The Basket Components
All disclosures contained in this term sheet regarding the Basket Components, including, without
limitation, their make-up, method of calculation, and changes in their components, have been derived from publicly available sources. The information reflects the policies of, and is subject to change by each of STOXX Limited (“STOXX”) with
respect to the EURO STOXX 50
®
Index (the “SX5E”), FTSE International Limited (“FTSE”) with respect to the FTSE
®
100 Index (the “UKX”), Nikkei Inc. (“Nikkei”) with respect to the Nikkei 225 Index (the “NKY”), S&P Dow
Jones Indices LLC (“S&P”), a division of S&P Global, with respect to the S&P/ASX 200 Index (the “AS51”), the Geneva, Zurich, SIX Group Ltd., certain of its subsidiaries, and the Management Committee of the SIX Swiss Exchange (the
“SIX Exchange”), with respect to the Swiss Market Index
®
(the “SMI”), and Hang Seng Indexes Company Limited (“HSIL”) with respect to the Hang Seng
®
Index (the “HSI”) (STOXX, FTSE, Nikkei, S&P, Six Exchange and HSIL
together, the “Index sponsors”). The Index sponsors have no obligation to continue to publish, and may discontinue or suspend the publication of any Basket Component at any time. The consequences of any Index sponsor discontinuing publication
of a Basket Component are discussed in the section entitled “Description of LIRNs—Discontinuance of an Index" beginning on page PS-20 of product prospectus supplement EQUITY INDICES LIRN-1. None of us, the calculation agent, or MLPF&S
accepts any responsibility for the calculation, maintenance or publication of any Basket Component or any successor index.
The EURO STOXX 50
®
Index
The SX5E is a capitalization-weighted index of 50 European blue-chip stocks in 11 Eurozone countries.
Publication of the SX5E began on February 26, 1998, based on an initial index value of 1,000 at December 31, 1991. The level of the SX5E is disseminated on, and additional information about the SX5E is published on, the STOXX website.
Information contained in the STOXX website is not incorporated by reference in, and should not be considered a part of, this term sheet.
As of February 28, 2019, the top ten industry sectors which comprise the SX5E represent the following
weights in the SX5E: Banks (11.0%), Industrial Goods & Services (10.7%), Personal & Household Goods (10.2%), Health Care (9.8%), Technology (9.7%), Chemicals (8.1%), Oil & Gas (7.3%), Insurance (6.8%), Telecommunications (4.6%) and
Utilities (4.6%). As of February 28, 2019, the eight countries which comprise the SX5E represent the following weights therein: France (38.7%), Germany (31.1%), Netherlands (10.4%), Spain (10.2%), Italy (4.9%), Belgium (2.5%), Finland (1.3%)
and Ireland (1.0%).
Index Composition and Maintenance
For each of the 19 EURO STOXX regional supersector indices, the stocks are ranked in terms of free-float
market capitalization. The largest stocks are added to the selection list until the coverage is close to, but still less than, 60% of the free-float market capitalization of the corresponding supersector index. If the next highest-ranked stock
brings the coverage closer to 60% in absolute terms, then it is also added to the selection list. All current stocks in the SX5E are then added to the selection list. All of the stocks on the selection list are then ranked in terms of
free-float market capitalization to produce the final index selection list. 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. In exceptional cases, STOXX’s management board can add stocks to and remove them from the selection list.
The SX5E components are subject to a capped maximum index weight of 10%, which is applied on a quarterly
basis.
The composition of the SX5E is reviewed annually, based on the closing stock data on the last trading day
in August. Changes in the composition of the SX5E are made to ensure that the SX5E includes the 50 market sector leaders from within the SX5E.
The SX5E is subject to a “fast exit rule.” The SX5E components are monitored for any changes based on the monthly selection
list ranking. A stock is deleted from the SX5E if: (a) it ranks 75 or below on the monthly selection list and (b) it ranked 75 or below on the selection list of the previous month. The highest-ranked stock that is not an SX5E component will
replace it. Changes will be implemented on the close of the fifth trading day of the month, and are effective the next trading day.
The SX5E is also subject to a “fast entry rule.” All stocks on the latest selection lists and initial public offering (IPO)
stocks are reviewed for a fast-track addition on a quarterly basis. A stock is added, if (a) it qualifies for the latest STOXX blue-chip selection list generated at the end of February, May, August or November and (b) it ranks within the “lower
buffer” (ranks 1-25) on this selection list.
The SX5E is also reviewed on an ongoing basis. Corporate actions (including initial public offerings, mergers and takeovers, spin-offs,
delistings, and bankruptcy) that affect the SX5E composition are immediately reviewed. Any changes are announced, implemented, and effective in line with the type of corporate action and the magnitude of the effect.
Index Calculation
The SX5E is calculated with the “Laspeyres formula,” which measures the aggregate price changes in the
component stocks against a fixed base quantity weight. The formula for calculating the SX5E value can be expressed as follows:
Index =
free float market
capitalization of the Index at the time
divisor of the Index at the time
The “free float market capitalization of the Index” is equal to the sum of the products of the closing price, number of shares, free float
factor, and weighting cap factor for the component company as of the time that the SX5E is being calculated.