CONTENTS Annual Report 2011 TAIWAN STOCK EXCHANGE 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 Taiwan's stock market, which saw a fall in the Taiwan Stock Exchange 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 Japan 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 China, 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 New Taiwan dollar 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