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 1.Participating Dealer

A securities firm that has signed a participant agreement with a securities investment trust enterprise (hereinafter referred to as “SITE”) that issues exchange-traded fund (ETF) beneficial certificates for the operation of creation and redemption of the ETF beneficial certificates for its own account or on behalf of its customers.

 2.Liquidity Providers

A SITE that issues ETF beneficial certificates should select some qualified participating dealers to enter into a contract for the provision of ETF beneficial certificates liquidity on the TPEx trading platform.

 3.Custodian Institution

A financial institution that has signed a trust agreement with a SITE that issues beneficial certificates of an ETF.

 4.Applicant

A customer who engages in creation or redemption of ETF beneficial certificates or a participating dealer that engages in creation or redemption of ETF beneficial certificates.

 5.Portfolio Composition File, or PCF

A list prepared and published by a SITE each day based on the reference data of underlying index forwarded by the index provider, which indicates the portfolio of securities and estimated cash component that would be required to apply for in-kind creation or redemption of one creation unit of beneficial certificate on the next trading day.

 6.In-kind Creation

The participating dealer for its own account or on behalf of its customer delivering a portfolio of securities and the cash component per basket required for one creation unit as published on the PCF as notified by the SITE, or their integer multiples to the SITE in exchange for ETF beneficial certificates.

 7.In-kind Redemption

The participating dealer for its own account or on behalf of its customer delivering ETF beneficial certificates to the SITE in exchange for a portfolio of securities and cash component per basket as published on the PCF as notified by the SITE for one creation unit or its integer multiples.

 8.Cash Creation

The participating dealer for its own account or on behalf of its customer delivering cash to the SITE in exchange for ETF beneficial certificates; the calculation basis for the monetary amount and units of the creation shall comply with the trust agreement.

 9.Cash Redemption

The participating dealer for its own account or on behalf of its customer delivering ETF beneficial certificates to the SITE in exchange for cash; the calculation basis for the monetary amount of the redemption shall comply with the trust agreement.

 10.Aggregate Creation

The situation where no more than three applicants who, based on their mutual agreement, combine their individual holding of securities into a portfolio of securities required for one creation unit as published on the PCF or its integer multiples, designate one among them as payer of cash payment required, and jointly appoint one participating dealer (if one of the applicants is a participating dealer with a proprietary trading said applicant shall be the participating dealer) to create ETF beneficial certificates from a SITE.

 11.Minimum In-kind Creation

The situation where a participating dealer may, with the consent of the SITE, create the beneficial certificates of ETF with domestic components securities for its own account by delivering at least 90% of the kind of securities required with more than 90% of the aggregate market value of creation basket for the in-kind creation, and paying a deposit for the shortfall, and then purchasing or borrowing the insufficient quantity of securities on the next trading day and delivering the securities to the custodian institution.

 12.Cash In-lieu

The practice where the in-kind creation or redemption of ETF beneficial certificates by an applicant may be tendered in cash as determined by the SITE if a specific security included in the portfolio of securities as published on the PCF is in any of the following situations:
(1) The applicant is restricted by law to hold or transfer said specific security.
(2) The trading of the said security has been stopped on the exchange.
(3) The said security may be substituted by cash as published on PCF by the SITE.
(4) The SITE does not own the said security or has insufficient shares of the security and is unable to borrow sufficient shares to deliver to the applicant when the applicant redeems the ETF beneficial certificates in-kind.

 13.Bond in lieu for ETFs with Component Bonds

If any of the following circumstances apply to a specific bond in the portfolio published in the PCF, then another bond may be substituted for that bond during the applicant's in-kind creation or redemption of ETF beneficial certificates:
(1) The applicant is restricted by law from holding or transferring the specific bond.
(2) Trading of the specific bond has been suspended on the exchange.
(3) The SITE has published the specific bond in the PCF as one for which another bond may be substituted.
(4) The ETF does not hold the specific bonds, or does not hold a sufficient number of the specific bonds to meet the applicant's in-kind redemption.

 14.Cash Payment

The amount equivalent to the cash component multiplied by the number of creation or redemption units; if the cash payment is positive, it means the applicant should pay the amount to the SITE when creating ETF beneficial certificates or the SITE should pay the amount to the applicant when the applicant redeems ETF beneficial certificates; if the cash payment is negative, it means the SITE should pay the amount to the applicant when the applicant creates ETF beneficial certificates or the applicant pays the amount to SITE when it redeems ETF beneficial certificates.

 15.Shortfall

The securities in the portfolio of securities published on the PCF not delivered by a participating dealer when it transacts on “minimum in-kind creation” basis.