Ground Rules for EMIX European Index Series. November 2017

Transcription

1 Ground Rules for EMIX European Index Series

2 Contents 1. Introduction Background Regions and Markets Index Series EMIX Industry classification structure (EMICS) Quarterly reviews Annual reviews Daily calculations Data sources Data and market disruption Termination of Index Euromoney Index Committee Review of Ground Rules 4 2. Eligible Companies Shares classes Exclusions Foreign ownership restrictions Nationality Liquidity Screening Secondary Classes of Shares 6 3. Free Float Indices using Free Float Shares Monitoring Banding 7 4. EMIX Smaller European Companies Indices - Quarterly Review Europe ex UK Quarterly Review procedures UK Quarterly Review procedures Allocation of companies to the relevant indices 9 5. EMIX Smaller European Leaders Indices - Annual Review and Quarterly Review Annual Review - Liquidity analysis Annual Review - Constituent changes Quarterly Review EMIX Europe Indices - Quarterly Review EMIX Europe Low Volatility Index - Quarterly Review Daily Review Shares changes Mergers, acquisitions and restructurings Suspension Replacement of constituents Dividends IPOs Announcements Index reviews Constituent changes Amendments Dissemination Distribution Index values Constituent data Reports Historic data About Euromoney Indices Responsibility for the Indices Euromoney Indices Contacts 19 Appendix A 20 Countries included in EMIX European Index Series Appendix B 21 EMIX Industry classification structure Appendix C 25 List of Indices by Region / Country Disclosure & Disclaimer

3 Definitions 3m ADTV Average daily traded value over 3 months as defined in Section m ADTV Average daily traded value over 12 months as defined in Section 5.1. AR Base Date Business Day Annual Review The date on which the value of an index is set at a specified value (usually 100). Monday to Friday. Constituent A stock whose price is used in the calculation of one or more of the Indices. Constituent Data The lists of constituents and their associated market data on a daily basis. Corporate Action Mergers, acquisitions and restructurings. Data Disruption Event resulting in the unavailability of data, as defined in Section 1.9. EEI Effective Date EELVI EMCEI EMICS ESECI ESELI Euromoney Indices Euromoney Index Committee Euromoney Trading Limited Expert Judgement EMIX Europe Indices Date when, following the close of business, new constituents of the Indices take effect following the Quarterly Review. EMIX Europe Low Volatility Index. EMIX Micro Cap Europe Indices. EMIX Industry classification structure. EMIX Smaller European Companies Indices. EMIX Smaller European Leaders Indices. A business unit of Euromoney Trading Limited. A committee comprised of members of Euromoney Indices which meets quarterly to discuss all aspects of the Indices, including any change to these Ground Rules. Euromoney Trading Limited acting through Euromoney Indices. As defined in Expert Judgement Policy, available on the Euromoney Indices website,

4 Foreign Ownership Limit Free Float Maximum percentage of a constituent allowed by law or company articles to be held by shareholders domiciled in countries other than the constituent s domicile. Percentage of shares of a constituent deemed to be in circulation, and defined in Section 3 of the Ground Rules. Free Float Factor Factor calculated using Free Float information and defined in Section 3.3. Ground Rules Historic Data Index Values the Indices This document, which sets out how the Indices are constructed, maintained, and calculated. Constituent data prior to the current Business Day. Calculated values of the Indices The EMIX European Index Series. Liquid Universe Stocks resulting from Liquidity Screening as defined in Section 2.5. Liquidity Screening MADTV Market Capitalisation The process used to reconstruct the Liquid Universe at each Quarterly Review. Minimum average daily traded value. For an index, the sum of each constituent s market value, expressed in the currency of the index. Market Disruption Event where trading does not take place as defined in Section 1.9. Minimum Threshold QR Quarterly Review Reserve List Review Timetable Turnover figure which determines a stock s inclusion or exclusion from the Liquid Universe as defined in Section 2.5. Quarterly Review. A quarterly sequence of procedures which results in the reconstitution of the Indices. List of stocks from which constituents are selected as replacements to constituents. A timetable of tasks set out at each Quarterly Review as defined in Section

5 1. Introduction 1.1 Background Euromoney Indices has been active in constructing, calculating and maintaining indices since The construction methodology for the EMIX European Index Series (the Indices ), which includes the EMIX Smaller European Companies Index launched in 1994, takes a regional approach, splitting companies according to size and liquidity resulting in a broad-based, comprehensive set of indices which can be used as benchmarks, investment universes and as the bases of investment products in their own right. The Indices are designed for the investment community and are governed by the Euromoney Index Committee (see section 1.11). The Indices are calculated using the Laspeyres formula and is provided in Corporate Actions and Events Guide for the purposes of Euromoney Indices index calculations. 1.2 Regions and Markets The Index construction methodologies partly take a regional approach, where Europe ex UK is treated as one region, and the UK market treated separately. Europe ex UK markets are included based on a number of criteria including: Established and regulated stock exchange open to Foreign Investment Availability of a liquid universe of securities Investment community feedback The full list of markets covered is provided in Appendix A. 1.3 Index Series There are five sets of indices which make up the Indices, and are covered by these Rules: (i) (ii) (iii) (iv) (v) EMIX Europe Indices (EEI) EMIX Smaller European Leaders Indices (ESELI) EMIX Smaller European Companies Indices (ESECI) EMIX Micro Cap Europe Indices (EMCEI) EMIX Europe Low Volatility Index (EELVI) The EMIX Europe Indices applies free-float constraints. The Free Float methodology is described in Section 3. The other Indices are calculated using full market capitalisation. The EMIX Europe Low Volatility Index applies weightings based on inverse volatility, as described in Methodology for EMIX Low Volatility Indices. The Index base date and security breakdown per Region/Market is provided in the following table

6 Region / Market EEI ESELI ESECI EMCEI (Base date) (29 Dec 2006) (31 Dec 1998) (31 Dec 1989) (04 Jan 1999) Europe ex UK * 461 * 111 1,000 * 514 UK * 169 * * 158 Europe including UK * 630 * 161 1,350 * 672 Notes * These indices do not have fixed numbers of securities. The numbers provided are the average of those at each Annual Review (September 2007 to September 2013). The diagram below illustrates the overlap of the size categories. Companies are initially categorised as Large or Smaller. The Leaders represent the most liquid smaller companies and the Micro Cap represent the bottom 15% of the overall EMIX Smaller European Companies Series. Please see Sections 4 to 6 for more information. LARGE SMALLER (ESECI) LEADERS (ESELI) (most liquid) MICRO (EMCEI) The EMIX European Indices combine companies from the Large and Leaders categories. 1.4 The EMIX Industry classification structure (EMICS) All constituents of the Indices are classified according to a 3-tier structure consisting of 8 economic groups, 41 sectors, and 123 subsectors. Euromoney Indices applies Expert Judgement when classifying constituents, using publicly available information about each company. The full sector classification structure is shown in Appendix B. 1.5 Quarterly Reviews The Index Series are reviewed quarterly at the start of each March, June, September and December. The Quarterly Reviews are conducted using market data as at the previous month end, e.g. end February data for the March review. The Effective Date for changes is the close of business on the third Friday of the month

7 Parts of the Quarterly Review are carried out on a regional basis with Europe ex UK reviewed separately from the UK. The composite index review is a combination of the two regional reviews. This Ground Rules document has a section for each Regional review: Section 4.1 for Europe ex UK; Section 4.2 for UK. Section 4.3 covers the composite series: Europe including UK. 1.6 Annual Reviews The EMIX Smaller European Leaders Indices (ESELI) has both Quarterly Reviews and Annual Reviews. The Annual Review is a major review which accounts for constituent changes to the EMIX Smaller European Companies Indices (ESECI) as well as the liquidity and size of all constituents of ESECI. Quarterly Reviews mostly account for constituent changes to ESECI, with more generous liquidity constraints. 1.7 Daily calculations Index Values are calculated and released normally before 8.00 a.m. (UK time) and are distributed to data vendors, where they are available on the following pages. Daily calculations Vendor Bloomberg Euromoney Indices website Factset RIMES Telekurs Thomson / Reuters Page <EMIX> GO Please use vendor s Search facility Please use vendor s Search facility Please use vendor s Search facility.emixeupe 1.8 Data sources Euromoney Indices obtains exchange rates, closing prices, traded volumes and numbers of issued shares used for both calculation and maintenance of Index Values each day from Interactive Data Corporation, Bedford, USA (IDC). The exchange rate data provided by IDC are composite; meaning they are calculated using a number of quotes taken at 4.00 p.m. in London. Data from IDC may be supplemented with other sources such as Thomson Reuters at Euromoney Indices absolute discretion. Whilst Euromoney Indices publishes the Index Values in good faith, it does not independently verify such data. Euromoney Indices does not guarantee, represent or warrant the accuracy or completeness of the Index or of the data compiled therein nor can it be held responsible for any delays in publishing the EMIX Indices

8 1.9 Data and market disruption In the event of a Data Disruption, Euromoney Indices shall use reasonable endeavours to source data from alternative sources with the aim of publishing Index Values by 8.00 a.m. (UK time) on the day of calculation. Euromoney Indices shall not publish Index Values until the Data Disruption is over or data from an alternative source has been acquired. The unavailability of Free Float and Foreign Ownership data shall not be considered sufficient reason to delay the calculation of Index Values and until such time that Free Float or Foreign Ownership data is once again available Euromoney shall continue using the last data available to it for the maintenance of the EMIX indices. In the event of a Market Disruption (including but not restricted to: (i) a relevant stock exchange not opening or severely curtailing hours of business; (ii) trading on a relevant stock exchange being conducted without timely electronic dissemination of closing price data; or (iii) disruption preventing Euromoney Indices staff from calculating and/or disseminating index values), Euromoney Indices reserves the right to not publish Index Values until such time as the Market Disruption is over and it believes it can once again accurately calculate the Index Values Termination of Index The publication and maintenance of the Indices is discretionary. Euromoney Indices may suspend or terminate the publication of the Indices at any time provided that it gives reasonable notice of such suspension or termination. In the event that an index is suspended or terminated, Euromoney Indices accepts no responsibility for any losses incurred by any party whether incidental or consequential arising out of any reliance on the continued existence and publication of that index Euromoney Index Committee The Euromoney Index Committee upholds the integrity of the Indices and ensures that the Ground Rules are implemented. It also acts as a forum for processing feedback from users of the Indices and other interested parties. The Euromoney Index Committee also reviews the Indices and agrees changes to their Ground Rules. Membership of the Euromoney Index Committee is restricted to professionals involved with the maintenance of these and other, related, EMIX indices. The Euromoney Index Committee meets formally once per quarter and exceptionally at other times, where circumstances dictate Review of Ground Rules In addition to any reviews undertaken by the Euromoney Index Committee, the Ground Rules are reviewed on an annual basis as part of the Annual Compliance Review

9 2. Eligible Companies 2.1 Share classes Most shares included in the indices will be ordinary voting or common shares. However, the following share classes can also be included: A and B shares in Denmark, Finland, Norway and Sweden. Non-voting shares in Germany and the UK Preference Shares in France, Germany, Italy and Sweden Registered, Bearer and Participating shares in Switzerland Savings shares in Italy VVPR strips in Belgium In some cases, where the liquidity of qualifying companies includes the liquidity of one or more associated depository receipts, the most liquid depository receipts are included in the Indices rather than the underlying shares. The following principles apply: If the underlying shares are unlisted, or unavailable to foreign investors, the depository receipts are included. Assuming they pass liquidity screening. 2.2 Exclusions The following share types will normally be excluded from the Indices. Convertibles Preference shares (except in France, Germany, Italy and Sweden, and where such shares are considered part of the local equity market) Investment companies (although REITs are included) Open-ended funds 2.3 Foreign ownership restrictions Only shares available to non-local investors are included in the Indices. Therefore companies which restrict ownership of all of their shares are excluded in their entirety. Companies which restrict nonlocal ownership to a proportion of shares within an issue (the Foreign Ownership Limit) have their shares similarly restricted in the Indices. Although these rules are in place it is not common for European companies to have foreign ownership restrictions. 2.4 Nationality Each Constituent company is allocated to a single country. Euromoney Indices uses three country data to determine nationality. country (or countries) of listing country of incorporation country of domicile

10 Although country of listing is a criterion, non-european companies with a secondary listing on a European exchange, are generally not included. Each company which has two or more countries in its data (above) is assessed on a case-by-case basis, taking into account investor perception, share ownership and liquidity. 2.5 Liquidity Screening Constituents for the EMIX European Index Series are selected from a Liquid Universe, which Euromoney Indices revises at the end of February, May, August and November. The Liquid Universe is the basis for many indices provided by Euromoney Indices, and the review procedure is repeated here. 1. For the primary line of each stock live on Euromoney Indices Global Equities Database, calculate the median number of shares traded each day for each of the three whole months prior to the quarterly review. 2. Divide each monthly median shares traded by the number of shares in issue at the end of the month to give a daily turnover ratio for each month. 3. Rank stocks by descending median turnover ratio, i.e. the median of the three daily turnover ratios for each stock. 4. Locate the turnover ratio which represents the threshold above which 99.95% of the total market capitalisation falls. (Typically this is around 0.015% to 0.020% turnover per day.) This is the Minimum Threshold. 5. Remove constituents from the Liquid Universe where all three daily turnover ratios are below the Minimum Threshold. 6. Add to the constituents of the Liquid Universe any stocks whose daily turnover ratios have exceeded the Minimum Threshold in each of the three months. 7. Further additions are made to ensure that stocks with less than three months trading history are included if their turnover ratios consistently exceed the Minimum Threshold. Remark Euromoney Indices also ensures representations of Emerging Markets is sufficient in terms of numbers of constituents and significant companies. However, these adjustments do not affect the constituents of the EMIX European Indices. 2.6 Secondary Classes of Shares The Liquidity Screening procedure only screens a company s most liquid class of share in issue. In order to calculate the full market capitalisation of a company, the market capitalisation and all share classes in issue are added together. The eligibility for secondary classes in ESECI is described in Section 4.3. Secondary classes in ESELI are evaluated in the same way as primary classes, and this procedure is described in Section

11 3 Free Float 3.1 Indices using Free Float shares The EMIX Europe Indices use Free Float market capitalisations in the index value calculations, but not when ranking companies for purposes of determining their size, where full market capitalisation is used. 3.2 Monitoring As of September 2014, Free Floats are calculated from data obtained from S&P Capital IQ s Xpressfeed service. The following classes of shareholder are identified and their shareholdings are added up: Employee Stock Ownership Plans Company controlled foundations Employees, directors, and other insiders Corporate investors Venture capital and private equity funds (holdings greater than 5%) Sovereign wealth funds (holdings greater than 5%) Hedge funds (holdings greater than 5%) State controlled entities (holdings greater than 5%) Investments funds with a holding greater than 30% Uncategorised shareholders (holdings greater than 5%) The total amount is subtracted from 100% to give us the Free Float. 3.3 Banding Free Float market capitalisations are calculated by applying a Free Float Factor to a company s issued share capital. The Free Float factor is calculated by first calculating the number of closely-held shares in the company, defined in 3.2 above. This figure is then rounded down to the nearest multiple of 20%. The Free Float Factor is then 100% minus this number. Consequently, Free Float Factors are 20%, 40%, 60%, 80%, or 100%. If the consequent Free Float Factor is greater than the proportion of shares available to foreign investors, then the Free Float factor is further reduced to this Foreign Ownership Limit regardless of how the Free Float is distributed amongst local and foreign share allocations

12 4. EMIX Smaller European Companies Indices - Quarterly Review This section describes the process by which companies in Europe ex UK and UK are added to, or removed from, the EMIX Smaller European Companies Indices (ESECI). 4.1 Europe ex UK Quarterly Review procedures The categorisation of Europe ex UK companies as Large or Smaller is the first stage of a Quarterly Review (QR). The aim of this stage is to analyse all eligible companies, as defined in Section 2, and categorise or recategorise each company as either Large (exactly 350) or Smaller (exactly 1000). The procedure is as follows. 1. Companies are ranked in descending order of full market capitalisation expressed in GBP. 2. Companies ranked between 1 and 315 are categorised as Large, regardless of their classification immediately before the QR. 3. Companies ranked 316 to 385 are then ordered first by whether they were categorised as Large immediately before the QR, and second by full market capitalisation. The highest ordered 35 of these are categorised as a Large and the lowest ordered 35 companies are classified as Smaller. 4. The 865 companies ranked between 386 and 1250 are categorised as Smaller. 5. Companies ranked 1251 to 1450 are then ordered first by whether they were classified as either Large or Smaller immediately before the QR, and second by full market capitalisation. The highest ordered 100 of these are categorised as Smaller and the lowest ordered 100 companies are categorised as Neither. 6. Companies ranked below 1450 are categorised as Neither regardless of their category just before the QR. 7. The largest 30 companies categorised as Neither become the Reserve List for the Europe ex UK part of ESECI. Steps 2 and 3 above result in 350 companies being categorised as Large. Steps 4 and 5 above result in 1000 companies being categorised as Smaller. 4.2 UK Quarterly Review procedures The categorisation of UK companies as Large, Smaller, or Neither is the second stage of each QR. The UK companies are categorised as Large, Smaller or Neither with reference to the Large/Smaller split of Continental Europe described in Section 4.1. The initial task is to identify the Rank (L) of the UK stock with a market capitalisation in GBP terms closest to the market capitalisation of the 350th ranked Continental Europe company analysed in section

13 In the steps below, buffer B is defined as 10% of L. B2 is defined as 10% of (L + 350). The aim of this stage is to analyse all eligible UK companies, as defined in Section 2, and categorise each company as either Large (Ranked from 1 to L), Smaller (Ranked L+1 to L+350) or Neither. The procedure is as follows. 1. Companies are ranked in descending order of full market capitalisation expressed in GBP. 2. Companies ranked between 1 and (L B) are categorised as Large 3. Companies ranked (L-B+1) to (L+B) are then ordered first by whether they were categorised as Large immediately before the QR, and second by full market capitalisation. The highest ordered B of these are categorised as Large and the lowest ordered B of these are categorised as Smaller. 4. Companies ranked between (L + B) + 1 and (L B2) are categorised as Smaller. 5. Companies ranked (L+350 B2) to (L+350+B2) are then ordered first by whether they were categorised as either Large or Smaller immediately before the QR, and second by full market capitalisation. The highest ordered B2 of these are categorised as Smaller and the lowest ordered B2 of these are categorised as Neither. 6. Companies ranked below (L+350+B2) are not categorised, regardless of their category just before the QR. The above steps result in L companies being categorised as Large and 350 companies as Smaller. The market capitalisation of company ranked L is in line with the 350th ranked company in Europe ex UK. 4.3 Allocation of companies to the relevant indices The final stage is to allocate the selected companies from Stages 4.1 and 4.2 to the relevant indices, effective as at the Effective Date of the QR. EMIX Smaller Europe ex UK Companies Index 1. The 1000 companies categorised as Smaller in Stage 4.1, including any secondary classes of share, become the constituents of this Index on the Effective Date of the QR. 2. All companies are weighted using full market capitalisation. 3. Classes of share whose median daily traded value is zero in each of the three months leading up to the QR are excluded. EMIX Smaller UK Companies Index 1. The 350 companies categorised as Smaller in Stage 4.2, including any secondary classes of share, become the constituents of this Index at the Effective Date of the QR. 2. All companies are weighted using full market capitalisation. 3. Classes of share whose median daily traded value is zero in each of the three months leading up to the QR are excluded

14 EMIX Smaller European Companies Index 1. All companies categorised as Smaller in Stages 4.1 and 4.2 become the constituents of this Index on the Effective Date of the QR. 2. All companies are weighted by using full market capitalisation. 3. Classes of share whose median daily traded value is zero in each of the three months leading up to the QR are excluded. EMIX Micro Cap Europe Index 1. The smallest constituents of ESECI making up the lowest 15% by full market capitalisation become the constituents of EMCEI after the QR. Any constituents of the EMCEI immediately before the QR which are not in the lowest 15% of ESECI are removed

15 5. EMIX Smaller European Leaders Indices Annual Review and Quarterly Review The EMIX Smaller European Leaders Indices (ESELI) are constructed using the larger and most liquid constituents of the EMIX Smaller European Companies Indices (ESECI). The ESELI Annual Review (AR) is a Major Review, where size and liquidity criteria are used to add or remove constituents, as well as reflecting changes to the ESECI. The AR takes place at the time of the QR in September each year. The ESELI QR is a Minor Review, which also uses size and liquidity criteria, but with more generous tolerances, meaning that many of the changes arise through changes to the ESECI. Because of the AR, there is no QR in September for the ESELI. Eligibility for ESELI takes place at the share level rather than at company level, ie each share is a constituent in its own right. 5.1 Annual Review Liquidity analysis The Annual Review (AR) starts by calculating a value representing the minimum average daily traded value (MADTV) for each class of share issued by companies categorised as Large in Section Using the Large category of companies, a monthly value representing the mean daily traded volume is calculated by multiplying the mean daily value over the month for each class of share by its price at the end of the month. Then, for each share, averaging these values over the most recent twelve months gives us the average daily traded value (12m ADTV) for each share. 2. The 12m ADTVs are ranked from highest to lowest, and the bottom 1% of these is removed from the analysis. 3. The MADTV is then the 12m ADTV of the lowest remaining company following Step Annual Review Constituent changes The next stage of the AR applies the MADTV calculated in 5.1 to the constituents of the ESECI, taking into account whether or not these were categorised as Large before the QR of the ESECI corresponding to the AR, and whether or not they are constituents of the ESELI just before the AR. This process uses a quantity calculated for each constituent, 3m ADTV, which is defined as the median of the three monthly median daily traded values. 1. Calculate N as the number of constituents of ESECI which represent the largest 35% by full market capitalisation. 2. Add any constituents of ESECI ranked N/2 or higher which also has a 3m ADTV greater than 75% of the MADTV if it is not already a constituent of ESELI

16 3. Add any constituent of ESECI ranked below N/2 but above 3 x (N/2) which was categorised as Large just before the AR and also has a 3m ADTV greater than 75% of MADTV. 4. Keep any constituent of ESECI ranked below N/2 but above 3 x (N/2) which is already a constituent of ESELI just before the AR. 5. Remove any constituent of ESELI which is no longer a constituent of ESECI. 6. Remove any constituent of ESELI if its 3m ADTV is below 75% of MADTV or its rank is below 3N/2 in ESECI. 7. With the constituents of ESELI, following steps 1 to 6 in place, rank by descending full market capitalisation. Let the number of constituents at this stage be Q. 8. If there are more than N constituents, then remove the smallest (Q-N) of these so that there are N constituents of ESELI after this step. 9. If there are fewer than N constituents, then add the largest (N-Q) constituents in ESECI which are not already constituents of ESELI and have a 3m ADTV greater than 75% of the MADTV. 5.3 Quarterly Review The Quarterly Review (QR) of ESELI uses the MADTV from the previous AR. As with the AR, the QR takes into account whether or not constituents of ESECI were categorised as Large just before the QR of ESECI, and whether or not they are constituents of ESELI at the time of the QR. 1. Calculate N as the number of constituents of ESECI which represent the largest 35% by full market capitalisation. 2. Add to ESELI any constituents of ESECI ranked N or above that was categorised as Large just before the QR, and has a 3m ADTV of at least 25% of MADTV. 3. Keep any constituent of ESELI ranked 2 x N or above in ESECI. 4. Remove any constituent of ESELI which is no longer a constituent of ESECI. 5. Remove any constituent of ESELI if its 3m ADTV is below 25% of MADTV or its rank in ESECI is below 2 x N. There is no requirement that ESELI has N constituents after a QR

17 6. EMIX Europe Indices Quarterly Review The Quarterly Review (QR) of the EMIX Europe Indices (EEI) takes place after the QR of the ESECI and the QR or AR of the ESELI. It is an amalgam of companies categorised as Large during the QR of ESECI and companies whose shares are constituents of ESELI. However, a further constraint on the liquidity of the Large category is imposed, primarily to remove less liquid secondary classes of share. 1. Add the constituent shares of each company categorised as Large during the QR of ESECI which are not already constituents of EEI, provided that the 3m ADTV is at least 75% of the MADTV. 2. Add all constituents of ESELI following its AR or QR which are not already constituents of EEI. 3. Remove all constituents of EEI which are neither categorised as Large during the QR of ESECI, and whose 3m ADTV is at least 25% of MADTV, nor are constituents of ESELI following its AR or QR. 4. Secondary classes of share are excluded from EEI if they are less than 5% of their company market capitalisation and/or less than 5% of the total company 3m ADTV in the previous month

18 7. EMIX Europe Low Volatility Index Quarterly Review The Quarterly Review (QR) of the EMIX Europe Low Volatility Index (EELVI) takes place after each QR of the EEI. Complete descriptions of the selection and weighting procedures are set out in the document Methodology for EMIX Low Volatility Indices for which the parameters required for section 2.3 in that document are A = 20% B = 20% Lmin = EUR 50 million Num Const = Number of constituents of EEI with three months or more of price history All constituents of EEI effective as a result of the QR are eligible for the EELVI provided that (i) (ii) there is at least three months of trading history; and where a company is representated by more than one listing, only the most liquid share class is eligible

19 8. Daily Review This section briefly describes how index constituents and weightings are adjusted for corporate actions. Please see the document Corporate Actions and Events Guide for the purposes of EMIX index calculations for information on Euromoney Indices treatment of corporate actions. 8.1 Shares changes Shares Changes which affect the price of a constituent are processed just before the action takes effect. Such actions include subdivisions, bonus issues, consolidations, rights issues, capital repayments, and complex issues. 8.2 Mergers, acquisitions and restructurings Corporate Actions which affect only the eligibility of the constituent to be in an index are processed after the close of the business day following an announcement by Euromoney Indices. Such corporate actions include takeovers, mergers, and schemes of arrangement. These are generally processed at the start of the date on which they are effective. A constituent is removed from an index once EI is aware that, via a company or regulatory announcement, 90% or more of its shares have been acquired. 8.3 Suspension A stock s quotation may be suspended for a number of reasons but, for index purposes, these fall into two categories. If the purpose of the suspension is to comply with regulations during takeover discussions, regulatory arrangements, or other corporate restructurings, then the constituent is not removed from the index. If the suspension is attributable to the possibility that the constituent is insolvent, is in breach of regulations or laws which may prevent the continuance of the constituent s quote, or is likely to be suspended for an indefinite period, then the constituent is removed with zero value and a replacement is found. Removal and replacement of suspended constituents takes place after the tenth business day of suspension, but the time period can be longer if the consequences of the reasons for suspension are unclear. Notice of potential removal of a suspended constituent is announced following eight days of suspension. If a suspended constituent is subsequently reinstated, it will be returned to indices at a value of zero at the close of business two Business Days following an announcement of its reinstatement

20 8.4 Replacement of constituents At the time of each Quarterly Review, a Reserve List is prepared for each index series with a fixed number of constituents. The Reserve List consists of companies which, after rebalancing, are ranked immediately below the smallest constituents of the index. If, some time later, a replacement constituent is required, then the largest Reserve List constituent is added to the index. In the unlikely event that all reserve list constituents are used up before the end of a quarter, then the largest qualifying stock in the Liquid Universe is selected as a replacement. 8.5 Dividends For the purposes of calculating a total return index, dividends are processed when a company is quoted ex-dividend. Dividends which appear to be paid from a company s capital are treated as capital repayments (please see section 8.1). Where applicable, the full, gross dividend is used in the total return calculation. However, the following exceptions apply. UK: Net dividend (10% tax) is used. The net total return series is calculated using, where possible, the gross dividend less a percentage withholding tax. The withholding tax is country specific and provided in Appendix A. 8.6 IPOs In general, no new constituents are added to the Indices between Quarterly Reviews. However, the following exceptions exist: When a company lists a major part of its capital as a new company IPO, then the newly listed company either replaces the issuing company in the Indices, or is included alongside it, depending, respectively, on whether the Index has a fixed number of constituents or not. However exceptions exist, for example when the new listing has a different nationality. Each IPO is considered on a case-by-case basis. When a constituent company moves its listing or reconstitutes itself in a different country then the new listing may be added to the relevant indices immediately following its deletion from indices in which it was a constituent. Each re-listing and reconstitution is considered on a caseby-case basis. When a newly-listed company, which is eligible for inclusion in the EMIX European Index Series, has a free float market capitalisation which is 1% or higher that the free float market capitalisation of EEI at the close of its first day of trading, it will be added to EEI at the close of business two Business Days following its first day of trading following an announcement

21 9. Announcements 9.1 Index reviews Euromoney Indices typically announces Quarterly Review constituent changes shortly before the Effective Date. However, this is not a binding commitment on the part of Euromoney Indices, and there may be delays before such announcements are made. 9.2 Constituent changes Announcements concerning constituent changes (apart from Quarterly Reviews) are made as soon as Euromoney Indices has verified and processed the implications of the reasons for the change. Normally, any changes take effect following the close of business two Business Days after the announcement is made. 9.3 Amendments If an announcement needs to be amended, then Euromoney Indices issues a replacement announcement as soon as is reasonably practicable. Euromoney Indices makes every attempt to be as accurate as possible, and it cannot be held responsible for any actions subscribers take relating to announcements which are subsequently amended. 9.4 Dissemination Announcements are disseminated via to index subscribers, and are available on the website

22 10. Distribution 10.1 Index values Index Values are normally sent to electronic data systems by 8.00 a.m. daily (UK time). They then appear promptly, the actual delay depending on the internal procedures of each data provider. Euromoney Indices cannot be held responsible for any errors, intentional or unintentional, on the part of the data provider Constituent data Constituent Data is only available electronically directly from Euromoney Indices or through an approved re-seller. It is a condition that a customer of Euromoney Indices or of the re-seller enters into a contract with Euromoney Indices which states the terms of use regarding constituent data. Constituent data is available daily, weekly or monthly Reports Euromoney Indices provides index values and constituent data in the form of a monthly report. This is normally distributed to customers of Euromoney Indices by the third business day of each month. Data pertains to the closing values at the end of the previous month Historic data Historic Data, other than index values covered by data providers, is only available directly from Euromoney Indices. Please contact Euromoney Indices for more information (contact details provided in Section 11.3)

23 11. About Euromoney Indices 11.1 Responsibility for the Indices The Indices are maintained and distributed by the Euromoney Indices team, which is part of Euromoney Trading Limited. The team provides Calculation and Smart Beta services, Bespoke Data services and Benchmark Indices services to customers on a commercial basis Euromoney Indices Euromoney Indices is a business unit of Euromoney Trading Limited. Euromoney Indices provides proprietary indices, index calculation services, and financial market data. Expertise covers equities, equity indices, equity index tracking, credit and fixed income indices, credit derivatives data, and other market data. Euromoney Indices started publishing indices in 1993 with the launch of the EMIX (formerly HSBC) Smaller European Companies Indices. Euromoney Indices now calculates over 5,000 indices covering 69 countries and territories worldwide. Euromoney Indices provides a Calculation Agent Service on behalf of organisations promoting indices which they have defined. Each Index can be based on existing Indices or could be based on proprietary criteria Contacts For information relating to these Ground Rules and other services provided by Euromoney Indices, please contact: Address Euromoney Indices Hobart House 80 Hanover Street Edinburgh EH2 1EL United Kingdom Telephone +44 (0) indices@euromoneyplc.com

24 Appendix A Countries included in EMIX European Index Series Country Primary Exchange Trading Hours Withholding Tax Austria Vienna Stock Exchange (XWBO) 8.55 am 5.35 pm 25 Belgium Euronext Brussels (XBRU) 9.00 am 5.35 pm 25 Denmark NASDAQ OMX Copenhagen (XCSE) 9.00 am 5.00 pm 27 Finland NASDAQ OMX Helsinki (XHEL) am 6.30 pm 30 France Euronext Paris (XPAR) 9.00 am 5.35 pm 30 Germany Deutsche Börse (XFRA), Xetra (XETR) 9.00 am 5.35 pm Ireland Irish Stock Exchange (XDUB) 8.00 am 4.30 pm 20 Italy Borsa Italiana (XMIL) 8.00 am 5.30 pm 26 Netherlands Euronext Amsterdam (XAMS) 9.00 am 5.35 pm 15 Norway Oslo Bors (XOSL) 9.00 am 5.30 pm 25 Portugal Euronext Lisbon (XLIS) 9.00 am 5.35 pm 25 Spain Bolsa de Madrid (BMEX) 9.00 am 5.35 pm 21 Sweden NASDAQ OMX Stockholm (XSTO) 9.00 am 5.30 pm 30 Switzerland Six Swiss Stock Exchange (XSWX) 9.00 am 5.30 pm 35 UK London Stock Exchange (XLON) 8.00 am 4.35 pm 0 Note: Closing prices used are the traded prices reported from each exchange. These can be: last trade, closing auction price, or the volume weighted average price (VWAP). Prices are validated using two independent data sources, and in the unlikely event an official closing price is not reported, expert judgement is applied to determine the closing price

25 Appendix B EMIX industry classification structure EMIX Industry classification structure Economic group Industry sector Industry subsector Natural Resources Energy Exploration & Production Refining & Marketing Integrated Alternative Fuels Coal Uranium Metals & Minerals Gold Diversified Natural Resources Copper Nickel Lead & Zinc Aluminium Miscellaneous Base Metals Silver Platinum Group Metals Diamonds & Precious Metals Industrial Metals Gold Diversified Natural Resources Prospectors Basic Materials Chemicals Chemicals & Plastics Fertilisers Industrial Gases Speciality Chemicals Metal Production Construction & Building Materials Forestry, Paper & Pulp Iron & Steel Fabricated Metal Products Metal Recycling Cement & Aggregates Building Materials Glass (Flat) Contractors & Construction Homebuilders Forestry, Paper & Pulp Industrial Goods Vehicle Manufacturers Automotive Manufacturers Components - Automotive & Mechanical Industrial Machinery Heavy Engineering Automotive Component Suppliers Mechanical Components Industrial Machinery & Process Equipment Shipbuilding & Shipbuilding Repairs Heavy Engineering

26 EMIX Industry classification structure (cont d) Economic group Industry sector Industry subsector Industrial Goods (cont d) Aerospace & Defence Packaging & Printing Electricals Diversified Industrial Goods Manufacturers & Prime Contractors Defence Electronics & Components Containers & Bottlers Packaging Printing Electrical Engineering & Components Power Generation, Transmission & Distribution Transport Systems Cable Manufacturers Other Electrical Equipment Diversified Industrial Goods Technology Electronics Semiconductors Instrumentation & Control Equipment Consumer Electronics Other Electronic Computer & Communications Equipment Software & Information Technology Diversified Technology Computers Office Communication Equipment Telecom & Communications Equipment On-Line Software & Programming Outsourcing & Support Data Networking Diversified Technology Consumer Goods Food Agriculture, Plantations & Fisheries Refiners, Processors & Manufacturers Beverage & Tobacco Household Goods & Textiles Personal & Household Consumables Health Diversified Consumer Goods Beverages Alcoholic Beverages Non-Alcoholic Tobacco Textile, Clothing & Footwear Luxury Goods Domestic Appliances Furniture & Furnishings Cosmetics & Personal Products Household Consumables Pharmaceutical Medical Accessories Biotechnology Health & Hospital Services Diversified Consumer Goods

27 EMIX Industry classification structure (cont'd) Economic group Industry sector Industry subsector Business Providers General Services Consulting & Employment Accounting & Legal Engineering & Energy Services Waste Management, Property Maintenance & Cleaning Hire Services Courier & Parcel Delivery Services Security Telecommunications (Mobile) Mobile Operators Telecommunications (Fixed) Telecoms Utilities Cable Providers Media Media & Broadcasting Publishing Advertising Transport & Distribution Shipping Airlines Roads & Railways Transport Infrastructure Providers Freight Forwarders Distributors Utilities Electricity Gas Water Retail Food Retailers Supermarkets Hypermarkets Stores (Non-Food) Department Stores Clothing Retailers Speciality Stores DIY Leisure General Leisure & Entertainment Gaming Hotels & Motels Public Houses, Restaurants & Catering Financial Banks Banking Retail, Wholesale, Universal Specialist Credit Institutions Financial Services Financial Services Fund Management Investment Banks Investment Holding Companies (Take-over Specialists) & Trusts

28 EMIX Industry classification structure (cont'd) Economic group Industry sector Industry subsector Financial (cont d) Insurance Insurance Composite Insurance Life Insurance Property & Casualty (P&C) Reinsurance Insurance Brokers & Agents Real Estate Real Estate Property Agents Property Trusts Diversified Financial Diversified Financial & Holding Companies

29 Appendix C List of Indices by Region / Country Region / Country EMIX Europe Indices EMIX Smaller European Leaders Indices EMIX Smaller European Companies Indices EMIX Micro Cap Europe Indices Europe including UK Europe including UK Index Smaller Europe including UK Leaders Index Smaller Europe including UK Index Micro Cap Europe including UK Index Europe excluding UK Europe excluding UK Index Smaller Europe excluding UK Leaders Index Smaller Europe excluding UK Index Micro Cap Europe excluding UK Index Euroland Euroland Index Smaller Euroland Leaders Index Smaller Euroland Index Micro Cap Euroland Index Austria Austria Index Smaller Austria Index Belgium Belgium Index Smaller Belgium Index Denmark Denmark Index Smaller Denmark Index Finland Finland Index Smaller Finland Index France France Index Smaller France Index Germany Germany Index Smaller Germany Index Ireland Ireland Index Smaller Ireland Index Italy Italy Index Smaller Italy Index Netherlands Netherlands Index Smaller Netherlands Index Norway Norway Index Smaller Norway Index Portugal Portugal Index Smaller Portugal Index Spain Spain Index Smaller Spain Index Sweden Sweden Index Smaller Sweden Index Switzerland Switzerland Index Smaller Switzerland Index UK UK Index Smaller UK Index 1. Turkey was included in the EMIX European Index Series until 30 September Greece was included in the EMIX European Index Series until 18 March

30 Disclosure & Disclaimer Disclosure Euromoney Indices is the Index compilation and calculation business of Euromoney Institutional Investor PLC (Sedol ). Euromoney Institutional Investor PLC may from time to time enter and exit as a constituent of the EMIX Smaller European Companies Indices. Disclaimer Euromoney Indices, Euromoney Trading Ltd. and its affiliates or employees, or any third-party data provider, shall not have any liability for any loss sustained by anyone who has relied on the information contained in this document. The data and analysis contained herein are provided as is. Euromoney Indices disclaims any and all express or implied warranties, including, but not limited to, any warranties of merchantability, suitability or fitness for a particular purpose or use. None of the information or any EMIX Index or related products and services constitutes an offer to buy or sell, or promotion or recommendation of, any security, financial instrument of product or trading strategy. Further none of the information or EMIX Index or related products and services is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. Further distribution prohibited without prior written permission. Copyright 2017 (c) Euromoney Indices. All rights reserved. Euromoney Indices, a business that is part of Euromoney Trading Limited, a company incorporated in England and Wales with company number , having its registered office at 8 Bouverie Street, London EC4Y 8AX