Methodology Change | Solactive B-BRE Israel Infrastructure Index | Effective Date 21/08/2020

Today, on the 07/08/2020, Solactive announces the following changes to the Methodology of the following indices (the ‘Affected Indices’):

Rationale for Methodology Change

Solactive has determined that due to the updated requirements of the Israel Securities Authority it is necessary to align the index universe requirements. Within the scope of its diversification and liquidity restrictions, the Israel Securities Authority requires a maximum asset ratio for corporate and government securities of 25% and a minimum threshold for the floating market capitalization of ILS 75 million, as well as a minimum floating market capitalization of 10% relative to the total market capitalization. In consideration of the effects Solactive proposes to cap the weights of each index components at 20% and exclude securities with a floating market capitalization of less than ILS 75 million as well as less than 10% of floating market capitalization relative to the total market capitalization.

Changes to the Index Guideline

1. Section 2.1. INDEX UNIVERSE REQUIREMENTS

From (old version):

“The Index Universe is comprised of all financial instruments which fulfill the below requirements

 (the “Index Universe Requirements“):

1. All stocks listed on the Tel Aviv Stock Exchange.
2. Stocks need to be classified in any of the following FactSet industries: Air Freight/Couriers, Airlines, Trucking, Railroads, Marine Shipping, Other Transportation, Electric Utilities, Gas Distributors, Water Utilities, Alternative Power Generation, Electrical Products, Electronic Equipment/Instruments, Oil & Gas Production, Integrated Oil, Oil Refining/Marketing, Coal, Environmental Services, Oil & Gas Pipelines, Engineering & Construction, Miscellaneous Commercial Services, Industrial conglomerates, Construction Materials, Major Telecommunications, Wireless Telecommunications, Computer Communications, Miscellaneous, Investment Trusts/Mutual Funds.
3. A minimum Total Market Capitalization of at least ILS 400 million.
4. Average Daily Value Traded of at least ILS 150,000 over the past three months, including the Selection Day.

[…]”

To (new version):

“The Index Universe is comprised of all financial instruments which fulfill the below requirements

 (the “Index Universe Requirements“):

1. All stocks listed on the Tel Aviv Stock Exchange.
2. Stocks need to be classified in any of the following FactSet industries: Air Freight/Couriers, Airlines, Trucking, Railroads, Marine Shipping, Other Transportation, Electric Utilities, Gas Distributors, Water Utilities, Alternative Power Generation, Electrical Products, Electronic Equipment/Instruments, Oil & Gas Production, Integrated Oil, Oil Refining/Marketing, Coal, Environmental Services, Oil & Gas Pipelines, Engineering & Construction, Miscellaneous Commercial Services, Industrial conglomerates, Construction Materials, Major Telecommunications, Wireless Telecommunications, Computer Communications, Miscellaneous, Investment Trusts/Mutual Funds.
3. A Free Float Market Capitalization of at least ILS 75 million.
4. A minimum percentage of Free Float of 10 percent.
5. A minimum Total Market Capitalization of ILS 400 million.
6. Average Daily Value Traded of at least ILS 150,000 over the past three months, including the Selection Day.

[…]”

2. Section 2.3. WEIGHTING OF THE INDEX COMPONENTS

From (old version):

“On each Selection Day each Index Component is assigned a weight according to the following mechanism which will be conducted by the Index Administrator:

In a first step, the Index Category weight is calculated as the number of Index Component in each Index Category divided by the number of all Index Components. Any Index Category exceeding 40 percent in weight will be capped at 40 percent. Any excess weight will be redistributed proportionally among the other Index Categories. This process is repeated iteratively, if necessary, until the weight of no Index Category exceeds 40 percent.

Within each Index Category the Index Components are initially weighted according to their adjusted Total Market Capitalization calculated as the Total Market Capitalization multiplied by the infrastructure coefficient as determined by the Data Provider.

In a next step, the weight per Index Component is multiplied with its Index Category weight such that the overall index weight is scaled to 100 percent.”

To (new version):

“On each Selection Day each Index Component is assigned a weight according to the following mechanism which will be conducted by the Index Administrator:

In a first step, the Index Category weight is calculated as the number of Index Component in each Index Category divided by the number of all Index Components. Any Index Category exceeding 40 percent in weight will be capped at 40 percent. Any excess weight will be redistributed proportionally among the other Index Categories. This process is repeated iteratively, if necessary, until the weight of no Index Category exceeds 40 percent.

Within each Index Category the Index Components are initially weighted according to their adjusted Total Market Capitalization calculated as the Total Market Capitalization multiplied by the infrastructure coefficient as determined by the Data Provider.

In a next step, the weight per Index Component is multiplied with its Index Category weight such that the overall index weight is scaled to 100 percent.

Finally, the weight of any single Index Component is capped at 20 percent. Any excess weight will be redistributed proportionally only among those Index Components which do not belong to an Index Category that is capped at 40 percent. This process is repeated iteratively, if necessary, until the weight of no Index Component exceeds 20 percent.

Additionally, if the weight of a company reaches 24 percent between two Rebalance Days, at the close of any Business Day, its weight is capped to 20 percent. The excess weight is redistributed to the other Index Components according to their relative weights. The reweighting will be effective two Business Days (close of business) after the weight of any Index Components has reached 24 percent or more at any given Business Day (close of business).”

3. Section 6. DEFINITIONS

The following definitions have been added:

“The “Free Float” is with regard to each of the securities fulfilling the Index Component Requirements on a Selection Day the share class-specific fraction of the total number of shares of such share class issued that are available for trading by market participants and not locked-in by long term holders, as sourced from data vendors.”

“The “Free Float Market Capitalization” is with regard to each of the securities fulfilling the Index Component Requirements on a Selection Day the share class-specific free float market capitalization. It is calculated as the multiplication of the shares outstanding in Free Float (as sourced from data vendors) with the Closing Price of the share class as of the respective Selection Day.”

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.