The capped indices have been adjusted on the basis of the closing values of 16 June 2003. The new weights for the capped versions of the KAX All-Share Index and the KBX Benchmark Index will enter into effect tomorrow, Wednesday 18 June 2003.
As regards KAXcap, the following shares have been affected by the capping: A.P. Møller - Mærsk A, A.P. Møller - Mærsk B, Danske Bank and Novo Nordisk B have all been capped at 10 per cent at company level, while H Lundbeck has been capped at 5 per cent. The weight of TDC will no longer be capped, but will be included fully in KAXcap.
As regards KBXcap, the following shares will be affected by the capping: A.P. Møller - Mærsk A, A.P. Møller - Mærsk B, Danske Bank and Novo Nordisk B have all been capped at IO per cent at company level, while Nordea and Danisco have been capped at 5 per cent. As of tomorrow, the full weight of H Lundbeck will be included in KBXcap and the company will thus have the same number of shares included in the capped as well as the non-capped version of K-BX.
A capped price index as well as a capped yield index will be calculated for KAX and KBX.
Capped indices appeal especially to institutional investors, who are subject to restrictions limiting risk exposure in single companies.
The new capped indices follow a European directive applicable to investment funds, the so-called UCITS rules (40-10-5). Investment funds and institutional investors are typically subject to these rules, which mean that an ordinary investment fund may not invest more than 5 per cent of its assets in the shares of a single company. However, this may be raised to 10 per cent provided that the companies that weight between 5 and IO per cent do not exceed 40 per cent in the aggregate. The 8 largest companies of a portfolio comprising X share classes will, for instance, be capped as follows:
| Company | Before Cap | After Cap |
Process |
|
| A | 17 | 10 |
The weight of the companies A-F, which all exceed 5 per cent, totals 58.4 per cent before the capping, which means that the 40 per cent threshold is exceeded. |
|
| B | 14 | 10 |
The companies A and B also exceed the 10 per cent threshold for a company's maximum weight, consequently, they are both reduced to IO percent. Since the weight of the companies still exceeds 40 per cent (47.4 per cent), even after the capping of the companies A and B, the companies E and F will also have to be capped. |
|
| C | 8 | 8* | ||
| D | 7 | 7* | ||
| E | 6.5 | 5 |
After the capping, the weight of the companies between 5 and 10 per cent totals 35 per cent, and thus all the rules of the UCITS provision have been complied with. |
|
| F | 5.9 | 5 | ||
| G | 3 | 3* |
A new capping will not be made until the portfolio is reviewed, i.e. at the beginning of June and December. |
|
| H | 2 | 2* |
* In reality the weights of these companies will be increased when the weights of other companies are reduced. If the weight of the companies subsequently exceeds 10 or 5 per cent, they too will be capped.
This rule is also known as the 5-10-40 rule.
