Other Terms of the Notes
Market Measure Business Day
The following definition shall supersede and replace the definition of a “Market Measure Business Day” set forth in product
prospectus supplement EQUITY INDICES MITTS-1:
A “Market Measure Business Day” means a day on which:
(A)
|
each of the Eurex (as to the EURO STOXX 50
®
Index), the London Stock Exchange (as to the FTSE
®
100 Index), the Tokyo Stock Exchange (as to the Nikkei Stock Average Index), the SIX
Swiss Exchange (as to the Swiss Market Index
®
), the Australian Stock Exchange (as to the S&P/ASX 200 Index) and the Stock Exchange of Hong Kong (as to the Hang Seng
®
Index) (or any successor to the
foregoing exchanges) are open for trading; and
|
(B)
|
the Basket Components or any successors thereto are calculated and published.
|
The Basket
The Basket is designed to allow investors to participate in the percentage changes in the levels of the Basket Components from the Starting Value to the Ending Value of the
Basket. The Basket Components are described in the section “The Basket Components” below. Each Basket Component will be assigned an initial weight on the pricing date, as set forth in the table below.
For more information on the calculation of the value of the Basket, please see the section entitled “Description of the Notes—Basket Market Measures”
beginning on page PS-21 of product prospectus supplement EQUITY INDICES MITTS-1.
If June 24
, 2019 were the pricing date, for each Basket Component, the Initial Component Weight, the closing level, the hypothetical Component Ratio
and the initial contribution to the Basket value would be as follows:
Basket Component
|
|
Bloomberg Symbol
|
|
Initial Component Weight
|
|
Closing Level
(1)(2)
|
|
Hypothetical Component Ratio
(1)(3)
|
|
Initial Basket Value Contribution
|
EURO STOXX 50
®
Index
|
|
SX5E
|
|
40.00%
|
|
3,455.57
|
|
0.01157551
|
|
40.00
|
FTSE
®
100 Index
|
|
UKX
|
|
20.00%
|
|
7,416.69
|
|
0.00269662
|
|
20.00
|
Nikkei Stock Average Index
|
|
NKY
|
|
20.00%
|
|
21,285.99
|
|
0.00093959
|
|
20.00
|
Swiss Market Index
®
|
|
SMI
|
|
7.50%
|
|
9,898.85
|
|
0.00075766
|
|
7.50
|
S&P/ASX 200 Index
|
|
AS51
|
|
7.50%
|
|
6,665.437
|
|
0.00112521
|
|
7.50
|
Hang Seng
®
Index
|
|
HSI
|
|
5.00%
|
|
28,513.00
|
|
0.00017536
|
|
5.00
|
|
|
|
|
|
|
|
|
Starting Value
|
|
100.00
|
(1)
|
The actual closing level of each Basket Component and the resulting actual Component Ratios will be determined on the pricing date, subject to adjustment as more fully described in the section entitled
“Description of the Notes—Basket Market Measures—Determination of the Component Ratio for Each Basket Component” beginning on page PS-36 of product prospectus supplement EQUITY INDICES MITTS-1 if a Market Disruption Event occurs on
the pricing date as to any Basket Component.
|
(2)
|
These were the closing levels of the Basket Components on June 24, 2019.
|
(3)
|
Each hypothetical Component Ratio equals the Initial Component Weight of the relevant Basket Component (as a percentage) multiplied by 100.00, and then divided by the closing level of that Basket
Component on June 24, 2019 and rounded to eight decimal places.
|
The calculation agent will calculate the value of the Basket on each calculation day during the Maturity Valuation Period by summing the products of the
closing level for each Basket Component on such calculation day and the Component Ratio applicable to such Basket Component. If a Market Disruption Event occurs as to any Basket Component on any scheduled calculation day, the closing level
of that Basket Component will be determined as more fully described beginning on page PS-22 of product prospectus supplement EQUITY INDICES MITTS-1 in the section “Description of the Notes—Observation Level or Ending Value of the Basket”.
While actual historical information on the Basket will not exist before the pricing date, the following graph sets forth the
hypothetical historical performance of the Basket from January 1, 2008 through June 24, 2019. The graph is based upon actual daily historical levels of the Basket Components, hypothetical Component Ratios based on the closing levels of the
Basket Components as of December 31, 2007, and a Basket value of 100.00 as of that date. This hypothetical historical data on the Basket is not necessarily indicative of the future performance of the Basket or what the value of the notes may
be. Any hypothetical historical upward or downward trend in the value of the Basket during any period set forth below is not an indication that the value of the Basket is more or less likely to increase or decrease at any time over the term
of the notes.
Hypothetical Historical Performance of the Basket
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 the MITTS—Discontinuance of an Index" beginning on page PS-20 of product prospectus supplement EQUITY INDICES MITTS-1. None of us, the calculation agent, MLPF&S or BofAS 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 May 31, 2019, the top ten industry sectors which comprise the SX5E represent the following weights in the SX5E: Personal & Household Goods (11.7%), Industrial Goods &
Services (10.8%), Technology (10.5%), Banks (9.8%), Health Care (9.0%), Chemicals (8.2%), Insurance (6.9%), Oil & Gas (6.7%), Utilities (4.9%) and Telecommunications (4.7%). As of May 31, 2019, the eight countries which comprise the
Index represent the following weights therein: France (38.9%), Germany (31.4%), Netherlands (10.4%), Spain (10.0%), Italy (4.6%), Belgium (2.6%), Finland (1.1%) 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.
The SX5E is calculated using a divisor that helps to maintain the continuity of the SX5E’s value so that corporate actions do not artificially increase or
decrease the level of the SX5E. The divisor of the SX5E is adjusted to maintain the continuity of the SX5E’s values across changes due to corporate actions, such as cash dividends, rights offerings, stock dividends from treasury shares,
repurchases of shares and self-tender, and spin-offs.
The following graph shows the daily historical performance of the SX5E
in the period from January 1, 2008 through June 24, 2019. We
obtained this historical data from Bloomberg L.P. We have not independently verified the accuracy or completeness of the information obtained from Bloomberg L.P. On June 24, 2019, the closing level of the SX5E
was 3,455.57.
Historical Performance of the EURO STOXX 50
®
Index
This historical data on the SX5E is not necessarily indicative of the future performance of the SX5E or what the value of the notes
may be. Any historical upward or downward trend in the level of the SX5E during any period set forth above is not an indication that the level of the SX5E
is more or less likely to increase or decrease at any time over the term of
the notes.
Before investing in the notes, you should consult publicly available sources for the levels of the SX5E.
License Agreement
BNS has entered into a non-exclusive license agreement with STOXX, which grants BNS a license in exchange for a fee to use the SX5E in connection with the
issuance of certain securities, including the notes.
STOXX, Deutsche Börse Group and their licensors, research partners or data providers have no relationship to BNS, other than the licensing of the SX5E and
the related trademarks for use in connection with the notes.
STOXX, Deutsche Börse Group and their licensors, research partners or data providers do not:
·
|
sponsor, endorse, sell or promote the notes;
|
·
|
recommend that any person invest in the notes or any other financial products;
|
·
|
have any responsibility or liability for or make any decisions about the timing, amount or pricing of the notes;
|
·
|
have any responsibility or liability for the administration, management or marketing of the notes; and
|
·
|
consider the needs of the notes or the owners of the notes in determining, composing or calculating the SX5E or have any obligation to do so.
|
STOXX, Deutsche Börse Group and their licensors, research partners or data providers give no warranty, and exclude any liability (whether in negligence or otherwise) in
connection with the notes or their performance.
STOXX does not assume any contractual relationship with the purchasers of the notes or any third parties.
Specifically,
·
|
The Sponsor, Deutsche Börse Group and their licensors, research partners or data providers do not make any warranty, express or implied and disclaim any and all warranty about:
|
·
|
the results to be obtained by the notes, the owner of the notes or any other person in connection with the use of the SX5E and the data included in the SX5E;
|
·
|
the accuracy, timeliness, and completeness of the SX5E or its data;
|
·
|
the merchantability and the fitness for a particular purpose or use of the SX5E or its data; and
|
·
|
the performance of the notes generally.
|
·
|
STOXX, Deutsche Börse Group and their licensors, research partners or data providers give no warranty and exclude any liability, for any errors, omissions or interruptions in the SX5E or its data; and
|
·
|
under no circumstances will Deutsche Börse Group and their licensors, research partners or data providers be liable (whether in negligence or otherwise) for any lost profits or indirect, punitive,
special or consequential damages or losses, arising as a result of such errors, omissions or interruptions in the SX5E or its data or generally in relation to the notes, even in circumstances where the Sponsor Deutsche Börse Group
and their licensors, research partners or data providers are aware that such loss or damage may occur.
|
The FTSE
®
100 Index
The UKX is a market-capitalization weighted index calculated, published and disseminated by FTSE, an independent company wholly owned by the London Stock
Exchange Group (the “LSE”). The UKX is designed to measure the composite performance of the 100 largest UK domiciled blue chip companies that pass screening for size and liquidity traded on the LSE. The UKX was launched on January 3, 1984
and has a base date of December 30, 1983. The UKX is reported by Bloomberg under the ticker symbol “UKX.”
The UKX is calculated by (i) multiplying the per share price of each stock included in the UKX by the number of outstanding shares and by the free float
factor applicable to such stock, (ii) calculating the sum of all these products (such sum referred to hereinafter as the “FTSE Aggregate Market Value”) as of the starting date of the UKX and (iii) dividing the FTSE Aggregate Market Value by
a divisor which represents the total issued share capital of the UKX on the base date and which can be adjusted to allow changes in the issued share capital of individual underlying stocks (including the deletion and addition of stocks, the
substitution of stocks, stock dividends and stock splits) to be made without distorting the UKX. Because of such capitalization weighting, movements in share prices of companies with relatively larger market capitalization will have a
greater effect on the level of the entire UKX than will movements in share prices of companies with relatively smaller market capitalization.
The 100 stocks included in the UKX (the “FTSE 100 Index Underlying Stocks”) were selected from a reference group of stocks trading on the LSE which were
selected by excluding certain stocks that have low liquidity based on public float, accuracy and reliability of prices, size and number of trading days. The FTSE 100 Index Underlying Stocks were selected from this reference group by
selecting 100 stocks with the largest market value. A list of the issuers of the FTSE 100 Index Underlying Stocks is available from FTSE. The UKX is reviewed quarterly by the FTSE Europe/Middle East/Africa Regional Committee (the
“Committee”) in order to maintain continuity in the level. The FTSE 100 Index Underlying Stocks may be replaced, if necessary, in accordance with deletion/addition rules which provide generally for the removal and replacement of a stock
from the UKX if such stock is delisted or its issuer is subject to a takeover offer that has been declared unconditional or it has ceased to be a viable component of the UKX. To maintain continuity, a stock will be added at the quarterly
review if it has risen to 90th place or above and a stock will be deleted if at the quarterly review it has fallen to 111th place or below, in each case ranked on the basis of market value.
The following graph shows the daily historical performance of the UKX in the period from January 1, 2008 through June 24, 2019. We obtained this historical data from Bloomberg L.P. We have
not independently verified the accuracy or completeness of the information obtained from Bloomberg L.P. On June 24, 2019, the closing level of the UKX was 7,416.69.
Historical Performance of the FTSE
®
100 Index
This historical data on the UKX is not necessarily indicative of the future performance of the UKX or what the value
of the notes may be. Any historical upward or downward trend in the level of the UKX during any period set forth above is not an indication that the level of the UKX is more or less likely to increase or decrease at any time over the term
of the notes.
Before investing in the notes, you should consult publicly available sources for the levels of the UKX.
License Agreement
BNS has entered into a non-exclusive license agreement with FTSE, whereby BNS and its affiliates and subsidiary companies and certain of its affiliates, in
exchange for a fee, will be permitted to use the UKX, which is owned and published by FTSE, in connection with certain products, including the notes.
Neither FTSE nor the LSE makes any representation or warranty, express or implied, to the owners of the notes or any member of the public regarding the
advisability of investing in structured products generally or in the notes particularly, or the ability of the UKX to track general stock market performance. FTSE and the LSE’s only relationship with BNS is the licensing of certain
trademarks and trade names of FTSE, respectively, without regard to us or the notes. FTSE and the LSE have no obligation to take the needs of us or the holders of the notes into consideration in determining, composing or calculating the
UKX. Neither FTSE nor the LSE is responsible for and has not participated in the determination of the timing, price or quantity of the notes to be issued or in the determination or calculation of the amount due at maturity of the notes.
Neither FTSE nor the LSE has any obligation or liability in connection with the administration, marketing or trading of the notes.
The notes are not in any way sponsored, endorsed, sold or promoted by FTSE or the LSE, and neither FTSE nor the LSE makes any claim, prediction, warranty or
representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the UKX and/or the figure at which the said component stands at any particular time on any particular day or otherwise, or the
suitability of the UKX for the purpose to which it is being put in connection with the notes. The UKX is compiled and calculated by FTSE. However, neither FTSE nor the LSE shall be liable (whether in negligence or otherwise) to any person
for any error in the UKX and neither FTSE nor the LSE shall be under any obligation to advise any person of any error therein.
“FTSE
®
,” “FTSE
TM
,” “FT-SE
®
” and “Footsie
®
” are trade marks of the London Stock Exchange Group companies and are
used by FTSE International Limited under license. “All-World,” “All-Share” and “All-Small” are trade marks of FTSE International Limited.
The Nikkei Stock Average Index
The NKY is a stock index that measures the composite price performance of selected Japanese stocks. The NKY is based on 225 underlying stocks (the “Nikkei
Underlying Stocks”) trading on the Tokyo Stock Exchange (“TSE”), representing a broad cross-section of Japanese industries. All 225 Nikkei Underlying Stocks are stocks listed in the First Section of the TSE. Stocks listed in the First
Section of the TSE are among the most actively traded stocks on the TSE. Nikkei’s rules require that the 75 most liquid issues (one-third of the component count of the NKY) be included in the NKY. Nikkei first calculated and published the
NKY in 1970; prior to 1970, the TSE calculated the NKY. The NKY is reported by Bloomberg under the ticker symbol “NKY.”
The 225 companies included in the NKY are divided into six sector categories: Technology, Financials, Consumer Goods, Materials, Capital
Goods/Others and Transportation and Utilities. These six sector categories are further divided into 36 industrial classifications as follows:
|
◾
|
Technology — Pharmaceuticals, Electrical Machinery, Automobiles, Precision Machinery, Telecommunications;
|
|
◾
|
Financials — Banks, Miscellaneous Finance, Securities, Insurance;
|
|
◾
|
Consumer Goods — Marine Products, Food, Retail, Services;
|
|
◾
|
Materials — Mining, Textiles, Paper and Pulp, Chemicals, Oil, Rubber, Ceramics, Steel, Nonferrous Metals, Trading Houses;
|
|
◾
|
Capital Goods/Others — Construction, Machinery, Shipbuilding, Transportation Equipment, Miscellaneous Manufacturing, Real Estate; and
|
|
◾
|
Transportation and Utilities — Railroads and Buses, Trucking, Shipping, Airlines, Warehousing, Electric Power, Gas.
|
Calculation of the NKY
The NKY is a modified, price-weighted index (
i.e.
, a Nikkei Underlying Stock’s weight in the NKY is based on its
price per share rather than the total market capitalization of the issuer) which is calculated by (i) multiplying the per share price of each Nikkei Underlying Stock by the corresponding weighting factor for such Nikkei Underlying Stock (a
“Weight Factor”), (ii) calculating the sum of all these products and (iii) dividing such sum by a divisor (the “Divisor”). The Divisor was initially set at 225 for the date of May 16, 1949 (the date on which the TSE was reopened after World
War II) using historical numbers from that date. The Divisor is subject to periodic adjustments as set forth below. Each Weight Factor is computed by dividing ¥50 by the presumed par value of the relevant Nikkei Underlying Stock, so that
the share price of each Nikkei Underlying Stock when multiplied by its Weight Factor corresponds to a share price based on a uniform par value of ¥50. The stock prices used in the calculation of the NKY are those reported by a primary
market for the Nikkei Underlying Stocks (currently the TSE). The level of the NKY is calculated once every 15 seconds during TSE trading hours.
In order to maintain continuity in the NKY in the event of certain changes due to non-market factors affecting the Nikkei Underlying Stocks, such as the
addition or deletion of stocks, substitution of stocks, stock splits or distributions of assets to stockholders, the Divisor used in calculating the NKY is adjusted in a manner designed to prevent any instantaneous change or discontinuity
in the level of the NKY. Thereafter, the Divisor remains at the new value until a further adjustment is necessary as the result of another change. As a result of such change affecting any Nikkei Underlying Stock, the Divisor is adjusted in
such a way that the sum of all share prices immediately after the change multiplied by the applicable Weight Factor and divided by the new Divisor (
i.e.
, the level of the NKY immediately after such
change) will equal the level of the NKY immediately prior to the change.
Standards for Listing and Maintenance
A Nikkei Underlying Stock may be deleted or added by Nikkei. Any stock becoming ineligible for listing in the First Section of the TSE due to any of the
following reasons will be deleted from the Nikkei Underlying Stocks: (i) bankruptcy of the issuer, (ii) merger of the issuer with, or acquisition of the issuer by, another company, (iii) delisting of such stock, (iv) transfer of such stock
to the “Seiri-Meigara” because of excess debt of the issuer or because of any other reason or (v) transfer of such stock to the Second Section. In addition, a component stock transferred to the “Kanri-Meigara” (posts for stocks under
supervision) becomes a candidate for deletion. Nikkei Underlying Stocks with relatively low liquidity, based on trading value and rate of price fluctuation over the past five years, may be deleted by Nikkei. Upon deletion of a stock from
the Nikkei Underlying Stocks, Nikkei will select a replacement for such deleted Nikkei Underlying Stock in accordance with certain criteria. In an exceptional case, a newly listed stock in the First Section of the TSE that is recognized by
Nikkei to be representative of a market may be added to the Nikkei Underlying Stocks. In such a case, an existing Nikkei Underlying Stock with low trading volume and deemed not to be representative of a market will be deleted by Nikkei.
A list of the issuers of the Nikkei Underlying Stocks constituting the NKY is published by Nikkei. Nikkei may delete, add or substitute any stock
underlying the NKY.
The following graph shows the daily historical performance of the NKY in the period from January 1, 2008 through June 24, 2019. We obtained this historical data from Bloomberg L.P. We
have not independently verified the accuracy or completeness of the information obtained from Bloomberg L.P. On June 24, 2019, the closing level of the NKY was 21,285.99.
Historical Performance of the Nikkei Stock Average Index
This historical data on the NKY is not necessarily indicative of the future performance of the NKY or what the value
of the notes may be. Any historical upward or downward trend in the level of the NKY during any period set forth above is not an indication that the level of the NKY is more or less likely to increase or decrease at any time over the term
of the notes.
Before investing in the notes, you should consult publicly available sources for the levels of the NKY.
License Agreement
BNS will enter into an agreement with Nikkei providing us with a non-exclusive license with the right to use the NKY in exchange for a fee. The NKY is the
intellectual property of Nikkei. “Nikkei,” “Nikkei Stock Average,” “Nikkei Average,” and “Nikkei 225” are the service marks of Nikkei. Nikkei reserves all the rights, including copyright, to the NKY.
The notes are not in any way sponsored, endorsed or promoted by Nikkei. Nikkei does not make any warranty or representation whatsoever, express or implied,
either as to the results to be obtained as to the use of the NKY or the figure as which the NKY stands at any particular day or otherwise. The NKY is compiled and calculated solely by Nikkei. However, Nikkei shall not be liable to any
person for any error in the NKY and Nikkei shall not be under any obligation to advise any person, including a purchaser or seller of the notes, of any error therein.
In addition, Nikkei gives no assurance regarding any modification or change in any methodology used in calculating the NKY and is under no obligation
to continue the calculation, publication and dissemination of the NKY.
The Swiss Market Index
®
The Swiss Market Index
®
(Bloomberg ticker “SMI”):
◾
|
was first launched with a base level of 1,500 as of June 30, 1988; and
|
◾
|
is sponsored, calculated, published and disseminated by the SIX Exchange.
|
The SMI is a price return float-adjusted market capitalization-weighted index of the 20 largest stocks traded on the Swiss Stock Exchange.
The Management Committee of SIX Swiss Exchange is supported by an Index Commission (advisory board) in all index-related matters, notably in connection with changes to the SMI rules and adjustments, additions and exclusions outside of the
established review and acceptance period. The Index Commission meets at least twice annually.
Index Composition and Selection Criteria
The SMI is comprised of the 20 highest-ranked stocks traded on the Swiss Stock Exchange that have a free float of 20% or more and that are
not investment companies. The equity universe is largely Swiss domestic companies; however, in some cases, foreign issuers with a primary listing on the Swiss Stock Exchange or investment companies that do not hold any shares of any other
eligible company and that have a primary listing on the Swiss Stock Exchange may be included.
The ranking of each security is determined by a combination of the following criteria:
◾
|
average free-float market capitalization (compared to the capitalization of the entire Swiss Stock Exchange index family), and
|
◾
|
cumulative on order book turnover (compared to the total turnover of the Swiss Stock Exchange index family).
|
Each of these two factors is assigned a 50% weighting in ranking the stocks eligible for the SMI.
The SMI is reconstituted annually after prior notice of at least two months on the third Friday in September after the close of trading.
The reconstitution is based on data from the previous July 1 through June 30. Provisional interim selection (ranking) lists are also
published following the end of the third, fourth and first financial quarters.
In order to reduce turnover, an index constituent will not be replaced unless it is ranked below 23 or, if it is ranked 21 or 22, if
another share ranks 18 or higher. If a company has primary listings on several exchanges and less than 50% of that company’s total turnover is generated on the Swiss Stock Exchange, it will not be included in the SMI unless it ranks at
least 18 or better on the selection list on the basis of its turnover alone (
i.e
., without considering its free float).
Maintenance of the SMI
Constituent Changes
. In the case of major market changes as a result of capital events such as
mergers or new listings, the Management Committee of SIX Swiss Exchange can decide at the request of the Index Commission that a security should be admitted to the SMI outside the annual review period as long as it clearly fulfills the
criteria for inclusion. For the same reasons, a security can also be excluded if the requirements for admission to the SMI are no longer fulfilled. As a general rule, extraordinary acceptances into the SMI take place after a three-month
period on a quarterly basis after the close of trading on the third Friday of March, June, September and December (for example, a security listed on or before the fifth trading day prior to the end of November cannot be included until the
following March). An announced insolvency is deemed to be an extraordinary event and the security will be removed from the SMI with five trading days’ prior notice if the circumstances permit such notice.
Number of Shares and Free Float
. The securities included in the SMI are weighted according to
their free float. This means that shares deemed to be in firm hands are subtracted from the total market capitalization of that company. The free float is calculated on the basis of outstanding shares. Issued and outstanding equity capital
is, as a rule, the total amount of equity capital that has been fully subscribed and wholly or partially paid in and documented in the Commercial Register. Not counting as issued and outstanding equity capital are the approved capital and
the conditional capital of a company. The free float is calculated on the basis of listed shares only. If a company offers several different categories of listed participation rights, each is treated separately for purposes of index
calculation.
Shares held deemed to be in firm hands are shareholdings that have been acquired by one person or a group of persons in companies domiciled
in Switzerland and which, upon exceeding 5%, have been reported to the SIX Exchange. Shares of persons and groups of persons who are subject to a shareholder agreement which is binding for more than 5% of the listed shares or who, according
to publicly known facts, have a long-term interest in a company, are also deemed to be in firm hands.
For the calculation of the number of shares in firm hands, the SIX Exchange may also use other sources than the reports submitted to it. In
particular, the SIX Exchange may use data gained from issuer surveys that it conducts itself.
In general, shares held by custodian nominees, trustee companies, investment funds, pension funds and investment companies are deemed
free-floating regardless whether a report has been made to the SIX Exchange. The SIX Exchange classifies at its own discretion persons and groups of persons who, because of their area of activity or the absence of important information,
cannot be clearly assigned.
The free-float rule applies only to bearer shares and registered shares. Capital issued in the form of participation certificates and bonus
certificates is taken into full account in calculating the SMI because it does not confer voting rights.
The number of securities in the SMI and the free-float factors are adjusted after the close of trading on four adjustment dates per
year, the third Friday of March, June, September and December. Such changes are pre-announced at least one month before the adjustment
date, although the Index sponsor reserves the right to take account of recent changes before the adjustment date in the actual adjustment, so the
definite new securities are announced five trading days before the adjustment date.
In order to avoid frequent slight changes to the weighting and to maintain the stability of the SMI, any extraordinary change of the total
number of outstanding securities or the free float will only result in an extraordinary adjustment if it exceeds 10% and 5% respectively and is in conjunction with a corporate action.
After a takeover, Six Exchange may, in exceptional cases, adjust the free float of a company upon publication of the end results after a
five-day notification period or may exclude the security from the relevant index family. When an insolvency has been announced, an extraordinary adjustment will be made and the affected security will be removed from the SMI after five
trading days’ notice.
The Index sponsor reserves the right to make an extraordinary adjustment, in exceptional cases, without observing the notification period.
Calculation of the Index
The Index sponsor calculates the SMI using the “Laspeyres formula,” with a weighted arithmetic mean of a defined number of securities
issues. The formula for calculating the index value can be expressed as follows:
Index =
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Free Float Market Capitalization of the index
Divisor
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The “free float market capitalization of the index” is equal to the sum of the product of the last-paid price, the number of shares, the free-float factor
and, if a foreign stock is included, the current CHF exchange rate as of the time the index value is being calculated. The index value is calculated in real time and is updated whenever a trade is made in a component stock. Where any index
component stock price is unavailable on any trading day, Six Exchange will use the last reported price for such component stock. Only prices from the SIX Exchange’s electronic order book are used in calculating the SMI.