Construction Rules for the Morningstar Canada Natural Resource Index

Transcription

1 Construction Rules for the Morningstar Canada Natural Resource Index Morningstar Methodology Paper Version 1.0 March Morningstar, Inc. All rights reserved. The information in this document is the property of Morningstar, Inc. Reproduction or transcription by any means, in whole or in part, without the prior written consent of Morningstar, Inc., is prohibited. For Professional Use Only

2 Contents Morningstar Canada Natural Resource Index Overview 3 Inception Dates and Base Market Values 3 Calculation and Dissemination of Index Values 3 Trading Holidays 3 Index Value Currencies 3 Index Constituents Overview 4 Index Eligibility 4 Index Weighting and Maintenance Constituent Weighting 7 Scheduled Reconstitution Dates 7 Scheduled Rebalancing Dates 7 Unscheduled Index Rebalancing 7 Index Maintenance 7 2

3 Morningstar Canada Natural Resource Index Overview The Morningstar Canada Natural Resource Index invests in stocks issued by Canadian companies that have significant business operations in ownership, extraction, production, processing or management of natural resources as identified by the Morningstar Global Equity Classification Structure. Inception Dates and Base Market Values The index inception date is when the first back-tested index value was calculated. The backtest calculations are based on the same methodology that was in effect when the index was officially launched. The inception date of the Morningstar Canada Natural Resource Index is June 30, Daily price return and total return series are available from this date forward. The base market value of the index at inception is set to 1,000. Calculation and Dissemination of Index Values Price return, total return and net return index values are calculated at the end of each business day. All index values are disseminated via various data distribution channels. Trading Holidays The Morningstar Canada Natural Resource Index is not calculated when the Toronto Stock Exchange is closed. Index Value Currencies The closing values of the Morningstar Canada Natural Resource Index are calculated in U.S. dollars and Canadian dollars. 3

4 Index Constituents Overview At each reconstitution date, the investable universe and index eligibility are defined by the criteria in this section. The investable universe and index eligibility criteria are applied in the following sequence. Each criterion is applied only to the survivors of the previously applied criteria. Index Eligibility To qualify for the investable universe, a stock must meet the following criteria: 1) Must be included in the Morningstar Canada Index. For more details, refer to Construction Rules for Morningstar Global Markets ex-us Index Family. 2) Must be classified in one of the following Morningstar industries: A. Basic Materials Agriculture i. Agricultural Inputs: Companies that manufacture nitrogenous and phosphatic fertilizers, pesticides, seeds, or other agricultural chemical products. Coal: Companies engaged in mining coal. Chemicals i. Chemicals: Major international chemical manufacturing companies engaged in diverse chemical and chemical-related operations. ii. Specialty Chemicals: Companies that manufacture specialty chemical products such as polishes, adhesives and sealants, explosives, printing ink, carbon black, acids, repellants, and cleaning solutions. Forest Products i. Lumber and Wood Production: Wood and wood products for construction. 4

5 ii. Paper and Paper Products: Companies that manufacture and market paper and paper-related products from wood pulp or other fibers. Metals and Mining i. Aluminum: Companies that produce, refine, market, or distribute aluminum or aluminum-based products. ii. Copper: Companies that explore for, mine, smelt, or refine copper ores or related copper products. iii. Gold: Companies engaged in gold-ore-related activities including exploration, mining, processing, extraction, and smelting. iv. Industrial Metals and Minerals: Companies that mine, refine, produce, smelt, or mill miscellaneous ores, including lead, zinc, uranium, radium, vanadium, nickel, tin, coal, titanium, platinum, and related materials. v. Silver: Companies engaged in silver-ore-related activities including exploration, mining, and extraction. Steel: Companies that produce or process steel or steel- or iron-based products. B. Consumer Defensive Consumer Packaged Goods i. Farm Products: Companies that produce, raise, or grow agricultural or farm-based food products, including fruits, vegetables, other crop products, cattle, and eggs. Also includes seafood products. C. Energy Oil and Gas Drilling: Companies primarily engaged in contract drilling and exploration for petroleum and natural gas, including offshore and onshore drilling as well as related oil well and contracting services. Oil and Gas E&P: Energy companies that are primarily engaged in gas exploration and production. Oil and Gas Integrated: Major energy companies engaged in the diverse aspects of oil and gas operations including crude oil and gas exploration, production, manufacturing, refining, marketing, and transportation. Oil and Gas Midstream: Companies that own and operate oilfield pipelines, including the gathering, processing, and transportation of natural crude petroleum. Oil and Gas Refining and Marketing: Companies that refine, gather, market, or sell petroleum or petroleum products. 5

6 Oil and Gas Equipment and Services: Companies that provide oilfield services and equipment such as contract drilling, seismic surveys, equipment and tool rental, pumping and processing services, and inspection and contracting services. For additional information about the industry classification, read the Morningstar Global Equity Classification Structure rulebook. 6

7 Index Weighting and Maintenance Constituent Weighting The weighting methodology employs float-adjusted market capitalization. Each index constituent is weighted according to free float value, which is the product of free float shares and the most recently traded price of the security. Scheduled Reconstitution Dates The index is reconstituted i.e., the index membership is reset twice annually, on the Monday following the third Friday of June and the third Friday of December. If the Monday is a holiday, reconstitution occurs on the Tuesday immediately following. Reconstitution is carried out after the day s closing index values have been determined. Scheduled Rebalancing Dates The index is rebalanced i.e., the number of free float shares of each constituent security is adjusted four times annually. Adjustments are made on the Monday following the third Friday of March, June, September, and December. If the Monday is a holiday, rebalancing occurs on the Tuesday immediately following. Rebalancing is carried out after the day s closing index values have been determined. Market data used for rebalancing are from the last trading day of the first month of each quarter. Index constituent float factors and shares outstanding updates are announced at least two business days prior to rebalancing. Unscheduled Index Rebalancing In addition to scheduled rebalancing, the index is rebalanced whenever a constituent s total outstanding shares or free float changes by 10% point or more. Rebalancing is carried out at the close of trading on the day of the event. The index is not reconstituted when unscheduled rebalancing occurs. Index Maintenance For more details on index maintenance procedures, calculations, and corporate action adjustments, refer to Construction Rules for Morningstar Global Markets ex-us Index Family. 7