Replies to post #4001 on Tri-Valley Corp (fka TVLYQ)

[jonesieatl]

2005 RUSSELL RECONSTITUTION DATA

Some interesting tidbits of information relevant to the time TIV was included in R2K/R3K in 2005.

[jonesieatl]

A second Russell 2000 min. mkt. cap estimate

(skip to the bottom for the estimate}

Year 2008 Russell Reconstitution Preview1

* Russell 2008 Adds/Deletes Spread Return Intraday Chart

The market worries of Spring 2007, when the previous reconstitution analysis took place, seem like good times when looking back from the spring of 2008. The deteriorating credit crunch featured the Fed’s stepping in and guaranteeing Bear Sterns' bad loans so it could find a buyer. Whether the worst of the sub-prime mortgage crisis is over is subject to wide debate, and is directly related to an even more troubling discussion of whether the US is or will be in its first recession since 2002.

The extent of market worries could be summarized by noting that the CBOE Volatility index (VIX) has reached levels not seen since March 2003, when the US invaded Iraq. In the presence of significant market turmoil, the flight to safety on the part of mutual fund investors is not surprising. In fact, January’s outflow from stock funds ranks among the highest in history (right after October 1987 and September 2001), with 0.69% of asset being withdrawn. In these conditions money managers appreciate some certainty as far as index-reconstitution flows are concerned.

To what end ITG is conducting our 2008 Russell Reconstitution analysis, in which we look at the impending changes the annual rebalancing brings to index sector composition and risk profile, while providing fund managers with the estimates of turnover-related trading costs. We also offer powerful pre-trade tools, such as ITG Logic®, which could be used to smoothly transition institutional portfolios.

Like last year, the predicted index changes due to the Russell Reconstitution are not large. This is mostly due to continuing use of 5% bands, which were introduced in 2007. Below we provide more detailed highlights of 2008 Russell Reconstitution process.

Highlights

* In order to minimize unnecessary turnover, Russell continues to use a 5% band around the market capitalization breakpoint for R1000. This means that in order to be moved from R1000 to R2000 or from R2000 to R1000, the existing index member’s market cap should fall outside the 5% band around the cumulative market cap breakpoint. Cumulative market cap percentages are based on the Russell 3000E Index. According to our calculations, R1000 and R2000 stocks ranked between 820 and 1255 will not be moved between these two indexes.
* The list of Benefit Driven Corporations (BDIs) that became eligible for inclusion into Russell indexes since 2007 has grown a bit larger. Russell has added Anguilla, Barbados, Turks and Caicos, Antigua, and the Faroe Islands to the BDI list of countries.

As a reminder, Russell considers companies incorporated in BDI countries but with headquarters in the US or with US-based primary exchange as eligible for index membership. The original list of BDI countries included Bahamas, Belize, Bermuda, British Virgin Islands, Cayman Islands, Channel Islands, Cook Islands, Gibraltar, Isle of Man, Liberia, Marshall Islands, Netherlands Antilles, and Panama.

In 2007 a total of 93 BDIs became R3000 members. In 2008 we expect this number to be significantly lower, most likely in the single digits.
* As before, IPOs have been added to Russell indexes on a quarterly basis (35 IPOs were added to R3000 in Q3 2007, 37 added in Q4 2007 and 12 added Q1 2008).
* Companies which experience a corporate action between May 31st and June 20th (or one week prior to final reconstitution) will be reassigned to the correct capitalization-based index. In previous years, standard corporate action methodology was applied.
* Russell introduced a new requirement of 1% of float for large companies and 5% or more for small capitalization companies to be included in the membership. (Large and small capitalization are determined by the breakpoints established at reconstitution.) The purpose of this change is to exclude companies with a small portion of shares available in the marketplace.
* The chart below shows the historical numbers of companies that were added to and deleted from the R2000 since 1995, combined with this year’s projection. The projected numbers of 236 additions and 187 deletions for 2008 would be similar to last year’s.

{see link below for chart)


* The 5% bands continue to play a key role in dramatically decreased number of additions/deletions. We expect that 11% of the R2000 index weight will be deleted and that additions will make up 7% of the new R2000 index weight.
* Changes in Sector Composition
This year’s market volatility as well as investors shifting into more defensive positions, bring rather significant changes to sector weights in Russell indexes. Most notably, investors shift money from Financials and Consumer Discretionary into Energy and Industrials. As a result, the Financials weight in R1000 is expected to go down from 21.3% to 17.1% and the weight of Consumer Discretionary to go down from 11.1% to 9.3%.

On the other hand, the weights of Energy and Industrials in R1000 are projected to increase from 10% to 12.9% and from 11% to 12.3%, respectively. The changes in R2000 sector compositions are slightly different, with the Financials weight remaining stable at 21.8%, Industrials growing from 14.1% to 15.6% and Consumer Discretionary dropping from 15.5% to 13.5%.
* More Indexed Funds, Less Liquidity Pressure
As of the end of 2007, there was about $386 billion in assets indexed to the R1000, R2000, and R3000 combined. This does not include assets benchmarked to the Russell value and growth indices, and represents almost 6% decrease over the dollar amount of assets indexed one year before. This decrease is even more obvious considering that R1000 and R3000 still managed to record gains in 2007 (3.9% and 3.4%, respectively), while R2000 had a negative return of -2.9%.

In terms of cash flows, there was a reversal of fortune for the R1000 and R2000 indexes relative to the previous year: R1000 experienced a net loss of -20% (it had an +8% gain in 2006) while R2000 net inflow was +17% (from -24% loss in 2006). The net outflow from R3000 in 2007 has been a modest -1.3%.
* Lower Cutoffs
The projected market capitalization cutoffs for the new Russell indices are $1.93 billion for membership in the R1000 and $171 million for membership in the R2000, which represent 18% and 28% reduction from the last year, respectively.

http://www.itginc.com/research/russ/08/index.php



Yorkville / Cornell Tracking Board #board-9964


"I can think of no more valuable commodity than information"

[jonesieatl]

TIV IN RUSSELL 3000/2000 FOR 2008!

Tri-Valley made it back into the Russell 2000/3000!

http://www.russell.com/indexes/membership/Reconstitution/Recon_3000_Additions.asp

Minimum Market Capitalization Estimates for 2008 & TIV/Russell 'Actual'

$185.88MM -- jonesie
$171.63MM -- TIV Actual
$171.00MM -- ITG
$165.00MM -- Melissa Roberts
$165.00MM -- JPMorgan

$xxx.xxMM -- ACTUAL RUSSELL MIN. MKT. CAP FOR R2000/R3000 (unknown at this time)


Yorkville / Cornell Tracking Board #board-9964


"I can think of no more valuable commodity than information"