Ground Rules. FTSE Global Wealth Allocation (GWA) Index Series v2.8

Transcription

1 Ground Rules FTSE Global Wealth Allocaton (GWA) Index Seres v2.8 ftserussell.com January 2018

2 Contents 1.0 Introducton Management Responsbltes FTSE Russell Index Polces Elgble Securtes Perodc Revew of Consttuents Changes to Consttuent Companes Corporate Actons and Events Index Calculaton Methodology Defntons of Wealth Appendx A: Further Informaton FTSE Russell FTSE Global Wealth Allocaton (GWA) Index Seres, v2.8, January of 17

3 Secton 1 Introducton 1.0 Introducton 1.1 Ths document sets out the Ground Rules for the constructon and management of the FTSE Global Wealth Allocaton (GWA) Index Seres, calculated n assocaton wth Global Wealth Allocaton Lmted. 1.2 The FTSE GWA Index Seres weghts the consttuents of the FTSE All-Share Index and the FTSE All-World Index accordng to the consttuent s ablty to create shareholder wealth measured by net proft, cash flow and book value (see Secton 5). The FTSE GWA Index Seres s not market captalsaton weghted, but each consttuent weght s based upon ts ablty to create wealth. 1.3 FTSE Russell FTSE Russell s a tradng name of FTSE Internatonal Lmted, Frank Russell Company, FTSE Global Debt Captal Markets Lmted (and ts subsdares FTSE Global Debt Captal Markets Inc. and MTSNext Lmted), Mergent, Inc., FTSE Fxed Income LLC and The Yeld Book Inc. 1.4 FTSE Russell hereby notfes users of the ndex seres that t s possble that factors, ncludng external factors beyond the control of FTSE Russell, may necesstate changes to, or the cessaton of, the ndex seres and therefore, any fnancal contracts or other fnancal nstruments that reference the ndex seres or nvestment funds whch use the ndex seres to measure ther performance should be able to wthstand, or otherwse address the possblty of changes to, or cessaton of, the ndex seres. 1.5 The FTSE GWA Index Seres s based on the followng FTSE ndexes: Usng the FTSE All-Share Index: FTSE GWA UK Index Usng the FTSE All-World Index: FTSE GWA US Index FTSE GWA Japan Index FTSE GWA Australa Index FTSE GWA Developed Eurozone Index FTSE GWA Asa Pacfc ex Japan ex Australa ex New Zealand Index FTSE GWA Developed Asa Pacfc Index FTSE GWA Developed Asa Pacfc ex Japan Index FTSE GWA Developed Index FTSE GWA Developed Net of Tax Index FTSE Russell FTSE Global Wealth Allocaton (GWA) Index Seres, v2.8, January of 17

4 FTSE GWA Developed ex US Index FTSE GWA Developed ex Japan Index FTSE GWA Developed ex Australa Index FTSE GWA Developed ex Eurozone Index FTSE GWA Developed ex North Amerca Index FTSE GWA Developed ex UK Index FTSE GWA Developed Europe Index FTSE GWA Developed Europe ex UK Index FTSE GWA Emergng Index FTSE GWA North Amerca Index FTSE GWA Sharah Developed Index FTSE GWA All-World Index Note: The FTSE All-Share Index and the FTSE All-World Index are referred to as the underlyng ndexes n these rules. 1.6 The FTSE GWA Index Seres s calculated at the end of each busness day n US Dollars, Japanese Yen, Australan Dollars, Euro and Sterlng. Addtonally the FTSE GWA US Index wll be calculated on a real-tme bass every 15 seconds n US Dollars. 1.7 Captal and Total Return ndexes are calculated. 1.8 These Ground Rules Ths document sets out the Ground Rules for the constructon and mantenance of the FTSE Global Wealth Allocaton Index Seres Unless contaned n these Ground Rules, all other areas of the methodology relatng to the FTSE GWA Index Seres are governed by the Ground Rules of the relevant underlyng FTSE Index. These Ground Rules should therefore be read n conjuncton wth the Ground Rules of the relevant underlyng FTSE ndexes (see Appendx A for contact detals) Unless specfcally detaled n ths document, all areas of the methodology regardng the management of the FTSE GWA Index Seres are related to the FTSE Global Equty Index Seres Ground Rules. The FTSE GWA Index Seres methodology should therefore be read n conjuncton wth the FTSE Global Equty Index Seres Ground Rules. For further explanatons on the Sharah methodology, please refer to the FTSE Sharah Global Equty Index Seres Ground Rules. These rules are avalable on FTSE Russell FTSE Global Wealth Allocaton (GWA) Index Seres, v2.8, January of 17

5 Secton 2 Management Responsbltes 2.0 Management Responsbltes 2.1 FTSE Internatonal Lmted (FTSE) FTSE s the benchmark admnstrator of the ndex seres FTSE s responsble for the daly calculaton, producton and operaton of the FTSE GWA Index Seres and wll: mantan records of the ndex weghtngs of all consttuents; make changes to the consttuents and ther weghtngs n accordance wth the Ground Rules; apply the changes resultng from the revews as requred by the Ground Rules; publsh changes to the consttuent weghtngs resultng from ther ongong mantenance and the perodc revews; dssemnate the ndexes. 2.2 Global Wealth Allocaton Lmted (GWA) GWA s responsble for the calculaton of the quarterly revews of the FTSE GWA Index Seres. For each FTSE GWA Index, GWA bulds wealth-weghted portfolos; see Secton 5 for further detals. These portfolos are rebalanced on a quarterly bass to be synchronsed to the underlyng FTSE quarterly revews. The new wealth adjustment factor for each consttuent s derved from the portfolo weghts that GWA supply to FTSE on a quarterly bass. 2.3 Amendments to these Ground Rules These Ground Rules shall be subject to regular revew by FTSE Russell to ensure that they contnue to meet the current and future requrements of nvestors and other ndex users. Any proposals for sgnfcant amendments to these Ground Rules wll be subject to consultaton wth FTSE Russell advsory commttees and other stakeholders f approprate. The feedback from these consultatons wll be consdered by the FTSE Russell Product Governance Board before approval s granted As provded for n the Statement of Prncples for FTSE Russell Equty Indexes, where FTSE Russell determnes that the Ground Rules are slent or do not specfcally and unambguously apply to the subject matter of any decson, any decson shall be based as far as practcal on the Statement of Prncples. After makng any such determnaton, FTSE Russell shall advse the market of ts decson at the earlest opportunty. Any such treatment wll not be consdered as an excepton or FTSE Russell FTSE Global Wealth Allocaton (GWA) Index Seres, v2.8, January of 17

6 change to the Ground Rules, or to set a precedent for future acton, but FTSE Russell wll consder whether the Ground Rules should subsequently be updated to provde greater clarty. FTSE Russell FTSE Global Wealth Allocaton (GWA) Index Seres, v2.8, January of 17

7 Secton 3 FTSE Russell Index Polces 3.0 FTSE Russell Index Polces These Ground Rules should be read n conjuncton wth the followng polcy documents whch can be accessed usng the lnks below: 3.1 Corporate Actons and Events Gude Full detals of changes to consttuent companes due to corporate actons and events can be accessed n the Corporate Actons and Events Gude usng the followng lnk: Corporate_Actons_and_Events_Gude.pdf 3.2 Statement of Prncples for FTSE Russell Equty Indexes (Statement of Prncples) Indexes need to keep abreast of changng markets and the Ground Rules cannot antcpate every eventualty. Where the Rules do not fully cover a specfc event or development, FTSE Russell wll determne the approprate treatment by reference to the Statement of Prncples whch summarses the ethos underlyng FTSE Russell s approach to ndex constructon. The Statement of Prncples s revewed annually and any changes proposed by FTSE Russell are presented to the FTSE Russell Polcy Advsory Board for dscusson before approval by the FTSE Russell Product Governance Board. The Statement of Prncples can be accessed usng the followng lnk: Statement_of_Prncples.pdf 3.3 Index Polcy for Tradng Halts and Market Closures Gudance for the treatment of ndex changes n the event of tradng halts or market closures can be found usng the followng lnk: Index_Polcy_for_Tradng_Halts_and_Market_Closures.pdf 3.4 Index Polcy n the Event Clents are Unable to Trade a Market Detals of FTSE Russell s treatment can be accessed usng the followng lnk: Index_Polcy_n_the_Event_Clents_are_Unable_to_Trade_a_Market.pdf FTSE Russell FTSE Global Wealth Allocaton (GWA) Index Seres, v2.8, January of 17

8 3.5 Recalculaton Polcy and Gudelnes The FTSE Global Wealth Allocaton Index Seres are recalculated whenever errors or dstortons occur that are deemed to be sgnfcant. Users of the FTSE Global Wealth Allocaton Index Seres are notfed through approprate meda. For further nformaton refer to the FTSE Russell Recalculaton Polcy and Gudelnes document whch s avalable from the FTSE Russell webste usng the lnk below or by contactng nfo@ftserussell.com. Recalculaton_Polcy_and_Gudelnes_Equty_Indexes.pdf 3.6 Polcy for Benchmark Methodology Changes Detals of FTSE Russell s polcy for makng benchmark methodology changes can be accessed usng the followng lnk: Polcy_for_Benchmark_Methodology_Changes.pdf FTSE Russell FTSE Global Wealth Allocaton (GWA) Index Seres, v2.8, January of 17

9 Secton 4 Elgble Securtes 4.0 Elgble Securtes 4.1 Consttuents of the FTSE All-Share Index and FTSE All-World Index are elgble for ncluson n the FTSE GWA Index Seres. 4.2 The consttuents of the FTSE GWA Index Seres wll match exactly the consttuents of the underlyng FTSE Index. FTSE Russell FTSE Global Wealth Allocaton (GWA) Index Seres, v2.8, January of 17

10 Secton 5 Perodc Revew of Consttuents 5.0 Perodc Revew of Consttuents 5.1 The FTSE GWA Index Seres wll be revewed quarterly based on data as at the close of busness on the Tuesday before the frst Frday of March, June, September and December, takng nto account any addtons and deletons n the underlyng ndexes. 5.2 At the quarterly revew the wealth adjustment factor s calculated, and s appled to the nvestable market captalsaton of each consttuent (see detals below). Changes arsng from the quarterly revew wll be mplemented after the close of busness on the thrd Frday (.e. effectve Monday) of March, June, September and December. 5.3 The wealth creaton of a company s defned n terms of the followng three measures, as found n a company s proft and loss account, and balance sheet: Net Proft, Cash Flow, Book Value = Wealth Creaton 5.4 If a company has more than one stock ssue or a stock ssue has more than one lstng n the ndex, a wealth measure wll be appled to each stock ssue/lstng. 5.5 Sub Portfolo Constructon The frst step of constructng the Wealth Portfolo s to buld a sub portfolo for each of the three wealth measures As ndvdual wealth proxes are a partal vew of a company s wealth, the most extreme values are trmmed to mantan a broad perspectve on a company s wealth For portfolo constructon, GWA converts the local currency wealth to US dollars usng the spot exchange rate The sub portfolo weghts are constructed by dvdng each company s wealth measure by the sum of the wealth measures for that ndex. Secton 7 shows formulae for ths step n more detal If a company does not report a wealth measure, t enters that sub portfolo at ts weght n the underlyng FTSE Index (market captalsaton weghted ndex) The sub portfolos are long only. Companes reportng negatve wealth measures wll have a zero weght n that sub portfolo. 5.6 Wealth Portfolo Constructon The fnal step n Portfolo Constructon s to buld the Wealth Portfolo from the three sub portfolos. FTSE Russell FTSE Global Wealth Allocaton (GWA) Index Seres, v2.8, January of 17

11 5.6.2 The Wealth Portfolo weghts are the average of the three sub portfolo weghts. 5.7 Wealth Adjustment Factor In order to smplfy constructon of the FTSE GWA Index Seres, t s convenent to make use of the rato of the ndependently developed wealth portfolo weght to the underlyng ndex weght. Ths rato s defned as the Wealth Adjustment Factor and s usually constant for each company between rebalancng dates n the FTSE All-Share Index and FTSE All-World Index The Wealth Adjustment Factor s used by FTSE to make the necessary changes to the approprate FTSE GWA Index weghts followng mergers and other corporate events. 5.8 Treatment of Multple Classes of Shares Wealth s measured at the company level and dvded between the dfferent classes of shares ssued by the company When a company has multple classes of shares whch are all present n the same FTSE GWA Index, GWA allocates the wealth measured for a company between the share classes that own ths wealth n proporton to the market captalsaton of the dfferent classes of shares When a company has multple classes of shares, not all of whch appear n the FTSE GWA Index, the total wealth s splt between the classes of shares n the rato of ther market captalsaton. 5.9 Treatment of Dual Lsted Companes Dual lsted companes consst of two enttes that exst as separate companes, but operate as a combned group. GWA allocates the wealth of the combned group to each separate company accordng to the rato of ther market captalsaton. FTSE Russell FTSE Global Wealth Allocaton (GWA) Index Seres, v2.8, January of 17

12 Secton 6 Changes to Consttuent Companes 6.0 Changes to Consttuent Companes 6.1 Addtons Includng New Issues When a new ssue s added to an underlyng ndex ts ndex elgblty for the FTSE GWA ndex wll be assessed at the next quarterly revew. 6.2 Deletons If a consttuent s removed from the underlyng ndex, the consttuent wll also be removed from the relevant FTSE GWA Index. The removal wll be concurrent wth ts removal from the relevant underlyng ndex. FTSE Russell FTSE Global Wealth Allocaton (GWA) Index Seres, v2.8, January of 17

13 Secton 7 Corporate Actons and Events 7.0 Corporate Actons and Events If a consttuent n the underlyng ndex has a stock splt, stock consoldaton, rghts ssue, bonus ssue, a change n the number of shares n ssue or a change n free float, the consttuent s weghtng n the FTSE GWA Index wll reman unchanged pre and post such an event untl the next quarterly revew. Full detals of changes to consttuent companes due to corporate actons and events can be accessed n the Corporate Actons and Events Gude for Non Market Captalsaton Weghted Indexes usng the followng lnk: Corporate_Actons_and_Events_Gude_for_Non_Market_Cap_Weghted_Indexes.pdf A Corporate Acton s an acton on shareholders wth a prescrbed ex date. The share prce wll be subject to an adjustment on the ex date. The ndex wll be adjusted n lne wth the ex date. These nclude the followng: Captal Repayments Rghts Issues/Enttlement Offers Stock Converson Splts (sub-dvson) / Reverse splts (consoldaton) Scrp ssues (Captalsaton or Bonus Issue) A Corporate Event s a reacton to company news (event) that may mpact the ndex dependng on the ndex rules. For example, a company announces a strategc shareholder s offerng to sell ther shares (secondary share offer) ths could result n a free float weghtng change n the ndex. Where an ndex adjustment s requred FTSE wll provde notce advsng of the tmng of the change. 7.1 Suspenson of Dealng Suspenson of Dealng rules can be found wthn the Corporate Actons and Events Gude for Non Market Captalsaton Weghted Indexes. 7.2 Mergers and Take-overs The treatment of takeovers, mergers and demergers can be found wthn the Corporate Actons and Events Gude for Non Market Captalsaton Weghted Indexes. FTSE Russell FTSE Global Wealth Allocaton (GWA) Index Seres, v2.8, January of 17

14 Secton 8 Index Calculaton Methodology 8.0 Index Calculaton Methodology 8.1 Index Revew Calculaton Once the three wealth measurements have been obtaned (see Secton 5), the correspondng subportfolo s constructed as follows (for clarty, the formula for Book Value s shown; the other subportfolos are congruent) If every company has reported a Book Value, and t s postve, then the Book Value sub-portfolo weght, PBV for company s gven by: Where:- P BV BV f BV f j j j BV = the most recent reported book value applcable to stock n US dollars. f = the nvestablty weght for securty (.e. the free-float weght) In general, not every company wll have all wealth measures avalable. To descrbe ths, we defne an ndcator functon I BV where I BV= 1 f book value s avalable for company and I BV=0 otherwse. Further, to keep the portfolo long only, negatve wealth measures are set to zero. For the Book Value sub-portfolo ths allows: P BV Where:- I BV j Max( BV,0) f BV I Max( BV,0) f j j j I k k BV l MC MC l k (1 I BV ) MC MC MC = the market captalsaton of stock after the applcaton of any nvestablty weghtng n US dollars In ths way, companes wthout reported wealth measures exst n the ndex at ther nvestabltyadjusted market captalsaton weght, at exactly the same weght as the underlyng FTSE ndex To convert the sub-portfolos to the wealth-weghted portfolo, P, we take the average: m m P P BV P 3 CF P NP FTSE Russell FTSE Global Wealth Allocaton (GWA) Index Seres, v2.8, January of 17

15 Where:- P BV = the Book Value sub portfolo weght. P CF = the Cash Flow sub portfolo weght. P NP = the Net Proft sub portfolo weght For convenence n convertng between mandates, we defne a wealth adjustment factor c as follows (c s constant across ndexes and through tme between rebalancng): Where:- P c w w = The securtes weght n the underlyng ndex: 8.2 Index Calculaton Calculaton of the FTSE GWA Index Seres s carred out by way of the wealth adjustment factor, c. Ths factor adjusts the nvestable market captalsaton of the consttuent to take nto account the wealth creaton for each consttuent. Thus:- Where, =1, 2,, N N 1 p e s d f c N s the number of securtes n the ndex. p s the latest trade prce of the component securty (or the prce at the close of the ndex on the prevous day). e s the exchange rate requred to convert the securty s currency nto the Index s base currency. s s the number of shares n ssue used by FTSE Russell for the securty, as defned n these Ground Rules. f s the Investablty Weghtng Factor to be appled to a securty to allow amendments to ts weghtng, expressed as a number between 0 and 1, where 1 represents a 100% free float. Ths factor s publshed by FTSE Russell for each securty n the underlyng ndex. c s the Wealth Adjustment Factor to be appled to a securty to correctly weght that securty n the ndex. Ths factor maps the nvestable market captalsaton of each stock to a notonal market captalsaton for ncluson n the Index. Ths factor s publshed by FTSE Russell for each securty n the ndex. d s the dvsor, a fgure that represents the total ssued share captal of the ndex at the base date. The dvsor can be adjusted to allow changes n the ssued share captal of ndvdual securtes to be made wthout dstortng the ndex. FTSE Russell FTSE Global Wealth Allocaton (GWA) Index Seres, v2.8, January of 17

16 Secton 9 Defntons of Wealth 9.0 Defntons of Wealth 9.1 The sources for the wealth measurement data nclude data provded by a multtude of databases, and n some cases, ndvdual company annual reports. Cash Flow - The measure of proftablty of the company s assets on a cash bass. It s the sum of net proft and all non-cash charges or credts. It ncludes, but s not restrcted to, deprecaton, amortsaton of ntangbles and deferred taxes, and t excludes extraordnary tems and changes n workng captal. Net Proft - The second measure of proftablty s net proft after tax. Net proft s ncome after operatng and non-operatng expense, reserves, ncome taxes, and mnorty nterest but before extraordnary tems, preferred dvdends and common dvdends. Book Value - A rough proxy for the lqudaton value or replacement cost, the Balance Sheet value of a company s broadly defned as the total assets mnus the total labltes. From the March 2013 rebalance, the Book Value wealth proxy evolved to better reflect the wealth creatng assets of the company. Although Unadjusted Book Value provdes a rough proxy for the wealth stock of a company, there are elements of wealth that t may not farly reflect. For example: Companes nvest n Research & Development to generate future ncome and t s therefore part of a company s wealth. Unadjusted Book Value would not reflect ths wealth when R&D expendtures are expensed. A company s wealth ncludes Intellectual Property, Busness Relatonshps and Brandng whch may not be ncluded n Unadjusted Book Value where they have not been explctly acqured. Balance sheets tend to reflect the hstorcal cost of assets. If these assets have become unproductve, mpared or obsolete, the hstorcal cost may overstate the company s wealth. The adjusted book value consders non-captalsed tems and the value of the excess proft that the frm generates after chargng for the captal used n ts generaton. For more nformaton on the Adjusted Book Value, please contact: Clentservce (ClentServce@globalwealthallocaton.com) FTSE Russell FTSE Global Wealth Allocaton (GWA) Index Seres, v2.8, January of 17

17 Appendx A: Further Informaton A Glossary of Terms used n FTSE Russell s Ground Rule documents can be found usng the followng lnk: Glossary.pdf For further nformaton on the FTSE Global Wealth Allocaton Index Seres Ground Rules vst or e-mal nfo@ftserussell.com. GWA can be contacted at:- Global Wealth Allocaton Lmted 17 Battery Place, 11 th floor New York, NY USA London Stock Exchange Group plc and ts applcable group undertakngs (the LSE Group ). Global Wealth Allocaton Lmted ( GWA ). The LSE Group ncludes (1) FTSE Internatonal Lmted ( FTSE ), (2) Frank Russell Company ( Russell ), (3) FTSE Global Debt Captal Markets Inc. and FTSE Global Debt Captal Markets Lmted (together, FTSE Canada ) and (4) MTSNext Lmted ( MTSNext ), (5) Mergent, Inc. ( Mergent ), (6) FTSE Fxed Income LLC ( FTSE FI ) and (7) The Yeld Book Inc ( YB ). All rghts reserved. The FTSE Global Wealth Allocaton Index Seres s calculated by or on behalf of FTSE Internatonal Lmted or ts afflate, agent or partner. FTSE Internatonal Lmted s authorsed and regulated by the Fnancal Conduct Authorty as a benchmark admnstrator. FTSE Russell s a tradng name of FTSE, Russell, FTSE Canada, MTSNext, Mergent, FTSE FI and YB. FTSE, Russell, FTSE Russell MTS, FTSE4Good, ICB, Mergent, WorldBIG, USBIG, EuroBIG, AusBIG, The Yeld Book and all other trademarks and servce marks used heren (whether regstered or unregstered) are trade marks and/or servce marks owned or lcensed by the applcable member of the LSE Group or ther respectve lcensors and are owned, or used under lcence, by FTSE, Russell, MTSNext, FTSE Canada, Mergent, FTSE FI or YB. 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 any member of the LSE Group nor ther respectve drectors, offcers, employees, partners or lcensors for any errors or for any loss from use of ths publcaton or any of the nformaton or data contaned heren. No member of the LSE Group nor ther respectve drectors, offcers, employees, partners or lcensors make any clam, predcton, warranty or representaton whatsoever, expressly or mpledly, ether as to the results to be obtaned from the use of the FTSE Global Wealth Allocaton Index Seres or the ftness or sutablty of the Index Seres for any partcular purpose to whch t mght be put. No member of the LSE Group nor ther respectve drectors, offcers, employees, partners or lcensors provde nvestment advce and nothng n ths document should be taken as consttutng fnancal or nvestment advce. No member of the LSE Group nor ther respectve drectors, offcers, employees, partners or lcensors make any representaton regardng the advsablty of nvestng n any asset. A decson to nvest n any such asset should not be made n relance on any nformaton heren. Indexes cannot be nvested n drectly. Incluson of an asset n an ndex s not a recommendaton to buy, sell or hold that asset. The general nformaton contaned n ths publcaton should not be acted upon wthout obtanng specfc legal, tax, and nvestment advce from a lcensed professonal. 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 otherwse, wthout pror wrtten permsson of the applcable member of the LSE Group. Use and dstrbuton of the LSE Group ndex data and the use of ther data to create fnancal products requre a lcence wth FTSE, Russell, FTSE Canada, MTSNext, Mergent, FTSE FI, YB and/or ther respectve lcensors. FTSE Russell FTSE Global Wealth Allocaton (GWA) Index Seres, v2.8, January of 17