Announcement Methodology Change | Solactive China Clean Energy Index | Effective Date 06/02/2020

Today, on the 22/01/2020, Solactive announces the following changes to the methodology of the following Indices (the ‘Affected Indices):

Rationale for methodology change

Solactive has determined that the current Index Methodology is lacking in regards to the credit risk of companies active in the clean energy industries.

The clean energy industry is evolving dramatically and changing rapidly. Some constituents in the index have been squeezed and marginalized by their competitors.

In order to reflect these economic circumstances, Solactive decided  to apply one additional criterium, the interest coverage ratio (debt to EBIT). In this clean energy world, high Debt-to-EBIT is the most reliable indicator to demonstrate that a company is seriously squeezed by their competitors.

Changes to the Index Guideline

The following Methodology changes are applied in the following points  of the Index Guideline (ordered in accordance with the numbering of the affected sections): In Chapter 2.1 of the Index Methodology, an additional section will be included between points 8 and 9.:

8. If the company is not classified in the sector Utilities, based on FactSet Industries and Economic Sectors, the company should have a Debt-to-EBIT ratio of less than, or equal to, 30  over the last 12 months

Therefore, chapter 2.1. will read:

The Index Universe is comprised of all financial instruments which fulfill the below requirements (the “Index Universe Requirements“):

1. Headquartered in China or Hong Kong
2. Should be listed on one of the following exchanges:
   1. Hong Kong: HKEX
   2. Stock Connect: Shanghai and Shenzhen
   3. US: NYSE and NASDAQ
3. Should be from the following industries according to the FactSet Industries and Economic Sectors:
   1. Alternative Power Generation
   2. Engineering & Construction
   3. Industrial Specialties
   4. Miscellaneous Manufacturing
   5. Semiconductors
   6. Electrical Products
   7. Electronic Production Equipment
   8. Electric Utilities
4. From the list of constituents remaining after step 3, only companies with significant exposure to clean energy are eligible. Identification is based on the company description included in FactSet, and keywords that indicate significant exposure to clean energy and its related supply chain. The keywords are subject to regular revision by the OVERSIGHT COMMITTEE
5. As an exclusion policy, companies (i) with insignificant exposure to clean energy and its related supply chain and/or (ii) which engage in business(es) that may have adverse environmental impact will be identified and removed from the list of eligible constituents after step 4 above. Identification is based on the company description included in FactSet and the “exclusion” keywords indicating limited or no exposure to clean energy and its related supply chain. The keywords are subject to regular revision by the OVERSIGHT COMMITTEE
6. Should have AVERAGE DAILY VALUE TRADED of at least HKD 20 million over 6 months prior to and including the Selection Day
7. If a company has more than one share classes then the most liquid share class is eligible
8. If the company is not classified in the sector Utilities, based on FactSet Industries and Economic Sectors, the company should have a Debt-to-EBIT ratio of less than, or equal to, 30  over the last 12 months
9. The companies are ranked in their industries, as defined in step 3, according to Total Market Capitalization. The top 6 per industry are selected and constitute the INDEX UNIVERSE
10. Should less than 15 securities fulfill the requirements until and including step 9, the largest security/securities per Total Market Capitalization that does/do not fulfill the requirements until and including step 9, but fulfills/fulfill the requirements until and including step 8, is/are selected until the Index Universe consists of 15 securities

Extraordinary rebalance

An extraordinary rebalancing  on 6th February 2020 will be performed, based on a selection on the 23rd January 2020. The rebalancing will already apply the methodology changes.

Defined terms used in this announcement, but not defined herein, have the meaning assigned to them in the respective index guideline of the Affected Indices. The amended version of the index guideline will be available on the effective date.