Methodology Change |SOLACTIVE L&G ENHANCED ESG DEVELOPED MARKETS AND UNITED KINGDOM INDEX| Effective Date 24/09/2021

Today, on the 07/09/2021, Solactive announces the following changes to the methodology of the following Indices (the ‘Affected Indices’):

Rationale for the  Methodology  Change

The last few months saw an extensive emphasis being put on climate change mitigation and multiple countries and entities setting targets to get to net-zero emissions by 2050. This objective is at the heart of the European Green Deal and in line with the EU’s commitment to global climate action under the Paris Agreement. Given the recent developments in the investment space, Solactive considers appropriate to enhance the methodology of the Affected Indices in order to explicitly commit to a carbon reduction trajectory. This would be achieved in a similar manner with the recommendations of the EU- Paris Agreement Alignment, targeting an initial reduction in average Index Carbon Intensity by 50% with a subsequent 7% year on year reduction trajectory.

The Affected Indices already achieve a carbon intensity reduction of approximately 50% solely based on the integration of the ESG Score tilting in the determination of the security weighting. Committing explicitly to the respective decarbonization trajectory would thus further serve the index objective, making the index also a suitable opportunity to those investors targeting to contribute to the climate risk mitigation through their investment decisions.

Changes to the Index Guideline

The following Methodology changes are proposed in the following points of the Index Guideline:

Section 1.1. Scope of the index

Addition to the Strategy Description:

[…]

In addition, the components are weighted based on an optimized algorithm such as to ensure that the portfolio is in line with the climate-neutrality by 2050 objective.

Section 2.3 Weighting of the index

Addition of a description of the carbon reduction initial target and subsequent trajectory:

[…]

The set of securities and their weights will consist of the Intermediate Universe, and their weights will be referenced as .

The final Weight of each Index Component is further determined based on an optimization approach that minimizes the cumulative absolute weight deviation from the Intermediate Universe on each Selection Day.

On the Base Day, it is subject to the following constraints:

1. Reduce the Carbon Intensity of the Index compared to the Carbon Intensity of the Index Universe by at least 50%.
2. Maximum absolute weight deviation from the weight in the Investable Universe of 3%. Individual Weights are capped at the minimum between 8% and Investable Universe weight * 20 as well as floored at 0.01%.
3. The sum of weights which exceed 5% is capped at 35%.
4. Compared to the Investable Universe, the deviation of the sector weights is capped at 2% and floored at 3%.
5. Compared to the Investable Universe, the absolute deviation of the regional weights is capped at 0.5%. [This point is applicable only to the Solactive L&G Enhanced ESG Developer Markets Index]

If no solution can be found, the constraints are relaxed in the following order:

1. Sector constraint: Compared to the Investable Universe, the deviation of the sector weights is increased by 0.5% in each direction.
2. Regional weight constraint: Compared to the Investable Universe, absolute deviation of the region weights is capped at 1%. [This point is applicable only to the Solactive L&G Enhanced ESG Developer Markets Index]
3. Single weight constraint: Maximum absolute deviation from the weight in the Investable Universe is iteratively increased by 0.25% until a solution is found.

The Carbon Intensity of the Index Universe is calculated by weighting the Carbon Intensity of the components of the Index Universe by the weight of the respective components within the Index Universe.

On each following Selection Day each Index Component is assigned a weight based on the same objective function, but the algorithm is subject to the following constraints:

1. A Decarbonization Trajectory is defined by an annual minimum Carbon Intensity reduction of 7% compared to the Carbon Intensity of the Index on the Base Day in a geometric progression applied semi-annually. The Carbon Intensity of the Index is then capped at the minimum of the Carbon Intensity of the Decarbonization Trajectory on the Selection Day and 50% of the Index Universe Carbon Intensity on the Selection
2. Maximum absolute weight deviation from the weight in the Investable Universe of 3%. Individual Weights are capped at the minimum between 8% and Investable Universe weight * 20 as well as floored at 0.01%.
3. The sum of weights which exceed 5% is capped at 35%.
4. Compared to the Investable Universe, the deviation of the sector weights is capped at 2% and floored at 3%.
5. Compared to the Investable Universe, the absolute deviation of the regional weights is capped at 0.5%. [This point is applicable only to the Solactive L&G Enhanced ESG Developer Markets Index]

If no solution can be found, the constraints are relaxed in the following order:

1. Sector constraint: Compared to the Investable Universe, the deviation of the sector weights is increased by 0.5% in each direction.
2. Regional weight constraint: Compared to the Investable Universe, absolute deviation of the region weights is capped at 1%. [This point is applicable only to the Solactive L&G Enhanced ESG Developer Markets Index]
3. Single weight constraint: Maximum absolute deviation from the weight in the Investable Universe is iteratively increased by 0.25% until a solution is found.

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. The amended version of the index guideline will be available on the effective date.