Divestor Canadian Oil and Gas Index – Re-balancing Policy

The Divestor Canadian Oil and Gas Index (DCOGI) was created on February 5, 2021. You can view the index here.

Currently the DCOGI is up with a total return of 72%, with the nearest ETF comparators, XEG, ZEO and VCN, up 61%, 45% and 17%, respectively.

In the initial index construction, there was no contemplation of re-balancing or re-investment of dividends.

So far, the index has accrued 3.4% of its initial value in the form of cash and by year-end this will be around 3.5%. Likewise, XEG/ZEO/VCN will have accumulated substantial cash on their notional accounts.

Accordingly, I will be revising the reinvestment policy to a yearly deployment of accumulated cash.

On the first trading day of the year (January 4, 2022), the accumulated cash will be re-deployed in the 9 constituent components in the proportion of the original index construction.

As a reminder, this is:

20%: CVE, CNQ, SU
10%: TOU, WCP
5%: ARX, BIR, MEG, PEY

The opening price will be the price received on the dividend reinvestment. This also applies to XEG/ZEO/VCN, where cash dividends accumulated in the year will be applied to their own units to the maximum extent possible. This will happen on an annual basis going forward.

Also, at this time, while it has not occurred yet, if there is a merger/acquisition of one of the constituent components that involves an election, the election will be as equity-oriented as possible. If a DCOGI component is removed as a result, any future re-investment will be proportionate to the remaining components. If a merger results in a new component to the index, it will be included to the extent of the predecessor component as long as the entity is Canadian. I do not foresee a foreign entity acquiring any of the 9 DCOGI companies anytime soon, but if a successor entity is foreign, it will be sold at the opening of the first day of the completion of such merger.