Handelsbanken Debt Security Index Base Methodology. Version September 2017

Transcription

1 Handelsbanken Debt Security Index Base ethodology Version Septeber 2017

2 Contents 1 Introduction Description General Ters Iportant Inforation Definitions iscellaneous Paraeters Dates & Calendars Deterination of the Index Level Deterination of the Total Return Index Level Deterination of the Index Average Duration Deterination of the Index Average odified Duration Deterination of the Index Average Yield to aturity Deterination of the Index Average Coupon Deterination of the Index Average Convexity Deterination of the Index Average Life Deterination of the Index Total arket Value Deterination of the Index Total Face Value Deterination of the Clean Price Index Level Deterination of the Gross Price Index Level Deterination of the Interest Paid this Year

3 7 Instruent Calculations Deterination of the Clean Price of an Instruent Deterination of the Accrued Interest of an Instruent Deterination of the Duration of an Instruent Deterination of the odified Duration of an Instruent Deterination of the Convexity of an Instruent Rebalancing Deterination of the Adjusted Notional for an Instruent Deterination of the Weighting Factor for an Instruent Deterination of the Cost Factor iscellaneous Disruption Events Consequences of Disruption Events Change in ethodology and Terination of the Index Availability and Publication of Index Levels and Adjustents General Index Closing Levels iscellaneous Schedule For of Index Suppleent

4 1 Introduction This docuent (the Base ethodology ) is intended to be read together with an index suppleent (substantially in the for set out in the Schedule enclosed in this docuent) (the Index Suppleent ) and a docuent containing principles and codes of conduct set up to define the different roles involved in the process of aintaining, calculating and publishing the index (the Index Principles ). This Base ethodology as suppleented and copleted by an Index Suppleent and the Index Principles sets out the rules (the Index Rules ) applicable to the index specified in such Index Suppleent (the Index ) and the basis on which the Index will be calculated. The Index Base ethodology and respective Index Suppleent ay be aended by the Index Adinistrator fro tie to tie as provided in Section 8 (Change in ethodology of the Index and Terination). This docuent and any other part of the Index Rules will be superseded by any subsequent Index Rules. A copy of the current version of the Index Rules can be obtained on the Handelsbanken Website. Ters used in this Base ethodology will have the eanings given to the in Section 3 (General Ters) and Section 5 (Definitions) below. 2 Description The Index Rules intends to replicate the perforance of a basket of debt securities defined as Instruents, for inclusion as further specified in the respective Index Suppleent. Positions are taken in such Instruents and are periodically rebalanced. Rebalancing frequency as well as potential constraints or reweighting ethods are specified in the respective Index Suppleent. 3 General Ters The Index Level will be calculated by the Index Calculator on each Index Calculation Date following the Index Launch Date subject to Section 7 (Disruption Events) and published as soon as reasonably practicable by the Index Publisher after the Index Publication Tie on the Index Business Day iediately following the relevant Index Calculation Date in accordance with Section 9 (Availability, Publication and Adjustents) below. All calculations will be done based on data provided by the Index Contributor(s) were applicable and the odels, algoriths and scripts used by the Index Calculator are pre validated by the Index Validator. Index Adinistrator: Index Contributor: Index Calculator: Index Validator: Index Publisher: Svenska Handelsbanken AB (publ) as further described in the Index Principles. As specified in the Index Suppleent and further described in the Index Principles. As specified in the Index Suppleent and further described in the Index Principles. As specified in the Index Suppleent and further described in the Index Principles. As specified in the Index Suppleent and further described in the Index Principles. 3

5 4 Iportant Inforation An Index defined under this Base ethodology and respective Index Suppleent, is considered rules based. Rules based indices are passive algorithic indices intended to replicate a pre defined investent strategy or process where the presence of discretionary decision aking and active anageent is put to an absolute iniu. The process of iniizing discretionary andates is done to prevent conflicts of interest. A degree of discretion can however arise when aking certain deterinations, calculations and adjustents in relation to the Index. In order to counter potential conflicts of interests, Handelsbanken works in accordance with its Index Principles in which a nuber of roles such as Index Adinistrator, Index Contributor, Index Calculator, Index Validator and Index Publisher (the Index Operators ) are defined and where desirable; its assignents are kept separated. Unless otherwise provided and subject to Section 8 (Change in ethodology of the Index and Terination) all deterinations ade by the Index Operators will be ade in good faith and in a coercially reasonable anner by reference to such factors as the respective Index Operator dees appropriate and in accordance with the Index Principles. The Index Adinistrator ay, in its sole and absolute discretion, at any tie and without notice, order the terination of the calculation and publication of the Index or delegate or transfer the responsibilities or functions defined in the Index Principles. The Index Adinistrator will act in good faith and in a coercially reasonable anner when exercising such discretion. All decisions, deterinations or interpretations ade by the Index Adinistrator will be final, conclusive and binding in the absence of anifest error. Transactions linked to the Index The Index Operators are not obliged to enter into or proote transactions or investents that are linked to the Index and ake no express or iplied representations or warranties as to: (a) the advisability of purchasing or assuing any risk in connection with any such transaction; (b) the levels at which the Index stands at any particular tie on any particular date; (c) the results to be obtained by the issuer of any security or any counterparty or any such issuer s security holders or custoers or any such counterparty s counterparties or custoers or any other person or entity fro the use of the Index or any data used or published in connection with the Index in connection with any licensed rights or for any other use; or (d) any other atter. The Index Operators ake no express or iplied representations or warranties of erchantability or fitness for a particular purpose with respect to the Index or any data used or published in connection with the Index. General Without liiting any of the foregoing, in no event shall the Index Operators be liable (whether directly or indirectly, in contract, or otherwise) for any loss incurred by any person that arises out of or in connection with the Index, including in relation to the perforance by an Index Operator of any part of its role as Index Operator under the Index Rules, provided that nothing shall relieve the Index Operator fro any liability arising by reason of acts or oissions constituting any breach of regulation (including the regulatory syste) or other law. The Index Adinistrator owns intellectual property rights in the Index and in this Base ethodology. Any use of any such intellectual property rights ust be with the prior written consent of the Index Adinistrator. 4

6 5 Definitions 5.1 iscellaneous Index Level, ( I t ) The level of the Index as published by the Index Publisher. Index Base Level, ( I 0 ): Index Nae: ACT(t 1, t 2 ): Disruption Event: Blooberg ticker: Force ajeure Event: Handelsbanken Website: As specified in the Index Suppleent, eaning the start value for the Index Level. As specified in the Index Suppleent. eans the nuber of calendar days between Index Calculation Date t 1 (included) and Index Calculation Date t 2 (excluded). If Index Calculations Date t 1 occurs after Index Calculation Date t 2, ACT(t 1, t 2 ) = ACT(t 2, t 1 ) applies. Has the eaning given to it in Section 6.1 (Disruption Events). As specified in the Index Suppleent. eans an event or circustance (including, without liitation, a systes failure, fire, building evacuation, natural or anade disaster, ared conflict, act of terroris, act of state, riot or labour disruption or any siilar intervening circustance) that affects the ability of the Index Calculator to calculate or deterine the Index and which is beyond the reasonable control of the Index Calculator. Reuters Ticker: Reuters: Instruent ( i ): Clean Price ( P i,t ): Trade Price ( P trade i,t ): Accrued Coupon ( A i,t ): As specified in the Index Suppleent. eans Reuters Group PLC or any of its affiliates and subsidiaries, or any successor arket price inforation provider(s). Any asset or financial instruent that is, has been, or could becoe a constituent of the Index (if all relevant Eligibility Criteria are et). In respect of an Instruent i and an Index Calculation Date t, the clean price for such Instruent on such date, deterined according to Section 7. In respect of an Instruent i and an Index Calculation Date t, the price adjusted for transaction costs for such Instruent on such date, deterined according to the Trade Price Deterination ethodology. In respect of an Instruent i and an Index Calculation Date t, the accrued coupon for such Instruent on such date, deterined according to Section 7. 5

7 Coupon Payent ( G i,t ): Coupon Copensation ( ACP i,t ): Index Type: Valuation Tie: Cost Factor ( CostFactor t ): In respect of an Instruent i and an Index Calculation Date t, the coupon payent for such Instruent on such date, deterined according to Section 7. In respect of an Instruent i and an Index Calculation Date t, the coupon copensation for such Instruent on such date, deterined according to Section 7. As specified in the Index Suppleent, eaning the type of weighting ethod used in the Index. The tie during an Index Business Day iediately following the noral business hours of the Swedish bond arket and when arket prices for Eligible Instruents quoted by arket akers can be observed and the Index can be calculated and if on a Rebalancing Date, rebalancing can take place. A factor possible to use specifying the way to take transaction costs fro rebalancing of the index into account, deterined according to Section Paraeters Index Currency: Eligibility Criteria Eligible Instruent Eligible Instruent Currency: Eligible Issuer: Eligible Instruent iniu Tie to aturity: Eligible Instruent axiu Tie to aturity: Index Target Duration ( TD ): Index Target odified Duration ( TD ): As specified in the Index Suppleent, eaning the currency in which the Index Level is denoinated. As specified in the Index Suppleent, eaning any nuber of criteria for specifying whether an Instruent i should be given a non-zero weight in the rebalancing procedure on an Ordinary Rebalancing Date t rb. In respect of an Index Calculation Date t, any Instruent fulfilling all relevant Eligibility Criteria. As specified in the Index Suppleent, eaning the currency in which an instruent has to be denoinated, to be able to becoe an Eligible Instruent. As specified in the Index Suppleent, eaning a set of criteria that an issuer would need to fulfil, in order for its instruents to be able to becoe Eligible Instruents. As specified in the Index Suppleent, eaning a iniu reaining tie to aturity an instruent would need to have, to be able to becoe an Eligible Instruent. As specified in the Index Suppleent, eaning a axiu reaining tie to aturity an instruent would need to have, to be able to becoe an Eligible Instruent. As specified in the Index Suppleent, eaning the target Index Average Duration. As specified in the Index Suppleent, eaning the target Index Average odified Duration. 6

8 Sub-index: Sub-index Weight: Eligibility Constraint ( I s, w target s ): As specified in the Index Suppleent, eaning another index that the Index is based upon. As specified in the Index Suppleent, eaning the weight of another index in the Index. A rule specifying a constraint for a set of Instruents, so that in the course of rebalancing, the aggregate of the Weighting Factors for all Instruents within the set ust not be higher than the Group Target Weighting Factor w s target : w j,t j I s target w s Price Deterination ethodology: As specified in the Index Suppleent, eaning a ethod for deterining the price for an Instruent i on an Index Calculation Date t. If no Price Deterination ethodology is specified in the Index Suppleent, the price is deterined according to the below ethodology: The prices for all bonds in the Index are quoted as yields. For each bond, bid and ask rates fro all arket akers at the Valuation Tie are used. The latest contributed bid and ask price fro each arket aker are recorded at the Valuation Tie. These prices are published on Reuters or through such other syste or on such other screen page that replaces the aforeentioned syste or screen page, however the Index Calculator ight use another source of data if necessary. The list of arket akers for each type of bond is updated at the beginning of every year. If at the Valuation Tie a arket aker shows an ask rate which is higher than or equal to the bid rate, the bid and ask rates fro that arket aker are reoved. For all reaining arket akers, id rates are coputed as the ean of the bid and the ask rates. The spreads between the bid and the ask rates are also calculated by subtracting the ask rate fro the bid rate for each arket aker. For each bond, the edian of the coputed id rates and the edian of the spreads are calculated, rounded to three decial places and used in the index calculations. The spread is used to calculate an ask rate (id - spread/2) and a bid rate (id + spread/2). Fro these rates, the prices used in the forulas in Section 1 are calculated. The bid and ask prices are needed when the cost factor is calculated. If less than three arket akers show valid bid and ask prices for a bond in the Index, the previous day s price shall be used. If this price doesn t reflect the current arket value of the bond correctly, the Index Calculator ay deterine the price. Instruent Exclusion As specified in the Index Suppleent, eaning a ethod for 7

9 ethodology: Trade Price Deterination ethodology: deterining whether an Instruent i should be excluded fro the Index on Index Calculation Date t. As specified in the Index Suppleent, eaning a ethod to deterine the price for an Instruent i on an Index Calculation Date t. 5.3 Dates & calendars Index Base Date ( t 0 ): Index Launch Date: Index Business Day: Index Business Day Center: Index Calculation Date, ( t ): N(t 1, t 2 ): Settleent Date ( t i S (t) ): Ordinary Rebalancing Date ( t rb ): Extraordinary Rebalancing Date ( t E rb ): Notional Effective Date ( t N (t) ): The date specified as such in the Index Suppleent, eaning the first Index Calculation Date, at which the Index Level I t is equal to the Index Base Level I 0. As specified in the Index Suppleent. The Index has been calculated on a live basis fro and including the Index Launch Date and has been retrospectively calculated since such date. eans each day (other than a Saturday or a Sunday) on which coercial banks and foreign exchange arkets settle payents and are open for general business (including dealings in foreign exchange and foreign currency deposits) in all Index Business Day Centers. As specified in the Index Suppleent, eaning a arket, region or country that specifies a calendar for the deterination of whether a day is an Index Business Day. Any Index Business Day on which no Index Disruption Event occurs (except as provided for in Section 7.1 (Consequences of Disruption Events). The nuber of Index Calculation Dates between Index Calculation Date t 1 (included) and Index Calculation Date t 2 (excluded). If Index Calculation Date t 1 occurs after Index Calculation Date t 2, N(t 1, t 2 ) = N(t 2, t 1 ) applies. In respect of an Instruent i and an Index Calculation Date t, the settleent date for a trade in Instruent i conducted on Index Calculation Date t, following the ordinary settleent cycle of Instruent i on such date. As specified in the Index Suppleent, eaning any Index Trading Date on which ordinary rebalancing in accordance with Section 8 is perfored. As specified in the Index Suppleent, eaning any Index Trading Date on which extraordinary rebalancing in accordance with Section 8 is perfored. In respect of an Index Calculation Date t, the date that should be used for reading the Notional Aount of an Instruent i, for the purpose of deterining the Weighting Factor in the rebalancing procedure. 8

10 6 Deterination of the Index Level 6.1 Deterination of the Total Return Index Level As of the Index Base Date t 0, the Index Level I t is equal to the Index Base Level I o. As of each Index Calculation Date t where N(t 0, t) > 0, the Index Level I t is deterined in accordance with the following forula: I t = I t 1 where: (P i,t + A i,t + CP i,t + G i,t ) AN i,t 1 Cost Factor t (P i,t 1 + A i,t 1 + CP i,t 1 ) AN i,t 1 P i,t is the Clean Price of Instruent i on Index Calculation Date t, and: A i,t is the Accrued Interest of Instruent i on Index Calculation Date t, and: G i,t is the value of any coupon payent received fro Instruent i on Settleent Date t i S (t), and: CP i,t copensates for the next coupon payent of bond i (the ith bond) if it is not included in the bond s price at Index Calculation Date t. If the price of the bond at Index Calculation Date t does not include the next coupon payent CP i,t equals the next coupon payent. If the price of the bond at Index Calculation Date t does include the next coupon payent CP i,t = 0, AN i,t 1 is the Adjusted Notional of Instruent i on the Index Calculation Date iediately preceding Index Calculation Date t; and: I t 1 is the Index Level on the Index Calculation Date iediately preceding Index Calculation Date t. 6.2 Deterination of the Index Average Duration As of each Index Calculation Date t the Average Duration ADU t is deterined in accordance with the following forula: ADU t = D i,t (P i,t + A i,t ) AN i,t (P i,t + A i,t ) AN i,t where D i,t is the Duration of Instruent i on Index Calculation Date t. 6.3 Deterination of the Index Average odified Duration As of each Index Calculation Date t the Average odified Duration AADU t is deterined in accordance with the following forula: AADU t = D i,t (P i,t + A i,t ) AN i,t (P i,t + A i,t ) AN i,t where D i,t is the odified Duration of Instruent i on Index Calculation Date t. 6.4 Deterination of the Index Average Yield to aturity As of each Index Calculation Date t the Average Yield to aturity AYT t is deterined in accordance with the following forula: AYT t = y i,t D i,t (P i,t + A i,t ) AN i,t D i,t (P i,t + A i,t ) AN i,t 9

11 where y i,t is the yield to aturity of Instruent i on Index Calculation Date t, as deterined per the applicable Price Deterination ethodology. 6.5 Deterination of the Index Average Coupon As of each Index Calculation Date t the Average Coupon AC t is deterined in accordance with the following forula: AC t = C i AN i,t AN i,t where C i,t is the coupon rate of Instruent i on Index Calculation Date t. 6.6 Deterination of the Index Average Convexity As of each Index Calculation Date t the Average Convexity ACV t is deterined in accordance with the following forula: ACV t = X i,t (P i,t + A i,t ) AN i,t (P i,t + A i,t ) AN i,t where X i,t is the Convexity of Instruent i on Index Calculation Date t. 6.7 Deterination of the Index Average Life As of each Index Calculation Date t the Average Life ALF t is deterined in accordance with the following forula: ALF t = AN i,t L i,t AN i,t where L i,t is the reaining aturity of Instruent i on Index Calculation Date t. 6.8 Deterination of the Index Total arket Value As of each Index Calculation Date t the Total arket Value V t is deterined in accordance with the following forula: V t = AN i,t (P i,t + A i,t ) 6.9 Deterination of the Index Total Face Value As of each Index Calculation Date t the Total Face Value FV t is deterined in accordance with the following forula: 6.10 Deterination of the Clean Price Index Level FV t = AN i,t As of the Index Base Date t 0, the Clean Price Index Level CPI t is equal to the Clean Price Index Base Level CPI 0. As of each Index Calculation Date t the Clean Price Index Level CPI t is deterined in accordance with the following forula: 10

12 CPI t = CPI t 1 P i,t AN i,t 1 P i,t 1 AN i,t Deterination of the Gross Price Index Level As of the Index Base Date t 0, the Gross Price Index Level GPI t is equal to the Gross Price Index Base Level GPI 0. As of each Index Calculation Date t the Gross Price Index Level GPI t is deterined in accordance with the following forula: GPI t = CPI 1 (1 + AI t ) where A t, the accrued interest, is given by: AI t = A i,t AN i,t 1 P i,t AN i,t Deterination of the Interest Paid this Year At the beginning of every year Interest Paid this Year IN t is equal to 0. As of each Index Calculation Date t the Interest Paid this Year IN t is deterined in accordance with the following forula: IN t = IN t 1 + GPI t 1 7 Instruent Calculations G i,t AN i,t 1 (P i,t 1 + A i,t 1 ) AN i,t Deterination of the Clean Price of an Instruent In respect of an Instruent i that is a fixed rate noinal bond, the Clean Price on Index Calculation Date t is deterined according to the following forulae: If the Instruent s reaining tie to aturity is greater than 360 days (easured with ISA s 30E/360 day count convention), the Clean Price is calculated as: P i,t = d 360 (1 + y i,t ) + c j j 1+d 360 (1 + y i,t ) A i,t If the Instruent s reaining tie to aturity is saller than or equal to 360 days (easured with ISA s 30E/360 day count convention), the Clean Price, P i,t, is calculated as: 100 P i,t = 1 + y i,t ( 1 + d 360 ) + c j A 1 + y i,t (j 1 + d 360) i,t where: is the nuber of reaining coupon payents, y i,t is the yield to aturity, d is the nuber of days fro the Settleent Date t i S (t) to the instruent s next coupon date easured with ISA s 30E/360 day count convention, c j is the jth coupon payent; and: A i,t is the Accrued Interest for Instruent i on Index Calculation Date t. 11

13 In respect of an Instruent i that is a treasury bill or any other type of discount instruent, the Clean Price on Index Calculation Date t is deterined as: P i,t = where: y i,t d 360 y i,t is the yield to aturity; and: d is the nuber of days fro the Settleent Date t i S (t) to the instruent s aturity date (Actual nuber of days). In respect of an Instruent i that is an index-linked bond, the Clean Price on Index Calculation Date t is deterined using the sae forula as for a noinal fixed rate bond ultiplied by the Index Factor IF i,t : 100 P i,t = [ (1 + y i,t ) 1+d c j j 1+d 360 (1 + y i,t ) A i,t ] IF i,t or if the Instruent s reaining tie to aturity is saller than or equal to 360 days (easured with ISA s 30E/360 day count convention): 100 P i,t = [ 1 + y i,t ( 1 + d 360 ) + c j A 1 + y i,t (j 1 + d 360) i,t ] IF i,t where the Index Factor is calculated as: IF i,t = RI t BI i where: RI t is the Reference Index on Index Calculation t, calculated as: RI t = RI t0 + in [ACT (t L, t S i (t)), 30] 1 (RI 30 t1 RI t0 ) where: t L is the last date in the onth iediately preceding Index Calculation Date t. RI t0 is the Reference Index on the first day of the sae onth as the settleent day, RI t0 is equal to the CPI three onths earlier; and: RI t1 is the Referece Index on the first day of the next onth. 7.2 Deterination of the Accrued Interest of an Instruent In respect of an Index Calculation Date t, the Accrued Interest of an Instruent i that is a fixed rate noinal bond is calculated as: A i,t = where: d 360 c i

14 d is the nuber of days between the previous coupon date and the bond s settleent date easured with ISA s 30E/360 day count convention. During the ex-coupon period d will be negative since the previous coupon date is after the settleent date; and: c i is the coupon rate of Instruent i. In respect of an Instruent i that is a treasury bill or any other type of discount instruent, the Accrued Interest A i,t is equal to zero for any Index Calculation Date t. In respect of an Instruent i that is a index-linked bond, the Accrued Interest has to be ultiplied by the index factor on the settleent date. 7.3 Deterination of the Duration of an Instruent The Duration D i,t, is calculated as: t PV(CF) D i,t = DirtyPrice 100 ( 1 + d 360) c 1+d 360 (1 + y i,t ) + j (j 1 + d 360) j 1+d 360 (1 + y i,t ) = P i,t + A i,t If the Instruent s reaining tie to aturity is saller than or equal to 360 days (easured with ISA s 30E/360 day count convention), the Duration D i,t, is calculated as: 100 ( 1 + d 360) 1 + y i,t ( 1 + d 360 ) + c j (j 1 + d 360) 1 + y i,t (j 1 + d 360) D i,t = P i,t + A i,t If the Instruent is an Index Linked Bond, Duration D i,t, is calculated as: 100 ( 1 + d 360) c 1+d (1 + y i,t ) j (j 1 + d 360) j 1+d (1 + y i,t ) 360 D i,t = IF P i,t + A i,t i,t If the Instruent is an Index Linked Bond and the Instruent s reaining tie to aturity is saller than or equal to 360 days (easured with ISA s 30E/360 day count convention), the Duration D i,t, is calculated as: 100 ( 1 + d 360) 1 + y i,t ( 1 + d 360 ) + c j (j 1 + d 360) 1 + y i,t (j 1 + d 360) D i,t = IF P i,t + A i,t i,t 7.4 Deterination of the odified Duration of an Instruent The odified Duration D i,t is calculated as: t PV(CF) D i,t = DirtyPrice (1 + y) 1 ( 1 + d = ( ) +d 360 (P i,t + A i,t ) (1 + y i,t ) + c j (j 1 + d 360) j+d 360 (1 + y i,t ) ) If the Instruent s reaining tie to aturity is saller than or equal to 360 days (easured with ISA s 30E/360 day count convention), the odified Duration D i,t, is calculated as: 13

15 1 D i,t = (P i,t + A i,t ) 100 ( 1 + d 360 ( ) (1 + y i,t ( 1 + d 360 )) 2 + c j (j 1 + d 360) (1 + y i,t (j 1 + d 360)) 2 ) If the Instruent is an Index Linked Bond, odified Duration D i,t, is calculated as: 100 ( 1 + d 360 D i,t = ( ) +d 360 (1 + y i,t ) + cj (j 1 + d 360 ) IF i,t j+d 360 (1 + y i,t ) ) (P i,t + A i,t ) If the Instruent is an Index Linked Bond and the Instruent s reaining tie to aturity is saller than or equal to 360 days (easured with ISA s 30E/360 day count convention), the odified Duration D i,t, is calculated as: D i,t = IF i,t (P i,t + A i,t ) 100 ( 1 + d 360 ( ) (1 + y i,t ( 1 + d 360 )) 7.5 Deterination of the Convexity of an Instruent 2 + c j (j 1 + d 360) (1 + y i,t (j 1 + d 360)) 2 ) The Convexity X i,t is calculated as: X i,t = t j(1 + t j ) PV(CF j ) (1 + y) 2 where = (100 t (1 + t ) (1 + y i,t ) t + c j t j (1 + t j ) +2 (1 + y i,t ) t ) j+2 t j = j 1 + d 360 If the Instruent s reaining tie to aturity is saller than or equal to 360 days (easured with ISA s 30E/360 day count convention), the Convexity X i,t, is calculated as: X i,t = ( 2 t (1 + y i,t t ) t j 2 c j (1 + y i,t t j ) 3 ) If the Instruent is an Index Linked Bond, Convexity X i,t, is calculated as: X i,t = IF i,t (100 t (1 + t ) (1 + y i,t ) t + c j t j (1 + t j ) +2 (1 + y i,t ) t ) j+2 If the Instruent is an Index Linked Bond and the Instruent s reaining tie to aturity is saller than or equal to 360 days (easured with ISA s 30E/360 day count convention), the Convexity X i,t, is calculated as: X i,t = IF i,t ( 2 t (1 + y i,t t ) t j 2 c j (1 + y i,t t j ) 3 ) 14

16 8 Rebalancing 8.1 Deterination of the Adjusted Notional for an Instruent In respect of an Instruent i and an Index Calculation Date t that is also an Ordinary Rebalancing Date t rb, the Adjusted Notional for an Instruent that fulfils all Eligibility Criteria is deterined as: AN i,t = w i,t N j,t j where: w i,t is the weighting factor of Instruent i on Index Calculation Date t; and: j N j,t is the Notional Aount of all Eligible Instruents on Index Calculation Date t; and: N j,t is the Notional Aount of Instruent j on Index Calculation Date t, calculated as the total notional aount outstanding in Instruent j on Notional Effective Date t N (t). In respect of an Instruent i that is not an Eligible Instruent on Index Calculation Date t, or if Instruent i should be excluded fro the Index on the Index Calculation Date iediately succeeding t rb according to the Instruent Exclusion ethodology, the Adjusted Notional AN i,t should be set to zero on Index Calculation Date t. In respect of an Instruent i and an Index Calculation Date t that is also an Extraordinary Rebalancing Date t E rb, the Adjusted Notional for an Instruent that fulfilled all Eligibility Criteria on the ost recent Ordinary Rebalancing Date t rb is deterined as: AN i,t = w i,t N j,t j where: w i,t is the weighting factor of Instruent i on Index Calculation Date t; and: j N j,t is the Notional Aount of all Eligible Instruents on Index Calculation Date t; and: N j,t is the Notional Aount of Instruent j on Index Calculation Date t, calculated as the total notional aount outstanding in Instruent j on Notional Effective Date t N (t rb ). In respect of an Instruent i that should be excluded fro the Index on the Index Calculation Date E iediately succeeding t rb according to the Instruent Exclusion ethodology, the Adjusted Notional AN i,t should be set to zero on Index Calculation Date t. In respect of an Instruent i and any other Index Calculation Date t, the Adjusted Notional is deterined as: AN i,t = AN i,t Deterination of the Weighting Factor for an Instruent In respect of an Index Calculation Date t and an Eligible Instruent i, the Weighting Factor w i,t is calculated in accordance with the following forulae: If the Index Type is specified as Regular: w i,t = N i,t j N j,t 15

17 If the Index Type is specified as Regular Capped: w i,t = α i N i,t j N j,t where α i are adjustent factors, set so that: w i,t = 1 i w i,t 0 (for all i) and so that all applicable Eligibility Constraints are fulfilled. When deterining the values of α i, they will be set so that the lowest value of α i < 1 will be as high as possible, then the second to lowest value of α i < 1 as high as possible (given the α i values already set) and so on. Accordingly, the values of α i > 1 will be set so that the highest value of α i > 1 is as low as possible, then the second to highest value of α i > 1 is as low as possible (given the α i values already set) and so on. If the Index Type is specified as Constant Duration / Constant odified Duration: w i,t = f where: N i,t j N j,t f = f short, if the Duration of Instruent i is less than the Target Duration; and: f = f long, if the Duration of Instruent i is greater than the Target Duration. where f short and f long are set so that: w i,t = 1 i w i,t 0 ADU t = TD AADU t = TD (for all i) (Constant Duration) (Constant odified Duration) If the Index Type is specified as Index Based Weighted: w i,t = u x w i,t (x) x where u x is the Sub-index Weight of Sub-index x in the Index (suation over all Sub-indices with a non-zero Sub-index Weight in the Index). If the Index Type is specified as Follow Index Duration, the sae ethodology as for Constant Duration shall be used, except for that the condition for the Index Average Duration ADU t shall be that it should be equal to the Index Average Duration of another index ( ADU t Other ), instead of a fixed value (the Target Duration). 16

18 8.3 Deterination of the Cost Factor If no Trade Price Deterination ethodology is specified for the Index, the Cost Factor in respect of any Index Calculation Date t is equal to 1. If a Trade Price Deterination ethodology is specified, the Cost Factor in respect of an Index Calculation Date t is calculated as: CostFactor t = i N i,t 1 (P trade i,t + A i,t + CP i,t + G i,t ) i N i,t (P i,t + A i,t + CP i,t ) i N i,t 1 (P i,t + A i,t + CP i,t + G i,t ) i N i,t (P trade i,t + A i,t + CP i,t ) trade where P i,t is the Trade Price, deterined as per the applicable Trade Price Deterination ethodology. 8.4 iscellaneous The Index Closing Level shall be calculated by the Index Calculator and published by the Index Publisher rounded to four decial places with being rounded upwards, as set out in Section 9 (Availability and Publication of Index Closing Levels and Adjustents) below. 9 Disruption Events A Disruption Event, in respect of any Index Business Day, eans an event (including a Force ajeure Event or a day of national ourning) that would require the Index Calculator to calculate the Index on an alternative basis were such event to occur or exist on such day, all as deterined by the Index Calculator in its sole and absolute discretion. Without liitation, each of the following ay be a Disruption Event if so deterined by the Index Calculator in its sole and absolute discretion: (i) (ii) (iii) (iv) (v) (vi) (vii) Price Source Disruption : any Price Source, any Instruent or any other inforation relevant to the calculation of the Index is teporarily or peranently discontinued, unavailable or not announced or published thereby preventing or restricting the availability of the inforation necessary for deterining the Index. Trading Suspension : the aterial suspension of trading in any Instruent. Disappearance of any Instruent : the failure of trading to coence, or the peranent discontinuation of trading in any Instruent. De iniis Trading : the nuber of Instruents traded on any relevant date is aterially reduced or liquidity in the arket for any Instruent is otherwise reduced for any reason. Change of Law or Rules : there is a change in, or aendent to, the laws, rules, regulations or standard for contracts relating to any Instruent or a change in any application or interpretation of such laws, rules, regulations or standard for contracts that has a aterial effect on such Instruent. Settleent Disruption : the Index Calculator deterines in its sole and absolute discretion that trading in, or settleent in respect of, any Instruent is subject to any aterial disruption teporarily or peranently. Tax Disruption : the iposition of, change in, reoval of or change in the interpretation of any tax (including, without liitation, any excise, severance, sales, use, value-added, transfer, stap, docuentary, recording or siilar tax) on, or in relation to any Instruent, by any governent or taxation authority after the relevant Index Launch Date, if the effect of such iposition, change, reoval or change in interpretation is to raise or lower the 17

19 price, rate or level at which such Instruent trades on the relevant exchange or in the relevant arket on any relevant date fro the price, rate or level at which it would have traded without that iposition, change, reoval or change in interpretation. (viii) Hedging Disruption : The Index Calculator deterines that it would be unable, after using coercially reasonable efforts, to: (a) acquire, establish, re-establish, substitute, aintain, unwind or dispose of any transaction(s) or asset(s) it dees necessary to hedge its position in relation to any securities issue, financial instruent or other relevant financial transaction relating to or calculated by reference to the Index; or (b) realise, recover or reit the proceeds of any such transaction(s) or asset(s). 9.1 Consequences of Disruption Events If a Disruption Event occurs or subsists on any Index Business Day, that in the deterination of the Index Calculator prevents or otherwise affects its deterinations with respect to the Index Level or any other relevant value that requires deterination or calculation by the Index Calculator in relation to such Index Business Day (including, but not liited to, the deterination of any price, value, rate or level of any Instruent relating to the Index), then: first, the Index Calculator ay ake such adjustents and/or deterinations in relation to the Index (including, but not liited to, the Index Rules) and any relevant value as it ay deterine, in its sole and absolute discretion, appropriate to facilitate the calculation of the Index Level on such Index Business Day; secondly, if the Index Calculator deterines that any such adjustent or deterination referred to in sub-section above cannot be ade on such Index Business Day, then the Index Calculator and Index Publisher ay defer calculation and publication respectively of the Index Level until the next Index Business Day on which the Index Calculator deterines, in its sole and absolute discretion, that no Disruption Event exists provided that where any such deferral of calculation and publication continues for a period of twenty consecutive Index Business Days, then the Index Adinistrator ay: (i) (ii) allow the Index Calulator to calculate the Index Level relating to each Index Business Day falling in or after such period having regard to the then prevailing arket conditions, the last reported price, value, rate or level of any Instruent relating to the Index and such other factor(s) and condition(s) that the Index Calculator considers relevant for the purpose of deterining such Index Levels including, but not liited to, any odifications that the Index Calculator deterines to be appropriate in relation to reconstitution relating to the Index; and/or peranently cease to have the Index Level calculated or published as of the later of (x) the date when such Disruption Event coenced or (y) the [Index Business Day] following the last [Index Business Day] for which the Index Calculator calculated and the Index Publisher published the relevant Index Level in accordance with sub-section 9.1.2(i) above (if any) and, in each case, as applicable, the Index shall terinate. 10 Change in ethodology and Terination of the Index In calculating and deterining the value of the Index, the Index Calculator shall, subject as provided below, eploy the ethodology described above and its application of such ethodology shall be conclusive and binding. While the Index Adinistrator currently eploys the above described 18

20 ethodology to calculate the Index, no assurance can be given that fiscal, arket, regulatory, juridical, financial or other circustances (including, but not liited to, any changes to or any suspension or terination of or any other events affecting transactions on the sae or siilar ters to any Instruent for which values will be deterined in relation to the Index) will not arise that would, in the view of the Index Adinistrator, necessitate or ake desirable a odification of or change to such ethodology and the Index Adinistrator shall be entitled to ake any such odification or change. The Index Adinistrator ay ake odifications to the ters of the Index in any anner that it ay dee necessary or desirable, including (without liitation) to correct any anifest or proven error or to cure, correct or suppleent any abiguity or defective provision contained in this Base ethodology. In particular, but without liitation, the Index Adinistrator ay, at any tie and without notice, change the frequency of calculation of the Index Level and ake such adjustent to the Base ethodology as it dees necessary, in its sole and absolute discretion, to take account of the aended frequency of calculation. In aking any such odifications however the Index Adinistrator shall ake reasonable efforts to ensure that such odifications or changes result in a ethodology that is consistent in its intended coercial purpose with the ethodology described in Section 2 (Description) and the Index Stateent as specified in the Index Suppleent. The Index Adinistrator ay, in its sole and absolute discretion, at any tie and without notice, terinate the calculation and publication of the Index. The Index Adinistrator has no obligation to infor any person about such odification or change. 11 Availability and Publication of Index Levels and Adjustents 11.1 General The Index Publisher will ake available the Index Level for each Index Business Day as soon as reasonably practicable after CET (the Index Publication Tie ) on the next Index Business Day following such Index Business Day. Also the Index Publisher will disclose the current Notional Aounts for the respective Eligible Currency as of the latest Rebalancing Date on the Handelsbanken Website Index Closing Levels Each Index Closing Level shall be published at any or all of: (i) (ii) (iii) (iv) on Blooberg using the Blooberg Ticker, as set out in the in the Index Suppleent; on Reuters using the Reuters Ticker, as set out in the in the Index Suppleent; on the Handelsbanken Website on such other inforation sources as the Index Publisher ay select fro tie to tie at its sole and absolute discretion iscellaneous The Index Publisher accepts no legal liability to any person for publishing or not continuing to publish for any period of tie any Index Level at any particular place or any particular tie. This Base ethodology is written and published by the Index Adinistrator. The Index Adinistrator is exclusively entitled to construe its provisions and deterine or clarify their 19

21 eaning. If there is any abiguity in, or uncertainty or dispute about the eaning of, any of the provisions of this Base ethodology, the Index Adinistrator shall, in its sole and absolute discretion, construe the relevant provision(s) in order to deterine the correct interpretation, and the decision of the Index Adinistrator shall be final. 20

22 For of Index Suppleent Handelsbanken Index 1 Description This docuent is an Index Suppleent as defined in the Handelsbanken Debt Security Index Base ethodology dated version (the Base ethodology ). Ters used herein shall have the eaning given to the in the Base ethodology [as aended fro tie to tie]. This Index Suppleent ust be read in conjunction with the Base ethodology and principles set up to define the different roles involved in the process of aintaining, calculating and publishing the index (the Index Principles ). This Index Suppleent as suppleented and copleted by the Base ethodology and the Index Principles constitute the rules (the Index Rules ) applicable to the index specified in this Index Suppleent (the Index ) and the basis on which the Index will be calculated. 2 Index Stateent 3 General Definitions Index Nae: Blooberg ticker: Reuters ticker: Index Contributor: Index Calculator Index Validator Index Publisher Index Base Level ( I 0 ): Index Currency: Index Base Date ( t 0 ): Index Launch Date: Index Type: Eligible Issuer: Eligible Instruent Benchark Status: Eligible Instruent Currency Eligible Instruent iniu Tie to aturity: [ 21

23 Index Business Day Center(s): Ordinary Rebalancing Date ( t rb ): Extraordinary Rebalancing Date ( t rb ): Notional Effective Date ( t N (t) ): Largest Issuer Eligibility Constraint ( I L, w target L ): Other Issuer Eligibility Constraint ( I O, w target O ): Price Deterination ethodology: Instruent Exclusion ethodology Trade Price Deterination ethodology: 22