| APPROVED by the General Meeting of the Shareholders of Basic Index Capital, Corp. Minutes No. 3 from July 20, 2000 Chairman of the Meeting:(signature) A.N. Krasotkin |
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| REGULATIONS for the formation and modification of the Portfolio of Basic Index Capital, Corp. (with amendments and modifications approved by Minutes No. 4 of the General meeting of the Shareholders of Basic Index Capital, Corp. from January 31, 2001, Minutes No. 12 of the Council of directors of Basic Index Capital, Corp. from September 21, 2001) |
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The portfolio of Basic Index Capital, Corp. (hereinafter referred to as the Portfolio) consists of the securities freely negotiated on the market in the Russian Federation. The managing company constantly monitors the conformity of the Portfolio to certain criteria and if necessary effects correcting transactions. The formation and modification of the Portfolio are performed pursuant to the following rules:
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1. General provisions 1.1. The Portfolio can include only securities freely negotiated on the market of the Russian Federation and accessible for resident legal entities with no limitations. 1.2. The Portfolio does not include any derivatives of issued securities, including ADR and GDR. и GDR. 1.3.The Portfolio consists of the Kinds of the securities included in the list of those traded on one of stock exchanges: MICEX, RTS or MFB. 1.4. The kinds of the securities included in the Portfolio are selected on the basis of their current liquidity indicator (see section 3) as of the date of calculating the index value, beginning with the highest. The Portfolio includes the kinds of the securities with the liquidity of more than 20 % from the maximum current liquidity value of the sampling. 1.5. The share of each Kind of the securities included in the Portfolio is calculated pro rata the market capitalization as of the date of calculating the index (see section 6). 1.6. The minimum number of the securities of one Kind in the Portfolio is established by the minimum possible established amount of investments in one Kind (minimum lot) (see section 5). 1.7. . The reputation of not less than 50 % of the issuers whose Kinds of securities are included in the Portfolio should be confirmed and permanently monitored by the leading rating agencies Standard & Poor's, Moody's and Fitch IBCA. 1.8. Not less than 50 % of the Kinds of the securities included in the Portfolio should have derivatives - ADR and GDR. 1.9. The Kinds of the securities of the companies - subsidiaries of the issuer whose Kinds of securities are already included in the Portfolio can be entered in the Portfolio only by a special decision of the Managers. Subsidiaries here shall mean the companies more than 50 % of the shares of which belong to another (parent) company. 1.10. The Portfolio can not include any Kinds of securities with a predetermined negative profitability (planned unprofitable Kinds of securities). 1.11. The Portfolio can not include any Kinds of securities of the companies declared bankrupt by the court decree. 1.12. The decision to include in the Portfolio the Kinds of securities of the companies against which the bankruptcy procedure has been initiated shall be taken by the Managing company at its discretion. The planned unprofitable Kinds of securities shall mean the securities having negative profitability without taking into account other factors (for example, inflation) and usually issued for any other purposes, distinct from the investment ones. 1.13. РThe decision to include in the Portfolio the Kinds of securities of the companies undergoing restructuring shall be taken by the Managing company at its discretion. 1.14. Transactions with securities shall be effected only in case of a favorable market conjuncture (see section 10). |
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2. Calculation of absolute liquidity The absolute liquidity of a Kind of the securities shows the share of trading days from the moment of the Basic Index Capital, Corp. registration, in which for the said Kind of the securities it was possible to effect transactions on three trading floors (MICEX, RTS, MFE) with an aggregate volume equaling the current cost of the Basic Index Capital, Corp. Portfolio. Proceeding from the above, the absolute liquidity (Lni abc) for each Kind of the securities (n) on the i-th day shall be calculated in accordance with the following formula: |
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 ,
where  (1) |
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kni
abc - number of trading days from the date of the Basic Index Capital, Corp. registration to the date of calculating the parameter in which the aggregate volume of the transactions on three trading floors (MICEX, RTS, MFE) by the Kind of the securities of the n-th issuer was not less than the cost of the minimum lot. At that in calculating the data coming from RTS, the volume of the transactions for the Kind of the securities of the n-th issuer on the k-th date is calculated in rubles at the MICEX dollar rate as of the said k-th date. kbi abc - number of trading days from the date of the Basic Index Capital, Corp. registration to the date of the parameter calculation. |
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3. Calculation of current liquidity The current liquidity of the Kind of the securities shows the share of trading days, for the 30 calendar days preceding the day of calculation, in which for the said Kind of the securities it was possible to effect transactions on three trading floors (MICEX, RTS, MFE) with an aggregate volume equaling the current cost of the minimum lot. Proceeding from the above, the current liquidity (Lni) for each Kind of the securities (n) on the i-th day shall be calculated in accordance with the following formula: |
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, where (2) |
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kni
- number of trading days, for the 30 calendar days preceding the day of calculation, in which the aggregate volume of the transactions on three trading floors (MICEX, RTS, MFE) by the Kind of the securities of the n-th issuer was not less than the cost of the minimum lot. At that in calculating the data coming from RTS, the volume of the transactions for the Kind of the securities of the n-th issuer on the k-th date is calculated in rubles at the MICEX dollar rate as of the said k-th date.
kbi = 30 days. The Portfolio includes the Kinds of the securities with the liquidity of more than 20 % from the maximum value of the current liquidity for the sampling. |
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4. Calculation of market capitalization The market capitalization reflects the total amount of money resources of all investors placed in a certain Kind of the securities. The market capitalization of a Kind of the securities (Cni) represents the market cost of the total number of the issued securities of the given Kind (n) on the i-th date of calculation and is calculated in accordance with the formula: |
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 ,
where (3) |
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Vni
- total number of the issued securities of the n-th Kind on the i-th date of the index calculation. Pw ni - weighted-mean price of the security of the n-th Kind on the i-th date of the index calculation. At that the weighted-mean price (Pw ni) on the i-th date of calculation is taken by the results of trading on MICEX, in absence of the transactions on MICEX the price will be taken from RTS or MFE (sequentially) for the last trading day in which there were transactions effected on it. |
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5. Calculation of the minimum sum of investments in one Kind of securities* The limitation of the sum of the minimum lot is necessary to limit the risk of increased costs for the operations to modify (liquidate) the portfolio and prevent the expenses exceeding the limits established (in accordance with limited conditions of the Agreement with the broker and stock exchange). The minimum investment amount is calculated proceeding from the fact that on purchasing one lot most expensive on the i-th date of calculation: - the price of one piece of the Kind of the securities on the day of the transaction intended with it can change by the value of its maximum change for 30 trading days (elected period); - the price of one piece of the Kind of the securities on the day of the transaction intended with it can change by the maximum spread for one trading session; - the price of a Kind of the securities should take into account the brokerage for purchase - sale; - - after the sale of a Kind of the securities another Kind may be purchased on the same conditions. The minimum amount of investments minloti) in one Kind (n) of the securities is established in accordance with the formula: |
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 ,
where (4) |
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Pw i
- weighted-mean price of one share with the maximum cost of the lot on the i-th date of calculation (since the greatest cost is that of one lot of the Norilsk Nickel shares). gn - established brokerage for the given volume of assets. spi - maximum spread for all Kinds of the securities selected from the spreads for 30 trading days precedent the i-th date of calculation.  i - maximum ratio of the weighted-mean prices of two consecutive trading days for all Kinds of the securities selected for 30 trading days precedent the i- th date of calculation. |
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As the greatest cost now is that of one lot of the common shares of Norilsk Nickel, all calculations are conducted for it. The present condition may be applied flexibly, since due to the immaturity of the Russian securities market and low standardization the cost of the securities may differ by several times, which at the initial stages of activity may result in consequences harmful for the Portfolio as a whole. |
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6. Calculation of the share of the Kind of the securities in the Portfolio 6.1. Algebraic description. The percentage ( ni
) of a Kind of the securities (n) in the Portfolio is calculated on the i-th date, proceeding from the general market capitalization represented by the given Kind on the securities market (2), in accordance with the formula: |
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cni
- market capitalization of the Kind of the securities of the n-th issuer on the i-th date of calculation. Cn0 - volume of cash in the Portfolio. |
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The number of the securities (Rni) of one Kind (n) in the Portfolio is determined as the maximum quantity of lots which may be acquired for the calculated market cost of the securities: |
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 ,
where (6) |
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Sni
- market cost of the Kind of the securities (n) in the Portfolio on the i-th date of calculation. Pw n i - weighted-mean price of one share of the Kind of the securities (n) on the i-th date of calculation. Rn - number of the securities of the given Kind in one lot |
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The obtained quantity of the lots of the Kind of the securities for their inclusion in the Portfolio is rounded off up to an integer towards the lesser number to eliminate money shortage. |
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The market cost
(Sni) ) of the Kind of the securities (n) in the Portfolio in rubles on the i-th date is established in accordance with the following formula: |
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 ,
wherecost of the whole Portfolio by weighted-mean costs of the Kinds of the securities on the i-th date of calculation. (7) |
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Si
- percentage of the Kind of the securities (n) in the Portfolio on the i-th date of calculation. D ni - percentage of the Kind of the securities (n) in the Portfolio on the i-th date of calculation. |
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At that the number of each Kind of the securities is calculated stage-wise. The calculation starts with the including in the Portfolio of one Kind of the securities with maximum capitalization, i.e. there are sequentially included in the Portfolio the Kinds with the largest market capitalization (1), starting with n=2 up to the n when the volume of the given Kind in rubles becomes not less than the minimum possible established sum of investments in one Kind. For the calculation of the real market cost of the given volume (Srealni) of the Kind of the securities (n) on the i-th date of calculation in the Portfolio the following formula is used: |
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 ,
где (8) |
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Pw n i
- weighted-mean price of one share of the Kind of the securities (n) on the i-th date of calculation. Rni - number of the Kind of the securities (n) in the lots in the Portfolio on the i-th date of calculation. Rn - number of the securities of the given Kind in one lot. At that the sum remaining from the calculated volume shall remain on the account in the pecuniary form. 6.2. Algorithmic description There are preliminarily selected the Kinds of the securities by the criterion of the absence of planned-negative profitability. At the first stage of forming the Portfolio the current liquidity of all Kinds of the securities traded on MICEX, RTS and MFE is calculated. At the second stage the Kinds of the securities with the liquidity less than 20 % of the maximum current liquidity calculated at the first stage of formation are excluded. At the third stage the capitalization of the Kinds of the securities included in the final list of the current liquidity and aggregate capitalization are calculated. At the fouth stage from the capitalization list there are selected two kinds of the securities with the greatest values of capitalization. Pro rata the capitalization of the selected Kinds of the securities their share in the Portfolio in percents and rubles is calculated. If the ruble share of the Kind of the securities does not exceed the sum of the minimum lot, a similar calculation is repeated for three and more Kinds of the securities. As soon as the ruble share of the Kind of the securities with the least capitalization becomes less than the sum of the minimum lot, the calculation ceases and we go back to the number of the Kinds of the securities a unit less. At the fifth stage the Kinds of the securities having the rating of the leading agencies are established. If more than 50 % of these Kinds have no such rating, the Kinds with no rating shall be sequentially eliminated, beginning with those with the smallest capitalization, until at least 50 % have the said rating. If more than 50 % of these Kinds have the required rating, we pass on to the sixth stage. At the sixth stage we begin to add the kinds of the securities from the list of current liquidity and to calculate their share in the Portfolio similarly to the fifth stage. At the seventh stage the sixth stage is repeated, but the criterion of selection is the presence of ADR or GDR (not less than 80 % of the Kinds of the securities should have them). After the checking of all conditions and calculations of the necessary shares the Portfolio shall be considered formed. All calculations are performed in accordance with the formulas described above (p. 6.1.). |
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7. Limitations on the formation and modification of the Portfolio 7.1. All transactions on the formation (modification) of the Portfolio are conducted in a volume of not less than one minimum lot for each kind of the securities. 7.2. The securities included in the Portfolio can be excluded therefrom not earlier than one calendar month from the date of their inclusion. The securities excluded from the Portfolio can be included in the Portfolio not earlier than one month from the date of their exclusion. 7.3. The minimum (not sold) volume of a Kind of the securities ever present in the Portfolio is equivalent to the cost of the minimum lot at the moment of their exclusion from the Portfolio. 7.4. The transactions to modify the Portfolio are not made if the aggregate commission for the acquisition or sale of the volume of the securities exceeds 0.7 % from the sum of the transaction. |
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8. Order of changing the Regulations for the formation and modification of the Portfolio of Basic Index Capital, Corp. The changes in the Regulations for the formation and modification of the Portfolio of Basic Index Capital, Corp. may be introduced by 3/4 votes at the General Meeting of the Shareholders of Basic Index Capital, Corp. as recommended by the Council of directors of Basic Index Capital, Corp. The right to make suggestions to the Council of directors to change the Regulations for the formation and modification of the Portfolio of Basic Index Capital, Corp. shall belong to any legal entity or individual. |
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9. Peculiar features of forming the Portfolio of Basic Index Capital, Corp. Russia is a country with unstable economy, unstable political situation and immature market, in this connection it is sometimes not expedient and even harmful to precisely follow the Regulations for the formation and modification of the Portfolio of Basic Index Capital, Corp. As vivid examples there can serve the instances when the Shareholders prefer "to leave the game" and urgently remove their money, for example, nationalization, limitation of the turnover of the securities. Less obvious, but also expedient, are the special rules of formation, in accordance with which for including / excluding the security in/from the Portfolio there are powerful arguments in addition to the Regulations for the formation and modification of the Portfolio of Basic Index Capital, Corp., for example, insider information. The managing company stipulates the following mechanism of operation in extraordinary situations: 9.1. АThe shareholder owning not less than 1 % of the shares, a member of the Council of directors or the Managing company submits to the Council of directors a proposal on individual deviations from the Regulations for the formation and modification of the Portfolio of Basic Index Capital, Corp. 9.2. The Council of directors considers the proposal received and either sends it to its shareholders or rejects it with appropriate explanations. 9.3. If no more than 1/3 of the shareholders vote against the proposal, the Managing company is obliged to carry out the operations named in the proposal. 9.4. The Managing company can deviate from the Regulations for the formation and modification of the Portfolio of Basic Index Capital, Corp. on analogy, with mandatory informing of the shareholders, i.e. if any deviations were made earlier, under similar circumstances similar operations will be performed followed by immediate notifying the shareholders thereof. |
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10. Special conditions of effecting transactions with securities*. On receiving additional money resources (issue, dividends, other incomes), acquisition of securities may start only after the RosCapital Real Index graph crosses its simple 20-day upglide average, or on its growing trend, and after the graph of the cost of the Kind of the securities crosses the simple 20-day upglide average, or on its growing trend. If it is necessary to sell a part of the securities (lowering liquidity, change of capitalization), the transaction is effected mainly after the RosCapital Real Index graph crosses its simple 20-day downglide average, or on its falling trend, and after the graph of the cost of the Kind of the securities crosses the simple 20-day downglide average, or on its falling trend. These provisions are necessary to lower the losses of the investors caused by local unfavorable market conditions and, as a result, their knowingly "bear" or "bull" targeting. |
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*The present rule does not apply for the instances of initial purchasing. Afterwards the decision will be taken at the discretion of the Managing company |
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