Rule 1.8 currently states that the total number of shares is included in the index. This will be changed into the free float corrected number of shares. The new rule 1.8 will read as follows:"The index is weighted by the market capitalisation of a company's ordinary shares, taking no account of any potential dilution, subject to any adjustment according to the rules set out in appendix 3 if any part of the ordinary share capital is not freely available for trading (not "free float")"
The appendix to which is referred in the new rule 1.8, will read as follows:
"Appendix 3: Free float calculation method
- The following categories of shares will be excluded from the free float, irrespective of size:
- Shares subject to foreign ownership restrictions.
- Shares held by officers, board members, their families, associated trusts or foundations and publicly disclosed concert parties.
- Shares held in employee incentive schemes.
- Shares held by companies in which a reciprocal holding exists (cross-holding).
- Shares subject to lock-up clauses.
- Shares with current loyalty incentives, so long as the incentives are material.
- Shares repurchased by the company and held in treasury.
- The following categories of shares will be excluded from the free float if the respective holding is 5% or more of the issued ordinary share capital:
- Shares held by certain government-related organizations, whether supranational, national or municipal. Exclusion will be based on investment objectives and the level of government involvement in management of these organizations.
- Shares held by banks, unless by the asset management arm of the bank.
- Shares held by any investor which has any degree of control (e.g. board representation, or any special agreement in respect of the shares) or whose holding is clearly strategic in nature.
- Shares held by or through custodians and nominees, on behalf of investors such as pension funds, insurance companies, mutual funds and other investment organisations, will be included in the free float, unless excluded under rule 2.c.
- Free float weights will be subject to a banding system, as set out below. The free float calculated in accordance with the above rules will be rounded up to the nearest 10%, except that a calculated free float of less than 10% will result in a 0% weight.
Calculated free float Banded free float
- <10% 0%
- =>10%, <20% 20%
- =>20%, <30% 30%
- =>30%, <40% 40%
- =>40%, <50% 50%
- =>50%, <60% 60%
- =>60%, <70% 70%
- =>70%, <80% 80%
- =>80%, <90% 90%
- =>90%, <100% 100%
- The free float weightings will be reviewed quarterly, any changes taking effect on 1st January, 1st April, 1st July or 1st October. A stock will only be moved from one band to another if its calculated free float changes by at least 5%.
- If a change in, or amendment of, free float would cause a stock to move two or more bands, the change will be implemented immediately, subject to three working days notice.
- In case of doubt the decision of the EPRA Index committee will be final."
The European Public Real Estate Association in conjunction with Euronext Indices BV calculates and publish the EPRA Index. Euronext Indices BV announce on a quarterly basis the outcome of the periodic review of the index. Euronext Indices BV calculate the index every 15 seconds making the EPRA Index Europe's first real time index focused on the European real estate sector.
The European Public Real Estate Association exists to promote and develop the European quoted real estate sector. Some of the ways in which the association seeks to achieve this objective are:
- the establishment of an active forum;
- the promotion of common standards of "best practice" across the industry-liaison with government and regulators;
- the establishment of the information function.
