The primary objective of the Index is to have a benchmark by which the stock price performance can be compared to over a period of time. In particular, it is designed to provide investors with a sense of how the market is performing. Thus, it is similar to other indicators that track various sectors of the economic activity such a the gross national product, consumer price index, etc. Some major international indices are NYSE, FTSE (London), NZSE 40, SENSEX 30

On November 1, 1991 the KSE 100 Index was introduced. It is capital weighted index and consists of 100 companies representing about 86% of market capitalization of the Exchange. In November 1994 it was recomposed by the Baring Securities London and rules were framed for its re- composition.

ON - LINE COMPUTATION OF THE INDEX During market hours, prices of the Index scrips, at which trades are executed, are automatically used by the trading computer to calculate the KSE-100 Index and continuously make up-dation on all trading workstations connected to the KSE trading computer on real time basis. The KSE 100 Index re-composed on semi-annually basis

The selection criteria for stock inclusion in the recomposed KSE 100 Index are: SECTOR RULE Largest market capitalization in each of the 34 sector of the Exchange, excluding Open – end Mutual Fund sector; CAPITALIZATION RULE The remaining 66 companies are taken up on the basis of market capitalization companies in descending order.

A number of the 34 top sector companies may also qualify for inclusion on the basis of their market capitalization: i.e. companies may qualify under Sector Rule or under Capitalization Rule, or under both. However, in that case the company shall be included on the basis of Sector Rule.

Close-end Mutual Fund Modaraba Leasing Companies Inv. Banks / Inv. Cos. / Sec. Cos Commercial Banks Insurance Textile Spinning Textile Weaving Textile Composite Woollen Synthetics & Rayon Jute Sugar & Allied Cement Tobacco Refinery Power Generation & Distribution Oil & Gas Marketing Companies Oil & Gas Exploration Companies Engineering Automobile Assembler Automobile Parts & Accessories Cables & Electric Goods Transport Technology & Communication Fertilizer Pharmaceutical Chemical Paper & Board Vanapati & Allied Leather & Tanneries Foods & Personal Care Products Glass & Ceramics Miscellaneous

SECTOR RULE: Value-based Rule: A company which is the largest in its sector by a minimum of 10% in capitalization than the present largest in the sector (in the index) will enter in the index on re-composition. Time-based Rule: A company which is the largest, but not more than 10% greater in value than the present largest company in the sector will enter the index after maintaining its position as largest in the sector for two consecutive re-composition period.

CAPITALIZATION RULE: Time-based Rule: A company may qualify for entry if it exceeds the market capitalization of the last stock in the index selected on the basis of market capitalization for two re-composition periods. A qualifying company automatically pushes out the lowest capitalization selected stock in the index.

RULES FOR NEW ISSUES: A newly listed company or a privatized company shall qualify to be included in the existing index (on day of recomposition) if the market capitalization of the new or privatized company is at least 2% of the total market capitalization.

VALUE BASE Companies largest in its Sector by a minimum 10% at the last cut off date. TIME BASE Companies which are greater but less than 10%. SECTOR BUFFER Companies will enter the Index after maintaining its position for last Two cut off dates. INDEX

TIME BASE Companies which are amongst the top 66 companies on market capitalization basis. MARKET CAP. BUFFER Companies will enter the Index after maintaining its position for last Two cut off dates. INDEX

Hypothetical Example Step 1 The Base Period Day 1 StockShare Price (Rs.) No. of SharesMarket Value (Rs.) A ,000,0001,000,000, B ,000,0003,000,000, C ,000,0006,000,000, Total Market Capitalization10,000,000, Note: Base Period Value / Base Divisor = Rs.10,000,000, =

Step 2 Index Value as on Day 2 StockShare Price (Rs.) No. of SharesMarket Value (Rs.) A ,000,0001,100,000, B ,000,0003,300,000, C ,000,0006,600,000, Total Market Capitalization11,000,000, Index = = 1.10 * 1000 = ,000,000,000.00

The for Calculating the KSE 100 Index is: Sum of Shares Outstanding x Current Price x 1000 Base Period Value Market Capitalization x 1000 Base Divisor OR

Change of Regime Terrorists Attack in US (9/11) Indo-Pak Tension Improving Economy Improvement in Indo-Pak Relations New Economic Agenda CVT Levy S&P upgraded rating Nuclear Tests Settlement Crisis CFS Implementation 25 Bn

COMPANY NAMEINDEX WEIGHTAGE O. G. D. C P. T. C. L. “A”7.30 Pakistan Petroleum Limited6.50 National Bank of Pakistan Limited6.48 MCB Bank Limited4.27 United Bank Limited3.29 Pakistan Oilfields Limited2.89 Fauji Fertilizer Company Limited2.20 Pakistan State Oil Company Limited2.03 Sui Northern Gas Pipelines Limited1.93

COMPANY NAMEINDEX WEIGHTAGE INFOSYS TECHNOLOGIES9.50 RELIANCE8.86 ICICI BANK7.61 ITC LTD7.44 HDFC4.35 HINDUSTAN LEVER4.35 LARSEN & TOUBRO4.35 ONGC4.07 TELEVENTURES3.97 SATYAM COMPUTERS3.59

FUTURE PLANS INTRODUCTION OF KSE-30 INDEX The primary objective of the KSE-30 Index is to have a benchmark by which the stock price performance can be compared to over a period of time. In particular, the KSE-30 Index is designed to provide investors with a sense of how large company’s scrips of the Pakistan’s equity market are performing. Thus, the KSE-30 Index will be similar to other indicators that track various sectors of country’s economic activity such as the gross national product, consumer price index, etc. Globally, the Free-float Methodology of index construction is considered to be an industry best practice and all major index providers like MSCI, FTSE, S&P, STOXX and SENSEX have adopted the same. MSCI, a leading global index provider, shifted all its indices to the Free-float Methodology in 2002