In creating the S&P MidCap 400 Index, the Standard & Poor's Corporation applied the same rigorous standards and procedures that it adheres to in the S&P 500 Stock Index. Standard & Poor's employed extensive research of medium capitalization stocks, applying numerous selection criteria so that the end result-the S&P MidCap 400- would be recognized by investors as a representative in investable benchmark,

The easiest way to explain the construction and structure of the MidCap Index is to compare it to the S&P 500 Index. The S&P MidCap 400 Index, like the S&P 500, is market-weighted (share price x shares outstanding). This means that the component stocks affect the Index 'in direct proportion to the dollar value of the shares outstanding. However, the MidCap comprises 400 U.S. companies and includes such familiar names as Sun Microsystems, Fruit of the Loom and Storage Technology. Again like the S&P 500 Index, the MidCap Index is not static. Standard & Poor's can add and delete stocks as economic conditions change. In fact, some stocks from the 400 may be deleted and added to the S&P 500. However, none of the 400 stocks in the MidCap may concurrently be in the S&P 500.

The structure of the MidCap Index can be examined in terms of industry group representation, exchange representation, market coverage and weightings. First, the industry group representation of the two indexes as of December 31, 1991:

In 1991, the MidCap Index rose approximately 47%. It clearly outperformed the S&P 500 and the Dow Jones Industrial Average, which gained 26'Y. and 20%, respectively, for the same time period. The MidCap had a base level of 100 as of December 31,1990. As of December 31,1991, the Index stood at 146.59.