Press Releases

• 26 June 2023 Quarterly Rebalance — Barnes (B) was added to the index. 
  

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• 31 March 2023 Quarterly Rebalance — Eaton (ETN) was added to the index. Telos (TLS) was removed.
  

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• 30 December 2022 Quarterly Rebalance — There were no changes to holdings in the index. In late November, Leonardo DRS completed its reverse merger with index constituent RADA Electronics, and  changed its ticker to DRS.

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• 29 September 2022 Quarterly Rebalance — The following changes were made to the index. BBAI and VSEC were removed as they no longer met the price and liquidity rules governing the index, respectively. In addition, the following companies were added: GE ($6B in A&D sales; Parker (PH), which just closed on its acquisition of UK defense firm Meggitt to expand its A&D offerings, and Planet Labs (PL), an imagery provider that receives a significant percent of its revenues from the defense and intelligence communities.

• 30 June 2022 Quarterly Rebalance — No edits to the index constituents were made. Ball Corporation changed its ticker during the quarter from BLL to BALL. Several acquisitions are pending. 

• 31 March 2022 Quarterly Rebalance — BigBear.ai (BBAI), TTM Technologies (TTMI), and VSE Corporation (VSEC) were added to the index. 

• 25 February 2022 —
  From Pearl Harbor to 9-11, download our PDF providing historical data providing “Returns During Conflicts” here

• 25 February 2022 — Download this commentary in PDF format here
  

When the Tides Change and the Market Shifts…Ride the Wave

As the first wave of Russian tanks and troops enter the Ukraine, and missiles and drones attack from the sky and the sea, investor attention is quickly turning toward the defense and security sector. This should not be a surprise. The images and videos coming from the region offer us a fear of the unknown and of what’s to come. Defense stocks provide people with a sense of stability. But like any trend, investors should understand the bigger picture to decide whether we are looking at short-term news or a more sustainable development.

The Russian invasion of Ukraine is likely the first domino to fall. There is no doubt that inside the offices of Xi Jinping, President of China, there is a discussion wondering if Russia’s action provides a blueprint (and necessary diversion) that will allow China to move its troops into Taiwan. The Chinese leadership will be closely monitoring the reaction by the West to the Russia/Ukraine situation and determining whether they can withstand a similar economic retaliation by the United States and Europe (or more likely if they believe the US and EU would be willing to act and suffer the consequences of ceasing trade with China.) In this respect China is much better positioned than Russia.

China isn’t the only one who bears watching as other nations (i.e., North Korea, Iran, Afghanistan, etc.) and non-nation states (i.e., terrorist organizations) may seek to take advantage of the current instability. Meanwhile, Western democracies are slowly sliding toward more divisive and combative politics that are eroding democratic freedoms. Instead of the world moving toward increased globalization and greater openness, it is sliding into a period where defense and security will be of paramount importance.

The economic sanctions already imposed on Russia by nations around the world will likely have a devastating impact—especially if a block to the SWIFT banking transaction system is imposed. Doing so would essentially prohibit Russia from receiving funds from the sale of oil and natural gas on the international markets. By the end of the first day of the invasion, the ruble had plummeted, and its national stock market declined by a third. However, most of us are well aware that the Russian people have become accustomed over the past century to hardship and believe that a bit of suffering is necessary for the good of their nation.

For individuals and investors in the United States, a destabilized world means that supply chain issues are likely to remain as it will take time for production activity to increasingly shift to onshore sources. It is also likely that inflation will continue to rise toward (at least) historical averages. So, for investors, can there be any safer place for stocks than firms operating in the defense sector?

To identify opportunities, the holdings of Invesco’s Defense ETF(NYSE: PPA), which tracks the benchmark SPADE Defense Index, offers a good starting point. However, even within this thematic basket there will likely be winners and losers. The challenge for investors is making the right call.

As commented upon in the January 2022 issue of The SPADE Investor and blogs such as Seeking Alpha, there have been only two occurrences since 1990 when the defense index produced positive gains but underperformed the broader market over a two-to-three year period—2020 and 2021 being the most recent. Each time, defense stocks soared over the next decade, more than doubling the returns of the S&P 500. Additionally, over the past 25 years, any short-term declines from investing in the sector have been recouped within three years’ time.

In coming years, as defense and security receive greater attention, a wide range of companies operating in the space will likely benefit. The F-35 aircraft built by Lockheed Martin for the US and its allies will likely be in high demand. Raytheon should receive increasing orders for its air defense and radar systems. Helicopters from Textron will be in needed. Boeing military aircraft and helicopters should see steady orders, although its stock market performance will depend on global stability and how passenger and cargo air traffic will (or will not) be impacted. Additionally, with Russia as an adversary, it is likely to see increased military (and commercial) spending on cyber protection products and services offered by firms such as CACI, Mantech, and Mandiant as threats to our digital economy increase. It should be noted that not all ETFs offer similar baskets of stocks. While each of the aforementioned companies are components of the SPADE Defense Index (and of the PPA ETF), its competitor, the iShares Aerospace ETF (NYSE: ITA), does not include the pure cyber firms working with the Pentagon and the intelligence community, only those involved with industrial activity. PPA holds more than 50 firms deemed systematically important to the defense and security of the United States—nearly two dozen more companies. This provides additional diversification inside a concentrated sector.

The decision to allocating investments toward the defense sector has proven to be a smart decision for investors in recent decades; and the current turmoil means it could be a smart decision for the next several years. As the world becomes more complicated politically and there is a post-pandemic desire to return to exerting one’s philosophical will upon others, a diversified basket, such as that provided by the Invesco Defense ETF (NYSE: PPA), can provide sought-after exposure to the sector without the added risk of choosing individual firms.

• 28 October 2021 —Mandiant divested its FireEye division, renamed the firm, and changed its ticker to MNDT from FEYE.
• 30 September 2021 Quarterly Rebalance — Keysight (KEYS) was added to the Index.
• 6 August 2021 —SPADE Indexes has published a free (no registration required) book, Investing in the Defense Sector. It was developed to provide detailed information for investors and advisers seeking to better understand an industry that represents nearly 5% of US GDP and employs more than 2 million people in the United States.
• 28 June 2021 —Palantir (NYSE: PLTR) was added to the Index and SPADE Indexes True Cap methodology was employed during our quarterly rebalance.

• 31 March 2021 —There were no changes made to the Index during the quarterly rebalance.

• March 2021 — Notice / SPADE Defense Index Consultation Regarding Revised Index MethodologyThe SPADE Defense Index is conducting a consultation with market participants on a proposal to update the Index methodology.

There are several proposed changes, including (1) raising the minimum float-adjusted market cap for initial inclusion in the Index to $250 million from the current $100 million, (2) changing to a market capitalization for continued inclusion to $150 million from $75 million, and (3) implementing SPADE Indexes’ True Cap™ methodology.

Incorporating the True Cap methodology will enable the SPADE Defense Index to handle companies with a diverse revenue base outside the core aerospace, defense, and homeland security reflected in this Index or those firms whose valuation is computed differently than the sector. Employing this added factor is not expected to have a significant impact on the holdings or exposure of the Index.

Changes to the Index methodology contemplated by this Index consultation (detailed below) would take effect with the June rebalance if approved.

Questions
1. Please provide feedback on all aspects of the Index methodology and proposed changes and suggest any other changes that should be considered.

2. What would be the best timing for implementing this proposal if SPADE Indexes proceeds?

Please respond to this survey as soon as possible. To participate in this consultation, please send an email to info@spadeindex.com

Thank you for taking the time to respond to this consultation.

Rationale
The following edits to the methodology for the SPADE Defense Index are being evaluated.

1. The minimum market capitalization for a firm to be considered for initial inclusion in the index has been raised to $250 million from $100 million. The market capitalization for continued inclusion in the index has been raised to $150 million from $75 million. These changes are being incorporated to reflect the increase in the capitalization of publicly listed firms in the 17 years since the SPADE Defense Index was launched. This change would not have an impact on any firm currently held in the index.

2. The Index will begin incorporating SPADE Indexes “True Cap”™ methodology which was developed to more accurately reflect the weightings assigned to highly diversified firms by focusing on their relevant business activity within a sector/theme (ie, defense, aerospace, homeland security, space) as if it were a standalone entity. SPADE Indexes believes that its True Cap methodology will enhance its defense index by solving issues related to overweighting highly diversified firms operating in the sector and enabling the inclusion of companies who the market values more richly than the valuation of the sector as a whole.

Index Objective
The SPADE® Defense Index (NYSE: DXS) is a rules-based, equity index comprised of publicly traded companies that benchmarks the performance of companies involved with defense, homeland security, and space. The Index is typically composed of more than 50 firms who are systematically important to the defense sector and are engaged principally in the development, manufacture, operation, and support of US defense, military, homeland security, and space operations. These may include, for example, companies that have representative business activities involved with aircraft, naval vessels, missiles, spacecraft and launch vehicles; ground and armored vehicles; unmanned and robotic vehicles; communications; defense electronics and sensors; information technology and network centric warfare; intelligence, surveillance, and reconnaissance systems and analysis, border security screening systems; and satellite- and space-based services.

• 17 May 2021 — FLIR Systems was removed from the Index after its acquisition by Teledyne was closed.
• 31 March 2021 Quarterly Rebalance — There were no changes made to the Index.
• 10 March 2021 — Perspecta was removed from the index after its acquisition by Veritas Capital closed
• 31 December 2020 Quarterly Rebalance — Telos Corporation (NASDAQ: TLS) was added to the index.
• 30 September 2020 — Alleghany Technologies (NYSE: ATI) was added to the index.

• 6 September 2020 — Research report: With an eye on the November election, SPADE Indexes has released a new report that consolidates the historical performance data of the stock market in terms of presidential administration and control of Congress. Inside you’ll get answers to the questions: How does the stock market perform when a Democrat or a Republican lives in the White House? Does the stock market perform better when Congress is controlled by a single party or when it is split between parties? Which presidents presided when the economy was in recession or the was a bear market? Which presidents saw the best and worst returns during their administration? What about a defense; are Republicans or Democrats better for investing in the sector?

• 22 July 2020 — PDF Transcript of interview with Scott Sacknoff, Manager, SPADE Defense Index by InvestorIdeas.com
• 30 June 2020 — RADA Electronics (RADA), PAE Systems (PAE), Howmet (HWM), and Spirit Aerosystems (SPR) were added to the index.
• 3 April 2020 — The merger of Raytheon (RTN) and United Technologies (UTX) was finalized after UTX completed two planned spinoffs. The new company, Raytheon Technologies (RTX), began trading immediately upon the spin.
• 30 March 2020 Quarterly Rebalance — Intelsat (I) was removed from the Index as its price is below required index levels.
• 30 December 2019 Quarterly Rebalance — CAE (CAE) and Iridium (IRDM) were added to the index. Several mergers remain pending including the United Technologies / Raytheon merger.
• 30 September 2019 Quarterly Rebalance — No changes to the index were required. Several mergers remain pending.
• 28 June 2019 Quarterly Rebalance — Parsons (PSN) and Jacobs Engineering (JEC) added to the index. Merger of L3 (LLL) and Harris (HRS) completed and replaced by new company L3 Harris (LHR) beginning 1 July 2019. KeyW Holdings (KEYW) removed following its acquisition by Jacobs during the quarter.
• 29 March 2019 Quarterly Rebalance — Engility (EGL), Sparton (SPA), and Esterline (ESL) were removed from the index when their acquisitions closed (SAIC, Cerberus Capital, and Transdigm, respectively)
• 31 December 2018 Quarterly Rebalance — United Technologies’ acquisition of Rockwell Collins closed. Four mergers pending for 1Q19.
• 30 September 2018 Quarterly Rebalance — No changes to the index were required. Several mergers remain pending.
• 30 June 2018 Quarterly Rebalance — Perspecta (PRSP) and Intelsat (I) were added to the index. During the quarter, Northrop Grumman (NOC) completed their acquisition of Orbital ATK (OA); and General Dynamics (GD) completed their acquisition of CSRA (CSRA)..
• 31 March 2018 Quarterly Rebalance — No changes to the index were required. Several mergers remain pending.
• 29 December 2017 Quarterly Rebalance — No changes to the index were required. Several mergers remain pending.
• 30 September 2017 Quarterly Rebalance — NCI Inc (NASDAQ: NCIT) was acquired during the quarter by a PE firm. The acquisition of DigitalGlobe by MDA Corporation completed and MDA was added to the index
• 30 June 2017 Quarterly Rebalance — NCI Inc (NASDAQ: NCIT) and VSE Corporation (NASDAQ: VSEC) were added to the index. During the quarter, TASER changed its name to Axon (AAXN).
• 31 March 2017 Quarterly Rebalance — Ducommun (NYSE: DCO) and Elbit (NASDAQ: ESLT) were added to the Index.
• 31 December 2016 Quarterly Rebalance — No changes were made to the index constituents. The Honeywell spinoff of AdvanSix during the quarter was removed.
• 30 September 2016 Quarterly Rebalance — KBR, which recently acquired Wyle and HTSI to expand their government services business was added to the index. American Science & Engineering was acquired during the quarter and was removed once OSI Systems, also a constituent of the index, completed the acquisition.
• 30 June 2016 Quarterly Rebalance — No changes were made to the index constituents.
• 31 March 2016 Quarterly Rebalance — Intelsat and Ducommun were removed from the Index for price and liquidity screens, respectively.
• 30 December 2015 Quarterly Rebalance — CSRA was added to the index following the split of CSC into two publicly-traded firms–one focused on commercial clients (CSC) and one focused on government (CSRA). BWX Technologies was added to the index. Babcox & Wilcox recently sold its power division, and changed its name, leaving it almost exclusively focused on its Navy nuclear business. Supercom Ltd (SPCB) fell below the market cap requirements of the index’s governing rules
• 30 September 2015 Quarterly Rebalance — No changes were made to the constituents of the index
• 30 June 2015 Rebalance — LMI Aerospace (LMIA) was removed from the Index as it no longer meet trading liquidity screens. During the quarter, Harris (HRS) completed its acquisition of Exelis (XLS) and Gencorp Aerojet (GY) renamed/new ticker to Aerojet Rocketdyne (AJRD).
• 31 March 2015 Rebalance — Supercom (SPCB) was added to the Index. SPCB maintains passport and border security for a number of nations.
• February 2015 — Ticker change to Orbital ATK (OA): Merger of Orbital Sciences (ORB) and Alliant Techsystems (ATK)
• 31 December 2014 Rebalance — Curtiss Wright (CW), Woodward (WWD) and FireEye (FEYE) were added to the Index. FEYE owns 2 of the only 7 companies approved as part of the NSA’s National Cyber Assistance Program.
• October 2014 — URS (NYSE: URS) was removed from the index following the close of its acquisition by AECOM for $5.8B in cash and stock.
• 27 September 2014 Rebalance — Vectrus (NYSE: VEC) added to the index following its spin from Exelis (XLS).
• 30 June 2014 Rebalance — Kaman (NYSE: KAMN) was added to the index.
• 31 March 2014 Quarterly Rebalance — Sparton (NYSE: SPA) was added to the index. Anaren was removed during the quarter after they were acquired by a private equity firm.
• 31 December 2013 Quarterly Rebalance — SAIC (NYSE: SAI) split into two public companies– SAIC (NYSE: SAIC) and Leidos (NYSE: LDOS).
• 30 September 2013 Quarterly Rebalance — Intelsat (NYSE: I) and LMI Aerospace (NASDAQ: LMIA) were added to the index.
• 30 June 2013 Quarterly Rebalance — No changes were made to the constituents of the index
• 31 March 2013 Quarterly Rebalance — During the quarter, DigitalGlobe (DGI) completed its acquisition of GeoEye (GEOY).
• 30 December 2012 Quarterly Rebalance — Ceradyne (CRDN) was removed from the index during the quarterly upon finalizing their acquisition by 3M.
• 30 September 2012 Quarterly Rebalance — Engility (NYSE: EGL) was added to the index. LMI Aerospace (LMIA) was removed from the index when its trading volume fell below required levels. Goodrich (GR) was removed during the quarter upon completion of its acquisition by United Technologies.
• 30 June 2012 Quarterly Rebalance — Anaren (ANEN) was added to the index. NCI (NCIT) was removed when its trading volume fell below required levels.
• 29 December 2011 Quarterly Rebalance — Hexcel (NYSE: HXL) was added the index. Elbit Systems (ESLT) was removed from the index when its trading volume fell below required levels.
• 19 December 2011 — Force Protection (FRPT) was removed from the index following the completion of its acquisition by General Dynamics
• 1 November 2011 — ITT Exelis (NYSE: XLS) replaced ITT when the company split into three separately traded firms.
• 30 September 2011 Quarterly Rebalance — Huntington Ingalls (NYSE: HII) was added the index
• 30 June 2011 Quarterly Rebalance — Heico (NYSE: HEI) was added the index
• 9 May 2011 — Ladish was removed from the index following the closing of its acquisition by Alleghany Technologies
• 31 March 2011 Quarterly Rebalance — There were no changes to the index. CPI International (NASDAQ: CPII) and Applied Signal (NASDAQ: APSG) were removed from the index when the acquisitions of the aforementioned firms closed.
• 31 December 2010 Quarterly Rebalance — Booz Allen Hamilton (NYSE: BAH) and Key W Corporation (NASDQ: KEYW) were added to the Index. VSE Corporation (NYSE: VSEC) was removed from the Index when the firm no longer met the liquidity requirements of the index. Cogent (COGT) and ICX (ICXT) were removed after they were acquired and trading ceased.
• 30 September 2010 Quarterly Rebalance — Transdigm (NYSE: TDG), LMI Aerospace (NASDAQ: LMIA), and CPI International (NASDAQ: CPII) were added to the Index. During the quarter, the following companies were removed when their acquisitions closed: Dyncorp (NYSE: DCP), Argon ST (NASDAQ: STST), Stanley (NYSE: SXE), and ICX Technologies (NASDAQ: ICXT)
• 30 June 2010 Quarterly Rebalance — There were no changes to the index however the acquisition of DynCorp is expected to close in July and Argon ST has been acquired by Boeing and is expected to close in 3Q10.
• 31 March 2010 Quarterly Rebalance —Kratos Defense (KTOS) and ICx Technologies (ICXT) were added to the index as part of the quarterly rebalancing. Herley Industries was removed when its liquidity/trading volume dropped below required levels.
• 31 December 2009 Quarterly Rebalance — Gencorp/Aerojet (NYSE: GY) was added to the index after meeting the rules governing the index. Garmin and Trimble Navigation were removed from the index — although their businesses continue to rely on the Department of Defense GPS signal, the focus of both companies lies predominantly outside the sector.
• 30 September 2009 Quarterly Rebalance — General Dynamics completed their acquisition of AXSYS Technologies during the quarter and it was removed from the index.
• 29 June 2009 Quarterly Rebalance — The following firms were added to the Index: Digital Globe (NYSE: DGI), a provider of high-resolution imagery for military, intelligence, and commercial customers; and EMS Technologies (NASDAQ: ELMG) and Comtech Telecom (NASDAQ: CMTL) providers of communications hardware and systems used by customers involved with defense and satellite communications.
• 26 March 2009 Quarterly Rebalance — Force Protection (NASDAQ: FRPT), Herley Industries (NASDAQ: HRLY), and Integral Systems (NASDAQ: ISYS) were added to the Index. ICx Technologies (NASDAQ: ICXT) was removed when their liquidity/trading volume fell below acceptable levels. Force Protection engages in the manufacture of ballistic and blast protected vehicles primarily used to support armed forces and security personnel. Herley Industries has for more than 40 years, supplyied solid, innovative, and sophisticated RF, microwave and millimeter wave components and subsystems to the defense and aerospace industries. Integral Systems builds satellite ground systems and equipment for command and control, integration and test, data processing, and simulation in the United States and internationally and serves government and commercial organizations.
• 30 December 2008 Quarterly Rebalance — ICx Technologies (NASDAQ: ICXT) and VSE Corporation (NASDAQ: VSEC) were added to the Index. DRS Technologies and SI International were removed from the index during the quarter when they ceased trading following their acquisitions by Finmeccanica (Italy) and Serco (UK), respectively. Gencorp (NYSE: GY) was removed from the index when its 25-day average price at the time of the review dropped below required levels. ICx Technologies (NASDAQ: ICXT) develops and integrates advanced sensor technologies for homeland security, force protection, and commercial applications; specifically the detection and identification of chemical, biological, radiological, nuclear, and explosive threats. VSE Corporation (NASDAQ: VSEC) is a professional services company that is ranked among the top 100 defense contractors, top 10 foreign military sales contractors, and top 50 Navy contractors in the nation. It provides engineering, technical, management, integrated logistics support, and IT services to all U.S. military services and other government agencies.
• 30 September 2008 Quarterly Rebalance — NCI Information Systems (NASDAQ: NCIT) and AXSYS Technologies (NASDAQ: AXYS) were added to the Index. NCI provides information technology services and solutions to the federal government defense, intelligence, and civilian agencies. Axsys Technologies designs and manufactures precision optical solutions for defense, aerospace, homeland security, and commercial applications; operating in two segments — the Surveillance Systems Group and the Imaging Systems Group.
• 30 June 2008 Quarterly Rebalance — MTC Technologies was removed from the index following the completion of their acquisition by BAE.
• 30 March 2008 Quarterly Rebalance — Force Protection, KVH Industries, and Herley Industries were removed from the index after they failed to meet the rules governing the index.
• 27 December 2007 Quarterly Rebalance — Textron, Elbit Systems, AAR Corp, and Triumph Group added to the index.
• 21 December 2007 – EDO removed from the index following closing of its acquisition by ITT.
• Defense Sector Set to Outperform the S&P500 for Eighth Consecutive Year19 December 2007 [Washington DC] Compiling a track record that many professional money managers and mutual funds would envy, the defense and homeland security sector is on pace to outperform the S&P500 benchmark for an eighth consecutive year. The benchmark SPADE Defense Index (AMEX:DXS) currently has a year-to-date gain of 21.5%, nearly 20% better than the widely followed S&P500 broad-market index.During this period, the SPADE Defense Index has outperformed the S&P500 by more than 10% in six of the eight yearly periods and gained better than 19% in four of the previous five years. Since 2000, the SPADE Defense Index has produced a total cumulative gain of 159.8%, as compared to the gain in the S&P500 of 10.2%, and the Russell 3000 of 5.9%. The PowerShares Aerospace & Defense ETF (AMEX:PPA), which seeks to replicate the SPADE Defense Index, has seen 2007 inflows of nearly 400% as investors add defense to their core portfolios. Reporters producing end-of-year market stories should not ignore the returns of a sector that is in the midst of a long investment cycle and whose companies generate nearly 5% of U.S. GDP.Although much of the gains can be attributed to government spending in the aftermath of 9-11 and the war in Iraq, the defense sector’s positive performance predates the 9-11 attack on the U.S., and trends suggest that growth may continue even after a pullback from Iraq occurs. Notably: (1) The mission to protect and defend the U.S. and its citizens remains a critical goal of government; (2)Support for defense among Congress and political leaders remains strong; (3) The recently approved core Department of Defense budget for FY-08 is 10% higher than FY-07; (4) A tremendous need to recapitalize equipment used in Iraq and modernize defense equipment and systems–some of which dates to the Eisenhower Administration; and (5) Continued expansion in related business lines such as commercial aircraft.As always, politics remains the biggest risk to the sector.” Mr. Sacknoff concluded stating that, “Current economic issues related to the subprime loan crisis, inflation, and the possibility of recession tend to have less of a direct impact on the defense sector which derives much of its revenues from government budgets. While the sector may move in sympathy with the overall market at times, the underlying factors driving the defense industry remain quite different.”
• 19 November 2007 – Textron completed their acquisition of United Industrial Corporation and UIC was removed from the index.
• 16 November 2007 – URS Corp shares outstanding were adjusted and updated to account for the approximately 29.4 million shares to acquire Washington Group International (WNG)
• 28 September 2007 – September 2007 Quarterly Review
  Changes to the Index, effective 28 September 2007, are as follows: Armor Holdings was removed mid-quarter when it was acquired by BAE Systems. Additions to the index are GeoEye (NASDQ: GEOY) which provides space imagery of the earth to military, intel, and commercial customers and Ducommon (NYSE: DCO) which manufactures components for military and commercial aircraft and space programs. In addition, DirecTV and Echostar were removed from the Index. Both companies have invested billions in space systems which in turn helped to support the military space industrial base that builds and launches satellites for government customers. With the bulk of their space infrastructure development complete and in orbit, this segment of the commercial space sector does not have enough overlap with the defense and homeland security market to justify its continued inclusion. The Index continues to have high exposure in the area of space with 17 of the 20 largest firms in the Index maintaining space operations and capabilities.
• 30 June 2007 – Armor Holdings will be removed from the Index after its acquisition by BAE Systems closes on 30 July 07. Changes to the Index, effective 29 June 2007, are as follows: Safenet was removed mid-quarter when it was acquired by Vector Capital.

• March 2007 Quarterly Review
  Additions to the Index, effective 30 March 2007, are as follows: AeroVironment (NASDAQ: AVAV), AV designs, develops, produces, and supports an advanced portfolio of Unmanned Aircraft Systems (UAS) and efficient electric energy systems. The company’s small UAS are used extensively by agencies of the U.S. Department of Defense and increasingly by allied military forces to deliver real-time reconnaissance, surveillance, and target acquisition to tactical operating units. .Force Protection (NASDAQ: FRPT), manufactures ballistic- and blast-protected vehicles, which have been used to support armed forces and security personnel in Iraq, Afghanistan, Kosovo and other hot spots around the globe. In addition, XM Satellite (NASDAQ: XMSR) and Sirius Satellite Radio (NASDAQ: SIRI) were removed from the Index. By definition, firms providing satellite services are included in the SPADE Defense Index when their operations include the acquisition of space and ground assets (such as satellites, launch vehicles, and monitoring networks) as this helps to ensure the stability of the infrastructure base of the sector — an area of critical importance to the Department of Defense. Both XM Satellite Radio and Sirius Satellite Radio have evolved to the point where current and future near-term operations do not require a continued, significant investment in infrastructure. As such, these two firms have been removed from the Index.
• March 2007 – SPADE Indexes to Present to the NY Society of Security Analysts (pdf)
• 2 January 2007 – Year End Review: SPADE Defense Index Finishes 2006 up 19.33% – Beats S&P500 for 7th CONSECUTIVE Year

• 29 December 2006 – December 2006 Quarterly Review
  Additions to the Index, effective 29 December 2006, are as follows: SAIC (NYSE: SAI), SAIC is a leading provider of scientific, engineering, systems integration and technical services and solutions to all branches of the U.S. military, agencies of the Department of Defense, the intelligence community, the U.S. Department of Homeland Security and other U.S. Government civil agencies, as well as to customers in selected commercial markets. With more than 44,000 employees in over 150 cities worldwide, SAIC engineers and scientists solve complex technical challenges requiring innovative solutions for customers’ mission-critical functions. Stanley (NYSE: SXE) is a provider of information technology services and solutions to U.S. defense and federal civilian government agencies. Headquartered in Arlington, Va., Stanley has approximately 2,300 employees at more than 100 locations in the U.S. and worldwide. Also, during the quarter, Integraph Corporation (NASDQ: INGR) was removed following completion of their acquisition by private equity. Essex (NASD: KEYW) remains in the Index pending the completion of their acquisition by Northrop Grumman. Andrew Corporation was removed from the Index when research determined that the scope of their defense/space antenna operation no longer warranted their inclusion.

• 27 September 2006 -September 2006 Quarterly Review
  Additions to the Index, effective 30 September 2006, are as follows: DynCorp International (NYSE: DCP), DynCorp works behind the scenes to support U.S. military and diplomatic efforts on the front lines. The company provides base operations, drug eradication, law enforcement training, logistics support services, and security services. It also contracts with the U.S. Department of State to train police officers overseas. Also, during the quarter, PanAmSat was acquired by Intelsat, a private company, and was removed from the Index when the deal closed on 3 July 2006. Mid-quarter, the merger of Viisage and Identix led to a change in ticker when the firm was renamed L-1 Identity Solutions (NYSE: ID).

“The SPADE Defense Index aims to cover the broad diversity of activities that is representative of companies involved with defense, homeland security, and space including not only industrial firms that manufacture aircraft, tanks, ships, and missiles but those involved with current and next generation systems related to network centric warfare and information technology; intelligence, surveillance, and reconnaissance; satellites; border security; and defense systems that protect the lives of our servicemen and servicewomen”, said Scott Sacknoff, manager of the SPADE Defense Index. Companies are required to meet a variety of eligibility criteria for market valuation, trading volume, and be listed on the American, New York, or NASDAQ exchange. The addition of DynCorp provides the Index with added diversification toward the multi-billion operations and technical support side of the defense and homeland security business. “The SPADE Defense Index has outperformed the S&P500 in each of the six years since 2000, as well as in 19 of the past 24 quarters. The Powershares Aerospace & Defense Portfolio ETF which tracks the SPADE Defense Index is up 13.7% since its introduction in October 2005. The SPADE Defense Index is a modified market capitalization-weighted index that currently has 58 components. Full details on the SPADE Defense Index are available at www.spadeindex.com/defense

• 29 June 2006 – June 2006 Quarterly Review
  Changes to the Index, effective 30 June 2006, are as follows:
  URS Corporation (NYSE: URS), the 24th largest defense contractor and #29 largest contractor to the federal government, is added as a constituent of the Index. URS provides a range of professional planning, design, systems engineering and technical assistance, program and construction management, and operations and maintenance services. Its EG&G Division is involved in the complete life cycle of defense systems: from concept formulation through production, to operational training and in-service maintenance. The firm also offers homeland security consulting and advisory services including antiterrorism, threat and vulnerability risk assessments, and design force protection and security systems. Anteon was removed from the Index on 9 June 2006 when the firm’s acquisition by General Dynamics (NYSE: GD) closed.The SPADE Defense Index aims to cover the broad diversity of activities that is representative of companies involved with defense, homeland security, and space: including not only industrial firms that manufacture aircraft, tanks, ships, and missiles but those involved with current and next generation systems related to network centric warfare and information technology; intelligence, surveillance, and reconnaissance; satellites; border security; and defense systems that protect the lives of our servicemen and servicewomen”, said Scott Sacknoff, manager of the SPADE Defense Index. Companies are required to meet a variety of eligibility criteria for market valuation, trading volume, and listing on a major U.S. exchange. The addition of URS provides the Index with added diversification toward the multi-billion operations and technical support side of the defense and homeland security business.”The SPADE Defense Index has outperformed the S&P500 in each of the six years since 2000, as well as in 19 of the past 23 quarters. The Powershares Aerospace & Defense Portfolio ETF which tracks the SPADE Defense Index is up 7.6% since its introduction in October 2005.

• 19 April 2006 – SPADE Defense Index Closes Above 2000
  An investment benchmark for companies involved with defense, homeland security, and space, the SPADE Defense Index continued a multi-year rally in which it has outperformed the S&P 500 for six consecutive years and in 19 of the last 23 quarters. For the year, the index is up more than 13%. The Index also serves as the basis for the Powershares Aerospace & Defense Portfolio ETF (AMEX: PPA). Since its launch on 25 October 2005, the exchange traded fund is up nearly 18%. According to Scott Sacknoff, manager of the Index, “Investors are increasingly noticing companies involved in defense, homeland security, and space. Not just for the growth in the Index over the last half decade but as a hedge against world events and other economic factors. As the situation in Iran continues to unfold, the defense sector is an area gaining increasing attention. With CNBC reporting that analysts believe that continued government spending in this area is likely to continue for some time, it would not surprise me to see the index go higher. [Though investors should recognize that past performance is not indicative of future gain]”Ladish Co. Added to Index as part of March 2006 Quarterly Review

• 6 February 2006 – Defense Budget Growth Fuels Investment Gains:
  President Bush’s FY-07 budget request continues to favor spending on defense and homeland security. The budget for the Pentagon is set to increase by nearly 5% to $439.3 billion including $84.2 billion for weapon systems, an 8% gain. This amount is in addition to $120 billion requested by the Pentagon to help pay for the wars in Iraq and Afghanistan, and an estimated $40 billion in classified and intelligence-agency related programs. With funding for the Department of Homeland Security set to rise by 6% to $42.7 billion, the President has proposed spending an estimated $600 billion on the security of our nation. With nearly 5% of U.S. GDP spent on defense and homeland security, since the events of September 11, 2001, investors have seen dramatic gains in the financial performance of many firms operating in this area.The SPADE Defense Index (AMEX: DXS), a financial benchmark for defense, homeland security, and space, has beaten the S&P500 for 6 consecutive years and 18 of the last 22 quarters. Since 2000, the Index has gained 79.2% vs. a 15% decline in the S&P500.

The breath of this multi-year rally extends beyond the big 5 defense prime contractors of Boeing (NYSE: BA), Lockheed Martin (NYSE: LMT), General Dynamics (NYSE: GD), Northrop Grumman (NYSE: NOC) and Raytheon (NYSE: RTN). Mid-cap companies such as Armor Holdings (NYSE: AH) and L-3 Communications (NYSE: LLL) have seen nice runs as have defense information technology firms like CACI (NYSE: CAI) and SI International (NASDQ: SINT).

To make it easier for individuals to invest in the sector, in October 2005, Powershares licensed the SPADE Defense Index and launched the first exchange-traded fund (ETF) to focus on defense and homeland security. The Powershares Aerospace & Defense Portfolio ETF trades under the symbol (AMEX: PPA) and has attracted more than $60 million in its first months of operation with trading volume in January more than doubled from December. According to Scott Sacknoff, manager of the SPADE Defense Index, “President Bush’s FY07 budget shows that protecting our nation remains the most vital and critical element of government. For investors, this is a factor that should not be ignored.”

• 3 January 2006: Year-End Summary–The SPADE Defense Index ended 2005 at 1764.97, up 5.30% from the last day of trading in 2004, outperforming the S&P 500, which gained 3.00%, for the sixth consecutive year.

Year-End Summary
– SPADE Defense Index Outperforms S&P 500 for Sixth Consecutive Year
– SPADE Exceeds Returns of S&P 500 in 18 of last 22 quarters
– Reached all-time high of 1804.88 on December 27, 2005
– Since 2000, has gained 79.2% vs. [-15.0%] for the S&P 500
– ETF Tracking the Index Launched by Powershares (AMEX: PPA)
– Options for ETF and Index Launched by the American Stock Exchange
– Overall, the SPADE Defense Index had outperformed the S&P 500 for seven consecutive quarters (18 of the last 22) before ending the streak in the fourth quarter.
– During 2005, the SPADE reached a new all-time intraday high of 1804.88 on 27 December 2005, an increase of 7.68% from 2004 year-end levels. New intraday highs were reached 25 times during the year.
– Since 2000, the Index has gained 79.2% compared with a 15.0% loss by the S&P 500. (A hypothetical investment tracking the SPADE Defense Index of $10,000 on January 1, 2000 would have returned $17,921 whereas a similar investment in the S&P 500 would have been worth only $8496.)
– Leading Gainers — Companies that gained more than 20% in the Index during 2005 (in order of market capitalization) were Boeing (NYSE: BA) 35.7%, ITT Industries (NYSE: ITT) 21.8%, Precision Castparts (NYSE: PCP) 57.8%, Harris Corp (NYSE: HRS) 39.2%, Goodrich (NYSE: GR) 25.9%, Oshkosh Truck (NYSE: OSK) 30.4%, PanAmSat (NYSE: PA) 41.2%, Anteon (NYSE: ANT) 29.8%, DRS Technologies (NYSE: DRS) 20.4%).

• December 2005 — Two new additions to the Index:
  As part of the Index’s quarterly rebalancing process, on 30 December 2005, American Science & Engineering (NASDQ: ASEI) and NCI (NASDQ: NCIT) were added as constituents. American Science and Engineering engages in the development, manufacture, marketing, and sale of X-ray inspection and other inspection solutions for the homeland security and other defense applications. NCI, Inc. provides information technology services and solutions to defense, intelligence and federal civilian agencies in four categories, including network engineering; information assurance; systems development and integration; and enterprise systems management.
• 26 October 2005 — Powershares Aerospace & Defense ETF (ticker: PPA) Launched
  New York, NY–At a bell-ringing ceremony at the American Stock Exchange, Powershares launched an exchange traded fund designed to track the SPADE Defense Index.
• August 2005 — Powershares Licenses SPADE Defense Index to Offer ETF
  Washington DC, August 2005 — The ISBC licensed its SPADE Defense Index to Powershares Capital Management for the purpose of creating an Exchange Traded Fund based on the Index. The Powershares SPADE Defense Portfolio ETF is expected to become available before the end of the year. The Powershares Aerospace & Defense Portfolio ETF will trade on the American Stock Exchange(R) under the symbol ‘PPA’.
• May 2005 — Options Now Available on the AMEX
  Washington DC, May 2005 — Trading in options on the SPADE Defense Index (AMEX: DXS) have begun on the American Stock Exchange(R). The options will trade on the February expiration cycle. The specialist will be Susquehanna Investment Group. The DXS Index is rebalanced quarterly each March, June, September and December. For option chain information, click here

• 6 July 2004 — SPADE Defense Index Launched to Benchmark Defense and Space Sector
  Washington DC — The ISBC, in cooperation with the American Stock Exchange (Amex), today announced the launch of a new proprietary index to benchmark the performance of securities in the defense, homeland security, and space marketplace. The SPADE Defense Index, began publication on July 6 and has been assigned the symbol “DXS”. The SPADE Defense Index is a modified market capitalization weighted index comprised of publicly-traded companies that meet objective screening criteria. The Index has been designed to act as a benchmark for a range of financial instruments offered to investors worldwide including exchange traded funds, options, and structured products. Scott Sacknoff, president of the ISBC, said, “We enjoy a strong relationship with the Amex and this affiliation allows us to tap into their expertise and resources to create an index that will not only benchmark the defense and space sector but meet the needs of investors seeking diversified portfolios.” As part of this relationship, the Amex will handle the calculation of the index while the ISBC will handle licensing activities and monitor the sector for the quarterly rebalancing. “We are extremely pleased to be working with the ISBC and to have been selected to provide the on-going maintenance of the SPADE Defense Index,” said Robert Tull, vice president of the ETF Marketplace. “Its creation contributes to our expanding index family. Not only is the Amex the premier listing venue for ETFs in the marketplace, but it is also the preferred listing exchange for an ever increasing array of index strategies.” Eligible companies are determined on a quarterly basis using a range of criteria including a market capitalization greater than $100 million; a minimum $5.00 daily price; average daily trading volume in excess of 50,000 shares; and quarterly revenues of at least $10 million. Currently, 51 companies comprise the index. Additional information on the SPADE Defense Index can be found at www.spadeindex.com/defense. The ISBC is a private organization, independent of Wall Street and the broker/dealer community, that is responsible for the continued development and ongoing maintenance of the SPADE Defense Index. Launched in 1999, the organization has served as a platform for independent research and analysis related to the defense and space sectors. The American Stock Exchange (Amex) is the only primary exchange that offers trading across a full range of equities, options and exchange traded funds (ETFs), including structured products and HOLDRS(sm). In addition to its role as a national equities market, the Amex is the pioneer of the ETF, responsible for bringing the first domestic product to market in 1993. Leading the industry in ETF listings, the Amex lists 138 ETFs. The Amex is also one of the largest options exchanges in the U.S., trading options on broad-based and sector indexes as well as domestic and foreign stocks. For more information, please visit www.amex.com.
• 2 July 2004 — AMEX Vendor Alert #2004-09 / New Index (DXS) – The SPADE Defense Index publishing 6 July 2004The American Stock Exchange will begin publishing the SPADE Defense Index (Ticker Symbol: DXS) on Tuesday 6 July 2004. The following is a more detailed description of the new index. [Public files containing the current index composition and daily historical index values back to 30 December 1997 are available on www.amex.com].The SPADE Defense Index is a modified market capitalization weighted index comprised of publicly traded companies that seeks to measure the performance of securities in the defense, homeland security, and space marketplace. 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 30 December 2002. The SPADE Index was created by, and is a trademark of, the International Space Business Council (“ISBC”).