NASDAQ-100 - Yearly Rebalancing and Re-ranking

Yearly Rebalancing and Re-ranking

While the composition of the NASDAQ-100 changes in the case of delisting (such as transferring to another exchange, merging with another company, or declaring bankruptcy, and in a few cases, being delisted by NASDAQ for failing to meet listing requirements), the index is only rebalanced once a year, in December, when NASDAQ reviews its components, compares them with those not in the index, re-ranks all eligible companies and makes the appropriate adjustments.

There are two tools the NASDAQ uses to determine the market values of companies for the annual review:

• Share Prices as of the last trading day in October.
• Publicly announced share totals as of the last trading day of November.

Those components that are in the top 100 of all eligible companies at the annual review are retained in the index. Those ranked 101 to 125 are retained only if they were in the top 100 of the previous year's annual review. If they fail to move into the top 100 in the following year's review, they are dropped. Those not ranked in the top 125, are dropped regardless of the previous year's rank.

A company will also be dropped if, at the end of two consecutive months, the component fails to have an index weighting of at least one-tenth of a percent. This can occur at any time.

The companies that are dropped are replaced by those who have the largest market value and are not in the index already. Anticipation of these changes can lead to changes in the stock prices of the affected companies.

All changes, regardless of when they occur, are publicly announced via press releases at least five business days before the change is scheduled to take place. The 2011 results of the re-ranking and rebalancing will be announced on December 9 with the changes effective the morning of December 19, coinciding with the expiration of options on December 16.