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SPADE Defense Index: Calculation Methodology


Calculation Methodology
The Index is calculated using a modified market capitalization weighting methodology; with component weights modified to conform to asset diversification rules applied in conjunction with the scheduled quarterly updates to the Index. The resultant weighting is designed to be RIC compliant and 'fund friendly'. The weight of any component stock at the time of rebalancing may not account for more than 10% of the total value of the Index.

Component Selection
The Index includes companies that are involved with the development, manufacture, operation, and support of U.S. defense, military, homeland security, and space operations that are listed on the New York Stock Exchange or quoted on the NASDAQ National Market.

To be included in the Index, components must meet the following:
  • Maintain a minimum $100 million market valuation during the 25 days preceding the initial inclusion date.
  • Maintain a minimum $5.00 daily share price during the 25 days preceding the initial inclusion date.
  • Have a minimum average daily trading volume over the preceding 25 days prior to the inclusion date of 50,000 shares
  • Have a quarterly sales/revenue/turnover of at least $10 million for the prior two announced quarters preceding its inclusion.

    The ISBC may at any time and from time to time change the number of issues comprising the Index by adding or deleting one or more components, or replace one or more issues contained in the Index with one or more substitute stocks of its choice, if in the ISBC's discretion such addition, deletion or substitution is necessary or appropriate to maintain the quality and/or character of the industry groups to which the Index relates.

    Continued Component Inclusion
    Component stocks will typically be removed from the SPADE Defense Index´┐Ż under the following conditions at the time of rebalancing:
  • Total market capitalization falls below $75 Million for 25 consecutive trading days.
  • The last-reported sale price falls below $3.00 per share
  • Liquidity falls below acceptable levels

    The above requirements notwithstanding, the ISBC reserves the authority to remove one or more component stocks at any time if it believes such stock(s) no longer provide adequate representation of the sector or no longer maintain the quality and/or character of the Index.

    Maintenance of the Index
  • In the event of a merger between two components, the share weight of the surviving entity may be adjusted to account for any shares issued in the acquisition.

  • The ISBC may substitute components or change the number of issues included in the index, based on changing conditions in the industry or in the event of certain types of corporate actions, including mergers, acquisitions, spin-offs, and reorganizations.

  • In the event of component or share weight changes to the Index portfolio, the payment of dividends other than ordinary cash dividends, spin-offs, rights offerings, re-capitalization, or other corporate actions affecting a component of the Index; the Index divisor may be adjusted to ensure that there are no changes to the Index level as a result of non-market forces.

  • For changes in a component's shares outstanding greater than 5% due to a merger, acquisition or spin-off, an adjustment will be made effective after the close on the effective date of the corporate action. Share changes less than 5% are made during the scheduled quarterly updates to the Index.

    Quarterly Updates
    Changes to the Index composition and/or the component share weights in the Index typically take effect after the close of trading on the next to last business day of each calendar quarter month ("Rebalance Date"). The components and weights will be determined and announced at the close of trading two days prior to the Rebalance Date. This takes place in March, June, September, and December.

    In conjunction with the quarterly review, the share weights used in the calculation of the Index are updated based upon current shares outstanding and prices as of the close of trading two business days prior to the Rebalance Date. The share weight of each component in the Index portfolio remains fixed between quarterly reviews except in the event of certain types of corporate actions such as splits, reverse splits, stock dividends, or similar events