Dow Jones STOXX® Index Guide Version 13.0 · October 2008 DOW JONES STOXX® INDEX GUIDE
Section A: Dow Jones STOXX Equity Indices 3
Section B: Dow Jones STOXX Strategy Indices 70
Section C: Industry Classifi cation Benchmark 89
Changes to the Dow Jones STOXX Index Guide 100
STOXX LIMITED A Joint Venture of Deutsche Börse AG, Dow Jones & Company and SIX Swiss Exchange AG
The indices described in this guide are the intellectual property of STOXX Limited and/or Dow Jones & Company Inc. ‘STOXX’ is a registered trademark of STOXX Limited. ‘Dow Jones’ and ‘Dow Jones Indexes’ are service marks of Dow Jones & Company Inc. A licence agreement is required to use indices and trademarks from STOXX and/or Dow Jones Indexes for any commercial purpose, namely but not exclusively for arranging, marketing, issuing, promoting fi nancial products based on the indices. Neither STOXX nor Dow Jones sells, sponsors or recommends the purchase of fi nancial products based on their indices. Neither Dow Jones nor STOXX makes any warranty as to the accuracy and completeness of any such index or any information related to it, or, as to the results to be obtained by any person or entity from the use of any such index or any information related to it.
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Section A: Dow Jones STOXX Equity Indices
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Section A
1 OVERVIEW 6 4 DEFINITIONS 28 1.1 Index Family 6 4.1 Base Dates & Base Values 28 1.2 Coverage 8 4.2 Block Ownership & Restricted Shares 29 1.2.1 Global 8 4.3 Free Float Market Capitalisation 30 1.2.2 Europe 9 4.4 Weighting Factors 30 1.2.3 Eastern Europe 10 4.5 Weighting Cap Factors 31 4.6 Buffers 32 4.7 Currency Rates 32 2 SCOPE 11 4.8 Dividend Treatment 33 2.1 Investable Stock Universe 11 4.9 Index Parameters 33 2.2 Stock Exchanges and Trading Systems 11 4.9.1 Price & Total Return Indices 33 2.2.1 Global 11 4.9.2 Indices in Euro, U.S. Dollar 2.2.2 Europe 13 and Other Currencies 33 2.2.3 Eastern Europe 13 4.9.3 Realtime & End-of-Day Indices 33 2.3 Classifi cation – Country and Regional 14 4.10 Index Formula & Index Divisors 34 2.4 Classifi cation – Size (Large/Mid/Small) 17 4.11 Index Open Quotations 34 2.5 Classifi cation – Style (Growth/Value) 17 4.12 Index Settlement Values 34 2.6 Classifi cation – Sectors 17 4.13 Review Dates 34 4.14 Selection Lists 35 4.14.1 Dow Jones STOXX Global 1800 Indices 35 3 INDICES 18 4.14.2 Dow Jones STOXX 600 Indices 35 3.1 Dow Jones STOXX Global 1800 Indices 18 4.14.3 Dow Jones STOXX Blue-chip Indices 35 3.1.1 Regional Indices 18 4.14.4 Dow Jones STOXX Select Dividend Indices 36 3.1.2 Sector Indices 19 4.14.5 Dow Jones STOXX Strong Style Indices 36 3.2 Dow Jones STOXX Total Market Indices (TMI) 19 4.14.6 Dow Jones STOXX Private Equity 20 Index 36 3.2.1 Regional Indices 19 4.15 Stock Prices 37 3.2.2 Sector Indices 20 3.2.3 Size Indices 20 3.2.4 Style Indices 21 5 DISSEMINATION 38 3.2.5 Strong Style Indices 22 5.1 Calendar 38 3.3 Dow Jones STOXX Fixed Component Benchmark Indices 22 5.2 Dissemination Period 38 3.3.1 Dow Jones STOXX 600 Indices 22 5.3 Available Data 38 3.3.2 Dow Jones STOXX Eastern Europe 300 Indices 22 5.3.1 Intraday Data 38 3.3.3 Sector Indices 23 5.3.2 Closing Data 39 3.3.4 Size Indices 24 5.3.3 Monthly Reports 39 3.3.4.1 Dow Jones STOXX 600 Indices 24 5.3.4 Quarterly, Semi-Annual & Annual Data 39 3.3.4.2 Dow Jones STOXX 600 5.3.5 Corporate Action Forecasts 39 Eastern Europe 300 Size Indices 24 3.4 Dow Jones STOXX Blue-chip Indices 25 3.5 Dow Jones STOXX Select Dividend Indices 26 3.6 Dow Jones STOXX Theme Indices 27 3.6.1 IPO Indices 27 3.6.2 Private Equity Index 27 3.6.3 Grand Prix Index 27 3.6.4 Football Index 27
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6 CALCULATION 40 8 ONGOING REVIEW 65 6.1 Index Value Calculation 40 8.1 Replacements 65 6.1.1 Market Capitalisation Weighted 40 8.2 Free Float Factors and Shares Changes 65 6.1.2 Price Weighted With Weighting Factors 40 8.3 Dividend Data Changes 66 6.2 Index Divisor Calculation 41 8.4 Illiquidity 66 6.2.1 Market Capitalisation Weighted 41 8.5 Initial Public Offerings 67 6.2.2 Price Weighted With Weighting Factors 41 8.5.1 Blue-chip Indices 67 6.3 Data Accuracy 42 8.5.2 IPO Indices 67 6.4 Input Data 42 8.6 Mergers & Takeovers 67 6.4.1 Sources 42 8.7 Sector Changes 68 6.4.2 Monitoring 42 8.8 Spin-Offs 69 6.4.3 Correction 42 6.5 Index Divisor Correction 43 6.6 Corporate Actions and Adjustments 43
7 PERIODIC REVIEW 46 7.1 Dow Jones STOXX Global 1800 Indices 46 7.2 Dow Jones STOXX Total Market Indices (TMI) 47 7.2.1 Regional Indices 47 7.2.2 Size Indices 48 7.2.3 Style Indices 49 7.2.4 STOXX Strong Style Indices 51 7.3 Dow Jones STOXX Fixed Component Benchmark Indices 52 7.3.1 Dow Jones STOXX 600 Index 52 7.3.2 Dow Jones STOXX Eastern Europe 300 Index 54 7.4 Dow Jones STOXX Blue-chip Indices 55 7.5 Dow Jones STOXX Select Dividend Indices 59 7.6 Dow Jones STOXX Theme Indices 61 7.6.1 Dow Jones STOXX IPO Indices 62 7.6.2 Dow Jones STOXX Private Equity Indices 62 7.6.3 Dow Jones STOXX Grand Prix Index 63 7.6.4 Dow Jones STOXX Football Index 63 7.7 Free Float Factors 64 7.8 Weighting Factors 64 7.9 Weighting Cap Factors 64
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1.1 Index Famil y
World Inde DJ x*
ge ra ve DJ STOXX TMIDJ STOXX 600 DJ STOXX Co al Blue-Chips n io g e R % 5 9 DJ STOXX ~ Large 200 TMI · Large
s t n e n o DJ STOXX Global 1800 p m Mid 200 o
C
0
0
5 Global ,
6 ~ DJ STOXX DJ STOXX Equity DJ STOXX 600 Mid Americas 600 Asia/Pacific 600 Small 200 Universe Blue-Chips
~ 60,000 Components DJ STOXX Eastern Europe 300 Small
~ 1,000 Components Large 100 ~ 95% Regional Coverage Mid 100
DJ STOXX Eastern Europe TMI Small 100 DJ STOXX EU Enlarged TMI ~ 500 Components ~ 95% Country Coverage
*ex bia clu Ser ding ine, coun , Ukra tries: Croatia, Macedonia TMI = Total Market Index
derived are derived are derived are derived are derived are > Theme indices > Regional indices > Sustainability indices > Regional indices > Regional indices > Regional indices > Country indices > Select Dividend indices > Sector indices > Sector indices > Strategy indices > Sector indices > Size indices > Size indices > Size indices > Style indices > Select Dividend indices > Style indices > Sustainability indices > Sustainability indices > Strategy indices
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1.2 Cover age
1.2.1 Global
Indices (& ex-regions) Global Global ex Americas Global ex Europe Global ex Asia/Pacific DJ STOXX Global 1800 11 1 1
Sector indices: Supersectors 19 19 19 19 Sectors 1 – – –
Select Dividend indices: DJ STOXX Select Dividend 1 – – –
Theme indices: DJ STOXX Grand Prix 1 – – –
Indices (regions) Americas Europe Asia/Pacific Asia/Pacific ex Japan Regional indices: DJ STOXX Americas 600 1 – – – DJ STOXX 600 – 1 – – DJ STOXX Asia/Pacifi c 600 – – 1 – DJ STOXX Asia/Pacifi c 600 ex Japan – – – 1
Sector indices: Supersectors 19 19 19 19 Sectors 1 1 1 –
Select Dividend indices: DJ STOXX Select Dividend 1 1 1 –
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1.2.2 Europe
Indices Europe Euro Europe ex UK Europe ex Euro Nordic Benchmark & Size indices: DJ STOXX Total Market Index (TMI) 1 1 1 1 1 (Large/Mid/Small) (1/1/1) (1/1/1) (1/1/1) (1/1/1) (1/1/1) DJ STOXX 600 1 1 1 1 1 (Large/Mid/Small) (1/1/1) (1/1/1) (1/1/1) (1/1/1) (1/1/1)
Style indices: DJ STOXX Strong 2 2 – – – (Growth/Value/Composite) (1/1/1) (1/1/1) – – – DJ STOXX TMI Growth/Value 2 2 – – – (Large/Mid/Small) (1/1/1) (1/1/1) – – –
Sector indices: DJ STOXX TMI: Industries 10 10 – – 8 DJ STOXX TMI: Supersectors 19 19 19 – 12 DJ STOXX TMI: Sectors 41 35 – – – DJ STOXX TMI: Subsectors 12 – – – – DJ STOXX 600: Industries 10 10 – – – DJ STOXX 600: Supersectors 19 19 19 – – DJ STOXX 600: Sectors 1 – – – –
Blue-chip indices: DJ STOXX Blue-chip indices 1 1 – – 1
Select Dividend indices: DJ STOXX Select Dividend 1 1 – – 1
Theme indices: DJ STOXX IPO indices 3 – – – – DJ STOXX Private Equity 20 1 – – – – DJ STOXX Football 1 – – – –
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1.2.3 Eastern Europe
Indices Eastern Europe Eastern Europe Sub Balkan Balkan EU Enlarged ex Greece & Turkey Benchmark & Size indices: DJ STOXX Total Market Index (TMI) 1 1 1 1 1 (Large/Mid/Small) (1/1/1) – – – – DJ STOXX Eastern Europe 300: 1 – – – – (Large/Mid/Small) (1/1/1) – – – –
Sector indices: DJ STOXX Eastern Europe 300: 19 – – – – Supersectors
Blue-chip indices: DJ STOXX Blue-chip indices 1 – 1 1 1
Select Dividend indices: DJ STOXX Select Dividend – – – – 1
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2.1 Investable Stock Universe
The DJ STOXX investable stock universe is a subset of the global universe (see below). Stocks in the DJ STOXX investable universe have the following characteristics:
Stock class: only common stocks and others with similar characteristics.
Trading frequency: only stocks with no more than 10 non-trading days in the three months prior to the review dates.
2.2 Stock Exchanges and Trading Systems
2.2.1 Global The global universe for the DJ World Index consists of the following trading systems:
Americas Europe American Stock Exchange Athens Stock Exchange Bolsa Mexicana de Valores MTA/MTAX – Borsa Italiana Caracas Stock Exchange NYSE EURONEXT Amsterdam (NL) NASDAQ NYSE EURONEXT Brussels (BE) NYSE Arca New York (USA) NYSE EURONEXT Lisbon (PT) NYSE EURONEXT New York (USA) NYSE EURONEXT Paris (FR) Santiago Stock Exchange OMX − Copenhagen Stock Exchange (DK) Sao Paulo Stock Exchange OMX – Helsinki Stock Exchange (FI) Toronto Stock Exchange OMX – Reykjavik Stock Exchange (IS) OMX – Stockholm Stock Exchange (SE) Africa Oslo Stock Exchange Johannesburg Stock Exchange SETSmm/SEAQ/SETSqx/SETS − LSE SIBE – Bolsa De Madrid Asia/Pacific SWX Europe, SIX Swiss Exchange AG Australian Stock Exchange XETRA − German Stock Exchange (DE) Jakarta Stock Exchange XETRA − Irish Stock Exchange (IE) JASDAQ XETRA − Vienna Stock Exchange (AT) Korea Stock Exchange Kuala Lumpur Stock Exchange EU Enlarged Nagoya Stock Exchange Bratislava Stock Exchange New Zealand Stock Exchange Bucharest Stock Exchange Osaka Stock Exchange Budapest Stock Exchange Philippine Stock Exchange Cyprus Stock Exchange Singapore Stock Exchange Ljubljana Stock Exchange Stock Exchange of Hong Kong Malta Stock Exchange Stock Exchange of Thailand OMX – Riga Stock Exchange (LV) Taiwan Stock Exchange OMX – Tallinn Stock Exchange (EE) Tokyo Stock Exchange OMX – Vilnius Stock Exchange (LT) Prague Stock Exchange Warsaw Stock Exchange XETRA − Bulgarian Stock Exchange
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2.2.1 Global (cont.) The global universe for the DJ World Index consists of the following trading systems:
Eastern Europe Eastern Europe Athens Stock Exchange OMX – Riga Stock Exchange (LV) Belgrade Stock Exchange OMX – Tallinn Stock Exchange (EE) Bratislava Stock Exchange OMX – Vilnius Stock Exchange (LT) Bucharest Stock Exchange Prague Stock Exchange Budapest Stock Exchange Russian Trading System (RTS) Cyprus Stock Exchange Ukrainian Stock Exchange Istanbul Stock Exchange Warsaw Stock Exchange Ljubljana Stock Exchange XETRA – Bulgarian Stock Exchange Macedonia Stock Exchange Zagreb Stock Exchange Moscow Interbank Currency Exchange (MICEX)
The broadest DJ STOXX index – The DJ STOXX Global 1800 Index – is a subset of DJ World Index and includes all developed countries of the above universe. The DJ STOXX global universe therefore consists of all stock exchanges in Europe (excluding EU Enlarged region) and the following trading systems of the Americas and Asia/Pacifi c region:
Americas Asia/Pacific American Stock Exchange Australian Stock Exchange NASDAQ JASDAQ NYSE Arca New York (USA) Nagoya Stock Exchange NYSE EURONEXT New York (USA) New Zealand Stock Exchange Toronto Stock Exchange Osaka Stock Exchange Singapore Stock Exchange Stock Exchange of Hong Kong Tokyo Stock Exchange
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2.2.2 Europe The regional universe for the DJ STOXX Total Market Index (TMI) consists of the following trading systems:
Europe Europe Athens Stock Exchange OMX – Stockholm Stock Exchange (SE) MTA/MTAX – Borsa Italiana Oslo Stock Exchange NYSE EURONEXT Amsterdam (NL) SETSmm/SEAQ/SETSqx/SETS − LSE NYSE EURONEXT Brussels (BE) SIBE – Bolsa De Madrid NYSE EURONEXT Lisbon (PT) SWX Europe, SIX Swiss Exchange AG NYSE EURONEXT Paris (FR) XETRA − German Stock Exchange (DE) OMX − Copenhagen Stock Exchange (DK) XETRA − Irish Stock Exchange (IE) OMX – Helsinki Stock Exchange (FI) XETRA − Vienna Stock Exchange (AT) OMX – Reykjavik Stock Exchange (IS)
2.2.3 Eastern Europe The regional universe for the DJ STOXX Eastern Europe TMI Index consists of the following trading systems:
Eastern Europe Eastern Europe Athens Stock Exchange OMX – Riga Stock Exchange (LV) Belgrade Stock Exchange OMX – Tallinn Stock Exchange (EE) Bratislava Stock Exchange OMX – Vilnius Stock Exchange (LT) Bucharest Stock Exchange Prague Stock Exchange Budapest Stock Exchange Russian Trading System (RTS) Cyprus Stock Exchange Ukrainian Stock Exchange Istanbul Stock Exchange Warsaw Stock Exchange Ljubljana Stock Exchange XETRA – Bulgarian Stock Exchange Macedonia Stock Exchange Zagreb Stock Exchange Moscow Interbank Currency Exchange (MICEX)
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2.3 Classification – Country and Regional
Each company is uniquely assigned to a specifi c country within the DJ STOXX global universe. The country classifi cation is based on the country of incorporation, the primary listing and the country with the largest trading volume.
The regional classifi cations cover the global universe in complementary ways:
Global: companies incorporated and listed in the DJ STOXX global universe, regardless of the trading currency. Americas: companies incorporated and listed in the Americas regional universe, regardless of the trading currency. Asia/Pacifi c: companies incorporated and listed in the Asia/Pacifi c regional universe, regardless of the trading currency. Europe: see below. Asia/Pacifi c ex Japan: companies incorporated and listed in the Asia/Pacifi c regional universe excluding Japan, regardless of the trading currency. Global ex Americas: companies incorporated and listed in the global universe excluding the Americas regional universe, regardless of the trading currency. Global ex Asia/Pacifi c: companies incorporated and listed in the global universe excluding the Asia/Pacifi c regional universe, regardless of the trading currency. Global ex Europe: companies incorporated and listed in the global universe excluding the European regional universe, regardless of the trading currency.
Europe: companies incorporated and listed in the European regional universe (i.e. 18 Western European countries), regardless of the trading currency. Eurozone: companies incorporated and listed in the Eurozone that are traded in Euro. Europe ex UK: companies incorporated and listed in the European regional universe excluding the United Kingdom, regardless of the trading currency. Nordic: companies incorporated and listed in the Nordic region (i.e. Sweden, Denmark, Finland, Norway and Iceland), regardless of the trading currency. Europe ex Euro: companies incorporated and listed in the European regional universe excluding the Eurozone region, regardless of the trading currency.
Eastern Europe: companies incorporated and listed in the Eastern European regional universe (i.e. 18 Eastern European countries), regardless of the trading currency. EU Enlarged: companies incorporated and listed in the EU Enlarged regional universe (i.e. the 10 countries that acceded to the EU in May 2004, and Bulgaria and Romania which joined the EU in January 2007), regardless of the trading currency. Balkan: companies incorporated and listed in the Balkan regional universe (i.e. Bulgaria, Croatia, Greece, Macedonia (FYROM), Romania, Serbia, Slovenia and Turkey), regardless of the trading currency. Balkan ex Greece & Turkey: companies incorporated and listed in the Balkan regional universe excluding Greece and Turkey, regardless of the trading currency. Sub Balkan: companies incorporated and listed in the Sub Balkan regional universe (i.e. Croatia, Macedonia (FYROM), Slovenia and Serbia), regardless of the trading currency.
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The countries covered by the DJ STOXX Global 1800 Index and the DJ STOXX TMI Index are assigned to regions as shown in the table below:
Region Country Global Americas Asia/Pacific Europe Euro Nordic Europe Austria x – – x x – Belgium x – – x x – Denmark x – – x – x Finland x – – x x x France x – – x x – Germany x – – x x – Greece x – – x x – Iceland x – – x – x Ireland x – – x x – Italy x – – x x – Luxembourg x – – x x – Netherlands x – – x x – Norway x – – x – x Portugal x – – x x – Spain x – – x x – Sweden x – – x – x Switzerland x – – x – – United Kingdom x – – x – – Americas Canada x x – – – – USA x x – – – – Asia/Pacific Australia x – x – – – Hong Kong x – x – – – Japan x – x – – – New Zealand x – x – – – Singapore x – x – – – No. of Countries 25 2 5 18 12 5
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The countries covered by the DJ STOXX Eastern Europe TMI Index are assigned to regions as shown in the table below:
Region Country Eastern Europe EU Enlarged Balkan Sub Balkan Eastern Europe Bulgaria x x x – Croatia x – x x Cyprus x x – – Czech Republic x x – – Estonia x x – – Greece x – x – Hungary x x – – Latvia x x – – Lithuania x x – – Macedonia (FYROM) x – x x Malta – x – – Poland x x – – Romania x x x – Russia x – – – Serbia x – x x Slovak Republic x x – – Slovenia x x x x Turkey x – x – Ukraine x – – – No. of Countries 18 12 8 4
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2.4 Classification – Size (Large/Mid/Small)
The size classifi cation groups companies into three different size ranges:
Large.
Mid.
Small.
2.5 Classification – Style (Growth/Value)
The style classifi cation groups companies that have similar growth and value characteristics. The resulting style clusters are:
Strong Growth (SG).
Weak Growth (WG).
Strong Value (SV).
Weak Value (WV).
Neutral (NT).
Companies that are added to the DJ STOXX TMI Index in-between style reviews will be assigned to the No Data (ND) category, until the next semi-annual review.
The Growth/Value indices consist of all companies that belong to the strong and weak growth/value clusters.
Companies in the Neutral or No Data category are not considered in the DJ STOXX TMI Style indices.
2.6 Classification – Sectors
The Industry Classifi cation Benchmark (ICB) groups together companies that have similar sources of primary revenue.
There are 10 Industries and, derived from these in increasingly fi ner classifi cations, there are also 19 Supersectors, 41 Sectors and 114 Subsectors. Each stock in the investable stock universe is uniquely classifi ed into one of the 114 Subsectors, depending on the company’s primary source of revenue. Consequently, it is automatically and uniquely classifi ed into one of the 41 Sectors, one of the 19 Supersectors and one of the 10 Industries.
The detailed hierarchy of the Industry Classifi cation Benchmark is shown in Section C.
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The DJ World Index covers countries from the following regions: Europe, Eastern Europe, EU Enlarged, the Americas, Africa and Asia/Pacifi c. The DJ World Index is subdivided into Regional indices, Country indices and Sector indices as well as Size, Style, Select Dividend, Islamic, Dharma, Sustainability and Theme indices.
The DJ STOXX indices cover all European/EU Enlarged companies in the DJ World Index and the 600 largest companies of the developed countries in the Americas, Europe and Asia/Pacifi c region. In addition, the DJ STOXX IPO indices expand the coverage of the DJ STOXX indices by continuously (i.e. on a daily or weekly basis) adding recent IPOs.
The DJ STOXX indices are available in different size categories, where the companies within the respective indices are classifi ed according to their market capitalisation.
The DJ STOXX indices are available in different sector classifi cations. The companies comprising the respective indices are subdivided into different sector classifi cation levels according to the Industry Classifi cation Benchmark (ICB).
The DJ STOXX Total Market indices (TMI) for Europe have an additional dimension: the companies of these indices are grouped by investment styles into growth or value.
In addition to the above, the DJ STOXX indices cover the Eastern European region, and the 300 largest companies from the region to continuously expand the coverage provided by the DJ STOXX indices.
The following chapter gives an overview of the different index products and their subsets.
3.1 Dow Jones STOXX Global 1800 Indices
The DJ STOXX Global 1800 Index comprises the largest 600 stocks in the developed markets in each of the three regions: Europe, the Americas and Asia/Pacifi c.
3.1.1 Regional Indices The DJ STOXX Global 1800 Index combines the DJ STOXX 600 Index, which covers the 600 largest stocks in Europe, with the DJ STOXX Americas 600 and the DJ STOXX Asia/Pacifi c 600 indices.
The following table shows the DJ STOXX Global 1800 Index and its derived regional subsets:
Region Index Name Global DJ STOXX Global 1800 Global ex Europe DJ STOXX Global 1800 ex Europe Global ex Americas DJ STOXX Global 1800 ex Americas Global ex Asia/Pacifi c DJ STOXX Global 1800 ex Asia/Pacifi c Europe DJ STOXX 600, see chapter 3.3.1 for details Americas DJ STOXX Americas 600 Asia/Pacifi c DJ STOXX Asia/Pacifi c 600 Asia/Pacifi c ex Japan DJ STOXX Asia/Pacifi c 600 ex Japan Japan DJ STOXX Global 1800 Japan
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3.1.2 Sector Indices The DJ STOXX Global 1800 Index is further subdivided into 19 Supersectors according to the ICB.
The DJ STOXX Global 1800 Sector indices are available for the following regions and sector classifi cations:
Region Index Name Global DJ STOXX Global 1800 ‹Supersector› Global DJ STOXX Global 1800 ‹Sector›* Global ex Europe DJ STOXX Global 1800 ex Europe ‹Supersector› Global ex Americas DJ STOXX Global 1800 ex Americas ‹Supersector› Global ex Asia/Pacifi c DJ STOXX Global 1800 ex Asia/Pacifi c ‹Supersector› Europe DJ STOXX 600, see chapter 3.3.3 for details Americas DJ STOXX Americas 600, see chapter 3.3.3 for details Asia/Pacifi c DJ STOXX Asia/Pacifi c 600, see chapter 3.3.3 for details
* As some of these indices would not have enough components, not all indices are disseminated.
3.2 Dow Jones STOXX Total Market Indices (TMI)
The DJ STOXX TMI Index covers 95 percent of the free fl oat market capitalisation of the respective investable stock universe by region, while the DJ STOXX Eastern Europe TMI Index covers 95 percent of the free fl oat market capitalisation of the respective investable stock universe by country.
3.2.1 Regional Indices The following table shows the DJ STOXX TMI Index and its derived regional subsets:
Region Index Name Europe DJ STOXX TMI Eurozone DJ EURO STOXX TMI Europe ex UK DJ STOXX ex UK TMI Europe ex Euro DJ STOXX ex EURO TMI Nordic DJ STOXX NORDIC TMI
The following table shows the DJ STOXX Eastern Europe TMI Index and its derived regional subsets:
Region Index Name Eastern Europe DJ STOXX Eastern Europe TMI EU Enlarged DJ STOXX EU Enlarged TMI* Balkan DJ STOXX Balkan TMI Balkan ex Greece & Turkey DJ STOXX Balkan TMI ex Greece & Turkey Sub Balkan DJ STOXX Sub Balkan TMI
* Includes Malta
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3.2.2 Sector Indices The DJ STOXX TMI indices are subdivided into four different sector classifi cation levels in line with the ICB.
The DJ STOXX TMI Sector indices are available for the following regions and sector classifi cations:
Region Index Name Europe DJ STOXX TMI ‹Industry› DJ STOXX TMI ‹Supersector› DJ STOXX TMI ‹Sector›* DJ STOXX TMI ‹Subsector›* Eurozone DJ EURO STOXX TMI ‹Industry› DJ EURO STOXX TMI ‹Supersector› DJ EURO STOXX TMI ‹Sector›* Europe ex UK DJ STOXX ex UK TMI ‹Supersector› Nordic DJ STOXX NORDIC TMI ‹Industry›* DJ STOXX NORDIC TMI ‹Supersector›*
* As some of these indices would not have enough components, not all indices are disseminated.
3.2.3 Size Indices The DJ STOXX TMI Size indices are available for the following regions and are subdivided into three size categories:
The following table shows the DJ STOXX TMI Size indices and their derived regional subsets:
Region Index Name Europe DJ STOXX TMI Large DJ STOXX TMI Mid DJ STOXX TMI Small Eurozone DJ EURO STOXX TMI Large DJ EURO STOXX TMI Mid DJ EURO STOXX TMI Small Europe ex UK DJ STOXX ex UK TMI Large DJ STOXX ex UK TMI Mid DJ STOXX ex UK TMI Small Europe ex Euro DJ STOXX ex EURO TMI Large DJ STOXX ex EURO TMI Mid DJ STOXX ex EURO TMI Small Nordic DJ STOXX NORDIC TMI Large DJ STOXX NORDIC TMI Mid DJ STOXX NORDIC TMI Small Eastern Europe DJ STOXX Eastern Europe TMI Large DJ STOXX Eastern Europe TMI Mid DJ STOXX Eastern Europe TMI Small
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3.2.4 Style Indices The DJ STOXX TMI Growth and Value indices cover the DJ STOXX TMI Index in three size ranges:
Index Based on DJ STOXX TMI Large Growth & Value DJ STOXX TMI Large DJ STOXX TMI Mid Growth & Value DJ STOXX TMI Mid DJ STOXX TMI Small Growth & Value DJ STOXX TMI Small
The above Growth and Value indices are combined to produce:
DJ STOXX TMI Growth Index: combining the TMI Large Growth, TMI Mid Growth and TMI Small Growth indices.
DJ STOXX TMI Value Index: combining the TMI Large Value, TMI Mid Value and TMI Small Value indices.
The DJ STOXX TMI Growth and Value indices are available for the following regions:
Region Index Name Europe DJ STOXX TMI Growth DJ STOXX TMI Growth Large DJ STOXX TMI Growth Mid DJ STOXX TMI Growth Small DJ STOXX TMI Value DJ STOXX TMI Value Large DJ STOXX TMI Value Mid DJ STOXX TMI Value Small Eurozone DJ EURO STOXX TMI Growth DJ EURO STOXX TMI Growth Large DJ EURO STOXX TMI Growth Mid DJ EURO STOXX TMI Growth Small DJ EURO STOXX TMI Value DJ EURO STOXX TMI Value Large DJ EURO STOXX TMI Value Mid DJ EURO STOXX TMI Value Small
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3.2.5 Strong Style Indices The DJ STOXX Strong Style Growth and Value indices cover the most style pure companies in the DJ STOXX TMI Growth/ Value Style indices.
Index Based on DJ STOXX Strong Growth 20 DJ STOXX TMI Growth DJ STOXX Strong Value 20 DJ STOXX TMI Value
The above Growth and Value indices are combined to produce:
The DJ STOXX Strong Style Composite 40 Index: combining the DJ STOXX Strong Growth 20 Index and the DJ STOXX Strong Value 20 Index.
The DJ STOXX Strong Growth and Value indices are available for the following regions:
Region Index Name Europe DJ STOXX Strong Growth 20 DJ STOXX Strong Value 20 DJ STOXX Strong Style Composite 40 Eurozone DJ EURO STOXX Strong Growth 20 DJ EURO STOXX Strong Value 20 DJ EURO STOXX Strong Style Composite 40
3.3 Dow Jones STOXX Fixed Component Benchmark Indices
3.3.1 Dow Jones STOXX 600 Indices The DJ STOXX 600 Index, which is the European sub-index of the DJ STOXX Global 1800 Index, covers the largest 600 stocks in the DJ STOXX TMI Index. The DJ STOXX Americas 600 Index and the DJ STOXX Asia/Pacifi c 600 Index cover the largest 600 stocks of the developed countries in their respective region.
Besides the above-mentioned DJ STOXX 600 indices, there are also regional subindices with a varying number of stocks. The table below lists all DJ STOXX 600 indices and their derived regional subsets:
Region Index Name Europe DJ STOXX 600 Eurozone DJ EURO STOXX Europe ex UK DJ STOXX ex UK Europe ex Euro DJ STOXX ex Euro Nordic DJ STOXX NORDIC Americas DJ STOXX Americas 600 Asia/Pacifi c DJ STOXX Asia/Pacifi c 600 Asia/Pacifi c ex Japan DJ STOXX Asia/Pacifi c 600 ex Japan
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3.3.2 Dow Jones STOXX Eastern Europe 300 Indices The DJ STOXX Eastern Europe 300 Index, which is the Eastern European sub-index of the DJ STOXX Eastern Europe TMI Index, covers the largest 300 stocks in the DJ STOXX Eastern Europe TMI Index.
Region Index Name Eastern Europe DJ STOXX Eastern Europe 300
3.3.3 Sector Indices The DJ STOXX 600 and the DJ STOXX Eastern Europe 300 indices are subdivided into different sector classifi cation levels in line with the ICB.
For the DJ STOXX 600 indices, the following Sector indices are available:
Region Index Name Europe DJ STOXX 600 ‹Industry› DJ STOXX 600 ‹Supersector› DJ STOXX 600 ‹Sector›* DJ STOXX 600 ‹Subsector›* Eurozone DJ EURO STOXX ‹Industry› DJ EURO STOXX ‹Supersector› Europe ex UK DJ STOXX ex UK ‹Supersector› Americas DJ STOXX Americas 600 ‹Supersector› DJ STOXX Americas 600 ‹Sector›* DJ STOXX Americas 600 ‹Subsector›* Asia/Pacifi c DJ STOXX Asia/Pacifi c 600 ‹Supersector› DJ STOXX Asia/Pacifi c 600 ‹Sector›* DJ STOXX Asia/Pacifi c 600 ‹Subsector›*
For the DJ STOXX Eastern Europe 300 indices, the following Sector indices are available:
Region Index Name Eastern Europe DJ STOXX Eastern Europe 300 ‹Industry›* DJ STOXX Eastern Europe 300 ‹Supersector› DJ STOXX Eastern Europe 300 ‹Sector›* DJ STOXX Eastern Europe 300 ‹Subsector›*
* As some of these indices would not have enough components, not all indices are disseminated.
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3.3.4 Size Indices
3.3.4.1 Dow Jones STOXX 600 Size Indices The DJ STOXX 600 Size indices are available for Europe and cover the largest 600 stocks in the DJ STOXX TMI Index in three ranges:
DJ STOXX Large 200 Index: largest 200 stocks.
DJ STOXX Mid 200 Index: next largest 200 stocks.
DJ STOXX Small 200 Index: next largest 200 stocks.
The above DJ STOXX Large 200, Mid 200 and Small 200 indices are combined to produce the DJ STOXX 600 Index.
The European Size indices have a fi xed number of 200 stocks. The regional subsets of the Size indices have varying numbers of stocks. The following Size indices are available and are derived from the DJ STOXX 600 Index:
Region Index Name Eurozone DJ EURO STOXX Large DJ EURO STOXX Mid DJ EURO STOXX Small Europe ex UK DJ STOXX ex UK Large DJ STOXX ex UK Mid DJ STOXX ex UK Small Europe ex Euro DJ STOXX ex EURO Large DJ STOXX ex EURO Mid DJ STOXX ex EURO Small Nordic DJ STOXX NORDIC Large DJ STOXX NORDIC Mid DJ STOXX NORDIC Small
3.3.4.2 Dow Jones STOXX Eastern Europe 300 Size Indices The DJ STOXX Eastern Europe 300 Size indices are available for Eastern Europe and cover the largest 300 stocks in the DJ STOXX Eastern Europe TMI Index in three ranges:
DJ STOXX Eastern Europe Large 100 Index: largest 100 stocks.
DJ STOXX Eastern Europe Mid 100 Index: next largest 100 stocks.
DJ STOXX Eastern Europe Small 100 Index: next largest 100 stocks.
The above DJ STOXX Eastern Europe Large 100, Mid 100 and Small 100 indices are combined to produce the DJ STOXX Eastern Europe 300 Index.
www.stoxx.com 24 3 INDICES
3.4 Dow Jones STOXX Blue-chip Indices
The DJ STOXX 50 Index consists of 50 stocks covering the largest Supersector leaders in the DJ STOXX 600 Index.
The DJ EURO STOXX 50 Index likewise consists of 50 stocks covering the largest Supersector leaders in the DJ EURO STOXX Index.
The DJ STOXX NORDIC 30 Index consists of 30 stocks covering the largest Supersector leaders in the DJ STOXX NORDIC Index.
The DJ STOXX Eastern Europe 50 Index consists of 50 stocks covering the largest Supersector leaders with country limitations in the DJ STOXX Eastern Europe 300 Index.
The DJ STOXX EU Enlarged 15 Index consists of 15 stocks covering the highest-ranked companies in the DJ STOXX EU Enlarged TMI Index, according to a weighted score based on their free fl oat market capitalisation, revenue and net income.
The DJ STOXX Sub Balkan 30 Index consists of 30 stocks covering the largest Supersector leaders in the DJ STOXX Sub Balkan TMI Index.
The DJ STOXX Balkan 50 Equal Weighted Index consists of 50 stocks covering the highest-ranked companies in the DJ STOXX Balkan TMI Index, according to their free fl oat market capitalisation along with the average daily traded value for the past three months.
www.stoxx.com 25 3 INDICES
3.5 Dow Jones STOXX Select Dividend Indices
The DJ STOXX Select Dividend 30 Index consists of 30 stocks covering the highest-yielding stocks relative to their home market in Europe. The index components are selected from the DJ STOXX 600 components plus their secondary lines.
The DJ EURO STOXX Select Dividend 30 Index consists of 30 stocks covering the highest-yielding stocks relative to their home market in the Eurozone. The index components are selected from the DJ EURO STOXX components plus their secondary lines.
The DJ STOXX NORDIC Select Dividend 20 Index consists of 20 stocks covering the highest-yielding stocks relative to their home markets in Denmark, Finland, Iceland, Norway and Sweden. The components are selected from the DJ STOXX NORDIC TMI components.
The DJ STOXX EU Enlarged Select Dividend 15 Index consists of 15 stocks covering the highest-yielding stocks relative to their home markets in the twelve countries which joined the EU in May 2004 and January 2007 respectively. In cases where a company’s home market is represented by fi ve or fewer stocks, its yield will be measured relative to the net yield of the EU Enlarged region as a whole rather than its home market. The components are selected from the DJ STOXX EU Enlarged TMI components.
The DJ STOXX Americas Select Dividend 40 Index consists of 40 stocks covering the highest-yielding stocks relative to their home markets in the Americas region. A maximum of 30 stocks per country can be included in the index. The index components are selected from the DJ STOXX Americas 600 Index.
The DJ STOXX Asia/Pacifi c Select Dividend 30 Index consists of 30 stocks covering the highest-yielding stocks relative to their home markets in the Asia/Pacifi c region. In cases where a company’s home market is represented by twenty or fewer stocks, its yield will be measured relative to the net yield of the Asia/Pacifi c region as a whole rather than its home market. A maximum of 10 stocks per country can be included in the index. The index components are selected from the DJ STOXX Asia/Pacifi c 600 Index.
The DJ STOXX Global Select Dividend 100 Index consists of 100 stocks covering the highest-yielding stocks in the three regions Europe, the Americas and Asia/Pacifi c. The index combines the constituents of the following three indices: DJ STOXX Select Dividend 30 Index, DJ STOXX Americas Select Dividend 40 Index and DJ STOXX Asia/Pacifi c Select Dividend 30 Index.
www.stoxx.com 26 3 INDICES
3.6 Dow Jones STOXX Theme Indices
3.6.1 IPO Indices The DJ STOXX IPO indices consist of European IPO stocks with a free fl oat market capitalisation on their listing date (i.e. number of IPO shares times the IPO-offer price) of between 100 million EUR and 3 billion EUR. Three different time horizons are available for the DJ STOXX IPO index family: 3 months, 12 months and 60 months. Each time horizon defi nes the length of the membership of each IPO in the index after its addition.
IPO companies are added to the DJ STOXX IPO Index (3 months) based on their fi rst closing price following their IPO listing. IPO stocks are removed after the close of trading on the fi rst Wednesday following 3 calendar months after the inclusion in the index, unless this removal would result in less than ten index components.
The DJ STOXX IPO Index (12 months) and the DJ STOXX IPO Index (60 months) include IPO stocks from the second Wednesday following their listing date. If the listing date is a Wednesday, this day is counted as the fi rst Wednesday. Stocks are removed from the indices after the close of trading on the fi rst Wednesday following, as the case may be, 12 or 60 calendar months after the inclusion in the index, unless this removal would result in less than ten index components.
3.6.2 Private Equity Index The DJ STOXX Private Equity 20 Index consists of 20 stocks that are classifi ed by the ICB as either Subsector 8775 (Specialty Finance) or Subsector 8985 (Equity Investments Instruments) and/or must have their main involvement in private equity.
3.6.3 Grand Prix Index The DJ STOXX Grand Prix Index covers publicly traded companies on a global basis which support or supply Formula 1 teams including engine manufacturers, tyre suppliers, oil/fuel suppliers and title sponsors.
3.6.4 Football Index The DJ STOXX Football Index covers all football clubs that are listed on a stock exchange in Europe and Eastern Europe.
www.stoxx.com 27 4 DEFINITIONS
4.1 Base Dates & Base Values
The base dates and base values for the DJ STOXX indices are:
Indices Region Base Date Base Value DJ STOXX Global 1800 Index All 31 December 1991 100 DJ STOXX Global Real Estate Cap indices All 29 December 2000 100 DJ STOXX Global REITS indices All 31 December 2006 100 DJ STOXX 600 indices All 31 December 1991 100 DJ STOXX TMI indices, Size & Sectors Europe 31 December 1991 100 DJ STOXX Eastern Europe TMI indices EU Enlarged 31 December 2002 100 Eastern Europe 31 December 2002 100 Balkan 31 December 2004 100 Sub Balkan 31 December 2004 100 DJ STOXX TMI Style indices Europe, Eurozone 30 June 1997 1,000 DJ STOXX Strong Style indices Europe, Eurozone 30 September 2001 1,000 DJ STOXX Football Index Europe, Eastern Europe 31 December 1991 100 DJ STOXX Grand Prix Index Global 31 December 1996 100 DJ STOXX Blue-chip indices Europe, Eurozone, Nordic 31 December 1991 1,000 Eastern Europe, EU Enlarged 31 December 2002 1,000 Balkan 31 December 2006 1,000 Sub Balkan 31 December 2004 1,000 DJ STOXX Select Dividend indices Europe, Eurozone, Nordic, Global, Americas, Asia/Pacifi c 31 December 1998 1,000 EU Enlarged 31 December 2002 1,000 DJ STOXX IPO indices Europe 31 December 2001 1,000 DJ STOXX Private Equity 20 Index Europe 31 December 2003 1,000
www.stoxx.com 28 4 DEFINITIONS
4.2 Block Ownership & Restricted Shares
All indices – except the DJ STOXX Balkan 50 Equal Weighted Index, DJ STOXX Strong Style indices and the DJ STOXX Grand Prix Index, which are weighted based on specifi c weighting factors – are weighted according to free fl oat market capitalisation in order to refl ect the proportion of a company’s stock that is available for trading. This is achieved by adjusting the total number of stocks by the stock held in strategic long-term holdings, i.e. block ownership.
This block ownership adjustment is applied if blocks of at least 5 percent of a company’s total stock are held in:
Cross-ownership: stock owned either by the company itself, in the form of treasury shares, or owned by other companies. Government ownership: stock owned by either governments or their agencies. Private ownership: stock owned by either individuals or families.
This block ownership adjustment is not applied if:
The blocks comprise less than 5 percent of the total stock. The blocks are held by – but not limited to – custodian nominees, trustee companies, mutual funds and pension fund holdings, investment companies with short-term investment strategies and pension funds.
In addition, the total number of stocks is also adjusted by the restricted stocks, i.e. either those that cannot be traded during a certain period or those that have a foreign ownership restriction. Either the block ownership adjustment or the restricted stocks adjustment is applied, whichever produces the higher result.
www.stoxx.com 29 4 DEFINITIONS
4.3 Free Float Market Capitalisation
The free fl oat factor is the percentage of shares remaining after the block ownership and restricted shares adjustments have been applied to the total number of shares:
Free fl oat factor (%) = 100% - [Maximum (block ownership (%); restricted shares adjustment (%))]
The free fl oat market capitalisation is the portion of a stock’s total market capitalisation that is available for trading:
Free fl oat market capitalisation = free fl oat factor · full market capitalisation
4.4 Weighting Factors
Weighting factors are used for the calculation of price weighted indices.
The weighting for DJ STOXX Select Dividend indices is based on a stock’s net dividend yield, the weighting for the DJ STOXX Strong Style indices is based on its growth/value scores, the weighting for the DJ STOXX Balkan 50 Equal Weighted Index is based on 2% per company and the weighting for the DJ STOXX Grand Prix Index is based on the category a stock is in. A weighting factor is introduced to refl ect the initial stock’s weighting at the annual review. The weighting factor for a company has a similar role as the product of the number of shares and fl oat fi gures have for free fl oat market capitalisation weighted indices.
The weighting factor is kept constant until the next annual review. The weighting factor for the DJ STOXX Select Dividend, DJ STOXX Strong Style, DJ STOXX Balkan 50 Equal Weighted and the DJ STOXX Grand Prix constituents is calculated as follows:
Determine the initial weight of each company in the index based on the relevant methodology (i.e. based on net dividend yield for the DJ STOXX Select Dividend indices, based on growth/value score for the DJ STOXX Strong Style indices, based on 2% per company for the DJ STOXX Balkan 50 Equal Weighted Index and based on the different categories for the DJ STOXX Grand Prix Index).
Determine the weighting factor for each stock, i.e.
Weighting factor = (1,000,000,000 · initial weight/closing price of stock) and rounded to integers.
The weighting factor will be adjusted in the event of a corporate action.
www.stoxx.com 30 4 DEFINITIONS
4.5 Weighting Cap Factors
The individual weightings are capped at the following percentages:
Indices Region Weighting Cap Factor DJ STOXX Fixed Component Benchmark & Size All 20% DJ EURO STOXX & Size Eurozone 20% DJ STOXX Blue-chip Europe, Eurozone, Nordic, Eastern Europe, Sub Balkan 10% EU Enlarged 15% DJ STOXX Real Estate Cap All 20% DJ STOXX Select Dividend All 15% Global 10% DJ STOXX Football Europe, Eastern Europe 10% DJ STOXX IPO Indices (12 months / 60 months) Europe 20% DJ STOXX Private Equity 20 Europe 20% DJ STOXX Strong Style All 15%
The capping for market capitalisation weighted indices is implemented at the time of the quarterly reviews, for the Select Dividend indices and for the Strong Style indices, at the annual review.
If the weighting of a stock is 10 percent (15 percent, 20 percent) or less, then its weighting cap factor is 1.0.
If the weighting of a stock is greater than 10 percent (15 percent, 20 percent), then its weighting cap factor is adjusted to reduce the weighting to 10 percent (15 percent, 20 percent). The weightings of all other index components will therefore increase at the same time.
For the DJ STOXX Eastern Europe 50 Index, the weight of each country is capped at 50 percent and if the weighting of a stock is greater than 10 percent, then its weighting cap factor is adjusted to reduce the weighting to 10 percent and reallocated within the capped stocks of that country.
The weighting cap factors are calculated and announced on the quarterly underlying data announcement dates, implemented on the quarterly implementation dates and fi xed until the next quarterly review. For the Select Dividend indices and the Strong Style indices, the factors are announced on the annual underlying data announcement date, implemented on the annual implementation date, and fi xed until the next annual review.
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4.6 Buffers
Buffers are used in the periodic reviews of the DJ STOXX indices for the following purposes:
To achieve the fi xed number of stocks for the DJ STOXX Blue-chip indices, the DJ STOXX Strong Style indices, the DJ STOXX Select Dividend indices, the DJ STOXX Fixed Component Benchmark indices and the DJ STOXX Global 1800 indices.
To achieve a fi xed free fl oat market capitalisation threshold for the DJ STOXX TMI Size indices.
To maintain the stability of the indices by reducing the index composition changes.
The buffers consist of an upper and a lower limit. These limits are applied to the stocks/companies on the relevant selection lists.
The stocks ranked at and above the upper limit are selected for the index.
The remaining stocks – necessary to achieve the target coverage (fi xed number of stocks or market capitalisation threshold) – are selected from the largest remaining current stocks ranked between the upper and lower limits.
If the index’s target coverage is still not achieved, then the largest remaining stocks are selected until the target coverage is achieved.
4.7 Currency Rates
All realtime indices use the following currency rates:
From 9:00 to 17:30 CET, the mid between the latest realtime bid and ask prices is used as the currency rate in order to calculate the indices for Europe, Eastern Europe and the EU Enlarged region.
From 15:30 to 22:00 CET, the mid between the latest realtime bid and ask prices is used as the currency rate in order to calculate the indices for the Americas region.
From 23:00 to 11:00 CET, the mid between the latest realtime bid and ask prices is used as the currency rate in order to calculate the indices for the Asia/Pacifi c region.
All end-of-day indices, as well as the closing procedure for the realtime indices, use currency rates as follows:
From 17:30 CET, fi xed foreign exchange rates are used for the calculation of the indices (using WM fi xed exchange rates from 17:00 CET).
The Global closings fi xed at 23:15 CET utilise the same fi xed rates as the European indices.
The fi xed foreign exchange rates are provided by the WM-Company – see Reuters page WMRSPOT01 & pp. or Bloomberg pages WMCO & pp. as reference.
www.stoxx.com 32 4 DEFINITIONS
4.8 Dividend Treatment
Dividend payments are included in the appropriate indices as net dividends: net dividend = declared dividend less withh olding tax.
For the latest update, please refer to the following link: http://www.stoxx.com/indices/indexguides/updates.html
4.9 Index Parameters
4.9.1 Price & Total Return Indices All indices are calculated as Price and Total Return indices. The only difference is the treatment of the dividend payments.
The Total Return indices include all dividend payments.
The Price indices only include:
Cash dividends with a gross amount equal to or greater than 10 percent of the stock’s closing price on the day before the effective date.
Special dividends from non-operating income.
4.9.2 Indices in Euro, U.S. Dollar and Other Currencies All indices are calculated with the stock prices converted to Euro and U.S. Dollars, as appropriate:
Euro indices: non-Euro stock prices are converted to Euro for the index calculation.
U.S. Dollar indices: non-Euro stock prices are converted to Euro fi rst (as above), and then – together with the Euro stock prices – converted to U.S. Dollars for the index calculation.
Some indices are additionally available in other currencies.
Indices in other currencies: non-Euro stock prices are converted to Euro fi rst, and then – together with the Euro stock prices – converted to the appropriate index currency for the index calculation.
4.9.3 Realtime & End-of-Day Indices The indices are calculated and disseminated at different frequencies:
Realtime indices: calculated and disseminated every 15 seconds during the index dissemination period.
End-of-day indices: calculated and disseminated once a day at the end of the index dissemination period.
www.stoxx.com 33 4 DEFINITIONS
4.10 Index Formula & Index Divisors
The indices are calculated with the Laspeyres formula, which measures price changes against a fi xed base quantity weight. Each index has a unique index divisor, which is adjusted to maintain the continuity of the index’s values across changes due to corporate actions.
4.11 Index Open Quotations
The index open quotation takes account of the opening prices of all stocks in a realtime index. This value gives an indication of what the index value would have been if all opening stock prices had been received at the same time.
The index open quotations for the realtime indices are calculated either as soon as all the relevant opening stock prices are received or, at the latest, 10:30 CET. If an opening stock price is unavailable at 10:30 CET, then the stock’s previous day’s closing/adjusted price is used.
Non-Euro stock prices are converted into Euro using the currency rate that was valid at the time when the opening stock price (or previous day’s closing/adjusted price) was received, i.e. opening stock prices are converted using the realtime currency rates and the previous day’s closing prices are converted using the WM fi xed exchange rates of the day before.
4.12 Index Settlement Values
The index settlement values for the realtime indices and the Total Return Blue-chip indices are calculated daily as the average of the 41 index values disseminated between 11:50 CET and 12:00 CET.
4.13 Review Dates
The implementation dates are every third Friday of a quarter end (i.e. March, June, September, December).
Review data: the quarterly index reviews are based on the closing/adjusted stock data on the last trading day in January, April, July and October. [Style indices: on the last trading day in February and August; Strong Style indices: on the last trading day in August; and Blue-chip indices: on the last trading day in February for the DJ STOXX Eastern Europe 50 Index; and August for the other Blue-chip indices; Select Dividend indices and DJ STOXX Grand Prix Index: on the last trading day in February], see chapter 7 for details.
Component announcement: the index components are announced a minimum of four weeks before implementation, i.e. in the middle of February, May, August and November. [Style indices: on the fi rst trading day in March and September; Strong Style indices: on the fi rst trading day in September and Blue-chip indices: on the fi rst trading day in March for the DJ STOXX Eastern Europe 50 Index; and September for the other Blue-chip indices; Select Dividend indices and DJ STOXX Grand Prix Index: on the fi fth trading day in March; IPO indices: composition is constantly reviewed, see chapter 7 for details].
Underlying data announcement: the underlying data (i.e. new number of shares, new free fl oat, new weighting cap factors, new weighting factors) are announced two trading days before implementation. For Select Dividend indices the new weighting factors are announced fi ve trading days before implementation.
Implementation: the changes in the underlying data are implemented on the third Friday in March, June, September and December, after the index dissemination period. The changes become effective on the next trading day.
www.stoxx.com 34 4 DEFINITIONS
4.14 Selection Lists
The selection lists are produced for indices with a fi xed number of constituents in order to:
Indicate possible changes in the composition of the index at the time of the next quarterly / semi-annual / annual review.
Determine replacements for any stocks deleted from the indices due to corporate actions.
Selection lists are produced annually for DJ STOXX Strong Style indices, quarterly for DJ STOXX Select Dividend indices, DJ STOXX Balkan 50 Equal Weighted Index and DJ STOXX Private Equity 20 Index and monthly for all other indices with a fi xed number of components.
4.14.1 Dow Jones STOXX Global 1800 Indices The quarterly DJ STOXX Global 1800 review procedures are applied to the more liquid stock classes of the DJ Americas TMI, DJ STOXX TMI, DJ Asia/Pacifi c TMI stocks on the last trading day of each month in order to produce the selection list.
This list is valid for corporate actions that become effective the following month.
4.14.2 Dow Jones STOXX 600 and the Dow Jones STOXX Eastern Europe 300 Indices The respective quarterly review procedures are applied to the more liquid stock classes of the DJ STOXX TMI stocks on the last trading day of each month in order to produce the selection list.
This list is valid for corporate actions that become effective the following month.
4.14.3 Dow Jones STOXX Blue-chip Indices The respective Blue-chip index review procedures are applied on the last trading day of each month in order to produce the selection lists:
Index Produced from DJ STOXX 50 DJ STOXX 600 DJ EURO STOXX 50 DJ EURO STOXX DJ STOXX NORDIC 30 DJ STOXX NORDIC DJ STOXX EU Enlarged 15 DJ STOXX EU Enlarged TMI DJ STOXX Eastern Europe 50 DJ STOXX Eastern Europe 300 DJ STOXX Balkan 50 Equal Weighted DJ STOXX Balkan TMI DJ STOXX Sub Balkan 30 DJ STOXX Sub Balkan TMI
The lists are valid for corporate actions that become effective the following month.
www.stoxx.com 35 4 DEFINITIONS
4.14.4 Dow Jones STOXX Select Dividend Indices The annual DJ STOXX Select Dividend review procedures are applied on the last trading day of each quarter in order to produce the selection lists (with the exception of the list at the end of the fi rst quarter, which is produced at the end of February):
Index Produced from DJ STOXX Select Dividend 30 DJ STOXX 600 + secondary lines DJ EURO STOXX Select Dividend 30 DJ EURO STOXX + secondary lines DJ STOXX NORDIC Select Dividend 20 DJ STOXX NORDIC TMI DJ STOXX EU Enlarged Select Dividend 15 DJ STOXX EU Enlarged TMI DJ STOXX Americas Select Dividend 40 DJ STOXX Americas 600 DJ STOXX Asia/Pacifi c Select Dividend 30 DJ STOXX Asia/Pacifi c 600 DJ STOXX Global Select Dividend 100 DJ STOXX Global 1800 (reviewed separately by region)
The lists are valid for corporate actions that become effective the following quarter.
4.14.5 Dow Jones STOXX Strong Style Indices The annual DJ STOXX Strong Style review procedures are applied on the last trading day of August in order to produce the selection lists.
Index Produced from DJ STOXX Strong Growth 20 DJ STOXX TMI Growth DJ STOXX Strong Value 20 DJ STOXX TMI Value DJ EURO STOXX Strong Growth 20 DJ EURO STOXX TMI Growth DJ EURO STOXX Strong Value 20 DJ EURO STOXX TMI Value
The lists are valid for corporate actions that become effective the following year.
4.14.6 Dow Jones STOXX Private Equity 20 Index The quarterly DJ STOXX Private Equity 20 Index review procedures are applied on the last trading day of each quarter in order to produce the selection list.
This list is valid for corporate actions that become effective the following quarter.
www.stoxx.com 36 4 DEFINITIONS
4.15 Stock Prices
The stock prices used to calculate the indices are:
The opening price: the fi rst traded price during the offi cial trading hours of the stock’s trading system; until this is available, the previous day’s closing/adjusted price is used.
The intraday price: the currently traded price during the offi cial trading hours of the stock’s trading system. As long as the stock is not traded, the last available stock price will be used; this could either be the last available intraday stock price (e.g. if the stock is temporarily suspended) or the last available closing/adjusted price (e.g. if the stock exchange is closed).
The closing price: the last traded price or auction price during the offi cial trading hours of the stock’s trading system. If the stock has not been traded all day, then the previous day’s closing/adjusted price is used.
The adjusted price: the closing price is adjusted to refl ect a stock’s corporate action effective the next trading day.
www.stoxx.com 37 5 DISSEMINATION
5.1 Calendar
The DJ STOXX Total Market Index (TMI) and DJ STOXX Eastern Europe TMI indices, as well as all their respective subindices, are only disseminated on days when at least 50 percent of the DJ STOXX TMI Index’s free fl oat market capitalisation and at least 50 percent of its markets are available for trading.
These two thresholds are based on:
The DJ STOXX TMI Index free fl oat market capitalisation at the end of the preceding year.
The trading calendars of the trading systems in the regional universe; changes to these trading calendars that are announced during the current year will only be implemented in the index dissemination calendar in the following year.
In exceptional cases the STOXX Limited Supervisory Board can make changes to the trading calendar.
5.2 Dissemination Period
The index dissemination period begins when the fi rst trading system in the regional universe opens for trading. The actual dissemination of each index is triggered when the fi rst opening stock price for that index is received. The index dissemination period ends when the last trading system in the regional universe closes.
For the latest update, please refer to the following link: http://www.stoxx.com/indices/dissemination/period.html
5.3 Available Data
Different sets of data are available for the DJ STOXX indices.
5.3.1 Intraday Data Intraday data for the DJ STOXX indices are disseminated daily at:
Open quotation (10:30 CET or earlier): opening stock prices for the DJ STOXX Blue-chip indices and open quotation index values for realtime indices.
10:30 CET: stock prices for all DJ STOXX TMI indices.
12:00 CET: index settlement values as well as index stock prices for the DJ STOXX Blue-chip indices, DJ STOXX Select Dividend indices and the DJ STOXX 600 Supersector indices; index settlement values for the DJ STOXX Size and DJ STOXX TMI indices.
15:30 CET: stock prices for all and DJ STOXX TMI indices.
18:00 CET: stock prices for all stocks in the DJ STOXX Global Select Dividend 100 and DJ STOXX Grand Prix indices.
www.stoxx.com 38 5 DISSEMINATION
5.3.2 Closing Data The closing data for the DJ STOXX indices are disseminated after the index dissemination period for the relevant region. The closing data includes the following sets of data:
Stock prices: both closing and adjusted prices for all components of the DJ STOXX indices.
Index related values: closing values, market capitalisation and divisors for all indices.
Currency rates to Euro for all currencies used in any DJ STOXX indices.
Corporate actions and dividends: effective the next trading day.
Other information like country and sector weightings, corporate actions and dividend forecasts.
5.3.3 Monthly Reports The monthly reports are disseminated on the fi rst trading day of each month and include the following data:
Pre-selection lists: Blue-chip indices; consisting of the Supersector leaders.
Index composition and performance reports.
Statistical and fundamental reports.
5.3.4 Quarterly, Semi-Annual & Annual Data The quarterly, semi-annual and annual data contain:
Review lists: are available on the annual announcement dates in September for the DJ STOXX Blue-chip (except the DJ STOXX Eastern Europe 50 with announcement dates in March and September) and DJ STOXX Strong Style indices and in March for the DJ STOXX Select Dividend and the DJ STOXX Grand Prix indices; are available at the semi-annual announcement dates in March and September for the DJ STOXX Style indices, and quarterly component announcement dates for all other indices.
Underlying data, i.e. number of shares, free fl oat factor, for all stocks on the underlying data announcement dates.
Factsheets for various indices with the most up-to-date information on fundamental ratios, performance data and other statistics.
5.3.5 Corporate Action Forecasts The corporate action forecasts are updated daily and include the following information:
Mergers, takeovers, spin-offs and share consolidations: forecast for the coming weeks.
Initial public offerings (IPOs): recent IPOs that could qualify for the indices; for the DJ STOXX IPO Index (12 months) and the DJ STOXX IPO Index (60 months), separate additions and deletions announcements will be made every Monday.
A separate 3-months forecast for the DJ STOXX Large 200 companies is published; it contains information about upcoming dividends.
www.stoxx.com 39 6 CALCULATION
6.1 Index Value Calculation
6.1.1 Market Capitalisation Weighted The indices are calculated with the Laspeyres formula, which measures price changes against a fi xed base quantity weight. ͚n i = 1(pit ∙ sit ∙ ffit ∙ cfit ∙ xit) Mt Indext = = Dt Dt Where: t = Time the index is computed n = Number of companies in the index pit = Price of company (i) at time (t) sit = Number of shares of company (i) at time (t) ffit = Free fl oat factor of company (i) at time (t) cfit = Weighting cap factor of company (i) at time (t) (if index is capped, otherwise equals 1) xit = Exchange rate from local currency into index currency for company (i) at time (t) Mt = Free fl oat market capitalisation of the index at time (t) Dt = Divisor of the index at time (t)
6.1.2 Price Weighted With Weighting Factors The indices are weighted, based on the components’ stock prices and weighting factors: ͚n i = 1(pit ∙ wfit ∙ cfit ∙ xit) Mt Indext = = Dt Dt Where: t = Time the index is computed n = Number of companies in the index pit = Price of company (i) at time (t) wfit = Weighting factor of company (i) at time (t) cfit = Weighting cap factor of company (i) at time (t) xit = Exchange rate from local currency into index currency for company (i) at time (t) Mit = Total ‘units’ of the index at time (t) Dit = Divisor of the index at time (t)
www.stoxx.com 40 6 CALCULATION
6.2 Index Divisor Calculation
6.2.1 Market Capitalisation Weighted Each index has a unique index divisor that is adjusted to maintain the continuity of the index’s values across changes due to corporate actions: The index divisors are calculated as follows:
͚n (p ∙ s ∙ ff ∙ cf ∙ x ) ± MC D = D · i = 1 it it it it it t+1 t+1 t ͚n i = 1(pit ∙ sit ∙ ffit ∙ cfit ∙ xit)
Where:
Dt+1 = Divisor at time (t+1) D1 = Divisor at time (t) n = Number of companies in the index pit = Price of company (i) at time (t) sit = Number of shares of company (i) at time (t) ffit = Free fl oat factor of company (i) at time (t) cfit = Weighting cap factor of company (i) at time (t) (only applicable if index is capped) xit = Exchange rate from local currency into index currency for company (i) at time (t) MCt+1 = The difference between the closing market capitalisation of the index and the adjusted closing market capitalisation of the index: For companies with corporate actions effective at time (t+1), the free fl oat market capitalisation calculated with adjusted closing prices, the new number of shares at time (t+1) and the free fl oat factor at time (t+1) minus the free fl oat market capitalisation calculated with closing prices, number of shares at time (t) and free fl oat factor at time (t).
6.2.2 Price Weighted with Weighting Factors Each index has a unique index divisor that is adjusted to maintain the continuity of the index’s values across changes due to corporate actions: The index divisors are calculated as follows:
͚n (p ∙ wf ∙ cf ∙ x ) ± MC D = D · i = 1 it it it it t+1 t+1 t ͚n i = 1(pit ∙ wfit ∙ cfit ∙ xit)
Where:
Dt+1 = Divisor at time (t+1) D1 = Divisor at time (t) n = Number of companies in the index pit = Price of company (i) at time (t) wfit = Weighting factor of company (i) at time (t) cfit = Weighting cap factor of company (i) at time (t) xit = Exchange rate from local currency into index currency for company (i) at time (t) MCt+1 = The difference between the units in the index at closing and the units in the index after calculation parameters have been adjusted: For companies with corporate actions effective at time (t+1), the units in the index calculated with adjusted closing prices, the adjusted weighting factors at time (t+1) and the adjusted weighting cap factors at time (t+1) minus the units in the index calculated with closing prices, weighting factors at time (t) and weighting cap factors at time (t).
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6.3 Data Accuracy
The data accuracy for the index calculation is:
Input data and other underlying data: rounded to seven decimal places.
Index divisors: rounded to integer numbers.
Free fl oat factors: rounded to four decimal places.
Index values: rounded to two decimal places for dissemination.
6.4 Input Data
6.4.1 Sources The input data sources for the index calculation include:
Trading platforms.
Regulatory agencies.
Companies in the investable stock universe.
Realtime stock prices are provided by Thomson Reuters.
Related service providers.
6.4.2 Monitoring The realtime input data feeds for the index calculation are monitored by:
Data fi lters.
Quality assurance tools.
Verifi cation against secondary sources.
6.4.3 Correction The correction procedures for incorrect or missing input data are:
Input data: corrected immediately.
Realtime index values: not retroactively corrected because the index is calculated in realtime.
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6.5 Index Divisor Correction
The correction procedures for incorrect index divisors are:
If discovered on the effective date: intraday correction.
If discovered after a day: intraday correction only if correction is feasible and considered signifi cant by the STOXX
Limited Supervisory Board.
6.6 Corporate Actions and Adjustments
Below is a list of corporate actions that indicates how the adjusted prices are calculated. The impact on the divisor is indicated as well.
For the corporate actions listed below, the following assumptions apply:
Shareholders will receive ‘B’ new shares for every ‘A’ share held (where applicable).
If the new shares have a dividend disadvantage – i.e. the new shares have a different dividend from that paid on the old shares – the price for these new shares will be adjusted according to the net dividend amount.
If the subscription price is not available, rule 8.2 applies.
1. Cash dividend (applied to Total Return indices only) Divisor Adjusted price = closing price - dividend announced by the company · (1 - withholding tax)
2. Special cash dividend (applied to Price and Total Return indices) Divisor Adjusted price = closing price - dividend announced by the company · (1 - withholding tax)
3. Split and reverse split Divisor Adjusted price = closing price · A / B New number of shares = old number of shares · B / A [For price weighted indices with weighting factors: new weighting factor = old weighting factor · B / A]
4. Rights offering a) Free fl oat market capitalisation weighted indices Divisor Adjusted price = (closing price · A + subscription price · B) / (A + B) New number of shares = old number of shares · (A + B) / A
b) Price weighted indices with weighting factors Divisor Adjusted price = (closing price · A + subscription price · B) / (A + B) New weighting factor = old weighting factor · closing price / adjusted price
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6.6 Corporate Actions and Adjustments (cont.)
5. Stock dividend (withholding taxes are not applied to stock dividends) Divisor Adjusted price = closing price · A / (A + B) New number of shares = old number of shares · (A + B) / A [For price weighted indices with weighting factors: new weighting factor = old weighting factor · (A + B) / A]
6. Stock dividend of another company (withholding taxes are not applied to stock dividends) Divisor Adjusted price = (closing price · A - price of the other company · B) / A
7. Return of capital and share consolidation Divisor Adjusted price = [closing price - capital return announced by company · (1 - withholding tax)] · A / B New number of shares = old number of shares · B / A [For price weighted indices with weighting factors: new weighting factor = old weighting factor · B / A]
8. Repurchase of shares/self tender a) Free fl oat market capitalisation weighted indices Divisor Adjusted price = [(price before tender · old number of shares) - (tender price · number of tendered shares)] / (old number of shares - number of tendered shares) New number of shares = old number of shares - number of tendered shares
b) Price weighted indices with weighting factors Divisor Adjusted price = [(price before tender · old number of shares) - (tender price · number of tendered shares)] / (old number of shares - number of tendered shares) New weighting factor = old weighting factor · closing price / adjusted price
9. Spin-off a) Adjusted price = (closing price · A - price of spin-off shares · B) / A Divisor
b) Price weighted indices with weighting factors Divisor Adjusted price = (closing price · A - price of spin-off shares · B) / A New weighting factor for the spin-off = weighting factor of the parent company
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6.6 Corporate Actions and Adjustments (cont.)
10. Combination stock distribution (dividend or split) and rights offering For the above corporate action the following additional assumptions apply:
Shareholders receive ‘B’ new shares from the distribution and ‘C’ new shares from the rights offering for every ‘A’ share held.
If ‘A’ is not equal to one, all the following ‘new number of shares’ formulae need to be divided by ‘A’:
a1) If rights are applicable after stock distribution (one action applicable to another) Divisor Adjusted price = [closing price · A + subscription price · C · (1 + B / A)] / [(A+B) · (1+C / A)] New number of shares = old number of shares · [(A + B) · (1 + C / A)] / A
a2) If stock distribution is applicable after rights (one action applicable to another) Divisor Adjusted price = [closing price · A + subscription price · C] / [(A + C) · (1 + B / A)] New number of shares = old number of shares · [(A + C) · (1 + B / A)]
a3) Stock distribution and rights (neither action is applicable to the other) Divisor Adjusted price = [closing price · A + subscription price · C] / [A + B + C] New number of shares = old number of shares · [A + B + C] / A
b) Price weighted indices with weighting factors: Divisor Adjusted prices = see above New weighting factor = old weighting factor · closing price / adjusted price
To ensure that DJ STOXX indices are always accurate and follow the changes in the stock markets as closely as possible, the indices are reviewed on a regular basis. The following chapters describe the methodology that is applied to the different indices.
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7.1 Dow Jones STOXX Global 1800 Indices
The DJ STOXX Global 1800 Index is reviewed on a quarterly basis:
Target coverage: largest 600 companies from developed markets in each of the following regions: Europe, Americas and Asia/Pacifi c; only the more liquid stock class for each company in the DJ STOXX Total Market Index (TMI), the DJ US TMI Index and DJ Asia/Pacifi c TMI Index is eligible.
Review procedure: the European, Americas and Asia/Pacifi c regional indices are selected as follows:
1. The 550 highest-ranking stocks on the selection list are selected for the index.
2. The remaining 50 companies are selected from the highest-ranking current component between 551 and 750.
3. If the component number is still below 600, then stocks not previously included in the index are selected, beginning with the highest-ranking one.
The three regional indices are then combined to create the DJ STOXX Global 1800 Index.
Derived indices: the DJ STOXX Global 1800 ex Americas Index, the DJ STOXX Global 1800 ex Europe Index and the DJ STOXX Global 1800 ex Asia/Pacifi c Index are derived from the DJ STOXX Global 1800 Index.
Further derived indices from the above are the DJ STOXX Global 1800 Japan Index and the DJ STOXX Asia/Pacifi c 600 ex Japan Index.
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7.2 Dow Jones STOXX Total Market Indices (TMI)
7.2.1 Regional Indices The DJ STOXX TMI Index is reviewed on a quarterly basis:
Target coverage: 95 percent of the free fl oat market capitalisation of the investable stock universe by respective regions.
Review procedure:
1. All stocks in the investable stock universe on the quarterly review date are ranked in terms of free fl oat market capitalisation to produce the review list.
2. The stocks covering the top 93 percent of the free fl oat market capitalisation of the investable stock universe qualify for selection.
3. The stocks covering the remaining 2 percent are selected from the largest remaining current TMI components between the 93rd and 99th percentiles.
4. If the coverage is still below 95 percent, then the largest remaining stocks are selected until the coverage is 95 percent.
Derived indices: TMI for the other four European regions are then derived from the above reviewed DJ STOXX TMI Index.
The DJ STOXX Eastern Europe TMI Index is also reviewed on a quarterly basis:
Target coverage: 95 percent of the free fl oat market capitalisation of the investable stock universe by country.
Review procedure:
1. All stocks in the investable stock universe on the quarterly review date are ranked in terms of free fl oat market capitalisation to produce the review list. 2. The stocks covering the top 93 percent of the free fl oat market capitalisation of the investable stock universe qualify for selection. 3. The stocks covering the remaining 2 percent are selected from the largest remaining current TMI components between the 93rd and 99th percentiles. 4. If the coverage is still below 95 percent, then the largest remaining stocks are selected until the coverage is 95 percent.
Derived indices: TMI for the other four regional indices are then derived from the above reviewed DJ STOXX Eastern Europe TMI Index.
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7.2.2 Size Indices The DJ STOXX TMI Size indices are reviewed on a quarterly basis:
Target coverage: companies in the DJ STOXX TMI Index.
Review procedures: the companies in the given DJ STOXX TMI Index on the quarterly review date are ranked in terms of their total market capitalisation – i.e. for each company the total market capitalisation based on all its stock classes in the given DJ STOXX TMI Index – to produce the DJ STOXX TMI Size index review list.
DJ STOXX TMI Large Index (67.5 – 75 Rule) Target coverage: companies with a total market capitalisation above the 70th percentile of the total market capitalisation of the investable stock universe:
1. Companies with a total market capitalisation above the 67.5th percentile are selected.
2. Current DJ STOXX TMI Large companies with a total market capitalisation between the 67.5th and 75th percentiles are also selected.
DJ STOXX TMI Mid Index (85 – 92.5 Rule) Target coverage: companies with a total market capitalisation between the 70th and 90th percentiles of the total market capitalisation of the investable stock universe:
1. Companies with a total market capitalisation above the 85th percentile qualify for selection. Of these companies, those not already selected for the DJ STOXX TMI Large Index are selected for the DJ STOXX TMI Mid Index.
2. Current DJ STOXX TMI Mid companies with a total market capitalisation between the 85th and 92.5th percentiles are also selected.
DJ STOXX TMI Small Index Target coverage: companies with a total market capitalisation between the 90th and 95th percentiles of the total market capitalisation of the investable stock universe:
1. Companies not already selected for the DJ STOXX TMI Large and DJ STOXX TMI Mid indices are selected for the DJ STOXX TMI Small Index.
Derived indices: DJ STOXX TMI Size indices for the four European regions are then derived from the above reviewed DJ STOXX TMI Size indices.
The DJ STOXX Eastern Europe TMI Size Indices are also reviewed on a quarterly basis:
This index follows the same rules as those indicated above.
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7.2.3 Style Indices The Style indices are reviewed on a semi-annual basis in March and September:
Target coverage: growth and value stocks from the stocks selected from the European DJ STOXX TMI Index at the fi rst and third quarter reviews.
Review procedures: the style characteristics of each stock are determined by analysing six factors, i.e. two projected, two current and two historical factors:
Projected price/earnings (P/E) ratio: based on the closing price at the time of the review and on mean annual earnings-per-share (EPS) expected for the next fi scal period, as reported by IBES.
Projected earnings growth: based on the expected 3-5 year annual increase in operating EPS, as defi ned by the IBES long-term growth forecast.
Trailing P/E ratio: based on the closing price at the time of the review and on the previous quarter’s EPS from continuing operations, as reported by IBES.
Trailing earnings growth: based on average annualised EPS growth for the previous 21 quarters, as reported by IBES.
Price/book (P/B) ratio: based on the closing price at the time of the review and book value per share, as reported by Worldscope.
Dividend yield: based on the closing price at the time of the review and on total dividends declared by the company during the previous 12 months.
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7.2.3 Style Indices (cont.) DJ STOXX TMI Large Growth and Value Indices 1. The qualifying DJ STOXX TMI Large stocks are ranked for each of the six factors. For each factor, the stocks beyond the 5th and 95th percentiles are assigned the same values for the factor as the stocks at the 5th and 95th percentiles.
2. For each stock the values of the six factors are z-scored for normalisation. A multivariate, statistical cluster analysis is conducted to produce fi ve clusters: strong growth and weak growth, strong value and weak value, and neutral.
3. To reduce turnover there are certain criteria as to when a stock is reclassifi ed into a new cluster based on the result of the review. The rules are as follows:
All stocks that have been classifi ed into the strong value (strong growth) cluster in the last review, will remain in this cluster.
All stocks that have been classifi ed into the neutral cluster in the last review, will go into the cluster that they classify for in this review.
All stocks that have classifi ed for the weak value (weak growth) cluster in the last review, and are still classifi ed in any value (growth) cluster in this review, will remain in the weak value (weak growth) cluster.
All stocks that have classifi ed for the weak value (weak growth) cluster in the last review, and are now classifi ed in any growth (value) or neutral cluster in this review, will be reclassifi ed to neutral.
Neutral stocks with free fl oat market cap weightings of greater than or equal to 0.5 percent of the total index, which are closer to a value (growth) cluster mean, will be reclassifi ed to value (growth).
The remaining stocks are excluded from the Style indices.
At the second and fourth quarter reviews of the DJ STOXX TMI Index:
New stocks added to the DJ STOXX TMI Index are immediately classifi ed as neutral stocks until the time of the next review of the Style indices.
Stocks deleted from the DJ STOXX TMI Index are also immediately deleted from the Style indices.
Stocks reclassifi ed into different DJ STOXX TMI Size indices are also immediately reclassifi ed into the corresponding DJ STOXX TMI Style Size indices.
DJ STOXX TMI Mid Growth and Value Indices Same methodology.
DJ STOXX TMI Small Growth and Value Indices Same methodology.
Combination indices: DJ STOXX TMI Large Growth and Value, DJ STOXX TMI Mid Growth and Value, and DJ STOXX TMI Small Growth and Value indices, as reviewed above, are combined to produce the DJ STOXX TMI Growth and Value indices for Europe.
Derived indices: Growth and Value indices for the Eurozone are then derived from the DJ STOXX TMI Growth and Value indices.
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7.2.4 Strong Style Indices DJ STOXX Strong Style indices are reviewed on an annual basis in September.
The DJ STOXX Strong Style index family consists of six indices: Target coverage: growth and value stocks from the stocks selected from the then DJ STOXX TMI Style Index at the third quarter review.
Review procedures:
DJ STOXX Strong Growth 20 Index (10 – 30 Rule)
1. The six factors used in creating the DJ STOXX Style index are normalised as z-scores.
2. The vector distances between the six factors and the growth seeds are calculated.
3. Stocks are screened for a minimum level of liquidity. If multiple lines of a stock qualify for the index, the less liquid line is removed.
4. Then the growth score is calculated.
5. All current components ranked 10 or above on the selection list will remain in the index. The remaining 10 stocks are selected from the largest remaining current stocks ranked between 11 – 30. If the number of stocks selected is still below 20, then the largest remaining stocks are selected until the component count reaches 20.
DJ STOXX Strong Value 20 Index (10 – 30 Rule) Same methodology.
DJ STOXX Strong Style 40 Index: the combination of the underlying DJ STOXX Strong Growth 20 and DJ STOXX Strong Value 20 indices.
Derived indices: Strong Growth and Strong Value indices for the Eurozone are then derived from the DJ EURO STOXX TMI Growth and Value indices.
In exceptional cases the STOXX Limited Supervisory Board can add stocks to the selection list and also remove them from the selection list.
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7.3 Dow Jones STOXX Fixed Component Benchmark Indices
7.3.1 Dow Jones STOXX 600 Index The DJ STOXX 600 Index is reviewed on a quarterly basis:
Target coverage: largest 600 companies in the DJ STOXX TMI Index; for each company only the more liquid stock is eligible.
Review procedures: on the quarterly review date, the more liquid stock class of the DJ STOXX TMI stocks are ranked in terms of free fl oat market capitalisation to produce the DJ STOXX 600 Index selection list.
DJ STOXX Large 200 Index (170 – 230 Rule) Target coverage: largest 200 companies in the DJ STOXX 600 Index:
1. The largest 170 stocks on the selection list are selected.
2. The remaining 30 stocks are selected from the largest remaining current DJ STOXX Large 200 stocks ranked between 171 and 230.
3. If the number of stocks selected is still below 200, then the largest remaining stocks are selected until there are 200 stocks.
DJ STOXX Mid 200 Index (350 – 450 Rule) Target coverage: next 200 companies in the DJ STOXX 600 Index:
1. The largest 350 stocks on the selection list qualify for selection. Of these 350 stocks, 200 stocks are already selected for the DJ STOXX Large 200 Index; the remaining 150 are selected for the DJ STOXX Mid 200 Index.
2. The remaining 50 stocks are selected from the largest remaining current DJ STOXX Large 200 and DJ STOXX Mid 200 stocks ranked between 351 and 450.
3. If the number of stocks selected is still below 200, then the largest remaining stocks are selected until there are 200 stocks.
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7.3.1 Dow Jones STOXX 600 Index (cont.) DJ STOXX Small 200 Index (550 – 750 Rule) Target coverage: next 200 companies in the DJ STOXX 600 Index:
1. The largest 550 stocks on the selection list qualify for selection. Of these 550 stocks, 400 stocks are already selected for the DJ STOXX Large 200 and DJ STOXX Mid 200 indices; the remaining 150 stocks are selected for the DJ STOXX Small 200 Index.
2. The remaining 50 stocks are selected from the largest remaining current DJ STOXX Large 200, DJ STOXX Mid 200 and DJ STOXX Small 200 stocks ranked between 551 and 750.
3. If the number of stocks selected is still below 200, then the largest remaining stocks are selected until there are 200 stocks.
Combination index: DJ STOXX Large 200, DJ STOXX Mid 200 and DJ STOXX Small 200 indices, as reviewed above, are combined to produce the DJ STOXX 600 indices.
Derived indices: Size indices for the four European regions are then derived from the DJ STOXX Size indices for Europe, as reviewed above.
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7.3.2 Dow Jones STOXX Eastern Europe 300 Index The DJ STOXX Eastern Europe 300 Index is reviewed on a quarterly basis: Target coverage: largest 300 companies in the DJ STOXX Eastern Europe TMI Index; for each company only the more liquid stock is eligible.
Review procedures: on the quarterly review date, the more liquid stock class of the DJ STOXX Eastern Europe TMI stocks are ranked in terms of free fl oat market capitalisation to produce the DJ STOXX Eastern Europe 300 Index selection list.
DJ STOXX Eastern Europe Large 100 Index (85 – 115 Rule) Target coverage: largest 100 companies in the DJ STOXX Eastern Europe 300 Index:
1. The largest 85 stocks on the selection list are selected.
2. The remaining 15 stocks are selected from the largest remaining current DJ STOXX Eastern Europe Large 100 stocks ranked between 86 and 115.
3. If the number of stocks selected is still below 100, then the largest remaining stocks are selected until there are 100 stocks.
DJ STOXX Eastern Europe Mid 100 Index (175 – 225 Rule) Target coverage: next 100 companies in the DJ STOXX Eastern Europe 300 Index:
1. The largest 175 stocks on the selection list qualify for selection. Of these 175 stocks, 100 stocks are already selected for the DJ STOXX Eastern Europe Large 100 Index; the remaining 75 are selected for the DJ STOXX Eastern Europe Mid 100 Index.
2. The remaining 25 stocks are selected from the largest remaining current DJ STOXX Eastern Europ Large 100 and DJ STOXX Eastern Europe Mid 100 stocks ranked between 176 and 225.
3. If the number of stocks selected is still below 100, then the largest remaining stocks are selected until there are 100 stocks.
DJ STOXX Eastern Europe Small 100 Index (275 – 375 Rule) Target coverage: next 100 companies in the DJ STOXX Eastern Europe 300 Index:
1. The largest 275 stocks on the selection list qualify for selection. Of these 275 stocks, 200 stocks are already selected for the DJ STOXX Eastern Europe Large 100 and DJ STOXX Eastern Europe Mid 100 indices; the remaining 75 stocks are selected for the DJ STOXX Eastern Europe Small 100 Index.
2. The remaining 25 stocks are selected from the largest remaining current DJ STOXX Eastern Europe Large 100, DJ STOXX Eastern Europe Mid 100 and DJ STOXX Eastern Europe Small 100 stocks ranked between 276 and 375.
3. If the number of stocks selected is still below 100, then the largest remaining stocks are selected until there are 100 stocks.
Combination index: DJ STOXX Eastern Europe Large 100, DJ STOXX Eastern Europe Mid 100 and DJ STOXX Eastern Europe Small 100 indices, as reviewed above, are combined to produce the DJ STOXX Eastern Europe 300 indices.
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7.4 Dow Jones STOXX Blue-chip Indices
The Blue-chip indices are reviewed on an annual basis in September.
The DJ STOXX Blue-chip index family consists of three indices from different European regions: the DJ STOXX 50 Index represents the Blue-chip stocks from Europe, the DJ EURO STOXX 50 Index represents Blue-chip stocks from the Eurozone, and the DJ STOXX NORDIC 30 Index represents Blue-chip stocks from the Nordic region.
Target coverage: Supersector leaders of the DJ STOXX 600, DJ EURO STOXX and DJ STOXX NORDIC indices on the annual review date.
Review procedures: DJ STOXX 50 Index (40 – 60 Rule) Target coverage: 50 Supersector leaders from the stocks in the DJ STOXX 600 Index:
1. For each of the 19 DJ STOXX 600 Supersector indices, the stocks are ranked in terms of free fl oat market capitalisation; the largest stocks are added to the selection list until the coverage is close to, but still less than, 60 percent of the free fl oat market capitalisation of the corresponding DJ STOXX TMI Supersector Index; if the next ranked stock brings the coverage closer to 60 percent in absolute terms, then it is also added to the selection list; all remaining DJ STOXX 50 stocks are then added to the selection list.
2. All the stocks on the selection list are then ranked in terms of free fl oat market capitalisation to produce the DJ STOXX 50 Index selection list.
3. The largest 40 stocks on the selection list are selected; the remaining 10 stocks are selected from the largest remaining current stocks ranked between 41 and 60; if the number of stocks selected is still below 50, then the largest remaining stocks are selected until there are 50 stocks; if a stock is deleted from the DJ STOXX 600 Index in-between the annual review dates but is still a component of the DJ STOXX TMI Index, then this stock will remain in the DJ STOXX 50 Index until the next annual review.
In exceptional cases the STOXX Limited Supervisory Board can add stocks to the selection list and also remove them from the selection list.
DJ EURO STOXX 50 Index (40 – 60 Rule) Similarly, 50 Supersector leaders from the DJ EURO STOXX Index.
DJ STOXX NORDIC 30 Index (20 – 40 Rule) Similarly, 30 Supersector leaders from the DJ STOXX NORDIC Index and with 80 percent Supersector coverage.
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7.4 Dow Jones STOXX Blue-chip Indices (cont.)
The Dow Jones STOXX Eastern Europe 50 Index represents the Blue-chip stocks from Eastern Europe; and is reviewed on a semi-annual basis in March and in September.
Target coverage: Supersector leaders of the DJ STOXX Eastern Europe 300 Index on the semi-annual review date.
Review procedures: DJ STOXX Eastern Europe 50 Index (40 – 60 Rule) Target coverage: 50 Supersector leaders from the stocks in the DJ STOXX Eastern Europe 300 Index:
1. For each of the 19 DJ STOXX Eastern Europe 300 Supersector indices, the stocks are ranked in terms of free fl oat market capitalisation; the largest stocks are added to the selection list until the coverage is close to, but still less than, 80 percent of the free fl oat market capitalisation of the corresponding DJ STOXX Eastern Europe TMI Supersector Index; if the next ranked stock brings the coverage closer to 80 percent in absolute terms, then it is also added to the selection list; all remaining DJ STOXX Eastern Europe 50 stocks are then added to the selection list.
2. All the stocks on the selection list are then ranked in terms of free fl oat market capitalisation and are screened for a minimum level of liquidity to produce the DJ STOXX Eastern Europe 50 Index selection list, of which only the largest 15 stocks per country are selected.
3. The largest 40 stocks on the selection list are selected; the remaining 10 stocks are selected from the largest remaining current stocks ranked between 41 and 60; if the number of stocks selected is still below 50, then the largest remaining stocks are selected until there are 50 stocks; if a stock is deleted from the DJ STOXX Eastern Europe 300 Index in-between the annual review dates but is still a component of the DJ STOXX Eastern Europe TMI Index, then this stock will remain in the DJ STOXX Eastern Europe 50 Index until the next semi-annual review.
In exceptional cases the STOXX Limited Supervisory Board can add stocks to the selection list and also remove them from the selection list.
The DJ STOXX EU Enlarged 15 Index represents the Blue-chip stocks from 12 countries; i.e. the 10 countries that acceded to the EU in May 2004 plus Bulgaria and Romania which joined the EU in January 2007.The index is reviewed on an annual basis in September.
Target coverage: the largest stocks in the DJ STOXX EU Enlarged TMI Index on the annual review date; only the more liquid stock class for each company in the DJ STOXX EU Enlarged TMI Index is included.
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7.4 Dow Jones STOXX Blue-chip Indices (cont.)
Review procedure: DJ STOXX EU Enlarged 15 Index (10 – 20 Rule) 1. All of the stocks on the selection list are ranked separately in terms of free fl oat market capitalisation, gross revenue, and net income. The fi nal ranking is calculated by weighting the free fl oat market capitalisation rank at 60 percent, the gross revenue rank at 20 percent and the net income rank at 20 percent.
2. The top 10 ranked stocks are selected. The remaining 5 stocks are selected from the highest remaining current stocks ranked between 11 and 20. If the number of stocks selected is still below 15, then the highest remaining stocks are selected until there are 15 stocks.
The Dow Jones STOXX Balkan 50 Equal Weighted Index represents the Blue-chip stocks from 8 countries and is reviewed on an annual basis in September.
Target coverage: highest-ranked components in the DJ STOXX Balkan TMI Index on the annual review date; only the more liquid stock class for each company in the DJ STOXX Balkan TMI Index is included.
Review procedures: DJ STOXX Balkan 50 Equal Weighted Index (5/3 – 15/7 Rule) 1. Selection process: for each country, companies are ranked by free fl oat market capitalisation. The highest-ranked components (20 companies each from Greece and Turkey, 10 companies from Bulgaria, Croatia, Macedonia (FYROM), Romania, Serbia and Slovenia) are chosen for the selection list. Each country selection list is fi rst ranked by free fl oat market capitalisation and second by liquidity (average daily traded value for the past three months). The fi nal rank is calculated by the average of the two ranks. If two or more companies have the same fi nal ranking, then their free fl oat market capitalisation is used as a tie-breaker.
2. Selection list: the top 5 ranked stocks are selected for Greece and Turkey. The top 3 ranked stocks are selected for other countries. The remaining 5 stocks each for Greece and Turkey are selected from the highest remaining current stocks ranked between 6 and 15. The remaining 2 stocks each from other countries are selected from the highest remaining current stocks ranked between 4 and 7. If the number of stocks selected is still below 10 for Greece and Turkey and 5 for other countries, then the highest remaining stocks are selected until there are 10 stocks from Greece and Turkey and 5 from other countries.
In exceptional cases the STOXX Limited Supervisory Board can add stocks to the selection list and also remove them from the selection list.
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7.4 Dow Jones STOXX Blue-chip Indices (cont.)
The DJ STOXX Sub Balkan 30 Index represents the Blue-chip stocks from 4 countries and is reviewed on an annual basis in September.
Target coverage: Supersector leaders of the DJ STOXX Sub Balkan TMI Index on the annual review date; only the more liquid stock class for each company in the DJ STOXX Sub Balkan TMI Index is included.
Review procedures: DJ STOXX Sub Balkan 30 Index (20 – 40 Rule) 1. For each of the 19 DJ STOXX Sub Balkan TMI Supersector indices, the stocks are ranked in terms of free fl oat market capitalisation; the largest stocks are added to the selection list until the coverage is close to, but still less than, 80 percent of the free fl oat market capitalisation of the corresponding DJ STOXX Sub Balkan TMI Supersector Index; if the next ranked stock brings the coverage closer to 80 percent in absolute terms, then it is also added to the selection list; all remaining DJ STOXX Sub Balkan 30 stocks are then added to the selection list.
2. All the stocks on the selection list are then ranked in terms of free fl oat market capitalisation to produce the DJ STOXX Sub Balkan 30 Index selection list.
3. The largest 20 stocks on the selection list are selected; the remaining 10 stocks are selected from the largest remaining current stocks ranked between 21 and 40; if the number of stocks selected is still below 30, then the largest remaining stocks are selected until there are 30 stocks;
In exceptional cases the STOXX Limited Supervisory Board can add stocks to the selection list and also remove them from the selection list.
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7.5 Dow Jones STOXX Select Dividend Indices
DJ STOXX Select Dividend indices are reviewed on an annual basis in March.
The Select Dividend index family consists of seven indices: they represent the highest-yielding stocks within each region.
The DJ STOXX Global Select Dividend 100 Index covers the highest-yielding stocks in the three regions Europe, the Americas, and Asia/Pacifi c. Each region is reviewed separately and the highest-yielding stocks relative to their home market are selected (see below for details of the review procedure).
Target coverage: the highest-yielding companies based on indicated net dividend yield relative to their home market.
Review procedures: DJ STOXX Select Dividend 30 Index Target coverage: the highest dividend-yielding stocks relative to their home market; the 30 stocks are selected from the DJ STOXX 600 constituents including secondary lines of those companies:
1. Universe: the index universe is defi ned as all those companies in the DJ STOXX 600 Index (plus their secondary lines) that pay a dividend, have a non-negative historical fi ve-year dividend growth rate (at least 2 years for IPOs), and a non-negative payout ratio of less than or equal to 60 percent; the components will be screened for a minimum level of liquidity as well; current DJ STOXX Select Dividend 30 constituents are added to the universe as long as they are still components of the DJ STOXX 600 Index.
2. Selection process: an outperformance factor is calculated for every stock, i.e. the company net dividend yield divided by the net yield of the respective DJ Country TMI Index minus 1; for companies that have secondary lines in the index universe, only the higher-yielding line will remain in the index universe.
3. Ranking: all remaining stocks are ranked by their outperformance factor.
4. Index composition: all current components ranked 60 or above in the selection list will remain in the index; starting from the highest-ranked non-component on the selection list, stocks are added until the component count reaches 30; if a company is deleted from the DJ STOXX 600 Index between the DJ STOXX Select Dividend annual review dates, but is still a component of the DJ STOXX TMI Index, then this company will remain in the DJ STOXX Select Dividend Index until the next annual review, provided that it still meets the requirements for the DJ STOXX Select Dividend Index.
In exceptional cases the STOXX Limited Supervisory Board can add stocks to the selection list and also remove them from the selection list.
DJ EURO STOXX Select Dividend 30 Index Similarly, the 30 highest-yielding companies relative to their home market from the DJ EURO STOXX Index (plus secondary lines).
DJ STOXX NORDIC Select Dividend 20 Index Similarly, the 20 highest-yielding companies relative to their home market selected from the DJ STOXX NORDIC TMI Index. The non-negative payout ratio has to be less than or equal to 80 percent, and the index composition is using a 10/30 buffer (i.e. the stocks ranked 10 or above are automatically included in the index, and current components ranked between 11 and 30 are added to the index. If the number of stocks is still below 20, then the largest non-components are added until the index contains 20 stocks).
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DJ STOXX EU Enlarged Select Dividend 15 Index Similarly, the 15 highest-yielding companies relative to their home market selected from the DJ STOXX EU Enlarged TMI Index. The non-negative payout ratio has to be less than or equal to 100 percent, the non-negative dividend growth rate is based on the past 3 years, and the components will be screened for a minimum level of liquidity. The outperformance factor for countries with six or more components is calculated as indicated above; for countries with fi ve or fewer components the outperformance factor is calculated by dividing the company’s net dividend yield by the net yield of the DJ STOXX EU Enlarged TMI Index minus 1.
The index composition is using a 10/20 buffer (i.e. the stocks ranked 10 or above are automatically included in the index, and current components ranked between 11 and 20 are added to the index. If the number of stocks is still below 15, then the largest non-components are added until the index contains 15 stocks).
DJ STOXX Americas Select Dividend 40 Index Similarly, the 40 highest-yielding companies relative to their home market are selected from the DJ STOXX Americas 600 Index.
1. Preliminary index composition: all stocks in the index universe are ranked by country and by outperformance factor; all current components ranked 60 or above in each country will remain in the index; if less than 40 stocks remain in the index, the highest-ranked non-components in the region are added until the component count reaches 40; a single country can have a maximum of 30 stocks in the index.
2. Index composition: the list of 40 stocks (the preliminary index composition) is reviewed again. The number of stocks of each country in the preliminary index composition is divided by two (the result is rounded up to the next integer if necessary). The resulting number determines how many of the highest-ranked stocks in that country should be included in the index. In case they are not already in the index, they are added to the index and are replaced by the lowest- ranked stocks in the preliminary index composition.
DJ STOXX Asia/Pacifi c Select Dividend 30 Index Similarly, the 30 highest-yielding companies relative to their home market are selected from the DJ STOXX Asia/ Pacifi c 600 Index.
1. Index universe: all stocks in the index universe have to have a non-negative payout ratio of less than or equal to 80 percent. The outperformance factor for countries with twenty-one or more components is calculated as described in the DJ STOXX Select Dividend 30 review procedure. For countries with twenty or fewer components the outperformance factor is calculated by dividing the company’s net dividend yield by the net yield of the DJ STOXX Asia/Pacifi c 600 Index minus 1.
2. Preliminary index composition: all stocks in the index universe are ranked by country and by outperformance factor. All current components ranked 20 or above in each country will remain in the index. If less than 30 stocks remain in the index, the highest-ranked non-components in the region are added until the component count reaches 30. A single country can have a maximum of 10 stocks in the index.
3. Index composition: the list of 30 stocks (the preliminary index composition) is reviewed in line with the review procedure for the DJ STOXX Americas Select Dividend 40 Index.
DJ STOXX Global Select Dividend 100 Index Similarly, the 100 highest dividend-yielding stocks in the three regions Europe, the Americas and Asia/Pacifi c. Each region is reviewed separately, and the index combines the constituents of the following three indices: DJ STOXX Select Dividend 30 Index, DJ STOXX Americas Select Dividend 40 Index and the DJ STOXX Asia/Pacifi c Select Dividend 30 Index.
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7.6 Dow Jones STOXX Theme Indices
7.6.1 Dow Jones STOXX IPO Indices The DJ STOXX IPO indices are reviewed on a daily or on a weekly basis.
The DJ STOXX IPO index family consists of three indices: DJ STOXX IPO Index (3 months) represents IPO stocks for a rolling 3 month period; the DJ STOXX IPO Index (12 months) and the DJ STOXX IPO Index (60 months) represent IPO stocks for a rolling 12 month and 60 month period respectively.
Target coverage: IPO stocks in Europe with a free fl oat market capitalisation at the listing date (i.e. number of IPO shares times the IPO-offer price) of between 100 million EUR and 3 billion EUR.
Review procedures: DJ STOXX IPO Index (3 months) IPO stocks with a free fl oat market capitalisation on their listing date of between 100 million EUR and 3 billion EUR are added to the DJ STOXX IPO Index (3 months) following the close of their fi rst listing day.
IPO stocks are removed from the DJ STOXX IPO Index (3 months) after the close of trading on the fi rst Wednesday following 3 calendar months after inclusion in the index, unless this removal would result in less than ten index components.
In cases where a removal would decrease the number of index components to less than ten, the exit date of the component set for removal is extended until a new component is added. If several stocks are to be removed on the same date, the removal process starts with the smallest stock in terms of free fl oat market capitalisation as of three days prior to the removal date.
It is acceptable that the index component count falls below ten following a merger, acquisition or related corporate action.
The number of shares and the free fl oat factors of all constituents of the DJ STOXX IPO Index (3 months) are reviewed on a quarterly basis in line with the review dates of other DJ STOXX indices.
DJ STOXX IPO Index (12 months) IPO stocks with a free fl oat market capitalisation on their listing date of between 100 million EUR and 3 billion EUR are added to the DJ STOXX IPO Index (12 months) after the close of trading of the second Wednesday following their listing date. If the listing date is a Wednesday, this day is counted as the fi rst Wednesday.
IPO stocks are removed from the DJ STOXX IPO Index (12 months) after the close of trading of the fi rst Wednesday following 12 calendar months after inclusion in the index, unless this removal would result in less than ten index components.
In case a removal would decrease the number of index components to less than ten, the exit date of the component set for removal is extended until a new component is added. If several stocks are to be removed on the same date, the removal process starts with the smallest stock in terms of free fl oat market capitalisation as of three days prior to the removal date.
It is acceptable that the index component count falls below ten following a merger, acquisition or related corporate action.
The number of shares and the free fl oat factors of all constituents as well as the 20 percent weighting cap factors of the DJ STOXX IPO Index (12 months) are reviewed on a quarterly basis in line with the review dates of other DJ STOXX indices.
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7.6.1 Dow Jones STOXX IPO Indices (cont.) Additionally, all constituents of the DJ STOXX IPO Index (12 months), which are no longer a constituent of the DJ STOXX IPO Index (3 months), are reviewed for their liquidity. If a constituent has more than ten non-trading days in the three months prior to the quarterly review date, it will be deleted from the index unless this deletion would decrease the number of constituents to below ten.
DJ STOXX IPO Index (60 months) In line with the review procedure of the DJ STOXX IPO Index (12 months), but the time period before removal is 60 months.
7.6.2 Dow Jones STOXX Private Equity Index The DJ STOXX Private Equity 20 Index is reviewed on a quarterly basis:
Target coverage: companies in the DJ STOXX TMI Index and other private equity companies of Western European developed markets.
Review procedures:
1. Universe: All companies that are classifi ed by the ICB – Industry Classifi cation Benchmark as either subsector 8775 (Speciality Finance) or subsector 8985 (Equity Investment Instruments). A minimum of 40% can be held in private equity companies, such as ‘Mezzanine’, ‘venture capital’, ‘buy-out’, ‘buy-in’. A maximum of 30% can be held in the DJ STOXX Global 1800 companies. All companies are screened for a minimum level of liquidity. In the case of multiple lines of a company qualifying for the index, the less liquid line is removed.
2. DJ STOXX Private Equity 20 Index (15 – 25 Rule) Target coverage: largest 20 companies in the universe:
1. The largest 15 stocks on the selection list are selected.
2. The remaining 5 stocks are selected from the largest remaining current stocks ranked between 16 and 25.
3. If the number of stocks selected is still below 20, then the largest remaining stocks are selected until there are 20 stocks.
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7.6.3 Dow Jones STOXX Grand Prix Index The DJ STOXX Grand Prix Index is reviewed on an annual basis in March:
Target coverage: publicly traded companies on a global basis which support or supply Formula 1 teams including engine manufacturers, tyre suppliers, oil/fuel suppliers, and title sponsors.
Review procedure: 1. Universe: all companies listed on a stock exchange covered by the DJ STOXX TMI Index.
2. Index composition: companies in the index universe which support or supply the Formula 1 teams on the entry list are reviewed for parent companies with exchange listings; the constituents of the DJ STOXX Grand Prix Index have to be in one of the following categories: Engine Manufacturers. Tyre Suppliers. Oil/Fuel Suppliers. Title Sponsors.
Weighting: the four categories in the DJ STOXX Grand Prix Index are weighted as follows: Engine Manufacturers 60 percent Tyre Suppliers 15 percent Oil/Fuel Suppliers 15 percent Title Sponsors 10 percent
For ‘Engine Manufacturers’, 30 percent weight is distributed equally among the components in this category. Based on the Constructors Championship, an additional 15 percent is added to the weight of the previous year’s winner, 10 percent is added to the weight of the previous year’s fi rst runner-up and 5 percent is added to the weight of the previous year’s second runner-up. For the remaining categories, the weight is distributed equally among the category components.
In the case of a component with a free fl oat market capitalisation of less than 250 MEUR in the category ‘Engine Manufacturers’, the component will automatically be weighted at 1 percent. The equal distribution will then be based on the remaining companies/weights (e.g. 29 percent).
7.6.4 Dow Jones STOXX Football Index The DJ STOXX Football Index is reviewed on a quarterly basis:
Target coverage: all football clubs that are listed in Europe or Eastern Europe.
Review procedure: all football companies in Europe or Eastern Europe are selected for inclusion in the index regardless of their trading volume and their number of days without any trading at all.
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7.7 Free Float Factors
The free fl oat factors are reviewed on a quarterly basis; they are published on the quarterly underlying data announcement dates and implemented on the quarterly implementation dates. The calculation of the free fl oat factors is described in chapter 4.3.
7.8 Weighting Factors
The weighting factors for the DJ STOXX Select Dividend indices, DJ STOXX Strong Style indices and the DJ STOXX Grand Prix Index are adjusted at the annual review. The DJ STOXX Balkan 50 Equal Weighted Index is adjusted on a quarterly basis. The calculation of the weighting factors is described in chapter 4.4.
7.9 Weighting Cap Factors
The weighting cap factors for stocks are reviewed on a quarterly basis (for the DJ STOXX Select Dividend and the DJ STOXX Strong Style indices annually). The calculation of the weighting cap factors is described in chapter 4.5.
www.stoxx.com 64 8 ONGOING REVIEW
Corporate actions – including initial public offerings, mergers and takeovers, spin-offs, de-listings and bankruptcy – that affect the composition of the index are reviewed immediately. Any changes are announced, implemented and become effective in line with the type of corporate action, the indices affected and the magnitude of the effect.
8.1 Replacements
A deleted stock is replaced immediately to maintain the fi xed number of stocks in the DJ STOXX Global 1800, DJ STOXX Size, DJ STOXX Select Dividend, DJ STOXX Blue-chip and DJ STOXX Strong Style indices. The replacement is based on the latest respective selection list:
DJ STOXX Global 1800 Index: replaced by the largest non-component on the respective selection list.
DJ STOXX Size indices: replaced by the largest non-size component on the DJ STOXX 600 Index selection list; if the replacement stock is a component of a smaller Size index, then it is likewise replaced.
DJ STOXX Select Dividend indices: replaced by the largest non-component on the respective Select Dividend selection list; the new company will be added at the same weight as the company being removed.
DJ STOXX Blue-chip indices: replaced by the largest non-component on the Blue-chip Index selection list. For the DJ STOXX Eastern Europe 50 Index: replaced by the largest non-component on the selection list. For the DJ STOXX Balkan 50 Equal Weighted Index: replaced by the highest-ranked non-component on the respective country selection list. The new company will be added at the same weight as the company being removed.
DJ STOXX Strong Style indices: replaced by the largest non-component on the respective Strong Style selection list; the new company will be added at the same weight as the company being removed.
Changes are announced immediately, implemented two trading days later and become effective on the next trading day after implementation.
8.2 Free Float Factors and Shares Changes
The indices are updated with changes to the number of shares and/or free fl oat factors due to corporate actions; the timing depends on the magnitude of the change:
Changes to the number of shares due to stock dividends, splits, rights issues etc: implemented immediately and effective the next trading day.
Changes greater than ± 10 percent to the number of shares from one trading day to the next: announced immediately, implemented two trading days later and effective the next trading day after implementation.
Free fl oat factor changes greater than ± 5 percent from one trading day to the next: announced immediately, implemented two trading days later and effective the next trading day after implementation.
Changes to the combined free fl oat adjusted number of shares greater than ± 10 percent from one trading day to the next: announced immediately, implemented two trading days later and effective the next trading day after implementation.
All other changes: announced on the next quarterly underlying data announcement date, implemented on the quarterly implementation date and effective the next trading day after implementation.
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8.3 Dividend Data Changes
The components of the DJ STOXX Select Dividend indices are monitored for any changes in their dividend data. The timing depends on the changes in the dividend data:
Company eliminates its declared dividend: the company will be deleted from the index; the replacement will be announced immediately, implemented two trading days later and become effective the next trading day after implementation.
Company lowers its declared dividend: the company will remain in the index until the next selection list is available; if the company is ranked above the lower buffer on this selection list (e.g. ranked 60 or above for the DJ STOXX Select Dividend 30 Index), it is retained; if it falls below the lower buffer (e.g. ranked 61 or below for the DJ STOXX Select Dividend 30 Index), it is removed and replaced by the highest-ranked non-component on that selection list.
8.4 Illiquidity
Illiquid stocks are deleted immediately if their illiquidity is due to:
Not being traded for ten consecutive days.
Being suspended from trading.
Ongoing bankruptcy proceedings: a company that has fi led for bankruptcy will be deleted from the index based on either the traded stock price on its primary market, if available, or else the OTC stock price; if neither price is available, the company will be deleted at EUR 0.
Changes are announced immediately, implemented two trading days later and become effective the next trading day after implementation.
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8.5 Initial Public Offerings
8.5.1 Blue-chip Indices An initial public offering (IPO) stock is reviewed for fast-track addition to the Blue-chip indices at the next quarterly review.
The IPO stock is added if it would have:
Qualifi ed for the latest Blue-chip Index selection list valid during the appropriate quarterly review, i.e. the February, May, September or November Blue-chip index selection lists; and
Been ranked 40 or above on this selection list [DJ STOXX Nordic 30 and DJ STOXX Sub Balkan 30 Index : ranked 20 or above; DJ STOXX EU Enlarged 15 Index: ranked 10 or above]; and
Been the largest, non-current Blue-chip stock on this selection list.
If it is added, then the IPO stock replaces the smallest stock in the Blue-chip Index and the respective regional DJ STOXX TMI, DJ STOXX 600 and DJ STOXX Eastern Europe 300 indices.
Changes are announced on the quarterly underlying data announcement dates, are implemented two trading days later on the quarterly implementation dates and become effective the next trading day after implementation.
8.5.2 IPO Indices An initial public offering (IPO) stock is reviewed for immediate addition to the IPO indices. Please see chapter 7.6.1 for details.
8.6 Mergers & Takeovers
A merger or takeover is deemed successful if it has been declared wholly unconditional and has received the approval of all the regulatory agencies with jurisdiction over the transaction.
The result of a merger or takeover is one surviving stock and one or more non-surviving stocks that may not necessarily be de-listed from the respective trading system(s). The rules below are only applied if at least one company of this transaction is a component of the DJ STOXX TMI or the DJ STOXX IPO indices. A surviving stock that does not qualify for the DJ STOXX TMI or the DJ STOXX IPO indices, and also the non-surviving stock(s), is deleted immediately.
A surviving stock that qualifi es for the DJ STOXX TMI indices or the DJ STOXX IPO indices is added to the indices as follows:
DJ STOXX TMI indices: the surviving stock replaces the largest of the original stocks.
DJ STOXX Size indices: the surviving stock replaces the original stock that belonged to the largest affected Size index.
DJ STOXX Global 1800 indices: the surviving stock replaces the original stock that belonged to the largest affected regional index.
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8.6 Mergers & Takeovers (cont.)
DJ STOXX Blue-chip indices: if one of the original stocks was a Blue-chip stock, then it is replaced by the surviving stock. For the DJ STOXX Balkan 50 Equal Weighted Index, if one of the original stocks was a Blue-chip stock and from the same country, then it is replaced by the surviving stock: otherwise the highest-ranked non-component on the respective country selection list qualifi es.
DJ STOXX Select Dividend indices: if one of the original stocks was a Select Dividend component, then it is replaced by the surviving stock if this would be ranked at or above the lower buffer limit on the currently valid Select Dividend selection list (e.g. ranked 60 or above for the DJ STOXX Select Dividend 30 Index); if the surviving company falls below the lower buffer limit (e.g. ranked 61 or below for the DJ STOXX Select Dividend 30 Index), the original company will be replaced by the highest-ranked non-component on the selection list.
DJ STOXX Strong Style indices: if one of the original stocks was a Strong Style component, then it is replaced by the surviving stock if this would be ranked at or above the lower buffer limit on the currently valid Strong Style selection list. (e.g. ranked 15 or above for the DJ STOXX Strong Growth/Value 20 Index); if the surviving company falls below the lower buffer limit (e.g. ranked 16 or below for the DJ STOXX Strong Style Growth/Value 20 Index), the original company will be replaced by the highest-ranked non-component on the selection list.
DJ STOXX IPO indices: non-surviving stocks will be deleted immediately and surviving stocks will remain in any IPO indices of which they were components; no additions or replacements to the indices will be made.
DJ STOXX Private Equity 20 Index: if one of the original stocks was a private equity component, then it is replaced by the surviving stock if this would be ranked at or above the lower buffer limit on the currently valid private equity selection list (e.g. ranked 15 or above for the DJ STOXX Private Equity 20 Index); if the surviving company falls below the lower buffer limit (e.g. ranked 16 or below for the DJ STOXX Private Equity 20 Index), the original company will be replaced by the highest-ranked non-component on the selection list.
DJ STOXX Grand Prix Index: non-surviving stocks will be deleted immediately and the surviving stock will remain in the index; the weighting factors will not be changed.
Changes are announced immediately, are implemented two trading days later and become effective on the next trading day after implementation.
8.7 Sector Changes
The indices are updated with the sector changes; the timing depends on the cause of the change:
Changes due to corporate actions: announced immediately, implemented two trading days later and effective the next trading day after implementation.
Changes in the primary revenue source: announced on the quarterly component announcement dates, implemented on the quarterly implementation dates and effective the next trading day after implementation.
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8.8. Spin-Offs
Each spin-off stock is immediately added to all affected indices including the fi xed component indices for one trading day. If the spin-off company does not qualify based on the rules set out below, it will be deleted after the fi rst trading day.
DJ STOXX Global 1800 indices: if a spin-off stock would have qualifi ed for the latest DJ STOXX Global 1800 selection list, then it is added to the appropriate one of the three regional indices and replaces the smallest current stock in that index.
DJ STOXX TMI indices: the spin-off stock is added if it qualifi es for the DJ STOXX TMI Indices.
DJ STOXX Style indices: if a spin-off stock qualifi es for the DJ STOXX TMI Index, it will be added to the same cluster as its parent company.
DJ STOXX Size indices: if a spin-off stock would have qualifi ed for the latest DJ STOXX 600 or DJ STOXX Eastern Europe 300 selection list, then it is added to the appropriate one of the three Size indices and replaces the smallest current stock in that index.
DJ STOXX Blue-chip indices:
1. If the original company was a Blue-chip stock, then each spin-off stock qualifi es for addition if it is ranked at 60 or above on the Blue-chip Index selection list [DJ STOXX NORDIC 30 and DJ STOXX Sub Balkan 30 Index: ranked at 40 or above; DJ STOXX EU Enlarged 15 Index: ranked at 20 or above; DJ STOXX Balkan 50 Equal Weighted Index: ranked 15 or above for Greece and Turkey, 7 or above for Bulgaria, Croatia, Macedonia (FYROM), Romania, Serbia and Slovenia].
2. The qualifying spin-off stocks are added in sequence: The largest qualifying spin-off stock replaces the original stock in the index. The next largest qualifying spin-off stock replaces the smallest current stock in the index, if the spin-off stock is the larger. Likewise for the other qualifying spin-off stocks.
DJ STOXX Select Dividend indices: spin-off stocks are not considered for immediate addition in the DJ STOXX Select Dividend indices; if the original company has a signifi cantly lower dividend after the spin-off, then its status will be reviewed according to Chapter 8.3.
DJ STOXX Strong Style indices: spin-off stocks are not added to the DJ STOXX Strong Style indices.
DJ STOXX IPO indices: spin-off stocks are not added to the DJ STOXX IPO indices.
DJ STOXX Grand Prix Index: if the original company was a constituent of the DJ STOXX Grand Prix Index, each spin-off stock is reviewed for addition; the spin-off stock which carries on the business, as a supplier or sponsor of a Formula 1 team, will replace the original stock at the original stock’s weight; if the spin-off stock is no longer eligible for the DJ STOXX Grand Prix Index, the weighting factor for the original stock will be adjusted so that the weight of the original stock in the index does not change.
Changes are announced immediately, implemented two trading days later and become effective on the next trading day after implementation.
www.stoxx.com 69 DOW JONES STOXX® INDEX GUIDE
Section B: Dow Jones STOXX Strategy Indices
www.stoxx.com 70 DOW JONES STOXX® INDEX GUIDE
Section B
1 DJ EURO STOXX 50 BUYWRITE 72 3 DJ EURO STOXX 50 VOLATILITY (VSTOXX) 80 1.1 Overview 72 3.1 Overview 80 1.1.1 Basic Data 72 3.1.1 Concept 80 1.1.2 Historical Data 72 3.1.1.1 Underlying Index and Index Options 80 1.2 Calculation 73 3.1.1.2 Sub-Indices 80 1.2.1 The Dow Jones EURO STOXX 50 3.1.1.3 VSTOXX 80 BuyWrite Index formula 73 3.1.2 Input Data 81 1.2.2 The Dow Jones EURO STOXX 50 3.1.3 Dissemination 81 BuyWrite Index formula (Price Index) 74 3.1.4 Historical Data 82 1.2.3 Computational Accuracy 75 3.2 Data and Calculation 83 1.2.4 Rolling 75 3.2.1 Index Calculation 83 1.2.5 Trading Suspension 75 3.2.2 Input Data 84 3.2.3 Price Screens 84 3.2.4 Preparing Data 85 2 DJ STOXX LEVERAGED AND SHORT 76 3.2.5 Calculation Example 86 2.1 Overview 76 3.2.6 Calculation of VSTOXX 88 2.1.1 Coverage 76 2.2 Defi nitions 76 2.2.1 Base Date & Base Values 76 2.2.1.1 Dow Jones STOXX Leveraged Index 76 2.2.1.2 Dow Jones STOXX Short Index 76 2.3 Indices 77 2.3.1 Dow Jones EURO STOXX 50 Leveraged Index 77 2.3.2 Dow Jones EURO STOXX 50 Short Index 77 2.3.3 Dow Jones STOXX 600 Supersector Short indices 77 2.4 Calculation 78 2.4.1 The Dow Jones STOXX Leveraged Index formula 78 2.4.2 The Dow Jones STOXX Leveraged Short Index formula 78 2.4.3 Computational Accuracy 79 2.4.4 Adjustments due to Extreme Market Movements 79 2.4.4.1 Exceptional Handler for the Dow Jones STOXX Leveraged Index 79 2.4.4.2 Exceptional Handler for the Dow Jones STOXX Short Index 79 2.4.5 Trading Suspension 79
www.stoxx.com 71 1 DJ EURO STOXX 50 BUYWRITE
1.1 O ver v iew
The DJ EURO STOXX 50 BuyWrite Index refl ects the so-called ‘buy-write’ option strategy. With this strategy – which is also referred to as ‘covered-call’ – an investor buys the DJ EURO STOXX 50 Index (Price or Total Return index as the case may be) as an underlying instrument and simultaneously sells a DJ EURO STOXX 50 call option.
The index is based on the DJ EURO STOXX 50 Price Index or on the DJ EURO STOXX 50 Total Return Index and a DJ EURO STOXX 50 call option traded at Eurex.
1.1.1 Basic Da t a Two versions of the DJ EURO STOXX 50 BuyWrite Index are available:
1. The DJ EURO STOXX 50 BuyWrite Index combines the DJ EURO STOXX 50 (Total Return) Index and a DJ EURO STOXX 50 call option.
2. The DJ EURO STOXX 50 BuyWrite (Price Index) combines the DJ EURO STOXX 50 (Price) Index and a DJ EURO STOXX 50 call option.
The base date of the DJ EURO STOXX 50 BuyWrite Index is 31 December 1999, with a base level of 100.
The index composition is adjusted on a monthly basis. On each third Friday of the month, a new one-month DJ EURO STOXX 50 call option is determined, which will be used to calculate the index until its last trading day, at noon (12:00 CET).
On regular trading days, the DJ EURO STOXX 50 BuyWrite Index is calculated every 60 seconds, between 9:00 and 18:00 CET; on option expiry dates, i.e. every third Friday in a month, only from 9:00 to 12:00 CET. The calculation is based on Eurex price data.
1.1.2 Historic al Da t a Historical index data is available back on a daily basis to the base date 31 December 1999.
www.stoxx.com 72 1 DJ EURO STOXX 50 BUYWRITE
1.2 Calculation
1.2.1 The Dow Jones EURO STOXX 50 BuyWrite Index Formula On regular trading days the DJ EURO STOXX 50 BuyWrite Index is calculated as follows:
DJES50(TR)t ΄ ∙ DJES50(P)EXP΅ – Ct DJES50(TR)EXP DJES50(BW)t = · DJES50(BW)EXP DJES50(P)EXP – Co The rolling is carried out monthly on every third Friday, i.e. on the expiry day (EXP).
DJES50(TR)EXP ΄ ∙ DJES50(P)EXP–1΅ – C’EXP DJES50(TR)EXP–1 DJES50(BW)EXP = · DJES50(BW)EXP–1 DJES50(P)EXP–1 – C’o Where:
DJES50(BW)t = DJ EURO STOXX 50 BuyWrite Index at time t DJES50(BW)EXP = Settlement value of DJ EURO STOXX 50 BuyWrite Index at the previous expiry day (EXP) DJES50(BW)EXP–1 = Settlement value of DJ EURO STOXX 50 BuyWrite Index at the last expiry day before the previous expiry date
DJES50(TR)t = Last price of DJ EURO STOXX 50 (Total Return) Index at time t DJES50(TR)EXP = Settlement price of DJ EURO STOXX 50 (Total Return) Index at the previous expiry day (EXP) DJES50(TR)EXP–1 = Settlement price of DJ EURO STOXX 50 (Total Return) Index at the last expiry day before the previous expiry date
DJES50(P)EXP = Settlement price of DJ EURO STOXX 50 (Price) Index at the previous expiry day (EXP) DJES50(P)EXP–1 = Settlement price of DJ EURO STOXX 50 (Price) Index at the last expiry day before the previous expiry date Ct = Last price of the DJ EURO STOXX 50 call option at time t Co = Inclusion price of the DJ EURO STOXX 50 call option; i.e. averages of all best bids quoted on Eurex between 12:15 – 12:45 CET at the last expiry day (EXP)
C’EXP = Settlement price of old DJ EURO STOXX 50 call option at the last expiry day (EXP) C’o = Inclusion price of the old DJ EURO STOXX 50 call option; i.e. averages of all best bids quoted on Eurex between 12:15 – 12:45 CET at the last expiry day (EXP-1), before the previous expiry day (EXP)
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1.2.2 The Dow Jones EURO STOXX 50 BuyWrite Index Formula (Price Index) On regular trading days the DJ EURO STOXX 50 BuyWrite (Price) Index is calculated as follows:
DJES50(P)t – Ct DJES50(BWPrice)t = · DJES50(BWPrice)EXP DJES50(P)EXP – Co
The rolling is carried out monthly on every third Friday, i.e. on the expiry day (EXP).
DJES50(P)EXP – C’EXP DJES50(BWPrice)EXP = · DJES50(BWPrice)EXP–1 DJES50(P)EXP–1 – C’o
Where:
DJES50(BWPrice)t = DJ EURO STOXX 50 BuyWrite (Price) Index at time t DJES50(BWPrice)EXP = Settlement value of DJ EURO STOXX 50 BuyWrite (Price) Index at the previous expiry day (EXP) DJES50(BWPrice)EXP–1 = Settlement value of DJ EURO STOXX 50 BuyWrite (Price) Index at the last expiry day before the previous expiry date
DJES50(P)EXP = Settlement price of DJ EURO STOXX 50 (Price) Index at the previous expiry day (EXP) DJES50(P)EXP–1 = Settlement price of DJ EURO STOXX 50 (Price) Index at the last expiry day before the previous expiry date
Ct = Last price of the DJ EURO STOXX 50 call option at time t Co = Inclusion price of the DJ EURO STOXX 50 call option; i.e. averages of all best bids quoted on Eurex between 12:15 – 12:45 CET at the last expiry day (EXP)
C’EXP = Settlement price of old DJ EURO STOXX 50 call option at the last expiry day (EXP) C’o = Inclusion price of the old DJ EURO STOXX 50 call option; i.e. averages of all best bids quoted on Eurex between 12:15 – 12:45 CET at the last expiry day (EXP-1), before the previous expiry day (EXP)
www.stoxx.com 74 1 DJ EURO STOXX 50 BUYWRITE
1.2.3 Computational Accuracy The DJ EURO STOXX 50 Index (Price and Total Return), the DJ EURO STOXX 50 call option and the DJ EURO STOXX 50 BuyWrite Index are published as fi gures rounded to two decimal places.
1.2.4 Rolling The DJ EURO STOXX 50 BuyWrite Index requires a monthly rollover procedure, whereby the old DJ EURO STOXX 50 call option ceases trading at noon (12:00 CET) on the pre-determined expiry date, i.e. third Friday of a month, and is replaced by a new DJ EURO STOXX 50 call option whose last trading day falls on the next expiry date. The new one-month DJ EURO STOXX 50 call option must have a remaining lifetime of one month, and must be 5 percent out-of-the-money (i.e. the highest strike price below or equal to the DJ EURO STOXX 50 settlement price plus 5 percent).
1.2.5 Trading Suspension If there is suspension of the DJ EURO STOXX 50 Index (Price or Total Return) or the DJ EURO STOXX 50 call option which is included in the DJ EURO STOXX 50 BuyWrite Index, then the index will be calculated using the latest prices which were available.
If a suspension occurs on an expiry day during the averaging process, i.e. 12:15 – 12:45 CET, only bids before the suspension will be considered.
In cases where the averaging procedure does not start at all (i.e. the suspension starts before 12:15 CET) then the averaging will be delayed until the end of the suspension on the same index business day. The averaging process will start 30 minutes after the end of the suspension and it will then take 30 minutes.
If the suspension will continue until the end of trading then the averaging will be delayed until the next index business day at 12:15 CET.
www.stoxx.com 75 2 DJ STOXX LEVERAGED AND SHORT
2.1 Overview
2.1.1 Coverage
Indices Leveraged Short DJ EURO STOXX 50 1 1 DJ STOXX 600 Supersectors – 19
2.2 Definitions
2.2.1 Base Date & Base Values The base dates and base values for the DJ STOXX indices are:
Indices Region Base Date Base Value Leveraged indices DJ EURO STOXX 50 Eurozone 31 December 1991 1,000
Short indices DJ EURO STOXX 50 Eurozone 31 December 1991 10,000 DJ STOXX 600 Supersector indices Europe 31 December 1991 10,000
2.2.1.1 Dow Jones STOXX Leveraged Index The index replicates the performance of an investor attaining twice the daily performance of the index or, in other words, a leverage factor of 2 with a daily rebalance. The double performance is achieved by investing twice the available money into the index portfolio, i.e. the available money is invested in the index basket, and the same amount is borrowed and additionally invested in the index.
The cost of borrowing is taken into account in the index calculation of the Leveraged index.
2.2.1.2 Dow Jones STOXX Short Index The index replicates the performance of an investor attaining the negative daily performance of the index, or, in other words, short selling the index with a daily rebalance.
The cost of dividends and the benefi t of earning interest are taken into account in the index calculation of the Short index.
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2.3 Indices
2.3.1 Dow Jones EURO STOXX 50 Leveraged Index The index replicates the performance of an investor attaining twice the daily performance of the index or, in other words, a leverage factor of 2 with a daily rebalance.
2.3.2. Dow Jones EURO STOXX 50 Short Index The index replicates the performance of an investor attaining the negative daily performance of the index, or, in other words, short selling the index with a daily rebalance.
2.3.3. Dow Jones STOXX 600 Supersector Short Indices The indices replicate the performance of an investor attaining the negative daily performance of the index, or, in other words, short selling the index with a daily rebalance.
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2.4 Calculation
2.4.1 The Dow Jones STOXX Leveraged Index Formula The Leveraged indices are calculated as follows:
DJS EONIA Index = t T t IndexT ∙ ΄΅ 2 ∙ – 1 – IndexT ∙ ∙ d DJST 360
LEVERAGE TERM FINANCING TERM Where: The ‘leverage term’ describes the effect of Price index movements on the Leveraged index portfolio. The ‘fi nancing term’ indicates the costs caused by raising capital and reinvesting in the index portfolio. Index = Leveraged index DJS = Dow Jones STOXX underlying Price index EONIA = Overnight interest rate* t = Time of calculation T = Close of last trading day prior to t d = Number of calendar days between t and T
2.4.2 The Dow Jones STOXX Short Index Formula The Short indices are calculated as follows:
DJSTR EONIA Index = t T t IndexT ∙ ΄΅ –1 ∙ + 2 + IndexT ∙ ∙ d ∙ 2 DJSTRT 360
INVERSE PERFORMANCE INTEREST ACCRUING TERM Where: The ‘inverse performance’ describes the effect of the Total Return index movements on the Short index. The ‘interest accruing term’ indicates the interest received from lending capital. Index = Short index DJSTR = Dow Jones STOXX underlying Total Return index EONIA = Overnight interest rate* t = Time of calculation T = Close of last trading day prior to t d = Number of calendar days between t and T
*Euro Overnight Index Average (EONIA) is the effective reference rate computed daily as a weighted average of all overnight unsecured lending transactions undertaken in the interbank market by the European Central Bank since 1 January 1999. Up to this date the daily interest provided by Deutsche Bundesbank has been used for calculation purposes.
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2.4.3 Computational Accuracy The DJ STOXX Short and the Leveraged indices are published as fi gures rounded to two decimal places.
All relevant parameters for calculation of the Dow Jones Price and Total Return indices are as described above.
2.4.4 Adjustments due to Extreme Market Movements
2.4.4.1 Exceptional Handler for the Dow Jones STOXX Leveraged Index
DJSt < DJST · 0.75
If the DJ STOXX Price index drops by 25 percent at the time of calculation t compared to the closing price on the last trading day T, the leverage will be adjusted intraday. During the adjustment, the latest prices received before time t are considered. No additional refi nancing costs (‘fi nancing term’) are calculated.
The adjustment will be carried out by simulating a new day, by setting:
t = T (i.e. DJST = DJSt and IndexT = Indext) d = 0
With this adjustment the risk of a total loss is substantially limited.
2.4.4.2 Exceptional Handler for the Dow Jones STOXX Short Index
DJSTRt > DJSTRT · 1.25
If the DJ STOXX Total Return index rises by 25 percent at the time of calculation t compared to the closing price on the last trading day T, the inverse performance will be adjusted intraday. During the adjustment, the latest prices received before time t are considered. No additional interest (‘interest accruing term’) rates are calculated. The adjustment will be carried out by simulating a new day, by setting:
t = T (i.e. DJSTRT = DJSTRt and IndexT = Indext) d = 0
2.4.5 Trading Suspension The DJ STOXX Leveraged and the Short indices are calculated on the same days and during the same time as the underlying DJ STOXX indices are calculated.
If there is suspension of the DJ STOXX Price or Total Return index, the DJ STOXX Leveraged or Short indices will be calculated with the latest prices available.
www.stoxx.com 79 3 DJ EURO STOXX 50 VOLATILITY (VSTOXX)
3.1 Overview
3.1.1 Concept Volatility is a measure of the level of uncertainty prevailing in certain markets. In principle, there are two different approaches to estimating volatility. Historical volatility involves measuring the standard deviation of historical closing prices for any particular security over a given period of time. Implied volatility is derived from option prices; this kind of volatility represents the estimates and assumptions of market participants involved in a trade, on the basis of a given option price.
The DJ EURO STOXX 50 Volatility Index (VSTOXX) does not measure implied volatilities of at-the-money DJ EURO STOXX 50 options but the implied variance across all options of a given time to expiry1. This model has been jointly developed by Goldman Sachs and Deutsche Börse. It offers great advantages in terms of trading, hedging and introducing derivative products on this index. The main index VSTOXX is designed as a rolling index at a fi xed 30 days to expiry through linear interpolation of the two nearest of the eight available subindices. The VSTOXX and its eight subindices are updated every minute.
3.1.1.1 Underlying Index and Index Options The DJ EURO STOXX 50 measures the performance of the Eurozone equity market. It covers the 50 largest sector leaders in the Eurozone based on free fl oat market capitalisation. The index is calculated every 15 seconds and provides a comprehensive and up-to-date image of the Eurozone stock market. The options contract on this index is one of the products of Eurex with the highest trading volume2. The VSTOXX is calculated on the basis of eight expiry months with a maximum time to expiry of two years.
3.1.1.2 Subindices Apart from the main index VSTOXX (which is irrespective of a specifi c time to expiry), subindices for each time to expiry of the DJ EURO STOXX 50 options, ranging from one month to two years, are calculated and distributed. For options with longer time to expire, no such subindices are currently available.
The various VSTOXX subindices are calculated on the basis of all options available. The calculations are based on the best bid and best ask available for these options in the Eurex system.
3.1.1.3 VST OX X The VSTOXX is calculated by way of linear interpolation using the two subindices which include the remaining time to expiry of 30 days for VSTOXX. The VSTOXX is therefore independent of a specifi c time to expiry, i.e. it does not expire. This helps to eliminate effects that typically result in strong volatility fl uctuations close to expiry.
1 STOXX®, Dow Jones EURO STOXX 50® and VSTOXX® are registered trademarks of STOXX Ltd. 2 Eurex® and REX® are registered trademarks of Deutsche Börse AG
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3.1.2 Input Data During the calculation hours for the VSTOXX and the respective eight subindices (9:15 to 17:30 CET), the following data is used via snapshots every minute:
DJ EURO STOXX 50 - DJ EURO STOXX 50 Index OESX - Best bid and best ask of all DJ EURO STOXX 50 options EONIA - Euro Overnight Index Average – overnight interest rate EURIBOR - Euro Interbank Offered Rates – money market reference rates for 1, 2, … 12 months (calculated once a day, 11:00 CET, by the European Banking Federation) REX - Yield of the 2-year REX as the longer-term interest rate
Index Name Period Code ISIN EONIA 1 day EU1D EU0009659945 EURIBOR 1 month 1 month EU1M EU0009659937 EURIBOR 2 months 2 months EU2M EU0009652841 EURIBOR 3 months 3 months EU3M EU0009652783 EURIBOR 4 months 4 months EU4M EU0009652858 EURIBOR 5 months 5 months EU5M EU0009652866 EURIBOR 6 months 6 months EU6M EU0009652791 EURIBOR 7 months 7 months EU7M EU0009652874 EURIBOR 8 months 8 months EU8M EU0009652882 EURIBOR 9 months 9 months EU9M EU0009652890 EURIBOR 10 months 10 months EU10 EU0009652908 EURIBOR 11 months 11 months EU11 EU0009652916 EURIBOR 12 months 12 months EU12 EU0009652809 REX 2-year (Price index) 2 years REX2 DE0008469149
3.1.3 Dissemination The VSTOXX and its eight subindices are calculated on every Eurex exchange trading day, from 9:15 to 17:30 CET.
The realtime calculation of a sub-index is triggered as soon as all required input data for this sub-index is available.
The dissemination of the VSTOXX commences as soon as the two subindices, which include the 30-day time to expiry, become available and thus allow for an interpolation.
In line with the expiration structure of DJ EURO STOXX 50 options, each of the eight subindices is assigned to a specifi c expiry, which can be directly identifi ed from the respective code. There is a system of 120 codes and ISINs, only eight of each of which are in simultaneous use at any time.
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3.1.4 Historical Data
Index Code ISIN Daily closing price since VSTOXX V2TX DE000A0C3QF1 4 January 1999 VSTOXX 1M V6I1 DE000A0G87B2 4 January 1999 VSTOXX 2M V6I2 DE000A0G87C0 4 January 1999 VSTOXX 3M V6I3 DE000A0G87D8 4 January 1999 VSTOXX 6M V6I4 DE000A0G87E6 4 January 1999 VSTOXX 9M V6I5 DE000A0G87F3 4 January 1999 VSTOXX 12M V6I6 DE000A0G87G1 4 January 1999 VSTOXX 18M V6I7 DE000A0G87H9 4 January 1999 VSTOXX 24M V6I8 DE000A0G87J5 4 January 1999
The VSTOXX and its eight subindices have been calculated on a realtime basis starting April 2005. Historical time series for the main index and the subindices, based on daily settlement prices, date back to 4 January 1999.
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3.2 Data and Calculation
3.2.1 Index Calculation The model for VSTOXX aims at making pure volatility tradable – i.e. the index should be trackable by a portfolio which does not react to price fl uctuations, but only to changes in volatility. This is not directly achieved through volatility, but rather through variance or squared volatility. A portfolio of DJ EURO STOXX 50 options with different exercise prices with a given weighting, as described below, meets this requirement. So the implied volatilities of all options of a given time to expiry are considered.
The subindices are calculated according to the formula shown below: