Tokyo Stock Exchange: Addition To TOPIX Methodology

Tokyo Stock Exchange, Inc. (TSE) announced on Wednesday, August 20, 2003, that it will adopt certain changes concerning its method for including newly listing companies^*with extremely large market capitalizations into the TOPIX and its sub-indices. This measure is designed to mitigate market impact from inclusion of such large companies to the TOPIX, in light of the fact that TOPIX is widely used as a benchmark for institutional investors. Details on the changes are as follows.

^* adoption is subject to TSE announcement

1. Outline

TOPIX is a market capitalization-weighted index based on all stocks listed on the 1st section of TSE and the shares of a newly listing company are included in the TOPIX one calendar month and one business day after its listing.

As for the shares of newly listing companies with extremely large market capitalization, TSE has decided to include them into the TOPIX in phases if the market capitalization ratio described below (the ratio of market capitalization of the new listing company to the market value of TOPIX) reaches or exceeds one percent on any date during five business days after the listing. As a result, the ratio for each inclusion of the new company's market capitalization will be capped under one percent and thus market impact will be mitigated.

Number of Inclusion
TSE will calculate market capitalization of a newly listing company on a closing basis and compare it to the market value of TOPIX during five business days after the listing.
Market Capitalization Ratio (MCR) = Market Capitalization of Newly Listing Company^* / Market Value of TOPIX^*
^*closing basis
In case MCR reaches or exceeds one percent on at least one business day during the period, the minimum integral figure that could make the MCR under one percent will be adopted as the number of phases for inclusion to the TOPIX.
Number of Inclusion (NOI) = minimum integral figure that could make the MCR under one percent, after dividing MCR by NOI
(For example, an MCR of 1.7% would require two phases for inclusion, while an MCR of 2.8% would require 3 phases)
Number of Shares For Each Inclusion
The number of shares used for calculation of TOPIX for each inclusion will be calculated as follows.
Number of shares for each inclusion to TOPIX = Number of shares of newly listing company / NOI

Interval of the Inclusion

Inclusion after the initial inclusion will be conducted two calendar months after the previous inclusion.

(Example)

Assuming that MCR was determined to be 1.5%, NOI will be two (2).

Phase	Date for Inclusion (Adjustment Date)	Number of Shares
First	One Calendar month and one business day after listing (same as usual)	Number of Shares of Newly Listing Company / 2
Second	Two Calendar months after first phase	Number of shares of Newly Listing Company / 2

2. Effective Date

These changes will be effective for companies that list their shares on or after September 1, 2003

For further information, please contact the Information Services, Index Group at Tokyo Stock Exchange, Inc.