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Standard & Poor's Reviews Float Adjustment of U.S. Indices Releases Concept Paper and Calls for Rethinking of Paradigm NEW YORK, Oct. 27 /PRNewswire/ -- Standard & Poor's, the leading provider of independent investment research, indices and ratings, announced today that it is reviewing the idea of introducing float adjustments to its U.S. indices, including the S&P 500. As part of this review, a concept paper examining the implications of float adjustment of U.S. indices was released on Standard & Poor's web site. Float adjustment refers to the reduction of a company's weight in an index to exclude closely held shares, certain legal restrictions on investments and cross-holdings. Float adjustment was initially done in emerging market indices to make them more liquid and investable. In recent years, many other indices have also been float-adjusted. However, there has not yet been a comprehensive review of float adjustment, and particularly of float adjustment in the U.S. "This is the first comprehensive examination of the practical and conceptual implications of float adjustment on indices," said David Blitzer, managing director and chairman of the S&P Index Committee. "The study shows that float adjustment would have little impact on the structure or risk profile of Standard & Poor's U.S. indices." Examining the three different types of float adjustment, the paper finds that investment regulations are not an issue for U.S. equities and that adjustment for cross holdings prevents double counting and is conceptually justified. However, adjustment for strategic holdings is not consistent with the conceptual purpose of indices. The paper also finds that float adjustment would not improve liquidity of the index portfolio because of incorporation of minimum liquidity and public float criteria in current S&P U.S. index methodology. Many of Standard & Poor's non-U.S. indices are currently float-adjusted, reflecting market conditions outside the U.S. The study presents evidence of public float and liquidity in U.S. markets as being much higher than in non-U.S. markets. Also, in many non-U.S. markets, there exist regulations on investment restrictions and stock holdings of government or quasi-government entities. The S&P Index Committee will be consulting market participants and its U.S. Index Advisory Panel on this issue. The review and any changes resulting from it would affect Standard & Poor's U.S. indices only. The full concept paper can be found at http://www.standardandpoors.com/indices. About Standard & Poor's Standard & Poor's, a division of The McGraw-Hill Companies (NYSE:MHP), is the world's foremost provider of independent credit ratings, indices, risk evaluation, investment research, data and valuations. With 5000 employees located in 20 countries, Standard & Poor's is an essential part of the world's financial infrastructure and has played a leading role for more than 140 years in providing investors with the independent benchmarks they need to feel more confident about their investment and financial decisions. For more information, visit http://www.standardandpoors.com/. DATASOURCE: Standard & Poor's CONTACT: Media: Lynn Cohn Standard & Poor's 212 438 1650 David M. Blitzer Chairman of the S&P Index Committee Web site: http://www.standardandpoors.com/

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