FTSE FAQ Document

August 2014

FTSE China 25 Index

Enhancement

September 2014

FAQ

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Overview

With over 13 years experience developing indices specifically for the

China market, FTSE has become widely recognized by investors and

financial product issuers globally as a leading measure of the China

equities market and the natural choice for creating China-themed

investment products.

Launched in 2001, the FTSE China 25 Index was specifically designed to

help international investors access the Chinese market. It is comprised

of 25 of the largest and most liquid Chinese stocks (H Shares, Red Chips

and P Chips) listed and trading on the Hong Kong Stock Exchange

(HKEx), and combines the ease of trading on HKEx with a methodology

to meet fund regulatory requirements worldwide.

Since the original launch of the FTSE China 25 Index more than a

decade ago, there has been a substantial increase in the number of

stocks in the eligible universe. In response to feedback from market

practitioners, FTSE is extending the current FTSE China 25 Index to

become a 50 stock index after the close of trading on 19 September

2014 (effective from the start of trading on 22 September 2014). The

FTSE China 25 Index will be renamed the FTSE China 50 Index.

1. What change is planned for the FTSE China 25

Index?

The FTSE China 25 Index is being enhanced to become a 50 stock

index, and its name will change to the FTSE China 50 Index. As part of

the increase in constituent numbers FTSE will also be enhancing the

capping methodology and aligning the foreign exchange rates source

used in the official closing index values with that of FTSE’s Global

Indices.

A net of tax index will also become available to index users. The

additional index will be based on the maximum withholding tax rates

applicable to dividends received by institutional investors who are not

resident in the same country as the remitting company, and who do not

benefit from double taxation treaties. This tax stance is used for FTSE’s

Global Indices.

Max tax rates are available at

http://www.ftse.com/products/indices/withholding-tax-service.

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2. Why has FTSE decided to make these changes?

Since its launch in 2001, the FTSE China 25 Index has become widely

recognized by market participants as a leading Chinese benchmark for

international investors. In recent years, there has been a substantial

increase in the number of stocks in the eligible universe of companies

that are freely accessible to international investors. In fact the review

universe has more than doubled over the past 10 years (70 vs. 157).

FTSE is enhancing the FTSE China 25 Index to become a 50 stock index

in response to this market evolution. FTSE has also been receiving a

growing number of requests from market practitioners to extend the

breadth of the index, and change the foreign exchange source used in

the official closing index values.

In addition, FTSE has reviewed the existing capping methodology

applied to the FTSE China 25 Index at the quarterly reviews.

3. What is the new capping methodology and how does it differ from the previous methodology?

In response to feedback from index users we are enhancing the

methodology to reduce the probability of the index constituents

breaching the existing concentration requirements between the capping

date and implementation date. The enhanced capping methodology will

also move away from the stepped approach to capping that is applied in

steps of 1% (i.e. 10,9,8,7,6,4…), with the aim of reducing turnover and

improving the tracking error compared to the underlying (uncapped)

index.

Further information on the new capping methodology can be found in

the FTSE China 50 Index ground rules.

4. When will the change take place?

The FTSE China 25 Index will become a 50 stock index and its name will

change to the FTSE China 50 Index as part of the quarterly review cycle

after the close of trading on 19 September 2014 (effective from the start

of trading on 22 September 2014). Over three monthly reviews the

constituent weights’ will be migrated in a phased approach starting on

22 September 2014 and finishing on 24 November 2014.

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5. When will the FTSE China 50 Index constituents be announced as part of the September 2014 review?

The FTSE China 50 Index constituents will be announced after the FTSE Asia Pacific Regional Advisory Committee on 3 September 2014.

6. How will the additional 25 companies be selected for inclusion to the FTSE China 50 Index?

At the September 2014 review, eligible companies of the FTSE All-World Index will be ranked by their full market capitalisation. In determining the full market capitalisation of a company, all share classes are included, while only the eligible share classes are included in the index weighting. The review will take into consideration any constituent changes to the FTSE All-World Index as announced by the FTSE Asia Pacific Regional Committee. A company will be inserted into the FTSE China 50 Index if it rises to 40th position or above when the eligible companies are ranked by full market capitalisation (before the application of any investability weightings). A company in the FTSE China 50 Index will be deleted if it falls to 61st position or below when the eligible companies are ranked by full market value (before the application of any investability weightings). To ensure the index comprises of 50 companies at the September 2014 review, the securities of the highest ranking companies which are presently not included in the Index will be inserted. The review will be based on data from the close of business on the next trading day following the third Friday in August. The review will be implemented after the close of business on the third Friday (i.e. effective Monday) in September 2014. Over three monthly reviews the constituent weights’ will be migrated in a phased approach starting on 22 September 2014 and finishing on 24 November 2014. Further information on the periodic review selection process can be found in the FTSE China 50 Index ground rules.

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7. When will the last review of the FTSE China 25 Index take place?

The FTSE China 25 Index will become a 50 stock index and its name will change to the FTSE China 50 Index as part of the quarterly review cycle in September 2014. The last review of the FTSE China 25 Index using the existing FTSE China 25 Index ground rules will take place in June 2014.

8. Will there be a change to the vendor/ticker codes, FTSE index codes or file names?

Existing vendor/ticker codes and file names will remain the same to minimise any disruption to existing clients.

Vendor FTSE China 25 Index Code

FTSE Code XIN0

Bloomberg 24 Characters "Short Name" FTSE CHINA 25 IDX

Bloomberg Total Return Codes TXINOU

FTSE- Declared or Net Declared

Bloomberg BBGID BBG000NV4162

Price Bloomberg Codes XIN0I Index

Thomson Reuters 14 Characters "Short Name" FTSE China 25

RIC Total Return Codes .TRIXIN0

FTSE- Declared or Net Declared

Price RIC Codes .FTXIN25

Telekurs Codes 1224983

Factset Codes XIN0.LOC-FTX

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9. Will new Ground Rules be made available?

Ground Rules for the FTSE China Index Series pre and post-change are

freely available on FTSE.com at

http://www.ftse.com/products/indices/china.

This will include the ground rules for the FTSE China 50 Index migration.

10. Will a provisional history of the FTSE China 50 Index

be made available? To provide supporting data to clients on how the FTSE China 50 Index would have performed historically using the enhanced FTSE China 50 Index ground rules FTSE will make available a ten year provisional history. This information will be available directly from FTSE.

FTSE China 25 Index Bloomberg Ticker

HKD Price Index (XIN0) XIN0I

HKD Declared Total Return Index (XIN0) TXINOU

HKD Net Tax Total Return Index (XIN0N) TXIN0NH

USD Price Index (XIN0U) XIN0U

USD Declared Total Return Index (XIN0U) TXINOUU

USD Net Tax Total Return Index (XIN0UN) TXIN0UNU

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11. What impact will there be on the FTSE China 50 Index by including additional companies?

By including an additional twenty-five companies to the FTSE China 50 Index it is estimated that the new companies will comprise of just under twenty percent of the index.

FTSE China 50 Index Weight Contribution by Existing / New FTSE

China 50 Index Constituents (%)

Source: FTSE Group – provisional data as at 31 July 2014

80.31

19.69

Existing FTSE 25 Index

Constituents

New FTSE China 50

Index Constituents

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12. Will there be any changes to the composition of the FTSE China 50 Index?

Including an additional twenty-five companies in the FTSE China 50 Index is estimated to reduce the weight of financials in the index by just under 10 per cent. The next largest estimated weighting change will be the consumer goods industry with an increase of over 4 per cent. Oil and Gas and Telecommunications will potentially also see a change in index weighting of just over 3 per cent. Industry Breakdown of the FTSE China 25 Index and FTSE China 50

Index

ICB Industry

FTSE China 25

Index Weight (%)

FTSE China 50

Index Weight (%)

Difference

Basic Materials 3.86 3.44 -0.42

Consumer Goods 1.74 6.80 5.06

Consumer Services - 0.24 0.24

Financials 55.39 45.52 -9.87

Health Care - - -

Industrials 1.84 4.72 2.88

Oil & Gas 11.54 14.50 2.96

Technology 10.27 11.06 0.80

Telecommunications 15.36 11.83 -3.53

Utilities - 1.88 1.88

Totals 100.00 100.00 -

Source: FTSE Group – provisional data as at 31 July 2014

13. What is FTSE doing to help clients implement this

change? To help our clients manage the migration, FTSE will be providing clients with the option of utilising a FTSE China 50 Reference Index. The FTSE China 50 Reference Index will allow users to move to the official FTSE China 50 Index in one step, with all 50 stocks being included at their full index weights from 22 September 2014. The FTSE China 50 Reference Index will be calculated until November 2014 when the FTSE China 50 Index has fully migrated.

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14. What are the key dates for the FTSE China 50 Index over the migration process?

The following table provides information of the key dates for the

calculation of the FTSE China 50 Index over the migration process.

Date Note

18 Aug 2014 September review data cut-off date to determine the

FTSE China 50 Index constituents

3 Sep 2014 Indicative review product is disseminated following

announcement of the index constituents

12 Sep 2014 FTSE China 50 Index weights are determined after the

FTSE China 50 Reference Index is capped

19 Sep 2014 Index name is changed to the FTSE China 50 Index after

the close of trading

Index name in products are also changed

22 Sep 2014 First day of index calculation with 50 constituents

WM/Reuters Closing Spot Rates ™ applied to closing

USD index calculation

Indicative review product now adjusted to focus on 20

Oct 2014 migration review implementation date

10 Oct 2014 Migration review - FTSE China 50 Index weights are

determined

20 Oct 2014 Effective date of the migration review changes

Indicative review product now adjusted to focus on 24

Nov 2014 migration review implementation date

21 Nov 2014 Last day that the Indicative review product is

disseminated on a daily basis

24 Nov 2014 Effective date of the migration review changes

The migration process is now complete

December review data cut-off date to determine whether

any IPO’s are added to the FTSE China 50 Index

12 Dec 2014 FTSE China 50 Index is capped using the new capping

process

22 Dec 2014 Effective date of the December review

23 Mar 2015 Effective date of the March 2015 review – the first full

review since the index migrated

15. How does the migration process work?

As part of the migration process a separate FTSE China 50 Reference

Index will be calculated. This index will be a reference point for the

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FTSE China 50 Index over the migration period. The FTSE China 50

Reference Index will be capped using prices as at 12th September 2014.

On 22 September 2014, a third of the weights of the existing FTSE

China 25 Index constituents are adjusted. New companies added to the

FTSE China 50 Index at the review will see their index weights rise by a

third of their full index weights. The target weights will be determined

by the FTSE China 50 Reference Index.

This process continues whereby a proportion of the weights are

reapportioned in October and November 2014 until the FTSE China 50

Index has the same composition as the FTSE China 50 Reference Index.

Throughout the migration process corporate events that will shift the

index weights in the opposite direction to that which is intended will be

neutralised.

Overview of the FTSE China 50 Migration Process

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16. When will the next review take place after the migration period ends?

After the migration period ends in November 2014, FTSE will not undertake

a full review of the constituents at the December 2014 review. The next full

review of the FTSE China 50 Index will take place in March 2015. At the

December 2014 review, FTSE will include any eligible IPO that listed over the

migration period that was not included in the index (see question 17 below).

The index will also be capped in December using the new capping method.

17. How long will the FTSE China 50 Reference Index be calculated for?

The FTSE China 50 Reference Index will be calculated until November 2014

when the FTSE China 50 Index has fully migrated.

18. What are the key dates for the FTSE China 50 Reference

Index over the migration process?

The following table provides information of the key dates for the calculation

of the FTSE China 50 Reference Index over the migration process.

Date Note

3 Sep 2014 Indicative review product is disseminated following

announcement of the index constituents

12 Sep 2014 Capping factors calculated for the FTSE China 50

Reference Index

15 Sep 2014 5 day tracker product starts to disseminate

19 Sep 2014 Tracker product and opening constituent list calculated

22 Sep 2014 First day of index calculation (all daily products)

21 Nov 2014 Last day of index calculation – final products

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19. What are the FTSE China 50 Reference Index codes and Bloomberg tickers?

FTSE Code Bloomberg Code Index Name

CH50REF CH50REHP FTSE China 50 Reference Price Index in

HKD

CH50REF CH50REHT FTSE China 50 Reference Total Return

Index in HKD

CH50REFN CH50REHN FTSE China 50 Reference Net Tax Index in

HKD

CH50REF CH50REUP FTSE China 50 Reference Price Index in

USD

CH50REF CH50REUT FTSE China 50 Reference Total Return

Index in USD

CH50REFN CH50REUN FTSE China 50 Reference Net Tax Index in

USD

20. Will further detail on the migration process for the FTSE China 50 Index be made available?

A document outlining the migration process for the FTSE China 50 Index will

be made freely available on FTSE.com in April 2014.

21. Will IPO’s be eligible for inclusion in the index over the migration period?

Over the migration period no IPO’s will be eligible for inclusion into either the

FTSE China 50 Index or the FTSE China 50 Reference Index. The migration

period will start after the close of trading on 19 September 2014 (effective

from the start of trading on 22 September 2014) until the next capping date

effective on 22 December 2014. After this date IPO’s will become eligible for

inclusion.

Where an IPO lists over the migration period whose size would have made it

eligible for inclusion, FTSE will add the company to the FTSE China 50 Index

at the next capping date, effective on 22 December 2014. The review of

eligible IPO's will be based on data from the close of business on the next

trading day following the third Friday in November.

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22. What notifications will FTSE provide during the migration process?

The existing index products will provide all the information that clients will

need to manage the migration of the FTSE China 25 Index to the FTSE China

50 Index.

Index changes such as additions/deletions and corporate events will be

included in the 1-day and 5-day tracker products. The 5-day tracker product

will look forward up to five business days ahead to provide information on

any adjustments to index constituents.

FTSE will also provide on a daily basis the index review product. For the

migration process this product will look forward to the next monthly

migration to allow clients to see constituent weight changes after the

monthly migration has taken place. For example, once the September

migration has been completed it will start showing the constituents weights

following the October migration.

23. Will FTSE provide examples of how the migration process will work?

To provide further information on how the migration process will work, FTSE

has created a series of worked examples in Microsoft Excel format. These

examples are freely available on FTSE.com at

http://www.ftse.com/Indices/FTSE_China_Index_Series/index.jsp.

24. How will capping be applied to the index constituents over the migration process?

At the September 2014 review the FTSE China 50 Index will have its index

constituent weights adjusted by taking a third of the weights of the FTSE

China 50 Reference Index that will be capped using the new capping process

as per the FTSE China 50 Index rules. The remaining two-thirds weights will

be taken from the existing FTSE China 25 Index prior to migrating to the

FTSE China 50 Index. The cut-off date for calculating these weights will be

on the second Friday of the review month (12th September).

The FTSE China 25 Index will not be capped in September. We will not cap

the FTSE China 25 Index as we would potentially be will shifting the index

weights in the opposite direction to that which is intended as we move

towards the index weights of the FTSE China 50 Reference Index (which is

capped).

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Information on the constituent weights for the FTSE China 25, FTSE China

50, and FTSE China 50 Reference Indices will be provided as part of the

September review products.

The next capping of the FTSE China 50 Index constituents will take place at

the December 2014 review using the new capping methodology.

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If you have any questions and would like to speak to a client services individual directly, please do not hesitate to contact us on the numbers below, or via email at info@ftse.com.

Hong Kong +852 2164 3333

London +44 (0) 20 7866 1810

Milan +39 02 3604 6953

New York +1 888 747 FTSE (3873)

Sydney +61 (2) 9293 2864

Tokyo +81 (3) 3581 2811

©FTSE International Limited (“FTSE”) 2014.

“FTSE®” is a trade mark of the London Stock Exchange Plc Group companies and is used by FTSE International Limited (“FTSE”) under licence. All rights in and to the FTSE China 25 Index, the FTSE China 50 Index, and the FTSE China 50 Reference Index (the “Indices”) vest in FTSE. All information is provided

for information purposes only. Every effort is made to ensure that all information given in this publication is accurate, but no responsibility or liability can be accepted by FTSE or its licensors for any errors or for any loss from use of this publication. Neither FTSE nor any of its licensors makes any claim, prediction,

warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the names of the Indices set out above or the fitness or suitability of the Indices for any particular purpose to which it might be put. All figures and graphical representations in this publication refer

to past performance and are sourced by FTSE. Past performance is not a reliable indicator of future results. No part of this information may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior written permission of FTSE. Distribution of FTSE data and the use of FTSE indices to create financial products requires a licence with FTSE and/or its licensors.