Guide to the. Dow Jones Global Total Stock Market Indexes SM

Transcription

1 Guide to the Dow Jones Global Total Stock Market Indexes SM

2 Contents 01. Introduction Index Descriptions Index Universe Industry Indexes Index Attributes Dividend Treatment Base Dates and Base Values Calculation and Dissemination Index Dissemination Index Construction Selecting Eligible Countries Identifying the Broad Market Defining the Investable Universe Component Selection Calculations and Adjustments Input Data Sources Index Formula Divisor Adjustments Data Correction Policy Intraday Corrections Index-Related Data and Divisor Corrections Methodology Changes Dow Jones Index Oversight Committee...18 Appendix A Index Maintenance Monthly Additions and Deletions Quarterly Reviews Semi-Annual Reviews Timing Ongoing Maintenance Removal of Companies Due to Delisting, Bankruptcy or Extreme Financial Distress Pricing of Stocks in Extreme Financial Distress for Index Maintenance Float Adjustment Float Factors Qualifications Threshold Foreign Restrictions...17

3 01. Introduction The Dow Jones Global Total Stock Market Index SM family provides comprehensive coverage of the world s equity markets with a consistent rules-based methodology. The indexes are designed to measure the performance of global equity securities with readily available prices. As of March 19, 2012, the global family covers 77 countries and more than 12,000 securities. The global composite index, the Dow Jones Global Total Stock Market Index SM, is the bottom-up aggregate of the country indexes. Also provided as part of the family are a variety of regional, size-segment and sector indexes. 2.1 Index Universe Country Classification Process Countries will be reviewed through a quantitative and qualitative process that will result in a classification of Developed Market, Emerging Market or Frontier Market. The review process begins with analysts examination of countries based on three broad categories of metrics for each country: Market & Regulatory Structure, Trading Environment, and Operational Efficiency. These categories reflect the market characteristics that are often considered by investors when determining the relative level of development and ease of investment. The various specific considerations for each of these three categories are listed in Figure Index Descriptions The Dow Jones Global Total Stock Market Index SM family includes country-level indexes for each of the 77 markets listed in Table 1. Table 1: Country-Level Indexes (as of March 2012) Argentina Germany Malaysia Slovakia Australia Greece Malta Slovenia Austria Hong Kong Mauritius Spain Bahrain Hungary Mexico South Korea Bangladesh Iceland Morocco South Africa Belgium India Netherlands Sri Lanka Brazil Indonesia New Zealand Sweden Bulgaria Ireland Nigeria Switzerland Canada Israel Norway Taiwan Chile Italy Oman Thailand China Offshore* Japan Pakistan Turkey Colombia Jordan Peru Tunisia Croatia Kazakhstan Philippines UAE Cyprus Kenya Poland Ukraine Czech Republic Kuwait Portugal U.K. Denmark Latvia Qatar U.S. Egypt Lebanon Romania Vietnam Estonia Lithuania Russia Finland Luxembourg Serbia France Macedonia Singapore *Includes mainland China companies listed overseas. Eligible are B shares traded in Shanghai or Shenzhen; H shares; red chips; China DRs; and U.S.-listed China stocks Figure 1: Country Assessment Metrics Country Assessment Metrics Market & Regulatory Structure Trading Environment Operational Efficiency Detailed Metrics Market Environment Regulatory Framework Market Infrastructure Trading Environment Clearing & Settlement Operational Environment Main Considerations Foreign ownership limits Treatment of foreign investors Capital flow restrictions Foreign exchange market Investment landscape Foreign investor registration process Active regulatory bodies Transaction costs Trading platforms Short selling & stock lending Derivatives market DR availability Settlement cycle Settlement methods Central registry & depository Custodian bank services 3.

4 Ultimately, the information gathered is intended to assess the foreign investor experience in any given market. The analysts will use these data, along with feedback from ongoing client consultations, to develop final classification recommendations. The analysts will present these recommendations, along with a short summary of the key considerations, to Dow Jones Indexes internal steering committee, the Index Oversight Committee (IOC), The IOC will make final classification decisions using all necessary intelligence, including but not limited to the analysts recommendations. The classification will not be strictly rules-based, i.e., a country will not have to necessarily pass a set number of criteria to earn a certain status. Rather, the assessment of all metrics will be considered in conjunction with market sentiment to assign an overall classification. Country Classification Category Descriptions Developed markets are the most accessible to and supportive of foreign investors. Generally, there is high degree of consistency across these markets. Emerging markets generally have less accessibility relative to developed markets, but demonstrate some level of openness. Frontier markets are typically much less accessible to foreign investors, exhibit notable limitations in their regulatory and operational environments, and support a smaller investment landscape. Markets tend to be much less robust and in the earlier stages of development. Table 2: Developed vs. Emerging Markets (as of March 2012) Developed (28) Australia Germany Japan South Korea* Austria Greece Luxembourg Spain Belgium Hong Kong Netherlands Sweden Canada Iceland New Zealand Switzerland Denmark Ireland Norway Taiwan* Finland Israel Portugal U.K. France Italy Singapore U.S. Emerging (19) Brazil Egypt Mexico Russia Chile Hungary Morocco South Africa China Offshore India Peru Thailand Colombia Indonesia Philippines Turkey Czech Republic Malaysia Poland Frontier (30) Argentina Kazakhstan Mauritius Slovenia Bahrain Kenya Nigeria Sri Lanka Bangladesh Kuwait Oman Tunisia Bulgaria Latvia Pakistan UAE Croatia Lebanon Qatar Ukraine Cyprus Lithuania Romania Vietnam Estonia Macedonia Serbia Jordan Malta Slovakia *South Korea and Taiwan are currently on a watch-list for future assessment as per the Country Classification System in section Regional Indexes Countries in the Dow Jones Global Total Stock Market Index SM family are aggregated into four major regional indexes: Americas, Asia/Pacific, Europe, and Middle East & Africa. (See Table 3.) Because each country index stands alone, the countries also may be aggregated into a series of regional sub-indexes, based on IMF geographic designations or other criteria to meet specific requirements. (See Table 4.) 4.

5 Table 3: Regional Indexes Americas (8) Latin America North America Argentina Colombia Canada U.S. Brazil Mexico Chile Peru Asia/Pacific (18) Australia Indonesia Pakistan Taiwan Bangladesh Japan Philippines Thailand China Offshore Kazakhstan Singapore Vietnam Hong Kong Malaysia South Korea India New Zealand Sri Lanka Europe (36) Austria France Luxembourg Serbia Belgium Germany Macedonia Slovakia Bulgaria Greece Malta Slovenia Croatia Hungary Netherlands Spain Cyprus Iceland Norway Sweden Czech Republic Ireland Poland Switzerland Denmark Italy Portugal Turkey Estonia Latvia Romania U.K. Finland Lithuania Russia Ukraine Middle East & Africa (15) Middle East Africa Table 4: Global and Regional Sub-Indexes World World Emerging Africa Americas Americas ex-u.s. Asia/Pacific World ex-u.s. World ex-frontier Global Indexes World Developed World Frontier Regional Sub-Indexes Asia/Pacific ex-japan Euro Europe Europe Developed 2.2. Industry Indexes Europe Developed ex-u.k. Europe Emerging Europe Nordic Latin America World Developed ex-u.s. Middle East Middle East & Africa Stocks in the Dow Jones Global Total Stock Market Indexes SM are categorized into 10 Industries, 19 Supersectors, 41 Sectors and 114 Subsectors as defined by the proprietary classification system used by Dow Jones Indexes (See Table 5). These segments are designed to capture the risk characteristics of a specific market by grouping together constituents that respond in similar ways to economic, political and environmental factors. Indexes are maintained at each of the four levels defined by the proprietary classification system used by Dow Jones Indexes. Bahrain Lebanon Egypt Nigeria Israel Oman Kenya South Africa Jordan Qatar Mauritius Tunisia Kuwait UAE Morocco 5.

6 Table 5: The Proprietary Classification System Used by Dow Jones Indexes Industry Supersector Sector Subsector 0001 OIL & GAS 0500 Oil & Gas 0530 Oil & Gas Producers 0570 Oil Equipment, Services & Distribution 0580 Alternative Energy 0533 Exploration & Production 0537 Integrated Oil & Gas 0573 Oil Equipment & Services 0577 Pipelines 0583 Renewable Energy Equipment 0587 Alternative Fuels 1000 BASIC MATERIALS 1300 Chemicals 1350 Chemicals 1730 Forestry & Paper 1750 Industrial Metals & Mining 1700 Basic Resources 1770 Mining 1353 Commodity Chemicals 1357 Specialty Chemicals 1733 Forestry 1737 Paper 1753 Aluminum 1755 Nonferrous Metals 1757 Iron & Steel 1771 Coal 1773 Diamonds & Gemstones 1775 General Mining 1777 Gold Mining 1779 Platinum & Precious Metals 2300 Construction & Materials 2350 Construction & Materials 2353 Building Materials & Fixtures 2357 Heavy Construction 2710 Aerospace & Defense 2713 Aerospace 2717 Defense 2730 Electronic & Electrical Equipment 2723 Containers & Packaging 2727 Diversified Industrials 2000 INDUSTRIALS 2700 Industrial Goods & Services 2730 Electronic & Electrical Equipment 2750 Industrial Engineering 2733 Electrical Components & Equipment 2737 Electronic Equipment 2753 Commercial Vehicles & Trucks 2757 Industrial Machinery 2771 Delivery Services 2773 Marine Transportation 2770 Industrial Transportation 2775 Railroads 2777 Transportation Services 2779 Trucking 6.

7 Table 5: The Proprietary Classification System Used by Dow Jones Indexes (Continued) Industry Supersector Sector Subsector 2791 Business Support Services 2790 Support Services 2793 Business Training & Employment Agencies 2795 Financial Administration 2797 Industrial Suppliers 3000 CONSUMER GOODS 3300 Automobiles & Parts 3500 Food & Beverage 3700 Personal & Household Goods 3350 Automobiles & Parts 3530 Beverages 3570 Food Producers 3720 Household Goods & Home Construction 3740 Leisure Goods 3760 Personal Goods 2799 Waste & Disposal Services 3353 Automobiles 3355 Auto Parts 3357 Tires 3533 Brewers 3535 Distillers & Vintners 3537 Soft Drinks 3573 Farming & Fishing 3577 Food Products 3722 Durable Household Products 3724 Nondurable Household Products 3726 Furnishings 3728 Home Construction 3743 Consumer Electronics 3745 Recreational Products 3747 Toys 3763 Clothing & Accessories 3765 Footwear 3767 Personal Products 3780 Tobacco 3785 Tobacco 4000 HEALTH CARE 4500 Health Care 5000 CONSUMER SERVICES 5300 Retail 4530 Health Care Equipment & Services 4570 Pharmaceuticals & Biotechnology 5330 Food & Drug Retailers 5370 General Retailers 4533 Health Care Providers 4535 Medical Equipment 4537 Medical Supplies 4573 Biotechnology 4577 Pharmaceuticals 5333 Drug Retailers 5337 Food Retailers & Wholesalers 5371 Apparel Retailers 5373 Broadline Retailers 5375 Home Improvement Retailers 5377 Specialized Consumer Services 5379 Specialty Retailers 7.

8 Table 5: The Proprietary Classification System Used by Dow Jones Indexes (Continued) Industry Supersector Sector Subsector 5553 Broadcasting & Entertainment 5500 Media 5550 Media 5700 Travel & Leisure 5750 Travel & Leisure 5555 Media Agencies 5557 Publishing 5751 Airlines 5752 Gambling 5753 Hotels 5755 Recreational Services 5757 Restaurants & Bars 6000 TELECOMMUNICATIONS 6500 Telecommunications 6530 Fixed Line Telecommunications 5759 Travel & Tourism 6535 Fixed Line Telecommunications 6570 Mobile Telecommunications 6575 Mobile Telecommunications 7000 UTILITIES 7500 Utilities 7530 Electricity 7570 Gas, Water & Multiutilities 7535 Conventional Electricity 7537 Alternative Electricity 7573 Gas Distribution 7575 Multiutilities 7577 Water 8300 Banks 8350 Banks 8355 Banks 8532 Full Line Insurance 8000 FINANCIALS 8500 Insurance 8600 Real Estate 8700 Financial Services 8530 Nonlife Insurance 8534 Insurance Brokers 8536 Property & Casualty Insurance 8538 Reinsurance 8570 Life Insurance 8575 Life Insurance 8630 Real Estate Investment & Services 8670 Real Estate Investment Trusts 8770 Financial Services 8633 Real Estate Holding & Development 8637 Real Estate Services 8671 Industrial & Office REITs 8672 Retail REITs 8673 Residential REITs 8674 Diversified REITs 8675 Specialty REITs 8676 Mortgage REITs 8677 Hotel & Lodging REITs 8771 Asset Managers 8773 Consumer Finance 8775 Specialty Finance 8777 Investment Services 8779 Mortgage Finance 8.

9 Industry Supersector Sector Subsector 9000 TECHNOLOGY 9500 Technology 8980 Equity Investment Instruments 8990 Nonequity Investment Instruments 9530 Software & Computer Services 9570 Technology Hardware & Equipment 8985 Equity Investment Instruments 8995 Nonequity Investment Instruments 9533 Computer Services 9535 Internet 9537 Software 9572 Computer Hardware 9574 Electronic Office Equipment 9576 Semiconductors 9578 Telecommunications Equipment 03. Index Attributes 3.1 Dividend Treatment The indexes are calculated on a price-return basis in real time and on both a gross and a net total-return basis at the end of each trading day. The reinvestment of all dividend payments is reflected in the total-return indexes on the ex-dividend date but is not reflected in the price indexes. The withholding rates used to adjust each country s dividends for the net return index are presented in Appendix A. For countries such as South Korea, where dividends often are announced after their ex-dates, any dividend declared after the fact will be applied on its pay date. Dividend payments are not taken into account in the price index, whereas dividend payments net of taxes are reinvested in the index sample of the total-return index. Only extraordinary and special cash dividends are included in the index. Special dividends from non-operating income continue to be included in the index calculation. 3.2 Base Dates and Base Values Indexes in the Dow Jones Global Total Stock Market Index SM family have a base date of December 31, 1991, when their respective index values were set at 1000 (December 31, 1991 = 1000). The Dow Jones U.S. Total Stock Market Index SM price index has a base date of January 1, 1987, and a base value of The Dow Jones U.S. Total Stock Market Index SM total-return index has a base date of January 1, 1987, and a base value of Information on the The Dow Jones U.S. Total Stock Market Index SM family can be found in Guide to the The Dow Jones U.S. Total Stock Market Index SM. The Europe Emerging index and its country indexes except Turkey, Russia and Cyprus have a base date of December 31, 2002, and a base value of 1000 (December 31, 2002 = 1000). Turkey, Russia, Cyprus, Israel and China Offshore have a base date of December 31, 2005, and a base value of 1000 (December 31, 2005 = 1000). Iceland, Bulgaria and China Offshore have a base date of December 31, 2005, and a base value of 1000 (December 31, 2005 = 1000). Iceland, Bulgaria and Romania have a base value of 1000 as of December 31, Base dates and base values for industry and sector indexes based on the proprietary classification system used by Dow Jones Indexes may vary, depending upon when individual Industry, Supersector, Sector and Subsector indexes were created. 3.3 Calculation and Dissemination Index Formula The Dow Jones Global Total Stock Market Indexes SM are Laspeyres indexes. A detailed explanation of Laspeyres s formula is provided in Section Daily Calculation Cycle The index calculation week begins at 6:00 p.m. New York time on Sunday and ends at 5:00 p.m. New York time on Friday. The closing values of the indexes are calculated on a 24-hour day that ends at 5:00 p.m. New York time, using the official WM closing spot rates as reported by Reuters and each component stock s closing price on its primary market during the previous 24-hour period. The WM Company s closing spot rates, which are widely used for portfolio valuation and investment performance measurement, are based on the rates at 4:00 p.m. U.K. time each trading day and are published at 4:15 p.m. U.K. time. Following the determination of the previous day s closing price, index values for the then-current day are updated on a real-time basis beginning at 6:00 p.m. New York time whenever any of the exchanges represented in the index are open. (Next-day trading 9.

10 prices from Asia-Pacific markets are not included in the index calculation until 6.00 p.m. New York time to insure that each day s price history includes only one day s trading.) Indexes unaffected by that trading, however, are not updated Stock Prices Dow Jones Global Total Stock Market Indexes SM are computed using each security s last-traded price on its primary exchange. Index closing values are calculated using each component s primary-exchange closing price. Until a particular stock opens, its latest adjusted closing price is used for index computation. If trading in a stock is suspended while its market is open, the last traded price for that stock is used for all subsequent index computations until trading resumes. If trading is suspended before the opening, the stock s latest adjusted closing price is used to calculate the index until trading resumes. However, if a market is closed due to an exchange holiday, the previous closing price for each of its index components, coupled with the most recent intraday currency mid price, is used to determine the index s then-current U.S. dollar value until the opening of trading after the holiday. At that time, a stock s adjusted closing price is used for index computations until its first trading price is received Index Currencies Prices are computed on both a price and total-return basis in local currencies and U.S. dollars. All non-u.s. dollar stock prices are converted to U.S. dollars based on the latest available relevant intraday currency bid price. Every index in the Dow Jones Global Total Stock Market Index SM family can be converted into any other currency upon request Computational Precision Index values are available with six decimal precision (note: index values displayed by vendors are rounded to two decimal places). Index divisors are available with up to ten decimal places. Additional precision for index levels and divisors may be maintained internally for index adjustment purposes. Any values derived by the index calculation engine from a corporate action used for the divisor adjustments and index computations are rounded to six decimal places. The number of shares outstanding for a company is not rounded. 3.4 Index Dissemination The price indexes and total-return indexes are disseminated endof-day on the Dow Jones Indexes Web site at and via data vendors to licensees and paying subscribers. For a list of Dow Jones Global Total Stock Market Indexes SM on our real-time data feed please visit If you are interested in Dow Jones Global Total Stock Market Indexes SM not listed on our Web site, or for more information, please contact Dow Jones Indexes at [email protected]. 04. Index Construction The Dow Jones Global Total Stock Market Indexes SM are weighted by float-adjusted market capitalization. Details on the floatadjustment rules are provided in Section 7. Each index of the Dow Jones Global Total Stock Market Index SM family is constructed according to four basic steps: selecting the eligible countries, identifying the broad market, defining the investable universe and selecting the components. 4.1 Selecting Eligible Countries Dow Jones Indexes considers a variety of factors beyond a country s overall stock market capitalization and trading volume in determining whether to add that country to the Dow Jones Global Total Stock Market Index SM family. Beginning in 2007, country risk will be assessed using the rankings in the Index of Economic Freedom, a joint publication of the Heritage Foundation and The Wall Street Journal. Qualifying countries generally will be added to the index after the close of trading on the last business days of March and September Requirements for Qualification To be eligible for the index family, a country must provide: Accessibility to Nonresidents If a country s regulations impede the ability of nonresidents to easily enter or exit the market, its stocks are excluded from the universe of securities eligible for Dow Jones Global Total Stock Market Indexes SM. 10.

11 Availability of Real-Time and Historical Market Data A country must have a convertible currency and available realtime pricing of stocks and currency exchange rates, as well as historical currency exchange rates, before its stocks can be eligible for the index universe. If a country in the index family prohibits currency conversions, its country index and individual stocks will be suspended from the Dow Jones Total Stock Market Indexes SM until the country again permits currency conversions Access to Reliable Data Sources Dow Jones Indexes must have access to reliable sources for ownership information and corporate action data for a country to be added to the Dow Jones Total Stock Market Indexes SM Adding or Removing Countries Countries will be added or removed from the Dow Jones Total Stock Market Indexes SM on the last business day of March or September. Exceptions may be made, under extraordinary circumstances, by the Dow Jones Index Oversight Committee, but in no case shall a country be added or deleted without advance notice of at least 60 days. Country Exchange Bulgaria XETRA Bulgaria S.E. Canada Toronto S.E. Chile Santiago S.E. China Offshore Shenzhen S.E., Shanghai S.E. Colombia Bolsa de Valores de Colombia Croatia Zagreb S.E. Cyprus Cyprus S.E. Czech Republic Prague S.E. Denmark OMX Copenhagen S.E. Egypt Egyptian S.E. Estonia NASDAQ OMX Tallinn Finland OMX Helsinki S.E. France EURONEXT Paris Germany XETRA German S.E. Greece Athens S.E. Hong Kong S.E. of Hong Kong Dow Jones Indexes will aim to include all of the countries included in the Country Classification System in the Dow Jones Global Total Stock Market Index. However, countries will be added or deleted from the index at the discretion of the Dow Jones Index Oversight Committee. 4.2 Identifying the Broad Market Market Universes Table 6 lists the stock exchanges whose components are currently eligible for inclusion in the Dow Jones Total Stock Market Indexes SM. Table 6: Primary Equity Markets (as of March 2012) Hungary Iceland India Indonesia Ireland Israel Italy Japan Jordan Kazakhstan Budapest S.E. OMX Reykjavik S.E. BSE Ltd. Indonesia S.E. XETRA Irish S.E. Tel Aviv S.E. Italian S.E. Nagoya S.E., Osaka S.E., Tokyo S.E. Amman S.E. Kazakhstan S.E. Country Argentina Australia Austria Bahrain Bangladesh Belgium Brazil Exchange Buenos Aires S.E. Australian S.E. XETRA Vienna S.E. Bahrain Bourse Dhaka S.E. EURONEXT Brussels Bolsa de Valores de Sau Paulo Kenya Kuwait Latvia Lebanon Lithuania Malaysia Malta Macedonia Nairobi S.E. Kuwait S.E. NASDAQ OMX Riga Beirut S.E. NASDAQ OMX Vilnius Bursa Malaysia Berhad Malta S.E. Macedonian S.E. 11.

12 Country Exchange Country Exchange Mauritius S.E. of Mauritius Limited Ukraine Ukrainian S.E. Mexico Morocco Netherlands New Zealand Bolsa Mexicana de Valores Bourse De Casablanca EURONEXT Amsterdam New Zealand S.E. U.S. Vietnam American S.E.*, NASDAQ, New York S.E., NYSE ARCA, OTC Bulletin Board, Pink Sheet Exchange Hochiminh S.E. Nigeria Nigerian S.E. *Acquired by NYSE Euronext Norway Oman Pakistan Peru Philippines Poland Portugal Qatar Romania Russia Serbia Singapore Slovakia Slovenia South Africa South Korea Spain Sri Lanka Sweden Switzerland Taiwan Thailand Tunisia Turkey UAE Oslo S.E. Muscat S.E. Karachi S.E. Bolsa de Valores de Lima Philippine S.E. Warsaw S.E. EURONEXT Lisbon Doha Securities Exchange Bucharest S.E. MICEX, RTS Belgrade S.E. Singapore S.E. Bratislava S.E. Ljubljana S.E. Johannesburg S.E. Korea S.E. KOSDAQ Bolsa de Madrid Colombo S.E. OMX Stockholm S.E. SIX Swiss Exchange Ltd., Virt-X GreTai Securities Market, Taiwan S.E. S.E. of Thailand Bourse de Tunis Istanbul S.E. Abu Dhabi Securities Exchange, Dubai Financial Market, NASDAQ Dubai Determining a Company s Country For information on determining a company s country, please refer to the S&P Dow Jones Corporate Actions Policies & Practices Index Methodology. 4.3 Defining the Investable Universe To arrive at the investable securities universe, the equities included in the broad market are screened to exclude securities without readily available prices. The screening is repeated every quarter. Dow Jones Indexes then adjusts the companies shares outstanding for float. (See Section 7.) Share Class For additional information on Multiple Share Classes, please refer to the S&P Dow Jones Corporate Actions Policies & Practices Index Methodology Definition of Readily Available Prices Except for Oman and Qatar, shares of noncomponent companies that have had more than 10 nontrading days during the past quarter are considered not to have readily available prices and are excluded from the investable universe. For Oman, shares must trade ten days in a quarter, for Qatar, shares must trade five days in a quarter. U.K. London S.E. (SETS and SEAQ, SEATS, AIM) 12.

13 4.4 Component Selection The following steps are followed to create the ex-u.s. indexes: 1. The index universe for each country is sorted by floatadjusted market capitalization. Beginning with the largest float-adjusted market cap company, stocks are added to the index until cumulative coverage reached the initial total market representation threshold for that country. 2. Size-segment categories are established as follows: a. The selected companies for each country are sorted by full market capitalization to determine market-cap cutoffs for the large-cap, small-cap and mid-cap indexes. b. The market cap of the company that brought the cumulative market cap to 85% becomes the bottom cutoff target for the large-cap Index. c. Countries without micro-cap Indexes have no bottom target for the small-cap index. (As of April 1, 2009, only the U.S. market had a micro-cap index.) The market representation thresholds at that date were 98% of each country s float-adjusted market capitalization for developed markets ex-u.s. and 95% for emerging and frontier markets. d. Each mid-cap Index overlaps its country s respective large and small-cap Indexes. The market cap of the company that brought the cumulative market cap to 80% became the top cutoff target for the mid-cap index. The market cap of the company that brought the cumulative market cap to 90% became the bottom cutoff target for the mid-cap Index. 3. Stocks selected for each country index in step 1 whose full market capitalizations are equal to or larger than the 85% capitalization target are assigned to the large-cap index. All other stocks are assigned to the small-cap index. Stocks whose market caps fell between the 80% and 90% targets also are assigned to the mid-cap index. 05. Index Maintenance 5.1 Monthly Additions and Deletions The composition of the Dow Jones Total Stock Market Indexes SM is reviewed monthly to account for initial public offerings and companies that have ceased to meet the criteria for index membership. Additions and deletions are made after the close of trading on the third Friday of the month. Final component changes are announced on the second Friday of the month Additions Initial public offerings and U.S. listings and new listings on eligible exchanges as of the Wednesday prior to the second Friday of each month (Friday prior to the third Friday for the U.S.) will be added to their respective country indexes after the close of trading on the third Friday of each month, if and when they meet the following criteria: a. The stock is actively trading on an eligible primary exchange. b. Sufficient company information is available to allow Dow Jones Indexes to determine the company s float-adjusted shares outstanding. c. Countries without a micro-cap index limit additions to companies whose float-adjusted market capitalization is at least as large as that of the company at the market representation threshold less a 1 percentage point % buffer at the most recent index review. d. New components are placed into size-segment indexes based on where their full market capitalizations would have ranked them at the most recent size-segment review Monthly Deletions A component stock will be removed after the close of trading on the third Friday of each month if it is delisted by its primary exchange or transfers its listing to an ineligible exchange for any reason other than bankruptcy. Any issue that loses its exchange listing is deleted at its latest quoted value or at $ if no recent quoted value is available. Real time pricing published by the Pink OTC Market (Pink Sheets) will be used for daily index maintenance and calculation purposes for any U.S. issue that becomes a Pink Sheet stock. 13.

14 In addition to the scheduled composition reviews, any issue that at any time fails to meet one or more of the index membership requirements is removed from the indexes as soon as prudently possible. 5.2 Quarterly Reviews Subsequent Selections The following criteria are used to re-select index components for each country during the quarterly review process: a. Except for Oman and Qatar, stocks in the index universe for each country as of the index snapshot date are screened for trading frequency. Noncomponent stocks with more than 10 non-trading days during the then-current quarter are excluded. Then-current component stocks with more than 20 nontrading days during the quarter or those with more than 10 consecutive nontrading days during the quarter are excluded. However, if a stock is suspended from trading, the Dow Jones Index Oversight Committee will evaluate the circumstances involved in the suspension to determine whether the company should be removed from the index. For Oman, noncomponent stocks that trade on fewer than ten days during the quarter are excluded from the index. Current component stocks must trade on at least seven days to remain in the index. For Qatar, stocks that trade on fewer than five days are excluded from the index. Current component stocks must trade on at least three days to remain in the index. b. `The index universe for each country is sorted by free-float market capitalization. Noncomponent stocks whose floatadjusted market capitalization rank above their country s respective market representation thresholds are added to their country indexes. c. New components added during quarterly shares and float updates are placed into size-segment indexes based on where their full market capitalizations would have ranked them at the most recent size-segment review. d. If a component s float adjusted market cap falls below its country s market coverage target plus a buffer equivalent to 1% of total float-adjusted market cap, it will be removed from its country s small-cap Index. If the country has a microcap Index, the company will be added to it; if not, it will be removed from its country index. 5.3 Semi-Annual Reviews For the semi-annual size-segment reviews in March and September, in addition to the quarterly review steps, these additional steps are followed for each country: a. All selected stocks are sorted by full market capitalization to establish size-segment index boundaries, as described in Section If a company has multiple share classes, the market capitalizations of those share classes are added up to determine the full-market capitalization of that company. New components are added to the size-segment indexes based on where their full market capitalizations fall in relation to those boundaries. b. To reduce unnecessary turnover in the size-segment indexes, buffers will be applied to then current index components. mid-cap components ranked greater than 80% but less than 77.5% will remain in the mid-cap Index. mid-cap components ranked greater than 77.5% will be removed from the mid-cap. Then-current mid-cap components ranked lower than 90% but greater than 92.5% will remain in the mid-cap. Then-current mid-cap components ranked lower than 92.5% will be removed from the mid-cap. c. Then-current small-cap components ranked higher than 82.5% will be added to the large-cap index. Components ranked below 82.5% will remain in the small-cap. d. Then-current large-cap components ranked higher than 87.5% will remain in the large-cap Index. Components ranked lower than 87.5% will be added to the smallcap Index. 5.4 Timing Component shares are updated quarterly after the close of trading on the third Friday of March, June, September and December. Size-segment index changes are updated semi-annually concurrently with the March and September reviews. The changes become effective at the opening of trading on the next business day. These changes are implemented simultaneously in every Dow Jones Total Stock Market Index SM, including economic sectors and industry groups. Preliminary component changes that result from the quarterly reviews will be preannounced after the close of trading on the second Friday of the review month. Shares that result from the quarterly review will be announced after the close of trading on the second Friday of March, June, September, and December. These changes will be implemented after the official 14.

15 closing values have been established on the third Friday of March, June, September, and December. The changes go into effect at the opening on the next business day. 06. Ongoing Maintenance In addition to the scheduled reviews, the Dow Jones Total Stock Market Index SM family is reviewed on an ongoing basis. Changes in index composition and related weight adjustments are necessary whenever there are extraordinary events such as delistings, bankruptcies, spinoffs, mergers or takeovers involving index components. In these cases, each event will be taken into account as soon as it is effective. If the impact of a corporate action during the period between scheduled updates changes a company s float-adjusted shares outstanding by 10% or more, the company s shares and float factor are updated as soon as prudently possible. Share and float changes based on corporate actions are implemented using the procedures described in Section 7. Whenever possible, the changes in an index s components will be announced at least two business days prior to the change implementation date. 6.1 Removal of Companies Due to Delisting, Bankruptcy or Extreme Financial Distress a. If an index constituent is delisted by its primary market, or is in bankruptcy proceedings, it will be removed from the index with a minimum of two business days notice. b. If an index component enters bankruptcy proceedings, it will be removed from the index and will remain ineligible for re-inclusion until it has emerged from bankruptcy. However, the Dow Jones Index Oversight Committee may, at its discretion, following a review of the bankrupt company and the issues involved in the filing, retain the company in the index. c. The Dow Jones Index Oversight Committee may, at its discretion, remove a company it has determined to be in extreme financial distress from any index to which it belongs, if the committee deems the removal necessary to protect the integrity of the index and the interests of investors in products linked to that index. 6.2 Pricing of Stocks in Extreme Financial Distress for Index Maintenance When a stock is suspended from trading due to financial distress and subsequently delisted by its primary market prior to resumption of trading, the rules for pricing suspended securities in Section 3.3 are not appropriate for determining the value of the stock when it is removed from the index. Whenever practicable, Dow Jones Indexes will use the best-available alternate pricing source to determine the value at which the company should be removed from the index. a. If the stock's primary market price is no longer available due to its suspension or delisting, a current price from another exchange, such as a regional or electronic marketplace, may be used. In the absence of those prices in the case of U.S. securities, NYSE ARCA, OTC Bulletin Board, OTC Equity (non-otcbb stocks), and Pink Sheet traded prices could be applied in that order. Similar pricing sources, where available, will be used for non-u.s. securities. b. If only bid and asked quotes are available for the stock, Dow Jones Indexes will use the average of the latest bid/ asked quotes as the current day's closing price. c. If neither a traded price nor a bid/asked range is available, the Dow Jones Index Oversight Committee will evaluate the status of the suspended stock. The committee may consult with managers of portfolios linked to indexes in which the stock is a constituent in determining the value of the stock. d. If the committee concludes that the security has become worthless or is likely to remain too illiquid to be traded, it will be removed from the index at a price equal to $ For additional information on ongoing maintenance, please refer to the S&P Dow Jones Corporate Actions Policies & Practices Index Methodology. 07. Float Adjustment Float-adjusted rather than full-market capitalization is used to reflect the number of shares actually available to investors. Please refer to the S&P Dow Jones Indices: Float Adjustment Methodology for a detailed description of float adjustment and the Investable Weight Factor (IWF). 15.

16 08. Calculation and Adjustments 8.1 Input Data Sources a. Real-time stock prices are currently provided by Reuters. The latest trading price is used for index calculation. b. The number of shares is determined separately for each class of stock. This information is obtained from regulatory filings, a variety of data vendors, and the companies themselves. c. Corporate actions are sourced from public news services, regulatory filings, data vendors and the companies. d. Float data are obtained from a variety of sources including data vendors, exchanges, regulators and the companies themselves. 8.2 Index Formula The indexes are calculated using a Laspeyres formula. This formula is used for the calculation of the price and total-return indexes. The only difference is that the divisor Dt is different for the two indexes. The indexes are computed as follows: 8.3 Divisor Adjustments Corporate actions affect the share capital of component stocks and therefore could trigger index increases or decreases. To avoid distortion, the index divisors are adjusted accordingly. Changes in index market capitalization due to changes in the composition (additions, deletions or replacements), weighting (following quarterly reviews or changes of more than 10% in a single component s float-adjusted shares outstanding) or corporate actions (mergers, spinoffs, rights offerings, repurchase of shares, public offerings, return of capital, or special cash or stock distributions of other stocks) result in a divisor change to maintain index continuity before and after the event Formulae for Divisor Adjustments The following formulae will be used for divisor adjustments. (Note: No divisor adjustments are necessary for stock splits, since market capitalization does not change and the share number and share price are adjusted prior to the opening of trading on the split s ex-date.) (p D t+1 = D t it q it ) ± MC t +1 (p it q it ) where The above mentioned formula can be simplified as Index t = M t B D t = t = divisor at times (t) Base index value n = the number of stocks in the index p i0 = the closing price of stock i at the base date q io = the number of shares of company i at the base date p it = the price of stock i at time (t) q it = the number of shares of company i at time (t) C t = the adjustment factor for the base date market capitialization D t D t = divisor at time (t) D t + 1 = divisor at time (t + 1) p it = stock price of company at time (t) q it = number of shares of company t at time (t) MC t + 1 = add new components market capitalization and adjusted market capitalization (calculated with adjusted closing price and shares effective at time t + 1 and/or minus market capitalization of companies to be deleted (calculated with closing prices and shares at time t) M t = market capitalization of the index at times (t) B t = adjusted base date market capitalization of the index at times (t) Adjustment for Corporate Actions Index divisors may decrease (t) or increase (s) or remain constant (n) when corporate actions occur for a component stock. Assuming shareholders receive B new shares for every A share held for the following corporate actions: 16.

17 Divisor t Divisor t A) Cash Dividend (applied for total return index only) adjusted price = closing price - dividend announced by the company B) Special Cash Dividend (applied for price and total return indexes) adjusted price = closing price - dividend announced by the company Divisor n Divisor s Divisor n Divisor t Divisor t Divisor t Divisor t C) Split and Reverse Split adjusted price = closing price * A / B new number of shares = old number of shares * B / A D) Rights Offering adjusted price = (closing price * A + subscription price * B) / (A + B) new number of shares = old number of shares * (A + B) / A E) Stock Dividend adjusted price = closing price * A / (A + B) new number of shares = old number of shares * (A + B) / A F) Stock Dividend of a Different Company Security adjusted price = (closing price * A - price of the different company security * B) / A G) Return of Capital and Share Consolidation adjusted price = (closing price - dividend announced by company) * A / B new number of shares = old number of shares * B / A H) Repurchase Shares Self Tender adjusted price = [(price before tender * old number of shares) - (tender price * number of tendered shares)] / (old number of shares - number of tendered shares) new number of shares = old number of shares - number of tendered shares I) Spinoffs adjusted price = (closing price * A - price of spun-off shares * B) / A spun-off company is added to the present company index until the next review J) Combination Stock Distribution (Dividend or Split) and Rights Offering Divisor s Divisor s Shareholders receive B new shares from the distribution and C new shares from the rights offering for every A shares held: If rights are applicable after stock distribution (one action applicable to other) adjusted price = [closing price * A + subscription price * C * (1 + B / A)] / [(A + B) * (1 + C / A)] new number of shares = old number of shares * [(A + B) * (1 + C / A)] / A If the stock distribution is applicable after rights (one action applicable to other) adjusted price = [closing price * A + subscription price * C] / [(A + C) * (1 + B / A)] new number of shares = old number of shares * [(A + C) * (1 + B / A)] / A K) Stock Distribution and Rights (Neither Actions is Applicable to the Other) adjusted price = [closing price * A + subscription price * C] / [A + B + C] new number of shares = old number of shares * [A + B + C] / A 17.

18 09. Data Correction Policy To maintain a high standard of data integrity, a series of procedures have been implemented to ensure accuracy, timeliness and consistency. Input prices are monitored using a variety of computerized range-check warning systems for both ticker-plant and real-time index systems. Fault tolerant methods are employed in the collection of market and corporate action data. Various verification and audit tasks are performed to ensure the quality of the real-time data feeds and related market data. While significant efforts are taken to ensure the accuracy of the information used for the index calculation, an index error may occur due to incorrect or missing data, including trading prices, exchange rates, shares outstanding and corporate actions, operational errors or other reasons. 9.1 Intraday Corrections Corrections will be made for bad prices and incorrect or missing corporate actions as soon as possible after detection. Since the indexes are calculated on a real-time basis, an incorrect index value tick will not be fixed retroactively. Incorrect daily high/low index values will be corrected as soon as practicable. 9.2 Index-Related Data and Divisor Corrections Incorrect pricing and corporate action data for individual issues in the database will be corrected upon detection. In addition, an incorrect divisor of an index, if discovered within five days of its occurrence, will be fixed on the day it is discovered to prevent an error from being carried forward. If a divisor error is discovered more than five days after occurrence, whether or not an adjustment is made will depend upon how significant the error is, how far back the error occurred and the feasibility of performing the adjustment. 10. Methodology Changes Dow Jones Indexes reserves the right to modify the methodology of calculating the Dow Jones Total Stock Market Index SM family at any time Dow Jones Index Oversight Committee The Dow Jones Index Oversight Committee is comprised of senior managers from Dow Jones Indexes. The oversight committee provides interpretations of index rules and procedures, and is convened as needed to rule on how the indexes will handle complex and special situations. 18.

19 Appendix A Tax Withholding Rates Used in the Dow Jones Total Stock Market Indexes SM Methodology for Net Total Return Indexes The following withholding tax rates used to calculate the net total return indexes have been compiled by Dow Jones Indexes from stock exchanges, government agency Web sites and other official sources. Country Tax Rate (%) Argentina 0 Australia 30 Austria 25 Bahrain 0 Bangladesh 15 Belgium 25 Bosnia 5 Brazil 0 Bulgaria 15 Canada 25 Chile 35 China - A Shares* 10 China - B Shares** 10 China - H Shares*** 10 China - Red Chips 0 Colombia 0 Croatia 0 Cyprus 0 Czech Republic 15 Denmark 28 Egypt 0 Estonia 0 Finland 28 France 25 Germany Greece 10 Hong Kong - Local Shares**** 0 Hungary 10 Country Tax Rate (%) Iceland 15 India 0 Indonesia 20 Ireland 20 Israel 20 Italy 27 Japan 10 Jordan 0 Kazakhstan 15 Kenya 10 Kuwait 15 Latvia 10 Lebanon 10 Lithuania 15 Luxembourg 15 Macedonia 10 Malaysia 25 Malta 35 Mauritius 0 Mexico 10 Morocco 10 Netherlands 15 New Zealand 30 Nigeria 10 Norway 25 Oman 0 Pakistan 10 Peru 4.1 Country Tax Rate (%) Philippines 30 Poland 19 Portugal 20 Qatar 0 Romania 16 Russia 15 Saudi Arabia 5 Serbia 20 Singapore 0 Slovakia 0 Slovenia 20 South Africa 0 South Korea 27.5 Spain 19 Sri Lanka 10 Sweden 30 Switzerland 35 Taiwan 20 Thailand 10 Tunisia 0 Turkey 15 U.K. Corporations 0 U.K. REITS 20 U.S. 30 Ukraine 15 United Arab Emirates 0 Vietnam 0 ** Companies incorporated in mainland China and listed in Shanghai and Shenzhen. B-shares in Shanghai are traded in U.S. dollars, while B-shares in Shenzhen are traded in Hong Kong dollars. B-shares are available to mainland and foreign investors. ***Companies incorporated in mainland China and listed on the Hong Kong Stock Exchange. ****Companies incorporated in Hong Kong and listed on the Hong Kong Stock Exchange. 19.

20 For more information on the Dow Jones Global Total Stock Market Indexes SM, or call Americas ; Asia ; Europe Learn more at All information as of July CME Group Index Services LLC All rights reserved. Dow Jones Indexes, the marketing name of CME Group Index Services LLC ( CME Indexes ), is a trademark of Dow Jones Trademark Holdings LLC. Dow Jones, Dow Jones Indexes, DJ, Dow Jones Total Stock Market Indexes and all other index names listed above are service marks of Dow Jones Trademark Holdings, LLC ( Dow Jones ), and have been licensed for use by CME Indexes. CME is a trademark of Chicago Mercantile Exchange Inc. The Industry Classification Benchmark is a joint product of FTSE International Limited and Dow Jones Indexes, a licensed trademark of CME Group Index Services LLC. FTSE is a trade and service mark of London Stock Exchange and The Financial Times Limited. Investment products based on the Dow Jones Total Stock Market Indexes are not sponsored, endorsed, sold or promoted by Dow Jones, CME Indexes or their respective affiliates and none of Dow Jones, CME Indexes or any of their respective affiliates make any representation regarding the advisability of investing in such products. Inclusion of a company in any of the indexes in these materials does not in any way reflect an opinion of Dow Jones, CME Indexes or any of their respective affiliates on the investment merits of such company. None of Dow Jones, CME Indexes or any of their respective affiliates is providing investment advice in connection with these indexes. All information in these materials is provided as is. CME Indexes, Dow Jones and their respective affiliates do not make any representation regarding the accuracy or completeness or these materials, the content of which may change without notice, and specifically disclaims liability related to these materials. FTSE, Dow Jones, CME Indexes and their respective affiliates do not accept any liability to any person for any loss or damage arising out of any error or omission in the ICB. RULE-INST