SOLUTION OVERVIEW

Russell US Indexes

How Russell indexes are built
Transparent
FTSE Russell’s methodology is constructed using transparent rules,
written to be easily understood by any financial professional. So yourindex is always predictable.

Unbiased rules
FTSE Russell follows published rules, allowing the market to determine
which companies are included in the indexes, ensuring the purest
reflection of stock market performance.

Style distinction
To create its style indexes, FTSE Russell employs a multi-variableapproach, using book-to-price, I/B/E/S forecast medium-term growth andhistorical sales per share growth to determine whether a company ispart of the growth or value investment universe. When company stock
characteristics don’t allow for absolute style distinction, FTSE Russell’sindexes allocate portions of the firm’s market capitalization to both
growth and value stocks.
FTSE Russell also offers stability indexes. The Russell Defensive Index®
and Russell Dynamic Index® measure a portion of the market based on thesensitivity to economic cycles, credit cycles and market volatility. Stability
is measured at the company level in terms of volatility (price and earnings),
leverage and return on assets.

Float adjusted
Russell, which pioneered the now industry standard float adjustment in
1984, adjusts its index membership weights for float shares to accurately
represent the investable universe. To be eligible for the Russell US
Indexes, companies must have minimum 5% shares available in themarketplace.

Regular index maintenance
The indexes are regularly and proactively maintained. Updates such as daily
corporate actions, quarterly share adjustments, quarterly IPO inclusions andannual total reconstitution ensure that the indexes accurately represent theentire opportunity set while balancing turnover costs.

A series of US equity indices
Russell US Indexes—based on the broad market
Russell 3000® Index—include two well known
subsets: the large-cap Russell 1000® Index and thesmall-cap Russell 2000® Index.
Russell’s US equity indexes were introduced
in 1984 to create a more accurate andcomprehensive system for evaluating theperformance of investment managers. Today,
FTSE Russell offers a comprehensive series ofboth US and global indices.
Our modular index construction allows investors to
track current and historical market performance byspecific market segment (large/mid/small cap) or
investment style (growth/value/defensive/dynamic).
All sub-indices roll up to the Russell 3000 Index
with no gaps or overlaps.
A complete description of index construction andmethodology is available at: lseg.com/ftse-russell

Purpose− Act as a performance standard for active
managers− Serve as a proxy for asset allocation purposes− Become a replicable vehicle for passive
investment strategies

Russell US Indexes

Methodology summary
All Russell US indexes are subsets of the Russell 3000E Index, which represents approximately 99% of the US equity market. Index
membership is determined during annual reconstitution, which begins with “rank day”.1 As of rank day, all eligible stocks are ranked bytotal market capitalization in descending order. The largest 4,000 become the Russell 3000E Index, and the other Russell US indexes
are determined from that set of securities. Reconstitution becomes effective after US market close on the fourth Friday each June.

Determining index membership1234Identify eligible securities

Rank eligible US common stocks

Determine market segments

Refresh universe of publicly
traded US companies andremove ineligible securities.

In descending order by total
market capitalization and capture
the largest 4,000 securities above$30M in market capitalization tocreate the Russell 3000E Index.

Apply breakpoints and banding tocontrol turnover

DDA

FC

LARGEST

CRussell
3000@Index

Russell
2000
Index

AGHH

Universe of ~7,000 securities~4,000 securities**

Based on float-adjusted
market capitalization

DRussell1000@Index

FG

Derive each security’sindex weight

CFRussell
Microcap
Index

AGHSMALLEST

If there are fewer than 4,000 eligible
companies above $30M in size, theRussell 3000E Index will contain fewer
than 4,000 companies.

Determining style membership

12

3

4

Rank each stock by stylevariables

Combine variables to create
relevant scores

Rank stocks by CVS orCDS score

Apply non-linear probability
algorithm for distribution

Large, small and micro cap2styles are calculated separately

Style characteristics of themarket are not static, nor arestyles of individual companies

Determine weights of stylemembershipA stock’s CVS may differ
from its CDS~70% classified as one style(value / growth; defensive /dynamic) ~30% weighted
proportionately between styles

DCFA

DEFENSIVEDCA

DYNAMICVALUATION

VALUE

Composite Value
Score (CVS)
1 Value and 2 Growth metrics

LARGE

GROWTH

Composite Defensive
Score (CDS)
3 Quality and 2 Volatility metrics

FGROWTHDCSTABILITY
SMALL

VALUE

FA
DEFENSIVE

Probabilities that are 95% ormore are increased to 100%35%

30%35%

DYNAMIC

1 Timetable is announced and made available on our website each spring.
2 For micro cap stocks, only growth and value styles are calculated.

FTSE Russell

2Russell US Indexes

Maintenance−−−−

Stocks deleted between reconstitution dates are not replaced
Spin-offs are added to the parent stock’s index between reconstitution dates
IPOs that meet Russell’s membership rules are added on the third Friday of March, September, and December
Dividends are reinvested daily on the ex-date at the close of US markets

Exclusions−−−−−−−−

Foreign Stocks and American Depositary Receipts (ADRs)
Companies under $30 Million in total market capitalization
Stocks trading below $1.00 (average used of the past 30 days for existing members)
Stocks with less than 5% of shares available in free float
Companies with less than 5% voting rights
Bulletin board, pink sheet or over-the-counter (OTC) traded securities
Royalty trusts, US limited liability companies (LLCs), closed-end investment companies
Companies that are required to report acquired fund fees and expenses as defined by the SEC, including business developmentcompanies (BDCs)− Blank check companies, special-purpose acquisition companies (SPACs), and limited partnerships− Exchange traded funds (ETFs) and mutual funds− REITs and publicly traded partnerships (PTPs) that generate or have historically generated unrelated business taxable income (UBTI)
and have not taken steps to block UBTI to equity holders.

FTSE Russell

3About FTSE Russell
FTSE Russell is a leading global provider of index and benchmark solutions, spanning diverse asset classes and investment objectives. As a trusted
investment partner we help investors make better-informed investment decisions, manage risk, and seize opportunities.
Market participants look to us for our expertise in developing and managing global index solutions across asset classes. Asset owners, asset managers,
ETF providers and investment banks choose FTSE Russell solutions to benchmark their investment performance and create investment funds, ETFs,
structured products, and index-based derivatives. Our clients use our solutions for asset allocation, investment strategy analysis and risk management,and value us for our robust governance process and operational integrity.
For over 35 years we have been at the forefront of driving change for the investor, always innovating to shape the next generation of benchmarks andinvestment solutions that open up new opportunities for the global investment community.

Contact Us
To learn more, visit lseg.com/ftse-russell; email info@ftserussell.com; or call your regional Client Service team office:
EMEA +44 (0) 20 7866 1810

Asia-PacificNorth America +1 877 503 6437

Hong Kong +852 2164 3333
Tokyo +81 (3) 6441 1430
Sydney +61 (0)2 7228 5659

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