New Index Methodology At The Ljubljana Stock Exchange

On its meeting of 14 March 2003, the Management Board of the Ljubljana Stock Exchange decided on the revision of the current calculation methodology related to its indices. The Exchange strives to modernize the procedures of calculation and adjust its indices for the use in index-based investment products as well as to start organising trading in stock index futures on the Ljubljana Stock Exchange. The recent Law on Investment Funds and Management Companies (ZISDU-1) allows for the setting up of such index funds. The most extensive alterations in methodology were executed with the SBI 20 Index, all in consideration of an increase in investability, of minimal modifications of its structure, and of more transparent procedures of the calculation of indices.

Key modifications of the SBI 20 Index methodology:

• total number of shares is reduced, from 20 to 15,
• the principal criterion for placement in the index calculation no longer includes total market capitalisation but free float capitalisation,
• participation of individual shares in the index structure no longer depends on their total market capitalisation but on free float capitalisation,
• a two-way revision system will replace the existing four equivalent revisions per year. An annual revision will take place at the end of the year, placing the best fifteen shares on the market in the index calculation, according to the adopted criteria. With the three-month revisions, shares of an individual issuer will only be included in the index in case they are placed tenth or higher - likewise, shares will only be excluded from the index calculation should they rank as low as twentieth, or lower.
• the precise method, term and place of publication of all alterations related to the index calculations are all fixed.

Methodology of other indices of the Ljubljana Stock Exchange will be altered as follows:

• the system of revisions for the IPT (Free Market Index) and the PIX (Authorised Investment Funds Index) Indices is altered in accordance with the modifications of the SBI 20 Index revisions. The PIX Index will be reduced in size, from the existing twenty to fifteen shares.
• there will be no alterations with the Bond Index (BIO), and with the Industrial Sector Indices.

The first revision based on the new methodology was executed on 17 March 2003, adopting the methods of an annual revision, by way of exception; the indices have been calculated with the new methodology since 1 April 2003. In future, the revision will take place on 15 December every year.