Sampo Pankki Suomi Osake Risk Conrol Index Version 1.0 Publicaion Dae: 29 March 2010 Produced By: The Royal Bank of Scoland plc, Global Banking & Markes 250 Bishopsgae, London EC2M 4AA, Unied Kingdom 1
Table of Conens 1. General Descripion...3 2. Risk Facors... 5 3. General Definiions... 9 4. Calculaion... 4.1 Base Dae and Value... 4.2 Index Equaions... 4.3 Base Mehodology Equaions... 4.4 Baske Equaions... 4.5 Baske Deerminaion and Rebalancing... 4.6 Universe Selecion Crieria... 4.7 Weigh Calculaion Crieria... 4.8 Dynamic Paricipaion Crieria... 5. Publicaion and Adjusmens... 5.1 Role and Discreion of he Sponsor and Calculaion Agen... 5.2 Calculaion Frequency and Disseminaion... 5.3 Corporae Acions and Underlying Changes... 5.4 Descripion Updae... 5.5 Correcions... 5.6 Disruped Days... 5.7 Disrupion Even... 5.8 Index Disrupion Fallbacks... 5.9 Adjusmen Evens... 5.10 Simulaed Operaing Hisory... 5.11 Terminaion of Calculaion Agency Agreemen... 5.12 Noice... 6. Change in Mehodology and Terminaion... 27 6.1 Terminaion... 27 7. Disclaimer... 28 8. Appendix: Dividend Bid Level... 29 14 14 14 14 15 17 18 19 19 21 21 21 21 22 22 22 23 24 24 25 25 26 2
1. General Descripion This documen (he Descripion ) summarises he mehodology and rules used o consruc, calculae, and mainain he Sampo Pankki Suomi Osake Risk Conrol Index (he Index, also known as he Sampo Bank Finnish Equiy Risk Conrol Index ). Terms used bu no oherwise defined in his Descripion have he meanings given o hem in Chaper 3, eniled General Definiions. All persons reading his Descripion should refer o he Disclaimer se forh in Chaper 7 and he Risk Facors se forh in Chaper 2 and should consider he informaion in his Descripion in ligh of such Disclaimer and Risk Facors. The Index is calculaed and mainained by Sandard & Poor's Financial Services LLC, a limied liabiliy company organized under he laws of he sae of Delaware ("S&P") whose principal office is locaed a 55 Waer Sree, New York, New York 10041 (he Calculaion Agen ), based on his Descripion developed by The Royal Bank of Scoland plc (he Sponsor ). The Index is a published index which is sponsored by The Royal Bank of Scoland plc (Bloomberg page SMPOSORC Index). The Index aims o rack a noional sraegy ha applies a risk-sabilisaion overlay o a base mehodology. The base mehodology reflecs he performance of an underlying baske of socks or deposiory receips (each a Securiy and ogeher he Securiies form he Baske ) following he deducion of a performance adjusmen ( Base Mehodology ). The Baske is rebalanced quarerly. On each deerminaion dae ( Deerminaion Dae ), defined as he las calculaion dae in he monhs of March, June, Sepember and December, he Sponsor shall selec he Securiies for inclusion in he Baske in accordance wih he crieria and processes se ou in his Descripion which include (bu are no limied) o he following: (a) each Securiy mus be lised on he Helsinki Sock Exchange, have an average daily urnover greaer han EUR 1,000,000 and he Sponsor mus be able o hedge is exposure o such Securiy ( Qualifying Share ); (b) each Qualifying Share will be ranked from highes o lowes by is prevailing average daily urnover, wih he highes rank being allocaed o he Qualifying Share wih he highes average daily urnover, and he lowes rank being allocaed o he Qualifying Share wih he lowes average daily urnover (if 2 or more Qualifying Shares have he same average daily urnover, such Qualifying Share will be ranked from highes o lowes according o marke capialisaion, wih he highes rank being allocaed o he Qualifying Share wih he highes marke capialisaion and he lowes rank being allocaed o he Qualifying Share wih he lowes marke capialisaion; (c) a Baske of up o fory of he highes ranked Qualifying Shares will be seleced; and (d) each seleced Qualifying Share will be allocaed a weigh. On he hird calculaion dae immediaely following he Deerminaion Dae ( Rebalancing Dae ), he Baske will conain up o fory of he mos liquid lised Securiies on he Helsinki Sock Exchange. If here are less han 10 Qualifying Shares which saisfy he above, he Index will cease o be calculaed unil he nex Rebalancing Dae on which here are a leas 10 such Qualifying Shares. The performance adjusmen is he level of adjusmen, applied o he Base Mehodology which represens he coss incurred by he Sponsor in linking (and herefore noionally exposing) he Base Mehodology o he Baske ( Performance Adjusmen ). The Performance Adjusmen will reduce he level of he Base Mehodology and herefore he Index level. The purpose of he risk-sabilisaion overlay is o dynamically adjus exposure o he Base Mehodology on a daily basis and such adjusmen will be dependan upon on he Maximum Realised Volailiy (as defined below) of he Base Mehodology. The Maximum Realised Volailiy is calculaed as he maximum Realised Volailiy (as defined below) over 5 consecuive calculaion daes which are used as reference observaion daes (each, an Observaion Dae ). The Realised Volailiy herein is specifically a measure of how much he daily reurns of he Base Mehodology have flucuaed around he average reurn of he Base Mehodology in he pas over a defined ime period. The ime period is aken o be weny (20) calculaion daes days prior o he curren o calculaion dae. Exposure o he Base Mehodology is reduced if he Maximum Realised Volailiy of he Base Mehodology increases o cerain levels. Conversely, exposure o he Base Mehodology is increased if he Maximum Realised Volailiy of he Base Mehodology decreases o cerain levels.
The dynamically adjused exposure (he Dynamic Paricipaion ) provides for he Index o have exposure o he Base Mehodology wihin a range from a minimum of 0% o a maximum of 150%. The Dynamic Paricipaion is hus deermined according o he range ha he Maximum Realised Volailiy falls wihin. The ranges of he Maximum Realised Volailiy and he corresponding Dynamic Paricipaion values are described in Chaper 4, eniled Calculaion. The Index Level shall be calculaed daily a he Valuaion Time on each Scheduled Trading Day, which is no a Disruped Day for he Underlying (each such day being a Calculaion Dae ), in accordance wih Chapers 4 eniled Calculaion and 5 eniled Publicaion and Adjusmens of his Descripion. The informaion conained in his Descripion is a summary of he mehodology and maerial rules and risks relaing o he Index. This informaion is subjec o change. The Sponsor makes no represenaion or warrany ha he Index will achieve is saed objecives. In some circumsances (see Chaper 5.7 Disrupion Even, Chaper 5.8 Index Disrupion Fallbacks and 5.9 Adjusmen Evens ), he Sponsor may modify he calculaion of he Index and change hese rules wihou consen as described in Chaper 5 eniled Publicaion and Adjusmens. The Index is he inellecual propery of he Sponsor. 4
2. Risk Facors The following lis of risk facors does no purpor o be a complee enumeraion or explanaion of all he risks associaed wih he Index. All persons should seek such advice as hey consider necessary from heir professional advisors, legal, ax or oherwise, in connecion wih any invesmen in an insrumen linked o in he Index. An invesmen in an insrumen relaed o he Index may no be a suiable invesmen for all invesors. Insrumens relaed o he Index are complex financial insrumens and such insrumens may be purchased as a way for you o incur paricular marke exposures or seek enhanced yield wih an appropriae addiion of risk o your overall porfolio. You should no inves in complex financial insrumens unless you have he experise o evaluae how such an insrumen may perform under changing condiions, he resuling effecs on he value of such insrumen and he impac his invesmen will have on your overall invesmen porfolio. You mus deermine he suiabiliy of an invesmen in an insrumen relaed o he Index in ligh of your own circumsances, in paricular, you should: (i) (ii) (iii) (iv) (v) have sufficien knowledge and experience o make an evaluaion of an invesmen in an insrumen relaed o he Index and he meris and risks of invesing in an insrumen relaed o he Index; have access o, and knowledge of, appropriae analyical ools o evaluae, in he conex of your paricular financial siuaion, an invesmen in an insrumen relaed o he Index and he impac such invesmen will have on your overall invesmen porfolio; have sufficien financial resources and liquidiy o bear all of he risks of an invesmen in an insrumen relaed o he Index, including he risk of loss of such invesmen and any currency risk where he reurn, if any, on your invesmen is payable in one or more currencies, or where he currency for principal or premium or reurn, if any, on your invesmen is differen from your currency; undersand he erms of he invesmen in an insrumen relaed o he Index and be familiar wih he behaviour of he Index, and he componens hereof and financial markes generally; and be able o evaluae possible scenarios for economic, ineres rae and oher facors ha may affec your invesmen and your abiliy o bear he applicable risks. Proprieary and Rules-Based Trading The Index follows a noional rules-based proprieary rading algorihm ha operaes on he basis of pre-deermined rules. Accordingly, poenial invesors in financial producs which are linked o he performance of he Index should deermine wheher hose rules as summarised in his Descripion are appropriae in ligh of heir individual circumsances and invesmen objecives. No assurance can be given ha he algorihm on which he Index is based will be successful or ha he Index will ouperform any alernaive algorihm ha migh be employed. No recourse o asses The Index is purely synheic. The exposure o each Underlying is purely noional and will exis only in he records held by he Sponsor. There are no asses o which any person is eniled or in which any person has any ownership ineres or which serve as collaeral for any invesmen produc relaed o he Index. In paricular no invesor in insrumens linked o his Index will have any righs in respec of any Underlying. 5
Simulaed Operaing Hisory The Index will be firs calculaed on or around he Live Dae and herefore lacks hisorical performance. The Calculaion Agen and he Sponsor have rerospecively calculaed he closing levels of he Index from he Base Dae. However, because he Index will no be calculaed before he Live Dae, all such rerospecive closing levels are simulaed and mus be considered hypoheical and illusraive only. Simulaed daa prior o he Base Dae may be consruced using cerain procedures ha may vary from he procedures used o calculae he Index following is esablishmen, and on he basis of cerain assumpions ha may no apply in he fuure. Alhough hese assumpions are considered reasonable or necessary, he variaions used in producing simulaed hisorical daa from hose used o calculae he Index going forward could produce variaions in reurns of indeerminae direcion and amoun. The assumpions are as follows: i) Any hisoric non-ordinary dividends have been reinvesed a he relevan Dividend Bid Level; and ii) The Dividend Bid Levels, Performance Adjusmen and Spread Rae used are hose as a on he Publicaion Dae. The acual performance of he Index may be maerially differen from he resuls presened in any Simulaed Operaing Hisory relaing o he Index. Pas performance should no be considered indicaive of fuure performance. Fuure Index Performance No assurance can be given ha he algorihms employed by he Calculaion Agen and/or he Sponsor will be successful or ha he reurn on he Index will be as projeced or esimaed. There can be no assurance ha he Index will generae posiive reurns or ouperform any benchmark index or alernaive index. Temporary Cessaion of he Index In he even ha he Baske conains fewer han he Minimum Number of Underlyings, he Index Level shall be held consan unil he immediaely following Rebalancing Dae on which he Baske conains a leas he Minimum Number of Underlyings, and hence his may have a negaive impac on he reurn of he Index. Terminaion of he Index The Calculaion Agen is under no obligaion o coninue he calculaion, publicaion and disseminaion of he Index. The Index may be erminaed a any ime by he Sponsor. Should he Index cease o exis, his may have a negaive impac on he reurn on any invesmen in an insrumen relaed o he Index. Amendmen or Modificaion o he Descripion This Descripion may be amended, modified or adjused from ime o ime by he Calculaion Agen and/or he Sponsor, as applicable. Any such amendmen may have an adverse effec on he level of he Index wihou he consen of or noice o invesors in insrumens linked o he Index. Marke Risks The performance of he Index is dependen on he performance of each Underlying in he Baske. As a consequence, invesors in financial producs, he reurn on which is linked o he Index, should appreciae ha heir invesmen is exposed o he performance of each Underlying. Equiies Risk Each Underlying is a Securiy and herefore exposed o (and linked o he performance of) equiy 6
markes. Price movemens in each Underlying can be volaile. Prices are affeced by a wide range of facors relevan o equiies which will affec he level of he Index. Prospecive invesors should undersand ha invesmens in insrumens relaing o equiy markes may be negaively affeced by global economic, financial and poliical developmens, in paricular hose relaing o Finland, and ha such developmens, among oher hings, may have a maerial effec on he value of each Underlying and/or he performance of he Index. Hisorical performance of each Underlying and he Index should no be considered indicaive of fuure prices. Fees, Coss and Performance Adjusmen The level of he Index will be reduced by a Performance Adjusmen. The Performance Adjusmen means he level of adjusmen, applied o he Base Mehodology which represens he coss incurred by he Sponsor in linking (and herefore noionally exposing) he Base Mehodology o he Baske. The Performance Adjusmen shall be deermined by adding he Spread Rae o he Ineres Rae. The Performance Adjusmen will reduce he level of he Base Mehodology and herefore he Index Level. Prospecive invesors should undersand ha such cos may have a maerial effec on he closing level of he Index. For he avoidance of doub, such cos is no passed on o invesors as a paymen bu will be deduced from he level of he Index in accordance wih his Descripion. Sponsor/Calculaion Agen Discreion The Index confers on he Calculaion Agen and/or he Sponsor, as applicable, discreion in making cerain deerminaions, calculaions and correcions from ime o ime. The exercise of such discreion in he making of calculaions and deerminaions may adversely affec he performance of he Index. The Sponsor shall deermine in is sole and absolue discreion wheher any such correcion shall apply rerospecively or from he relevan dae forward. Poenial Conflics of Ineres Poenial conflics of ineres may exis in he srucure and operaion of he Index and he course of he normal business aciviies of he Calculaion Agen and/or he Sponsor and any of heir respecive affiliaes or subsidiaries or heir respecive direcors, officers, employees, represenaives, delegaes or agens (each a person for he purposes of his Descripion). During he course of heir normal business, each person may ener ino or promoe, offer or sell ransacions or invesmens (srucured or oherwise) linked o he Index and/or any of he noional rading posiions. In addiion, any person may have, or may have had, ineress or posiions, or may buy, sell or oherwise rade posiions in or relaing o he Index or any of he noional rading posiions, or may inves or engage in ransacions wih oher eniies, or on behalf of such eniies relaing o any of hese iems. Such aciviy may or may no have an impac on he Index Level bu all invesors reading his Descripion should be aware ha a conflic of ineres could arise where anyone is acing in more han one capaciy, and such conflic may have an impac, posiive or negaive on he Index Level. Neiher he Calculaion Agen nor he Sponsor nor any oher person has any duy o consider he circumsances of any eniies when paricipaing in such ransacions or o conduc hemselves in a manner ha is favourable o anyone wih exposure o he Index. Sandard & Poor s is he iniial calculaion agen of he Index. Dynamic Paricipaion and Leverage The Index is calculaed using he Dynamic Paricipaion mechanism which means ha he synheic exposure o he Base Mehodology may be greaer han, equal o or less han 100 per cen. (up o a maximum of 150 per cen. and a minimum of 0 per cen.), and he use of he Dynamic Paricipaion may herefore leverage reurns of he Base Mehodology. Leverage has he poenial o magnify he gains or losses of he Base Mehodology. 7
Volailiy Sraegy Volailiy is ofen used o quanify he risk of an underlying insrumen or sraegy over a given ime period, so ha a high volailiy indicaes a higher risk. The Index is calculaed wih reference o he hisorical volailiy of he Base Mehodology o deermine he Dynamic Paricipaion. The impac of any negaive performance of he Base Mehodology on he performance of he Index may be reduced hrough he use of he Dynamic Paricipaion. Conversely, he impac of any posiive performance of he Base Mehodology on he performance of he Index may be reduced by he use of he Dynamic Paricipaion which means ha he performance of he Index may be lower han if he Index was direcly linked o he performance of he Base Mehodology wihou any Dynamic Paricipaion feaure applying. 8
3. General Definiions Affiliae means, in relaion o any eniy (he Firs Eniy), any eniy conrolled, direcly or indirecly, by he Firs Eniy, any eniy ha conrols, direcly or indirecly, he Firs Eniy or any eniy direcly or indirecly under common conrol wih he Firs Eniy. For hese purposes conrol means he possession, direc or indirec, of he power o direc or cause he direcion of he managemen and policies of an eniy, wheher hrough he ownership of voing securiies, by conrac or oherwise. Nowihsanding he foregoing, Affiliaes shall no include (i) he UK governmen or any member or insrumenaliy hereof, including Her Majesy's Treasury and UK Financial Invesmens Limied (or any direcors, officers, employees or eniies hereof) or (ii) any persons or eniies conrolled by or under common conrol wih he UK governmen or any member or insrumenaliy hereof (including Her Majesy's Treasury and UK Financial Invesmens Limied) and which are no par of The Royal Bank of Scoland Group plc and is subsidiary or subsidiary underakings (including The Royal Bank of Scoland N.V); 3-monh Average Daily Value Traded or ADV means, in respec of any Underlying or Qualifying Share, he average daily value raded of such Underlying or Qualifying Share, deermined wih reference o he Price Source; Bankrupcy means, in respec of any Underlying ha by reason of he volunary or involunary liquidaion, bankrupcy, insolvency, dissoluion or winding up of, or any analogous proceeding affecing, an issuer of an Underlying (a) all of he Securiies of ha issuer are required o be ransferred o a rusee, liquidaor or oher similar official or (b) holders of he Securiies of ha issuer become legally prohibied from ransferring hem; Base Currency means he currency in which he Index is denominaed, and shall be Euro ( EUR ); Base Dae means he firs dae on which he Index has a value, and shall be 11 February 2004; Base Mehodology means he componen comprising he Index which reflecs he performance of he Baske following he deducion of a Performance Adjusmen; Base Mehodology Value or BMV means he value of he Base Mehodology as deermined pursuan o Base Mehodology Equaions in Chaper 4; Base Value means he value of he Index on he Base Dae, and shall equal 100.000000; Baske means, in respec of he Base Mehodology, he baske of beween 10 and 40 Underlyings, where each Underlying which relaes o a specific Qualifying Share ( Underlying Qualifying Share ) will be weighed by allocaing one or more such Underlying Qualifying Shares o such Underlying in accordance wih his Descripion, which affec he value of he Base Mehodology; Baske Value or BV means he value of he Baske as deermined pursuan o Baske Equaions in Chaper 4; Bloomberg Page means he Bloomberg page SMPOSORC Index or any successor or replacemen page, on which he Index Level shall be published; Calculaion Dae means any day (oher han a Saurday or Sunday) ha is a Scheduled Trading Day, which is no a Disruped Day, for each Underlying; Calculaion Agency Agreemen means he agreemen beween he Sponsor and he Calculaion Agen; Calculaion Agen means he person responsible for calculaing he Index, as described in his Descripion, and as amended, replaced or subsiued, from ime o ime. The iniial Calculaion Agen is Sandard & Poor's Financial Services LLC, a limied liabiliy company organized under he laws of he sae of Delaware ("S&P") whose principal office is locaed a 55 Waer Sree, New York, New York 10041 ( Sandard & Poors ); 9
Delising means, in respec of any Underlying, he Exchange announces ha pursuan o he rules of such Exchange, such Underlying ceases (or will cease), o be lised, raded or publicly quoed on he Exchange for any reason (oher han a Merger Even or Tender Offer) and is no immediaely relised, re-raded or re-quoed on an exchange or quoaion sysem locaed in he same counry as he Exchange (or, where he Exchange is wihin he European Union, in any member sae of he European Union) or anoher exchange or quoaion sysem locaed in anoher counry which exchange or quoaion sysem and counry is deemed accepable by he Calculaion Agen; Descripion means his documen as amended, replaced or subsiued, from ime o ime; Deerminaion Dae means he quarerly dae falling on he las Calculaion Dae in each monh of March, June, Sepember and December, The Calculaion Agen may, wih he prior wrien consen of he Sponsor, deermine any Calculaion Dae o be a Deerminaion Dae, and will if required for regulaory or legal reasons declare more frequen Deerminaion Daes as deemed appropriae a is sole and absolue discreion; Disruped Day has he meaning given in Chaper 5 eniled Publicaion and Adjusmens ; Dividend Amoun or Div means, in respec of each Underlying, he company declared ordinary dividend, ne of any axes, noionally receivable in respec of he ex-dividend dae which falls on he relevan Calculaion Dae for such Underlying (where he ex-dividend dae is defined as he firs dae on which such Underlying rades wihou enilemen o he laes declared dividend), and deermined in he Base Currency wih reference o he FX Price Source; Dividend Bid Level or DB means, in respec of each Underlying, a number (expressed as a percenage of he Dividend Amoun) reflecing he dividend receivable, ne of any axes deducable, and deermined wih respec o he counry of ax residence of he issuer of such Underlying in accordance wih Chaper 8, eniled Appendix: Dividend Bid Level ; Dynamic Paricipaion or DP means he variable exposure of he Index o he Base Mehodology, as deermined pursuan o he Dynamic Paricipaion Crieria in Chaper 4 eniled Calculaion ; Exchange means, in respec of each Underlying, he exchanges or quoaion sysem or any subsiue exchanges or quoaion sysem in which rading of he Underlying principally occurs, as deermined by he Sponsor; FX Price Source means he foreign exchange rae, deermined wih reference o Bloomberg page WMCO, used o conver he relevan amoun o he Base Currency (as pursuan o he Baske Equaions in Chaper 4 eniled Calculaion ) or, if such price source is unavailable, any alernaive price source seleced by he Sponsor in is sole and absolue discreion; Hedging Aciviy means any rading in: (i) an Underlying; and (ii) financial insrumens relaing o an Underlying, in each case for he purpose of hedging any obligaions incurred by The Royal Bank of Scoland plc and is Affiliaes (each such Affiliae, a Hedging Eniy and, ogeher wih he Sponsor, RBS ) in connecion wih he Index; Index means he Sampo Pankki Suomi Osake Risk Conrol Index (also known as he Sampo Bank Finnish Equiy Risk Conrol Index ), as se ou in his Descripion; Index Level or I means he value of he Index as deermined pursuan o he Index Equaions in Chaper 4 eniled Calculaion ; Ineres Rae means he maximum of i) he EUR Effecive Overnigh Index Average deermined using Bloomberg page EONIA Index; and ii) he EURIBOR 1 Monh Rae deermined using Bloomberg page EUR001M Index, as furher deermined and adjused in accordance wih he Base Mehodology Equaions in Chaper 4 eniled Calculaion ; Live Dae means he dae on which he level of he Index is firs calculaed and shall mean 19 April 2010; 10
London Business Day means any day (oher han a Saurday or Sunday) on which commercial banks and foreign exchange markes sele paymens in London; Marke Capialisaion means, in respec of any Underlying or Qualifying Share, he value of he issuer of such Underlying or Qualifying Share, calculaed by muliplying he number of shares of such Underlying or Qualifying Share by is share price deermined wih reference o he Price Source; Maximum Realised Volailiy or MRV means he maximum realised hisorical volailiy (measured over a number of Calculaion Daes) of he Base Mehodology, as deermined pursuan o he Dynamic Paricipaion Crieria in Chaper 4 eniled Calculaion ; Maximum Number of Underlyings means, in respec of he Baske, he maximum number of Underlyings comprising he Baske, and shall equal 40 Underlyings; Merger or Acquisiion means, in respec of any relevan Underlyings, any: (a) reclassificaion or change of such Underlyings ha resuls in a ransfer of, or an irrevocable commimen o ransfer all such Underlyings ousanding o anoher eniy or person; or (b) consolidaion, amalgamaion, merger or binding share exchange of an issuer of he Underlying wih or ino anoher eniy or person (oher han a consolidaion, amalgamaion, merger or binding share exchange in which such issuer is he coninuing eniy and which does no resul in any such reclassificaion or change of all such Securiies ousanding); or (c) akeover offer, ender offer, exchange offer, soliciaion, proposal or oher even by any eniy or person o purchase or oherwise obain 100 per cen. of he ousanding Securiies of he issuer of he Underlying ha resuls in a ransfer of or an irrevocable commimen o ransfer all such Securiies (oher han such Securiies owned or conrolled by such oher eniy or person); or (d) consolidaion, amalgamaion, merger or binding share exchange of he issuer of he Underlying or is subsidiaries wih or ino anoher eniy in which he issuer is he coninuing eniy and which does no resul in a reclassificaion or change of all such Securiies ousanding bu resuls in he ousanding Securiies (oher han Securiies owned or conrolled by such oher eniy) immediaely prior o such even collecively represening less han 50 per cen. of he ousanding Securiies immediaely following such even; Minimum Number of Underlyings means, in respec of he Baske, he minimum number of Underlyings comprising he Baske, and shall equal 10 Underlyings; Number of Underlyings or M means, in respec of a Baske, he prevailing number of Underlyings comprising he Baske which shall be greaer han or equal o he Minimum Number of Underlyings and less han or equal o he Maximum Number of Underlyings; Performance Adjusmen or PA means he level of adjusmen, applied o he Base Mehodology which represens he coss incurred by he Sponsor in linking (and herefore noionally exposing) he Index o he Base Mehodology. The Performance Adjusmen shall be deermined by adding he Spread Rae o he Ineres Rae. The Performance Adjusmen will reduce he level of he Base Mehodology and herefore he Index Level; Price Source means, for each Underlying or Qualifying Share, he relevan Bloomberg page on which he price, level or value (as he case may be) of he Underlying Price, 3-monh Average Daily Value Traded or Marke Capialisaion is published or, if such source is unavailable, any alernaive price source seleced by he Sponsor in is sole and absolue discreion which may include he selecion of a successor or replacemen page; Publicaion Dae means he dae of publicaion of his Descripion and shall be he 29 March 2010; Publishing Time means 16.30 London ime on each London Business Day; Qualifying Share means a Securiy comprising he Universe; Quaniy of each Underlying or N means, in respec of each Underlying, he quaniy of Qualifying Shares which relae specifically o he Underlying and herefore represen each Underlying comprising he Baske; 11
Realised Volailiy or RV means he hisorical realised volailiy of he Base Mehodology, as deermined pursuan o he Dynamic Paricipaion Crieria in Chaper 4 eniled Calculaion ; Rebalancing Dae means he Calculaion Dae falling hree Calculaion Daes immediaely following each Deerminaion Dae, from and including he Base Dae; Rebalancing Period means he period of ime from and including he Valuaion Time on a Rebalancing Dae up o and excluding he Valuaion Time on he immediaely following Rebalancing Dae; Relaed Exchange means, in respec of each Underlying, he exchange or quoaion sysem or any subsiue exchange or quoaion sysem in which rading of he fuures or opions conracs linked o he Underlying principally occurs or he exchange or quoaion sysem where rading has a maerial effec on he overall marke for fuures or opions conracs relaing o he Underlying, in each case as deermined by he Sponsor; Reurn or R means he reurn of he Base Mehodology as deermined pursuan o he Index Equaions in Chaper 4 eniled Calculaion ; Scheduled Closing Time means, in respec of each Exchange and Relaed Exchange and a Scheduled Trading Day, he scheduled weekday closing ime of he Exchange and Relaed Exchange on such Scheduled Trading Day, wihou regard o afer hours or any oher rading ouside of he regular rading session hours; Scheduled Trading Day means, in respec of each Underlying, a day on which he Exchange and Relaed Exchange are scheduled o be open for rading during heir regular rading sessions; Securiy means a common sock or a deposiory receip; Spin-off means, in respec of any Underlying, a demerger of a porion of he Underlying o form one or more new Securiies; Sponsor means The Royal Bank of Scoland plc, locaed a 250 Bishopsgae, London, EC2M 4AA, or any successor hereo; Spread Rae means 0.15% on he Publicaion Dae and subjec o a minimum of 0.00% and a maximum of 0.50% (and subjec o change a he sole and absolue discreion of he Sponsor) as applied in accordance wih he rae and mehod described in he Base Mehodology Equaions in Chaper 4 eniled Calculaion ; Underlying means, in respec of he Baske, a Qualifying Share comprising he Baske, pursuan o he Baske Equaions in Chaper 4 eniled Calculaion ; Underlying Currency means he currency in which each Underlying is denominaed; Underlying Price or UP means, in respec of each Underlying, he price of he Underlying deermined wih reference o he Price Source; Underlying Weigh or uw means, in respec of each Underlying, a number (expressed as a percenage of he Baske Value) represening he proporion of he Baske comprised of such Underlying, as deailed in he Baske Equaions in Chaper 4 eniled Calculaion ; Universe means he Qualifying Shares seleced in accordance wih he Universe Selecion Crieria in Chaper 4 eniled Calculaion ; and Valuaion Time means, in respec of a Scheduled Trading Day, he ime a which prices for all Underlyings are available on he relevan Price Source, and shall iniially be 16.30 London Time, or such oher ime as he Sponsor may deermine and announce o be he Valuaion Time for he Index. Inerpreaion As used in his Descripion, excep where oherwise indicaed: (A) in relaion o any Calculaion Dae, (or i ) means he relevan Calculaion Dae and, in respec of ha Calculaion Dae, references o (or i ) plus or minus a specified number i.e. +1 (or i+1 ), +2 (or i+2 ), or -1 (or i-1 ) shall be o he 12
(B) (C) (D) Calculaion Dae falling ha specified number of Calculaion Daes afer or before, as he case may be, he Calculaion Dae o which (or i ) relaes; words used in he singular ense should be inerpreed o include he plural ense and vice versa; any use of he word "including" will no be limied by he words ha follow; and he headings in his Descripion do no affec is inerpreaion. 13
4. Calculaion This chaper oulines he key seps in consrucing and calculaing he Index, wih special aenion o he relevan formulae. 4.1 Base Dae and Value Base Dae Base Currency Base Value 11 February 2004 EUR 100.000000 4.2 Index Equaions Subjec o Chaper 5 eniled Publicaion and Adjusmens, on each Calculaion Dae he Index shall consis of he Base Mehodology, he exposure o which shall depend upon he Dynamic Paricipaion Crieria (as described below in Chaper 4.8 eniled Dynamic Paricipaion Crieria ) deermined wo Calculaion Daes immediaely preceding such Calculaion Dae. The level of he Index ( Index Level ) will be deermined in accordance wih he following formula a he Valuaion Time on each Calculaion Dae -1 ( 1+ DP R ) I = I where I is he Index Level deermined a he Valuaion Time on Calculaion Dae ; I -1 is he Index Level deermined a he Valuaion Time on he Calculaion Dae immediaely preceding Calculaion Dae ; DP -2 is he Dynamic Paricipaion deermined a he Valuaion Time on he Calculaion Dae ha is 2 Calculaion Daes immediaely preceding Calculaion Dae, as described below in Chaper 4.8 eniled Dynamic Paricipaion Crieria ; R is he Reurn deermined a he Valuaion Time on Calculaion Dae and shall equal: R BMV = BMV -1 1 where BMV is he value of he Base Mehodology ( Base Mehodology Value ) deermined a he Valuaion Time on Calculaion Dae, as described below in Chaper 4.3 eniled Base Mehodology Equaions ; and BMV -1 is he Base Mehodology Value deermined a he Valuaion Time on he Calculaion Dae immediaely preceding Calculaion Dae. -2 4.3 Base Mehodology Equaions A any ime, he Base Mehodology shall consis of he Baske. The Base Mehodology Value for he Base Mehodology will be deermined in accordance wih he following formula a he Valuaion Time on each Calculaion Dae : 14
On he Base Dae, he Base Mehodology Value shall equal 100, BMV 0 = 100. On any subsequen Calculaion Dae : BMV = BMV 1 BV BV 1 PA 1 DC 360 1, where: BV is he value of he Baske ( Baske Value ) deermined a he Valuaion Time on Calculaion Dae in accordance wih Chaper 4.4 eniled Baske Equaions ; BV -1 is he Baske Value deermined a he Valuaion Time on he Calculaion Dae immediaely preceding Calculaion Dae ; DC -1, is he Day Coun and means he number of calendar days, from and including Calculaion Dae -1 o bu excluding Calculaion Dae ; and PA -1 means he Performance Adjusmen and will be deermined a he Valuaion Time on he Calculaion Dae immediaely preceding Calculaion Dae, as he sum of he Ineres Rae and he Spread Rae in accordance wih he following formula: PA = max(r, r ) + r where: Ineres Rae refers o he maximum of r 1D and r 1M. where: r 1D means he EUR Effecive Overnigh Index Average specified as a percenage on Calculaion Dae, deermined a he Valuaion Time using Bloomberg page EONIA Index. If on Calculaion Dae he EUR Effecive Overnigh Index Average is no available on he Bloomberg page menioned above, hen he Sponsor shall deermine he EUR Effecive Overnigh Index Average wih reference o such sources on such day and a such ime as i deems appropriae in is sole and absolue discreion; r 1M means he EURIBOR 1 Monh Rae specified as a percenage on Calculaion Dae, deermined a he Valuaion Time using Bloomberg page EUR001M Index. If on Calculaion Dae he EURIBOR 1 Monh Rae is no available on he Bloomberg page menioned above, hen he Sponsor shall deermine he EURIBOR 1 Monh Rae wih reference o such sources and on such day as i deems appropriae in is sole and absolue discreion; r s means he Spread Rae and shall equal 0.15% on he Publicaion Dae, and can vary beween a minimum of 0.00% and a maximum of 0.50%, and is subjec o change a he sole and absolue discreion of he Sponsor. For he purpose of any deerminaions requiring Base Mehodology Values prior o he Base Dae, hese shall be calculaed in accordance wih he mehodology described in his Chaper 4.3. 1D 1M s 4.4 Baske Equaions A any ime, he Baske shall consis of beween 10 and 40 Securiies. The number, ideniy and weigh of such Securiies in he Baske shall be deermined on he relevan Deerminaion Dae and seleced for inclusion in he Baske a he Valuaion Time on he immediaely following Rebalancing Dae, where such selecion will creae a weighed baske of Securiies. The number, ideniy and weigh of he Securiies will under normal marke condiions apply during he Rebalancing Period and shall all be deermined in accordance wih Chaper 4.5, eniled Baske Deerminaion and Rebalancing, Chaper 4.6, eniled Universe Selecion Crieria, and Chaper 4.7, eniled Weigh Calculaion Crieria. 15
The Maximum Number of Underlyings shall equal 40 Underlyings, and he Minimum Number of Underlyings shall equal 10 Underlyings. On he Rebalancing Dae r (7 January 2010) immediaely preceding he Publicaion Dae, he Baske will consis of: Underlying, u Bloomberg Exchange Underlying Underlying Quaniy of each Code Weigh, uw u r Price, UP u r Underlying in Baske, N u r Nokia OYJ NOK1V FH Helsinki 10.000000% 9.29 1.754976 Forum OYJ FUM1V FH Helsinki 10.000000% 19.22 0.848269 Sampo OYJ SAMAS FH Helsinki 7.197261% 17.52 0.669761 UPM-Kymmene OYJ UPM1V FH Helsinki 6.799453% 8.735 1.269106 Meso OYJ MEO1V FH Helsinki 6.451847% 26.6 0.395448 Sora Enso OYJ STERV FH Helsinki 6.200039% 5.245 1.927241 Ouokumpu OYJ OUT1V FH Helsinki 4.828207% 14.45 0.544760 Kone OYJ KNEBV FH Helsinki 4.312388% 29.76 0.236250 Warsila OYJ WRT1V FH Helsinki 3.664682% 29.02 0.205886 Nokian Renkaa OYJ NRE1V FH Helsinki 3.660994% 17.49 0.341268 Nordea Bank AB NDA1V FH Helsinki 3.081308% 7.17 0.700653 Nese Oil OYJ NES1V FH Helsinki 2.963774% 13.06 0.369989 Ouoec OYJ OTE1V FH Helsinki 2.961932% 25.98 0.185876 Rauaruukki OYJ RTRKS FH Helsinki 2.850579% 17 0.273383 YIT OYJ YTY1V FH Helsinki 2.644816% 16.04 0.268830 Elisa OYJ ELI1V FH Helsinki 2.642506% 15.6 0.276171 Konecranes OYJ KCR1V FH Helsinki 2.497678% 19.6 0.207763 TeliaSonera AB TLS1V FH Helsinki 1.858896% 5.005 0.605533 Tieo OYJ TIE1V FH Helsinki 1.657297% 15.58 0.173428 Kesko OYJ KESBV FH Helsinki 1.525830% 23.17 0.107366 Pohjola Bank PLC POH1S FH Helsinki 1.427883% 7.86 0.296181 Kemira OYJ KRA1V FH Helsinki 1.269426% 10.7 0.193424 Orion OYJ ORNBV FH Helsinki 1.219114% 16.05 0.123839 Sanoma OYJ SAA1V FH Helsinki 1.101000% 16.44 0.109187 Cargoec Oyj CGCBV FH Helsinki 1.007869% 20.07 0.081874 Uponor OYJ UNR1V FH Helsinki 0.706440% 15.34 0.075082 Huhamaki OYJ HUH1V FH Helsinki 0.689287% 9.73 0.115498 Talvivaara Mining Co PLC TLV1V FH Helsinki 0.586900% 4.39 0.217965 M-real OYJ MRLBV FH Helsinki 0.558073% 1.63 0.558201 Ramiren OYJ RMR1V FH Helsinki 0.501886% 7.27 0.112553 Ruukki Group OYJ RUG1V FH Helsinki 0.499329% 2.16 0.376894 Cramo OYJ CRA1V FH Helsinki 0.498612% 12.5 0.065034 Sponda OYJ SDA1V FH Helsinki 0.486605% 2.85 0.278367 Amer Spors OYJ AMEAS FH Helsinki 0.483382% 7.12 0.110687 Oriola-KD OYJ OKDBV FH Helsinki 0.436883% 4.75 0.149954 Sockmann OYJ Abp STCBV FH Helsinki 0.370647% 19.67 0.030722 Ciycon OYJ CTY1S FH Helsinki 0.357175% 3.06 0.190304 16
The Baske Value for he Baske and all oher deerminaions will be deermined in accordance wih he following formula a he Valuaion Time on each Calculaion Dae : On he Base Dae, he Baske value shall equal 100, BV 0 = 100. On any subsequen Calculaion Dae : where: BV = BV -1 M u= 1 N u UP M u=1 N u u -1 + SumDiv UP M is he Number of Underlyings comprising he Baske a he Valuaion Time on Calculaion Dae ; UP u means he Underlying Price for Underlying u deermined a he Valuaion Time on Calculaion Dae ; UP u -1 means he Underlying Price for Underlying u deermined a he Valuaion Time on he Calculaion Dae immediaely preceding Calculaion Dae ; N u is he Quaniy of each Underlying u comprising he Baske, and deermined in accordance wih he following formula a he Valuaion Time on each Calculaion Dae, and subjec o any Inerim Even as described in Chaper 5.3, eniled Corporae Acions and Underlying Changes : N u -1 is he Quaniy of each Underlying u deermined a he Valuaion Time on he Calculaion Dae u immediaely preceding such Calculaion Dae. If Calculaion Dae -1 is a Rebalancing Dae, N -1 shall mean he Quaniy of each Underlying u deermined on he Deerminaion Dae and effeced on such Rebalancing Dae, pursuan o Chaper 4.5, eniled Baske Deerminaion and Rebalancing ; SumDiv means he sum of any company declared ordinary dividends, ne of any axes, noionally receivable in respec of he ex-dividend dae ha falls on such Calculaion Dae for each Underlying (where he ex-dividend dae is defined as he firs dae on which he Underlying rades wihou enilemen o he laes declared dividend) and deermined pursuan o he following formula: SumDiv u 1 = u= 1 N u u 1 DB Div u is he relevan Dividend Amoun receivable in respec of Underlying u on Calculaion Dae, deermined in he Base Currency or convered ino he Base Currency wih reference o he FX Price Source; and DB u is he relevan percenage Dividend Bid Level reflecing he dividend receivable, ne of any axes deducable, in respec of Underlying u on Calculaion Dae, deermined pursuan o Chaper 8, eniled Appendix: Dividend Bid Level. For he purpose of any deerminaions requiring Baske Values prior o he Base Dae, hese shall be calculaed in accordance wih he mehodology described in his Chaper 4.4. 4.5 Baske Deerminaion and Rebalancing N u = N M A he Valuaion Time on each Deerminaion Dae d (immediaely before each Rebalancing Dae r): A universe of Qualifying Shares (he Universe ) shall be seleced in accordance wih he Universe Selecion Crieria described in Chaper 4.6 eniled Universe Selecion Crieria ; Div u u -1 17
Each Qualifying Share in he Universe shall be ranked from highes o lowes according o is prevailing 3-monh Average Daily Value Traded, wih he highes rank being allocaed o he Qualifying Share wih he highes 3-monh Average Daily Value Traded, and he lowes rank being allocaed o he Qualifying Share wih he lowes 3-monh Average Daily Value Traded. In even ha 2 or more Qualifying Shares have he same 3-monh Average Daily Value Traded, such Qualifying Shares shall be ranked from highes o lowes according o Marke Capialisaion, wih he highes rank being allocaed o he Qualifying Share wih he highes Marke Capialisaion and he lowes rank being allocaed o he Qualifying Share wih he lowes Marke Capialisaion; The Baske shall be seleced and shall comprise he Number of Underlyings (M) which are he highes ranked Qualifying Shares subjec o he Maximum Number of Underlyings; Each seleced Qualifying Share (an Underlying) shall be apporioned an Underlying Weigh in accordance wih Chaper 4.7, eniled Weigh Calculaion Crieria. (ogeher he Baske Crieria ) such Baske being effecive during he Rebalancing Period subjec o Chaper 5 eniled Publicaion and Adjusmens. If he Number of Underlyings is less han he Minimum Number of Underlyings, hen he Index will cease o be calculaed and shall recommence on he nex following Rebalancing Dae on which he Baske conains a leas he Minimum Number of Underlyings. The level of he Index, Base Mehodology and Baske will be held consan unil such Rebalancing Dae. A he Valuaion Time on each Rebalancing Dae r (immediaely proceeding each Deerminaion Dae d): he Baske will be noionally sold and he Baske Value deermined; he ideniy of he Underlyings will be deermined in accordance wih he Baske Crieria; he Quaniy of each Underlying, N r u, held in he Baske is calculaed by muliplying (a) is Underlying Weigh, as deermined on he Deerminaion Dae d, (b) by he Baske Value, and dividing such value by he Underlying Price of such Underlying; he Baske is noionally purchased. 4.6 Universe Selecion Crieria To qualify for inclusion in he Universe, each Securiy mus saisfy he following crieria a he Valuaion Time on each Deerminaion Dae (a Qualifying Share ): (i) each Securiy mus be of a company wih a lising on he Helsinki Sock Exchange; (ii) each Securiy mus have an average daily urnover, measured as he 3-monh Average Daily Value Traded, greaer han EUR 1,000,000 (or currency equivalen); (iii) he selecion of he Securiy as an Underlying in he Baske mus no give rise o any Technical Consrain; (iv) if more han one class of Securiy of he same issuing company is available for selecion as a Qualifying Share, hen he class of Securiy of he issuing company which has a higher 3- monh Average Daily Value Traded shall be eligible as a Qualifying Share, ogeher he Universe Selecion Crieria If, having used reasonable effors, he Calculaion Agen deermines, in is sole and absolue discreion, ha i canno evaluae he 3-monh Average Daily Value Traded for a Securiy, he Calculaion Agen may deermine no o selec he Securiy as a Qualifying Share on he basis ha i does no mee he Universe Selecion Crieria. 18
4.7 Weigh Calculaion Crieria On each Deerminaion Dae d, each Underlying shall be allocaed an Underlying Weigh in he Baske, such weigh being applied a he Valuaion Time on he immediaely following Rebalancing Dae r o bu excluding he Valuaion Time on he immediaely following Rebalancing Dae. Such Underlying Weigh on Rebalancing Dae r (uw u r) in respec of each Underlying u, shall be proporional o he prevailing 3-monh Average Daily Value Traded on Deerminaion Dae d ( ADV u d ), and subjec o a maximum of 10%, wih weighs in excess of 10% being redisribued pro raa amongs he oher Underlyings, such ha he weighs sum o 100%, in accordance wih he following formulae. As an example, in a Baske comprising 40 Underlyings, if one Underlying would have an uncapped Underlying Weigh above 10%, such as 12%, he amoun above 10%, i.e. 2%, shall be re-allocaed amongs he oher 39 Underlyings, i.e. an exra 0.05128% per Underlying. where: uw u r u ADVd = min 10%, SumADV SumADV d M = d u=1 ADV u d d ; and M d is he Number of Underlyings comprising he Baske deermined on he Deerminaion Dae d and effeced on he immediaely following Rebalancing Dae r. 4.8 Dynamic Paricipaion Crieria A any ime, he Dynamic Paricipaion is a funcion of he maximum realised hisorical volailiy ( Maximum Realised Volailiy ) of he Base Mehodology, deermined over he below specified number of Calculaion Daes. The Dynamic Paricipaion for he Base Mehodology will be deermined in accordance wih he following formula and able a he Valuaion Time on each Calculaion Dae ( DP ), and will be deermined by he Lower Boundary i ( LB{i} ) and Upper Boundary i ( UB{i} ) ha he Maximum Realised Volailiy ( MRV ) falls beween. For he avoidance of doub, he unrounded calculaed value of MRV shall be used o deermine DP, while DP shall be rounded o wo decimal places. LB{i} MRV < UB{i} Table for he Base Mehodology: i Lower Boundary i, LB{i} Upper Boundary i, UB{i} Dynamic Paricipaion, DP 1 0.00% 7.00% 150.00% 2 7.00% 12.00% 100.00% 3 12.00% 17.00% 69.70% 4 17.00% 22.00% 53.49% 5 22.00% 27.00% 43.40% 6 27.00% 32.00% 36.51% 7 32.00% 37.00% 31.51% 8 37.00% 42.00% 27.71% 9 42.00% 47.00% 24.73% 10 47.00% 52.00% 22.33% 11 52.00% 57.00% 20.35% 12 57.00% 62.00% 18.70% 13 62.00% 67.00% 17.29% 14 67.00% 72.00% 16.08% 15 72.00% 77.00% 10.00% 19
16 77.00% (infiniy) 0.00% For example, if MRV = 10.00%, hen DP = 100.00%; if MRV = 30.00%, hen DP = 36.51%; and if MRV = 42.00%, hen MRV falls on he Lower Boundary 9, and hence DP shall equal 24.73%. Boh he Lower Boundary and Upper Boundary may change a he Sponsor s sole and absolue discreion, if required. The Maximum Realised Volailiy for he Base Mehodology will be deermined in accordance wih he following formula on each Calculaion Dae, and shall be he maximum Realised Volailiy observed over 5 Calculaion Daes, including such Calculaion Dae and he preceding 4 Calculaion Daes (each being a Calculaion Dae i). MRV = max 4 i [ RV ] i where: RV i is he hisorical realised volailiy ( Realised Volailiy ) of he Base Mehodology deermined on Calculaion Dae i, and calculaed using he Base Mehodology Value for such Calculaion Dae i and he immediaely preceding 20 Calculaion Daes, and shall equal: RV i = 19 BMV 19 i- j 1 BMV i-k 252 ln ln j= 0 BMVi- j-1 20 k= 0 BMVi-k- 1 19 where: BMV i-j is he Base Mehodology Value deermined on he Calculaion Dae i-j, where j represens he jh Calculaion Dae immediaely preceding such Calculaion Dae i; BMV i-j-1 is he Base Mehodology Value deermined on he Calculaion Dae immediaely preceding Calculaion Dae i-j; BMV i-k is he Base Mehodology Value deermined on he Calculaion Dae i-k, where k represens he kh Calculaion Dae immediaely preceding such Calculaion Dae i; and BMV i-k-1 is he Base Mehodology Value deermined on he Calculaion Dae immediaely preceding Calculaion Dae i-k. 2 20
5. Publicaion and Adjusmens 5.1 Role and Discreion of he Sponsor and Calculaion Agen The Calculaion Agen is appoined by he Sponsor pursuan o he erms of he Calculaion Agency Agreemen. Pursuan o he Calculaion Agency Agreemen, he Calculaion Agen has agreed o provide services o he Sponsor regarding he calculaion of he Index. In calculaing and deermining he value of he Index, he Calculaion Agen will refer o he mehodology described above and he applicaion of such mehodology shall be conclusive and binding. In cerain circumsances described below (see Chaper 5.7 Disrupion Even, Chaper 5.8 Index Disrupion Fallbacks and 5.9 Adjusmen Evens ), he Sponsor has discreion o modify his Descripion. Such discreion arises where, in he sole opinion of he Sponsor, his Descripion requires modificaion because here are circumsances ha warran such acion. Unless oherwise provided below, any such deerminaions by he Sponsor or he Calculaion Agen, as applicable, will be made in heir sole and absolue discreion by reference o such facors as he Sponsor and he Calculaion Agen, as applicable, deem appropriae a such ime. Any such deerminaion by he Sponsor or he Calculaion Agen, as applicable, will, in he absence of manifes error, be final, conclusive and binding. 5.2 Calculaion Frequency and Disseminaion The Index Level deermined in respec of any Calculaion Dae will be published by he Publishing Time on he nex day ha is a London Business Day. The Index Level will be disseminaed by he Calculaion Agen on Bloomberg page SMPOSORC Index ( Bloomberg Page ). On any day where he Index is no calculaed, such as a Disruped Day or oherwise, no value for he Index will be published on he Bloomberg Page in respec of such day, subjec o he provisions se ou below. 5.3 Corporae Acions and Underlying Changes Changes o he Underlyings comprising he Baske may occur beween Rebalancing Daes if a specific corporae even or corporae acion has occurred in respec of one or more Underlyings (an Inerim Even ). When an Inerim Even happens, he Calculaion Agen shall follow he prevailing Inerim Even mehodology as published by Sandard & Poors (www.sandardandpoors.com) for he purpose of accouning for he Inerim Evens, wih he excepion ha Inerim Evens referred o in he able below will be adjused in accordance wih he acions described below: Inerim Even Merger or Acquisiion Acion If a Merger or Acquisiion resuls in an Underlying (he Affeced Underlying ) being absorbed ino anoher company or Underlying, such Affeced Underlying will be removed from he Baske immediaely afer being absorbed ino such company. Such Affeced Underlying shall no be replaced in he Baske and is weighing will be allocaed o a non-ineres bearing accoun unil he nex Rebalancing Dae. Spin-off If an Underlying issuer (he Affeced Underlying ) is subjec o a Spin-off, he Affeced Underlying will remain in he Baske, as long as i mees he Universe Selecion Crieria. If he Affeced Underlying does no mee he Universe Selecion 21
Crieria, hen i will be removed from he Baske immediaely afer being spin-off, and shall no be replaced in he Baske and is weighing will be allocaed o a nonineres bearing accoun unil he nex Rebalancing Dae. Bankrupcy If a Bankrupcy occurs in respec of an Underlying (he Affeced Underlying ), he Affeced Underlying will be removed from he Baske immediaely afer he Bankrupcy filing. Such Affeced Underlying shall no be replaced in he Baske and is weighing will be allocaed o a non-ineres bearing accoun unil he nex Rebalancing Dae. Delising If a Delising occurs in respec of an Underlying (he Affeced Underlying ), he Affeced Underlying will be removed from he Baske immediaely afer being delised from is primary marke. Such Underlying shall no be replaced in he Baske and is weighing will be allocaed o a non-ineres bearing accoun unil he nex Rebalancing Dae. If an Inerim Evens resuls in he Number of Underlyings falling below he Minimum Number of Underlyings, hen he Index will cease o be calculaed and shall recommence as soon as he Minimum Number of Underlyings are available a he nex following Rebalancing Dae. 5.4 Descripion Updae Upon each occurrence of an updae o his Descripion, a new version of he Descripion will be creaed. The mos recen version of he Descripion shall be deemed o be in force from he dae of such updae and replace in is enirey he preceding version such ha in he even of any conflic beween he preceding version and he mos recen version, he mos recen version shall prevail. 5.5 Correcions In he even ha he Calculaion Agen or he Sponsor deermines ha a maerial error has occurred in he calculaion of he Index, he Calculaion Agen, having consuled, or having been consuled by, he Sponsor, will endeavour o correc such error on a dae agreed by he Sponsor (a Correcion ). If a Correcion occurs, he Sponsor shall deermine in is sole and absolue discreion wheher he Correcion shall apply rerospecively or from he relevan dae forward. 5.6 Disruped Days If, in he opinion of he Sponsor, a Disruped Day has occurred on any Scheduled Trading Day, he Index Level will be calculaed and published by he Calculaion Agen on he firs succeeding Scheduled Trading Day which is no a Disruped Day, as deermined by he Sponsor in is sole and absolue discreion, subjec o he Index Disrupion Fallbacks below. For he purpose of his Descripion: Disruped Day means any Scheduled Trading Day on which: (i) he Exchange or Relaed Exchange fails o open for rading during is regular rading session; or (ii) a Disrupion Even, Adjusmen Even or Technical Consrains Even has occurred; Technical Consrains Even means any even causing a Technical Consrain o occur; Technical Consrains in relaion o any Underlying, in circumsances where he Sponsor, acing in is sole and absolue discreion, deermines ha i canno adequaely hedge any of is exposure, 22
including reducing, increasing and mainaining, such exposure in respec of such Underlying as a resul of marke, compliance, inernal risk limis, regulaory, reporing or repuaional reasons or due o any local regulaions which would require i o make a ake-over bid. 5.7 Disrupion Even The occurrence of any of he following evens shall consiue a Disrupion Even unless he Sponsor deermines in is sole and absolue discreion ha such even is no sufficienly maerial o consiue a Disrupion Even. Underlying Marke Disrupion Even. A marke disrupion even, howsoever defined, in respec of any Underlying, as deermined in he sole and absolue discreion of he Sponsor; or Price Source Disrupion. I becomes impossible o obain a price in respec of any Underlying on any Scheduled Trading Day; or Change in Law. On or afer he Publicaion Dae (A) due o he adopion of or any change in any applicable law or regulaion (including, wihou limiaion, any ax law), or (B) due o he promulgaion of or any change in he inerpreaion by any cour, ribunal or regulaory auhoriy wih compeen jurisdicion of any applicable law or regulaion (including any acion aken by a axing auhoriy), he Sponsor deermines in is sole and absolue discreion ha (i) i has become illegal o hold, acquire or dispose of hedging posiions in relaion o any Hedging Aciviy or (ii) he Sponsor will incur a maerially increased cos in performing is obligaions in relaion o he Index (including, wihou limiaion, due o any increase in ax liabiliy, decrease in ax benefi or oher adverse effec on he ax posiion of he Sponsor and/or any of is Affiliaes); or Repariaion Limiaions. Limiaions on he repariaion of invesed capial in he jurisdicion of he principal financial cenre of any Underlying are announced or imposed; or Cusodial Even. Any even, regarding he mainenance of porfolio securiies and cash wih sub-cusodians and securiies deposiories in he jurisdicion of any Underlying, occurs which deprives he Sponsor (or any of is Affiliaes) of all or subsanially all of is asses in he jurisdicion of he principal financial cenre of he componens of such Underlying; or Hedging Disrupion. The Sponsor and/or any of is Affiliaes is unable, afer using commercially reasonable effors, o (A) acquire, esablish, re-esablish, subsiue, mainain, unwind or dispose of any ransacion(s) or asse(s) he Sponsor deems necessary o hedge he exposure or oher price risk of he Sponsor in performing is obligaions wih respec o he Index, or (B) realise, recover or remi he proceeds of any such ransacion(s) or asse(s); or Maerial Even. The occurrence or exisence of (A) a Trading Disrupion; (B) an Exchange Disrupion a any ime during he one hour period ha ends a he Valuaion Time in respec of any Relaed Exchange; or (C) an Early Closure. For he purpose of his Descripion: Early Closure means he closure on any Scheduled Trading Day of he Exchange or Relaed Exchange in respec of any Underlying or he Index prior o is Scheduled Closing Time unless such earlier closing is announced by he Exchange or Relaed Exchange, as he case may be, a leas one hour prior o he earlier of: (i) he acual closing ime for he regular rading session on he Exchange or Relaed Exchange, as he case may be, on such Scheduled Trading Day; and (ii) he submission deadline for orders o be enered ino he Exchange or Relaed Exchange, as he case may be, sysem for execuion on such Scheduled Trading Day; Exchange Disrupion means any even (oher han an Early Closure) ha disrups or impairs (as deermined by he Calculaion Agen) he abiliy of marke paricipans in general o effec ransacions in, or obain marke values for, any Underlying, including, bu no limied o, for he purpose of hedging any obligaions in connecion wih he Index; and 23
Trading Disrupion means (1) any suspension of or limiaion imposed on rading by he Exchange or Relaed Exchange, as he case may be, or oherwise and wheher by reason of movemens in price exceeding limis permied by he Exchange or Relaed Exchange, as he case may be, or oherwise: (i) relaing o any Underlying or he Index or (ii) in fuures, opions conracs or any oher derivaives conracs relaing o any Underlying or he Index on he Relaed Exchange. 5.8 Index Disrupion Fallbacks If (i) a Disrupion Even persiss for each of he 5 Scheduled Trading Days immediaely following he original Scheduled Trading Day ha is a Disruped Day or (ii) if he Sponsor deermines ha (a) here is a disconinuaion in he publicaion of any Underlying (b) he use of any Underlying in he Index is prohibied, or (c) in any oher way any Underlying is maerially modified (oher han a previously prescribed modificaion o he Underlying), or (iii) any Underlying is erminaed, hen he Sponsor shall deermine in consulaion wih he Calculaion Agen wha acions i may ake, which includes, bu no be limied o, he following (each an Index Disrupion Fallback ): (i) selec an alernaive underlying; (ii) calculae a subsiue level for he Index based on bu no resriced o he las published level of he Underlying and such Underlying level may be zero; (iii) accep he closing level of he Underlying published on any alernaive price source; (iv) adjus, amend or oherwise aler he Descripion in accordance wih he adjusmen provisions below under Adjusmens Evens below; or (v) permanenly cease o calculae and disseminae he Index. 5.9 Adjusmen Evens This Descripion, and each of he clauses herein, may be adjused, amended, deleed or oherwise alered by he Sponsor, acing in a commercially reasonable manner (wih he consen of he Calculaion Agen) a any ime, on such dae as he Sponsor shall designae. These adjusmens (each an Adjusmen Even ) may include, bu are no limied o, adjusmens in respec of he following: (a) (b) (c) (d) (e) lllegaliy: any adjusmens required because i has become unlawful in any applicable jurisdicion for he Sponsor o sell or purchase any securiy, or o mainain any posiion linked o any Underlying (which includes, bu is no limied o, where i becomes or is reasonably likely o become unlawful); or UCITS: any adjusmens made o he Index o ensure ha he Index complies wih he requiremens of he Council Direcive of 20 December 1985 on he co-ordinaion of laws, regulaions and adminisraive provisions relaing o underakings for collecive invesmen in ransferable securiies (No 85/611/EEC) as amended from ime o ime and supplemened in similar laws or regulaions for financial indices; or Calculaion Agen: any adjusmens required as a resul of he Calculaion Agen ceasing or advising i will cease, for any reason, o calculae he Index; or Clarificaion: any adjusmens required for clarificaion or for minor or echnical reasons including (wihou limiaion) o correc any manifes or proven error or o cure, correc or supplemen any ambiguiy or defecive provision conained in his Descripion; or Hedging Aciviy: If he Sponsor deermines in is sole and absolue discreion ha any Hedging Aciviy will disor he performance of he Index, he Sponsor may modify he Descripion o ensure ha he Index coninues o mee is objecives; or 24
(f) (g) (h) (i) Inegriy: such oher adjusmens as are necessary o ensure he inegriy of he Index; or Aleraion of he Underlying: any aleraion or adjusmen required o be made o effec adjusmens or Inerim Evens o any Underlying; or Change in economic circumsances: any adjusmens required o reflec a change in economic circumsances of noionally having exposure o he Underlying ; or Index Disrupion Fallback: an Index Disrupion Fallback specified in Chaper 5.8 eniled Index Disrupion Fallbacks has occurred. 5.10 Simulaed Operaing Hisory The Index will be firs calculaed on or around he Live Dae. Therefore any hisorical informaion in respec of he performance of he Index prior o he Live Dae shall be a simulaed hisory ( Simulaed Operaing Hisory ). The Calculaion Agen and he Sponsor have rerospecively calculaed he Index Levels based upon hisorical daa relaing o he prices of he Underlyings obained from he Price Source prior o he Live Dae. The assumpions are as follows: i) Any hisoric non-ordinary dividends have been reinvesed a he relevan Dividend Bid Level; and ii) The Dividend Bid Levels, Performance Adjusmen and Spread Rae used are hose as a on he Publicaion Dae. The Simulaed Operaing Hisory may be published on he Bloomberg Page on or around he Publicaion Dae. Alhough he Sponsor will obain informaion for inclusion in or for use in he calculaion of he Simulaed Operaing Hisory from sources which he Sponsor considers reliable, he Sponsor will no independenly verify such informaion and does no guaranee he accuracy and/or he compleeness of he Simulaed Operaing Hisory or any daa included herein. 5.11 Terminaion of Calculaion Agency Agreemen If on any Scheduled Trading Day he Calculaion Agen is (i) for any reason, oher han a such day being a Disruped Day, unable o calculae he Index; or (ii) in maerial breach of any provision of he Calculaion Agency Agreemen, as deermined by he Sponsor in is sole and absolue discreion, he Sponsor may, in accordance wih he erms of he Calculaion Agency Agreemen, erminae he appoinmen of he Calculaion Agen (a Calculaion Agen Terminaion Even ). On he occurrence of a Calculaion Agen Terminaion Even, he Sponsor may, in is sole and absolue discreion: appoin a replacemen Calculaion Agen; or cease he calculaion of he Index in he even a replacemen Calculaion Agen canno be appoined wihin 8 Scheduled Trading Days, unless he Sponsor decides o exend such period. Any suspension of calculaion of he Index while a new Calculaion Agen is appoined will be reaed as if a Disruped Day was occurring; or choose o ac as Calculaion Agen iself and coninue o publish he Index Level on he Bloomberg page on an ongoing basis or for as long as i deems necessary unil a new independen Calculaion Agen is appoined. 25
Nowihsanding he above, he Sponsor may, in is sole and absolue discreion, a any ime and wihou noice, erminae he Index and proceed o ask he Calculaion Agen o cease he calculaion and disseminaion of he Index. 5.12 Noice The Sponsor may, wih he prior consen of he Calculaion Agen, publish noices relaing o he Index as i deermines necessary, bu is under no obligaion o publish any paricular noice. Such noices may be published on he Bloomberg Page. 26
6. Change in Mehodology and Terminaion In calculaing and deermining he value of he Index, he Calculaion Agen will refer o he mehodology described above and he applicaion of such mehodology shall be conclusive and binding. No assurance can be given ha fiscal, marke, regulaory, juridical, financial or oher circumsances (including, bu no limied o, any changes o or any suspension or erminaion of any componens for which values will be deermined in relaion o he Index) will no arise ha would, in he view of he Sponsor, necessiae or make desirable a modificaion of or change o he mehodology of he Index and he Sponsor shall be eniled o make any such modificaion or change. Any change or modificaion o he mehodology may be ouside he echnology employed by he Calculaion Agen and hus, he Calculaion Agen may no be able o calculae he Index, in which even he Sponsor shall, in is sole and absolue discreion, appoin a successor Calculaion Agen. The Sponsor may make modificaions o he erms of he Index in any manner ha i may deem necessary or desirable, including (wihou limiaion) o correc any manifes or proven error or o cure, correc or supplemen any ambiguiy or defecive provision conained in he mehodology or rules relaing o he Index. In paricular, bu wihou limiaion, he Sponsor may, a any ime and wihou noice, change he frequency of calculaion of he Index and make such adjusmen o he mehodology described in hese Index rules as i deems necessary, in is sole and absolue discreion, o ake accoun of he amended frequency of calculaion. 6.1 Terminaion The Sponsor may, in is sole and absolue discreion, a any ime and wihou noice, erminae and proceed o ask he Calculaion Agen o cease he calculaion and disseminaion of he Index. 27
7. Disclaimer Alhough he Sponsor will obain informaion for inclusion in or for use in he calculaion of he Index from sources which he Sponsor considers reliable, he Sponsor will no independenly verify such informaion and does no guaranee he accuracy and/or he compleeness of he Index or any daa included herein. The Sponsor is under no obligaion o advise any person of any error in he Index (bu may do so in is sole and absolue discreion). References o any Underlying are included only o describe each Underlying upon which he Index is based. The Index is no in any way sponsored, endorsed or promoed by he issuer of any Underlying. Any informaion in his Descripion wih respec o he Index is based on publicly available informaion and neiher he Sponsor nor he Calculaion Agen make any represenaion or warrany as o he accuracy or compleeness of such informaion. The Sponsor makes no express or implied represenaions or warranies concerning (i) he accuracy or compleeness of his Descripion, (ii) wheher or no he Index may achieve any paricular level or mee or correlae wih any paricular objecive or (iii) he finess for any purpose of he Index or accuracy or compleeness of his Descripion. The Royal Bank of Scoland plc and is Affiliaes shall have no liabiliy o any person for he qualiy, accuracy, or compleeness of he informaion in his Descripion or for any delays, omissions or inerrupions in delivery of any informaion relaing o he Index. The Royal Bank of Scoland plc shall have no liabiliy o any person in respec of any deerminaion, amendmen, modificaion, adjusmen or erminaion in respec of he Index. The Royal Bank of Scoland plc makes no warrany or represenaion, express or implied in connecion wih he Index or he purposes for which i is used, and shall no have liabiliy for any losses or expenses incurred in connecion wih he Index, his Descripion or any insrumen linked o he Index. Neiher he Sponsor nor any of is Affiliaes accep legal liabiliy o any person in connecion wih (i) his Descripion and (ii) is publicaion and disseminaion of he Index. Nohing in his Chaper 7 will: (i) exclude or resric any obligaion he Sponsor may have o any recipien of his Descripion, nor any liabiliy he Sponsor may incur o any such recipien, under he Financial Services and Markes Ac 2000, or he regulaory regime hereunder; or (ii) exclude or resric, o an exen prohibied by law, any duy or liabiliy he Sponsor may have o any recipien of his Descripion. The Royal Bank of Scoland plc owns inellecual propery righs in he Index and in his Descripion, which has been supplied by he Sponsor. Any use of any such inellecual propery righs mus be wih he consen of The Royal Bank of Scoland plc. 28
8. Appendix: Dividend Bid Level Dividend Bid Level prevailing on he Publicaion Dae. The below levels are deermined by he Calculaion Agen, and may be updaed from ime o ime in accordance wih he ax raes which apply o non-residen insiuions, based in Luxembourg, ha do no benefi from double axaion reaies (sourced from Erns & Young s Worldwide Corporae Tax Guide and he Economic Inelligence Uni) Counry of ax residence Dividend Bid Level Ausralia 85.00% Ausria 75.00% Belgium 75.00% Canada 75.00% Czech Republic 85.00% Denmark 72.00% Finland 72.00% France 75.00% Germany 73.63% Indonesia 80.00% Ireland 80.00% Ialy 73.00% Japan 80.00% Luxembourg 85.00% Neherlands 85.00% Norway 75.00% Porugal 80.00% Russia 85.00% Souh Korea 72.50% Spain 82.00% Sweden 70.00% Swizerland 65.00% Taiwan 75.00% Unied Kingdom 100.00% Unied Saes 70.00% 29