Ansoft (ANST) was acquired by Ansys (ANSS) on 7/31/2008 for $832M at $16.25/share plus 0.431882 shares of ANSYS/share

Moldflow (MFLO) was acquired by Autodesk (ADSK) on 06/26/2008 for $297M at $22.00/share

Navteq (NAV) was acquired by NOKIA (NOK) on 7/10/2008 for $8.1B in cash at $78.00/share

Synplicity (SYNP) was acquired by Synopsis (SNYP) on 5/16/2008 for $223M at $8.00/share

The Cyon Research Stock Index has eight market sectors, shown with their respective percentages of the index:
   • 25% AEC Software
   • 40% MECH Software (see breakdown below)
   •  3% Channel and Services
   • 10% GIS and Geospatial Software
   •  8% Plant Software
   •  8% ECAD/EDA Software
   •  3% Hardware
   •  3% Other Hardware
 
Most of the value of the index is in industry sectors that Cyon Research covers: AEC, mechanical/manufacturing, GIS, Plant, ECAD, and the Channel. A small portion of the index is divided among other areas that allow us a direct compare: Hardware and Other Software companies.

With a tracking index for each of these submarkets, we are able to get a finely-tuned picture of what is happening.

The mechanical/manufacturing market consists of very diverse segments that may obscure important trends if we were to aggregate them without further detail. We’ve therefore broken the MECH section into segments to make sense of the movements within the industry. We should thus be able to differentiate between problems within a specific segment and issues that affect the entire industry. The breakdowns are:
   • 40% CAD – computer-aided design
   • 20% CAE – computer-aided engineering analysis
   • 15% CAM/visualization/mockup
   • 20% cPDM – collaborative product data management
   •  5% RP: Rapid prototyping and desktop manufacturing

The stocks for each market and segment are listed in the chart below. Along with the company are the stock symbol and market, weight (more on this later), current price, and holdings.

The stocks for each market and segment are listed in the chart below. Along with the company are the stock symbol and market, weight (more on this later), current price, and holdings.

To create the index, EAR invested a fictitious $1,000,000, allocated among the markets according to the values listed above. The EAR Stock Index is set to the current value of all the holdings, divided by 10,000—a value of 100 at our start date of December 24, 2000.

Within each market, a weighting system is imposed, and investments are made based on those weights. Any virtual monies not invested are left in the fund as cash. For the purpose of the index, the cash does not accrue interest, nor are there any transaction fees imposed when buying or selling fictitious shares. 

Each stock within each market (and segment) is weighted to reflect the impact that company has on the market (or segment). At the end of each year, We re-examine the market and change the weights accordingly. The weights are highly subjective in nature and reflect the opinion of Cyon Research, the final arbiter of the weights. (The weights are totaled, and each stock is assigned a dollar value based on its percentage of the total weights for that market or segment.)

At the end of each year (on the last trading day before December 25th) the Index is re-evaluated. All stocks are “sold.” The total dollar amount is redistributed to each market and segment with the same proportions as the fund started with: 25% AEC, 40% MECH, and so on. The weights for each stock will be reappraised; the stocks will be “repurchased” based on the revised allocations. Going through this process each year will prevent the index from getting out of synch with its purpose.

From time to time, certain conditions may arise that call for mid-year corrections to the index.
1. Stocks that belong in the index may enter the market. To accommodate them, all stocks in that market or section will be “sold,” the new stock will be given an appropriate weight, and all the stocks in that section will then be “repurchased” based on the revised allocations. Weights for stocks then in the index will NOT be revised—that only happens at the year-end review.
2. Companies whose stocks are in the index may be target of mergers and acquisitions. In the case of a merger or acquisition by a public company, the stock will be replaced by the same dollar value of stock of the merged or acquiring company. If a stock is acquired by or merges with a private company, the value of the stock shall be added to the cash-on-hand for that sector.
3. Any dividends generated by the stocks held are ignored, except for exceptional events, in which case the value is added to the cash on hand for that sector.
4. The Cyon Research Stock Index is based on the US dollar. At each update, native currency values are converted into the equivalent US dollar amount at the the reported exchange rate at noon on that day. The exchange rates may cause fluctuations in price of non-US stocks, with attendant impact on the index.
5. Certian private companies play a major role in their sectors. For these companies we have set aside a dollar amount (determined by the company's weight in that sector) as a reserve. Should one of these companies go public or be aquired by a public company, shares will be allocated as the reserve amount allows.

The current Cyon Research Index was set on December 24, 2000 with an imaginary investment of $1,000,000 distributed in the eight market sectors. An initial index value of 100 was established by dividing the value of the investment by $10,000.  By comparison, the NASDAQ on that same date was 2517.02.  At the end of its seventh year, the Cyon Research Index reached 236 representing $2,360,749.58.  That’s not bad, particularly when you consider that the NASDAQ ended the same period at 2670.09, an index of 106.

In addition to adjusting the sectors, every year at this time we perform our annual market adjustment.  The adjustment is necessary to allow the index to follow its original purpose – tracking our industry.  Each sector experiences different growth rates (otherwise, we’d have no reason to track it), and after a period of time, the index becomes unbalanced; we end up with too much invested in one sector versus another.  This imbalance lessens the value of the index for understanding the movements within the industry.

A second level of imbalance occurs after a single stock experiences significant change in value relative to other stocks in the index.

To counter this, we periodically adjust and rebalance the index.  We do this by figuratively selling all holdings in the index and redistributing the resulting funds to each sector in their original percentages.  The funds within each sector are then redistributed among the stocks within the sector with the values weighted according to our view of the importance they hold to each market.  Some stocks are represented in multiple sectors.  For example, Autodesk is the predominant player in the AEC sector and also plays a significant but smaller role in the CAD software division of the MECH sector.

We also take this opportunity to make other adjustments, such as moving a stock that might be better placed in a different sector, deleting stocks that are no longer relevant (or that have been delisted), and adding new stocks to the index that might have been overlooked in the past or that are new to the market.  Each year, we add a designation, indicating funds that we have set aside for companies that we expect to go public within the next year.  We will convert that set-aside amount into shares of the stock 30 days after the stock is listed.  The delay is intended to allow the stock price to settle in order to get a better picture of the market value of the stock.  All of these adjustments are indicated in the table and detailed below.