Methodology Change | Solactive MLP Infrastructure Index & Solactive MLP Infrastructure Index (Price) | Effective Date 08th January 2020

Today, on the 18 December 2019, Solactive announces the following changes to the methodology of the following index (the ‘Affected Indices‘):

Rationale for methodology change

Solactive has determined that the methodology change will ensure the medium-term stability of the Affected Indices in the rapidly changing sector in the MLP space in case the initial universe does not lead to 20 members on the selection date. The changes  guarantee that Master Limited Partnerships which are taxed as corporates are limited to the weighting cap of Index Components, taxed as partnership. Additionally, the methodology change should ensure that the weighting concept could be applied even when the index contains less than 20 constituents, considering the limited weighting cap of Master Limited Partnerships which are taxed as corporates.

Taking this into account, the oversight committee has decided to amend chapter 1.5 “Weighting”, chapter 2.1, chapter 2.3 and chapter 4 of the methodology of the Affected Indices as reflected in the following section “Changes to the Index Guideline”:

Changes to the Index Guideline

The following definitions will be updated with the new wording as follows:
Section 1.5Weighting:

o Old Wording:
On each Adjustment Day each Index Component of the Solactive MLP Infrastructure Index is weighted proportionally according to its Free Float Market Capitalization.
The Percentage Weight of the Index Component, with the highest Free Float Market Capitalization (rank number 1) is capped at 10%, the Index Component with rank number 2 at 9%. This mechanism proceeds until the Index Component with rank number 6 is capped at 5% and all Index Components with a rank number above 6 are capped at 4,75%. The excess weight is allocated proportionally to all Index Components whose Percentage Weight is not capped.
The calculated Number of Shares as of the Selection Day are used and will be implemented as ofthe 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 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.

o New Wording:
On each Adjustment Day each Index Component of the Solactive MLP Infrastructure Index is weighted proportionally according to its Free Float Market Capitalization.
The Percentage Weight of the Index Component, taxed as partnership, with the highest Free Float Market Capitalization (rank number 1) is capped at 10%, the Index Component with rank number 2 at 9%. This mechanism proceeds until the Index Component with rank number 6 is capped at 5% and all Index Components with a rank number above 6 are capped at 4,75%. The excess weight is allocated proportionally to all Index Components whose Percentage Weight is not capped. In the event that there are fewer than 20 Index Components, the cap on each of the six highest-ranked Index Components is increased by 0.5% multiplied by the difference between 20 and the current number of Index Components. For example, if only 18 Index Components are included in the Solactive MLP Infrastructure Index, the Index Component with the highest Free Float Market Capitalization would be capped at 11%.
The Percentage Weight of each Index Component, taxed as a corporation, is capped at 2%, provided, however, that if such cap would cause the total maximum weight of all Index Components to be capped at less than 100%, the Percentage Weight of each Index Component taxed as a corporation will be capped at 100% minus the sum of MLP companies taxed as partnerships (assuming their maximum weight will be reached) divided by the number of Index Components taxed as corporations The excess weight is allocated
proportionally to all Index Components whose Percentage Weight is not capped.
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 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.

o Section 2.1 Selection of the Index Components:

o Old wording:
The initial composition of the Index as well as any ongoing adjustment is based on the following rules:
On the Selection Days, Solactive AG provides the Selection Pool. All infrastructure MLPs 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 required number of Index Components is 20 and the maximum number of Index Components is 30.
If there are less than 20 companies that fulfil the criteria outlined in chapter 4, the following criteria will be relaxed in the following order until the required number of 20 Index Components is reached:

1. Minimum Free Float Market Capitalization is relaxed up to 1,000 million USD
2. Minimum Average daily trading volume in the last three months is relaxed up to 2 million USD
3. Maintained or grown its distribution quarter-over-quarter for at least one of the trailing three quarters.

To clarify, the criteria is only relaxed step-by-step until there are 20 constituents to pass the criteria.
If there are more than 30 companies that fulfil the criteria defined in section 4 the 30 companies with the highest rank are chosen. The companies in the Selection Pool are ranked according to their Free Float Market Capitalization. The company with the largest Free Float Market Capitalization is assigned rank number 1, the company with the second-largest Free Float Market Capitalization rank number 2 etc. The companies with the highest ranks are then chosen as Index Components and the new index composition determined this way is valid starting immediately following the Adjustment Day. For clarification, rank number 1 is higher than rank number 2.

o New wording:

The initial composition of the Index as well as any ongoing adjustment is based on the following rules:
On the Selection Days, Solactive AG provides the Selection Pool.
All infrastructure MLPs which fulfil the index criteria as outlined in chapter 4 and which are taxed as partnership, 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 required number of Index Components is 20 and the maximum number of Index Components is 30.
If there are less than 20 companies that fulfil the criteria outlined in chapter 4, the following criteria will be relaxed in the following order until the required number of 20 Index Components is reached:

1. Minimum Free Float Market Capitalization is relaxed up to 1,000 million USD
2. Minimum Average daily trading volume in the last three months is relaxed up to 2 million USD
3. Maintained or grown its distribution quarter-over-quarter for at least one of the trailing three quarters.

To clarify, the criteria is only relaxed step-by-step until there are 20 constituents to pass the criteria.
The companies in the Selection Pool are ranked according to their Free Float Market Capitalization. The company with the largest Free Float Market Capitalization is assigned rank number 1, the company with the second-largest Free Float Market Capitalization rank number 2 etc.

The companies with the highest ranks are then chosen as Index Components and the new index composition determined this way is valid starting immediately following the Adjustment Day. For clarification, rank number 1 is higher than rank number 2.
If this procedure would result in a number of constituents of less than 20, the Minimum Free Float Market Capitalization is relaxed up to 500 million USD.
If there are still less than 20 constituents that pass the criteria, all infrastructure MLPs which are taxed as a corporation and which fulfil the index criteria as outlined in chapter 4 and at least the relaxed criteria above, will be added to the index until the required number of 20 index Components is reached.
If there are still less than 20 constituents that pass the criteria, the index will contain less than 20 constituents.
If there are more than 30 companies that fulfil the criteria defined in section 4 the 30 companies with the highest rank are chosen.

• Section 2.3 Extraordinary adjustment:

o Old Wording:
If a company included in the Solactive MLP Infrastructure Index is removed from the Index between two Adjustment Days due to an Extraordinary Event, if necessary, the Committee shall designate a successor, if the index would otherwise consist of less than 20 companies

o New Wording:
If a company included in the Solactive MLP Infrastructure Index is removed from the Index between two Adjustment Days due to an Extraordinary Event, if necessary, a successor will be added to the index, if the index would otherwise consist of less than 20 companies.

• Section 4 “Selection Pool” (b):

o Old Wording:
Structured as Master Limited Partnership

o New Wording:
Structured as Master Limited Partnership, taxed as partnership, or a Master Limited Partnership which is taxed as a corporation

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