Methodology Change | Solactive MLP & Energy Infrastructure Index | Effective Date 17th December 2018
Today, on 19th of November, 2018, Solactive announces the following changes to the methodology of the Solactive MLP & Energy Infrastructure Index (DE000SLA0XX7).
Due to changes in the market environment in relation to MPL´s Solactives Oversight Committee had decided, inter alia, to amend the index methodology and therefore, due to the fact that certain amendments are deemed to be material changes, to initiate a market consultation. The oversight committee has discussed the feedback of the market and has decided to change the methodology of the Solactive MLP Infrastructure Index.
Taking this into account, the oversight committee has decided to amend chapter 2.1 “Selection of the Index Components”, chapter 2.3 “Extraordinary adjustment” as well as chapter 4 “Definitions” of the methodology of the Solactive MLP Infrastructure Index as follows:
The following sections in chapter 2.1 (Selection of the Index Components)
“All infrastructure MLPs and their affiliate companies which fulfil the index criteria as outlined in chapter 4 will be added to the index. In case two affiliate companies are eligible for index inclusion, the index owner may decide to exclude the corresponding MLP in order to increase issuer diversification.
The minimum number of Index Components is 20. There have to be at least 13 companies in the index which are not registered as an MLP as of the selection day in order to comply with index diversification rules. The index Committee may decide to temporarily reduce the minimum criteria as displayed in chapter 4 in order to reach the minimum number of index components.
If there are not enough MLP affiliate companies in the index, the index committee may decide to include companies into the index which are listed on a regulated exchange in the United States and have their main business focus on energy infrastructure in the United States.”
shall be deleted and replaced as follows:
“All infrastructure MLPs, their affiliate companies and all Energy Infrastructure Companies, which fulfil the index criteria as outlined in chapter 4 will be added to the index. If a company, which is not a current Index Component, has publicly announced a merger agreement to be acquired as of the Selection Day, it will not be considered eligible for the Selection Pool.
The minimum number of Index Components is 20. There have to be at least 13 companies in the index which are not registered as an MLP as of the selection day in order to comply with index diversification rules. The index Committee may decide to temporarily reduce the minimum criteria as displayed in chapter 4 in order to reach the minimum number of index components.”
In chapter 2.3 (Extraordinary adjustment) the entire section shall be deleted and replaced by the following:
“An extraordinary adjustment, if applicable, is triggered and applied in compliance with the rules set forth in the Solactive Guideline for Extraordinary Corporate Actions.”
The references in (b) and (c) of the definition of “Selection Pool” In chapter 4 (Definitions):
“(b) Structured as Master Limited Partnership or as an affiliate corporation of an MLP company”
(c) Business Focus on own and operate assets used in energy logistics, including, but not limited to, pipelines, storage facilities and other assets used in transporting, storing, gathering, and processing natural gas, natural gas liquids, crude oil or refined products.
(d) Market Capitalization of at least 1000 million USD for MLP affiliated companies which are not Index Components on the respective Selection Day, at least 750 million USD for MLP affiliated companies which are Index Components on the respective Selection Day”
shall be deleted and replaced as follows:
“(b) Structured as Master Limited Partnership, an affiliate corporation of an MLP company or a midstream Energy Infrastructure Company”
(c) Business focus on owning and operating assets used in midstream energy logistics, including, but not limited to, pipelines, storage facilities and other assets used in transporting, storing, gathering, and processing natural gas, natural gas liquids, crude oil or refined products.
(d) Market Capitalization of at least 1,000 million USD for non MLP companies which are not Index Components on the respective Selection Day, at least 750 million USD for non MLP companies which are Index Components on the respective Selection Day”
The reference in definition of Business Day In chapter 4 (Definitions) to “Stuttgart Exchange” shall be amended to a reference to New York Exchange”.
Solactive AG’s oversight committee is of the opinion that the suggested methodology changes do not compromise the index’ integrity and comparability. The changes were deemed material by Solactive’s oversight committee.
For clarification purposes, chapter 1.5 (Weighting) will be deleted and replaced as follows:
“On each Adjustment Day, the MLP allocation within the Solactive MLP & Energy Infrastructure Index is weighted according to Free Float Market Capitalization.
The Percentage Weight of any MLP component is capped at 4.5% on the Adjustment Days. The excess weight is allocated proportionally to all MLP Components whose Percentage Weight is not capped. The capping methodology may be amended by the Committee from time to time to ensure appropriate index representation and index compliance with financial product regulations in the United States. All MLPs as a group receive an aggregated weight of 24% as of the quarterly Selection Day.
All non MLP companies are weighted according to Free Float Market Capitalization. The three index components with the largest Free Float Market Capitalization are assigned a fixed weight of 9%. The company with the fourth largest Free Float Market Capitalization receives a fixed weight of 8% and the fifth largest company in terms of Free Float Market Capitalization is assigned a fixed weight of 7%. The sixth largest company in terms of Free Float Market Capitalization receives 6.5%. All other non MLP components are capped at 4.5%. All non MLP companies as a group receive a weight of 76% as of the quarterly Selection Day.
The calculated Number of Shares as of the Selection Day are used and will be implemented as of the close on the Adjustment Day. To match the correct index level on the Adjustment Day, the Number of Shares will be multiplied with a constant Correction Factor, i.e. the Number of Shares will be up scaled or down scaled.
The Number of Shares as of the Selection Date are adjusted for any relevant corporate actions between Selection Day and Adjustment Day. This only relates to corporate actions that have a direct impact on the price and shares (i.e. stock splits, stock dividends, rights issues).
For clarification: The calculation of the weighting is based on the close market data as of the Selection Day.”
The index guideline will be modified accordingly and the changes will be effective on 17th of December, 2018. The new index guideline will be available on this date.