EAE 20 Share Index

Alliance Help Doc

Ground Rules for Generation of East African Exchanges 20 Share Index

An index, in general terms, is a measure of relative change from one point in time to another. It attempts to summarize in fairly simple terms changes that have occurred to a large number of items during the reference period. This manual outlines the procedures that guide the generation and management of the EAE 20 Share Index, which is a market capitalization-weighted index. It tackles issues concerning stock eligibility criteria, index construction and maintenance methodology, determination of the index base date, and dissemination of index results. METHODOLOGY USED TO GENERATE THE INDEX

Construction methodology

The EAE 20 Share Index is calculated using the base-weighted aggregate methodology, also known as the market capitalisation/value-weighted methodology, which means that the index level reflects the total market value of component stocks relative to a particular base period. The Index will reflect the price/market cap movements of companies that are constituents of the index.

Calculations

The initial total market value of the 20 selected securities is factored as of a base date. determined d. (I.e., market value = total number of shares outstanding x price). This figure is established as the base and assigned a base value of 100. The same method is used to derive the total market value at current prices. The new market value is divided by the base value to determine the level of change, which is in turn, applied to the beginning index value of 100.Maintenance methodology Maintenance of the EAE 20 Share Index includes monitoring and completing adjustments for company additions (new listings) and deletions (delistings or suspensions), share changes, stock dividends, and stock price adjustments due to company restructurings, spin-offs offs and carve-outs. Any actions that possess the ability to trigger a change in the total market value of the index are catered for by adjusting the EAE 20 Share Index divisor. The EAE divisor is a constant that is multiplied by the unadjusted EAE 20 Share Index figure in order to keep the EAE 20 Share Index constant. The goal here is to keep the EAE 20 Share Index accurate as a barometer of market performance and ensure movement of the index does not reflect corporate actions of companies in the index.