Index Methodology

The MAC Global Solar Energy Index (“Underlying Index”) is designed to provide exposure to companies listed on exchanges in developed markets that derive a significant amount of their revenues from the following business segments of the solar industry: solar power equipment producers including ancillary or enabling products such as tracking systems, inverters, or batteries; suppliers of raw materials, components or services to solar producers or developers; companies that produce solar equipment fabrication systems; companies involved in solar power system installation, development, integration, maintenance, or finance; or companies that sell electricity derived from solar power.

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 Underlying 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.

The MAC Global Solar Energy Index is designed to track the global solar energy equity sector.  The MAC Global Solar Energy Index is constructed as follows.

  • Companies that qualify for inclusion in the Underlying Index must derive a significant portion of their revenue, measured by the methodology set forth below, from operating in the following business segments of the solar industry: solar power equipment producers including ancillary or enabling products such as tracking systems, inverters, or batteries; suppliers of raw materials, components or services to solar producers or developers; companies that produce solar equipment fabrication systems; companies involved in solar power system installation, development, integration, maintenance, or finance; or companies that sell electricity derived from solar power.

  • To determine whether solar power is a significant component of a company’s business, the Index Provider uses 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, companies that are identified through the initial search are put into groups:

    • 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 Underlying Index constituent.

    From the securities in the Pure-Play Group and Medium-Play Group, securities eligible for inclusion in the Underlying Index that are not existing constituents of the Underlying Index must be listed on a developed market exchange, as defined below, have a minimum market capitalization greater than or equal to $150 million at the reference date preceding each rebalance, and have a minimum one month average daily trading value of $750,000 at the reference date preceding each rebalance. Securities in the Pure-Play Group or Medium-Play Group that do not meet these criteria are excluded from consideration as an Underlying Index constituent. Securities that are already in the Underlying Index are not subject to the minimum market capitalization and trading value to remain constituents of the Underlying Index.

    The weighting of Underlying Index constituents on the rebalance date is determined as follows:

    • The float-adjusted market capitalization for each security is multiplied by its Exposure Factor of either 1.0 or 0.5, meaning the market capitalization for the securities in the Pure-Play Group is taken at full value and for the Medium-Play Group is reduced by one half.
    • The resulting adjusted market capitalizations are used to create a standard market-capitalization-weighted index with raw weighting factors.
    • If necessary, the raw weighting factors are modified through a weighting-gap rebalancing algorithm to ensure that, at the time of rebalance, no security in the Underlying Index has an individual weighting greater than 10% and that the aggregate weighting of securities in the Underlying Index with individual weightings of more than 4.5% is no more than 45.0% of the total Underlying Index. The weighting-gap rebalancing algorithm progressively reduces the weighting gap between adjacent securities, as ranked by their raw weighting factors, on a proportional basis, until the weighting parameters specified above are met. The Index Provider may adjust the weights to account for liquidity, solar exposure, ownership, or diversification factors. The Underlying Index in addition follows an “80% investment policy” whereby at least 80% of the combined weight of the index constituents must be represented by companies that derive at least 50% of their revenues from the solar industry. Stocks with less than 50% solar revenue will either be dropped from the Index, not included in the Index, or have a weight adjustment to the extent necessary to comply with this policy.

    If an Underlying Index constituent is determined to be delisted; illiquid; in bankruptcy or debt restructuring 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. An Underlying Index constituent that is under a trading halt or suspension will be reviewed on an ongoing basis for possible deletion. A spin-off from an existing Underlying Index constituent will automatically be included in the Underlying Index if it meets the standard Underlying Index criteria but will be dropped from the Underlying Index as soon as is reasonably practicable if the spun-off company does not meet the standard Underlying 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 Underlying Index constituent only at the time of the quarterly Underlying Index rebalance, and only after the security has completed at least two (2) months 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 Underlying Index will be rebalanced 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 Underlying Index rebalance:

    • securities may be added or deleted as Underlying Index constituents according to the criteria defined above,
    • the Exposure Factor may be changed based on a shift in a company’s relative exposure to the solar industry, and
    • constituent weightings may be adjusted to reflect a change in the Exposure Factor for a particular stock, the addition or deletion of Underlying Index constituents and/or the need to meet the specified weighting requirements.

    Constituent stocks must be listed on exchanges in 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 in the Underlying 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.