Methodology Change | Cannabis Index | Effective Date 02/11/2022

Today, on the 21/10/2022, Solactive announces the following changes to the methodology of the following indices (the ‘Affected Indices’):

Rationale for Methodology Change

Due to the significant drop in the cannabis market, which has a negative impact on the Average Daily Value Traded (ADV) and the Market Capitalization (MCAP) of the respective stocks/companies in particular, Solactive proposes to reduce the minimum thresholds  in terms of Market Capitalization and  Average Daily Value Traded for current index member to be selected to USD 35 million and USD 0.2 million  respectively. This proposed adjustment shall help to avoid excessive turnover within the current volatile market environment and ensure a sufficient amount of index components. Additionally, companies which provide software and/or online marketplaces or platforms primarily for the cannabis sector should be added to the Index Universe due to their increasing importance within the cannabis value chain as reflected in Section 4.c).

Changes to the Index Guideline

Section 2.1 SELECTION OF THE INDEX COMPONENTS

From:

“[…]

2. the market capitalization is relaxed up to USD 50 million (USD 40 million for companies that are Index Components on the applicable Selection Day)
3. the average daily trading volume in the last three and/or six months is relaxed up to USD 0.5 million (USD 0.35 million for companies that are Index Components on the applicable Selection Day

[…].”

To:

“[…]

2. the market capitalization is relaxed up to USD 50 million (USD 35 million for companies that are Index Components on the applicable Selection Day)
3. the average daily trading volume in the last three and/or six months is relaxed up to USD 0.5 million (USD 0.2 million for companies that are Index Components on the applicable Selection Day

[…].

Section 4 DEFINITIONS

From:

“[…]

1. Either (i) derives at least 50% of its revenue from the cannabis industry value chain (“Pure-Play Companies”) or (ii) does not derive at least 50% of its revenue from the cannabis industry value chain, but is a pharmaceutical or biotechnology company and is expected to derive at least 50% of its revenue from the cannabis industry value chain in the future based on their primary business operations, and/or product pipeline (“Pre-Revenue Companies”). The cannabis industry value chain includes:
   1. The legal production, growth and distribution of marijuana, as well as extracts, derivative products or synthetic versions thereof.
   2. The legal production, growth and distribution of hemp as well as extracts, derivative products or synthetic versions thereof.
   3. Financial services (including insurance offerings, property leasing, financing, capital markets activity and investments) related to companies involved in the production, growth and distribution of cannabis.
   4. Pharmaceutical applications of cannabis.
   5. Cannabidiol (better known as CBD) and cannabis oil products, edibles, topicals, drinks and other products.
   6. Products that may be used to consume cannabis.

[…]”

To:

“[…]

1. Either (i) derives at least 50% of its revenue from the cannabis industry value chain (“Pure-Play Companies”) or (ii) does not derive at least 50% of its revenue from the cannabis industry value chain, but is a pharmaceutical or biotechnology company and is expected to derive at least 50% of its revenue from the cannabis industry value chain in the future based on their primary business operations, and/or product pipeline (“Pre-Revenue Companies”). The cannabis industry value chain includes:
   1. The legal production, growth and distribution of marijuana, as well as extracts, derivative products or synthetic versions thereof.
   2. The legal production, growth and distribution of hemp, as well as extracts, derivative products or synthetic versions thereof.
   3. Financial services (including insurance offerings, property leasing, financing, capital markets activity and investments) related to companies involved in the production, growth and distribution of cannabis.
   4. Pharmaceutical applications of cannabis.
   5. Cannabidiol (better known as CBD) and cannabis oil products, edibles, topicals, drinks and other products.
   6. Products that may be used to consume cannabis.
   7. The provision of software and/or online marketplaces or platforms primarily for the cannabis sector

[…]”