Calculation formulas

(a)

For Hang Seng Index (HSI), Hang Seng China Enterprises Index (HSCEI), Hang Seng China H-Financials Index (HSCHFI), Hang Seng Freefloat Index (HSFI) Series and Hang Seng REIT Index (HSREIT):

Freefloat Adjustment*
The following shareholdings are viewed as strategic in nature and are excluded for index calculation:

1.	Strategic holdings – shares held by strategic shareholder(s) who individually or collectively control more than 30% of the shareholdings;
2.	Directors' holdings – shares held by director(s) who individually control more than 5% of the shareholdings;
3.	Cross-holdings – shares held by a Hong Kong-listed company which controls more than 5% of the shareholdings as investments; and
4.	Lock-up shares – shares held by shareholder(s) who individually or collectively represent more than 5% of the shareholdings in the company and with a publicly disclosed lock-up arrangement.

The data used for the freefloat adjustment are taken from publicly available sources, including annual reports and Securities Notification History Reports from Hong Kong Exchanges and Clearing Limited.

The Freefloat-adjusted Factor (FAF), representing the proportion of shares that is freefloated as a percentage of issued shares, is rounded up to the nearest multiple of 5% for Index calculation.

Cap Adjustment*

A Cap Factor (CF) is calculated in each regular half-yearly constituent change implementation, such that no constituent has a weighting exceeding 15%.

* The compilation of the HSI was switched from a full market capitalisation weighted formula to a freefloat-adjusted market capitalisation weighted formula with a 15% cap on individual stock weightings starting from 11 September 2006. The above changes are phased in over a period of 12 months from September 2006 to September 2007 to ensure a smooth transition and to minimise any impact on the market.

A re-capping exercise will be conducted semi-annually in Q1 and Q3 to coincide with the regular update of the FAF. Additional re-capping will be performed should there be constituent changes.

The timetable for the adjustments is as follows:

	Freefloat Adjustment		Capping Level
	Existing Constituent	New Constituent

Phase 1:
8 Sep 2006 (Fri),
after market close

Nil

Applying full Freefloat Adjustment (FAF2)

25%

Phase 2:
9 Mar 2007 (Fri),
after market close

Applying 2/3 Freefloat Adjustment (FAF1),

Where:

Rounded up to the nearest 5%

20%

Phase 3:
7 Sep 2007 (Fri),
after market close

Applying full Freefloat Adjustment (FAF2)

15%

(b)

For Hang Seng Composite Index (HSCI) Series:

(c)

For Total Return Index (TRI) Series:

(d)

For HSI Short Index (HSISI), HSCEI Short Index (HSCEISI), HSI 2x Short Index (HSI2SI), HSCEI 2x Short Index (HSCEI2SI):

(e)

For HSI Leveraged Index (HSILI) and HSCEI Leveraged Index (HSCEILI):

Numerical Examples for index calculation

BASE DAY

Six stocks are selected as constituent stocks and they are grouped into two sectors, I and II. The following tabulates the number of issued shares for each of the six stocks and their closing prices for the base day. The base day index is set at 100.


Sector	Stock	Issued Shares	Closing Price (HKD)	Market Capitalisation (HKD)	Aggregate Market Capitalisation (HKD)

I	A	20,000	6.0	120,000
	B	5,000	17.0	85,000
	C	7,000	12.0	84,000	289,000

II	D	8,000	21.0	168,000
	E	10,000	10.0	100,000
	F	12,000	8.5	102,000	370,000

All constituent stocks					659,000

DAY 1: NORMAL COMPUTATION

No adjustment is required as there are no changes in the capital structure of the constituent stocks. The day's closing price quotations and other parameters for Index calculation are as follows:


Sector	Stock	Issued Shares	Closing Price (HKD)	Market Capitalisation (HKD)	Aggregate Market Capitalisation (HKD)

I	A	20,000	6.5	130,000
	B	5,000	16.5	82,500
	C	7,000	11.5	80,500	293,000

II	D	8,000	20.5	164,000
	E	10,000	11.0	110,000
	F	12,000	8.3	99,600	373,600

All constituent stocks					666,600

Index computation:

Sector		Aggregate Market Capitalisation (HKD)		Base Day's Index	Today's Index
		Day 1	Base Day
		(1)	(2)	(3)	(3)x(1)/(2)

I		293,000	289,000	100	101.3841
II		373,600	370,000	100	100.9730

Index		666,600	659,000	100	101.1533

DAY 2: BONUS ISSUES

Stock A is to be traded ex-bonus (XB) at the ratio of "1 for 2". Adjusted number of issued shares of Stock A = 20,000 x (2 + 1) / 2 = 30,000

Sector	Stock	Issued Shares	Closing Price (HKD)	Market Capitalisation (HKD)	Aggregate Market Capitalisation (HKD)

I	A	30,000	4.5XB	135,000
	B	5,000	17.0	85,000
	C	7,000	11.0	77,000	297,000

II	D	8,000	21.0	168,000
	E	10,000	10.0	100,000
	F	12,000	8.0	96,000	364,000

All constituent stocks					661,000

Index computation:

Sector		Aggregate Market Capitalisation (HKD)		Day 1's Index	Today's Index
		Day 2	Day 1
		(1)	(2)	(3)	(3)x(1)/(2)

I		297,000	293,000	101.3841	102.7682
II		364,000	373,600	100.9730	98.3784

Index		661,000	666,600	101.1533	100.3035

DAY 3: RIGHTS ISSUES

Stock D is to be traded ex-right (XR) at the ratio of "1 for 4" at HKD10 per share. Adjusted number of issued shares of Stock D = 8,000 x (4 + 1) / 4 = 10,000

Sector	Stock	Issued Shares	Closing Price (HKD)	Market Capitalisation (HKD)	Aggregate Market Capitalisation (HKD)

I	A	30,000	5.0	150,000
	B	5,000	17.5	87,500
	C	7,000	11.5	80,500	318,000

II	D	10,000	19.0XR	190,000
	E	10,000	10.5	105,000
	F	12,000	8.2	98,400	393,400

All constituent stocks					711,400

Index computation:

Sector		Aggregate Market Capitalisation (HKD)		Day 2's Index	Today's Index
		Day 3	Day 2
		(1)	(2)	(3)	(3)x(1)/(2)

I		318,000	297,000	102.7682	110.0346
II		393,400	384,000*	98.3784	100.7866

Index		711,400	681,000*	100.3035	104.7811



* Adjusted for Stock D's rights issues: Sector II's aggregate market capitalisation = HKD364,000 + (HKD10 x 2,000) = HKD384,000 Aggregate market capitalisation for all constituent stocks = HKD297,000 + HKD384,000 = HKD681,000

DAY 4: NORMAL COMPUTATION

No adjustment is required as there are no changes in the capital structure of the constituent stocks.

Sector	Stock	Issued Shares	Closing Price (HKD)	Market Capitalisation (HKD)	Aggregate Market Capitalisation (HKD)

I	A	30,000	5.5	165,000
	B	5,000	17.5	87,500
	C	7,000	12.0	84,000	336,500

II	D	10,000	20.0	200,000
	E	10,000	10.0	100,000
	F	12,000	8.5	102,000	402,000

All constituent stocks					738,500

Index computation:

Sector		Aggregate Market Capitalisation (HKD)		Day 3's Index	Today's Index
		Day 4	Day 3
		(1)	(2)	(3)	(3)x(1)/(2)

I		336,500	318,000	110.0346	116.4360
II		402,000	393,400	100.7866	102.9899

Index		738,500	711,400	104.7811	108.7726

DAY 5: REPLACEMENT OF CONSTITUENT STOCKS

Stock B is to be replaced by Stock G. Stock G was selling at HKD15 on Day 4 and its number of issued shares is 6,000.

Sector	Stock	Issued Shares	Closing Price (HKD)	Market Capitalisation (HKD)	Aggregate Market Capitalisation (HKD)

I	A	30,000	5.0	150,000
	C	7,000	12.3	86,100
	G	6,000	15.5	93,000	329,100

II	D	10,000	20.5	205,000
	E	10,000	9.0	90,000
	F	12,000	9.0	108,000	403,000

All constituent stocks					732,100

Index computation:

Sector		Aggregate Market Capitalisation (HKD)		Day 4's Index	Today's Index
		Day 5	Day 4
		(1)	(2)	(3)	(3)x(1)/(2)

I		329,100	339,000*	116.4360	113.0357
II		403,000	402,000	102.9899	103.2461

Index		732,100	741,000*	108.7726	107.4662

* Adjusted for replacing Stock B by Stock G: Sector I's aggregate market capitalisation = HKD336,500 - HKD87,500 + (HKD15 x 6,000) = HKD339,000 Aggregate market capitalisation for all constituent stocks = HKD339,000 + HKD402,000 = HKD741,000

DAY 6: SUSPENSION OF STOCKS

Stock A is to be suspended from trading.

Sector	Stock	Issued Shares	Closing Price (HKD)	Last Traded Price (HKD)	Market Capitalisation (HKD)	Aggregate Market Capitalisation (HKD)

I	A	30,000	Susp	5.0	150,000*
	C	7,000	12.6	-	88,200
	G	6,000	15.0	-	90,000	328,200

II	D	10,000	21.0	-	210,000
	E	10,000	8.8	-	88,000
	F	12,000	8.5	-	102,000	400,000

All constituent stocks						728,200

*Last traded price will be used for Index calculation regardless of the time of suspension.

Index computation:

Sector

Aggregate Market Capitalisation (HKD)

Day 5's Index

Today's Index

Day 6

Day 5

(1)

(2)

(3)

(3)x(1)/(2)

328,200

329,100

113.0357

112.7265

400,000

403,000

103.2461

102.4775

Index

728,200

732,100

107.4662

106.8936

DAY 7: RESUMPTION OF SUSPENDED STOCKS

Stock A is to resume trading today.


Sector	Stock	Issued Shares	Closing Price (HKD)	Market Capitalisation (HKD)	Aggregate Market Capitalisation (HKD)

I	A	30,000	4.0	120,000
	C	7,000	13.0	91,000
	G	6,000	15.2	91,200	302,200

II	D	10,000	20.8	208,000
	E	10,000	8.9	89,000
	F	12,000	8.5	102,000	399,000

All constituent stocks					701,200

Index computation:

Sector		Aggregate Market Capitalisation (HKD)		Day 6's Index	Today's Index
		Day 7	Day 6
		(1)	(2)	(3)	(3)x(1)/(2)

I		302,200	328,200	112.7265	103.7963
II		399,000	400,000	102.4775	102.2213

Index		701,200	728,200	106.8936	102.9303

DAY 8: DIVIDEND

Stock G is to be traded ex-dividend (XD). No adjustment is required.


Sector	Stock	Issued Shares	Closing Price (HKD)	Market Capitalisation (HKD)	Aggregate Market Capitalisation (HKD)

I	A	30,000	4.2	126,000
	C	7,000	13.3	93,100
	G	6,000	15.0XD	90,000	309,100

II	D	10,000	21.0	210,000
	E	10,000	9.1	91,000
	F	12,000	8.8	105,600	406,600

All constituent stocks					715,700

Index computation:

Sector		Aggregate Market Capitalisation (HKD)		Day 7's Index	Today's Index
		Day 8	Day 7
		(1)	(2)	(3)	(3)x(1)/(2)

I		309,100	302,200	103.7963	106.1663
II		406,600	399,000	102.2213	104.1684

Index		715,700	701,200	102.9303	105.0588