December 13, 2019

Bloomberg Professional Services

Bloomberg
US Equity Corporate Action Methodology

Indices
- Market-Capitalized Weighted Indices

1
CONTENTS

3 INTRODUCTION
INDEX DEFINITIONS
CORPORATE ACTION: IMPLEMENTATION OF INDEX EVENTS
6 Capital Change
Mergers & Acquisitions
12 Spin-off
22 Bankruptcy Filing/Liquidation
23 Exchanges and Conversions (Reclassification of Shares)
24 Rights Offering
26 Stock Buyback
Additional Offering
Other Share Changes
Corporate Events
Delisting
Change in Listing
27 New Listings and IPOs
Domicile Change
Name and Ticker Change
28 Distributions
Cash Dividends
Stock Split
29 Stock Dividend
NON-CORPORATE CHANGES
ADDITIONAL INDEX DETAILS
30 GLOSSARY OF TERMS
31 ACCESSING INDEX DATA
32 DISCLAIMER

2
INTRODUCTION

The Bloomberg US Equity Index family includes investable companies in the U.S. The Bloomberg US Aggregate Equity
Index (AGGE) represents approximately 99% of the US market by capitalization. Bloomberg sources the corporate
action from Bloomberg’s corporate action database and applies them to its indices daily.

Changes in the methodology may be necessary to help ensure representativeness, accuracy or integrity. Material
changes to the methodology are reviewed and approved by the Product, Risk and Oversight Committee (PROC).
Bloomberg will provide reasonable notice to its clients of any planned changes along with the rationale for any
changes.

INDEX DEFINITIONS

AGGE: The Bloomberg US Aggregate Equity Index

Base-Index: The underlying benchmark Index from which another Index is derived. The Base-Index is typically a
market cap weighted Index. For example the Bloomberg SASB Large Cap Index is based on the
Bloomberg US Large Cap Index (B500). The derived Index is termed Sub-Index as defined below.

Sub-Index An Index that “carved-out” from the Base-Index. Sub-Indices in each segment should add up to the
Base-Index. Examples of segments are Size (Large, Mid, Small), Style (Value, Growth) and Sector
(Industrial, Technology, Utilities etc.)

CORPORATE ACTIONS: IMPLEMENTATION OF INDEX EVENTS

Corporate Actions are events that result in material changes to a company’s operations, financials or capitalization they
are typically approved by the company's board of directors and authorized by the shareholders. Corporate Actions that
lead to an adjustment for an Index are classified into three broad categories – Capital Change, Corporate Events, and
Distributions. Each of these broad categories consists of several different Corporate Action types. For carved-out
indices, Bloomberg calculates Corporate Action Coefficient (CAC) that is used in the calculation of adjusted shares for
the Sub-Index post the corporate action event. CAC is applied as below in the Index calculation formula:

∑ni=1 TFi,t × CACi,t × Ni,t × Pi,t

It =
Dt

Where:
It = the Index value on calculation date t; on the Index inception date the Index level is denoted as I0, which is equal
to 100;

Dt = the divisor of the Sub-Index on calculation date t; on the Index inception date the Index divisor is denoted as D0

Ni,t = number of shares of stock i in the Base-Index on calculation date t

n = the total number of stocks in the Sub-Index;

Pi,t = price of stock i on calculation date t;

TFi,t = Tilt Factor stock i on calculation date t; each member in the Base-Index will have a Tilt Factor of 1 1

CACi,t = Corporate Action Coefficient for stock i on calculation date t; each member in the Base-Index will have CAC
of 1 2

1
Tilt Factor (TF) is only applicable to carved out Indices (e.g. Value, Growth). Tilt Factor “tilts” the weight of the security
based on its factor score (Value Score, Growth Score).
2
Corporate Action Coefficient (CAC) is only applicable to carved out Indices (e.g. Value, Growth). The Corporate Action
Coefficient role is to maintain the security’s weight exposure through corporate actions and other Index changes.

3
A note on Corporate Action Coefficient (CAC): The Corporate Action Coefficient is typically set to 1 for each member at
launch, at each Rebalance, and when a new member is added to the Sub-Index. It is updated as per the formula
described under certain corporate action types below. Where there is no formula provided, the Corporate Action
Coefficient of the securities impacted by corporate action will remain at 1. In conjunction with the Tilt Factor (TF), the
Corporate Action Coefficient is used to determine the final shares of the member in the Sub-Index. In the event of
multiple corporate action occurring on the same Index member, CAC calculation will be based on the same sequence
used in adjustment of the shares of the impacted security(ies) in the Base-Index.

The total return Index, which reflects the impact of dividends over time, is calculated daily using the below formula:

∑ni=1 DVi,t × TFi,t × CACi,t × Ni,t

Index Dividendt =
Dt

Daily Total Return t = (It + Index Dividendt )/ It−1 − 1

Total Return Index t = Total Return Index t-1 * (1+ Daily Total Return t)

Where:
It = the Index value on calculation date t; on the Index inception date the Index level is denoted as I0 which is equal
to 100;

Dt = the divisor of the Sub-Index on calculation date t; on the Index inception date the Index divisor is denoted as D0

Ni,t = number of shares of stock i in the Base-Index on calculation date t

n = the total number of stocks in the Index;

Pi,t = price of stock i on calculation date t;

DVi,t = dividend per share paid for stock i on calculation date t;

TFi,t = Tilt Factor stock i on calculation date t; each member in the market cap weighted Base-Index will have a Tilt
Factor of 1 3

CACi,t = Corporate Action Coefficient for stock i on calculation date t; each member in the market cap weighted
Base-Index will have an adjustment factor of 1 4

Note: In the above formula for Index Dividendt, CACi,t and Ni,t are values of the Corporate Action Coefficient of stock i
and the Number of Shares of stock i in the index, respectively, prior to the dividend payment. On days when there are
multiple corporate actions, one of which is Dividend, the sequence number associated with the corporate action
determines the values of CACi,t and Ni,t. For example if on the Ex-dividend day for a stock i, the company also acquires
another company for stock and the order of events is Dividend followed by Acquisition, then the CACi,t and Ni,t used for
Index Dividendt will be the pre-acquisition values CACi,t and Ni,t. On the other hand, if the order of events is Acquisition
followed by Dividend, then the values of CACi,t and Ni,t used for Index Dividendt will be the post-acquisition values of
CACi,t and Ni,t.

3
Tilt Factor (TF) is only applicable to carved out Indices (e.g. Value, Growth). Tilt Factor “tilts” the weight of the security
based on its factor score (Value Score, Growth Score).
4
Corporate Action Coefficient (CAC) is only applicable to carved out Indices (e.g. Value, Growth). The Corporate Action
Coefficient role is to maintain the security’s weight exposure through corporate actions and other Index changes.

4
Certain corporate actions such as Mergers and Acquisitions, Spin-offs and Rights Issues lead to an adjustment of the
Index divisor. New index divisor following such corporate actions is calculated as below:

New Divisor = Old Divisor * New Market Cap / Old Market Cap

Where:

New Market Cap = ∑ni=1 TFi,t × CACi,t,post−corporate action × Ni,t,post−corporate action × Pi,t,post−corporate action
Old Market Cap = ∑ni=1 TFi,t × CACi,t,pre−corporate action × Ni,t,pre−corporate action × Pi,t,pre−corporate action

TFi,t =Tilt Factor stock i on calculation date t; each member in the market cap weighted Base-Index will have a Tilt
Factor of 1 5

CAC i,t,pre−corporate action = Corporate Action Coefficient of the stock i prior to implementation of all corporate actions
effective day t
CAC i,t,post−corporate action = Corporate Action Coefficient of the stock i after implementation of all corporate actions
effective day t
N i,t,pre−corporate action = number of shares of the stock i in the Base-Index prior to implementation of all corporate
actions effective day t
N i,t,post−corporate action = number of shares of the stock i in the Base-Index after implementation of all corporate actions
effective day t

P i,t,pre−corporate action = closing price of the stock i prior to implementation of all corporate actions effective day t

P i,t,post−corporate action = closing price of stock i after implementation of all corporate actions effective day t

5
Tilt Factor (TF) is only applicable to Non-Market cap weighted indices (e.g. Dividend Yield, R-Factor Score Weighted,
R-Factor Score Optimized). Tilt Factor “tilts” the weight of the security based on its factor score (Value score, Growth
Score, R-Factor score etc.)

5
Capital Change

Corporate Actions that lead to a change in the market capitalization of the security are categorized as “Capital Change”.
Mergers and Acquisitions and Spin-offs are examples of such corporate actions.

Mergers & Acquisitions

A merger or an acquisition (M&A) is when one party (or multiple parties known as the Acquirer) acquires ownership in
an existing company (referred to as Target). M&A deal types can include: minority interest, company takeover, private
equity, venture capital, financing round, asset sale and cross border.

M&A deals can be executed in the following forms:

1. Cash and/or debt only
2. Stock only
3. Cash and/or debt and stock
4. Cash and/or debt or stock

Adjustment for acquisition will take place on the deal completion date only if a corresponding and separate delisting is
announced on the same date; an acquired company always delists after the deal is completed. The absence of a
delisting is a strong indication that the deal did/will not complete on the originally expected date.

6
Index Adjustments:

Acquirer
Target In AGGE - Action Target Not In AGGE
Status - Action

In AGGE • Target is removed from the Index on the effective date. Shares outstanding
• If the acquisition is for 100% stock or stock and cash and/or debt or changes to the
stock or cash and/or debt then the shares of the acquiring company acquiring company
are increased on the effective date as per the terms of the will generally be
acquisition. A divisor adjustment may be warranted to compensate made at the
for any change in the Index market value to preserve the Index level. following Rebalance.
• If the acquisition is for 100% cash or 100% debt or cash and debt, In the event of a
then no adjustment is made to the shares of the Acquirer. A divisor significant increase
adjustment is warranted to compensate for any change in the Index to the market
market value to preserve the Index level. capitalization of an
acquiring company,
Expert Judgment
will be used.

Not In • Target is removed from the Index on the effective date Combined company
AGGE • If the acquisition is for 100% stock or stock and cash and/or debt or will be considered
stock or cash and/or debt and the Acquirer meets Index eligibility for Index inclusion at
and liquidity requirements, then it is added to the Index. A divisor next Rebalance date
adjustment may be warranted to compensate for any change in the with the exception of
Index market value to preserve the Index level. the Fast Track new
• If the acquisition is for 100% cash, a divisor adjustment is made to addition rule.
compensate for any change in the Index market value and to
preserve the Index level.
• If the Acquirer does not meet the index eligibility, the new eligible
shares from the acquisition are added to the eligible Sub-Indices
from the Base-Index. Transfer of shares preserve the size and style
purity and modularity of the indices.

If the completion of a merger is confirmed post-market close on the trading day before the effective date, then the non-
surviving entity will continue to remain in the Index on the effective day at its last traded price. It will be removed from
the Index on the following trading day at its last traded price and other adjustments will be made to the Index in
accordance with the table above. Late mergers will be treated the same as any other merger other than being
implemented on the trading day after the effective day.

Merger/Acquisition of a publicly listed company by a private company resulting in privatization of the public company is
termed as Reverse Merger/Acquisition. If the public company is an Index member, it will be removed from the Index and
a divisor adjustment will be made.

7
Base-Index Adjustment:

IS Acquirer Base-Index, post-corporate action= IS Acquirer Base-Index, pre-corporate action + IS Target Base-Index, pre-corporate action* AR

IS Target Base Index, post-corporate action = 0

Sub-Index Adjustment:

CAC Acquirer Sub-Index, post-corporate action =((IS Acquirer Base-Index, pre-corporate action * TF Acquirer Sub-Index + AR * IS Target Base-Index, pre-corporate
action * TF Target Sub-Index* CAC Target Sub-Index, pre-corporate action) + (IS Acquirer Base-Index, post-corporate action - ((IS Acquirer Base-Index, pre-corporate-

action * TF Acquirer Sub-Index * TIF Acquirer Sub-Index + AR * IS Target Base-Index, pre-corporate action * TF Target Sub-Index * TIF Acquirer Sub-Index ) *

TIF Acquirer Sub-Index + (IS Acquirer Base-Index, pre-corporate action * (1- TF Acquirer Sub-Index) * CTIF Acquirer Sub-Index + IS Target Base-Index, pre-corporate
action* (1- TF Target Sub-Index) * (CTIF Acquirer Sub-Index * AR) * CTIF Acquirer Sub-Index))) * TF Acquirer Sub-Index )/ (IS Acquirer Base-Index, post-

corporate action* TF Acquirer Sub-Index)

IS Target Sub-Index, post–corporate acti0n = 0

Where:

Base-Index = Bloomberg US Large Cap Index (B500)

Sub-Index = Value/Growth Index being constructed

CAC Acquirer Sub-Index, post-corporate action = Post-corporate action Corporate Action Coefficient of the Acquirer in the Sub-
Index
IS Acquirer Base-Index, pre-corporate action = Pre-corporate action Index Shares of Acquirer in the Base-Index
TF Acquirer Sub-Index = Tilt Factor of Acquirer in the Sub-Index
CAC Acquirer Sub-Index, pre-corporate action = Pre-corporate action Corporate Action Coefficient of Acquirer in the Sub-
Index
IS Target Base-Index, pre-corporate action = Pre-corporate action Index Shares of Target in Base-Index
TF Target Sub-Index = Tilt Factor of Target in Sub-Index
CAC Target Sub-Index, pre-corporate action = Pre-corporate action Corporate Action Coefficient of Target in Sub-Index
IS Acquirer Base-Index, post-corporate action = Post-corporate action Index Shares of Acquirer in Base-Index
TF Acquirer Sub-Index = Tilt Factor of Acquirer in the Sub-Index
CAC Acquirer Sub-Index, pre-corporate action = Pre-corporate action Corporate Action Coefficient of Acquirer in the Sub-
Index
TIF Acquirer Sub-Index = Tilt Inclusion Factor for the Acquirer. Tilt Inclusion Factor is a binary variable that takes a value of
0 or 1 based on the TF. If TF > 0 then TIF = 1, else TIF = 0.
CTIF Acquirer Sub-Index = Complementary Tilt Inclusion Factor for the Acquirer. Complementary Tilt Inclusion Factor is a
binary variable that can take a value of 0 or 1 based on 1 - TF. If (1 - TF) > 0, then CTIF = 1, else CTIF = 0
AR = Acquisition Ratio represents the number of Acquirer share per each Target share
If Acquisition for shares is on a per share basis, then AR is used as provided by the company
If Acquisition for shares is on a total number of shares of basis, then
AR = Number of additional shares of Acquirer issued / IS Target Base-Index, pre-corporate action
If Acquisition for shares is on a Dollar per share basis, then
AR = Dollar per share value / Closing Price of Acquirer on day prior to the effective date
If Acquisition on a total Dollar amount basis, then
AR = Total Dollar Amount / (Closing Price of Acquirer on day prior to the effective date * IS Target Base-Index, pre-corporate
action)

Note:
1. If the acquisition is for Stock or Cash, AR will reflect the Stock Proration.
2. If Target is not in the index, Total Float Shares Outstanding of the Target will replace IS Target Base-Index, pre-corporate
action in the formula.

8
 Example 1: Both Acquirer and Target in the Base-Index and Sub-Index - 100% stock

Action: Company B is acquired by Company A

Acquisition Shares/Target Shares: 0.4

Adjustment: Company B is removed from the Index

Company A adjusted for increase in float

Pre-corporate action Base-Index

Company Price Tilt Corporate Index Market Cap Weight Index Values
Factor Action Shares
Coefficient

A 120 1 1 4,000 480,000 40.0% Market Cap 1,200,000

B 48 1 1 7,500 360,000 30.0% Divisor 12,000
C 80 1 1 4,500 360,000 30.0% Level 100

Post-corporate action Base-Index

Company Price Tilt Corporate Index Market Cap Weight Index Values
Factor Action Shares
Coefficient

A 120 1 1 7,000 840,000 70.0% Market Cap 1,200,000

C 80 1 1 4,500 360,000 30.0% Divisor 12,000
Level 100

Pre-corporate action Sub-Index

Company Price Tilt Corporate Index Market Cap Weight Index Values
Factor Action Shares
Coefficient

A 120 0.85 1 3,400 408,000 48.6% Market Cap 840,000

B 48 0.7 1 5,250 252,000 30.0% Divisor 8,400
C 80 0.5 1 2,250 180,000 21.4% 100 100

Post-corporate action Sub-Index

Company Price Tilt Corporate Index Market Cap Weight Index Values
Factor Action Shares
Coefficient

A 120 0.85 0.9244 5,500 660,000 78.6% Market Cap 840,000

C 80 0.5 1 2,250 180,000 21.4% Divisor 8,400
Level 100

9
 Example 2: Both Acquirer and Target in Base-Index and Sub-Index – Stock and Cash

Action: Company B is acquired by Company A

Acquisition Shares/Target Shares: 0.25 + $18 Cash

Adjustment: Company B is removed from the Index

Company A adjusted for increase in float

Divisor adjustment to preserve Index level

Pre-corporate action Base-Index

Company Price Tilt Corporate Index Market Cap Weight Index Values
Factor Action Shares
Coefficient

A 120 1 1 4,000 480,000 40.0% Market Cap 1,200,000

B 48 1 1 7,500 360,000 30.0% Divisor 12,000
C 80 1 1 4,500 360,000 30.0% Level 100

Post-corporate action Base-Index

Company Price Tilt Corporate Index Market Cap Weight Index Values
Factor Action Shares
Coefficient

A 120 1 1 5,875 705,000 66.2% Market Cap 1,065,000

C 80 1 1 4,500 360,000 33.8% Divisor 1,065
Level 100

Pre-corporate action Sub-Index

Company Price Tilt Corporate Index Market Cap Weight Index Values
Factor Action Shares
Coefficient

A 120 0.85 1 3,400 408,000 48.6% Market Cap 840,000

B 48 0.7 1 5,250 252,000 30.0% Divisor 8,400
C 80 0.5 1 2,250 180,000 21.4% Level 100

Post-corporate action Sub-Index

Company Price Tilt Corporate Index Market Cap Weight Index Values
Factor Action Shares
Coefficient

A 120 0.85 0.9437 4,713 565,500 75.9% Market Cap 745,500

C 80 0.5 1 2,250 180,000 24.1% Divisor 7,450
Level 100

10
 Example 3: Target not in Sub-Index but in Base-Index

CAC Acquirer Sub-Index, post-corporate action = CAC Acquirer Sub-Index, pre-corporate action

Hence no adjustment necessary.

Example 4: Target and Acquirer are in the Base-Index, Target in Sub-Index, and Acquirer not in
the Sub-Index

Action: Company B (100% Value security) is acquired by Company A (100% Growth security)

Acquisition Shares/Target Shares: 0.4

Adjustment: Company A’s shares in Growth is adjusted for transfer of eligible float shares from
Value Index

Divisor adjustment to preserve Index level for Sub-Indices

Pre-corporate action Base-Index

Company Price Tilt Corporate Index Market Cap Weight Index Values
Factor Action Shares
Coefficient

A 120 1 1 4,000 480,000 40.0% Market Cap 1,200,000

B 48 1 1 7,500 360,000 30.0% Divisor 11,765
C 80 1 1 4,500 360,000 30.0% Level 102

Post-corporate action Base-Index

Company Price Tilt Corporate Index Market Cap Weight Index Values
Factor Action Shares
Coefficient

A 120 1 1 7000 840,000 70% Market Cap 1,200,000

C 80 1 1 4,500 360,000 30% Divisor 11,765

Pre-corporate action: Growth

Company Price Tilt Corporate Index Market Cap Weight Index Values
Factor Action Shares
Coefficient

A 120 1 1 4,000 480,000 72.7% Market Cap 660,000

B 48 0 1 0 0 0% Divisor 6,600
C 80 0.5 1 2250 180,000 27.3% Level 100

11
 Post-corporate action: Growth

Company Price Tilt Corporate Index Market Cap Weight Index Values
Factor Action Shares
Coefficient

A 120 1 1 7000 840,000 82.4% Market Cap 1,020,000

C 80 0.5 1 2250 180,000 17.6% Divisor 10,200
Level 100

Pre-corporate action: Value

Company Price Tilt Corporate Index Market Cap Weight Index Values
Factor Action Shares
Coefficient

A 120 0 1 0 0 0% Market Cap 540,000

B 48 1 1 7,500 360,000 66.7% Divisor 5400
C 80 0.5 1 2250 180,000 33.3% Level 100

Post-corporate action: Value

Company Price Tilt Corporate Index Market Cap Weight Index Values
Factor Action Shares
Coefficient

A 120 0 1 0 0 0% Market Cap 180,000

C 80 0.5 1 2250 180,000 100% Divisor 1800
Level 100

Spin-off

In a Spin-off, the Parent company creates an independent company typically a subsidiary (referred to as the Child) by
distributing all the shares of the Child company to the shareholders of the Parent company in a pre-determined ratio
established by the Parent company. After the adjustment, both the Parent and the Child are treated as independent
companies. Bloomberg also classifies split-off and in-specie splits as Spin-off actions. Typically no adjustment is made
for a split-off. In-specie splits are treated the same as any other Spin-off.

Spin-offs when the Child is trading when-issued prior to the ex- date

The Child company will be added to the Parent company’s Index on the ex-date as long as it meets the Index-eligibility
criteria. The float shares of the Child are calculated by multiplying the Parent float shares by the Spin-off ratio. The price
of the Child company will be the closing price on the day prior to the ex-date. The Parent company will have a price
adjustment on the ex-date by the free-float market capitalization of the Child entity. If the Child company doesn’t meet
the Index eligibility criteria, the Parent company will experience a price adjustment and the Index divisor will be
adjusted to account for the drop in market capitalization.

12
When Child is added to the Index:

Base-Index Adjustment:

Price:
PX Parent Base-Index, post-corporate action = (PX, Parent Base-Index, pre-corporate action) x (Adjustment factor)

Adjustment factor = 1 - [ ( B x N ) / P ]

Where:

B = provided by the exchange, either the closing price of the Child on the last trading day prior to Spin-off
or closing price of the when-issued security
N = Spin-off terms
P = closing price of the Parent company on the last trading day prior to Spin-off.
PX Parent Base-Index, post-corporate action = Closing Price of Parent on day prior to Spin-off adjusted for the Spin-off
PX, Parent Base-Index, pre-corporate action = Closing Price of Parent on day prior to the Spin-off (unadjusted)

PX Child Base-Index, post-corporate action = PX Child Base-Index, pre-corporate action

Where:
PX Child Base-Index, post-corporate action = Closing Price of Child on day prior to Spin-off adjusted for the Spin-off
PX, Child Base-Index, pre-corporate action = Closing Price of Child on day prior to the Spin-off (unadjusted)

Shares:

IS Parent Base-Index, pre-corporate action = IS Parent Base-Index, post-corporate action

IS Child Base-Index, post-corporate action = IS Parent Base-Index, pre-corporate action x SR

Where:

IS Child Base-Index, pre-corporate action = Pre-corporate action Index Shares of Child in the Base-Index
SR = Spin-off Ratio representing number of Child share per each Parent (Spinning-off company) share
IS Parent Base-Index, pre-corporate action = Pre-corporate action Index Shares of Parent in Base-Index
PX Child Base-Index, pre-corporate action = Pre-corporate action closing price of Child
IS Parent Base-Index, post-corporate action = Post-corporate action Index Shares of Parent in Base-Index
IS Child Base-Index, post-corporate action = Post-corporate action Index Shares of Child in Base-Index
PX Child Base-Index, post corporate action = Post-corporate action closing price of Child

Example: Company A spins off Company D

Adjustment: Company A float is unchanged, Company D is added to the Index

Company A price is multiplied by adjustment factor

Factor: Spin-off Price 50

Spin-off float 2,000

Adjusted Price 95

Adjustment Factor 0.79

13
 Pre-corporate action Base-Index

Company Price Index Market Cap Weight Index Values

Shares

A 120 4,000 480,000 40.8% Market Cap 1,177,500

B 45 7,500 337,500 28.7% Divisor 11,775
C 80 4,500 360,000 30.6% Level 100

Post-corporate action Base-Index

Company Price Index Market Cap Weight Index Values

Shares

A 95 4,000 380,000 32.3% Market Cap 1,177,500

B 45 7,500 337,500 28.7% Divisor 11,775
C 80 4,500 360,000 30.6% Level 100
D 50 2,000 100,000 8.5%

Sub-Index Adjustment:

The Child will inherit the same Tilt Factor as the Parent company, unless the Child is already a member of the
Index.

Shares:

IS Parent Sub-Index, pre-corporate action = IS Parent Sub-Index, post-corporate action

IS Child Sub-Index, pre-corporate action = IS Child Base Sub-Index, post-corporate action * TF Parent Sub-Index

IS Child Sub-Index Index, post-corporate action = IS Child Base-Index, post-corporate * TF Parent Sub-Index
CAC Parent Sub-Index post-corporate action= CAC Parent Sub-Index, pre corporate action

Where:

IS Parent Sub-Index, pre-corporate action = Pre-corporate action Index Shares of Parent company in Sub-Index
IS Parent Sub-Index, post-corporate action = Post-corporate action Index Shares of Parent in Sub-Index
IS Child Sub-Index, pre-corporate action = Pre-corporate action Index Shares of Child in Sub-Index
IS Child Sub-Index, post-corporate action = Post-corporate action Index Shares of Child in Sub-Index
TF Parent Sub-Index = Tilt Factor of Parent in Sub-Index
CAC Parent Sub-Index post-corporate action = Post-corporate action Corporate Action Coefficient of Parent in Sub-Index
CAC Parent Sub-Index, pre corporate action = Pre-corporate action Corporate Action Coefficient of Parent in Sub-Index

Example: Company A spins off Company D

Adjustment: Company A float is unchanged, Company D is added to the Index

Company A price is multiplied by adjustment factor

Factor: Spin-off Price 50

Spin-off float 2,000

Adjusted Price 95

Adjustment Factor 0.79

Distribution Ratio = 0.5

14
 Pre-corporate action Base-Index

Company Price Index Market Cap Weight Index Values

Shares

A 120 4,000 480,000 40.0% Market Cap 1,200,000

B 48 7,500 360,000 30.0% Divisor 12,000
C 80 4,500 360,000 30.0% Level 100

Post-corporate action Base-Index

Company Price Index Market Cap Weight Index Values

Shares

A 95 4,000 380,000 31.7% Market Cap 1,200,000

B 45 7,500 360,000 30.0% Divisor 12,000
C 80 4,500 360,000 30.0% Level 100
D 50 2,000 100,000 8.3%

Pre-corporate action Sub-Index

Company Price Tilt Corporate Index Market Weight Index Values

Factor Action Shares Cap
Coefficien
t

A 120 0.85 1 3,400 408,000 48.6% Market Cap 840,000

B 48 0.7 1 5,250 252,000 30.0% Divisor 8400
C 80 0.5 1 2,250 180,000 21.4% Level 100

Post-corporate action Sub-Index

Company Price Tilt Corporate Index Market Weight Index Values

Factor Action Shares Cap
Coefficien
t

A 95 0.85 1 3,400 323,000 38.5% Market Cap 840,000

B 48 0.7 1 5,250 252,000 30.0% Divisor 8,400
C 80 0.5 1 2,250 180,000 21.4% Level 100
D 50 0.85 1 1,750 85,000 10.1%

15
When Child is not added to the Index:

Base-Index and Sub-Index Adjustment:

Price: PX Parent Base-Index, post-corporate action = (PX Parent Base-Index, pre-corporate action) x (Adjustment factor)
PX Parent Sub-Index, post-corporate action = (PX Parent Sub-Index, pre-corporate action) x (Adjustment factor)

Adjustment factor = 1 - [ ( B x N ) / P ]

Where:

B = provided by the exchange, either the closing price of the Child on the last trading day prior to Spin-off
or closing price of the when-issued security
N = Spin-off terms
P = closing price of the Parent company on the last trading day prior to Spin-off.
PX Parent Base-Index, post-corporate action = Closing Price of Parent on day prior to Spin-off adjusted for the Spin-off
PX Parent Base-Index, pre-corporate action = Closing Price of Parent on day prior to the Spin-off (unadjusted)
PX Parent Sub-Index, post-corporate action = Closing Price of Parent on day prior to Spin-off adjusted for the Spin-off
PX Parent Sub-Index, pre-corporate action = Closing Price of Parent on day prior to the Spin-off (unadjusted)

Divisor: Divisor is adjusted to account for this drop in market capitalization

Example: Company A spins off Company D

Adjustment: Company A float is unchanged, Company D is not added to the Index

Price is multiplied by adjustment factor

Divisor adjustment for change in market capitalization

Factor: Spin-off Price 50

Spin-off float 2,000

Adjusted Price 95

Adjustment Factor 0.79

Pre-corporate action Base-Index

Company Price Index Market Cap Weight Index Values

Shares

A 120 4,000 480,000 40.8% Market Cap 1,177,500

B 45 7,500 337,500 28.7% Divisor 11,775
C 80 4,500 360,000 30.6% Level 100

Post-corporate action Base-Index

Company Price Index Market Cap Weight Index Values

Shares

A 95 4,000 380,000 35.3% Market Cap 1,077,500

B 45 7,500 337,500 31.3% Divisor 10,775
C 80 4,500 360,000 33.4% Level 100

16
 Pre-corporate action Sub-Index

Company Price Tilt Corporate Index Market Weight Index Values

Factor Action Shares Cap
Coefficien
t

A 120 0.85 1 3,400 408,000 48.6% Market Cap 840,000

B 48 0.7 1 5,250 252,000 30.0% Divisor 8400
C 80 0.5 1 2,250 180,000 21.4% Level 100

Post-corporate action Sub-Index

Company Price Tilt Corporate Index Market Weight Index Values

Factor Action Shares Cap
Coefficient

A 95 0.85 1 3,400 323,000 42.8% Market Cap 755,000

B 48 0.7 1 5,250 252,000 33.4% Divisor 7,550
C 80 0.5 1 2,250 180,000 23.8% Level 100

Spin-offs when the Child security does not trade prior to the ex-date.

When Child is added to the Index:

If when-issued security’s pricing is not available, then no adjustment to the Parent company is needed, add the Child to
the Index at "0" price, keep the security in the Index until the Child starts regular-way trading or the reconstitution date
is reached. In cases where the Child does not price until the reconstitution date, it will be removed from the Index.

Base-Index and Sub-Index Adjustment:

Price:
PX Parent Base-Index, post-corporate action = (PX Parent Base-Index, pre-corporate action)
PX Child Base-Index, post-corporate action = 0

PX Parent Sub-Index, post-corporate action = (PX Parent Sub-Index, pre-corporate action)

PX Child Sub-Index, post-corporate action = 0

Where:

PX Parent Base-Index, post-corporate action = Closing Price of Parent on day prior to Spin-off adjusted for the Spin-off
PX, Parent Base-Index, pre-corporate action = Closing Price of Parent on day prior to the Spin-off (unadjusted)
PX Child Base-Index, post-corporate action = Closing Price of Child on day prior to Spin-off adjusted for the Spin-off
PX, Child Sub-Index, pre-corporate action = Closing Price of Child on day prior to the Spin-off (unadjusted)

Shares:

IS Parent Sub-Index, pre-corporate action = IS Parent Sub-Index, post-corporate action

IS Child Sub-Index, pre-corporate action = IS Child Base Sub-Index, post-corporate action * TF Parent Base-Index

IS Parent Sub-Index, pre-corporate action = Pre-corporate action Index Shares of Parent company in Sub-Index
IS Parent Sub-Index, post-corporate action = Post-corporate action Index Shares of Parent in Sub-Index
IS Child Sub-Index, pre-corporate action = Pre-corporate action Index Shares of Child in Sub-Index
IS Child Sub-Index, post-corporate action = Post-corporate action Index Shares of Child in Sub-Index
TF Parent Sub-Index = Tilt Factor of Parent in Sub-Index

17
When Child is not added to the Index:

In certain cases, the spun-off entity may not be added to the index because they are ineligible (e.g., spun-off is a
private company or a non-US security or trading in OTC etc.).

Base-Index and Sub-Index Adjustment:

Price: PX Parent Base-Index, post-corporate action = (PX Parent Base-Index, pre-corporate action) x (Adjustment factor)
PX Parent Sub-Index, post-corporate action = (PX Parent Sub-Index, pre-corporate action) x (Adjustment factor)

Adjustment factor = 1 - [( B x N ) / P]

Where:

B = provided by the exchange, either the closing price of the Child on the last trading day prior to Spin-off
or closing price of the when-issued security
N = Spin-off terms
P = closing price of the Parent company on the last trading day prior to Spin-off.
PX Parent Base-Index, post-corporate action = Closing Price of Parent on day prior to Spin-off adjusted for the Spin-off
PX Parent Base-Index, pre-corporate action = Closing Price of Parent on day prior to the Spin-off (unadjusted)
PX Parent Sub-Index, post-corporate action = Closing Price of Parent on day prior to Spin-off adjusted for the Spin-off
PX Parent Sub-Index, pre-corporate action = Closing Price of Parent on day prior to the Spin-off (unadjusted)

Divisor: Divisor is adjusted to account for this drop in market capitalization

Example: Company A spins off Company D

Adjustment: Company A float is unchanged, Company D is not added to the Index

Price is multiplied by adjustment factor

Divisor adjustment for change in market capitalization

Factor: Spin-off Price 50

Spin-off float 2,000

Adjusted Price 95

Adjustment Factor 0.79

Pre-corporate action Base-Index

Company Price Index Market Cap Weight Index Values

Shares

A 120 4,000 480,000 40.8% Market Cap 1,177,500

B 45 7,500 337,500 28.7% Divisor 11,775
C 80 4,500 360,000 30.6% Level 100

Post-corporate action Base-Index

Company Price Index Market Cap Weight Index Values

Shares

A 95 4,000 380,000 35.3% Market Cap 1,077,500

B 45 7,500 337,500 31.3% Divisor 10,775
C 80 4,500 360,000 33.4% Level 100

18
 Pre-corporate action Sub-Index

Company Price Tilt Corporate Index Market Cap Weight Index Values
Factor Action Shares
Coefficient

A 120 0.85 1 3,400 408,000 48.6% Market Cap 840,000

B 48 0.7 1 5,250 252,000 30.0% Divisor 8400
C 80 0.5 1 2,250 180,000 21.4% Level 100

Post-corporate action Sub-Index

Company Price Tilt Corporate Index Market Cap Weight Index Values
Factor Action Shares
Coefficient

A 95 0.85 1 3,400 323,000 42.8% Market Cap 755,000

B 48 0.7 1 5,250 252,000 33.4% Divisor 7,550
C 80 0.5 1 2,250 180,000 23.8% Level 100

19
Spin-off when the Child is already a member of the Index.

If a Parent company spins-off shares of an existing Index member, the additional shares issued will be reflected as a
share adjustment. In addition, the Parent company will have a price adjustment on the ex-date by the free-float market
capitalization of the Child.

Base-Index Adjustment:

Price:
PX Parent Base-Index, post-corporate action = (PX, Parent Base-Index, pre-corporate action) x (Adjustment factor)

Adjustment factor = 1 - [ ( B x N ) / P ]

Where:

B = provided by the exchange, either the closing price of the Child on the last trading day prior to Spin-off
or closing price of the when-issued security
N = Spin-off terms
P = closing price of the Parent company on the last trading day prior to Spin-off.
PX Parent Base-Index, post-corporate action = Closing Price of Parent on day prior to Spin-off adjusted for the Spin-off
PX, Parent Base-Index, pre-corporate action = Closing Price of Parent on day prior to the Spin-off (unadjusted)

PX Child Base-Index, post-corporate action = PX Child Base-Index, pre-corporate action

Where:
PX Child Base-Index, post-corporate action = Closing Price of Child on day prior to Spin-off adjusted for the Spin-off
PX Child Base-Index, pre-corporate action = Closing Price of Child on day prior to the Spin-off (unadjusted)

Shares:

IS Parent Base-Index, pre-corporate action = IS Parent Base-Index, post-corporate action

IS Child Base-Index, post-corporate action = IS Child Base-Index, pre-corporate action + IS Parent Base-Index, pre-corporate action x SR

Where:

IS Child Base-Index, pre-corporate action = Pre-corporate action Index Shares of Child in the Base-Index
SR = Spin-off ratio representing number of Child share per each Parent (Spinning-off company) share
IS Parent Base-Index, pre-corporate action = Pre-corporate action Index Shares of Parent in Base-Index
PX Child Base-Index, pre-corporate action = Pre-corporate action closing price of Child
IS Parent Base-Index, post-corporate action = Post-corporate action Index Shares of Parent in Base-Index
IS Child Base-Index, post-corporate action = Post-corporate action Index Shares of Child in Base-Index
PX Child Base-Index, post corporate action = Post-corporate action closing price of Child

20
 Sub-Index Adjustment:

Shares:

IS Parent Sub-Index, post-corporate action = IS Parent Sub-Index, pre-corporate action

CAC Child Sub-Index, post-corporate action = (IS Child Base-Index, pre-corporate action * TF Child Sub-Index + (IS Parent Base-Index, pre-corporate action * TF
Parent Sub-Index * SR))/(IS Child Base-Index, post-corporate action* TF Child Sub-Index) * CAC Child Sub-Index, pre-corporate action

CAC Child Sub-Index, post-corporate action = Post-corporate action Corporate Action Coefficient of Child in Sub-Index
IS Parent Sub-Index, pre-corporate action = Pre-corporate action Index Shares of Parent company in Sub-Index
IS Parent Sub-Index, post-corporate action = Post-corporate action Index Shares of Parent in Sub-Index
IS Child Sub-Index, pre-corporate action = Pre-corporate action Index Shares of Child in Sub-Index
IS Child Sub-Index, post-corporate action = Post-corporate action Index Shares of Child in Sub-Index
IS Parent Base-Index, pre-corporate action = Pre-corporate action Index Shares of Parent in Base-Index
IS Child Base-Index, post-corporate action = Pre-corporate action Index Shares of Child in Base-Index
TF Child Sub-Index = Tilt Factor of Child in Sub-Index
TF Parent Sub-Index = Tilt Factor of Parent in Sub-Index
CAC Child Sub-Index post-corporate action = Pre-corporate Corporate Action Coefficient of Child in Sub-Index

Note: If TF Child Sub-Index = 0 or 1, or if the parent is not in the base index, the CAC will remain unchanged.

Example: Company A spins off Company C

Adjustment: Company A float is unchanged, Company C float is adjusted

Price is multiplied by adjustment factor

Factor: Spin-off Price 80

Spin-off float 2,000

Adjusted Price 80

Adjustment Factor 0.67

Distribution Ratio 0.5

Pre-corporate action Base-Index

Company Price Index Market Cap Weight Index Values

Shares

A 120 4,000 480,000 40.0% Market Cap 1,200,000

B 48 7,500 360,000 30.0% Divisor 12,000
C 80 4,500 360,000 30.0% Level 100

Post-corporate action Base-Index

Company Price Index Market Cap Weight Index Values

Shares

A 80 4,000 320,000 26.7% Market Cap 1,200,000

B 48 7,500 360,000 30.0% Divisor 12,000
C 80 6,500 520,000 43.3% Level 100

21
 Pre-corporate action Sub-Index

Company Price Tilt Corporate Index Market Weight Index Values

Factor Action Shares Cap
Coefficien
t

A 120 0.85 1 3,400 408,000 48.6% Market Cap 840,000

B 48 0.7 1 5,250 252,000 30.0% Divisor 8,400
C 80 0.5 1 2,250 180,000 21.4% Level 100

Post-corporate action Sub-Index

Company Price Tilt Corporate Index Market Weight Index Values

Factor Action Shares Cap
Coefficien
t

A 80 0.85 1 3,400 272,000 32.4% Market Cap 840,000

B 48 0.7 1 5,250 252,000 30.0% Divisor 8,400
C 80 0.5 1.2154 3,950 316,000 37.6% Level 100

Bankruptcy Filing/Liquidation

A bankruptcy filing is one of the preliminary steps a company will take in the bankruptcy stage by filing a document with
the governing stock exchange and regulatory agency. A liquidation is a step in which the company begins to sell off its
assets to current shareholders - usually through distributions.

Index Adjustment:

Bankruptcy:

• Company will remain in the Index as long as the security remains listed on an eligible exchange.
• The security will be reviewed for inclusion at semi-annual Rebalance Date.
• If the bankruptcy results in delisting, standard delisting rule will apply.

Liquidation:

• Companies that are under a plan of liquidation will continue to be included in the Index as long as they are listed
and being actively traded.
• When a company announces its intention to delist from an exchange of interest due to liquidation, the security
will be removed from all Indices after the close of the last day of trading from the exchange of interest.

Suspension:

• If security remains suspended for 60 calendar days, it will be removed from the Index at 0 price. If the
suspension is lifted the security will be eligible for inclusion at the next rebalancing.

22
Exchanges and Conversions (Reclassification of Shares)

Shares are reclassified when a company exchanges (reclassifies) current shares into a different class or into a different
type of security. A company may reclassify shares during a corporate restructuring.

Index Adjustment:

• If the impacted security is an Index member and is no longer eligible due to the reclassification, it will be
removed from the Index. Any change in the Index market capitalization will be addressed by a divisor
adjustment to preserve the economic value of the Index.
• If a company creates additional share classes that are publicly listed, the additional share classes will be added
to the Index on the effective date. Any change in the Index free-float market capitalization will be addressed by
an Index divisor adjustment to preserve the economic value of the Index.
• If the reclassification results in the change in security type from an eligible security type (e.g., common stock) to
an ineligible security type (e.g., unit), the security will be removed from the Index.
• If the share exchange is not 1 for 1, shares of the reclassified company in the index will be updated in
accordance with the exchange ratio.

23
Rights Offering

A rights offering, or an entitlement, happens when an organization aims to expand its capital by issuing new securities.
A rights issue results in an increase in the quantity of shares, free-float market capitalization and capital inflows. An issue
of rights to an organization’s current shareholders qualifies them to purchase extra shares, within a fixed time, from the
organization proportionally to what they already own. The subscription price at which every share may be bought is
usually at a discount to the current market price. Rights are sometimes transferable, permitting the holder to sell them
on the open market. Transferable rights, also called renounceable rights, are issued to existing shareholders and are
tradable on the exchange.

Index Adjustment:

On the ex-date of a rights offering:

• If the security’s price is greater than the subscription price of the right, the right is assumed to be fully
subscribed and the shares in the Index are increased by the amount of the rights offering.

• The Index divisor is also updated to take into account the discounted price at which the shareholder receives
the shares. The discounted price is calculated by adding the market cap of the new shares to the market cap of
the existing shares then dividing by the total new shares. The Bloomberg-calculated rights adjustment factor is
used to calculate the adjusted price. If the subscription price of the offering is more than the current price, the
action is ignored. If the shares offered in the rights offering are not the same as the shares in the Index then the
action is ignored.

(𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑘𝑘 ′ 𝑠𝑠 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝 𝑥𝑥 1 + 𝑅𝑅𝑅𝑅𝑅𝑅ℎ𝑡𝑡𝑡𝑡 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆 𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝 𝑥𝑥 𝑅𝑅𝑅𝑅𝑅𝑅ℎ𝑡𝑡𝑡𝑡 𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅 )/(1 + 𝑅𝑅𝑅𝑅𝑅𝑅ℎ𝑡𝑡𝑡𝑡 𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅)
𝑅𝑅𝑅𝑅𝑅𝑅ℎ𝑡𝑡𝑡𝑡 𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 =
(𝑆𝑆𝑆𝑆𝑜𝑜𝑜𝑜𝑘𝑘 ′ 𝑠𝑠 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃)

The rights adjustment factor is used to calculate the stock’s adjusted price, the Rights Ratio (number of new
shares that can be purchased or acquired for each existing share held) is used to calculate the increase in
Index shares and a divisor adjustment is made to neutralize the increase in Index market capitalization as a
result of these adjustments.

Example 1: Rights Offering

Action: Company A – Rights Ratio: 1 per 5

Price Adjustment Factor: 0.970445

Adjustment: Company A shares increased in proportion to the rights ratio

Divisor adjusted for increase in float

Pre-corporate action Index

Company Price Index Market Weight Index Values

Shares Cap
A 120 4,000 480,000 40.0% Market Cap 1,200,000
B 48 7,500 360,000 30.0% Divisor 11,775
C 80 4,500 360,000 30.0% Level 102

24
 Post-corporate action Index

Company Price Index Market Weight Index Values

Shares Cap
A 116.4 4,800 558,976 43.7% Market Cap 1,278,976
5
B 48 7,500 360,000 28.1% Divisor 12,790
C 80 4,500 360,000 28.1% Level 100

Implementation for Sub-Indices

CACSub-Index, post-corporate action = CAC Sub-Index, pre-corporate action

Pre-corporate action Index

Company Price Tilt Corporate Index Market Cap Weight Index Values
Factor Action Shares
Coefficient

A 120 0.85 1 3,400 408,000 48.6% Market Cap 840,000

B 48 0.7 1 5,250 252,000 30.0% Divisor 8,235
C 80 0.5 1 2,250 180,000 21.4% Level 102

Post-corporate action Index

Company Price Tilt Corporate Index Market Cap Weight Index Values
Factor Action Shares
Coefficient

A 116.4 0.85 1 4,080 475,130 52.4% Market Cap 907,130

5
B 48 0.7 1 5,250 252,000 27.8% Divisor 8,893
C 80 0.5 1 2,250 180,000 19.8% Level 102

25
Stock Buyback

A stock buyback (or share repurchase) occurs when a company purchases existing share outstanding from its
shareholders, thus reducing the number of total shares in the open market. U.S. companies typically engage in periodic
stock buybacks as a way to increase shareholder value. As information on the proceeds from a buyback program is not
immediately available and cannot be attributed to a single date or a corporate action record, typically no share update
for buybacks will be made until the quarterly share-update dates — at which time the cumulative impact of all
repurchases and other share changes for the security will be updated.

Additional Offering

Additional offering can be in the form of a primary offering or a secondary offering. A primary offering: an already-
listed company issues new shares, thus increasing the number of total shares outstanding. A secondary offering action:
existing shareholders make their shares available through an offering. Usually, this will not lead to a change in the
number of total shares outstanding; however, it could result in a change in float shares. Typically, no share update will
be made for additional offerings (both primary and secondary) until the quarterly share-update dates — at which time
the cumulative impact of all additional offerings of the security will be updated.

Other Share Changes

Share updates as a result of changes to the number of shares outstanding and free-float percent due to other reasons
(buyback, green shoe exercise, convertibles, warrants exercise, insider buying and selling, etc.) will be made on a
quarterly basis either on the semi-annual Rebalance Dates or the share-update dates in June and December.
Exceptions may be made in cases where such share changes result in a significant change in the security’s market
capitalization.

Corporate Events

Delisting

A delisting action occurs when a security is no longer traded on an exchange either voluntarily through company
decisions or involuntarily by failing to meet certain listing requirements. Completion of majority acquisitions and
corporate restructurings are also signaled by a delisting action.

Index Adjustment:

• Delisting from any of the secondary exchanges, no change is made to the Index.
• Delisting from a security’s primary exchange - as long as it is listed on another eligible exchange, it will be
included in the Index if it meets the eligibility requirement.
• If it is not listed on another eligible exchange, the security will be removed from the Index. A divisor
adjustment will be made to account for the drop in the Index’s market capitalization.

Change in Listing

A change in listing: a listing event wherein a security is effectively delisted from one exchange, while simultaneously
being listed on another exchange. These are not represented as a delisting/listing, but as an aggregate change in
listing as the security did not become inactive.

Index Adjustment:

If Primary Exchange:

• If listed on another eligible exchange, a security will be included in the Index if it meets the eligibility
requirement.
• If not, the security is removed from the Index and a divisor adjustment is made.

If Secondary Exchange:

• No change is made to the Index.

26
New Listings and IPOs

A listing action represents a company’s issuing publicly traded securities on a stock exchange. Different listing types
include: initial public offerings (IPO), dual listings and direct listings.

Index Adjustment:

• New listings, and IPOs that rank among the top 500 companies in the Bloomberg US Aggregate Equity Index
(AGGE), during the intra-rebalance period, will be added with a 3 days’ notice period as long as they have
been trading for at least 5 days and have been ranked among the top 500 securities for 5 consecutive trading
days over the course of the intra-rebalance period (Fast Track new addition rule).
• Such securities should meet all other eligibility requirement except for the minimum trading volume and the
seasoning of securities criteria.
• New listings and IPOs that don’t rank among the top 500 companies for 5 consecutive trading days will be
considered for inclusion only on the rebalance date after they have traded for at least 3 months and if they
meet Index eligibility requirements.
• Any new addition to the index will result in a divisor adjustment to account for any change in the market
capitalization of the index.

IPOs that are fast-tracked into the Bloomberg US Large Cap Index are simultaneously added to the Bloomberg US
Large Cap value and Bloomberg US Large Cap Growth Indices. The position size of the IPO security in the Bloomberg
US Large Cap Value Index and Bloomberg US Large Cap Growth Index is determined based on the composite value
factor score of the security as of last business day prior to the inclusion in the B500 index. For IPOs, fiscal annual data is
used to compute the composite value factor score until the quarterly and trailing 12 month data is available. The change
in usage of annual to quarterly or trailing 12 month data is made on a go forward basis.

Note: Prior to 9/11/2019 IPOs Fast Tracked to the Large Cap Index were allocated 50% to the US Large Cap Value Index
and 50% to the US Large Cap Growth Index.

Domicile Change

Bloomberg defines domicile as the place where a majority of company executives are located. This can be on a country
level, as well as state/province level for certain countries.

Index Adjustment:

• When a company undergoes a change in domicile, it will continue to remain in the Index.
• A company could be dropped from the Index if it does not meet the Index eligibility requirements due to the
change in domicile.

Name and Ticker Change

A name change occurs when a company registers a new official name with the registry, and exchange if it is publically
traded. These usually are the result of M&A activity, geographical expansion, brand diversification or internal
restructurings.
Index Adjustment:

• A name or ticker symbol change will generally not result in changes to weighting or removal of the member from
the Index.
• All such changes will be reflected immediately in the most recent membership list of the Index.

27
DISTRIBUTIONS

Cash Dividends

A cash dividend is a payment made by a corporation to its shareholders, usually as a distribution of profit. When a
corporation earns a profit or surplus, it can either re-invest such funds in the business (called retained earnings), or it
can distribute them to shareholders. A corporation may retain a portion of its earnings and pay the remainder as a
dividend. There are three main types of cash distributions that are applicable to equity securities: regular cash, special
cash and return on capital.

Index Adjustment:

• No adjustment to the stock’s price or Index divisor is made because of regular cash dividends.
• Regular cash dividends are factored into the calculation of the total return Index level.
• Large dividend payments in the form of a special cash dividend, return on capital or liquidation have a
significant impact on stock price and, accordingly, a market capitalization impact, thus a divisor adjustment is
made to account for the decrease in the market capitalization of the Index.
• Regular cash dividends are factored into the calculation of the total return Index level.
• If a company distributing an ordinary dividend subsequently announces a retraction (i.e. dividend is no longer
being paid), Bloomberg will apply a corrective negative adjustment with T+1 notice.
• Where dividends that have been confirmed or estimated by the company prior to the ex-date, the confirmed
or estimated value is applied on the ex-date. For dividends that are confirmed or estimated by the company
after the ex-date, a further positive or negative ex- adjustment will be applied on the next business day
following the receipt of data.
• Where the dividend remains undetermined on the ex-date, Bloomberg will apply the dividend amount paid
from the same period in the previous year (adjusted by any capital change) on the ex-date. If there was no
dividend paid from the same period in the previous year, a dividend value of zero will be used.
• Non-US dollar dividends will be converted to US dollars using the London 4PM exchange rate from the day
prior to the ex-date

Special Dividend with Cash/Stock Election

Index Adjustment:

• Same as standard special cash dividend; results in a divisor adjustment.

• Any changes to float shares as a result of certain shareholders electing the stock option will be made during
the semi-annual Rebalance Dates in March or September or the share update dates in June and December.

Stock Split

A stock split is a corporate action in which a company divides its existing shares into multiple shares (forward split) or
consolidates its existing shares (reverse split). The number of shares outstanding and the price of each share will
change in proportion to the split ratio; however the value of the shares held by each shareholder remains the same. For
example, if a company splits is stock 2:1 and had 100 shares outstanding with a price per share of $50, after the split, the
company will have 200 shares outstanding at a price of $25 per share.

Index Adjustment:

• Shares in the Index will be increased (for forward split) or decreased (for reverse splits) in proportion to the
split ratio on the ex-date of the stock split (e.g., 2 times for a 2:1 stock split).
• The price of the stock in the Index will be adjusted by the same factor.

28
Stock Dividend

A stock dividend is an event in which a company distributes a payment to shareholders in the form of shares of stock, as
opposed to cash, while increasing the total number of shares outstanding.

Index Adjustment:

• A stock dividend will receive treatment similar to stock split. For example, a 100% stock dividend will be treated
like a 2:1 stock split.

If the completion of any corporate action event is announced too late to be reflected as of the close of the last trading
day prior to the effective date, implementation of the event will occur as of the close of the following day or as soon as
practical with appropriate notices sent to stakeholders.

All corporate action adjustments are made based on available information at the time the adjustments are made, typically
after market close on the day before the ex-date. Usually, no retroactive adjustments will be made — even if additional
information becomes available after market open on the ex-date.

NON-CORPORATE CHANGES

Any required changes driven by Bloomberg-reported data, namely changes to the reported float-adjusted market
capitalization, will be made during the semi-annual rebalancing. Necessary divisor adjustments will be made to
accommodate the changes in float-adjusted market capitalization driven by any change in reported float-adjusted
figures.

ADDITIONAL INDEX DETAILS

Additional Index details on the below categories are available in the Bloomberg US Equity Indices Methodology.

INDEX MAINTENANCE
RESTATEMENTS
STAKEHOLDER ENGAGEMENT
RISKS
LIMITATIONS OF THE INDEX
BENCHMARK OVERSIGHT AND GOVERNANCE
INDEX AND DATA REVIEWS
EXPERT JUDGEMENT
RESTATEMENT POLICY

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GLOSSARY OF TERMS

Term Definition

Acquirer A merger or an acquisition (M&A) is when one party (or multiple parties
known as the Acquirer) acquires ownership in an existing company
(referred to as Target).

Base-Index The underlying benchmark Index from which another index is derived.
The Base-Index is typically a market cap weighted index. For example the
Bloomberg SASB Large Cap Index is based on the Bloomberg US Large
Cap Index (B500). The derived index is termed Sub-Index as defined
below.
Child In a Spin-off, the Parent company creates an independent company
typically a subsidiary referred to as the Child.

Corporate Action Coefficient (CAC) The calculation of adjusted shares for the Sub-Index post the corporate
action event.

Fast Track The Index methodology that allows of an initial public offering to be
added to an Index in advance of the next Rebalancing Date.

Parent In a Spin-off, the Parent company creates an independent company

typically a subsidiary referred to as the Child.

Rebalance The selection and weighting of securities in an index based upon its
methodology.

Rebalance Date The day of selection and weighting of securities in an index based upon
its methodology.

Spin-off A corporate action in which a Parent company creates an independent

company typically a subsidiary referred to as the Child.

Sub-Index An index that “carved-out” from the Base-Index. Sub-Indices in each

segment should add up to the Parent Base-Index. Examples of segments
are Size (Large, Mid, Small), Style (Value, Growth) and Sector (Industrial,
Technology, Utilities etc.).

Target A merger or an acquisition (M&A) is when one party (or multiple parties
known as the Acquirer) acquires ownership in an existing company
(referred to as Target).

Tilt Factor Tilt Factor (TF) is only applicable to carve out Indices (e.g. Value, Growth).
A Tilt Factor “tilts” the weight of the security based on its factor score
(e.g., Value Score, Growth Score).

Tilt Inclusion Factor A binary variable that can take a value of 0 or 1 based on 1 – TF.

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ACCESSING INDEX DATA

Bloomberg Terminal Bloomberg indices are the benchmarks of choice for capital markets investors.
• IN <GO> - The Bloomberg Index Browser displays the latest performance results and
statistics for the indices as well as history. IN presents the indices that make up
Bloomberg's global, multi-asset class index families into a hierarchical view, facilitating
navigation and comparisons. The "My Indices" tab allows a user to focus on a set of favorite
indices.
• PORT <GO> - Bloomberg’s Portfolio & Risk Analytics solution includes tools to analyze the
risk, return, and current structure of indices. PORT includes tools to analyze performance of
a portfolio versus a benchmark as well as models for performance attribution, tracking error
analysis, value-at-risk, scenario analysis, and optimization.
• DES <GO> - The index description page provides transparency into the current and
projected index universe including membership information, aggregated characteristics
and returns, and historical data.

Bloomberg Indices Website The index website makes available limited index information including:
bloomberg.com/bloombergindices • Index methodology and factsheets
• Current performance numbers for select indices
Index Licensing Bloomberg requires an index data license for services and products linked to the indices.
Examples include:
• Exchange-traded index products
• OTC products
• Index or constituent-level redistribution
• Custom index solutions

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Take the next step. Disclaimer
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VERSIONS
Date Update Owner
9/17/2019 Methodology written William Mast (Product Manager)

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