1. Merits and Demerits of Direct & Indirect Account Method July 27 th, 2006 Taiwan Depository & Clearing Corporation

2. Content  Market Overview  Operation Models  Comparison btw Direct & Indirect Accounts  Prospects

3. Market Overview – Account Structure TDCC Ministry of Finance Central Bank Pension Fund TSEC GTSM TAIFEX Securities Firms Custodian Banks Issuers Trusts Securities Finance Co. Participants Account Settlement Account Participants Account Customers Account Settlement Account Participants Account Customers Account Participants Account Customers Account TDCC: Taiwan Depository & Clearing Corp. TSEC: Taiwan Securities Exchange Co. GTSM: GreTai Securities Market TAIFEX: Taiwan Futures Exchange

4. Market Overview – Direct Account Ministry of Finance –National Stabilization Fund was established in 1999 –To maintain safeness and soundness of financial market –Became TDCC’s participant on March 16 th, 2000 Public Service Pension Fund –Established in 1943 –Contributed by individual public servants and the government –Became TDCC’s participant on Nov. 11 th, 2004 Central Bank –For business in which securities under TDCC custody are collateral of the public construction contracts –Became TDCC’s participant on Dec. 30th, 2005

5. Operational Process - Indirect Account TDCC Securities Firms Pressing Order 4. Confirmation 6. Account Balance Inquiry TSEC 2. Pressing order 3.Confirmation 5.Settlement Notice Investors 7 Trading Report

6. Book-entry Process - Indirect Account Participant: Broker S Customer’s Account: 1)-1000 shares TSEC TDCC Participant’s Settlement Account: 1) +1000 shares 2) -1000 shares Securities will be transferred to TDCC participants’ settlement account on T+1 but securities and payment will be settled on T+2. 參加人 B 券商 Participant’s/ Customer Account: 3) +1000 shares Participant’s Settlement Account: 2) +1000 shares 3) -1000 shares Participant: Broker B

7. Operational Process - Direct Account Pension Funds TDCC Securities Firms 4. Confirmation 6. Securities Transfer 7. Account Reconciliation TSEC 3. Confirmation 5.Settlement Notice 1. Pressing Order 8 Trading Report 2. Pressing order

8. Book-entry Process -Direct Account Participant: Broker S TSEC TDCC 參加人 B 券商 自有帳 / 客戶帳 +1000 股 Pension Fund Participant’s Account 1)-1000 shares Participant’s Settlement Account: 1) +1000 shares 2) -1000 shares Participant’s Settlement Account: 2) +1000 shares 3) -1000 shares Participant’s/ Customer Account: 3)+1000 shares Participant: Broker B Securities will be transferred to TDCC participants’ settlement account on T+1 but securities and payment will be settled on T+2.

9. ItemsDirect AccountsIndirect Accounts Order & Confirmation Order through and confirmed by securities firms Account Reconciliation Receive packed data via TDCC computer linkages Reconcile trade data with each securities firm Confidentiality of Trading Information Securities transferred to each securities firm only when trading activities happened Protect more privacy Order through securities firms and position is maintained by individual securities firm itself. Securities firms acknowledge trading and balance details Comparison btw Direct & Indirect Accounts Note: Direct Account herein refer to Public Service Pension Fund

10. ItemsDirect AccountsIndirect Accounts Securities Settlement Short position-account owner shall transfer securities on their own. Long position-TDCC will transfer the securities to buyers’ direct accounts automatically. Post-trading clearing and settlement to be controlled by account owners Conducted by securities firms Account Balance Single account Easy to manage Customers must manage each account owned by themselves among various securities firm. Comparison btw Direct & Indirect Accounts Note: Direct Account herein refer to Public Service Pension Fund

11. ItemsDirect AccountsIndirect Accounts Corporate action All of the stock dividends and new shares will be distributed to one account Easy to manage Stock dividends and new shares will be distributed to various brokers’ accounts Difficult to manage Operating Cost Cost of computer connections Cost of custody No cost of computer connections No cost of custody Risk Control Higher securityCredit risk of participants Comparison btw Direct & Indirect Accounts Note: Direct Account herein refer to Public Service Pension Fund

12. Prospects Potential Customers –Major shareholders of listing companies –Insurance companies –Labor Insurance Fund, Labor Pension Fund and Postal saving fund Follow-up issues  Individual investors’ incentives to open direct accounts.  Competition with CSD’s current participants (e.g. custodian banks)  Management of numerous direct accounts and corresponding operations.

13. Thank You