Message from the Chairman

I. Introduction

1. Profile

2. Objective and Mission

II. TSA Organization

1. TSA Organization Chart

2. General Assembly

3. Board of Directors

4. Board of Supervisors

5. Committees

6. Association Affairs

III. Work Report

IV. Work plans for 2017

Appendix

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Contents2 16ANNUAL REPORT

Taiwan Securities Association

2 16ANNUAL REPORT

Passion．Professionalism．Efficiency．Innovation

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Message from the Chairman

I. The Momentum of the Securities Market is Inconsistent with the Pace of the IndexLooking back at the previous year, Taiwan's securities market/centralized market's TAIEX rose from 8,611 to 9,307, showing an increase of 10.98%; demonstrating the best performance among Asia's stock markets. The total market value of TWSE/TPEx listed companies increased from NT$27.2 trillion to NT$30.0 trillion; showing a gain of 10.29%. However, the average daily value of TWSE/TPEx listed stocks dropped from NT$116.2 billion to NT$98.8 billion; showing a 14.97% decrease. The net income for all securities firms showed an unsatisfactory performance of NT$19.4 billion after taxes; an EPS of NT$0.625 and an ROE of 4.11%. Compared to the net income of 2015 (NT$26.1 billion), this was a drop of 25.67%.

II. Major Accomplishments in 20161. Continued to support the suspension of trading tax for corporate bonds and financial bonds

To revitalize the bond market, help enterprises raise funds, and promote the growth of the capital market, the Association has recommended the continued suspension of trading taxes for corporate bonds and financial bonds. On December 16, 2016, the Legislative Yuan passed the third reading of amendments to Article 2-1of the Securities Exchange Act, which was implemented on December 30, 2016. Starting on January 1, 2017, the collection of transaction taxes for corporate bonds, financial bonds, and bond ETFs will be temporarily suspended for the next 10 years.

2. Expanded the scope of day trading and supported the reduction of day trading taxesIn order to increase the application of investor transaction strategies, on February 1 and November 21, 2016, the

competent authority once again relaxed the types and scope of day trading; all securities from margin purchases and short sales as well as individual stocks from securities lending were included.

The Association continued to work with the government to promote the reduction of taxes on profits earned through high-frequency day trading. As a result, on Executive Yuan's authority, day trading taxes were reduced by half on December 30, 2016. In addition, the amendment of Article 2-2 of the Securities Transaction Tax Act was passed on January 4, 2017; it became Legislative Yuan's priority bill during 2017's first meeting session.

3. Promoted the review of dividend income tax and fee systemsIn Taiwan, a domestic natural person's dividend income tax is combined with his/her individual income tax's progressive

tax rate. No matter if it's a foreign investor investing in Taiwan's market, or compared with the taxation policies of key Asian markets, the burden of paying taxes is quite heavy. By using various channels for explanation, the Association has raised awareness among the public with regard to the appropriateness of the capital gains tax and taxes on dividends. As a result, the Ministry of Finance will review Taiwan's personal dividend income tax system; an improved program will be announced in May of 2017.

4. Lending of funds for unlimited purposes by securities firms and negative pledgeIn order to allow reinvestment for investors' securities and improve securities firms' capital utilization efficiency, the

competent authority announced that securities firms were allowed to lend funds with securities as guarantees starting on January 18, 2016. The funds may be loaned for unlimited purposes. The mortgage on the securities purchased by the client does not have to be set through the book entry system. Collateral management and use can be processed according to money lending for securities businesses.

5. Investors purchasing individual stocks and ETF through regular fixed-amount investmentsThe competent authority has instructed the TWSE to invite TPEx, TDCC, and the Association to discuss investors purchasing

individual stocks and ETFs regular fixed-amount investments. Securities firms are able to select "brokerage businesses" or "wealth management businesses" to process regular fixed-amount investments; which was launched online on January 16, 2017. The measure can improve the quality of life for small investors as well as energize the market.

6. Opening employee welfare trust and insurance trust for securities firm personnel handling trust and wealth management business operations

In order to offer more diversified investment products which meet customer demands as well as earning customer trust, on December 23, 2016, the competent authority passed new measures which required securities firms to follow relevant regulations when processing "employee stock ownership trust", "employee benefit savings trust", and "insurance benefit trust".

7. Expanding foreign currency operations open to securities firmsTo effectively expand foreign currency operations for securities firms, as well as to allow securities firms to provide one-

stop services, the Association has made great efforts in pushing the Central Bank to open up business operations related to exchanging Taiwanese currency overseas. As a result, the Central Bank has announced the amendment of related regulations on January 9, 2017. Securities firms will soon be able to apply for the eligibility to handle such businesses.

8. Relaxation of the restriction that securities firms may only conduct the trading of financial derivativesTo reflect exposure risks and meet hedging demands faced by securities firms, the competent authority has agreed to the

relaxation of the restriction that securities firms may only conduct the trading of financial derivatives.Key points include: 1.Hedging sections related to warrants and financial derivative products were no longer restricted by quota calculations.2.Relax excessive hedging by securities firms to be included in the trading quota of financial derivative products for non-

hedging purposes. The calculation method for the quota of securities firms trading financial derivative products for non-hedging purposes was changed to market risk equivalents.

3.Allowing the total (nominal) value to be added to the delta value for equity-type options contracts between securities firms and the Taiwan Futures Exchange.

4.Securities firms involved in trading domestic financial derivative products are exempt from Article 18, Subparagraph 1 of the Regulations Governing the Acquisition and Disposal of Assets by Public Companies.

9. Helping the securities industry with fintech developmentIn response to the fintech development trends and to allow securities firms to provide innovative services through advanced

technology, the Association has announced the "FinTech Development Program". The competent authority has also launched items including "securities firm's place of business changing to specifications based on a principled structure", "implementing multipoint services for opening accounts", "building an identity identification center", and "optimizing securities firms' place of business". The competent authority has also approved securities firm’s personnel to interact with clients on social media to provide financial information or services.

10. Strengthening self-regulation and money laundering prevention measures among industry professionalsIn order to strengthen the protection of investors' rights and interests, the competent authority has amended and released

regulations related to acquisition, established measures for public takeover based on cash transactions. A confirmation letter stating that the purchase has the ability to pay the full purchase price should be issued by a financial consultant with securities underwriting qualifications. In order to strengthen the self-regulation of securities firms and to better evaluate if the public offeror is capable of executing the contract, the Association has established measures for corresponding evaluation process. In addition, Directions for Anti-Money Laundering and Countering Terrorism Financing Template was also amended to meet the practices of securities firms.

III. Top Priorities for the Association in 2016

1. Devising an Appropriate Taxation System Consistent with International PracticesTaxes for domestic natural persons investing in Taiwan's capital market is higher than most international markets, and taxes for

domestic/overseas investors investing in Taiwan's capital market are inconsistent, causing funds to disappear. Taiwan's securities market is currently facing a challenging period, therefore we recommend that international taxation systems should be used as references: 1. Dividend income tax for long term investors should adopt the classification of taxation policy in order to stabilize the market and create market making effects; 2. Securities transaction taxes should be lowered for short term investors, especially for those involved in day trading in order to increase market liquidity; 3. Securities firms' profits and losses from issuing warrants are already included in the income tax as according to regulations, the securities transaction tax for exclusive benchmark stock trading accounts conducting warrant hedging transactions should be reduced.

2. Attract domestic/overseas investmentsWorking together with various securities peripheral institutions and industry unions to promote and expand investor education. In

addition, group activities are organized to promote investment; with seminars related to investing in Taiwan held throughout the world. Overseas investment activities and visits to large institutional investors were also organized by collaborating with the TWSE and TPEx to promote Taiwan's capital market; encourage civic groups, legal foundations, and organizations of various levels to invest in Taiwan ETFs; as well as to recommend the substantial relaxation of investment restrictions with respect to life insurance funds and open up investment opportunities for investors from Mainland China.

3. Expanding the business scope for securities firmsBusiness scope of securities firms must be expanded due to a low trading volume of the securities market; securities firms are also

becoming less competitive as they deal with operation bottlenecks. The following items must be included in the expansion: (1) Open up private equity fund businesses to securities firms(2) Allow securities firms to issue ETNs(3) Relax the restrictions on venture capital investments by securities firms(4) Expand bond operations for securities firms(5) Provide immediate assistance for industry professionals exchanging Taiwanese currency overseas

4. Relaxing the restrictions on selling borrowed securitiesBy the end of 2011, Taiwan's securities market index was on a decline. As a result, the competent authority announced the

adjustment of selling borrowed securities on November 21, 2011. The number of borrow securities sold daily shall not exceed 20% of the average number of transactions for that specific type of securities from the previous 30 business days; however, the number of shares in Taiwan has been shrinking in recent years, the daily average share of individual stocks and the sale of corresponding borrowed securities are also on a decline. This not only limits day trading or investment requirements for trading borrowed securities and impact investors' willingness to invest, it also influences the execution of hedging operations for securities firms. The Association proposes that the quota of borrowed securities sold should not exceed 3% of the shares listed on the TWSE/TPEx.

5. Relaxing required conditions and scope for linking to targets for TWSE (TPEx) warrantsTo provide more high-quality choices for warrant investors, the Association proposed that the standard market value for TWSE

(TPEx) warrants should be corrected to be consistent; this allows more top quality enterprises to issue underlying instruments with respect to warrants; targets linked to warrants for preferred stocks are also relaxed to increase the market's trade volume.

6. Research and discuss measures related to non-paired tradesExisting major international markets are adopting non-paired trades. The implementation of non-paired trades can connect

with international practices to attract foreign traders to participate. However, some domestic securities firms are concerned that the

implementation of non-paired trades can provide additional advantages to professional investment institutions who are able to execute program trading since they can conduct day trades through the system; because most domestic investors can only adopt the manual mode, market resources and prices may show signs of being unbalanced. Due to the extensive involvement of this project, securities firms' information systems will need to go through significant changes and the burden on securities firms' human resources and material requirements will be great.

In order to protect the rights and interests of various investors and securities firms implementing non-paired trading systems, in addition to negotiating with TWSE's peripheral units about providing subsidies for system building costs, network connection costs, and promotional expenditures, the Association also researches and discussed measures related to non-paired trades; requesting all securities firm members to provide trading services under fair conditions.

7. Advocating for the adjustment of monitoring standards based on market conditionsThe goals of the market monitoring system are to maintain the fairness and openness of market transactions, as well as to

prevent individuals from manipulating stock prices to cause functional loss. Through design changes to the trading mechanism, investors are made aware of all potential risks before making an investment decision. Each nation's stock exchange monitors their operations based on their respective market transactions. Through TWSE's alerts, investors are reminded to make rational decisions in order to achieve reasonable price changes through market transactions. Currently, Taiwan's securities market is facing a downturn, when dealing with abnormal transactions (such as: change in volume, turnover rate, concentration, P/E ratio, net price ratio, brokerage ratio, and percentage of premiums), TWSE and TPEx's monitoring standards should not be rigid; they should be adjusted according to Taiwan's market characteristics and conditions in order to enhance the overall momentum of the stock market.

8. Assist members with business expansion throughout AsiaIn order to work with the government's New Southbound Policy, the Association will continue to encourage industry professionals

to strengthen their capital in order to tap into ASEAN countries as well as South Asia. At the same time, we will also continue to advocate for the loosening of regulations while maintaining risk control. This will help companies in their overseas strategic planning.

9. Provide continuous training for industry professionalsIn order to promote fintech development, all digital sales marketing, innovation, management, regulatory compliance, risk

management, and personnel training are integrated into statutory training for industry personnel to enhance their professionalism, creative thinking, and regulatory compliance capabilities. In addition, by working with the competent authority to relax relevant restrictions, open up different business operations, prevent money laundering, and combat terrorism financing, the Association will continue to organize lectures to help industry professional understand the direction and prospect of capital market development, as well as to cultivate talent for the financial industry.

10. Assisting securities firms implement money laundering prevention measures and combat terrorism financingTo help securities firms implement policies to prevent money laundering and terrorism financing, and to help strengthen Taiwan's

capabilities to fight against money laundering and terrorism financing practices that meet international evaluation requirements, the Association has designed assessment questionnaires for securities firms to prevent money laundering and combat terrorism financing; it helps us better understand the implementation status of securities firms in their fight against money laundering and terrorism financing, as well as help the competent authority to take appropriate actions.

IV. Working together to create a thriving market and prosperous economyLooking ahead in 2017, uncertainties faced by the United States and the United Kingdom are eliminated; global commodity

prices are also on the rise. IMF predicts that the world's economy will grow by 3.4% this year; Department of Census, Directorate-General of Budget, Accounting and Statistics, Executive Yuan has also revised Taiwan's economic growth rate to reach 1.92% for 2017. The economy is expected to recover at a steady pace, and Taiwan's stock market is also expected to have a great performance. The Association will continue to promote the reform of unfair tax systems, accelerate the establishment of a trading system which satisfies the requirements of Taiwan's stock market, and improve the overall operation of securities firms to facilitate the flow of capital into Taiwan's stocks. The capital market is to reach a greater potential while the economy is expected to grow more prosperous. The Association will also continue to serve as the bridge of communication between the competent authority and fellow financial organizations to advocate for the best interests of securities firms. We will bring together the best minds and ideas about the necessary reforms to the market, build consensus among our member firms, and provide concrete advice. We will work with related agencies to regain investor confidence in Taiwan's stocks and support the efforts of the securities industry to transform and grow. We sincerely believe that Taiwan's stock market is well on its way to a full recovery!

Chairman

04 05

Taiwan Securities Association

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General Assembly ofthe Members

Secretary General

Board of Directors

Board of Supervisors

Deputy SecretaryGeneral

Business S

ervice Dept.

Education &

Training Dept.

International Affairs D

ept.

Kaohsiung O

ffice

Secretariat D

ept.

Finance Dept.

Planning D

ept.

Information M

anagement D

ept.

Editorial D

ept.

Chairman

I. Introduction1. Profile

(1) The Association was incorporated upon official

approval of the Ministry of Interior on January 26,

1998. A total of three preparatory meetings have

been held from February to March 1998, and the

enrollment of members commenced officially from

February 27, 1998.

(2) The Association called the first meeting of 1st term

General Assembly on April 4, 1998, in which the

directors/supervisors of 1st term, and the Chairman

and convener of supervisors' meeting, were elected.

(3) The Association consolidated Taipei Securities

Association and Kaohsiung Securities Association on

July 31, 1999 and December 31, 1999 respectively,

and became the only securities association

throughout the nation. As of December 31, 2016,

the Association has enrolled a total of 136 securities

dealer members and 936 subsidiaries thereof.

II. Objectives and Mission(1) Objectives

1. Protect all investors

2. Develop the national economy

3. Coordinate relations among companies in the industry

4. Advance mutual interests

(2) Mission

1. Exercise the functions to boost the securities market

in coordination with national economic planning and

development.

2. Communication, investigation, statistic consultation,

R&D and release of publications related to domestic

and foreign securities businesses.

3. Assist in implementing, researching and proposing

motions about the government economic policies

and the Securities and Exchange Act.

4. Work together to improve, communicate and

coordinate the issues about promotion of member

self-regulation.

IntroductionI TSA OrganizationII

5. Definition and preparation of the common rules and

regulations in the industry.

6. Promote healthy and well-rounded organizations

and development among members.

7. Discover and correct flaws in members' operations.

8. Organize competency training and business

seminars for employees in the industry.

9. Organize public service enterprises for members.

10. Maintain members' legal interest and rights.

11. Discipline member non-compliance with rules.

12. Meditation and arbitration of disputes among

members, and between members and investors.

13. Enactment of the regulations or fair trade rules

governing members' business.

14. Request, change and re-issuance of membership

certificates, and other services.

15. Joining international securities organizations and

strengthening civil diplomacy.

16. Accept the responsibility of providing services

authorized by government agencies, or services

commissioned by other institutions and organizations.

17. Participate in social movements.

18. Maintain fairness of securities exchange and

protect investors.

19. Prevent fraudulent securities exchange, market

manipulation, collection of illegal service charges

and fees, and any other unjust enrichment.

20. Handle qualification testing and registration for

securities specialists.

21. Establishing basic information database for

members, member representatives, and employees

of members, as well as the creating dynamic

surveys and conducting matters of registration.

22. Conducting education and training of employees of

public companies as well as matters for advocacy

and awareness.

23. Conducting finance and investment education and

training for existing and potential investors as well

as matters for advocacy and awareness.

24. Perform any other tasks required under laws or

suggested by members.

I. TSA Organization Chart

Underwriting Committee

Dealing Business Committee

Brokerage Business Committee

R&D Committee

Discipline Committee

Finance Committee

Education & Training Committee

International Affairs Committee

Public Affairs Committee

New Financial Products Committee

Bond Market Committee

Foreign Brokers Committee

Risk Management Committee

E-Commerce Business Committee

Taxation and Accounting Committee

Brokerage of Foreign Securities Committee

Shareholder Service Committee

Wealth Management Committee

Auditing Committee

Offshore Securities Business Committee

Tendering Committee

Legal Affairs and Compliance Committee

Taiwan Securities Association

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II. General AssemblyThe General Assembly of the Members represents

the association's highest authority. Members of the

association shall appoint representatives to attend the

General Assembly of the Members, to be designated

member representatives, and the number of whom shall

be determined by the following criteria:

(1) A member engaged in securities underwriting

business shall appoint one member representative.

(2) A member engaged in proprietary trading business

shall appoint one member representative.

(3) A member engaged in securities brokerage business

shall appoint one member representative.

(4) A member engaged in 2 or 3 of the above businesses

shall appoint two or three member representatives.

(5) A member engaged in securities introducing brokerage

business shall appoint one (1) member representative.

As of December 31, 2016, the Association has a

total of 256 member representatives.

III. Board of DirectorsThe Board of Directors is a permanent establishment

of the associat ion, and i t is a lso the execut ive

organization responsible for planning and implementing

the association's overall business and carrying out the

associated duties. There are 33 Directors in the Board of

Directors, 11 of who are Executive Directors, and among

these 11 Executive Directors one shall be designated the

Chairman.

IV. Board of SupervisorsThe Board of Supervisors is the supervisory agency

of the association, and it is charged with the responsibility

of overseeing and correcting actions taken by the Board of

Directors on association duties and on financial matters.

There are 11 Supervisors in the Board of Supervisors,

three of who are Executive Supervisors, and among which

one shall be designated the Convener of the Board of

Supervisors.

V. CommitteesIn order to more effectively pursue its objectives,

the Association has established a total of 22 committees:

Securities Underwriting, Proprietary Trading, Securities

Brokerage, Research & Development, Discipline, Finance,

Education Training & Promotion, International Affairs,

Public Affairs, New Financial Products, Bond Market,

Foreign Brokers, Risk Management, E-Commerce

Business, Taxation and Accounting, Brokerage of Foreign

Securities, Shareholder Service, Wealth Management,

Auditing, Offshore Securities Business, Tendering, and

Legal Affairs and Compliance Committee. In accordance

with the charters of the Associations, the committees

shall be the advisory units of the board of directors.

The committees are responsible for engaging in the

research and development of securities markets as well

as the proposition and integration of various motions and

resolutions to help advance the association's work. In

particular, the price negotiation committee is responsible

for dealing with matters associated with bargaining in

major procurement cases, the purpose of which is to

centralize the handling of major expenditures and achieve

significant savings.

January 19, 2016 - The Chairman was awarded with the Finance Professional First Class Medal

VI. Association AffairsAssociation Affairs is the main body in charge of

administering the Association and implementing its

decisions. It is headed by the Secretary General and two

Deputy Secretary Generals. Association Affairs oversees

the Secretariat, the Finance Department, the Planning

Department, the IT Department, the Business Service

Department, the Education & Training Department, the

International Affairs Department, the Editorial Office,

and the Kaohsiung office; each department/group's job

responsibilities are described below:

(I)Secretariat: Organizes the Association's General Assembly

meetings and meetings of the Board of Directors and

Board of Supervisors, public relations, secretarial

matters, the off icial seal, personnel, f i les, the

sending and receiving of mail, the safekeeping of

property, general affairs, the joining and leaving of

members, member certificates, changes in member

representatives, and other office affairs.

(II)Finance Department:

In charge of income, expenditures, budgets, audits,

statements, accounting, cashiering, certificate review,

account handling, funding allocation, financial analysis,

inspection of purchases, etc.

(III)Planning Department: In charge of research and submitting proposals for

improving securities-related regulations, the planning

and development of securities-related business

operations, the organization's legal affairs, researching

and making suggestions regarding specific topics,

collection and analysis of relevant data, etc.

(IV)IT Department: In charge of reviewing underwriting agreements,

dev is ing and amending underwr i t ing- re la ted

regulations, conducting inspection and personnel

registration of underwriting sites and equipment,

consultat ion visi ts, other underwrit ing-related

businesses, bond-related businesses, shareholder

service-related businesses, auditing, computer-related

businesses, etc.

(V)Business Service Department: In charge of providing recommendations to securities-

related agencies; member services for securities

agencies, securit ies dealers, f inancial futures

businesses, and new financial products businesses;

supervising and reviewing securities firms entrusted

with trading foreign securities; site inspections;

personnel registration and revocation; visiting and

advising companies facing operational difficulties;

investigating and mediating disciplinary issues and

disputes between members; and other member

services.

(VI)Education and Training Department:In charge of holding qualification tests for securities

personnel; providing on-the-job training, networking

events, and competitions for securities personnel;

organizing investment education and awareness

events; producing and printing securities-related

pamphlets and publications; etc.

(VII)International Affairs Department: In charge of communication, coordination, and

exchanging with international securities organizations;

collecting, researching, and analyzing international

secur i t ies-related informat ion; promot ing the

liberalization and internationalization of securities; etc.

(VIII)Editorial Office: In charge of the latest news related to the capital

market; composes, edits, and publishes various

articles for monthly and quarterly periodicals, Chinese/

English annual reports; and attract domestic and

international investors.

(IX)Kaohsiung office: In charge of organizing educational training courses

for member personnel in the south region, as well as

holding networking events, seminars/conferences,

and providing other services for members in southern

Taiwan.

Taiwan Securities Association

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To expand the scope of the securities business, improve the competitiveness of securities firms, and lower the firms'

operating costs, the various committees have issued the following suggestions to the competent authority and relevant

agencies over the past year (2016), arguing for the rights of members, reflecting members' opinions, and conducting services

for members:

I. Key Accomplishments in 2016(1) Reduced the operating costs for securities firms

1. Amended the operational procedures for conducting

margin purchases and short sales businesses

To reduce unnecessary costs for securities firms,

the Association has proposed the amendment of

Article 10, Paragraph 1, and Subparagraph 7 of

the Operating Rules for Securities Firms Handling

Margin Purchases and Short Sales of Securities;

those applying for financing not exceeding the

amount of NT$500,000 are exempt from credit

history check. The proposal was approved by TWSE

and the announcement to amend Article 10 of the

Operating Rules for Securities Firms Handling

Margin Purchases and Short Sales of Securities

was made on February 3, 2016 in the letter TWSE-

1050002137; it was added that if the total value

of financing applied plus the value of other credit

businesses approved by the same securities film do

not exceed NT$500,000, the securities firm does not

have to check the client's credit history.

2. Allowing securities firms to accept foreign currencies

as collateral for conducting securities lending

businesses

For the flexible use of foreign currencies as

collateral, the Association has submitted a proposal

to the TWSE for allowing securities firms to accept

foreign currencies as collateral for conducting

securities lending businesses; the proposal was

approved by the TWSE. On September 14, 2016,

letter No. TWSE-1050018215 was issued to amend

Article 19-1 of the Regulations Governing Securities

Borrowing and Lending by Securities Firms; it was

added that foreign currencies obtained by securities

firms as collateral while conducting securities

lending businesses can be used by OSUs as the

source of capital, and foreign exchange transactions

processed by using foreign currencies as collateral

should be performed by OSUs. Foreign exchange

transactions between a foreign currency as collateral

and NT should be processed by DSUs as stated in

the original policies; all changes made are effective

immediately.

3. Providing straight through processing book entry

services for the Taiwan Depository & Clearing

Corporation

To create a digital book-entry environment, the

Association has submitted a proposal related to

book-entry STP services to the competent authority

and TDCC, which allowed investors to perform book-

entry operations without going to the counter. The

proposal was approved and adopted on December

28, 2016; letter No. TDCC-1050027107 was issued

to inform participating securities firms of helping

client’s process book-entry operations digitally;

book-entry STP services can also be used to forward

application documents to TDCC and complete

various forms.

4. Optimization measures for securities business

locations

In response to fintech development trends and

the increasing popularity of electronic trading,

the Association and the TWSE jointly launched

optimization measures for securities firms' business

locations and related measures to lower costs and

increase profit. The Association has announced that

branch offices may not set up brokerage services

while sub-renting specification for office spaces were

relaxed; the proposal was approved by the FSC on

December 30, 2016 in the letter Jin-Guan-Zheng-

Work ReportIII

Quan-Zi No. 1050039067. Relevant details are

currently under negotiation between the Association

and the TWSE.

5. Recommended TWSE to provide warrant liquidity

providers with an exclusive FIX Session free of

charge

To further satisfy market requirements for warrant

liquidity providers, we submitted a proposal to the

TWSE for offering free FIX Sessions for warrant

liquidity providers with sufficient funds. On July 1,

2016, TWSE has increased the number of people

eligible for using the "dedicated FIX line"; where

the first six flow units of the first session are free

of charge; subsequent flow units are charged at

NT$2,000 per unit per month while order flow is free.

6. Continued to support the exemption of trading tax for

corporate bonds and financial bonds

Concerning the Association proposal for the Ministry

of Finance to amend Article 2-1 of the Securities

Transaction Tax Act, starting on January 1, 2017, the

collection of transaction taxes for corporate bonds

and financial bonds will be temporarily suspended

for the next 10 years. To revitalize the bond market,

help enterprises raise funds, and promote the

growth of the capital market, the Association has

recommended the continued suspension of trading

taxes for corporate bonds and financial bonds. On

December 16, 2016, the Legislative Yuan passed

the third reading of amendments during the 15th

meeting of the 2nd session, the 9th Legislative Yuan,

which was implemented on December 30, 2016 with

the announcement of letter Hua-Zong-I-Yi-Zi No.

10500165221.

7. Recommended TWSE to provide warrant liquidity

providers with an exclusive FIX Session free of

charge

To further satisfy market requirements for warrant

liquidity providers, we submitted a proposal to the

TWSE for offering free FIX Sessions for warrant

liquidity providers with sufficient funds. On July 1,

2016, TWSE has increased the number of people

eligible for using the "dedicated FIX line"; where

the first six flow units of the first session are free

of charge; subsequent flow units are charged at

NT$2,000 per unit per month while order flow is free.

(2)Improving the Operation Mechanism for the Securities Market1. Research report management

To better match operation requirements, the Association

has proposed that in order to meet securities firms'

securities research needs, study reports should be

provided to TWSE/TPEx listed companies, industry/

product experts or upstream/downstream vendors, and

customers of the underwriting departments; the proposal

was approved by the TWSE, and the amendment was

announced on May 26, 2016 in letter Tai-Zheng-Fu-Zi

No. 1050008989. Article 7-1 was added where study

July 22, 2016 - The Association held its 7th Term 1st General Assembly of the Members

Taiwan Securities Association

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reports must be provided to non-customers who are (1)

professional institutional investors; (2) TWSE/TPEx listed

companies, upstream/downstream vendors, or experts

offering or seeking opinion; (3) potential customers with

real business development needs. When study reports

are provided to non-customers, the securities firm must

notify him/her to not disclose the report's content to the

public or engage in activities involving conflict of interest;

the amendment took effect on the same day.

2. Processing fees for trading emerging stocks

Based on the principle of consistency with respect to

market supervision, the Association has submitted

a proposal to the TPEx for the adjustment of

processing fees with respect to trading emerging

stocks. By comparing with the centralized exchange

market regulation involving maximum fee limits, the

proposal was adopted by the TPEx and announced

in letter Zheng-Gui-Jiao-Zi No. 10500268951

on September 9, 2016. Compared with TWSE/

TPEx listed stocks, processing fees collected from

investors with respect to emerging stock trading

are not restricted by maximum fee limits; this new

measure took also took effect on September 9.

3. Threshold criteria for securities firms attending

shareholders meetings of companies whose stocks

they hold

To increase the participation of corporate management

among securities films and to exercise shareholder

activism, the Association is working on the amendment

of threshold criteria for securities firms attending

shareholders meetings of companies whose stocks

they hold; the proposal was approved by the competent

authority and announced on July 22, 2016 in the

letter Jin-Guan-Zheng-Quan-Zi No. 1050021126.

The following amendments were made: (1) It is not

necessary to appoint an individual to attend the

shareholders' meeting if the shareholders meeting of

the company whose stocks they hold does not offer

online voting, and the total number of shares held

does not exceed 300,000 shares. (2) Aside from online

voting, shareholders with voting rights shall clearly state

his/her instructions for exercising the right to vote for

each measure.

4. Assisted with OSU revisions; internal control of

money lending operations

With respect to the approval of DSUs accepting

foreign currencies as collateral for conducting

securities lending businesses can be used by OSUs

as the source of capital, the case was forwarded

to TPEx and incorporated into securities firms'

standards for internal control system's "International

Securities Businesses: Money Lending Operations";

updates will also be made to Overseas Securities

Units (OSUs) Accounting System Template to help

industry professionals handle related businesses.

5. Establish processing specifications for foreign

exchange accounts

In response to the Central Bank's opening of spot

foreign exchange transactions involving NTD for

DSUs and enhance the operating efficiency of industry

professionals, the Association has submitted a letter

to the Securities and Futures Bureau on November

24, 2016 concerning the principle and interpretation of

account practices related to foreign currency operations;

each principle was listed in detail as a reference for

securities firms handling multi-currency accounting, the

letter was also forwarded to the Central Bank for review.

6. Improve the efficiency of foreign exchange transactions

To expand the scope of business management for

securities firms, the Association has submitted a

proposal to the competent authority for the removal

of restriction on securities firms handling spot foreign

exchange transactions involving NTD. On August 19,

2016, The FSC issued letter Jin-Guan-Yin-Fa-Zi No.

10510002860 for the interpretation of Article 45 of the

Financial Holding Company Act; where it states related

trading conditions must not be better than regulations

governing other similar objects. Thus, for spot foreign

currency transactions between financial holding

companies and subsidiaries of banks and securities

companies, their trading conditions must match market

practices and do not deviate from spot foreign exchange

market prices between banks, and the management

must conduct self-evaluations with respect to the

rationality of the trade price. It is not necessary to review

and attach proof documents to demonstrate that "trade

conditions are not better than regulations governing

other similar objects" on a case by case basis.

7.False declarations made by the book-building

underwriter and associated penalties

To implement the self-regulation of book-building

placement of shares and strengthen honest declaration

by book-building underwriters, the competent

authority has instructed the Association to add related

regulations. Rules Governing Underwriting and Resale

of Securities by Securities Firms, Placement Methods

for Book-Building, and Standard Directions for Internal

Control Systems for Underwriters were amended;

underwriters who made false declarations will be

penalized. The Association followed the competent

authority's instructions to clearly state a fine exceeding

more than 30% of the liquidated damages; the change

was announced and implemented on February 3, 2016.

8.Taking measures for handling certain counties/

cities not working on open auction sales' payment

collection days

To protect the rights and interests of bidders in an open

auction and help securities films, measures for dealing

with the collection of security deposits for underwriting

auction sales during non-working days for certain counties/

cities will remain the same as the announcement made

by the Association on December 29, 2015. If the collection

of security deposits falls on a non-working day for certain

counties/cities, the task is to be extended by one business

day. As for the definition of non-working days for each

county/city, in principle, they should be based on the

municipality, county, city (excluding county-controlled city).

The chief underwriter must also inform the Association

and the TWSE of the original security payment collection

date; TWSE will announce the payment extension on the

MIS after receiving notification. In addition, the Bankers

Association will notify its members of relevant measures in

order to assist securities firms. A letter was also issued on

June 21, 2016 to each securities firm member.

9.Book-building identity restrictions

In order to verify the identity of the individual accepting

book-building projects as well as to work with the

Association's procedure for handling errors made by

underwriting agencies, amendments were made to the

Rules Governing Underwriting and Resale of Securities

by Securities Firms; the new changes took effect on

April 12, 2016.

10.Assessment procedures for securities underwriters

In line with the prevailing mergers and acquisitions

during recent years, according to the regulatory

provisions when issuing new shares, in addition to the

conversion of shares to obtain equity, Article 27 of the

Business Mergers And Acquisitions Act should also

be included, or in accordance with Article 185 of the

Company Act for transferring businesses or assets.

In order to comply with the actual operations, relevant

audit procedures for the acquisition of the business or

assets shall be established, in the absence of a pro

forma financial statement, the underwriter shall state

the reasons and alternative verification procedures

and collect any other supporting evidence necessary

to check and amend the relevant provisions. The

Association's Rules for Information to be Published in

Securities Underwriter Evaluation Reports on Offering

and Issuance of Securities by Securities Issuers

July 22, 2016 - Medals were given to high-performing conveners and Association's committee members

Taiwan Securities Association

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was amended accordingly; the new changes were

announced and implemented on November 4, 2016.

11.Book-building placement of shares

In order to enhance the rationality of book-building

and based on the specification balance of financial

holding and non-financial holding underwriters,

as well as to consider the underwriter's parent

company and subsidiaries should possess control

over each other's manage strategies or have

significant influence, the underwriter's parent

company, subsidiaries, and each company's

directors, supervisors, managers, and their

spouses and children should be clearly stated as

targets for refusal with respect to book-building.

The Association's Rules Governing Underwriting

and Resale of Securities by Securities Firms was

amended and promulgated on November 29, 2016.

12.Lock-up period for convertible debts and pricing

regulations

To strengthen the policies related to lock-up periods

for convertible debts and pricing regulations, the

security lock-up period for converting ordinary

shares was extended from one to three months. In

addition, the time period where the issuer promises

not to buy back company shares from the financing

stage to the list date was also extended from one

to three months. The Association's Self-Regulation

Rules Regarding Member Underwriters Advising

Company Funding and Issuance of Securities and

Issuance of Convertible Debts and Convertible Price

Regulations were also amended to strengthen and

explain the justifiability of establishing convertible

prices; regulation amendments were announced

by the Association on December 29, 2016 and

implemented on January 1, 2017 when reporting

fund raising applications to the competent authority.

13.Opened up interactions between personnel of

securities firms, social media, and clients, as

well as established the Association's Guidelines

for Accessing Social Media for Securities Firm

Personnel

By following the competent authority's instructions,

the Association has proposed the planning for

"interactions between personnel of securities firms,

social media, and clients", which received the

competent authority's approval on June 24, 2016. In

addition, Guidelines for Accessing Social Media for

Securities Firm Personnel were also established by

the Association as a part of our service management

operation; the Guidelines were submitted to member

firms as references.

(3)Expanding the business scope for securities firms1. Lending of funds for unlimited purposes by securities

firms and negative pledge

In order to expand securities firms' business scope,

the Association proposed that securities firms should

be allowed to lend funds with securities as guarantees;

the proposal was approved by the competent authority

and announced on January 18, 2016 in the official

letter Jin-Guan-Zheng-Quan-Zi No. 1040053607. It was

announced that the funds may be loaned for unlimited

purposes. The mortgage on the securities purchased

by the client does not have to be set through the book

entry system. Collateral management and use can be

processed according to Article 8, Article 9, and Articles

11 to 16 under money lending for securities businesses.

Collateral was to be submitted to special accounts at

securities firms by using the negative pledge method,

and the measure was effective on the same day.

2.Opening up the commissioning of securities firms for

trading ETNs

TIn order to satisfy investors' various investment

requirements, the Association has proposed

the allowance of trading exchange traded notes

(ETNs) by securities firms and discussed related

implementation measures, which was approved by

the competent authority and announced on January

6, 2016 in the official letter Jin-Guan-Zheng-Quan-Zi

No. 1040048721. It was announced that with respect

to trading ETNs, if the client is not a professional

investor, securities firm may only trade unleveraged

ETNs by using stocks, bonds, or gold.

3.Increasing the type and scope of securities for day

trading transactions

To keep strengthening the international competitiveness

of Taiwan's capital market and increase the application

of investors' trading strategies, the competent authority

has adopted the Association proposal to once again

increase the type and scope of securities for day trading

transactions: 1. Constituent shares of the TWSE Taiwan

50 Index, the TWSE Taiwan Mid-Cap 100 Index, and the

GreTai 50 Index; 2. Trading of call (put) warrants (including

warrants issued by a grade A issuer) or margin purchase

and short sales securities, and those who received

notifications from the TWSE or TPEx; the proposal was

announced on January 27, 2016 in letter No. Financial-

Supervisory-Securities-Trading-1040053364 and it took

effect on February 1, 2016. In addition, to increase the trade

volume in Taiwan's stock market, the competent authority

announced the expansion of type and scope with respect

to day trading securities on November 14, 2016 in letter

No. Financial-Supervisory-Securities-Trading-1050044060;

the change took effect on November 21, 2016.

4.Relax relevant restrictions for securities firms dealing

with exchanging Taiwanese currency overseas

The securi t ies industry faces a chal lenging

management environment; both securities and

banks are parts of the financial industry; constantly

under the strict supervision of financial supervisory

agencies. In principle, aside from specific bank

operations such as making deposits, other business

operations should be conducted openly and fairly

under the same set of supervision specification

standards for application, establishment, and

operation. In response to the Central Bank's request

to relax relevant restrictions for securities firms

dealing with foreign exchanges, after conducting

numerous discussions, the Association has agreed

to open up relevant restrictions for securities firms

dealing with exchanging Taiwanese currency

overseas at the end of 2016. Foreign exchange

regulations will be established based on actual

business requirements; the scope for DSUs selling

derivatives to PIs domestically was also relaxed.

5.Applicable for OSUs handling account management

operations

OSUs handling account management is also

responsible for managing the client's funds; they

must follow the client's instructions to transfer

funds to specific accounts. This operation model is

commonly used by securities firms throughout the

world; it is therefore suitable for DSUs to handle

various types of international securities businesses.

The Association has proposed the amendment of

relevant regulations, which was announced in official

letters Jin-Guan-Zheng-Quan-Zi No. 1050029770,

10500297701, and 10500297702 on August 12,

2016. The newly approved measures are applicable

to OSUs handling account management operations

such as financial derivative products approved by the

competent authority and spot exchange transactions

in foreign currencies.

(4)Relax restrictions and strengthen self-discipline1. Financial friendly service guidelines and establishing

an accessible website

In order to provide fr iendly services and an

accessible environment for handicapped individuals,

the Association has established the Financial

Friendly Service Guidelines by following the

instructions of the competent authority; the project

August 10, 2016 - FinTech Symposium

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was announced on June 21, 2016 in the zhong-

zheng-shang-ye-zi letter No. 1050003382, and it

was implemented on July 1, 2016. In addition, official

websites of the Association and securities firms were

modified and additional links were added for the

announcement of friendly financial measures; these

changes were implemented online on January 1,

2017.

2.Expanding the scope of securities firms to accept the

power of attorney from specific customers

To enhance the service quality of securities firms

and facilitate client interaction, the Association

has submitted a proposal to the TWSE to expand

the scope of securities firms to accept the power

of attorney from specific customers. Aside from

legal persons or professional investors, the power

of attorney from specific natural persons may be

accepted. The proposal was approved and adopted

by the TWSE and Article 97 of its Detailed Business

Guidelines was also amended accordingly. In

addition, the Association's Self-regulatory Rules for

Member Firms Accepting Power of Attorney to Trade

Securities on Behalf of Clients was also amended;

the new policy took effect on February 24, 2016.

3. Amending the Association's Directions for Anti-

Money Laundering and Countering Terrorism

Financing Template

To meet the practices of securities firms, the Association

has recommended the amendment of Directions for

Anti-Money Laundering and Countering Terrorism

Financing Template: 1. To prevent the confusion

between trading terms and the number of units, "giant

sum" was changed to "large sum"; 2. Remove the

saving and depositing of giant sum securities, and act

quickly when suspected money laundering activities

are discovered; 3. Eliminate professional institutional

investors trading or managing accounts on other's

behalf for buying. or selling specific securities suspected

of money laundering; 4. Eliminate clients who failed

to fulfill their settlement obligations as scheduled, as

well as breaching settlement contracts with a net value

exceeding NT$10 million and suspected of money

laundering; 5. Delete related bond specifications.

The changes were announced in the zhong-zheng-

shang-ye-zi letter No. 1050004931 on August 16, 2016

following the approval of the competent authority.

4.Designing assessment questionnaires for securities

firms to prevent money laundering and combat

terrorism financing

To help securities firms implement policies to prevent

money laundering and terrorism financing, strengthen

Taiwan's capabil i t ies to f ight against money

laundering and terrorism financing practices, and in

response to achieving direct results3 (supervisory

authority taking effective supervision measures) and

direct results4 (financial institutions implementing

measures to prevent money laundering) by following

FATF's evaluation methods, the Association has

designed assessment questionnaires for securities

firms to prevent money laundering and combat

terrorism financing; it helps us better understand the

implementation status of securities firms in their fight

against money laundering and terrorism financing,

as well as help the competent authority to take

appropriate actions.

5.Established the Association's Safety Standards for

Cloud Computing, Social Media, and Mobile Devices

To strengthen the information safety and security

control mechanisms of securities industry personnel,

the Association has established Safety Standards for

Cloud Computing, Social Media, and Mobile Devices;

the project was submitted to the competent authority

for approval and took effect on December 13, 2016.

September 26, 2016 - Representatives from the

Japanese Association taking a tour in the Sanyo

Sanin region.

3.Securities firms providing endorsement guarantees

for overseas subsidiaries issuing corporate bonds

The Association has submitted a proposal to the

competent authority to allow securities firms to

provide endorsement guarantees for overseas

subsidiaries issuing corporate bonds domestically or

in an overseas market. The proposal was approved

by the competent authority and took effect on April

27, 2016; endorsement guarantees were provided

for overseas subsidiaries directly or indirectly holding

over 50% of the outstanding number of voting

shares.

4.The Association's exclusive International Investor Alerts

website

In order to improve member service and strengthen

investor protections, and in coordination with the

Period Location Explanation

May 22 - 24 Stockholm, Sweden Attended the 29th Annual General Meeting of the International Council of Securities Associations (ICSA)

November 20 - 22 Manila, Philippines The 21st Asia Securities Forum (ASF)

November 28 - December 2 Tokyo, Japan The 12th ASF Tokyo Round Table

Period Location Explanation

August 4 - 24 Taipei Visit by representatives from the Hong Kong Exchanges and Clearing Limited

November 1 Taipei Shenzhen - Hong Kong Stock Market Trading Communication and Networking Mechanisms Seminar

November 16 Taipei Visit by representatives from the Hong Kong Exchanges and Clearing Limited

November 17 Hong Kong Symposium with Financial Supervisory Commission and Hong Kong's Taiwanese securities firms

(5)Increase the international competitiveness of securities firms1. International conferences and exchanges

2. Cross-strait interchanges

competent authority's policies, starting on June 1,

2010 the Association has added an International

Investor Alerts section to its website. The section

contains translated summaries of alerts issued

by the International Organization of Securities

Commissions (IOSCO) that have been forwarded by

the FSC's Securities and Futures Bureau, as well

as the alerts in their original language. These alerts

are provided for member companies and investors

so that they can avoid falling victim to fraud by

unethical institutions or individuals, or suffer losses

due to making investments that have been part of

warnings issued by international authorities. As of

December 31, 2016, a total of 4,581 International

Investor Alerts articles have been posted on the

Association's Investor Alerts website.

Taiwan Securities Association

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Work plans for 2017IV

1. Devising an appropriate taxation system consistent with international practices

(1) Lower taxes for day trading activitiesConsidering the low trade volume faced by Taiwan's securities market; desperate times call for desperate measures. Tax rates for day trading transactions should be reduced, and all investors who meet the requirements are eligible for the discounted day trading tax rates. The Association will continue to focus our efforts on encouraging the Legislative Yuan to lower day trading tax rates, speed up the process, as well as to obtain a better rate reduction. We predict that these measures will increase market liquidity, drive investors to make investments, and revitalize the market.

(2) Review dividend income tax and fee systemsIn Taiwan, a domestic natural person's dividend income tax is combined with his/her individual income tax's progressive tax rate. Since 2015, the maximum tax rate was raised to 45% and dividends can be tax deductible by half, but the individual must bear the second-generation national health insurance supplemental premium of 1.91%. Income tax for foreign capital earned should be levied on individual stock transactions of 20%. Tax can be further reduced if there are additional tax treaties or agreements; causing various taxation disparities. A special task force was formed by the Association to work with the Ministry of Finance to reform subsequent taxation regulations; proposals were also submitted with respect to dividend income taxes and fees.

(3) Reduce securities transaction tax rate applicable to warrant hedgingSecurities firms responsible for managing warrants also have market-making responsibilities as required by law (need to pay 1 securities transaction tax); they also need to implement dynamic hedging. Profits and losses earned through warrant issuance are classified as

income tax (17%), but the purchase/sale of stocks is subject to an additional 3 securities transaction tax, resulting in heavy tax burden. The Association has proposed the reduction pr securities transaction tax to 1 when selling stocks from warrant hedging accounts to help enhance the liquidity of warrants and energize spot transactions.

2. Attracting domestic/overseas investments(1)Strengthen the promotional of investment

education: 1. Work with various securities peripheral

institutions and industry unions to promote and

expand investor education; 2. Recommend TWSE

to organize regular simulated spot transaction

competitions for college and university students,

where incentive measures for securities firms are

adjusted according to trade volume.

(2) Introduce domestic capital: 1. Plan the collaboration of various securities

peripheral institutions; group activities are

organized to promote investment; 2. propose the

substantial relaxation of investment restrictions

with respect to life insurance funds; 3. Assist

the competent authority with encouraging civic

groups, legal foundations, and organizations of

various levels to invest in Taiwan ETFs.

(3) Introduce foreign capital: 1. Proactively organize seminars related to

investing in Taiwan held throughout the world

to attract investors to invest in Taiwan's capital

market; 2. overseas investment activities and

visits to large institutional investors are organized

by collaborating with the TWSE and TPEx; 3.

open up investment opportunities for investors

from Mainland China.

3. Expanding the business scope for securities firms(1) Open up private equity fund businesses to

securities firms

Securities firms in the United States, Singapore,

Hong Kong, and China are able to process

private equity fund businesses with outstanding

results. When it comes to net worth, capital

adequacy rat ios, business stabi l i ty, and

professional experience, Taiwan's securities

firms are also capable of handling private equity

fund businesses. By opening up private equity

fund businesses to securities firms, new financial

products will be created to offer more choices

to investors and guide professional investors to

Taiwan to make investments. By working hand-

in-hand, securities firms and the securities

investment trust industry and help Taiwan's

private equity fund businesses grow and expand

into a big market.

(2) Allowing securities firms to issue ETNsMany investors in Taiwan have invested large

sums of money on foreign currency-denominated

products from overseas. The reason is that

the financial products available domestically

could not meet investor demands for asset

diversification. We encourage TWSE and TPEx

to pick on the pace on the development of

various new financial instruments, providing

greater flexibility on product design, currency and

linking to targets, thus expanding the breadth

and depth of the financial instruments market.

Exchange trade notes (ETNs) are one of the new

passive indexing investment tools; it is a new

financial product which combines the concept of

ETFs with bonds, and it has the ability to provide

a full range of investment strategy solutions.

If securities firms are allowed to issue ETNs,

based on their rich professional experience,

sufficient capital, and improved error tracking

capabilities, they can help achieve the goal

of risk diversification for investors. ETNs can

become a niche market for securities firms.

(3) Relax the restrictions on venture capital investments by securities firmsTo assist with the development of emerging

industr ies and increase prof i t source for

securities firms, the Association has proposed

the relaxation of restrictions on venture capital

investments by securities firms and venture

capital management companies. Including

securities firms investing in venture capital

are allowed to invest in the same securities,

shares held by financial holding securities

firms investing in venture capital are to be

managed under the Financial Holding Company

Act, investments made by securities firms are

to be managed under the lump sum model,

overseas subsidiar ies of securi t ies f i rms

investing in venture capital are managed by

local supervision to encourage and promote the

government's entrepreneurship policies, support

innovation, and generate creative ideas for

micro-enterprises to grow.

November 6, 2016 - Warrant Run

Taiwan Securities Association

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(4) Expand bond operations for securities firms1.Recommended the exclusion of overseas

Chinese and foreigners who hold corporate

and financial bonds from the 30% capital

remi t tance res t r ic t ion w i th respect to

convertible (exchangeable) bonds.

2.Proposed the construction of a foreign currency

bonds with conditional trading mechanism

to solve the problem of tightening foreign

currency funds in Taiwan 's overall money

market.

3 . In response to the "F inanc ia l Impor t

Substitution" program, the Association has

proposed the expansion to include high-quality

local government bonds for international board

bond issuers.

4.Submitted a proposal to TPEx for allowing

foreign issuers to issue green bonds in Taiwan.

(5) Provide immediate assistance for industry professionals exchanging Taiwanese currency overseasAfter putting in a tremendous amount of hard

work by the Association, the Central Bank

finally opened up securities-related businesses

involving spot exchange transactions in foreign

currencies as well as foreign exchange financial

derivative products and services to securities

firms. In addition, the amendment of Regulations

Governing Foreign Exchange Businesses of

Securities Enterprises was announced on

January 9, 2017. Since securities firms dealing

with exchanging Taiwanese currency overseas is

a brand new business scope, the Association will

work closely with related authorities on key items

such as regulatory relevance and amendments,

application procedures, personnel qualifications,

customer declarations, and foreign exchange

accounting practices.

4. Relaxing the restrictions on selling borrowed securitiesBy the end of 2011, Taiwan's securities market index was on a decline; market index fell to under 7,000 points. As a result, the competent authority announced the adjustment of selling borrowed securities on November 21, 2011. The number of borrow securities sold daily shall not exceed 20% of the average number of transactions for that specific type of securities from the previous 30 business days; however, the number of shares in Taiwan has been shrinking in recent years, the daily average share of individual stocks and the sale of corresponding borrowed securities are also on a decline. This not only limits day trading or investment requirements for trading borrowed securities and impact investors' willingness to invest, it also influences the execution of hedging operations for securities firms. The Association proposes that the quota of borrowed securities sold should not exceed 3% of the shares listed on the TWSE/TPEx.

5. Relaxing required conditions and scope for linking to targets for TWSE (TPEx) warrants(1) Adjust the market value of securities listed on

the TWSE/TPEx by using a consistent standard.

The warrant's market value requirements from

issuer on the TWSE market is NT$10 billion;

market value requirements on the TPEx market

is NT$4 billion; the two values are not only

inconsistent, they are significantly different.

Market liquidity and depth for TWSE listed

stocks are higher than those of TPEx listed

stocks; it is recommended that the market

values be standardized so that more high-

quality companies can issue warrants.

(2) Relaxing targets linked to warrants for preferred

stocks

Since 2016, some financial holding companies

continued to issue preferred stocks. The market

for preferred stocks is widely accepted, especially

among long-term investors. If preferred stocks

can be included as targets linked to warrants,

preferred stock trading can be energized to offer

more high-quality choices for warrant investors

and increase the market's trade volume.

6. Research and discuss measures related to non-paired tradesExisting major international markets are adopting

non-paired trades. The implementation of non-

paired trades can connect with international

practices to attract foreign traders to participate.

However, some domestic securities firms are

concerned that the implementation of non-paired

trades can provide additional advantages to

professional investment institutions who are able to

execute program trading since they can conduct day

trades through the system; because most domestic

investors can only adopt the manual mode, market

resources and prices may show signs of being

unbalanced. Due to the extensive involvement of

this project, securities firms' information systems

will need to go through significant changes, and the

burden on securities firms' human resources and

material requirements will be great.

In order to protect the rights and interests of

various investors and securities firms, in addition

to negotiating with TWSE's peripheral units about

providing subsidies for system building costs,

network connect ion costs, and promotional

expenditures, the Association also researches and

discussed measures related to non-paired trades;

requesting all securities firm members to provide

trading services under fair conditions.

7. Advocating for the adjustment of monitoring standards based on market conditionsThe goals of the market monitoring system are

to maintain the fairness and openness of market

transactions, as well as to prevent individuals from

manipulating stock prices to cause functional loss.

May 23, 2016 - Attended the 29th ICSA AGM in Stockholm, Sweden

November 21, 2016 - Attended the 21st Asia Securities Forum (ASF) in Manila, Philippines

November 11, 2016 - Startup Symposium

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Through design changes to the trading mechanism,

investors are made aware of all potential risks before

making an investment decision. Each nation's stock

exchange monitors their operations based on their

respective market transactions. Through TWSE's

alerts, investors are reminded to make rational

decisions in order to achieve reasonable price

changes through market transactions. Currently,

Taiwan's securities market is facing a downturn,

when dealing with abnormal transactions (such as:

change in volume, turnover rate, concentration,

P/E ratio, net price ratio, brokerage ratio, and

percentage of premiums), TWSE and TPEx's

monitoring standards should not be rigid; they

should be adjusted according to Taiwan's market

characteristics and conditions in order to enhance

the overall momentum of the stock market.

8. Assist Members with Business Expansion Throughout AsiaCurrently, many of Taiwan's securities firms have

set up subsidiaries in Hong Kong, Singapore,

Ma lays ia , Tha i l and , V ie tnam, Cambod ia ,

South Korea, and Indonesia. There are also 15

representative offices in China. In order to work

with the government's New Southbound Policy,

the Association will continue to encourage industry

professionals to strengthen their capital in order to

tap into ASEAN countries as well as South Asia. At

the same time, we will also continue to advocate

for the loosening of regulations while maintaining

risk control. This will help companies in their

overseas strategic planning.

9. Provide Continuous Training for Industry ProfessionalsIn order to promote fintech development, all

digital sales marketing, innovation, management,

regulatory compliance, risk management, and

personnel training are integrated into statutory

training for industry personnel to enhance their

professionalism, creative thinking, and regulatory

compliance capabilities. In addition, by working

with the competent authority to relax relevant

restrictions, open up different business operations,

prevent money laundering, and combat terrorism

financing, the Association will continue to organize

lectures to help industry professional understand

the direction and prospect of capital market

development, as well as to cultivate talent for the

financial industry.

10. Assisting securities firms implement money laundering prevention measures and combat terrorism financingTo help securities firms implement policies to

prevent money laundering and terrorism financing,

and to help strengthen Taiwan's capabilities to

fight against money laundering and terrorism

f inancing pract ices that meet internat ional

evaluation requirements, the Association has

designed assessment questionnaires for securities

firms to prevent money laundering and combat

terrorism financing; it helps us better understand

the implementation status of securities firms in

their fight against money laundering and terrorism

financing, as well as help the competent authority

to take appropriate action.

Major Events for the Securities Market in 2016

September 26, 2016 - Representatives from the Japanese Association taking a tour in the Sanyo Sanin region

January 25 The world-class information center built by TWSE officially began its operation.

January 29

In order to work together with the competent authority's plan to promote the securities market, start ing on February 1, 2016, securit ies f irms were able to process book-entry central government bonds bi-directional lending as well as expand the source of securities for lending; related regulations were released by the TPEx.

February 1

To enhance service efficiency and expand the business scope of securities firms, as well as allowing securities firms to conduct securities lending businesses, new policies were added which allowed the borrowing of securities from clients and the borrowing or lending of securities between securities firms and securities finance enterprises as the source.

February 26

TPEx is aware that changes in the economy is not something which TPEx l isted companies can easily manage when handling private placement of securities. In order for companies to take advantage of their operation strategies as well as in response to external competitions, amendments to Article 15 of the Rules Governing the Review of Securities for Trading on the TPEx and Article 30 of the Rules Governing the Review of Foreign Securities for Trading on the TPEx were announced to relax certain profit requirements for private placement of securities.

April 7

The FSC convened the Securities and Futures Industry Policy Symposium to discuss issues important to industry professionals, including important measures that can be promoted and will be completed within the next three months, future financial market development pol icy recommendat ions and other issues, and exchanges between chairman and general managers. During the Symposium, industry professional submitted their recommendations concerning the capital market's tax system, foreign exchange businesses, overseas strategic planning, and the relaxation of business operations, which all received positive responses from the FSC.

March 31In order to enhance the liquidity of Taiwan's secondary market for international bonds based on the developments of a healthy bond market, TPEx has developed a system for international bonds liquidity providers which was officially launched online.

January

February

March

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May 20The resignation of Director Yu-Qun Wu of the Securities and Futures Bureau, Financial Supervisory Commission took effect on May 20, 2016; Deputy Director Li-Zhen Zhang took over the post temporarily before a new director is appointed.

May 20Kung-Wha Ding was appointed by President Tsai to serve as the chairman of the Financial Supervisory Commission. Xian-Nong Gui was appointed as the vice chairman; they took office on May 20, 2016

May 23

Chairman Kung-Wha Ding took office on May 20, 2016; a joint press conference was held on the 23rd where he explained the challenges faced by the financial industry as well as future strategies. Taiwan's economic development is showing positive results during recent years; as of the end of 2015, the overall asset for the financial industry reached NT$79.8 trillion and the total market value for TWSE/TPEx listed companies reached NT$27.2 trillion. Financial business and profitability also showed a significant increase; pre-tax income for the banking industry reached NT$371.7 billion, and the NPL ratio for Taiwan's banks was 0.23% with a 555.43% coverage rate for allowance of bad debts. Income earned for the life insurance industry reached NT$2.9 trillion in 2015, with NT$137.6 billion in pre-tax profit. Chairman Ding also expressed his appreciation for the former head of the FSC and fellow colleagues for their hard work.

August 11The Financial Supervisory Commission (FSC) organized the Conducting Financial Research to Support the Economy - Three Strengths and Four Supports Policy's Finance Incentives for the Five Innovative Industries Meeting.

August 22

On August 19, 2016, Mega International Commercial Bank (Mega Bank) New York branch was fined US$180 million for violating anti-money laundering laws by the New York State Department of Financial Services (NYDFS). On August 22, 2016, the FSC has summoned the Ministry of Finance, the Ministry of Justice, and the Central Bank to form the Mega Bank U.S. Penalty Case Task Force to investigate the matter, discover facts, and pursue Mega Bank personnel who may be responsible.

August 25

Amendments to the Money Laundering Control Act proposed by the Ministry of Justice was passed during today's Executive Yuan meeting; the project referenced 40 items recommended by the FATF. After conducing inter-ministerial discussions, the project was used to establish regulations in connection with international standards. Various government units' dedication to fight again money laundering were also on display for the international community. It is expected that once the regulations are passed, Taiwan's money laundering prevention policies will meet existing international standards.

June 4

At 1:30PM on June 4, FSC Chairman Kung-Wha Ding invited representatives from securities firms, the chairman and secretary general from the Securities Investment Trust and Consulting Association of the R.O.C. to a discussion involving how to promote the growth of Taiwan's economy and increase job opportunities through financial development; thus achieving a win-win situation for the finance sector as well as Taiwan's industries.

June 8

On the afternoon of June 8, FSC invited 16 persons in charge from various financial holding companies to exchange their ideas on dr iv ing f inancial development and promoting economic growth; the goal of the discussion was to achieve mutually beneficial results for the financial sector and Taiwan's industries.

July 11

On July 11, Lord Mayor Mountevans of the City of London and British Office Taipei Representative Chris Wood met with the Association's Vice Chairman Xian-Nong Gui to discuss bilateral financial issues concerning Taiwan and the United Kingdom. FSC expressed that Taiwan and the United Kingdom have solid economic relations. In 2007, the FSC signed an MOU with the former FSA. After reforming its financial supervision structure, the United Kingdom amended its Bank of England and Financial Services Act in May of 2016; but information sharing between the two countries and the MOU still remained in effect. In the future, both sides will continue to take advantage of the MOU mechanism to strengthen bilateral supervision cooperation and improve their good relationship.

July 12

In order to meet the development needs of securi t ies and futures f irms, FSC has amended Article 14 of the Regulations Governing Securities Firms and Article 18 of the Regulations Governing Futures Commission Merchants; the changes will be implemented in the near future. The focus of the amendments was to increase the ratio of special surplus reserves to the securities and futures companies and to state their use must be regulated separately by the FSC. Once the amendments are passed, FSC will guarantee the rights and interests of securities firms, the securities investment trust industry, and futures personnel in response to Fintech development. Based on the regulations stated above as well as Article 11 of the Regulations Governing Securities Investment Trust Enterprises, surplus income must be reserved for personnel transformation.

May

August

June

July

March 7

In response to Taiwan's aging population, the Financial Supervisory Commission reported its findings on the "business development of the financial industry in response to an aging population" during today's Executive Yuan meeting; the report encouraged financial organizations to reallocate their resources to develop financial products and services for seniors. Other resources from medical care and long-term care institutions can be combined to provide seniors with the funds required to receive long-term care and live a better life after retirement.

April 14

To help investors which the Financial Consumer Protection Act do not apply, as well as to take advantage of other channels for resolving disputes aside from civil litigation so that disputes between banks related to complex and high-risk derivatives can be resolved rapidly, on April 15, 2016, the Financial Ombudsman Institution has started to process such dispute cases at FSC's request.

April

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November 15

To promote the development of the financial industry, the FSC has proposed 10 major plans for fintech development to encourage industry professionals to take full advantage of information technology and create innovative f inancial service to satisfy publ ic demands. FSC emphasized that the financial industry should enhance its data security by focusing on establishing a fair and secure risk management platform. Diverse and convenient financial services must be developed to protect consumer rights. The 10 major plans for fintech development are already showing great outcomes as a result of the financial industry's hard work.

November 16 Cheng-Mount Cheng was appointed by President Tsai to serve as the vice chairman of the Financial Supervisory Commission; Cheng took office on November 16, 2016.

November 17

During the 2016 annual shareholders' meeting, there were a total of 604 TWSE/TPEx l isted companies and emerging stocks offer online voting. 983,700 total votes were received with 233.2 billion voting shares, which were 2.87 times and 1.19 times greater, respectively, compared to 2015. The average number of electronic voting shares in the overall market was 45.24% of the total number of shareholders at the meeting, up by 1.45 percentage points from last year's 43.79%; of which 133 companies had an attendance rate of greater than 50%. General shareholders (legal persons from non-professional organizations) accounted for the largest number of electronic votes with 902,600, accounting for 92% of the total votes; this was a substantial increase of 623,700 votes from the previous year, which shows that online voting is becoming widely accepted by general investors.

December 13

Because ETFs fo l low an index (a basket fu l l of domest ic component secur i t ies) performance for financial products, they possess risk dispersion characteristics and are convenient to trade. During recent years, the Association has promoted the development of ETFs for investors to participate in market investment.

December 20

Because ETFs fo l low an index (a basket fu l l of domest ic component secur i t ies) performance for financial products, they possess risk dispersion characteristics and are convenient to trade. During recent years, the Association has promoted the development of ETFs for investors to participate in market investment.

December 20

Currently, listed ETFs on Taiwan's securities market are mainly ETFs which follow the stock index or the commodity index. In order to develop ETFs which follow the domestic bond index, with the help of the Ministry of Finance, the Association has proposed the amendment of Article 2-1 of the Securities Transaction Tax Act this year. From January 1, 2017 to December 31, 2026, no securities transaction tax will be collected for bond ETFs; this will help the investment trust industry to launch bond ETF products that will meet investors' financial retirement needs, as well as provide investors with a set of comprehensive investment tools.

November

December

October 3

Chairman Kung-Wha Ding resigned from his post at the FSC. Due to the poor handling of Mega Bank New York branch's violation of anti-money laundering laws last year, a large fine was issued by the NYDFS during August. FSC immediately began its own investigation to determine the responsible party. A special task force was also formed as instructed by the Executive Yuan to discover the facts and find out who was responsible. Questions and public suspicion remained, forcing Chairman Ding to resign from his post in order to stop further damages to FSC's reputation.

October 25

FSC expressed that in order to protect legal and reasonable business activities, maintain the trustworthiness of Taiwan's financial systems, and ensure the safety and order of Taiwan's financial markets, financial institutions must implement measures to prevent money laundering and terrorism financing so that they do not become a tool for others to commit a crime. Therefore, the FSC has included money laundering and terrorism financing prevention as key points of financial supervision; their also reemphasized their commitment to strengthen related mechanisms.

October 27 Ruey-Tsang Lee was appointed by President Tsai to serve as the chairman of the Financial Supervisory Commission; Lee took office on October 27, 2016.

October

September 1

During today's Executive Yuan meeting, FSC reported on the Conducting Financial Research to Support the Economy - Three Strengths and Four Supports Project. Through diversified capital resources of the financial industry, it is hoped that financial research assistance and hardware/software facilities support and other measures can be implemented to drive industry growth, create job opportunities, support entrepreneurship, and create innovative industries. After the report presentation, Executive Yuan President expressed that to effectively introduce capital to drive production and to increase domestic investment are very important responsibilities for the government, and FSC should be recognized for their efforts in making proposals to drive economic growth and enhance the job market.

September 14 The FSC punished Mega Bank and all related personnel responsible for violating anti-money laundering laws; the Bank was fined US$180 million by the New York State DFS.

September 23

FSC reported that First Bank's online banking system and First Securities experienced DDOS attacks during the evening of the 21st and the morning of the 22nd, respectively. Online customers were unable to access the Bank's online services, and the company's corporate online banking system was stil l unable to provide services at 11:30AM on the 22nd; the securities firm's ordering platform was also unresponsive at 10:50AM on the 22nd. First Bank's personal online banking system was restored at 2:30AM on the 22nd; corporate online banking system was restored at 2PM of the same day, and First Securities was able to restore its services at 7:30PM on the 22nd.

September

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2016 Statistics for Securities Firms Entrusted with the Trading of Foreign Securities and Regional Commodities

Area of Trading Type of Investor TotalStock Exchange Market

Stocks ETF Stock warrants

The United States

Non-professional investor 123,154,226,705 92,189,671,446 24,880,921,635 1,095,624

Professional investor 186,187,180,430 64,032,410,290 116,955,240,851 0

Professional institutional investors 646,687,382,784 354,527,179,680 287,509,229,549 0

Subtotal 956,028,789,919 510,749,261,416 429,345,392,035 1,095,624

Canada

Non-professional investor 97,266,432 64,126,066 0 0

Professional investor 97,264,158 326 0 0

Professional institutional investors 1,466,818,261 1,305,382,871 5,046,905 0

Subtotal 1,661,348,851 1,369,509,263 5,046,905 0

Luxembourg

Non-professional investor 117,254,116,557 0 0 0

Professional investor 23,870,425,736 0 0 0

Professional institutional investors 114,049,518,206 0 0 0

Subtotal 255,174,060,499 0 0 0

The United Kingdom

Non-professional investor 911,386,037 192,864,667 22,298,553 0

Professional investor 6,392,560,575 83,738,677 63,509,600 0

Professional institutional investors 26,527,214,898 8,787,497,274 4,266,682,702 0

Subtotal 33,831,161,510 9,064,100,618 4,352,490,855 0

Ireland

Non-professional investor 2,183,034,329 0 0 0

Professional investor 2,155,969,983 0 0 0

Professional institutional investors 131,920,441 15,215,341 0 0

Subtotal 4,470,924,753 15,215,341 0 0

Germany

Non-professional investor 671,311,868 654,857,418 0 0

Professional investor 825,580,222 594,563,780 0 0

Professional institutional investors 7,440,937,234 4,875,285,445 2,326,733,132 0

Subtotal 8,937,829,324 6,124,706,643 2,326,733,132 0

France

Non-professional investor 36,237,412 6,068,347 0 0

Professional investor 2,368,668,944 8,910,811 0 0

Professional institutional investors 6,433,686,137 3,901,549,964 2,474,751,564 0

Subtotal 8,838,592,493 3,916,529,122 2,474,751,564 0

Switzerland

Non-professional investor 70,158,950 0 0 0

Professional investor 1,640,974,563 16,582,245 13,333,645 0

Professional institutional investors 800,264,562 446,600,501 348,128,531 0

Subtotal 2,511,398,075 463,182,746 361,462,176 0

Spain

Non-professional investor 0 0 0 0

Professional investor 0 0 0 0

Professional institutional investors 639,942,072 620,788,227 19,153,845 0

Subtotal 639,942,072 620,788,227 19,153,845 0

Italy

Non-professional investor 0 0 0 0

Professional investor 13,073,730 0 0 0

Professional institutional investors 751,510,423 746,387,204 5,123,219 0

Subtotal 764,584,153 746,387,204 5,123,219 0

Stock Exchange Market Over-the-counterOffshore funds

Depository receipts Other types of securities Bonds Offshore structured products

4,710,576,323 0 1,109,482,673 250,253,702 12,225,302

1,219,559,751 0 2,855,584,256 555,265,716 569,119,566

3,528,126,526 155,906,761 966,940,268 0 0

9,458,262,600 155,906,761 4,932,007,197 805,519,418 581,344,868

0 0 33,140,366 0 0

0 0 97,263,832 0 0

0 0 156,388,485 0 0

0 0 286,792,683 0 0

0 0 0 0 117,254,116,557

0 0 6,318,180 0 23,864,107,556

0 0 0 0 114,049,518,206

0 0 6,318,180 0 255,167,742,319

3,545,382 0 676,963,740 11,263,152 4,450,543

0 0 1,718,502,579 4,405,400,585 121,409,134

124,037,986 3,304,200 13,236,638,123 109,054,613 0

127,583,368 3,304,200 15,632,104,442 4,525,718,350 125,859,677

0 0 0 0 2,183,034,329

0 0 6,889,645 0 2,149,080,338

0 0 13,776,063 0 102,929,037

0 0 20,665,708 0 4,435,043,704

0 0 16,454,450 0 0

0 0 231,016,442 0 0

128,967,730 0 109,950,927 0 0

128,967,730 0 357,421,819 0 0

0 0 0 30,169,065 0

0 0 49,844,090 2,309,914,043 0

0 1,906,423 55,478,186 0 0

0 1,906,423 105,322,276 2,340,083,108 0

0 0 70,158,950 0 0

0 0 641,067,158 969,991,515 0

0 0 5,535,530 0 0

0 0 716,761,638 969,991,515 0

0 0 0 0 0

0 0 0 0 0

0 0 0 0 0

0 0 0 0 0

0 0 0 0 0

0 0 13,073,730 0 0

0 0 0 0 0

0 0 13,073,730 0 0

(Unit：NTD)

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Area of Trading Type of Investor TotalStock Exchange Market

Stocks ETF Stock warrants

The Netherlands

Non-professional investor 164,990,164 156,062,014 0 0

Professional investor 135,929,586 58,271,995 0 0

Professional institutional investors 671,922,824 640,150,922 0 0

Subtotal 972,842,574 854,484,931 0 0

Other European regions

Non-professional investor 0 0 0 0

Professional investor 6,720,093 0 0 0

Professional institutional investors 1,503,177,925 1,502,812,122 0 0

Subtotal 1,509,898,018 1,502,812,122 0 0

Hong Kong

Non-professional investor 66,986,137,189 58,148,062,158 4,040,113,128 497,286,608

Professional investor 24,549,852,766 11,080,746,201 1,762,755,580 466,832

Professional institutional investors 174,905,114,401 79,922,904,159 33,596,836,548 24,524,472

Subtotal 266,441,104,356 149,151,712,518 39,399,705,256 522,277,912

China

Non-professional investor 0 0 0 0

Professional investor 4,644,163,925 4,644,163,925 0 0

Professional institutional investors 55,407,891,630 55,407,891,630 0 0

Subtotal 60,052,055,555 60,052,055,555 0 0

Japan

Non-professional investor 5,878,984,655 5,875,019,883 3,964,772 0

Professional investor 3,057,706,845 2,377,552,604 680,154,241 0

Professional institutional investors 23,889,678,766 22,539,875,978 1,349,802,788 0

Subtotal 32,826,370,266 30,792,448,465 2,033,921,801 0

South Korea

Non-professional investor 29,906,458 29,906,458 0 0

Professional investor 560,700 560,700 0 0

Professional institutional investors 5,860,822,017 5,667,377,854 176,220,963 0

Subtotal 5,891,289,175 5,697,845,012 176,220,963 0

Singapore

Non-professional investor 497,160,471 462,403,177 2,002,914 642,228

Professional investor 925,704,820 204,937,799 0 0

Professional institutional investors 4,726,746,158 4,191,486,770 37,716,046 65,156,871

Subtotal 6,149,611,449 4,858,827,746 39,718,960 65,799,099

Malaysia

Non-professional investor 82,111,730 82,111,730 0 0

Professional investor 68,630,282 15,672 0 0

Professional institutional investors 388,785,958 388,785,958 0 0

Subtotal 539,527,970 470,913,360 0 0

Thailand

Non-professional investor 1,581,776 990,592 0 61,720

Professional investor 66,118,727 24,064,991 0 0

Professional institutional investors 858,042,032 751,872,900 0 0

Subtotal 925,742,535 776,928,483 0 61,720

Indonesia

Non-professional investor 1,600,093 1,600,093 0 0

Professional investor 0 0 0 0

Professional institutional investors 5,569,602,779 5,569,602,779 0 0

Subtotal 5,571,202,872 5,571,202,872 0 0

Stock Exchange Market Over-the-counterOffshore funds

Depository receipts Other types of securities Bonds Offshore structured products

0 0 8,928,150 0 0

0 0 77,657,591 0 0

0 0 31,771,902 0 0

0 0 118,357,643 0 0

0 0 0 0 0

0 0 6,720,093 0 0

0 0 365,803 0 0

0 0 7,085,896 0 0

16,194,404 11,732,522 3,260,722,994 3,056,690 1,008,968,685

295,466 1,890,288 10,362,735,986 936,576,153 404,386,260

0 68,751,233 61,214,383,109 0 77,714,880

16,489,870 82,374,043 74,837,842,089 939,632,843 1,491,069,825

0 0 0 0 0

0 0 0 0 0

0 0 0 0 0

0 0 0 0 0

0 0 0 0 0

0 0 0 0 0

0 0 0 0 0

0 0 0 0 0

0 0 0 0 0

0 0 0 0 0

0 0 17,223,200 0 0

0 0 17,223,200 0 0

0 3,703,110 28,409,042 0 0

0 0 720,767,021 0 0

0 432,386,471 0 0 0

0 436,089,581 749,176,063 0 0

0 0 0 0 0

0 0 68,614,610 0 0

0 0 0 0 0

0 0 68,614,610 0 0

529,464 0 0 0 0

42,053,736 0 0 0 0

106,169,132 0 0 0 0

148,752,332 0 0 0 0

0 0 0 0 0

0 0 0 0 0

0 0 0 0 0

0 0 0 0 0

(Unit：NTD)

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Area of Trading Type of Investor TotalStock Exchange Market

Stocks ETF Stock warrants

India

Non-professional investor 0 0 0 0

Professional investor 0 0 0 0

Professional institutional investors 1,845,826,617 1,845,826,617 0 0

Subtotal 1,845,826,617 1,845,826,617 0 0

Philippines

Non-professional investor 0 0 0 0

Professional investor 13,308,602 13,308,602 0 0

Professional institutional investors 327,024,028 301,479,088 0 25,544,940

Subtotal 340,332,630 314,787,690 0 25,544,940

Asia

Non-professional investor 5,547,308 5,547,308 0 0

Professional investor 0 0 0 0

Professional institutional investors 39,340,319 39,340,319 0 0

Subtotal 44,887,627 44,887,627 0 0

Australia and New Zealand

Non-professional investor 145,862,485 121,412,838 0 0

Professional investor 61,982,111 7,389,712 0 0

Professional institutional investors 2,906,839,630 2,722,149,959 8,424,088 0

Subtotal 3,114,684,226 2,850,952,509 8,424,088 0

Russia

Non-professional investor 4,731,977 0 0 0

Professional investor 94,090,217 0 0 0

Professional institutional investors 0 0 0 0

Subtotal 98,822,194 0 0 0

South Africa

Non-professional investor 4,991,000 0 0 0

Professional investor 0 0 0 0

Professional institutional investors 313,303,253 191,830,524 0 0

Subtotal 318,294,253 191,830,524 0 0

Turkey

Non-professional investor 0 0 0 0

Professional investor 0 0 0 0

Professional institutional investors 0 0 0 0

Subtotal 0 0 0 0

Brazil

Non-professional investor 5,260,473 748,013 0 0

Professional investor 432,474,217 0 0 0

Professional institutional investors 1,072,291,888 1,025,988,421 46,303,467 0

Subtotal 1,510,026,578 1,026,736,434 46,303,467 0

Other areas

Non-professional investor 109,224,376 0 0 0

Professional investor 229,342,748 0 0 0

Professional institutional investors 162,226,162 88,130,802 0 0

Subtotal 500,793,286 88,130,802 0 0

Total 1,661,511,943,830 799,162,063,847 480,594,448,266 614,779,295

Subtotal

Non-professional investor 318,295,828,445 157,991,452,208 28,949,301,002 499,086,180

Professional investor 257,838,283,980 83,147,218,330 119,474,993,917 466,832

Professional institutional investors 1,085,377,831,405 558,023,393,309 332,170,153,347 115,226,283

Stock Exchange Market Over-the-counterOffshore funds

Depository receipts Other types of securities Bonds Offshore structured products

0 0 0 0 0

0 0 0 0 0

0 0 0 0 0

0 0 0 0 0

0 0 0 0 0

0 0 0 0 0

0 0 0 0 0

0 0 0 0 0

0 0 0 0 0

0 0 0 0 0

0 0 0 0 0

0 0 0 0 0

0 0 24,449,647 0 0

0 0 54,592,399 0 0

0 6,284,712 169,980,871 0 0

0 6,284,712 249,022,917 0 0

0 0 4,731,977 0 0

0 0 94,090,217 0 0

0 0 0 0 0

0 0 98,822,194 0 0

0 0 4,991,000 0 0

0 0 0 0 0

0 0 121,472,729 0 0

0 0 126,463,729 0 0

0 0 0 0 0

0 0 0 0 0

0 0 0 0 0

0 0 0 0 0

0 0 4,512,460 0 0

0 0 432,474,217 0 0

0 0 0 0 0

0 0 436,986,677 0 0

0 0 109,224,376 0 0

0 0 229,342,748 0 0

0 0 74,095,360 0 0

0 0 412,662,484 0 0

9,880,055,900 685,865,720 99,192,725,175 9,580,945,234 261,801,060,393

4,730,845,573 15,435,632 5,352,169,825 294,742,609 120,462,795,416

1,261,908,953 1,890,288 17,666,554,794 9,177,148,012 27,108,102,854

3,887,301,374 668,539,800 76,174,000,556 109,054,613 114,230,162,123

Stops at the end of the current month

Total No. of valid accounts opened

Non-professional investor 1,128,602

General professional investor 4,599

Professional institutional investors 3,151

Total No. of accounts 1,136,352

(Unit：NTD)

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Securities Firms' Income Statements (January to December 2016)

Number of firms Type of firm Operating income Costs and expenses Non-operating

profits/losses Current surplus Capital Owners' equity Profitability (%) EPS(NTD) ROE(%) Revenue share(%)

Net value pershare (NT$)

73 Total for securities industry 79,326 68,462 11,175 19,400 310,264 471,799 24.46 0.625 4.11 100.00 15.206

43 General 75,335 65,196 10,710 18,433 299,887 452,804 24.47 0.615 4.07 94.97 15.099

30 Professional brokerage 3,990 3,266 465 967 10,378 18,995 24.24 0.932 5.09 5.03 18.304

57 Local securities firms 67,505 60,706 10,987 15,966 293,453 407,123 23.65 0.544 3.92 85.01 13.874

31 General 66,296 59,247 10,560 15,818 285,476 423,721 23.86 0.554 3.73 83.57 14.843

26 Professional brokerage 1,210 1,459 427 147 7,977 12,939 12.19 0.185 1.14 1.52 16.220

16 Foreign securities firms 11,820 7,755 188 3,435 16,812 64,676 29.06 2.043 5.31 14.90 38.471

12 General 9,040 5,949 150 2,615 14,411 29,083 28.93 1.815 8.99 11.40 20.181

4 Professional brokerage 2,781 1,807 38 820 2,400 6,056 29.48 3.415 13.54 3.51 25.230

20 Top 20 securities firms 63,058 56,059 10,248 15,534 240,747 365,886 24.64 0.645 4.25 79.49 15.198

(Unit: NT$1 million)

1. Background on the analysis report：(1)As of December 2016, there are 136 member

companies under the Association; 78 chartered

secur i t ies f i rms and 58 f inanc ia l ins t i tu t ions

concurrently operating securities business (e.g. banks,

bills finance companies and futures commission

merchants).

(2) This operating profit and loss analysis report for

securities firms include only the 73 securities firms that

have filed monthly financial statements with TWSE,

and the following have been excluded: Far Eastern

International Securities Company Ltd., Citibank,

Friendly, DIT Startup, and FRS which are securities firms

involved only in specific operations; firms that operate

securities as a secondary business such as banks, note

companies, or futures companies were also excluded.

(3)The analysis contained in this report is based on

year-to-month accumulated data. Operating losses

and profits are calculated according to financial data

of January through December 2016 submitted by

securities firms to TWSE on a monthly basis. The

analysis was published on January 15, 2017.

(4)US economy: In December of 2016, the ISM

manufacturing index reached 54.7, which was the highest

point since December, 2014; this was an indication that

the manufacturing industry was in its recovery stage.

The population of non-agricultural employment increased

by 156,000 with a jobless rate of 4.7%; the job market

remained at a steady level. On December 14, Fed raised

interest rates by 0.25 percentage points; interest rate

target range was raised to 0.5% to 0.75%. The US job

market remained at a stable level with a strong economic

growth expected, Fed is expected to raise interest rates

once again in 2017. On January 16, 2017, IMF released

its Global Financial Stability Report; due to US President

Donald Trump's policies to cut taxes and increase

spending, the economic growth rate of the United States

has been raised 2.3% for 2017. However, Trump's

protectionism policies are likely to suppress the global

economy and lead to a decline in global growth rate;

which is projected to be 3.4%. In addition, the growth

rate for the Eurozone is estimated to be 1.6%; 0.8% for

Japan and 6.5% for China.

2. Fed raising interest rates twice in 10 years, refugee capital is still going strong：

(5) Between January and December 2016, the average

daily value of Taiwan's stock market (TSE: NT$77.5

billion / OTC: NT$21.2 billion) fell short of that of

2015 (TSE: NT$92.2 billion / OTC: NT$23.3 billion).

Average EPS for the 73 securities firms in Taiwan was

NT$0.625, lower than the NT$0.821 of 2015. 48 firms

made a profit while 25 suffered losses. The index rose

over the year from 8,338 to 9,253 for a gain of 10.98%.

(6)From January to December in 2016, the average EPS

for composite securities firms was NT$0.615, which

was not as high as the EPS for professional securities

firms at NT$0.932. The average EPS among foreign

funded securities firms was NT$2.043, which was

better than Taiwan's securities firms at NT$0.544.

The average EPS for domestic composite securities

firms was NT$0.554, outperforming the NT$0.185

EPS for domestic chartered securities firms. Average

EPS for foreign funded chartered securities firms was

NT$3.415, outperforming the NT$1.815 EPS for foreign

funded composite securities firms.

3.Profits for the top 20 securities firms by capitalization averaged NT$15.534 billion：

(7)Between January and December 2016, the top 20

securities firms by capitalization averaged an EPS of

NT$0.645, similar to the industry average; 15 of these

firms saw a profit. Yuan Ta Securities had the highest

EPS at NT$1.355. ROE for the top 20 firms was 4.25%,

similar to the industry average of 4.21%.

(8)Goldman Sachs, Credit Suisse, and UBS had the

highest operating profits, with EPS of NT$13.35,

NT$8.27, and NT$7.15, respectively. CIMB, Primasia,

and SG Securities reflected the highest losses in

terms of EPS with -NT$4.04, -NT$1.46, and -NT$0.74,

respectively.

(9)Domestic economic aspects: From January to

December 2016, the total export value was US$280.4

billion, which was 1.7% lower compared to 2015.

The export value for December 2016 was US$25.7

billion, an YOY of 14% with positive growth for three

consecutive months; it was also the biggest increase

since February of 2013. The export momentum is

expected to continue on its path to recovery. From

January to December 2016, the total import value was

US$230.9 billion, which was 2.6% lower compared

to 2015; but capital equipment showed a growth of

12.7%, which was an indicator that enterprises do not

hold a negative outlook toward the economy. As of

November 2016, the economic monitoring indicator

showed a green light for five consecutive months;

which is positive sign for Taiwan's 2017 financial

outlook. We predict that after day trading taxes are

lowered, it will create a market-making effect which will

increase market liquidity and drive market recovery!

Appendix

Taiwan Securities Association

2 16ANNUAL REPORT

Passion．Professionalism．Efficiency．Innovation

36

Securities Firms Income Statements for the Most Recent Two Years

Securities Firms’ Accumulated Operating Revenues

Securities Firms’ Accumulated Operating Profit/Loss

Securities Firms’ Accumulated Return on Shareholders Equity (ROE)

Securities Firms' Net Value per Share

• Operating revenue for all securities firms: NT$79.326 billion in 2016; NT$89.317 billion in 2015.

• In 2016, the total market turnover volume was nearly 15% lower compared to 2015. Income earned by securities firms through transaction fees was reduced by NT$6.6 billion (approximately 15%).

• Operat ing income for a l l secur i t ies firms: NT$19.4 billion in 2016 with EPS of NT$0.625; not as high as 2015 with NT$26.131 billion and EPS of NT$0.821.

• In terms of profit earned from securities firms' main business operations (management, proprietary trading, and underwriting), the overall performance was not as good compared to 2015; over 50% of profit earned came from non-operating income. Total loss sustained by the entire securities industry for the year was 25%.

• ROE for all securities dealers: 4.11% as of the end of 2016; 5.33% as of the end of 2015.

• Performance by securities firms in recent years is not ideal; overall ROE peak was 11.22% in 2007, which has proven difficult to surpass.

• Entire securities firms' net value per share: NT$15.21 in 2016 and NT$15.41 in 2015.

• Since June of 2016, the TAIEX has seen a gradual increase; the index climbed from 7,999 to 9,430 as its highest point. June of 2016 has become the year's lowest point with respect to securities firms' net value per share.

0

20,0007,931

13,977

23,800

33,134

40,35346,832

52,388

64,561

73,096

81,111

89,317

56,228

6,50211,899

21,23626,631

32,850

39,079

48,936

57,77363,871

68,62674,055

79,326

2015 2016

40,000

60,000

80,000

100,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

(Million NTD)

0

5,0002,426

4,147

8,433

12,460

14,26114,767 14,582

12,825

15,830

19,23821,341

26,1312015 2016

10,000

15,000

20,000

25,000

30,000

8961,120 4,568

4,9236,464

8,031

12,370

17,296

18,911

18,86819,415 19,400

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

(Million NTD)

0.00

1.000.50

0.86

1.73

2.54

2.933.06 3.03

2.67 3.28

3.95

4.38

5.33

0.19 0.23 0.94 1.02

1.361.71

2.61

3.61

3.98 3.97

4.09 4.11

2015 2016

2.00

3.00

4.00

5.00

6.00

(%)

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

14.80

15.15 15.16

15.27 15.21

15.0014.95

15.07

15.24

15.3215.3015.30

15.21

15.23

15.29

15.41 15.4915.38

15.12 15.11

15.05

15.13

15.2515.27

15.41

15.10

15.40

15.70

(NTD)

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2015 2016