Methodology Change | RAFI Multi-Factor Index Series | Effective Date 17 January 2023

Today, on the 17th of January 2023, Solactive announces the following changes to the methodology of the following indices (the ‘Affected Indices’):

Rationale for Methodology Change

For the purpose of portfolio construction, companies in the RAFI Global Equity Investable Universe (GEIU), based on their country classification, are assigned to one of the six regions defined as United States, Japan, United Kingdom, Developed Europe (ex UK), Other Developed Markets and Emerging Markets. Currently, China is included within the Emerging Markets (EM) region. The change is to break out the one EM region into two regions (EM ex China and China), to be effective for the March 2023 annual reconstitution. Treating China separately as a region on its own have benefits arising from China’s significant market size, its increasing dominance in the EM benchmark, and unique geopolitics and regulatory policy that could affect its performance.

Changes to the Index Guideline

The following Methodology changes have been implemented:

To reflect the new regions from the proposed separation of Emerging Markets, the following changes have applied to the corresponding sections:

Section 2.1

From:

“Eligible developed and emerging market countries are assigned to one of six regions as defined in Table 1.”

To:

“Eligible developed and emerging market countries are assigned to one of seven regions as defined in Table 1.”

From:

“As of March 2022, there are 23 developed market countries and 24 emerging market countries eligible for inclusion.”

To:

“As of March 2023, there are 23 developed market countries and 24 emerging market countries eligible for inclusion.”

Section 2.3

From:

”Table 2 outlines the 12 region and size classifications used to construct the single factor indices for value, low volatility, quality, momentum and size.

Country groups as outlined in Table 1 consist of major nations or small-country groups within each of the six regions.”

To:

”Table 2 outlines the 14 region and size classifications used to construct the single factor indices for value, low volatility, quality, momentum and size.

Country groups as outlined in Table 1 consist of major nations or small-country groups within each of the seven regions.”

Section 2.10

From:

“The RAFI Size Factor Index is the equal weight of the Small Value, Small Quality, Small Low Volatility, and Small Momentum factor portfolios for all regions, except for Emerging Markets.”

To:

“The RAFI Size Factor Index is the equal weight of the Small Value, Small Quality, Small Low Volatility, and Small Momentum factor portfolios for all regions, except for China and Emerging Markets ex-China.”

Section 2.11

From:

“The RAFI Multi-Factor Index takes an equally weighted allocation to value, low volatility, quality, momentum, and size factor indices for all regions, except for Emerging Markets where the size factor is excluded.”

To:

“The RAFI Multi-Factor Index takes an equally weighted allocation to value, low volatility, quality, momentum, and size factor indices for all regions, except for China and Emerging Markets ex-China where the size factor is excluded.”

Section 2.11.3

From:

“The RAFI Multi-Factor Emerging Markets ex-China Exclusion Screened Index is built using a custom Emerging Markets region that excludes China.”

To:

“The RAFI Multi-Factor Emerging Markets ex-China Exclusion Screened Index takes an equally weighted allocation to value, low volatility, quality and momentum for the Emerging Markets ex-China region.”

Section 2.12

From:

“The RAFI Dynamic Multi-Factor Index dynamically allocates to value, low volatility, quality, momentum, and size factor indices for all regions, except for Emerging Markets where the size factor is excluded.”

To:

“The RAFI Dynamic Multi-Factor Index dynamically allocates to value, low volatility, quality, momentum, and size factor indices for all regions, except for China and Emerging Markets ex-China where the size factor is excluded.”

Table 1 in section 2.1 now reflects the two new regions under Emerging Markets as a result of the change:

The following sentences have been removed:

Section 2.1 and 2.3

“The RAFI Multi-Factor Emerging Markets ex-China Exclusion Screened Index described in Section 2.11.3 excludes China from the Emerging Markets Region.”

Section 2.10

“As noted, Emerging Market Small is excluded.”

Table 2 in section 2.3 has been updated to reflect the new regions as follows:

Defined terms used in this announcement, but not defined herein, have the meaning assigned to them in the respective index guideline of the Affected Indices.