Bloomberg Barclays Indices A Bloomberg Professional service offering

Bloomberg Barclays Index Methodology 1

Bloomberg Barclays Index Methodology

Since 1973, the Bloomberg Barclays Indices have been the market standard for fixed income

investors seeking objective, rules-based, and representative benchmarks to measure asset class

risk and return. Whether published under the banner of Kuhn Loeb, Lehman Brothers or

Barclays Capital, these indices have provided investors with a wealth of market information, with

the scope of index solutions growing substantially to mirror broad asset class expansions and

capital markets innovations. On August 24, 2016, Bloomberg acquired these assets from

Barclays Bank PLC. Barclays and Bloomberg co-branded the indices as the Bloomberg Barclays

Indices for a term of five years.

In addition to the Bloomberg Barclays Indices, Bloomberg also offers other index families,

including the Bloomberg AusBond, Commodity (BCOM) and Currency Indices.

AusBond Indices are the leading fixed income benchmarks for Australia and New Zealand. BCOM are a family of benchmarks designed to provide liquid and diversified exposure to

physical commodities through futures contracts.

Currency Indices offer a real time measure of the underlying currencies against a diversified, dynamic basket of emerging and developed market currencies.

These index families have separate index methodologies and are not covered in the scope of

this publication. These methodologies are available on the Bloomberg Professional service and

on the Bloomberg Index Website (www.bloombergindices.com).

While Bloomberg Index Services Limited (BISL and with its affiliates, Bloomberg) publishes a

wide range of index primers, factsheets, rules documents, technical notes, and index specific

research in support of our products, the scope of our offering can make it a challenge for both

new and experienced index users to get a full overview of index methodology in a single

publication. This guide supplements these index-specific documents to detail index rules and

methodologies in a single publication.

In particular, this methodology document will cover:

Index eligibility criteria and inclusion rules Rebalancing rules and mechanics Return calculations, analytics and pricing conventions Weighting and aggregation rules

Understanding the index methodology is an important part of the portfolio management

process; as such, we understand that no single document will answer every question that an

index user may have. The index group has dedicated teams of research analysts globally to work

with clients on bespoke index and portfolio management solutions and assist clients with

specific questions that may not be addressed in this handbook. We invite readers to direct any

further questions they may have to these teams to facilitate an even stronger dialogue between

index users and the research analysts who have put it together.

Note: On August 24, 2016, Bloomberg LP (with its affiliates, Bloomberg) completed its

acquisition of Barclays Risk Analytics and Index Solutions Limited (BRAIS) from Barclays Bank

PLC (Barclays). Upon the closing of this transaction, BRAIS was renamed Bloomberg Index

Services Limited ("BISL"). BISL will remain the administrator of the Bloomberg Barclays Indices.

The below methodology is substantially the same as the version published by Barclays on July

17, 2014 but with certain limited updates to reflect the sale of BISL to Bloomberg. During a

limited transition period additional updates will be required, including with respect to index

pricing sources and governance. Accordingly, while we believe that the rules and criteria for

determining the Bloomberg Barclays Indices remain substantially the same, users of the

Bloomberg Barclays Indices should be aware that the below methodology is subject to change,

including the areas indicated above. Please contact indexhelp@bloomberg.net with any

particular questions or concerns.

March 17, 2017

Bloomberg Barclays Index Methodology 2

Contents

Contents .................................................................................................................................................. 2

About Bloomberg Barclays Indices ...................................................................................................... 3

Benchmark Index Design Principles ..................................................................................................... 9

Benchmark Index Eligibility Rules ......................................................................................................... 11

Currency ............................................................................................................................................................................. 13

Sector .................................................................................................................................................................................. 16

Credit Quality ................................................................................................................................................................... 25

Amount Outstanding ...................................................................................................................................................... 29

Maturity .............................................................................................................................................................................. 34

Country .............................................................................................................................................................................. 35

Market of Issue .................................................................................................................................................................. 41

Taxability ........................................................................................................................................................................... 44

Subordination ................................................................................................................................................................... 46

Benchmark Index Rebalancing Rules ................................................................................................. 49

Benchmark Index Pricing and Analytics ............................................................................................. 57

Benchmark Index Returns Calculations and Weighting Rules .......................................................... 61

Accessing Indices..69

Appendices ........................................................................................................................................... 70

Appendix 1: Total Return Ralculations .......................................................................................................................... 70

Appendix 2: Index Rules for Currency Hedging and Currency Returns ................................................................. 75

Currency Returns and Hedging for Series-B Indices ......................................................................................... 83

Appendix 3: Detailed Discussion of Excess Return Computations ..........................................................................87

Appendix 4: Benchmark Index Pricing Methodology ................................................................................................ 91

US Aggregate Index Components ....................................................................................................................... 93

Other US Indices ..................................................................................................................................................... 95

Pan-European Indices ............................................................................................................................................ 97

Other Pan-European Indices ................................................................................................................................. 98

Asian-Pacific Indices ............................................................................................................................................. 100

EM Local Currency Government Index-Eligible Currencies ........................................................................... 101

Price Timing and Conventions for Nominal Bonds and Convertibles ......................................................... 102

Inflation-Linked Indices ........................................................................................................................................ 105

Appendix 5: Glossary of Terms .................................................................................................................................... 107

Appendix 6: Index Governance and Index Methodology Considerations ............................................................ 118

March 17, 2017

Bloomberg Barclays Index Methodology 3

About Bloomberg Barclays Indices

The range of products and

services offered by Bloomberg

extends well beyond benchmark

fixed income indices to include

investable inde