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Nasdaq 100 Description

The Nasdaq 100 Index includes 100 of the largest domestic and international non-financial companies listed on The Nasdaq Stock Market based on market capitalization. The Index reflects companies across major industry groups including computer hardware and software, telecommunications, retail/wholesale trade and biotechnology. It does not contain financial companies including investment companies.

Launched in January 1985, the Nasdaq 100 Index represents the largest non-financial domestic and international issues listed on The Nasdaq Stock Market based on market capitalization. The Nasdaq 100 Index is calculated under a modified capitalization-weighted methodology. The methodology is expected to retain in general the economic attributes of capitalization-weighting while providing enhanced diversification. To accomplish this, Nasdaq will review the composition of the Nasdaq 100 Index on a quarterly basis and adjust the weightings of Index components using a proprietary algorithm, if certain pre-established weight distribution requirements are not met.

An investment in Nasdaq 100 Index Tracking Stock should be made with an understanding that the Nasdaq 100 Trust will not be able to replicate exactly the performance of the Index because the total return generated by the securities held in the Trust will be reduced by transaction costs incurred in adjusting the actual balance of the securities and other Trust expenses, whereas such transaction costs and expenses are not included in the calculation of the Index. It is also possible that for short periods of time, the Trust may not fully replicate the performance of the Index due to the temporary unavailability of certain Index securities in the secondary market or due to other extraordinary circumstances. Such events are unlikely to continue for an extended period of time because the trustee of the Trust is required to correct such imbalances by means of adjusting the composition of the Trust. It is also possible that the composition of the Trust may not exactly replicate the composition of the Index if the Trust has to adjust its portfolio holdings in order to continue to qualify as a "regulated investment company" under the Internal Revenue Code. As a result, while the investment objective of the Trust is to provide investment results that generally correspond to the price and yield performance of the Index, there is no assurance that this investment objective can be fully achieved.

Nasdaq 100 Index Eligibility Criteria

To be eligible for inclusion in the Nasdaq 100 Index, a common type security must be traded on the Nasdaq National Market tier of The Nasdaq Stock Market and meet the following criteria:

• the security must be of a non-financial company;
• only one class of security per issuer is allowed;
• the security may not be issued by an issuer currently in bankruptcy proceedings;
• the security must have average daily trading volume of at least 100,000 shares;
• the security must have "seasoned" on The Nasdaq Stock Market or another recognized market (generally, a company is considered to be seasoned by Nasdaq if it has been listed on a market for at least two years; in the case of spin-offs, the operating history of the spin-off will be considered);
• if a security would otherwise qualify to be in the top 25% of the issuers included in the Index by market capitalization, then a one-year "seasoning" criteria would apply;
• if the security is of a foreign issuer, the company must have a worldwide market value of at least $10 billion, a U.S. market value of at least $4 billion, and average trading volume on The Nasdaq Stock Market of at least 200,000 shared per day; in addition, foreign securities must be eligible for listed-options trading; and
• the issuer of the security may not have entered into a definitive agreement or other arrangement which would result in the security no longer being listed on The Nasdaq Stock Market within the next six months.

Nasdaq 100 Stock Ranking Review

The Index Securities are evaluated on an annual basis, except under extraordinary circumstances which may result in an interim evaluation, as follows. Securities listed on The Nasdaq Stock Market which meet the above eligibility criteria are ranked by market value using closing prices as of the end of October and publicly available total shares outstanding as of the end of November. Index-eligible securities which are already in the Index and which are in the top 150 eligible securities (based on market value) are retained in the Index provided that such security was ranked in the top 100 eligible securities as of the previous ranking review. Securities not meeting such criteria are replaced. The replacement securities chosen are those Index-eligible securities not currently in the Index which have the largest market capitalization.

Generally, the list of annual additions and deletions is publicly announced via a press release in the early part of December. Replacements are made effective after the close of trading on the third Friday in December. Moreover, if at any time during the year an Index Security is no longer traded on The Nasdaq Stock Market, or is otherwise determined by Nasdaq to become ineligible for continued inclusion in the Index, the security will be replaced with the largest market capitalization security not currently in the Index and meeting the Index eligibility criteria listed above.

The number of securities in the Nasdaq 100 Index makes it an effective vehicle for investors. In January 1994, options on the Nasdaq 100 Index began trading on the Chicago Board Options Exchange. The Chicago Mercantile Exchange began to trade futures and futures options on the Nasdaq 100 Index in April of 1996. Nasdaq 100 Index Tracking Stock (QQQQ) began trading on the American Stock Exchange in March 1999. In addition, the Index is used as a benchmark for financial products in many countries around the world.

• Nasdaq 100 securities FlashQuote
• Nasdaq 100 Index Tracking Stock InfoQuote
• Fact Sheet

For more information about this and other index based products check the Nasdaq Exchange Traded Funds area.

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