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 MAC Indexing, LLC (the "Index Provider"), 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 three 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, 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 and Medium-Play Groups, securities eligible for inclusion in the Index must be listed on a developed market exchange, have a minimum market capitalization greater than or equal to $150 million at the reference date preceding each reconstitution and have a minimum 3-month average daily trading value of $2 million preceding each reconstitution. Securities in the Primary and Secondary set that do not meet these criteria are excluded from consideration as an Index constituent.
- 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 20% 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.
- Any company in the Index that is acquired or delisted is removed from the Index at the time the event becomes effective, and will not be replaced. If a stock is considered to be illiquid, or if a company has filed for bankruptcy, the stock will be deleted from the Index immediately and will not be replaced. Any spin-off from an existing Index constituent will automatically be included in the Index. Continued inclusion in the Index is dependent upon whether the spun-off company meets the standard Index criteria at the time of the next quarterly reconstitution.
- 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 three (3) months of trading history.
- 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) stocks 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.