NASDAQ® NeuroInsights® Neurotech Index

Index Definition and Rules

The NASDAQ NeuroInsights Neurotech Index (“The Index”) is a modified market-capitalization weighted index designed to track the performance of the largest and most liquid neurotechnology companies which are listed and actively traded on one of the three major U.S. stock exchanges. The Index is designed to track the performance of publicly traded companies researching, developing, manufacturing, and marketing pharmaceuticals, biologics, medical devices, and diagnostics for the brain and nervous system.


The Index is a price return index (NASDAQ: NERV) which is ordinarily calculated without regard to cash dividends on Index Securities. The Index will commence calculation with a value of 150.00 on September 25, 2007.

Index Inclusion Criteria

To be included in the Index, the security:


• must be listed on The NASDAQ Stock Market, the New York Stock Exchange, or the American Stock Exchange, and• must be identified by NeuroInsights as significantly involved in researching, developing, manufacturing, and marketing pharmaceuticals, biologics, medical devices, and diagnostics for the brain and nervous system.


Each security, according to a recognized market data vendor, must also have:


• a minimum market capitalization of $200 million;• a minimum three-month average daily trading volume of 100,000 shares; and

• a minimum closing price of $3.00.


In addition, the issuer of the security may not have entered into a definitive agreement or other arrangement which would likely result in the security no longer being Index eligible.


Index administration shall be performed by NASDAQ or a recognized third-party index service provider acting on behalf of NASDAQ (i.e., “Index Administrator”), and shall conform to the above criteria and generally accepted index policies and procedures.


NASDAQ may, from time to time, exercise reasonable discretion as it deems appropriate in order to ensure Index integrity, including adjusting the frequency of the reconstitution or the number of securities in the Index, applying different price, trading volume, and market capitalization criteria, or making other determinations as necessary (e.g., modifying the index weight caps described below) in order to ensure Index Securities meet standards which NASDAQ believes are necessary for the ongoing investability of the Index and representation of the neurotechnology sector.


In addition to the criteria above, the following criteria will be monitored continually.
• The security may not be issued by an issuer currently in bankruptcy proceedings;

• The issuer of the security may not have annual financial statements with an audit opinion that is currently withdrawn.



Semi-Annual Evaluation

The Index is evaluated semi-annually in June and December. In such evaluation, NeuroInsights provides NASDAQ with a list of neurotechnology companies. The Index Administrator applies the above eligibility criteria using market data through the previous May and November. Companies meeting the criteria are included in the Index. Upon each semi-annual evaluation, security additions and deletions are made effective after the close of trading on the third (3rd) Friday in June and December. Ordinarily, if at any time during the year an Index Security no longer meets the Index inclusion criteria, or is otherwise determined by the Index Administrator to have become ineligible for continued inclusion in the Index, the security will be deleted. If an Index Security is deleted, the Index Divisor will be adjusted to ensure Index continuity.

Index Weighting Methodology


The Index employs a modified market capitalization-weighted methodology based on the market capitalization ranking of the Index Securities. At each quarterly rebalance, if the index weight of the highest ranking security is greater than 8%, it will be capped at 8% and the excess weight will be proportionally distributed across the remaining securities. Then, if the index weight of the second highest ranking security is greater than 8%, it too will be capped at 8% and the excess weight will be proportionally distributed across the remaining securities. This process will be repeated until no more than 5 components are capped at 8%. Next, the index weight of all other securities greater than 4% will be capped at 4% with the excess weight proportionally distributed across the remaining securities to generate the final rebalanced index weights.


The modified market capitalization-weighted methodology is applied to the capitalization of each Index Security, after applying quarterly changes to the total shares outstanding and the corresponding last sale price of the security at the close of trading on the Friday two weeks preceding the week of the third Friday in March, June, September, and December. Index Shares are then calculated by dividing this modified market capitalization for each Index Security by its corresponding last sale price.

Index Maintenence

Changes in the price and/or Index Shares driven by corporate events such as stock dividends, stock splits, certain spin-offs, and rights issuances will be adjusted on the ex-date. If the change in total shares outstanding arising from other corporate actions is greater than or equal to 5 percent, the change will ordinarily become effective as soon as practicable in accordance with generally accepted index policies and procedures. Changes of less than 5 percent will be accumulated during the quarter and will ordinarily be made effective after the close of trading on the third Friday in March, June, September, and December. In each case, an adjustment to the divisor will be made to ensure continuity of the Index.


In the case of a special cash dividend, the Index Administrator will determine on an individual basis whether to make a change to the price and/or Index Shares of an Index Security in accordance with generally accepted index policies and procedures. If it is determined that a change will be made, it will ordinarily become effective on the ex-date.