Composition Guidelines for TPEX and Industrial Sub-Indices

I. The constituents of the Taipei Exchange Capitalization Weighted Stock Index ("TPEX") compiled by Taipei Exchange ("TPEx") are taken from all common stocks listed for trading, including non-managed stocks and Emerging stocks, as set forth below:

(I) Stocks of newly listed companies are included in the sample from the sixth trading day from listing day; provided, stocks of listed companies converted into financial holding companies or investment holding companies are included in the sample from the day of listing.

(II) Stocks suspended from trading are excluded from the sample, and would be included in the sample from the first trading day of the next month following one full calendar month from reinstatement of normal trading; provided, stocks suspended from trading because of issuance of replacement shares due to capital reduction resulted from a corporate split are included in the sample from the day of resuming trading of the new shares.

II. The TPEx indices are divided into the Taipei Exchange Capitalization Weighted Stock Index (the "TPEX"), the Electronics Sub-Index, and other Industrial Sub-Indices:

(I) Constituents of the TPEX: Common stocks of TPEx listed companies that are not managed stocks or Emerging Stocks and meet the listing time requirement.

(II) Constituents of the Electronics Sub-Index: Common stocks of TPEx listed companies that meet the listing time requirement and belong to any one of the sectors: semiconductor, computer and peripheral equipment, optoelectronic, communications and internet, electronic parts and components, electronic products distribution, information service, and electronics.

(III) Constituents of other Industrial Sub-Indices: TPEx follows the industry definitions under the Taipei Exchange Directions for Classifying and Adjusting the Industry Categories of TPEx Listed Companies. The constituents in the Industrial Sub-Indices are common stocks of TPEx listed companies that meet the listing time requirement and belong to the respective sectors.

III. The base values of the TPEX, the Electronics Index, and other sector indices will not be adjusted on ex-dividend dates for listed companies distributing cash dividends. The TPEx compiles total return index, which is a volume weighted price index that is adjusted by cash dividends to reflect returns including cash dividends. The index is calculated and announced at the end of each trading day.

IV. Index calculation:

Index = Total outstanding market value × Base index
Current date base value

The initial base value for an index is the total market value of the constituents on the business day preceding the first calculation date.

The total market value is the sum of the latest trading prices of the component stocks multiplied by the number of outstanding shares on the day. If trading prices are not available on the day, the initial base prices on the day may be used in the calculation.

V. The TPEx maintains continuity of the indices by adjusting base values.

(I) Timing of base value adjustment:

  1. Addition or deletion of a constituent - effective date.
  2. Distribution of common shares or certificates of entitlement to new shares to employees as compensation - listing date.
  3. Distribution of common shares as stock dividends on preferred stock - ex-right date.
  4. Subscription of common shares by existing shareholders for cash capital increase - ex-right date.
  5. Cash capital increase shares or certificates of payment for which shareholders have waived subscription rights and public underwriting has been adopted - listing date.
  6. Failed offering for cash capital increase - at reversion to the original number of issued shares on the first trading day of the next month following receipt of notification.
  7. Share cancellation based on the law - ex-right date or the third trading day of the next month following public announcement on capital decrease, whichever comes first.
  8. Listing of certificates of entitlement to shares or new shares following company merger or consolidation - listing date.
  9. New shares issued for global depositary receipts - listing date.
  10. Common shares converted from bonds with warrants - listing date.
  11. Common shares converted directly from convertible bonds or issued through exercise of securities with subscription right - ex-right date or the third trading day of the next month following the public announcement of capitalization amendment registration.
  12. Common shares converted from convertible preferred shares - listing date.
  13. Other non-trading factors affecting aggregate market value.
  14. Ex-dividend date for cash dividends (applicable only to the total return index).

(II) Base adjustment calculation:

  1. Base adjustment formula for the capitalization weighted stock index:
    Current day base value = Previous day base value × Adjusted aggregate market value after the close of the previous day
    the closing aggregate market value of the previous day
      Adjusted aggregate market value after the close of the previous day = the closing aggregate market value of the previous day + the sum of various adjustments in market value of constituents

  2. Base adjustment formula for the total return index of the capitalization weighted stock index:
    Current day base value = Previous day base value × adjusted aggregate market value after the close of the previous day - aggregate cash dividends distributed on the current day
    the closing aggregate market value of the previous day
  3. Adjusted market values of constituents under Article 5, Paragraph 1 are calculated as follows:
    Adjustment under Item 1: Adjusted market value = Closing price on previous date × number of outstanding shares of listed company
    Adjustment under Item 2: Adjusted market value = Closing price on previous date × number of shares resulting from compensation to employees
    Adjustment under Item 3: Adjusted market value = Ex-right reference price of common shares × total number of common shares issued as stock dividends on preferred shares
    Adjustment under Item 4: Adjusted market value = Subscription price for cash capital increase × number of shares in cash capital increase
    Adjustment under Items 5 to 13: Adjusted market value = closing price of the previous day × change in the number of shares
    The opening auction reference price of the current day may be used for the calculation of the adjustments above in market value after the close of the previous day, if the closing price is not available

VI. Guidelines for adding new Industrial Sub-Indices and terminating existing Industrial Sub-Indices:

(I) Adding new Industrial Sub-Indices: Regular reviews are performed every year on the last business day of November to calculate the number of listed stocks already included in the index composition on the first business day of December in the current year. Except the managed stocks, if the number of listed companies in any sector reaches twenty, an announcement will be made that a sector index will be calculated and disclosed starting on the first business day of January of the following year.

(II) Terminating existing industrial sub-indices: Regular reviews of the existing industrial sub-indices are performed every year on the last business day of November to calculate the number of constituents already included in the respective index compositions on the first business day of December in the current year. If the number of listed companies in any sector is less than five, an announcement will be made that the industrial sub-index will be terminated starting on the first business day of January of the following year, and the calculation of the industrial sub-index will resume when the requirement of adding a new industrial sub-index is met again.

(III) For existing industrial sub-indices, an industrial sub-index should be terminated if a constituent ceases trading or transfers listing to TWSE and consequently becomes unavailable for the index calculation.

(IV) Continuation and termination of industrial sub-indices will be announced on the review date. Around a review date, an industrial sub-index will not be adjusted except the circumstances described in the paragraph above.

VII. These key points shall take effect upon being publicly announced. Subsequent amendment hereto shall be effected in the same manner.