ISEQ Equity Indices - Rulebook

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ISEQ Equy Idices - Rulebook This documet details how the ISEQ Idices are calculated, costuets are selected ad how market drive chages relevat to the Idices ad costuets are alied.

1 ISEQ Equy Idices - Rulebook This documet details how the ISEQ Idices are calculated, costuets are selected ad how market drive chages relevat to the Idices ad costuets are alied. The ISE reserves the right to aly or adjust these secificatios i the best iterest of the market. 1.0 ISEQ Equy Idices Overview The ISEQ Equy Idices are the official Idices of the Irish Stock Exchage. They are calculated ad ublished o ISE busiess days utilisig the Orderbook rices matched o the ISE-Xetra tradig system. 1.1 List of ISEQ Equy Idices Idex Price Idex ISIN Retur Idex ISIN ISEQ Overall IE IE ISEQ Fiacial IE IE ISEQ Geeral IE IE ISEQ Small Ca IE IE ISEQ ESM Idex IE00B2QF5299 IE00B2QF5307 ISEQ 20 Idex IE00B IE00B ISEQ 20 Leveraged IE00B2QF4Y48 Not Alicable ISEQ 20 Caed IE00B2QF4Z54 IE00B2QF Iclusio Creria Admissio to the ISEQ Equy Idices is subject to the aroval of the ISE. To be cosidered for iclusio i the ISEQ Equy Idices, there are creria that aly to all Idices alog wh addioal creria secifically required for the ISEQ 20 Idices ad the ISEQ Small Ca Idices. Ay decisio of the ISE o the iterretatio of these admissio creria shall be fial Iclusio creria required for all ISEQ Equy Idices New etrats to the market are eligible for iclusio i the ISEQ Idices if they meet the followig 3 creria: The secury is a ordiary share, (or similar secury wh equivalet rights); The secury is admted to tradig o eher the Mai Securies Market, the Eterrise Securies Market or the Atlatic Securies Market; The issuer of the secury must: (a) be icororated i the Reublic of Irelad, or (b) be icororated i Norther Irelad, or (c) have s cetre of ecoomic iterest i Irelad.* * For existig costuets of the ISEQ (of more tha 2 years stadig) but whose busiesses have develoed so that their cetre of ecoomic iterest could be deemed to be outside Irelad will

2 remai eligible for iclusio whi the Idex, subject to cotiued comliace wh the other relevat ISEQ rules Addioal creria required for the ISEQ 20 Idices The ISEQ 20 Idices rereset the 20 most liquid ad largest caed eligible equies quoted o the ISE. I addio to the creria listed i above, to be icluded i the ISEQ 20 Idices, a costuet must be raked as oe of the to 20 comaies based o free-float market caalisatio ad orderbook turover. Further details ca be foud i 1.5 Quarterly Chaiig below Addioal creria required for the ISEQ Small Ca Idex The Small Ca Idex reresets a asset class of s ow, i.e. the smaller quoted comaies. I addio to the creria listed i above, to be icluded i the Small Ca Idex, a costuet must meet the followig creria: Comaies must have a market caalisatio of less tha or equal to the curret Small Ca Threshold; If a comay eters ito the ISEQ 20 Idex the will be removed from the ISEQ Small Ca Idex uo the ext Chaiig review. Chaiig is detailed further i sectio Total Retur Idices Wh the excetio of the ISEQ 20 Leveraged Idex, the ISE calculates both a Price ad a Total Retur Idex. The differece betwee the Price ad Retur Idices is that for Retur Idices, divideds gross of tax, are assumed to be reivested back ito the ayig costuet o the day the secury is marked ex-divided. I this way ivestors ca see the "total" retur from the market. Total Retur Idices are subject to the same iclusio creria as for Price Idices. 1.4 Base Date ad Value Idex Base Value Base Date ISEQ Overall 1, Ja-88 ISEQ Fiacial 1, Ja-88 ISEQ Geeral 1, Ja-88 ISEQ Small Ca 1, Ja-99 ISEQ ESM Idex 1, Dec-08 ISEQ 20 Idex 1, Dec-04 ISEQ 20 Leveraged 1, Dec-08 ISEQ 20 Caed 1, Dec Quarterly Chaiig To allow for redictable, trasaret ad cost efficiet trackig of the ISEQ Equy Idices, chages to the idices are alied quarterly o the third Friday of March, Jue, Setember ad December. Chages that are alied durig the chaiig rocess iclude the followig: Costuet free-float values are udated;

3 Share chages are alied to costuets; A maximum weightig of 20% is alied to the ISEQ 20 Idex ad the ISEQ 20 Leveraged Idex; A maximum weightig of 9% is alied to the ISEQ 20 Caed Idex; As a comay issues divideds or exerieces cororate actios, the idex is ket cosistet through the use of adjustmet factors. Durig the chaiig rocess, these adjustmet factors are reset ; The Small Ca Idex market caalisatio threshold is reviewed ad ay chages to costuets of the Small Ca Idex are alied; For the ISEQ 20 idices, the to 20 comaies are evaluated ad ay costuet chages are alied. The followig rules are used whe selectig the to 20 comaies: Quarterly: o Fast Ex (30/30): Costuets that rak > 30 i order-book turover ad/or free-float market caalisatio, will be relaced, if a iclusio cadidate, that raks <= 25 i both creria, exists; o Fast Etry (15/15): No-costuets that rak <= 15 i order-book turover ad/or free-float market caalisatio, will be icluded. Excluded the will be the lowest caalized costuet, which raks > 25 i oe of the creria. If o such comoet exists, the lowest caalized costuet will be excluded. Aually: o Regular Ex (25/25): Costuets that rak >25 i order-book turover ad/or free-float market caalisatio, will be relaced, if a iclusio cadidate, that raks <= 25 i both creria, exists; o Regular Etry (20/20): No-costuets that rak <= 20 i orderbook turover ad/or free-float market caalisatio, will be icluded, if a costuet, that raks >25 i oe of the creria, exists. Addioal Rules: o If, whe alyig the above rules, more tha oe cadidate for iclusio/exclusio exists, the the cadidate wh the highest/lowest free-float market caalisatio will be icluded/excluded; o To determie the free-float market caalisatio the average VWAP (volume weighted average rice) of the revious 20 tradig days is used i order to avoid maiulatio of idex decisios. 1.6 Free Float Each stock is assiged a uique free-float factor. The free-float factor reduces the umber of shares to the actual amout available o the market. All fractios of the total umber of shares that are larger tha 5% ad whose holdig is of a log-term ature are excluded from the idex calculatio. This icludes: Cross-owershi: stock owed eher by the comay self, i the form of treasury shares, or owed by other comaies;

4 Govermet owershi: stock owed by eher govermets or their agecies; Private owershi: stock owed by eher idividuals or families; Shares that caot be traded durig a certai eriod or have a foreig owershi restrictio. Block owershi is ot alied for holdigs of custodia omiees, trustee comaies, mutual fuds, ivestmet comaies wh short-term ivestmet strategies, esio fuds ad similar eties Free Float factors ad share adjustmets: The free float factors ad outstadig umber of shares are reviewed o a quarterly basis based o the most recet available data. The fial data are ublished o the quarterly uderlyig data aoucemet dates ad imlemeted o the quarterly imlemetatio dates. The cut-off dates for free float data are o the 3rd Friday of May, August, November, February. Data arrivig after the cut-off dates are imlemeted i the followig Quarterly Chaiig review.

5 1.7 New Comaies ad Deartures The followig table details how ew comaies ad deartures are treated for each ISEQ Idex: Idex New comay Dearture ISEQ Overall Icluded o day of listig Removed after dearture ISEQ Fiacial Icluded o day of listig Removed after dearture ISEQ Geeral Icluded o day of listig Removed after dearture ISEQ Small Ca Cosidered for eligibily at ext chaiig evaluatio Removed after dearture ISEQ ESM Idex Icluded o day of listig Removed after dearture ISEQ 20 Idex Cosidered for eligibily at ext chaiig evaluatio Removed after dearture ad relacemet secury idetified ISEQ 20 Leveraged ISEQ 20 Caed Cosidered for eligibily at ext chaiig evaluatio Cosidered for eligibily at ext chaiig evaluatio Removed after dearture ad relacemet secury idetified Removed after dearture ad relacemet secury idetified 1.8 Calculatio ad Publicatio Frequecy Other tha the ISEQ 20 Leveraged idex which is calculated oce er miute, all other ISEQ Price ad Retur Idices are calculated ad ublished four times er miute durig the tradig day (08:00 16:45). 2.0 Calculatio Methodology 2.1 Calculatio formulae Idex formula for free float marketca-weighted idices Idex Formula for free float marketca-weighted idices Idex K t T ff q q c Base whereby: c = Adjustmet factor of comay i at time t ff = Free float factor of share class i at time T = Number of shares i the idex = Closig rice of share i o the tradig day before the first iclusio i a idex = Price of share i at time t q = Number of shares of comay i o the tradig day before the first iclusio i a idex q = Number of shares of comay i at time T t = calculatio time of the idex KT = Idex-secific chaiig factor valid as of chaiig date T T = Date of the last chaiig The formula set out below is equivalet i aalytic terms, but desiged to achieve relative weightigs:

6 Idex t i1 (K i1 T ff q q q q 100 c i1 i 1 i1 100 ) Basis Fi Basis A A whereby: i1 q 100 q i1 ad: F i K T ff i1 q q 100 c The idex calculatio ca be reroduced i simlified terms by usig the exressio Fi: Multily the curret rice by the resective Fi weightig factor; Take the sum of these roducts; ad Divide this by the base value (A), which remais costat util the idex comosio is modified. The Fi factors rovide iformatio o the umber of shares required from each comay to track the uderlyig idex ortfolio Idex formula for ISEQ 20 Leveraged Idex Based o the ISEQ 20 Price Idex, the ISEQ 20 Leveraged Idex is calculated so as to magify moves i the ISEQ20 Price Idex 200%. A osive move i the ISEQ20 Price Idex will result i double erformace i the ISEQ20 Leveraged Strategy Idex ad vice versa. The leveraged effect is maaged by the use of borrowed fuds that are reivested i the ISEQ 20 Price Idex. The ivestor gets the beef of a larger ivestmet wh a lower iial outlay. It is imortat to ote that the ISEQ20 Leveraged Strategy Idex also ihers the risk of over roortioal losses (dowside risk)

7 A measure of the effective iterest rate revailig i the euro iterbak overight market. It is calculated as a weighted average of the iterest rates o usecured overight ledig trasactios deomiated i euro, as reorted by a ael of cotributig baks.

8 2.2 Chaiig Regular Chaiig The quarterly chaiig rocedure is carried out quarterly ad ecomasses the followig measures: Regular chages to the comosio of the various idices are imlemeted The umber of shares ad the resective free float factors are udated i accordace wh the caal chages carried out The accumulated icome from distributios ad caal chages is allocated to the idex comoet issues accordig to the resective ew weights. For this urose, the idividual c adjustmet factors are set to 1. A chaiig factor is calculated to avoid a ga i the resective idex. Chaiig is carried out i three stes: a) Calculatio of the idex value o the chaiig date accordig to the old weightig scheme The followig alies accordigly: Idex t K T i1 i1 ff q q c Base This value corresods to the closig idex ublished o the date of chaiig, ad is used wh two decimal laces (as ublished) for all subsequet calculatios. b) Comutatio of a iterim value The iterim value is comuted usig the umber of shares valid o the chaiig date (qi,t+1) ad the curret free float factors (ffi,t+1). The c adjustmet factors are set to 1. The followig alies accordigly: Iterim value i1 i1 ff i,t1 q q i,t1 Base The iterim value is used as a exact figure for subsequet calculatios. c) Calculatio of the ew chaiig factor The followig alies accordigly: K T 1 Idext Iterim value After chaiig, the idex is comuted o the basis of the ew chaiig factor (KT+1).

9 After calculatio of the chaiig factor, caal chages ad divided aymets due o the date of chaiig are take ito accout via the c factor. The Fi weightig factors of the idex formula based o relative weights are calculated as follows: F i K T 1 ff i,t1 q i1 i,t1 q c Uscheduled Chaiig I case of extraordiary circumstaces, the free float res. umber of shares ca be chaged itra-review. The uscheduled chaiig takes lace accordigly to the methodology described i sectio Factors for cosideratio for Uscheduled Chaiig iclude, but are ot limed to, relative chage i share caal, relative chage to ISEQ weightig, roximy to the ext Regular Chaiig evet ad relevat market factors as decided by the Irish Stock Exchage Caig For some idices, the maximum idex weightig that a comay ca adot is limed. This maximum idex weightig is kow as the caig lim ad is defied for each secific idex. The followig formula is used to calculate the free float market caalisatio: FF MCa ff q Where: t = Last tradig time o the day of the scheduled or uscheduled chaiig T = 3rd Friday of May, August, November, February. A reductio of this arameter may therefore be made by reducig the umber of shares (q) of a comay. The rocedure described below is called caig ad is erformed agai o each chaiig day. Iially, the idex weightigs are calculated wh the etire free float market caalisatio. I a secod ste, is checked whether the caig lim has bee exceeded. I this case, the umber of shares i the affected comay is reduced util the weightig is below the caig lim. The imlied reductio of the overall idex caalisatio (sum of the free float market caalisatio of all comaies i the idex) may mea that aother comay exceeds the caig lim. Caig is a erative

10 rocess ad is ow erformed agai for this comay util o comaies exceed the caig lim. If the caed ortio of a comay rises above s threshold ercet or falls below s threshold ercet i the course of a quarter, is raised or lowered back to the caig lim oly o the followig chaiig date, where alicable. Note that for the ISEQ 20 ad ISEQ 20 Leveraged Idices, the threshold ercet is 20% ad for the ISEQ 20 Caed Idices is 9%. 2.3 Cororate Actios The erformace idices are adjusted for exogeous iflueces (e.g. rice-relevat caal chages) by meas of certai correctio factors, assumig a reivestmet. All cotiuously calculated idices are simultaeously adjusted for systematic rice chages usig ex-ate calculatios of the correctio factor. The rerequise for this is to calculate the correctio factor o a ex-ate basis. Cosequetly, the first ex rice ca be adequately icluded for idex calculatio uroses. The ex-ate icororatio of adjustmets resuoses a geeral accetace of the comutatio formula as well as a geeral availabily of the arameters used. The calculated adjustmet factor ad a sythetic rice accordigly adjusted for this factor are used i the idex from the ex-date of a share as log as o ex rice is available. 2.4 Distributios Cash Divideds ad Other Distributios The c adjustmet factors for cash divideds, bouses ad secial distributios are calculated as follows: c i,t 1 i,t 1 D i,t c 1 Where: i.t-1 = Closig rice of the relevat share o the day before the ex divided date Di,t = Cash divided, bous or secial distributio o day t Whi the framework of idex calculatio, the share rice is thus modified by the amout of the resective cash distributio. Cash divideds ad bous distributios are oly corrected i erformace ad et retur idices. Secial distributios are take accout of i all erformace, et retur ad rice idices Stock Divideds

11 The issue of shares istead of the distributio of cash to rovide divideds is treated i the same way as bous shares or omial value chages ad is accouted for i both erformace ad rice idices. If the holder is grated the right to choose betwee cash divideds ad stock divideds, shall be assumed that cash divideds will be draw. 2.5 Chages i Share Caal Caal Icreases The c adjustmet factors for caal icreases (agaist cash cotributios, or usig comay reserves) are determied as follows: c i,t 1 i,t 1 BR i,t 1 c 1 where: BR i,t 1 i,t 1 B BV 1 DN ad: i,t-1 = Closig rice o the day before the ex divided date BRi,t-1 = Theoretical value of subscritio rights B = Subscritio rice BV = Subscritio ratio DN = Divided disadvatage For caal icreases usig comay reserves: B = 0 The divided disadvatage is equivalet to the last divided aid or the roosed divided ublished by fiacial data roviders Caal Reductios The followig formula is used to calculate the c adjustmet factor i the case of a simlified caal reductio: c 1 V c 1 Where: V = Reductio ratio of comay i valid at time t I the evet of a caal reductio ad subsequet caal icrease agaist addioal cotributios, the itroductio of a ew class of shares is hadled as follows: The old classes are removed, ad the ew class is icluded wh the corresodig comutatio of a chaiig factor. I this cotext, two assumtios are made: firstly, that the last traded rice could have bee achieved, ad secodly that the released

12 caal will be ivested i the ew class o the subsequet day. The ew class is icluded i the idex based o the resective oeig rice o the first day of the ew quotatio. 2.6 Nomial Value Chages ad Share Sls I the case of omial value chages (or share sls), is assumed that the resective rice chages occur i roortio to the related omial value (or umber of shares). The adjustmet factor reflects this assumtio accordigly: c N N i,t 1 i,t c 1 Where: Ni,t-1 = Previous omial value of share class i (or ew umber of shares) Ni,t = New omial value of share class i (or revious umber of shares) 2.7 Si-offs Where a comay ( class A ) sis off oe of s divisios ito a ew, ideedet comay ( class B ), the adjustmet is carried out as described below. A theoretical markdow caot be calculated o a ex-ate basis sice there is o closig rice for the shares of the ew comay B. B shares are addioally icluded i the idex at a rice of 0 o the ex divided date so as to avoid ay idex trackig errors. For a si-off affectig the ISEQ 20, for istace, this imlies that the idex is calculated o the basis of 21 issues for at least oe day. O their first tradig day, B shares are oce agai removed from the idex. At the same time, the ci factor of comay A is adjusted as follows: c A i,t c 1 c B B i,t1 i,t 1 A A i,t1 i,t 1 c BV A i,t 1 Where: A 1 = Closig rice of A shares o the first tradig day of B shares B 1 = Closig rice of B shares o their first tradig day BV = Subscritio ratio t = Ex divided date

PX Index Manual (1) M(0) = CZK 379,786,853,620.0 is the market capitalisation of the base on the starting date of 5 April 1994

PX Index Manual (1) M(0) = CZK 379,786,853,620.0 is the market capitalisation of the base on the starting date of 5 April 1994 PX Idex aual I. Itroductio The PX idex is the official idex of the Prague Stock Exchage (hereiafter referred to as the Stock Exchage ). The PX idex was calculated for the first time o 20 arch 2006 whe