Portfolio Composition - September to December/2008 Current Portfolio Composition - 12/04/2008 1st. Preview of the Portfolio - January to April/2009
BOVESPA considers that, some years after the split-up and privatization of Telebrás (which took place in July, 1998), the telecommunication sector has already concluded most of its stock restructuring which was the following step after privatization, and it therefore enables the consistent measurement of the companies' trading of this important sector. Basing on such consistency, BOVESPA has established the basis of 1.000 points of ITEL for December 30, 1999, when the companies resulting from Telebrás' split-up had already been traded for about one year. Following the latest experiences in international indexes, BOVESPA has adopted for ITEL calculation the "free float" weighting (quantity of outstanding stocks). The weighting of an index by the outstanding stocks' market capitalization enables the index to represent the performance of the stocks that are actually available, which facilitates the composition of portfolios denominated on the index and also enables a better follow-up of their performance. Besides such characteristic, BOVESPA has established a 20% capitalization limit for each company that comprises the portfolio. Such criterion has been adopted in order to prevent a company that has a high market capitalization from playing an extremely preponderant role concerning the index performance, impairing the reflection of other stocks' performance.
Shares Eligible for the Index The ITEL is composed by the telecommunications sector's most representative companies (including wire and cellular-line telephony), whose stocks are weighted by the market value of the outstanding stocks ("free float"). Criteria for Inclusion in the Portfolio The stocks that comply with the following criteria will be included in the portfolio: a) participation in terms of
financial value higher than 0,01% of BOVESPA's cash market value (round-lot) over the last
twelve months; The same company may have more than one stock type in the index, provided that each stock singly complies with inclusion criteria. Criteria for Exclusion from the Portfolio A stock will be excluded from the portfolio whenever it fails to comply with one of the inclusion criteria during periodical reevaluations. If, during the life cycle of the portfolio, the issuing company changes its main economic activity or enters a regime of judicial reorganization or files for bankruptcy, its shares will be excluded from the index portfolio. In case of a public offering which results in the removal of a significant proportion of shares from the market, the company's shares will be excluded from the portfolio. In such circumstances, the necessary adjustment will be made to ensure the continuity of the index.
The index notional portfolios are valid for four months, for the periods of January to April, May to August and September to December. The portfolio is recalculated at the end of each four-month period, according to the procedures and criteria of this methodology. On this occasion, BOVESPA will analyze if the component shares are under the maximum participation limit (see "Weighting Criterion"). Weighting Criterion The ITEL will measure the return of a notional portfolio comprised by the stocks that comply with every above-mentioned criterion, which will be weighted by the market capitalization of the stock type included in the portfolio. In order to calculate the market capitalization for each stock, only shares available for trading will be considered ("free float"), that is to say, those ones which are owned by the controlling group will be excluded. The participation of a company in the ITEL (considering the sum of the participations of its stocks that comprise the index) will not be higher than 20%, at the moment of its inclusion or on periodical reevaluations. If such is the case, adjustments will be made so that the company's weight is adequate to such limit. The ITEL's basis has been established in 1.000 points for December 30, 1999. In order to be adjusted to such initial basis, the market capitalization of the portfolio has been adjusted by a reducer (adjustment coefficient), represented by µ in the index formula. That is, Initial Index = Portfolio's value / µ = 1,000 The index reducer will be changed whenever inclusions or exclusions in the portfolios are necessary and on the occasion of periodical rebalancing. Also, whenever there are readjustments as a result from benefits/actions distributed by companies. The specific weight of each stock in the index may be changed during the portfolio term due to stock price evolution and benefit distribution by issuing companies. Necessary adjustments will be made whenever issuing companies of component stocks distribute benefits so that the index reflects not only stock quotation variations but also the impact caused by benefit distribution. According to such methodology, the ITEL is considered as an index that evaluates the total return of the component stocks of its portfolio.
Index Calculation BOVESPA calculates the ITEL in real time by considering prices of the last trades carried out in the cash market (round-lot) with component stocks of its portfolio. Suspension of Trading In the event of suspension of a component stock, the index will use the price of the last registered operation until normal trading is resumed. If such suspension continues for 50 days, as of the date of its beginning, or in case of lack of perspectives of trading resumption, or in case of portfolio rebalancing, suck stock will be excluded from the portfolio. In such case, necessary readjustments will be made to ensure the continuity of the index. Rebalancing Procedures Rebalancings at the end of a four-month period will adopt the following procedures: 1. The rebalancing of the index notional portfolio will take place after the closing of the last trading session of the four-month period and will be based on that day's closing index. 2. Once the companies that will comprise the portfolio in the following four-month period are selected, each stock will have its market capitalization calculated - that's the result from the multiplication of the outstanding stocks by their closing price -, then the sum of all such values is done. In other words, the economic value of the new portfolio is calculated according to the market's closing prices of the day. 3. The adjusted reducer for the new portfolio is calculated by dividing the economic value, pursuant to item I.2, by the closing index of the four-month period. 4. The reducer adjustment seeks to ensure the index continuity by not enabling the number of index points to change as a result from the rebalancing. Therefore, both the division of the index notional portfolio's "new market value" by the new reducer and the division of the "previous notional portfolio's market value" by its respective reducer will result in the same index points. Index Adjustments The ITEL will be adjusted for all the benefits distributed by issuing companies of the stocks of the portfolio in order to measure the total return on its notional portfolio.
Example:
Notes: (1) Closing position
of the stock on the last session prior to the benefit distribution, that is, the number of
stocks before the distribution of benefits multiplied by the last quotation registered for
that day. In the case of reverse splits by issuing companies, the theoretical quantity will be reduced in the proportion set forth by the company and a special ex-theoretical price will be calculated so that the stock's economic value remains the same. Besides such situations, pertinent adjustments will be made whenever an issuing company informs events that cause changes in the total quantity of its securities (conversion of debentures into stocks, stock cancellation, conversion of one type of stock into another, etc.).
After the closing of the last trading session prior to the benefit distribution, the market capitalization of the stock will be recalculated by keeping the theoretical quantities of such stocks in the portfolio unchanged and by using their ex-theoretical price. The resulting value will provide a basis for the comparison of the evolution of such stock quotations on the following day. Example:
Notes: Special Procedures 1. Adjustments in case of Company Spin-off a) Announcement/Spin-off Substantiation If an issuing company announces a spin-off, its situation in the index notional portfolio will remain unchanged. After the spin-off substantiation and during the expectation of the operationalization/ registration of the resulting companies, such companies will be regarded as a trading unit and will remain in the index portfolio (under a "spin-off" condition). For trading purposes at BOVESPA, the spin-off substantiation means the act by which the stocks of companies resulting from a spin-off begin to be traded in the trading session.
The stocks of companies resulting from the spin-off which continue to operate in the telecommunications sector will remain in the index.
In order to select the stocks that cumulatively comply with index inclusion criteria, the following procedures will be adopted:
· after 12 months as of the
spin-off: stocks will be considered separately. 2. Adjustments in case of Public Offerings Whenever a company makes a public offer which causes the acquisition of a significant part of its outstanding stocks, BOVESPA may adopt one of the two procedures: a)
when the acquisition is lower than 2/3 (two thirds) of the outstanding shares
exclude from the index the
percentage of the outstanding capital which has been acquired by the company, or In either case, an adjustment in the index reducer will be carried out.
a) Company having stocks in the index mergers with a company whose stocks are also in the index The incorporating company's stocks remain in the index and their theoretical quantity is adjusted. b) Company having stocks in the index mergers with a company whose stocks are not in the index The incorporating company's stocks remain in the index and their theoretical quantity is not changed. The new stocks resulting from such merger will only be considered in the next reevaluation of the notional portfolio.
Such situation will be analyzed on a case-by-case basis, and BOVESPA may at its discretion:
Note: In either case, reducer adjustments will be made. In addition, the incorporated company's negotiability data will be added to the incorporating company's ones on the occasion of the four-month period reevaluations.
The ITEL can be calculated as follows:
where: ITEL (t) = index value on day
t
where: ITEL t = index value at
moment t
The theoretical quantities of the stocks (i.e. their quantities available for trading) will remain constant during the portfolio's four-month term, and they will only be altered in the event of distribution of benefits in stocks of the same type by issuing companies (bonuses, splits, subscriptions, etc.). The adjustment of theoretical quantities, in the exact proportion of the distributed benefit, is made after the closing of BOVESPA's trading session, on the last day prior to the ex-date of the corporate action.
Qn = Qa * (1 + B + S) where: Qn = adjusted stock quantity In the event an approved benefit is partially ratified or it is not ratified at all, the quantity of stocks in the portfolio will be proportionally reduced to reflect the real quantity of outstanding stocks. Such adjustment will be made on the trading session after the receipt by BOVESPA of a notice from the issuing company informing such facts. The index reducer will be adequated so that the index value is not changed.
where: Note: The Vet is calculated by considering the financial amount which would be obtained from the sale of stocks of another type and/or other asset (debentures, stocks of another company, etc.) which were received. For example, let us suppose that company A is distributing, free of charges, to its stockholders one stock of company B for each two stocks of company A held, and that stocks B are evaluated at $ 5.00/stock. In this case, the Vet will be equal to $2.50. |
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