Table of Contents INTRODUCTION... 3 DETAILED METHODOLOGY... 4 INDEX REBALANCE... 6 RESEARCH INDEX... 9 APPENDIX... 10

Transcription

1 April 2018

2 Table of Contents INTRODUCTION... 3 DETAILED METHODOLOGY... 4 INDEX REBALANCE... 6 RESEARCH INDEX... 9 APPENDIX

3 INTRODUCTION The Thomson Reuters Private Equity Buyout Index seeks to provide the returns of the US private equity industry. Rather than investing in private equity companies directly, the Index seeks to replicate the industry s returns by constructing a portfolio of liquid, US large cap, listed equities. This portfolio is designed to mirror the characteristics and returns of the private markets (i.e., private equity), which is tracked and calculated by Thomson Reuters in their Private Equity Buyout Research Index. This overall process can be distilled into two steps: Step 1: Construction of Thomson Reuters Private Equity Buyout Research Index For over 20 years, Thomson Reuters has been collecting detailed transaction and valuation data on the universe of US private equity companies. Individual companies are aggregated to provide an industry level valuation of all US private equity companies. This approach allows the Research Index to reflect the gross returns of the industry, i.e., before private equity fund manager fees and expenses are deducted. Step 2: Construction of Thomson Reuters Private Equity Buyout Index With a detailed historical profile of the private equity industry return characteristics established through the Research Index, a tracking portfolio is then created to mirror the return characteristics of the private market companies. This tracking portfolio, the Thomson Reuters Private Equity Buyout Index, is constructed using liquid, US large cap, listed equities (e.g., Apple, Dow Chemical, Berkshire Hathaway Inc.). Leverage is commonly used so that the tracking portfolio s risk loadings match those of the private equity industry in aggregate. This leverage factor has averaged 1.27 since inception. 3

4 DETAILED METHODOLOGY All information contained herein on the Thomson Reuters Private Equity Buyout Index and the Thomson Reuters Private Equity Buyout Research Index is derived from publicly available information. The numerical value of the Thomson Reuters Private Equity Buyout Index is published daily by Thomson Reuters on its website, (symbol.trpei ). The Thomson Reuters Private Equity Buyout Index was first published in January 2014 and has a base value of 100 as of December 30, 1996, a number that was achieved by conducting simulated models across historical data. As of 12/30/2016, the Thomson Reuters Private Equity Buyout Index had a value of The Thomson Reuters Private Equity Buyout Index is composed of publicly traded stocks, and the composition, valuation and adjustment methodology of this index is based upon the use of a proprietary model created by DSC Quantitative Group, LLC ( DSC ), a privately held financial services firm. The composition and performance of the Thomson Reuters Private Equity Buyout Index is calculated by reference to a separate index that is intended to track the actual performance of the private equity industry. This separate index, the Thomson Reuters Private Equity Buyout Research Index (symbol.trper ), was first published by Thomson Reuters in January 2014 with a base value of 100 as of December 30, While the last eight quarters of the Thomson Reuters Private Equity Buyout Research Index are subject to quarterly retroactive revision, the Thomson Reuters Private Equity Buyout Index itself has not been revised since it was first published and is not intended to be revised. As of 12/30/2016, the Thomson Reuters Private Equity Buyout Research Index had a value of Six private equity sectors are tracked in the Thomson Reuters Private Equity Buyout Index Six industry sectors tracked in the Thomson Reuters Private Equity Buyout Index were identified and established pursuant to a methodology designed by DSC. These industry sectors are the following: (1) materials, industrials, energy and utilities, (2) consumer cyclicals, (3) healthcare, (4) technology, (5) financials and (6) consumer non-cyclical. Each of the six sectors is represented in the Thomson Reuters Private Equity Buyout Index by publicly traded stocks that are selected out of one or more corresponding Thomson Reuters sector indices using defined methodology. These sector indices, along with their corresponding sectors, consist of the following: Sector 1. Materials, Industrials, Energy and Utilities Sector Index Materials Industrials Energy Utilities 2. Consumer Cyclical Consumer Cyclical 3. Consumer Non-Cyclical Consumer Non-Cyclical 4. Financials Financials 5. Health Care Health Care 6. Technology Technology Telecommunications 4

5 The chart below lists the Thomson Reuters Datastream symbols and the Thomson Reuters Eikon Reuters Instrument Codes (RICs) that may be used to retrieve data on the sector indices on those platforms, including the weights of each of those sector indices within the overall Thomson Reuters Private Equity Buyout Index as of April 30, Thomson Reuters DataStream and Eikon are real-time information portals used for gathering economic data and performing economic research and analytics. Sector Index DataStream Eikon RIC Index Weight (as of April 30, Symbol 2018) 1. Materials X1USBML.TRXFLDUSPMAT 5.08% 2. Industrials X1USIDL.TRXFLDUSPIND 14.89% 3. Consumer Non-Cyclical X1USNCL.TRXFLDUSPYCY 9.98% 4. Consumer Cyclical X1USCYL.TRXFLDUSPNCY 13.20% 5. Financials X1USFNL.TRXFLDUSPFIN 8.35% 6. Energy X1USE1L.TRXFLDUSPENE 7.18% 7. Utilities X1USU1L.TRXFLDUSPUTL 1.81% 8. Health Care X1USHCL.TRXFLDUSPHLC 8.85% 9. Technology X1USG1L.TRXFLDUSPTEC 27.94% 10. Telecommunications X1UST1L.TRXFLDUSPCOM 2.72% Total: % Further information regarding these sector indices, including a list of companies comprising each such index, can be obtained from the Thomson Reuters Eikon platform at: A discussion of the treatment of fundamental changes related to component stocks of each of the sector indices listed above is available at: Industry sector indices are used for sourcing components of the Thomson Reuters Private Equity Buyout Index Each sector index contains publicly traded equities stocks with large market capitalizations (e.g., Pioneer Natural Resources, Dow Chemical Company and Berkshire Hathaway Inc.). No one stock can be included in more than one sector index. The assumption underlying the use of these public equities and indices is that private and public company valuations are driven by the same economic factors and therefore are sufficiently linked for purposes of index replication. The component stocks of the Thomson Reuters Private Equity Buyout Index, categorized by sector and sector index, as of 9/30/2016, are set forth in Appendix A hereto. The 10 sector indices are utilized solely for the purposes of selecting component stocks of the Thomson Reuters Private Equity Buyout Index. On a quarterly basis, each of the 10 sector indices is assigned a market-capitalization weight by the Thomson Reuters Private Equity Buyout Research Index, with the total weights adding up to 100% for the 10 sector indices. There is no requirement that any sector index is assigned a weight above 0% by the Thomson Reuters Private Equity Buyout Research Index. 5

6 INDEX REBALANCE On a quarterly basis, stocks are selected out of the sector indices for inclusion in the Thomson Reuters Private Equity Buyout Index pursuant to predetermined criteria The quarterly selection process for the stocks used in the Thomson Reuters Private Equity Buyout Index is model-based. With respect to each sector index (other than those with a Thomson Reuters Private Equity Buyout Index weight below 0.25%, as further explained below); the model first selects the largest-capitalization stock in such sector index. Thereafter, the second-largest-capitalization stock is added, and so on proceeding to stocks with smaller capitalizations until the applicable correlation target (as explained below; e.g., 95%) is achieved or exceeded. Stocks of companies that are Master Limited Partnerships (MLPs) are excluded out of the selection process, even if the MLPs would otherwise be selected due to their capitalization. Finally, a further constraint is applied so that no individual stock represents more than 4.5% of the total portfolio. The result is that each participating sector index is represented by a portfolio (with respect to each sector index out of which equities are selected for inclusion in the Thomson Reuters Private Equity Buyout Index, a Custom Basket ) of equity securities. The process is repeated on a quarterly basis. The selection of stocks out of a particular sector index for inclusion in the Thomson Reuters Private Equity Buyout Index is performed with the goal of achieving a high correlation of performance between the stocks selected out of a particular sector index and such corresponding sector index. Pursuant to the methodology that has been followed since the inception of the Thomson Reuters Private Equity Buyout Index, a minimum correlation of 95% is the target for sector indices with a Thomson Reuters Private Equity Buyout Index weight greater than 2%, and a minimum correlation of 80% is the target for sector indices with a Thomson Reuters Private Equity Buyout Index weight between 0.25% and 2%. No stocks will be selected for inclusion in the Thomson Reuters Private Equity Buyout Index with respect to sector indices with a Thomson Reuters Private Equity Buyout Index weight below 0.25%. The intent of the methodology is to have the past quarterly performance of the stocks selected out of a particular sector index for inclusion in the Thomson Reuters Private Equity Buyout Index correlate 80% or 95%, as applicable, or higher with the past performance of the corresponding sector index. The 95% correlation is measured at the level of the sector index. For example, the Technology sector has two sector indices, Technology (X1USG1L) and Telecommunication (X1UST1L). The stocks selected out of the Technology (X1USG1L) sector index, in the aggregate, are correlated by at least 95% with the total performance of the Technology sector index over the previous quarter. The same correlation is achieved with the stocks selected out of the Telecommunications (X1UST1L) sector index with respect to the performance of the Telecommunications sector index. Correlation measures are computed using daily total returns from the component equities over the previous three months. To compute the correlation, daily total returns of a value-weighted portfolio of the equities selected for each Custom Basket and daily total returns from the corresponding sector indices are used. Further information regarding correlation, along with an example, is contained in Appendix B. On a quarterly basis, the Thomson Reuters Private Equity Buyout Index undergoes a wholesale reweighting Once a quarter (at the end of March, June, September, and December) the Thomson Reuters Private Equity Buyout Index is recomputed. One of the outputs of the Thomson Reuters Private Equity Buyout Research Index computation is the sector index weightings of firms in the Private Equity Buyout industry. At the time of the following month end (April, July, October, January), the sector index weightings of the Thomson Reuters Private Equity Buyout Index are rebalanced to match the most recent weightings of the Thomson Reuters Private Equity Buyout Research Index, updated using relative performance. The quarter-end weights of the Thomson Reuters Private Equity Buyout Index are multiplied by one plus the return of the matching sector in the Thomson Reuters Private Equity Buyout Research Index. For any sector containing more than one sector index, the relative weights of the component sector indices within such sector will match that of the relative weights of the sector index weightings within the Thomson Reuters Private Equity Buyout Research Index as provided by Thomson Reuters. The weights are then normalized by dividing by their sum so that the total weight is 100%. At these quarter ends, the set of stocks included in each Custom Basket is also adjusted to match any changes in the composition of the sector indexes (stock splits, new stocks, re-categorization, etc.) according to the changes implemented by Thomson Reuters in their sector indices. 6

7 MONTHLY REWEIGHTING On months when a wholesale weight update does not occur, the Thomson Reuters Private Equity Buyout Index undergoes intermediate reweighting Thomson Reuters provides the relative weights of the six sectors on a monthly basis. Accordingly, on a monthly basis, the Thomson Reuters Private Equity Buyout Index will undergo a reweighing at the sector (but not the sector index) level. As explained above, the stock selection process will only occur every three months. For the monthly sector-level re-weightings that do not coincide with the quarterly sector-index-level selections, the process involves the following: Reweighting of each of the six sectors amongst themselves based on updated sector-level weights provided by Thomson Reuters. With respect to each sector that contains multiple sector-index-level Custom Baskets, each Custom Basket is reweighted on a pro rata basis. For example, if the weight of the Technology sector as of end of January is 5%, with 2% weight attributed to the Technology (X1USG1L) sector index Custom Basket, and 3% weight attributed to the Telecommunications (X1UST1L) sector index Custom Basket, and the weight of the Technology sector at end of February increases to 10%, where end of February is not accompanied by quarterly index-sector-level reweighting, then, all else being equal, as of the beginning of March, the weight attributed to the Technology (X1USG1L) sector index Custom Basket will increase to 4% and the weight attributed to the Telecommunications (X1UST1L) sector index Custom Basket will increase to 6%. Reweighting of the stocks within each of the Custom Baskets by market capitalization, based on actual performance of the stocks, subject to the constraint that no individual stock is allowed to represent more than 4.5% of the total portfolio. For example, if the Consumer Non-Cyclical (X1USNCL) sector index as of end of January is represented by a Custom Basket consisting solely of Procter & Gamble (PG) and Coca Cola (KO), where PG is weighted 60% due to a $300 billion capitalization, and KO is weighted 40% due to a $200 billion capitalization, and during February PG s capitalization increases to $400 billion while KO s capitalization decreases to $100 billion, then, all else being equal, as of end of February, the Consumer Non-Cyclical (X1USNCL) sector index Custom Basket will be reweighted such that PG is weighted 80% and KO is weighted 20%. An adjustment to the overall risk exposure is performed on a monthly basis using a portfolio leverage adjustment and sector-level leverage adjustments At the end of each calendar month, but effective on the first trading day of the following month, a portfolio-level leverage adjustment and sector-level leverage adjustments are effected, reflecting the updated risk exposure estimate of the Thomson Reuters Private Equity Buyout Research Index based on historical observations. Because Private Equity-backed firms, on average, have an amplified reaction to market changes (such that an economic condition that causes the overall market to decrease in value by a certain percentage is expected to cause a greater decrease in value for Private Equity-backed firms, with similar but opposite effects observed during economic conditions that cause the overall market to increase in value), the Thomson Reuters Private Equity Buyout Index equity exposures have typically included positive overall portfolio leverage since inception of the Thomson Reuters Private Equity Buyout Index. From inception of the Thomson Reuters Private Equity Buyout Index to the date of this prospectus, 78% of months have had positive portfolio leverage. This amplification varies over time but has averaged 1.27 since inception and has operating parameters of 0 to 2 times exposure. Each month new leverage factors are computed and implemented at the time of the monthly reweighting. The leverage adjustments are achieved through direct leverage and the use of broad equity. The portfolio leverage adjustment is applied equally to all sectors. The sector-level leverage adjustments are applied to specific sectors in order to capture risk exposures that are not adequately represented by a single leverage factor in order to improve correlation between the Thomson Reuters Private Equity Buyout Index and the Thomson Reuters Private Equity Buyout Research Index. DSC, in its role as the developer of the Thomson Reuters Private Equity Buyout Index methodology, created and maintains 20 proprietary models that are used to generate independent leverage adjustment factors. The leverage adjustments are estimated using mathematical models that capture the historical relations between a set of economic variables and the return 7

8 profile of the Thomson Reuters Private Equity Buyout Research Index. The final value of each monthly leverage adjustment is calculated following these steps: Step 1: Model Calibration: Using historical data, the Thomson Reuters Private Equity Buyout Research Index exposures to equity market performance, interest rate spreads and market volatility are calculated. Specifically, the 20 models estimate the relation between these economic variables and the required leverage of the equity baskets in the Thomson Reuters Private Equity Buyout Index so that changes in these economic variables drive changes in the Thomson Reuters Private Equity Buyout Index leverage adjustments. Step 2: Data Collection: The current values of the economic variables are observed. This step requires the use of public sources including but not limited to stock exchanges and the Federal Reserve. Depending on the specific model, each observed value is a factor in the determination of the portfolio and sector-level leverage adjustments. For example, daily returns of the S&P 500 over the past three months are used to compute the market volatility. This step includes collecting daily returns of the S&P 500, and then computing the standard deviation of these returns over the previous three months. Step 3: Single Model Forecast: Each of the 20 models calculates the portfolio and sector-level leverage adjustments using updated data collected during the previous step and the calibrated model parameters from step one. Step 4: Consensus Forecast: The use of 20 models to compute the required leverage adjustments is intended to increase the quality of the results so that an anomalous economic circumstance that affects one model will not have undue effect on the overall leverage adjustments. The results of the 20 models are aggregated into a single consensus forecast for the portfolio leverage adjustment and each sector-level leverage adjustment. In particular, the 20 forecasts for each parameter are used to generate a consensus forecast in accordance with the following formula: Where: ConsensusAdjustmentj is the consensus forecast for portfolio leverage adjustment. Adjustmentj and Adjustmentj,i is the forecast of the i-th model for the Adjustmentj. Each model has a 5% weight in the overall forecast for a given parameter. This strategy is intended to limit the effect of erroneous data which could otherwise distort the correlation between the Thomson Reuters Private Equity Buyout Index and the Thomson Reuters Private Equity Buyout Research Index. The proprietary models are completely systematic and are not intended to involve discretion as they operate according to a fixed set of mathematical/statistical rules that drive the Thomson Reuters Private Equity Buyout Index s computations. A leverage factor can increase or decrease from the preceding month depending on variables including, but not limited to, volatility of the broader market, the month-over-month increase or decrease in volatility and the movement in interest rates. In Appendix C, we set forth the methodology by which monthly sector-level and quarterly sector-index-level reweighting occurs within the Thomson Reuters Private Equity Buyout Index. In Appendix D, we set forth the method by which the level and return of the Thomson Reuters Private Equity Buyout Index are calculated. In Appendix E, we set forth an example of the re-weighting of the Thomson Reuters Private Equity Buyout Index. 8

9 RESEARCH INDEX The Thomson Reuters Private Equity Buyout Research Index is designed to track the gross performance of the United States private equity industry. The Thomson Reuters Private Equity Buyout Research Index generates returns through the application of proprietary tools (developed by DSC and academic advisors) such as econometric models to a set of data compiled by Thomson Reuters through its own analysis of private companies. The returns generated by the Thomson Reuters Private Equity Buyout Research Index are instructive for purposes of constructing the Thomson Reuters Private Equity Buyout Index. Additionally, the Thomson Reuters Private Equity Buyout Research Index methodology generates estimates of the total market cap of all private equity-backed firms by sector index. This information is then used in quarterly updates of the Thomson Reuters Private Equity Buyout Index to set the new sector index weights and serves as a baseline for the Thomson Reuters Private Equity Buyout Index monthly re-weightings. The Thomson Reuters Private Equity Buyout Research Index sources its data from Thomson Reuters Standard Private Equity Data Feed (the Data Feed ), which tracks the valuation of PE firms at the time of buyouts and captures the performance of certain private equity-backed private companies across several economic sectors. The source data from the Data Feed is then merged with valuation data for exits from private equity transactions and is then further adjusted through the use of statistical regression, extrapolation and interpolation in order to produce the values of the Thomson Reuters Private Equity Buyout Research Index. For more information regarding the Thomson Reuters Private Equity Buyout Research Index and how performance is measured through this index, please refer to Appendix F. 9

10 APPENDIX Appendix A Thomson Reuters Private Equity Buyout Index Component Stocks and Weights as of April 30, 2018 Please note that the Sector Index Weight listed in the bottom line of each chart below is rounded to the nearest hundredth of a percent. Actual sector-index weights used in the Thomson Reuters Private Equity Buyout Index are not subject to rounding. I. Materials, Industrial, Energy and Utilities Sector a. Materials Sector Index Custom Basket Company Name Ticker Symbol Weight Within Sector Weight within Thomson Reuters Private Equity Buyout Index DOW DUPONT INC DWDP 27.20% 1.38% PRAXAIR INC PX 8.00% 0.41% AIR PRODUCTS AND CHEMICALS INC APD 6.95% 0.35% PPG INDUSTRIES INC PPG 5.17% 0.26% LYONDELLBASELL INDUSTRIES NV LYB 5.50% 0.28% SHERWIN-WILLIAMS CO SHW 5.95% 0.30% INTERNATIONAL PAPER CO IP 3.94% 0.20% NEWMONT MINING CORP NEM 3.65% 0.19% NUCOR CORP NUE 3.62% 0.18% VULCAN MATERIALS CO VMC 2.61% 0.13% CELANESE CORP CE 2.63% 0.13% FREEPORT-MCMORAN INC FCX 3.89% 0.20% EASTMAN CHEMICAL CO EMN 2.60% 0.13% MONSANTO CO MON 10.92% 0.55% ECOLAB INC ECL 7.36% 0.37% % 5.08% 10

11 b. Industrials Sector Index Custom Basket Company Name Ticker Symbol Weight Within Sector Weight within Thomson Reuters Private Equity Buyout Index GENERAL ELECTRIC CO GE 8.19% 1.22% CSX CORP CSX 3.11% 0.46% 3M CO MMM 7.66% 1.14% EMERSON ELECTRIC CO EMR 2.82% 0.42% HONEYWELL INTERNATIONAL INC HON 7.25% 1.08% UNITED TECHNOLOGIES CORP UTX 6.44% 0.96% BOEING CO BA 13.12% 1.95% UNITED PARCEL SERVICE INC UPS 5.29% 0.79% UNION PACIFIC CORP UNP 6.87% 1.02% S&P GLOBAL INC SPGI 3.12% 0.46% LOCKHEED MARTIN CORP LMT 5.28% 0.79% NORFOLK SOUTHERN CORP NSC 2.92% 0.43% DEERE & CO DE 2.62% 0.39% CATERPILLAR INC CAT 5.78% 0.86% RAYTHEON CO RTN 3.71% 0.55% DELTA AIRLINES DAL 2.50% 0.37% NORTHROP GRUMMAN CORP NOC 3.51% 0.52% FEDEX CORP FDX 3.81% 0.57% ILLINOIS TOOL WORKS INC ITW 2.97% 0.44% GENERAL DYNAMICS CORP GD 3.03% 0.45% % 14.89% 11

12 Company Name c. Energy Sector Index Custom Basket Ticker Symbol Weight Within Sector Weight within Thomson Reuters Private Equity Buyout Index EXXON MOBIL CORP XOM 26.24% 1.88% CHEVRON CORP CVX 19.04% 1.37% SCHLUMBERGER NV SLB 7.57% 0.54% OCCIDENTAL PETROLEUM CORP OXY 4.41% 0.32% CONOCOPHILLIPS COP 6.06% 0.44% EOG RESOURCES INC EOG 4.98% 0.36% KINDER MORGAN INC KMI 2.45% 0.18% HALLIBURTON CO HAL 3.49% 0.25% PHILLIPS 66 PSX 4.18% 0.30% PIONEER NATURAL RESOURCES CO PXD 2.56% 0.18% ANADARKO PETROLEUM CORP APC 2.73% 0.20% VALERO ENERGY CORP VLO 3.52% 0.25% DEVON ENERGY CORP DVN 1.49% 0.11% MARATHON PETROLEUM CORP MPC 2.62% 0.19% ONEOK INC OKE 1.78% 0.13% WILLIAMS COMPANIES INC WMB 1.46% 0.10% APACHE CORP APA 1.18% 0.08% ANDEAVOR ANDV 1.63% 0.12% TECHNIPFMC PLC FTI 1.17% 0.08% CONCHO RESOURCES INC CXO 1.45% 0.10% % 7.18% 12

13 d. Utilities Sector Index Custom Basket Company Ticker Symbol Weight within Sector Index Weight within Thomson Reuters Private Equity Buyout Index NEXTERA ENERGY INC NEE 19.15% 0.35% DUKE ENERGY CORP DUK 14.90% 0.27% SOUTHERN CO SO 12.33% 0.22% DOMINION RESOURCES INC D 10.90% 0.20% AMERICAN ELECTRIC POWER COMPANY INC AEP 8.55% 0.15% PUBLIC SERVICE ENTERPRISE GROUP INC PEG 6.53% 0.12% EXELON CORP EXC 9.50% 0.17% PG&E CORP PCG 5.56% 0.10% SEMPRA ENERGY SRE 6.40% 0.12% CONSOLIDATED EDISON INC ED 6.17% 0.11% % 1.81% 13

14 II. Consumer Non-Cyclical Sector Company Name a. Consumer Non-Cyclical Sector Index Custom Basket Ticker Symbol Weight Within Sector Weight within Thomson Reuters Private Equity Buyout Index PROCTER & GAMBLE CO PG 12.68% 1.27% COCA-COLA CO KO 12.81% 1.28% PEPSICO INC PEP 9.85% 0.98% PHILIP MORRIS INTERNATIONAL INC PM 8.85% 0.88% ALTRIA GROUP INC MO 7.41% 0.74% CVS HEALTH CORP CVS 4.87% 0.49% KRAFT HEINZ CO KHC 2.52% 0.25% WALGREENS BOOTS ALLIANCE INC WBA 3.84% 0.38% MONDELEZ INTERNATIONAL INC MDLZ 4.08% 0.41% COLGATE- PALMOLIVE CO CL 3.92% 0.39% KIMBERLY-CLARK CORP KMB 2.36% 0.24% ESTEE LAUDER CO INC EL 2.11% 0.21% ARCHER DANIELS MIDLAND CO ADM 1.74% 0.17% EXPRESS SCRIPTS HOLDING CO ESRX 2.78% 0.28% MCKESSON CORP MCK 2.24% 0.22% GENERAL MILLS INC GIS 1.64% 0.16% MONSTER BEVERAGE CORP MNST 1.63% 0.16% SYSCO CORP SYY 2.27% 0.23% CONSTELLATION BRANDS INC STZ 2.78% 0.28% WAL MART STORES INC WMT 9.60% 0.96% % 9.98% 14

15 III. Healthcare Sector Company Name a. Healthcare Sector Index Custom Basket Ticker Symbol Weight Within Sector Weight within Thomson Reuters Private Equity Buyout Index JOHNSON & JOHNSON JNJ 17.88% 1.58% PFIZER INC PFE 11.60% 1.03% MERCK & CO INC MRK 8.46% 0.75% UNITEDHEALTH GROUP INC UNH 11.40% 1.01% MEDTRONIC PLC MDT 5.72% 0.51% AMGEN INC AMGN 5.69% 0.50% GILEAD SCIENCES INC GILD 4.69% 0.42% ABBVIE INC ABBV 7.02% 0.62% BRISTOL-MYERS SQUIBB CO BMY 4.49% 0.40% ANTHEM INC ANTM 2.97% 0.26% CELGENE CORP CELG 3.26% 0.29% ELI LILLY AND CO LLY 3.91% 0.35% ABBOTT LABORATORIES ABT 5.35% 0.47% THERMO FISHER SCIENTIFIC INC TMO 4.50% 0.40% DANAHER CORP DHR 3.05% 0.27% % 8.85% 15

16 IV. Technology Sector Company Name a. Technology Sector Index Custom Basket Ticker Symbol Weight Within Sector Weight within Thomson Reuters Private Equity Buyout Index APPLE INC AAPL 16.10% 4.50% MICROSOFT CORP MSFT 15.14% 4.23% FACEBOOK INC FB 8.29% 2.32% ALPHABET INC-CL C ORD GOOG 12.79% 3.57% INTUIT INC INTU 0.83% 0.23% INTEL CORP INTC 5.12% 1.43% CISCO SYSTEMS INC CSCO 4.54% 1.27% INTERNATIONAL BUSINESS MACHINES CORP IBM 2.84% 0.79% ORACLE CORP ORCL 2.90% 0.81% QUALCOMM INC QCOM 1.61% 0.45% BROADCOM LTD AVGO 1.64% 0.46% VISA INC V 4.86% 1.36% TEXAS INSTRUMENTS INC TXN 2.10% 0.59% ADOBE SYSTEMS INC ADBE 2.15% 0.60% PAYPAL HOLDINGS INC PYPL 1.78% 0.50% SALESFORCE.COM INC CRM 1.52% 0.42% NETFLIX INC NFLX 2.39% 0.67% MICRON TECHNOLOGY INC MU 1.07% 0.30% AUTOMATIC DATA PROCESSING ADP 1.10% 0.31% COGNIZANT TECHNOLOGY SOLUTIONS CORP CTSH 1.02% 0.29% APPLIED MATERIALS INC AMAT 1.11% 0.31% MASTERCARD INC MA 3.51% 0.98% ACTIVISION BLIZZARD INC ATVI 0.92% 0.26% NVIDIA CORP NVDA 2.64% 0.74% ACCENTURE PLC ACN 2.04% 0.57% % 27.94% 16

17 b. Telecommunications Sector Index Custom Basket Company Name Ticker Symbol Weight Within Sector Weight within Thomson Reuters Private Equity Buyout Index AT&T INC T 44.92% 1.22% VERIZON COMMUNICATIONS INC VZ 45.03% 1.23% CENTURYLINK INC CTL 3.68% 0.10% ZAYO GROUP HOLDINGS INC ZAYO 1.78% 0.05% T-MOBILE US INC TMUS 4.60% 0.13% % 2.72% 17

18 V. Financial Sector Company Name a. Financial Sector Index Custom Basket Ticker Symbol Weight Within Sector Weight within Thomson Reuters Private Equity Buyout Index BERKSHIRE HATHAWAY INC BRK 15.88% 1.33% JPMORGAN CHASE & CO JPM 15.48% 1.29% WELLS FARGO & CO WFC 10.51% 0.88% BANK OF AMERICA CORP BAC 12.71% 1.06% CITIGROUP INC C 7.25% 0.61% U.S. BANCORP USB 3.49% 0.29% AMERICAN INTERNATIONAL GROUP INC AIG 1.96% 0.16% GOLDMAN SACHS GROUP INC GS 3.79% 0.32% CHUBB LTD CB 2.44% 0.20% BB&T CORP BBT 1.70% 0.14% AMERICAN EXPRESS CO AXP 3.56% 0.30% MORGAN STANLEY MS 2.64% 0.22% AMERICAN TOWER CORP AMT 2.49% 0.21% BLACKROCK INC BLK 2.73% 0.23% PNC FINANCIAL SERVICES GROUP INC PNC 2.85% 0.24% BANK OF NEW YORK MELLON CORP BK 2.28% 0.19% CME GROUP INC CME 1.87% 0.16% CHARLES SCHWAB CORP SCHW 2.78% 0.23% PRUDENTIAL FINANCIAL INC PRU 1.86% 0.16% METLIFE INC MET 1.72% 0.14% % 8.35% 18

19 VI. Consumer Cyclical Sector Company Name a. Consumer Cyclical Sector Index Custom Basket Ticker Symbol Weight Within Sector Weight within Thomson Reuters Private Equity Buyout Index AMAZON.COM INC AMZN 30.08% 3.97% HOME DEPOT INC HD 9.57% 1.26% COMCAST CORP CMCSA 6.88% 0.91% WALT DISNEY CO DIS 7.14% 0.94% BOOKINGS HOLDINGS INC BKNG 4.33% 0.57% MCDONALD'S CORP MCD 5.96% 0.79% STARBUCKS CORP SBUX 3.83% 0.51% NIKE INC NKE 4.17% 0.55% COSTCO WHOLESALE CORP COST 4.05% 0.53% TWENTY-FIRST CENTURY FOX INC FOXA 1.63% 0.21% LOWE'S COMPANIES INC LOW 3.20% 0.42% TIME WARNER INC TWX 3.50% 0.46% FORD MOTOR CO F 2.08% 0.27% TJX COMPANIES INC TJX 2.51% 0.33% GENERAL MOTORS CO GM 2.20% 0.29% TARGET CORP TGT 1.75% 0.23% CHARTER COMMUNICATIONS INC CHTR 2.30% 0.30% TESLA INC TSLA 1.41% 0.19% MARRIOTT INTERNATIONAL INC MAR 1.94% 0.26% LAS VEGAS SANDS CORP LVS 1.47% 0.19% % 13.20% 19

20 Appendix B Description and Example of Correlation Given two random variables x and y, the correlation between them is a measure of linear co-movements. It is defined as the ratio of the covariance of the two variables and the product of their respective standard deviations. In a formula, this concept can be expressed as follows: Correlation can assume values between -1 (perfectly negative correlated) and 1 (perfectly correlated). Two random variables that exhibit a correlation of zero are said to be uncorrelated. To calculate the correlation between a basket of sector index constituents and the sector index itself the following steps are taken: 1. The stocks belonging to the sector index are sorted by market capitalization in a decreasing order. 2. A number of market-capitalization-weighted portfolios are constructed using the first 1, 2, 3, 4, stocks of the list compiled in step The daily returns of each portfolio are calculated. 4. For each portfolio the correlation between the portfolio returns and the sector index return are calculated. The correlation is calculated using three months of daily data. Example: The following chart illustrates the relationship between the number of stocks selected out of the Energy and Materials Custom Baskets and the resulting correlation based on historical values since the Thomson Reuters Private Equity Buyout Index was first published in January % 99.00% 98.00% 97.00% 96.00% 95.00% 94.00% 93.00% 92.00% 91.00% Energy Materials 90.00% 89.00% 88.00% 87.00% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00% 9.00% 10.00% 11.00% Historical Correlation 12.00% 13.00% 14.00% 15.00% 16.00% 17.00% 18.00% 19.00% 20.00% 21.00% 22 00% Percentage of stocks included The chart illustrates that, on a historical basis, a minimum of 1.9% of the Energy sector constituents are required to be included in the Energy Custom Basket to achieve the target correlation of 95%, which contrasts with the Materials sector, which has historically required a greater percentage of stocks (4.9%) to be included in the Custom Basket in order to achieve the target correlation. 20

21 Appendix C Thomson Reuters Private Equity Buyout Index: Monthly Sector Weighting Update Computation Because the sector-index-level weights of the Thomson Reuters Private Equity Buyout Research Index are available only quarterly and implemented one month after computation, Thomson Reuters Private Equity Buyout Index sector weights are derived from the most recent available Thomson Reuters Private Equity Buyout Research Index weights in the following manner. In the formula below, the weight of each of the six PE sectors as of the last published Thomson Reuters Private Equity Buyout Research Index month is denoted by W i t-j. Note that the Thomson Reuters Private Equity Buyout Research Index produces sector-index-level weights, which are then added within sectors in some cases to calculate the sector weights used here. The following formula is used to calculate the weight of each sector in the Thomson Reuters Private Equity Buyout Index (denoted by W i ) : t Where: i denotes the sector, t denotes the current date, S denotes the performance of the corresponding sector index or indices, and j is the number of months that have passed since the last available weights in the Thomson Reuters Private Equity Buyout Research Index. In the case where j is equal to 1 (at the end of January, April, July and October), the sector index Custom Basket weights within the sector are also adjusted to the relative weightings produced by the Thomson Reuters Private Equity Buyout Research Index in the previous month. For example, if, during the previous month, the Thomson Reuters Private Equity Buyout Research Index had weights of 2% for the Technology sector index (X1USG1L) and 3% for the Telecommunication sector index (X1UST1L) and the updated aggregate sector weight for the Technology sector is 10%, then the Technology sector index Custom Basket will have a weight of 4% in the updated weightings and the Telecommunications sector index Custom Basket will have a weight of 6%. In the case where j is not equal to 1, the relative weightings of sector indices within their sectors is updated using sector-index performance using the same method/formula described for updating sector weights above. 21

22 Appendix D Thomson Reuters Private Equity Buyout Index Level Computation and Return The actual value (index level) of the Thomson Reuters Private Equity Buyout Index as of any particular month (L t) is calculated as follows: L t = L t - 1 * [ 1 + (B t * R t) + AE t ] Where: L t - 1 is the Thomson Reuters Private Equity Buyout Index level for the previous month; B t is the aggregate leverage factor R t is the aggregate return for the Thomson Reuters Private Equity Buyout Index, as calculated below AE t is the sector level leverage adjustment expressed as a return Daily index levels are calculated in a similar manner, but without including B t (aggregate leverage factor) and AE t (sector level leverage adjustment expressed as a return). At the beginning of each month, the target weights (W i t) are computed using the method in Appendix C and the overall risk exposures are computed using the 20 DSC models. The return over that month of the sectors (before any leverage adjustments) is then observed. The unadjusted monthly return of the Thomson Reuters Private Equity Buyout Index is calculated as follows: Where: R i t is the return to sector index Custom Basket i in month t and W i t is the weight that sector index Custom Basket i receives in month t. As an example, assume, for a given month, the beginning-of-month weights of the Thomson Reuters Private Equity Buyout Index sectors are as follows: Table 1. Beginning-of-month weights Sector Weight Consumer Cyclical 8% Energy, Utilities, Materials and Industrials 22% Healthcare 20% Technology 18% Consumer Non-Cyclical 22% Financials 10% Total 100% 22

23 The returns over the course of the month for each sector are as follows: Table 2. Monthly returns Sector Return Consumer Cyclical 4.00% Energy, Utilities, Materials and Industrials 3.50% Healthcare 7.50% Technology -0.05% Consumer Non-Cyclical 2.00% Financials -0.50% In addition, assume further that the leverage in effect at the beginning of the month was 1.2. The before-leverage (unadjusted) return is calculated by multiplying corresponding weights and returns by sector and adding up the result. The before-leverage (unadjusted) return in this example is 2.971%. This return is then multiplied by the portfolio leverage adjustment factor of 1.2, resulting in a levered return of %. Finally, if in this month, each sector-level leverage adjustment was 0.20% (in practice, sector-level leverage adjustments are likely to be different for each sector), the afterleverage performance is added to the sector-level leverage adjustment resulting in the total return of the Thomson Reuters Private Equity Buyout Index as follows: (2.971% x 1.2) % = %. Alternatively, if the portfolio leverage factor for the given month was instead 0.8 (meaning the Thomson Reuters Private Equity Buyout Index had a reduced exposure to economic variables in the month), then the before-leverage (unadjusted) return of 2.971% is multiplied by 0.8 to achieve a levered return of %. If the effect of each sector-level leverage adjustment (0.20%) is then added, the total return of the Thomson Reuters Private Equity Buyout Index is (2.971% x 0.8) % = % 23

24 Appendix E Re-weightings of the Thomson Reuters Private Equity Buyout Index Please refer to Tables 1 and 2 in Appendix D. To calculate the end-of-month unadjusted weights, beginning-of-month weights are multiplied by 1 plus the sector return for each sector. Each weight is then divided by the total so that they add up to 100%. Please note that the portfolio leverage adjustment and the sector-level leverage adjustments do not affect reweighting. Sector Beginning of Month Weight Unadjusted Weight Final Weight Consumer Cyclical 8% 8.32% 8.08% Energy, Utilities, Materials and Industrials 22% 22.77% % Healthcare 20% 21.5% 20.88% Technology 18% % % Consumer Non-Cyclical 22% 22.44% % Financials 10% 9.95% 9.663% Total 100% % 100% 24

25 Appendix F Description of the Thomson Reuters Private Equity Buyout Research Index The Thomson Reuters Private Equity Buyout Research Index is intended to track the aggregate performance of the US private equity industry, with an aggregation of private company values that are weighed by market capitalization. The Thomson Reuters Private Equity Buyout Research Index reflects non-tradable assets. The Thomson Reuters Private Equity Buyout Research Index was launched in January It has a base value of 100 as of December 30, 1996, and values are computed quarterly, as of the last business day of the month, beginning on January 31, The value of the Thomson Reuters Private Equity Buyout Research Index is published by Thomson Reuters on a quarterly basis, and the source data for the Thomson Reuters Private Equity Buyout Research Index originates in the Data Feed, which tracks transaction valuations. The source data is merged with valuation data of buyout exits from private equity transactions to create the data set that is used in the Thomson Reuters Private Equity Buyout Research Index. In addition to using data specific to the private equity industry from the Data Feed, some of the calculations involved in formulating the Thomson Reuters Private Equity Buyout Research Index are based on general industry data with respect to a particular sector. Industry data is used for creating statistical regressions and interpolating and extrapolating various numbers that are fed into the calculation of the Thomson Reuters Private Equity Buyout Research Index. Industry data is sourced from the performance of sector indices in the following sectors: Basic Materials Cyclical Consumer Goods and Services Energy Financials Technology Industrials Noncyclical Consumer Goods and Services Telecommunications Utilities Healthcare While values derived from IPOs, trade sales and buybacks are included in the exit data, secondary sales between private equity companies are excluded. The value of a private equity firm following an IPO is calculated by adding the total proceeds for the entire IPO plus the overallotment amount ( green shoe ) sold. The green shoe is a clause in an underwriting agreement that requires the issuer to authorize additional shares to be issued through the existing underwriting syndicate in the case of excess demand for the stock. The Thomson Reuters Private Equity Buyout Research Index only includes valuations out of the first exit round for a particular company. If a firm has an IPO, then returns to private status and then exits private status again, only the valuation of the first IPO is included in the Thomson Reuters Private Equity Buyout Research Index. A monthly data series is produced for each firm based on data from buyouts, any intermediate funding rounds and exit rounds. The monthly values are derived using statistical regression analysis along with interpolation and extrapolation after the last funding/buyout transaction. The Thomson Reuters Private Equity Buyout Research Index is rebalanced on a quarterly basis in response to returns within each sector. Because private equity-backed company valuations are only available on an intermittent basis (at buyouts, sometimes at intermediate funding rounds and exits), statistical models are used to interpolate intra-valuation monthly values for each private equity firm as well as to extrapolate monthly returns for firms following the last known funding round. Monthly valuations and estimated or observed company returns are then used to construct a value-weighted index of buyout companies, which is the Thomson Reuters Private Equity Buyout Research Index. Separately, the valuation and sectorindex categorization of each private equity-backed firm is produced. These company weights are aggregated by sector index and used, after updating, in the Thomson Reuters Private Equity Buyout Index. 25