Methodology Change | Solactive Global Uranium & Nuclear Components Total Return Index (SOLURANT) | Effective Date 13/08/2020

Solactive conducted a Market Consultation (https://www.solactive.com/market-consultation-on-the-methodology-change-of-solactive-global-uranium-nuclear-components-total-return-index-solurant-july-2020/), which ended on 05/08/2020. Solactive announces the following changes to the methodology of the following index (the ‘Affected Index’) as consulted in the Market Consultation:

Rationale for the Methodology Change

The change of methodology enhances the targeted nature of the Affected Index while accounting for liquidity and capacity considerations.

Currently 50% Pure Play Companies and 50% Non-Pure Play Companies are included in the Affected Index.

With the new weighting concept, the share of Pure-Play Companies will be increased to 70% to better represent the focus of the Affected Index and not be diluted by companies with another focus and only a small uranium exposure.

In order to better represent the uranium market the Affected Index will, therefore, restrict the number of Non-Pure Play Companies and Nuclear Component Producer Companies being tract, while reducing the Free Float Market Capitalization threshold in order to select smaller Pure Play Companies. Additionally, and for the same reason, the adjustment frequency will be twice a year instead of once a year to capture important IPOs in the uranium market.

Furthermore, the weighting concept will shift the focus more on Pure Play Companies and account for markets liquidity peculiarities.

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 1.5 Weighting

From (old version):

“On each Selection Day and Reweighting Selection Day a calculation model is applied to determine the weights of the Index Components of the Solactive Global Uranium & Nuclear Components Total Return Index. The objective of the calculation model is to minimize the sum of squared differences between the final weights and the free float market capitalization weighted Index Universe subject to the following set of constraints.

(a) The maximum weight of a pure play company is 20%

(b) The maximum weight of a non-pure play company is 4.50%

(c) The maximum weight of a nuclear component producer company  is 4.50%

(d) The minimum weight is 0.25%

(e) The sum of weights of all components that have a weight larger than 5% must not exceed 45%

(f) The sum of weights of all components that have a market capitalization smaller than USD 100 million must not exceed 5%

(g) The maximum allowed weight of a company that has an average daily trading volume over the previous 3 months below USD 200,000 is 0.50%

(h) The sum of weights of all nuclear component producer companies must not exceed 30%”

To (new version):

“On each Selection Day the weights of the selected Index Components are determined by applying an “Effective Market Capitalization” weighting scheme that accounts for liquidity in determining final weights.

1. The weight of a selected given constituent will be determined based on the lesser of:

         o              Free Float Market Capitalization

         o              Average daily trading value multiplied by 2000.

2. Non-Pure Play Companies and Nuclear Component Producer Companies will be capped at 2.00%.
3. The overall number of Non-Pure Play Companies and Nuclear Component Producer Companies (in aggregate) will be capped at 15, with preference given to current Index Components first and then prioritized by Free Float Market Capitalization.
4. The maximum weight of a Pure Play Company is 22.50%.
5. The aggregate weight of all Pure Play Companies with a weight larger than or equal to 5% will be capped to 47.50%.
6. All remaining Pure Play Companies are capped at 4.75%.”

Section 2.1 Selection of the Index Components

Add the minimum number of Non-Pure Play and Nuclear Component Producer Companies:

“(…) The overall number of Non-Pure Play Companies and Nuclear Component Producer Companies (in aggregate) will be capped at 15, with preference given to current Index Components first and then prioritized by Free Float Market Capitalization.”

Section 2.2 Ordinary adjustment

From (old version):

“The composition of the Index is ordinarily adjusted once a year on the last business day of January and July. The composition of the Index is reviewed on the Selection Day and necessary changes are announced.

Additionally, the weights of the Index components will be newly determined as described in 1.5 on the Reweighting Adjustment Day on the last business day of July. (…)”

To (new version):

“The composition of the Index is ordinarily adjusted semi-annually on the last Business Day of January and July. The composition of the Index is reviewed on the Selection Day and necessary changes are announced. (…)”

Section 4 Definitions

Amendment of the definition of “Index Universe”:

From (old version):

““Index Universe” in respect of a Selection Day are companies that fulfill the following criteria:

(…)

(c)           Free Float Market Capitalization of at least USD 75 million for companies which are not Index Components on the respective Selection Day, at least USD 50 million for companies which are Index Components on the respective Selection Day

(…).”

To (new version):

““Index Universe” in respect of a Selection Day are companies that fulfill the following criteria:

(…)

(c)           Free Float Market Capitalization of at least USD 50 million for companies which are not Index Components on the respective Selection Day, at least USD 30 million for companies which are Index Components on the respective Selection Day

(…)”

Amendment of the definition of “Adjustment Day”:

From (old version):

““Adjustment Day” is the last business day in January. If that day is not a business day, the adjustment day will be postponed to the next following business day.”

To (new version):

““Adjustment Day” is the last Business Day in January and July. If that day is not a Trading Day, the Adjustment Day will be postponed to the next following Trading Day.”

Amendment of the defined term of Pure Player:

From (old version):

““Pure Player” refers to a company if a significant part of the business operations is or is expected to be related to the uranium industry (in particular uranium mining, exploration for uranium, physical uranium investments and technologies related to the uranium industry). For companies that are defined as Primary Producers, they must additionally earn more than 50% of the previous year’s revenue with the sale of uranium.”

To (new version):

“”Pure Play Company” refers to a company if a significant part of the business operations is or is expected to be related to the uranium industry (in particular uranium mining, exploration for uranium, physical uranium investments and technologies related to the uranium industry). For companies that are defined as Primary Producers, they must additionally earn more than 50% of the previous year’s revenue with the sale of uranium.”

Amendment of the defined term of Pure Player and Non-pure Player:

From (old version):

““Non-pure Player” refers to a company if a significant absolute amount of the business operations is or is expected to be related to the uranium industry (in particular uranium mining, exploration for uranium, physical uranium investments and technologies related to the uranium industry).”

To (new version):

“”Non-Pure Play Company” refers to a company if a significant absolute amount of the business operations is or is expected to be related to the uranium industry (in particular uranium mining, exploration for uranium, physical uranium investments and technologies related to the uranium industry).”

Removal:

Removing of “Reweighting Adjustment Day” and “Reweighting Selection Day” since replaced by the semi-annual selection/rebalance.

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