Microsoft word - index methodology guide_mbcpvgus_version1.3.doc
Index Methodology Guide Millennium bcp Value&Growth US Index Issue 1.3
Issue date: May 14th, 2009 Print date: May 14th, 2009 Produced by: Millennium investment banking
The information contained in this document is current as of the publication date, and is subject to change without notice. Millennium investment banking will not accept responsibility for damages, direct or indirect, caused by any error or omissions in this document Table of contents
Chapter 1. Index description Chapter 2. Index construction
2.2. Component eligibility and other requirements
Chapter 3. Index maintenance Chapter 4. Index calculation and dissemination
4.2. Calculation frequency and dissemination
Appendix A. Index components from July 1st 2004 to May 1st 2009
Chapter 1. Index descriptions
This document summarizes the methodology and rules used to construct, calculate, and maintain the Millennium bcp Value&Growth US Index. The Index is designed to track the performance of Millennium investment banking’s selected investment list of publicly traded companies in the United States. The Index is calculated and maintained by Standard & Poor’s based on a methodology developed by Millennium investment banking in consultation with Standard & Poor’s. Millennium bcp Value&Growth US Index tracks the performance of publicly traded companies selected by Millennium investment banking by applying a proprietary screening process to the universe composed by the S&P500 and Nasdaq 100 indexes. The screening approach selects 10 stocks by employing the following steps:
1. Data availability: the stock must have coverage by at least 5 equity analysts
in the database used by Millennium investment banking.
2. Value: the stocks with the highest Div Yield, highest Earnings Yield and
lowest P/BV are selected. The metrics are calculated based on the current price and last figures available.
3. Growth: the stocks with the highest CAGR’s EPS in the next 2 years, based
The Millennium bcp Value&Growth US Index contains 10 different stocks, with monthly rebalancing where up to 10 stocks can be replaced. Companies may not apply, and may not be nominated, for inclusion in the Index. Companies are added or removed by Millennium investment banking based on the methodology described herein. Whenever possible, Millennium investment banking will publicly disclose changes to the Index on the calendar month of the actual change. Given the nature of the selection, the Index applies an equal-weighted methodology. The equal-weighted methodology ensures each component stock is equally represented in the Index. Monthly rebalancing events are used to “re-set” the weighting of each component such that each component has an equal influence on the Index performance. The Index is calculated on a price return basis and on an end-of-day basis, disseminated via Reuters. The set of values will be freely available on Millennium investment banking’s website, www.millenniuminvestmentbanking.pt. . Chapter 2. Index construction
This chapter outlines and defines the key steps in constructing and calculating the Index, including: eligibility requirements, formulas, initial component selection, and special adjustments. 2.1. Base date and value The Index has the following base date and value: Index Base date Base Value # of Components Weighting
* EW = equal-weighted 2.2. Component eligibility and other requirements All of the following sequential requirements must be met in order for a company to be eligible for inclusion: 1) Investable Universe a. Common stock of companies included in the S&P500 Index or Nasdaq 100. b. Covered by at least 5 equity analysts. 2) Value Rank The stocks within the Investable Universe are ranked based on Value Scores. A stock with a high Value Score would have a higher Value Rank. The Value Score, based on current prices, uses three metrics: a. Earnings yield b. Dividend yield c. Price/Book Value The stocks are then sorted in descending order of their Value Rank and the stocks with the highest ranking are selected (Top Value Rank). 3) Growth Rank Among the stocks in the Top Value Rank, the 10 with the highest Growth Rank are selected. The Growth Rank is based on the aggregate Growth Score using the consensus expectations for EPS Growth in the current year and the next year. The execution of the process described above will use financial databases available to Millennium investment banking 2.3. Weighting adjustment The Index is equal-weighted index with each stock representing, at each monthly rebalancing, 10% of the Index Value. As the stock prices move, the weightings in the index will change. At the beginning of each monthly rebalancing, the Index Number of Shares (INSi) of stock (i) are set so that each constituent has a weight of 10%. The INSi(t) is represented by the following equation:
where, Pi(r) = Price of stock (i) at time (r). Time (r) represents the closing value at the day of the rebalancing. 2.4. Dividend treatment The price index does not take normal dividend payments into account. Special dividends require an adjustment (as described in Chapter 3) to prevent such distributions from distorting the price index. 2.5. Index equations The price index is calculated using the following basic equation:
where: I(t) = Index value at time (t) n = Number of stocks in the index t = The day the index is calculated Pi(t) = Price of stock (i) at time (t) INSi(t) = Number of shares of stock (i) at time (t). The initial Index Value, set as at July 1st 2004 is 1000. Several key features of this process should be noted: INS (Index Number of Shares) and Index Value are artificial constructs. Index Number of Shares shown in the equations here are artificial constructs bearing no relation to actual shares outstanding. These might include fractions, and might be less than 1. Therefore, the Index Value is also an artificial construct. These terms are used simply to show the resemblance between the calculation methodology of the equally weighted and capitalization-weighted indices. The index return is an arithmetic mean, not a geometric mean. In between two rebalancing periods, the index return will be the arithmetic mean of the return of the stocks in the Index. The index is not always equally weighted. In between two rebalancing periods, the Millennium bcp Value&Growth US Index will usually not be equally weighted. Therefore, any return computation starting from a non-rebalancing date will not match the arithmetic average of returns of Millennium bcp Value&Growth US Index’s constituents between those two dates.
Chapter 3. Index maintenance
This chapter describes the circumstances that require Index changes, as well as the details on performing those changes. 3.1. Details of share changes The following events require adjustments to the Index Number of Shares:
The adjustment to the Index Number of Shares will be made so that the component’s weight in the Index Value remains unaffected by the event, therefore assuring the continuity of the index as well as the component’s representation in the Index. Price of a stock making a special dividend payment is adjusted by adding the per share special dividend amount to the prices as of the close of trading on the day after the ex- date. Any other extraordinary event will be dealt with in a way consistent with the underlying policy of the adjustments set in this Chapter. 3.2. Scheduled component changes Each component’s eligibility and ranking is reviewed at scheduled times throughout the year. The Index is rebalanced monthly. Changes are made using the closing prices on the first trading day of each month, and become effective at the opening on the next trading day. However, should one or more markets within the index be closed then the rebalance will take place on the next business day when all markets are open. Whenever possible, Millennium investment banking will publicly disclose changes to the Index on the Internet in the calendar month of the actual change. The selection process will use the requirements of Chapter 2.2. 3.3. Unscheduled component changes Component changes may occur between scheduled review and rebalancing events if a specific corporate event makes an existing component ineligible. The following events may require a component’s replacement: Event
If a merger or acquisition results in one component absorbing another, the
resulting company will remain a component and the absorbed company will be replaced. If a non-component company absorbs a component company,
the original component will be removed and replaced.
If a component splits or spins off a portion of its business to form one or more new companies, the resulting company with the highest market value will remain a component as long as it meets the eligibility requirements. The remaining companies will be evaluated for eligibility and possible addition to the Index.
A component will be removed and replaced immediately after bankruptcy filing.
A component will be removed and replaced immediately after being delisted from its primary market.
If a component is suspended for 5 or more days the Index committee will meet and decide which measures should be taken. During those five days, the rebalance won't be done.
Millennium investment banking maintains a Component Replacement Pool (CRP) for the Index at all times for contingency purposes. The CRP contains three stocks. These stocks are the ones ranked in 11th, 12th, and 13th in the ranking process described in 2.2. Components removed from the Index are replaced with those from the CRP in descending order by ranking. The company entering the Index goes in at the weight of the company coming out. This weight is used to compute the Index Number of Shares (INS) as described in Chapter 3. Whenever possible, interim component changes are disclosed on Millennium investment banking’s publicly available website. Chapter 4. Index calculation and dissemination
This chapter summarizes calculation and dissemination practices, quality assurance practices, and the circumstances requiring calculation corrections. 4.1. Price return calculation Standard & Poor’s calculates the Millennium bcp Value&Growth US Index. The price index is calculated and disseminated on an end-of-day basis. The Millennium bcp Value&Growth US Index is calculated using the last traded price for each company in the Index from the relevant exchanges and markets. Index values are rounded to two decimal places. 4.2. Calculation frequency and dissemination Index values are posted on Millennium investment banking’s website, www.millenniuminvestmentbanking.pt. If trading in a stock is suspended prior to the market opening, the stock’s adjusted closing price from the previous day will be used in the Index calculation until trading commences. If trading in a stock is suspended while the relevant market is open, the last traded price for that stock will be used for all subsequent Index calculations until trading resumes. 4.3. Input data Standard & Poor’s uses various quality assurance tools to audit, monitor, and maintain the accuracy of its input data. While every reasonable effort is taken to ensure high standards of data integrity, there is no guarantee against errors. Please refer to the Data Correction section for more detail. The index closing price is calculated using the closing prices issued by the primary exchange for each component stock in the index. If the primary exchange changes the closing price of a component stock, the new price will be used to calculate the index closing price. A final check of closing prices is done between one hour and one and one half hours after the close of markets. This timeframe may be expanded at S&P’s discretion on days where trading volume is unusually large at the close. For example, futures and options expiration dates, and large index rebalancing dates often result in unusually large volume. Only changes received prior to this final check are used in the closing price calculation. 4.4. Data correction Incorrect index component data or corporate action data will be corrected upon detection. If such errors are discovered within five days of occurrence, they will be corrected that same day. If discovered after five days, adjustments will be handled on a case-by-case basis depending on the significance of the error and the feasibility of a correction. Announcements will be made on the Internet prior to the change becoming effective.
Appendices This section provides additional information related to the Index in particular as well as changes to this document. Appendix A. Index components from July 1st 2004 to May 1st 2009
July 2004 components August 2004 components
September 2004 components October 2004 components November 2004 components December 2004 components
January 2005 components February 2005 components March 2005 components April 2005 components May 2005 components June 2005 components July 2005 components August 2005 components September 2005 components October 2005 components November 2005 components December 2005 components January 2006 components February 2006 components March 2006 components April 2006 components May 2006 components June 2006 components July 2006 components August 2006 components September 2006 components October 2006 components November 2006 components December 2006 components January 2007 components February 2007 components March 2007 components April 2007 components May 2007 components June 2007 components July 2007 components August 2007 components September 2007 components October 2007 components November 2007 components December 2007 components January 2008 components February 2008 components March 2008 components April 2008 components May 2008 components June 2008 components July 2008 components August 2008 components September 2008 components October 2008 components November 2008 components December 2008 components January 2009 components February 2009 components March 2009 components April 2009 components Appendix B. Document change history A history of significant changes to this document is shown in the table below. Issue Date
TECh RoUnDUP TECh RoUnDUP -->> Cleantech/Renewable will allow Israel to meet its goal of with related professional services tronE and GibbsCAM for the pro- for the building of a 4G wireless duction of turbine blades. Dong-UK magazine Global Water Intelli- of water per year that is based on broadband network in rural India fang Turbine Co., a subsidiary of gence named I