OBJECTIVE CRITERIA
DESCRIPTION OF THE ROGERS INTERNATIONAL COMMODITY INDEX®
The following is a description of the RICI®, including a summary of the procedures used to determine and calculate the RICI®. The information contained in this section has been provided by Beeland Interests.
The Rogers International Commodity Index® (the “RICI”)1 is a composite, U.S. dollar-based, total return index created by James Beeland Rogers, Jr. (“Rogers”) on July 31, 1998. The RICI® was designed to meet the need for consistent investing in a broad based international vehicle; it represents the value of a basket of commodities consumed in the global economy, ranging from agricultural to energy to metal products. The value of this basket is tracked via futures contracts on 36 different exchange-traded physical commodities, quoted in four currencies, listed on eleven exchanges in five countries.
The RICI® aims to be an effective measure of the price action of raw materials not just in the United States but also around the world. Indeed, the RICI’s® weightings attempt to balance consumption patterns worldwide (in developed and developing countries) and specific contract liquidity.
Below is a current list of the futures contracts comprising the RICI®, together with their respective symbols, exchanges, currencies and initial weightings:
| Contract | Exchange | Currency | Initial Weighting |
| Crude Oil | NYMEX | USD | 21.00% |
| IPE Brent | ICE | USD | 14.00% |
| Wheat | CBOT | USD | 7.00% |
| Aluminum | LME | USD | 4.00% |
| Copper | LME | USD | 4.00% |
| Corn | CBOT | USD | 4.75% |
| Heating Oil | NYMEX | USD | 1.80% |
| IPE Gasoil | ICE | USD | 1.20% |
| RBOB Gasoline | NYMEX | USD | 3.00% |
| Natural Gas | NYMEX | USD | 3.00% |
| Cotton | NYCE | USD | 4.05% |
| Soybeans | CBOT | USD | 3.25% |
| Gold | COMEX | USD | 3.00% |
| Live Cattle | CME | USD | 2.00% |
| Coffee | CSCE | USD | 2.00% |
| Zinc | LME | USD | 2.00% |
| Silver | COMEX | USD | 2.00% |
| Lead | LME | USD | 2.00% |
| Rice | CBOT | USD | 0.50% |
| Soybean Oil | CBOT | USD | 2.00% |
| Platinum | COMEX | USD | 1.80% |
| Lean Hogs | CME | USD | 1.00% |
| Sugar | CSCE | USD | 2.00% |
| Azuki Beans | TGE | JPY | 0.25% |
| Cocoa | CSCE | USD | 1.00% |
| Nickel | LME | USD | 1.00% |
| Tin | LME | USD | 1.00% |
| Greasy Wool | SFE | AUS | 0.25% |
| Rubber | TOCOM | JPY | 1.00% |
| Lumber | CME | USD | 1.00% |
| Barley | WCE | CAD | 0.27% |
| Canola | WCE | CAD | 0.67% |
| Orange Juice | NYCE | USD | 0.66% |
| Oats | CBOT | USD | 0.50% |
| Palladium | COMEX | USD | 0.30% |
| Soybean Meal | CBOT | USD | 0.75% |
Rogers and the RICI® Committee have stated that the RICI® is designed to offer stability, partly because it is broadly based and consistent in composition, and to meet a need in the financial spectrum currently not effectively covered.
The RICI® Committee
The RICI® Committee formulates and enacts all business assessments and decisions regarding the composition of the RICI®. Rogers, as the founder of the RICI®, chairs the RICI® Committee and is the final arbiter of its decisions. Beside Rogers, representatives of the following parties are members of the RICI® Committee: (1) UBS AG, (2) Daiwa Securities Co. Ltd., (3) Beeland Management Company, (4) Diapason Commodities Management S.A. and (5) ABN Amro Bank N.V. Exclusively, Rogers, as chairman of the committee, is authorized to designate new members of the committee, if necessary.
The RICI® Committee meets each December to consider changes in the components and weightings of the RICI® for the following calendar year; however, such changes can be made at any time.
RICI® Composition
The Process
The contracts chosen for the basket of commodities that constitute the RICI® are required to fulfill various conditions described below. Generally, the selection and weighting of the items in the RICI® are reviewed annually by the RICI® Committee, and weights for the next year are assigned every December. The RICI’s composition is modified only on rare occasions, in order to maintain investability and stability, and the composition of the RICI® generally will not be changed unless severe circumstances in fact occur. Such “severe circumstances” may include (but are not restricted to):
To date, there have been few changes in the components of the RICI® in the history of the RICI®.,
Exchanges and Non-Traded Items
All commodities included in the RICI® must be publicly traded on recognized exchanges in order to ensure ease of tracking and verification. The 15 international exchanges recognized by the RICI® Committee are:
General Contract Eligibility
A commodity may be considered suitable for inclusion in the RICI® if it plays a significant role in worldwide (developed and developing economies) consumption. “Worldwide consumption” is measured via tracking international import and export patterns, and domestic consumption environments of the world’s prime commodity consumers. Only raw materials that reflect the current state of international trade and commerce are eligible to become RICI® commodities. Commodities that are merely linked to national consumption patterns will not be considered. The RICI® is not related to any commodities production data.
Commodity Screening Process
Data of private and governmental providers concerning the world’s top consumed commodities is actively monitored and analyzed by the members of the RICI® Committee throughout the year. In order to obtain the most accurate picture of international commodities consumption, a wide range of sources on commodities demand and supply is consulted. The findings of this research are then condensed into the different commodities contracts weightings of the RICI®. Sources on world’s commodity consumption data include:
Contract Characteristics
In order to decide whether a specific commodity contract is actually investable, the RICI® Committee screens the volume and liquidity data of international exchanges, published on a regular basis by the Futures Industry Association (Washington DC, United States). Additionally individual exchange data on contracts may also be included in the process.
If a commodity contract trades on more than one exchange, the most liquid contract globally, in terms of volume and open interest combined, is then selected for inclusion in the RICI®, taking legal considerations into account. Beyond liquidity, the RICI® Committee seeks to include the contract representing the highest quality grade of a specific commodity.
RICI® Weightings
Initial Weightings
As of the date of this Schedule, the RICI® components have the initial weightings listed in the chart above (the “Initial Weightings”). The Initial Weightings may be amended from time to time, as described below.
Changes in Weights and/or RICI® Composition
As noted, the RICI® Committee reviews the selection and weighting of the futures contracts in the RICI® annually. Thus, weights are potentially reassigned during each month of December for the following year, if the RICI® Committee so determines in its sole discretion.
Monthly Rolling of Contracts
On the close of the last Business Day of each month, all the futures contracts used to calculate the RICI®, except for the contracts traded on the London Metal Exchange, are rolled. Generally, if the next calendar month of a futures contract includes a first notice day, a delivery day or historical evidence that liquidity migrates to a next contract month during this period, then the next contract month is intended to be applied to calculate the RICI®, taking legal constraints into account. For example, on the close of the last Business Day of November, the January Crude Oil contract is replaced by the February Crude Oil contract. If the exchange on which one of the RICI® components is closed the last Business Day of the month, the roll of this specific contract takes place the next Business Day for that exchange.
Rebalancing of the RICI® Components
On the close of the last Business Day of each month, the current weight of each RICI® component is rebalanced in order to be set at its “Initial Weighting”. If the exchange on which one of the RICI® components is traded is closed on the last Business Day of the month, the reference price for the calculation of the weighting of this specific component is the closing price of the next Business Day. This rule is also valid if there is more than one component that cannot be traded on the last Business Day of the month.
Data Source
The RICI® calculation is based on the official commodity exchanges’ prices of the futures contracts used.
Market Disruption
If, for any reason, one of the RICI® components ceases to exist or its liquidity collapses to unacceptable levels, or any other similar event occurs with similar consequences, as determined at the discretion of the RICI® Committee, the RICI® Committee will call an exceptional meeting to assess the situation and decide on a replacement for this component or on a change in the weighting. For example, following a currency board on the Malaysian ringgit in 1998, the liquidity of the Palm Oil futures contract on the Kuala Lumpur Commodity Exchange collapsed to a point where it became impossible to trade it. In that case, the RICI® Committee, calling an exceptional meeting, decided to replace the Palm Oil futures contract with the Soybean Oil contract that trades on the Chicago Board of Trade, United States.
Reference Rates
The foreign exchange rates used to translate the value of the futures contracts denominated in a foreign currency into U.S dollars are obtained from Bloomberg. This is the “close” value for each currency taken at 5:00 pm New York time. The interest rate used is the United States 3-Month Treasury bill rate, as available on Bloomberg ticker USGG 3M
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