GLOBAL CANNABIS INDEX
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The index selection process selects equities for the selection pool that meet the following conditions as determined by EQM Indexes:
Securities are selected based on the following criteria:
- Publicly traded companies engaged in cannabis industry that 1) directly interact with the cannabis plant, and/or 2) support cannabis cultivation and retail, and/or 3) provide ancillary products or services to the cannabis industry.
- The Index seeks to provide exposure to companies in the cannabis industry that demonstrate a verifiable beneficial interest in the cannabis industry as verified by one of the following quantifiable measures:
1) Ownership/partnership or investment interest in a cannabis or cannabis-related company.
2) Revenue or profit derived from the cultivation and/or sale of cannabis or cannabis-related products or business.
3) Market share in a specific segment of the cannabis industry.
Companies with 50% or more their verifiable business interest in the cannabis industry are categorized as CORE cannabis companies, while companies with less than 50% of their verifiable business interest in the cannabis industry are defined as NON-CORE cannabis companies.
- Listing on a regulated, major stock exchange in the form of shares tradable for foreign investors without restrictions.
- Market capitalization of at least $100 million USD.
- Average traded value of at least $1,000,000 USD traded over the last three months.
- Adequate constituent liquidity and accessibility for an exchange-listed product as determined by the Index Provider.
- Non-US companies will be U.S. exchange traded or ADR versions if available, provided their liquidity is comparable to locally traded shares.
The company did not meet the selection criteria when the index was last reconstituted. Companies that now meet index selection criteria will become candidates for inclusion at the next reconstitution date.
In case a security does not have a trading history of 6 months (e.g., IPOs), such a security must have started trading at least 3 months before the start of the data analysis date and should have traded on 90% of the eligible trading days for the past 3 months.
If an index component’s stock is discontinued due to a merger or acquisition, the index committee may, at its sole discretion, replace the discontinued component at the time of discontinuation if more than 30 calendar days remain until the next reconstitution date. The discontinued component will either be deleted entirely or be replaced with the next eligible security from a reserve list. The replacement will be given the appropriate weighting given the securities country of domicile. If there are not more than 30 calendar days remaining until the next reconstitution date, the index committee will wait until the next reconstitution date to make the replacement. In this scenario, any funds received from the discontinued security will be distributed to the remaining index components pro rata.
On each Adjustment Day each Index Component of the EQM Global Cannabis Index (CANABIZ) receives either a CORE or NON-CORE weighting. Each constituent is assigned to one of three cannabis industry sectors as defined by the Index provider: THE CANNABIS PLANT, SUPPORT and ANCILLARY. There are eleven industry categories which map to the 3 cannabis industry sector classification as follows:
- THE CANNABIS PLANT
2. Cultivation & Retail
3. Hemp Products
4. Cannabis-Infused Products
5. Agricultural Technology
6. Real Estate
7. Commercial Services
8. Consumption Devices/Mechanisms
9. Investing & Finance
10. Technology and Media
11. Other Ancillary
Companies with 50% or more cannabis-related business are assigned to the CORE holding weighting pool, while companies with less than 50% of their business related to cannabis, are assigned to the NON-CORE holding weighting pool.
NON-CORE companies receive a one-half weight relative to an equal weighting, with the residual weight equally distributed among the remaining CORE holdings. If any individual sector weight exceeds 75% of the index portfolio, the constituent weights within that sector will be trimmed equally and redistributed among the other constituents.