S&P RTS Indces Methodology S&P Dow Jones Indces: Index Methodology
Table of Contents Introducton 3 Partnershp 3 Representaton 3 Hghlghts 4 Elgblty Crtera 5 Elgblty Factors 5 Tmng of Changes 6 Index Constructon 7 Approaches 7 Index Calculatons 7 Index Mantenance 8 Rebalancng 8 Corporate Actons 8 Currency of Calculaton 9 Base Date 9 Float Adjustment 9 Other Adjustments 9 Settlement Values for Futures on the RTS Index 10 Settlement Prce 10 Index Governance 11 Index Commttee 11 Partner 11 Index Polcy 12 Announcements 12 Holday Schedule 12 Recalculaton Polcy 12 Standard & Poor s: RTS Indces Methodology 1
Real-Tme Calculatons 13 Index Precson 13 Index Dssemnaton 14 Tckers 14 Web ste 14 Appendx 1: Methodology of the RTS Index Calculaton 15 General Provsons 15 General Procedure for Index Calculaton 15 Stock Prce Calculaton (P ) 17 Calculatng the float-adjustment coeffcent 18 Changes to the Adjustng Coeffcent Z 19 Calculaton of Weghtng Coeffcents 19 Lst of Consttuent Stocks 22 Treatment of Corporate Events 23 Procedure of Index calculaton Control 25 Informaton Dsclosure 25 Introducton of Changes to the Methodology of Calculaton 26 Appendx 2: Methodology for the calculaton of the ndcatve US$/Ruble exchange rate 27 General provsons 27 Calculaton of the Exchange Rate 27 Informaton Dsclosure 29 Amendments to the Methodology 29 S&P Contact Informaton 30 Index Management 30 Product Management 30 Index Operatons & Busness Development 30 Dsclamer 31 Standard & Poor s: RTS Indces Methodology 2
Introducton In response to nternatonal nvestors seekng hgh growth areas and new strategy plays, Standard & Poor s added Russa s RTS Index (RTSI) to ts global ndex portfolo n 2006. Wth the nflow of captal to Russa at the end of 2005, fuelng demand for transparent and rgorous benchmarks that not only capture the unqueness of Russan equtes but also fathfully measure the market s performance, Standard & Poor s recognzed the mportance of expandng ts exstng network of exchange partnershps n key geographes. The RTS Index s the premer benchmark ndex to measure the fast growng Russan equty market. It ncludes 50 of the largest and most lqud stocks lsted on the Russan Tradng System (RTS). Partnershp Standard & Poor s s n partnershp wth the Russan Tradng System (RTS) to promote and market the ndex. Standard & Poor s also provdes advce and consultancy on nternatonally accepted ndex methodology and mantenance polces by ts representaton on the RTS Stock Exchange Informaton Commttee. Representaton The RTS Index s an offcal benchmark for the exchange. Snce ts ncepton n September 1995, t has become the stock market ndcator for Russa. Wth the ncluson of Gazprom on March 15 th, 2006, the RTS Index captures more than 85% of the Russan stock market captalzaton. The RTS-2 Index (the second-ter stock ndex) s the benchmark of tradng actvty n second-ter stocks, based on lqudty and market captalzaton. The RTS Sector Indces were launched n 2007 n response to the growng nvestor demand for sector dfferentaton of nvestment strateges. Ther consttuent lsts nclude stocks pertanng to a partcular sector of the Russan economy. Ths seres currently ncludes seven ndces, but could be further expanded to cover addtonal sectors of the Russan economy. Standard & Poor s: RTS Indces Methodology 3
Hghlghts Avalablty Mkt Currency Flo Consttuent Index (Code) No. of Stocks Cappng Real Tme Cap Wgt of Calculaton at Adj Index Levels Levels RTS Index (RTSI) 50 15% Yes Yes US$, RUB Yes 01-Sep- 1995 01-Oct- 2001 RTS-2 Index (RTS2) 77 15% Yes Yes US$, RUB Yes 31-Dec- 2003 31-Dec- 2003 RTS Sector Indces: RTS-Ol & Gas (RTSog) 12 25% Yes Yes US$, RUB Yes 05-Jan- 05-Jan- 2000 2000 RTS-Telecom (RTStl) 12 25% Yes Yes US$, RUB Yes 05-Jan- 05-Jan- 2000 2000 RTS-Metals & Mnng 13 25% Yes Yes US$, RUB Yes 31-Dec- 31-Dec- (RTSmm) 2003 2003 RTS-Industral (RTSn) 10 25% Yes Yes US$, RUB Yes 31-Dec- 31-Dec- 2003 2003 RTS-Consumer & Retal 12 25% Yes Yes US$, RUB Yes 31-Dec- 31-Dec- (RTScr) 2004 2004 RTS-Electrc Utltes 16 25% Yes Yes US$, RUB Yes 11-Jan- 11-Jan- (RTSeu) 2005 2005 RTS-Fnancals (RTSfn) 9 25% Yes Yes US$, RUB Yes 11-Jan- 11-Jan- 2005 2005 Standard & Poor s: RTS Indces Methodology 4
Elgblty Crtera All stocks lsted on the Russan Tradng System (RTS) Stock Exchange are elgble for ncluson. The RTS ndex s constructed wth a fxed number of consttuents. The am s not to replcate a fxed percentage of the market captalzaton, but to desgn a hghly lqud and tradable ndex whose total market captalzaton s large enough to approxmate the market segment t s capturng, whle keepng the number of stocks at a mnmum. Ths creates a hghly cost-effectve, easly replcable tradng nstrument that provdes an excellent barometer of the market s performance. The fxed number of stocks also ensures mnmum turnover, as changes are typcally made due to corporate actvty or a reducton n a stock s sze or lqudty that makes t nelgble for ncluson. Elgblty Factors Market Captalzaton. Market captalzaton s a key crteron for stock selecton. A stock s weght n an ndex s determned by the float-adjusted market captalzaton of the stock. All strategc holdngs are classfed as ether corporate, prvate or government holdngs as determned by the Exchange, through recommendatons of the Index Commttee, and are removed from the float-adjusted market captalzaton. Companes ranked by float-adjusted market captalzaton are ncluded n the ndex subject to ther havng met the strngent lqudty crtera descrbed below. Each company s market captalzaton s capped at 15% n the RTSI and RTS2, and at 25% n the RTS Sector Indces, to restrct the weght of any one company domnatng the entre ndex. Lqudty. Securtes that do not meet the followng crtera over the three month perod precedng the date of the revson are excluded from the ndex elgblty lst: 1. The average number of companes-brokers that submtted the bd and ask quotes for the securty at the end of the tradng sesson s at least two. 2. The average spread between the ask and the bd prces at the end of the tradng sesson s less than or equal to 15%, as compared to the buyng prce. 3. The securty should have two-sded quotes n the tradng system at the end of the tradng sesson for at least 90% of the tradng days of a gven perod. 4. The daly average number of transactons n ths securty s greater than or equal to 0.5. 5. The daly average tradng volume n ths securty s greater than or equal to US$ 3,000. Domcle. Only stocks of a Russan domcle are elgble to be ncluded n the ndex. A stock s domcle s based on a number of crtera that nclude headquarters of the company, regstraton, lstng of stock, place of operatons, and resdence of the senor Standard & Poor s: RTS Indces Methodology 5
offcers. In today s world of multnatonals, t s hard to fx one set rule for domcle. The RTS Stock Exchange Informaton Commttee takes all crtera nto account before decdng on the domcle of a company. Elgble Securtes. All common and preferred shares lsted on the RTS (whch are of an equty and not of a fxed ncome nature) are elgble for ncluson n the Indces. Convertble stocks, bonds, warrants, rghts, and preferred stocks that provde a guaranteed fxed return are not elgble. Tmng of Changes Changes n the ndex consttuents enters nto force on the frst busness day followng March 14 th, June 14 th, September 14 th and December 14 th. Addtons. Four months before each revson date (.e., the 15 th of February, May, August, and November) the complete lst of securtes s compled. The lqudty flter s, then, appled to them. After that, the stocks are ordered by float-adjusted market captalzaton. RTS Index: The top 50 stocks, n terms of sze, are dentfed for ncluson n the RTS Index. RTS-2 Index: The lst of stocks used n the RTS-2 Index calculaton ncludes stocks wth md-to-low captalzaton. RTS Sector Indces: The lst of stocks ncludes stocks of Russan companes selected by the sector crtera. Sector dvson of the stocks s based on the expert evaluaton usng both Russan and nternatonal ndustry classfcaton systems. The lsts of stocks of the RTSI and RTS2 are used as a basc lst of securtes. The number of stocks n the RTS Sector Indces currently vares from about nne to 16. Only those stocks for whch the share of the securtes wth float exceedng 5% are ncluded. If the canddates are dfferent from the current composton of the ndex, the RTS Stock Exchange Informaton Commttee decdes f the new addtons and deletons should be made at the next rebalancng date or f these new addtons should be kept on a watch lst for some tme. Ths s done n order to reduce frequent turnover based on sudden and temporary stock prce fluctuatons. The fnal decsons are made a month before mplementaton. Deletons. Stocks may be deleted due to mergers, acqustons or spn-offs, as well as by a substantated decson of the Informaton Commttee. Otherwse, as noted above, every quarter a new elgble stock lst s drawn up to revew aganst the current consttuents. If ths new lst warrants changes n the exstng consttuent lst, then the smallest exstng consttuents are dropped n favor of the new addtons. Agan, the RTS Index Informaton Commttee wll decde whether to make the deletons mmedately or put the stocks on a watch lst. Standard & Poor s: RTS Indces Methodology 6
Index Constructon Approaches The RTS Indces are real-tme market captalzaton-weghted ndces. Each Index s calculated durng the prmary tradng sesson of the Exchange and durng an addtonal tradng sesson (f any) followng any change n the prce of any consttuent (securty) of the ndex. The frst Index value calculated durng the prmary (addtonal) tradng sesson s calculated 15 seconds after the tradng sesson starts and s consdered the openng value, and the last calculated Index value durng the prmary (addtonal) tradng sesson s consdered the closng value. Index Calculatons The RTS Indces are calculated both n U.S. dollars and Russan rubles. The ruble ndex s based on the dollar-denomnated ndex, and s consdered auxlary. The ndex s calculated every 15 seconds. Please refer to the Appendx 1 for mathematcal formulae detalng the calculatons. Standard & Poor s: RTS Indces Methodology 7
Index Mantenance Rebalancng The decson to change the lst of ndex consttuents (stocks) and adjustng coeffcents s made by the Russan Tradng System (RTS) Stock Exchange Index Commttee once every three months. The new lst of ndex consttuents becomes effectve as of the 15 th of March, June, September and December. The coeffcents cappng the shares of any securtes aganst total market captalzaton are calculated once every three months on the 1 st of March, June, September and December, and are made effectve on the 15 th of the month. Securtes can be removed from the lst of ndex consttuents before the apponted tme f one of the followng events happens: The securty s removed from the lst of securtes admtted to tradng on the RTS Stock Exchange. Informaton about changes n ownershp of the company-ssuer becomes publc and ths nformaton reveals that the stock s no longer consdered publcly avalable for tradng. Frequency. The ndex s calculated real-tme on all days that the stock exchange s open. (The ndex s calculated every 15 seconds durng the prmary tradng sesson of the Exchange and durng an addtonal tradng sesson (f any) on all days that the stock exchange s open). Share Updates. Shares are updated every quarter on the 15 th of March, June, September and December. Corporate Actons On any gven day, the ndex value s the quotent of the total avalable market captalzaton of the ndex s consttuents and ts adjustng coeffcent. Contnuty n ndex values s mantaned by adjustng the coeffcent for all changes n the consttuents share captal after the base date. Ths ncludes addtons and deletons to the ndex, rghts ssues, share buybacks and ssuances and spn-offs. The coeffcent s tme seres s, n effect, a chronologcal summary of all changes affectng the base captal of the ndex. The coeffcent s adjusted such that the ndex value at an nstant just pror to a change n base captal equals the ndex value at an nstant mmedately followng that change. Standard & Poor s: RTS Indces Methodology 8
To prevent such dscrepances that could result from changes n the consttuent stock lst or adjustng ndvdual stock s cappng coeffcents, the adjustng coeffcent Z n s recomputed as follows: Z = Z n+ 1 n MC * MC n ' n where and MC n = the ndex market captalzaton computed mmedately before the transacton and MC n = the ndex market captalzaton computed mmedately after the transacton. Please refer to the Appendx 1 for further nformaton on ndex calculatons and related coeffcents. Currency of Calculaton All prces are n U.S. dollars. If orders and trades prces are expressed n Russan rubles, they are converted nto the U.S. dollars at the exchange rate of the Bank of Russa as of the day when the gven prce s calculated unless otherwse specfed by the Board of Drectors of the Exchange. Please refer to the Appendx 2 for further nformaton on the Exchange rate calculaton. Base Date The RTS Index s base date s September 1 st, 1995 wth a base value of 100. The RTS-2 Index s base date s December 31 st, 2003 wth a base value of 567.25. The RTS Sector Indces base dates are January 11, 2005 wth base values of 100. Float Adjustment All stocks are adjusted for government, strategc and corporate long-term holders, and the float adjusted market captalzaton s used for calculatng the ndex. Other Adjustments All stocks are capped at 15% n the RTSI and RTS2, and at 25% n the RTS Sector Indces, n terms of ther ndex weght versus the total ndex market captalzaton. Please refer to the Appendx 1 for detals on the cappng procedure. Standard & Poor s: RTS Indces Methodology 9
Settlement Values for Futures on the RTS Index Settlement Prce Underlyng Asset Contract Sze (Tradng Unt) Quotaton Mnmum Prce Movement (Tck Sze and Value) Settlement Contract Months Last Tradng Day Fnal Settlement Day Fnal Settlement Prce The RTS Index s managed and calculated by the RTS Stock Exchange. US$ 2 tmes the RTS Index 100 tmes the RTS Index 5 (0.05 ndex ponts or US$ 0.1 per contract) Cash-settled 4 successve quarterly months n the cycle March, June, September and December Tradng day precedng the 15 th of the settlement month Busness day followng the last tradng day US$ 2 tmes the average value of RTS Index calculated durng the last tradng hour of the last tradng day Standard & Poor s: RTS Indces Methodology 10
Index Governance Index Commttee The Russan Tradng System (RTS) Stock Exchange Index Commttee performs general control and amendments to the exstng methodology. Partner Standard & Poor s s represented on the RTS Stock Exchange Informaton Commttee and s commtted to the promoton and marketng of these ndces. Standard & Poor s: RTS Indces Methodology 11
Index Polcy Announcements All ndex-related announcements are posted on the Russan Tradng System (RTS) Web ste. Changes mpactng the consttuent lst are posted on ts Web ste no later than two weeks pror to the change. Please refer to the RTS Web ste at www.rts.ru. Holday Schedule For the calculaton of ndces, the RTS Index follows the offcal holday schedule approved by the Russan Federaton Government. Recalculaton Polcy In the followng cases the RTS Stock Exchange Informaton Commttee can recalculate ndex values: A techncal error occurred A non-standard stuaton occurred that was not related to market changes and was not accounted for by ths methodology, but nevertheless sgnfcantly nfluenced the ndex Should a techncal error be detected, the ndex s recalculated as soon as possble. The value s recalculated only f the error happened no earler than durng the prevous tradng sesson. If a non-standard stuaton occurs, the ndex value s recalculated followng the approprate decson of the RTS Stock Exchange Informaton Commttee and s based on ts expert opnon. The values can be recalculated gong back no more than the last fve tradng sessons. Snce recalculaton of the ndex s an extraordnary event, the recalculaton of the ndex wll be fully justfed. If the ndex s recalculated, an approprate notce should be avalable on the RTS Web ste. For more nformaton on ndex recalculaton polcy, please refer to the RTS Web ste at www.rts.ru. Standard & Poor s: RTS Indces Methodology 12
Real-Tme Calculatons The ndces are calculated real-tme, every 15 seconds. Index Precson Index values are calculated to two decmal places Prces are rounded to fve decmal places Index adjustng coeffcents (Z n ) to seven decmal places Float-adjustment factors (W ) to two decmal places Weght cappng adjustments (C) to seven decmal places Please refer to the Appendx 1 for further detals on the varables lsted above. Standard & Poor s: RTS Indces Methodology 13
Index Dssemnaton Tckers Reuters Bloomberg RTS Index.IRTS RTSI$ RTS-2 Index.RTS2 RTS2$ RTS Sector Indces RTS Ol & Gas.RTSOG RTSOG$ RTS Telecom.RTSTL RTSTL$ RTS Metals & Mnng.RTSMM RTSMM$ RTS Industral.RTSIN RTSIN$ RTS Consumer & Retal.RTSCR RTSCR$ RTS Electrc Utltes.RTSEU RTSEU$ RTS Fnancals.RTSFN RTSFN$ Web ste Daly ndex value, ndex consttuents, methodology, and specal announcements are avalable on the Russan Tradng System (RTS) Web ste at www.rts.ru. Standard & Poor s: RTS Indces Methodology 14
Appendx 1: Methodology of the RTS Index Calculaton General Provsons The RTS Index (the Index) s the composte ndex of the Russan stock market calculated by the OJSC "Russan Tradng System" Stock Exchange (the Exchange) n accordance wth ths Methodology. The ndex s used by the Exchange for tradng suspenson n accordance wth regulatory acts of the federal executve body for the securtes market. The name for the RTS Index n Russan s "Индекс РТС"; the name for the RTS Index n Englsh s "RTS Index". The Index s code s RTSI. The verbal mark "Индекс РТС" s a trade mark of OJSC RTS, regstered n the State regster of trade and servce marks of the Russan Federaton on March 15, 2007 (certfcate for the trade mark 322604). The verbal mark "RTS Index" s a trade mark of OJSC RTS, regstered n the State regster of trade and servce marks of the Russan Federaton on May 17, 2007 (certfcate for the trade mark 326584). General Procedure for Index Calculaton The RTS Index s calculated durng the prmary tradng sesson of the Exchange and durng an addtonal tradng sesson (f any). The RTS Index values, calculated durng the prmary and addtonal tradng sessons are calculated separately. The RTS Index s calculated every 15 seconds. The frst Index value calculated durng the prmary (addtonal) tradng sesson s calculated 15 seconds after the tradng sesson starts and s consdered the openng value. The last calculated Index value durng the prmary (addtonal) tradng sesson s calculated at the moment of the sesson closng and s consdered the closng value. The Board of Drectors of the Exchange s enttled to change the start and end tmes of the Index calculaton. The Exchange market partcpants shall be notfed of the nformaton on the resolutons taken by the Board of the Drectors n accordance wth ths clause through publshed notfcatons on the Web ste www.rts.ru (the Exchange s Web ste), no later than fve busness days before those changes come nto force, unless the Board of Drectors of the Exchange determnes a dfferent tme perod. Standard & Poor s: RTS Indces Methodology 15
The RTS Index s computed by dvdng the total market captalzaton of the Index component securtes (Stocks) by the total market captalzaton of the same securtes as of the ntal date of the Index calculaton, multpled by the Index value as of the ntal date of the Index calculaton and the adjustng coeffcent by the followng formula: I MC n = Z I, n n 1 MC1 where: I n the Index value as of the n th moment of the Index calculaton; MC n - total market captalzaton of all Stocks as of the n th moment of the Index calculaton; MC 1 - total market captalzaton of all Stocks as of the ntal date of the Index calculaton; I 1 the Index value on the ntal date of the Index calculaton; Z n adjustng coeffcent value as of the n th moment of the Index calculaton. Index values are expressed n ndex ponts and are calculated to two decmal places. The followng ntal values are used as of September 1, 1995 (the ntal date of the Index calculaton): I 1 = 100; MC 1 = US$ 12,666,080,264; Z 1 = 1. The total market captalzaton of all Stocks as of the n th moment of the Index calculaton s calculated as follows: MC n N = P Q * C * W, = 1 where: N - the total number of Stocks. One share s equal to a share of one category (type) of one ssuer; P - prce of the th Stock; Q - the total number of shares of the th Stock; W the adjustment coeffcent reflectng the number of outstandng th Stocks avalable on the open market (float-adjustment coeffcent); С the coeffcent restrctng the share of the th Stock n total market captalzaton (weghtng coeffcent). For the purpose of ths Methodology the total number of shares of the th Stock (Q ) s determned as the total number of the th Stocks of all ssues (addtonal ssues) whch meet the requrements of the Federal law On Securtes Market and regulatory acts of Standard & Poor s: RTS Indces Methodology 16
the federal executve body for the securtes market, for the admsson of securtes to tradng on markets of organzers of tradng, but excludng the Stocks purchased by the ssuer as well as redeemed (cancelled) Stocks of the specfed ssues (addtonal ssues). The total number of shares of the th Stock (Q ) s calculated through the results of the tradng day precedng the day when the Exchange publshes the nformaton on consttuent changes on ts Web ste, except for any exceptons detaled below. The Exchange also calculates a ruble-denomnated ndex usng the followng formula: I K n rn = I n, K 1 where: I rn ruble-denomnated Index value as of the n th moment of calculaton; I n the Index value as of the n th moment of the Index calculaton; K n the US dollar exchange rate aganst the Russan ruble as of the n th moment of calculaton. Ths s the US dollar exchange rate aganst the Russan ruble fxed by the Bank of Russa on the day when the ruble-denomnated Index s calculated, unless otherwse determned by the Board of Drectors of the Exchange; K 1 the US dollar exchange rate aganst Russan ruble as of the ntal date of the Index calculaton (K 1 = 4.447). Stock Prce Calculaton (P ) The th Stock prce, P, equals the prce for the last trade. If the prce for the best bd for the th Stock exceeds the last calculated prce for the stock, P, but does not exceed the prce for the best ndrect offer, then P equals the best bd for the th Stock. If the best offer for the th Stock s lower than the last calculated prce for the stock, P, but not lower than the best ndrect bd, then P equals the best offer for the th Stock. In order to determne the prce for the th Stock, sale and purchase trades and orders for such trades are taken nto account. The tradng mode, where the trades and orders are made to be used for calculatng the prce for the stock, s determned by the sole executve body of the Exchange through recommendatons of the Index Commttee. In ths regard: In the Electronc tradng mode for calculatng the prce for the th stock, ndrect orders and trades concluded based on ndrect orders are taken nto account; In the Non-anonymous tradng mode for calculatng the prce for the th stock, ndrect orders and trades concluded based on ndrect and drect orders are taken nto account; Standard & Poor s: RTS Indces Methodology 17
In the On-exchange tradng mode wth T+4 settlement for calculatng the prce for the th stock, ndrect orders and trades concluded based on ndrect orders are taken nto account. A trade of the th Stock concluded n the Non-anonymous tradng mode s taken nto account for calculatng the prce for the th Stock on condton there are ndrect bds and offers for the Stock submtted n the above-mentoned mode, and the prce for the gven trade s not lower than the best ndrect bd for and does not exceed the best ndrect offer for the th Stock. Only ndrect orders submtted n the Electronc tradng mode are taken nto account for calculatng the prce of the th Stock, n those cases where ndrect orders n the Electronc and Non-anonymous tradng modes are submtted at the same tme Orders and trades prces n US dollars are used to determne the prce for the th Stock n the process of calculatng a dollar-denomnated Index, If, n accordance wth the Exchange documents, the orders and trades prces are expressed n Russan rubles, then the gven prces are converted nto US dollars at the exchange rate of the Bank of Russa as of the day when the gven prce s calculated, unless otherwse specfed by the Board of Drectors of the Exchange. The prce for the th Stock (P ) s calculated to fve decmal places. The procedure for calculatng the prce for the th Stock (P ) determned above shall not be appled n the case of splts and reverse splts, as descrbed below. Calculatng the float-adjustment coeffcent The value of the float-adjustment coeffcent, W, reflectng the number of outstandng shares of the th Stock avalable to the open market s calculated on the Lst of consttuent Stocks revew date. The coeffcent s determned through publc data and expert opnon. Informaton, ncludng ndrect (benefcary) owners, publshed by reputable nformaton agences and the Stock s ssuers s used for ths analyss. The coeffcent s determned by the sole executve body of the Exchange based on the total number of Stocks (Q ) as of the last busness day precedng the calculaton date. The number of Stocks consdered unavalable to the market s determned by the Exchange through recommendatons of the Index Commttee, based on expert opnon, wth due account for the number of Stocks that are owned by the state, controllng shareholders, crossholders, management and other strategc nvestors. If the securtes of Russan companes are lsted on foregn exchanges beyond the borders of the Russan Federaton n accordance wth the foregn law (depostory recepts), then the number of shares that are counted n the float s rased by the number of the dstrbuted Stocks n the followng cases: If there are any lmtatons for acqurng the stock when exercsng a rght for the depostary recepts of Russan domcled companes; Standard & Poor s: RTS Indces Methodology 18
If the number of the depostary recepts (n ordnary share terms) exceeds the total number of Stocks (Q ) by at least 1.5 tmes, excludng the number of Stocks that are owned by the state, controllng shareholders, crossholders, management and other strategc nvestors The value of the float-adjustment coeffcent, W, s expressed n percent (%) and s rounded to the nearest 5%. The Exchange dscloses the value of the coeffcent and any nformaton on changes to ts value, together wth the grounds for such changes. Ths nformaton s dsclosed on the Exchange s Web ste no later than the day followng the day when the gven coeffcent changed ts value. Changes to the Adjustng Coeffcent Z The adjustng coeffcent, Z, s changed f there are changes n the Lst of consttuent Stocks, the float-adjustment coeffcents, W, the weghtng coeffcents, С, and/or n cases of corporate events as descrbed below. The adjustng coeffcent, Z, s calculated by the followng formula: Z = Z MC n, n+ 1 n ' MCn where: Z n the current value of adjustng coeffcent Z; Z n+1 the new value of adjustng coeffcent Z; MC n the total captalzaton of all Stocks before any event descrbed above; MC n ' total captalzaton of all Stocks after any event descrbed above. The adjustng coeffcent Z s calculated accurate to seven decmal places. Calculaton of Weghtng Coeffcents The aggregate weght of all of the th Stocks n an ndex (Specfc weght) s calculated by the formula: Wght = W P Q * C N = 1 W P Q * C, where: Wght the Specfc weght of the th Stock; P the prce of the th Stock; Q the total number of shares of the th Stock; С the weghtng coeffcent of the th Stock; Standard & Poor s: RTS Indces Methodology 19
W the float-adjustment coeffcent of the th Stocks; N the total number of Stocks n the ndex. The Specfc weght of the securtes of one ssuer s the sum of the Specfc weghts of all categores of Stock of ths ssuer. In order to lmt the concentraton of a gven ssuer s stocks n the Index: No sngle ssuer s total Specfc weght can exceed 15% (S = 15%) as of the day of the determnaton of the Lst of consttuent Stocks. No sngle ssuer s total Specfc weght can exceed 30% (S = 30%) on the day followng the effectve date of the new Lst of consttuent Stocks. No sngle ssuer s total Specfc weght can exceed 50% (S = 50%) at any moment of the Index calculaton. where S s defned at the maxmum weght of an ndvdual ssuer n an ndex, dependng on the crcumstances lsted above. The weghtng coeffcents, С, are calculated and updated usng the followng procedure: The market-cap weght of each ssuer s Stocks are frst calculated wthout any restrctng coeffcents, С j S = j N 1,..., N j= 1 MCap MCap j j =, where: S j the market-cap weght of all the Stocks of j th ssuer wthout any restrctng coeffcents, С ; N the number of ssuers n the ndex. Mcap = P * Q * W, j pj pj pj p where: P pj the prce of the p th category Stock of the j th ssuer; Q pj the total number of the p th category s shares of Stock of the j th ssuer; W pj the float-adjustment coeffcent of the p th category Stock of the j th ssuer; p a partcular category of the Stocks of an ssuer taken nto account when calculatng the Index. The number of ssuers, M, for whom S j > S s true (pent-up ssuers) s calculated. If M = 0, then the restrctng coeffcent С = 1for each Stock. If M > 0, then an auxlary market captalzaton value, X, s calculated as follows: Standard & Poor s: RTS Indces Methodology 20
X = S * N M j= 1 1 MCap S * M j, where the sum n the numerator ( N M j= 1 of the ssuers for whom the condton maxmum weght crteron). The new market-cap weght of the Stocks of each ssuer, follows: MCap j ) s calculated usng only those Stocks S j S s true (ssuers who do not exceed the ' j S = j N, j= 1 MCap MCap j ' S j, are calculated as wth Mcap j usng X, as calculated above, for the pent-up ssuers (those for whom S j > S s true) and a value calculated by the formula Mcap = P * Q * W for the rest of the ssuers. If there are ssuers for whom the condton S ' > S j s stll true, then a new number of pent-up ssuers, M, s calculated and the steps specfed above are repeated. If, as a result of the steps specfed above, there are no longer any ssuers for whom the term S ' j > Ss true, then the С coeffcent s calculated for all categores of the Stocks of the pent-up ssuers as follows: X C =. P * Q * W j p pj pj pj For the rest of the stocks С = 1. Coeffcents С are calculated accurate to seven decmal places. The weghtng coeffcent, С, are calculated usng the results of the tradng day precedng the day when the Exchange publshes any nformaton on changes to the Lst of consttuent Stocks on ts Web ste. If the Specfc weght of the Stocks of any ssuer exceeds 25% on the effectve date of the new Lst of consttuent stocks, the Exchange s enttled to take a decson on unscheduled calculatons of the weghtng coeffcents wth the purpose of meetng the requrements for restrctons set forth above. Standard & Poor s: RTS Indces Methodology 21
If the Specfc weght of the Stocks of any ssuer exceeds 40% on any tradng day, the Exchange s enttled to take a decson on unscheduled calculatons of the weghtng coeffcents wth the purpose of meetng the requrements for restrctons set forth above. Lst of Consttuent Stocks The Lst of consttuent Stocks contans the name of the ssuers and the Stock category (type). The number of Stocks shall not exceed 50. There are no lmtatons on the number of stocks n the RTS 2 ndex. Stocks are added to and deleted from the Lst of consttuent Stocks whenever the Lst s revewed and changes are ratfed. The Exchange revews the Lst of consttuent Stocks at least four tmes a year wth any changes made effectve on the frst busness day followng March 14 th, June 14 th, September 14 th and December 14 th. In addton, the Exchange revews the Lst of consttuent Stocks n the followng cases: the Stocks are excluded from the lst of shares admtted to tradng on the Exchange; the tradng mode for stocks change; a corporate event takes place; upon the recommendaton of the Index Commttee. When the Lst of consttuent Stocks s revewed off of the regular quarterly schedule, only stock deletons can be made to the Lst. The Lst can be comprsed of lqud shares of Russan stock companes and shares ncluded n quotaton lsts of the Russan stock exchanges, ncludng Quotaton lst I and shares admtted to tradng wthout havng gone through lstng procedure. The number of ssuers whose shares are ncluded n the Lst of consttuent Stocks shall not exceed 10. The Lst of consttuent Stocks s approved by the sole executve body of the Exchange through recommendaton of the Index Commttee. It s the Index Commttee that determnes f the shares are lqud based on expert opnon and wth due regard to the followng crtera: average daly tradng volume; average daly number of trades; supply and demand; spread (dfference between the best offer and the best bd); sze of captalzaton, ncludng float-adjusted shares; stock company s ndustry; Standard & Poor s: RTS Indces Methodology 22
other factors that can nfluence the lqudty of the shares. Only those Stocks whch were prevously on the lst of canddates watng to be ncluded (the Watng Lst) and the shares of the ssuers whose securtes recently had an IPO (Intal Publc Offerng) and Secondary Offerng can be added to the Lst of consttuent Stocks. Stocks are added to the Watng lst on the condton that all crtera above are met. Informaton on the Watng lst consttuents s publshed on the Exchange s Web ste. Notfcatons of the changes to the Lst of consttuents Stocks are publshed on the Exchange s Web ste no later than two weeks before the effectve date of the new Lst of consttuent Stocks. Treatment of Corporate Events Suspenson of tradng on the Exchange. If tradng n the k th share s suspended on the Exchange for more than one tradng day, the prce P k s used for the RTS Index calculaton durng the suspenson. The prce P k s calculated as follows: P k = P 1 k * L k, where: P k the prce for the k th Stock used n the Index calculaton; P 1 k the prce for the k th Stock on the tradng day precedng the suspenson; L k a coeffcent, as defned below. L k m = 1, k m = 1, k W P Q * C W P Q * C where: P the current prce for the th Stock; P ' the prce for the th Stock on the precedng tradng day; Q the total number of shares of the th Stock; W the float-adjustment coeffcent of the th Stock; C - the weghtng coeffcent of the th Stock. = ' The coeffcent, L k, s calculated usng securtes of ssuers n the same ndustry as the k th Stock. If ths number s lower than fve, then the coeffcent s calculated usng all Stocks, except for the k th Stock. The Index Commttee determnes the ndustry of the Stocks. Addton and redempton of securtes. The admsson and/or redempton (cancellaton) of shares of the th Stock tradng on the Exchange do not serve as grounds for recalculaton of the total number of shares the th Stock (Q ). The gven recalculaton s Standard & Poor s: RTS Indces Methodology 23
performed n accordance wth the establshed procedure specfed n General Procedure for Index Calculaton above. Splt and reverse splt. For splts or reverse splts of the th Stock, the Exchange recalculates the total number of shares (Q ) and the prce (P ) on the effectve date. Reorganzaton of a company. When a company s reorganzed, the Exchange wll mplement a decson based on the type of acton and the recommendaton of the Index Commttee as follows: Merger of companes. In the case of a merger, the reorganzed company s excluded from the Lst of consttuent Stocks at a tme determned by the Exchange, and upon recommendaton of the Index Commttee. Reorganzaton of a jont stock company n the form of splt-off. In the case of a splt-off, the reorganzed companes are excluded from the Lst of consttuent Stocks at a tme determned by the Exchange, and upon recommendaton of the Index Commttee Reorganzaton of a company n the form of spn-off. In the case of a spn-off, the prce of the parent company (P ) s fxed at the end of the tradng day precedng the effectve date of the spn-off. Ths date and the determnaton of the prce are made by the Exchange wth the recommendaton of the Index Commttee. On the effectve date of the spn-off, the Exchange recalculates the total number of the parent company (Q ) and ts adjustng coeffcent Z and the stock resumes tradng. Reorganzaton of a company n the form of acquston. In the case of the acquston of an ndex consttuent company by another, the prce of the acqurer (P ) s fxed at the end of the tradng day precedng the effectve date of the acquston. Ths date and the determnaton of the prce are made by the Exchange wth the recommendaton of the Index Commttee. On the effectve date of the acquston, the Exchange recalculates the total number of the th Stocks (Q ) and adjustng coeffcent Z and the stock resumes tradng. In the case of the acquston of an ndex consttuent by a company that s not an ndex consttuent, the reorganzed company s excluded from the Lst of consttuent Stocks at a tme determned by the Exchange, and upon the recommendaton of the Index Commttee. Reorganzaton of a company n the form of a splt-off or spn-off, wth a smultaneous merger or acquston. In the case where the spn-off of an ndex consttuent s acqured by another ndex consttuent, the rules and calculaton procedures for spn-offs and acqustons detaled above apply. In the case where the spn-off of an ndex consttuent s acqured by a company that s not an ndex consttuent, only the rules and calculaton procedures detaled for the spn-offs mmedately above apply. Standard & Poor s: RTS Indces Methodology 24
In the case where the spn-off of an ndex consttuent s merged wth another ndex consttuent, the rules and calculaton procedures for spn-offs and mergers detaled above apply. In the case where the spn-off of an ndex consttuent s merged wth a company that s not an ndex consttuent, only the rules and calculaton procedures detaled for the spn-offs mmedately above apply. In the case where the splt-off of an ndex consttuent s acqured by another ndex consttuent, the rules and calculaton procedures for splt-offs and acqustons detaled above apply, excludng the requrement to recalculate the Z coeffcent. In the case where the splt-off of an ndex consttuent s acqured by a company that s not an ndex consttuent, only the rules and calculaton procedures detaled for the splt-offs mmedately above apply. In the case where the splt-off of an ndex consttuent s merged wth another ndex consttuent, the rules and calculaton procedures for splts-offs and mergers detaled above apply. In the case where the splt-off of an ndex consttuent s merged wth a company that s not an ndex consttuent, only the rules and calculaton procedures detaled for the splt-offs mmedately above apply. Procedure of Index calculaton Control In case of a techncal breakdown n any Index calculaton or a techncal falure n the tradng system that led to dstortons of the data used for any ndex calculaton, Index values are recalculated, but only for the prevous tradng day. In such cases, the Exchange shall publsh the correspondng notfcaton on ts Web ste. In case there are crcumstances or events that affect the Index as beng representatve of the Russan stock market, the Exchange s enttled to undertake any actons necessary to remedy ths stuaton. Informaton Dsclosure Informaton on the Indces and the methodology of ts calculaton s dsclosed on the RTS Web ste http://www.rts.ru/en/ndex/rts/ and other pages, some of whose lnks can be found on the Web ste. In addton, the Exchange dscloses a daly Lst of consttuent Stocks, the total number of shares for each th Stock (Q ), and the Specfc weght for each Stock. It also provdes complance nformaton provded by the regulatory act of the federal executve body for the securtes market that establshes requrements for the composton and structure of the assets of ncorporated nvestment funds and mutual nvestment funds. It also provdes nformaton on all Index values, ncludng the exchange rates used for the rubledenomnated calculaton. Informaton on the current Index values s dsclosed wthn two mnutes of the latest Index calculaton. Standard & Poor s: RTS Indces Methodology 25
Informaton dsclosed on the Exchange s Web ste can addtonally be dsclosed through other means, ncludng nformaton agences that dstrbute the Exchange tradng data. Introducton of Changes to the Methodology of Calculaton The Exchange s enttled to ntroduce changes nto the present methodology, ncludng upon the recommendaton of the Index Commttee, but no more than once a quarter. Any changes to ths methodology are subject to the approval of the Board of Drectors of the Exchange and shall be regstered wth the federal executve body for the securtes market. Notces of such changes are publshed on the Exchange s Web ste no later than two weeks before such changes come nto effect. Standard & Poor s: RTS Indces Methodology 26
Appendx 2: Methodology for the calculaton of the ndcatve US$/Ruble exchange rate General provsons The ndcatve US$/Ruble (RUB) exchange rate (the Exchange Rate) s calculated by the OJSC RTS (the Exchange) based on quotes of the US dollar aganst the Russan ruble, wth next day settlement, announced by Russan banks on the nterbank market and publshed by Thomson Reuters wth the tcker RUBTNOR. The lst of banks whose quotes are employed n the Exchange Rate calculaton s approved by the sole executve body of the Exchange and publshed on the Exchange s Web ste at www.rts.ru. The Exchange s enttled to amend the above-mentoned lst. Such amendments are subject to approval of the sole executve body of the Exchange and are dsclosed on the Web ste at www.rts.ru no later than one busness day pror to the effectve date of the relevant resoluton. The Exchange Rate s used by the Exchange for the calculaton of equty ndces and/or other ndcators f the documents of the Exchange and/or resolutons of ts bodes provde for usng the Exchange Rate for such purposes. Calculaton of the Exchange Rate The Exchange Rate s calculated each second from 10:30 to 23:50 MSK on each Exchange busness day. The Exchange Rate s calculated accordng to the followng formula: R = MA res t where: R t res The Exchange Rate at moment t; MA t The Movng Average exchange rate at the moment t determned n accordance wth the formulas below. t where: MA t = t = t 60 R / 60 Standard & Poor s: RTS Indces Methodology 27
MA t The Movng Average exchange rate at moment t; R the average US$/RUB exchange rate at moment, after cuttng off devatons from the market, as calculated below. The average US$/RUB exchange rate at moment t, after cuttng off devatons from the market, s calculated accordng to the formula: R t RA / R 1 0,0005 t t 1 RA,f t RA / R 1 > 0,0005 t t 1,t 60 t : RA / R = Rt 1 1 > 0,0005 RA / R 1 > 0,0005 t t 1,f 1,t 60 t : RA / R 1 1 0,0005 where: R t the average US$/RUB exchange rate at moment t, after cuttng off devatons from the market; R t-1 the average US$/RUB exchange rate at moment t-1, after cuttng off devatons from the market; RA t the average US$/RUB exchange rate at moment t, before cuttng off devatons from the market calculated as defned below. n RM bt b= 1 RAt =, n where: RA t the average US$/RUB exchange rate at the moment t, before cuttng off devatons from the market; n the number of banks whose quotes are used n the exchange rate calculaton at the moment of calculaton; RM bt the average US$/RUB exchange rate of the bank b at moment t, determned n accordance wth the formulas and rules set out below. RM = + bt ( Bdbt Askbt ) / 2, Standard & Poor s: RTS Indces Methodology 28
where: RM bt the average US$/RUB exchange rate of bank b as of moment t; Bd bt the US$ bd of bank b as of the moment t; Ask bt the US$ ask of bank b as of the moment t. If at the moment t there are no Bd bt and/or Ask bt values n Thomson Reuters Informaton System, the average US$/RUB exchange rate of the bank b at the moment t (RM bt ) s not calculated. If the bank b has not been announcng US$ bd or ask quotes n Thomson Reuters Informaton System for over 15 mnutes, ts quotes are not used n the Exchange Rate calculaton, untl the bank resumes announcng ts quotes. If the quotes of more than two banks cannot be used for any gven Exchange Rate calculaton, the Exchange Rate s deemed equal to the last calculated Exchange Rate. If the Exchange s not recevng US$/RUB exchange rate data from Thomson Reuters due to dsruptons n the functonng of communcaton channels, or for other reasons, the Exchange Rate s deemed equal to the last calculated Exchange Rate. If recept of the US$/RUB exchange rate from Thomson Reuters has not been resumed by 10:00 MSK on a gven busness day, no later than at the start of that day s man (addtonal) tradng sesson the Exchange s enttled to establsh a constant (fxed) Exchange Rate for the man (addtonal) tradng sesson as equal to any of the followng values, unless decded otherwse by the sole executve body of the Exchange: а) the US$/RUB exchange rate establshed by the Central Bank of Russa; b) a value receved from a dfferent source of current US$/RUB exchange rates formed on the nterbank FX market; or c) the US$/RUB exchange rate formed on a Russan organzed FX markets at the tme the Exchange took ts decson. Informaton Dsclosure Based on the results of the man tradng sesson, the Exchange publshes the last daly Exchange Rate calculated at the close of the man tradng sesson on ts Web ste at www.rts.ru. Informaton on the current Exchange Rate, as well as any constant (fxed) Exchange Rate, s dsclosed by the Exchange. Amendments to the Methodology The present Methodology can be amended by resoluton of the Exchange s Board of Drectors. Informaton on amendments to the present Methodology s publshed on the Exchange s Web ste at www.rts.ru no later than one busness day pror to the day such amendments come nto effect. Standard & Poor s: RTS Indces Methodology 29
S&P Contact Informaton Index Management Davd M. Bltzer, Ph.D. Managng Drector & Charman of the Index Commttee davd_bltzer@standardandpoors.com +1.212.438.3907 Product Management Alka Banerjee Vce Presdent, Index Research & Analyss alka_banerjee@standardandpoors.com +1.212.438.3536 Index Operatons & Busness Development North Amerca New York Clent Servces ndex_servces@standardandpoors.com +1.212.438.2046 Toronto Jasmt Bhandal +1.416.507.3203 Europe London Susan Fagg +44.20.7176.8888 Moscow Yur Morozov +7.495.783.4015 Asa Tokyo Sechro Uch +813.4550.8568 Bejng Andrew Webb +86.10.6569.2919 Sydney Guy Magure +61.2.9255.9822 Standard & Poor s: RTS Indces Methodology 30
Dsclamer Copyrght 2010 by The McGraw-Hll Companes, Inc. Redstrbuton, reproducton and/or photocopyng n whole or n part s prohbted wthout wrtten permsson. All rghts reserved. S&P and Standard & Poor s are regstered trademarks of Standard & Poor s Fnancal Servces LLC. Ths document does not consttute an offer of servces n jursdctons where Standard & Poor s or ts afflates do not have the necessary lcenses. Standard & Poor s receves compensaton n connecton wth lcensng ts ndces to thrd partes. All nformaton provded by Standard & Poor s s mpersonal and not talored to the needs of any person, entty or group of persons. Standard & Poor s and ts afflates do not sponsor, endorse, sell, promote or manage any nvestment fund or other vehcle that s offered by thrd partes and that seeks to provde an nvestment return based on the returns of any Standard & Poor s ndex. Standard & Poor s s not an nvestment advsor, and Standard & Poor s and ts afflates make no representaton regardng the advsablty of nvestng n any such nvestment fund or other vehcle. A decson to nvest n any such nvestment fund or other vehcle should not be made n relance on any of the statements set forth n ths presentaton. Prospectve nvestors are advsed to make an nvestment n any such fund or other vehcle only after carefully consderng the rsks assocated wth nvestng n such funds, as detaled n an offerng memorandum or smlar document that s prepared by or on behalf of the ssuer of the nvestment fund or other vehcle. Incluson of a securty wthn an ndex s not a recommendaton by Standard & Poor s to buy, sell, or hold such securty, nor s t consdered to be nvestment advce. Standard & Poor s does not guarantee the accuracy and/or completeness of any Standard & Poor s ndex, any data ncluded theren, or any data from whch t s based, and Standard & Poor s shall have no lablty for any errors, omssons, or nterruptons theren. Standard & Poor s makes no warrantes, express or mpled, as to results to be obtaned from use of nformaton provded by Standard & Poor s and used n ths servce, and Standard & Poor s expressly dsclams all warrantes of sutablty wth respect thereto. Whle Standard & Poor s has obtaned nformaton beleved to be relable, Standard & Poor s shall not be lable for any clams or losses of any nature n connecton wth nformaton contaned n ths document, ncludng but not lmted to, lost profts or puntve or consequental damages, even f t s advsed of the possblty of same. These materals have been prepared solely for nformatonal purposes based upon nformaton generally avalable to the publc from sources beleved to be relable. Standard & Poor s makes no representaton wth respect to the accuracy or completeness of these materals, the content of whch may change wthout notce. The methodology nvolves rebalancngs and mantenance of the ndces that are made perodcally durng each year and may not, therefore, reflect real tme nformaton. Analytc servces and products provded by Standard & Poor s are the result of separate actvtes desgned to preserve the ndependence and objectvty of each analytc process. Standard & Poor s has establshed polces and procedures to mantan the confdentalty of non-publc nformaton receved durng each analytc process. Standard & Poor's and ts afflates Standard & Poor s: RTS Indces Methodology 31
provde a wde range of servces to, or relatng to, many organzatons, ncludng ssuers of securtes, nvestment advsers, broker-dealers, nvestment banks, other fnancal nsttutons and fnancal ntermedares, and accordngly may receve fees or other economc benefts from those organzatons, ncludng organzatons whose securtes or servces they may recommend, rate, nclude n model portfolos, evaluate or otherwse address. Analytc servces and products provded by Standard & Poor s are the result of separate actvtes desgned to preserve the ndependence and objectvty of each analytc process. Standard & Poor s has establshed polces and procedures to mantan the confdentalty of non-publc nformaton receved durng each analytc process. Standard & Poor s: RTS Indces Methodology 32