Nomura Crude Oil Index

Global Markets Research
4 November 2020

EQUITY: EQUITY QUANTITATIVE RESEARCH (INDEX)

Index rulebook

Research Analysts
Japan index products
Index Operations Dept. - NSC
idx_mgr@jp.nomura.com+81 3 6703 3986

What is the Nomura Crude Oil Index?
• The Nomura Crude Oil Index is an index designed to track movements in crude oil
prices.
• The index mimics the performance of investments in crude oil futures andincorporates a rollover mechanism to enable investment that tracks the index.

Main changes• [October 2016] Change to QUICK code in “5. Index data publication services”• [October 2020] Change to Crude Oil Long Index calculation method• [November 2020] Change to QUICK code in “5. Index data publication services”

See Appendix A-1 for analyst certification, important disclosures and the status of non-US analysts.

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Contents
1. Introduction
2. Index constituents
3. Index reconstitution[2]3.1 Index reconstitution date
3.2 Index reconstitution base date
4. Nomura Crude Oil Long Index calculation method
4.1 Index base date and index base value
4.2 Calculation method
5. Index data publication services
5.1 Publication of index values
5.2 License
5.3 Disclaimer
Appendix A-1

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1. Introduction
The Nomura Crude Oil Index is an index designed to track movements in crude oil prices.
The index mimics the performance of investments in crude oil futures and incorporates arollover mechanism to enable investment that tracks the index[1] .

2. Index constituents
The index comprises NYMEX WTI Light Sweet Crude Oil futures, which are listed on the
New York Mercantile Exchange (NYMEX).
Contract months of the futures contracts used to calculate the index are as follows[2] .

DateContract months offutures contracts used

Most recent reconstitution date (*1) ≦ calculation date ≦reconstitution base date immediately after most recent
reconstitution date (*1)

3rd, 4th, and 5thcontract months

Reconstitution base date immediately after most recent
reconstitution date (*1) < calculation date < next reconstitution
date (*1)

2nd, 3rd, and 4thcontract months(*1) See “3. Index reconstitution” for details.
Index constituents are changed only on reconstitution dates.

1.

2.

The Nomura Crude Oil Index tracks crude oil futures prices, but diverges from theprice, referred to by news outlets, that simply represents the futures price for thelatest front month contract. Futures contracts have expiration dates and the priceused by news outlets when they discuss market conditions is based on the futurescontract with an expiration date that is closest to the current date (ie, the front monthcontract). When the front month contract approaches maturity, news outlets switch
to reporting the price of the next futures contract, ie, the contract with an expiration
date that is the next-closest to the current date. At this point, if the price of the next
futures contract is higher (or lower) than the price of the expiring futures contract,
the futures price that is quoted by news outlets appears to rise (or fall) sharply.
Futures contracts have a time value, and generally speaking this time value is larger
the further the contract is from expiry. This means that when the price switches fromone contract to the next it tends to rise, rather than fall. However, investment in
crude oil futures is investment in futures contracts that have expiration dates, andtherefore at some point it is necessary to sell the front month contract and buy aback month contract (this process is called “rolling over”). Because, on average, theprice of a contract in a further-out month tends to be higher than the price of thefront month contract, the volume of contracts held will tend to decline following
rollover if the size of the investment remains the same. The futures price quoted bynews outlets appears to jump when the front month contract expires and is replacedby another front month contract. However, because the size of the investment
remains the same, this switch in front month contracts results in a divergence
between fluctuations in the futures price quoted by news outlets and fluctuations in
the assets invested.
Effective from November 2020.

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3. Index reconstitution[2]3.1 Index reconstitution date
If the fifth business day on NYMEX after the last day of trading is a business day inTokyo, the index reconstitution date is the fifth business day on NYMEX after the last dayof trading. However, if the fifth business day on NYMEX after the last day of trading is nota business day in Tokyo, the index reconstitution date is the next day, after the fifthbusiness day on NYMEX after the last day of trading, that is both a business day on
NYMEX and a business day in Tokyo.

3.2 Index reconstitution base date
The last day of trading each month is the index reconstitution base date. The volume of
the index constituent used to calculate the index, for each index constituent, is based on
the value for index calculation purposes on the reconstitution base date (*2) and the priceof the index constituent after the next reconstitution on the reconstitution base date. The
volume of the index constituent used to calculate the index does not change up to thenext reconstitution.
(*2) See “4.2 Calculation method” for value for index calculation purposes.

• A "business day in Tokyo" is defined here as a day on which commercial banks inTokyo settle payments.
• The "next day, after the fifth business day on NYMEX, that is both a business day on
NYMEX and a business day in Tokyo" is defined here as the first business day on
NYMEX after the fifth business day on NYMEX that is also a business day in Tokyo.
• The "last day of trading" is defined here as the day that is three business days on
NYMEX before the 25th day of each month. However, if the 25th day of the month is
not a business day on NYMEX, the "last day of trading" is defined here as the day thatis three business days on NYMEX before the business day on NYMEX before the 25th
day of the month.

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4. Nomura Crude Oil Long Index calculation
method
4.1 Index base date and index base value
The index base date is 31 December 2008 and the base value for the index is 1,000.

4.2 Calculation method
Nomura Crude Oil Long Index values are calculated using the method set out below[3] .

t : calculation date (business day on NYMEX)
t-1 : business day preceding t on NYMEX
T(t) : reconstitution date immediately preceding t
T'(t) : reconstitution date immediately preceding T(t)T 0 (t) : reconstitution base date immediately preceding T(t)price i(s) : settlement price of index constituent i on NYMEX at time s (price perbarrel in USD)[4]• index constituent (t ): futures contracts for 3rd, 4th, and 5th contract months at timeT(t) (*4)• Volume used to calculate indexi (T(t) ): volume of index constituent i used to calculate
the index at time T(t)• Value for index calculation purposes (T 0 (t)) : total of [volume of index constituent iused to calculate index at time T'(t) ] X [price of index constituent i at time T 0 (t) ] forindex constituent (T(t))

•
•
•
•
•
•

(*3) Futures contracts for 3rd, 4th, and 5th contract months at time T'(t)(*4) Futures contracts for 4th, 5th, and 6th contract months at time T 0 (t) , and 2nd, 3rd,and 4th contract months after index reconstitution base date immediately after time T(t)3.
4.

Effective from 30 November 2020.
If for some reason the price cannot be used or if use of the price is considered to be
extremely inappropriate, the price may be determined with reference to the price on
the preceding business day on the exchange on which index constituent i is listed,
the price of a similar commodity future, or the market traded price.

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5. Index data publication services
5.1 Publication of index values
Nomura Crude Oil Long Index values are published on the following media:
Our website： http://qr.nomura.co.jp/jp/oil/index.html
Bloomberg： NMLSCOIL Index
QUICK： SOIL#L/NRIN[5]REUTERS： .NCOILL

5.2 License
The intellectual property rights and any other rights in the Nomura Crude Oil Index belong
to Nomura Securities Co., Ltd. ("Nomura"). A license from Nomura Securities is therefore
required in order to use this Index and receive detailed data services.

5.3 Disclaimer
In the case of an unavoidable event such as computer breakdown or natural disaster,
calculation of the Nomura Crude Oil Index may be delayed or suspended. Nomura does
not guarantee the accuracy of the Nomura Crude Oil Index under any circumstances andassumes no responsibility for losses incurred as a result of any errors in the index data.

For information, please contact:
TEL: +81-3-6703-3986
e-mail: idx_mgr@jp.nomura.com
Index Operations Dept.
Global Research Division, Financial Engineering & Technology Research Center
Nomura Securities Co., Ltd.

5.

Effective from 30 November 2020.
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Appendix A-1
Analyst Certification
I, Index Operations Dept., hereby certify (1) that the views expressed in this Research report accurately reflect my personalviews about any or all of the subject securities or issuers referred to in this Research report, (2) no part of my compensation
was, is or will be directly or indirectly related to the specific recommendations or views expressed in this Research report and (3)no part of my compensation is tied to any specific investment banking transactions performed by Nomura Securities
International, Inc., Nomura International plc or any other Nomura Group company.

Important Disclosures
The lists of issuers that are affiliates or subsidiaries of Nomura Holdings Inc., the parent company of Nomura Securities Co., Ltd., issuers thathave officers who concurrently serve as officers of Nomura Securities Co., Ltd., issuers in which the Nomura Group holds 1% or more of any
class of common equity securities and issuers for which Nomura Securities Co., Ltd. has lead managed a public offering of equity or equity
linked securities in the past 12 months are available at https://www.nomuraholdings.com/report/ . Please contact the Research Production
Operation Dept. of Nomura Securities Co., Ltd. for additional information.

Online availability of research and conflict-of-interest disclosures
Nomura Group research is available on www.nomuranow.com/research, Bloomberg, Capital IQ, Factset, Reuters and ThomsonOne.
Important disclosures may be read at http://go.nomuranow.com/research/globalresearchportal/pages/disclosures/disclosures.aspx or requested
from Nomura Securities International, Inc. If you have any difficulties with the website, please email grpsupport@nomura.com for help.
The analysts responsible for preparing this report have received compensation based upon various factors including the firm's total revenues, aportion of which is generated by Investment Banking activities. Unless otherwise noted, the non-US analysts listed at the front of this report are
not registered/qualified as research analysts under FINRA rules, may not be associated persons of NSI, and may not be subject to FINRA Rule
2241 restrictions on communications with covered companies, public appearances, and trading securities held by a research analyst account.
Nomura Global Financial Products Inc. (NGFP) Nomura Derivative Products Inc. (NDP) and Nomura International plc. (NIplc) are registered with
the Commodities Futures Trading Commission and the National Futures Association (NFA) as swap dealers. NGFP, NDPI, and NIplc are
generally engaged in the trading of swaps and other derivative products, any of which may be the subject of this report.

Distribution of ratings (Nomura Group)
The distribution of all ratings published by Nomura Group Global Equity Research is as follows:
51% have been assigned a Buy rating which, for purposes of mandatory disclosures, are classified as a Buy rating; 44% of companies with thisrating are investment banking clients of the Nomura Group*. 0% of companies (which are admitted to trading on a regulated market in the EEA)
with this rating were supplied material services** by the Nomura Group.
43% have been assigned a Neutral rating which, for purposes of mandatory disclosures, is classified as a Hold rating; 58% of companies withthis rating are investment banking clients of the Nomura Group*. 0% of companies (which are admitted to trading on a regulated market in the
EEA) with this rating were supplied material services by the Nomura Group
6% have been assigned a Reduce rating which, for purposes of mandatory disclosures, are classified as a Sell rating; 14% of companies withthis rating are investment banking clients of the Nomura Group*. 0% of companies (which are admitted to trading on a regulated market in the
EEA) with this rating were supplied material services by the Nomura Group.
As at 30 September 2020.
*The Nomura Group as defined in the Disclaimer section at the end of this report.
** As defined by the EU Market Abuse Regulation

Definition of Nomura Group's equity research rating system and sectors
The rating system is a relative system, indicating expected performance against a specific benchmark identified for each individual stock,subject to limited management discretion. An analyst’s target price is an assessment of the current intrinsic fair value of the stock based on an
appropriate valuation methodology determined by the analyst. Valuation methodologies include, but are not limited to, discounted cash flow
analysis, expected return on equity and multiple analysis. Analysts may also indicate expected absolute upside/downside relative to the statedtarget price, defined as (target price - current price)/current price.

STOCKSA rating of 'Buy', indicates that the analyst expects the stock to outperform the Benchmark over the next 12 months. A rating of 'Neutral',indicates that the analyst expects the stock to perform in line with the Benchmark over the next 12 months. A rating of 'Reduce', indicates thatthe analyst expects the stock to underperform the Benchmark over the next 12 months. A rating of 'Suspended', indicates that the rating, target
price and estimates have been suspended temporarily to comply with applicable regulations and/or firm policies. Securities and/or companies
that are labelled as 'Not rated' or shown as 'No rating' are not in regular research coverage. Investors should not expect continuing or7

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additional information from Nomura relating to such securities and/or companies. Benchmarks are as follows: United States/Europe/Asia exJapan: please see valuation methodologies for explanations of relevant benchmarks for stocks, which can be accessed at:
http://go.nomuranow.com/research/globalresearchportal/pages/disclosures/disclosures.aspx ; Global Emerging Markets (ex-Asia): MSCIEmerging Markets ex-Asia, unless otherwise stated in the valuation methodology; Japan: Russell/Nomura Large Cap.

SECTORSA 'Bullish' stance, indicates that the analyst expects the sector to outperform the Benchmark during the next 12 months. A 'Neutral' stance,
indicates that the analyst expects the sector to perform in line with the Benchmark during the next 12 months. A 'Bearish' stance, indicates thatthe analyst expects the sector to underperform the Benchmark during the next 12 months. Sectors that are labelled as 'Not rated' or shown as'N/A' are not assigned ratings. Benchmarks are as follows: United States: S&P 500; Europe: Dow Jones STOXX 600; Global Emerging
Markets (ex-Asia): MSCI Emerging Markets ex-Asia. Japan/Asia ex-Japan: Sector ratings are not assigned.

Target Price
A Target Price, if discussed, indicates the analyst’s forecast for the share price with a 12-month time horizon, reflecting in part the analyst's
estimates for the company's earnings. The achievement of any target price may be impeded by general market and macroeconomic trends, andby other risks related to the company or the market, and may not occur if the company's earnings differ from estimates.

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Investors in the financial products offered by Nomura Securities may incur fees and commissions specific to those products (for example,
transactions involving Japanese equities are subject to a sales commission (all figures on a tax-inclusive basis) of up to 1.43% of the transaction
amount or a commission of ¥2,860 for transactions of ¥200,000 or less, while transactions involving investment trusts are subject to various
fees, such as commissions at the time of purchase and asset management fees, such as commissions at the time of purchase and asset
management fees (trust fees), specific to each investment trust).
In addition, all products carry the risk of losses owing to price fluctuations or other factors. Fees and risks vary by product. Please thoroughly

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read the written materials provided, such as documents delivered before making a contract, listed securities documents, or prospectuses.
Transactions involving Japanese equities (including Japanese REITs, Japanese ETFs, and Japanese ETNs, Japanese Infrastructure Funds)
are subject to a sales commission of up to 1.43% (tax included) of the transaction amount (or a commission of ¥2,860 (tax included) for
transactions of ¥200,000 or less). When Japanese equities are purchased via OTC transactions (including offerings), only the purchase priceshall be paid, with no sales commission charged. However, Nomura Securities may charge a separate fee for OTC transactions, as agreed withthe customer. Japanese equities carry the risk of losses owing to price fluctuations. Japanese REITs carry the risk of losses owing tofluctuations in price and/or earnings of underlying real estate. Japanese ETFs and ETNs carry the risk of losses owing to fluctuations in theunderlying indexes or other benchmarks. Japanese Infrastructure Funds carry out the risk of losses owing to fluctuations in price and/or
earnings of underlying infrastructures.
Transactions involving foreign equities are subject to a domestic sales commission of up to 1.045% (tax included) of the transaction amount(which equals the local transaction amount plus local fees and taxes in the case of a purchase or the local transaction amount minus local fees
and taxes in the case of a sale) (for transaction amounts of ¥750,000 and below, maximum domestic sales commission is ¥7,810 (taxincluded)). Local fees and taxes in foreign financial instruments markets vary by country/territory. When foreign equities are purchased via OTC
transactions (including offerings), only the purchase price shall be paid, with no sales commission charged. However, Nomura Securities may
charge a separate fee for OTC transactions, as agreed with the customer. Foreign equities carry the risk of losses owing to factors such as pricefluctuations and foreign exchange rate fluctuations.
Margin transactions are subject to a sales commission of up to 1.43% (tax included) of the transaction amount (or a commission of ¥2,860 (taxincluded) for transactions of ¥200,000 or less), as well as management fees and rights handling fees. In addition, long margin transactions are
subject to interest on the purchase amount, while short margin transactions are subject to fees for the lending of the shares borrowed. A marginequal to at least 30% of the transaction amount (at least 33% for online transactions) and at least ¥300,000 is required. With margintransactions, an amount up to roughly 3.3x the margin (roughly 3x for online transactions) may be traded. Margin transactions therefore carry
the risk of losses in excess of the margin owing to share price fluctuations. For details, please thoroughly read the written materials provided,such as listed securities documents or documents delivered before making a contract.
Transactions involving convertible bonds are subject to a sales commission of up to 1.10% (tax included) of the transaction amount (or acommission of ¥4,400 (tax included) if this would be less than ¥4,400). When convertible bonds are purchased via OTC transactions (including
offerings), only the purchase price shall be paid, with no sales commission charged. However, Nomura Securities may charge a separate fee for
OTC transactions, as agreed with the customer. Convertible bonds carry the risk of losses owing to factors such as interest rate fluctuations andprice fluctuations in the underlying stock. In addition, convertible bonds denominated in foreign currencies also carry the risk of losses owing tofactors such as foreign exchange rate fluctuations.
When bonds are purchased via public offerings, secondary distributions, or other OTC transactions with Nomura Securities, only the purchaseprice shall be paid, with no sales commission charged. Bonds carry the risk of losses, as prices fluctuate in line with changes in market interest
rates. Bond prices may also fall below the invested principal as a result of such factors as changes in the management and financial
circumstances of the issuer, or changes in third-party valuations of the bond in question. In addition, foreign currency-denominated bonds also
carry the risk of losses owing to factors such as foreign exchange rate fluctuations.
When Japanese government bonds (JGBs) for individual investors are purchased via public offerings, only the purchase price shall be paid, withno sales commission charged. As a rule, JGBs for individual investors may not be sold in the first 12 months after issuance. When JGBs forindividual investors are sold before maturity, an amount calculated via the following formula will be subtracted from the par value of the bondplus accrued interest: (1) for 10-year variable rate bonds, an amount equal to the two preceding coupon payments (before tax) x 0.79685 will be
used, (2) for 5-year and 3-year fixed rate bonds, an amount equal to the two preceding coupon payments (before tax) x 0.79685 will be used.
When inflation-indexed JGBs are purchased via public offerings, secondary distributions (uridashi deals), or other OTC transactions with
Nomura Securities, only the purchase price shall be paid, with no sales commission charged. Inflation-indexed JGBs carry the risk of losses, as
prices fluctuate in line with changes in market interest rates and fluctuations in the nationwide consumer price index. The notional principal of
inflation-indexed JGBs changes in line with the rate of change in nationwide CPI inflation from the time of its issuance. The amount of the
coupon payment is calculated by multiplying the coupon rate by the notional principal at the time of payment. The maturity value is the amountof the notional principal when the issue becomes due. For JI17 and subsequent issues, the maturity value shall not undercut the face amount.
Purchases of investment trusts (and sales of some investment trusts) are subject to a purchase or sales fee of up to 5.5% (tax included) of thetransaction amount. Also, a direct cost that may be incurred when selling investment trusts is a fee of up to 2.0% of the unit price at the time ofredemption. Indirect costs that may be incurred during the course of holding investment trusts include, for domestic investment trusts, an asset
management fee (trust fee) of up to 5.5% (tax included/annualized basis) of the net assets in trust, as well as fees based on investment
performance. Other indirect costs may also be incurred. For foreign investment trusts, indirect fees may be incurred during the course of holding
such as investment company compensation.
Investment trusts invest mainly in securities such as Japanese and foreign equities and bonds, whose prices fluctuate. Investment trust unit
prices fluctuate owing to price fluctuations in the underlying assets and to foreign exchange rate fluctuations. As such, investment trusts carry
the risk of losses. Fees and risks vary by investment trust. Maximum applicable fees are subject to change; please thoroughly read the writtenmaterials provided, such as prospectuses or documents delivered before making a contract.
In interest rate swap transactions and USD/JPY basis swap transactions (“interest rate swap transactions, etc.”), only the agreed transaction
payments shall be made on the settlement dates. Some interest rate swap transactions, etc. may require pledging of margin collateral. In someof these cases, transaction payments may exceed the amount of collateral. There shall be no advance notification of required collateral value or
collateral ratios as they vary depending on the transaction. Interest rate swap transactions, etc. carry the risk of losses owing to fluctuations inmarket prices in the interest rate, currency and other markets, as well as reference indices. Losses incurred as such may exceed the value ofmargin collateral, in which case margin calls may be triggered. In the event that both parties agree to enter a replacement (or termination)transaction, the interest rates received (paid) under the new arrangement may differ from those in the original arrangement, even if terms otherthan the interest rates are identical to those in the original transaction. Risks vary by transaction. Please thoroughly read the written materials
provided, such as documents delivered before making a contract and disclosure statements.

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In OTC transactions of credit default swaps (CDS), no sales commission will be charged. When entering into CDS transactions, the protection
buyer will be required to pledge or entrust an agreed amount of margin collateral. In some of these cases, the transaction payments may exceed
the amount of margin collateral. There shall be no advance notification of required collateral value or collateral ratios as they vary depending on
the financial position of the protection buyer. CDS transactions carry the risk of losses owing to changes in the credit position of some or all of
the referenced entities, and/or fluctuations of the interest rate market. The amount the protection buyer receives in the event that the CDS is
triggered by a credit event may undercut the total amount of premiums that he/she has paid in the course of the transaction. Similarly, theamount the protection seller pays in the event of a credit event may exceed the total amount of premiums that he/she has received in thetransaction. All other conditions being equal, the amount of premiums that the protection buyer pays and that received by the protection seller
shall differ. In principle, CDS transactions will be limited to financial instruments business operators and qualified institutional investors.
Transfers of equities to another securities company via the Japan Securities Depository Center are subject to a transfer fee of up to ¥11,000(tax included) per issue transferred depending on volume. No account fee will be charged for marketable securities or monies deposited.

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Additional information regarding the methodologies or models used in the production of any investment recommendations contained
within this document is available upon request by contacting the Research Analysts of Nomura listed on the front page. Disclosuresinformation is available upon request and disclosure information is available at the Nomura Disclosure web page:
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Copyright © 2020 Nomura Securities Co., Ltd. All rights reserved.

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