March 2024

FTSE Classification of Fixed Income Markets –FTSE Fixed Income Country Classification
Announcement March 2024
Published: 27 March 2024

The inclusion of nominal and inflation-linked local currency government bond markets in global FTSE fixed income
indices is governed by the FTSE Fixed Income Country Classification Framework.
A core feature of this framework is the assignment of Market Accessibility Levels, which are reviewed on a semi-annualbasis. The transparent nature of the Market Accessibility Levels allows FTSE Russell to seek feedback frominternational investors on their practical investment experiences and to engage with relevant authorities in markets
which are under review for potential reclassification.
Index inclusion changes due to market size and credit rating are also assessed as part of the FTSE Fixed IncomeCountry Classification process.
The results of the March 2024 FTSE Fixed Income Country Classification Review can be found in the remainder of thisannouncement.

FTSE Fixed Income Country Classification – Announcement March 2024

Addition of Portugal to the FTSE World Government Bond Index
As part of each semi-annual FTSE Fixed Income Country Classification Review, objective index inclusion criteria formarket size and credit rating are assessed to ensure a consistent approach to market inclusion in FTSE global
government bond indices. As of the March 2024 review, the local currency fixed-rate Portuguese government bondmarket meets all three eligibility criteria (market size, credit rating 1 and a minimum Market Accessibility Level of “2”) forentry into the FTSE World Government Bond Index (WGBI). FTSE Russell therefore announces that Portugal will be
added to the FTSE WGBI effective with the November 2024 index profiles.
As of the March 2024 index profiles, 17 EUR-denominated Portuguese government bonds with EUR 144.9 par amountoutstanding (USD 158.5 billion, JPY 23.2 trillion) are projected to enter the FTSE WGBI, representing 0.61% of theindex on a market value weighted basis. Portugal will also be included in indices that derive their membership from theFTSE WGBI, including the FTSE European Government Bond Index (EGBI), and alternatively weighted versions,including the FTSE Climate Risk-Adjusted WGBI.2

Status of Watch List Markets
South Korea
South Korea will remain on the FTSE Fixed Income Country Classification Watch List for the potential
reclassification of its Market Accessibility Level from 1 to 2, and consideration for inclusion in the FTSE WGBI.
In September 2022, South Korea was placed on the FTSE Fixed Income Country Classification Watch List for apotential upgrade to a Market Accessibility Level of 2, and consideration for inclusion in the FTSE WGBI.
Local market authorities continue to progress initiatives intended to improve the accessibility of South Korean
government bonds for international investors, which would facilitate the fulfilment of the criteria for a MarketAccessibility Level of 2. FTSE Russell notes the following developments since its last review in September 2023:•International Central Securities Depositary (ICSD) Connectivity: in August 2023, the Korean Securities
Depository (KSD) announced that it had signed contracts with Clearstream and Euroclear to establish a link
between the KSD and these ICSD platforms. In December 2023, it was further announced that the service is
expected to be available by the end of June 2024. FTSE Russell notes that a prerequisite for the use of theseplatforms by international investors is a seamless withholding tax exemption process for South Korean
government bonds. This appears to require further focus by the market authorities to resolve outstanding
issues in the application process for certain investors.

•Transition from the Investor Registration Certificate (IRC) to the Legal Entity Identifier (LEI) registration
scheme: regulatory approval was passed on 05 June 2023 for the IRC abolishment. The implementation ofLegal Entity Identifier (LEI) was implemented on 14 December 2023. Initial feedback received by FTSE Russell
has generally been positive, although difficulties in corroboration have also been noted for certain types offunds.

1Prior to the March 2024 FTSE Fixed Income Country Classification Review, Portugal did not meet the minimum credit rating threshold for entry inthe FTSE WGBI (A3 by Moody’s and A- by S&P). The long-term local currency debt rating for Portugal was upgraded to A3 by Moody’s in November
2023 and to A- by S&P on 01 March 2024.
2For related or custom indices that incorporate the FTSE Fixed Income Emerging Markets definition as part of the index inclusion criteria, FTSERussell confirms that Portugal is classified as a Developed market.

FTSE Russell

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FTSE Fixed Income Country Classification – Announcement March 2024

•Foreign Exchange (FX) market reforms: the necessary approvals to enhance the foreign exchange market
were approved by the National Assembly and revisions of relevant laws were finalised in 2023. A six-monthpilot period for third-party FX commenced in early January 2024. FTSE Russell understands that participation
is currently limited, but increasing. The planned implementation for relevant changes, including the extensionof Korean won trading hours, is expected to extend through the second half of 2024.

FTSE Russell acknowledges the meaningful progress over the last six months, which is in line with the announced
implementation target dates. FTSE Russell also recognises the commitment of the South Korean market authorities toaddress investor feedback regarding practical issues in the implementation of its reforms. Ahead of its next scheduled
review in September 2024, FTSE Russell will continue to monitor the positive developments in the South Korean
government bond market towards the successful fulfilment of the criteria for Market Accessibility Level 2.

Switzerland
Switzerland will be removed from the FTSE Fixed Income Country Classification Watch List for the potential
reclassification of its Market Accessibility Level from 1 to 2, and consideration for inclusion in the FTSE WGBI.
Switzerland was originally placed on the FTSE Fixed Income Country Classification Watch List in September 2021, fora potential upgrade to a Market Accessibility Level of 2, and consideration for inclusion in the FTSE WGBI.
Based on feedback from international investors, FTSE Russell determined that the withholding tax reclamation processfor Swiss government bonds did not satisfy the Taxation Regime requirement for a Market Accessibility Level of “2”specified in the FTSE Fixed Income Country Classification Framework. FTSE Russell monitored proposed legislativereforms to abolish the withholding tax applied to international investors, which failed to pass in late 2022. FTSE Russell
is not aware of any subsequent or planned reforms to the domestic taxation regime that would potentially result in aMarket Accessibility Level reclassification. As such, Switzerland will be removed from the FTSE Fixed Income Country
Classification Watch List.

India
India will remain on the FTSE Fixed Income Country Classification Watch List for the potential reclassificationof its Market Accessibility Level from 0 to 1, and consideration for inclusion in the FTSE Emerging Markets
Government Bond Index (EMGBI).
In March 2021, India was added to the FTSE Fixed Income Country Classification Watch List for the potential
reclassification of its Market Accessibility Level from 0 to 1, and for consideration for inclusion in the FTSE EMGBI.
This followed the introduction of the Fully Accessible Route (FAR).
Since its last review, FTSE Russell acknowledges areas of progress in the accessibility of the Indian government bondmarket with additional flexibility afforded to custodians relating to margin financing, which has now been more widelyadopted. This has helped to improve certain aspects of the trade settlement process. However, there continue to be
criteria for a Market Accessibility Level of 1 that the market does not satisfy, including the documentary requirements tofulfil the Foreign Portfolio Investor (FPI) registration, increased regulatory reporting, the inflexible length of thesettlement cycle and the tax clearance process.
FTSE Russell intends to continue its valuable dialogue with the Reserve Bank of India and welcomes feedback from an
expanding cohort of international investors entering the Indian government bond market on the practicalities of theirinvestment experience.

FTSE Russell

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ABOUT FTSE RUSSELL
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