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.

VALUEBASE

Companies largest in its Sector by a minimum 10% at the last cut off date.

TIMEBASE

Companies which are greater but less than 10%.

SECTOR BUFFERCompanies 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. BUFFERCompanies will enter the Index after maintaining its position for last Two cut off dates.

INDEX

Hypothetical Example

Step 1

The Base Period Day 1

Stock Share Price (Rs.)

No. of Shares Market Value (Rs.)

A 20.00 50,000,000 1,000,000,000.00

B 30.00 100,000,000 3,000,000,000.00

C 40.00 150,000,000 6,000,000,000.00

Total Market Capitalization 10,000,000,000.00

Note: Base Period Value / Base Divisor = Rs.10,000,000,000.00 = 1000.00

Step 2

Index Value as on Day 2

Stock Share Price (Rs.)

No. of Shares Market Value (Rs.)

A 22.00 50,000,000 1,100,000,000.00

B 33.00 100,000,000 3,300,000,000.00

C 44.00 150,000,000 6,600,000,000.00

Total Market Capitalization 11,000,000,000.00

11,000,000,000.00

Index = -------------------------- = 1.10 * 1000 = 1100

10,000,000,000.00

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

11,686.44

1753.82

9,556.61

6,218.40

4,471.60

2,701.42

1,273.071507.61408.91945.24

1339.931,497.76

2,049.11

2,164.26

1,243.71

1,000.00

0.00

2,000.00

4,000.00

6,000.00

8,000.00

10,000.00

12,000.00

14,000.00

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Change of Regime Terrorists Attack

in US (9/11)

Indo-Pak Tension

Improving Economy

Improvement in Indo-Pak Relations

New Economic AgendaCVT Levy

S&P upgradedrating

Nuclear Tests

Settlement Crisis

CFS Implementation 25 Bn

500.001,000.001,500.002,000.002,500.003,000.003,500.004,000.004,500.005,000.005,500.006,000.006,500.007,000.007,500.008,000.008,500.009,000.009,500.00

10,000.0010,500.0011,000.0011,500.0012,000.0012,500.00

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COMPANY NAME INDEX WEIGHTAGE

O. G. D. C. 23.82

P. T. C. L. “A” 7.30

Pakistan Petroleum Limited 6.50

National Bank of Pakistan Limited 6.48

MCB Bank Limited 4.27

United Bank Limited 3.29

Pakistan Oilfields Limited 2.89

Fauji Fertilizer Company Limited 2.20

Pakistan State Oil Company Limited 2.03

Sui Northern Gas Pipelines Limited 1.93

COMPANY NAME INDEX WEIGHTAGE

INFOSYS TECHNOLOGIES 9.50

RELIANCE 8.86

ICICI BANK 7.61

ITC LTD 7.44

HDFC 4.35

HINDUSTAN LEVER 4.35

LARSEN & TOUBRO 4.35

ONGC 4.07

TELEVENTURES 3.97

SATYAM COMPUTERS 3.59

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