions for desired securities to adjust with market trends, increase transaction opportunities and elevate the efficiency of a market requiring price-reflexive transactions.

b) Reducing the Latency of Index and Statistical Information Disclosures

To facilitate investors in transaction decisions through a solid grasp of accurate information, references were made to the latency of index disclosures in the Asian region. The latency of indexes, trades and statistical transaction information requests has been shortened to 15 seconds since January 17, 2011, synchronizing disclosure with Annual Report 2011 FTSE's Taiwan Index Series. Moreover, in addition to the overall market, the real-time statistical information for h) Abolishment of T day Settlement for Block Trade Transactions transactions and commissions were classified into stocks, funds and warrants. As the transaction date and settlement volume for block trade transactions occupy a relatively low percentage c) Before Market Close Data Disclosure of overall block trading, no effective method can be applied to keep investors from selling the shares which are not yet delivered to the account due to different settlement period. Therefore, the settlement date for a To provide investors with more trading references, TWSE has launched an order matching simulation mechanism block trade is the second business day after the transaction date (T+2), related regulations were revised modeled on measures used by major stock exchanges across the world. According to the intervals of the intraday accordingly, effective since December 19, 2011. call auction (currently approximately every 20 seconds), during the five minutes before the closing session the simulation mechanism will simulate deals and disclose the highest bidding price and the lowest asking price as i) Adjusting Reporting Procedures for Omnibus Trading Account (OTA) trading references. In addition, supporting measures similar to the Intraday Volatility Interruption System will be TWSE adjusted the OTA information reporting timeline in order to prevent securities firms from delaying adopted during the closing system. When the simulation price of a stock rises or falls more than 3.5 percent in the declarations and affecting follow-up computer operations. A securities firm shall submit the itemized post- last minute before the closing session, stock trading will be suspended from 13:31, for two minutes. During the allocation transaction statement to TWSE between 3 pm and 6 pm on T-day, in the prescribed electronic suspension period, investors may add, cancel or adjust an order. The simulation mechanism will continue to match format. However, if the securities firm is unable to complete transaction allocation operations for an OTA orders and disclose the highest bidding price and the lowest asking price until the calculation of the weighted index

STOCK EXCHANGE STOCK with foreign principals, it may report by 6 pm of T-day and preserve unallocated information in the prescribed closing level at 13:33, to provide more market information to investors. electronic format under the original OTA; it must report a partial allocation adjustment with respect to the d) Allowing Foreign Individual Investors in Taiwan to Open NTD Accounts Through Domestic Agents itemized transaction information by 6 pm of T+1 day. This measure became effective on March 26, 2012.

To facilitate overseas Chinese and non-resident foreigners selling stocks, TWSE added Article 77-2 to the Operating j) Study and Development of Off-market Trading Rules of the Taiwan Stock Exchange Corporation, stipulating that overseas Chinese and foreign nationals who meet Under the supervision of the regulators, TWSE deliberated the influences of off-market trading on collective certain requirements may appoint lawyers, accountants, banks or security dealers to act as agents in the opening of market pricing, the elevation of Korea to a developed market by the UK's FTSE and its resulting effects, NTD accounts, with certified documents required for the identification of the deputy agent. This was announced and and the related off-market trading regulations in Korea. The Securities and Futures Institute (SFI) was became effective on July 29, 2011. commissioned to conduct a project researching the above issues. Research was completed in November e) Setting Out Ways for Foreign Issuers to Repurchase Listed Securities 2011 and reported to the regulators.

In accordance with Article 4 of the TWSE Rules Governing Foreign Issuers' Repurchase of Listed Securities (the k) Strengthening the Unified Reporting Functions for Securities Firms TAIWAN "Repurchase Rules"), foreigners are allowed to repurchase stocks of listed companies using a special account, and TWSE updated functions related to the Supervision and Disclosure for the Wealth Management Businesses related rules have been amended. The rules were announced and became effective on October 27, 2011. of Securities Firms, adding a reporting/monitoring system for the Establishment of Representative Offices and f) Reducing the Rate of Handling Fees Investments for Cross-strait Securities Firms and a Securities Firms Reinvestment Search system. TWSE also established a primary listings (TWSE & GTSM) cross-reference system and implementation method, In accordance with instruction from the regulators, from December 1, 2011, TWSE decreased handling fees from and amended FHC collective market reporting functions, while working with the regulators concerning the the previous rate of 0.0065% discounted by 20% (0.00572%) to a further 20% discount (0.0052%), at the same improvement of the system for underwriters, adjusting the ceiling cap for public procurement of primary time, continuing to allocating the default damages reserve. listings (TWSE & GTSM) and primary issues of TDRs.

g) Developing the TDR Trading Suspension System l) The Actuarial Analysis of the Settlement and Clearing Fund

TWSE devised a system for suspending and resuming trading, applicable to TDRs and call (put) warrants of The regulators approved a project conducting the actuarial analysis of the settlement and clearing fund on which the underlying securities are TDRs and foreign securities, with the revision of related rules conducted in two December 5, 2011, reducing joint responsibility of clearing and settlement funds from NTD$8 billion to NT$6.4 phases. Phase one was implemented in January 2011, executing the system for trading suspension of securities billion. The Special Clearing Fund maintained by TWSE remained the same at NT$3 billion and the Joint during a trading session, with the resumption of trading on the next business day. Phase two was announced in Settlement and Clearing Fund (JSCF) contributed to by securities firms was decreased from NTD$5 billion to August 2011 and implemented in October of the same year, allowing the resumption of trading on the same day NTD$3.4 billion, while a mechanism was implemented allowing securities brokers flexibility in reallocation. following a suspension of trading. 18 m) Margin Trading for Listed Securities 19 (1) Adopting suggestions from the Taiwan Securities Association, starting from May 3, 2011, the margin trading accounts of securities firms as well as the securities and financial services industry were allowed to use USD from margin trading as collateral when borrowing securities on the TWSE SBL system.

(2) To avoid concerns regarding the effect on stock prices by a high volume of short selling, since November 21, 2011, daily maximum short selling of borrowed stocks cannot exceed 20% of the average trading volume during the previous 30 business days per stock.

Annual Report 2011 2. Stimulating Derivative Product Trading

a) Continually improving the offshore ETF issuance and trade system

(1) Opinions were collected from foreign investors taking part in offshore ETF market allocation and trading in Taiwan, formulating packaged measures and providing suggestions to the Central after receiving approval from the regulators. b) Conducting Risk Management Evaluations for Securities Firms (2) Information regarding offshore ETF listing regulations, the monitoring of information transfers and conditions as In 2001, to better understand the situations of securities firms in the implementation of risk management systems well as market mechanisms, and information disclosure was collected from , the UK, , Mexico, according to the Operational Items for Securities Firms' Risk Management Evaluations Procedures, TWSE and Singapore, Hong Kong, Macau and Japan and reported to the regulators. GTSM conducted risk management evaluations for eight securities firms engaged in derivative products business. b) Operations Related to Call (Put) Warrants c) TWSE reviewed the financial statements and audited the finance, business and internal audit operations of (1) Auditing the Issuance of Call (Put) Warrants by Securities Firms securities firms. In 2011, TWSE conducted a review of 230 financial statements, 2,036 monthly sheets and self- STOCK EXCHANGE STOCK capital adequacy reporting sheets and 16 previews of the raising of capital and issuance of securities. Also, 39 The issuance of 13,806 call (put) warrant was audited, a total amount of NT$ 232,969,878 (thousands). routine inspections were conducted into finance, business and internal audit operations. A total of 588 selected and regular cases were audited. (2) Allowing Issuers to Issue Callable Bull/Bear Contracts d) Maintaining Market Order On June 3, 2011, amendments were made to related regulations and implemented on July 1, 2011. (1) Continually Monitoring the Market (3) Organizing Promotional Activities for Warrants Throughout the year, a total of 852 trading irregularities were announced, containing 155 types of listed TWSE and securities issuers co-hosted 30 promotional events for investors. securities and disposal measures were used to deal with 15 types of securities on 71 occasions. Moreover, real-time trading news reports and internet information were monitored, discovering 64 parties with material information that influenced the stock prices of listed companies. Request was made that they deliver public

TAIWAN 3. Strengthening Market Services and Supervision retractions. 12 cross-market monitoring information reports were made.

a) Conducting Securities Firms Internal Control Information Forums (2) Recording and Monitoring of Cable TV Investment and Finance Programs

(1) To acquaint securities agents with the revisions of Criteria Governing the Establishment of Internal Control Throughout the year, around 3,291 cable TV programs on finance and investment analysis and explanation System, a total of 13 information forums were conducted from May 9 to June 2, 2011 for securities firms' were recorded and monitored; summarized program content showed that 8,857 company stocks were auditors and other related persons. recommended. Over 585 listed companies with individual stocks that were evidently promoted or had trading abnormalities were selected from standard sampling and sent through daily e-mails to the Taiwan Securities (2) To enhance the financial structure of securities firms and maintain market trading order, in addition to prevent Association for members to download. Investors were asked to check company financial operations and other violations by securities agents, managers were encouraged to strengthen the monitoring of practitioners' related information through MOPS to ensure prudent investment. In regards to specific cases under inspection, compliance with regulations, and internal audit supervisors should instruct audit staff to thoroughly implement according to the instructions of the regulators, more controversial investment TV programs were monitored and internal controls, while conforming to regulations. From July 25 to September 5, 2011, TWSE conducted seven reports were delivered to the regulators. In addition, TWSE took the initiative to alert regulators of an 10 Sharing and Discussion of Violation Cases information events. A total of 1,196 managers, internal audit additional 290 irregularities including reservations over the qualifications of analysts. supervisors and legal compliance officers attended. 3 Computer Applications and Information Services

1. Executing the Securities and Futures' Peripheral Units Information Transmission 20 Integration Project 21

To carry out information resource integration of the securities and futures' peripheral units, improving the quality and efficiency of information operations, decreasing operational costs and enhancing services provided to the securities and futures industry, Web Integration and FIX Protocol Integration were promoted under the instructions of the regulators. Construction was completed in June 2011 and provided for the industry to use after application. 2. Building a New Computer Center

In order to find a solution to bottlenecks at the Yang Te Center, provide a safe operation environment for computer systems and satisfy the long-term development needs of the securities market, the building of a Banqiao Computer Annual Report 2011 Center (the first information center) has been planned. Discussions on the new computer center's architectural design were initiated with a team of architects. 3. Planning and Implementing a Continuous Stock Trading System

In accordance with TWSE's timetable for the complete promotion of continuous trading, planning for trading system proposals and installation was completed. Related operations including project management, needs analysis, planning and design, as well as development tests will be conducted according to the scheduled timetable. 4. Outsourcing of a Research Project on Cloud Use

In accordance with government policies to provide better services for the market, TWSE requested that the Institute devices, simplifying the operational procedures and reducing labor time. System installation was completed and for Information Industry research the employment of cloud computing technology in the securities market. With the system went online. its Securities Market Cloud Platform and Application Service Needs Research Plan, 18 types of cloud application opportunities in TWSE were simulated; an implementation program for services was formulated, and suggestions on STOCK EXCHANGE STOCK d) TWSE integrated non-trading computer system back-up procedures and elevated the efficacy of system damage the securities market's cloud platform promotional strategies and operational mechanisms were offered, all of which restoration. On October 17, hardware was installed, and backup of the Internet, OPEN, OA, monitoring and all Xin served as future reference for subsequent planning and installation. The research report was completed in July 2011. Yi computer room servers and advanced system data were completed and synthesized with the Xin Yi back-up computer room. 5. Responding to the Latest Personal Data Protection Act (PDPA) e) TWSE continued to promote the system maintenance, product promotion and customer services of the Public In response to the latest PDPA, a personal data protection taskforce was formed, and procedures for a Personal Information Transmission Monitoring Station, Network Information Shop and After-market Information, while Data Inventory and Personal Data Processing Risk Evaluation were completed. The result of the risk evaluation led enriching multi-media service functions of the information center. to the introduction of a remote operations audit control system and proposals to construct a database safety control and audit system. Throughout the year, personal data-related educational courses were held, with a total of 328 7. Maintaining the normal operations and security of the computer trading system, participants. These aimed to enhance staff personal data protection awareness and management. Furthermore, 19 non-trading computer system and network system staff members were certified as leading auditors for the BS 10012 Personal Information Management System. TWSE inspected and maintained the operational conditions of the computer mainframe, trading system network TAIWAN 6. Enhancing IT Systems Service and Management Functions and back-up modem, high/low voltage electricity, uninterruptible power supply, generator, fire control and air a) Improvements were made to the operations and management functions of the trading mainframe, enhancing conditioning, trading system application program, non-trading system network and hardware facilities on a regular system monitoring functions and web facility management to facilitate efficiency when handling irregularities. basis to ensure safety. Adjustments to the converters and firewalls in the Yang Te and Xin Yi computer rooms were completed. Customized 8. Licensing stock indexes software went online as of December 23. TWSE proactively conducted the licensing of stock indexes compiled by TWSE or in cooperation with FTSE. A total b) The integration and virtualization of non-trading computer systems such as Windows, Linux and Unix were of 45 licensing agreements were executed in 2011. completed to boost resource use and system management efficiency, reducing the number of mainframes and space used by computer rooms. The second-stage Windows and Linux resource integration checks were 9. Participating in the Financial Information Exchange Platform service of Taiwan-CA Inc. completed, and the third-stage facility arrival and installation were completed on October 27. The second-stage plans and bidding procedures for the development of a UNIX resource integration system were completed. TWSE developed the Financial Information Exchange Platform with TWCA, hoping to provide the securities industry with a safer information exchange platform, while cutting down industry costs. The TWSE computer c) TWSE conducted the second-stage construction of the Non-trading Computer System: System Message system connected to the platform and went online on July 20, 2010 and with TWCA FINE replaced the previous Management System, centralizing the monitoring of information on the Xin Yi computer room servers and storage information exchange platform service in 2012 to increase financial information exchange service efficacy. 10. Promoting Trading Information Services 3. Participating in International Forums

TWSE strived to sign contracts with domestic and foreign information companies to use trading information TWSE participated in various international forums, including the Forum on Hong Kong and Taiwan Financial products or participate in various TWSE platform operations. Real-time trading information companies such Cooperation in Hong Kong, Futures Industry Association Annual Meeting and Forum on Strengthening Investor 22 as Digital Efficiency, Goldman Sachs, TVBS, Next Media and Jaguar Cars Limited, and real-time stock price Relations and Enhancing International Visibility in Taiwan, Daiwa-Cathay Forum and Forum on Japanese 23 information companies such as NHK and Next VIEW were added to the name list in 2011. The Financial Times Companies Listing in Taiwan in Tokyo, Haixi Conference on The Cross-Strait Economic and Financial Development Limited, a delayed transaction information company, signed a contract with TWSE. in Xiamen, Baoa Forum for Asia on Hainan Island, 12th Five-year Plan and Shanghai-Taiwan Economic Trade 11. Providing a Stock Integrated Information Webpage Service Conference, Lujiazui Forum and Forum on the Greater China Financial Center held in Shanghai, and the DBS Access Asia Conference and World Exchange Congress Asia 2011 in Singapore. An integrated information webpage for all stocks was added to the TWSE website for users to browse and check, allowing for better understanding of listed company trading information and related financial information, 4. Promoting the signing of MOUs in Cooperation with International Stock Exchanges enhancing efficacy when using the TWSE website and assisting users in searching for information, solving issues with scattered website information and inconveniences for users in data collection. On May 12, 2011, an MOU for cooperation in information sharing was signed with the , extending the MOU on the exchange of market information signed by the two exchanges on May 20, 1998 and

Annual Report 2011 taking a step further to strengthen the existing partnership. In total, TWSE has signed effective cooperation MOUs with 28 stock exchanges.

5. Proactively Pursuing Mutually Beneficial Cooperation with Various Stock Exchanges

In March, TWSE visited the and communicated on topics including mutually listed ETFs and the holding of a listed company expo. In May, TWSE visited the and discussion occurred on topics including mutually listed ETFs, the authorization of real-time trading information and the signing of a cooperation MOU. In August, the WFE General Secretary and Hong Kong, South Africa, London and Tokyo Stock Exchanges visited TWSE and exchanged views on international stock exchanges. In November, TWSE held the 50th anniversary forum on international capital market developments, inviting directors of global stock Research and Development for exchanges and industry experts to participate in an in-depth discussion on the challenges faced by global stock 4 exchanges and development trends. the International Business STOCK EXCHANGE STOCK

1. Encouraging offshore ETF and Feeder Fund ETF to List in Taiwan

In 2011, three domestic ETFs were listed on TWSE, including two domestic component ETF and one foreign component ETF.

2. Participating in Activities Held by International Securities Organizations

a) TWSE attended the 8th Annual PASLA/RMA Conference on Asian Securities Lending (PASLA), Annual Meeting of the Global Association of Central Counterparties (CCP12), 20th Annual International Securities Lending Conference (ISLA) in Portugal and 6th Asia/ Oceania CCP Meeting (A/O CCP). TAIWAN

b) TWSE participated in the Financial Information Service Division (FSID) events, including the World Financial Information Conference (WFIC), held in San Francisco, USA, and Asia Pacific Financial Information Conference (APFIC), held in Hong Kong.

c) TWSE attended various meetings held by the WFE, including the Working Committee meeting in Mexico, Statistics Advisory Group meeting in Paris, Annual Conference and Working Committee meeting in South Africa and Regulation Task Force meeting in Singapore. TWSE also participated in events held by the International Organization of Securities Commissions (IOSCO), including the Emerging Markets Committee (EMC) in Rio de Janeiro, Brazil, 36th Annual Conference and Self-Advisory Working Committee meeting in Cape Town, South Africa, EMC Annual Meeting in The Dominican Republic, and the Asian and Oceanian Stock Exchanges Federation (AOSEF)Working Committee meeting in Mumbai, India. 5 Securities Investment Education and Promotion 24 25 1. Arranging Securities Investment Education and Promotion

a) TWSE held the 2011 Industry Knowledge Workshop with training course topics including Prospects of Industrial network in the education and promotion of main and subsidiary companies while hosting a promotion of the Rise and Fall from the Cross-Straits Situation, Current Situation and Future Development Trends of the Smart viewing of video recordings. Phone Industry, Analysis of the Development Trends of Multimedia Products, Current Situation and Future Development Trends of the LED Industry, and Positions and Strategies of Cloud Computing Giants. TWSE invited d) TWSE hosted 14 Forums on Securities Firms Clearing and Settlement and Listed Securities Lending Market experts including Chairman Schive, the HTC IR Director, Epistar R&D Vice President, Wintek Chairman and III Explanation to educate and promote to securities firm employees regarding securities clearing and settlement Director, and analysts to conduct seminars. The courses were rich in content, containing both theory and practice. and listed companies lending market organization and practice guidelines. TWSE staff attended the courses with participants from the Securities and Futures Bureau and GTSM. Annual Report 2011 3. Holding Educational and Promotional Forums on Strengthening the Prevention of b) TWSE hosted the Listed Companies Expo to boost the relationship between listed companies and investors, and Insider Trading and Internal Equity Management enhance the visibility and influence of the Taiwan securities market in the International securities market. A total of 58 listed companies, six ETFs and warrant issuing securities firms, and 12 IT vendors exhibited, conducting 30 a) In order to boost the views of listed company internal persons and various sections of society towards insider listed company information sessions and five investment and financial management seminars. Throughout the two trading regulations' knowledge and abidance, TWSE hosted 10 different educational and promotional activities days, almost 20,000 members of the public participated. on the prevention of insider trading. These activities included promotional workshops, contest events with prizes, advocacy for listed companies, and sending promotional information for the reference of companies listing for c) TWSE held 50 community college financial lectures for the Financial Literacy Project: Investing in the Future Series, the first time. There were a total of 72,841 participants. with a total of 4,500 participants. b) To strengthen full awareness of companies on the Securities Exchange Act regulations regarding to insider d) TWSE hosted the fifth Securities Knowledge Camps for Teachers from Primary and High Schools, lecturing on equity management, various educational and promotional workshops were held on insider equity trading laws. securities market-related systems, investment and financial management. Two camps were held in , and one These workshops were focused on participants from unlisted (GTSM) public companies, listed companies and in , Hualien and respectively, with a total of 503 participants. companies listed for the first time. e) TWSE established a professional service center providing full-time service to investors, and improved the quality of STOCK EXCHANGE STOCK the investor services hotline. Three service personnel and six service hotlines were set up to receive related calls, with almost 15,000 calls for suggestions made throughout the year.

f) TWSE hosted an online quiz game with prizes to the general public regarding the five topics of Investing in the Stocks of Primary Listed Foreign Companies in Taiwan and the Issuance of TDRs, ETFs, Call (Put) Warrants and Stock Market Knowledge. Over 1,200,000 people participated.

g) TWSE hosted the eighth Campus Knowledge King of Securities Investment campus education competitions, to assist students in affirming both theory and practice. 92 tertiary institutions and 3,423 students participated in the competition.

h) In order to increase and develop the understanding of investors in financial products and the capital market, TWSE TAIWAN published educational and promotional leaflets and posters on securities investment, seven different educational and promotional leaflets for topics such as callable (bear/bull) contracts, 11 posters concerning Adjusting Auction Reference Prices at Market Opening etc., and a two-volume picture album illustrating Warrants and TDRs.

2. Holding Business Promotion and Employee Training Seminars

a) TWSE counseled securities firms in the dealing of margin trading and securities lending business, holding nine events starting from the end of December.

b) TWSE held four Securities Firms New System Self-owned Capital Adequacy Training events.

c) TWSE held educational and promotional events on topics including Adjusting Auction Reference Prices at Market Opening, Shortening the Latency of Index and Statistical Information Disclosure, The Market Suspension and Resumption of Trading Measures and Other Business and the Securities Firms Business Explanation Website Live Streaming Event. At the same time, TWSE visited various securities firms and made use of the internal training Objectives for 2012

6 Media Communication and Caring for the Community 1 Promote Internationalization of the Capital Market 1. Develop into a Regional Fundraising Center 26 1. Publishing Material Information and News of the Securities Market a) Promote the listing of qualified domestic and foreign companies 27 TWSE arranged 153 listed companies' material information press conferences, allowing listed companies to b) Cooperate with the Fund-Raising Platform for Hi-Tech and Innovative Firms initiative to stimulate listing applications disclose material information. TWSE also worked to deliver accurate material market information, issued 1,791 for agricultural technology industries bilingual press releases, and received press coverage 689 times. It also worked with the mainstream financial c) Continue to promote the market trading of foreign index ETFs media in Taiwan to cohost investment forums, and delivered a total of 11 speeches, as well as promoting news, advertising and interviews with domestic TV broadcasters, newspapers and magazines. 2. Expedite International Alignment and Strengthen Cooperation

2. Corporate Social Responsibility a) Upgrade the Taiwan stock market to a developed market by adjusting trading, clearing and settlement, and securities lending operations TWSE organized a number of charitable activities to demonstrate its concern for society, particularly for the elderly, Annual Report 2011 children and other people in need who are contributing community members. b) Promote and assist Taiwanese companies in adopting International Financial Reporting Standards in their financial statements a) Providing assistance services to the elderly and displaying the warmth of society, TWSE sponsored the Li Shin Charity Fund to provide food delivery services to the elderly in the Wanhua District. c) Promote and implement the use of XBRL in the Taiwan capital market b) Providing a fair and supportive learning environment for children in situations of economic distress, TWSE sponsored 32 elementary and junior high schools in Taipei City, , City, Miaoli , d) Adopt international protocol standards for information exchange Taichung City, , , Ilan County and to provide after school tutorial governance classes, living allowances and emergency assistance to children in economic hardship. e) Participate in activities arranged by international securities c) Encouraging prison inmates to rehabilitate and reintegrate into society by stimulating their determination and organizations, arrange international meetings and promote strength to change, TWSE sponsored the ROC Light up Cultural Association to arrange 20 Light Up Your Life interaction and cooperation with overseas securities institutions speech tours to prisons across Taiwan. The objective of these speeches was to encourage inmates to change their lives by inviting previously rehabilitated inmates to share their moving life stories of change and positively moving Promote a Comprehensive and Strong 2 STOCK EXCHANGE STOCK forward in society. Mechanism for Market Operation 1. Issuance

a) Promote Better Corporate Governance and Corporate Social Responsibility

(1) Encourage listed companies to develop a comprehensive Corporate Governance System

(2) Educate listed companies to place more emphasis on corporate social responsibility and display more integrity in their business

b) Implement synchronized information disclosure of secondary listed companies TAIWAN 2. Trade: Increase Flexibility of the Trading System

a) Discuss the content of information disclosures at market opening and before market closing, and related supporting measures

b) Promote the comprehensive execution of continuous trading

c) Discuss the adjustment of preferential measures for foreign ETF liquidity providers

d) Develop the use of instant price stabilization measures for warrants

e) Explore the trading suspension system and related measures

3. Clearing: Provide a Comprehensive Clearing System

a) Implement related measures for the actuarial analysis of the Settlement and Clearing Fund, handling the clearing and settlement of securities firms with a monthly tracking mechanism b) Continue to upgrade the TWSE SBL system and bolster the 3. Research the securities market applications of cloud computing management of securities lending transactions 4. Conduct Enhancement of TWSE Personal Data Protection in accordance with the 4. Products: Develop New Products stipulations of the Personal Data Protection Act a) Plan for new put call (put) warrants 5. Reinforce the security of information pathways and management systems

28 b) Discuss the development of new financial products and indices 6. Upgrade IT system management functions 29

5. Information: Set up a platform for the disclosure a) In accordance with the open computer platform of the new trading system, develop open computer platform tools of warrant information and increase information such as system management, scheduling software, delivery software to enhance system management efficiency transparency b) Continue the integration of data backups for non-trading computer systems in order to increase efficacy in data recovery

3 Strengthen Market Supervision and Services c) Increase security by installing Pathway Server Config check tools 1. Reinforce Supervision and Services of Listed Companies d) Continue the virtualization and resource integration of non-trade computer systems to enhance resource use and Annual Report 2011 system management efficacy, decreasing the number of mainframes and space used by the computer rooms a) Toughen the supervision of conglomerates e) Upgrade the power of the non-trade computer system's ISO27001 information security management system to b) Supervise the real-time reporting information and material information disclosure of listed companies increase operational security

c) Strengthen the normal supervision mechanisms over the financial operations of foreign issuers and promote the f) Improve the power and air-conditioning facilities in the Yang Te mainframe room implementation of primary listed company internal control systems 7. Increase IT system service functions d) Assist listed companies in promoting investor relations a) Continue importation of ISO20000 IT flow management tools, thereby strengthening the connectivity of various 2. Boost Supervision of Market Operations information service procedures, providing multi-faceted information on system management and related service management reports for a better grasp of information department efficacy a) Improve efficacy in illegal trading inspections, undertake online and offline market supervision and enhance communication with law enforcement agencies b) Research the securities market's developmental needs for the setting up of a cloud computing infrastructure environment to decrease the securities market information dissemination costs and augment TWSE's trading STOCK EXCHANGE STOCK b) Upgrade the investor database to expand the investor information inquiry system information services

c) Strengthen statistical and analytical operations for specific transactions undertaken by investors c) Promote classification of information services to provide customized information services d) Further cross-market surveillance and relations

e) Strengthen the reporting and management of internet and other reports on trading irregularities that deviate from the fundamentals of individual stocks 5 Enhance Management Efficiency and Performance

3. Enhance Management and Services of Securities Firms 1. Adopt IFRS financial reporting and strengthen financial operations a) Improve audit operations of securities firms

TAIWAN 2. Strengthen internal management and ensure the effective b) Enhance the services provided to securities firms and simplify management measures use of human resources c) Gradually implement new capital requirements for securities firms, and cooperate with IFRS to amend capital 3. Upgrade the functionality of legal and procedural operations requirement calculation methods and reports to strengthen TWSE's personal data protection mechanism d) Host educational and promotional workshops for securities firms in accordance with related legal amendments, and 4. Strengthen internal controls and reduce operational risk the promotion of new products or trading systems

4 Enhance IT Services and Management 6 Compliment Government Policies 1. Set up two information centers in Banqiao to facilitate TWSE's long-term development 1. Promote implementation of the Fundraising Platform for Hi-Tech and Innovative Firms initiative 2. Establish a new IT system: Plan and install computer platforms and related operations required 2. Coordinate with the promotions of the Taipei Financial Zone by the New Trading System 30 Exchange Information 31

Board Members Annual Report 2011

Chairman Schive Chi (Government Appointed)

Bank of Taiwan (Representative:Ming-Daw Chang) Land (Representative:Yao-Shing Wang) CPC Corporation, Taiwan (Representative:Maw-Wen Lin) Mega International Commercial Bank (Representative:Mckinney Y. T. Tsai) China Development Industrial Bank (Representative:Lawrence S. Liu)

STOCK EXCHANGE STOCK Corporation (Representative:Nelson Chang) Directors Fubon Securities Co.,Ltd. (Representative:Jerry Harn) Yuen Foong Yu Investment Company Ltd. (Representative:Show-Chung Ho) Yuanta Securities Co., Ltd. (Representative:Lee-Chiou Chang) Samuel J.S. Hsu (Government Appointed) Tsing-Yuan Hwang (Government Appointed) Len-Yu Liu (Government Appointed) Wang-Ruu Tseng (Government Appointed) Shang-Wu YU (Government Appointed) TAIWAN Supervisors

Resident Chien-Fu Lin (Government Appointed) Supervisor

Hua Nan Commercial Bank, Co., Ltd. (Representative:Jiunn-Chih Wang) Supervisors Chiloo Industries, Inc. (Representative:Hwe-Ching Wong) Internal Audit Office

The Organization Domestic Listing The Executives Department

Foreign Listing Department Shareholders' Meeting Trading Department

32 Clearing Department 33

Surveillance Department Board of Directors Supervisors Chairman Compliance & Inspection Department System Development Department Computer Operation

Annual Report 2011 Department President Committees Market Data & Corporate Systems Department Corporate Communications Department

Senior Executive Corporate Planning & Strategy Department Vice President Finance Department

Administration Department

Legal & Secretarial Services STOCK EXCHANGE STOCK Department

Labor Security Office

TAIWAN Organization Organization

Senior Vice President, Market Data & Corporate Systems / Lung Chao Senior Vice President, Legal & Secretarial Services / Pauline Cheng Senior Vice President, Domestic listing Department / Thann-shing Lao Senior Vice President, Computer Operation / Charles Hsu Executive Vice President, Administration / Labor Security / Shie-jay Yang Executive Vice President, Foreign listing Department / Hui-chuan Tu Executive Vice President, System Development / Chang-ching Lin Senior Vice President, Surveillance / Wen-kuei Hwah Senior Vice President, Internal Audit / Chen-tsung Chiang Senior Executive Vice President / Michael Lin Senior Executive Vice President / Chao-zon Yang Senior Executive Vice President / Lih-chung Chien Senior Vice President, Corporate Planning & Strategy / Shin-chung Chen Senior Vice President, Clearing / Fred Lin Senior Vice President, Compliance & Inspection / Chun-chin Hsieh Senior Vice President, Corporate Communications / Gau-nian Shane Executive Vice President, Trading / Rebecca Chen Senior Vice President, Finance / Wendy Shih

Organization•Left to right 34 Market Activities 35

Major Events in 2011

TWSE announced that, listed companies and primary listed foreign issuers using

Annual Report 2011 ROC GAAP financial reporting should convert to the XBRL format by the deadline for 20 the submission of financial reports. This is apart from those exempt from submitting financial reports with the current TXT format and those continuing to file using written financial statements or electronic books according to provisions set by the regulators, starting from the submission of 2010 financial reports, a n u r y J The FSC announced that apart from when operating overseas funds, securities 28 investment consultancies may not carry out securities investment analysis activities through radio or television media.

1 The FSC announced that securities brokers may use self-owned funds to invest in the futures market and hedge risks. STOCK EXCHANGE STOCK 24 TWSE became the fourth stock exchange in the world to obtain ISO20000 certification. e b r u a y F 25 Japanese company Elpida issued Taiwan TDRs and became the first Japanese company to establish a secondary listing in Taiwan.

The FSC announced that securities investment trust enterprises investing in 1 Mainland China securities with private securities trust funds are limited to listed securities (including underwritten stock) and the invested amount must not be more TAIWAN than 30% of the net asset value of the fund.

In the northeast Japanese Tohoku area, off the coast of Miyagi Prefecture, an 11 earthquake of 8.9 magnitude caused a mighty tsunami as well as the Fukushima nuclear power plant explosion and other natural disasters, leading to global market h

c setbacks.

M a r Taiwan's FSC became a signatory of the International Organization of Securities Counsel's Multilateral Memorandum of Understanding on cooperation and information 15 exchange (IOSCO MMOU); this is one of several MMOUs on cooperation with international organizations. Others include the International Association of Insurance Supervisors' (IAIS) MMOU on the supervision of cooperation in June 1999.

28 On this date, TWSE adjusted the auction reference point at market opening, targeting securities with no previous day closing price. The FSC agreed to the planning and development by the In the evening of August 5, American time, Standard & Poor officially downgraded for a futures market block trading system. Initial plans were to start with the most the United States' credit rating from AAA to AA+, added to the spreading of the 7 actively traded products in Taifex, small Taiwanese stock index futures and Taiwan 6 European sovereign debt crisis to countries such as Greece; the world's major stock stock index options as products to engage in block trading, with no limitations to the markets plummeted with many European countries. The U.S. and Korea followed 36 participants trading in this area. with announcements restricting the short selling of stocks. 37 A p r i l 19 The FSC allowed securities firms to issue callable bull/bear warrants, projecting The FSC announced the relaxing of limitations on the procurement of funds issued

implementation to be in the second half of 2011. u g s t by their company by persons-in-charge of securities investment enterprises and

A 24 members of industry, shortening the minimum holding periods of currency futures 29 The NTD and USD exchange rate closed at 28.763, a new record high in the past 13 from a month to seven days. and a half years. TWSE announced amendments to Article 4 of the TWSE Rules Governing Block 26 Trading of Listed Securities, deleting the settlement date for transaction day settlement during block trading, in effect from December 19, 2011. TWSE and the Hong Kong Exchanges and Clearing Ltd signed an MOU on the

Annual Report 2011 supervision of information sharing, furthering the MOU on the cooperation of y 12 information exchange signed between the two stock exchanges on May 20, 1998 and

M a taking a further step in the strengthening of their cooperation relationship. According The FSC announced considerations on the size of the protection fund and the sound to the MOU, both shall exchange information on events and news that may influence financial structure of the protection agency while taking into account burdens on the market activities. 2 industry, and adjusted the ratio of the required protection fund contributions made by securities and futures firms. The ratio of transaction totals contributed to the protection fund by securities and futures firms was decreased from 0.000285% to 0.000185%.

3 The Financial Consumer Protection Act was passed by the after The FSC announced amendments to certain articles of the Regulations Governing u n e

J three readings. the Banking Activity and the Establishment and the Investment by Financial Institution 7 Between the Taiwan Area and the Mainland Area, deleting the regulations limiting Taiwan banks to enter into Mainland China only as branches and subsidiary banks. The "choose two of three" form of investment and "choose one of two" restrictions on 8 The first TWSE callable bull/bear warrants officially listed on the market. the investing entity were also eliminated. S e p t m b r STOCK EXCHANGE STOCK

The FSC announced the relaxing of the limitations on the total percentage of The Association of East Asian Relations and the Ogaki International Exchange brokers' trading commission of securities investment enterprises through securities Association represented Taiwan and Japan in the signing of the Arrangement investment trust funds. Due to country (regional) investment laws and local securities Between the Association of East Asian Relations and the Interchange Association for 13 market requirements, when the trading total proportion for an individual broker 22 the Mutual Cooperation on the Liberalization, Promotion and Protection of Investment. commissioned by an individual fund surpasses 30% of the fund's total annual trading This provided the greatest breakthrough in Taiwan and Japan relations since the amount, local related requirements should be followed and a request made to the 1972 severance of diplomatic relations. It was also the first significant result seen by FSC for an exemption from limits. Taiwan on foreign economic diplomacy since the cross-strait signing of ECFA.

The FSC members meeting resolved to recognize the completed application and 14 successful obtainment by Ruen Chen Investment Holding Co. of equity in Nan Shan

TAIWAN Life Insurance Co., Ltd. u l y J The FSC announced the establishment of the Regulations on the Conduct of 21 Renminbi Business by Banks in the Taiwan Area, allowing the overseas business units (OBU) of Taiwanese banks and foreign branches to conduct renminbi business. Listing Changes in 2011

Listings: Common Stocks (Total 39 companies) 38 Code Name Date 39

3705 Yungshin Global Holding Corporation 2011/1/3 3598 Ili Technology Corp. 2011/1/11 4746 Formosa Laboratories, Inc. 2011/3/1 3257 Champion Microelectronic Corp. 2011/3/21 3665 Bizlink Holding Inc. 2011/4/21 3694 Azurewave Technologies, Inc. 2011/5/3 8404 Paiho Shih Holdings Corporation 2011/5/18 4942 Chia Chang Co., Ltd 2011/6/27 For the 50th year anniversary of the establishment of TWSE, a 50th year anniversary 3454 Vivotek Inc. 2011/7/22 4935 Global Lighting Technologies Inc. 2011/7/28 Annual Report 2011 tea party and exhibition looking back at history and culture was specially held. Listed 4934 Tainergy Tech Co., Ltd. 2011/8/16 companies, securities firms and senior investors were all invited under one roof. 25 1337 Asia Plastic Recycling Holding Limited 2011/8/17 Vice-President Sean Chen of the Executive Yuan and Chairman Yuh Chang Chen of 3669 Aver Information Inc. 2011/8/25 the FSC personally gave speeches and participated in the entire event. 4984 Coadna Holdings, Inc. 2011/8/31 8199 Huga Optotech Inc. 2011/9/8

O c t o b e r The major American futures broker MF Global unexpectedly filed for bankruptcy 5007 San Shing Fastech Corp. 2011/9/16 protection, becoming the first major American financial institution to file for bankruptcy 8011 Tai Tung Communication Co., Ltd. 2011/9/19 31 due to the European sovereign debt crisis. In reference to assets, they were the 1789 Scinopharm Taiwan, Ltd. 2011/9/29 eighth largest bankrupt case in American history. 3698 Lextar Electronics Corp. 2011/9/29 3645 Taimide Tech. Inc 2011/10/5 3679 Nishoku Technology Inc. 2011/10/5 4144 Coland Holdings Limited 2011/10/5 8422 Cleanaway Company Limited 2011/10/5 5706 Phoenix Tours International, Inc. 2011/10/21 The FSC, Executive Yuan and the Public Company Accounting Oversight Board 4956 Epileds Technologies, Inc. 2011/10/24 STOCK EXCHANGE STOCK

e m b r 18

v (PCAOB) signed an agreement on cooperation supervision. 4960 Chi Mei Materials Technology Corp. 2011/10/24 5906 Enterprise(Cayman)Co., Limited 2011/10/24 N o 4952 Generalplus Technology Inc. 2011/11/1 6702 Transasia Airways Corporation 2011/11/1 8411 Kingcan Holdings Limited 2011/11/1 The FSC announced the approval of a draft regulation adjustment submitted by 3149 G-Tech Optoelectronics Corporation 2011/11/23 6 TWSE and GTSM. From January 1, 2012, foreign companies applying to list on the 5880 Taiwan Cooperative Financial Holding Co., Ltd. 2011/12/1 (GTSM) and emerging stock markets may issue no-par or par value not limited to $10. 6183 Trade-Van Information Services Co. 2011/12/1 8210 Chenbro Micom Co., Ltd. 2011/12/1 8427 Keysheen (Cayman) Holdings Co., Limited 2011/12/6 The FSC announced that in response to the European sovereign debt crisis, when 5871 Chailease Holding Company Limited 2011/12/13 15 calculating unrealized gains or losses with the capital adequacy ratio, the investment 4426 Li Cheng Enterprise Co.,Ltd. 2011/12/16 TAIWAN industry must carry out the valuation using the average calculated price from the 4958 Zhen Ding Technology Holding Limited 2011/12/26 daily closing price in the six months prior to the day of calculation. 5215 Ko Ja (Cayman) Co., Ltd. 2011/12/26

The FSC announced that the effective date of liquidity investment by Mainland Chinese banks in Taiwan was set at January 2, 2012. The shareholdings of an Delistings: Common Stocks (Total 7 companies) 20 individual Mainland Chinese bank must not exceed 5% of the Taiwanese bank or Code Name Date FHC subsidiary being invested in and the combined shareholding with other investors D e c m b r from Mainland China must not exceed 10%. 1716 Yung Shin Pharm. Ind. Co., Ltd. 2011/1/3 6012 Taiwan International Securities Corporation 2011/5/2 2463 Aaeon Technology Inc. 2011/6/1 The FSC agreed to preparation for the establishment of Taipei branches of Mainland 3534 Ralink Technology Corp 2011/10/1 22 China's Bank of China in addition to the Bank of Communications as the first wave of 2854 Polaris Securitues Co., Ltd. 2011/10/3 Mainland China banks establishing branches in Taiwan. 3367 Inventec Appliances Corp 2011/10/7 5854 2011/12/1 Listing: ETFs (Total 3 funds) Market Performance Code Name Date

6203 PMT 2011/5/12 6205 Fubon SSE180 2011/9/26 40 6204 Sinopac TAIEX ETF 2011/9/28 41

TAIEX Listing: TDRs (Total 9 companies) Taiwan 50 Index Code Name Date Trading Value Trading Volume 910801 Golden Meditech Holdings Limited 2011/1/24 916665 Elpida Memory,Inc. 2011/2/25 10,000.00 95 1900 911616 Dukang Distillers Holdings Limited 2011/3/9 9,145.35 912000 SIM Technology Group Limited 2011/4/25 (1/28) 90 1800 Annual Report 2011 911619 HISAKA Holdings Ltd. 2011/6/24 85 1700 910708 New Media Group Holdings Limited 2011/7/19 911622 Tycoons Worldwide Group (Thailand) Public Co. 2011/9/29 80 1600 910069 Serial System Ltd. 2011/10/5 911626 Multi Sports Holdings Ltd 2011/12/30 8,000.00 75 1500

70 1400 Delisting: TDRs (Total 1 company) 65 1300 Code Name Date 6,633.33 60 1200 9102 Eastern Asia Technology Limited 2011/1/17 (12/19) 6,000.00 55 1100

Listing: Government Bonds (Total 12 kinds) 50 1000 STOCK EXCHANGE STOCK

Code Name Date 45 900 A00101 Central Government Construction Bonds 2011/1/5 40 800 A00102 Central Government Construction Bonds 2011/1/13 4,000.00 A00103 Central Government Construction Bonds 2011/2/14 35 700 A00104 Central Government Construction Bonds 2011/2/22 A00105 Central Government Construction Bonds 2011/3/17 30 600 A00201 Central Government Construction Bonds 2011/5/26 A00106 Central Government Construction Bonds 2011/7/20 25 500 A00107 Central Government Construction Bonds 2011/8/2 Trading Volume : 100 million shares

A00108 Central Government Construction Bonds 2011/8/22 Trading Value : NT$100 billion 2,000.00 20 400 A00109 Central Government Construction Bonds 2011/9/30 TAIWAN HB0001 Kaohsiung Provincial Construction Bonds 2011/10/17 15 300 HB0002 Kaohsiung Provincial Construction Bonds 2011/12/13 10 200 Delisting: Government Bonds (Total 9 kinds) 5 100 Code Name Date 0 0 0.00 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 A95101 Central Government Construction Bonds 2011/1/6 D96101 Kaohsiung Provincial Construction Bonds 2011/1/7 2010 2011 A90101 Central Government Construction Bonds 2011/1/9 00955 Central Government Construction Bonds 2011/3/22 C90101 Taipei Provincial Construction Bonds 2011/5/30 C90102 Taipei Provincial Construction Bonds 2011/7/18 A95105 Central Government Construction Bonds 2011/7/20 A86309 Central Government Construction Bonds 2011/8/23 A98107 Central Government Construction Bonds 2011/10/21 Financial Review Report of Independent Accountants

42 To the Board of Directors and Stockholders of Taiwan Stock Exchange Corporation 43

We have audited the accompanying non-consolidated balance sheets of Taiwan Stock Exchange Corporation as of 31st December 2011 and 2010, and the related non-consolidated statements of income, of changes in stockholders' equity and of cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these non-consolidated financial statements based on our audits. We did not audit the 2011 and 2010 financial statements of Taiwan Depository and Clearing Corporation, Taiwan-Ca. Inc. and Taiwan Ratings Corporation, investees accounted for under the equity method. These long-term equity investments amounted to NT$7,215,265 thousand and NT$6,600,075 thousand as of 31st December 2011 and 2010, respectively, and their related investment income amounted to NT$813,854 thousand Annual Report 2011 and NT$827,572 thousand for the years then ended. These financial statements were audited by other auditors, whose reports thereon were furnished to us and our opinion, insofar as it relates to the amounts included in the financial statements relative to these long-term investments, is based solely on the reports of other auditors.

We conducted our audits in accordance with the "Rules Governing the Examination of Financial Statements by Certified Public Accountants" and generally accepted auditing standards in the Republic of China. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the reports of other auditors provide a reasonable basis for our opinion.In our opinion, based on our audits and the reports of other auditors, the non-consolidated financial statements referred STOCK EXCHANGE STOCK to in the first paragraph present fairly, in all material respects, the financial position of Taiwan Stock Exchange Corporation as of 31st December 2011 and 2010, and the results of its operations and its cash flows for the years then ended, in conformity with the "Criteria Governing Preparation of Financial Reports by Company-Type Stock Exchanges" and generally accepted accounting principles in the Republic of China. TAIWAN

27th March 2012 Taipei, Taiwan BALANCE SHEETS Unit: NT$ 1,000 Unit: NT$ 1,000 31st December, 2011 and 2010 2011 2010 2011 2010

ASSETS Amount % Amount % LIABILITIES AND STOCKHOLDERS’ EQUITY Amount % Amount % 44 45 Current Assets Current Liabilities Cash and cash equivalents $ 27,331,794 42 $ 42,641,046 51 Payable for securities settlement service $ 36,518 - $ 82,660 - Available-for-sale financial assets 1,917,096 3 5,075,990 6 Accrued expenses 828,720 1 777,231 1 Held-to-maturity financial assets 2,050,242 3 1,274,060 2 Income tax payable 133,058 - 206,672 - Accounts receivable-net 234,925 - 454,111 1 Securities lending and borrowing collateral payable 21,816,597 34 40,722,402 49 Interest receivable 146,789 - 148,105 - Other current liabilities 518,840 1 516,588 1 Other receivables-net - - 147,398 - Total Current Liabilities 23,333,733 36 42,305,553 51

Annual Report 2011 Other current assets 5,831 - 5,946 - Other Liabilities Total Current Assets 31,686,677 48 49,746,656 60 Default damages reserve 8,192,994 12 8,036,253 10 Funds and Long-term Investments Deposits received 43,915 - 45,800 - Held-to-maturity financial assets-noncurrent 15,563,415 24 16,341,349 20 Reserve for land value increment tax 44,599 - 44,599 - Financial assets carried at cost-noncurrent 821,652 1 821,652 1 Total Other Liabilities 8,281,508 12 8,126,652 10 Default damages fund 8,171,010 13 7,995,246 9 Securities Settlement Credit - - - - Long-term equity investments accounted for under the equity method 7,215,265 11 6,600,075 8 Total Liabilities 31,615,241 48 50,432,205 61 Total Funds and Long-Term Investments 31,771,342 49 31,758,322 38 Property, Plant and Equipment Stockholders' Equity Original Cost Capital stock STOCK EXCHANGE STOCK Land 129,496 - 129,496 - Common stock 5,983,213 9 5,837,281 7 Buildings 180,233 - 180,233 - Capital reserve Computer equipment 449,942 1 1,459,305 2 Capital reserve 37,682 - 37,682 - Other equipment 285,686 1 498,258 1 Retained earnings Appreciation – land 37,084 - 37,084 - Legal reserve 4,197,006 6 3,933,324 5 1,082,441 2 2,304,376 3 Special reserve 21,220,762 33 19,849,613 24 Less:Accumulated depreciation ( 515,015 ) ( 1 ) ( 1,601,393 ) ( 2 ) Unappropriated earnings 2,472,842 4 2,660,919 3 Construction in progress and prepayments on equipment 811,063 1 101,612 - Other adjustments to Stockholders' Equity

TAIWAN Total Property, Plant and Equipment 1,378,489 2 804,595 1 Unrealized gain or loss on financial instruments ( 201,780 ) - 49,966 - Other Assets Total Stockholders' Equity 33,709,725 52 32,368,785 39 Rental assets 85,203 - 85,657 - Commitments Operations guarantee deposits 300,000 1 300,000 1 Significant Subsequent Event Refundable deposits and miscellaneous assets 103,255 - 105,760 - Total Other Assets 488,458 1 491,417 1 Securities Settlement Debit - - - - TOTAL ASSETS $ 65,324,966 100 $ 82,800,990 100 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 65,324,966 100 $ 82,800,990 100 INCOME STATEMENTS Unit: NT$ 1,000 31st December, 2011 and 2010 2011 2010

ASSETS Amount % Amount % 46 Operating revenues Trading fees $ 3,069,329 62 $ 3,309,108 65 Market data fees 417,841 8 412,894 8 Listing fees 858,505 17 745,346 15 Computer and other equipment fees 82,252 2 82,658 2 Data processing fees 142,193 3 195,208 4 Others 373,317 8 321,257 6

Annual Report 2011 Total Operating Revenues 4,943,437 100 5,066,471 100 Operating expenses Personnel ( 1,223,911 ) ( 25 ) ( 1,209,085 ) ( 24 ) General and administrative ( 2,388,686 ) ( 48 ) ( 2,386,584 ) ( 47 ) Total Operating Expenses ( 3,612,597 ) ( 73 ) ( 3,595,669 ) ( 71 ) Operating income 1,330,840 27 1,470,802 29

Non-operating income Interest income 741,037 15 668,554 13 Equity in net income of investee companies 813,854 16 827,572 16 STOCK EXCHANGE STOCK Gain on disposal of investments - - 150,932 3 Other income 36,449 1 24,191 1 Total Non-operating Income 1,591,340 32 1,671,249 33 Non-operating expenses Interest expense ( 13,093 ) - ( 69,114 ) ( 1 ) Loss on disposal of investments ( 19,007 ) ( 1 ) - - Other expenses ( 65,918 ) ( 1 ) ( 84,621 ) ( 2 ) Total Non-operating Expenses ( 98,018 ) ( 2 ) ( 153,735 ) ( 3 )

TAIWAN Income before income tax 2,824,162 57 2,988,316 59 Income tax expense ( 355,884 ) ( 7 ) ( 351,491 ) ( 7 ) Net income $ 2,468,278 50 $ 2,636,825 52

Pre tax After tax Pre tax After tax

Basic earnings per share (NT$) $ 4.72 $ 4.13 $ 4.99 $ 4.41