凡格原始檔.indd

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13 3 Public issue Advice of recommending underwriter Apply for registration Approved by of GTSM Begin trading on emerging stock market Apply for listing Under discussion of review baord Under discussion by GTSM board of directors File with SFB Approved by SFB Underwriting of stocks Stocks deposited with TSCD Begin trading on GTSM general board F A C T B O O K

14 Advice of securities firms Recommended in writing by at least two securities firms after public issue with leading and co-sponsoring underwriters named. Years of establishment Incorporated and registered under the Company Law for no less than two full fiscal years. (Technology enterprises and state-run enterprises are not subject to this limitation.) Capital Profitability (Operating profit and pre-tax income as a percentage of paid-in capital) Pre-tax income as a percentage of paid-in capital exceeds 4% in the latest year according to the corporate financial statements and the consolidated financial statements prepared in compliance with Financial Accounting Bulletin No. 7, and no accumulated loss in the final settlement of the latest fiscal year; or the ratio in each of the latest 2 years exceeds 3%; or the ratio exceeds 3% on average in the latest 2 years, and the profit in the latest year is better than that of the year before. (Technology businesses and state-run businesses are exempted from this requirement.). The pre-tax income in the latest fiscal year shall not be less than NT$4 million. Exclusion clauses 12

15 1. Having any condition provided in Article 156 Section 1 Subsections 1 to 3 of the Securities & Exchange Act. 2. Finance or business not independent and separate from other organizations. 3. Having event of major labor disputes or major environmental pollution that has not been resolved. 4. Having significant extraordinary transaction and no improvement has been made as of the time of application. 5. The profitability requirement cannot be met when new shares issued or to be issued for capital increase in the fiscal year of application are included in calculation of paid-in capital in the latest financial statements. 6. Failing to prepare financial statements according to relevant laws and regulations and the generally accepted accounting principles, or failing to thoroughly establish and effectively implement internal control, internal auditing and accounting systems, where such failure is material. 7. The company, its directors, supervisors, president or actual person-incharge serving at the time of application have acted in violation of their fiduciary duty in the past three years. 8. The board of directors or the supervisors is unable to perform its duty independently. 9. Having been registered for trading as an emerging stock on the OTC market in the fiscal year of the application and the most recent fiscal year thereto, and there has been, from the registration date onward, any trading of company stock by any incumbent director, supervisor, or shareholder holding more than 10% of its total issued and outstanding shares other than on the emerging stock market; provided, this restriction shall not apply where such trading is for purposes of underwriting under Article 4 or for other legitimate reason. 10. Deemed unfit for listing by the GTSM due to business scope, nature or other special conditions of the applicant. F A C T B O O K

16 Dispersion of shareholding 1. More than 300 registered shareholders holding between 1,000 shares to 50,000 shares; and 2. The total number of shares held by aforementioned shareholders is more than 10% of the total issued and outstanding shares or more than 5,000,000 shares. Applicable supplemental provisions Central custody of stocks 14

17 1. Directors, supervisors and shareholders holding more than 10% of shares, and directors, supervisors and shareholders of a technology or information software company holding more than 5% of shares, as well as shareholders that contribute to the capital by patents or special technology, work for the company, and own 0.5% or 100,000 shares or more of the total issued and outstanding shares at the time of listing application shall place their stocks under central depository according to applicable rules; shares of a technology enterprise or a securities investment trust enterprise held by the recommending securities firm during the registration as emerging stock are excluded. 2. Number of shares and term for central depository: A minimum percentage of total issued and outstanding shares at the time of application (determined by the capital bracket), which are to be withdrawn in phases after 2 years according to applicable rules. Persons as provided in section 1 herein shall deduct from their holding as stated on the listing application the aforesaid deposited shares and shares entrusted to recommending securities firms for underwriting, and submit the rest of their holdings to central depository for 1 year. If the total shares under central depository have exceeded 50% of total issued and outstanding shares and the paidin capital of the issuer reaches NT$30 billion, the portion in excess of 50% of total issued and outstanding shares may be substituted by proof of pledge issued by a financial institution, which will be kept under central depository for 1 year. 3. The above provisions do not apply to shareholders whose equity interest belongs to the national treasury. 4. The above provisions do not apply to applicants that are state-run enterprises. F A C T B O O K

18 Registrar and transfer agent Having a professional registrar and transfer agent or a shareholders service department located in the same locality of GTSM and accepted by Taiwan Depository and Clearing Corporation to handle shareholder s affairs. Trading as emerging stock Dematerialized issue Issuing all of its stocks and bonds in dematerialized form starting July 1, Underwriting Public subscription: Regardless whether a company meets the shareholding dispersion requirement, the company shall place at least 10% shares of its paid-in capital with its recommending securities firms for underwriting, but if the number of shares calculated thereof is less than 1 million, at least 1 million shares shall be placed; if the number of shares calculated thereof exceeds 10 million shares, at least 10 million shares shall be placed. Application of technology enterprise A company that wishes to apply for recognition as a technology enterprise shall submit an application with the GTSM and also notify the Industrial Development Bureau, and the GTSM will issue the technology enterprise certificate to the company after consulting with the Industrial Development Bureau. 16

19 An applicant for initial public offering on GTSM shall pay NT$500,000 examination fee at the time of application. A public company shall pay the GTSM-listing fee based on the size of its capital before listing in accordance with the GTSM fee standards, and shall do the same when issuing new shares to increase the capital; after being listed, the company shall pay the GTSM an annual listing fee in January each year. After the GTSM-listing, a listed company shall input basic data of the company into the Market Observation Post System according to GTSM rules, and shall make public announcement of major corporate events as required in the Measures for Verification of Major News and Disclosure Procedure; additionally, the company shall publish and file its operating status of the previous month on the 10th day of each month, and publish and file its annual report, 1Q report, semi-annual report and 3Q report at the end of April, August and October each year respectively; the company shall also publish its financial forecast according to the Implementation Guidelines for Publishing Public Financial Forecast Information by Public Companies, to serve the purpose of full disclosure of financial and business information of the company. F A C T B O O K

20 1. A public company; 2. Has signed a GTSM-listing or TSE-listing advisory agreement; 3. Recommended in writing by 2 or more securities firms with leading and co-sponsoring underwriters appointed, and providing an examination report on the financial, business and information disclosure status of the applicant in the latest month, which concludes the absence of material irregularity; 4. Shareholders affairs are handled by a professional registrar and transfer agent or a shareholders service department located in the same locality of GTSM and accepted by Taiwan Depository and Clearing Corporation; 5. Offering at least 1% of the total GTSM-registered stocks for subscription by recommending securities firms, which shall not be fewer than 100,000 shares; or offering at least 500,000 shares to recommending securities firms if 1% of the registered stocks exceed 500,000 shares; 6. Issuing all of its stocks and bonds in dematerialized form starting July 1, 2006; and 7. An approval letter from the designated competent authority if the applicant is in the securities, futures, banking, or insurance industry. 18

21 1. The recommending securities firms shall not quit within 1 year, unless there are still 2 or more firms to provide advisory service after quitting. 2. Each individual recommending securities firm shall subscribe at least 30,000 shares. 3. New recommending securities firms may participate after one month of trading on GTSM. 1. Submit relevant documentation. 2. Disclosing financial and business information 5 business days before trading begins. 3. Price quotation and trading generally begin on the 9 th business day after submitting the application. 1. Annual and semi-annual financial statements. 2. Financial forecast is not mandatory, and the forecast already published shall be handled according to relevant rules. 3. Monthly announcement of business operation. 4. Disclosure of major information shall follow the provisions of Article 28 of the Guidelines for Examination of Emerging Stocks. F A C T B O O K

22 1. GTSM has implemented a market settlement fund system on December 1, As of December 31, 2006, the fund had a balance of NT$2,601 million. 2. As of year-end 2006, a total of 1,108 securities firms, including 102 head offices and 1,006 branches have signed a trading agreement with GTSM. 3. There were a total of 248 trading days in All payment and settlement operations were processed on time without any incidence of default by securities firms. 1. Margin trading of GTSM-listed stocks was put into effect on January 1, As of year-end 2006, there were 358 GTSM-listed stocks allowed for margin purchase and short selling, accounting for 67.42% of all GTSM-listed stocks, which represented an increase of 41 stocks as compared to 317 GTSM-listed stocks allowed at the end of

23 2. The amount of margin trading (excluding offset of margin purchase and short selling) as a percentage of total market turnover in 2006 averaged 30.73%, up 9.55% from 28.05% in The amount of margin financing outstanding at the end of 2006 amounted to NT$71.8 billion, representing a significant increase of 72.60% or NT$30.2 billion as compared to NT$41.6 billion at the end of Balance of short interest at the end of 2006 amounted to 288,953,000 shares, increasing 50,329,000 shares or 21.09% as compared to the balance of 238,624,000 shares at the end of The transaction amount of margin purchase and short selling offset accounted for 7.98% of total market turnover in 2006, down 10.94% as compared to 8.96% in The GTSM is staffed with a market surveillance unit in charge of planning and execution of the surveillance system. The surveillance operation mainly covers: on-line surveillance, off-line surveillance, examining illegal trading activities, and insider equity management. 2. The GTSM s surveillance operations in 2006 are summarized as follows: among 1,795 announcements of trade watch, there were totally 126 events that triggered disposition, 204 events that triggered on-line notification, 104 surveillance reports completed, and disgorgement review was completed for 509 companies on general board and 284 companies on emerging stock market in the second half of 2005 and 525 companies on general board and 247 companies on emerging stock market in the first half of F A C T B O O K

24 The GTSM volume weighted price index that was published by the GTSM on November 1, 1995 is an index compiled by the total market value of stocks, with 100 points as the base. As more and more stocks were listed on GTSM, the GTSM subsequently published a series of various sector stock indexes, currently including 11 sector stock price indexes: electronics, securities, banking, steel, textile, machinery, electric cables, chemical, construction, shipping and tourism. Service fees paid by the securities firms are computed once a month by the following manners: 1. For brokers and dealers buying or selling GTSM-listed stocks, % of the monthly trading amount. 2. For brokers and dealers buying or selling GTSM-registered emerging stocks, % of the monthly trading amount. 3. Service fees a securities firm may charge its customers for buy/sell orders placed over-the-counter were replaced on July 1, 2000 by a cap system. Under the cap system, securities firms may charge up to % of the trading amount for each transaction of GTSM-listed stock, and up to 0.5% of the trading amount for each transaction of emerging stock. 22

25 Currently the GTSM is in charge of the over-the-counter trades of bonds and responsible for the drafting of listing, trading and settlement rules and systems for bonds and derivatives, maintenance of market order, and administration of securities firms. In our bond market, some convertible bonds are traded on the centralized market, but the great majority of bond trades are customarily carried out through negotiation at the business premises of securities firms (i.e. over-the-counter). Thus the GTSM, under the commission and supervision of the competent authority, shoulders the missions of developing and administering the bond market. When the issuance of foreign currency denominated international bonds on GTSM was first opened on October 7, 2005, it was limited to bonds with exemption or for private placement. Subsequently in line with government s liberalization policy, GTSM has relaxed the restrictions on May 30, 2006 to allow ECB and other equity-based bonds issued abroad to be traded in Taiwan, and allow the public offering of certain international bonds issued by domestic and foreign issuers. In addition, in coordination with the opening of over-the-counter trading of international bonds to small investors, the minimum trading unit by face value was dropped from 100,000 USD, 100,000 euro, or 10 million Japanese yen to 10,000 USD, 10,000 euro, or 1 million Japanese yen respectively. And foreign issuers are allowed to issue international bonds that meet certain requirements in accordance with foreign regulations. Those measures have been promulgated in August 2006 in the hope to attract more retail investors into the bond market. F A C T B O O K

26 Until the end of 2006, a total of 6,483 bonds with the amount outstanding of NT$5,482.6 billion were listed on the GTSM, registering continual growth in the number of issue and amount outstanding. The above statistics include 90 issues of government bonds in the sum of NT$3,382.3 billion; 1,139 issues of bank debentures in the sum of NT$653.1 billion; 75 issues of beneficiary certificates in the sum of NT$132.1 billion; 2,279 issues of corporate bonds in the sum of NT$933.4 billion; 285 issues of convertible bonds in the sum of NT$177 billion; 1 issue of corporate bond with warrant in the sum of NT$91 million; 140 issues of foreign bank debentures in the sum of NT$71 billion; and 2,474 issues of stripped bonds in the sum of NT$133.6 billion. To bolster the long-short mechanism in the bond market, GTSM has called several meetings since February 2006, inviting the competent authority and primary dealers of government bonds to review the long-short and bond lending mechanisms. GTSM has also studied the establishment of a government bond position disclosure system, strengthened the bond lending mechanism, and studied the feasibility of disallowing short selling by bond holders having bonds in stock, and amended and promulgated relevant regulations. The turnover in the bond market in 2006 broke the NT$250 trillion mark, reaching NT$275,662.3 billion (convertible bonds and corporate bonds with warrant excluded), of which, NT$169,548.2 billion involved outright trades, accounting for 61.51% of total turnover and representing a decrease of 31.41% from 2005 in volume (the outright trade market totaled NT$247,186.6 billion in 2005, accounting for 77.75% of total turnover for the year). Practically all outright trades of government bonds in 2006 went through the GTSM electronic bond trading system (EBTS) that broke the NT$150 trillion mark, recording NT$160,457.5 billion in trading, amounting to 95% of outright trades. The turnover of RP/RS trades totaled NT$105,663.9 billion, showing a steady growth of 9% from NT$97,302.0 billion in 2005 (accounting for 28.25% of the yearly turnover). 24

27 Trading method and business pattern Trading method - over-the-counter negotiation: Outright trade and RP/RS trade. - EBTS (international bond trading system included): outright trade and RP/RS trade. - Fixed-income trading system: outright trade. - Automated trade matching system: outright trade. Business pattern - Over-the-counter negotiation: dealing - EBTS (foreign international bond trading system included): dealing - Fixed-income trading system, automated trade matching system: dealing and brokerage. Trading hours Over-the-counter negotiation- Monday ~ Friday 9:00am ~3:00pm (outright trade and RP/RS trade) EBTS- Monday ~ Friday: outright trade: 9:00am ~1:30pm RP/RS trade: 9:00am-1:30pm, 2:00-3:00pm fixed-income trading system and Automated trade matching system Monday ~ Friday: 9:00am-1:30pm (outright trade) F A C T B O O K

28 Quotation and trading units Over-the-counter negotiation - Quoted by yield or by price in NT$100. Tick size: 0.01 b.p. (0.0001% yield) or $ Minimum trading unit: NT$10,000. Foreign-currency bonds Japanese yen denominated bonds - 10 million. Euro or USD denominated bonds - $100,000. EBTS - Quoted by yield Tick size: 0.01 b.p. (0.0001% yield) or $ Minimum trading unit: - Electronic negotiation system: NT$50 million. - Matching system: NT$100, International bond trading system - Japanese yen denominated bonds - 10 million. - Euro or USD denominated bonds - $100,

29 Fixed-income trading system - Quoted by price in NT$100. Tick size: $0.01. Minimum trading unit: NT$100,000. Automated trade matching system - quoted by price in NT$100. Tick size: < $150, $0.05; $150 - $1,000, $1; >1,000, $5. Minimum trading unit: NT$100,000. Transaction price and Interest calculation The transaction price is calculated based on the ex-interest price. The accrued interest is included in the transaction price to be paid to the seller and calculated based on the number of days held (the first day of holding is counted, but not the last day of holding) over 365 days a year. If the payment day is postponed due to natural disaster or other force majeure event, the days postponed thereof shall accrue interest. Daily price movement Automated trade matching system and over-the-counter negotiation of convertible bond or corporate bond with warrant: 7% Other systems: None. Disclosure of transaction information Securities firms disclose relevant trading price information at their business premises every day. GTSM publishes transaction information daily on its website. F A C T B O O K

30 Taxation Capital gain tax from securities trading: exempted. Sales tax: exempted. Interest income tax: taxable Individual: on the cash basis, where the income tax is calculated and paid according to interest actually received. Institution: on the accrual basis, where the profit-seeking enterprise income tax is calculated and paid according to the time bonds are actually held; Securities transaction tax: exempted. Fees Proprietary trade: No fees. Brokerage: Comparable to the trading of stocks, brokers may charge up to % of the trading amount for each bond transaction. 28

31 October International bond market When the issuance of foreign currency denominated international bonds on GTSM was first opened on October 7, 2005, it was limited to bonds with exemption or for private placement. In line with government s liberalization policy, GTSM has relaxed the restrictions on May 30, 2006 to allow ECB and other equity-based bonds issued abroad to be traded in Taiwan, and allow the public offering of certain international bonds issued by domestic and foreign issuers. In addition, in coordination with the opening of over-the-counter trading of international bonds to small investors, the minimum trading unit by face value was dropped from 100,000 USD, 100,000 euro, or 10 million Japanese yen to 10,000 USD, 10,000 euro, or 1 million Japanese yen respectively. And foreign issuers are allowed to issue international bonds that meet certain requirements in accordance with foreign regulations. Those measures have been promulgated in August October Exchangeable bond In response to the increasingly diverse corporate financing venues and to promote the development of capital market and augment its scale, GTSM drafted the rules and regulations for over-the-counter trading of exchangeable bonds, which have been approved by the competent authority and promulgated on December 12, Securities underwriters can now assist issuers to list exchangeable bonds on GTSM. F A C T B O O K

32 February October Bolstering long-short mechanism in the bond market Planning the realtime disclosure of o v e r - t h e - c o u n t e r negotiated trades GTSM has called several meetings since February 2006, inviting the competent authority and primary dealers of government bonds to review the long-short and bond lending mechanisms. GTSM has also strengthened the bond lending mechanism, and implemented the system of disallowing short selling by bond holders having bonds in stock, and amended and promulgated relevant regulations. To improve the timeliness of trading information disclosure, GTSM reviewed the prevailing rules for the disclosure of transaction information, payment and settlement of negotiated outright trades, and produced a report for the reference of the competent authority in October. November Augmenting the scale of international bond trading market In line with the listing timetable of the first international bond on Taiwan s exchange - US$250 million bond offering by Deutsche Bank, GTSM decided to solicit public opinion for the name of Taiwan s international bonds following the tradition of Japan s Samurai bond, Britain s Bulldog bond, American s Yankee bond, and South Korea s Kimchi bond. The activity was launched in September. On November 1, 2006, the International Bond Naming and First Listing 30

33 Ceremony was held at Westin Taipei. FSC Commissioner Lee, SFB Director Wu, and GTSM Chairman together announced the name chosen for Taiwan s foreign currency denominated bonds - the Formosa Bond, and gave out awards to the first prize, second prize and third prize winners. After the ceremony, a press conference was held to announce the listing of the first international bond. January ~ December Corporate bond yield curve GTSM continued to conduct quarterly review of whether corporate bond yield curves could serve as reasonable benchmark interest rate, and reported the findings to FSC Commissioner Lee. F A C T B O O K

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151 13 4,000 3,500 3,000 2,500 2,000 1,500 1, A 95101(5) A 95102(20) A 95103(10) A 95101R (5) A 95104(2) A 95103R (10) A 95105(5) A 95102R (20) A 95106(10) A 95105R (5) A 95107(20) A 95106R (10) F A C T B O O K

152 14 1,800,000 1,600,000 1,400,000 1,200,000 1,000, , , , , /01 06/02 06/03 06/04 06/05 06/06 06/07 06/08 06/09 06/10 06/11 06/12 150

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