WHAT ARE THE UNDERLYING INDEXES AND
HOW ARE THEY CREATED AND MAINTAINED?
Each of the Underlying Indexes seeks to measure and monitor the performance of publicly-listed healthcare, life sciences and biotechnology companies. Each Fund focuses on a different healthcare, life sciences or biotechnology index. XShares Group LLC the parent of the Advisor, is the creator of each Underlying Index and has created each Underlying Index using a patent-pending investment approach known as "Vertical Investing". "Vertical Investing" seeks to categorize companies within a particular healthcare, life sciences or biotechnology index by focusing on each company's business activities with regard to the diagnosis of diseases, the developments of drugs, treatments, therapies, delivery systems, and the development of enabling/research tools and technologies for use in the healthcare, life sciences or biotechnology sectors.
Download our Index Methodology
Index Methodology Constituent List Reflecting June 2007 Rebalancing
You cannot invest directly in any of the following indexes.
- Asian Healthcare
- Autoimmune-Inflammation
- Cancer
- Cardio Devices
- Cardiology
- Dermatology and Wound Care
- Diagnostics
- Emerging Cancer
- Enabling Technologies
- European Drugs*
- European Medical Products and Devices*
- GI/Gender Health
- Infectious Disease
- Metabolic-Endocrine Disorders
- Neuroscience
- Ophthalmology
- Orthopedic Repair
- Patient Care Services
- Respiratory/Pulmonary
- Composite*
* The 'Vertical Investment' methodology was not used in the creation of these indexes.
Each Fund is focused on one of these vertical indexes and will provide both institutional and retail investors with the ability to invest in the complex and rapidly evolving sectors of healthcare, life sciences and biotechnology. Based on its own proprietary intellectual model, XShares has established specific, defined characterization/inclusion/exclusion criteria (the "Index Methodology") that an issuer must meet in order to be included in an Underlying Index. Each Underlying Index will be administered by Standard & Poor's, the Index Administrator, which will employ the Index Methodology to determine the composition of each Underlying Index. BNY Investment Advisors acts as the investment sub-adviser to the Funds and will be responsible for the day-to day management of each Fund's portfolio, which involves principally reconfiguring the portfolio of each Fund, typically quarterly, to reflect any reconfiguration in the Underlying Index by the Index Administrator.
When determining the composition of each Underlying Index, the Index Administrator relies on many sources of information, including information obtained from the BioCentury and MedTrack databases. The BioCentury and MedTrack databases are independent, generally available databases that provide a vast amount of data for healthcare, life sciences and biotechnology companies, including information regarding products, clinical trials, pipeline development, patent and other information.
For each Underlying Index, the Index Administrator will employ the Index Methodology for each Underlying Index to identify the companies that satisfy these criteria. The Index Methodology is publicly available (see link above). Any change to the Index Methodology will be posted on the Funds. website at least 60 days prior to its being implemented. For each Underlying Index, except those noted below, the Index Administrator will screen companies to eliminate those with market capitalizations above $15 billion or below $100 million. For the Asian Healthcare Index, the Cardio Devices Index, the Orthopedic Repair Index and the Composite Index, the market capitalization range is from $100 million to $20 billion. For the Enabling Technologies Index, the European Drugs Index and the European Medical Products and Devices Index, the market capitalization range is from $100 million to $10 billion. For the Patient Care Services Index, the market capitalization range is from $350 million to $15 billion. Typically, the largest of these companies (determined by market capitalization) are included in an Underlying Index, with a minimum of 22 companies in each Underlying Index. The initial companies selected for inclusion are weighted equally at inception, and are thereafter weighted based upon the individual company's market value relative to the overall market value of the relevant Underlying Index (i.e., price weighted). Maximum weighting for any security in an Underlying Index is typically 15%. When a company's weighting exceeds 15% of the Underlying Index, the Index Administrator will reduce such company's weighting to 10%, with the 5% "excess" applied equally to all remaining component securities in the Underlying Index. Minimum weighting for a security in an Underlying Index is 2.5%, if a security's weighting falls below 2.5%, the Index Administrator will increase the security's weighting to its initial weighting or 5%, whichever is less, with the required increment taken equally from all the remaining component securities. Information about each Underlying Index, including the component securities in each Underlying Index and value of the securities in each Underlying Index are posted throughout the trading day every 15 seconds and are available through Reuters under the following symbols: