FIXED INCOME FUNDAMENTALLY WEIGHTED INDICES

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1 FIXED INCOME FUNDAMENTALLY WEIGHTED INDICES Index Methodology October 2015 FOR PROFESSIONAL INVESTOR USE ONLY.

2 fxed ncome famly ndex methodology, october 2015 Contents Part I: Index Overvew 3 1 Index Specfcatons 3 Part : Elgble Government Unverse 5 Part I: Elgble Corporate Unverse 6 PART IV: Buldng the Fundamental Fxed Income Corporate Indces 7 1 Notaton and Defntons 7 2 LOIM Sector Descrpton 8 3 Weght Determnaton Scheme 9 Part V: Buldng the Fundamental Fxed Income Government Indces 19 1 Determnng the Country Credt and Socal / Demographc Weghts 19 2 Factor Adjustments 20 3 Fnal Bond Weghts 22 4 Fnal Remarks 22 Part VI: Index Calculatons 23 1 BVAL Overvew 23 2 BVAL Index Calculatons 23 3 Currency-hedged Indces 25 4 Index Rebalance Process 27 Appendx 29 Key Terms and Defntons 29 References 30 Bloomberg Sector Mappng to LOIM Sectors 31 UCITS Gudance Note 1/96 32 Changes to the Index Methodology 32

3 fxed ncome famly ndex methodology, october 2015 Part I: Index Overvew 1 INDEX SPECIFICATIONS 1.1 Index Famly The followng Lombard Oder Investment Managers (LOIM fundamental fxed ncome ndces are covered n ths methodology: TABLE 1 INDICES COVERED TICKER BBG CODE INDEX NAME INDEX TYPE BASE CURRENCY MARKET TYPE REBALANCE FREQUENCY INCEPTION DATE LOFEURG Index LOIM Fundamental Euro Government Government EUR Developed Monthly 12-Apr LOFUOEC Index LOIM Fundamental Global Government Government USD Developed Monthly 16-Dec LOFEMLU Index LOIM Fundamental EM Local Currency Government USD Emergng Monthly 12-Jan LOFEUCP Index LOIM Fundamental Euro Corporate Corporate EUR Developed Sem Annual 14-Apr LOFGLUIG Index LOIM Fundamental Global Corporate Corporate USD Developed Sem Annual 20-Dec LOFE5B Index LOIM Fundamental Euro BBB-BB Corporate EUR Developed Sem Annual 01-Dec LOFGLU5B Index LOIM Fundamental Global BBB-BB Corporate USD Developed Sem Annual 16-Jul BASE VALUE 1.2 Dstrbuton The Index s publshed by Bloomberg Indexes and s dstrbuted to Lombard Oder. Each vendor determnes whether they wll dstrbute/dsplay the ndex data va ther respectve nformaton systems. 1.3 Calculaton Frequency The Indces are calculated and publshed once on each weekday,.e. Monday to Frday nclusve, rrespectve of holdays on the local markets. 1.4 Index Accuracy The Index shall be publshed to an accuracy of 3 decmal places. Any ncorrect calculaton of the Index shall be adjusted on a retrospectve bass and announced on nvestment-approach/smart-beta/ndex-detals.html 1.5 Decson-makng Bodes Index Oversght Commttee A commttee composed of representatves from LOIM (the Index Oversght Commttee s responsble for the desgn and creaton of ths Index Methodology and any perodc amendments thereto. Members of the Index Oversght Commttee may at any tme recommend changes to ths Index Methodology (ncludng the Index selecton crtera and lst of Elgble Countres by submttng any proposed changes to the Index Oversght Commttee for consderaton and approval n advance of the next Scheduled Determnaton Date. Followng approval by the Index Oversght Commttee, such changes shall be mplemented by way of an update to ths Index Methodology whch shall be publshed on nvestment-approach/smart-beta/ndex-detals.html 3

4 fxed ncome famly ndex methodology, october 2015 The Index Oversght Commttee typcally meets on a sem-annual bass n advance of each sem-annual Scheduled Determnaton Date wth respect to the Credt Indces, and on a monthly bass n advance of each monthly Scheduled Determnaton Date for the Government Indces. The Index Oversght Commttee members are provded n Table 2, below: TABLE 2 INDEX OVERSIGHT COMMITTEE: MEMBERS NAME FUNCTION WITHIN LOIM CONTACT DETAILS Jan Straatman Global CIO Tel: Emal: j.straatman@lombardoder.com Carolna Mno-Paluello Deputy Global CIO Tel: Emal: c.mno-paluello@lombardoder.com Stephen Grobman Chef Rsk Offcer Tel: Emal: Stephen.Grobman@lombardoder.com Salman Ahmed Global Strategst Tel: Emal: s.ahmed@lombardoder.com Puja Schams Chef of Staff to the CIO Tel: Emal: p.schams@lombardoder.com James O Connor Head of Complance Tel: Emal: j.oconnor@lombardoder.com Benjamn Horsell Head of Marketng and Product Development Tel: Emal: b.horsell@lombardoder.com Supervsory Index Commttee Where an extraordnary event occurs or s occurrng, e.g. a market dsrupton event such as but not lmted to: a force majeure, act of god, economc crss, or any other event whch the Calculaton Agent deems as resultng n nadequate or null prce nformaton an affected securty, then a commttee composed of staff from The Calculaton Agent (the Supervsory Index Commttee shall be responsble for determnng the prce of that affected securty, whch may nvolve usng the most recent traded prce, BVAL prce, or any source that the Supervsory Index Commttee deems applcable, ncludng the possblty of removng such affected securty from the Index return calculatons. TABLE 3 NAME SUPERVISORY INDEX COMMITTEE: MEMBERS CONTACT DETAILS Wllam Mast Tel: Emal: wmast2@bloomberg.net Scott Stallwood Tel: Emal: sstallwood@bloomberg.net Mchael Luongo Tel: Emal: mluongo@bloomberg.net Andrew Nelan Tel: Emal: anelan@bloomberg.net 1.6 Index Lcensng Stock exchanges, banks, fnancal servces provders and nvestment houses seekng to reference the Index value drectly or ndrectly for dervatve nstruments, custom ndces/benchmarks or any other ndex type or product wll requre a vald lcense by LOIM. 4

5 fxed ncome famly ndex methodology, october 2015 Part : Elgble Government Unverse Inclusons - for each Elgble Unverse: Classfcaton: Classfed as havng been ssued by a Government as defned by Bloomberg Industry Classfcaton (BICS 1 Currency: Issued n the same currency as that of the local currency of that government s country. Coupon: Fxed-rate Bond Maturty: 1 year as of each monthly Index Determnaton Date Global Government Elgble Unverse Each country must be a member of the Organzaton for Economc Co-operaton and Development (OECD Excluson: Inflaton-lnked bonds Euro Government Elgble Unverse Each country must be a member of the European Monetary Unon (EMU Bond must be EUR-denomnated Excluson: Inflaton-lnked bonds Emergng Market Local Elgble Unverse Each country must be defned as Emergng market and developng economes by the Internatonal Monetary Fund (IMF as publshed n the World Economc Outlook (WEO; Excluson: Inflaton lnked bonds, wth the excepton of nflaton-lnked bonds ssued by Chle (n CLF Exclusons for each Elgble Unverse: Table 1: Factor Weghts dsplays the macro-economc data, whch forms the Factor Weghts for the Index. The data s publshed n Aprl and October. Countres / ssuers whch have no data pertanng to the current rebalance are removed from the respectve Elgble Unverse. UCITS Requrement: The market n whch the securtes trade are requred to be regulated, operate regularly, be recognzed and open to the publc. Please see APPENDIX UCITS Gudance Note 1/96 for full defntons. TABLE 1 FACTOR WEIGHTS CREDIT FACTORS SOCIAL / DEMOGRAPHIC FACTORS MACRO FACTORS Publc Debt to GDP Rato ( 15% Poltcal Stablty ( + 10% PPPGDP ( + 30% Net Internatonal Investment Poston ( + 15% Old Age Dependency Rato ( + 5% Fscal Balance ( + 10% Msery Index ( + 5% Prvate Debt to GDP Rato ( + 5% Current Account Balance ( + 5% Source: IMF, World Bank, Unted Natons. See Appendx for full defntons and data access. 5

6 fxed ncome famly ndex methodology, october 2015 Part I: Elgble Corporate Unverse In order to determne the Elgble Credt Unverse, whch wll form the bass for the LOIM Fundamental Euro Corporate Index and LOIM Fundamental Global Corporate Index, we work our way through Table 1, followng n numercal order from Step 1 to Step 7. The resdual bonds whch reman after the fnal step, Step 7: Exclusons, wll form the Elgble Credt Unverse. TABLE 1 DETERMING THE ELIGIBLE CREDIT UNIVERSE STEP FILTER DESCRIPTION 1 Currency For the LOIM Fundamental Euro Corporate Index and LOIM Fundamental Euro BBB-BB Index: Consder only EUR-denomnated bonds For the LOIM Fundamental Global Corporate Index and LOIM Fundamental Global BBB-BB Index: Consder only EUR-, USD-, GBP- denomnated bonds 2 Amount Outstandng For the LOIM Fundamental Euro Corporate Index: EUR 500mn For the LOIM Fundamental Global Corporate Index EUR 500mn, USD 500mn, GBP 350mn See TABLE 2: AMOUNT OUSTANDING FOR BBB-BB INDICES 3 Sector Only consder ssuers who are members of a LOIM sector 4 Bond Maturty Only consder bonds wth a maturty 1.5 years as of the Determnaton Date 5 Bond Ratng For LOIM Fundamental Euro Corporate Index and LOIM Fundamental Global Corporate Index: Only consder nvestment grade bonds: Moody s Baa3, S&P BBB-, Ftch BBB- ; or hgher: 6 Coupon Type Fxed-rate coupon For LOIM Fundamental Euro BBB-BB Index and LOIM Fundamental Global BBB-BB Index: Only consder bonds wth ratng between: Moody s Baa1 and Ba3, S&P BBB+ and BB-, Ftch BBB+ and BB- In both cases: I. When all three are avalable, choose the mddle ratng. When two agency ratngs are avalable, choose the lowest ratng I. When only one agency ratng s avalable, choose that credt ratng. 7 Excluson Securtzed and covered bonds Warrants, convertbles, and other equty converson type bonds Inflaton-lnked bonds, floatng-rate ssues Prvate placements, retal bonds. Structured Notes, pass-through certfcates UCITS Requrement: The market n whch the securtes trade are requred to be regulated, operate regularly, be recognzed and open to the publc. Please see APPENDIX UCITS Gudance Note 1/96 for full defntons TABLE 2 AMOUNT OUSTANDING FOR BBB-BB INDICES RATING AGENCY BOND RATING AMOUNT OUTSTANDING Mood ys Baa1 to Baa3 EUR 500mn USD 500mn GBP 350mn Ba1 to Ba3 EUR 250mn USD 250mn GBP 200mn S&P BBB+ to BBB- EUR 500mn USD 500mn GBP 350mn BB+ to BB- EUR 250mn USD 250mn GBP 200mn Ftch BBB+ to BBB- EUR 500mn USD 500mn GBP 350mn BB+ to BB- EUR 250mn USD 250mn GBP 200mn 6

7 fxed ncome famly ndex methodology, october 2015 PART IV: Buldng the Fundamental Fxed Income Corporate Indces 1 NOTATION AND DEFINITIONS Defnton 1: Let I be the set of all ssuers n the Elgble Corporate Unverse, and I I the th ssuer n that set. Typcally called the th element belongng to set I, and I the number of elements n set I. Defnton 2: Let be the set of elgble regons where bonds can be ssued, namely Unted States, UK and Euro regon. And G k the k th geographcal regon belongng to the set, where k 1, 2, 3, wth 3. Note: Notaton: An ssuer can appear n one or more regons f the ssuer has ssued bonds denomnated n that country/regon s currency. For example, suppose corporate ABC, a bank, has ssued bonds denomnated n USD, EUR. Then ts sector classfcaton would be Bankng Sector and t would appear twce: Once n the Bankng Sector sector wthn the US regon, and once n the Bankng Sector of the Euro regon. When defnng sets and subsets and explanng the mathematcs whch ensue, t s often useful to hold a regon constant, denoted by ˆ (pronounced G hat. One would then repeat the steps nvolved n the formula contanng the hat expresson, but replacng the constant wth another element of that set. Defnton 3: Let be the set of sectors wthn a fxed geographcal regon ˆ, and S k the k th sector belongng to wthn that fxed regon ˆ. The strct notaton whch wll be used throughout the calculatons wll be of the fashon: Sk ˆ. Where ˆ denotes the relatonshp subset of,.e. s a subset of ˆ. Defnton 4: Defnton 5: Defnton 6: Let B I be the set of all bonds ssued by ssuer I, and bond k I denote the ndvdual bonds, wth k 1, 2,, B I. Let I, Sk, ˆ be the set of all bonds, bond j I over j ssued by ssuer I wthn sector S k, wthn a fxed geographcal regon ˆ. Then we have: I, Sk, ˆ { bond j I Sk, ˆ k 1, 2,, 9 } Let H S k, ˆ be the set of all Issuers wthn a fxed sector S k, wthn a fxed regon ˆ,.e. H S k, ˆ { I I S k ˆ. k 1, 2,, 9 } 7

8 fxed ncome famly ndex methodology, october LOIM SECTOR DESCRIPTION The followng LOIM Sectors and ther descrptons are used throughout the Index calculatons: TABLE 1 LOIM SECTORS 1 SECTOR Basc Industry Captal Goods Chemcals Healthcare Retal Servce Autos-Aerospace Utltes TMT Transport Bank Non-Bank Fnancal DESCRIPTION Extracton, dstrbuton & manufacture of natural resources and related servces. Encompasses the extracton, refnng, basc processng & dstrbuton of ol, metal, wood & paper & packng resources. Manufacture & dstrbuton of machnery & products that are sold busness to busness & n turn used n the producton of fnshed goods. These nclude buldng materals, engneerng & constructon machnery as well as holdng companes that nvest n dversfed range of busness. Manufacture & dstrbuton of chemcals, medcnes, pharmaceutcals, surgcal and healthcare products. All aspects of healthcare servces ncludng hosptal, clncal & home care. Manufacture and dstrbuton of consumer goods & provson of servces for consumpton, lesure and retal. Servces cover those for consumers and busnesses such as property, food servces, facltes management, and employment. Excludes vehcle manufacture, communcaton and health-related products & servces captured by other sectors. Manufacture of vehcles, & ther component parts used to transport goods and people ncludng automobles, shps, trucks & aeroplanes. Includes the captve fnance companes. Utltes ncludng the generaton and dstrbuton of electrcty, heatng, water and provson of waste and envronmental servces. Communcatons nfrastructure and servces encompassng telephone, meda, technology and transport used to broadcast and communcate vrtually or physcally. Transport nfrastructure servces nclude arlnes, shppng, ralway networks and toll roads but exclude manufacture of the vehcles that use them such as automobles and aeroplanes. Fnancal nsttutons that provde servces to commercal and retal customers such as acceptng deposts and gvng loans Frms that provde fnancal servces to commercal and retal customers ncludng brokers, nsurance (lfe and non-lfe and general fnancal servces such as consumer fnance, specalty fnance, asset management and nvestment servces. 1 See APPENDIX: Bloomberg Sector Mappng to LOIM Sectors The below fgure, FIG 1, dsplays the herarchcal relatonshp between bond, ssuer, sector and regon, and defned by Defnton 6. FIG 1 ALL BONDS WITHIN A SECTOR WITH A REGION Regons Sectors Issuers Bonds 8

9 fxed ncome famly ndex methodology, october WEIGHT DETERMINATION SCHEME Overvew In order determne the Fnal Issuer Weghts we refer to Fgure 1: Road Mappng Process, whch outlnes nne separate % Allocatons. Each % Allocaton s attrbutable to a Factor (Credt, Valuaton, and Lqudty and to an Aggregaton Level (Issuer, Sector, and Geography. Both the Factor and Aggregaton Level are dmensons whch, when combned together, form the bass of the road mappng process. Aggregaton Level Dmenson: Ths dmenson s dvded nto three levels: Issuer Level, Sector Level and Geographcal Level. The process for calculatng Aggregaton Level (or column flows down the rows (or Factors as depcted n the Fgure 1. Ths leads to a Total Issuer Weght, Total Sector Weght, and Total Geographcal Weght. The product of these total weghts yelds the Fnal Issuer Weght, wth some addtonal Factor Weght Caps whch wll be descrbed later on. Issuer Level: Determnes the % Allocaton attrbutable to the bond s ssuer, n a partcular sector for a partcular regon, n the benchmark Sector Level: Determnes the % Allocaton attrbutable to the bond s currency, for a partcular sector, n the benchmark. Geographcal Level: Determnes the % Allocaton attrbutable to the bond s currency, for a partcular regon, n the benchmark FIG 2 ROAD MAPPING PROCESS CREDIT 60% VALUATION (20% LIQUIDITY (20% Issuer Credt (% Allocaton Issuer Valuaton (% Allocaton Issuer Lqudty (% Allocaton Total Issuer Weght AREGATION LEVEL FACTOR ISSUER SECTOR GEOGRAPHY W c I W V I W L I Sector Credt (% Allocaton Sector Valuaton (% Allocaton Sector Lqudty (% Allocaton CCY Credt (% Allocaton CCY Valuaton (% Allocaton CCY Lqudty (% Allocaton W I (total W S (total W G (total W c S W V S W L S Total Geography X Total Sector Weght X Weght W c G W V G W L G Factor Weghts Cap 4% Total Credt Weght + Total Valuaton Weght + Total Lqudty Weght 60%W c (total 20%W v (total 20%W L (total Fnal Issuer Weght Factor Level Dmenson: Ths dmenson s dvded nto three levels (or factors: Credt Factor, Valuaton Factor, and Lqudty Factor. The process for calculatng the Factor Level (or row flows along the columns (or Aggregaton Levels as depcted n Fgure 1. Ths leads to a Total Credt Weght, Total Valuaton Weght, and Total Lqudty Weght. These are requred as the weght per ssuer that s attrbutable to each Total Factor Weght, e.g. Total Credt Weght, s capped at 4%. As mentoned above the Factor Weght Cappng wll be explaned later on. Credt Factor: Macro and Mcro economc based allocaton. Allocaton done to capture the potental rsk of ssuer (dosyncratc rsk and sector (Bubble effect Valuaton Factor: Market based allocaton. Allocaton based on bonds prcng to capture the realzed rsk already prced by the market Lqudty Factor: Lqudty based allocaton. Make sure that the computed ndex s lqudty-adjusted. 9

10 fxed ncome famly ndex methodology, october Issuer Level Credt Factors The determnaton of the ssuer level credt % Allocaton reflects the credt-worthness of the ndvdual ssuers. The metrcs and ther weghtngs depend on the followng sector breakdown: TABLE 2 FACTORS APPLIED TO BANKING ISSUERS CREDIT MEASURE ITEM DETAIL WEIGHT EFFECT DESCRIPTION Sze Sze (25% Revenues + Hgh revenues gve a hgher allocaton as they reflect scale & better reslence to shocks Indebtedness Leverage (15% Fundng Total assets / Total common equty Hgher assets relatve to equty means hgher relance on debt fnancng and s lower weghted Fundng Profle (15% Gross loans/deposts Hgh loans relatve to deposts means hgher relance on borrowed funds and s lower weghted Asset Qualty Asset qualty 1 (20% Loan loss provsons / pre-provsons proft Hgh mparment charges relatve to pre-provson proft are lower weghted Asset qualty 2 (25% Loan loss provsons / gross loans Hgh mparment charges relatve to loan balances are lower weghted Source: S&P Captal IQ. TABLE 3 FACTORS APPLIED TO FINANCIAL EX-BANKING ISSUERS CREDIT MEASURE ITEM DETAIL WEIGHT EFFECT DESCRIPTION Sze Sze (30% Revenues + Hgh revenues gve a hgher allocaton as they reflect scale & better reslence to shocks Indebtedness Leverage (25% Total assets / Total common equty Hgher assets relatve to equty means hgher relance on debt fnancng and s lower weghted Earnngs Generaton Return on equty (15% Earnngs from contnung operatons / Average equty Return on revenues (30% Earnngs from contnung operatons / Total revenues + Hgher returns on equty and captal generaton capacty are hgher weghted + Hgher returns on revenue and better cost control are hgher weghted Source: S&P Captal IQ. 10

11 fxed ncome famly ndex methodology, october 2015 TABLE 4 FACTORS APPLIED TO CORPORATE EX-FINANCIAL ISSUERS CREDIT MEASURE ITEM DETAIL WEIGHT EFFECT DESCRIPTION SIZE Sze (30% Revenues + Hgher revenues gve a hgher allocaton as they reflect scale & better reslence to shocks. INDEBTEDNESS Leverage (30% Adjusted total debt / EBITDAR Hgher debt levels relatve to the earnngs generated to repay the debt are lower weghted. Interest Cover (15% EBITDAR / nterest pad + Hgher levels of earnngs relatve to the debt expense that needs to be pad out of earnngs are hgher weghted. CASH GENERATION Free cash flow (15% Free cash flow / total debt + Hgher levels of unencumbered cash relatve to the debt burden are hgher weghted. Earnngs growth (10% EBITDA growth / total debt growth + In the last fve years, growng earnngs faster than debt results n greater weghtng. Source: S&P Captal IQ. Let tem j be the Credt Measure for a Sector S k s.t. ˆ. Denote val j to be value of tem j, and a j the absolute weght of tem j dsplayed n brackets next to each tem j. Then, determne the ssuer weghts w.r.t each lne tem j, denoted W I (tem j accordng to the followng formulas: If the Weght Effect s postve,.e. +, then: mn( ( ( mn( (1.0 If the Weght Effect s negatve,.e., then: ( ( ( ( (1.1 Where H : H S k, ˆ, as per Defnton 6, s the set of all Issuers wthn a fxed sector S k, wthn a fxed regon ˆ,.e. H S k, ˆ, {I I S k ˆ k 1,2,,9 } The Issuer Credt weght for ssuer I, denoted W c I H s gven by: 1 ( Where ITEMS{set contanng all lne tems q tems q S k } (2 11

12 EXAMPLE CREDIT - ISSUER LEVEL WEIGHT Suppose we consder the set of USD-denomnated bonds. And, we fx the sector to be Bankng. Then let s further suppose for example that results n the followng table: fxed ncome famly ndex Suppose we consder methodology, the set of october USD-denomnated 2015 bonds. And, we fx the sector to be Bankng. Then let s further suppose for eas TABLE 5 EXAMPLE USD DENOMINATED, BANKING SECTOR example that results n the followng table: ISSUERS TABLE 5 EXAMPLE USD DENOMINATED, BANKING SECTOR CREDIT MEASURE Bank 1 Bank 2 Bank 3 Bank 4 ISSUERS Sze EXAMPLE: USD CREDIT 3.5 mn ISSUER LEVEL USD WEIGHT 2.4 USD 7.6 mn USD 0.5 mn CREDIT MEASURE Bank 1 Bank 2 Bank 3 Bank 4 Suppose we consder the set of USD-denomnated bonds. And, we fx the sector to be Bankng. Then Leverage 1x 1.2x 0.5x 1.8x Sze let s USD further 3.5 mn suppose for ease of example USD 2.4 that results n the followng USD 7.6 table: mn USD 0.5 mn Leverage 1x 1.2x 0.5x 1.8x TABLE 5 EXAMPLE USD DENOMINATED, BANKING SECTOR Notng we have: ISSUERS I Notng Sector CREDIT we have: SS Bankng MEASURE Sector BANK 1 BANK 2 BANK 3 BANK 4 Sze USD 3.5 mn USD 2.4 mn USD 7.6 mn USD 0.5 mn Geography UUUU (USD-denomnated bonds Sector SS Leverage Bankng Sector 1x 1.2x 0.5x 1.8x Lne Items 1 Sze, 2 Leverage Geography Notng UUUU (USD-denomnated we have: bonds Issuers 1 Bank 1, 2 Bank 2, 3 Bank 3, 4 Bank 4. Lne Items Sector 1 Sze, 2 Leverage ˆ Values for Bankng Sector 11 vvvvvv , 2 vvvvvv1 2.4, 3 vvvvvv1 7.6, 4 vvvvvv Issuers 1 Bank Geography 1, 2 Bank 2, 3 Bank 3, ˆ 4 Bank 4. Values for 22 vvvvvv 1 US (USD-denomnated bonds 2 1, 2 vvvvvv2 1.2, 3 vvvvvv3 0.5, 4 vvvvvv Values for 11 vvvvvv 1 Lne 1 3.5, 2 vvvvvv1 2.4, 3 vvvvvv1 7.6, 4 vvvvvv Items tem 1 Sze, tem 2 Leverage Values for 22 vvvvvv 1 2 1, 2 vvvvvv2 1.2, 3 vvvvvv3 0.5, 4 vvvvvv Issuers I 1 Bank 1, I 2 Bank 2, I 3 Bank 3, I 4 Bank 4. I Values for Item 1 val , val I 2 2.4, val I 3 7.6, val I Issuer weghts w.r.t lne tem 1: I Values for Item 2 val 1 2 1, val I 2 1.2, val I 3 0.5, val I Gven Issuer weghts w.r.t 1 Sze has a postve Weght Effect, we refer to Equaton (1.1. lne tem 1: Weght of 1 Sze w.r.t. Issuer weghts 1 Bank 1, denoted by WW 1( w.r.t lne tem 1: 1, s gven by: Gven 1 Sze has a Gven postve temweght 1 Sze Effect, has a postve we refer Weght to Equaton Effect, we (1.1. refer to Equaton (1.1. Weght of 1 Sze w.r.t. WW Weght 1 of tem Bank 1 1, Sze denoted w.r.t. Iby 1 WWBank (1 ( (2.4 1( 1, denoted 0.5 1, + s by (7.6 gven W I 1 (tem by: 0.5 1, + s (0.5 gven by: % WW In a smlar fashon we fnd: (1 WW 2( ( ( ( ( % %, WW 3( %, WW 4( 1 0%. In a smlar fashon we fnd: In a WWsmlar 2( fashon 1 we 15.83%, fnd: WWW I 2(tem 3( %, WW %, W I 3(tem 1 4( 59.17%, 1 W0%. I 4(tem 1 0%. Issuer weghts w.r.t lne tem 1: Issuer weghts w.r.t lne tem 1: Gven Issuer weghts w.r.t 2 Leverage lne Gven has tem tema negatve 1: 2 Leverage Weght has a negatve Effect, we Weght refer Effect, to Equaton we refer (1.2. to Equaton (1.2. Weght of 2 Leverage Weght of tem w.r.t. 2 1 Leverage Bank 1, w.r.t. denoted I 1 Bank by WW1, denoted 1( by 2, Ws I 1(tem gven 2, by: s gven by: Gven 2 Leverage has a negatve Weght Effect, we refer to Equaton (1.2. Weght of 2 Leverage WW w.r.t. 1 Bank 1, denoted by WW ( 2 1 (2, s gven by: ( ( ( ( % In a smlar fashon WW 1( we In a fnd: smlar 2 WW fashon 2(we ( ( ( ( % 2 fnd: 22.22%, W I 2(tem WW 3( %, WW %, W I 3(tem %, 4(W 2 I 4(tem 0%. 2 0%. EXAMPLE: CREDIT ISSUER LEVEL WEIGHT In a smlar fashon we fnd: WW 2 ( %, WW 3 ( %, WW 4 There are three addtonal lne tems (Interest cover, Free cash flow, (2 and Earnngs 0%. growth, whch are calculated n the same manner. Therefore the set ITEMS {set of all lne tems n Bankng Sector}, and ITEMS 5. To arrve at the Credt Issuer weght for Issuer I 1 Bank 1,.e., we take the product of: 2015 Lombard Oder a Asset the weght Management of tem k (Europe w.r.t. Issuer Lmted, I 1,.e. all rghts (tem reserved k, and; b the absolute weght of lne tem k, dsplayed n brackets next to each lne tem Lombard Oder Asset And Management we sum over k, (Europe or wthout Lmted, loss of all generalty rghts reserved (W.LO.G. q. We have explctly: Therefore, 25% 25% + 15% 29.63% + 15% (tem % (tem % (tem 5 12

13 INDEX METHODOLOGY FIXED INCOME FAMILY fxed ncome famly ndex methodology, october Valuaton Factor The Valuaton Factor ncreases the % Allocaton of Issuers wth hgher spreads to those wth lower ones. Gven that sectors have ther respectve nuances n terms of duraton, Valuaton Issuers Factor have to be compared by elmnatng the mpact of these nuances n terms of average maturty of ther bonds. Ths secton detals the methodology wth the objectve to obtan comparable metrcs across ssuers. The Valuaton Factor ncreases the % Allocaton of Issuers wth hgher spreads to those wth lower ones. Gven that sectors have ther respectve nuances n terms of duraton, Issuers have to be Usng Defnton 5, Let, SS kk, be the set of all bonds, bbbbbbbb compared by elmnatng the mpact of oooooooo ssued by ssuer these nuances n terms of average wthn sector SS maturty of ther kk, wthn a fxed geograph bonds. regon. Then we have:, SS Ths kk, secton { detals bbbbbbbb SS kk the methodology kk wth 1, the 2, objectve, 9 } W.L.O.G. to obtan comparable we denote metrcs across, SS kk, ssuers.. Usng Defnton 5, Let I,S,ˆ, k be the set of all bonds, bond I Step 1: Defntons j over j ssued by ssuer I wthn sector S k, wthn a fxed geographcal regon ˆ. Then we have: I,S,ˆ k {bond I S k j ˆ k 1, 2,...,9 } W.L.O.G. we denote I,S,ˆ k Wth reference to Defnton 5: Let mmmmmm be the Maturty of bbbbbbbb then we defne the average Maturty for Issuer b Step 1: Defntons Wth reference to Defnton 5: Let mat I j be the Maturty of bond I j then we defne the average mmmmmm zz Maturty for Issuer I by: mmmmmm (3.0 Where zz s gven by: (3.0 Where Z I j s gven by: zz kk AAAAAA(bbbbbbbb kk (3.1 AAAAAA(bbbbbbbb kk ( (3.1 ( Wth reference to Defnton 4: Let OOOOOO be the Opton Adjusted Spread ( OAS of bbbbbbbb then we defne the average OAS for Issuer by: Wth reference to Defnton 4: Let OAS I j be the Opton Adjusted Spread ( OAS of bond I j then we defne the average OAS for Issuer I by. OOOOOO zz OOOOOO (4 (4 Step 2: Regresson Model Step 2: Regresson Model We run a regresson model usng Ordnary Least Square technque to arrve at the Regresson Lne We run a regresson model usng Ordnary RL(OAS I Least Square technque to arrve at the Regresson Lne RRRR(OOOOOO gven by the formu j gven by the formula: RRRR(OOOOOO αα SS + ββ SS log(mmmmmm + ee, (5 (5 FIG 3 FIG. 3 LINEAR REGRESSION MODEL Ordnary Least Square LINEAR REGRESSION MODEL ORDINARY LEAST SQUARE Each pont on the graph represents Each the pont coordnate on the of: graph represents the coordnate of: (a Average maturty (of bonds (a per Average ssuer maturty for a (of gven sector bonds over per ssuer a fxed for a gven regon sector of same over currency a fxed regon of same currency denomnated denomnated bonds, and; bonds, and; OAS I (b Average OAS (of bonds (b Average OAS (of bonds per ssuer per ssuer for a gven for a gven sector sector over a a fxed regon of same of same currency currency denomnated bonds. denomnated bonds. mat I RL(OAS I The Regresson Lne (RL s calculated usng Ordnary The Regresson Lne (RL s Least Square technque calculated and usng Ordnary Least s calculated for each Square sector technque and s calculated for each sector S k, over a fxed SS kk SS, over a fxed geographcal regon geographcal ˆ, such regon, such that: S k ˆ that:. SS kk SS. The α Sˆ, β Sˆ are fxed The per αα SS, and ββ SS are fxed per sector per regon, sector but the per regon, but the error term ee error term e I s unque per s unque per ssuer pe regon. ssuer per regon Lombard Oder Asset Management (Europe Lmted, all rghts reserved 13

14 INDEX METHODOLOGY FIXED INCOME FAMILY INDEX METHODOLOGY FIXED INCOME FAMILY fxed ncome famly ndex methodology, october 2015 Estmated parameter ββ Estmated parameter SS. Estmated parameter ββ SS.. ββ Constant over the fxed sector SS. SS (OOOOOO SS OOOOOO SS (llllll mmmmmm SS ββ log mmmmmm Constant over the fxed sector SS. SS (OOOOOO SS OOOOOO SS (llllll mmmmmm SS log mmmmmm SS (6.0 (llllll mmmmmm SS log mmmmmm SS Constant over the fxed sector. (llllll 2 mmmmmm SS log mmmmmm SS 2 Estmated parameter αα SS. Estmated parameter αα ( Constant over the fxed sector SS. SS. αα SS OOOOOO SS log mmmmmm log Constant over the fxed sector SS. αα SS OOOOOO SS log mmmmmm SS (6.0 Error terms ee are unque for each Error terms ee are unque for each Issuer Issuer Estmated SS parameter ee SS ee OOOOOO SS αα SS ββ SS llllll mmmmmm OOOOOO SS SS αα SS ββ SS llllll mmmmmm. (6.1 Constant over the fxed sector. mmmmmm SS the arthmetc average of Error terms e I are unque for each mmmmmm SS mmmmmm the SS, arthmetc SS,.e. for all ssuers average of mmmmmm SS, over the sector SS, gven by: SS,.e. for all ssuers over the sector (6.2 SS, gven by: Issuer the arthmetc average of mmmmmm, SS 1 NN mmmmmm SS 1 NN (6.3 NN mmmmmm qq SS,.e. for all ssuers I over the sector, NN mmmmmm qq SS qq1 gven by: qq1 OOOOOO SS the arthmetc average OOOOOO of SS OOOOOO SS, the arthmetc average SS,.e. of OOOOOO for all ssuers SS, over the sector SS, gven by: SS,.e. for all ssuers over the sector (6.3 SS, gven by the arthmetc average of, OOOOOO SS 1 NN OOOOOO SS 1 NN (6.4,.e. NN for all OOOOOO qq SS NN OOOOOO qq SS ssuers I over the sector, gven by: qq1 qq1 We defne the Fundamental Regresson Lne FFFFFF(OOAAAA We defne the Fundamental Regresson as the unque spread per Lne FFFFFF(OOAAAA ssuer as the as: unque spread per ssuer (6.4 as: We defne the FFFFFF(OOOOOO Fundamental Regresson Lne as the unque spread per ssuer I as: αα SS + ββ FFFFFF(OOOOOO SS log TT + ee, αα SS + (7 ββ SS log TT + ee, (7 Where TT ( trple hat arthmetc average maturty per ssuer over all sector and geographcal regons. Where TT ( trple hat arthmetc average maturty per ssuer over all sector and geographcal regons. Where ( trple hat arthmetc average maturty per ssuer over all sector and geographcal regons. Step 3: Transformaton of Fundamental Spreads to Weghts Step STEP 3: 3: Transformaton TRANSFORMATION of Fundamental OF FUNDAMENTAL Spreads SPREADS to Weghts TO WEIGHTS For ease of notaton we let OOOOOO FF FFFFFF(OOOOOO For For ease of of notaton we let OOOOOO FF FFFFFF(OOOOOO The Fundamental Regresson Lne The The Fundamental per Issuer Regresson s transformed Lne per nto per Issuer a Valuaton Issuer I l s transformed - Issuer Weght, s nto a nto Valuaton dentoed a Valuaton - Issuer WW VV va - Issuer Weght, the Transformaton Weght, dentoed WW Functon: Functon: dentoed va the Transformaton Functon: SS (6.1 SS ( OOOOOO OOOOOO WW FF mmmmmm (OOOOOO FF WW FF mmmmmm (OOOOOO FF I VV I (OOOOOO INDEX METHODOLOGY VV FF mmmmmm (OOOOOO FIXED INCOME FAMILY (8 (8 FF (OOOOOO I FF mmmmmm (OOOOOO FF I Lqudty Factor Lqudty Factor Usng Defnton 5, Let I, Sk, ˆ be the set of all bonds, bond I Usng Defnton j over 5, Let j ssued, SS kk, by ssuer I wthn sector be the set of all bonds, bbbbbbbb oooooooo s S k, wthn a fxed geographcal regon ˆ Then we have: I, Sk, ˆ { bond I Sk, regon. Then we have:, SS kk, ˆ j k 1, { bboooooo 2,, SS kk 9 } kk 1, 2,, 9 W.L.O.G. we denote I, Sk, ˆ then defne the average average lqudty per per Issuer I to be llllll s.t Lombard Oder Asset Management (Europe Lmted, all rghts reserved 2015 Lombard Oder Asset Management (Europe Lmted, all rghts reserved llllll zz kk zz kk AAAAAA(bb AAAAAA( llllll kk PP tt AAAAAA (kk PP BB

15 INDEX INDEX METHODOLOGY FIXED FIXED INCOME INCOME FAMILY FAMILY INDEX INDEX METHODOLOGY Lqudty FIXED FIXED Factor INCOME FAMILY FAMILY Lqudty Factor Lqudty Usng Factor Defnton 5, Let, SS kk, be the set of all bonds, bbbbbbbb fxed oooooooo ssued by ssuer ncome famly ndex methodology, wthn sector SS october kk, wthn a fxed geo Lqudty Factor Factor regon. Usng Defnton 5, Let Then we have:, SS kk,, SS kk, { bboooooo SS kk be the set of all bonds, bbbbbbbb kk 1, 2,, 9 } W.L.O.G. we denote, SS kk,, then defne t Usng Defnton 5, Let, SS kk, be the set of all bonds, bbbbbbbb oooooooo ssued by ssuer wthn sector SS kk, wthn a fxed geographcal average lqudty oooooooo ssued by ssuer wthn sector SS kk, wthn a fxed geographcal regon Usng. Then we have: 5, Let, SS, SS kk, kk, Usng Defnton 5, Let { bboooooo SS kk kk 1, 2,, 9 } W.L.O.G. we denote, kk, regon. Then we have: per, SS kk be, Issuer the be the set to be llllll s.t. of, SS kk, all { bboooooo bonds, SS kk bbbbbbbb set of all bonds, bbbbbbbb oooooooo oooooooo ssued ssued by ssuer by ssuer wthn wthn sector sector, then defne the kk 1, 2,, 9 } W.L.O.G. we denote SS, SS kk, SSwthn kk, kk, wthn a fxed a fxed geographcal then defne the average regon lqudty. Then per we Issuer have: to be llllll average lqudty per Issuer, SS kk, s.t. to be llllll { bboooooo SS kk s.t. kk 1, 2,, 9 } we denote, SS kk, regon. Then we have:, SS kk, { bboooooo SS kk kk 1, 2,, 9 } W.L.O.G. we denote, SS kk, then,, then defne defne the the average average lqudty lqudty per per Issuer Issuer to be llllll to be llllll s.t. llllll zz kk llllll kk s.t. llllll zz kk llllll kk (9.0 llllll zz kk llllll kk (9.0 llllll zz kk llllll llllll zz kk kk llllll zz kk AAAAAA(bbbbbbbb kk kk (9.0 (9.0 zz kk AAAAAA(bbbbbbbb kk zz (9.1 kk AAAAAA(bbbbbbbb AAAAAA(bbbbbbbb kk kk AAAAAA(bbbbbbbb (9.1 AAAAAA(bbbbbbbb kk (9.1 zz kk kk zz kk AAAAAA(bbbbbbbb kk kk (9.1 kk llllll kk PP tt AAAAAA llllll (9.1 AAAAAA(bbbbbbbb kk PP tt (kk PP BBBBBB tt (kk kk PP BBBBBB (kk PP BBBBBB tt (kk tt (kk llllll BBBBBB (9.2 kk PP tt AAAAAA (kk PP BBBBBB tt (kk tt PP BBBBBB (9.2 llllll kk PP tt AAAAAA (kk PP BBBBBB tt (kk tt (kk llllll kk PP tt AAAAAA (kk PP BBBBBB tt (kk AAAAAA(bbbbbbbb PP BBBBBB (9.2 (9.2 tt PP BBBBBB (9.2 kk Amount Outstandng for bond tt (kk kk (kk PP AAAAAA tt (kk The Askng Prce of bond kk AAAAAA(bbbbbbbb AAAAAA(bbbbbbbb kk Amount Outstandng for bond kk PP kk PP BBBBBB Amount Outstandng for bond kk tt PP tt (kk The Bd Prce of bond kk (kk The Askng Prce of bond kk PP BBBBBB tt (kk kk The Amount AAAAAA(bbbbbbbb kk Askng Amount Prce Outstandng of bond for kk bond for bond kk kk tt PP PP BBBBBB AAAAAA AMT (bond tt (kk The Bd Prce of bond kk tt (kk (kk The The Bd Askng Prce Prce k I Amount Outstandng for bond k PP AAAAAA tt (kk The Askng of bond Prce of bond kk of bond kk kk PP BBBBBB Ask p tt (kk The k (k The Askng Prce of bond k PP BBBBBB tt (kk The lqudty factor s then The transformed Bd Bd Prce Prce of nto bond of bond a kk correspondng kk weght per Issuer va the Transformaton Functon: Bd p t (k The Bd Prce of bond k The The lqudty lqudty factor factor s s then then transformed transformed nto The nto a lqudty a correspondng correspondng factor s then weght weght transformed per per Issuer Issuer nto a va the Transformaton Functon: correspondng va mmmmmm the Transformaton weght per Functon: Issuer I The lqudty factor s then nto a weght per Issuer va the va the Transformaton The lqudty factor s then transformed Functon: nto a correspondng weght per Issuer va (llllll kk llllll INDEX METHODOLOGY FIXED INCOME FAMILY WW kk LL the Transformaton Functon: mmmmmm (llllll kk llllll WW mmmmmm kk LL (llllll kk (mmmmmm llllll (llllll llllll WW LL mmmmmm kk mmmmmm (llllll (llllll 1 kk kk llllll llllll (10 (mmmmmm(llllll llllll (10 WW kk LL WW kk 3.2 Sector Level LL 1 (llllll llllll 1 (10 (mmmmmm (llllll llllll 1 (10 (10 (mmmmmm(llllll llllll 1 INDEX METHODOLOGY FIXED INCOME FAMILY We now calculate the Credt Factor, Valuaton Factor and Lqudty Factor w.r.t the Sector Level Total Issuer Level Total Weght Issuer Level Weght Wth reference to FIG 1, we can now calculate the Total Issuer Level Weght, denoted W I (Total, NDEX XED FIXED INCOME METHODOLOGY INCOME FAMILY FAMILY Sector Total FIXED Total Issuer INCOME Wth Level Issuer reference - Level FAMILY - Level Weght to Weght FIG 1,.e. we the can weght now of calculate an Issuer the wthn Total a partcular Issuer sector, Level Weght, wthn a fxed denoted regon: WW I (TTTTTTTTTT, S k ˆ n.e. accordance the weght of an Issue Total Total partcular Credt Issuer Issuer Factor - sector, Level - Level wthn Weght Weght to a fxed the followng regon: formula: SS kk, n accordance to the followng formula: We Wth Wth now reference reference calculate to to the FIG FIG Credt 1, 1, we we Factor, can can now now Valuaton calculate calculate Factor the the Total Total and Issuer Lqudty Level Factor Level Weght, Weght, w.r.t the denoted denoted Sector WWLevel. (TTTTTTTTTT, (TTTTTTTTTT,.e..e. the the weght weght of of an an Issuer Issuer wthn wthn a.2 Sector Level a partcular partcular Wth Wth sector, sector, reference wthn to wthn FIG to a FIG 1, a fxed fxed we 1, regon: we can regon: can now now calculate SS kk, n accordance to the followng formula: calculate SS kk the the Total, n Total accordance WWIssuer Issuer Level to Level the Weght, followng Weght, denoted denoted formula: WW WW (tttttttttt 60% SS (TTTTTTTTTT, WWCC + 20% WW.e..e. the the weght weght The Sector Level Credt Weght per sector SS of an of Issuer an Issuer wthn wthn a a VV + 20% WW kk for a fxed geographcal regon denoted WW kk CC s calculated LL wth reference (11 to the ctor, t e Factor, now Valuaton calculate Valuaton Factor the Factor Credt and partcular Gross Lqudty and Factor, Lqudty sector, Added Factor Valuaton sector, Factor wthn w.r.t Value wthn Factor the w.r.t a Sector ( GAV, fxed the and a Sector fxed Lqudty Level. regon: regon: Level. and Factor s gven w.r.t SS kk the SSby kk Sector the, formula: n Level., n accordance to the to the followng followng formula: formula: WW (tttttttttt 60% WW CC + 20% WW VV + 20% WW 3.2 WWSector (tttttttttt Level 60% WW LL (11 CC + 20% WW VV + 20% WW Credt Factor LL (11 WW (tttttttttt 60% WWCC + 20% WW WW (tttttttttt 60% VV + 20% WW WWCC + 20% WW VV + 20% LL WW We now calculate the Credt Factor, Valuaton Factor and Lqudty Factor LL w.r.t the Sector Level. (11 SS ( Credt Factor WW kk kk CC The Sector Level Credt Weght per sector SS kk Credt for a fxed Factor SS geographcal regon denoted 9 (12 1 WW kk CC s calculated wth reference to the SS SS he Sector Level Credt Weght per sector SS The Sector Level Credt Weght per sector S k for a fxed geographcal regon ˆ denoted W Sk Gross Added Value ( GAV, kk for a fxed geographcal regon denoted WW kk ht per sector SS kk for a fxed geographcal regon denoted and s WW kk SS eght per sector SS kk for a fxed geographcal regon denoted gven CC WW kk s by calculated CC the s calculated formula: wth reference wth reference CC to the s to calculated the wth reference to the ˆ c s, d ross s and gven Added s gven by Value the by formula: the ( GAV, formula: Where and s the gven Gross by the formula: Added Value s defned n the Appendx: References; Data Defntons and Access. calculated wth reference to the Gross Added Value ( GAV, and s gven by the formula: SS SS WW kk WW kk SS kk kk WW kk SS kk CC WW kk kk CC CC 9 CC (12 9 (12 9 ( ( alue s here defned s the defned Gross the n Appendx: Added the Appendx: Value References; s defned Data n the Defntons Appendx: and References; Access. Data Defntons and Access. Where the References; Gross Added Valuaton Data Defntons Value Factor and Access. s defned n the Appendx: References; Data Defntons and Access. Where the Gross Added Value s defned n the Appendx: References; Data Defntons and Access. In a smlar fashon as the pror sectons we start by defnng all the Issuers Valuaton Factor wthn a sector SS kk, wth a fxed geographcal regon, r.2.2 Valuaton Factor.e. SS kk. For each we In already a smlar have fashon a as unque the pror Fundamental sectons we Regresson start by defnng Lne, all OOOOOO FF the Issuers represented I wthn a n sector Equaton S k, wth 10, a Secton 2.1. Valuaton Factors. n a smlar fashon as the pror sectons we start by defnng all the Issuers fxed geographcal ˆ,.e. I Valuaton Factor S k ˆ sectons ror sectons we start we by start defnng by defnng all the all Issuers the Issuers wthn a sector SS kk, wth a fxed geographcal For regon each, I we already have a unque Fundamental wthn wthn a sector a sector SS kk, wth SS kk, a wth fxed a fxed geographcal geographcal regon regon,,.e. SS kk. For each we already have a unque Fundamental Regresson Lne, OOOOOO e already have a unque Fundamental Regresson Lne, OOOOOO FF represented n n Equaton 10, Secton 10, Secton Valuaton Factors. FF represented h we already have a unque Fundamental Regresson Lne, OOOOOO FF represented n Equaton Equaton 10, Secton 10, Secton SS aluaton Factors. We now defne the Average Issuer-Weghted Sector-Level Fundamental Regresson Lne, denoted OOOOOO kk In a smlar fashon as 2015 the Lombard pror sectons Oder we Asset We start now Management by defne defnng the Average (Europe all the Issuer-Weghted Issuers Lmted, all wthn rghts Sector-Level a sector reserved SS kk, Fundamental wth a fxed Regresson geographcal FF (not be confused wth OOOOOO SS Lne, regon denoted, whch s an arthmetc average OAS SSfor SS e now defne.e. the Average SS kk Issuer-Weghted. For each Sector-Level we already Fundamental have Regresson a unque Lne, Fundamental denoted kk Regresson Lne, FF (not be confused wth FF OOOOOO SS Sector-Level Fundamental Regresson Lne, denoted OOOOOO kk the FF SS be wth OOOOOO SS e Issuer-Weghted Sector-Level Fundamental Regresson Lne, denoted OOOOOO(not kk sector. Then: FF (not be be confused wth OOOOOO SS whch s an arthmetc represented average OAS n for Equaton the sector. 10, Then: Secton age hch AS OAS for s the an for arthmetc sector. the Valuaton sector Then: average 2015 Lombard Then: Factors. OAS for Lombard Oder the sector. Oder Asset Then: Asset Management Management (Europe (Europe Lmted, Lmted, all all rghts rghts reserved reserved Lombard Lombard Oder Oder Asset Asset Management (Europe (Europe Lmted, Lmted, all rghts SSall rghts reserved reserved SS SS SS We now defne the Average Issuer-Weghted Sector-Level Fundamental Regresson Lne, denoted OOOOOO kk FF (not be confused wth OOOOOO SS OOOOOO kk WW (tttttttttt OOOOOO OOOOOO kk SS FF WW OOOOOO kk OOOOOO kk FF WW (tttttttttt OOOOOO FF (13 (tttttttttt OOOOOO FF WW (tttttttttt (13 FF OOOOOO FF FF (13 (13 SS kk (13 whch s an arthmetc SS kk SS kk average OAS for SS the kk sector. Then: efned en here defned WW Equaton (tttttttttt n Equaton 13, has Secton 13, been Where Secton defned WW2.1.4 Total n Equaton (tttttttttt Total Issuer-Level Issuer-Level 13, has Secton Weght. been Weght defned Total Issuer-Level n Equaton Weght. 13, Secton Total Issuer-Level Weght. SS OOOOOO kk FF WW (tttttttttt OOOOOO FF (13 15 The Average Issuer-Weghted Sector-Level Fundamental Regresson Lne s then transformed nto a correspondng Valuaton-Sector Level weght per sector SS kk wthn fxed regon va the Transformaton Functon: Where WW (tttttttttt has been defned n Equaton 13, Secton Total Issuer-Level Weght. he Average Issuer-Weghted Sector-Level Fundamental Regresson Lne s then transformed nto a correspondng Valuaton-Sector wthn fxed regon va the Transformaton Functon: ted Sector-Level Fundamental See Fundamental mportant nformaton Regresson Regresson at the Lne end of s Lne ths then materal. s transformed then transformed nto a nto a correspondng Valuaton-Sector n evel fxed weght regon per sector va the SSTransformaton kk wthn fxed regon Functon: va the Transformaton Functon: SS kk OOOOOO SS kk OOOOOO OOOOOO SS mmmmmm (OOOOOO SS kk SS mmmmmm (OOOOOO SS kk mmmmmm (OOOOOO SS

16 SS We now defne the Average Issuer-Weghted Sector-Level Fundamental Regresson Lne, denoted OOOOOO kk FF (not be confused wth OOOOOO whch s an arthmetc average OAS for the sector. Then: fxed ncome famly ndex methodology, october 2015 OOOOOO FF SS kk WW (tttttttttt SS kk Where WW (tttttttttt has been defned n Equaton 13, Secton Total Issuer-Level Weght. OOOOOO FF (13 Where W I (total has been defned n Equaton 13, Secton Total Issuer-Level Weght. The Average Issuer-Weghted The Sector-Level Average Issuer-Weghted Fundamental Sector-Level Regresson Fundamental Lne s then Regresson transformed Lne nto s then a correspondng transformed nto Valuaton-Sector a Level weght per sector SS kk wthn correspondng fxed regon Valuaton-Sector va the Transformaton Level weght per Functon: sector S k wthn fxed regon ˆ va the Transformaton INDEX METHODOLOGY FIXED INCOME Functon: FAMILY SS OOOOOO kk FF mmmmmm (OOOOOO SS SS WW kk SS FF INDEX Lqudty METHODOLOGY Factor FIXED FIXED INCOME FAMILY VV (14 INDEX METHODOLOGY FIXED SS 9 INCOME FAMILY (OOOOOO FF mmmmmm (OOOOOO SS qq (14 1 SS qq FF From Secton Lqudty INDEX METHODOLOGY Factor, Equaton FIXED 11 we INCOME already FAMILY have defned llllll,.e. the average lqudty for Issuer wthn a sector SS kk, wthn a fxed geographcal Lqudty Factor regon. We can also now Lqudty defne - Factor analogous to Secton Valuaton Factor - the Average Lqudty Lqudty Factor Weghted Sector-Level value, denoted llllll SS kk as follows: From Secton From Secton Lqudty Lqudty Factor, Factor, Equaton Equaton 11 we 11 we already have defned llllll,.e. the average lqudty for Issuer wthn From Lqudty Factor, 11 we have llllll From Secton Lqudty Factor, Equaton wthn a fxed 11 we geographcal already regon have. defned We can llllll,.e. also now,.e. the lqudty for Issuer I defne the - average analogous to lqudty for Secton Valuaton Factor - the Average L Weghted Sector-Level wthn a sector S value, denoted k, wthn a fxed geographcal regon ˆ for Issuer Issuer wthn. We can also now a a sector sector SS kk SS, kk wthn From Secton Lqudty Factor, Equaton 11 we already have defned llllll llllll SS kk wthn a a fxed fxed geographcal regon regon.. We We can can also also now now defne defne - - analogous to to as, Secton.e. follows: the average lqudty Valuaton for Issuer Factor Factor wthn - the - the a sector Average SS kk, Lqudty- wthn a fxed value, geographcal defne regon llllll analogous SS. kk We can to also Secton now defne analogous Valuaton to Factor Secton the Average Valuaton Lqudty-Weghted Factor - the Average Lqudty- Sector-Level Weghted Sector-Level value, denoted llllll SS as llllll kk as SS kk WW follows: (tttttttttt llllll SS kk (15 Weghted Sector-Level value, denoted llllll SS kk as follows: SS kk llllll SS kk WW (tttttttttt llllll SS kk SS kk llllll SS kk llllll SS llllll SS kk WW llllll kk SS kk llllll SS kk WW The Average Lqudty-Weghted Sector-Level value s then transformed nto a correspondng (tttttttttt llllll Lqudty-Sector-Level SS kk Weght (15 per (15 sector SS kk (15 (15 The Average Lqudty-Weghted SS kk Sector-Level SS SS kk value s then transformed nto a correspondng Lqudty-Sector-Level Weght wthn fxed regon denoted WW kk SS kk LL va the SS wthn Transformaton fxed regon Functon: denoted WW kk LL va the Transformaton Functon: The Average Lqudty-Weghted Sector-Level value s then transformed nto a correspondng Lqudty-Sector-Level Weght per sector SS kk The The SS wthn fxed regon denoted Average WW kk Lqudty-Weghted LL value va the s Transformaton then Sector-Level Functon: nto value a s then transformed nto a correspondng The Average Lqudty-Weghted Sector-Level value s then transformed nto a correspondng Weght per sector SS mmmmmm Lqudty-Sector-Level 2015 Lombard Oder Asset Management (Europe Lmted, all rghts reserved SS WW kk SS (llllllss llllll SS kk Weght per sector kk SS Lqudty-Sector-Level SS wthn fxed regon WW kk Weght per mmmmmm sector S LL va the k wthn fxed regon ˆ denoted W Sk, ˆ SS L va the wthn fxed regon denoted WW kk LL Transformaton LL va the SS Functon: Transformaton Functon: WW kk SS (llllllss llllll SS kk LL mmmmmm 9 qq1 mmmmmm SS (llllllss llllll SS qq SS WW kk SS (llllllss llllll SS kk (16 LL 9 qq1 mmmmmm (16 9 mmmmmm qq1 SS llllll SS qq SS WW kk SS (llllllss llllll SS kk SS mmmmmm SS WW LL kk LL SS (llllllss llllll SS (llllllss llllll SS qq kk (16 (16 ( qq1 mmmmmm mmmmmm Total Sector - Level Weght SS (llllllss llllll SS qq qq1 SS (llllllss llllll SS qq Total Sector - Level Weght Total Sector - Level Weght Wth reference to FIG 1, we can now calculate the Total Sector Level Weght,.e. fnal weght of an Issuer wthn a partcul Total wthn Sector a fxed Level regon, Weght denoted WW SS kk(tttttttttt, wth SS kk, n accordance to the followng formula: Wth reference to FIG Wth 1, we reference can now calculate to Fgure the 1, Total we Sector can now Level calculate Weght, the.e. Total fnal weght Sector of an Level Issuer Weght, wthn a partcular.e. fnal regon, weght of an wthn a fxed regon, denoted WW SS kk(tttttttttt, wth SS WW SS kk SS (tttttttttt 60% WW kk SS CC + 20% kk SS WWVV + 20% kk kk, n accordance to the followng formula: Issuer wthn a partcular regon, wthn a fxed regon, denoted W S k (total, wth S WWLL k ˆ, n accordance to the followng WWformula: SS kk SS (tttttttttt 60% WW kk SS CC + 20% kk SS WWVV + 20% kk WWLL (17 Remark: We note that the fnal weght of an Issuer wthn a partcular regon s gven by: WW SS kk (tttttttttt WW SS kk (tttttttttt (17 (17 Remark: We note that the fnal weght of an Issuer wthn a partcular regon s gven by: WW SS kk (tttttttttt WW SS kk (tttttttttt Wth reference to FIG 1, we can now calculate the Total Sector Level Weght,.e. fnal weght of an Issuer wthn a partcular regon, INDEX METHODOLOGY FIXED INCOME wthn a fxed regon, Total Total denoted Sector - WWLevel - Level SS FAMILY kk(tttttttttt, Weght wth SS kk, n accordance to the followng formula: Wth Wth reference to to FIG FIG 1, 1, we we can can now WWnow the Total Sector Level.e. weght of an Issuer wthn a regon, wthn a fxed regon, WW SS SS kk calculate the Total Sector SS (tttttttttt 60% WW kk Level Weght,.e. SSfnal weght of an Issuer wthn a partcular regon, wthn a fxed regon, denoted WW SS wth SS kk, n CC + 20% kk SS WWVV + 20% kk WWLL 3.3 Geographcal Level kk(tttttttttt, wth SS kk, n accordance to to the the followng formula: Remark: We note that the fnal weght of an Issuer wthn a partcular regon s gven by: We now calculate the Credt Factor, WW SS kk SS 60% WW kk SS CC + 20% kk SS WWVV + 20% kk Valuaton Factor and WW SS kk Lqudty SS (tttttttttt 60% WW kk SS WWLL (17 CC + 20% kk SS WWVV + 20% kk Remark: We note that the fnal weght of an Issuer wthn a partcular regon s gven by: WW SS kk (tttttttttt WW SS kk W WWLL (tttttttttt I Sk (total W S k ˆ Factor w.r.t the Geographcal Level. (total ( Geographcal Level We note that the fnal weght We now of calculate an Issuer the wthn Credt a Factor, Valuaton regon Factor s gven and Lqudty by: WW Factor SS kk WW SS kk Remark: We note that the fnal weght of an Issuer wthn a partcular regon s gven by: WW SS kk w.r.t the Geographcal (tttttttttt WW SS kk Credt Factor (tttttttttt Level Credt Factor Let WW cc be the Geographcal-Credt Weght, or as per FIG 1 the Currency Credt % Allocaton. Then: Let W cˆ be the Geographcal-Credt Weght, or as per FIG 1 the Currency Credt % Allocaton. Then: WW kk cc PPPPPPPPPPPP kk 3 PPPPPPPPPPPP qq qq1 (18 (18 PPPPPPPPPPPP GDP-PPP of country, as defned PPPGDP n APPENDIX, References, Data Defntons and Access j GDP-PPP of country, as defned n APPENDIX, References, Data Defntons and Access Valuaton Factor 2015 Lombard Oder Asset Management (Europe Lmted, all rghts reserved 2015 Lombard Oder Asset Management (Europe Lmted, all rghts reserved 22 Wth reference to Defnton 6: 16 Let H SS kk, be the set of all Issuers wthn a fxed sector SS kk, wthn a fxed regon,.e H SS kk, { SS kk kk 1, 2,, 9 }. Let B be the set of all bonds ssued by ssuer H, and bbbbbbbb B H denote the ndvdual bond ssued by Issuer

17 Let WW cc be Let the WWGeographcal-Credt cc be the Geographcal-Credt Weght, or as Weght, per FIG or as 1 the per Currency FIG 1 the Credt Currency % Allocaton. Credt % Then: Allocaton. Then: INDEX WW kk Let WW WW kk cc PPPPPPPPPPPP kk cc be the Geographcal-Credt Weght, or as per FIG 1 the Currency cc METHODOLOGY PPPPPPPPPPPP kk FIXED INCOME FAMILY 3 (18 PPPPPPPPPPPP WW kk qq1 qq cc PPPPPPPPPPPP Credt 3 (18 qq1 % Allocaton. Then: kk 3WW kk cc PPPPPPPPPPPP PPPPPPPPPPPP qq kk (18 qq1 3.3 PPPPPPPPPPPP qq WW kk Geographcal 3 cc (18 qq1 PPPPPPPPPPPP Level kk qq PPPPPPPPPPPP GDP-PPP of country, as defned n APPENDIX, References, fxed 3 ncome PPPPPPPPPPPP Data famly ndex Defntons and methodology, Access (18 october 2015 PPPPPPPPPPPP GDP-PPP of country, as defned n APPENDIX, We now References, calculate qq1 the Credt Data Factor, Defntons qq Valuaton Factor and and Access Lqudty Factor w.r.t the Geographcal Level. INDEX METHODOLOGY FIXED INCOME FAMILY PPPPPPPPPPPP PPPPPPPPPPPP GDP-PPP of GDP-PPP country, of as country defned, n as APPENDIX, defned n APPENDIX, References, References, Data Defntons Data Defntons and Access and Access PPPPPPPPPPPP GDP-PPP of country, as defned n APPENDIX, References, Credt Factor Data Defntons and Access Valuaton Factor 3.3 Geographcal Level Valuaton Factor We now calculate the Credt Factor, Let WW cc Valuaton be the Geographcal-Credt Factor and Lqudty Weght, Factor w.r.t or as the per Geographcal FIG 1 the Currency Level. Credt % Allocaton. Then: Valuaton Wth reference Valuaton Factor to Defnton Factor 6: Valuaton Factor Wth reference Valuaton to Defnton Factor 6: Wth reference Defnton 6: WW kk cc PPPPPPPPPPPP kk Let H SS kk, be the set of all Issuers wthn a fxed sector SS kk, wthn a fxed regon,.e H SS kk, { Let H SS kk, be the set of all Issuers wthn a fxed Let H S k ˆ sector SS be the set kk, wthn a fxed regon,.e H SS 3 SS kk kk PPPPPPPPPPPP 1, 2, qq, 9 }. qq1 Wth reference Wth kk, Let to B reference Defnton to 6: Defnton 6: Credt Factor be the set of all bonds ssued by ssuer { of all Issuers wthn a fxed sector S k, wthn a fxed SS regon kk ˆ kk,.e H S k, ˆ 1, 2,, 9 }. { I I B Let H SS kk, be the set of all Issuers wthn bonds a fxed ssued sector by ssuer SS S k ˆ k H, and bbbbbbbb 1, 2,, 9 }. Let B I B be H kk, wthn a fxed regon,.e H SS kk, Let Wth H reference SS kk, H, and bbbbbbbb B H denote the ndvdual bond ssued by Issuer be the to set Defnton of all Issuers 6: wthn a fxed sector SS kk, wthn denote { the ndvdual bond ssued by Issuer the set all bonds SS ssued kk kk 1, 2,, 9 }. by ssuer I H, and bond I j Let B PPPPPPPPPPPP a fxed belongng the set to of the all bonds set H. ssued Then we by defne ssuer Bthe I H weght H, and denote of bbbbbbbb the such ndvdual bond bond wwwwww(bbbbbbbb B regon,.e H SS kk, GDP-PPP { of country, as defned APPENDIX, SS kk kk 1, 2,, 9 }. belongng References, Data Defntons and Acces H Let Let BH SS to the set H. Then we defne the kk, Let WWweght be be the the set set of of all all bonds Issuers ssued wthn by a fxed ssuer cc be the of sector Geographcal-Credt such bond wwwwww(bbbbbbbb H, SS denote kk and, wthn bbbbbbbb Weght, a ssued fxed or regon B as per by Issuer the H FIG to be: to, be: denote ndvdual 1 the Currency bond ssued by Issuer I.e belongng H SS the kk, ndvdual Credt % Allocaton. to the { set H. bond Then SSssued Then: kk we defne by kk Issuer the 1, weght 2,, 9 }. belongng to Let the Bset H. Then we defne the weght of of such such bond bond wgt(bond wwwwww(bbbbbbbb be the set of all bonds ssued by ssuer H, and j I to bbbbbbbb be: to be: belongng to the set H. Then we defne the weght of such bond wwwwww(bbbbbbbb B H to be: denote WW kk cc the ndvdual PPPPPPPPPPPP kk bond ssued by Issuer 3 ( Valuaton belongng to the set H. Then we defne the weght of such bond wwwwww(bbbbbbbb Factor qq1 PPPPPPPPPPPP qq wwwwww(bbbbbbbb wwwwww(bbbbbbbb WW to (tttttttttt be: WW SS kk(tttttttttt αα WW (tttttttttt WW SS kk(tttttttttt (19.0 αα (19.0 (19.0 PPPPPPPPPPPP Wth reference wwwwww(bbbbbbbb WW to Defnton 6: (tttttttttt WW SS kk(tttttttttt GDP-PPP of country, as wwwwww(bbbbbbbb Let H SS kk, defned n be the set of all Issuers wthn a fxed αα sector SS kk, wthn a fxed regon (19.0,.e H SS kk, WW APPENDIX, (tttttttttt References, WW SS kk(tttttttttt Data Defntons and Access αα (19.0 { SS kk Where AMT means Amount wwwwww(bbbbbbbb Outstandng Let B per bond. Where AMT means Amount WWAAAAAA(bbbbbbbb be the set of all (tttttttttt bonds ssued WW by SSssuer kk(tttttttttt H, zz and bbbbbbbb αα B H Where AMT means Amount AAAAAA(bbbbbbbb denote the (19.0 ndvdual bond belongng zz Outstandng per bond. to the set H. Then we defne the weght of such bond wwwwww(bbbbbbbb Outstandng per bond. to be: (19.1 (19.1 Where AMT means Amount AAAAAA(bbbbbbbb Valuaton Factor Where AMT means Amount AAAAAA(bbbbbbbb AAAAAA(bbbbbbbb zz AAAAAA(bbbbbbbb B B qq Outstandng per bond. zz qq (19.1 Outstandng per bond. AAAAAA(bbbbbbbb (19.1 Where AMT means Amount AAAAAA(bbbbbbbb B qq zz wwwwww(bbbbbbbb (19.1 WW (tttttttttt WW SS kk(tttttttttt Wth reference to Defnton 6: AAAAAA(bbbbbbbb αα B Outstandng per bond. qq Let H SS kk, SS kk B H be the set of all Issuers wthn a fxed sector (19.1 SS kk SS kk, wthn a fxed regon B H AAAAAA(bbbbbbbb,.e H Then by constructon we have: Then by constructon we have: WW SS B kk (tttttttttt SS kk B WW (tttttttttt H qq SS kk, { SS kk kk 1, 2,, 9 }. Then by constructon we have: Let B be the set of all bonds ssued by ssuer H, and bbbbbbbb B Where AMT means Amount AAAAAA(bbbbbbbb αα 1 zz (19.2 SS kk B H WW SS kk (tttttttttt WW (tttttttttt H denote αα the ndvdual bond ssued by Issuer 1 (19.2 belongng to the set H. Then we Then by constructon we have: WW SS Outstandng defne the per weght kk (tttttttttt SS kk SS WW bond. of such bond wwwwww(bbbbbbbb SS to be: kk SS (tttttttttt 1 αα SS kk B 1 1 H AAAAAA(bbbbbbbb (19.2 B qq Then by constructon we have: WW SS 1 kk (tttttttttt WW 1 (tttttttttt αα 1 (19.2 Then by constructon we have: SS kk SS WW SS 1 kk (tttttttttt WW 1 (tttttttttt αα 1 SS kk B (19.2 (19.2 SS H kk SS 1 wwwwww(bbbbbbbb WW1 (tttttttttt WW SS kk(tttttttttt αα (19.0 Then by constructon we have: We now defne the Yeld to Maturty ( YTM per bond bbbbbbbb SS kk SS WW SS kk (tttttttttt WW (tttttttttt We now defne the Yeld to Maturty ( YTM per bond bbbbbbbb αα to be YYYYYY(bbbbbbbb. Then the average YTM for a fxed regon, to be YYYYYY(bbbbbbbb 1. Then the average 1 YTM SS kk SS for a fxed 1 regon, 1 denoted by ( YYYYYY to be: Where AMT means We now defne denoted the Yeld by ( YYYYYY to Maturty to be: ( YTM per bond bbbbbbbb to be Amount We now defne the Yeld to Maturty ( YTM per bond bbbbbbbb YYYYYY(bbbbbbbb to be. Then the AAAAAA(bbbbbbbb YYYYYY(bbbbbbbb. average Then zzthe YTM average for a fxed YTM Outstandng per bond. regon for a fxed, regon, (19.1 We now defne the Yeld to denoted by ( YYYYYY We now defne to be: the Yeld to Maturty ( YTM per bond bbbbbbbb Maturty ( YTM per bond to be bond I We now defne the Yeld to Maturty ( YTM YYYYYY(bbbbbbbb. Then the j to per be bond YTM AAAAAA(bbbbbbbb B bbbbbbbb (bond average YTM to be for j I. YYYYYY(bbbbbbbb Then the average. Then the average YTM f denoted by ( YYYYYY to be: qq a fxed regon, YTM for a fxed regon YYYYYY ( ˆ, denoted by ( YYYYYY wwwwww(bbbbnndd to to be: be: YYYYYY ( wwwwww(bbbbnndd YYYYYY(bbbbbbbb SS kk denoted by ( YYYYYY to be: YYYYYY(bbbbbbbb B H (20 Then by constructon we have: B, (20 YYYYYY ( wwwwww(bbbbnndd WW B, YYYYYY(bbbbbbbb YYYYYY ( wwwwww(bbbbnndd (20 YYYYYY(bbbbbbbb YYYYYY ( wwwwww(bbbbnndd SS kk (tttttttttt WW YYYYYY(bbbbbbbb (tttttttttt αα 1 (19.2 (20 SS kk SS 1 1 (20 B, YYYYYY ( wwwwww(bbbbnndd B, B, YYYYYY(bbbbbbbb (20 We now defne the Yeld to Maturty ( YTM per bond bbbbbbbb The Average ( YYYYYY value s then transformed nto a correspondng B, geographcal to valuaton be YYYYYY(bbbbbbbb weght. Then for the regon average YTM kk for a fxed regon, The Average YYYYYY ( value s then transformed The denoted Average by nto ( YYYYYYa correspondng to value be: s The then Average transformed geographcal YYYYYY ( value nto s a valuaton then correspondng transformed weght nto geographcal a for correspondng regon valuaton geographcal kk weght valuaton weght for reg denoted WW kk The Average denoted YYYYYY ( WW value kk VV va s then Transformaton transformed nto Functon: a correspondng geographcal denoted WW kk The Average VV va the Transformaton Functon: ( YYYYYY value s then transformed regon nto ˆ denoted a correspondng W k geographcal VV valuaton va the Transformaton weght valuaton for Functon: regon weght for kk regon kk k V ˆ va the Transformaton Functon: denoted WW kk VV denoted The Average va WWthe kk YYYYYY ( wwwwww(bbbbnndd INDEX METHODOLOGY FIXED INCOME FAMILY YYYYYY(bbbbbbbb VV ( YYYYYY Transformaton va the value Transformaton Functon: s then transformed Functon: nto a correspondng geographcal valuaton B, weght for regon kk YYYYYY ( kk mmmmmm {YYYYYY (20 INDEX METHODOLOGY FIXED INCOME FAMILY ( } YYYYYY ( kk mmmmmm denoted WW kk YYYYYY ( kk mmmmmm {YYYYYY WW kk VV va the Transformaton Functon: ( {YYYYYY ( } } VV WW kk VV YYYYYY ( kk mmmmmm {YYYYYY 3 WW kk INDEX METHODOLOGY FIXED INCOME FAMILY VV 1 YYYYYY ( mmmmmm ( } {YYYYYY ( qq } qq The Average YYYYYY ( value s then transformed YYYYYY ( nto a correspondng kk mmmmmmgeographcal {YYYYYY ( } valuaton weght for regon kk 3 1 YYYYYY mmmmmm {YYYYYY (21 WW kk VV WW kk denoted WW kk YYYYYY ( VV va the Transformaton VV Functon: ( ( {YYYYYY (21 ( Lqudty Factor 3 INDEX METHODOLOGY FIXED 1 INCOME FAMILY ( qq } qq } 2015 Lombard Oder Asset qq 3 kk Management 1 YYYYYY ( mmmmmm {YYYYYY mmmmmm qq (Europe (21 ( {YYYYYY Lqudty Factor ( Lmted, } all rghts reserved qq } WW kk VV 3 1 YYYYYY ( mmmmmm {YYYYYY (21 The average lqudty for a fxed geographcal regon, denoted by llllll s gven by: Lqudty Factor ( qq } qq qq YYYYYY ( 3 1 YYYYYY ( mmmmmm {YYYYYY kk mmmmmm (21 WW kk VV ( {YYYYYY ( } Lqudty Factor Lqudty Factor The average 2015 Lombard lqudty Oder for a Asset Management (Europe Lmted, all rghts reserved INDEX fxed geographcal METHODOLOGY regon, denoted FIXED by INCOME llllll s FAMILY gven by: qq } 2015 Lombard Oder Asset Management (Europe Lmted, all rghts reserved 3 qq SS 1 YYYYYY ( kk mmmmmm {YYYYYY B (21 ( qq } The average lqudty The average for lqudty a fxed for geographcal a fxed geographcal regon, regon, denoted by llllll s by: 2 qq The average lqudty for a fxed geographcal regon, denoted by s gven by: 2015 Lombard 2015 Oder Lombard Asset Oder Management Asset Management (Europe Lmted, (Europe all rghts Lmted, reserved all rghts reserved llllll llllll s gven WWby: SS kk(tttttttttt WW (tttttttttt llllll (22 SS kk B 23 2 SS kk B SS 2015 Lombard Oder Asset Management (Europe 2015 Lombard Lmted, Oder Asset all Management rghts reserved (Europe SS 1 Lmted, all rghts reserved llllll SS kk WW SS kk (tttttttttt B 1 llllll WW WW (tttttttttt llllll Lqudty Factor SS kk(tttttttttt WW (tttttttttt llllll (22 Where llllll SS kk SS 1 1 llllll WW SS kk(tttttttttt WW has been prevously defned n SS kkequaton SS 11.2, Secton Lqudty Factor. (tttttttttt 1 llllll (22 (22 Where llllll The average lqudty for a fxed geographcal has been prevously regon, SS kk SS defned denoted n Equaton by , Secton Lqudty 1 Factor. The Average lqudty value for a regon, llllll Where llllll llllll s gven by: has been prevously defned n Equaton 11.2, Secton s then transformed Lqudty Factor. nto a correspondng geographcal lqudty weght for regon kk The Average lqudty value for a regon, llllll s then transformed nto a correspondng geographcal lqudty weght for regon Where llllll has denoted been WW kk prevously LL va Where defned the Transformaton lq I j n has Equaton been Functon: prevously 11.2, denoted WW kk Secton defned n Equaton Lqudty 11.2, Factor. Secton Lqudty LL va the Transformaton Functon: SS kk Factor. B The Average lqudty value for a regon, llllll s then transformed nto a correspondng geographcal lqudty weght for regon The Average lqudty value for a regon, llllll WW mmmmmm {llllll } llllll The Average lqudty value a regon, llllll SS kk(tttttttttt WW kk (tttttttttt s then transformed nto a correspondng geographcal kk llllll s then transformed mmmmmm nto a correspondng geographcal WW kk lqudty LL weght for regon kk lqudty weght for regon SS kk SS 1 1 denoted WW kk 3 LL va the Transformaton Functon: ˆ {llllll } llllll kk denoted WW kk LL va the Transformaton Functon: denoted k WW kk LL va the Transformaton Functon: mmmmmm {llllll } llllll mmmmmm {llllll (23 3 qq qq1 } llllll qq qq1 Where llllll has been prevously defned n Equaton mmmmmm 11.2, {llllll Secton } llllll kk Lqudty Factor. WW kk LL mmmmmm {llllll (23 } llllll kk Total Geographcal WW kk LL Level The Average lqudty value for a regon, llllll s then transformed mmmmmm {llllll (23 3 Weght nto } a correspondng llllll qq qq1 geographcal lqudty weght 3 mmmmmm {llllll (23 for } llllll qq denoted Total WW kk LL Geographcal va the Transformaton Level Weght Wth reference to FIG Functon: 1, we can now calculate qq1 the Total Geographcal Level Weght,.e. the fnal weght of geography kk denoted WW kk(tttttttttt, wth kk, n accordance to the followng formula: Wth reference to FIG 1, we can now calculate the Total Geographcal Level Weght,.e. the fnal WW kk mmmmmm (tttttttttt 60% WW kk {llllll weght of geography CC + 20% kk WWVV } llllll kk denoted WW kk(tttttttttt, wth kk + 20% kk kk, n accordance to the followng formula: Total Geographcal Level Weght WWLL WW kk LL Remark: We note that the fnal weght of sector SS kk wthn a partcular regon s gven by: WW SS kk Total Geographcal Level Weght 3 mmmmmm {llllll } (tttttttttt llllll qq WW kk (tttttttttt 60% WW kk qq1 WW (tttttttttt CC + 20% kk WWVV + 20% kk WWLL (24 Wth reference to FIG 1, we can now calculate the Total Geographcal Level Weght,.e. the fnal weght of geography kk 17 denoted Wth WW kk(tttttttttt, reference to wth FIG kk 1, we, can n now accordance calculate to the the Total followng Geographcal Level formula: Weght,.e. the fnal weght of geography kk denoted WW Remark: We note that the fnal weght of sector SS kk(tttttttttt, wth kk, n accordance to the followng kk wthn a partcular regon s gven by: WW formula: SS kk (tttttttttt WW (tttttttttt WW kk (tttttttttt 60% WW kk + 20% WW kk + 20% WW kk (24

18 on, llllll s then transformed denoted WW kk nto a correspondng geographcal lqudty weght The Average lqudty value for a regon, llllll for regon LL va the Transformaton Functon: kk The Average s lqudty then transformed value a nto regon, a correspondng llllll s s then transformed geographcal nto lqudty a correspondng weght for geographc ton Functon: regon kk denoted WW kk LL va the Transformaton Functon: denoted WW kkkk LLLL va the Transformaton Functon: INDEX METHODOLOGY FIXED INCOME FAMILY mmmmmm {llllll } llllll kk mmmmmm {llllll } llllll kk mmmmmm fxed ncome famly ndex methodology, october 2015 {llllll } llllll WW kk kk mmmmmm {llllll LL } llllll WW kk LL kk LL WW kk LL mmmmmm {llllll (23 WW kk LL 3 } llllll qq qq1 3 mmmmmm {llllll ( mmmmmm {llllll (23 3 } llllll qq } llllll qq qq1 3 mmmmmm {llllll 3.4 Total qq1 Factor qq1 } Weghts Defne the Total Factor Weght per Factor Level (Credt, Valuaton, and Lqudty for Issuer INDEX METHODOLOGY FIXED INCOME FAMILY s.t. SS kk, as follows: INDEX METHODOLOGY FIXED INCOME FAMILY Total Geographcal Level Weght vel Weght INDEX METHODOLOGY INDEX METHODOLOGY FIXED INCOME FIXED INCOME Total Geographcal FAMILY FAMILY Level Weght Total Geographcal Level Weght Total Credt Factor Weght w.r.t Total Geographcal Level Weght Wth reference Issuer to FIG 1, Wth we reference can now Wth calculate FIG reference 1, we the can Total to now FIG Wth Geographcal Level WW 1, calculate reference we can the now to to Total FIG calculate 1, 1, Geographcal Level we Weght, CC (tttttttttt the can Total now.e. Geographcal Level calculate the fnal WW SS CC Weght, the weght WW kk CC Total.e. the Geographcal Level of Weght, fnal geography WW CC (2 weght.e. the of fnal kk geography weght calculate the Total Weght,.e. kk the fnal w denoted Geographcal Level WW3.4 kk(tttttttttt, Total 3.4 denoted wth Weght, Factor Total kk WW.e. Factor kk(tttttttttt,, Weghts the of n geography accordance fnal Weghts weght wth kk to of denoted, the geography n followng accordance WW kk(tttttttttt, formula: to the, wth followng kk kk formula:,, n accordance to the followng formula:, n accordance to Total the followng Factor Total INDEX Valuaton Factor Weghts formula: METHODOLOGY Factor Weghts Weght FIXED INCOME FAMILY Defne INDEX WW kk (tttttttttt 60% WW kk CC + 20% kk WWVV + 20% kk kk kk WWLL ( CC kk kk (tttttttttt 60% WW kk CC + 20% kk the Defne Total METHODOLOGY the Factor Total Weght Factor Weght WW kk per FIXED (tttttttttt Factor per w.r.t Issuer INCOME Factor Level Level 60% (Credt, FAMILY (Credt, WW Valuaton, Valuaton, WW VV kk CC + and and (tttttttttt 20% Lqudty Lqudty kk WWVV for for WW SS VV Issuer Issuer WW kk + 20% VV s.t. kk WWLL WW VV SS SS kk kk, as, as follows: (2 follows: (24 (24 WWVV + WW kk (tttttttttt 60% INDEX WW kk METHODOLOGY CC + 20% kk WWVV FIXED + 20% INCOME kk WWLL FAMILY Defne the Defne Total the Factor Total Factor Weght per Factor Level (Credt, Valuaton, and Lqudty (24 for Issuer s.t. SS kk, as follows: Total Weght Lqudty per Factor Level (Credt, Valuaton, and Lqudty for Issuer s.t. SS kk, as follows: Total Credt Factor Factor Weght Weght w.r.t Remark: We note Remark: that the fnal note weght of sector SS kk wthn a partcular regon s gven by: WW SS kk Remark: that the fnal We weght note that of the sector fnal S weght of of sector SSSS (tttttttttt WW kk s (tttttttttt SS kk kk wthn a partcular regon s gven by: WW SS kk COME FAMILY Total 3.4 Credt Factor Total Weght w.r.t Weghts Issuer Remark: We note that the WW fnal weght of sector SS ( ( kk wthn a partcular regon s gven K wthn a by: WW SS partcular kk regon s gven (tttttttttt WW by: Issuer (tttttttttt ht of sector SS kk wthn a partcular 3.4 regon Total s gven Factor by: WWWeghts SS kk (tttttttttt WW WW CC (tttttttttt CC kk w.r.t Issuer CC (tttttttttt WW CC SS CC WW kk CC (25.0 WW LL (ttttttttll WW SS LL WW kk LL WW LL (2 CC WW CC (25 Total Credt Total Factor Credt Weght Factor w.r.t Weght w.r.t (tttttttttt Issuer WW Defne 3.4 the Total Weghts per Factor Level (Credt, CC (tttttttttt WW SS Valuaton, and Lqudty CC kk CC WW for Issuer CC (25.0 Issuer WW CC (tttttttttt WW SS CC WW kk Total Valuaton Factor CC WW CC (25.0 s.t. SS kk, as follows: Total Defne Valuaton w.r.t Issuer the Total Factor Factor Weght WW VV (tttttttttt WW SS VV WW kk VV WW VV ( Weght Total per Factor Factor Weghts Level (Credt, Valuaton, and Lqudty for Issuer s.t. SS kk, as follows: w.r.t Issuer Defne the WW VV (tttttttttt WW SS VV WW kk VV WW VV (25 Total Valuaton Total Valuaton Factor Weght Factor Weght Total Credt Total Factor Factor Weght Defne w.r.t the per Total Factor Factor Level Weght (Credt, w.r.t Issuer per Factor Valuaton, Level (Credt, and Lqudty Valuaton, for and Issuer Lqudty s.t. for Issuer SS kk I s.t. I, as follows: WW VV (tttttttttt or Level (Credt, Valuaton, and Lqudty Total Issuer Credt WW SS VV kk VV WW for Issuer s.t. w.r.t SS kk, as follows: CC (tttttttttt WW VV (25.1 w.r.t Issuer SS CC WW kk WW VV (tttttttttt WW SS VV WW kk Total Soft Lqudty Caps Factor Factor Weght Weghts VV WW VV (25.1 w.r.t Issuer CC WW CC Total Factor WW LL (ttttttttll WW SS LL WW kk LL WW LL (25.2 Weght Total Credt WW Factor Weght w.r.t CC (tttttttttt WW SS CC WW kk CC WW w.r.t Issuer CC WW LL (ttttttttll WW SS LL WW kk LL WW LL (25 Total Lqudty Total Lqudty Factor Each Weght Factor Issuer Total Credt Factor Weght w.r.t Issuer I WW CC (tttttttttt WW SS CC WW kk Total Factor Weght Valuaton Weght Factor has Weght w.r.t Issuer WW CC WW CC (25.0 WW CC (tttttttttt WW SS CC WW kk LL (ttttttttll Total w.r.t Issuer Valuaton Factor CC Weght WW CC (25.0 WW WW SS LL kk a soft cap,.e. the cap restrant LL WW VV (tttttttttt WW LL (25.2 w.r.t Issuer SS VV WW kk WW s not bndng, LL (ttttttttll WW s.t. SSall LL WW kk the weghts for a fxed Total Factor LL WW LL (25.2 Weght are capp 4%. All the excess weght s redstrbuted n proporton to each Issuers Total Factor Weght. Let VV nn WW VV SS kk, then the sof Total Valuaton Factor Weght w.r.t Issuer I Total w.r.t Issuer Valuaton Factor Weght WW VV (tttttttttt WW SS VV WW kk cappng s VV WW VV ( calculated Soft as Caps follows: Factor Weghts WW w.r.t Issuer VV (tttttttttt WW WW SS VV WW kk VV (tttttttttt WW SS VV WW kk DEX METHODOLOGY FIXED Total INCOME Lqudty FAMILY Factor Weght VV WW VV VV Total WW VV Lqudty Factor Weght w.r.t (25.1 Issuer I Total w.r.t Issuer Lqudty Factor Weght WW LL (ttttttttll WW SS LL WW kk LL WW LL ( Soft Each Caps Factor Weght Factor has Weghts a soft cap,.e. the cap restrant s not bndng, Total w.r.t Issuer Lqudty WW s.t. all the weghts Factor LL (ttttttttll WW for a fxed SS LL WW kk Total Factor Weght are capped a Soft Caps Factor Weghts ccccccww LL WW Soft Caps Factor 4%. Weghts All the excess weght Soft s redstrbuted Caps Factor FF (tttttttttt mn( WW LL WW LL (ttttttttll w.r.t Issuer WW SS LL WW kk n proporton Weghts to each Issuers FF, 4% + WW LL WW LL (25.2 WW Total Factor FF ssssssssssssssss (2 Weght. LL (ttttttttll WW ssssssssssssssss Let SSnn LL WW kk LL WW SS kk, then the soft LL 4 Total Factor Weghts Each Factor cappng Weght s calculated has a Each soft as Factor follows: cap,.e. Weght the cap has a restrant soft cap, s not.e. the bndng, nn cap restrant s.t. all s the not weghts bndng, for s.t. a all fxed the Total weghts Factor for a fxed Weght are cappe Each Factor Each Weght Factor 4%. has Weght All a the soft has excess cap, a soft.e. weght cap, the cap s Total.e. redstrbuted restrant the Factor cap Weght restrant not proporton are bndng, s capped not bndng, s.t. to at each 4%. all the All s.t. Issuers weghts the all excess the Total weghts for weght a Factor fxed ssssssssssssssss max ( WW for s redstrbuted Weght. a fxed Total Let n nn Factor proporton Weght to SS kk each are, capped then the at FF 4%, Total 0 Factor Weght are capped at soft fne the 4%. Total All Factor the 4%. excess Weght All the cappng per weght excess Factor s weght redstrbuted Level calculated Soft (Credt, Caps redstrbuted as Valuaton, n follows: proporton Factor Issuers n and Total Weghts proporton to Lqudty Factor each Issuers to Weght. for each Let Issuers n s.t. Total SS Factor kk,, as Weght. then follows: the soft Let cappng nn s calculated SS kk, as follows: then the soft ccccccww Total Factor Weght. FF (tttttttttt mn( WW Let nn FF, 4% + WW FF ssssssssssssssss (2 1 SS kk, then the soft (26.0 cappng cappng s calculated s calculated as follows: as Soft follows: Caps Factor Weghts nn ssssssssssssssss nn tal Credt Factor Weght w.r.t Each Factor Soft Weght Caps has Factor a soft Weghts cap,.e. the cap restrant s not bndng, s.t. all the weghts for a fxed Total Factor Weght are ca uer WW Each 4%. All Factor the excess Weght weght has a s soft redstrbuted CC (tttttttttt WW SS cap,.e. the n proporton cap CC WW kk ccccccww ssssssssssssssss FF (tttttttttt restrant CC mn( WW to each s not CC WW WW (25.0 Issuers bndng, FF, 4% + WW Total s.t. all Factor the FF ssssssssssssssss ssssssssssssssss max (26 ccccccww weghts Weght. ssssssssssssssss for Let a fxed nn Total Factor SS kk Weght, then are the cas the cap restrant s not bndng, Each cappng 4%. s.t. all All Factor the the s weghts calculated excess Weght for weght a has fxed follows: a s Total FF (tttttttttt mn( WW soft redstrbuted Factor cap,.e. Weght the n proporton cap are capped FF, 4% + WW restrant to at each s not nn FF ssssssssssssssss (26.0 ccccccww (26.0 FF (tttttttttt mn( WW FF, 4% + WW FF Issuers bndng, ssssssssssssssss ( WW FF (2 FF 4%, ( Total s.t. all ssssssssssssssss (26.0 Factor the weghts Weght. for Let a fxed nn Total Factor SS kk Weght, then are the cas tal Valuaton Factor Weght ssssssssssssssss nn d n proporton to each Issuers Total cappng 4%. All Factor the s calculated Weght. excess Let weght as nn follows: s redstrbuted SS kk, n then proporton the soft r.t Issuer WW VV (tttttttttt WW SS VV WW kk nn nn VV to each WW ssssssssssssssss VV Issuers max ( WWTotal Factor ssssssssssssssss Weght. (25.1 FF WW 4%, 0 Let nn SS kk, then the (26 s FF cappng s calculated as follows: ccccccww FF (tttttttttt mn( WW FF, 4% + WW FF ssssssssssssssss (26.2 ssssssssssssssss max ( 1 WW ssssssssssssssss max ( WW FF 4%, FF 0 4%, 1 0 tal Lqudty Factor Weght WW FF (tttttttttt mn( WW FF, 4% + WW FF ssssssssssssssss ccccccww FF (tttttttttt (26.0 mn( WW FF, 4% + WW FF (26.1 (26.1 ( Fnal Issuer Weghts r.t Issuer ssssssssssssssss ccccccww FF (tttttttttt mn( WW FF, 4% + WW FF ssssssssssssssss WW LL (ttttttttll WW SS LL WW kk nn 1 1 LL WW LL (25.2 nn nn ssssssssssssssss nn WW FF ssssssssssssssss (26 nn nn ssssssssssssssss 2015 Lombard Oder Asset Management 2015 ssssssssssssssss Lombard (Europe Oder Lmted, WW The fnal weghts per Issuer (before ssssssssssssssss applyng factor caps WW denoted Asset FF wwwwwwwwwwwwwwww( all rghts Management max 1 reserved ( WW FF (Europe s gven by: 4%, Lmted, 0 ssssssssssssssss ( Fnal Issuer Weghts FF (26.2 all rghts reserved (26.2 ssssssssssssssss max ( WW nn FF 4%, 0 ssssssssssssssss 1 1 (26.1 max ( WW 1 FF 4%, 0 nn 1 ssssssssssssssss max ( WW 4.1 Soft Caps Factor Weghts The 3.5 Fnal Issuer Weghts fnal weghts wwwwwwwwwwwwwwww( per Issuer (before applyng factor caps denoted 1 wwwwwwwwwwwwwwww( FF 4%, s gven 0 by: nn nn 2015 Lombard Oder Asset 60% cccccccc (tttttttttt + 20% WW SS( (tttttttttt Management (Europe Lmted, all rghts reserved ssssssssssssssss 1 WW + 20% WW (SS( (tttttttttt The fnal weghts per Issuer I FF ment (Europe Lmted, ssssssssssssssss all rghts 3.5 reserved WW FF Fnal Issuer Weghts l (before applyng factor caps denoted wgtfnal (I s gven by: (26.2 ssssssssssssssss nn ch Factor Weght has a soft cap,.e. the cap restrant s not bndng, s.t. all the weghts for a fxed Total Factor WW24 1 Weght FF are capped at 3.5 Fnal SS( 1 Issuer Weghts. All the 3.5 excess weght Fnal s Issuer redstrbuted Weghts maps to some wwwwwwwwwwwwwwww( sector S, n proporton to each Issuers Total and 60% (SS( cccccccc maps Factor Weght. Let (tttttttttt SS( + to 20% some WW regon SS( ssssssssssssssss nn WW SS kk 1, then (tttttttttt. + 20% WW FF the soft (SS( (tttttttttt (27 ppng s calculated as follows: The fnal weghts per Issuer (before applyng factor caps denoted wwwwwwwwwwwwwwww( s gven by: 1 The fnal weghts per SS( The fnal weghts per Issuer Issuer (before (before maps applyng applyng to some sector factor S, caps and (SS( factor caps denoted denoted wwwwwwwwwwwwwwww( maps wwwwwwwwwwwwwwww( SS( s to some s gven regon by:. (27 gven by: 3.5 Fnal Issuer Weghts S(I ccccccww 3.5 FF (tttttttttt mn( WW Fnal wwwwwwwwwwwwwwww( Issuer Weghts FF, 4% + WW FF ssssssssssssssss maps I to some 60% cccccccc (26.0 ssssssssssssssss sector S, and (S(I maps (tttttttttt + 20% WW SS( S(I to some regon. (tttttttttt + 20% WW (SS( 3.6 Fnal Bond Weghts (tttttttttt ( wwwwwwwwwwwwwwww( nn pplyng factor caps denoted wwwwwwwwwwwwwwww( 3.5 The fnal weghts Fnal s gven Issuer per 60% cccccccc by: Issuer Weghts (before applyng (tttttttttt + 20% WW SS( (tttttttttt + 20% WW factor caps denoted wwwwwwwwwwwwwwww( s gven (SS( wwwwwwwwwwwwwwww( (tttttttttt (27 60% 3.6 cccccccc Fnal Bond (tttttttttt Weghts + 20% WW SS( (tttttttttt + 20% WW (SS( (tttttttttt by: (27 SS( 3.6 The fnal maps Fnal weghts ssssssssssssssss to Bond some sector Weghts The fnal weght for bbbbbbbb S, and per Issuer max (before ( WW FF applyng (SS( 4%, factor maps SS( 0 caps denoted to some regon. wwwwwwwwwwwwwwww( s (26.1 SS( gven by: SS( maps maps to some to sector some S, sector The, where and (SS( S, fnal and weght (SS( for SS kk bond, maps SS( to some regon. The fnal weghts per Issuer 0% cccccccc (tttttttttt + 20% WW SS( 1 maps SS( (tttttttttt + 20% WW (SS( (before applyng to j I, denoted where I some regon wwwwwwwwwwwwwwww(bbbbbbbb S k ˆ, denoted wgtfnal s calculated (bond. j I as s calculated follows: as follows: The fnal weght for bbbbbbbb factor caps denoted wwwwwwwwwwwwwwww( nn (tttttttttt (27 s gven by: wwwwwwwwwwwwwwww( 60% cccccccc (tttttttttt + 20% WW SS(, where SS kk, denoted wwwwwwwwwwwwwwww(bbbbbbbb s calculated as follows: (tttttttttt + 20% WW (SS( (tttttttttt wwwwwwwwwwwwwwww( ssssssssssssssss and (SS( maps SS( to some regon. WW AAAAAA(bbbbbbbb 60% FF cccccccc (tttttttttt + 20% WW SS( (tttttttttt ( % WW (SS( wwwwwwwwwwwwwwww(bbbbbbbb wwwwwwwwwwwwwwww( (tttttttttt SS( wwwwwwwwwwwwwwww( 60% cccccccc (tttttttttt + 20% WW SS( (tttttttttt + 20% WW (SS( maps to some sector 1 AAAAAA(bbbbbbbb ( Fnal Bond Weghts S, and (SS( maps wwwwwwwwwwwwwwww(bbbbbbbb SS( to some regon. wwwwwwwwwwwwwwww( AAAAAA(bbbbbbbb qq1 qq (tttttttttt ( Fnal Bond Fnal SS( Weghts Bond Weghts maps to some sector S, and (SS( maps SS( to some regon. AAAAAA(bbbbbbbb qq1 qq The SS( fnal weght for maps bbbbbbbb to some, where sector S, SS kk and, (SS( denoted maps wwwwwwwwwwwwwwww(bbbbbbbb SS( to some regon s calculated. as follows: 5 Fnal Issuer The fnal Weghts weght for bbbbbbbb, where SS kk, denoted wwwwwwwwwwwwwwww(bbbbbbbb The fnal weght for bbbbbbbb 4. Fnal Remarks, where SS kk, denoted wwwwwwwwwwwwwwww(bbbbbbbb s calculated s calculated as follows: as follows: The Index s rebalanced twce a year, on the last Busness Day of May and November. 3.6 Fnal Bond Weghts AAAAAA(bbbbbbbb e fnal weghts per Issuer SS kk, denoted wwwwwwwwwwwwwwww(bbbbbbbb (before 3.6 applyng Fnal factor s calculated Bond caps as Weghts denoted wwwwwwwwwwwwwwww( follows: wwwwwwwwwwwwwwww(bbbbbbbb s gven by: Credt data are updated twce a year n Aprl and October, wwwwwwwwwwwwwwww( AAAAAA(bbbbbbbb ( 3.6 The fnal weght Fnal Bond for bbbbbbbb Weghts, where SS kk, denoted wwwwwwwwwwwwwwww(bbbbbbbb wwwwwwwwwwwwwwww(bbbbbbbb AAAAAA(bbbbbbbb whch mpacts the rebalancng for 2015 Lombard Oder Asset Management AAAAAA(bbbbbbbb wwwwwwwwwwwwwwww(bbbbbbbb (Europe Lmted, all rghts wwwwwwwwwwwwwwww( reserved 2015 Lombard Oder the Asset followng Management May. qq1 s calculated qq as follows: (28 wwwwwwwwwwwwwwww( (Europe Lmted, all rghts reserved The fnal weght AAAAAA(bbbbbbbb for bbbbbbbb wwwwwwwwww(bbbbbbbb wwwwwwwwwwwwwwww(, where SS kk, denoted wwwwwwwwwwwwwwww(bbbbbbbb 60% cccccccc (tttttttttt + 20% WW SS( (tttttttttt + 20% WW (SS( AAAAAA(bbbbbbbb (28 Economc data that are used to compute AAAAAA(bbbbbbbb the sector (tttttttttt qq1 weghts s calculated qq qq1 qq are updated once a year n October, (27 as follows: wwwwwwwwwwwwwwww( The fnal whch (28 weght for bbbbbbbb mpacts the rebalancng for the followng Novemeber. AAAAAA(bbbbbbbb, where qq1 qq SS kk, denoted wwwwwwwwwwwwwwww(bbbbbbbb AAAAAA(bbbbbbbb s calculated as follows: wwwwwwwwwwwwwwww(bbbbbbbb here:ss( maps to some sector S, and (SS( maps SS( to some regon. AAAAAA(bbbbbbbb wwwwwwwwwwwwwwww( 18 wwwwwwwwwwwwwwww(bbbbbbbb wwwwwwwwwwwwwwww( AAAAAA(bbbbbbbb AAAAAA(bbbbbbbb qq1 wwwwwwwwwwwwwwww(bbbbbbbb wwwwwwwwwwwwwwww( qq AAAAAA(bbbbbbbb qq 2015 Lombard Oder Asset Management (Europe Lmted, all rghts reserved qq1 AAAAAA(bbbbbbbb qq1 qq 6 Fnal 2015 Bond Lombard 2015 Weghts Lombard Oder Asset Oder Management Asset Management (Europe (Europe Lmted, Lmted, all rghts all reserved rghts reserved 25

19 fxed ncome famly ndex methodology, october 2015 Part V: Buldng the Fundamental Fxed Income Government Indces Overvew The Fundamentally Weghted Fxed Income Government Indces use fundamental nformaton to measure the potental solvency of each country n the Elgble Government Unverse; gatherng together economc and fnancal data. The weght that the Index allocates to each country reflects the assessment of ths data. Table 1 below dsplays the breakdown n country weghts attrbutable to each lne tem (or factor : ( Credt accountng for 50% of the total weght, ( Socal/Demographc (20% and ( Macro (30%. Factors are defned as per the IMF, Unted Natons and World Bank; full defntons and data access s descrbed n the Appendx. 1 DETERMINING THE COUNTRY CREDIT AND SOCIAL / DEMOGRAPHIC WEIGHTS Let U be the set of all countres n the Soveregn Elgble Country Unverse, and U the number of elements,.e. countres, n ths set. Then: The Soveregn Elgble Country Unverse s ranked from best to worst based on each lne tem (or factor n Table 1,.e. we have nne separate ordered lsts. Dependng on the relatonshp of the target weght to each lne tem (or factor, we have: ( + Denotes a postve relatonshp between the target country weght and the specfc factor. Meanng the rankng of the Soveregn Elgble Country Unverse by ths factor s an ordered lst from hghest to lowest value. Hghest value recevng a rank 1, and lowest value recevng a rank U ( Denotes a negatve relatonshp between the target country weght and the specfc factor. Meanng the rankng of the Soveregn Elgble Country Unverse by ths factor s an ordered lst from lowest to hghest value. Lowest value recevng a rank 1, and hghest value recevng a rank U. TABLE 1 FACTOR WEIGHTS CREDIT FACTORS SOCIAL / DEMOGRAPHIC FACTORS MACRO FACTORS Publc Debt to GDP Rato ( 15% Poltcal Stablty ( + 10% PPPGDP ( + 30% Net Internatonal Investment Poston ( + 15% Old Age Dependency Rato ( + 5% Fscal Balance ( + 10% Msery Index ( + 5% Prvate Debt to GDP Rato ( + 5% Current Account Balance ( + 5% INDEX METHODOLOGY INDEX METHODOLOGY FIXED INCOME FAMILY FIXED INCOME FAMILY Source: IMF, World Bank, Unted Natons. See Appendx for full defntons and data access. The Credt and Socal / Demographc factors are converted nto weghts va the exponental The Credt and Socal The / Demographc Credt and Socal factors / Demographc are converted transformaton: factors nto weghts are converted va the nto exponental weghts va transformaton: the exponental transformaton: WW CC,SS&DD WW CC,SS&DD 8 αα exp ( 0.05 (ffff kk rrrrrrrr kk : For each UU (1.0 (1.0 αα exp ( 0.05 (ffff kk rrrrrrrr kk : For each UU (1.0 kk1 8 kk1 CC,SS&DD WW ffff kk rrrrrrrr kk UU CC,SS&DD Where WWheeeeee a constant, aa cccccccccccccccc, α, s chosen αα, s.t. cchoooooooo CC,SS&DD WWheeeeee aa cccccccccccccccc, αα, cchoooooooo ss. tt. WW ss. tt. WW 1 (1.1 1 (1.1 (1.1 CC,SS&DD WW ffff kk 1 1 C,S&D W Credt and Socal / Demographc weghts assocated wth country. fw Correspondng Factor Weght assocated wth country. k rank Rank of country w.r.t. Factor k. k U Number of countres n the set U, where U Soveregn Elgble Country Unverse. Credt and Socal / Demographc Credt and Socal weghts / Demographc assocated weghts wth country assocated wth country Correspondng Factor Correspondng Weght assocated Factor wth Weght country assocated wth country Rank of rrrrrrrr country kk w.r.t. Rank Factor of country kk w.r.t. Factor kk Number UU of countres Number n the set of countres UU, where n UU the Soveregn set UU, where Elgble UU Country Soveregn Unverse Elgble Country Unverse UU UU Determnng 1.1 the Determnng Country Macro the Factor Country Weghts Macro Factor Weghts

20 rrrrrrrr kk Rank of country w.r.t. Factor kk UU Number of countres n the set UU, where UU Soveregn Elgble Country Unverse CC,SS&DD WW Credt and Socal / Demographc weghts assocated wth country ffff kk Correspondng Factor Weght assocated wth country rrrrrrrr fxed ncome kk Rank of country w.r.t. Factor kk famly ndex methodology, october 2015 UU 1.1 Number Determnng of countres the n Country the set UU, Macro where UU Factor Soveregn Weghts Elgble Country Unverse The Macro Factor weghts assocated wth each country, are converted nto a weght va the functon: 1.1 Determnng the Country Macro Factor Weghts WW MM PPPPPPPPPPPP 1.1 Determnng the Country Macro Factor NN PPPPPPPPPPPP Weghts (2 1 The Macro Factor weghts assocated The wth Macro each Factor country weghts, are assocated converted wth nto each a weght country va, the are functon: converted nto a weght va the functon: Where MM WW MM PPPPPPPPPPPP WW Macro weght assocated wth country (2 NN 1 PPPPPPPPPPPP (2 PPPPPPPPPPPP GDP-PPP of country, as defned n APPENDIX, References, Data Defntons and Access Where NN Number of countres Where n the Soveregn Elgble Country Unverse W M Macro weght assocated wth country MM WW Macro weght assocated PPPGDP wth country j GDP-PPP of country, as defned n APPENDIX, References, Data Defntons and PPPPPPPPPPPP GDP-PPP of country Access, as defned n APPENDIX, References, Data Defntons and Access NN 1.2 Determnng Number of countres the Fundamental N n the Number Soveregn of countres Weghts Elgble n Country the Soveregn Unverse Elgble Country Unverse INDEX METHODOLOGY FIXED INCOME FAMILY 1.2 Determnng the Fundamental Weghts INDEX The METHODOLOGY Fundamental Weghts FIXED per INCOME country, FAMILY WW FFFFFFFF The Fundamental, are calculated by combnng the Macro Factor Weghts per country, prevously Fdtl Weghts per country, W, are calculated by combnng the Macro Factor Weghts denoted WW MM, wth the Credt and Socal / Demographc Factor Weghts, prevously denoted WW CC,SS&DD per country, prevously denoted W 1.2 Determnng the Fundamental Weghts M, wth the Credt and Socal / Demographc as follows: Factor Weghts, C,S&D 2 Factor Adjustments prevously denoted W as follows: The Fundamental Weghts per country, WW FFFFFFFF, are calculated WW FFFFFFFF by 30% combnng WW MM INDEX METHODOLOGY FIXED INCOME FAMILY 2 CC,SS&DD 2 the + Macro 70% Factor WW (3 2 Factor Adjustments Weghts per country, prevously (3 denoted WW MM, wth the Credt and Socal / Demographc Factor Weghts, prevously denoted WW CC,SS&DD as follows: The countres INDEX wth the METHODOLOGY lowest fundamental FIXED weghts INCOME are FAMILY 2 removed Factor up a Adjustments 5% allocaton. The remanng DOLOGY FIXED INCOME FAMILY 2.1 Lqudty Adjustment fundamental weghts are rebased such that the sum of the Fundamental Weghts sums to 100% The Lqudty countres wth the lowest fundamental weghts Adjustment WW FFFFFFFF are removed 30% WW MM up to a 5% allocaton. CC,SS&DD The remanng fundamental weghts are rebased + 70% WW (3 such that the sum of the Fundamental 2 FACTOR Weghts ADJUSTMENTS Usng Defnton 5, Let sums to 100%. 2.1 Lqudty Adjustment Usng 5, Let, SS kk,, SS kk, be the 2 set of Factor all bonds, be the 2.1 set Lqudty of all Adjustment bbbbbbbb Adjustments bbbbbbbb 5, Let, SS kk, oooooooo ssued by ssuer wthn sector SS kk, wthn a fxed geogra be the set of all oooooooo Usng Defnton 5, Let, SS kk, r Adjustments be the set of all bonds, bbbbbbbb by by ssuer wthn SS kk SS, kk wthn, a a fxed fxed regon. Then we have: Usng Defnton 5, Let I, Sk, ˆ be the set of all bonds, bond I Usng Defnton j over j 5, ssued Let, by SS kk ssuer be I set wthn of all sector. Then we have:, SS kk,, SS kk, { bbbbbbbb SS kk oooooooo ssued by ssuer wthn sector SS kk, wthn a fxed geographcal { bbbbbbbb SS kk bonds, bbbbbbbb oooooooo kk 1, 2,, 9 } we, SS kk,. we The countres wth the lowest, SS kk, { SS kk kk 1, 2,, 9 } W.L.O.G. we denote, SS kk,, then defne the fundamental S k, wthn weghts kk 1, 2,, 9 } we a fxed are geographcal removed up regon to a 5% ˆ. Then allocaton. we have: The I remanng, Sk, ˆ { bond fundamental, SS kk,, regon. Then we have:, SS kk, { bbbbbbbb SS kk then the kk 1, 2,, 9 } W.L.O.G. we denote, SS kk, I Sk, regon. Then we have: ˆ, average lqudty per Issuer then the to be llllll s.t. j, SS kk, k weghts, then { 1, bbbbbbbb 2, defne are, 9 rebased SSthe kk } per kk 1, 2, such that the sum of the Fundamental to be llllll per to be llllll average lqudty per Issuer s.t. to be llllll W.L.O.G. Weghts 2.1 Lqudty Adjustment s.t. s.t. we sums denote to 100%. I, Sk, ˆ, then defne the average average lqudty per per Issuer I to be llllll ty Adjustment s.t. Usng Defnton 5, Let llllll, SS kk, αα be the set of all bonds, llllll llllll αα kk llllll kk (4.0 llllll αα kk llllll bbbbbbbb kk oooooooo ssued by ssuer wthn sector SS kk, wthn a f kk llllll (4 regon. Then llllll we have:, SS αα kk, kk { llllll kk bbbbbbbb SS kk kk 1, 2,, 9 } W.L.O.G. we denote kk (4.0 (4.0, SS kk, 5, Let, SS kk, be the set of all bonds, bbbbbbbb oooooooo ssued by ssuer wthn sector SS kk, wthn a fxed geographcal, then average lqudty per Issuer to be llllll e have:, SS kk, { bbbbbbbb SS kk kk 1, 2,, 9 } W.L.O.G. we denote, SS kk,, then defne the s.t. αα kk AAAA αα AA kk kk αα kk kk αα (4.1 kk AAAAAA(bbbbbbbb αα kk AAAAAA(bbbbbbbb kk kk per Issuer to be llllll s.t. (4 llllll AAAAAA(bbbbbbbb αα ( Lombard Oder Asset Management (Europe Lmted, all rghts reserved kk kk kk kk llllll kk llllll αα kk llllll kk (4.1 (4.1 AAAAAA(bbbbbbbb (4.0 kk llllll kk PP tt AAAAAA llllll kk PP tt AAAAAA (kk PP BBBBBB tt (kk llllll kk PP tt AAAAAA (kk PP BBBBBB tt (kk llllll PP BBBBBB (4.2 kk PP tt AAAAAA llllll (kk PP tt AAAAAA (kk PP BBBBBB tt (kk αα kk AAAAAA(bbbbbbbb kk PP BBBBBB tt PP(kk BBBBBB AAAAAA(bbbbbbbb kk (4 αα kk AAAAAA(bbbbbbbb kk (4.1 tt (kk AAAAAA(bbbbbbbb tt PP BBBBBB (4.2 kk tt PP BBBBBB (kk (4.2 (4.2 (kk AAAAAA(bbbbbbbb tt (kk kk Amount Outstandng for bond kk llllll 2015 Lombard Oder Asset Management (Europe Lmted, all rghts reserved PP AAAAAA kk PP tt AAAAAA (kk PP BBBBBB tt (kk tt (kk PP The Askng Prce of bond kk BBBBBB 2 tt (kk AAAAAA(bbbbbbbb llllll kk PP tt AAAAAA (kk PP BBBBBB tt (kk PP BBBBBB tt (kk The Bd Prce of bond kk kk kk Amount Outstandng for bond kk AAAAAA(bbbbbbbb PP AAAAAA PP BBBBBB (4.2 tt (kk for bond kk kk for bond kk PP AAAAAA tt kk (kk Amount Outstandng for bond kk tt PPPP AAAAAA AAAAAA AMT (bond The tt (kk (kk The The Prce Prce k I Askng Amount Prce of Outstandng bond kk for bond k of of bond bond kk PP BBBBBB tt (kk PP BBBBBB AAAAAA(bbbbbbbb kk Amount Outstandng for bond kk Amount The Askng Prce of bond kk tt PPPP BBBBBB Outstandng tt (kk for bond kk Ask BBBBBB p tt (kk (kk The The Bd k (k The PP AAAAAA tt Bd (kk Prce The of Askng bond Prce kk INDEX The METHODOLOGY Askng Prce of bond FIXED kk INCOME FAMILY of bond k The Bd Prce of bond bond kk kk The Fundamental Weghts are adjusted to take nto account the market tt Askng (kk Prce of bond kk The Bd p Bd Prce PPof BBBBBB tt bond (kk kk The Bd Prce of bond kk t (k The Bd Prce of bond k The Bd Prce of bond kk WW FFFFFFFF 2 The Fundamental Weghts are adjusted to 2 take nto Factor account Adjustments the market lqudty for bonds n (llllllllllll The Fundamental Weghts NN that are country: adjusted The to Fundamental take nto account Weghts are the adjusted market to lqudty take nto account for bonds the market n that lqudty country: for bonds n that country: l Weghts are adjusted The The The to Fundamental take nto account Weghts the market are are are lqudty adjusted for bonds to to take to take n take that nto nto country: nto account the the the market lqudty for for for bonds n n that n that that country: If the followng nequalty Lqudty Test s not satsfed for any, then ll WW FFFFFFFF 2 llllll WW FFFFFFFF 2 llllll FFFFFFFF 2.1 Lqudty WW FFFFFFFF 2 WW llllll FFFFFFFF WW FFFFFFFF Adjustment (llllllllllll WW WW FFFFFFFF 2 llllll FFFFFFFF (llllllllllll WW WW FFFFFFFF 2 llllll FFFFFFFF NN 2 WW llllll FFFFFFFF (5 (llllllllllll NN 2 llllll 1 WW WW FFFFFFFF 2 llllll FFFFFFFF WW (llllllllllll (5 FFFFFFFF NN 2 llllll FFFFFFFF 1 2 llllll (5 WW FFFFFFFF NN 1 2 llllll 1 WW (5 NN 2 llllll FFFFFFFF Usng Defnton 5, Let (5 WW, SS kk, be the set of all bonds, bbbbbbbb 1 WW FFFFFFFF oooooooo ssued by ssue 1 regon. Then WW we Lqudty have:, SS Test kk, { bbbbbbbb SS kk kk 1, 2,, 9 } W.L.O.G. w If the followng If nequalty the followng Lqudty nequalty Lqudty Test average s not Test satsfed lqudty not satsfed per for Issuer any for, any to then, be then llllll llllll s.t. s s replaced wth μμ NN 1( WW llllll, where μμ < 1 s a FFFFFFFF (llllllllllll FFFF WW equalty Lqudty Test s not satsfed for any, then llllll s replaced where wth μμ <1 llllll s, where a constant μμ < 1 such s a constant such NN 1 FFFFFFFF If the followng nequalty Lqudty Test s not satsfed for any, then llllll s replaced wth μμ llllll, where μμ < 1 s a ( WWconstant 2 su If the Test s not for any, then llllll llllll αα s wth that μμthe llllll kk llllll Lqudty Test kk If the Test s not for any, then llllll s wth Lqudty llllll If the followng nequalty Lqudty Test s not satsfed for any, then llllll s replaced wth μμ llllll,, Test, where becomes μμ μμ < μμ 1 < equalty 1 s 1 s a s a and a constant s equal such to such such 20%. NN ( WW FFFFFFFF (llllllllllll FFFFFFFF 1 WW 2 Lqudty Test αα kk AAAAAA(bbbbbbbb kk NN FFFFFFFF 1( WW 2 20% NN ( Lqudty Test WW FFFFFFFF (llllllllllll FFFFFFFF 1 WW 2 AAAAAA(bbbbbbbb Test kk Test NN FFFFFFFF ( WW 2 20% (6 1 that NN 1( WW FFFFFFFF FFFFFFFF WW 2 20 NN 1( WW FFFFFFFF FFFFFFFF WW 2 NN ( WW NN the ( Lqudty WW NN FFFFFFFF FFFFFFFF Test becomes equalty and s equal (llllllllllll FFFFFFFF 1 WW 2 to 20%. Test becomes equalty and s equal to 20%. (llllllllllll 1 NN ( FFFFFFFF WW FFFFFFFF ( WW % llllll kk PP tt AAAAAA (kk PP BBBBBB tt (kk 20% PP(6 NN FFFFFFFF 1( WW 2 (6 NN 1 FFFFFFFF 1( WW 2 20% BBBBBB tt (kk (6 that the Lqudty Test becomes equalty and s equal to 20%. that that that the the the Lqudty Test Test Test becomes equalty and and and s s equal s equal to to 20%. to AAAAAA(bbbbbbbb 20%. kk Amount Outstandng for bond kk PP AAAAAA tt (kk The Askng Prce of bond kk BBBBBB

Construction Rules for Morningstar Canada Target Dividend Index SM

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