Currency of Calculation

The index is calculated in real-time in Sri Lankan rupees.

Base Date

The base date is December 17, 2004. The base value is 1000.

Eligible Securities

The eligible universe from which the index is derived includes all companies established in Sri Lanka and listed on the Colombo Stock Exchange. The following share classes of stocks listed on the Colombo Stock Exchange are eligible for index inclusion:

• The eligible universe from which the index is derived includes all companies established in Sri Lanka and listed on the Colombo Stock Exchange. The following share classes of stocks listed on the Colombo Stock Exchange are eligible for index inclusion: s
• Voting share classes

Non-voting share classes provided the voting share class is eligible

Eligibility Criteria

Stocks are eligible for inclusion in the S&P Sri Lanka 20 if they meet the following criteria for size, liquidity and financial viability.

Market Capitalization

Companies must have a float-adjusted market capitalization of at least LKR 500 million as of the reconstitution reference date. Current constituents’ require a float-adjusted market capitalization of at least LKR 300 million to remain eligible.

Liquidity

To ensure investability, stocks must have a minimum six-month median daily value traded (MDVT) of LKR 500,000 as of the reconstitution reference date. Current constituents’ require a MDVT of at least LKR 350,000 to remain eligible. Liquidity is measured independently for voting and non-voting share classes.

Trading Days

All eligible voting and non-voting share classes are required to trade a minimum of 10 days each month for the three months prior to the reconstitution reference date.

Financial Viability

Companies must be profitable, as measured by positive net income over the latest 12-month period, as of the reconstitution reference date. The figure is calculated by aggregating the latest four quarters of net income reported for the company.

Constituent Selection

Companies that meet the conditions set forth in Eligibility Criteria are ranked by total market capitalization as of the reconstitution reference date. The 20 largest companies are selected and form the index, subject to a three company buffer for current index constituents. If a current index constituent is ranked in the top 23, it remains in the index. If not, the company is deleted and the next largest non-constituent company is added until the company count reaches 20.

Constituent Weightings

The index employs a modified market capitalization weighting scheme. Each constituent company’s weight is capped at 15% and any company exceeding the cap is brought back to 15% at each quarterly rebalancing.

Index Maintenance

Rebalancing

The index is rebalanced quarterly, effective at the open of the Monday following the third Friday of March, June, September and December. Company weights in the index are calculated using closing prices on the Wednesday prior to the second Friday of the rebalancing month as the price reference date. Index share amounts are calculated and assigned to each stock to arrive at the weights determined on the price reference date. Since index shares are assigned based on prices prior to the rebalancing, the actual weight of each stock at the rebalancing differs from these weights due to market movements.

Semi-annual Reconstitution

The index is reconstituted semi-annually in conjunction with the June and December quarterly rebalancings. The reference date for data used in the reconstitution is the last trading date of May and November, respectively. The Index Committee may change the date of a given rebalancing for reasons including market holidays occurring on the scheduled rebalancing date. Any such change will be announced with proper advance notice where possible.

Additions

With the exception of spin-offs and replacements for deleted constituents, index additions are made only at the semi-annual reconstitutions.

Significantly sized initial public offerings (IPOs) are added to the index as soon as practical at the discretion of the Index Committee. In such cases, the IPO must rank among the largest five companies in the index, based on float-adjusted market capitalization. Other eligibility criteria may be waived. Any such IPO addition is made with sufficient notice to clients to allow for a reasonable timeframe for portfolio adjustment.

Deletions

Between reconstitutions, companies can be deleted from the index due to mergers, acquisitions, or delistings. Other causes of a deletion include:

• Bankruptcy: Once a company applies for bankruptcy proceedings, it is deleted from the index
• Reorganization: The Index Committee analyzes the company’s reorganization plan before deciding whether the reorganized company and/or any spin-offs will retain index membership
• Other reasons: A company may no longer meet the eligibility criteria for index inclusion for reasons such as the inability of a company to reflect the market due to a large change in size or liquidity. In addition, a company is removed from the index, as soon as practical, if it is listed for closer supervision by the exchange.

Investable Weight Factor (IWF)

All issues are assigned a float factor, called an Investable Weight Factor (IWF). The IWF ranges between 0 and 1 and is an adjustment factor that accounts for the publicly available shares of a company. The company’s adjusted market capitalization determines an equity issue’s relative weight in the index.

Corporate Actions

Maintaining the S& P Sri Lanka 20 includes monitoring and completing the adjustments for company additions and deletions, share changes, stock splits, stock dividends, and stock price adjustments due to restructurings or spin-offs.

Some corporate actions, such as stock splits and stock dividends, require simple changes in the common shares outstanding and the stock prices of the companies in the index. Other corporate actions, such as share issuances, change the market value of an index and require an index divisor adjustment to prevent the value of the index from changing. Adjusting the index divisor for a change in market value leaves the value of the index unaffected by the corporate action. This helps keep the value of the index accurate as a barometer of stock market performance, and ensures that the movement of the index does not reflect the corporate actions of the companies in it. Divisor adjustments are made after the close of trading and after the calculation of the closing value of the index. Corporate actions such as splits, stock dividends, spin-offs, rights offerings, and share changes are applied on the ex-date.