FTSE Renaissance Global IPO Index Series Ground Rules v1.4x

SECTION 10
10.0 CAPPING METHODOLOGY
10.1 The index capping process aims to reduce any concentration levels that may exist. The
capping process is applied after the close of business on the third Friday in March, June,
September and December based on the starting constituents of the next working day and
prices as of the close on the second Friday of the review month. The capping process is also
applied when a new company is added to the index intra-review, or when a corporate event
causes the investable market capitalization of a constituent to exceed the maximum weight
permitted in that particular index.
10.2 When the capping process is applied, any constituents whose weights are greater than the
maximum weight permitted are capped at the maximum weight permitted. The weights of all
lower ranking constituents are increased as a consequence of reducing the weights of the
bigger constituents. The remaining lower ranking constituents are then checked and if they
exceed the maximum weight permitted they are also capped, as further described below.
10.3 Quarterly review capping process
10.3.1 At review, companies that have a weight of more than the maximum weight permitted are
capped. The index is capped after the close of business on the third Friday of the month
using prices from close of business on the second Friday of that month. The following data is
used in the capping algorithm:
a) a security’s closing price adjusted for corporate events after the close of business on the
second Friday of the review month.
b) a security’s shares in issue and its investability weight adjusted for corporate events is
used on the next working day following the third Friday of the review month.
10.4 Interim capping outside a review process but within the review month
10.4.1 Companies added to a capped index intra-review that would have a weighting of more than
the maximum weight permitted are capped; concurrently, any existing constituents whose
weights are greater than the maximum weight permitted are capped at the maximum weight
permitted. When there is an interim addition within the review month that requires capping,
it will be capped based on the price and free float as at close of business on the first day of
trading. It will be added to the index after the close of its first trading day. The following
data is used in the capping algorithm:
a) a security’s price and free float are used as at the close of business on the first day of
trading.
b) a security’s shares in issue and its investability weight adjusted for corporate events are
used as at the close of business on the first day of trading.
As it is the review month, the index will be capped again after the close of business on the
third Friday of the review month.
Ground Rules for the Management of the FTSE Renaissance Global IPO Index Series 20
Version 1.4 April 2013