July 2011 Appendices A 1
FTSE China Index Series Review July 2011 Appendices Table of Contents Appendices Section Page No. A-3 About the FTSE China Indices A-4 Indices within the FTSE China Index series A-6 Guiding principles for the FTSE China Index Series A-7 Ground rules governing free float A-8 The Industry Classification Benchmark (ICB) A-10 User Guide to the FTSE China Index Series Review A-15 Guide to terminology A 2
July 2011 About the FTSE China Index Series The FTSE China Index Series (previously named FTSE Xinhua Index Series) is the leading index series designed to access investment opportunities for the Chinese market. The series covers various share classes, including A Shares, B Shares, H Shares, Red Chips and Hong Kong stocks, sized companies, sectors and themes, enabling investors to dissect the market for analysis and benchmarking purposes and to suit any domestic or international mandate. The indices are designed for use as performance benchmarks, and as the basis for derivative trading and index-tracking funds. Leading investment companies have launched exchange traded funds (ETFs), derivatives and other index-linked products on the FTSE China Index Series, which are available to investors across North America, Europe and Asia. The table below illustrates how the index family is structured under the FTSE China Index Series umbrella. The red shaded blocks indicate the tradeable indices and the grey shaded blocks indicate the benchmark indices. The index family is underpinned by the Industry Classification Benchmark (ICB) classification system, which is explained later in this Appendix. China A indices FTSE China A All-Share Index FTSE China A 200 FTSE China A 400 FTSE China A 600 FTSE China A Small Cap FTSE China A 200 & 600 Sector Indices FTSE China A50 FTSE China A Style Indices China A Bluechip Value 100 China A High Yield 150 China A Insurance Invmt China A Provincial Indices China B indices FTSE China B All-Share FTSE China B 35 H shares and Red Chips FTSE China (H & Red Chip) FTSE China 25 (H & Red Chip) H share, Red Chips and Hong Kong listed stocks FTSE Hong Kong (H & Red Chip) FTSE Hong Kong ex H share (Red Chip) FTSE China H share (H Share) Industry Classification Benchmark (ICB) 10 Industries 19 Supersectors 41 Sectors 114 Subsectors Share classes - A, B, H and Red Chip stocks A shares are securities of Chinese incorporated companies that trade on either the Shanghai or Shenzhen stock exchanges. They are quoted in Renminbi (CNY). They can only be traded by residents of the People s Republic of China (PRC) or under the Qualified Foreign Institutional Investor (QFII) rules. B shares are securities of Chinese incorporated companies that trade on either the Shanghai or Shenzhen stock exchanges. They are quoted in US dollars on the Shanghai Stock Exchange and Hong Kong dollars on the Shenzhen Stock Exchange. They can be traded by non-residents of the PRC and also by retail investors of the PRC with appropriate foreign currency dealing accounts. H shares are securities of Chinese incorporated companies and nominated by the Central Government for listing and trading on the Hong Kong Stock Exchange. They are quoted and traded in Hong Kong dollars. Like other securities trading on the Hong Kong Stock Exchange, there are no restrictions on who can trade H shares. Appendices A 3 Red Chip shares are securities of companies incorporated outside the PRC that trade on the Hong Kong Stock Exchange. They are quoted in Hong Kong dollars. A Red Chip is a company that is substantially owned directly or indirectly by Mainland China entities and has the majority of its sales revenue or operating assets derived from Mainland China. Share Classes A Share B Share H Share Red Chip Domestic investors No restrictions Domestic retail investors No restrictions No restrictions International investors Under QFII rules No restrictions No restrictions No restrictions Trading stock exchange (trading currency) Shanghai (CNY)/ Shenzhen (CNY) Shanghai (USD)/ Shenzhen (HKD) Hong Kong (HKD) Hong Kong (HKD) Country of incorporation PRC PRC PRC Not in PRC Universe Eligible A shares traded on Shanghai & Shenzhen stock exchanges Eligible B shares traded on Shanghai & Shenzhen stock exchanges Eligible H shares traded on Stock Exchange of Hong Kong and included in the FTSE All- World Index Eligible Red Chip traded on Stock Exchange of Hong Kong and included in the FTSE All-World Index Selection criteria/ other factors Listed on Shanghai SE main board or Shenzhen SE main market Listed on Shanghai SE main board or Shenzhen SE main market H shares included in the FTSE All-World China Index Companies directly or indirectly owned by Chinese entities, in aggregate of at least 35% At least 55% of sales revenue or operating assets derived from PRC A 3
FTSE China Index Series Review July 2011 Indices within the FTSE China Index Series This document contains information on the FTSE China A indices, FTSE China B indices and the FTSE China H and Red Chip indices. Each of these indices is managed and maintained under the Asia Regional Committee structure. FTSE China A Share Index Series The FTSE China A Share Index Series is designed to represent the performance of the companies in the mainland Chinese market that are available to A Share investors and international investors via the Qualified Foreign Institutional Investment (QFII) scheme, that are traded on the Shanghai and Shenzhen stock exchanges. FTSE China A All-Share Index Benchmark index comprising all companies within the top 98% of the eligible A Shares listed on the Shanghai and Shenzhen Stock Exchanges, ranked by full market capitalisation that meet the stated eligibility requirements. This index is reviewed annually in March. FTSE China A 200 Index The FTSE China A 200 comprises the largest 200 companies (ranked by full market capitalisation) in the FTSE China A All-Share Index. This is the large cap index in the FTSE China A Share Index Series. This index is reviewed quarterly in March, June, September and December. FTSE China A 400 Index The FTSE China A 400 comprises the next largest (mid cap) 400 companies, that are not large enough to be constituents of the FTSE China A 200 Index, ranked by full market capitalisation. This is the mid cap index in the FTSE China A Share Index Series and is reviewed quarterly in March, June, September and December. FTSE China A 600 Index FTSE China A 600 Index comprises the companies in the FTSE China A 200 and FTSE China A 400 indices. This is the large/mid cap index in the FTSE China A Share Index Series and is reviewed quarterly in March, June, September and December. FTSE China A Small Cap Index The small cap index in the FTSE China A Index Series. It consists of the companies within the FTSE China A All-Share Index which do not meet the market capitalisation eligibility requirement of the FTSE China A 600 Index. This index is annually reviewed in March. FTSE China A50 Index A real-time, tradable index comprising the 50 largest companies by full market capitalisation of the FTSE China A All-Share Index. The index offers the optimal balance between representativeness and tradability for China s A Share market. This index is a subset of the FTSE China A 200 index and is reviewed quarterly in March, June, September and December. Other indices in the FTSE China A Share Index Series The following indices in the FTSE China A Share Index Series are not included in this Monthly Review: FTSE China A Style Indices Style indices are calculated for FTSE China A 200 and FTSE China A 600 indices. Growth index is designed to reflect portfolios focusing on earnings and revenue growth, weighted towards those companies with identifiable growth characteristics. Value index is designed to reflect portfolios focusing on the price and value characteristics of securities, weighted towards those companies with identifiable value characteristics. The FTSE China A Style Index Series is reviewed semiannually in June and December (with new index additions reviewed quarterly in March, June, September and December). FTSE China A Bluechip Value 100 Index A tradable index comprising constituents from the FTSE China A 200 Index. The index introduces four value factors Book to Price, Sales to Price, Dividend Yield and Cash Flow to Price as the criteria for score-based screening. FTSE China A High Yield 150 Index Benchmark index comprising the top 150 A Share companies of the China A 600 index when ranked by the highest historical yields. It is weighted by dividend yield and components are selected on the consistency of dividend payments over the past three years, subject to a liquidity screening. This index is reviewed annually in March. FTSE China A Insurance Investment Index Benchmark index comprising 200 constituents that comply with both the performance requirements and equity investment regulations as set by the China Insurance Regulatory Commission (CIRC). It is the first index designed expressly to meet the investment needs of the Chinese insurance industry. FTSE China A Provincial Indices Comprises 32 regional indices for all Chinese provinces and the municipalities, such as Beijing, Chongqing, Shanghai, Tianjin and Shenzhen. FTSE China A 200 Composite Index Benchmark index designed to reflect the combined performance of the domestic equity and bond markets of Mainland China. The index is composed of 75% of the FTSE China A 200 Index and 25% of the FTSE China Government Bond Index. FTSE China Government Bond Index Benchmark index designed to represent the performance of government bonds issued in Mainland China. Index includes bonds that are traded on the Shanghai and Shenzhen stocks exchanges. Assessment criteria for a prospective A Share new issue: FTSE China A50 - a new issue whose market capitalisation amounts to 0.5% or more of the full market capitalisation of the China A All-Share index (before the application of individual constituent investability weightings). FTSE China A Small Cap - a new issue whose market capitalisation amounts to 0.3% or more of the full market capitalisation of the China A Small Cap index (before the application of individual constituent investability weightings). Assessment criteria for an existing A Share at time of review: FTSE China A50 added to index if stock is ranked 40 th or above. Removed from index if ranked 61 st or below. FTSE China A 200 added to index if stock is ranked 160 th or above. Removed from index if ranked 241 st or below. FTSE China A 400 added to index if stock is ranked 520 th or above. Removed from index if ranked 681 st or below. A 4
July 2011 FTSE China B Share Index Series The FTSE China B Index Series is designed to represent the performance of B share companies in the Mainland Chinese market available to international investors and domestic Chinese retail investors with the obligatory foreign currency accounts. It consists of B share classes of equity that trade on the Shanghai and Shenzhen stock exchanges. FTSE China B All-Share Index A benchmark index in the FTSE China B Share Index Series which includes all eligible B shares listed on the Shanghai and Shenzhen Stock Exchanges. Constituents are reviewed annually in March. FTSE China B 35 Index A real-time, tradable index comprising the 35 largest B share companies by full market capitalisation of the FTSE China B All-Share Index. Constituents are reviewed quarterly in March, June, September and December. Assessment criteria for a prospective B share new issue: FTSE China B 35 new issue must have a full market capitalisation in 15 th position or higher, before the application of individual constituent investability weightings. Assessment criteria for inclusion or exclusion in the China B 35 index at time of review: FTSE China B 35 Added to index if stock is ranked 25 th or above. Removed from index if ranked 46 th or below. H Shares, Red Chip and Hong Kong Stocks The FTSE China Index and FTSE Hong Kong Index Series are aimed to represent the performance of the markets outside of Mainland China for international investors and Chinese Qualified Domestic Institutional Investor (QDII) investors. FTSE China Index (H and Red Chip) The FTSE China index is designed to represent the performance of all the large and mid caps stocks that are either a Red Chip or an H share company according to the FTSE Global Equity Index series (GEIS). All changes (including corporate actions) will be applied in the same manner as in the GEIS to ensure consitency. This index is reviewed in March (as part of the GEIS regional review). It is a real-time, tradable index which provides an expanded version of the FTSE China 25 Index, enabling investors to invest in a broader basket of largest and most liquid Chinese stocks (H Shares and Red Chips) listed on the Stock Exchange of Hong Kong. FTSE China 25 Index (H and Red Chip) A real-time, tradable index which offers the optimal representation of China blue chip stocks. It includes the largest 25 Chinese stocks (H shares and Red Chips) listed on the Stock Exchange of Hong Kong, ranked by full market capitalisation. Constituents are capped at 10% of the total index and reviewed quarterly in March, June, September and December. Assessment criteria for inclusion or exclusion in the China 25 index at time of review: FTSE China 25 added to index if stock is ranked 15 th or above. Removed from index if ranked 36 th or below (when the eligible companies are ranked by full market capitalisation (before the application of any investability weightings)). FTSE Hong Kong Index (H and Red Chip, HK listed stocks and HSBC) *available from autumn 2011 Comprises (i) Red Chips from the FTSE All-World China Index and Hong Kong listed stocks from the FTSE All-World Hong Kong Index (ii) H shares from the FTSE All-World China Index and (iii) Hong Kong listed HSBC (cap of 20% applied to its full market capitalisation). Excludes stocks trading on Singapore Stock Exchange that are currently part of the FTSE All-World Hong Kong Index (Hong Kong Land, Jardine Matheson and Jardine Strategic). This index is reviewed annually in March (as part of the GEIS regional review). Appendices A 5 FTSE Hong Kong ex H share Index (Red Chip, HK listed stocks and HSBC) *available from autumn 2011 Comprises (i) Red Chips from the FTSE All-World China Index and Hong Kong listed stocks from the FTSE All-World Hong Kong Index and (ii) Hong Kong listed HSBC Holdings (cap of 20% applied to its full market capitalisation). Excludes stocks trading on Singapore Stock Exchange that are currently part of the FTSE All-World Hong Kong Index (Hong Kong Land, Jardine Matheson and Jardine Strategic). This index is reviewed annually in March (as part of the GEIS regional review). Assessment criteria for a prospective Red Chip: Incorporated outside the PRC and listed on the Hong Kong Stock Exchange; Companies directly or indirectly owned by Chinese entities, i.e. Chinese government/state/provinces/municipalities who either own or control Chinese companies (i.e. strategic holding) in aggregate of over 35%; Over 55% of revenue or operating assets derived from the PRC. Assessment criteria for an existing Red Chip at time of review: If it is no longer incorporated outside the PRC, it will not be classified as a Red Chip; If it is no longer listed on Hong Kong Stock Exchange, it will not be classified as a Red Chip; Companies directly or indirectly owned by Chinese entities, i.e. Chinese government/state/provinces/municipalities who either own or control Chinese companies (i.e. strategic holding), in aggregate falling below 25% will not be classified as a Red Chip; A company with sales revenue or operating assets derived from the PRC falling below 45% will not be classified as a Red Chip. FTSE China H Share Index (H share only) *available from autumn 2011 Comprises H Shares from the FTSE All-World China Index and is reviewed annually in March. Constituents are no greater than 15% of the total index on a quarterly basis. With regard to new issues eligible for entry into the FTSE China H Share Index, the index will be re-capped provided the new issue is greater than 15% of the index. A 5
FTSE China Index Series Review July 2011 Guiding principles for the FTSE China Index Series Transparency on all issues concerning the management of and changes to the FTSE China Index Series. Strict, widely published, rules-based methodology. Rules-driven, independent committee of market practitioners who oversee the indices. Committee decisions are made public in a timely manner to aid users of the indices. Eligible securities A, B, H and Red Chip share classes of securities listed on the Shanghai Stock Exchange (main board), Shenzhen Stock Exchange (main board) or the Stock Exchange of Hong Kong (SEHK), are eligible for inclusion in the FTSE China Index Series. A security must meet the following criteria: Accurate and timely data and pricing information must be available. Adequate liquidity must exist (as ranked by its mediate daily trading per month). A minimum trading record of at least three trading months prior to the date of the review. Convertible preference shares and loan stocks will be excluded until converted into eligible equity shares. Securities designated Special Treatment will be eligible for inclusion. Equity Investment Trusts (companies with ICB (Industrial Classification Benchmark) subsector code of 8985) and Non-Equity Investment instruments (ICB subsector code 8995) will not be eligible for inclusion. Constituent classification Sector classifications for all FTSE index constituents, including the FTSE China A Index Series, are defined by the ICB classification system. The ICB sector designations are listed below, with further guidance provided on the website at www.icbenchmark.com. Index review The index series is reviewed quarterly (or annually for some indices), with advance notification given of any changes to constituents via www.ftse.com to ensure that indices continue to reflect market reality. Details of the committees governing the FTSE China Index Series are given later in this document. A schedule of periodic reviews is provided on www.ftse.com. Rules-based methodology As with all FTSE indices, the FTSE China Index Series is strictly rules-based to ensure consistency and transparency. The Ground Rules for index series are published as widely as possible to allow anyone tracking the index to anticipate changes and accurately replicate the index. A full set of the Ground Rules for the management of the FTSE China Index Series is available on www.ftse.com. Strict governance by committees of market practitioners The FTSE China Index series is managed and maintained by independent committees of market practitioners. Committee members are responsible for deciding the treatment of complex corporate actions, as well as any necessary changes to the Ground Rules. Practitioner committees are essential in ensuring that FTSE indices reflect and deal with current issues affecting international investors. A description of the responsibilities of each committee involved in the management of the FTSE China Index series is provided later in this section. Constituent selection Inclusion screens. To ensure the FTSE China Index Series is investable, eligible securities are subject to three screens: Accurate and reliable price exists for the purposes of determining the market value of a company. Securities comprising up to 98% of China s full market capitalisation are included. Securities must have a minimum 20 day trading record when reviewed. Liquidity screens - are based on the security s median daily trading per month on the Shanghai and Shenzhen stock exchanges and Stock Exchange of Hong Kong (each daily trade total is ranked and the middle ranking day is selected). Daily totals with zero trades are included. Non-constituents must have a turnover of at least 0.05% of their shares in issue, based on their median daily trade per month in ten out of twelve months prior to a full market review, to be eligible for inclusion in the index series. An existing constituent must have a turnover of at least 0.04% of its shares in issue for at least eight of the twelve months prior to the full market review, to remain in the index. New issues must have a minimum three month trading record when reviewed and a turnover of at least 0.05% of their free float adjusted shares in each month since their listing. Free float. Constituents are adjusted for free float and weighted according to how much share capital is available for public investment. This achieves the most accurate and neutral market representation possible: meaning that only shares you can own are included in the index. FTSE has chosen to apply free float restrictions in weighted bands. The bands are narrow at the lower end of the scale where greater sensitivity is required for an accurate representation. At the higher end, broader bands are applied. With this methodology, the weightings of the larger companies do not fluctuate unless a significant corporate event has occurred. This process accurately reflects the investability of a company, without subjecting the investor to frequent rebalancing transactions associated with a precise free float methodology. Please refer to the more detailed notes on free float rules later in this section. Data on FTSE indices FTSE can supply daily updated data products giving constituent lists, index values and corporate actions for the FTSE China Index Series and its sub-indices. These products are available either direct from FTSE, or via all major data vendors. More details on how to access these products are available from FTSE. Closing end of day values for the FTSE China Index Series are available on www.ftse.com, along with the updated daily constituent lists for the China A50 (A share), China 25 (H and Red Chip) and China B 35 (B share) indices. A 6
July 2011 Ground rules governing free float stock weightings in the FTSE China Index Series Constituent weightings used to calculate the FTSE China Index Series are adjusted to reflect available free float including cross-holdings and foreign ownership limits. Factors used to adjust each constituent weighting are given in the stock level reports in this document. Free float adjusted constituent weightings are known as investability weights. I. Free float restrictions include: a) corporate investments in an index constituent either by a public listed, or strategic holding company, private or non-listed subsidiary of a listed company, or a private company b) holdings by company directors, their families, companies majority owned by a director, or promotors c) employee share schemes or shares held by employee unions d) government holdings are not available for public investment and include government authorities, government controlled corporations, government owned corporations or government investment companies e) Non-negotiable/non-tradable shares f) shares subject to a lock in clause II. The following are not considered as restricted free float: a) institutional investments b) nominee holdings (including those supporting ADRs / GDRs), unless they represent restricted free float as defined by rule I above c) holdings by investment companies, funds and trusts d) quasi government unless greater than 10% e) holdings by private investors unless greater than 10% III. Bands for initial weightings free float restrictions will be calculated using available published information. The initial weighting of a constituent in the index will be applied in the following bands. a) free float less than or equal to 15% = see rule (V) below b) free float greater than 15% but less than or equal to 20% = 20% c) free float greater than 20% but less than or equal to 30% = 30% d) free float greater than 30% but less than or equal to 40% = 40% e) free float greater than 40% but less than or equal to 50% = 50% f) free float greater than 50% but less than or equal to 75% = 75% g) free float greater than 75% = 100% IV. FTSE China A Share companies that have a free float of 15% or less, the following table outlines their treatment in the index series. Note for FTSE China B Share and FTSE China 25 indices, free float 5%-15% must be greater than USD $2.5bn. Company Free Float Thresholds Market Size Requirements New index entrant Greater than 3% but equal or less than 15%. Full market capitalisation is greater than CNY 17 billion. Existing index constituent Greater than 3% but equal or less than 15%. Full market capitalisation is greater than CNY 10 billion. Existing index constituent Less than or equal to 3% are excluded. N/A V. The FTSE China Indices will be periodically reviewed for changes in free float. These reviews will coincide with the quarterly reviews undertaken by the FTSE Asia Pacific Regional Committee. VI. A constituent s free float will also be reviewed and adjusted if necessary following a corporate event. If the corporate event includes a corporate action which affects the index, any change in free float will be implemented at the same time as the corporate action. If there is no corporate action, the change in free float will be applied as soon as practicable after the event. All changes in a constituent s investability weight within the index are subject to rule (VII) below. VII. Following the application of an initial free float restriction, a constituent s free float will only be changed if its actual free float moves to more than 5 percentage points above the minimum or more than 5 percentage points below the maximum of an adjacent band. This 5 percentage points threshold does not apply if the change is greater than 10 percentage points for the bands between 20% and 50% and 25 percentage points for the bands between 50% and 100% or to the 15% limit in (IV). Appendices A 7 A full copy of the Ground Rules and Committee meetings for the FTSE China A Index Series, FTSE China B Index Series, FTSE China Index and FTSE Hong Kong Index Series are available on www.ftse.com. Committee structure for the management of changes affecting the FTSE China Index Series FTSE Policy Group FTSE Equity Indices Committee Regional Committees ICB Advisory Board Nationality Working Party Responsible for determining major policy issues and monitoring the activities of the FTSE Equity Indices Committee. Responsible for maintaining the Ground Rules for the management of the FTSE China Index Series. The FTSE Equity Indices Committee has established three regional committees: FTSE Europe/Middle East/Africa Regional Committee FTSE Asia Pacific Regional Committee FTSE Americas Regional Committee The FTSE Asia Pacific Regional Committee undertakes the quarterly reviews of the FTSE China Series Index and ensures that constituent changes and index calculations are made in accordance with the Ground Rules. Responsible for the industry classification of constituents as defined by the ICB classification system. Makes recommendations on the appropriate nationality of stocks for consideration by the FTSE Equity Indices Committee. A 7
FTSE China Index Series Review July 2011 The Industry Classification Benchmark (ICB) The primary purpose of the Industry Classification Benchmark (ICB) is to provide a service to investors in quoted equity securities by grouping companies within homogenous subsectors. Subsectors are grouped into Sectors and Sectors are aggregated into Supersectors, which are further aggregated into Industries. The ICB Advisory Board provides advice in the allocation of companies to their subsectors, as well as changes to the rules for classifying companies and changes in a company s classification. The basic information used for the classification of a company is the audited accounts and directors' report. Where a company carries on two or more classes of business that differ substantially from each other, the ICB Advisory Board bases its determinations on the accounting segmentation published in the audited accounts and directors report. A company will be allocated to the subsector whose definition most closely fits the source of revenue or where it constitutes a majority of the revenue. A full copy of the Ground Rules for the Industry Classification Benchmark classification system and detailed definitions of each classification designation are available from www.icbenchmark.com. Industry Supersector Sector Subsector 0001 Oil & Gas 0500 Oil & Gas 0530 Oil & Gas Producers 0533 Exploration & Production 0537 Integrated Oil & Gas 0570 Oil Equipment, Services & Distribution 0573 Oil Equipment & Services 0577 Pipelines 0580 Alternative Energy 0583 Renewable Energy Equipment 0587 Alternative Fuels 1000 Basic Materials 1300 Chemicals 1350 Chemicals 1353 Commodity Chemicals 1357 Specialty Chemicals 1700 Basic Resources 1730 Forestry & Paper 1733 Forestry 1737 Paper 1750 Industrial Metals & Mining 1753 Aluminum 1755 Nonferrous Metals 1757 Iron & Steel 1770 Mining 1771 Coal 1773 Diamonds & Gemstones 1775 General Mining 1777 Gold Mining 1779 Platinum & Precious Metals 2000 Industrials 2300 Construction & Materials 2350 Construction & Materials 2353 Building Materials & Fixtures 2357 Heavy Construction 2700 Industrial Goods & Services 2710 Aerospace & Defense 2713 Aerospace 2717 Defense 2720 General Industrials 2723 Containers & Packaging 2727 Diversified Industrials 2730 Electronic & Electrical Equipment 2733 Electrical Components & Equipment 2737 Electronic Equipment 2750 Industrial Engineering 2753 Commercial Vehicles & Trucks 2757 Industrial Machinery 2770 Industrial Transportation 2771 Delivery Services 2773 Marine Transportation 2775 Railroads 2777 Transportation Services 2779 Trucking 2790 Support Services 2791 Business Support Services 2793 Business Training & Employment Agencies 2795 Financial Administration 2797 Industrial Suppliers 2799 Waste & Disposal Services 3000 Consumer Goods 3300 Automobiles & Parts 3350 Automobiles & Parts 3353 Automobiles 3355 Auto Parts 3357 Tires 3500 Food & Beverage 3530 Beverages 3533 Brewers 3535 Distillers & Vintners 3537 Soft Drinks 3570 Food Producers 3573 Farming & Fishing 3577 Food Products 3700 Personal & Household Goods 3720 Household Goods & Home 3722 Durable Household Products Construction 3724 Nondurable Household Products 3726 Furnishings 3728 Home Construction 3740 Leisure Goods 3743 Consumer Electronics 3745 Recreational Products A 8
July 2011 3747 Toys 3760 Personal Goods 3763 Clothing & Accessories 3765 Footwear 3767 Personal Products 3780 Tobacco 3785 Tobacco 4000 Health Care 4500 Healthcare 4530 Health Care Equipment & Services 4533 Health Care Providers 4535 Medical Equipment 4537 Medical Supplies 4570 Pharmaceuticals & Biotechnology 4573 Biotechnology 4577 Pharmaceuticals 5000 Consumer Services 5300 Retail 5330 Food & Drug Retailers 5333 Drug Retailers 5337 Food Retailers & Wholesalers 5370 General Retailers 5371 Apparel Retailers 5373 Broadline Retailers 5375 Home Improvement Retailers 5377 Specialized Consumer Services 5379 Specialty Retailers 5500 Media 5550 Media 5553 Broadcasting & Entertainment 5555 Media Agencies 5557 Publishing 5700 Travel & Leisure 5750 Travel & Leisure 5751 Airlines 5752 Gambling 5753 Hotels 5755 Recreational Services 5757 Restaurants & Bars 5759 Travel & Tourism 6000 Telecommunications 6500 Telecommunications 6530 Fixed Line Telecommunications 6535 Fixed Line Telecommunications 6570 Mobile Telecommunications 6575 Mobile Telecommunications 7000 Utilities 7500 Utilities 7530 Electricity 7535 Conventional Electricity 7537 Alternative Electricity 7570 Gas, Water & Multiutilities 7573 Gas Distribution 7575 Multiutilities 7577 Water 8000 Financials 8300 Banks 8350 Banks 8355 Banks 8500 Insurance 8530 Nonlife Insurance 8532 Full Line Insurance 8534 Insurance Brokers 8536 Property & Casualty Insurance 8538 Reinsurance 8570 Life Insurance 8575 Life Insurance 8600 Real Estate 8630 Real Estate Investment & Services 8633 Real Estate Holding & Development 8637 Real Estate Services 8670 Real Estate Investment Trusts 8671 Industrial & Office REIT 8672 Retail REIT 8673 Residential REIT 8674 Diversified REIT 8675 Specialty REIT 8676 Mortgage REIT 8677 Hotel & Lodging REIT 8700 Financial Services 8770 Financial Services 8771 Asset Managers 8773 Consumer Finance 8775 Specialty Finance 8777 Investment Services 8779 Mortgage Finance 8980 Equity Investment Instruments 8985 Equity Investment Instruments 8990 Nonequity Investment Instruments 8995 Nonequity Investment Instruments 9000 Technology 9500 Technology 9530 Software & Computer Services 9533 Computer Services 9535 Internet 9537 Software 9570 Technology Hardware & Equipment 9572 Computer Hardware 9574 Electronic Office Equipment 9576 Semiconductors 9578 Telecommunications Equipment The Industry Classification Benchmark (ICB) is owned by FTSE International Limited (FTSE). 2011 FTSE International Limited ( FTSE ). All rights reserved. Appendices A 9 A 9
FTSE China Index Series Review July 2011 User guide to the FTSE China Index Series Review Introduction The FTSE China Index Series Monthly Review provides month-end data for the (a) FTSE China A Index and component indices, including the FTSE China A50 Index, FTSE China A 200 Index, FTSE China A 400 Index, FTSE China A 600 Index and the FTSE China A Small Cap Index (b) FTSE China B All-Share Index, including FTSE China B 35 Index and (c) FTSE China Index and component indices, including the FTSE China 25 Index. *FTSE Hong Kong Index, FTSE Hong Kong ex H Share Index and FTSE China H Share Index sections will be added in the autumn 2011. China Indices - Performance Report These reports give details of capital return and total return at index level. For FTSE China A indices, the data is presented in Renminbi (CNY). For FTSE China B indices, the data is presented in US dollars (USD). For FTSE China Index and Hong Kong Index, the data is presented in Hong Kong dollars (HKD). Valuation Data Capital Return Total Return Yld % P/E P/B P/CE P/S ROE MCap Index No of Index Index 1M % YTD % 12M % Index 1M % YTD % 12M % CCY(mn) Wgt % Stocks Yield % Price/ Earnings Price/Book Value Price/Cash Earnings Price/Sales Return on Equity (ROE Aggregates Index Capital Return (Index Value) The dividend yield for the index. Aggregate fundamental data ratios, except aggregate ROE, are calculated based on the sum of each individual constituent s market capitalisation (adjusted for free float) divided by: the sum of the product of market capitalisation (adjusted for free float) multiplied by the reciprocal of the valuation ratio for each constituent. Aggregate ROE is the sum of weighted ROE values. Weighting is based on average equity allocated to that security based on its index market capitalisation, proportionate to total company market capitalisation. Where valuation ratios for individual constituents are not available, data values for these constituents are excluded from the corresponding aggregate calculation(s). See the glossary section for constituent level fundamental data item definitions for P/E, P/B, P/CE, P/S and ROE. The name of the index to which the data relates. The value on the report date of the capitalisation weighted index. Capital Return (Performance) Total Return (Index Value) Total Return (Performance) M Cap CCY (mn) Index Weight % No of Stocks The performance of the capitalisation weighted index (adjusted for special dividends) in the last month (1M), the last three months (3M), in the last calendar year (12M) and since the start of the calendar year (YTD). The value on the report date of the total return index. The performance of the total return index (adjusted for special dividends) in the last month (1M), the last three months (3M), in the last year (12M) and since the start of the year (YTD). The total market capitalisation of stocks in the index in million denominations of relevant currency below. China A = CNY China B = USD China Index / Hong Kong Index / China H = HKD The % weight of the stock within the given index. The number of stocks in the index. Relative Performance Charts China indices performance relative to the given index for 1-month and 12-month time periods. A 10
July 2011 Reports in all other sections Sector Performance Reports These reports give details of capital return and total return at the sector level. Data is presented in Renminbi (CNY) for the FTSE China A 200 and FTSE China A 600 indices only. Yld % Valuation Data Capital Return Total Return P/E P/B P/CE P/S ROE Sector Index 1M 3M YTD 12M Index 1M 3M YTD % % % % % % % 12M % MCap CNY (mn) Index Wgt % No of Stocks Yield % Price/ Earnings Price/Book Value Price/Cash Earnings Price/Sales Return on Equity (ROE Aggregates Sector Capital Return (Index Value) The dividend yield for the index. Aggregate fundamental data ratios, except aggregate ROE, are calculated based on the sum of each individual constituent s market capitalisation (adjusted for free float) divided by: the sum of the product of market capitalisation (adjusted for free float) multiplied by the reciprocal of the valuation ratio for each constituent. Aggregate ROE is the sum of weighted ROE values. Weighting is based on average equity allocated to that security based on its index market capitalisation, proportionate to total company market capitalisation. Where valuation ratios for individual constituents are not available, data values for these constituents are excluded from the corresponding aggregate calculation(s). See the glossary section for constituent level fundamental data item definitions for P/E, P/B, P/CE, P/S and ROE. The name of the sector index to which the data relates (as defined by the ICB classification system). The value on the report date of the capitalisation weighted index. Capital Return (Performance) Total Return (Index Value) Total Return (Performance) M Cap CNY (mn) M Cap USD (mn) M Cap HKD (mn) Index Weight % No of Stocks Relative Performance Charts FTSE China A 200 and FTSE China A 600 sector performance relative to the given index for 1-month and 12-month time periods. The performance of the capitalisation weighted index (adjusted for special dividends) in the last month (1M), the last three months (3M), in the last calendar year (12M) and since the start of the calendar year (YTD). The value on the report date of the total return index. The performance of the total return index (adjusted for special dividends) in the last month (1M), the last three months (3M), in the last year (12M) and since the start of the year (YTD). The total market capitalisation of stocks in the index in million denominations of CNY currency. The total market capitalisation of stocks in the index in million denominations of USD currency. The total market capitalisation of stocks in the index in million denominations of HKD currency. The % weight of the stock within the given index. The number of stocks in the index. Appendices A 11 A 11
FTSE China Index Series Review July 2011 Overview Absolute Performance This report shows the top ten and bottom ten companies ranked by performance for the previous month and the previous calendar year. Top and Bottom Performers Name Sector Price Chg % Name The name of a stock in the index. Price Stock price on the report date in local currency. Sector The sector level to which the stock belongs. Chg% The stock performance (adjusted for special dividends) over the given period. Overview Weighted Contribution This report shows the top ten and bottom ten companies ranked by weighted contribution for the previous month and the previous year. Top and Bottom Contributors Name Sector Price Wgt % Cont % Name The name of a stock in the index. Price Stock price on the report date in local currency. Sector The sector level to which the stock belongs. Wgt % Stock weight within the country index on the report date. Cont % The weighted contribution of the stock over the period. Overview Holdings This report shows the top ten companies ranked by market capitalisation as at the end of the month. Top 10 Holdings Name Sector Price Wgt % Name The name of a stock in the index. Price Stock price on the report date in local currency. Sector The sector level to which the stock belongs. Wgt% The index weight as at the end of the month. Overview Index Performance A chart showing the performance of the (capital) index and the total return index. Data for China A indices are shown in Renminbi (CNY), data for China B indices are shown in US dollars (USD) and data for China H and Red Chip indices are shown in Hong Kong dollars (HKD). Overview Index Volatility A chart showing one month and three month rolling volatility of the capital and total return index based on daily close data. A 12
July 2011 Constituent Report This report gives details of each stock which is a member of the index on the report date. Yld % Valuation Data Weight % P/E P/B P/CE P/S ROE Fiscal Local Year Sedol Code Sctr Idx Name Price CCY Shares (mn) FF% M Cap CCY (mn) 1M % Performance YTD 12M % % Vol Avg. (1M) Sh. Val (th) (mn) Yield % Price/ Earnings Price/Book Value Price/Cash Earnings Price/ Sales Return on Equity (ROE) Stock yield on the report date. Price to Earnings (P/E) is price divided by earnings per share. Earnings are based on net income from continuing operations, before amortization of goodwill and extraordinary items and after tax, minority interests, preferred dividend, at fiscal year end. Earnings is attributed across the different share classes, where common stock is comprised of more than one share type. Price to Book (P/B) is price divided by book value per share. Book value is based on common equity, excluding minority interest and preferred stock at the most recent fiscal year end. Goodwill written off may also be added back. The divisor is company market capitalisation (issued shares x price) at the review date. Common equity is attributed across different share classes, where common stock is comprised of more then one share type. Price to Cash Earnings (P/CE) is Price divided by Cash Earnings per share. Cash Earnings is earnings plus depreciation, amortisation, deferred taxes, other noncash items, extraordinary items and changes in working capital for the most recent year. If Cash Flow is not reported it is estimated based on net income plus depreciation at year end. Cash earnings are attributed across the different share classes, where common stock is comprised of more then one share type. Price to Sales (P/S) is price divided by sales per share. It is based on Sales from continuing operations for the fiscal year. It is generally as reported but occasional adjustments may be made. Sales values are also computed for banks, insurance and other financial companies based on appropriate definitions. Sales is attributed across different share classes, where Common equity is comprised of more then one share type. Return on Equity (ROE) ratio is net income (as defined in Price/Earnings above) divided by average common equity. Common Equity is averaged over the accounting year. It may be adjusted to include goodwill written-off and is attributed across different share classes, where common stock is comprised of more then one share type. ROE is expressed as a percentage and is not calculated when average common equity is negative. Fiscal Year End Sedol Local Code Weight % Sector Weight % Index Name Price CCY Shares (mn) Free Float M Cap CNY (mn) M Cap USD (mn) M Cap HKD (mn) Performance Volume Avg Sh (th) Volume Avg Val (mn) Company year-end report date. This date stamps the historic fundamental components of P/E, P/B, P/S, P/CE and ROE. SEDOL (Stock Exchange Daily Official List code) of a stock in the index. Official listing code of the stock on the relevant stock exchange (Shanghai / Shenzhen / Hong Kong). The weight of the stock within the sector of the index to which the stock belongs. Stock s weight within the index. Stock s name. Stock price on the report date in the traded currency. Currency of stock price quoted on the local exchange. The total number of shares in issue (in millions) on the report date. The proportion of company s capital included within the FTSE Share indices. The total market capitalisation of stocks in the index in million denominations of CNY currency. The total market capitalisation of stocks in the index in million denominations of USD currency. The total market capitalisation of stocks in the index in million denominations of HKD currency. The performance of the stock (adjusted for special dividends) in the last month (1M), three months (3M), in the last rolling 12-month period (12M) and since the start of the calendar year (YTD). Performance figures which form part of a total (see below) include contributions from stocks which may no longer be members of the index. Performance is measured in local currency. This includes splits, consolidations, rights issues and share buybacks. The average (mean) number of shares (in thousands) traded each day in the previous month. The average (mean) value of shares (in millions) traded each day in the previous month in the currency of the traded stock. Appendices A 13 Fiscal Year End is followed by 'p' where valuation ratios are based on data derived from preliminary company financial statements or related sources. Note that the values in P/E, P/B, P/CE, P/S and ROE all relate to the Fiscal Year End shown. Totals are shown for each industry sector (derived from the sector index for the index) and each index. Valuation ratios (i.e. P/E, P/B, P/S, P/CE, ROE) generally incorporate fundamental data components sourced from Worldscope Fundamentals. Dividend Yield values are shown to two decimal places. One decimal place is shown for other valuation ratios. Values outside the range 99 to 99 are indicated by +ve or -ve. N/A indicates that data is not available. A 13
FTSE China Index Series Review July 2011 Index Changes Six reports giving details of index changes for the FTSE China A Index (FTSE China A50, FTSE China A All-Share, FTSE China A 200, FTSE China A 400, FTSE China A 600 and FTSE China A Small Cap indices). Two reports giving details of index changes for the FTSE China B Index (FTSE China B All-Share and FTSE China B 35 indices). Two reports giving details of index changes for the FTSE China Index (FTSE China and FTSE China 25 indices). *Reports for FTSE Hong Kong, FTSE Hong Kong ex H Shares and FTSE China H index will be added in the autumn 2011. Changes are listed by sector, type of change and ordered by effective date. Changes listed are index additions/deletions, stock reclassifications, name changes and changes in investability weight. Additions are dated as at the beginning of the business day in which the constituent becomes a member of the index. Deletions are dated as of the end of the closing business day in which the constituent ceases to be a member of the index. Effective Date Sedol Local Code Name Details Effective Date The date the change became effective and was reflected in the index. The SEDOL (Stock Exchange Daily Official List code) for the constituent. Name Constituent name (or new name in the case of a name change). Details of the change: New/old investability weight (free float factor) Old name New/old subsector Sedol Local Code The listing code for the constituent on the Shanghai, Shenzhen or Hong Kong stock exchanges. Details Reserve List Reserve lists are compiled for the FTSE China A50, FTSE China A 200, FTSE China A 400, FTSE China B 35 and FTSE China 25 indices following the quarterly review. They will be used in the event that one or more constituents of the relevant index are deleted during the period up to the next quarterly review. The constituent in the reserve list with the highest market capitalisation at the time is promoted. Sedol Local Code Name Sector Free Float (%) Sedol Local Code Name The SEDOL (Stock Exchange Daily Official List code) for the constituent. The listing code for the constituent on the Shanghai, Shenzhen or Hong Kong stock exchanges. Constituent name (or new name in the case of a name change). Sector ICB sector classification for the constituent. Free Float (%) Investability weight (free float factor) for the constituent. A 14
July 2011 Guide to terminology Abbreviations and Nomenclature 1M 1 month MCap HKD(mn) Market Capitalisation in HKD (millions) 12M 12 months MCap USD(mn) Market Capitalisation in USD (millions) A All-Sh FTSE China A All Share Index M Mid cap A50 FTSE China A50 Index N/A Not applicable A 200 FTSE China A 200 Index P/B Price to Book A 400 FTSE China A 400 Index P/CE Price to Cash Earnings A 600 FTSE China A 600 Index P/E Price to Earnings A Sml FTSE China A Small Cap Index P/S Price to Sales B All-Sh FTSE China B All Share Index mn Millions B 35 FTSE China B 35 Index ROE Return on Equity Chn FTSE China Index S Small cap Chn 25 FTSE China 25 Index Sctr Sector Chn H FTSE China H share Index Sh(th) Shares (thousands) HK FTSE Hong Kong Index Sz Size of constituent (large, mid or small cap) HK x H FTSE Hong Kong excluding H share Index SQRT Square root Avg Average STDDEV Standard deviation Cap Market capitalisation th Thousands CCY Currency of stock price quoted on the local exchange Val(mn) Valuation (millions) Chg Change Vol Volatility Cont Weighted contribution Vol Ave Average Volume Del Stock was deleted from index prior to publication date Wgt Weight Ex Excluding Yield Dividend Yield Idx Index YTD Year to date FF (%) Free Float (%) N/A No data available Cap FF(%) Capped Free Float (%) 0 Value is too small to show L Large cap - Not applicable MCap CNY(mn) Market Capitalisation in CNY (millions) -ve/+ve Values outside the range 99 to 99. Glossary Aggregate Fundamental Data Valuation ratios Aggregate fundamental data ratios, except aggregate ROE, are calculated based on the sum of each individual constituent s market capitalisation (adjusted for free float) divided by: the sum of the product of market capitalisation (adjusted for free float) multiplied by the reciprocal of the valuation ratio for each constituent. Aggregate ROE is the sum of weighted ROE values. Weighting is based on average equity allocated to that security based on its index market capitalisation, proportionate to total company market capitalisation. Where valuation ratios for individual constituents are not available, data values for these constituents are excluded from the corresponding aggregate calculation(s). Appendices A 15 Capitalisation Weighted Index An index where the constituents effect on the index is weighted according to their market capitalisation. Fiscal Year End Free Float Factor Size Indicates the company s financial year-end date and is the date of the company s annual audited financial statements. The proportion of a stock s total market capitalisation to be included in the FTSE China Index. This is also known as the investability weight. Constituent s market capitalisation ranked by size: large cap, mid cap and small cap. Market Capitalisation Of a stock A at time T: Cap(A, T) = Price(A, T) * Shares(A, T) Of an index I at time T: Cap(I, T) = SUM( Cap(A,T) * Free Float(A, T)) for all stocks in the index (also known as market capitalisation). A 15