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    These Operation Directions are established in accordance with Article 79 of the Operating Rules for Securities Firms Handling Margin Purchases and Short Sales of Securities.

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    These Operation Directions shall apply when a TWSE listed or TPEx listed company completes settlement and securities transfer by the business day (inclusive) preceding the date (the book closure date) when, in accordance with Article 165 of the Company Act, entries in its shareholders' roster shall not be altered prior to the convening date of a special shareholders' meeting. Balance of each transaction shall be calculated based on the balance of the respective calculation record date. The terms used in these Operation Directions are defined, and the record date is determined, as follows:

1. Balance of each transaction: balance of transaction as defined below shall be calculated based on changes in the balance of the segregated account for margin purchases and short sales.
1. Margin loan balance shall mean the collateral balance for a margin purchase.
2. Balance of short sales shall mean the unsettled balances for short sales.
3. Balance of proprietary securities shall mean the remaining balance of the securities which is transferred as the source of securities from one's own account to a dedicated account for margin purchases and short sales.
4. Balance of borrowing securities shall mean the remaining balance of the securities which is transferred from the Stock Exchange securities lending center, a dedicated account for securities borrowing and lending, and a dedicated account for securities borrowing and lending of a securities firm or securities finance enterprise engaging in securities borrowing and lending business, as the source of securities, to a dedicated account for margin purchases and short sales.
5. Balance of lending securities shall mean the remaining balance of the securities which is transferred from a dedicated account for margin purchases and short sales, lent by the Stock Exchange securities lending center, lent to a securities firm or securities finance enterprise engaging in securities borrowing and lending business, and lent for participation in lending auction and lending negotiation, as the source of securities, to a dedicated account for securities borrowing and lending.
6. Balance of securities in the dedicated account for securities borrowing and lending shall mean the balance of securities transferred from a dedicated account for margin purchases and short sales that remain unborrowed.
7. Balance for refinancing of funds shall mean the balance of the collateral for refinancing of funds by a securities finance enterprise to a securities firm
8. Balance for refinancing of securities shall mean the balance of the securities for short sales and borrowing by a securities finance enterprise to a securities firm, which can be categorized in terms of functions into balance available for settlement and that for return.
2. For the purpose of verifying the basis for calculating the balance of transaction prescribed in the preceding paragraph, the record date is set forth as follows:
1. The third business day prior to the book closure date shall be deemed the calculation record date for margin loan balance, balance of short sales, balance for refinancing of funds and balance for refinancing of securities for settlement, and shall apply to transactions completed by the record date (inclusive) or the business day (inclusive) preceding the book closure date.
2. The business day preceding the book closure date shall be deemed the calculation record date for balance for refinancing of securities for return, balance of proprietary securities, balance of borrowing securities, balance of lending securities and balance of securities in the dedicated account for securities borrowing and lending, and shall apply to transactions completed or securities transferred by the record date (inclusive). A securities finance enterprise and securities firm shall verify on its own by the business day (inclusive) preceding the book closure date whether or not the securities have been transferred.

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    Calculation Principles

1. Basic calculation principles
Securities finance enterprises or securities firms shall calculate the number of shares of margin buyers based on the following formula. The number of shares each margin buyer can purchase shall be calculated by the ratio derived from his or her margin loan balance against the total margin loan balance of the securities finance enterprise or securities firm, rounded up to the nearest number of full shares. Remainder shares shall be arranged by decimal in descending or ascending order, and in the event of a tie, the securities finance enterprise or securities firm shall distribute the remainder shares by drawing lots. Each margin buyer can purchase the number of shares up to a maximum equivalent to his or her margin loan balance.
(Margin loan balance + Balance of proprietary securities + Balance of borrowing securities) - Balance of short sales - (Balance of lending securities - Balance of securities in the dedicated account for securities borrowing and lending)

2. Securities finance enterprises and securities firms' calculation principles for the number of shares of margin buyers where there is a balance for refinancing of funds or balance for refinancing of securities:
1. Securities firms
1. For securities firms re-financing securities for a short sale, the number of shares transferable to its margin buyers shall be zero. (NB: The financing securities shall be returned if the sum of the balance transferred as the source of securities from a securities firm's own account, the Stock Exchange securities lending center, securities borrowed by a securities firm or securities finance enterprise engaging in securities borrowing and lending business or securities margin purchase and short sale business, and securities borrowed from customers for securities borrowing and lending business, plus margin loan balance plus balance for refinancing of securities is greater than the sum of the balance of short sales, balance of securities for borrowing and lending securities, balance of securities lent to a securities firm or securities finance enterprise engaging in securities borrowing and lending business, securities lent by the Stock Exchange securities lending center, and balance of securities lent for participation in lending auction and lending negotiation.)
2. Upon receipt of notification from a securities finance enterprise of the "number of shares transferable for re-financing for margin loans", a re-financing securities firm shall, based on the "margin loan balance" + "balance of propriety securities" + "balance of borrowing securities" - "balance of short sales" - "balance of lending securities" + "balance of securities remained in the dedicated account for securities borrowing and lending" - "balance for refinancing of funds" + "the number of shares transferable for re-financing for margin loans", calculate the number of shares each margin buyer can purchase by the ratio derived from his or her margin loan balance against the total margin loan balance of the securities firm (the basic calculation principles apply to the above formula and likewise to the following).
2. Securities finance enterprises
1. When the "sum of "a securities finance enterprise's "margin loan balance, balance of proprietary securities, balance of borrowing securities and balance of securities in the dedicated account for securities borrowing and lending" is greater than the "sum of the balance of short sales and balance of lending securities", and the "balance for refinancing of funds" is greater than the "balance for refinancing of securities":
1. The number of shares transferable to its margin buyers shall be the same as those specified in the basic calculation principles.
2. A securities firm's "number of shares transferable for re-financing for margin loans" shall be calculated based on the difference by subtracting the "balance for refinancing of securities" from the "balance for refinancing of funds", and by the ratio derived from such securities firm's margin loan balance against the total margin loan balance of the securities finance enterprise.
2. When the "sum of" a securities finance enterprise's "margin loan balance, balance of proprietary securities, balance of borrowing securities and balance of securities in the dedicated account for securities borrowing and lending" is greater than the "sum of the balance of short sales and balance of lending securities", and the "balance for refinancing of funds" is less than the "balance for refinancing of securities", as well as when the "sum of" its "margin loan balance, balance of proprietary securities, balance of borrowing securities and balance of securities in the dedicated account for securities borrowing and lending minus the sum of the balance of short sales and balance of lending securities" plus the "balance for refinancing of funds minus the balance for refinancing of securities" leads to a positive number:
1. The number of shares transferable to its margin buyers shall be calculated based on the value derived by the "sum of the margin loan balance, balance of proprietary securities, balance of borrowing securities and balance of securities in the dedicated account for securities borrowing and lending minus the sum of the balance of short sales and balance of lending securities" plus the "balance for refinancing of funds minus the balance for refinancing of securities", and by the ratio derived from the margin buyer's margin loan balance against the total margin loan balance of the securities finance enterprise.
2. A securities firm's "number of shares transferable for re-financing for margin loans" shall be zero.
3. When the "sum of" a securities finance enterprise's "margin loan balance, balance of proprietary securities, balance of borrowing securities and balance of securities in the dedicated account for securities borrowing and lending" is less than the "total of balance of short sales and balance of lending securities", and the "balance for refinancing of funds" is greater than the "balance for refinancing of securities", as well as when the "sum of" its "margin loan balance, balance of proprietary securities, balance of borrowing securities and balance of securities in the dedicated account for securities borrowing and lending minus the sum of the balance of short sales and balance of lending securities" plus the "balance for refinancing of funds minus the balance for refinancing of securities" leads to a positive number:
1. The number of shares transferable to its margin buyers shall be zero.
2. The "number of shares transferable for re-financing for margin loans" for each securities firm shall be calculated based on the value derived by the "sum of the margin loan balance, balance of proprietary securities, balance of borrowing securities and balance of securities in the dedicated account for securities borrowing and lending minus the sum of the balance of short sales and balance of lending securities" plus the "balance for refinancing of funds minus the balance for refinancing of securities", and by the ratio derived from such securities firms' margin loan balance against the total margin loan balance of the securities finance enterprise.
4. When the "sum of" a securities finance enterprise's "margin loan balance, balance of proprietary securities, balance of borrowing securities and balance of securities in the dedicated account for securities borrowing and lending minus the sum of the balance of short sales and balance of lending securities" plus the "balance for refinancing of funds minus the balance for refinancing of securities" leads to a negative number:
1. The number of shares transferable to its margin buyers shall be zero.
2. A securities firm's "number of shares transferable for re-financing for margin loans" shall be zero.
3. A securities finance enterprise shall conduct competitive bid transactions or negotiated transactions.

    A securities finance enterprise shall give prompt notice to a securities firm upon completion of its calculation of the "number of shares transferable for re-financing for margin loans" for the said securities firm.

• ATTACHMENT EXAMPLE.doc

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    Where securities must be borrowed through competitive bid transactions or negotiated transactions on the second business day prior to the book closure date, such borrower will lose his or her voting right at the special shareholders meeting.
    A securities finance enterprise handling on the second business day prior to the book closure date a securities firm's application for re-financing of securities for redelivery of securities borrowed shall deny such application if, due to insufficiency of securities, securities need to be borrowed through competitive bid transactions or negotiated transactions on the business day preceding the book closure date.
    A securities finance enterprise shall not conduct competitive bid transactions or negotiated transactions on the business day preceding the book closure date, for the purpose of handling applications for re-financing of securities for redelivery of securities borrowed for margin loans for stock loans, or for securities borrowing and lending.

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    These Operation Directions shall be drafted by the TWSE along with the TPEx and take effect after having been submitted to and approved by the competent authority. Subsequent amendments thereto shall be effected in the same manner.