R Risk-Based Global Developed Markets Equity Index. Methodology

R Rsk-Based Global Developed Markets Equty Index Methodology

R Rsk-Based Global Developed Markets Equty Index Fnal Documentaton Dsclamer Rsk Based Investment Solutons Ltd ("RBIS") 2014. RBIS s the Index Sponsor of the R Rsk-Based Global Developed Markets Equty Index. The R Rsk- Based Global Developed Markets Equty Index s calculated by Markt Equtes Ltd ("Markt"), the Calculaton Agent. All rghts n the R Rsk-Based Global Developed Markets Equty Index vest n RBIS. All nformaton s provded for nformaton purposes only. Every effort s made to ensure that all nformaton gven n ths publcaton s accurate, but no responsblty or lablty can be accepted by RBIS or ts lcensors for any errors or for any loss from use of ths publcaton. Nether RBIS nor any of ts lcensors makes any clam, predcton, w arranty or representaton w hatsoever, expressly or mpledly, ether as to the results to be obtaned from the use of the R Rsk-Based Global Developed Markets Equty Index or the ftness or sutablty of the Index for any partcular purpose to w hch t mght be put. All fgures and graphcal representatons n ths publcaton refer to past performance and are sourced by RBIS. Past performance s not a relable ndcator of future results. No part of ths nformaton may be reproduced, stored n a retreval system or transmtted n any form or by any means, electronc, mechancal, photocopyng, recordng or otherw se, w thout pror w rtten permsson of RBIS. Dstrbuton of RBIS data and the use of RBIS ndces to create fnancal products requre a lcence w th RBIS and/or ts lcensors. RBIS s not an nvestment advser, and nothng heren consttutes fnancal or nvestment advce, or consttutes an offer or nvtaton to buy or sell any nvestment or partcpate n any nvestment actvty. 2

Contacts R Rsk-Based Global Developed Markets Equty Index Fnal Documentaton Requests should be addressed to Rothschld Rsk Based Investment Solutons Ltd New Court, St Swthn's Lane London EC4N 8AL, Unted Kngdom For the attenton of Abdelkader Bousabaa Catherne Adb Research & Development CIO and Deputy-CEO Tel.: +44 (0) 207 280 5473 Tel.: +44 (0) 207 280 5809 Abdelkader.Bousabaa@Rothschld.com Catherne.Adb@Rothschld.com 3

R Rsk-Based Global Developed Markets Equty Index Fnal Documentaton Contents 1. Overvew 5 2. Index Management 6 2.1 Index Sponsor 6 2.2 Index Calculaton Agent 6 2.3 Index Commttee 6 3. Equty Unverse 7 3.1 Defnng Elgble securtes 7 3.2 Country Classfcaton of Elgble Securtes 7 4. Investable Equty Unverse 9 4.1 Lqudty 9 4.2 Mnmum Length of Tradng Requrement 9 5. Market Captalzaton 9 5.1 Shares outstandng and prces 9 5.2 Free-float factors 10 5.3 Free-float market captalzaton 10 5.4 Determnng the Index components 10 6. Weghtng Methodology 11 6.1 Weghtng Calculaton 11 7. Index Constructon 19 7.1 Index Revew 19 7.2 Index Calculaton 19 8. Corporate Events and Treatments 21 8.1 Treatment procedure 21 8.2 Lst of Corporate Events 21 8.3 Treatment Specfcatons 22 9. Index Adjustments, Suspenson, Modfcaton and Cancellaton 35 9.1 Correcton of Index Values 35 9.2 Index Adjustment and Index Suspenson 35 9.3 Index Modfcaton 36 9.4 Index Cancellaton 37 9.5 Events Leadng to an Index Modfcaton or Index Cancellaton 37 10. Defned Terms 37 4

1. Overvew R Rsk-Based Global Developed Markets Equty Index Fnal Documentaton The R Rsk-Based Global Developed Markets Equty Index s an ndex desgned to provde a broad and lqud representaton of large captalzaton companes n Developed Markets, R Rsk-Based Global Developed Markets Equty Index focuses on the lsted companes presentng the largest market captalsaton, reflectng a sgnfcant proporton of the total value of the market. The Index s based on a transparent constructon process ncludng a systematc monthly rebalancng so that the portfolo as at the begnnng of each month s weghted to lead to an Equally-weghted Rsk Contrbuton (ERC) for every nvested asset n the Index. On each monthly rebalancng date the weghtngs wll respect the UCITS rules on ssuer-level concentratons, such that the sum of exposures that are ndvdually greater than 5% wll not exceed 40%, and no ndvdual ssuer exposure wll exceed 10% of the portfolo. The ndex wll not be leveraged (.e. the sum of exposures wll at no pont exceed 100%). R Rsk-Based Global Developed Markets Equty Index Base value and date 1,000 on 26/12/2014 Index publcaton date 29/12/2014 Prce and Gross Return (USD) Index type and currency Weghtng Closng prce of every busness day Prce, and Net Return n USD Rsk-Based Weghtng Global unverse Approx. 5,000 Selected Components Approx. 1,000 Invested Components Approx. 400 Revew Frequency Rebalanced Index Sponsor Index Calculaton Agent Weghtng Calculaton Agent Quarterly Monthly Rsk Based Investment Solutons Ltd ("RBIS"), a wholly-owned subsdary of the Rothschld Group. Markt Equtes Ltd ("Markt") Rsk Based Investment Solutons Ltd, a wholly-owned subsdary of the Rothschld Group. The R Rsk-Based Global Developed Markets Equty Index s composed of securtes whch meet the elgblty rules descrbed n the followng sectons. 5

R Rsk-Based Global Developed Markets Equty Index Fnal Documentaton 2. Index Management 2.1 Index Sponsor The Index Sponsor wll retan all ownershp rghts, expressed or otherwse, wth respect to the Index, ncludng the ablty to lcense, sell or transfer any or all of ts ownershp rghts wth respect to the ndex. The Index Sponsor has apponted an Index Calculaton Agent to calculate and mantan the Index on ts behalf. The Index Sponsor may n the future termnate ts relatonshp wth the Index Calculaton Agent named heren and appont a replacement ndex calculaton agent. To the extent that the Index Sponsor makes any determnatons n accordance wth ths Index Rulebook, such determnatons wll be made by t n ts sole and absolute dscreton by reference to such factors as t deems approprate and, n the absence of manfest error, wll be fnal, conclusve and bndng. Whlst the Index Sponsor currently employs the rules, procedures and methodology descrbed n ths Index Rulebook, no assurance can be gven that market, regulatory, judcal, fscal, fnancal or other crcumstances wll not arse that would, n the vew of the Index Sponsor, necesstate or make desrable a modfcaton to, adjustment to and/or deleton of ths Index Rulebook or any provson heren. The Index Sponsor may also make modfcatons to the terms of the Index n any manner that t may deem necessary or desrable, ncludng (wthout lmtaton) to correct any manfest or proven error or to cure, correct or supplement any defectve provson contaned n ths Index Rulebook. Upon makng any such modfcaton, adjustment and/or deleton, the Index Sponsor wll provde detals thereof to the Index Calculaton Agent. The Index Sponsor wll make avalable upon request any such modfcaton, adjustment and/or deleton. 2.2 Index Calculaton Agent The Index Calculaton Agent wll employ the methodology descrbed n ths Index Rulebook, as may be modfed and/or adjusted and/or subject to deletons from tme to tme, n ts calculaton of the Index Value on each Index Valuaton Date (subject always to the terms of Secton 4) and wll be responsble for the publcaton of the Index Value. Subject to the terms of ths Index Rulebook, any determnaton by the Index Calculaton Agent wll be made n ts sole and absolute dscreton by reference to such factors as t deems approprate at such tme. Any such determnaton by the Index Calculaton Agent wll, n the absence of manfest error, be fnal, conclusve and bndng. For the avodance of doubt, the Index Calculaton Agent has no authorty to requre a modfcaton, adjustment or deleton of any provson n ths Index Rulebook. 2.3 Index Commttee The Index Commttee wll, and ts prmary role s to determne whether a modfcaton, adjustment and/or deleton of ths Index Rulebook and/or any provson heren (ncludng, wthout lmtaton, the methodology) s necessary, n order to: 6

R Rsk-Based Global Developed Markets Equty Index Fnal Documentaton (a) ensure contnuty n calculaton and publcaton of the Index; (b) preserve or enhance performance of the Index; and/or (c) mantan the ntegrty of the Index, to the extent possble, gven ts stated objectve. Modfcatons or adjustments whch, pursuant to the terms of ths Index Rulebook, the Index Commttee may make nclude, wthout lmtaton, amendments to the methodology, determnaton of the value of any Underlyng Component and substtuton or removal of any Underlyng Component from the Index whch, n ether case, may have a negatve mpact on the performance of the Index. Upon makng any such modfcaton, adjustment and/or deleton, the Index Sponsor wll provde detals thereof to the Index Calculaton Agent. 3. Equty Unverse The Equty Unverse for the ndex constructon s defned by: Identfyng elgble equty securtes. Screenng the elgble securtes for ncluson n the nvestable unverse based on approprate country and stock exchange. 3.1 Defnng Elgble securtes Elgble securtes nclude all common stocks n the global equty unverse wth comparable characterstcs from fnancal markets that provde real-tme values and hstorcal values. Preferred shares that exhbt the characterstcs of equty securtes or those wth lmted votng power are generally defned as elgble securtes. However, when preferred shares have smlar features to a fxed ncome securty, such as fxed dvdend and/or, n case of lqudaton, an enttlement to a company s net assets whch s lmted to the par value of the preferred share, they are not elgble for ncluson n the Equty Unverse. Smlarly, mutual funds, ETFs, equty dervatves, trackng stocks, lmted partnershps, and nvestment trusts are not elgble for ncluson n the Equty Unverse. 3.2 Country Classfcaton of Elgble Securtes The securtes country classfcaton model reles on a rules-based methodology ncludng fve crtera. The fve crtera for the classfcaton of a country as a part of the Developed Markets nvestable equty unverse nclude macroeconomc data, market captalzaton, market lqudty 1, free currency convertblty on onshore and offshore markets, and no restrctons on captal flows. The process of country classfcaton s llustrated wth the followng model. 1 For the above-mentoned crtera, the average data of the last three consecutve years are used n order to avod short -term fluctuatons,.e. 2014 decsons are based on average data from 2010 to 2013. 7

R Rsk-Based Global Developed Markets Equty Index Fnal Documentaton IMF country classfcaton to developed markets. Market Captalzaton: All countres wth a market captalzaton exceedng USD 15 bllon. Lqudty: Total value of shares traded hgher than USD 15 bllon per annum. Free Currency Convertblty on On-Shore and Off- Shore Markets and no restrctons on captal flows. Developed Markets Investable Equty Unverse The table provdes a lst of Countres and Stock Exchanges from the RBIS Developed Markets Investable Unverse that meet the fve crtera as of 29.08.2014. RBIS Developed Markets Equty Australa Austra Belgum Canada Denmark Fnland France Germany Hong Kong Ireland Italy Japan Netherlands New Zealand Norw ay Portugal Sngapore Span Sw eden Sw tzerland Unted Kngdom USA Australan Securtes Exchange Venna Stock Exchange NYSE EURONEXT Brussels Toronto Stock Exchange NASDAQ OMX Copenhagen NASDAQ OMX Helsnk NYSE EURONEXT Pars Deutsche Borse Stock Exchange of Hong Kong Irsh Stock Exchange Borsa Italana Tokyo Stock Exchange TSE Jasdaq Nagoya Stock Exchange NYSE EURONEXT Amsterdam New Zealand Stock Exchange New Zealand Alternatve Exchange Oslo Bors NYSE EURONEXT Lsbon Sngapore Exchange Bolsa De Madrd NASDAQ OMX Stockholm SIX Sw ss Exchange London Stock Exchange New York Stock Exchange Nasdaq, NYSE MKT LLC Each company and ts securtes are unquely classfed to a specfc country and lstng wthn the nvestable unverse. The country classfcaton and lstng s based on the country of ncorporaton, the prmary lstng and the country of most lqud exchange. If a company ncorporates n, has a stated headquarters locaton n, and also trades n the same country, the company s assgned to ts country of ncorporaton. 8

R Rsk-Based Global Developed Markets Equty Index Fnal Documentaton However, n a few cases where a company s ncorporated n one country whle ts securtes have a man lstng n a dfferent country addtonal ndcators such as prmary asset/revenue locaton are used. 4. Investable Equty Unverse In order to make the ndex nvestable screens are appled at the ndvdual securty level. 4.1 Lqudty A lqudty screen s appled for each company and only the most lqud stocks are consdered. To be elgble for ncluson n the Investable Equty Unverse, a securty must have suffcent lqudty. Companes ncluded n the ndex must have a mnmum Average Daly Traded Value ( ADTV ) over a specfed amount of tme. The company s ADTV s based on the ndvdual securtes traded of the specfc lstng used for the ndex calculaton. R Rsk-Based Global Developed Markets Equty Index components must have a mnmum ADTV of greater or equal than one (1) mllon USD measured over 3-months. If there are less than 400 stocks that meet ths determned ADTV level then the number of ndex components s adjusted downwards accordngly. In case of events n the market that negatvely affect the aggregated lqudty and market captalzaton of entre markets, the number of the stocks n the ndex s reduced to a number of components that meet the lqudty requrement. 4.2 Mnmum Length of Tradng Requrement The share must have started tradng at least twelve months before beng consdered to be part of the ndex. For statstcal calculaton purposes, only stocks wth at least 253 hstorcal closng prces are consdered. 5. Market Captalzaton To determne the elgble company sze to be ncluded n the R Rsk-Based Global Developed Markets Equty Index, the free-float market captalzaton of each securty s calculated. 5.1 Shares outstandng and prces The free float s estmated based on the publcly avalable shareholder nformaton. For each securty, the free float s defned as the proporton of shares outstandng that are deemed to be avalable for purchase n the publc equty markets by nternatonal nvestors. 9

R Rsk-Based Global Developed Markets Equty Index Fnal Documentaton The prce to be used for the calculaton of the free-float market captalzaton s the closng prce reported by the lstng exchange where the securty s traded and ncluded n the Index. When a gven stock market s closed on the scheduled mplementaton date due to a stock market holday, the change wll be effectve on the next busness day, usng the prce of the prevous busness day s close. 5.2 Free-float factors In order to provde a more accurate reflecton of market movements each securty s assgned a unque free-float factor whch s revewed on a quarterly bass. The free-float factor reduces the number of shares to the actual amount avalable on the market and elmnates the locked-n shares that are not part of the avalable free float. All fractons of the total number of shares larger than 5% and whose holdng s of a long-term nature are not ncluded n the ndex calculaton. Ths ncludes: Shareholdngs owned by ether governments or ther agences; Restrcted shares that cannot be traded durng a certan perod or have a foregn ownershp restrcton whch materally lmt the ablty of nternatonal nvestors to freely nvest n a partcular equty market, sector or securty; Cross-ownershp: stock owned ether by the company tself, n the form of treasury shares, or owned by other companes; Shares owned by the company s prncpal offcers, ncludng shares owned by ndvduals or famles that are related to or closely afflated wth the company s prncpal offcers, members of the company s board of drectors, or foundng members deemed to be nsders; Shares held by the employees of the company held n a varety of ways ncludng retrement and savngs plans, ncentve compensaton programs and other deferred and employee penson funds; 5.3 Free-float market captalzaton The free-float market captalzaton s the share of a stock s total market captalzaton that s readly avalable n the market for portfolo nvestors and s calculated as follows: Free-float market captalzaton = free-float factor full market captalzaton. 5.4 Determnng the Index components The free-float adjusted market captalzaton s calculated for all the stocks n the nvestable equty unverse that passed the screens. Companes are sorted from largest to smallest by free-float market captalzaton on each rankng date t. Exstng consttuents are selected top-down untl the target consttuent number s reached. A lst of R Rsk-Based Global Developed Markets Equty Index components s produced by ncorporatng companes wth a free-float market captalzaton above fve bllons dollars. 10

R Rsk-Based Global Developed Markets Equty Index Fnal Documentaton 6. Weghtng Methodology The R Rsk-Based Global Developed Markets Equty Index s rsk-weghted wth a weghtng factor based on the Equally-weghted Rsk Contrbuton (ERC) model. ERC s a systematc and transparent model that combnes volatlty and correlaton as rsk factors to produce a portfolo where each nvested asset contrbutes the same level of rsk. The ERC constructon process ams: To lower the ndex volatlty, To enhance the Sharpe rato and To reduce the maxmum drawdown wthout negatvely mpactng the ndex dversfcaton and ts expected return. 6.1 Weghtng Calculaton Below are the successve steps to calculate the weghtngs for the R Rsk-Based Global Developed Markets Equty Index. 1.1. Defnton of the number of Assets and the number of base currences: N s the number of Assets composng the Index and N s the number of base currences of the N Assets composng the Index: N N N N, N N 1.2. Defnton of the asset vector Asset: asset 1 Asset = [ ] asset N 1,N, asset means the th Asset composng the ndex 1.3. Defnton of the base currency vector Crncy: Crncy = [ crncy 1 crncy N ] 11

R Rsk-Based Global Developed Markets Equty Index Fnal Documentaton 1,N, crncy means the base currency of the th Asset 1.4. Defnton of the currency dentfcaton number vector Cy: cy 1 Cy = [ ] cy N 1,N, cy 1,N cy means the dentfcaton number of the crncy wth 1,N, cy 1,N. The dentfcaton number cy s equal to 1 for the base currency that occurs the frst n the base currency vector, 2 for the second base currency that occurs n the base currency vector, and contnung up to N for the last base currency that occurs n the base currency vector. 1.5. Defnton of the prce matrx P: p 1,1 p N,1 P = [ p,d ] p 1,253 p N,253 (,d) 1,N 1,253, p,d means the adjusted closng prce of the th Asset to the date d after renvestment of all dvdends The prce matrx P s defned by the daly adjusted closng prce of each Asset over the last 253 Busness Days. The dates are Busness Days. If for the th Asset, d s not a tradng day, then p,d s equal to the last adjusted closng prce of the Asset n the prevous tradng day n ts prmary exchange. 1.6. Defnton of the exchange rate matrx FX: fx 1,1 fx N,1 FX = [ fx j,d ] fx 1,253 fx N,253 (j,d) 1,N 1,253, fx j,d means exchange rate of the j th currency to the date d The exchange rate matrx FX s defned by the exchange rates of each Asset currency for the last 253 Busness Days accordng to the market exchange 12

R Rsk-Based Global Developed Markets Equty Index Fnal Documentaton rate of the WM/Reuters Closng Spot Rates fxed at 4.00 p.m. London Tme of each Busness Day. fx j,d s the drect quote between the j th currency and Euro at the date d. 1.7. Calculaton of the daly return matrx R: r 1,1 r N,1 R = [ r,d ] r 1,252 r N,252 (, d) 1,N 1,252, r,d = log ( p,d+1 p,d. fx cy,d+1 ) fx cy,d The daly return matrx R s defned by the daly returns of each Asset n the last 252 Busness Days. 1.8. Calculaton of the average return vector R : r 1 R = [ ] r N 1,N, r = 252 d=1 r,d 252 The average return vector R s defned by the average of the last 252 daly returns for each Asset. 1.9. Calculaton of the volatlty vector V: v 1 V = [ ] v N 252 1,N, v = d=1 (r,d r 251 ) 2 The volatlty vector V s defned by the standard devaton based on a sample of the last 252 Busness Days for each Asset. 1.10. Calculaton of the correlaton matrx C: 1 c 1,N C = [ c,j ] c 1,N 1 13

R Rsk-Based Global Developed Markets Equty Index Fnal Documentaton (, j) 1,N 2, c,j = 252 d=1 (r,d r ). (r j,d r j ) 252(r,d r ) 2 d=1. 252 (r j,d r ) 2 d=1 j The correlaton matrx C s defned by the correlaton of each Asset accordng to the daly returns of the last 252 Busness Days. 1.11. Calculaton of the Margnal Rsk Contrbuton vector MRC: mrc 1 MRC = [ ] mrc N 1,N, mrc = N j=1v j.v.c,j N,N j,k=1v j.v k.c k,j The Margnal Rsk Contrbuton vector MRC s calculated to defne whch Assets have the hghest rsk contrbuton. 1.12. For each currency, sort all Assets by decreasng order accordng to ther Margnal Rsk Contrbuton: mrc 1.1 {cy1 =1} mrc 1.1 {cy1 =N } Rank = SortEachColumn([ mrc.1 {cy =j} ]) mrc N.1 {cyn =1} mrc N.1 {cyn =N } (, j) 1,N 1,N, 1 {cy =j} = { 0 f th asset currency sn t the j th currency 1 f th asset currency s the j th currency The matrx Rank gves a rankng for each Asset accordng to the vector MRC. rank 1,1 rank 1,N Rank = [ rank,j ] rank N,1 rank N,N (, j) 1,N 1,N,rank,j s the rank of the th Asset accordng to the j th currency 1.13. Defnton of the Rsk Budget vector RB: Based on the rankng of the N Assets as descrbed above n 1.12, the Index excludes approxmatvely the most rsky Assets and allocated weghtng to the less rsky (.e. approx. 400 stocks). 14

R Rsk-Based Global Developed Markets Equty Index Fnal Documentaton For the Assets wth the hghest rsk contrbuton, the rsk budget s fxed to 0. For the Assets wth the lowest rsk contrbuton the rsk budget s dstrbuted dentcally Equally-weghted Rsk Contrbuton (ERC). rb 1 RB = [ ] rb N j 1,N, n j = N =1 1 {cy =j} n = N N N 400.n j j=1 N j 1,N, 1, N 400.n N j, rb rank,j = 0 j 1,N, N 400. n N j + 1, n j, rb rank,j = 1 n 1.14. Defnton of the weghtng of each Asset: w 1 W = [ ] w N 1,N, rb = w. mrc N w j.mrc j j Wth the followng Margnal Rsk Contrbuton vector MRC : mrc 1 MRC = [ ] mrc N 1,N, mrc = j=1 w j.v j.v.c,j N N,N j,k=1w j.w k.v j.v k.c k,j The weghtng of each Asset s defned by ther rsk budget, volatlty and correlaton. The formulas above nclude the followng condtons: 1,N, w 0 N =1 w = 1 1.15. Applyng of the 5/10/40 rule: If some weght w are above 8%, then we apply the followng adjustment of the weghtng many tmes untl the condton s respected: 15

R Rsk-Based Global Developed Markets Equty Index Fnal Documentaton We redefned the rsk budgets: {x 1,N w x p 8%},rb a = w a. amrc N w a j.amrc j j wth w a = 8% {x 1,N w x p < 8%},rb a = ( 1 n j rba j.1 p {wj 8%} n n j 1 p {wj 8%} ). 1 {rb p 0} We compute the new weghtng accordng the adjusted rsk budgets and the adjusted weghts prevously fxed: {x 1,N w x p < 8%},rb a = w a. {x 1,N w x p 8%},w a = 8% amrc N w a j.amrc j j Wth the followng Adjusted Margnal Rsk Contrbuton vector MRC : AMRC = [ amrc 1 ] amrc N 1,N, amrc = N j=1 w j a.v j.v.c,j N,N j,k=1w a j.w a k.v j.v k.c k,j Where 1,N,w p means the prevous weghtng defned for the th Asset a 1,N,w means the adjusted weghtng for the th Asset 1,N,rb p means the prevous rsk budget defned for the th Asset a 1,N,rb means the adjusted rsk budget for the th Asset 1,N, 1 p {w 8%} = { 0 f w p sn t above 8% 1 f w p s above or equal 8% 1,N, 1 {w p <8%} = { 0 f w p sn t under 8% 1 f w p s under 8% 16

R Rsk-Based Global Developed Markets Equty Index Fnal Documentaton If the sum of the weght w above 5% s above 40%, then we apply the followng adjustment of the weghtng many tmes untl the condton s respected: We sort all Assets by decreasng order accordng to ther weght. p w 1 RankW = Sort([ ]) p w N The vector RankW gves a rankng for each Asset accordng to the prevous vector W. rank 1 RankW = [ ] rank N 1,N,rank s the rank of the th Asset We defne: N L = 1 p { wrankj L = N 1 p {w 5%} j <40%} E = 40% w rank N p.1 { p j wrankj <40%} We redefned the rsk budgets: {x 1,N rank 1; L },rb a = w a. amrc Nw a j.amrc j j wth w a = w p {x 1,N rank L + 1; L },rb a = w a. amrc N w a j.amrc j j wth w a = 5% rb L a = w L a. amrc N a w j.amrcj j wth w L a = w L p E {x 1,N rank L + 1; N },rb a = ( 1 rb j a L j n L ).1 {rb p 0} 17

R Rsk-Based Global Developed Markets Equty Index Fnal Documentaton We compute the new weghtng accordng the adjusted rsk budgets and the adjusted weghts prevously fxed: {x 1,N rank L + 1; N }, rb a = w a. {x 1,N rank 1;L },w a = w p {x 1,N rank L + 1; L },w a = 5% w L a = w L p E amrc N w a j.amrc j j Wth the followng Adjusted Margnal Rsk Contrbuton vector AMRC : AMRC = [ amrc 1 ] amrc N 1,N, amrc = N j=1 w j a.v j.v.c,j N,N j,k=1 w a j.w a k.v j.v k.c k,j Where: 1,N,w p means the prevous weghtng defned for the th Asset a 1,N,w means the adjusted weghtng for the th Asset 1,N,rb p means the prevous rsk budget defned for the th Asset a 1,N,rb means the adjusted rsk budget for the th Asset 1,N, 1 p {w 5%} = { 0 f w p sn t above 5% 1 f w p s above or equal 5% 1,N, 1 { p = { 0 f j w rankj sn t under 40% j wrank <40%} j 1 f p j w rankj s under 40% p 18

R Rsk-Based Global Developed Markets Equty Index Fnal Documentaton 7. Index Constructon 7.1 Index Revew 7.2 Index Calculaton 1.1. Calculaton of the number of shares (q ) vector: q 1 Q = [ ] q N 1,N, q = 1000 sp.fx cy.w The vector Q defnes the number of shares for each Asset n the Index at the date M T accordng to the weghtng vector Wcalculated at the date M T 3. sp s the spot closng prce for the th Asset at the date M T. fx cy s the drect quote between the th Asset currency and Euro at the date M T accordng to the market exchange rate of the WM/Reuters Closng Spot Rates fxed at 4.00 p.m. London Tme of each Busness Day. 19

R Rsk-Based Global Developed Markets Equty Index Fnal Documentaton The vector Q s calculated and appled at the date M T whch s a tradng day of all the Index Component Stock Exchanges. 1.2. Calculaton of the Index Level: For each Busness Day, we defne the date t from the base date t = 0. Then, the Index level s calculated and publshed on a daly bass for each date t as follows: IndexLevel(t) = IndexMarketValue(t) IndexDvsor(t) IndexLevel(0) = 1,000.00 The Index Market Value s calculated as follows: IndexMarketValue(t) = N =1 sp (t). fx cy (t).q (t) The Index Dvsor s calculated as follows: IndexDvsor(t) = IndexDvsor(t 1). IndexDvsor(0) = N sp (0). fx cy (0) =1.q (0) IndexLevel(0) N sp (t). fx cy (t) =1.q (t) N =1 sp (t). fx cy (t).q (t 1) The Prce Return Index Closng Level s calculated as follows: PRIL(t) = =1 sp (t). fx cy (t) N IndexDvsor(t).q (t) Where (, t) 1,N N,sp (t) s the spot closng prce of the th Asset at the date t (, t) 1,N N,fr cy (t) s the drect quote between the th Asset currency and Euro at the rebalancng date at the date t (, t) 1,N N,q (t) s the number of shares for the th Asset at the date t 20

R Rsk-Based Global Developed Markets Equty Index Fnal Documentaton 8. Corporate Events and Treatments 8.1 Treatment procedure Corporate events are treated va Adjustment Factors. For the occurrence of a corporate event assocated to an ndex consttuent, the poston of ths ndex consttuent wthn the ndex s adjusted by ts adjustment factors. Two types of Adjustment Factors are specfed: Prce Adjustment Factor (P_AF t ) Number of Shares Adjustment Factor (NOSH_AF t ) 8.2 Lst of Corporate Events The followng dfferent types of corporate actons are defned below: No. Event Type CAPITAL RESTRUCTURE DIVIDENDS 1 DIVIDEND Cash Dvdend 2 DIVIDEND Specal Dvdend 3 DIVIDEND Stock Dvdend or Scrpt Dvdend 4 DIVIDEND Optonal Dvdend 5 DIVIDEND Bonus 6 CAPITAL CHANGE Stock Splt 7 CAPITAL CHANGE Stock Consoldaton / Reverse Splt 8 CAPITAL CHANGE Share Redenomnaton 9 MERGER & ACQUISITION Merger 10 MERGER & ACQUISITION De-merger/ Spn-Off 11 MERGER & ACQUISITION Takeover 12 MERGER & ACQUISITION Acquston 13 EXCEPTIONAL MARKET CONDITION Bankruptcy 14 EXCEPTIONAL MARKET CONDITION Change of Lstng 15 EXCEPTIONAL MARKET CONDITION Suspenson 16 EXCEPTIONAL MARKET CONDITION Share Converson 17 EXCEPTIONAL MARKET CONDITION Wrte-Up of Captal 18 EXCEPTIONAL MARKET CONDITION Wrte-Off of Captal 19 EXCEPTIONAL MARKET CONDITION Change to No Par Value 20 CAPITAL INCREASE Rghts Issue 21 CAPITAL RETURN Captal Return or Captal Repayment 22 CAPITAL RETURN Share Buy-Back 21

R Rsk-Based Global Developed Markets Equty Index Fnal Documentaton 8.3 Treatment Specfcatons 1. Cash Dvdend Dvdends are payments made by a corporaton to ts shareholders. Sometmes, when a corporaton earns a proft, that money can be put to two uses: t can be ether re-nvested n the busness or t can be pad to the shareholders as a dvdend. The Gross Dvdend Amount s the amount before applyng tax rates (Net Dvdend Amount). The regular cash dvdend s renvested after deducton of wthholdng tax by applyng the maxmum rate of the company s country of ncorporaton applcable to nsttutonal nvestors. A wthholdng tax related to a dvdend s a tax on the ncome of the shareholder wthheld by the company when the dvdend s pad to a shareholder. RBIS apples the maxmum rate applcable to non-resdent nsttutonal nvestors who do not beneft from double taxaton treates. The tax rate applcable s defned as T_Rate t. Annually, the Index Calculaton Agent wll provde a page wth the applcable T_Rate. For example: Company announces to pay a regular dvdend; the ex-date (XD) s day t. Specfcally, the gross dvdend amount s Dv t n the same currency as the stock currency; the tax rate applcable to ths dvdend s T_Rate t. Treatment: The Prce ndex does not take nto account the Cash Dvdend: P_AF t 1 = 1 NOSH_AF t 1 = 1 The Net Total Return ndex requres adjustment for the Net of Tax Cash Dvdend: P t,open = P t 1,Close Dv t FX t (1 T_Rate t ) P_AF t 1 = P t,open P t 1,Close NOSH _AF t 1 = 1 P_AF t 1 Note: There are exceptons to the general rules on: 22

R Rsk-Based Global Developed Markets Equty Index Fnal Documentaton The date to mplement dvdends If a dvdend amount s not avalable on the XD, then the dvdend amount one day pror to the pay date (PD) s appled. 2. Specal Dvdend Specal dvdends are those dvdends that are outsde of the normal payment pattern establshed hstorcally by the corporaton. Whether a dvdend s funded from operatng earnngs or from other sources of cash does not affect the determnaton of whether t s a specal dvdend. Instead, t s consdered a specal dvdend when the market perceves t as a specal dvdend wth dvdends outsde the normal payment pattern. The Specal dvdend s renvested after deducton of wthholdng tax by applyng the maxmum rate of the company s country of ncorporaton applcable to nsttutonal nvestors. A wthholdng tax related to a dvdend s a tax on the ncome of the shareholder wthheld by the company when the dvdend s pad to a shareholder. RBIS apples the maxmum rate applcable to non-resdent nsttutonal nvestors who do not beneft from double taxaton treates. The tax rate applcable s defned as T_Rate t. Note that: Dfferent from regular Cash Dvdends, a tax rate n some crcumstances may not apply n case of Specal Dvdends. For example, when the cash payout s a return of captal or a dstrbuton resultng from the dsposal of an asset, the tax s not applcable for ths specal dvdend. Example: Company announces to pay a specal dvdend; the ex-date s day t. Specfcally, the gross dvdend amount s Dv t n the same currency as the stock currency; the tax rate applcable to ths dvdend s T_Rate t Treatment: In the case that tax s applcable for ths specal dvdend, the Net Total Return ndex requres adjustments for the Net of Tax Specal Dvdend as below : P t,open = P t 1,Close Dv t FX t (1 T_Rate t ) P_AF t 1 = P t,open P t 1,Close NOSH _AF t 1 = 1 P_AF t 1 In the case that tax s not applcable for ths specal dvdend, the Net Total Return ndex requres adjustments for the Specal Dvdend as below : P t,open = P t 1,Close Dv t FX t 23

R Rsk-Based Global Developed Markets Equty Index Fnal Documentaton P_AF t 1 = P t,open P t 1,Close NOSH _AF t 1 = 1 P_AF t 1 3. Stock Dvdend The stock dvdend s a dstrbuton of shares to shareholders as an alternatve to a cash payment. In some nstances the stock dvdend can be optonal, whereby the shareholder may choose the shares nstead of a cash dvdend payment. In ths case the shares are ssued for the value. Example: Company announces to pay a stock dvdend; the ex-date s day t. Specfcally, every 1 unt of stock held pays the shareholders of Dv_Rato t unt(s) of new shares n the same company. Treatment: A prce adjustment s done on the openng of the event ex-date, and the number of shares s almost adjusted (ncreased) ether: On the ex-date for those cases where a stated amount of stock s announced; or On the pay-date, only f an undetermned amount of stock s announced based on earnngs and profts to be dstrbuted at a future date. When there s no cash alternatve, the stock dvdend represents a scrpt / bonus ssue and the adjustment factor should be calculated n the same way. P t,open = P t 1,Close 1 (1 + Dv_Rato t ) P_AF t 1 = P t,open = P t 1,Close 1 (1 + Dv_Rato t ) NOSH t = NOSH t 1 (1 + Dv_Rato t ) NOSH_AF t 1 = NOSH t = 1 + Dv_Rato t NOSH t 1 24

R Rsk-Based Global Developed Markets Equty Index Fnal Documentaton 4. Optonal Dvdend A company offers ts shareholders the choce of recevng the dvdend n cash or n shares. It s assumed that nvestors select the cash opton a) on the ex-date for those cases where a stated equvalent of stock s announced and b) on the pay-date for those cases where an undetermned amount of stock s announced based on earnngs and profts to be dstrbuted at a future date. Thus, the dvdend s treated n the same way as Cash Dvdend n the Secton 1. 5. Bonus A bonus s an offer of free addtonal shares to exstng shareholders. A company may decde to dstrbute further shares as an alternatve to ncreasng the dvdend pay-out. The same treatment as stock splts apples. On the ex-date, an adjustment s requred to the prce, the number of shares and the dvdends. It does not requre dvsor adjustment. Please see the Splt n the Secton 6 below. 6. Stock Splt Exstng shares are subdvded nto larger number of shares wth an equvalent reducton n the Nomnal Value of each share (where applcable). A stock splt ncreases the number of shares n a publc company. The prce s adjusted so that before and after ths corporate event the market captalzaton of the company remans the same and dluton does not occur. Example: Company announces a stock a stock splt event; the ex-date s day t. Specfcally, every 1 unt of stock held splts nto Splt_Rato t unt(s) of new share n the same company. Treatment: The number of shares, dvdends and the stock prce are adjusted by the splt factor on the ex -date. The stock splt does not have mpact on the dvsor as at the ex-date t. P t,open = P t 1,Close 1 Splt_Rato t P_AF t 1 = P t,open = P t 1,Close 1 Splt_Rato t NOSH t = NOSH t 1 Splt_Rato t 25

R Rsk-Based Global Developed Markets Equty Index Fnal Documentaton NOSH_AF t = NOSH t NOSH t 1 = Splt_Rato t 7. Consoldaton / Reverse Splt A reverse stock splt or reverse splt s a reducton n the number of shares and an accompanyng ncrease n the share prce. Example: Company announces a stock a stock splt event; the ex-date s day t. Specfcally, every 1 unt of stock held splts nto Splt_Rato t unt(s) of new share n the same company. Treatment: The reverse splt does not have mpact on the dvsor as at the ex-date t. The procedure s the same as n the secton 6 above. In essence, t means that: Splt_Rato 1 t = Consoldaton_Rato t The calculaton s the same regardless of whether the nomnal value of a share changes ( stock consoldaton ) or remans the same ( captal reducton ). 8. Share Redenomnaton The nomnal value of exstng shares n ssue changes due to the change of currency. Therefore, the amount s converted usng a set rate. 9. Merger Merger generally means that two or more companes merge to form one larger company. A merger s consdered completed f t has been declared uncondtonal and has receved the approval of all the regulatory agences wth jursdcton over the transacton regardless of the status of the securtes (ndex consttuents or non-ndex consttuents) nvolved n the event. The result of a merger s one out of the two possbltes as below: The mergng enttes cease to exst and a new entty ( New Name ) s created. Only one name ( Survvng Name ) wll survve out of all the mergng companes. 26

R Rsk-Based Global Developed Markets Equty Index Fnal Documentaton In ether case, we refer ths survvng/new name as the Resultng Name (or Resultng Stock). Usually the shareholders of the mergng companes exchange ther mergng company shares for shares n the resultng company. Example: There are n companes k1,k2,, kn mergng nto the resultng stock m; the ex-date s day t. Specfcally, for every 1 unt holdng of stock k, the shareholders receve CR unt(s) of stock m and a cash amount of Cash (f applcable), ( = 1,2,, n); the openng prce of the Resultng Stock m s P t,open s ether announced by the company or mpled by the company accouchement. Scenaros If there s a merger event occurrng on one ndex consttuents, normally the scenaro may fall nto one of the followng cases: Case1: All the relevant mergng enttes are ndex consttuents. Case2: Some relevant mergng enttes are not ndex consttuents; and the resultng entty s a New Name. Case3: Some relevant mergng enttes are not ndex consttuents; the resultng entty s a Survvng Name ; and the Survvng Name s an ndex consttuent before the merger event Case4: Some relevant mergng enttes are not ndex consttuents; the resultng entty s a Survvng Name ; the Survvng Name s not an ndex consttuent before the merger event The correspondng treatments for dfferent scenaros are the followng: Treatments: Case 1, Case 2 and Case 3 In these cases, some or all the mergng companes are ndex consttuents; say these are companes k1,k2,, and km (m n). The resultng new entty m replaces the all these m companes n the ndex wth a weght equal to the sum of the weghts of the mergng companes pror to the merger wth no dvsor change n prncple. Therefore, the followng equatons apply: k NOSH_AF t 1 = 0 and NOSH k t = 0 ; = 1,2,,n. NOSH m k t = NOSH t 1 n =1 Treatments: Case 4 CR + n =1 Cash m P t,open In ths case, only some of the mergng companes are ndex consttuents; say they are companes k1,k2,, and km (m < n). Essentally, these assocated ndex consttuents are taken 27

R Rsk-Based Global Developed Markets Equty Index Fnal Documentaton over or acqured by the Survvng Name. However, ths acqurng company,.e. Survvng Name s not elgble for the ndex. Therefore, these assocated ndex consttuents are removed from the ndex on day t and a weght equal to the sum of the weghts of the mergng companes pror to the merger wll be dstrbuted proportonally nto all the remanng stocks (REM, = 1,2, L). the followng equatons apply: k NOSH_AF t 1 = 0 and NOSH k t = 0 ; = 1,2,,m. NOSH m k t = NOSH t 1 n =1 10. Acquston CR + n =1 Cash m P t,open An acquston s the procurement of a controllng nterest of more than 50% n one company by another larger company and the acqured company may contnue to trade. Shareholders of the target company are offered cash and/or shares for ther holdng. Treatments: Case1: After the acquston, the acqured company stocks are stll outstandng and tradng: No adjustment s made for treatng ths event. Case2: After the acquston, the acqured company stocks stopped tradng: The procedure to mplement ths corporate event s as per the Merger Secton 9 above. 11. Demerger / Spn-off A company or group of companes splts up so that ts actvtes are carred on by two or more ndependent companes. One of the man reasons for dong ths s to mprove the value of the company s shares, especally f one part of the group s value can be better reflected by a separate share quotaton. A spn-off s the dstrbuton of shares n a wholly-owned or a partally-owned company to the parent company s exstng shareholders. A new ndependent company s formed from an exstng dvson or a subsdary of the parent company or corporaton through ssung share enttlement n the new company. For a current ndex consttuent ncurrng a spn-off: any cash pad as part of the spn-off s renvested n the ndex w th a dvsor change; the parent company s kept n the ndex provded t remans lsted and contnues to trade; 28

R Rsk-Based Global Developed Markets Equty Index Fnal Documentaton a poston n the spun-off company s placed nto the ndex f and only f the spun-off company passes bespoke rules regardng prces, stock exchanges and other applcable elgblty crtera. Example: There s an entty K spns off n dfferent enttes D1,D2,,Dn ; the ex-date s day t. Specfcally, every 1 unt holdng of stock K spns off DR unt(s) of stock D ( = 1,2,,n) and an amount of cash equal to KCash n the same currency as the stock (KCash = 0 f not applcable). The openng stocks prces n companes D1,D2,,Dn are usually determned and announced n D advance of the corporate event, say, as P t,open ( = 1,2,,n). Treatments: When there s a demerger/spn-off event occurrng on one ndex consttuents, there are three optons to treat ths event as below. Opton 1: Provded the spun-off enttes meet the ncluson crtera, the follow ng treatment apples. Keep ths ndex consttuent n the ndex and nclude all the spun-off companes nto the ndex. K P t,open K = P t 1,Close P_AF K t 1 = P t,open P t 1,Close n D KCash P t,open DR =1 NOSH_AF K t 1 = 1 + KCash K P t,open NOSH D K D t = NOSH t 1,Close DR, whle NOSH t 1, = 0; ( = 1,2,,n) Opton 2: If the spun-off enttes do not meet the ndex elgblty crtera: Keep ths ndex consttuent n the ndex but exclude all the spun-off companes; these assocated ndex consttuents are removed from the ndex on day t and a w eght equal to the sum of the w eghts of the removed companes pror to the spn-off w ll be renvested nto the spnnng-off stock K. The follow ng equatons apply: K P t,open K = P t 1,Close P_AF K t 1 = P t,open P t 1,Close n D KCash P t,open DR =1 29

R Rsk-Based Global Developed Markets Equty Index Fnal Documentaton NOSH_AF K t 1 = 1 K P_AF t 1 NOSH t D = 0 Opton 3: In rare cases, the parent company ceases to be elgble for the ndces tself: Exclude ths ndex consttuent and exclude all the spun-off companes; these assocated ndex consttuents are removed from the ndex on day t and a w eght equal to the sum of the w eghts of the mergng companes pror to the merger w ll be dstrbuted proportonally nto all the remanng stocks (REM, = 1, 2, L). The follow ng equatons apply: NOSH_AF K t 1 = 0, and NOSH K t = 0 NOSH t D = 0 NOSH_AF t 1 REM = NOSH t 1 K L =1 K P t 1,Close NOSH REM REM t 1 P t 12. Takeover A takeover s also the acquston of one company by another. However ths term s normally - but not always - used to mply that the acquston s made on the ntatve of the acqurer and often wthout the full agreement of the acqured company. Shareholders of the target company are gven cash and/or shares for ther holdng. A reverse takeover s the acquston of a larger company by a smaller one, based on certan crtera such as turnover, profts or net assets. The mechansms for carryng out an acquston or takeover may be through a cash offer -fxed, open or tender-, a share exchange or a combnaton of both. The procedure to mplement ths corporate event s as per the Merger Secton 9 above. 13. Bankruptcy A company legally declares nablty or mparment of ablty to pay ther credtors. Credtors may fle a bankruptcy petton aganst a debtor n an effort to recoup a porton of what they are owed. However, n the majorty of cases, bankruptcy s ntated by the debtor. After undergong reorganzaton, a company s lqudated. 30

R Rsk-Based Global Developed Markets Equty Index Fnal Documentaton Consttuents that fall under bankruptcy as at t are removed from the ndex after the close of t+1 to gve one day notce to clents. The company s removed based on the t+1 closng prce f avalable or at zero. 14. Change of Lstng If a company s delsted from a man lqud Stock Exchange wthn the unverse of elgble stock exchanges for the ndex, there are two dfferent optons to consder: The company s lstng changes to another man lqud stock exchange that s consdered elgble for the ndex. There s no change n the ndex. The company remans unlsted, or the lstng changes to a stock exchange that s not consdered elgble for the ndex. The company s removed from the ndex at ts last closng prce as securtes would not be elgble for ncluson n a standard ndex. NOSH_AF t 1 = 0, and NOSH t = 0 Here " refers to the event assocated ndex component. NOSH_AF t 1 REM = NOSH t 1 K L =1 K P t 1,Close NOSH REM REM t 1 P t,close 15. Suspenson A securty s removed at ts last tradng prce f a stock s suspended for full tradng for at least ten tradng days. Durng those ten tradng days, the ndex calculaton takes nto account the last tradng prce for the securty whch s suspended. There are two scenaros: a company s suspended before the stock exchange closes or t s announced that the company s gong to be suspended for the open of the next tradng sesson. However, for both cases the same mplementaton occurs for ths corporate event. For example a company was suspended durng the tradng hours of the 29/07/2009 or t was announced that t would be suspended for the open of the 30/07/2009, f the company s stll suspended after the close of the 13/08/2009 and the company s removed from the ndex after the close of the 13/08/2009. 16. Share Converson Share converson s the exchange of one form of securty for another securty of the same company. For example: preferred stock for common stock, debt securtes for equty. 31

R Rsk-Based Global Developed Markets Equty Index Fnal Documentaton Treatment: No treatment s requred for ths event. 17. Wrte-Up of Captal Exstng shares n ssue are converted one for one nto Ordnary Shares wth an ncreased Nomnal Value. Please note that a company may have as many dfferent types of shares as t wshes, all wth dfferent condtons attached to them. Generally share types fall nto the followng categores: Ordnary Shares Ordnary Shares do not have specal rghts or restrctons. The company may dvde them nto classes of dfferent value. Preference Shares Preference Shares normally carry a rght that the company should pay any annual dvdends avalable for dstrbuton on these shares before other classes. Cumulatve preference Shares Cumulatve preference Shares carry a rght that, f the company cannot pay the dvdend n one year, t w ll carry t forw ard to successve years. Redeemable Shares The company ssues Redeemable Shares w th an agreement that t w ll buy them back at the opton of ether the company or the shareholder after a certan perod, or on a fxed date. A company cannot have only redeemable shares. Treatment: No treatment s requred for ths event. 18. Wrte-Off of Captal Exstng shares n ssue are converted one for one nto shares wth a reduced Nomnal Value. Ths can happen because the market prce of the shares has dropped below ts Nomnal Value. Treatment: No treatment s requred for ths event. 32

R Rsk-Based Global Developed Markets Equty Index Fnal Documentaton Note: In the UK ths event also nvolves a number of deferred shares, whch are subsequently cancelled by the company. However, when consderng shares, t s usually the market value and not the nomnal or book amount whch nvestors and other stakeholders are nterested n. 19. Change to No Par Value Exstng shares n ssue are converted nto shares wth no Nomnal (par) Value. Ths means that the Nomnal Value s equal the Issue Prce. Treatment: No treatment s requred for ths event. 20. Rghts Issue Shareholders are offered the rght to buy new shares n proporton to ther exstng holdng at a set offer prce usually (but not always) at a dscount to the market prce. Rghts are an offer of addtonal shares to exstng shareholders. A company may decde to dstrbute further shares as an alternatve to ncreasng the dvdend payout. Rghts ssues can be renounceable or non-renounceable. Rght ssues are dsregarded f they are out of the money at the close of XD-1. Rght ssues n the money are adjusted after the close of XD-1. Example: There s an entty offers rghts ssue; the ex-date s day t. Specfcally, every 1 unt holdng of the rghts can buy R unts of stocks n entty wth at the subscrpton prce P Sub. Treatment The prncple of the default treatment s to keep market value neutral throughout ths event. In essence, under ths treatment, the ndex executes a porton of the stock rghts wth fundng from sellng the rest remander of the rghts. P t,open = P t 1,Close + R P Sub 1 + R 33

R Rsk-Based Global Developed Markets Equty Index Fnal Documentaton P_AF t = P t,open P t 1,Close NOSH_AF t = 1 P_AF t 21. Captal Return or Captal Repayment Captal repayments to shareholders s the return of all or any porton of the ssued captal of a company n the wndng up of operatons or the return of captal n excess of a company s requrements. A captal repayment refers to payments that exceed the growth (net ncome/taxable ncome) of a busness back to "captal owners", such as shareholders, partners or unt holders. The captal repayment s a transfer of value from the company to the exstng owners, but wth a dfferent tax treatment to the one appled to the dvdends. Strctly speakng these are dvdends taken from pad-n captal rather than current earnngs or retaned earnngs. They are generally not tax lable for the shareholder when pad. At present ths captal change type s beng used for a varety of global events ncludng the followng: The nomnal value of the company s adjusted and the dfference s returned to shareholders n cash Cash dstrbutons resultng from the sale of captal assets or securtes, or tax breaks from deprecaton The captal return s perceved to be replacng regular cash dvdends, then t s only appled to the Total Return Indces on the ex-date and t does requre a dvsor adjustment. Captal repayments are therefore treated as per cash dvdends n the Secton 1. However, for those specfc cases where the market does not perceve the captal return to be replacng a cash dvdend then the treatment s as per specal dvdends n the Secton 2. 22. Share Buy-Back The repurchase by a company of ts own shares, n order to reduce the number of shares n ssue, usually at a set prce ether as a percentage of shares ssued or rato of shares held. The followng reasons may explan why to carry t out: return surplus cash to shareholders reduce the company s cost captal enhance earnngs per share n the hope of ncreasng market prce per share and to reduce the possblty of a hostle takeover bd 34

R Rsk-Based Global Developed Markets Equty Index Fnal Documentaton A share buyback may be performed va a repurchase tender offer (to all shareholders), an open market purchase or a prvately negotated purchase. Share buybacks are mplemented only under a tender offer form. Example: There s an entty offers share buy-back; the ex-date s day t. Specfcally, every 1 unt holdng of the stock, the shareholders can sell back R unts of stocks n entty wth at the subscrpton prce P Buyback Treatment: P t,open = P t 1,Close R P Buyback 1 R P_AF t 1 = P t,open P t 1,Close NOSH_AF t = 1 P_AF t 9. Index Adjustments, Suspenson, Modfcaton and Cancellaton 9.1 Correcton of Index Values If the Index Sponsor determnes that a materal error has occurred n the calculaton of the Index, resultng n publcaton of a materally naccurate Index Value, the Index Sponsor may nstruct the Index Calculaton Agent to calculate and publsh a corrected Index Value and shall determne, n ts sole and absolute dscreton, whether such corrected Index Value shall apply on a retrospectve bass or only from the date such correcton s publshed for the purposes of Index calculatons. 9.2 Index Adjustment and Index Suspenson If, n respect of any Index Valuaton Date, the Index Sponsor determnes, n ts sole and absolute dscreton, that an Index Dsrupton Event has occurred then, n ts sole dscreton, the Index Sponsor may determne 35