Dow Jones U.S. Select Sector Specialty Indices

[Pages:19]Dow Jones U.S. Select Sector Specialty Indices

Methodology

July 2021

S&P Dow Jones Indices: Index Methodology

Table of Contents

Introduction

4

Index Objective

4

Highlights and Index Family

4

Supporting Documents

5

Eligibility Criteria and Index Construction

6

Index Eligibility

6

Multiple Classes of Stock

6

Constituent Selection

6

Constituent Weightings

7

Dow Jones U.S. Select Medical Equipment Capped 35/20 Index

8

Index Calculations

8

Index Maintenance

9

Rebalancing

9

Corporate Actions

9

Other Adjustments

9

Currency of Calculation and Additional Index Return Series

10

Base Dates and History Availability

10

Index Data

11

Calculation Return Types

11

Index Governance

12

Index Committee

12

Index Policy

13

Announcements

13

Pro-forma Files

13

Holiday Schedule

13

Rebalancing

13

Unexpected Exchange Closures

13

Recalculation Policy

13

Real-Time Calculation

13

Contact Information

14

Index Dissemination

15

Tickers

15

S&P Dow Jones Indices: Dow Jones U.S. Select Sector Specialty Indices Methodology

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Index Data

15

Web site

15

Appendix I

16

Methodology Changes

16

Appendix II

17

EU Required ESG Disclosures

17

Disclaimer

18

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Introduction

Index Objective

The Dow Jones U.S. Select Sector Specialty Indices measure the performance of specific sub-sectors, or groups of sub-sectors, in the U.S. stock market. Index constituents are float-adjusted market capitalization weighted, subject to the capping constraints defined in Constituent Weightings.

Highlights and Index Family

Dow Jones U.S. Select Aerospace & Defense Index. The index measures the performance of manuf acturers, assemblers and distributors of aircraft and aircraft parts primarily used in commercial or private air transport and producers of components and equipment for the defense industry, including military aircraft, radar equipment and weapons.

Dow Jones U.S. Select Health Care Providers Index. The index measures the performance of owners and operators of health maintenance organizations, hospitals, clinics, dentists, opticians, nursing homes, rehabilitation and retirement centers.

Dow Jones U.S. Select Home Construction Index. The index measures the performance of constructors of residential homes, including manufacturers of mobile and prefabricated homes intended f or use in one place; manufacturers and distributors of furniture, including chairs, tables, desks, carpeting, and wallpaper; retailers and wholesalers concentrating on the sale of home improvement products including garden equipment, carpets, wallpaper, paint, home furniture, blinds and curtains, and building materials; and producers of materials used in the construction and ref urbishment of buildings and structures, including cement and other aggregates, wooden beams and frames, paint, glass, roofing and f looring materials other than carpets.

Dow Jones U.S. Select Insurance Index. The index measures the performance of full-line insurance companies, property & casualty insurance companies and life insurance companies.

Dow Jones U.S. Select Investment Services Index. The index measures the performance of companies providing a range of specialized financial services, including securities brokers and dealers, online brokers and security or commodity exchanges.

Dow Jones U.S. Select Medical Equipment Index. The index measures the performance of manuf acturers and distributors of medical devices such as MRI scanners, prosthetics, pacemakers, X-ray machines and other non-disposable medical devices.

? Dow Jones U.S. Select Medical Equipment Capped 35/20 Index. The index mirrors the composition of the Dow Jones U.S. Select Medical Equipment Index , but employs a different constituent weighting scheme, as detailed in Constituent Weightings.

Dow Jones U.S. Select Oil Exploration & Production Index. The index measures the performance of companies engaged in the exploration for and drilling, production, refining and supply of oil and gas products.

Dow Jones U.S. Select Oil Equipment & Service Index. The index measures the performance of suppliers of equipment and services to oil fields and offshore platforms, such as drilling, exploration, seismic-information services and platform construction.

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Dow Jones U.S. Select Pharmaceuticals Index. The index measures the performance of manuf acturers of prescription or over-the-counter drugs, such as aspirin, cold remedies and birth control pills. The index also includes vaccine producers.

Dow Jones U.S. Select Regional Banks Index. The index measures the performance of banks that provide a broad range of financial services--including retail banking, loans and money transmissions-- and that individually account for less than 5% of banking industry assets.

Dow Jones U.S. Select Telecommunications Index. The index measures the performance of providers of fixed-line and mobile telephone services, as well as makers and distributors of high-technology

communications products. Fixed-line includes regional and long-distance carriers. Mobile includes cellular, satellite and paging services. Communications products includes satellites, mobile telephones, f iber optics, switching devices, local and wide-area networks, teleconferencing equipment and connectivity devices for computers.

Supporting Documents

This methodology is meant to be read in conjunction with supporting documents providing greater detail with respect to the policies, procedures and calculations described herein. References throughout the methodology direct the reader to the relevant supporting document for further information on a specific topic. The list of the main supplemental documents for this methodology and the hyperlinks to those documents is as follows:

Supporting Document S&P Dow Jones Indices' Equity Indices Policies & Practices Methodology S&P Dow Jones Indices' Index Mathematics Methodology S&P Dow Jones Indices' Float Adjustment Methodology S&P Dow Jones Indices' Sector Classification System: Dow Jones Indices

URL Equity Indices Policies & Practices Index Mathematics Methodology Float Adjustment Methodology Sector Classification System: Dow Jones Indices

This methodology was created by S&P Dow Jones Indices to achieve the aforementioned objective of measuring the underlying interest of each index governed by this methodology document. Any changes to

or deviations from this methodology are made in the sole judgment and discretion of S&P Dow Jones Indices so that the index continues to achieve its o bjective.

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Eligibility Criteria and Index Construction

Index Eligibility

With the exception of the Dow Jones U.S. Select Regional Banks Index, the index universe includes all common stocks of companies in the Dow Jones U.S. Broad Stock Market Index that are categorized into the corresponding sub-sector, based on a proprietary classification system used by S&P Dow Jones Indices, as noted in the table below. Limited Partnerships are not eligible for index membership.

For the Dow Jones U.S. Select Regional Banks Index, the constituents are selected from a starting universe of all stocks in the Dow Jones U.S. Banks Index.

Index Dow Jones U.S. Select Aerospace & Defense Index Dow Jones U.S. Select Health Care Providers Index

Dow Jones U.S. Select Home Construction Index

Dow Jones U.S. Select Insurance Index

Dow Jones U.S. Select Investment Services Index Dow Jones U.S. Select Medical Equipment Index Dow Jones U.S. Select Oil Exploration & Production Index Dow Jones U.S. Select Oil Equipment & Service Index Dow Jones U.S. Select Pharmaceuticals Index. Dow Jones U.S. Select Regional Banks Index

Dow Jones U.S. Select Telecommunications Index

Sub-Sectors (Sub-Sector Codes) Aerospace (2713) Def ense (2717) Health Care Providers (4533) Home Construction (3728) Building Materials & Fixtures (2353) Furnishings (3726) Home Improvement Retailers (5375) Full Line Insurance (8532) Property & Casualty Insurance (8536) Lif e Insurance (8575) Investment Services (8777) Medical Equipment (4535) Exploration & Production (0533) Oil Equipment & Services (0573) Pharmaceuticals (4577) Banks (8355) Fixed Line Telecommunications (6535) Mobile Telecommunications (6575) Telecommunications Equipment (9578)

Multiple Classes of Stock

All publicly listed multiple share class lines are eligible for index inclusion, subject to meeting the eligibility criteria.

For more information regarding the treatment of multiple share classes, please refer to Approach A within the Multiple Share Classes section of the S&P Dow Jones Indices' Equity Indices Policies & Practices Methodology.

Constituent Selection

Market Capitalization. On the last business day of the month prior to the quarterly rebalancing, a nonconstituent company must have float-adjusted market capitalization of at least $500 million to enter the index. If a company is already an index constituent, its float-adjusted market capitalization must be at least $250 million ($100 million for the Dow Jones U.S. Select Home Construction Index and Dow Jones U.S. Select Telecommunications Index) to remain in the index.

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Revenue Screen. Companies classified as Building Materials & Fixtures, Furnishings, and Home Improvement Retailers meeting the minimum market capitalization requirements will be included in the Dow Jones U.S. Select Home Construction Index if the majority of revenues are sourced from residential home construction and remodel related business activities.

Asset Screen. A company is excluded from the Dow Jones U.S. Select Regional Banks Index if its three-year average total assets account for more than 5% of the three-year average total assets of the index selection universe. Any company that failed this asset screen during the previous annual reconstitution and that accounts for at least 4% of the selection universe's three-year average total assets at the next review will continue to be excluded from the index.

Minimum Component Count. At each quarterly rebalancing, if the component count is less than 22 af ter applying the rules set forth in the eligibility criteria, the market capitalization requirement is relaxed so that the next largest non-component in the eligible universe is added until the component count reaches 22.

Constituent Weightings

At each rebalancing, the indices are f loat-adjusted market capitalization weighted, subject to the following constraints:

? The weight of any individual company is capped at 22.5%.

? If any company's weight exceeds 22.5%, that company's weight is capped at 22. 5% and all excess weight is proportionally redistributed to all uncapped companies within the index. If after this redistribution, any company breaches the 22.5% weight cap, the process is repeated iteratively until no company breaches the 22.5% weight cap.

? Then, the aggregate weight of the companies in the index with a weight greater than 4.5% is capped at 45%.

These caps are set to allow for a buffer below the 25%, 5%, and 50% limits, respectively.

In addition, for the Dow Jones U.S. Select Home Construction Index, companies classified as Building Materials & Fixtures, Furnishings, and Home Improvement Retailers are, in aggregate, capped at 35% of the index.

The constituent weighting scheme for the Dow Jones U.S. Select Medical Equipment Capped 35/20 Index is described in the next section.

For more on the float adjustment methodology, please see S&P Dow Jones Indices' Float Adjustment Methodology.

For more information about weight capping, please refer to the Capped Market Capitalization Indices section in S&P Dow Jones Indices' Index Mathematics Methodology.

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Dow Jones U.S. Select Medical Equipment Capped 35/20 Index

For capping purposes, the index rebalances quarterly after the close of business on the third Friday of

March, June, September, and December. The index is also reviewed on the Wednesday prior to the second Friday of all other months based on each company's capped market capitalization weight. Monthly capping is only performed when either the largest index weight exceeds 35% or the second

largest index weight exceeds 20%. The ref erence date for capping is the Wednesday prior to the second Friday of the reweighting month and changes are effective after the close of the third Friday of the

reweighting month using prices as of the reweighting reference date, adjusted for any applicable corporate actions, and membership, shares outstanding, and IWFs as of the reweighting effective date. While capping is reviewed monthly, the index may be capped on a less frequent basis. Both the quarterly

and monthly capping are performed for each index, as necessary, based on the scenarios in the table below:

Capping Scenario 1. At least one

company in the index has a f loat adjusted market capitalization weight exceeding 33%.

2. The weight of more than one company exceeds 19%, but the company with the largest weight does not exceed 33%.

Steps

1. The company with the largest weight is capped at 33%. All excess weight is proportionally redistributed to the remaining uncapped companies in the index.

2. If the weight of any remaining uncapped company exceeds 19%, its weight is capped at 19% and the excess weight is proportionally redistributed to all remaining uncapped companies.

3. Step 2 is repeated until the weight of all uncapped companies does not exceed 19%.

1. The company with the largest weight is capped at its float-adjusted market capitalization weight.

2. If the weight of any remaining uncapped company exceeds 19%, its weight is capped at 19% and the excess weight is proportionally redistributed to all remaining uncapped companies in the index.

3. Step 2 is repeated until the weight of all uncapped companies does not exceed 19%.

The weight cap scenarios outlined above are set in order to allow for a buffer below the 35% and 20% limits, as of the rebalancing effective dates.

In each of the above scenarios, index share amounts are assigned to each constituent to arrive at the

target weights. Since index shares are assigned based on prices as of seven business days prior to rebalancing, the actual weight of each constituent at the rebalancing may differ from the target weights due to price movements.

For more information on the index calculation methodology, please refer to the Capped Market Capitalization Weighted Indices section of S&P Dow Jones Indices' Index Mathematics Methodology.

Index Calculations

The indices are calculated by means of the divisor methodology used in all S&P Dow Jones Indices' equity indices.

For more information on the index calculation methodology, please refer to the Capped Market Capitalization Indices section of S&P Dow Jones Indices' Index Mathematics Methodology.

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