Dividend Cancellation | Extraordinary Index Adjusment | Effective Date: 8 April 2020

Dear  all,

As a response to a request from the Bank of England through the Prudential Regulation Authority (‘PRA’) to the seven largest systemically important UK deposit-takers to cancel payments of any outstanding 2019 dividends the relevant UK incorporated banking groups have issued on 31 March 2020 and 1 April 2020 respectively corresponding announcements to cancel dividend payments.

The banks listed below were represented in Solactive indices on the ex-dividend date of the dividends now affected by the announcements issued by the banks. The dividend payments were reflected in the index calculation on the Execution Date (specified in the table below) in accordance with the applicable index methodology and the Solactive Equity Index Methodology. In order to respond now to these unforeseen cancellations of dividend payments appropriately and in the interest of ensuring the most accurate possible reflection of the market or economic reality the respective Solactive index is intended to measure, the affected Solactive indices will be extraordinary adjusted (as specified in detail below) to take account of the impact of the cancellation of the dividend payments on the accuracy and representativeness of the affected Solactive indices. 

List of affected banks, ex-dates for dividends and dividend amount

Details of the extraordinary adjustment

Standard indices

For ‘Standard’ indices (where dividends are re-invested back into the dividend paying stock), the extraordinary adjustment will be made according to the following steps:

The Dividend Yield will be calculated as of Execution Date by taking the announced dividend amount (see table above) and dividing it by the close price of the respective stock.

The Dividend Yield will then be multiplied by the weight of the respective stock in the index on the Execution Date to arrive at the Dividend Weight.  The difference of 1 and the Dividend Weight will be used to calculate the reduction in the index level on the Effective Date.  As a consequence of the adjusted index level, the fraction of shares will be similarly adjusted.  In case of an index with cash pocket, this cash pocket will also be adjusted as described above.

Divisor Indices

For ‘Divisor’ indices (where dividends are re-invested into the entire basket of index components through an adjustment of the divisor), the extraordinary adjustment to the index level will be made according to the following steps:

A delta dividend amount will be determined based on the difference between the announced dividend amount and zero. The delta dividend amount will be converted into index dividend points calculated with the number of shares on the Execution Date. For the calculation of index dividend points on the effective date of the extraordinary adjustment, the calculation parameters of the particular stock from the Execution Date and the index divisor from the Execution Date are used. The index level will be reduced and will lead to a change in the divisor.

This treatment is analogous to the treatment applied for dividend distributions for shares listed in Japan that is described more detailed in Section 2.1.1.3.3 in the Equity Index Methodology (https://www.solactive.com/documents/equity-index-methodology/)

Effective Date and Implementation

The effective date will be 8 April 2020.  For the avoidance of doubt, the extraordinary adjustment will be made immediately following the closing calculation of the index on 7 April 2020.  Any subsequent adjustments (due to corporate actions for example) will be made following this extraordinary adjustment, and all will be reflected in the opening level of the index on 8 April 2020. Index levels for the period from the Execution Date to 8 April 2020 are not restated.

This adjustment is valid for all indices administered by Solactive AG as well as for all third party indices for which Solactive AG is the index calculation agent unless the index owner requests Solactive AG that the respective index shall not be subject of any index adjustment.

A list of the Solactive indices affected by the extraordinary adjustment is available upon request. For further information, please contact: equity.ops@solactive.com