corporate actions and events guide

Corporate Actions and Events Guide for the purposes of Euromoney Indices index calculations

September 2014

Euromoney Indices Corporate Actions and Events Guide

10 September 2014

Contents 1. Introduction 1 1.1. Aims of the Guide 1

1.2. Guide Upkeep 1

1.3. Disclaimer 1

1.4. Expert Judgement 1

2. Index Calculation 2 2.1. Index Calculation Formula 2

2.2. Market Capitalisation Calculation Formula 2

2.3. Divisor Adjustments 3

2.4. Total Return Index Calculation Formula 3

3. Corporate Actions and Adjustments 5 3.1. Scrip Issues 5

3.2. Splits 9

3.3. Write‐Up/Off of Capital 10

3.4. Redenomination 11

3.5. Renominalisation 11

3.6. Special Dividends 12

3.7. Rights Issues 13

4. Index Shares and Index Factor 18 4.1. Total Outstanding Shares (TOS) Update 18

4.2. Index Factor Update 19

5. Additions, Deletions and Suspensions 22 5.1. Additions 22

5.2. Deletions 23

5.3. Suspensions 23

5.4. Mergers and Acquisitions (M&A) 26

6. Dividends 30 6.1. Dividend Types 30

6.2. Withholding Tax 31

6.3. Gross Income Capital 32

6.4. Net Income Calculation 32

6.5. Net Income Calculation using Withholding Tax Rates 32

6.6. Late Dividends 32

Appendix A : Worked Example 33

Appendix B : Revision History 41

Disclosure & Disclaimer 42

1


10 September 2014

1. Introduction

1.1 Aims of the Guide

This document outlines the treatment of corporate actions and events by Euromoney Indices

(hereafter ‘EI’) in the calculation of market capitalisation weighted indices.

A corporate action is defined by EI as an event that affects a company’s number of shares in issue

and/or the share price.

Other specific index actions taken by EI are addressed in this guide. This includes changes to index

shares, constituent changes (additions, deletions, suspensions) and also the treatment of dividends.

Appendix A provides a worked example for an index simulating multiple corporate actions and

events occurring on a single day and detailing the calculations in line with the Index Calculation

Formula in section 2.

1.2 Guide Upkeep

EI will review its Corporate Actions and Events Guide at least once a year. Any changes will result in

an ‘Updates’ section in the revised addition. Appendix B has a revision history of any amendments

made.

1.3 Disclaimer

This document should be read in conjunction with ‘EI Ground Rules’ for specific indices. These

documents outline the index methodology for inclusion in the index. This document solely discusses

corporate actions and events.

EI strives to cover all corporate actions and events in this document. However, sometimes an

undefined corporate action may take place. Undefined events will usually be treated in a way

defined in this document. If this is not the case, then EI will apply Expert Judgement to deal with this

event in the most appropriate way.

1.4 Expert Judgement

As defined in the “Expert Judgement” Policy, available on the Euromoney Indices website,

www.euromoneyindices.com.

2


10 September 2014

2. Index Calculation

2.1 Price Index Calculation Formula

The Price Index return is a weighted average return of its constituent companies, where the weights

are the market capitalisations. The weights are adjusted to accommodate capitalisation issues and

corporate actions; this is the same method of calculation as that used for many equity indices. The

Price Index calculation formula is:

Mt PRIndext = PRIndex0 x Dt

Where:

PRIndext = Price Index value at time t

PRIndex0 = Price Index value as at the inception date of the Index

Mt = Market Capitalisation at time t, defined in Section 2.2

Dt = Divisor at time t, defined in Section 2.3

The Divisor is a figure that represents the total market capitalisation at the base date of the Index. It

is only adjusted (formula below) to accommodate changes to constituents and changes in the

constituents’ share capital, thus avoiding distortions in the Index.

2.2 Market Capitalisation Calculation Formula

The Market Capitalisation formula is:

Mt = (Pit Nit Fit Xit)

Where:

Pit = Closing price of constituent i at time t

Nit = Number of shares of constituent i at time t

Fit = Weighting factor of constituent i at time t

Xit = Exchange rate for Pit into the currency of the index

3


10 September 2014

2.3 Divisor Adjustments

The Divisor adjustment formula is:

CAit Dt = Dt‐1 x 1 + Mt‐1

Where:

Dt = Divisor at time t

Dt‐1 = Divisor at time t minus 1 day

CAit = Capital adjustment of constituent i between time t‐1 and t

M t‐1 = Market Capitalisation of the Index at time t minus 1 day

Note: The calculation of CAit is outlined in sections 3, 4, and 5 (page 5 to page 29)

2.4 Total Return Index Calculation Formula (applies to both Net and Gross Total Return Indices)

The Total Return Index calculation formula is:

Mt + Inct TRIndext = TRIndex(t‐1) x MOt

Where:

TRIndext = Total Return Index value at time t

TRIndext‐1 = Total Return Index value at time (t‐1), i.e. the previous day

and

Inct = (Divit Nit Fit Xit)

Where:

Divit = Dividend per share of constituent i at time t

Nit = Number of shares of constituent i at time t

Fit = Weighting factor of constituent i at time t

Xit = Exchange rate for Divit into the currency of the index at time t

and

PRIndex(t‐1) MOt = Mt x PRIndext

4


10 September 2014

The same formula is used for both Net Total Return Indices and Gross Total Return Indices.

For Net Total Return Indices, the dividends, Divit, are net of withholding tax.

For Gross Total Return Indices, the dividends, Divit, are gross of withholding tax.

Withholding tax rates used in Euromoney Indices index calculations are maintained by Euromoney

Indices using a variety of publicly available sources. Please contact Euromoney Indices for more

information on the rates or refer to the specific Index Ground Rules.

5


10 September 2014

3. Corporate Actions and Adjustments

The corporate actions are described using ratios (e.g. for every 1 share held shareholders receive 2

new shares). For the purposes of this guide, the subsequent assumptions apply:

X represents the current shares

Y represents the new shares

For each event type, we provide worked examples to illustrate the treatment within an index. The

capital adjustment (which could be 0) is computed and it is this value which impacts the index divisor

outlined in section 2.3.

Each corporate action is assumed to be in the same currency as the company impacted by the event.

In practice, where a corporate action does involve a different currency, the price adjustment and

capital changes are made using the exchange rates on the Effective Date. Each index Ground Rules

document will specify the data source of the exchange rates to be used.

3.1 Scrip Issues (Bonus Issues)

In general, EI separate scrip issues into three separate sub‐sections:

Regular Scrip Issue

Scrip Issue in Other Eligible Stock

Scrip Issue in Other Ineligible Stock

3.1.1 REGULAR SCRIP ISSUE (STOCK DIVIDEND)

A regular scrip issue is a form of secondary issue where a company's cash reserves are converted

into new shares and given to existing shareholders in the same class of equity already held.

Alternatively, this is referred to as a ‘stock dividend’ and is processed by EI as a ‘Regular Scrip Issue’.

Divisor Change:

No change – the capital change (CAit) is zero and therefore the divisor does not change.

Share Adjustment Price Adjustment Timing of application

New number of shares = Old number of shares * [(X+Y)/X]

Adjusted price = Original Share Price * [X/(X+Y)]

Ex date

6


10 September 2014

Example: Regular Scrip Issue

Company K offers new shares under the terms: 1 new share for every 5 shares already held (X=5, Y=1)

Original price = 1200p

Original shares in issue = 100

Original market capitalisation = 100*1200p = £1200

New number of shares in issue = 100*[(5+1)/5] = 120

New price of shares = 1200p*[5/(5+1)] = 1000p

New market capitalisation = 120*1000p = £1200 = Original market capitalisation

Capital adjustment = 0

3.1.2 SCRIP ISSUE IN OTHER ELIGIBLE STOCK (SPIN-OFF)

A scrip issue in other stock is a form of secondary issue where a company's cash reserves are

converted into new shares and given to existing shareholders, but not the same class of equity held

before.

This event covers spin‐offs, where a newly created independent company is formed through the sale

or distribution of new shares, from an existing business or division in a parent company. The new

shares become eligible for inclusion in the index. Each index series has specific rules governing the

treatment of spin‐offs and these are documented in the relevant Ground Rules.

The eligible scrip issue shares will be processed as either:

Total Outstanding Shares (TOS) Increase (section 4.1.1) TOS Increase occurs when the other eligible stock is already an index constituent.

or

Addition (section 5.1) An addition occurs when the other eligible stock becomes an index constituent following a spin‐off.

The adjustments below are applied to the stock having the scrip issue:

Divisor Change:

No change – a negative capital change (CAit) is applied to the original line of stock and a positive

capital change is applied to the other eligible stock. The net effect is zero, as the capital changes

cancel one another out.


No change Adjusted price = [(X*Original Common Share Price)‐(Y*Original Price offering of

Other Stock)]/X Ex date

7


10 September 2014

Example: Scrip Issue in Other Eligible Stock (existing constituent)

Company K offer new shares under the terms: 4 new preference shares for every 10 existing

common shares already held (X = 10, Y = 4). The preference shares are an existing index constituent.

Original common share price = 1200p

Original common shares in issue = 100

Original common market capitalisation = 100*1200p = £1200

Original price of preference shares = 480p

Original preference shares in issue = 60

Original preference shares market capitalisation = £288

Original total market capitalisation of Company K (common and preference shares) = £1488

Market price of preference shares = 480p

Additional preference shares being issued = 40

New price of common shares = [(10*1200p) ‐ (4*480p)]/10 = 1008p

New market capitalisation of common shares = 100*1008p = £1008

New market capitalisation of preference shares = £288 + (40*480p) = £480

New total market capitalisation of Company K = (100*1008p) + (£300 + (40*480p) = £1488 = Original

market capitalisation

Capital adjustment of common shares = ‐480p*(4/10)*100 = ‐£192

Capital adjustment of preference shares = 480p*40 = £192

Total capital adjustment to index = ‐£192+£192 = £0

Example: Scrip Issue in Other Eligible Stock (spin‐off added to index)

Company K spins off one of its divisions, creating independent Company J. Company J meets the

index requirements and is added to the index. For every 10 shares held in Company K, shareholders

receive 4 new Company J shares (X = 10, Y = 4).

Original share price of Company K = 1200p

Original shares in issue of Company K = 100

Original market capitalisation of Company K = 100*1200p = £1200

Initial price1 offering of Company J = 200p2

Initial share offering of Company J = 100*(4/10) = 40

Initial market capitalisation of Company J = 40*200p = £80

New price of Company K shares post‐spin‐off = [(10*1200p)‐(4*200p)]/10 = 1120p

New market capitalisation of Company K = 100*1120p = £1120

1 Note: If price of other stock is unknown, then EI calculates it using the adjustment in the price of the parent company. 2 Note: If the price spin‐off does not trade on the ex‐date, it is unlikely EI would add the spin‐off, unless an explicit statement of trading is made in the immediate short‐term by the exchange it trades on or the company itself.

8


10 September 2014

Total market capitalisation of Company K and Company J (once added to index) = £1120+£80 =

£1200

Capital adjustment of Company K = ‐200p*(4/10)*100 = ‐£80

Capital adjustment of Company J = 200p*40 = £80

Total capital adjustment to index = ‐£80+£80 = £0

3.1.3 SCRIP ISSUE IN OTHER INELIGIBLE STOCK

A scrip issue in other ineligible stock is a form of secondary issue where a company's cash reserves

are converted into new shares and given to existing shareholders, but not the same class of equity

held before. This other stock may be ‘B’ shares, warrants, options, convertible bonds or other

ineligible lines of stock. They are not eligible for inclusion into the index.

The adjustments below are applied to the stock having the scrip issue:

Divisor Change:

Negative – a negative capital change (CAit) is applied to the original line of stock.

Example: Scrip Issue in Other Ineligible Stock

Company K offers new ‘B’ shares under the terms: 4 new ‘B’ shares for every 10 existing common

shares already held (X = 10, Y = 4). The ‘B’ shares are redeemable for cash at 120p per share.

Original common share price = 1200p

Original common shares in issue = 100

Original common market capitalisation = 100*1200p = £1200

Original price of ‘B’ shares = 120p

Original ‘B’ shares in issue = 60

Original ‘B’ shares market capitalisation = £72

New price of common shares = [(10*1200p) ‐ (4*120p)]/10 = 1152p

New market capitalisation of common shares = 100*1152p = £1152

Capital adjustment to index = ‐120p*(4/10)*100 = ‐£48


No change Adjusted price = [(X*Original Common Share Price)‐(Y*Original Price offering of

Other Stock)]/X Ex date

9


10 September 2014

3.2 Splits

Splits can be separated into two sub‐sections:

Stock Split/Subdivision

Stock Consolidation

3.2.1 STOCK SPLIT / SUBDIVISION

A stock subdivision is the division of the nominal value by a company. Shareholders receive a ratio

of new shares for the amount of shares already held. This results in an increase in the number of

shares but a decrease in price. Shareholders’ investment is worth the same as before.

Divisor Change:


Example: Stock Subdivision

Company K shareholders will receive 5 new shares for every 1 share held currently (X = 1, Y = 5).

Original market share price = 1200p



New number of shares in issue = 100*(5/1) = 500

New share price = 1200p*(1/5) = 240p

New market capitalisation = 500*240p = £1200

Capital adjustment to Company K and index = £0


New number of shares = Current number of shares*(Y/X)

Adjusted Price = Current Price*(X/Y) Ex‐date

10


10 September 2014

3.2.2 STOCK CONSOLIDATION

A stock consolidation is a consolidation of the nominal value of a company, implemented by issuing

shares to holders each of which replaces more than one existing share. This mechanism is also used

to increase the share price.

Divisor Change:


Example: Stock Consolidation

Company K shareholders will receive 1 new share for every 5 shares currently held (X=5, Y=1).




New shares in issue = 100*(1/5) = 20




3.3. Write-Up/Off of Capital

3.3.1 WRITE-UP OF CAPITAL

A write‐up of capital is an increase in a company’s capital by virtue to the change to the nominal

value. Essentially a write‐up of book value to a fair market value; as is common during M&A deals.

Divisor Change:

No change – no capital is being raised or distributed so the capital change (CAit) is zero and the

divisor does not change.


New number of shares = Current number of shares*(Y/X)

Adjusted Price = Current Price*(X/Y) Ex‐date


No change

No change N/A

11


10 September 2014

3.3.2 WRITE-OFF OF CAPITAL

A write‐off of capital is a decrease in a company’s capital by virtue to the change to the nominal

value. Essentially a write‐off of book value to a fair market value; as is common during M&A deals.

Divisor Change:



3.4. Redenomination

A redenomination is a change in the nominal currency of the shares of the company. This is on a 1

for 1 basis (X:Y)

Divisor Change:



3.5. Renominalisation

A renominalisation is a change in the nominal value of a security which changes the shareholding.


No change

No change N/A


No change

No change N/A


New number of shares = Original number of shares*(Y/X)

Adjusted Price = Original Price*(X/Y) Ex‐date

12


10 September 2014

Divisor Change:



Example: Renominalisation

Company K shareholders will receive 4 new shares for every 2 shares held (X = 2, Y = 4).




New shares in issue = 100*(4/2) = 200




3.6 Special Dividends In general, dividends are treated as income and there is no adjustment made to the divisor of an

index. However, where a dividend is defined as ‘special’ or is an irregular payment, then EI treats

these dividends as a capital event and applies a corporate action in this case.

In general, EI separate corporate actions for dividends into two separate sub‐sections:

Special Cash Dividend

Stock Dividend (see section 3.1.1.)

Section 6.1 outlines the dividend types and corresponding treatment of them within an index. This

section covers payments received in cash and payments treated as ‘special’.

3.6.1 SPECIAL CASH DIVIDEND (CAPITAL REPAYMENT)

A special cash dividend is a non‐recurring distribution of company assets that is outside the scope of

the regular dividend policy, usually distributed in the form of cash to shareholders. This also

includes regular dividends where the dividend amount is greater than 15% of the company’s share

price.


No change Original Share Price – Special Cash Dividend

Ex‐date

13


10 September 2014

Divisor Change:

Negative – EI apply a negative capital change (CAit) as the base market capitalisation decreases

following the decrease in price. The value of the capital change is equivalent to the dividend paid

multiplied by the shares in issue. Therefore, the divisor change is negative.

Example: Special Cash Dividend

Company K issues a dividend outside the scope of its usual dividend policy to the amount of 60p per

share.




Dividend amount per share = 60p

New share price = 1200p*[1‐(60/1200)] = 1140p


Capital adjustment to Company K and index = 100*‐60p = ‐£60

3.7. Rights Issues A rights issue is an offering by a company for existing shareholders to purchase additional shares at a subscription price which is usually at a discount to the current share price of the company.

Rights issues can be processed in three separate ways according to the subscription price:

Rights issue equal to or at discount

Rights issue at premium

Rights issue where the subscription price is unknown

The types of rights issues separated into these sections are as follows:

Regular rights issue

Non‐renounceable rights issue

Rights issue in other stock

14


10 September 2014

3.7.1 PROCESSING RIGHTS ISSUES

3.7.1.1 Rights Issue equal to or at a discount In the case of a rights issue at a discount, the subscription price for new shares is less than the

market price (minus any dividend). The price and shares adjust to take into account the uptake of

new shares.


New number of shares = Original number of shares*[(X+Y)/X)]

Adjusted price = [(Y*Subscription Price)+(X*Original Share Price)]/(X+Y)

Ex‐date

Divisor Change:

Increases – EI apply a positive capital change (CAit) as the base market capitalisation increases

following the uptake of new rights issued shares. The value of the capital change is the value of the

rights issue. Therefore, the divisor change is positive.

Example: Rights Issue equal to or at a discount

Company K declares a Rights Issue at a discount. For every 4 share held in Company K, shareholders

can purchase 1 further share at 600p (X = 4, Y = 1).3




Subscription price = 600p

New number of shares = 100*[(4+1)/4] = 125

New price of shares = [(1*600) + (4*1200)] / (1+4) = 1080p


Capital adjustment to Company K and index = 100*(1/4)*600p = £150

3.7.1.2 Rights Issue at premium In the case of a rights issue at a premium, the subscription price is greater than the market price

(minus any dividend). In this case, the price and shares are not adjusted to take into account the

premium because there is no incentive for shareholders to pay over the market price for new shares.


No change

No change

Date when new shares are listed

3 Note: New shares are eligible for next dividend

15


10 September 2014

Divisor Change:

No change – EI do not apply a capital change (CAit) as the base market capitalisation does not

change.

3.7.1.3 Rights Issue where the subscription price is unknown

In the case of a rights issue where the subscription price is unknown, then no action will be taken.

Even in the event that the subscription price becomes known, the price will be noted by EI, but they

will not act to historically change the price.


No change No change Ex‐date

Divisor Change:

No change – EI do not apply a capital change (CAit) as the base market capitalisation does not

change.

Where the parent company share price adjusts, EI will apply Expert Judgement and process as a spin‐

off receiving the rights, see 3.1.3.

3.7.2 TYPES OF RIGHTS ISSUES (ENTITLEMENT OFFERS) 3.7.2.1 Renounceable Rights Issue

A renouceable rights issue is a form of secondary issue that allows a company's existing shareholders

to buy a proportional number of additional shares at a given price within a fixed period. In a

renouceable rights issue, the issue is in the same class of shares as those already held.

When a rights issue is declared, shareholders are issued with nil paid rights. In a renouceable rights

issue, there are three options for the shareholder here:

Take the option and buy all the shares offered

Take the option but buy a proportion of the shares offered – buying some shares for cash

and selling the opposite proportion of the nil paid rights for cash also (perhaps funding new

shares with the nil paid rights sale)

Do not take the option and sell the nil paid rights for cash in full

Nil paid rights are deleted once they trade on an equivalent basis with the existing shares.

Renouceable rights issues are processed according to the subscription price, see 3.7.1.

16


10 September 2014

3.7.2.2 Non‐renounceable Rights Issue

A non‐renounceable rights issue is the same as a regular rights issue except shareholders are denied

the option of selling any of the nil paid rights offered to them. Therefore, if a shareholder decides

not to fully exercise their right to buy new shares; they will lose value on their investment.

Non‐renounceable rights issues are processed according to the subscription price, see 3.7.1.

The exception is for UK non‐renounceable rights issue. These issues are classed as ‘open offers’, i.e.

there is no additional benefit to holding the stock before the issue as opposed to after it. In this

case, no capital adjustment is made at the time. Any share changes will result in a total shares

outstanding update (see section 4.1.) once the number of rights taken up has been announced by

the company.

3.7.2.3 Rights Issue in Other Stock

A rights issue in other stock is a form of secondary issue that allows company's existing shareholders

to buy a proportional number of additional shares in a different stock to the one already held.


Share adjustment takes place in other stock but not in existing stock

Adjusted Price = Share Price of Existing

Shares*{1‐[[Y*(Share Price of Other Stock ‐

Subscription Price of Other

Stock)]/(X*Market Price of Existing

Shares)]}

Ex‐date

Capital Change:


following the price change in the original line of shares. The value of the capital change is the value

of the rights issue in the other line. Therefore, the divisor change is negative.

Example: Rights Issue in Other Stock 4

Company K declares shareholders in the company have the right to purchase 2 preference shares for

every 4 common shares held (X = 4, Y = 2).

Market share price of common shares = 1200p

Market shares in issue of common shares = 100

4 Note: For the purposes of this example, the rights issue in other stock is at a discount. Where there is no discount, a capital adjustment is not applied.

17


10 September 2014

Market share price of preference shares = 300p

Subscription price of preference shares = 250p

New price of common shares = 1200p*{1‐[[2*(300p‐250p)]/(4*1200p)]} = 1175p

New market capitalisation of common shares= 100*1175p = £1175

Capital adjustment to common shares = 100*(2/4)*(250p‐300p) = ‐£25

18


10 September 2014

4. Index Shares and Index Factor

This section covers the ‘Shares in Issue’ included in an index and also the index factor which

determines the proportion of the shares which are included in an Index.

4.1 Total Outstanding Shares (TOS) Update The TOS amount is the total number of shares authorized and issued by a company. The figure for

TOS is regularly monitored through a variety of data sources and is used in calculating the Free Float

(see 4.2.1) of a company.

As well as through corporate actions (section 3), changes (increases or decreases) to the TOS amount

are made for a variety of reasons including:

Placing of new shares

Company buy‐back

Acquisition

The timing of the implementation of updates to the TOS amount is specified in the Ground Rule

document for the relevant index. This section concerns changes to TOS which are not the direct

consequence of corporate actions described in section 3.

4.1.1 TOS INCREASE

Increases in TOS are made following receipt of updated information from the company for example

as a result of an open offer, private placing, exercise of executive share options or through the listing

of new shares following an acquisition.

Divisor Change:

Positive – EI apply a positive capital change (CAit) as the base market capitalisation increases

following the increase in TOS. The value of the capital change is equivalent to the new TOS figure

minus the old TOS figure multiplied by the previous price. Therefore, the divisor change is positive.

Example: TOS Increase

Company K with 100 issued shares lists an additional 20 shares via an open offer.


New TOS = Original TOS + New shares

No change Ex‐date

19


10 September 2014




New TOS = 100 + 20 = 120


Capital adjustment to Company K and index = 20*1200p = £240

4.1.2 TOS DECREASE

Decreases in TOS are made following receipt of updated information from the company for example

as a result of a share buyback, share delisting or through the cancellation of shares following a

partial acquisition.

Divisor Change:


following the decrease in TOS. The value of the capital change is equivalent to the new TOS figure

minus the old TOS figure multiplied by the previous price. Therefore, the divisor change is negative.

Example: TOS decrease

Company K with 100 shares repurchases 10 shares from shareholders at market price.




New TOS = 100 ‐ 10 = 90


Capital adjustment to Company K and index = ‐10*1200p = ‐£120

4.2. Index Factor Update

The Index Factor is a percentage value which restricts the TOS used in an index. The Index Factor is

most commonly used to represent the available free float (see 4.2.1 below) but can also be used to

represent the Foreign Investor Limit or to constrain the weight of a stock within an index based on


New TOS = Original TOS ‐ Shares removed No change Ex‐date

20


10 September 2014

the underlying Index Ground Rules. The examples provided below relate to Free‐Float changes;

however the treatment is the same for other Index Factor changes.

4.2.1 FREE-FLOAT FACTOR

For EI Indices that are based on free‐float, a Free Float Factor is calculated and periodically reviewed

by analysing the number of shares available for investment. This means ‘locked in’ shares held by

company management or major shareholders are not counted towards the free float market

capitalisation. These tightly held shares are aggregated and the total percentage of the TOS is then

rounded down to the nearest multiple of 20%. The Free Float Factor is 100% minus this number.

Consequently, Free Float Factors are 20%, 40%, 60%, 80%, or 100%. In addition, the free float

bandings have tolerance levels. A movement must be 5% beyond the threshold for EI to adjust the

Free Float Factor.

Other EI calculated Index Series apply alternative free float methodologies, for example, factors that

are based on exact rather than banded free floats. However any change to the free float factor

applies the same treatment as outlined in the examples below.

4.2.2 FREE FLOAT INCREASE

Divisor Change:

Positive – EI apply a positive capital change (CAit) as the base market capitalisation increases

following the increase in the free float. The value of the capital change is equivalent to the new free

float adjusted TOS minus the old free float adjusted TOS multiplied by the closing share price on the

business day prior to the free float change. Therefore, the divisor change is positive.

Example: Flee Float Increase (beyond tolerance level)

Company K’s free float is 20% (20% of shares available are traded). ‘J Corporation’ decides to sell an

additional 25% of Company K to the market. There are now 45% of the TOS generally available to

trade and round down to the nearest 20%, so the free float factor increases to 40%.


Original TOS = 100

Original Free Float = 20%

Original free float market capitalisation = 100*1200p*20% = £240

New Free Float = 40%

New market capitalisation = 100*1200p*40% = £480

Capital adjustment to Company K and index = 1200p*(100*40% ‐ 100*20%) = £240

21


10 September 2014

4.2.3 FREE FLOAT DECREASE

DivisorChange:


following the decrease in the free float. The value of the capital change is equivalent to the new free

float adjusted TOS minus the old free float adjusted TOS multiplied by the existing price before the

free float change. Therefore, the divisor change is negative.

Example: Flee Float Decrease (beyond tolerance level)

Company K’s free float is 100% (all shares are traded). ‘J Corporation’ decides to buy a 45% stake in

Company K. The Free Float Factor is rounded down to 40% and the overall Free Float is 60%. The

company has also simultaneously announced an increase in TOS of 5%.



Original Free Float = 100%

Original free float market capitalisation = 100*1200p*100% = £1200

New TOS = 105

New Free Float = 60%

New free float market capitalisation = 105*1200p*60% = £756

Capital adjustment to Company K and index = ‐1*1200p*[(100*100%)‐(105*60%)] = ‐£444

22


10 September 2014

5. Additions, Deletions and Suspensions

The maintenance of an Index requires that constituent stocks be added or deleted in accordance

with the underlying Ground Rules. Special treatment is required to cater for index constituents that

have suspended trading and also previously suspended stocks that have resumed trading.

5.1 Additions

Additions to an Index follow the application of the Index Ground Rules and are usually caused by:

Periodic index review (Quarterly Review)

Spin‐offs

Initial Public Offering (IPO)

Replacement following a deletion to an Index with a fixed number of stocks

When an addition is processed, it is done using the latest closing price (normally the previous day’s

close) and the previous day’s closing TOS before its entry into the index the following day.

Divisor Change:

Positive – the capital change (CAit) applied to the index is equivalent to the market capitalisation of

the new constituent. Therefore the divisor will have a positive adjustment.

Example: Addition to index

Company K is added into the index following a quarterly index review.

Previous day’s closing price of Company K = 1200p

Previous day’s closing TOS amount of Company K = 100

Previous day’s closing market capitalisation of Company K = 100*1200p = £1200

Previous day’s closing market capitalisation of index = £15000

New market capitalisation of index = £15000 + £1200 = £16200

Capital adjustment to index = 100*1200p = £1200

Addition TOS amount used

Addition share price used

Capital Change Timing of application

Previous day’s closing TOS amount

Previous day’s closing share price

Change = TOS of New Constituent *Share Price of New Constituent

Ex‐date

23


10 September 2014

5.2 Deletions

Deletions from an Index follow the application of the Index Ground Rules and are usually caused by:

Periodic Index review (Quarterly Review)

Merger

Acquisition

Delisting

When a deletion is processed, it is done using the closing price on the effective date and the TOS on

the effective date.

Divisor Change:

Negative – a negative capital change (CAit) to the index is the equivalent to the market capitalisation

of the deleted constituent multiplied by ‐1. Therefore a negative adjustment to the divisor is made.

Example: Deletion at full price

Company K is removed from the index.

Closing price of Company K on the effective Date = 1200p

TOS amount of Company K = 100

Closing market capitalisation of Company K = 100*1200p = £1200

Closing market capitalisation of index = £15000

New market capitalisation of index = £15000 – (100*1200p) = £13800

Capital adjustment = 100*1200p*‐1 = ‐£1200

5.3 Suspensions Suspensions to an index or stock exchange can occur at any time, subject to a company or stock

exchange announcement. Suspension may occur for a number of reasons including:

Bankruptcy

Files for bankruptcy protection

Insolvency

Breach of stock exchange rules

Temporary suspension following or preceding a corporate action/reconstruction

Deletion TOS amount used

Deletion share price used


Effective date TOS amount

Effective Date closing share price

Capital Change = TOS of Existing Constituent*Share Price of Existing

Constituent*‐1

Effective Date

24


10 September 2014

Suspension period

If a company is suspended on its exchange, it will normally remain in an Index for a period of 10

business days. If it remains suspended after this time, EI may delete the company. Each index series

will have specific rules covering ‘Stock Suspension’ in terms of timing, replacement stocks, etc., and

will generally allow for Expert Judgement to be applied as each case may require a slightly different

treatment depending on the particular issue.

For example, EI may change this suspension period at their discretion. If it is decided that the

suspended constituent’s immediate future is negative (and will remain so in the near future) then EI

may delete the constituent before the 10 day period is over. Similarly, if it is decided that the

constituent’s immediate future is positive (and will remain so in the near future), it may be allowed

to remain suspended for a longer period of time without deletion from the index.

5.3.1 SUSPENSION (constituent removal)

In the event a constituent is suspended and deleted from an index (usually because of bankruptcy

and liquidation proceedings), the constituent is suspended at the previous day’s closing price and

TOS amount prior to the announcement of the suspension.

When the constituent is deleted, it is deleted at the price of zero. This represents the loss on the

investment as the shares originally held in the constituent are deemed worthless as they no longer

traded.

Divisor Change:

No change – no capital change (CAit) is applied and therefore no division change occurs. This is to

take into account the loss in value of the index and any original investment in the deleted company.

Example: Suspension (constituent removal)

Company K becomes suspended on its stock exchange due to filing for bankruptcy. 5 days later it is

liquidated and no longer exists as a business.

Closing price of Company K before suspension = 1200p

Closing TOS amount of Company K before suspension = 100

Closing market capitalisation of Company K before suspension = 100*1200p = £1200

New market capitalisation of Company K following deletion = 100*0p =£0

Capital adjustment to Company K and the index = £0

Suspended (is deleted) TOS amount used

Suspension (is deleted) share price used


Closing TOS amount day before announcement

of suspension

0

No change

Effective Date

25


10 September 2014

5.3.2 SUSPENSION (constituent addition following stock resuming trading)

In some cases, a company will be deleted following a period of suspension, but the company will

resume trading after its suspension. In this event, the eligible company will be re‐added to the index

at zero (the price at which it is deleted).

Divisor Change:

No change – no capital change (CAit) is applied and therefore no divisor change occurs. This is to

take into account the gain in value of the index and any original investment in the deleted company.

An investor will have not gained the re‐added constituent’s value, merely recouped the investment

previously lost through deletion.

Example: Suspension (constituent removal but re‐addition)

Company K becomes suspended on its stock exchange due to filing for bankruptcy, it is deleted from

the index. However, it resumes trading following its deletion from the index, and is re‐added.

Closing price of Company K before suspension = 1200p

Closing TOS amount of Company K before suspension = 100

Closing market capitalisation of Company K before suspension = 100*1200p = £1200

Closing market capitalisation of index (excl. Company K) = £13800

Closing market capitalisation of index before Company K suspension = £13800 + £1200 = £15000

Market capitalisation of Company K following deletion = 100*0p =£0

Market capitalisation of index following deletion = £13800 + (100*0p) = £13800

Company K re‐added:

Market capitalisation of index following re‐adding = £13800 + (100*1200p) = £15000

Capital adjustment to Company K and the index = £0

Suspended (is deleted but re‐added later) TOS

amount used

Suspension (is deletedbut re‐added later) share price used


Closing TOS amount day before announcement

of suspension 0 No change

Effective Date

26


10 September 2014

5.4 Mergers and Acquisitions (M&A)

This section focuses on the administration of mergers and acquisitions. Specific Index Ground Rules

documents will outline the application of mergers and acquisitions in terms of timing, replacement

stocks etc. The application of the rules will result in the processing of changes specified within this

document, for example shares increase, stock addition, stock deletion.

An acquisition is an event in which a company (acquirer) buys most, if not all, of another company

(target).

M&A events can be divided into three separate methods 5:

Acquisitions funded by cash

Acquisitions funded by stock and cash

Acquisitions funded by stock only

Furthermore, these acquisition methods can be separated into three further subsections based on

the source of acquiring/target company:

(a) Acquiring company and target company are in the same index

(b) Only target company is in the index

(c) Only acquiring company is in the index

For EI, the processing of M&A deals depends on the index type. The different types of index

methodology can be generally divided into:

Fixed number of constituent indices

Floating number of constituent indices

The sub‐sections below outline the treatment for each combination of acquisition method (cash

and/or shares), acquisition source (by existing or non‐existing constituent) and index type (fixed or

floating number of constituents).

5 Note: Mergers are also classified into one of the three groupings and EI may apply Expert Judgement to assign one company the acquiring and one the target.

27


10 September 2014

5.4.1 ACQUISITIONS FUNDED BY CASH

Acquisitions funded by cash are purchases of other companies by cash flows. In other words, no

stock is exchanged.

5.4.1.1 Fixed number of constituents

5.4.1.2 Floating number of constituents

Index Constituents Acquiring CompanyFixed Constituent Index Action Taken

Target CompanyFixed Constituent Index Action Taken

Index Capital Change

5.4.1.1.a Acquiring company and target company are in the

same index

No action

Target deleted and replaced

See section 5.1 and 5.2

5.4.1.1.b Only target company is in

the index N/A



5.4.1.1.c Only acquiring company is

in the index No action N/A No change

Index Constituents Acquiring CompanyFloating Constituent Index Action Taken

Target CompanyFloating Constituent Index Action Taken



same index

No action Target deleted and

not replaced See section 5.2


the index N/A

Target deleted and not replaced

See section 5.2


in the index No action N/A No change

28


10 September 2014

5.4.2 ACQUISITIONS FUNDED BY CASH AND STOCK

Acquisitions by cash and stock are purchases of other companies with cash and by issuing new stock

of the acquiring company to the shareholders of the target company.







same index

TOS Increase Positive capital adjustment


See section 4.1.1 and 5.1 and 5.2


the index N/A




in the index


N/A See section 4.1.1





same index



See section 4.1.1.and 5.2


the index N/A


See section 5.2


in the index



29


10 September 2014

5.4.3 ACQUISITIONS FUNDED BY STOCK ONLY

Acquisitions funded by stock only, is a complete purchase of a company by new stock of the

acquiring company and distributing it to the shareholders of the target company, replacing their now

defunct target company shares.







same index



See section 4.1.1. and 5.1 And 5.2


the index N/A




in the index







same index



See section 4.1.1.and 5.2


the index N/A


See section 5.2


in the index



30


10 September 2014

6. Dividends

A dividend is a distribution of a company’s profits to shareholders. Dividends can take the form of a

cash payment or a stock distribution; neither requires any adjustment to the index.

For the purposes of calculating a total return index, dividends are processed when a company is

quoted ex‐dividend.

Where applicable, the full, gross dividend is used in the total return calculation. However, the UK is

an exception, and a net dividend (10% tax) is used.

When a dividend amount is greater than 15% of the underlying share price the dividend is changed

to a 'Special Dividend' and is classed by EI as a corporate action. It will have a negative impact on the

market capitalisation of the index and the divisor (see 3.6.1.).

6.1. Dividend Types

Listed below are the most common dividend payment types6 and their treatments:

Dividend Type Description Income or Capital Event

YEARLY PAYMENT

A yearly payment is a dividend distribution paid once per year. A company has the option, but not an obligation, to pay its shareholders a proportion of profits in cash. The amount paid is fixed per share held in the company.

INCOME

INTERIM DIVIDEND

An interim dividend is a dividend distribution paid when the dividend structure issues allows dividends to be paid at a frequency greater than once per year. Usually an interim dividend is paid before a company's AGM and final year reports. It is complimented by a final dividend, (or other interim dividends), but generally the interim(s) are much smaller compared to the other dividend.

INCOME

QUARTERLY PAYMENT

A quarterly payment is a dividend distribution paid four times per year. A company has the option, but not an obligation, to pay its shareholders a proportion of profits in cash. The amount paid is fixed per share held in the company.

INCOME

FINAL DIVIDEND

A final dividend is a dividend distribution paid when the dividend structure issues allows (or requires) dividends to be paid at a frequency greater than once per year. Usually declared after company AGM and implemented afterwards also. It is complimented by an interim dividend, but generally the final dividend is larger than the interim(s).

INCOME

6 Note: Other dividend payments do occur and are recorded by EI. Their emission is for the brevity of this document.

31


10 September 2014

Dividend Type Description Income or Capital Event

MONTHLY DIVIDEND

A monthly dividend is a dividend distribution paid twelve times per year. A company has the option, but not an obligation, to pay its shareholders a proportion of profits in cash. The amount paid is fixed per share held in the company.

INCOME

SPECIAL CASH DIVIDEND

A special cash dividend is a non‐recurring distribution of company assets that is outside the scope of the regular dividend policy, usually distributed in the form of cash to shareholders. In any case where the dividend amount is greater than 15% of the underlying share price, this dividend should be classed as a ‘Special Cash Dividend’

CAPITAL

Negative capital adjustment

See section 3.7.1

SCRIP INSTEAD OF DIVIDEND

Scrip instead of dividend is a non‐recurring distribution of stock to shareholders instead of a cash payment. EI process such an event as a corporate action. Depending on the issue, EI treat this dividend as a regular scrip issue or a stock dividend.

CAPITAL

Zero capital adjustment

See section 3.1.1

DIVIDEND FROM RESERVES OR

ASSETS

Dividends from reserves or assets are non‐recurring distributions of cash. This cash is not from profits. Use of this dividend is usually for tax purposes.

CAPITAL

Negative capital adjustment

See section 3.7.1

SCRIP OPTIONAL TO DIVIDEND

A scrip issue optional to a dividend is a non‐recurring distribution of cash or stock. These dividends have a cash equivalent (yearly payment, Interim, etc.) and the cash is deemed the default. Non‐inclusion prevents double counting.

INCOME

HALF YEARLY PAYMENT

A half‐yearly payment is a dividend distribution paid twice per year. A company has the option, but not an obligation, to pay its shareholders a proportion of profits in cash. The amount paid is fixed per share held in the company. Both dividend payments are of equal amount.

INCOME

ALTERNATIVE CURRENCY

An alternative currency dividend is where the dividend payment is available in an alternative currency. These are not included as the primary record will be covered in another dividend type.

INCOME

RESCINDED PAYMENT

Rescinded payment dividends are dividends which are proposed but never paid. These dividends are recorded for information purposes only, as they have no effect on the stock and thus the index.

N/A

6.2. Withholding Tax

Withholding taxes require taxes to be paid to governments on dividend income before the

distribution of the income to non‐residents. The tax depends on the country of domicile of the

recipient of a dividend.

32


10 September 2014

Depending on the country of residence, the taxation may be reclaimed if a double‐taxation treaty

exists between the country in which the dividend is paid and the country of residence of the

recipient of the dividend payment.

Withholding tax rates are applied at a country level, rather than at a constituent level. EI keeps a

periodic record of withholding tax rates in countries covered by them, see ‘Ground Rules’ of specific

index for lists of relevant withholding tax rates.

6.3 Gross Income Capital

For Gross Total Return Indices, the Gross dividend per share announced by a company is used. The

calculation of the Index income is:

Dividend Income calculation Timing

Gross Dividend TOS x Gross Dividend / Index Factor Ex Date

6.4 Net Income Calculation

For an Index designed for local investors, where all the stocks are from the same country and have

the same Tax treatment, the net dividend per share announced by the company is used. The

calculation of the Index Income is:


Net Dividend TOS x Net Dividend / Index Factor Ex Date

6.5 Net Income Calculation using Withholding Tax Rates

For an Index where Withholding Tax Rates are to be applied, the withholding tax is applied to the

Gross dividend. The calculation of the Index income is:


Gross Dividend TOS x Gross Dividend * Withholding Tax / Index Factor Ex Date

6.6 Late Dividends

In certain markets, for example Korea, there is a practice for some stocks to announce dividends

with an ex date in the past. The standard Euromoney Indices policy in this event is to process the

dividend in T+3 business days following the dividend announcement.

The calculation scales the dividend by the capital performance between the actual ex date and the

new T+3 ex date applied by Euromoney Indices. The scaling ensures that the performance is

identical to the performance had the dividend been included at the ex date.

33


10 September 2014

Appendix A : Worked Example

The following example shows an Index, computed in Sterling (£), with a variable number of

constituents (initially 9) and weighted by free float market capitalisation. The written examples

below document a day where several index events occur on the same effective date, resulting in

there being 10 stocks in the Index.

The example sets out the index parameters: index values, market capitalisation, index divisor from

the previous business day with reference to the Index Calculation formula in Section 2. Each

constituent in the Index has an event impacting the Index is explained and referenced to the

relevant section within this Guide. Finally, the index calculation for the current business day is

outlined, again with reference to the Index Calculation formula in Section 2.

A tabular representation of the index events by index constituent is provided at the end of

Appendix A.

Previous Business Day

The previous business day is 10 May.

The previous business day Index parameters (see 2.1) are:

t = 10 May Previous Business Day

PRIndex0 = 100.00 Inception Date Index Value

Mt = 33342 Market Capitalisation at close of business day t

Dt = 25600 Divisor on business day t

PRIndext = 130.24 Index value (2 decimal places) at close of business day t

TRIndext = 148.27 Total Return at close of business day t

The PRIndext value is computed as: Mt 33342 PRIndext = PRIndex0 x = 100 x = 130.2422 Dt 25600

The current business day is 11 May. The events impacting each constituent on the current business

day are outlined below with reference to the Capital Adjustment (CAit) defined in section 2.3.

34


10 September 2014

Stock A

Stock A serves to provide an example of stock with zero corporate events taking place on the

effective date. The price fluctuation is down to normal market activity. The market capitalisation of

the stock is increased, but zero capital change is applied to the stock and index.

Original price of Stock A = 1000p

Original shares in issue of Stock A = 100m

Original free float = 100%

Original market capitalisation of Stock A in index = 100m*1000p*100% = £1000m

New price of Stock A = 1050p

New market capitalisation of Stock A in index = 100m*1005p*100% = £1050m

Capital adjustment to Stock A and index = £0m

Stock B

Stock B serves as an example of multi‐stage corporate event. Stock B simultaneously has a scrip

issue in an ineligible stock and a stock consolidation. The scrip issue in ineligible stock is under the

terms that existing shareholders are issued 1 ‘B Share’ for every 1 common share (X=1, Y=1). The

stock consolidation is under the terms 3 new shares for every 4 shares originally held (X=4, Y=3).

Original price of Stock B = 1500p

Original shares in issue of Stock B = 200m


Original market capitalisation of Stock B in index = 200m*1500p*100% = £3000m

Original price of ‘B Shares’ = 150p

New price of Stock B = ((1*1500p)‐(1*150p)*(1/1) = 1800p

New shares in issue of Stock B = 200m*(3/4) = 150m

New market capitalisation of Stock B in index = 150m*1800p*100% = £2700m

Capital adjustment to Stock B and index = ‐150p*(1/1)*200m = ‐£300m

See sections 3.1.3 and 3.2.2

35


10 September 2014

Stock C and Stock D

Stock C acquires Stock D, another index constituent. Stock D is purchased using a 50% split of cash

and stock. Stock D is deleted from the index.

Original price of Stock C = 2800p

Original shares in issue of Stock C = 250m


Original market capitalisation of Stock C in index = 250m*2800p*100% = £7000m

Original price of Stock D = 1400p

Original shares in issue of Stock D = 200m


Original market capitalisation of Stock D in index = £2800m

Original market capitalisation of Stock C and Stock D = £9800m

New shares in issue of Stock C = 250m + (200m*50%*(1/2)) = 300m

New market capitalisation of Stock C in index = 350m*2800p*100% = £8400m

Capital adjustment to Stock C = (300m‐250m)*2800p) = £1400m

Capital adjustment to Stock D = (200m*1400p*‐1) = ‐£2800m

Capital adjustment to index = ‐£2800+£1400m = ‐£1400m

See sections 4.1.1 and 5.2

Stock E

Stock E is an addition to the index to replace Stock D, which no longer exists.

Original price of Stock E = 1650p

Original shares in issue of Stock E = 150m


Original market capitalisation of Stock E in index = 150m*1650p*100% = £2475m

Capital adjustment to index = 150m*1650p = £2475m

See section 5.1

36


10 September 2014

Stock F

Stock F undergoes a regular rights issue. Stock F allows existing shareholders the right to purchase 1

new share for every 3 existing shares held, at a 10% discount to the market rate (X=3, Y=1).

Original price of Stock F = 2480p

Original shares in issue of Stock F = 60m


Original market capitalisation of Stock F in index = 60m*2480p*100% = £1488m

New price of Stock F = [(1*(2840p*90%))+(3*2840p)]/(3+1) = 2418p

New shares in issue of Stock F = 60*((3+1)/3) = 80m

New market capitalisation = 80m*2418p*100% = £1934.4m

Capital adjustment to Stock F and to index = 60*(1/3)*(2480p*90%) = £446.40m

See sections 3.7.1.1 and 3.7.2.1

Stock G

Stock G issues a final cash dividend of 10p per share. The Market adjusts the stock price in line with

this dividend.

Original price of Stock G = 600p

Original shares in issue of Stock G =200m


Original market capitalisation of Stock G in index = 200m*600p*100% = £1200m

Dividend amount per share = 10p

New stock price of Stock G = 600p‐10p = 590p

New market capitalisation of Stock G = 200m*590p*100% = £1180m

Capital adjustment to Stock G and index = £0m

See section 6.1

37


10 September 2014

Stock H

The Free Float Factor of Stock H is 60%. The major shareholder in Stock H sells 30% of the company.

These previously tightly held shares are released to market. Due to the banding limits, the 30%

figure is rounded down to 20%. This gives a new Free Float Factor of 80%.

Original price of Stock H = 335p

Original shares in issue of Stock H = 400m


Original market capitalisation of Stock H in index = 400m*335p*60% = £804m7

New free float = 80%

New market capitalisation of Stock H in index = 400m*335p*80% = £1072m

Capital adjustment to Stock H and to index = 335p*((400m*80%)‐(400m*60%)) = £268m

See section 4.2.2

Stock I

Stock I decides to pay its dividend in stock, as a one off, to shareholders. Shareholders receive 1 new

share for every 9 held (X=9, Y=1). Stock I’s free float is 80%, but this does not change in this

example.

Original price of Stock I = 1800p

Original shares in issue of Stock I = 540m


Original market capitalisation of Stock I in index = 540m*1800p*80% = £7776m

New price of Stock I = 1800p*(9/(9+1)) = 1620p

New shares in issue of Stock I = 540m*((9+1)/9) = 600m

New market capitalisation of Stock I in index = 600m*1620p*80% = £7776m = Original market

capitalisation

Capital adjustment to Stock I and index = £0m

See section 3.1.1

7 Note: Tightly held shares not included in the market capitalisation used in the index.

38


10 September 2014

Stock J and Stock K

Stock J spins‐off a division of its business and the spin‐off is added to the index. The spin off

becomes independent company Stock K. Stock K has an initial public offering of 850p and

shareholders of Stock J are issued with 2 new Stock K shares for every 5 Stock J shares originally held

(X=5, Y=2).

Original price of Stock J = 1950p

Original shares in issue of Stock J =200m


Original market capitalisation of Stock J in index= 200m*1950p*100% = £3900m

Initial public offering of Stock K = 850p

New price of Stock J = ((5*1950p)‐(2*850p))/5 = 1610p

New market capitalisation of Stock J in index = 200m*1610p*100% = £3220m

New shares in issue of Stock K = 200*(2/5) = 80m

New market capitalisation of Stock K in index = 80m*850p*100% = £680m

Capital adjustment to Stock J = (‐850p*(2/5)*200m) = ‐£680

Capital adjustment to Stock K = (850p*(2/5)*200m) = £680

Capital adjustment to index = ‐£680m + £680 = £0m

See section 3.1.2

Current Business Day

The current day is 11 May.

The sum of the capital adjustment required for the index events is 1489.4. With reference to the

divisor adjustment formula in section 2.3 the new divisor is:

CAit 1 + 1489.4 Dt = Dt‐1 x 1 + = 25600 x = 26743.56 Mt‐1 33342

39


10 September 2014

The current business day Index parameters (see 2.1) are:

T = 11 May Current Business Day

PRIndex0 = 100.00 Inception Date Index Value

Mt = 34861.4 Market Capitalisation at close of business day t

Dt = 26743.56 Divisor on business day t

PRIndext = 130.35 Index value at close of business day t

TRIndext = 148.48 Total return at close of business day t

The PRIndext value is computed as: Mt 34861.4 PRIndext = PRIndex0 x = 100 x = 130.35 Dt 26743.56 The index performance is positive attributable to the performance of Stock A, slightly offset by the

drop in price of Stock G which has adjusted for the dividend.

Total Return

The income of the current business day comes from Stock G and is £20m.

The TRIndext value is computed as: Mt + Inct 34861.4 + 20 TRIndext = TRIndex(t‐1) x = 148.27 x = 148.48 MOt 34831.4 Where MOt is calculated as: PRIndex(t‐1) 130.2422 MOt = Mt x = 34861.4 x = 34831.4 PRIndext 130.3544

40


10 September 2014

Listed Events

Stock

Index

10 May

Price

10 May

TOS (m) 10 May

Free Float

10 May

Market Cap

10 May

Index

11 May

Price

11 May

Dividend

TOS

11 May

Free Float

11 May

Market Cap

11 May

Capital Event

X

Y

Reference

Capital Event Notes

Capital

Change

A Y 10.00 100 100% 1,000 Y 10.50 100 100% 1,050.0 n/a Stock A naturally fluctuates in price

B Y 15.00 200 100% 3,000 Y 18.00 150 100% 2,700.0

Scrip Issue in

ineligible Stock

Stock Consolidation

1 4

1 3

3.1.3

3.2.2

Issue of ‘B Share’ on a 1 for 1

basis worth £1.50

Stock B undergoes a simultaneous stock consolidation

-300.0

C Y 28.00 250 100% 7,000 Y 28.00 300 100% 8,400.0 Acquisition 2 1 4.1.1 Acquisition of Stock D – funded 50%

cash, 50% stock, with 1 new C share for every 2 original D shares held

1400.0

D Y 14.00 200 100% 2,800 N Deletion 5.2 Acquisition with Stock C – shareholders are issued 1 Stock C share for every 2 -2800.0

E N 16.50 150 100% Y 16.50 150 100% 2,475.0 Addition 5.1 Stock E added to index following Stock D deletion 2475.0

F Y 24.80 60 100% 1,488 Y 24.18 80 100% 1,934.4 Regular Rights Issue 3 1 3.7.1.1

and 3.7.2.1

Stock F undergoes a regular rights issue under the terms existing shareholders

can purchase 1 share for every 3 shares 446.4

G Y 6.00 200 100% 1,200 Y 5.90 0.10 200 100% 1,180.0 Dividend Payment 6.1 Stock G issues a final dividend payment of £0.10

H Y 3.35 400 60% 804 Y 3.35 400 80% 1,072.0 Free Float Change 4.2.1 Stock H major shareholder sells 30%

of the company to the market, increasing the free float

268.0

I Y 18.00 540 80% 12,150 Y 16.20 600 80% 12,150.0 Regular Scrip Issue (Stock Dividend) 9 1 3.1.1 Stock I issues a stock dividend under the

terms 1 new share for every 9 held

J Y 19.50 200 100% 3,900 Y 16.10 200 100% 3,220.0 Scrip Issue in Eligible Stock (spin-off added) 5 2 3.1.2 Stock J spins off a division, and the spin-

off, Stock K, is added to the index -680.0

K N - - - - Y 8.50 80 100% 680.0 Shareholders are issued with 2 spin-off

shares for every 5 held in the existing company

680.0

TOTAL 33,342 34,861.4 1,489.4

41


10 September 2014

Appendix B

Revision History

Date of Revision Revision details Actioner

10 September 2014 Completion of V1 of Corporate Actions and Events Guide EI

42


10 September 2014

Disclosure & Disclaimer

Disclosure

Euromoney Indices is the Index compilation and calculation business of Euromoney Institutional Investor PLC

(SEDOL 688666). Euromoney Institutional Investor PLC may from time to time enter and exit as a constituent of the

Euromoney Smaller European Companies Indices.

Disclaimer

Euromoney Indices, Euromoney Trading Ltd. and its affiliates or employees, or any third‐party data provider, shall

not have any liability for any loss sustained by anyone who has relied on the information contained in this

document. The data and analysis contained herein are provided “as is.” Euromoney Indices disclaims any and all

express or implied warranties, including, but not limited to, any warranties of merchantability, suitability or fitness

for a particular purpose or use. None of the information or any Euromoney Index or related products and services

constitutes an offer to buy or sell, or promotion or recommendation of, any security, financial instrument of

product or trading strategy. Further none of the information or Euromoney Index or related products and services

is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of

investment decision and may not be relied on as such. Further distribution prohibited without prior written

permission. Copyright 2013 (c) Euromoney Indices. All rights reserved.

Euromoney Indices, a business that is part of Euromoney Trading Limited, a company incorporated in England and

Wales with company number 05935420, having its registered office at Nestor House, Playhouse Yard, London EC4V

5EX.

corporate actions and events guide

Data & Analytics

events guide

index shares

index factor

disclosure disclaimer

appendix b

prindex0x dtwhere

revision history