Refinitiv Convertible IndicesMethodology Changes Consultation(2020) - Provisional

Summary of proposed changes:
1. Handling of reinstatements where ‘no results are explicitly stated as the outcome of theevent that triggered the ‘Soft’ Drop’.
2. Eligibility for re-addition to the Global Index of issues previous removed from the Index due
to failing the Price or Size test or those proactively deselected.
3. Definition of a sub-set of an Exchangeables asset class and their treatment in the
Methodology.
Proposed Provisional Consultation Start Date: 16 Nov 2020
Proposed Provisional Consultation End Date: 27 Nov 2020•••

Proposed changes in the original Consultation were highlighted as such.
Amended wording (non-material) as well as the addition of the Percentage Price definition (forclarity) are highlighted as such.
Amended wording (material) are highlighted as such.

Full list of changes:
1. Section 2
a. 2.2.2.4 – New Section
i. Change of the Market Bid Price to Percentage Price
ii. Change of the Original Issue Price to 70% (Percentage Price threshold)iii. Change from 30 to 15 prior Weekdays
b. Percentage Price definition moved to 6.1.7
c. 2.6.3.1.2 / 2.6.3.1.3 Drop Due to Size / Pricei. Add a limit of the maximum number of weeks the testing period can be extended,
index wide to 6 weeks at a time
d. List of captured bonds amended to show 3 bonds that would also be captured due toamended wording for 2.2.2.4.
2. Section 3
a. Amend ‘An Exchangeable’ to ‘A Structured Exchangeable’ in the New Definition for
precision.
b. Correction to the table of captured Indices to exclude US Focus Investment Grade as it has
no capping limits and, therefore, structured exchangeable capping would not apply.

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1) Handling of reinstatements where ‘no results are explicitly stated as theoutcome of the event that triggered the ‘Soft’ Drop’A brief summary of the amendment proposed: reinstatement testing for the issues ‘Soft’dropped where no explicit outcome is known will be based on the information available after 2 calendar
months. A related clarification covers the issues approaching maturity that become subject to ‘Soft’ Drop.

Methodology wording proposed:
2.6.2.1‘Hard Drop’, ‘Soft Drop’ and Reinstatement Process Details‘Hard Drop’ is a drop that removes an issue from the Global Index without an immediate reinstatement
option.
A ‘Soft Drop’ is a drop that removes an issue from the Global Index with the option of automatic
reinstatement if, after the impact of the trigger event is determined, the issue meets the reinstatement
criteria.
All issues considered for a drop under Sections 2.6.3.2.1- 2.6.3.2.3 will be reviewed against ‘Soft Drop’
threshold. The default action is that if the issue meets the ‘Soft Drop’ threshold guideline it will beannounced as such in the Index Status Report (Section 7.2) unless the issue has a maturity date that is lessthan 6 months from the day of the anticipated ‘Soft Drop’ Effective Date, in which case the issue will be‘Hard’ dropped using the Removal Basis stated in the section applicable. See relevant sections for details ofeach threshold guideline and the announcement process. The Index Manager may, from time to time andas appropriate, override the default action detailed in the guideline for a given issue. Any such actions will
be advised to the User Base via the Index Status Report.
Any issue ‘Soft’ dropped from the Index will be monitored until the final results of the event that initiatedthe ‘Soft Drop’ are available to the Index Operations Team. When the outcome is known the issue will beconsidered for reinstatement to the Global Index. If no results that are explicitly stated as the outcome ofthe event that triggered the ‘Soft Drop’ are available to the Index Operations Team on the 1st Workday
immediately following the 2 calendar months from the event´s final Settlement Date or Exercise / Closing
Date if no Settlement Date is known (‘no result’ monitoring period), the issue will be tested forreinstatement based on the information available on that day.
The Index Manager may extend the ‘no result’ monitoring period and after an exceptionally long period
elapsing since the final Settlement Date or Exercise / Closing Date if no Settlement Date is known, of theevent that triggered the ‘Soft Drop’ designate the issue as ‘No Longer Eligible for Reinstatement’.
An issue considered for reinstatement is tested using the Outstanding Issues Proceeds effective EoD on the
day the outcome of the event that caused the ‘Soft Drop’ is known based on the procedure detailed in
Section 1 (Size) and 2.6.3.1.3 (Price). The issue must satisfy BOTH the Size and the Price tests during thesame period to be reinstated as well as have a maturity date that is more than 6 months from the Workday
immediately after the anticipated Reinstatement Date. In addition to the Size and the Price tests, for issues
tested following ‘no result’ monitoring period, the issue will need to meet the Qualifying Price Conditions(Section 6.2.2) regardless of its Region; for clarity, minimum 2 qualifying prices must be available to carryout Qualified Price Testing.
Reinstatement to Sub-Indices is done in accordance with eligibility criteria applicable for each of the SubIndices. Reinstatement of eligible issues is treated in the same way as any other Add. See Section 3 for fulldetails.
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The Reinstatement Effective Date for the Global and Static Sub-Indices is determined by the Index Manager
and may vary by the index family. Unless amended by the Index Manager, it will be the 3rd Workday
following the Reinstatement Announcement Date.
All stages of the ‘Soft Drop’ and Reinstatement process will be reflected in the Index Status Report. Any
issue ‘Soft’ dropped will remain on the Index Status Report until it is reinstated or confirmed as ‘No Longer
Eligible for Reinstatement’.

ADDITIONAL INFORMATION:
The following table shows the list of issues captured by the proposed amendment to the Methodology.
These issues will be assessed under the proposed changed the Workday following the Revision 9 effective
date.

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2) Eligibility for re-addition to the Global Index of issues previous removed
from the Index due to failing the Price or Size test or those proactively
deselected.
A brief summary of the amendment proposed: issues dropped under the specified
Methodology sections will become eligible for re-addition to the index providing conditions detailed in the
new section 2.2.2.4 (not in Revision 8) are met. Related amendments include an increased testing period
provisions for individual issues (as specified below) as well as for all issues during market wide events aswell as minimum time to maturity for Mature issues.

Methodology wording proposed:
2.2.1 General Criteria
To be eligible, an issue:(i) Must be an Equity-Linked Convertible Security as generally recognised in the market. Examples
of such issues would include convertibles, exchangeables, and Mandatory issues.
(ii) Must not be a contingent convertible structure with only downside e.g. contingent conversion
features which are dependent on capital ratio triggers.
(iii) The Exchange Property must be a listed share. On this basis various pre-IPO convertibles are
excluded from the Global Index. Should the issue become convertible into a listed share post
issuance it will be reviewed for eligibility at that time.
(iv) Must not be a Chinese domestic issue or a Taiwanese domestic issue.
(v) Must have an ISIN code.
(vi) Must have terms fixed.
(vii) Can be a security issued in exchange for other securities (‘Exchanged Issue’).
(viii) Must have at least 12 months of maturity remaining on the proposed Add date.
The Index Operations Team will refer any issue where there is uncertainty regarding any of the eligibility
criteria to the Index Manager. The Index Manager will determine the eligibility of such issues.

2.2.2.4 Issues Hard Dropped due to Price, Size or Proactively Deselected (NEW SECTION)
Any issue removed under sections 2.6.3.1.2, 2.6.3.1.3 or 2.6.3.2.3, Drop Due to Size, Price or Proactive
Deselection respectively may become eligible for addition as a mature issue under Section 2.2 to the Global
Index from the Workday immediately following 6 calendar months since the Drop Effective Date providingthat its Market Price Bid Percentage Price (See section 6.1.7 for definition), as determined by EPS, is equal
to or greater than its original Issue Price 70% for the prior 30 15 Weekdays.

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6.1.7 Accreted Issue Price and Percentage Price

The Accreted Issue Proceeds is a measure of the capitalisation of an issue which varies through the life of
an issue to reflect the impact of discount issue or premium redemption terms.
By way of example, the TJX Companies 0% 2021 issue was launched in 2001 at an issue price of 67.165%
with issue proceeds of US$347,578,875, the issue matures in 2021 at a price of 100% with redemption
proceeds of US$517,500,000. The Accreted Issue Proceeds tracks the change from the issue proceeds to
the redemption proceeds through the life of an issue.
The derivation of this value is as follows:
𝐴𝑐𝑐𝑟𝑒𝑡𝑒𝑑 𝐼𝑠𝑠𝑢𝑒 𝑃𝑟𝑜𝑐𝑒𝑒𝑑𝑠 = 𝐷𝑖𝑟𝑡𝑦 𝐴𝑐𝑐𝑟𝑒𝑡𝑒𝑑 𝐼𝑠𝑠𝑢𝑒 𝑃𝑟𝑖𝑐𝑒 𝑥 𝑂𝑟𝑖𝑔𝑖𝑛𝑎𝑙 𝐼𝑠𝑠𝑢𝑒 𝑆𝑖𝑧𝑒𝐷𝑖𝑟𝑡𝑦 𝐴𝑐𝑐𝑟𝑒𝑡𝑒𝑑 𝐼𝑠𝑠𝑢𝑒 𝑃𝑟𝑖𝑐𝑒 (𝐷𝐴𝐼𝑃) = 𝐴𝑐𝑐𝑟𝑒𝑡𝑒𝑑 𝐼𝑠𝑠𝑢𝑒 𝑃𝑟𝑖𝑐𝑒 + 𝐴𝑙𝑙𝑜𝑤𝑒𝑛𝑐𝑒 𝑓𝑜𝑟 𝐴𝑐𝑐𝑟𝑢𝑒𝑑
Allowance for Accrued is the accrued interest for transactions on the relevant trade date. For issues
subject to contractual accrued this is the contractual accrued. For issues that trade with accrued in theprice (Dirty Price) this value is a notional value calculated using an accrual method appropriate to themarket.
𝐴𝑐𝑐𝑟𝑒𝑡𝑒𝑑 𝐼𝑠𝑠𝑢𝑒 𝑃𝑟𝑖𝑐𝑒 = 𝐼𝑃 × (CY EL )1

𝑅𝑃 ⁄𝐼𝑇
𝐶𝑌 = ( )
𝐼𝑃
Where

𝐼𝑃

Issue Price as defined in Section Error! Reference source not found.

RP

Redemption Price

𝐶𝑌

Capital Yield*

𝐸𝐿

Elapsed Life is the number of years since issue date

𝐼𝑇

Issue Term is the number of years from Issue Date to final redemption*For issues where the Redemption Price is not a fixed value at issue (e.g. Floating principal issues) or where
the Redemption Price is not defined (e.g. Perpetual Issues) or where the Redemption Price is zero (e.g.
Mandatory issues) or where the Redemption Price is in a currency different to the Issue Price then Capital
Yield is set to a value of 1.

The Percentage Price is the price of an issue normalised to allow for a meaningful comparison of the issue’s
price with the prices of other constituents regardless of its issuance format (accreting vs non accreting),
maturity stage or its pricing units.

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𝑃𝑒𝑟𝑐𝑒𝑛𝑡𝑎𝑔𝑒 𝑃𝑟𝑖𝑐𝑒 =

𝐷𝑃
𝐷𝐴𝐼𝑃

Where

𝐷𝑃

Dirty Price = Clean Price + Contractual Accrued

𝐷𝐴𝐼𝑃

Dirty Accreted Issue Price - see definition earlier in this section

2.6.3.1.2. Drop Due to Size
All constituents of the Global Index are checked daily against the size thresholds stated below or upon any
change to the Outstanding Issue Size (see Section 2.7)
An issue will be dropped from the Index if the issue fails (i.e. does not meet) ANY of the thresholds listed
below on 5 consecutive Weekdays except where the issue’s Market price, as determined by EPS, is equal toor greater than 75% of the Accreted Issue Price, in which case the testing period would be 10 consecutive
Weekdays. For issues where there has been a change to the Outstanding Issue Size, the issue is re-testedon the 5 (10) Weekdays preceding the Change Notification Date (see Section 2.7) using the new
Outstanding Issue Size.
The Index Manager may also extend the duration of the testing periods, for up to a maximum of 6 weeks at
a time, for all issues during any market wide events adversely affecting pricing. Any such change will beannounced in the Index Status Report.

(i) Outstanding Issue Proceeds:
Must be greater than or equal to 75% of the Outstanding Issue Proceeds thresholds used for
addition (Section 2.2.2).

RegionCash equivalent of 75% of
Outstanding Issue Proceeds*

Countries included in the Region

USD
225m

US

Europe**

USD
150m

Austria, Belgium, Denmark, Finland, France,
Germany, Greece, Hungary, Ireland, Italy,
Liechtenstein, Luxembourg, Netherlands,
Norway, Poland, Portugal, Russia, Spain,
Sweden, Switzerland, UK

Other

USD
150m

Any country not listed under US, Europe, Asia
ex-Japan or Japan regions.

Asia exJapan

USD
75m

China, India, Indonesia, Malaysia, Pakistan,Philippines, Singapore, South Korea, Taiwan,
Thailand, Vietnam.

Japan**

USD
75m

US

EUR
131.25m

JPY 8,250m

GBP
112.5mJapan*For issues not denominated in USD the Outstanding Issue Proceeds will be translated to USD at the FX rates used for Global Index calculations.
** For issues denominated in a currency specified as a threshold, the local currency threshold will apply, for other issues the Outstanding Issue Proceeds will betranslated to USD at the FX rates used for Global Index calculations.

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(ii) Market Capitalisation:
Must be greater than or equal to USD 75m, and greater than or equal to the lesser of USD 400m
and 30% of the Accreted Issue Proceeds.
Any issue failing a threshold on 2 consecutive Weekdays, excluding issues being tested due to the change in
the Outstanding Issue Size, will be included in the Index Status Report issued on the following Workday as a‘Potential Drop Due to Size’. Once announced as such, the issue will either remain on the Index Status
Report until it is announced as a Drop or will be removed from the report the Workday after it no longer
fails the threshold that triggered the announcement.
Drop Due to Size
Removal Basis••

EoD Market Price on Drop Effective Date
Price Basis (Section 6.3.2), Price Sources (Section 6.3.3)•

Drop Notification Date: 1st Workday following the 5th consecutive day of
the issue failing the Size threshold
Timing
Guidelines• Drop Announcement Date: The same as Drop Notification Date
• Drop Effective Date: 2nd Workday following the Drop Notification Date
Removal guidelines, where applicable, for issues re-tested after the change in Outstanding Issue Size aredetailed in Section 2.7.3.

2.6.3.1.3. Drop Due to Price
All constituents of the Global Index are checked daily against both price spread thresholds stated below.
An issue will be dropped from the Index if the issue fails EITHER of the thresholds on 5 consecutive
Weekdays except where the issue’s Market price, as determined by EPS, is equal to or greater than 75% of
the issue’s Accreted Issue Price, in which case the testing period would be 10 consecutive Weekdays.
The Index Manager may also extend the duration of the testing periods, for up to a maximum of 6 weeks at
a time, for all issues during any market wide events adversely affecting pricing. Any such change will beannounced in the Index Status Report.
Price Spread
Threshold type

ThresholdFace value> 4%

Bid price> 6%

Any issue failing a threshold on 2 consecutive Weekdays will be included in the Index Status Report issued
on the following Workday as a ‘Potential Drop Due to Price’. Once announced as such, the issue will either
remain on the Index Status Report until it is announced as a Drop or will be removed from the report theWorkday after it no longer fails the threshold that triggered the announcement.
Drop Due to Price
Removal Basis

Timing
Guidelines

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EoD Market Price on Drop Effective Date
Price Basis (Section 6.3.2), Price Sources (Section 6.3.3)•

Drop Notification Date: 1st Workday following the 5th consecutive day of
the issue failing the Price threshold
Drop Announcement Date: The same as Drop Notification Date
Drop Effective Date: 2nd Workday following the Drop Notification Date••ADDITIONAL INFORMATION:
The following table shows the list of issues that are likely to be immediately affected by the proposed
Methodology changes. These issues will be assessed under the proposed changed the Workday following
the Revision 9 effective date.

Please note the addition of 3 names due to changes in proposed wording for section 2.2.2.4.

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3) Definition of a sub-set of an Exchangeables asset class and theirtreatment in the Methodology.
A brief summary of the amendment proposed: provides definition for and handling of the
sub-set of Exchangeables asset class in the Index. Related amendment states the default position in case ofconcentration level exceeding 125%.

Methodology wording proposed:
Structured Exchangeables (Specified Instrument Type): - NEW DEFINITON
An A Structured Exchangeable bond is a bond issued by a financial institution, where the issuer (or its
affiliate(s) or proxy(ies)) also act(s) in a capital market capacity for the issue, structured to reflect theperformance of the exchange property named and settled primarily in cash upon conversion or redemption.
If there is any doubt as to the nature of the issue under consideration the Index Manager will determine theinstrument type.
Specified Instrument Type: - NEW DEFINITON
A sub-set of instruments in an index that are determined to be of a specific type as defined in Section 6.1 of
the Methodology.
Financial Institution: - NEW DEFINITONA Financial Institution is any legal entity with TRBC classification of:
TRBC

Name

ECONOMIC SECTOR

Financials

BUSINESS SECTOR

Banking & Investment Services

INDUSTRY GROUP

Banking Services

INDUSTRYBanks

ACTIVITY
Banks (NEC)If there is any doubt or absence of a TRBC classification of the issuing entity the Index Manager will
determine the classification.

5.3 Concentration Factors
5.3.1 Concentration Levels
Concentration Factors are used to limit the impact of specific issues in a given index.
Concentration Factors are used for most indices.
For each index where Concentration Factors are used a Concentration Level is used to calculate theConcentration Factor to be applied to each issue in the index. The Concentration Level is the percentage ofthe Market Capitalisation of the index to which the influence of a single issuer, underlying or a Specified
Instrument Type is limited by application of the Concentration Factors.
The Index Manager will determine from time to time which indices will use Concentration Factors and for
those indices the Concentration Level to apply.
Any changes that are made to the list of which indices will use Concentration Factors and for those indices
the Concentration Level to apply will be announced in the Index Status Report.

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The table below sets out the Concentration Level used for each index group, the Concentration Level isused for all indices based on that selection of issues regardless of the calculation currency or calculation
method.
Underlying / Issuer
Concentration Level*

Structured Exchangeable
Concentration Level**

Global2%

5%

Global Vanilla2%

5%

Global All Cap Focus

2%

5%

Global ex US

3%

5%

US

3%

5%

US All Cap Focus

3%5%

Global Focus

4%5%

Global Investment Grade

4%

5%

US Vanilla

4%5%

Europe All Cap Focus

4%5%Asia All Cap Focus

4%5%Europe5%5%Eurozone

5%

5%

Asia

5%

5%

Growth Markets

5%5%

Global Focus ex US

5%

5%Global All Cap Focus Investment Grade

5%

5%

Global Focus Investment Grade

6%

5%

US Focus

6%5%Asia ex-Japan

6%

5%

Asia Focus

6%

5%

Japan

8%

5%

Europe Focus

8%5%Asia ex Japan All Cap Focus

8%5%Japan All Cap Focus

8%5%Eurozone Focus

10%

5%

Europe Investment Grade

10%

5%

Asia ex-Japan Focus

10%

5%

US Investment Grade

10%

5%

Europe All Cap Focus Investment Grade

10%

5%

Japan Focus

15%

5%

Europe Focus Investment Grade

15%

5%

US Focus Investment Grade

No Limit

No Limit

Japan Investment Grade

No Limit

No Limit

Other Markets

No Limit

No Limit

Index Group

Note: * Concentration Level values are effective as of August 2019. ** Structured Exchangeables (Specified Instrument Type) Concentration Level
values are effective as of [EFFECTVE DATE OF REVISION 9 – TO BE CONFIRMED].

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The Concentration Level used for each index group is reviewed at each Focus Monthly Review and theIndex Manager will determine any amendments to Concentration Levels.
Concentration Factors are used to ensure the following conditions are satisfied following the calculation ofConcentration Factors.
•

The total Market Capitalisation of issues from a single issuer does not exceed a specified amount set
for that index.

•

The total Market Capitalisation of issues that convert into a particular underlying does not exceed a
specified amount set for that index.

•

The total Market Capitalisation of the Specified Instrument Type does not exceed a specified amountset for that index.

There is only one Concentration Factor for each issue in a particular index. This concentration factor iscomprised of Underlying / Issuer and any Specified Instrument Type applicable.
The calculation of Concentration Factors may be carried out for an entire index or may be carried out for aselection of one or more issues.
The Index Manager may determine the Concentration Factor to be used for a specific issue in a particularindex.
Mandatory convertibles are not included in the computation of the total capitalisation issued by an issuer
but are included of the overall index capitalisation.
The issuer related to the Exchange Property of each issue is normally a straightforward determination,
however where necessary the Index Manager will determine the issuer to be allocated for the purposes ofthese calculations.
Any changes or proposed changes to the issuer associated with the Exchange Property of an issue will beannounced in the Index Status Report.
Any Specified Instrument Type is based on the instrument type definition stated in Section 6.1 of the
Methodology.
For issues that are being added or are proposed to be added to Global Index under the Addition to the
Global Index guidelines (Section 2.5) the process of identifying the issue as being of the Specified
Instrument Type and the issuer to be associated with the Exchange Property is carried out as part of theIssue Add process and feedback regarding the association will be taken in conjunction with any otherfeedback regarding the proposed addition of the issue.

5.3.2 Concentration Factor Changes
The method used to calculate Concentration Factors is set out in Section 5.3.3 below.
Concentration Factors are recalculated for each index, where applicable, on a monthly basis on the Focus
Monthly Review Effective Date. See here for the list of Concentration Level Reset Dates.
Concentration Factors are recalculated for specified issues when an issue is added to or dropped from anindex. In these circumstances the issues for which the Concentration Factors are recalculated is limited to
the Related Issues (Section 5.3.3) of the issue or issues being added or dropped.
During the daily index calculation, a check is carried out to determine if any issuer, underlying or a Specified
Instrument Type exceeds 125% of the Concentration Level applying to the index / Specified Instrument
Type. If this situation occurs, then the Index Manager is notified of the details of the situation and Index
Manager will determine if a re-calculation of the Concentration Factors is to be carried out and if so the
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timing of such re-calculation. The default position is not to re-calculate between the Monthly
Concentration Level Reset Dates.
The Index Manager may require a re-calculation of the Concentration Factors to be carried out for specified
issues, indices or a Specified Instrument Type(s) or may defer a specific calculation of Concentration
Factors.

5.3.3 Concentration Factor Calculation
The process for calculating the Concentration Factors is iterative as the application of any factor will change
the weighting of all other issues in the index.
The calculation follows the same sequence whether the Concentration Factors for the whole index or theConcentration Factors for specific issues are being recalculated in case of an Add or a Drop.
For recalculation of the Concentration Factors for the whole index the Relevant Issues are all of theconstituents of the index.
For recalculation of specified issues, in case of an Add or a Drop, the Relevant Issues are the Related Issues
based on the specified issues required for the recalculation.
Related Issues are determined by initially selecting all issues with the same issuer (except for Mandatories),
underlying or a Specified Issue Type(s) as any of the specified issues.
Then the process adds to Related Issues any additional bonds not already defined as Related Issues
which have the same underlying, issuer (except for Mandatories) or Specified Issue Type as any of theissues already defined as Related Issues. This process is repeated until no further Related Issues arefound.

Further, this process means that even if none of the issues that initiated the recapping process are known
to be of the Specified Issue Type(s) but any of the Related Issues are identified as such, the recapping
process will include the Specified Issue Type(s) captured by the Related Issues process.
As of Revision 9, only one Specified Issue Type is included in the capping process (Structured Exchangeables
as defined in Section 6.1).
Once Related Issues are determined, the sequence of operations for the calculation is as follows:a) Remove all of the Concentration Factors.
b) For any issues where the Index Manager has set an override value for the Concentration Factor,
apply the Concentration Factor and remove those issues from the list of Relevant Issues.

c) Underlying iteration:i.

Calculate the total Market Capitalisation of the index using the Concentration Factors
already set in step b) and then calculate the Threshold Capitalisation as the product of theMarket Capitalisation and the Concentration Level.

ii.

For each underlying represented in the Relevant Issues, calculate the aggregate Market
Capitalisation of all Relevant Issues with that underlying. If the value exceeds the Threshold
Capitalisation, then adjust the Concentration Factor used for each of the Relevant Issues
with that underlying by the ratio of the Threshold Capitalisation divided by the aggregate
Market Capitalisation of all Relevant Issues with that underlying.

d) Repeat steps c(i) and c(ii) until no material change is made.

Page | 12e) Issuer Iteration:i.

Calculate the total Market Capitalisation of the index using the Concentration Factors
already set and then calculate the Threshold Capitalisation as the product of the Market
Capitalisation and the Concentration Level.

ii.

For each issuer represented in the Relevant Issues, calculate the aggregate Market
Capitalisation of all Relevant Issues from that issuer. If the value exceeds the Threshold
Capitalisation, then adjust the Concentration Factor used for each of the Relevant Issues
from that issuer by the ratio of the Threshold Capitalisation divided by the aggregate
Market Capitalisation of all Relevant Issues from that issuer.

f) Repeat steps e(i) and e(ii) until no material change is made.

g) Specified Instrument Type iteration:i.

Calculate the total Market Capitalisation of the index using the Concentration Factors
already set and then calculate the Threshold Capitalisation as the product of the Market
Capitalisation and the Concentration Level.

ii.

For each and every member of the Specified Instrument Types represented in the Related
Issues, calculate the aggregate Market Capitalisation of all Issues in a given Specified
Instrument Type. If the value exceeds the Threshold Capitalisation for a given Specified
Instrument type, then adjust the Concentration Factor used for each of the Issues from thatSpecified Instrument Type by the ratio of the Threshold Capitalisation divided by theaggregate Market Capitalisation of all Issues of a given Specified Instrument Type.

h) Repeat steps g(i) and g(ii) for a given and each of the Specified Instrument Type(s) represented in
the Related Issues until no material change is made.
i) Repeat steps (c) to (g) until no material change is made in either d, f or h.
The materiality test used is that if the aggregate Market Capitalisation is no more than US$10 above theThreshold Capitalisation then the change is not material.

5.3.4 Concentration Factor Usage
The product of the Concentration Factor set at any particular calculation and the Outstanding Issue Size fora particular issue at the time of the calculation is the Maximum Allowed Size for that issue for the period
until the next calculation of Concentration Factors affecting that issue.
The actual issue size used in index calculation will be the lower of the Outstanding Issue Size and theMaximum Allowed Size.
An issue that is not subject to the application of a Concentration Factor will use the Outstanding Issue Size
as the actual issue size in index calculations.

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ADDITIONAL INFORMATION:
The following table shows the list of issues that are captured by the proposed definition and are or would
have been identified as a Specified Instrument Type (Structured Exchangeable) as well as indicating any ofsuch issues currently present in the Global and Global Focus Indices:

The following table contains the list of sub-indices where the Structured Exchangeables are currently
present. Any index where the combined weight of Structured Exchangeables exceeds the proposed
capping limit of 5% will be capped down to the proposed limit at the Concentration Level Reset Date
immediately following Revision 9 effective date. See here for the list of Concentration Level Reset Dates.
Please note the correction re US Focus Invest below.

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