FlexShares High Yield Value-Scored Bond Index Fund (HYGV US) – Portfolio Construction Methodology

The underlying Northern Trust High Yield Value-Scored US Corporate Bond Index targets USD-denominated, non-investment-grade U.S. corporate bonds selected from a defined high yield universe and optimized to maximize a proprietary value score while controlling risk. Bonds are scored on value, credit quality, and liquidity; names in the lowest decile of the proprietary credit score are removed, and new issues falling in the bottom 5% liquidity per sector are restricted. The optimizer constrains issuer weights to ≤5%, sector active weights to ±8% versus the eligible universe, effective duration to ±0.10, and duration-bucket weights to ±3%; turnover is capped at 15% each reconstitution. Constituents are weighted by the optimization outcome rather than pure market value to tilt toward favorable valuation while maintaining broad high yield characteristics. The index is reconstituted monthly on the last U.S. business day, effective after the close.

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