The S&P
500® Equal Weight Index
The SPW
is the equal weight version of the S&P 500® Index ("SPX").
The
composition of the SPW is the same as the SPX. Constituent changes are incorporated in the SPW
as and when they are made in the SPX. When a company is added to the SPW in the middle of the
quarter, it takes the weight of the company that it replaced. The one exception is when a
company is removed from the SPW at a price of $0.00. In that case, the company’s
replacement is added to the SPW at the weight using the previous day’s closing value, or
the most immediate prior business day that the deleted company was not valued at $0.00.
The SPW
is calculated and maintained in the same manner as the SPX, except that the constituents of the
SPW are equally weighted rather than weighted by float-adjusted market capitalization. To
calculate an equal-weighted index, the market capitalization for each stock used in the
calculation of the index is redefined so that each index constituent has an equal weight in the
index at each rebalancing date. In addition to being the product of the stock price, the
stock’s shares outstanding, and the stock’s investible weight factor
(“IWF”), an additional weight factor (“AWF”) is also introduced in the
market capitalization calculation to establish equal weighting. The AWF of a stock is the
adjustment factor of that stock assigned at each index rebalancing date that makes all index
constituents’ modified market capitalization equal (and, therefore, equal weight), while
maintaining the total market value of the overall index.
The S&P 500®
Index
The SPX
includes a representative sample of 500 companies in leading industries of the U.S. economy. The
SPX is intended to provide an indication of the pattern of common stock price movement. The
calculation of the level of the SPX is based on the relative value of the aggregate market value
of the common stocks of 500 companies as of a particular time compared to the aggregate average
market value of the common stocks of 500 similar companies during the base period of the years
1941 through 1943.
The SPX
includes companies from eleven main groups: Communication Services; Consumer Discretionary;
Consumer Staples; Energy; Financials; Health Care; Industrials; Information Technology; Real
Estate; Materials; and Utilities. S&P Dow Jones Indices LLC (“SPDJI”), the
sponsor of the SPX, may from time to time, in its sole discretion, add companies to, or delete
companies from, the SPX to achieve the objectives stated above.
Company
additions to the SPX must have an unadjusted company market capitalization of $18.0 billion or
more (an increase from the previous requirement of an unadjusted company market capitalization
of $15.8 billion or more).
SPDJI
calculates the SPX by reference to the prices of the constituent stocks of the SPX without
taking account of the value of dividends paid on those stocks. As a result, the return on the
Notes will not reflect the return you would realize if you actually owned the SPX constituent
stocks and received the dividends paid on those stocks.
Computation of the SPX
While
SPDJI currently employs the following methodology to calculate the SPX, no assurance can be
given that SPDJI will not modify or change this methodology in a manner that may affect payments
on the Notes.
Historically, the market value of any component stock of the SPX was calculated as the product
of the market price per share and the number of then outstanding shares of such component stock.
In March 2005, SPDJI began shifting the SPX halfway from a market capitalization weighted
formula to a float-adjusted formula, before moving the SPX to full float adjustment on September
16, 2005. SPDJI’s criteria for selecting stocks for the SPX did not change with the shift
to float adjustment. However, the adjustment affects each company’s weight in the SPX.
Under
float adjustment, the share counts used in calculating the SPX reflect only those shares that
are available to investors, not all of a company’s outstanding shares. Float adjustment
excludes shares that are closely held by control groups, other publicly traded companies or
government agencies.
In
September 2012, all shareholdings representing more than 5% of a stock’s outstanding
shares, other than holdings by “block owners,” were removed from the float for
purposes of calculating the SPX. Generally, these “control holders” will include
officers and directors, private equity, venture capital and special equity firms, other publicly
traded companies that hold shares for control, strategic partners, holders of restricted shares,
ESOPs, employee and family trusts, foundations associated with the company, holders of unlisted
share classes of stock, government entities at all levels (other than government
retirement/pension funds) and any individual person who controls a 5% or greater stake in a
company as reported in regulatory filings. However, holdings by block owners, such as depositary
banks, pension funds, mutual funds and ETF providers, 401(k) plans of the company, government
retirement/pension funds, investment funds of insurance companies, asset managers and investment
funds, independent foundations and savings and investment plans, will ordinarily be considered
part of the float.
Treasury
stock, stock options, restricted shares, equity participation units, warrants, preferred stock,
convertible stock, and rights are not part of the float. Shares held in a trust to allow
investors in countries outside the country of domicile, such as depositary shares and Canadian
exchangeable shares, are normally part of the float unless those shares form a control block. If
a company has multiple classes of stock outstanding, shares in an unlisted or non-traded class
are treated as a control block.
For each
stock, an investable weight factor (“IWF”) is calculated by dividing the available
float shares by the total shares outstanding. Available float