ISE Global Engineering and Construction INDEX

Transcription

1 April 2, 2008 Index Methodology Guide ISE Global Engineering and Construction INDEX Issue 1.1 Issue date: January 5, 2016 Produced by: LLC 60 Broad Street, New York NY

2 Table of Contents Chapter 1. Introduction... 3 Chapter 2. Index Description... 4 Chapter 3. Index Construction Base Date and Value Component Eligibility Requirements Dividend Treatment Index Equations Initial Component Selection... 8 Chapter 4. Index Maintenance Divisor Changes Details of Share Changes Semi-annual component changes and review Unscheduled component changes Unscheduled component weight adjustments Chapter 5. Index Calculation and Dissemination Price Calculation Calculation Frequency and Dissemination Input Data Data Correction Appendices Appendix A. Components Appendix B. Document Change History The information contained in this document is current as of the publication date, and is subject to change without notice. The ISE will not accept responsibility for damages, direct or indirect, caused by any error or omission in this document. The ISE globe logo and are trademarks of the LLC. is a trademark of the LLC LLC. All Rights Reserved. 2

3 Chapter 1. Introduction This document summarizes the methodology and rules used to construct, calculate, and maintain the. The provides a benchmark for investors interested in tracking public companies that are active in the global engineering and construction services industry, specifically those that are in engaged in large civil and capital projects, based on analysis of the products and services offered by those companies.

4 Chapter 2. Index Description The provides a benchmark for investors interested in tracking public companies that are active in the engineering and construction industry (the Industry ) based on analysis of those companies products and services. The index specifically targets companies that are engaged in large civil and capital projects such as infrastructure, utilities, transportation, (tele-)communications, commercial, residential, and commerce facilities and who s roles are within the engineering, designing, planning, consulting, project managing, and/constructing of these projects. To be included in the index, a company must receive at least 70% of revenues from these types of services and projects based on the reportable segment/division from its most recent annual report. The Index uses a linear-based capitalization-weighted methodology for the group of companies. The resulting linear weight distribution prevents a few large component stocks from dominating the index while allowing smaller companies to adequately influence index performance. Index components are reviewed semi-annually for eligibility, and the weights are re-set accordingly. The Index looks to capture all companies comprising the Global Engineering and Construction Industry. Companies may not apply, and may not be nominated, for inclusion in the Index. Companies are added or removed by the ISE based on the methodology described herein. The is calculated and maintained by Standard & Poor s Dow Jones Indices based on a methodology developed by the. The is calculated on a price and total return basis. The price Index is calculated in real-time and disseminated via the Options Price Reporting Authority (OPRA) and market data vendors every day the U.S. equity markets are open. The total return Index is calculated on an end-of-day basis. Both sets of values are freely available on ISE s website, and/or through market data vendors. 4

5 Chapter 3. 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 Base Date and Value The has the following base date and value: Index Base date Base value 12/31/ Component Eligibility Requirements All of the following requirements must be met in order for a company to be eligible for inclusion: 1. The component security must be actively engaged in some aspect of the engineering and construction industry such as engineering, designing, planning, consulting, project managing, and/or constructing of infrastructure, utilities, transportation, (tele-) communications, commercial, residential, and commerce facilities project. These projects are usually capital- and resource- intensive in nature, spanning many months to several years. 2. Revenues from these services and projects must account for at least 70% of the companies revenues. 3. The component security must not be listed on an exchange in a country which employs restrictions on foreign capital investment such that those restrictions render the component effectively non-investible, as determined by the ISE. 4. Must be an operating company and not a closed-end fund, exchange-traded fund (ETF), holding company, investment vehicle, or royalty trust (REIT). The following market capitalization and weighting concentration requirements must also be satisfied: 1. Each component security has a market capitalization of at least $500 million as of the constitution date. 2. No single component stock represents more than 24% of the weight of the index, and the cumulative weight of all components with an individual weight of 5% or greater do not in the aggregate account for more than 50% of the weight of the index. This particular requirement will be satisfied at the conclusion of each of the indexes semiannual rebalance periods. The ISE will, in most cases, use the quantitative ranking and screening system described herein. However, subjective screening based on fundamental analysis or other factors may be used, if in the opinion of the ISE certain components should be included or excluded from the index. 5

6 3.3. Dividend Treatment The price indexes do not take normal dividend payments into account. Dividends are accounted for by reinvesting them on a daily basis. ISE uses the ex-dividend date to determine the total daily dividends for each day. Special dividends require an index divisor adjustment (as described in Chapter 4) to prevent such distributions from distorting the price index Index Equations The price indexes are calculated using the following basic equations: Index Value Combined Mark et Value of Assigned Shares of Divisor All Components or I ( t ) n i 1 P i( t ) D x S ( t ) i( t ) where: I(t) = Index value at time (t) D(t) = Divisor at time (t) n = Number of stocks in the index t = The time the index is calculated Pi(t) = Price of stock (i) at time (t) Si(t) = Number of assigned shares of stock (i) at time (t) The initial index divisor is determined using the following equation: D ( o) n i 1 P i( o) I ( o) x S i( o) where: I(o) = Base index value at base date Do = Initial divisor at base date n = Number of stocks in the index Pi(o) = Closing price of stock (i) at base date 6

7 Si(o) = Number of assigned shares of stock (i) at base date Assigned shares are the number of shares needed for each component, as determined in the semi-annual review, such that the component s weighting conforms to the modified market cap weighting distribution outlined in Chapter 3.6. Changes to the index composition require divisor adjustments in order to retain index continuity before and after specific events (as outlined in Chapter 4 Index Maintenance). Divisor changes are made according to the following formula: D ( t 1) D ( t ) n P i 1 n i 1 i( t 1) P i( t ) x S x S i( t 1) i( t ) where: D(t+1) = Divisor after changes are made to the index Pi(t+1) = Price of each stock after index changes Si(t+1) = Number of assigned shares of each stock after index changes D(t) = Divisor before changes are made to the index Pi(t) = Price of each stock prior to index changes Si(t) = Number of assigned shares of each stock prior to index changes 7

8 3.5. Initial Component Selection The following steps are taken to select the initial components for the ISE Global Engineering and Construction Index. 1. Establish total population of companies that are involved in the Global Engineering and Construction Industry. 2. Remove companies that do not meet the Component Eligibility Requirements of Chapter If a component has multiple share classes, include the most liquid issue for that company (using average daily value traded during the prior six-month period) and remove the remaining classes. 4. Rank the stocks in descending order by unadjusted market capitalization. Assign a numerical score to each stock based on its rank (e.g., first stock gets a 1 ). 5. Rank the stocks in descending order by the average daily value of shares traded for the past three months (i.e., closing share price multiplied by shares traded for each day over the past three months) separately. Assign a numerical score to each stock based on its rank 6. Determine the combined liquidity score of each stock by adding the scores assigned during each ranking process above. In the event of a tie, the component with the higher market capitalization will have priority. 7. Adjust each component s weighting to a multiple of the weighting of the smallest component using the following equations: W i ( n 1 i) W n n W 1 i1 i W where: n n i1 ( n 1 i) Wi = Weight of each component 1 Wn = Weight of the smallest component by market capitalization n = Number of stocks in the index; ranked in descending order by market capitalization from 1 to n The adjustment described above results in a linear distribution where each component is weighted by a certain multiple of the smallest component. Note that the index portfolio 8

9 does not have a fixed number of stocks and attempts to include every stock in the industry that meets the eligibility requirements contained herein. The index component list is provided in Appendix A. 9

10 Chapter 4. Index Maintenance This chapter describes the circumstances that require index changes, as well as the details on performing those changes Divisor Changes Changes to the Index composition due to corporate actions or component eligibility changes will require Index Divisor adjustments, as follows: Component change Spinoff* Special Cash Dividend Rights Offering Adjustment Subtract the following from the price of the parent company: Spinoff stockprice Shareexchangeratio Adjust the assigned shares such that component s weighting is not changed as a result of the spinoff. Subtract special dividend from share price Subtract the following from the price of the parent company: Price of rights Rights ratio Adjust the assigned shares such that component s weighting is not changed as a result of the rights offering. Divisor changes are usually made on the date the corporate action becomes effective. For example, ISE use the ex-dividend date rather than the payment date to determine when making divisor adjustments. *Special note on Spin-offs: If a company being spun off is only trading on a whenissued basis, the when-issued price will be used to adjust the parent company s closing price Details of Share Changes Stock splits and reverse splits do not require Index Divisor adjustments because the corresponding change to the stock price equally offsets the number of shares outstanding, therefore not affecting the component s market capitalization Semi-annual component changes and review Each component s eligibility and ranking is reviewed in December and June according to the procedures below. Component changes are made after the close on the third Friday of December and June, and become effective at the opening on the next trading day. Changes are announced on ISE s publicly available website on the effective date. The procedures for performing the semi-annual rebalancing are identical to those shown in Chapter

11 4.4. Unscheduled component changes Component changes may occur between review periods if a specific corporate event makes an existing component ineligible. The following events may require a component s removal or possible replacement: Event Merger or acquisition Spin-off Bankruptcy Delisting Action 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 with the non-component. If a component company splits or spins off a portion of its business to form one or more new companies, the resulting company with the greatest relevance 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 company will be removed immediately after bankruptcy filing. Exceptions are made on a case-by-case basis. For example, a security might not be removed immediately when a bankruptcy filing is not a result of operating or financial difficulties. A component company will be removed immediately after being delisted from its primary market Unscheduled component weight adjustments Unscheduled component weight adjustments may occur between review periods if any component accounts for more than 24% of the index weight. The market capitalization of any component representing more than 24% of the index weight will be adjusted such that its new weight is no more than 20%. 11

12 Chapter 5. Index Calculation and Dissemination This chapter summarizes calculation and dissemination practices, quality assurance practices, and the circumstances requiring calculation corrections Price Calculation Price and total return indexes for the ISE Global Engineering and Construction Index are calculated by Standard & Poor s Dow Jones Indices. The price index is calculated on a real-time basis, and the total-return Index is calculated and disseminated on an end-of-day basis. The ISE Global Engineering and Construction 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 and divisors are rounded to 14 decimal places Calculation Frequency and Dissemination The price index is calculated on a real-time basis beginning when the first traded price of any of the Index components is received by Standard & Poor s Dow Jones Indices. Prices are delivered to ISE every 15 seconds and subsequently published to the Options Price Reporting Authority at that frequency. Total-return Index values are posted on ISE s publicly available website, 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 Input Data Standard & Poor s Dow Jones Indices 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 SPDJI 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 Data Correction Incorrect index component data, corporate action data, or Index Divisors 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, 12

13 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 ISE s publicly available website prior to the change becoming effective. Incorrect intraday index tick data will not be corrected. However, incorrect opening and closing values will be corrected as soon as possible after detection. 13

14 Appendices This section provides additional information related to the ISE Global Engineering and Construction Index in particular as well as changes to this document. 14

15 Appendix A. Components As of August 07, 2008 Rank Company Name Country Weighting 1 Vinci S.A. FRANCE 2.90% 2 Fluor Corp. UNITED STATES 2.86% 3 Bouygues S.A. FRANCE 2.81% 4 McDermott International Inc. UNITED STATES 2.77% 5 Actividades de Construccion y Servicios S.A. SPAIN 2.73% 6 Foster Wheeler Ltd. UNITED STATES 2.69% 7 Jacobs Engineering Group Inc. UNITED STATES 2.64% 8 China Communications Construction Co. Ltd. CHINA 2.60% 9 Leighton Holdings Ltd. AUSTRALIA 2.56% 10 Quanta Services Inc. UNITED STATES 2.51% 11 Shaw Group Inc. UNITED STATES 2.47% 12 Aker Solutions ASA NORWAY 2.43% 13 AMEC PLC UNITED KINGDOM 2.39% 14 KBR Inc. UNITED STATES 2.34% 15 Hochtief AG GERMANY 2.30% 16 Chicago Bridge & Iron Co. N.V. UNITED STATES 2.26% 17 JGC Corp. JAPAN 2.22% 18 SNC-Lavalin Group Inc. CANADA 2.17% 19 Skanska AB SWEDEN 2.13% 20 ORASCOM CONSTR INDS S A E SP GDR REG S EGYPT 2.09% 21 URS Corp. UNITED STATES 2.05% 22 Kajima Corp. JAPAN 2.00% 23 Chiyoda Corp. JAPAN 1.96% 24 Tecnicas Reunidas S.A. SPAIN 1.92% 25 Sacyr-Vallehermoso S.A. SPAIN 1.88% 26 AECOM Technology Corp. UNITED STATES 1.83% 27 Eiffage S.A. FRANCE 1.79% 28 China Railway Group Ltd. CHINA 1.75% 29 Balfour Beatty PLC UNITED KINGDOM 1.71% 30 Shimizu Corp. JAPAN 1.66% 31 Koninklijke Boskalis Westminster N.V. NETHERLANDS 1.62% 32 Impregilo S.p.A. ITALY 1.58% 33 Obayashi Corp. JAPAN 1.53% 34 EMCOR Group Inc. UNITED STATES 1.49% 35 YIT Oyj FINLAND 1.45% 36 Granite Construction Inc. UNITED STATES 1.41% 37 Taisei Corp. JAPAN 1.36% 38 Koninklijke BAM Groep N.V. NETHERLANDS 1.32% 39 Obrascon Huarte Lain S.A. SPAIN 1.28% 40 Kinden Corp. JAPAN 1.24% 41 Toyo Engineering Corp. JAPAN 1.19% 42 Imtech N.V. NETHERLANDS 1.15% 15

16 43 WS Atkins PLC SCOTLAND 1.11% 44 Comsys Holdings Corp. JAPAN 1.07% 45 Perini Corp. UNITED STATES 1.02% 46 Trevi-Finanziaria Industriale S.p.A. ITALY 0.98% 47 Maire Tecnimont S.p.A. ITALY 0.94% 48 Stantec Inc. CANADA 0.90% 49 Kyowa Exeo Corp. JAPAN 0.85% 50 NCC B SWEDEN 0.81% 51 ARCADIS N.V. NETHERLANDS 0.77% 52 Mota-Engil SGPS S/A PORTUGAL 0.72% 53 Toda Corp. JAPAN 0.68% 54 Ausenco Ltd. AUSTRALIA 0.64% 55 Heijmans N.V. NETHERLANDS 0.60% 56 Keller Group PLC UNITED KINGDOM 0.55% 57 Aecon Group Inc. CANADA 0.51% 58 Dycom Industries Inc. UNITED STATES 0.47% 59 Peab AB SWEDEN 0.43% 60 Nishimatsu Construction Co. Ltd. JAPAN 0.38% 61 Toshiba Plant Systems & Services Corp. JAPAN 0.34% 62 Okumura Corp. JAPAN 0.30% 63 Hill International Inc. UNITED STATES 0.26% 64 Veidekke ASA NORWAY 0.21% 65 Astaldi S.p.A. ITALY 0.17% 66 Grontmij N.V. NETHERLANDS 0.13% 67 WSP Group PLC UNITED KINGDOM 0.09% 68 Maeda Corp. JAPAN 0.04% 16

17 Appendix B. Document Change History A history of significant changes to this document is shown in the table below. Issue Date Change 0.1 August 07, 2008 First draft 1.0 August 16, 2008 First issuance 1.1 January 5, 2016 Rebalance disclosure change (4.3) 17