Index Rules and Methodology

Transcription

1 Index Rules and Mehodology S-Nework Europe Equy 500 Index (Ticker: SNE500) S-Nework Europe Equy 1000 Index (Ticker: SNE1000) S-Nework Pacific Equy 500 Index (Ticker: SNP500) S-Nework Pacific Equy 1000 Index (Ticker: SNP1000) S-Nework Developed Inernaional Equy 1000 Index (Ticker: SND1000) S-Nework Developed Inernaional Equy 2000 Index (Ticker: SND2000) December 2017

2 TABLE OF CONTENTS 1. General Descripion of he S-Nework Developed Inernaional Benchmark Indexes 3 2. The Index Commee Eligibily Creria & Weighing Index Values a Incepion Index Changes Quarerly Rebalancings Roles of he Paries in he Semi-Annual Reconsuions Roles of he Paries in he Quarerly Rebalancings Ongoing Mainenance and Handling of Corporae Acions Calculaion and Disseminaion of Index Values Calculaion and Adjusmens Daa Correcion Policy Review Schedule

3 1. General Descripion of he S-Nework Developed Inernaional Indexes The S-Nework Developed Inernaional Benchmark Indexes (he Benchmarks ) are a series of benchmark indexes designed o provide accurae coverage of publicly lised US socks ha represen over 85% of he marke capalizaion of developed markes ouside he Uned Saes. All Benchmarks are weighed based on floa marke capalizaion and are reconsued on he hird Friday of December and rebalanced on he hird Fridays of March and Sepember. The Benchmarks include he following indexes: S-Nework Pacific 500 (SNP500): The 500 larges Pacific Basin socks, including Israel. S-Nework Europe 500 (SNE500): The 500 larges European socks. S-Nework Developed Inernaional 1000 (SND1000): The combined SNP500 and SNE500 Indexes. S-Nework Pacific 1000 (SNP1000): The 1000 larges Pacific Basin socks, including Israel. S-Nework Europe 1000 (SNE1000): The 1000 larges European socks. S-Nework Developed Inernaional 2000 (SND2000): The combined SNP1000 and SNE1000 Indexes. Eligibily for inclusion in he benchmarks is deermined based on he company s full marke capalizaion. Cerain pass-hrough securies, including REITS, Morgage REITS, Maser Limed Parnerships, Closed-End Funds and Business Developmen Companies are excluded from he Benchmarks. 2. The Index Commee The S-Nework Benchmark Index Commee ( The Commee ) will be composed of no less han hree members. The Commee Chairman will have exensive experience wh and experise in Inernaional equy markes. The oher members will have experience in financial markes, indexes and/or financial producs. The Commee will be responsible for overseeing he acivies of he calculaion agen and approving all changes o he index relaed o s semi-annual reconsuions and quarerly rebalancings. The Commee mees semi-annually, eher in person or via eleconference, o discuss index issues and organize he semi-annual reconsuion and semi-annual rebalancing. The composion of he Commee may from ime o ime be changed o reflec changes in marke condions. All members of he index commee and heir advisors shall comply wh he S-Nework Global Indexes code of conduc and ehics wh respec o he disclosure and use of maerial non-public informaion. 3. Eligibily Creria and Weighing The saring universe for he SNP500 is he 750 larges marke capalizaion socks domiciled in he following counries: Ausralia Canada Hong Kong Japan Taiwan Israel Singapore Macao 3

4 Korea New Zealand The saring universe for he SNE500 is he 750 larges marke capalizaion socks domiciled in he following counries: Ausria Greece Porugal Belgium Ireland Spain Denmark Ialy Sweden Finland Luxembourg Swzerland France Neherlands Uned Kingdom Germany Norway Monaco Cerain socks domiciled in eligible counries may no be eligible if heir counry of risk is a non-eligible counry. Cerain socks domiciled in non-eligible counries may be eligible if heir counry of risk is an eligible counry. Counry of risk is defined as he counry in which he company s primary business acivies are locaed. Eligibily for inclusion in he saring universe is deermined based on he company s full marke capalizaion. Cerain pass-hrough securies, including REITS, Morgage REITS, Maser Limed Parnerships, Closed-End Funds and Business Developmen Companies, are excluded from he Benchmarks. Socks mus mainain an R-Score greaer han 1 over he 90 days preceding he las business day of November ( he Snapsho Dae ) o be included in a Benchmark. The saring universe is updaed semi-annually based on daa as of he las business day of November ( he Snapsho Dae ). Socks are seleced for inclusion in he Benchmarks based on heir full marke capalizaion rank in he saring universe. Socks wh free floa of less han 20% are excluded from he index. Buffers of 10% are applied o he eligibily creria a each reconsuion for curren consuens of he benchmark. Accordingly, socks mus fall below he following hresholds o be dropped from he Benchmarks: S-Nework Developed Inernaional Equy 1000 (SND1000): A consuen sock mus fall below he rank of 1100 o be deleed. S-Nework Europe Equy 1000 (SNE1000): A consuen sock mus fall below he rank of 1100 o be deleed. S-Nework Pacific Equy 1000 (SNP1000): A consuen sock mus fall below he rank of 1100 o be deleed. S-Nework Europe Equy 500 (SNE500): A consuen sock mus fall below he rank of 550 o be deleed. S-Nework Pacific Equy 500 (SNP500): A consuen sock mus fall below he rank of 550 o be deleed. 4

5 All socks seleced for inclusion in he Benchmarks are weighed based on heir floa marke capalizaion. Share weighs will be based on prices as of he close of rading on he day before he second Friday of he rebalancing monh ( The Record Dae ). 4. Secor Weighings The S-Nework Developed Inernaional Equy 1000 Index (SND1000) is used as he universe for he Developed Inernaional Equy Secor Benchmarks. The Secor Benchmarks rack socks in 10 GICS secors (all besides Real Esae): 1. Informaion Technology 2. Consumer Discreionary 3. Financials 4. Healh Care 5. Indusrials 6. Telecommunicaion Services 7. Consumer Saples 8. Energy 9. Maerials 10. Uilies Secor weighs whin he SND1000 are applied as par of he index rebalancings ha occur on he hird Friday of each June and December. Cerain adjusmens may be made o he secor weighings o eliminae daa anomalies and o address invesmen issues relaed o equy markes. Secor Benchmark consuens shall be subjec o limaion on heir floa-adjused capalizaion weighing as follows: a) No sock s weigh shall exceed 20%. b) The aggregae weigh of socks exceeding 5% shall no exceed 45%. The following procedure shall be used o ensure ha no Compose consuen weighing exceeds a pre-deermined maximum weigh on he rebalancing dae: Sep 1: Sor he Compose consuens by floa marke capalizaion in descending order. Saring wh he second larges company in he index, calculae a floa marke capalizaion raio for each company o he nex larges company in he index. Sep 2: Adjus his raio by he following formula: 1 OriginalRaio NewRaio 1 Facor where: Original Raio = he floa marke capalizaion raio of each company o he nex larges company calculaed in Sep 1. Facor = a divisor, ha sars wh 1, ha increases he raio calculaed in Sep1 Sep 3: Calculae new floa marke capalizaion using he New Raio for each company. Sep 4: Calculae he new weighs for each company based on he new floa marke capalizaion and check o see if he weigh lims described in V(ii) are saisfied. 5

6 Sep 5: If he weigh lims are no saisfied, repea Seps 2 o 4, increasing he Facor by.01 for each round unil he weigh lims are saisfied. Sep 6: Once he weigh lims are saisfied, calculae he final cap facors for each company using he floa marke capalizaion calculaed in Sep 3 such ha he smalles company in he index has a cap facor of Index Values a Incepion Each of he Benchmarks had values a incepion of 1000 on heir incepion dae of December 31, The Benchmarks are calculaed daily on boh a Price Only and on a Toal Reurn basis. 6. Index Changes The Indexes are reconsued semi-annually on he hird Friday of June and December and are rebalanced quarerly on he hird Friday of he las monh of each calendar quarer. Index changes ake place a each reconsuion dae, excep in he even of cerain corporae acions, such as mergers, acquisions, and delisings. In such cases, he change is applied on he effecive dae of he acion, unless oherwise deermined by he Index Commee. Whenever possible, changes will be announced a leas wo business days prior o heir implemenaion. Deleions are made a any ime in he even a sock is liquidaed, de-lised, files for bankrupcy or is acquired. Upon deleion, he weigh of he removed sock is reallocaed proporionaely o he remaining consuens. Addions are made only upon he effecive dae of he semi-annual reconsuions. 7. Quarerly Rebalancings The Indexes are rebalanced quarerly on he hird Friday of he las monh of each calendar quarer, a which ime he weighing mehodology described in Secion #3 herein are applied. 8. Roles of he Paries in he Semi-Annual Reconsuions Two paries paricipae in he semi-annual reconsuion: The Calculaion Agen, which is responsible for applying he relevan index rules o he Indexes; and The Benchmark Index Commee, which is responsible for reviewing and approving he changes o he Indexes ha are recommended by he Calculaion Agen. Daa used for he semi-annual reconsuions is as of he close of US rading on he las business days of May and November (he Snapsho Dae ). The Calculaion Agen will subm o he Index Commee s recommended changes o he Indexes five business days following he Snapsho Dae. The Index Commee will approve or rejec he changes and noify he calculaion agen of s decisions no laer han eigh business days following he Snapsho Dae. Whin 24 hours of noificaion by he Index Commee o he Calculaion Agen of s approval of changes, he Calculaion Agen will pos a press release on he Indexes web se announcing he changes. 6

7 Changes o he Indexes relaed o he semi-annual reconsuions are implemened in conjuncion wh he quarerly rebalancing as of he close of rading on he hird Friday of June and December. 9. Roles of he Paries in he Quarerly Rebalancings Two paries paricipae in he quarerly rebalancings: The Calculaion Agen, which is responsible for applying he relevan index rules o he Indexes; and The Index Commee, which is responsible for reviewing and approving he changes o he Indexes ha are recommended by he Calculaion Agen. Daa used for he quarerly rebalancings is as of he close of US rading on he day before he second Friday of he las monh of each calendar quarer (he Record Dae ). Share weighs for he rebalanced Indexes are compued as of he Record Dae. The Calculaion Agen will subm s recommended weighs o he Index Commee or s designee whin wo business days following he Record Dae. The Index Commee will approve or rejec he changes and noify he calculaion agen of s decisions no laer han hree business days following he Record Dae. Upon noificaion by he Index Commee o he Calculaion Agen of s approval of he weighs, he Calculaion Agen will issue pro forma index weighs o all relevan licensees and pos he pro forma files o s FTP server. Changes o he Indexes relaed o he quarerly rebalancings are as of he close of rading on he hird Friday of he las monh of each calendar quarer. 10. Ongoing Mainenance and Handling of Corporae Acions In addion o he scheduled quarerly reviews, he Indexes are reviewed on an ongoing basis. Changes in index composion and relaed weigh adjusmens are necessary whenever here are exraordinary evens such as liquidaions, conversions, delisings, bankrupcies, mergers or akeovers involving index componens. In hese cases, each even will be aken ino accoun on s effecive dae. Whenever possible, he changes in he index s componens will be announced a leas wo business days prior o heir implemenaion dae. Eligible Securies. In he even ha a componen no longer mees he eligibily requiremens described herein, will be removed from he index on he effecive dae of he nex rebalancing. Mergers. If wo index consuens merge, heir componen posions will be replaced by he surviving sock immediaely. If an index consuen merges wh a non-componen sock, s componen posion will be replaced by he new sock, provided he new sock mees he eligibily creria for he relevan index. If he combined sock fails o mee he eligibily creria for he relevan index, will be deleed from he index unless oherwise deermined by he Index Commee. If deleed, he weigh of he merged index consuen shall be redisribued proporionaely o he remaining consuens in he index. Takeovers. If an index componen is aken over by anoher componen sock, he former will be removed from he index immediaely upon compleion of he akeover. If an index componen is aken over by a non-componen sock, will be replaced by he acquiring sock immediaely, if he acquiring sock mees he eligibily creria for he relevan index. If he acquiring sock does no mee he eligibily creria for relevan index, he acquiring sock will be deleed from he Indexes and he weigh of he removed sock will be reallocaed proporionaely o he remaining consuens in he index. 7

8 Conversions. If an index componen is convered o a non-eligible financial secury, will be deleed from he Indexes on he dae of he nex rebalancing, unless oherwise deermined by he Index Commee. Share Offerings and Share Buy-Backs. All Share Offerings and Buybacks ha resul in an increase or decrease of a consuen sock s shares ousanding will be implemened a he quarerly rebalancing. Tender Offers. Tender offers will be acceped hree business days prior o he expiraion of he ender offer, provided managemen of he company for which he ender offer is being made is in favor of he ender offer. Righs Offerings. Righs will be execued, provided he righs are in he money. The coss associaed wh exercising he righs will be derived proporionaely from he remaining consuens in he index. Spin-Offs. In he even of a spin-off, boh he paren company shall remain in he index, he spun-off company shall be dropped from he index and he weigh of he spun-off company shall be reallocaed on a proporionae basis across he remaining index consuens. Removal of Socks Due o Delising, Bankrupcy or Exreme Financial Disress. If an index consuen is de-lised by s primary marke, or is in bankrupcy proceedings, will be removed from he index. * If an index componen is de-lised by s primary marke due o failure o mee financial or regulaory requiremens, will be removed from he indexes and s weigh will be reallocaed o he remaining consuens in he relevan index. * If an index componen eners bankrupcy proceedings, will be removed from he indexes and will remain ineligible for re-inclusion unil has emerged from bankrupcy. However, he Commee may, following a review of he bankrup company and he issues involved in he filing, decide o keep he sock in he indexes. * The Commee may, a s discreion, remove a sock has deermined o be in exreme financial disress from he Indexes, if he Commee deems he removal necessary o proec he inegry of he Indexes and he ineress of invesors in producs linked o he Indexes. Pricing of Socks in Exreme Financial Disress for Index Mainenance. * When a sock is suspended from rading due o financial disress and subsequenly de-lised by s primary marke prior o resumpion of rading, he Calculaion Agen will use he besavailable alernae pricing source o deermine he value a which he sock should be removed from he index. * If he sock s primary marke price is no longer available due o s suspension or de-lising, a curren price from anoher exchange, such as a regional or elecronic markeplace, may be used. In he absence of hose prices in he case of U.S. securies, OTC Bullein Board, OTC Equy (non-otcbb socks), and Pink Shee raded prices could be applied in ha order. * If neher a raded price nor a bid/asked range is available, he Commee will evaluae he saus of he suspended sock. The Commee may consul wh managers of porfolios linked o indexes in which he sock is a consuen in deermining he value of he sock. If he Commee concludes ha he secury has become worhless or is likely o remain oo illiquid o be raded, will be removed from he Indexes a.01 local currency of he sock. 8

9 11. Calculaion and Disseminaion of Index Values The Calculaion Agen will calculae closing values for boh he price and oal reurn Indexes based on closing prices as repored by he relevan exchanges. The Calculaion Agen pos he following files o s FTP server prior o 7:00PM EST each rading day: Closing Index File (CLS.SNC) Index consuens, closing prices, weighs, share weighs and relaed daa as of he day s close. Adjused Closing Index File (ADJ.SNC) Index consuens, closing prices, weighs, share weighs and relaed daa as of he nex rading day s open. Corporae Acion File (SNA) Daa relaed o upcoming corporae acions for he Indexes consuen socks. Index Values File (SNL) Closing values for he index reurn and currency varians, including divisors. Closing values for he Indexes will be ransmed o he NYSE prior o 7:00PM EST for redisribuion o various vendors and providers of financial daa via he NYSE Global Index Feed. The Indexes will be calculaed and disseminaed in USD. Index values will be disribued using he following ickers: S-Nework Europe 500 Index Price Index: SNE500 Toal Reurn Index: SNE500T S-Nework Pacific 500 Index Price Index: SNP500 Toal Reurn Index: SNP500T S-Nework Developed Inernaional 1000 Index Price Index: SND1000 Toal Reurn Index: SND1000T S-Nework Europe 1000 Index Price Index: SNE1000 Toal Reurn Index: SNE1000T S-Nework Pacific 1000 Index Price Index: SNP1000 Toal Reurn Index: SNP1000T S-Nework Developed Inernaional 2000 Index Price Index: SND2000 Toal Reurn Index: SND2000T 12. Calculaion and Adjusmens 1. Inpu Daa Sources 9

10 * Sock prices are provided by Thomson Reuers. The mos recen closing prices of consuen socks are used for index calculaion. * The number of shares is deermined separaely for each class of sock. This informaion is obained from regulaory filings and a variey of daa vendors. The daa also may be sourced from he consuen socks hemselves. * Corporae acions are sourced from public news services, regulaory filings and daa vendors. The consuen socks hemselves may be used as an addional source. 2. Index Formula. The index is calculaed using a Laspeyres formula. This formula is used for he calculaion of he reurn index and he price index. The only difference is ha he divisor D is differen for he wo indexes (reurn index and price index). The index is compued as follows: Index C n i1 p n i1 x q p q i0 r f i0 rio f io Base Index Value M B Base Index Value The above-menioned formula can be simplified as: Index M D Where: D B = = divisor a ime () base index value n = he number of socks in he index p i0 = he closing price of sock i a he base dae q i0 = he number of shares of sock i a he base dae r io = he exchange rae from local currency o USD a he base dae f io = he floa facor of company i a he base dae p q = he price of sock i a ime () = he number of shares of sock i a ime () r = he exchange rae from local currency o USD a ime () f = he floa facor of company i a ime () C M B = he adjusmen facor for he base dae marke capalizaion = he ime he index is compued = marke capalizaion of he index a ime () = adjused base dae marke capalizaion of he index a ime () Dividend paymens are no aken ino accoun in he price indexes, whereas dividend paymens are reinvesed in he index consuens of he oal reurn index on a proporional basis. The adjusmen proecs he indexes from he effecs of changes in index composion and he impac of corporae acions. 10

11 3. Divisor Adjusmens. Corporae acions affec he share capal of componen socks and herefore rigger increases or decreases in he index. To avoid disorion, he divisor of he index is adjused accordingly. 4. Changes in he index s marke capalizaion due o changes in he composion (addions, deleions or replacemens), weighing (following quarerly reviews, corporae acions (mergers, or special cash or sock disribuions of oher socks) resul in a divisor change o mainain he index s coninuy. By adjusing he divisor, he index value reains s coninuy before and afer he even. For righs offerings, he Calculaion Agen will price he righs during he subscripion period, no before or afer. Alernaively, he Calculaion Agen may sar pricing he righs afer he ex-dae and before he subscripion period, under he condion ha he righs are priced daily. * Formulae for Divisor Adjusmen. The following formulae will be used for divisor adjusmens. (Noe: No divisor adjusmens are necessary for sock spls, since marke capalizaion does no change and he share number and share price are adjused prior o he opening of rading on he spl's ex-dae.) D Where: D +1 D r p x q = divisor a ime () f r p x q MC f +1 D 1 p q = divisor a ime (+1) = sock price of sock i a ime () = number of shares of sock i a ime () r = he exchange rae from local currency o USD a ime () f = he floa facor of company i a ime () MC +1 = add new componens marke capalizaion and adjused marke capalizaion (calculaed wh adjused closing prices and shares effecive a ime +1 and/or minus marke capalizaion of socks o be deleed (calculaed wh closing prices and shares a ime ) Noe: If he curren rading price of an issue is unavailable, he previous rading session s closing price is used. However, if he issue is affeced by any corporae acion ha requires an adjusmen, hen he adjused price is used. * Adjusmens for Corporae Acions. An index divisor may decrease ( ) or increase ( ) or keep consan ( ) when corporae acions occur for a componen sock. Assuming shareholders receive B new shares for every A share held for he following corporae acions: A) CASH DIVIDEND (applied for reurn index only) adjused price = closing price - dividend announced by he sock B) SPECIAL CASH DIVIDEND (applied for price and reurn index) adjused price = closing price - dividend announced by he sock C) SPLIT AND REVERSE SPLIT adjused price = closing price * A / B new number of shares = old number of shares * B / A 11

12 D) RIGHTS OFFERING adjused price = (closing price * A + subscripion price * B) / (A + B) new number of shares = old number of shares * (A + B) / A E) STOCK DIVIDEND adjused price = closing price * A / (A + B) new number of shares = old number of shares * (A + B) / A F) STOCK DIVIDEND OF A DIFFERENT STOCK SECURITY adjused price =(closing price * A - price of he differen sock secury * B)/A G) COMBINATION STOCK DISTRIBUTION (DIVIDEND OR SPLIT) AND RIGHTS OFFERING Shareholders receive B new shares from he disribuion and C new shares from he righs offering for every A shares held: * If righs are applicable afer sock disribuion (one acion applicable o oher). adjused price = [closing price * A + subscripion price * C * (1 + B / A)] / [ (A + B) * (1 + C / A) ] new number of shares = old number of shares * [(A + B) * (1 + C / A)] / A * If sock disribuion is applicable afer righs (one acion applicable o oher). adjused price = [closing price * A + subscripion price * C] / [(A + C) * (1 + B / A)] new number of shares = old number of shares * [ ( A + C ) * ( 1 + B / A) ] H) STOCK DISTRIBUTION AND RIGHTS (NEITHER ACTION IS APPLICABLE TO THE OTHER) adjused price = [closing price * A + subscripion price * C] / [A + B + C] new number of shares = old number of shares * [A + B + C] 5. Compuaional Precision. Index values are rounded o wo decimal places and divisors are rounded o inegers. Any values derived by he index calculaion engine from a corporae acion used for he divisor adjusmens and index compuaions are rounded o seven decimal places. 13. Daa Correcion Policy To mainain a high sandard of daa inegry, a series of procedures have been implemened o ensure accuracy, imeliness and consisency. Inpu prices are monored using a variey of compuerized rangecheck warning sysems. Faul oleran mehods are employed in he collecion of marke and corporae acion daa. Various verificaion and aud asks are performed o ensure he qualy of he daa feeds and relaed marke daa. While every effor is aken o ensure he accuracy of he informaion used for he index calculaion, an index error may occur due o incorrec or missing daa, including rading prices, exchange raes, shares ousanding and corporae acions, due o operaional errors or oher reasons. 1. Inraday Correcions. Reasonable effors are employed o preven erroneous daa from affecing he indexes. Correcions will be made for bad prices and incorrec or missing corporae acions as soon as possible afer deecion. 2. Index-Relaed Daa and Divisor Correcions. Incorrec pricing and corporae acion daa for individual issues in he daabase will be correced upon deecion. In addion, an incorrec divisor of an index, if discovered whin five days of s occurrence, will always be fixed on he day is discovered o preven an error from being carried forward. 12

13 If a divisor error is discovered more han five days afer occurrence, he adjusmen will depend upon how significan he error is, how far back he error occurred and he feasibily of performing he adjusmen. 14. Review Schedule Reconsuions Frequency: Semi-annual Effecive dae(s): Mondays following he hird Fridays of June and December Advance noice: Approximaely 8 business days Rebalancings Frequency: Quarerly Effecive dae(s): Monday following he hird Friday of he las monh of each calendar quarer Advance noice: A leas 3 business days 13