Index description

Universe of Index Components
Equity securities or Substitutes of companies from the Reference Market.
Index Components and their selection
1. Selection of Portfolio Managers
The eligible portfolio managers selection is deemed to include 40 to 50 managers investing in the Reference Market. The selection is determined annually in January on the last Business Day (the "Managers Selection Day"). Eligible portfolio managers must meet the following criteria. They:
a) Follow a fundamental investment philosophy,
b) Manage a concentrated portfolio: top ten portfolio positions > 30%,
c) Manage a portfolio value> USD 100 million.
The selection of portfolio managers remains the same until the next Managers Selection Day unless any of the portfolio managers no longer meets the criteria or due to any event that substantially changes the way a portfolio is managed. The definition of a substantial change is at the discretion of the Index Allocator.
2. Selection of Securities
The eligible securities are determined quarterly by aggregating all the positions held in the portfolios of the selected managers on the basis of the latest published inventories.
(A) General criteria: Securities of the universe must fulfil the following criteria at the Rebalancing Determination Date to be eligible for the index component selection. The following process is applied:
a) Eligible securities are ranked by decreasing weightings of positions held by the selection of portfolio managers;
b) eligible securities must be listed on an exchange;
c) market capitalization of eligible securities must be between 500$ million and 50$ billion;
d) singletons defined as only one security line selected by a single manager out of the Selection of Portfolio Managers are not eligible;
e) Securities whose aggregated weighting is composed for more than two-thirds of a single portfolio manager’s weight are normalised. The normalisation is done by allocating, to this specific single portfolio manager, the average weight calculated from the remaining portfolio managers holding the specific security;
f) if multiple lines of a stock qualify for the Index, the less liquid is removed;
g) Then, a filter is used to exclude:
• Companies involved in serious violations of international standards, and which do not respect the principles of the United Nations Global Compact;
• Companies involved in controversial weapons (anti-personnel mines, cluster bombs, bacteriological or chemical weapons, depleted uranium or white phosphorus munitions);
• Companies with serious and/or recurring controversies on environmental, social and governance issues.
h) The Index Component Selection is then composed of the 40 top remaining eligible securities.
With each selection of securities and a following rebalancing, an equal weight of the Index Components is applied.
 
(B) ESG Score criteria: The following additional criteria must be met at the Rebalancing Determination Date:
a) The weighted average ESG risk score of the preliminary index component selection resulting after the step described in item g) of the general criteria set out under (A) above must be lower than the weighted average ESG risk score of an ESG Adjusted Reference Portfolio (as defined in item c) hereafter) using a combined ESG risk score from an external data provider to determine the ESG risk score of the individual securities. Individual securities, for which no such combined ESG risk score is available, will not be considered when calculating the weighted average ESG risk score.
b) For at least 90% of the securities included in the preliminary index component selection, a combined ESG risk score must be available.
c) The "ESG Adjusted Reference Portfolio" is constructed by removing 20% of the components of a reference portfolio composed of about 2500 listed companies representative of the small and mid capitalisation universe in the U.S. which have the highest combined ESG risk score relative to the other components of such reference portfolio.
d) If condition a) or b) of these ESG Score criteria is not met, the security with the highest individual combined ESG risk score of the preliminary index component selection is removed from the preliminary index component selection and the next highest ranking eligible security from the potential list of securities resulting after item f) of the general criteria set out under (A) above, which has not yet been included in the preliminary index component selection, is included in an updated index component selection instead. The step described in this item c) will be repeated until condition a) and b) are met in respect of the updated index component selection, which then becomes the final index component selection.
 
With each selection of securities and a following rebalancing, an equal weight of the Index Components is applied.