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ISEQ® Index Calculation Methodology

At the base date of January 4, 1988 the capitalisation of the constituent companies were summed and given the base figure of 1,000.  Subsequently the value of the Index at time t has been calculated as:

g

Where

Iit= constituent number isissued share capital at time t

Pit= constituent number isshare price at time t

Pis= constituent number isshare price at the base date

Iis= constituent number isissued share capital at the base date

n= last component of the index

The base value above relates only to the start of the index. It is recalculated whenever a constituent's issued share capital changes or a company enters \ leaves the indices. For the purposes of calculating market capitalisation, partly paid shares are adjusted to the fully paid price.

The ISEQ® system has been devised and is operated by the Irish Stock Exchange.It was designed to be as flexible as possible so that a number of extra outputs are available, such as an historical track of the performance (in numerical or graphical form) of the indices or any individual component stock.

Note that the ISEQ® 20 Index uses a different methodology to the other ISEQ® Indices, to see the methodology for the ISEQ® 20 Index click here.

ISEQ® Total Return Indices

In addition to the ISEQ® Price Indices, the ISE also produces the ISEQ® Total Return Indices.

Like the ISEQ® Price Index series, the ISEQ® Return Index series is comprised of the ISEQ® Return Overall, and five sub indices; the ISEQ® Return Financial, the ISEQ® Return General, the ISEQ® Return Small Cap ISEQ® Return ESM Index and the ISEQ® 20 Return Index. The components of the ISEQ® Return indices and the rules for inclusion are the same as for the ISEQ® Price Indices.

The difference between the ISEQ® Price and ISEQ® Return Indices is that in the latter, dividends, gross of tax, are assumed to be reinvested immediately on the day the security is marked ex dividend. In this way investors can see the "total" return from the market.

The gross dividend are calculated with reference to the published tax credit attaching. Details of tax credits, ex dividend dates and actual payment dates are available to the market to allow investors make appropriate adjustments according to their circumstances.

The ISEQ® Return Indices have the same base dates and values as the ISEQ® Price Indices.

Historical performance information for the ISEQ® Return Index is available from the beginning of 1988 onwards.

Calculation of the ISEQ® Return Indices:On any given day (that is not an ex-dividend day) the ISEQ® Return Index will be calculated using Formula 1:

2

Where:

Rt= ISEQ Return Index today

Ry= ISEQ Return Index yesterday

It= ISEQ Index today

Iy= ISEQ Index yesterday

The calculation is modified when shares go ex-dividend.

The effect of the shares going ex-dividend is calculated in ISEQ® index points, based on the closing ISEQ® Index of the day before the shares are marked ex-dividend (currently ex-dividend dates are set every Wednesday).

The effect of dividends on the ISEQ® Return Index is calculated as Formula 2 :

t

Where:

Ro= ISEQ Return Index "opening" Monday

Ry= ISEQ Return Index yesterday

Iy= ISEQ Index Friday close

XDG= The effect in Index points of the stocks going ex-dividend

This measures the return over the instant of the stocks going from cum-dividend to the stocks going ex-dividend. The value Ro will, for the purposes of calculating the Return index at the end of the ex-dividend day, substitute Ry in Formula 1 above. This will give Formula 3 as follows:

1

Restated:

Therefore tocalculate the ISEQ® Total Return Index on any given day that is not an ex-dividend day, Formula 1 will be used. To calculate the Index on an ex-dividend day Formula 3 , as restated above, will be used.

Treatment of dividends:Tax credits on Irish dividends were abolished with effect from6 April, 1999.

Dividend Withholding Tax (DWT) is now applied to distributions by Irish resident companies. DWT is applied at the standard rate of income tax. It will be generally applicable with the following exemptions, when dividends are paid to:

  • An Irish resident company
  • An Irish resident pension fund or registered charity
  • A shareholder resident for tax purposes in another member state of the European Union, or in a country with which Ireland has a tax treaty
  • A company resident in a non-treaty country outside the EU where the company is controlled by shareholders resident in another EU member state or in a treaty country

Full details of Irish Taxes can be found on the web site: www.revenue.ie.

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