Methodology Change | Solactive EQM Global Solar Energy Index | Effective Date 17/10/2022

Today, on the 06/10/2022, Solactive announces the following changes to the methodology of the following indices (the ‘Affected Indices’):

Rationale for Methodology Change

The Affected Indices represents the securities with primary business focus on the solar energy industry. Solactive has determined that the weighting methodology needs to be adjusted to better align with the index objective. The reason for the adjustment is that a very large company entered the index in the last rebalancing. The company is a non-core constituent and should therefore get a reduced weight. To do so, the market capitalization of non-core constituents is reduced by 50% before calculating the weights and weight cap. As the company has 20 times the size of the next biggest company based on market capitalization, reducing their weight by 50% did not have any effect on that company. Hence, the company ended up as a top holding of the index.
To make the weighting more robust, the maximum weight of a non-core constituent shall now be capped to 4%.

Furthermore, to improve the selection process the Index Administrator takes care of calculating the weights instead of the Selection Party.

Changes to the Index Guideline

The following Methodology changes will be implemented in the following points of the Index Guideline (ordered in accordance with the numbering of the affected sections):

Section 2.3

Old:

“On each Selection Day each Index Component is assigned a weight determined by the following steps:

1. Companies deriving more than 60% of their revenues from solar-related business operations, receive a score of 1.0 and are considered core constituents.

Companies deriving at least 5% and up to 60% of their revenues from solar business operations, receive a score of 0.5 and are considered non-core constituents.

2. The Free Float Market Capitalization of each Index Component is multiplied by the companies score as described in the previous step. Then, each Index Component is assigned a weight according to the adjusted Free Float Market Capitalization.
3. A weight cap of 8% is applied to each Index Component. Any excess weight is redistributed proportionally to the other Index Components in an iterative manner.

The revenue category and final weights of each Index Component are provided by the Selection Party.”

New:

“On each Selection Day each Index Component is assigned a weight determined by the following steps:

1. Companies deriving more than 60% of their revenues from solar-related business operations, receive a score of 1.0 and are considered Core Constituents.

Companies deriving at least 5% and up to 60% of their revenues from solar business operations, receive a score of 0.5 and are considered Non-Core Constituents.

2. The Free Float Market Capitalization of each Index Component is multiplied by the companies score as described in the previous step. Then, each Index Component is assigned a weight according to the adjusted Free Float Market Capitalization.
3. A weight cap of 8% (4%) is applied to each Core Constituent (Non-Core Constituent). Any excess weight is redistributed proportionally to the other Index Components in an iterative manner.

The revenue category of each Index Component is provided by the Selection Party.”

Section 6

New:

[…]

“Core Constituent” shall have the meaning as defined in Section “2.3 Weighting of the Index Components”.

[…]

“Non-Core Constituent” shall have the meaning as defined in Section “2.3 Weighting of the Index Components”.

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.