Index Methodology

The Index is designed to track companies within the following business segments of the solar power industry: solar power equipment producers; suppliers of materials or services to solar equipment producers; companies that derive a significant portion of their business, measured by the methodology set forth below, from solar power system installation, integration or finance; and companies that specialize in selling electricity derived from solar power.

As defined by the MAC Solar Index, solar power includes two main categories:

  • Solar photovoltaic power, which involves the conversion of sunlight into electricity through the photovoltaic process; and
  • Thermal solar power, which involves using energy from the sun to heat fluids for purposes of water or space heating or to produce electricity.

The Index is comprised of stocks selected based upon the relative importance of solar power within the company’s business model. To determine whether solar power is a major component of a company’s business, the Index Provider implements the following methodology.

  • All global publicly-traded companies with any connection to the solar industry are identified by company description database searches and bottom-up industry research of publicly available information and databases.
  • Based on a review of the company’s public filings and company description information, companies that are identified through the initial search are put into groups (the “Exposure Factor”)
    • Pure-Play Group: Companies that generate in excess of two thirds of their revenue from solar related business are considered to have their primary business in the solar industry and are placed in the Pure-Play Group. These are assigned an Exposure Factor of 1.0.
    • Medium-Play Group: Companies that operate in multiple industries, but have significant exposure to the solar industry–defined as generating less than approximately two thirds but more than approximately one third of their revenue from solar related business–are placed in the Medium-Play Group. These are assigned an Exposure Factor of 0.5.
    • Eliminated Group: Companies with marginal exposure to the solar industry–defined as generating less than approximately one-third of their revenue from solar related business–are eliminated from consideration as an Index constituent.
  • From the securities in the Pure-Play Group and Medium-Play Group, securities eligible for inclusion in the Index that are not existing constituents of the Index must be listed on a developed market exchange as defined above, have a minimum market capitalization greater than or equal to $150 million at the reference date preceding each reconstitution and have a minimum 1-month average daily trading value of $750,000 at the reference date preceding each reconstitution. Securities in the Pure-Play Group and Medium-Play Group that do not meet these criteria are excluded from consideration as an Index constituent.  Securities that are already in the Index are not subject to the minimum market capitalization and trading value to remain constituents of the Index.

The Index is comprised of equity securities, including American depositary receipts (“ADRs”) and global depositary receipts (“GDRs”), traded in developed markets. The depositary receipts included in the Index may be sponsored or unsponsored. The Index Provider currently defines developed markets as the following countries – Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom and the United States. While the equity securities comprising the Index are traded in developed markets, the issuers of such securities may be located in emerging markets. Emerging market countries are countries that major international financial institutions, such as the World Bank, generally consider to be less economically mature than developed nations. Emerging market countries can include every nation in the world except the United States, Canada, Japan, Australia, New Zealand and most countries located in Western Europe.

Index Construction

  • Index constituents are selected using the methodology described above.
  • The weighting of Index constituents on the rebalancing and reconstitution date is determined as follows: (a) The full market capitalization for each stock is multiplied by its Exposure Factor of either 1.0 or 0.5, meaning the market capitalization for the stocks in the Pure-Play Group is taken at full value and for the Medium-Play Group is reduced by one-half. (b) The resulting adjusted market capitalizations are used to create a standard market capitalization weighted index with raw weighting factors. (c) If necessary, the raw weighting factors are modified through a weighting-gap rebalancing algorithm to ensure that, at the time of rebalancing and reconstitution, no stock in the Index has an individual weighting greater than 10% and that the aggregate weighting of stocks in the Index with individual weightings of more than 4.5% is no more than 45.0% of the total Index. The weighting-gap rebalancing algorithm progressively reduces the weighting gap between adjacent stocks, as ranked by their raw weighting factors, on a proportional basis, until the weighting parameters specified above are met. The Index Provider may reduce the weight of a stock if necessary to ensure that the effective ownership share of that stock stays within regulatory and liquidity boundaries.
  • If an index constituent is determined to be delisted; under a trading suspension or halt; illiquid; in bankruptcy proceedings; acquired; or in extreme legal, regulatory or financial distress, that constituent may be removed from the index effective immediately and the stock will not be replaced. A spin-off from an existing Index constituent will automatically be included in the index if it meets the standard Index criteria, but will be dropped from the Index as soon as is reasonably practicable if the spun-off company does not meet the standard Index constituent criteria.
  • A company that recently completed an initial public offering (“IPO”) and that meets the criteria above can be considered for inclusion as an Index constituent only at the quarterly Index rebalance and reconstitution, and only after the stock has completed at least one (1) month of trading history.
  • Except in unusual circumstances (including, but not limited to, mergers, spin-offs, delisting, tender offers or the acquisition or bankruptcy of a company), the Index will be rebalanced and reconstituted quarterly on the third Friday of the last month of each calendar quarter, with a reference date for the data being the first business day of the last month of the calendar quarter. At the quarterly Index reconstitution:  (a) securities may be added or deleted as Index constituents according to the criteria defined above, (b) the Exposure Factor may change based on a shift in a company’s relative exposure to the solar industry, and (c) constituent weightings may be adjusted to reflect a change in the Exposure Factor for a particular stock, the addition or deletion of Index constituents and/or the need to meet the specified diversification requirements.