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 recomposition.

 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
TIME BASE

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

Companies which are greater but less than 10%.

INDEX

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

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

Stock
A B C

Share Price (Rs.)

20.00 30.00 40.00

No. of Shares
50,000,000 100,000,000 150,000,000

Market Value (Rs.)

1,000,000,000.00 3,000,000,000.00 6,000,000,000.00 10,000,000,000.00

Total Market Capitalization

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

Step 2 Index Value as on Day 2

Stock
A B C

Share Price (Rs.)

22.00 33.00 44.00

No. of Shares
50,000,000 100,000,000 150,000,000

Market Value (Rs.)

1,100,000,000.00 3,300,000,000.00 6,600,000,000.00 11,000,000,000.00

Total Market Capitalization

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

----------------------------------------------------------Base Period Value

x 1000

OR
Market Capitalization ----------------------------------------------------------Base Divisor x 1000

14,000.00 12,000.00 10,000.00 8,000.00

6 ,2 18 .4 0 9 ,556 .6 1 11,6 8 6 .4 4

6,000.00 4,000.00
2 ,16 4 .2 6 2 ,70 1.4 2 1,4 9 7.76 1,0 0 0 .0 0 2 ,0 4 9 .11 1,2 4 3 .71 13 3 9 .9 3 1753 .8 2 9 4 5.2 4 14 0 8 .9 1 150 7.6 1,2 73 .0 7

4 ,4 71.6 0

2,000.00 0.00

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

CFS Implementation 25 Bn

Indo-Pak Tension New Economic Agenda

12,500.00 12,000.00 11,500.00 11,000.00 10,500.00 10,000.00 9,500.00 9,000.00 8,500.00 8,000.00 7,500.00 7,000.00 6,500.00 6,000.00 5,500.00 5,000.00 4,500.00 4,000.00 3,500.00 3,000.00 2,500.00 2,000.00 1,500.00 1,000.00 500.00

Improvement in Indo-Pak Settlement Relations Crisis

Improving Economy CVT Levy

Change of Regime Nuclear Tests

Terrorists Attack in US (9/11)

S&P upgraded rating

1-Mar-05

20-May-03

14-Jan-98

26-Jun-98

30-Jan-04

18-Nov-98

23-Nov-00

28-Feb-02

17-Dec-02

31-Dec-04

10-Sep-99

28-Sep-01

18-Sep-03

20-Apr-99

30-Apr-01

30-Jun-05

4-May-06

23-Jul-02

9-Feb-00

4-Jul-00

COMPANY NAME O. G. D. C. P. T. C. L. A Pakistan Petroleum Limited

INDEX WEIGHTAGE 23.82 7.30 6.50

National Bank of Pakistan Limited

MCB Bank Limited

6.48
4.27

United Bank Limited

Pakistan Oilfields Limited Fauji Fertilizer Company Limited Pakistan State Oil Company Limited Sui Northern Gas Pipelines Limited

3.29
2.89 2.20 2.03 1.93

COMPANY NAME INFOSYS TECHNOLOGIES RELIANCE ICICI BANK ITC LTD HDFC

INDEX WEIGHTAGE 9.50 8.86 7.61 7.44 4.35

HINDUSTAN LEVER
LARSEN & TOUBRO ONGC TELEVENTURES SATYAM COMPUTERS

4.35
4.35 4.07 3.97 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 companys scrips of the Pakistans equity market are performing. Thus, the KSE-30 Index will be similar to other indicators that track various sectors of countrys 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