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MTS Italy Bond Index Rules

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Contents 1. MTS Indices Structure

1.1 Summary of MTS Indices

2. MTS Italy Indices

2.1 Summary of MTS Italy Indices 2.2 MTS[Italia]: MTS Italy Indices 2.3 MTS[ex-Banca d’Italia]: MTS Italy – Ex-Bank of Italy Indices

3. Generic Features of MTS Indices

3.1 Total Return 3.2 MTS Price Source. 3.3 Publication of Index and Underlying Data 3.4 Weekly Rebalancing

4. Index Algorithms

4.1 Weekly Rebalancing and Weights 4.2 Index Portfolio Capitalisations

4.3 Index Calculation

MTS Indices are calculated in accordance with this Rules document. In the event of any error or discrepancy in this document or any

variations in the calculation and/or publication of the MTS Indices, EuroMTS disclaims all liabilities, makes no representations,

disclaims all warranties (whether implied, express or statutory) and provides no undertakings whatsoever in respect thereof. This

document is subject to amendment at short notice. The most recent copy of the Rules document shall always be available on the

website (www.mtsindices.com).

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1. MTS Indices Structure

The MTS Indices are calculated and distributed by EuroMTS, part of the MTS group of markets which

collectively comprise Europe’s premier electronic market in fixed-income securities hosted on a

centralised trading platform. Pre-trade and post-trade market data from the consolidated inter-dealer

order book is widely distributed via data vendors, offering the best source of realtime price discovery for

the listed securities. All quotes made on the inter-dealer platform are live and tradable to member

dealers, and the commitment of liquidity by dealers to securities ensures that the order book is tight and

deep.

The MTS group also includes BondVision, a leading multi-dealer-to-client electronic bond trading market

offering price discovery and execution to buy-side institutions from MTS dealers.

MTS Indices are calculated in realtime using the best bid data from the MTS platform. Consequently, MTS

Indices enjoy the highest degree of price discovery, replicability and independence.

Bond portfolios for each index are constructed by first determining ‘Eligible Bonds’ in accordance with the

index rules, and then by selecting bonds from amongst these to become ‘Selected Bonds’. Although most

indices automatically select all Eligible Bonds, this approach preserves the historical design of the [e]MTX:

EuroMTS Eurozone Government Bond Indices (ex-CNO Etrix) – see the MTS Index website for further

details.

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1.1 Summary of MTS Indices

The MTS Indices product range comprises the following index families

[e]MTX: EuroMTS Eurozone Government Bond Indices (Ex-CNO Etrix)

eMTX[g]: EuroMTS Eurozone Government Broad Indices

eMTX[3a]: EuroMTS Highest Rated Government Bond Indices

eMTX[i]: EuroMTS Eurozone Inflation-Linked Bond Indices

eMTX[m]: EuroMTS Macro-Weighted Government Bond Indices

eMTX[c]: EuroMTS Covered Bond Indices

eMTX[s]: Short EuroMTS Eurozone Government Broad Indices

[gv]MTS: MTS Government Indices

eMTX[z]: EuroMTS Eurozone Government Bill Indices:

eMTX[n]: EuroMTS New EU Government Bond Index

MTS[Italia]: MTS Italy Indices

eMTX[d]: EuroMTS Deposit Indices

For further details of any of our index products, please visit our website:

http://www.mtsindices.com

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2 MTS[Italia] Indices

The MTS Italy Indices™ are a new range of indices calculated by MTS to replace the “MTS Analysis

Indices”, which were published by MTS prior to 17th

January 2011. The MTS Italy – Ex-Bank of Italy

Indices™ are a range of indices that replace the “Ex-Bank of Italy” indices published by the Bank of Italy

prior to December 1998.

2.1 Summary of MTS[italia] Indices

The MTS Italy Indices are comprised of two index groups:

MTS Italy Indices

MTS Italy – Ex-Bank of Italy Indices

Selections for the MTS Italy Indices are subject to the following eligibility criteria. All eligible securities are

selected.

Eligibility Criteria:

Quoted on the MTS platform

Issued by the sovereign government of the Italian Republic

One of the following security types: BOT, BTP, BTPi, CCT, CTZ

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2.2 MTS[italia]: MTS Italy Indices

A family of eight bond indices divided according to the following eligibility criteria:

MTS Italy Indices are published every 30 seconds between 09:00 and 17:30 CET. Two snapshots are

published daily at 11:00 and 17:30 CET. MTS Italy Indices are based to 100 on 31st

December 1997 with

the exception of the MTS Italy – Treasury BOT 6M Index which is based to 100 on 28th

November 2003.

MTS Italy Index Criteria

MTS Italy – Monetary Rate

MTS Italy – Treasury BOT 6M

BOTs with a maximum of 3 months to maturity

BOTs with a minimum of 2 months to maturity

MTS Italy – STIR BOTs, CTZs and BTPs with a minimum of 3 months and

maximum of 2 years to maturity

MTS Italy – Variable Rate CCTs with a minimum of 3 months to maturity

MTS Italy General – Fixed Coupon BTPs with a minimum of 3 months to maturity

MTS Italy Short Term – Fixed Coupon BTPs with a minimum of 3 months and maximum of 2 years to

maturity

MTS Italy Medium Term – Fixed Coupon BTPs with a minimum of 2 years and maximum of 5 years to

maturity

MTS Italy Long Term – Fixed Coupon BTPs with a minimum of 5 years to maturity

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2.3 MTS[ex-Banca d’Italia]: MTS Italy – Ex-Bank of Italy Indices

A family of seven indices divided by bond type according to the following eligibility criteria:

MTS Italy – Ex-Bank of Italy Index Criteria

MTS Italy BOT – Ex-Bank of Italy All BOTs listed on the MTS platform

MTS Italy BTP – Ex-Bank of Italy All BTPs listed on the MTS platform

MTS Italy CTZ – Ex-Bank of Italy All CTZs listed on the MTS platform

MTS Italy Composite – Ex-Bank of Italy All BOTs, BTPs and CTZs listed on the MTS platform

MTS Italy CCT – Ex-Bank of Italy All CCTs listed on the MTS platform

MTS Italy Aggregate – Ex-Bank of Italy All BOTs, BTPs, CTZs and CCTs listed on the MTS platform

MTS Italy BTPi – Ex-Bank of Italy All BTPis listed on the MTS platform

The MTS Italy CTZ – Ex-Bank of Italy Index is based to 100 on 24th

February 1995, the MTS Italy BTPi – Ex-

Bank of Italy Index is based to 100 on 28th

November 2003, the MTS Italy Composite – Ex-Bank of Italy

Index is based to 100 on 31st

December 1997. The Remaining MTS Italy – Ex-Bank of Italy Indices are

based to 100 on 31st

December 1990.

The indices are published every 30 seconds between 09:00 CET and 17:30 CET. Two snapshots are

published daily at 11:00 CET and 17:30CET.

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3. Generic Features of MTS Indices

3.1 Total Return

MTS Indices are total return indices. Coupons paid out on any bond in an index portfolio are reinvested

overnight in the index itself. No deduction is made to a coupon before it is reinvested in the index i.e. no

withholding tax is applied.

3.2 MTS Price Source

MTS Indices are priced using live quotes from the MTS inter-dealer platform. Each bond quoted on the

MTS platform is supported by multiple dealers supplying tight, continuous quotes. These quotes are

widely distributed for information to the market via data vendors.

Any bond included in an MTS Index must first be quoted on MTS. This is a very wide criterion that

excludes only extremely illiquid bonds, making the indices easier to replicate.

Index updates are calculated using best bids. New bonds entering an index portfolio for the first time use

the best offer, replicating the bid-offer spread experienced by a fund tracking the index.

The prices used to update the indices are taken from the MTS market every 30 seconds. In the event that

there is no market price for a given 30 second update, the index will be calculated using a “Last Good

Price” (LGP), i.e. the most recent acceptable market price for the affected bond. In addition, the index

process filters for off-market prices. In the event of an off-market price, the LGP is used until either an on-

market price is available, or until the filter is overridden.

3.3 Publication of Index and Underlying Data

MTS Indices are published every 30 seconds between 09:00 CET and 17:30 CET, with three snapshots at

11:00 CET, 16:00 CET and 17:30 CET. Bond prices used for the 11:00, 16:00 and 17:30 CET snapshots are

published on the website. Realtime bond prices directly from the MTS platform are available from data

vendors. These bond prices are distributed with a higher frequency than the 30 second index updates.

Underlying bond portfolio composition and weights are also published on the MTS Index website.

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3.4 Weekly Rebalancing

New selections for the index portfolios and their weights are established using market data at 11:00 CET

on the last TARGET business day immediately prior to the new selection period (usually the preceding

Friday - such a business day being the “Selection Day”).

The “Base Date” date for determining eligible maturities is the first business day following the end of the

effective week (i.e. normally the following Monday). Given the settlement period for each security (2 or 3

business days), the minimum Maturity Date of each eligible security is the settlement period plus one

business day after the Base Date for each effective week.

Where maximum maturity criteria apply, the maximum maturity date of each eligible security is the

maximum period after the Base date for each effective week.

The first settlement day of any security following issuance must be on or before the Selection Day in

order for that bond to be eligible for the new weekly selections.

Selections are effective from and including the second business day of each calendar week until and

including the first business day of the next calendar week.

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4. Index Algorithms

4.1 Weekly Rebalancing and Weights

Eligible Bonds are determined in accordance with the criteria for each MTS Italy Index. Selections are

made by including all Eligible Bonds.

The weight Wi of each Selected Bond i is determined using data from 11:00 CET on the selection day. This

time is denoted t0. All weights are published to 3 decimal places.

j

jjj

iiii

tNtAItCp

tNtAItCpW

][])[][(

][])[][(

000

000

in which Cpi[t0] is the quoted clean price of selected bond i at t0 and AIi[t0] is the accrued interest. Ni[t0] is

the nominal amount of selected bond i outstanding on day t0 and the summation (using the index j) is

over all selected bonds for that index.

Indices of Inflation-Linked Bonds

For indices of inflation-linked bonds in which all Eligible Bonds are automatically Selected, the weight Wi

is calculated in accordance with the following equation:

j

jjjj

iiii

i

tNtIRtAItCp

tNtIRtAItCpW

][][])[][(

][][])[][(

0000

0000

in which IR[t0] is the Index Ratio i.e. the inflation multiplier applicable to the un-inflated nominal amount

outstanding Ni[t0] at time t0 and other definitions are as above.

The Index Ratio is calculated according to the market standard and uses the monthly inflation figures

published by the relevant authorities.

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In the event that a required monthly inflation figure is unavailable, a substitute figure will be used until

the correct figure is published. Any substitute figure will be calculated in accordance with the

methodology specified by the inflation-linked bond issuers.

4.2 Index Portfolio Capitalisations

Index calculations are based on the weighted capitalisation of the underlying bond portfolios, both

including and excluding any coupons paid out.

Nominal Bond Portfolios

The weighted capitalisation V[t,d] of a nominal bond index portfolio at time t on day d and including any

coupons paid out is calculated as

i

iii

0i0i

iWithCoupon )C]1d,d[]d[AI]d,t[Cp(

])t[AI]t[Cp(

W]d,t[V

where [d,d-1] = 1 if and only if the settlement of d falls in a different coupon accrual period from the

settlement of the previous trading day (d-1) and Ci is the coupon payable in respect of the coupon accrual

period in which the settlement of d-1 falls (e.g. half the annual coupon if the bond is a semi-annual

security, or an adjusted coupon if the accrual period is a long or short first period).

No deduction is made to a coupon before it is reinvested in the index i.e. no withholding tax is applied.

The weighted capitalisation V[t,d] excluding any coupons paid out is:

i

ii

0i0i

iNoCoupon ])d[AI]d,t[Cp(

])t[AI]t[Cp(

W]d,t[V

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Inflation-Linked Bond Portfolios

The weighted capitalisations V[t,d] of an inflation-linked bond index portfolio includes the inflation ratio

IR[d]:

in which Ci is the real coupon, and:

4.3 Index Calculation

Each index is calculated at time t on trading day d as follows:

]1,00:11[

],[]1,00:11[],[

dCETV

dtVdCETIdtI

NoCoupon

WithCoupon

Note that:

The 11:00 CET base index and the base weighted capitalisation (both on d-1) are used for the 11:00 CET fixing, the 17:30 CET fixing and the realtime index process

The VWithCoupon and VNoCoupon used in the above equation must always be calculated in respect of the same weekly selection of bonds.

For this reason, although an expiring selection of bonds is used until the end of the first business day of a

new calendar week, a VNoCoupon calculation is made for the new selection of bonds at 11:00CET on the first

business day. This value is not used until the second business day, when it is used as the base (i.e. d-1)

weighted capitalisation for that day. Note that this value is calculated using best offer prices for newly-

selected bonds, and using best bid prices for all other selected bonds.

i

iiii

iii

iWithCoupon dIRCdddAIdtCp

tIRtAItCp

WdtV ][)]1,[][],[(

][])[][(],[

000

i

iii

iii

iNoCoupon dIRdAIdtCp

tIRtAItCp

WdtV ][])[],[(

][])[][(],[

000