Methodology of TPEx Taiwan Treasury Benchmark Index

I. Index name

Full name:TPEx Taiwan Treasury Benchmark Index

II. Ground Rules

(1)Index calculation method

Index algorithm:

Step 1: Calculate index base value on index launch date

Base=(3Ei-1 Pi)×(1/3)

Step 2: Calculate index on day t

otrGB(1i)=[(3Ei-1Pi,j)×(1/3)]/Base×1000

The index is set at 1000 on its launch date.

where

i= Bond number in the index

Pi= The latest trading price (after-tax dirty price) of the constituent

Base= Divisor, representing index base value

(2)Constituent selection criteria

Latest issued 5-year, 10-year and 20-year central government bonds (limited to Type A government bonds).

(3)Constituent adjustment

When the latest issued 5-year, 10-year or 20-year central government bonds are included in the index on their third trading day after listing on TPEx, the bonds with corresponding term originally included in the index will be removed. For example, when the newly issued 10-year central government bond (A99105) is listed on TPEx on March 10, 2010, A99105 will be included in the index on March 12, 2010 (third trading day after listing) and the 10-year government bond A98106 originally in the index will be removed.

Index calculation in the event of constituent adjustment

Total market value of constituents at closing before adjustment on the day preceding adjustment

X(i-1)=(3E(i-1)Pit-1)×(1/3)

Total market value of constituents at closing after adjustment on the day preceding adjustment

X^1(i-1)=(3E(i-1)P^1(it-1))×(1/3)

Index base value after constituent adjustment:

Base^1=Base × [X^1(i-1)]/[X(i-1)]

Index calculation after constituent adjustment:

otrGB(1i)=[(3Ei-1)Pi)×(1/3)]/Base^1×1000

where

i = Bond number in the index

t = The day on which constituents are adjusted

Pi,t-1 = The closing price (after-tax dirty price) of constituent before adjustment on the day preceding adjustment

P^1i,t-1 = The closing price (after-tax dirty price) of constituent after adjustment on the day preceding adjustment

Pi = The latest trading price (after-tax dirty price) of the constituent

Base = Divisor, representing index base value

(4)Sources of prices for index compilation

Sources of prices used for index compilation are in sequence:

  1. Transaction prices openly quoted in the Electronic Bond Trading System.
  2. If there is no transaction price for the day, the last transaction price openly quoted in the Electronic Bond Trading System.

Notes:

“Openly quoted price” means quotes given in the Electronic Bond Trading System for which there are at least 70 potential counterparties (bond dealers). Hence an openly quoted price may be regarded as a generally executable market price that is not easily manipulated by anybody. The openly quoted transaction price should be the most credible transaction price on the market.

(5)Index disclosure frequency

  1. The index is updated every 15 seconds during the trading hours daily (9:00 - 13:30).
  2. On the day preceding constituent adjustment (the latest issued 5-year, 10-year or 20-year central government bonds are included in the index on their third trading day after listing on TPEx), the index will be calculated until 12:00 noon.

(6)Auxiliary Information

Auxiliary information

  1. Weighted average coupon rate
  2. Weighted average years to maturity
  3. Weighted average yield
  4. Weighted average duration (modified duration)