Methodology
The Lux Nanotech Index ™ is founded on the rigorous analytical frameworks that Lux Research has developed in its authoritative studies of nanotechnology commercialization.

The value chain framework employed by the Index - separating nanomaterials and intermediate products from final goods - was introduced in the October 2004 report "Sizing Nanotechnology's Value Chain," the de facto standard forecast of the value of products incorporating emerging nanotech. The Index seeks to track the performance of a balanced set of companies across the four stages of this value chain framework:

• Nanomaterials are purposefully engineered structures of matter with a dimension of less than 100 nanometers that exhibit size-dependent properties and have been minimally processed. Nanoscale titanium dioxide from Nanophase is an example of a nanomaterial; other categories include carbon nanotubes, quantum dots, and dendrimers.
• Nanointermediates are intermediate products - neither raw materials nor goods that represent final consumption - that either incorporate nanomaterials or have been constructed de novo with nanoscale features. Headwaters' nanocatalysts, used to convert heavy oils into usable fuels, are nanointermediates. So are magnetoresistive memory chips built with technology from NVE Corporation.
• Nano-enabled products are finished goods at the end of a value chain that incorporate nanomaterials or nanointermediates. Examples include GM's Chevrolet Impala (which has body side moldings made from a nanocomposite material) and 3M's Adper Single Bond Plus dental adhesive (which employs 10% silica nanoparticles by weight).
• Nanotools are technical instruments and software used to visualize, manipulate, and model matter at the nanoscale. Veeco's atomic force microscopes and Accelrys' molecular modeling software are examples of nanotools.

The Index composition is also informed by Lux Research's proprietary data about nanotechnology R&D activity across industry sectors, as highlighted in its December 2004 report "The CEO's Nanotechnology Playbook."

Eligibility Criteria for Index Components
The Index includes companies that are involved with funding nanotechnology development, developing nanotechnology applications, manufacturing goods that incorporate those applications, and/or supplying tools and instrumentation to nanotechnology researchers. To be included in the Index, components must meet the following on the determination date:

1. Be listed on the New York Stock Exchange or American Stock Exchange, or quoted on the NASDAQ National Markets or Small Cap Market systems.
2. Have a minimum $75 million market valuation.
3. Have a minimum average daily trading volume over the preceding three months of 50,000 shares.

Selection Committee
The Lux Nanotech Index ™ selection committee is chaired by Matthew Nordan and Mark Kimsey of K&Z Partners. Mr. Nordan heads Lux's research organization, leading a team of analysts who advise corporations, start-ups, financial institutions, and governments on the impact of nanotechnology and related emerging technologies. He joined Lux Research with a distinguished career in analyzing emerging technology at Forrester Research, where he held a variety of senior management positions. Mr. Kimsey founded K&Z Partners in 1999 and has been involved in the securities industry for more than 15 years. Previously, Mr. Kimsey was the Equity Strategist and manager of the Investment Strategy Group for the Lehman Brothers' Private Client Division, managing over $1 billion in assets and providing asset allocation and strategy advice to the firm's high-net-worth clients. While working as the Equity Strategist, he was a member of Lehman Brothers' Investment Policy Committee and Asset Allocation Steering Committee.

Calculation Methodology
The Index is calculated using a modified equal weighting methodology. In conjunction with the scheduled quarterly updates to the Index, the components are split into two groups: nanotech specialists and end-use incumbents. Components within each group are equally weighted as described:

1. The components are sorted into two groups: nanotech specialists and end-use incumbents. Nanotech specialists are defined as small- and mid-sized companies (less than $5 billion in annual revenue) that focus specifically on developing or funding emerging nanotechnology applications. All have nanotechnology as either a company-wide or business-unit-wide focus, and most work with larger companies as manufacturing or distribution partners. End-use incumbents are large companies (greater than $5 billion in annual revenue) that are applying nanotechnology to existing product lines. All are leaders in nanotechnology R&D, commercialization in products, or both.
2. The two groups are then equally weighted with seventy-five percent (75%) applied to the nanotech specialist components and twenty-five percent (25%) for the end-use incumbent components.

Quarterly Updates to the Index
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 ("Determination Date"). The Index components are determined five days prior to the Rebalance Date.

In conjunction with the quarterly review, the share weights used in the calculation of the Index are updated based upon the 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.

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 Index Provider 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 extra-ordinary 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.

The Index is rebalanced quarterly each March, June, September and December. The Index divisor was initially determined to yield a benchmark value of 1000.00 at the close of trading on June 30, 2003. The Index was created by, and is a trademark of, Lux Research Inc. The American Stock Exchange serves as the calculation agent for the Index.

Disclaimer
This is a publication of Lux Research, Inc. It should not be construed as investment advice. It is not a solicitation or recommendation to purchase any services of any organization unless otherwise noted. The contents are intended for general information purposes only, and you are urged to consult your own investment advisor concerning your own situation and any specific investment questions you may have. For further information about these contents, please contact Lux Research, Inc. The information contained herein has been obtained from sources that we believe to be reliable, but its accuracy and completeness are not guaranteed. Lux Research, Inc. reserves the right at anytime and without notice to change, amend or cease publishing the information. It has been prepared solely for informative purposes. It is made available on an "as is" basis. Lux Research, Inc. does not make any warranty or representation regarding the information. Without prior written permission from Lux Research, Inc., the information may not be reproduced, in whole or in part, in any form, other than for your own personal, noncommercial use. Information has been obtained from sources believed to be reliable. However, because of human or mechanical errors by Lux Research, Inc., or its sources, Lux Research, Inc. does not guarantee the accuracy, adequacy or completeness of the information. Furthermore, Lux Research, Inc. is not responsible for any omissions or for results obtained from the use of such information.

The Lux Nanotech Index ™ is a registered trademark of Lux Research, Inc.

Copyright © 2007 by Lux Research, Inc.