Calculating Bond's Weights in the Index

Free float value for the purposes of calculating a bond's weight in the indices, is calculated in a manner customized to the needs of investment management.

A bond's weight is the product of multiplying the following three parameters:

• Base price
• Fixed Notional Value (FNV) - listed trading capital (Par value)
• Weight cap factor

Out of three parameters that affect the calculation of a bond's weight in the index, only one is a dynamic parameter (the Base price of the bond, which changes daily). All other parameters (FNV and Weight cap factor) remain constant and are updated on a monthly basis only, at the monthly parameters update date.

Monthly Parameters Update Date

The two fixed parameters are updated at the end of the trading session on the trading day before the last trading day of each month.

The fixed parameters are set according to the bond's data on the record date, the 10th of each month, and are published on TASE website one week after the record date.

To view the monthly parameters rebalance schedule >

The fixed parameters for calculating a bond's weight in the index

FNV – Fixed Notional Value

A bond's FNV is the listed capital for trading on the fixed parameters update record date and becomes effective on the fixed parameters update date.

Special FNV - during the period starting on the day after the record date and ends on the parameters update date, In the case that a partial redemption is expected (for any reason), the FNV of the bond will be the registered trading capital deducting the fund portion expected to be redeemed.

In exceptional cases - the Head of Indices may determine a special FNV for a bond series in cases other than those detailed above.

To view the FNV rebalance>

Weight cap factor

Weight Limit Factor is a mechanism that adjusts the weight of the most highly capitalized bonds in an index to the weight cap set for the index, In order to reduce dependency on a limited number of large bonds. each index has a different weight limit, based on market conditions.

How is the Weight Limitation Factor determined?

The factor is calculated based on a bond's data on the monthly parameters update record date and it becomes effective on the monthly update date.

• If a bond's weight exceeds the weight limit of the index – the factor will be less than 1. The factor reduces the FNV value of a bond until it reaches the maximum weight.
• If a bond's weight is less than the weight limit set in the index than the factor will equal 1 because there is no need to reduce the weight. The weight of most bonds in the indices are less than the weight cap and, therefore, most bond's factor will equal 1.

Why is the weight of a large cap bond different from the maximum weight?

The factor is calculated based on a bond's data held on the record date. In the time period between the day after the record date and the parameters update date, bond prices fluctuate and therefore largest cap bonds might reach the maximum weight cap and a factor less than 1 will apply. In other words:

• Large cap bonds whose prices increased significantly relative to other constituents in the index - will be higher than the weight cap.
• Large cap bonds whose prices decreased or increased less relative to other constituents in the index - will be lower than the weight cap.

Special Factor Update

Outline for gradual addition to universe or indices

On the parameters updated date, the original factor value of the bond series about to be added to the universe will be multiplied by 0.25.

On the parameter update date following the addition to universe date, the original factor value of the bond series will be multiplied by 0.5.

The weight cap factor of the bond series will be equal to the original factor value starting from the second parameter update date following the addition to universe date.

A gradual addition outline, the same as the outline described above, also exists when combining a series of bonds with one of the following indices:

Tel-Bond 20, Tel-Bond 60, Tel-Bond Shekel 50, Tel-Bond-Shekel, Tel-Bond-Indexed, Tel-Bond-Yields and Tel-Bond-Stock.

Outline for incremental deletion due to expected deletion from universes

On the parameter update date that takes place two months before the parameter update date when the bond series is expected to be subtracted from the universes, the original factor value of the bond series will be multiplied by 0.75.

On the parameter update date that takes place one month before the parameter update date when the bond series is expected to be subtracted from the universes, the original factor value of the bond series will be multiplied by 0.5.

To view the free float rate brackets weight limit factor rebalance>