STOXX Europe Sustainability Index* and EURO STOXX Sustainability Index* - METHODOLOGY

Overview
Annual Review
Ongoing Review

Overview

The STOXX Europe Sustainability Index* (STX Sustain*) and its subsets are reviewed annually and quarterly to ensure that the index composition accurately represents the top 20% of the leading sustainability companies in each of the SAM sectors within the STX Sustain* investable universe.

The annual review methodology selects these leading sustainability companies from the STX Sustain* investable stocks universe. The resulting changes to the index composition are announced on the annual review date in the first week of September and implemented - after the official closing prices have been determined - on the third Friday of September.

All these changes will be effective on the next trading day.

The quarterly reviews reflect changes in the investable stocks universe as well as changes with regard to the number of shares, free float factors and — if applicable — free float cap factors.

Quarterly reviews are implemented on the third Friday in March, June, September, and December to become effective on the next trading day.
Changes to the index are implemented after the official closing values have been established. All adjustments are made before the start of the next trading day. Constituent changes that result from the quarterly review will be announced at least two business days prior to the implementation date.

Annual Review

The annual review of the STOXX Europe Sustainability Index* is based on the STOXX Europe investable stocks universe as defined in the third quarterly review of this universe.

The review process follows:

1. SAM Sector Classification
2. Corporate Sustainability Assessment
3. Ranking within SAM Sectors
4. Eligible SAM Sectors
5. Eligible Companies
6. Component Selection
7. Free Float Market Capitalization Coverage

1. SAM Sector Classification

The SAM sector classification is based on the ICB industry, supersector, sector, and subsector classification.

Each of the 600 companies in the STX Sustain* investable stocks universe is assigned – based on the company’s primary revenue source – to one of the SAM sectors.

The SAM sectors - and their associated STOXX Europe 600 Indexes supersectors - are listed in the STOXX Sustainability Index* Guide Book.

2. Corporate Sustainability Assessment

All of the 600 companies in the STX Sustain* investable stocks universe are invited to take part in SAM’s corporate sustainability assessment. Each company assessed is assigned a corporate sustainability performance score.

3. Ranking within SAM Sectors

The companies in each of the SAM sectors are ranked according to their corporate sustainability performance score.

4. Eligible SAM Sectors

Only those SAM sectors – where the highest ranked company globally has a corporate sustainability performance score of at least one-fifth of the maximum score – are eligible for the STX Sustain*. All other sectors – and their associated companies – are deemed ineligible and are eliminated from the review process.

5. Eligible Companies

From each eligible SAM sector, only companies with a corporate sustainability performance score of at least half of the highest ranked company globally in the same sector are eligible for the STX Sustain*. All other companies are deemed ineligible and are eliminated from the review process.

6. Component Selection

The target selection for each eligible SAM sector is 20% of the companies in the investable universe in that group. In a first step, the top 15% of the eligible companies in each SAM sector – by corporate sustainability performance ranking – are selected for the STX Sustain*. In a second step, the eligible current STX Sustain* component companies ranked in the buffer zone between the top 15% and the top 25% of the eligible companies – by corporate sustainability performance ranking – are selected for the STX Sustain*. If after adding all current component companies in the buffer zone the target selection number is not reached, then additional non-component companies – in their corporate sustainability ranking order – are added to the selection universe, but only until the target selection number of companies is reached. If the difference in the corporate sustainability performance scores between the last selected company in order to reach the target selection number of companies in each SAM sector and the next company in the sustainability ranking order is within the specified average error margin, then this next ranked company is also selected for the STX Sustain*. The average error margin for the corporate sustainability performance assessment is determined by reviewing a random sample of companies among the upper half of the companies that were not selected because of relatively low corporate sustainability performance scores and the lower half of companies selected for the STX Sustain*. The average error margin is reviewed annually.

7. Free Float Market Capitalization Coverage

The target free float market capitalization coverage for each supersector is 45% of the STOXX Europe 600 index free float market capitalization for that market sector.
For each supersector, if the cumulative market capitalization of the selected companies exceeds this target, then no further companies from this SAM sector are selected for the STX Sustain*.
If the market capitalization target is not yet exceeded, then further companies from this market sector are selected for the STX Sustain*– according to their sustainability ranking order – until the cumulative market capitalization is as close as possible to the market capitalization target. Only companies that belong to the top 25% in their SAM sector are eligible for inclusion. Selection priority is given to companies that have a higher percentage of the best company’s score in their SAM sector in the STX Sustain*. Finally, further components may be added from the list of eligible companies – according to their sustainability ranking order – to reduce gaps between the regional and sectoral allocation of the STX Sustain* and the overall regional and sectoral distribution of the STOXX Europe 600 Index.

Ongoing Review

In addition to the annual and quarterly reviews, the STX Sustain* is also continually reviewed for changes to the index composition necessitated by extraordinary corporate actions - e.g. mergers, takeovers, spin-offs, initial public offerings (IPOs), delistings and bankruptcy - affecting the component companies and their corporate sustainability performance.

*Temporary index name (as of March 1, 2010)