e497
Filed Pursuant to Rule 497(b)
Registration File No. 333-31247
SUPPLEMENTAL
INFORMATION MEMORANDUM
FOR THE NETHERLANDS
Units issued in respect of
SPDR DOW JONES INDUSTRIAL AVERAGE ETF TRUST
(SPDR DJIA TRUST)
(A Unit Investment Trust organised in the United States)
This supplemental information memorandum (Supplemental
Information Memorandum) dated February 28, 2011
incorporates the attached prospectus dated February 25,
2011 (Prospectus and, together with this
Supplemental Information Memorandum, Introduction
Memorandum(1))
issued by the SPDR DJIA TRUST (Trust). Terms defined
in the Prospectus shall have the same meaning when used in this
Supplemental Information Memorandum.
The Introduction Memorandum constitutes an offering in the
Netherlands only. The Introduction Memorandum does not
constitute an offer of, nor an invitation by or on behalf of the
Trust to purchase any units of the Trust (Units or
Trust Units), and may not be used for or in
connection with any offer to, or solicitation by, anyone in any
other jurisdiction or in any circumstance in which such offer or
solicitation is not authorized by the Trust or is unlawful. No
action is being taken to permit an offering of Trust Units
or the distribution of the Introduction Memorandum in any
jurisdiction where such action is required.
Trust Units are listed on NYSE Euronext in Amsterdam
(Euronext Amsterdam), the regulated market of
Euronext Amsterdam N.V. This Supplemental Information Memorandum
contains additional information as required by the Dutch
Financial Supervision Act (Wet op het financieel
toezicht), as amended, the rules promulgated thereunder and
the Netherlands Authority for the Financial Markets
(Stichting Autoriteit Financiële Markten) (the
AFM).
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(1)
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The Introduction Memorandum
constitutes a prospectus for the Dutch market as required by the
Dutch Financial Supervision Act (Wet op het financieel
toezicht), as amended, and the rules promulgated
thereunder.
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SPDR DOW
JONES INDUSTRIAL AVERAGE ETF TRUST
SUPPLEMENTAL
INFORMATION MEMORANDUM
FOR THE NETHERLANDS
TABLE OF CONTENTS
Dow Jones Industrial
AverageSM,
DJIA®,
Dow
Jones®,
The
Dow®
and
DIAMONDS®
are trademarks and service marks of Dow Jones &
Company, Inc. (Dow Jones) and have been licensed for
use for certain purposes by State Street Global Markets, LLC
pursuant to a License Agreement with Dow Jones and
have been sublicensed for use for certain purposes to the Trust,
PDR Services LLC and NYSE Arca, Inc. pursuant to separate
Sublicenses. SPDR DJIA Trust is not sponsored,
endorsed, sold or promoted by Dow Jones and Dow Jones makes no
representation regarding the advisability of investing in the
Trust.
SPDR®
is a registered trademark of Standard & Poors
Financial Services LLC (S&P) and has been
licensed for use by State Street Corporation. No financial
product offered by State Street Corporation or its affiliates is
sponsored, endorsed, sold or promoted by S&P or its
Affiliates, and S&P and its affiliates make no
representation, warranty or condition regarding the advisability
of buying, selling or holding units/shares in such products.
S-2
SPDR DOW
JONES INDUSTRIAL AVERAGE ETF TRUST
The Trust is a unit investment trust organised in the United
States (US) that issues securities called
Units or Trust Units that represent
undivided ownership interests in the portfolio of stocks held by
the Trust. The portfolio consists of all of the component common
stocks that comprise the Dow Jones Industrial Average
(DJIA or Index).
PDR Services LLC, the sponsor of the Trust (the
Sponsor), accepts full responsibility for the
accuracy of information contained in the Introduction Memorandum
other than that given in the Prospectus under the heading
Report of Independent Registered Public Accounting
Firm, and confirms, having made all reasonable enquiries,
that to the best of its knowledge and belief, there are no other
facts the omission of which would make any statement in the
Introduction Memorandum misleading. No other person accepts such
responsibility or makes such confirmation.
The Trust is governed by the Standard Terms and Conditions of
Trust and Trust Indenture, as amended, between State Street
Bank and Trust Company, the trustee of the Trust
(Trustee), and the Sponsor dated as of
January 1, 1998 and effective as of January 13, 1998,
as amended (the Trust Agreement). Terms defined in
the Trust Agreement shall have the same meaning when used
in this Supplemental Information Memorandum.
All orders to buy and sell Trust Units trading on Euronext
Amsterdam will be made in euro (). The primary trading
markets for the securities held by the Trust (the
Portfolio Securities) are the New York Stock
Exchange LLC (the NYSE) and the Nasdaq Stock Market
where the Portfolio Securities trade in US dollars. The NYSE and
the Nasdaq Stock Market are in New York, NY, United States, in
the US Eastern Time Zone, and have regular trading hours between
9:30 a.m. and 4:00 p.m. Certain of the securities in
the DJIA (Index Securities) may trade in euro on
various European markets and in other currencies on other
national markets.
The primary trading market for Trust Units is in the United
States, where Trust Units are listed on NYSE Arca, Inc.
(NYSE Arca). Investors should note that trading in
Trust Units may be halted under certain circumstances.
Please refer to page 53 of the Prospectus. Trading of Units
on Euronext Amsterdam may be halted if the Trust fails to comply
with certain requirements of Euronext Amsterdam. Regular trading
for Trust Units ends at 4:00 p.m. on NYSE Arca
(New York Trading Hours). Investors should be aware
that Netherlands time is generally six hours ahead of United
States Eastern Standard time. Trading on Euronext Amsterdam
currently occurs between the hours of 9:00 a.m. and
5:30 p.m. in the Netherlands. Therefore, trading in Units
on Euronext Amsterdam will begin before US markets open and end
before regular trading concludes in the United States. Also, the
securities markets in the Netherlands and the United States will
be closed on certain national holidays in each country, so there
will be days when Units can trade on Euronext Amsterdam but not
in the United States, and vice versa.
The Trust issues and redeems Trust Units in the United
States only in multiples of 50,000 Trust Units in exchange
for the Portfolio Deposit (i.e., a specified portfolio of DJIA
stocks and cash). Trust Units listed on Euronext Amsterdam
can be transferred only
S-3
through the book-entry settlement system of Euroclear. No
separate share certificates representing one or more Units will
be issued. The Trust is independent of all secondary market
activities occurring on Euronext Amsterdam and does not make a
market in Trust Units either directly or through an
intermediary. Investors purchasing or selling Trust Units
on Euronext Amsterdam will do so at market prices and will pay
ordinary commissions and other usual charges for their trades in
Trust Units to their brokers.
On behalf of the Sponsor, NYSE Arca makes available every 15
seconds throughout the trading day at NYSE Arca a number
representing the intraday indicative value (IIV) for
a Trust Unit. The IIV represents, on a per-Trust Unit
basis, an amount equal to the sum of (i) the then-current
value of the securities portion of a Portfolio Deposit as in
effect on such day and (ii) the accumulated dividends on
the securities held in the Trusts portfolio, net of
expenses and accrued liabilities, calculated on a per-Creation
Unit basis through and including the previous Business
Day.(1)
During trading hours on Euronext Amsterdam, Euronext Amsterdam
N.V. will calculate and publish throughout its trading day an
intraday figure in euro for a Trust Unit called the
indicative net asset value
(INAV).(2)
Because Euronext Amsterdam N.V. uses a methodology and data to
calculate the INAV that differ from those used to calculate the
IIV published by NYSE Arca, the INAV and the IIV may not be the
same. Investors interested in creating or redeeming
Trust Units or purchasing or selling Trust Units in
the secondary market should not rely solely on the INAV or IIV
in making investment decisions but should also consider other
market information and relevant economic and other factors
(including, without limitation, information regarding the DJIA,
the Index Securities and financial instruments based on the
DJIA).
The Trust is registered as a unit investment trust under the US
Investment Company Act of 1940, as amended, and Trust Units
are registered under the US Securities Act of 1933, as amended,
with the US Securities and Exchange Commission (the
SEC). Regulatory oversight of the Trust is primarily
the province of the SEC.
The Trust and the Sponsor are subject to the Dutch Financial
Supervision Act (Wet op het financieel toezicht), as
amended. The Sponsor is the management company of the Trust
(beheerder) and the Trustee is the custodian of the Trust
(bewaarder), both within the meaning of the Dutch
Financial Supervision Act. Pursuant to Article 2:65 of the
(1) NYSE
Arca makes every effort to ensure the accuracy of the IIV.
However, it should be noted that the IIV is derived from
external sources. NYSE Arca accepts no explicit or implicit
liability for the accuracy, completeness or updating of the IIV,
or for the value thereof. The inability of NYSE Arca to provide
the IIV will not in itself result in a halt in the trading of
Trust Units on NYSE Arca.
(2) Euronext
Amsterdam N.V. makes every effort to ensure the accuracy of the
INAV. However, it should be noted that the INAV is derived from
external sources. Euronext Amsterdam N.V. accepts no explicit or
implicit liability for the accuracy, completeness or updating of
the INAV, or for the value thereof. The inability of Euronext
Amsterdam N.V. to provide the INAV will not itself result in a
halt in the trading of Trust Units on Euronext Amsterdam.
The Sponsor is not responsible for the calculation of the INAV
and accepts no explicit or implicit liability for the accuracy
or completeness of the INAV, or of the value thereof.
S-4
Dutch Financial Supervision Act, it is prohibited to offer in
the Netherlands interests in a collective investment scheme,
such as the Trust, if the management company of such collective
investment scheme (or, if the collective investment scheme does
not have a separate management company, the collective
investment scheme itself) does not have a license from the AFM,
unless an exception, exemption or individual dispensation
applies. Under the Dutch Financial Supervision Act, an exception
applies to the Sponsor in respect of the requirement to obtain a
license from the AFM to act as the management company of a
collective investment scheme for so long as the United States is
considered by the Dutch Minister of Finance (Minister van
Financiën) to have adequate supervision of
collective investment schemes. By Ministerial Decree of
January 1, 2007, as amended, in respect of the
accreditation of states as referred to in Article 2:66 of
the Dutch Financial Supervision Act, the United States was
accredited by the Dutch Minister of Finance to have such
adequate supervision in respect of collective investment schemes
authorized by, and subject to supervision of, the SEC. The Trust
and the Sponsor will remain subject to certain ongoing
requirements under the Dutch Financial Supervision Act relating
to the disclosure of certain information to investors, including
the publication of financial statements. The Trust is registered
with the AFM pursuant to Article 1:107 of the Dutch
Financial Supervision Act.
The Sponsor, as legal representative of the Trust, may
discontinue the listing of Trust Units on Euronext
Amsterdam and request the AFM to terminate the registration in
the Netherlands if the Sponsor determines that to do so is in
the best interest of the Trust and the investors, which
determination the Sponsor will make in its sole discretion. In
that event, delisting of Trust Units in the Netherlands
will take effect as of the close of business on the twentieth
(20th) business day after public notice by Euronext Amsterdam
N.V. of its receipt of an application for discontinuation of the
listing of Trust Units, provided Trust Units are
listed on another stock exchange on the day of delisting on
Euronext Amsterdam. The AFM will terminate the Trusts
registration as soon as practicable following the delisting of
Trust Units on Euronext Amsterdam. The decision to delist
from Euronext Amsterdam and the request to the AFM to terminate
the registration will be announced by means of a press release
and through a notice in a daily newspaper of wide circulation in
the Netherlands and on SNS Securities N.V.s website at
www.snssecurities.nl/spdrdjia. After the Trust Units are
delisted from Euronext Amsterdam, investors may be able to trade
Trust Units on other markets. Higher brokerage fees may
apply for trades of Trust Units on other markets.
If the Trust were to terminate in accordance with the terms of
the Trust Agreement, investors would be notified at least
20 days prior to such termination, as described in the
Prospectus. In the case of termination of the Trust,
Trust Units would similarly be delisted and the
registration of the Trust in the Netherlands would be terminated.
In the event a meeting of the holders of Trust Units is
convened, notice of such meeting will be published in a daily
newspaper of wide circulation in the Netherlands and on SNS
Securities N.V.s website at www.snssecurities.nl/spdrdjia
no later than on the fifteenth (15th) day prior to the day of
the meeting. The notice will contain the agenda and the contents
of all documents cognizance of which is of importance to the
holders of
S-5
Trust Units trading on Euronext Amsterdam for the purposes
of the agenda or an indication of where these documents may be
obtained in the Netherlands free of charge.
A copy of the semi-annual reports of the Trust will be published
within nine (9) weeks following the end of the first half
(1/2) of the Trusts fiscal year, and a copy of the
Trusts annual report will be published within four
(4) months following the end of the Trusts fiscal
year. All such reports can be obtained free of charge at the
offices of SNS Securities N.V. and on SNS Securities N.V.s
website at www.snssecurities.nl/spdrdjia. Announcement of the
availability of the semi-annual and annual reports will be made
through a notice in a daily newspaper of wide circulation in the
Netherlands.
Dividends on Trust Units trading on Euronext Amsterdam will
be paid by the Trust in immediately available funds in US
dollars.
Any dividends or other distributions on Trust Units will be
announced on SNS Securities N.V.s website at
www.snssecurities.nl/spdrdjia and in a daily newspaper of wide
circulation in the Netherlands. The regular monthly ex-dividend
date for Units is the third Friday in each calendar month,
unless such day is not a business day, in which case the
ex-dividend date is the immediately preceding business day
(Ex-Dividend Date). In those circumstances in which
the actual dividend amount is not available in time to allow for
publication on the Ex-Dividend Date, the notice in the daily
newspaper of wide circulation will specify that the actual
dividend amount will be available from SNS Securities
N.V.s website at www.snssecurities.nl/spdrdjia prior to
the opening of trading on Euronext Amsterdam.
The value of an investment in the Units traded on Euronext
Amsterdam may be affected by exchange rate fluctuations of the
US dollar against the euro, due to the fact that the Units are
traded on Euronext Amsterdam in euro while the Units and the
Portfolio Securities are traded in US markets in US dollars.
Losses may be sustained by the Trust as a result of negligence,
fraudulent behaviour
and/or
insolvency of the Trustee. Such losses may adversely affect the
value of the Units.
Investors should seek professional advice to ascertain
(a) the possible tax consequences, (b) the legal
requirements and (c) any foreign exchange restrictions or
exchange control requirements which they may encounter under the
laws of the countries of their citizenship, residence or
domicile and which may be relevant to the subscription, holding
or disposal of Trust Units.
Investors in the Trust are advised to review the Introduction
Memorandum in its entirety and carefully consider the risk
factors set out under the heading Risk Factors on
pages 12 to 15 of the Prospectus, and to refer to the
sections of this Supplemental Information Memorandum entitled
Certain United States Federal Income Tax
Considerations and Netherlands Taxation for a
discussion of the tax consequences of an investment by Dutch
investors in Trust Units.
A Financial Information Leaflet (financiële
bijsluiter) is available with information about the Trust
including the costs and risks associated with an investment in
Trust Units. Investors are advised to obtain this leaflet
from the website of SNS Securities N.V. at
www.snssecurities.nl/spdrdjia and read it carefully before
buying Trust Units.
S-6
ENQUIRIES
All enquiries about the Trust should be directed to SPDR DOW
JONES INDUSTRIAL AVERAGE ETF TRUST,
c/o SNS
Securities N.V., Nieuwezijds Voorburgwal 162, 1012 SJ Amsterdam,
the Netherlands, telephone 020 550 8509, telefax 020 427 3486.
The 2008, 2009 and 2010 annual reports of the Trust are
incorporated by reference. Copies of these reports, the letter
from the AFM confirming the registration with the AFM pursuant
to Article 1:107 of the Dutch Financial Supervision Act
(Wet op het financieel toezicht), the Introduction
Memorandum, Trust Agreement, latest
report(3)
and Financial Information Leaflet can be obtained free of charge
at the offices of SNS Securities N.V. or on SNS Securities
N.V.s website at www.snssecurities.nl/spdrdjia.
Additional information regarding the Trust, including
semi-annual reports, may be obtained free of charge on SNS
Securities N.V.s website at www.snssecurities.nl/spdrdjia
and at www.spdrs.com.
(3) This
report, published on a daily basis, contains the information
required by Article 50(2) of the Netherlands Decree on
Market Conduct Supervision of Financial Undertakings (Besluit
Gedragstoezicht financiële ondernemingen Wft),
including the composition and total value of the investments of
the Trust, the number of outstanding Trust Units and the
net asset value per Trust Unit.
S-7
CERTAIN
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a description of the material US federal income
tax consequences of the beneficial ownership of Units by a
person that is, for US federal income tax purposes, a
nonresident alien individual, a foreign corporation, a foreign
trust or a foreign estate (a Non-US Holder). The
discussion below provides general tax information relating to a
Non-US Holders investment in Units, but it does not
purport to be a comprehensive description of all the US federal
income tax considerations that may be relevant to a particular
Non-US Holders decision to invest in Units. This
discussion does not describe all of the tax consequences that
may be relevant in light of a Non-US Holders particular
circumstances. For example, this summary does not include any
discussion of US estate taxes. In addition, this discussion does
not describe tax consequences applicable to Non-US Holders
subject to special rules, such as a nonresident alien individual
who is a former citizen or resident of the United States; an
expatriated entity; a controlled foreign corporation; a passive
foreign investment company; or a corporation that accumulates
earnings to avoid US federal income tax.
If an entity that is classified as a partnership for US federal
income tax purposes holds Units, the US federal income tax
treatment of a partner will generally depend on the status of
the partner and the activities of the partnership. Partnerships
holding Units and partners in such partnerships should consult
their tax advisers as to the particular US federal income tax
consequences of holding and disposing of the Units.
This discussion is based on the Internal Revenue Code of 1986,
as amended (the Code), administrative
pronouncements, judicial decisions, and final, temporary and
proposed Treasury regulations all as of the date hereof, any of
which is subject to change, possibly with retroactive effect.
Prospective purchasers of Units are urged to consult their tax
advisers with regard to the application of the US federal income
tax laws to their particular situations, as well as any tax
consequences arising under the laws of any state, local or
foreign taxing jurisdiction.
If the income that a Non-US Holder derives from the Trust is not
effectively connected with a trade or business
conducted by such Non-US Holder in the United States,
distributions of investment company taxable income
(as described in the US prospectus) to such Non-US Holder will
generally be subject to US federal withholding tax at a rate of
30% (or lower rate under an applicable tax treaty). Under the
treaty for the avoidance of double taxation between the
Netherlands and the United States, any such distributions
derived by a qualified resident of the Netherlands (as
determined under the treaty) will be subject to a reduced rate
of withholding of 15%. Provided that certain requirements are
satisfied, the withholding tax will not be imposed on dividends
paid by the Trust in its taxable years beginning before
January 1, 2012 to the extent that the underlying income
out of which the dividends are paid consists of US-source
interest income or short-term capital gains that would not have
been subject to US withholding tax if received directly by the
Non-US Holder (interest-related dividends and
short-term capital gain dividends, respectively). It
is unclear whether any legislation will be enacted that would
extend this exemption from withholding to the Trusts
taxable years beginning on or after January 1, 2012.
S-8
A Non-US Holder whose income from the Trust is not
effectively connected with a US trade or business
will generally be exempt from US federal income tax on capital
gain dividends and any amounts retained by the Trust that are
designated as undistributed net capital gain, as described in
the US Prospectus. In addition, such a Non-US Holder will
generally be exempt from US federal income tax on any gains
realized upon the sale or exchange of Units. If, however, such a
Non-US Holder is a nonresident alien individual and is
physically present in the United States for 183 days or
more during the taxable year and meets certain other
requirements, such capital gain dividends, undistributed capital
gains and gains from the sale or exchange of Units, net of
certain US source capital losses, will be subject to a 30% US
tax.
If the income from the Trust is effectively
connected with a US trade or business carried on by a
Non-US Holder, any distributions of investment company
taxable income, any capital gain dividends, any amounts
retained by the Trust that are designated as undistributed
capital gains and any gains realized upon the sale or exchange
of Units will be subject to US federal income tax on a net
income basis at the rates applicable to unitholders who are US
persons for US federal income tax purposes. For more
information, see Federal Income Taxes Tax
Consequences to U.S. Holders in the US Prospectus. If
the Non-US Holder is a corporation, it may also be subject to
the US branch profits tax.
Information returns will be filed with the US Internal Revenue
Service (the IRS) in connection with certain
payments on the Units. A Non-US Holder may be subject to US
backup withholding on distributions in respect of the Units or
on the proceeds from a sale or other disposition of Units if
such Non-US Holder does not certify its non-US status under
penalties of perjury or otherwise establish an exemption. Backup
withholding is not an additional tax. Any amounts withheld
pursuant to the backup withholding rules will be allowed as a
credit against the Non-US Holders U.S. federal income
tax liability, if any, and may entitle the Non-US Holder to a
refund, provided that the required information is furnished to
the IRS on a timely basis.
Recent legislation generally imposes withholding at a rate of
30% on payments to certain foreign entities (including financial
intermediaries), after December 31, 2012, of US-source
dividends and the gross proceeds of dispositions of property
that can produce US-source dividends, unless the relevant
foreign entity satisfies various US information reporting and
due diligence requirements (generally relating to ownership by
US persons of interests in, or accounts with, those entities).
Non-US Holders should consult their tax advisors regarding the
possible implications of this legislation on their investment in
Units.
In order to qualify for the exemption from US withholding on
interest-related dividends, to qualify for an
exemption from US backup withholding tax and to qualify for a
reduced rate of US withholding tax on Trust distributions
pursuant to an income tax treaty, a Non-US Holder must generally
deliver to the Trust a properly executed IRS form (generally,
Form W-8BEN).
In order to claim a refund of any Trust-level taxes imposed on
undistributed net capital gains, any withholding taxes or any
backup withholding, a Non-US Holder must obtain a US taxpayer
identification number and file a US federal income tax return,
even if the Non-US Holder would not otherwise be required to
obtain a US taxpayer identification number or file a US income
tax return.
S-9
NETHERLANDS
TAXATION
GENERAL
The following summary describes the principal Netherlands tax
consequences of the acquisition, holding, redemption and
disposal of Trust Units. This section solely addresses the
situation of investors resident or deemed resident of the
Netherlands (including the individual investor who has opted to
be taxed as a resident of the Netherlands). This section does
not purport to be a comprehensive description of all Netherlands
tax considerations that may be relevant to a decision to
acquire, hold or dispose of Trust Units. Each investor
should consult his or her own professional tax advisor with
respect to the tax consequences of an investment in
Trust Units. The discussion of the principal Netherlands
tax consequences of the acquisition, holding, redemption and
disposal of Trust Units set forth below is included for
general information only.
This summary is based on the Netherlands tax legislation,
published case law, treaties, rules, regulations and similar
documentation in force as at the date hereof without prejudice
to any amendments introduced at a later date and implemented
with or without retroactive effect.
For the purpose of the principal Netherlands tax consequences
described herein, it is assumed that:
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(i)
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neither the Trust is, nor one or more companies whose shares are
included in the DJIA are, a resident or deemed to be a resident
of the Netherlands for Netherlands tax purposes or have or are
deemed to have any taxable presence in the Netherlands for
Netherlands tax purposes;
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(ii)
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no individual holder of Trust Units (Individual
Holder), alone, or together with his or her partner (as
that term is statutorily defined) or certain other related
persons, directly or indirectly, holds (a) an interest of
5 percent (5%) or more of the total issued capital of the
Trust or a company whose shares are included in the DJIA or of
5 percent (5%) or more of the issued capital of a certain
class of Trust Units or a certain class of shares of a
company whose shares are included in the DJIA, (b) rights
to acquire, directly or indirectly, such interest or
(c) certain profit sharing rights in the Trust or certain
profit sharing rights in a company whose shares are included in
the DJIA; and that no such interest as mentioned under (a),
(b) or (c) has been disposed of, or is deemed to have
been disposed of, on a non-recognition basis;
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(iii)
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no Individual Holder is taxed for the purposes of Dutch income
tax as an entrepreneur having an enterprise or an independent
activity in the Netherlands to which the Trust Units are
attributable, or who may otherwise be taxed with respect to
benefits derived from the Trust Units being treated as
income derived from work and home;
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(iv)
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no Individual Holders Trust Units or benefits derived
therefrom are in anyway connected to his past, present or future
employment, if any;
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(v)
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no corporate body holder of Trust Units (Corporate
Holder), is eligible for the participation exemption (as
set out in the Dutch Corporate Income Tax Act 1969);
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(vi)
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no Corporate Holder qualifies as an exempt investment
institution (vrijgestelde beleggingsinstelling) or
investment institution (beleggingsinstelling) for the
purpose of the Dutch Corporate Income Tax Act 1969, as a pension
fund, or otherwise as a taxpayer exempt for tax
purposes, and
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(vii)
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a holder of Trust Units is the beneficial owner
(uiteindelijk gerechtigde) of the Trust Units
and/or the
benefits derived from the Trust Units.
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DIVIDEND
WITHHOLDING TAX
Distributions from the Trust are not subject to Netherlands
dividend withholding tax.
CORPORATE
INCOME TAX AND INDIVIDUAL INCOME TAX
Corporate
Holders
If a Corporate Holder is subject to Netherlands corporate income
tax and the Trust Units are attributable to its (deemed)
business assets, distributions on the Trust Units and the
gains realised upon the disposal, transfer or other alienation
of the Trust Units are generally taxable in the Netherlands.
In general, the US dividend withholding tax which is withheld
with respect to distributions made by the Trust will be
creditable for Netherlands corporate income tax purposes in the
hands of the beneficial owner of the Trust Units.
Individual
Holders
A holder who is a private individual and a resident, or treated
as being a resident of the Netherlands for the purposes of Dutch
income tax, must record the Trust Units as assets that are
held in box 3. Taxable income with regard to the
Trust Units is then determined on the basis of a deemed
return on income from savings and investments (sparen en
beleggen), rather than on the basis of income actually
received or gains actually realised. This deemed return is fixed
at a rate of 4% of the holders yield basis
(rendementsgrondslag) at the beginning of the calendar
year, insofar as the yield basis exceeds a certain threshold.
Such yield basis is determined as the fair market value of
certain qualifying assets held by the holder of the
Trust Units, less the fair market value of certain
qualifying liabilities at the beginning of the calendar year.
The fair market value of the Trust Units will be included
as an asset in the holders yield basis. The deemed return
on income from savings and investments is taxed at a rate of
30%. Actual income such as dividend and capital gains realised
by the individual holder will as such not be subject to
Netherlands income tax.
In general, the US dividend withholding tax which is withheld
with respect to distributions made by the Trust will be
creditable for Netherlands individual income tax purposes in the
hands of the beneficial owner of the Trust Units.
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GIFT AND
INHERITANCE TAXES
Generally, gift and inheritance taxes will be due in the
Netherlands in connection with the acquisition of
Trust Units by way of gift by, or on the death of, a holder
of Trust Units who is a resident or deemed to be a resident
of the Netherlands at the time of the gift or of his or her
death.
An individual of the Netherlands nationality is deemed to be a
resident of the Netherlands for the purpose of the Netherlands
gift and inheritance tax if he or she has been a resident of the
Netherlands during the ten years preceding the gift or of his or
her death. An individual of any other nationality is deemed to
be a resident of the Netherlands for the purpose of the
Netherlands gift tax only if he or she has been residing in the
Netherlands at any time during the twelve months preceding the
time of the gift. Applicable tax treaties may override deemed
residency.
VALUE ADDED
TAX (VAT)
No Netherlands VAT should arise in respect of the issuance or
transfer of Trust Units or with regard to distributions on
Trust Units.
OTHER TAXES
AND DUTIES
No capital tax, net wealth tax, registration tax, customs duty,
transfer tax, stamp duty or any other similar documentary tax or
duty will be due in the Netherlands by an Individual Holder or a
Corporate Holder in respect of or in connection with the
subscription, issue, placement, allotment or delivery of
Trust Units.
S-12
GENERAL
AND STATUTORY INFORMATION
CURRENCY
All valuations set forth in the Introduction Memorandum,
semi-annual and annual reports and other communications or
materials provided by the Trust or the Sponsor shall be stated
in US Dollars ($).
PAYING AGENT
The Trust has appointed SNS Securities N.V. as the Netherlands
paying agent with respect to the offering of the Units in the
Netherlands.
LISTING
The Units are listed on Euronext Amsterdam. SNS Securities N.V.
is acting as the listing agent for the Units for the listing on
Euronext Amsterdam.
CLEARING AND
SETTLEMENT
The Units have been accepted for settlement through the systems
of Euroclear.
ISIN code: US2527871063
NOTICES
Any notice regarding the Units shall be validly given if
published in at least one daily newspaper of wide circulation in
the Netherlands. Any such notice shall be deemed to have been
given on the date of publication or, if published more than
once, on the date of the first publication.
SNS Securities N.V. will make available free of charge to
investors in the Netherlands investor communications from the
Trust, including semi-annual and annual reports, prospectuses
and communications and materials relating to investor meetings.
COMPLAINTS
Complaints about the Trust or the Sponsor should be sent in
writing to Lisa M. Dallmer, PDR Services LLC,
c/o NYSE
Euronext, 11 Wall Street, New York, NY 10005, telephone
+1-866-732-8673.
TOTAL
EXPENSE RATIO OF THE TRUST
This chart shows the total expense ratio of the Trust (after
rebates, Trustees earning credits and waivers) for the
fiscal years
2001-2010.
Total
Expense Ratio of the Trust
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For Fiscal Year Ended
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10/31/2010
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10/31/2009
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10/31/2008
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10/31/2007
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10/31/2006
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10/31/2005
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10/31/2004
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10/31/2003
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10/31/2002
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10/31/2001
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0.18
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%
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0.17
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%
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0.17
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%
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0.14
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%
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0.17
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%
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0.17
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%
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0.18
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%
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0.18
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%
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0.18
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%
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0.17
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%
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The total expense ratio is post-calculated at least once a year
by dividing the total costs by the average intrinsic value of
the SPDR DJIA Trust.
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Ordinary operating expenses do not include taxes, brokerage
commissions and any extraordinary non-recurring expenses,
including the cost of any litigation to which the SPDR DJIA
Trust or the Trustee may be a party.
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S-13
STOCK
MOVEMENT INFORMATION CHART:
DAILY CLOSING PRICE OF A TRUST UNIT VS.
DAILY CLOSING INDEX LEVEL OF THE DJIA VS.
DAILY NAV OF A TRUST UNIT
FOR THE
PREVIOUS CALENDAR YEAR.
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Sources:
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The daily NAV and daily closing
price of the Trust were provided by the NYSE Arca and the daily
closing index level for the DJIA was provided by Bloomberg.
Although information contained in the Stock Movement Information
Chart above has been obtained from sources deemed to be
reliable, all information is provided as is without
warranty of any kind. Because of the possibility of human and
mechanical errors, as well as other factors, the Sponsor is not
responsible for any errors or omissions in the information
contained in the Stock Movement Information Chart above.
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PORTFOLIO
TURNOVER RATE
The Trusts portfolio turnover rate is 0.56% for the fiscal
year ended October 31, 2010. Pursuant to
Article 3:25(2) of the Further Regulations on Market
Conduct Supervision of Financial Undertakings (Nadere
Regeling gedragstoezicht financiële ondernemingen Wft)
this portfolio turnover rate is calculated by dividing the total
of security transactions (security purchases + security sales =
total 1) less the total transactions (issue + purchase =
total 2) in units by the average intrinsic value of the
investment institution (X) according to the formula:
[(total 1 − total 2)/X]* 100.
Pursuant to the formula promulgated under the
U.S. Investment Company Act of 1940, as amended, the
Trusts portfolio turnover rate is 0.12% for the fiscal
year ended
S-14
October 31, 2010. This portfolio turnover rate is
calculated by dividing the lesser of purchases or sales by the
monthly average value of the portfolio * 100.
LEGAL
PROCEEDINGS
As of the date of this Supplemental Information Memorandum, the
Trust is not involved in any legal proceedings which might have
an impact on the Trusts future financial situation.
EXPENSES OF
THE TRUST
Information relating to the expenses of the Trust is set out in
the Prospectus under Expenses of the Trust. The
estimated audit expenses in relation to the annual audit of the
financial statements of the Trust by PricewaterhouseCoopers LLP
amount to USD 37,500 and are based on an estimate of hours
times billing rates. The audit expenses are charged to the
results of the Trust.
MATERIAL
CHANGES
There are no material changes since the last full financial year.
STATEMENT IN ACCORDANCE WITH ARTICLE 4:49(2)(B) DUTCH
FINANCIAL SUPERVISION ACT
The Sponsor believes that it, the Trust and the Trustee comply
with the applicable requirements of the Dutch Financial
Supervision Act (Wet op het financieel toezicht) and the
rules promulgated thereunder and that the Introduction
Memorandum complies with the applicable provisions of the Dutch
Financial Supervision Act and the rules promulgated thereunder.
S-15
Assurance
report (ex Section 4:49, subsection 2 under c of the
Financial Supervision Act (Wft))
To the Sponsor of SPDR Dow Jones Industrial Average ETF Trust
Engagement
and responsibilities
We have performed an assurance engagement in respect of the
content of the prospectus and supplemental information
memorandum for the Netherlands of SPDR Dow Jones Industrial
Average ETF Trust. Our engagement was aimed at establishing
whether the prospectus of SPDR Dow Jones Industrial Average ETF
Trust (the Prospectus) together with the
supplemental information memorandum for the Netherlands of SPDR
Dow Jones Industrial Average ETF Trust (the Supplemental
Information Memorandum) at least contains the information
which is required to be included therein pursuant to
Section 4:49, subsection 2 under a through e of the Dutch
Financial Supervision Act (Wet op het financieel
toezicht, hereafter Wft). This assurance
engagement is aimed at obtaining a reasonable level of assurance
pursuant to Section 4:49, subsection 2 under b through e of
the Wft. Unless specifically stated to the contrary in the
Prospectus together with the Supplemental Information
Memorandum, the information contained in the Prospectus together
with the Supplemental Information Memorandum is unaudited.
The respective responsibilities are as follows:
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The Sponsor of the Trust is responsible for preparing the
Prospectus together with the Supplemental Information
Memorandum, which at least contains the information required to
be included therein under the Wft.
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Our responsibility is to issue a conclusion as referred to in
Section 4:49, subsection 2 under c of the Wft.
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Scope
We conducted our examination in accordance with Dutch law,
including Standard 3000 Assurance engagements other
than audits or reviews of historical financial
information. Based thereon, we have performed the
procedures that we deemed necessary under the circumstances to
draw a conclusion.
We have examined whether the Prospectus together with the
Supplemental Information Memorandum contained the information
required to be included therein under Section 4:49,
subsection 2 under b through e, of the Wft.
The law does not require the auditor to perform additional
procedures with respect to Section 4:49, subsection 2 under
a, of the Wft. We believe the assurance evidence we have
obtained is sufficient and appropriate to provide a basis for
our conclusion.
Conclusion
Based on our procedures performed and the description included
in the section Engagement and responsibilities, we
conclude that the Prospectus together with the Supplemental
Information Memorandum at least contains the information
required to be included therein under Section 4:49,
subsection 2 under b through e, of the Wft.
With respect to Section 4:49, subsection 2 under a, of the
Wft, we report to the extent of our knowledge that the
Prospectus together with the Supplemental Information Memorandum
contains the information required to be included therein.
Rotterdam,
February 28, 2011
PricewaterhouseCoopers
Accountants N.V.
drs S.
Barendregt-Roojers RA
Filed
Pursuant to Rule 497(b)
Registration File No. 333-31247
SPDR®
DOW JONES INDUSTRIAL
AVERAGEsm
ETF
TRUST
(SPDR
DJIA TRUST)
(formerly,
DIAMONDS®
Trust, Series 1)
(A
Unit Investment Trust)
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SPDR DJIA Trust is an exchange traded fund designed to generally
correspond to the price and yield performance of the Dow Jones
Industrial Average.
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SPDR DJIA Trust holds all of the Dow Jones Industrial Average
stocks.
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Each Trust Unit represents an undivided ownership interest
in the SPDR DJIA Trust.
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The SPDR DJIA Trust issues and redeems Trust Units only in
multiples of 50,000 Units in exchange for Dow Jones Industrial
Average stocks and cash.
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Individual Trust Units trade on NYSE Arca, Inc. like any
other equity security.
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Minimum trading unit: 1 Trust Unit.
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SPONSOR: PDR SERVICES LLC
(Wholly Owned by NYSE Euronext)
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR
DISAPPROVED THESE SECURITIES NOR PASSED UPON THE ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus Dated February 25, 2011
COPYRIGHT 2011 PDR Services
LLC
SPDR DJIA
TRUST
TABLE OF
CONTENTS
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1
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1
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3
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12
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16
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60
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64
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68
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68
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69
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72
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75
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75
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75
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75
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76
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76
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83
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Dow Jones Industrial
Averagesm,
DJIA®,
Dow
Jones®,
The
Dow®
and
DIAMONDS®
are trademarks and service marks of Dow Jones &
Company, Inc. (Dow Jones) and have been licensed for
use for certain purposes by State Street Global Markets, LLC
pursuant to a License Agreement with Dow Jones and
have been sublicensed for use for certain purposes to the Trust,
PDR Services LLC and NYSE Arca, Inc. pursuant to separate
Sublicenses. SPDR DJIA Trust is not sponsored,
endorsed, sold or promoted by Dow Jones and Dow Jones makes no
representation regarding the advisability of investing in the
Trust.
SPDR®
is a registered trademark of Standard & Poors
Financial Services LLC (S&P) and has been
licensed for use by State Street Corporation. No financial
product offered by State Street Corporation or its affiliates is
sponsored, endorsed, sold or promoted by S&P or its
Affiliates, and S&P and its affiliates make no
representation, warranty or condition regarding the advisability
of buying, selling or holding units/shares in such products.
i
SUMMARY
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Glossary:
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All defined terms used in this Prospectus and page numbers on
which their definitions appear are listed in the Glossary.
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Total Trust Assets:
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$8,071,923,758
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Net Trust Assets:
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$8,058,639,107
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Number of Trust Units:
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72,442,867
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Fractional Undivided Interest in the Trust Represented by each
Unit:
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1/72,442,867th
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Dividend Record Dates:
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Monthly, on the second
(2nd )
Business Day after the third
(3rd )
Friday.
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Dividend Payment Dates:
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Monthly, on the Monday preceding the third
(3rd )
Friday of the next calendar month.
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Trustees Annual Fee:
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From
6/100
of one percent to
10/100
of one percent, based on the NAV of the Trust, as the same may
be adjusted by certain amounts.
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Estimated Ordinary Operating Expenses of the Trust:
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Estimated not to exceed
18/100
of one percent (0.18%) (inclusive of Trustees annual fee
and Sponsor reimbursement of certain expenses, if any).**
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NAV per Unit (based on the value of the Portfolio Securities,
other net assets of the Trust and number of Units outstanding):
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$111.24
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Evaluation Time:
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Closing time of the regular trading session on the New York
Stock Exchange, LLC. (ordinarily 4:00 p.m. New York time).
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1
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Licensor:
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Dow Jones & Company, Inc.
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Mandatory Termination Date:
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The Trust is scheduled to terminate no later than
January 13, 2123, but may terminate earlier under certain
circumstances.
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Discretionary Termination:
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The Trust may be terminated if at any time the value of the
securities held by the Trust is less than $350,000,000, as
adjusted for inflation. The Trust may also be terminated under
other circumstances.
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Market Symbol:
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Units trade on NYSE Arca, Inc. under the symbol DIA.
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Fiscal Year End:
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October 31
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CUSIP:
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78467X109
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*
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The Trust Agreement became
effective, the initial deposit was made and the Trust commenced
operation as the DIAMONDS Trust, Series 1 on
January 13, 1998 (Initial Date of Deposit).
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**
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As of the fiscal year ended
October 31, 2010, gross ordinary operating expenses of the
Trust were 0.18% of the Trusts daily NAV. Future expense
accruals will depend primarily on the level of the Trusts
net assets and the level of Trust expenses. The amount of the
earnings credit will be equal to the then current Federal Funds
Rate, as reported in nationally distributed publications,
multiplied by each days daily cash balance, if any, in the
Trusts cash account, reduced by the amount of reserves, if
any, for that account required by the Federal Reserve Board of
Governors. Until further notice, the Sponsor has undertaken that
it will not permit the ordinary operating expenses of the Trust
to exceed an amount that is 18/100 of 1% (0.18%) per annum of
the daily NAV of the Trust after taking into account any
expenses that offset credits. During the fiscal year ended
October 31, 2010, no expenses of the Trust were assumed by
the Sponsor. The Sponsor may discontinue or change this
undertaking at any time and therefore there is no guarantee that
the Trusts ordinary operating expenses will not exceed
0.18% of the Trusts daily NAV. See Expenses of the
Trust Trustee Fee Scale for a description of
the Trustees fee.
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2
Highlights
Units
are Ownership Interests in the SPDR DJIA Trust
SPDR DJIA Trust (Trust) is a unit investment trust
that issues securities called Trust Units or
Units. The Trust is organized under the laws of the
State of New York and is governed by a trust agreement between
State Street Bank and Trust Company (Trustee)
and PDR Services LLC (Sponsor), dated and executed
as of January 13, 1998, as amended
(Trust Agreement). The Trust is an investment
company registered under the Investment Company Act of 1940.
Trust Units represent an undivided ownership interest in a
portfolio of all of the common stocks of the Dow Jones
Industrial Average (DJIA).
Units
Should Closely Track the Value of the Stocks Included in the
DJIA
The Trust intends to provide investment results that, before
expenses, generally correspond to the price and yield
performance of the DJIA. Current information regarding the value
of the DJIA is available from market information services. Dow
Jones obtains information for inclusion in, or for use in the
calculation of, the DJIA from sources Dow Jones considers
reliable. None of Dow Jones, the Sponsor, the Trust, the
Trustee, NYSE Arca, Inc. or its affiliates accepts
responsibility for or guarantees the accuracy
and/or
completeness of the DJIA or any data included in the DJIA.
The Trust holds securities and cash and is not actively
managed by traditional methods, which would
typically involve effecting changes in an investment portfolio
on the basis of judgments relating to economic, financial and
market considerations. To maintain the correspondence between
the composition and weightings of stocks held by the Trust
(Portfolio Securities or, collectively,
Portfolio) and the component stocks of the DJIA
(Index Securities), the Trustee adjusts the
Portfolio from time to time to conform to periodic changes in
the identity
and/or
relative weightings of Index Securities. The Trustee generally
makes these adjustments to the Portfolio within three
(3) Business Days (defined below) before or after the day
on which changes in the DJIA are scheduled to take effect. Any
change in the identity or weighting of an Index Security will
result in a corresponding adjustment to the prescribed Portfolio
Deposit effective on any day that the New York Stock Exchange,
LLC (NYSE) is open for business (Business
Day) either prior to, on, or following the day on which
the change to the DJIA takes effect after the close of the
market.
The value of Trust Units fluctuates in relation to changes
in the value of the Portfolio. The market price of each
individual Unit may not be identical to the net asset value
(NAV) of such Unit but historically, these two
valuations have generally been close. See the table
Frequency Distribution of Discounts and Premiums for the
3
SPDR DJIA Trust: Bid/Ask Price vs. Net Asset Value (NAV) as of
12/31/2010
herein.
Units
are Listed and Trade on NYSE Arca, Inc.
Units are listed for trading on NYSE Arca, Inc. (the
Exchange or NYSE Arca), and are bought
and sold in the secondary market like ordinary shares of stock
at any time during the trading day. Units are traded on the
Exchange in 100 Unit round lots, but can be traded in odd lots
of as little as one Unit. The Exchange may halt trading of Units
under certain circumstances, as summarized herein (see
Exchange Listing).
Brokerage
Commissions on Units
Secondary market purchases and sales of Units are subject to
ordinary brokerage commissions and charges.
The
Trust Issues and Redeems Units in Multiples of 50,000 Units
Called Creation Units*
The Trust issues and redeems Units only in specified large lots
of 50,000 Units or multiples thereof referred to as
Creation Units. Fractional Creation Units may be
created or redeemed only in limited
circumstances.*
Creation Units are issued by the Trust to certain persons known
as Authorized Participants who, after placing a
creation order with ALPS Distributors, Inc.
(Distributor), deposit with the Trustee a specified
portfolio of securities substantially similar in composition and
weighting to Index Securities along with a cash payment
generally equal to dividends (net of expenses) accumulated up to
the time of the deposit. If the Trustee determines that one or
more Index Securities are likely to be unavailable, or available
in insufficient quantity, for delivery upon creation of Creation
Units, the Trustee may permit the cash equivalent value of one
or more of these Index Securities to be included in the
Portfolio Deposit as a part of the Cash Component in lieu
thereof. If a creator is restricted by regulation or otherwise
from investing or engaging in a transaction in one or more Index
Securities, the Trustee may permit the cash equivalent value of
such Index Securities to be included in the Portfolio Deposit
based on the market value of such Index Securities as of the
Evaluation Time on the date such creation order is deemed
received by the Distributor as part of the Cash Component in
lieu of the inclusion of such Index Securities in the stock
portion of the Portfolio Deposit.
* See, however, the
discussion of termination of the Trust in this Prospectus for a
description of the circumstances in which Units may be redeemed
in less than a Creation Unit size aggregation of 50,000 Units.
4
Creation Units are redeemable in kind only and are not
redeemable for cash. Upon receipt of one or more Creation Units,
the Trust delivers to the redeeming holder a portfolio of Index
Securities (based on NAV of the Trust), together with a Cash
Redemption Payment that on any given Business Day is an
amount identical to the Cash Component of a Portfolio Deposit.
If the Trustee determines that one or more Index Securities are
likely to be unavailable or available in insufficient quantity
for delivery by the Trust upon the redemption of Creation Units,
the Trustee may deliver the cash equivalent value of one or more
of these Index Securities, based on their market value as of the
Evaluation Time on the date the redemption order is deemed
received by the Trustee, as part of the Cash
Redemption Payment in lieu thereof.
Creation
Orders Must be Placed with the Distributor
All orders for Creation Units must be placed with the
Distributor. To be eligible to place these orders, an entity or
person must be an Authorized Participant, which is
either (a) a Participating Party, or (b) a
DTC Participant, and in each case must have executed
an agreement with the Distributor and the Trustee, as may be
amended from time to time (Participant Agreement).
The term Participating Party means a broker-dealer
or other participant in the Clearing Process (as defined below),
through the Continuous Net Settlement (CNS) System
of the National Securities Clearing Corporation
(NSCC), a clearing agency registered with the
Securities and Exchange Commission (SEC) and the
term DTC Participant means a participant in The
Depository Trust Company (DTC). Payment for
orders is made by deposits with the Trustee of a portfolio of
securities, substantially similar in composition and weighting
to Index Securities, and a cash payment in an amount equal to
the Dividend Equivalent Payment (as defined below), plus or
minus the Balancing Amount (as defined below). Dividend
Equivalent Payment is an amount equal, on a per Creation
Unit basis, to the dividends on the Portfolio (with ex-dividend
dates within the accumulation period), net of expenses and
accrued liabilities for such period (including, without
limitation, (i) taxes or other governmental charges against
the Trust not previously deducted, if any, and (ii) accrued
fees of the Trustee and other expenses of the Trust (including
legal and auditing expenses) and other expenses not previously
deducted), calculated as if all of the Portfolio Securities had
been held for the entire accumulation period for such
distribution. The Dividend Equivalent Payment and the Balancing
Amount collectively are referred to as Cash
Component and the deposit of a portfolio of securities and
the Cash Component collectively are referred to as a
Portfolio Deposit. Persons placing creation orders
with the Distributor must deposit Portfolio Deposits either
(i) through the CNS clearing process of NSCC, as such
processes have been enhanced to effect creations and redemptions
of Creation Units (such processes referred to herein as the
Clearing Process) or (ii) with the Trustee
outside the Clearing Process (i.e., through the facilities of
DTC).
5
The Distributor acts as underwriter of Trust Units on an
agency basis. The Distributor maintains records of the orders
placed with it and the confirmations of acceptance and furnishes
confirmations of acceptance of the orders to those placing such
orders. The Distributor also is responsible for delivering a
prospectus to persons creating Trust Units. The Distributor
also maintains a record of the delivery instructions in response
to orders and may provide certain other administrative services,
such as those related to state securities law compliance.
The Distributor is a corporation organized under the laws of the
State of Colorado and is located at 1290 Broadway,
Suite 1100, Denver, CO 80203, toll free number:
1-866-732-8673. The Distributor is a registered broker-dealer
and a member of the Financial Industry Regulatory Authority
(FINRA). The Sponsor of the Trust pays the
Distributor for its services a flat annual fee. The Sponsor will
not seek reimbursement for such payment from the Trust without
obtaining prior exemptive relief from the SEC.
Expenses
of the Trust
The expenses of the Trust are accrued daily and reflected in the
NAV of the Trust.
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Shareholder Fees:
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None*
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(fees paid directly from your investment)
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Estimated Trust Annual Ordinary Operating Expenses:
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Current Trust Annual Ordinary
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As a % of Trust
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Operating Expenses
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Average Net Assets
|
|
|
Trustees Fee
|
|
|
0.06
|
%
|
Dow Jones License Fee
|
|
|
0.04
|
%
|
Registration Fees
|
|
|
0.00
|
%
|
Marketing
|
|
|
0.06
|
%
|
Other Operating Expenses
|
|
|
0.02
|
%
|
|
|
|
|
|
Net Expenses**
|
|
|
0.18
|
%
|
|
|
|
|
|
Future expense accruals will depend primarily on the level of
the Trusts net assets and the level of expenses.
|
|
|
*
|
|
Investors do not pay shareholder
fees directly from their investment, but purchases and
redemptions of Creation Units are subject to Transaction Fees
(described below in A Transaction Fee is Payable For Each
Creation and For Each Redemption of Creation Units), and
purchases and sales of Units in the secondary market are subject
to ordinary brokerage commissions and charges (described above
in Brokerage Commissions on Units).
|
|
**
|
|
Until the Sponsor otherwise
determines, the Sponsor has undertaken that the ordinary
operating expenses of the Trust will not be permitted to exceed
0.18% of the Trusts daily NAV. Gross expenses of the Trust
for the year ended October 31, 2010, without regard to this
undertaking, did not exceed 0.18% of the daily NAV of the Trust
and therefore no expenses of the Trust were assumed by the
|
6
|
|
|
|
|
Sponsor. The Sponsor reserves the
right to discontinue this undertaking in the future. Therefore,
there is no guarantee that the Trusts ordinary operating
expenses will not exceed 0.18% of the Trusts daily NAV.
Trust expenses were reduced during the same period by a
Trustees earnings credit of less than 0.01% of the
Trusts daily NAV as a result of uninvested cash balances
in the Trust. The amount of earnings credit will be equal to the
then current Federal Funds Rate, as reported in nationally
distributed publications, multiplied by each days daily
cash balance, if any, in the Trusts cash account, reduced
by the amount of reserves, if any, for that account required by
the Federal Reserve Board of Governors.
|
Bar
Chart and Table
The bar chart below (Bar Chart) and the table on the
next page entitled Average Annual Total Returns (For
Periods Ending December 31, 2010) (Table)
provide some indication of the risks of investing in the Trust
by showing the variability of the Trusts returns based on
net assets and comparing the Trusts performance to the
performance of the DJIA. Past performance (both before and after
tax) is not necessarily an indication of how the Trust will
perform in the future.
The after-tax returns presented in the Table are calculated
using the highest historical individual federal marginal income
tax rates and do not reflect the impact of state and local
taxes. Your actual after-tax returns will depend on your
specific tax situation and may differ from those shown below.
After-tax returns are not relevant to investors who hold Units
through tax-deferred arrangements, such as 401(k) plans or
individual retirement accounts. The total returns in the Bar
Chart below, as well as the total and after-tax returns
presented in the Table, do not reflect Transaction Fees payable
by those persons purchasing and redeeming Creation Units, nor
brokerage commissions incurred by those persons purchasing and
selling Units in the secondary market (see footnotes
(2) and (3) to the Table).
This bar chart shows the performance of the Trust for each full
calendar year for the past 10 years ended December 31,
2010. During the period shown above (January 1, 2001
through December 31, 2010), the highest quarterly return
for the Trust was 15.71% (for the quarter ended
September 30, 2009), and the lowest was −18.39% (for
the quarter ended December 31, 2008).
7
Average
Annual Total Returns* (For Periods Ending December 31,
2010)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Past
|
|
|
Past
|
|
|
Past
|
|
|
|
One Year
|
|
|
Five Years
|
|
|
Ten Years
|
|
|
SPDR DJIA Trust
|
|
|
|
|
|
|
|
|
|
|
|
|
Return Before
Taxes(1)(2)(3)
|
|
|
13.82
|
%
|
|
|
4.15
|
%
|
|
|
2.99
|
%
|
Return After Taxes on
Distributions(1)(2)(3)
|
|
|
13.39
|
%
|
|
|
3.76
|
%
|
|
|
2.51
|
%
|
Return After Taxes on Distributions and Redemption of Creation
Units(1)(2)(3)
|
|
|
9.50
|
%
|
|
|
3.52
|
%
|
|
|
2.40
|
%
|
DJIA(4)
|
|
|
14.06
|
%
|
|
|
4.31
|
%
|
|
|
3.15
|
%
|
|
|
|
*
|
|
Total returns assume that dividends
and capital gain distributions have been reinvested in the Trust
at the net asset value per unit.
|
|
(1)
|
|
Includes all applicable ordinary
operating expenses set forth above in the section of
Highlights entitled Estimated Trust Annual
Ordinary Operating Expenses.
|
|
(2)
|
|
Does not include the Transaction
Fee (as defined below), which is payable to the Trustee only by
persons purchasing and redeeming Creation Units, as discussed
below in the section of Highlights entitled A
Transaction Fee is Payable For Each Creation and For Each
Redemption of Creation Units. If these amounts were
reflected, returns would be less than those shown.
|
|
(3)
|
|
Does not include brokerage
commissions and charges incurred only by persons who make
purchases and sales of Units in the secondary market, as
discussed above in the section of Highlights
entitled Brokerage Commissions on Units. If these
amounts were reflected, returns would be less than those shown.
|
|
(4)
|
|
Does not reflect deductions for
taxes, operating expenses, Transaction Fees, brokerage
commissions, or fees of any kind.
|
8
SPDR DJIA
TRUST
GROWTH OF
$10,000 INVESTMENT
SINCE
INCEPTION(1)
|
|
|
(1) |
|
Past performance is not necessarily
an indication of how the Trust will perform in the future.
|
A
Transaction Fee is Payable for Each Creation and for Each
Redemption of Creation Units
The transaction fee payable to the Trustee in connection with
each creation and redemption of Creation Units made through the
Clearing Process (Transaction Fee) is
non-refundable, regardless of the NAV of the Trust. The
Transaction Fee is $1,000 per Participating Party per day,
regardless of the number of Creation Units created or redeemed
on such day. The $1,000 charge is subject to a limit not to
exceed
10/100
of one percent (10 basis points) of the value of one
Creation Unit at the time of creation (10 Basis Point
Limit).
For creations and redemptions outside the Clearing Process, an
additional amount not to exceed three (3) times the
Transaction Fee applicable for one Creation Unit is charged per
Creation Unit per day. Under the current schedule, therefore,
the total fee charged in connection with creating or redeeming
one Creation Unit outside the Clearing Process would be $1,000
(the Transaction Fee for the creation or redemption of one
Creation Unit) plus an additional amount up to $3,000 (3 times
$1,000), for a total not to exceed $4,000. Creators and
redeemers restricted from engaging in transactions in one or
more Index Securities may pay the Trustee the Transaction Fee
and may pay an additional amount per Creation Unit not to exceed
three (3) times the Transaction Fee applicable for one
Creation Unit.
9
Units
are Held in Book Entry Form Only
DTC or its nominee is the record or registered owner of all
outstanding Units. Beneficial ownership of Units is shown on the
records of DTC or its participants. Individual certificates are
not issued for Units. See The Trust Securities
Depository; Book-Entry-Only System.
SPDR
DJIA Trust Makes Periodic Dividend Payments
Unitholders receive each calendar month an amount corresponding
to the amount of any cash dividends declared on the Portfolio
Securities during the applicable period, net of fees and
expenses associated with operation of the Trust, and taxes, if
applicable. Because of such fees and expenses, the dividend
yield for Units is ordinarily less than that of the DJIA.
Investors should consult their tax advisors regarding tax
consequences associated with Trust dividends, as well as those
associated with Unit sales or redemptions.
Monthly distributions based on the amount of dividends payable
with respect to Portfolio Securities and other income received
by the Trust, net of fees and expenses, and taxes, if
applicable, are made via DTC and its participants to Beneficial
Owners on each Dividend Payment Date. Any capital gain income
recognized by the Trust in any taxable year that is not
previously distributed during the year ordinarily is to be
distributed at least annually in January of the following
taxable year. The Trust may make additional distributions
shortly after the end of the year in order to satisfy certain
distribution requirements imposed by the Internal Revenue Code
of 1986, as amended (Code). Although all income
distributions are currently made monthly, under certain limited
circumstances the Trustee may vary the periodicity with which
distributions are made. Those Beneficial Owners interested in
reinvesting their monthly distributions may do so through a
dividend reinvestment service, if one is offered by their
broker-dealer. Under limited certain circumstances, special
dividend payments also may be made to the Beneficial Owners. See
Administration of the Trust Distributions to
Beneficial Owners.
The
Trust Intends to Qualify as a Regulated Investment
Company
For its taxable year ended October 31, 2010, the Trust
believes that it qualified for tax treatment as a
regulated investment company under Subchapter M of
the Code (a RIC). The Trust intends to continue to
qualify as a RIC. As a RIC, the Trust will generally not be
subject to U.S. federal income tax for any taxable year on
income, including net capital gains, that it distributes to the
holders of Units, provided that it distributes on a timely basis
at least 90% of its investment company taxable
income (generally, its taxable income other than net
capital gain) for such taxable year. In addition, provided that
the Trust distributes during each calendar year substantially
all of its ordinary income and capital gains, the Trust will not
be subject to U.S. federal excise tax. The Trust intends to
distribute annually its entire investment company taxable
income and net capital gain. For U.S. federal income
tax purposes, (a) distributions to an
10
individual or other non-corporate investor during a taxable year
of such investor beginning before January 1, 2013 will be
treated as qualified dividend income, which is
subject to tax at rates applicable to long-term capital gains,
to the extent that such distributions are made out of
qualified dividend income received by the Trust and
(b) distributions to a corporate investor will qualify for
the dividends-received deduction to the extent that such
distributions are made out of qualifying dividends received by
the Trust, provided, in each case, that the investor meets
certain holding period and other requirements with respect to
its Units. The Trusts regular monthly distributions are
based on the dividend performance of the Portfolio during such
monthly distribution period rather than the actual taxable
income of the Trust. As a result, a portion of the distributions
of the Trust may be treated as a return of capital or a capital
gain dividend for federal income tax purposes or the Trust may
be required to make additional distributions to maintain its
status as a RIC or to avoid imposition of income or excise taxes
on undistributed income.
Subchapter M of the Code imposes certain asset diversification
requirements. The Trustee may adjust the composition of the
Portfolio at any time if, in the Trustees view, such
adjustment is necessary to ensure continued qualification of the
Trust as a regulated investment company for tax
purposes.
Termination
of the Trust
The Trust has a specified term. The Trust is scheduled to
terminate on the first to occur of (a) January 13,
2123 or (b) the date 20 years after the death of the
last survivor of fifteen persons named in the
Trust Agreement, the oldest of whom was born in 1994 and
the youngest of whom was born in 1997. Upon termination, the
Trust may be liquidated and pro rata shares of the assets of the
Trust, net of certain fees and expenses, distributed to holders
of Units.
Restrictions
on Purchases of Trust Units by Investment
Companies
Purchases of Trust Units by investment companies are
subject to restrictions set forth in Section 12(d)(1) of
the Investment Company Act of 1940. The Trust has received an
SEC order that permits registered investment companies to invest
in Units beyond these limits, subject to certain conditions and
terms. One such condition is that registered investment
companies relying on the order must enter into a written
agreement with the Trust. Registered investment companies
wishing to learn more about the order and the agreement should
contact the Distributor by telephone at 1-866-732-8673.
The Trust itself is also subject to the restrictions of
Section 12(d)(1). This means that, absent an exemption or
SEC relief, (a) the Trust cannot invest in any registered
investment company, to the extent that the Trust would own more
than 3% of that registered investment companys outstanding
share position, (b) the Trust cannot invest more than 5% of
its total assets in the securities of any one registered
investment company, and (c) the Trust cannot invest more
than 10% of its total assets in the securities of registered
investment companies in the aggregate.
11
Risk
Factors
Investors can lose money by investing in Units. Investors should
carefully consider the risk factors described below together
with all of the other information included in this Prospectus
before deciding to invest in Units.
Investment in the Trust involves the risks inherent in an
investment in any equity security. An investment
in the Trust is subject to the risks of any investment in a
portfolio of large-capitalization common stocks, including the
risk that the general level of stock prices may decline, thereby
adversely affecting the value of such investment. The value of
Portfolio Securities may fluctuate in accordance with changes in
the financial condition of the issuers of Portfolio Securities,
the value of common stocks generally and other factors. The
identity and weighting of Index Securities and the Portfolio
Securities also change from time to time.
The financial condition of the issuers may become impaired or
the general condition of the stock market may deteriorate
(either of which may cause a decrease in the value of the
Portfolio and thus in the value of Units). Common stocks are
susceptible to general stock market fluctuations and to volatile
increases and decreases in value as market confidence in and
perceptions of their issuers change. These investor perceptions
are based on various and unpredictable factors including
expectations regarding government, economic, monetary and fiscal
policies, inflation and interest rates, economic expansion or
contraction, and global or regional political, economic and
banking crises.
Holders of common stocks of any given issuer incur more risk
than holders of preferred stocks or debt obligations of the
issuer because the rights of common stockholders, as owners of
the issuer, generally are inferior to the rights of creditors
of, or holders of debt obligations or preferred stocks issued
by, such issuer. Further, unlike debt securities that typically
have a stated principal amount payable at maturity, or preferred
stocks that typically have a liquidation preference and may have
stated optional or mandatory redemption provisions, common
stocks have neither a fixed principal amount nor a maturity.
Common stock values are subject to market fluctuations as long
as the common stock remains outstanding. The value of the
Portfolio will fluctuate over the entire life of the Trust.
There can be no assurance that the issuers of Portfolio
Securities will pay dividends. Distributions
generally depend upon the declaration of dividends by the
issuers of Portfolio Securities and the declaration of such
dividends generally depends upon various factors, including the
financial condition of the issuers and general economic
conditions.
The Trust is not actively managed. The Trust
is not actively managed by traditional methods, and
therefore the adverse financial condition of an issuer will not
result in its elimination from the Portfolio unless such issuer
is removed from the DJIA.
12
A liquid trading market for certain Portfolio Securities may
not exist. Although most of the Portfolio
Securities are listed on a national securities exchange, the
principal trading market for some may be in the
over-the-counter
market. The existence of a liquid trading market for certain
Portfolio Securities may depend on whether dealers will make a
market in such stocks. There can be no assurance that a market
will be made or maintained for any Portfolio Securities or that
any such market will be or remain liquid. The price at which
Portfolio Securities may be sold and the value of the Portfolio
will be adversely affected if trading markets for Portfolio
Securities are limited or absent.
The Trust may not exactly replicate the performance of the
DJIA. The Trust may not be able to replicate
exactly the performance of the DJIA because the total return
generated by the Portfolio is reduced by Trust expenses and
transaction costs incurred in adjusting the actual balance of
the Portfolio. In addition, it is possible that the Trust may
not always fully replicate the performance of the DJIA due to
the unavailability of certain Index Securities in the secondary
market or due to other extraordinary circumstances. In addition,
the Trusts portfolio may deviate from the DJIA to the
extent required to ensure continued qualification as a
regulated investment company under Subchapter M of
the Code.
Investment in the Trust may have adverse tax
consequences. Investors in the Trust should
consider the U.S. federal, state, local and other tax
consequences of the acquisition, ownership and disposition of
Trust Units. For a discussion of certain U.S. federal
income tax consequences of the acquisition, ownership and
disposition of Trust Units, see Federal Income
Taxes herein.
NAV may not always correspond to market
price. The NAV of Units in Creation Unit size
aggregations and, proportionately, the NAV per Unit, change as
fluctuations occur in the market value of Portfolio Securities.
Investors should be aware that the aggregate public trading
market price of 50,000 Units may be different from the NAV of a
Creation Unit (i.e., 50,000 Units may trade at a premium over,
or at a discount to, the NAV of a Creation Unit) and similarly
the public trading market price per Unit may be different from
the NAV of a Creation Unit on a per Unit basis. This price
difference may be due, in large part, to the fact that supply
and demand forces at work in the secondary trading market for
Units are closely related to, but not identical to, the same
forces influencing the prices of Index Securities trading
individually or in the aggregate at any point in time. Investors
also should note that the size of the Trust in terms of total
assets held may change substantially over time and from time to
time as Creation Units are created and redeemed.
The Exchange may halt trading in
Trust Units. Units are listed for trading on
the Exchange under the market symbol DIA. Trading in
Trust Units may be halted under certain circumstances as
summarized herein (see Exchange Listing). Also,
there can be no assurance that the requirements of the Exchange
necessary to maintain the
13
listing of Trust Units will continue to be met or will
remain unchanged. The Trust will be terminated if
Trust Units are delisted from the Exchange.
An investment in Trust Units is not the same as a direct
investment in the Index Securities or other equity
securities. Trust Units are subject to risks
other than those inherent in an investment in the Index
Securities or other equity securities, in that the selection of
the stocks included in the Portfolio, the expenses associated
with the Trust, or other factors distinguishing an ownership
interest in a trust from the direct ownership of a portfolio of
stocks may affect trading in Trust Units differently from
trading in the Index Securities or other equity securities.
Additionally, Trust Units may perform differently than
other investments in portfolios containing large capitalization
stocks based upon or derived from an index other than the DJIA.
For example, the great majority of component stocks of the DJIA
are drawn from among the largest of the large capitalization
universe, while other indexes may represent a broader sampling
of large capitalization stocks. Also, other indexes may use
different methods for assigning relative weights to the index
components than the price weighted method used by the DJIA. As a
result, DJIA accords relatively more weight to stocks with a
higher price-to-market capitalization ratio than a similar
market capitalization-weighted index.
The regular settlement period for Creation Units may be
reduced. Except as otherwise specifically noted,
the time frames for delivery of stocks, cash, or
Trust Units in connection with creation and redemption
activity within the Clearing Process are based on NSCCs
current regular way settlement period of three
(3) days during which NSCC is open for business (each such
day an NSCC Business Day). NSCC may, in the future,
reduce such regular way settlement period, in which
case there may be a corresponding reduction in settlement
periods applicable to Units creations and redemptions.
Clearing and settlement of Creation Units may be delayed or
fail. The Trustee delivers a portfolio of stocks
for each Creation Unit delivered for redemption substantially
identical in weighting and composition to the stock portion of a
Portfolio Deposit as in effect on the date the request for
redemption is deemed received by the Trustee. If the redemption
is processed through the Clearing Process, the stocks that are
not delivered are covered by NSCCs guarantee of the
completion of such delivery. Any stocks not received on
settlement date are
marked-to-market
until delivery is completed. The Trust, to the extent it has not
already done so, remains obligated to deliver the stocks to
NSCC, and the market risk of any increase in the value of the
stocks until delivery is made by the Trust to NSCC could
adversely affect the NAV of the Trust. Investors should note
that the stocks to be delivered to a redeemer submitting a
redemption request outside of the Clearing Process that are not
delivered to such redeemer are not covered by NSCCs
guarantee of completion of delivery.
14
Buying or selling Trust Units incurs
costs. Purchases and sales of exchange traded
securities involve both brokerage and spread costs.
Investors buying or selling Trust Units will incur a
commission, fee or other charges imposed by the broker executing
the transaction. In addition, investors will also bear the cost
of the spread, which is the difference between the
bid (the price at which securities professionals
will buy Trust Units) and the ask or
offer (the price at which securities professionals
are willing to sell Trust Units). Frequent trading in
Trust Units by an investor may involve brokerage and spread
costs that may have a significant negative effect upon the
investors overall investment results. This may be
especially true for investors who make frequent periodic
investments in small amounts of Trust Units over a lengthy
time period.
15
SPDR DOW
JONES INDUSTRIAL AVERAGE ETF TRUST
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Trustee and Unitholders of SPDR Dow Jones Industrial Average ETF
Trust
In our opinion, the accompanying statement of assets and
liabilities, including the schedule of investments, and the
related statements of operations and of changes in net assets
and the financial highlights present fairly, in all material
respects, the financial position of SPDR Dow Jones Industrial
Average ETF Trust (the Trust) at October 31,
2010, the results of its operations, the changes in its net
assets and the financial highlights for the periods indicated,
in conformity with accounting principles generally accepted in
the United States of America. These financial statements and
financial highlights (hereafter referred to as financial
statements) are the responsibility of the Trustee. Our
responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit of these
financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles
used and significant estimates made by management, and
evaluating the overall financial statement presentation. We
believe that our audit, which included confirmation of
securities at October 31, 2010 by correspondence with the
custodian and brokers, provide a reasonable basis for our
opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 17, 2010
16
SPDR Dow Jones Industrial Average ETF Trust
October 31, 2010
|
|
|
|
|
|
Assets
|
|
|
|
|
Investments in securities, at value
|
|
$
|
8,044,134,113
|
|
Cash
|
|
|
16,681,153
|
|
Receivable for units of fractional undivided interest
(Units) issued in-kind
|
|
|
45,207
|
|
Dividends receivable
|
|
|
11,063,285
|
|
|
|
|
|
|
Total Assets
|
|
|
8,071,923,758
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Income distribution payable
|
|
|
6,576,257
|
|
Accrued Trustee expense
|
|
|
414,570
|
|
Accrued expenses and other liabilities
|
|
|
6,293,824
|
|
|
|
|
|
|
Total Liabilities
|
|
|
13,284,651
|
|
|
|
|
|
|
Net Assets
|
|
$
|
8,058,639,107
|
|
|
|
|
|
|
|
|
|
|
|
Net Assets Consist of:
|
|
|
|
|
Paid in capital (Note 4)
|
|
$
|
11,111,430,615
|
|
Undistributed net investment income
|
|
|
22,812,991
|
|
Accumulated net realized loss on investments
|
|
|
(1,582,810,357
|
)
|
Net unrealized depreciation on investments
|
|
|
(1,492,794,142
|
)
|
|
|
|
|
|
Net Assets
|
|
$
|
8,058,639,107
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value per Unit
|
|
$
|
111.24
|
|
|
|
|
|
|
Units outstanding, unlimited Units authorized, $0.00
par value
|
|
|
72,442,867
|
|
|
|
|
|
|
|
|
|
|
|
Cost of investments
|
|
$
|
9,536,928,255
|
|
|
|
|
|
|
See accompanying notes to financial statements.
17
SPDR Dow Jones Industrial Average ETF Trust
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year
|
|
|
For the Year
|
|
|
For the Year
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
|
October 31, 2010
|
|
|
October 31, 2009
|
|
|
October 31, 2008
|
|
|
Investment Income
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend income
|
|
$
|
222,616,182
|
|
|
$
|
258,082,109
|
|
|
$
|
234,266,377
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Trustee expense
|
|
|
5,170,959
|
|
|
|
4,465,047
|
|
|
|
4,878,701
|
|
Marketing expense
|
|
|
4,956,465
|
|
|
|
4,583,583
|
|
|
|
5,319,946
|
|
DJIA license fee
|
|
|
3,404,310
|
|
|
|
3,155,722
|
|
|
|
4,152,507
|
|
Legal and audit services
|
|
|
436,458
|
|
|
|
199,547
|
|
|
|
181,128
|
|
Other expenses
|
|
|
596,111
|
|
|
|
337,558
|
|
|
|
389,842
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Expenses
|
|
|
14,564,303
|
|
|
|
12,741,457
|
|
|
|
14,922,124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Investment Income
|
|
|
208,051,879
|
|
|
|
245,340,652
|
|
|
|
219,344,253
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized and Unrealized Gain (Loss) on Investments
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized gain (loss) on investment transactions
|
|
|
56,806,457
|
|
|
|
(1,286,963,860
|
)
|
|
|
(172,099,218
|
)
|
Net change in unrealized appreciation (depreciation)
|
|
|
908,029,583
|
|
|
|
1,286,025,132
|
|
|
|
(3,238,666,792
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Realized and Unrealized Gain (Loss) on Investments
|
|
|
964,836,040
|
|
|
|
(938,728
|
)
|
|
|
(3,410,766,010
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Increase (Decrease) in Net Assets From Operations
|
|
$
|
1,172,887,919
|
|
|
$
|
244,401,924
|
|
|
$
|
(3,191,421,757
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
18
SPDR Dow
Jones Industrial Average ETF Trust
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year
|
|
|
For the Year
|
|
|
For the Year
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
|
October 31, 2010
|
|
|
October 31, 2009
|
|
|
October 31, 2008
|
|
|
Increase (decrease) in net assets resulting from
operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
$
|
208,051,879
|
|
|
$
|
245,340,652
|
|
|
$
|
219,344,253
|
|
Net realized gain (loss) on investment transactions
|
|
|
56,806,457
|
|
|
|
(1,286,963,860
|
)
|
|
|
(172,099,218
|
)
|
Net change in unrealized appreciation (depreciation)
|
|
|
908,029,583
|
|
|
|
1,286,025,132
|
|
|
|
(3,238,666,792
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in net assets resulting from
operations:
|
|
|
1,172,887,919
|
|
|
|
244,401,924
|
|
|
|
(3,191,421,757
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net equalization credits and charges
|
|
|
(6,394,413
|
)
|
|
|
(12,761,900
|
)
|
|
|
1,639,517
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions to unitholders from net investment income
|
|
|
(201,712,941
|
)
|
|
|
(231,359,719
|
)
|
|
|
(218,527,182
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in net assets from Unit transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net proceeds from sale of Units
|
|
|
13,886,085,189
|
|
|
|
24,458,446,137
|
|
|
|
43,007,862,019
|
|
Net proceeds from reinvestment of distributions
|
|
|
70,649
|
|
|
|
1,820,420
|
|
|
|
1,388,124
|
|
Cost of Units repurchased
|
|
|
(14,187,655,154
|
)
|
|
|
(26,198,575,593
|
)
|
|
|
(39,824,961,718
|
)
|
Net income equalization
|
|
|
6,394,413
|
|
|
|
12,761,900
|
|
|
|
(1,639,517
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in net assets from issuance and
redemption of Units
|
|
|
(295,104,903
|
)
|
|
|
(1,725,547,136
|
)
|
|
|
3,182,648,908
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in net assets during period
|
|
|
669,675,662
|
|
|
|
(1,725,266,831
|
)
|
|
|
(225,660,514
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets beginning of period
|
|
|
7,388,963,445
|
|
|
|
9,114,230,276
|
|
|
|
9,339,890,790
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets end of period*
|
|
$
|
8,058,639,107
|
|
|
$
|
7,388,963,445
|
|
|
$
|
9,114,230,276
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unit transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Units sold
|
|
|
131,950,000
|
|
|
|
286,350,000
|
|
|
|
366,850,000
|
|
Units issued from reinvestment of distributions
|
|
|
679
|
|
|
|
21,340
|
|
|
|
11,778
|
|
Units redeemed
|
|
|
(135,550,000
|
)
|
|
|
(308,100,000
|
)
|
|
|
(336,200,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease)
|
|
$
|
(3,599,321
|
)
|
|
$
|
(21,728,660
|
)
|
|
$
|
30,661,778
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*Includes undistributed (distribution in excess of) net
investment income
|
|
$
|
22,812,991
|
|
|
$
|
16,474,053
|
|
|
$
|
2,493,120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
19
SPDR Dow
Jones Industrial Average ETF Trust
Selected Data for a Unit Outstanding Throughout Each
Year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the
|
|
|
For the
|
|
|
For the
|
|
|
For the
|
|
|
For the
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
October 31,
|
|
|
October 31,
|
|
|
October 31,
|
|
|
October 31,
|
|
|
October 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Net asset value, beginning of year
|
|
$
|
97.17
|
|
|
$
|
93.22
|
|
|
$
|
139.17
|
|
|
$
|
120.69
|
|
|
$
|
104.31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment
income(1)
|
|
|
2.64
|
|
|
|
2.76
|
|
|
|
2.96
|
|
|
|
2.85
|
|
|
|
2.45
|
|
Net realized and unrealized gain (loss)
|
|
|
14.14
|
|
|
|
4.01
|
|
|
|
(45.91
|
)
|
|
|
18.57
|
|
|
|
16.37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total from investment operations
|
|
|
16.78
|
|
|
|
6.77
|
|
|
|
(42.95
|
)
|
|
|
21.42
|
|
|
|
18.82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net equalization credits and
charges(1)
|
|
|
(0.08
|
)
|
|
|
(0.14
|
)
|
|
|
0.02
|
|
|
|
(0.24
|
)
|
|
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less distributions from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
(2.63
|
)
|
|
|
(2.68
|
)
|
|
|
(3.02
|
)
|
|
|
(2.70
|
)
|
|
|
(2.41
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value, end of year
|
|
$
|
111.24
|
|
|
$
|
97.17
|
|
|
$
|
93.22
|
|
|
$
|
139.17
|
|
|
$
|
120.69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investment
return(2)
|
|
|
17.36
|
%
|
|
|
7.56
|
%
|
|
|
(31.23
|
)%
|
|
|
17.72
|
%
|
|
|
18.23
|
%
|
Ratios and supplemental data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio to average net assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
2.52
|
%
|
|
|
3.21
|
%
|
|
|
2.49
|
%
|
|
|
2.19
|
%
|
|
|
2.21
|
%
|
Total expenses
|
|
|
0.18
|
%
|
|
|
0.17
|
%
|
|
|
0.17
|
%
|
|
|
0.16
|
%
|
|
|
0.18
|
%
|
Total expenses excluding Trustee earnings credit
|
|
|
0.18
|
%
|
|
|
0.17
|
%
|
|
|
0.17
|
%
|
|
|
0.14
|
%
|
|
|
0.17
|
%
|
Portfolio turnover
rate(3)
|
|
|
0.12
|
%
|
|
|
5.39
|
%
|
|
|
11.27
|
%
|
|
|
1.45
|
%
|
|
|
0.01
|
%
|
Net assets, end of year (000s)
|
|
$
|
8,058,639
|
|
|
$
|
7,388,963
|
|
|
$
|
9,114,230
|
|
|
$
|
9,339,891
|
|
|
$
|
6,559,618
|
|
|
|
(1)
|
Per unit numbers have been calculated using the average shares
method, which more appropriately presents per share data for the
year.
|
|
(2)
|
Total return is calculated assuming a purchase of Units at net
asset value per Unit on the first day and a sale at net asset
value per Unit on the last day of each period reported.
Distributions are assumed, for the purposes of this calculation,
to be reinvested at the net asset value per Unit on the
respective payment dates of the Trust. Broker commission charges
are not included in this calculation.
|
|
(3)
|
Portfolio turnover ratio excludes securities received or
delivered from processing creations or redemptions of Units.
|
See accompanying notes to financial statements.
20
SPDR Dow
Jones Industrial Average ETF Trust
October 31, 2010
SPDR Dow Jones Industrial Average ETF Trust (the
Trust), formerly DIAMONDS Trust, Series 1, is a
unit investment trust created under the laws of the State of New
York and registered under the Investment Company Act of 1940, as
amended. The Trust was created to provide investors with the
opportunity to purchase a security representing a proportionate
undivided interest in a portfolio of securities consisting of
substantially all of the component common stocks, in
substantially the same weighting, which comprise the Dow Jones
Industrial Average (the DJIA). Each unit of
fractional undivided interest in the Trust is referred to as a
Unit. The Trust commenced operations on
January 14, 1998 upon the initial issuance of 500,000 Units
(equivalent to ten Creation Units see
Note 4) in exchange for a portfolio of securities
assembled to reflect the intended portfolio composition of the
Trust.
Under the Amended and Restated Standard Terms and Conditions of
the Trust, as amended (Trust Agreement), PDR
Services, LLC, as Sponsor of the Trust (Sponsor),
and State Street Bank and Trust Company, as Trustee of the
Trust (Trustee), are indemnified against certain
liabilities arising from the performance of their duties to the
Trust. Additionally, in the normal course of business, the Trust
enters into contracts that contain general indemnification
clauses. The Trusts maximum exposure under these
arrangements is unknown as this would involve future claims that
may be made against the Trust that have not yet occurred.
However, based on experience, the Trust expects the risk of
material loss to be remote.
|
|
NOTE 2
|
SIGNIFICANT
ACCOUNTING POLICIES
|
The following is a summary of significant accounting policies
followed by the Trust in the preparation of its financial
statements:
The preparation of financial statements in accordance with
U.S. generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts and disclosures in the financial statements.
Actual results could differ from these estimates.
Security
Valuation
The value of the Trusts portfolio securities is based on
the market price of the securities, which generally means a
valuation obtained from an exchange or other market (or based on
a price quotation or other equivalent indication of value
supplied by an exchange or other market) or a valuation obtained
from an independent pricing service. If a securitys market
price is not readily available or does not otherwise
21
SPDR Dow
Jones Industrial Average ETF Trust
Notes to Financial Statements
October 31, 2010
accurately reflect the fair value of the security, the security
will be valued by another method that the Trustee believes will
better reflect fair value in accordance with the Trusts
valuation policies and procedures. The Trustee has established a
Pricing and Investment Committee (the Committee) for
purposes of valuing securities for which market quotations are
not readily available or do not otherwise accurately reflect the
fair value of the security. The Committee, subject to oversight
by the Trustee, may use fair value pricing in a variety of
circumstances, including but not limited to, situations when
trading in a security has been suspended or halted. Accordingly,
the Trusts net asset value may reflect certain portfolio
securities fair values rather than their market prices.
Fair value pricing involves subjective judgments and it is
possible that the fair value determination for a security is
materially different than the value that could be received on
the sale of the security.
The Trust continues to follow the authoritative guidance for
fair value measurements and the fair value option for financial
assets and financial liabilities. The guidance for the fair
value option for financial assets and financial liabilities
provides the Trust the irrevocable option to measure many
financial assets and liabilities at fair value with changes in
fair value recognized in earnings. The guidance also establishes
a hierarchy for inputs used in measuring fair value that
maximizes the use of observable inputs and minimizes the use of
unobservable inputs by requiring that the most observable inputs
be used when available. The guidance establishes three levels of
inputs that may be used to measure fair value:
|
|
|
Level 1 quoted prices in active markets
for identical investments
|
|
|
Level 2 other significant observable
inputs (including, but not limited to, quoted prices for similar
investments, interest rates, prepayment speeds, credit risk,
etc.)
|
|
|
Level 3 significant unobservable inputs
(including the Trusts own assumptions in determining the
fair value of investments)
|
Investments that use Level 2 or Level 3 inputs may
include, but are not limited to: (i) an unlisted security
related to corporate actions; (ii) a restricted security
(e.g., one that may not be publicly sold without registration
under the Securities Act of 1933, as amended); (iii) a
security whose trading has been suspended or which has been
de-listed from its primary trading exchange; (iv) a
security that is thinly traded; (v) a security in default
or bankruptcy proceedings for which there is no current market
quotation; (vi) a security affected by currency controls or
restrictions; and (vii) a security affected by a
significant event (e.g., an event that occurs after the close of
the markets on which the security is traded but before the time
as of which the
22
SPDR Dow
Jones Industrial Average ETF Trust
Notes to Financial Statements
October 31, 2010
Trusts net assets are computed and that may materially
affect the value of the Trusts investments). Examples of
events that may be significant events are government
actions, natural disasters, armed conflicts, acts of terrorism,
and significant market fluctuations.
Fair value pricing could result in a difference between the
prices used to calculate the Trusts net asset value and
the prices used by the DJIA, which, in turn, could result in a
difference between the Trusts performance and the
performance of the DJIA. The inputs or methodology used for
valuation are not necessarily an indication of the risk
associated with investing in those investments. The type of
inputs used to value each security is identified in the schedule
of investments, which also includes a breakdown of the
Trusts investments by industry.
Subsequent
Events
Management has determined there are no subsequent events or
transactions that would have materially impacted the
Trusts financial statements as presented.
Investment
Risk
The Trusts investments are exposed to risks, such as
market risk. Due to the level of risk associated with certain
investments it is at least reasonably possible that changes in
the values of investment securities will occur in the near term
and that such changes could materially affect the amounts
reported in the financial statements.
An investment in the Trust involves risks similar to those of
investing in any fund of equity securities, such as market
fluctuations caused by such factors as economic and political
developments, changes in interest rates and perceived trends in
stock prices. The value of a Unit will decline, more or less, in
correlation with any decline in value of the DJIA. The values of
equity securities could decline generally or could underperform
other investments. The Trust would not sell an equity security
because the securitys issuer was in financial trouble
unless that security is removed from the DJIA.
Investment
Transactions
Investment transactions are recorded on the trade date. Realized
gains and losses from the sale or disposition of securities are
recorded on the identified cost basis. Dividend income is
recorded on the ex-dividend date.
23
SPDR Dow
Jones Industrial Average ETF Trust
Notes to Financial Statements
October 31, 2010
Distributions
to Unitholders
The Trust declares and distributes dividends from net investment
income to its Unitholders monthly. The Trust declares and
distributes net realized capital gains, if any, at least
annually.
Effective October 30, 2009, the Trusts Dividend
Reinvestment Service was discontinued. Broker-dealers, at their
own discretion, may offer a dividend reinvestment service under
which additional Units may be purchased in the secondary market
at current market prices. Investors should consult their
broker-dealer for further information regarding any dividend
reinvestment service offered by such broker-dealer.
Equalization
The Trust follows the accounting practice known as
Equalization by which a portion of the proceeds from
sales and costs of reacquiring the Trusts Units,
equivalent on a per Unit basis to the amount of distributable
net investment income on the date of the transaction, is
credited or charged to undistributed net investment income. As a
result, undistributed net investment income per Unit is
unaffected by sales or reacquisitions of the Trusts Units.
Federal
Income Tax
The Trust has qualified and intends to continue to qualify as a
regulated investment company under Subchapter M of
the Internal Revenue Code of 1986, as amended. By so qualifying
and electing, the Trust will not be subject to federal income
taxes to the extent it distributes its taxable income, including
any net realized capital gains, for each fiscal year. In
addition, by distributing during each calendar year
substantially all of its net investment income and capital
gains, if any, the Trust will not be subject to federal excise
tax. Income and capital gain distributions are determined in
accordance with income tax regulations which may differ from
those determined in accordance with U.S. generally accepted
accounting principles. These differences are primarily due to
differing treatments for tax equalization, in-kind transactions
and losses deferred due to wash sales. Net investment income per
unit calculations in the financial highlights for all years
presented exclude these differences.
The Trust has reviewed the tax positions for the open tax years
as of October 31, 2010 and has determined that no provision
for income tax is required in the Trusts Financial
Statements. The Trusts federal tax returns for the prior
three fiscal years
24
SPDR Dow
Jones Industrial Average ETF Trust
Notes to Financial Statements
October 31, 2010
remain subject to examination by the Trusts major tax
jurisdictions, which include the United States of America and
the State of New York.
During the year ended October 31, 2010, the Trust
reclassified $61,522,152 of non-taxable security gains realized
in the in-kind redemption of Creation Units
(Note 4) as an increase to paid in capital in the
Statement of Assets and Liabilities. At October 31, 2010,
the cost of investments for federal income tax purposes was
$9,538,505,522. Accordingly, gross unrealized appreciation was
$145,128,015 and gross unrealized depreciation was
$1,639,499,424, resulting in net unrealized depreciation of
$1,494,371,409.
At October 31, 2010, the Trust had the following capital
loss carryforwards which may be used to offset any net realized
gains, expiring October 31:
|
|
|
|
2011
|
|
$
|
68,716,435
|
2012
|
|
|
221,460,584
|
2014
|
|
|
52,316
|
2016
|
|
|
506,750,845
|
2017
|
|
|
779,537,215
|
2018
|
|
|
4,715,695
|
During the tax year ended October 31, 2010, the Trust had
$2,065,467 of capital loss carryforward expire.
The tax character of distributions paid during the years ended
October 31, 2010, 2009 and 2008 were as follows:
|
|
|
|
|
|
|
Distributions paid from :
|
|
2010
|
|
2009
|
|
2008
|
Ordinary Income
|
|
$201,712,941
|
|
$231,359,719
|
|
$218,527,182
|
As of October 31, 2010, the components of distributable
earnings (excluding unrealized appreciation/depreciation) on the
tax basis were undistributed ordinary income of $29,389,248
undistributed long term capital gain of $0 and unrealized
depreciation of $1,494,371,409.
|
|
NOTE 3
|
TRANSACTIONS
WITH THE TRUSTEE AND SPONSOR
|
In accordance with the Trust Agreement, the Trustee
maintains the Trusts accounting records, acts as custodian
and transfer agent to the Trust, and provides administrative
services, including filing of certain regulatory reports. The
Trustee is also responsible for determining the composition of
the portfolio of securities which must be delivered
and/or
received in exchange for the issuance
and/or
redemption of
25
SPDR Dow
Jones Industrial Average ETF Trust
Notes to Financial Statements
October 31, 2010
Creation Units of the Trust, and for adjusting the composition
of the Trusts portfolio from time to time to conform to
changes in the composition
and/or
weighting structure of the DJIA. For these services, the Trustee
received a fee at the following annual rates for the year ended
October 31, 2010:
|
|
|
|
|
Fee as a percentage of
|
Net asset value of the Trust
|
|
net asset value of the Trust
|
|
$0 $499,999,999
|
|
10/100 of 1% per annum plus or minus the Adjustment Amount
|
$500,000,000 $2,499,999,999
|
|
8/100 of 1% per annum plus or minus the Adjustment Amount
|
$2,500,000,000 and above
|
|
6/100 of 1% per annum plus or minus the Adjustment Amount
|
The Adjustment Amount is the sum of (a) the excess or
deficiency of transaction fees received by the Trustee, less the
expenses incurred in processing orders for creation and
redemption of units and (b) the amounts earned by the
Trustee with respect to the cash held by the Trustee for the
benefit of the Trust. During the year ended October 31,
2010, the Adjustment Amount reduced the Trustees fee by
$441,597. The Adjustment Amount included an excess of net
transaction fees from processing orders of $415,053 and a
Trustee earning credit of $26,544.
The Sponsor, a wholly-owned subsidiary of NYSE Euronext, agreed
to reimburse the Trust for, or assume, the ordinary operating
expenses of the Trust which exceeded 18.00/100 of 1% per annum
of the daily net asset value of the Trust. There were no such
reimbursements by the Sponsor for the fiscal years ended
October 31, 2010, October 31, 2009 and
October 31, 2008.
Dow Jones and State Street Global Markets, LLC
(SSGM) have entered into a License Agreement. The
License Agreement grants SSGM, an affiliate of the Trustee, a
license to use the DJIA as a basis for determining the
composition of the Portfolio and to use certain trade names and
trademarks of Dow Jones in connection with the Portfolio. The
Trustee on behalf of the Trust, the Sponsor and NYSE Arca, Inc.
have each received a sublicense from SSGM for the use of the
DJIA and such trade names and trademarks in connection with
their rights and duties with respect to the Trust. The License
Agreement may be amended without the consent of any of the
owners of beneficial interest of Units. Currently, the License
Agreement is scheduled to terminate on December 31, 2017,
but its term may be extended without the consent of any of the
owners of beneficial interests of Units. Pursuant to such
arrangements and in accordance with the Trust Agreement,
the Trust reimburses the Sponsor for payment of fees under the
License Agreement to Dow
26
SPDR Dow
Jones Industrial Average ETF Trust
Notes to Financial Statements
October 31, 2010
Jones equal to 0.05% on the first $1 billion of the then
rolling average asset balance, and 0.04% on any excess rolling
average asset balance over and above $1 billion. The
minimum annual fee for the Trust is $1 million.
The Sponsor has entered into an agreement with SSGM (the
Marketing Agent) pursuant to which the Marketing
Agent has agreed to market and promote the Trust. The Marketing
Agent is reimbursed by the Sponsor for the expenses it incurs
for providing such services out of amounts that the Trust
reimburses the Sponsor. Expenses incurred by the Marketing Agent
include but are not limited to: printing and distribution of
marketing materials describing the Trust, associated legal,
consulting, advertising and marketing costs and other
out-of-pocket
expenses.
|
|
NOTE 4
|
SHAREHOLDER
TRANSACTIONS
|
Units are issued and redeemed by the Trust only in Creation Unit
size aggregations of 50,000 Units. Such transactions are only
permitted on an in-kind basis, with a separate cash payment
which is equivalent to the undistributed net investment income
per unit (income equalization) and a balancing cash component to
equate the transaction to the net asset value per Unit of the
Trust on the transaction date. A transaction fee of $1,000 is
charged in connection with each creation or redemption of
Creation Units through the clearing process per participating
party per day, regardless of the number of Creation Units
created or redeemed. In the case of creations and redemptions
outside of the clearing process, the Transaction Fee plus an
additional amount not to exceed three (3) times the
Transaction Fee applicable for one Creation Unit per Creation
Unit redeemed, and such amount is deducted from the amount
delivered to the redeemer. Transaction fees are received by the
Trustee and used to defray the expense of processing orders.
|
|
NOTE 5
|
INVESTMENT
TRANSACTIONS
|
For the year ended October 31, 2010, the Trust had net
in-kind contributions, net in-kind redemptions, purchases and
sales of investment securities of $9,351,351,057,
$9,633,407,205, $9,887,705 and $23,383,750 respectively. Net
realized gain (loss) on investment transactions in the Statement
of Operations includes net gains resulting from in-kind
transactions of $61,522,152.
27
SPDR Dow
Jones Industrial Average ETF Trust
Other Information
October 31, 2010 (unaudited)
Tax
Information
For Federal income tax purposes, the percentage of Trust
distributions which qualify for the corporate dividends paid
deduction for the fiscal year ended October 31, 2010 is
100.00%.
For the fiscal year ended October 31, 2010 certain
dividends paid by the Trust may be designated as qualified
dividend income and subject to a maximum tax rate of 15%, as
provided for the Jobs and Growth Tax Relief Reconciliation Act
of 2003. Complete information will be reported in conjunction
with your 2010
Form 1099-DIV.
FREQUENCY
DISTRIBUTION OF DISCOUNTS AND PREMIUMS
Bid/Ask
Price(1) vs.
Net Asset Value (NAV)
As of October 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bid/Ask Price
|
|
Bid/Ask Price
|
|
|
Above NAV
|
|
Below NAV
|
|
|
50-99
|
|
100-199
|
|
>200
|
|
50-99
|
|
100-199
|
|
>200
|
|
|
BASIS
|
|
BASIS
|
|
BASIS
|
|
BASIS
|
|
BASIS
|
|
BASIS
|
|
|
POINTS
|
|
POINTS
|
|
POINTS
|
|
POINTS
|
|
POINTS
|
|
POINTS
|
|
2010
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
2009
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
2008
|
|
3
|
|
2
|
|
2
|
|
2
|
|
0
|
|
0
|
2007
|
|
1
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
2006
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
Comparison
of Total Returns Based on NAV and Bid/Ask
Price(1)
The table below is provided to compare the Trusts total
pre-tax returns at NAV with the total pre-tax returns based on
bid/ask price and the performance of the DJIA. Past performance
is not necessarily an indication of how the Trust will perform
in the future.
Cumulative Total Return
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Year
|
|
|
5 Year
|
|
|
10 Year
|
|
|
SPDR DJIA Trust
|
|
|
|
|
|
|
|
|
|
|
|
|
Return Based on NAV
|
|
|
17.36
|
%
|
|
|
20.83
|
%
|
|
|
26.52
|
%
|
Return Based on Bid/Ask Price
|
|
|
17.49
|
%
|
|
|
21.05
|
%
|
|
|
26.85
|
%
|
DJIA
|
|
|
17.62
|
%
|
|
|
21.70
|
%
|
|
|
28.36
|
%
|
28
SPDR Dow
Jones Industrial Average ETF Trust
Other Information
October 31, 2010 (unaudited)
Average
Annual Total Return
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Year
|
|
|
5 Year
|
|
|
10 Year
|
|
|
SPDR DJIA Trust
|
|
|
|
|
|
|
|
|
|
|
|
|
Return Based on NAV
|
|
|
17.36
|
%
|
|
|
3.86
|
%
|
|
|
2.38
|
%
|
Return Based on Bid/Ask Price
|
|
|
17.49
|
%
|
|
|
3.89
|
%
|
|
|
2.41
|
%
|
DJIA
|
|
|
17.62
|
%
|
|
|
4.01
|
%
|
|
|
2.53
|
%
|
|
|
(1) |
The Bid/Ask Price is the midpoint
of the Consolidated Bid/Ask price at the time the Trusts
NAV is calculated. From April 3, 2001 to November 28,
2008, the Bid/Ask price was the Bid/Ask price on the NYSE Amex
(formerly the American Stock Exchange) at the close of trading,
ordinarily 4:00 p.m. Prior to April 3, 2001, the
Bid/Ask price was the Bid/Ask price at the close of trading on
the American Stock Exchange, ordinarily 4:15 p.m.
|
29
SPDR Dow
Jones Industrial Average ETF Trust
October 31, 2010
|
|
|
|
|
|
|
|
|
Common Stocks
|
|
Shares
|
|
|
Value
|
|
|
3M Co.
|
|
|
5,475,627
|
|
|
$
|
461,157,306
|
|
Alcoa, Inc.
|
|
|
5,475,627
|
|
|
|
71,894,982
|
|
American Express Co.
|
|
|
5,475,627
|
|
|
|
227,019,495
|
|
AT&T, Inc.
|
|
|
5,475,627
|
|
|
|
156,055,369
|
|
Bank of America Corp.
|
|
|
5,475,627
|
|
|
|
62,641,173
|
|
Caterpillar, Inc.
|
|
|
5,475,627
|
|
|
|
430,384,282
|
|
Chevron Corp.
|
|
|
5,475,627
|
|
|
|
452,341,546
|
|
Cisco Systems, Inc.*
|
|
|
5,475,627
|
|
|
|
125,008,564
|
|
E. I. du Pont de Nemours & Co.
|
|
|
5,475,627
|
|
|
|
258,887,645
|
|
Exxon Mobil Corp.
|
|
|
5,475,627
|
|
|
|
363,964,927
|
|
General Electric Co.
|
|
|
5,475,627
|
|
|
|
87,719,545
|
|
Hewlett-Packard Co.
|
|
|
5,475,627
|
|
|
|
230,304,872
|
|
Intel Corp.
|
|
|
5,475,627
|
|
|
|
109,895,834
|
|
International Business Machines Corp.
|
|
|
5,475,627
|
|
|
|
786,300,037
|
|
Johnson & Johnson
|
|
|
5,475,627
|
|
|
|
348,633,171
|
|
JPMorgan Chase & Co.
|
|
|
5,475,627
|
|
|
|
206,047,844
|
|
Kraft Foods, Inc. (Class A)
|
|
|
5,475,627
|
|
|
|
176,698,483
|
|
McDonalds Corp.
|
|
|
5,475,627
|
|
|
|
425,839,512
|
|
Merck & Co., Inc.
|
|
|
5,475,627
|
|
|
|
198,655,748
|
|
Microsoft Corp.
|
|
|
5,475,627
|
|
|
|
145,870,703
|
|
Pfizer, Inc.
|
|
|
5,475,627
|
|
|
|
95,275,910
|
|
The Boeing Co.
|
|
|
5,475,627
|
|
|
|
386,798,291
|
|
The
Coca-Cola
Co.
|
|
|
5,475,627
|
|
|
|
335,765,448
|
|
The Home Depot, Inc.
|
|
|
5,475,627
|
|
|
|
169,087,362
|
|
The Procter & Gamble Co.
|
|
|
5,475,627
|
|
|
|
348,085,608
|
|
The Travelers Cos., Inc.
|
|
|
5,475,627
|
|
|
|
302,254,610
|
|
The Walt Disney Co.
|
|
|
5,475,627
|
|
|
|
197,724,891
|
|
United Technologies Corp.
|
|
|
5,475,627
|
|
|
|
409,412,631
|
|
Verizon Communications, Inc.
|
|
|
5,475,627
|
|
|
|
177,793,609
|
|
Wal-Mart Stores, Inc.
|
|
|
5,475,627
|
|
|
|
296,614,715
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Common
Stocks(a)
(Cost $9,536,928,255)
|
|
|
|
|
|
$
|
8,044,134,113
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
Non-income producing security
|
|
|
(a) |
The values of the securities of the Trust are determined based
on Level 1 inputs. (Note 2)
|
See accompanying notes to financial statements.
30
SPDR Dow
Jones Industrial Average ETF Trust
Schedule of Investments (continued)
October 31, 2010
INDUSTRY BREAKDOWN AS OF OCTOBER
31, 2010*
|
|
|
|
|
Industry**
|
|
Value
|
|
|
|
|
Oil, Gas & Consumable Fuels
|
|
$
|
816,306,473
|
|
Aerospace & Defense
|
|
|
796,210,922
|
|
IT Services
|
|
|
786,300,037
|
|
Pharmaceuticals
|
|
|
642,564,829
|
|
Industrial Conglomerates
|
|
|
548,876,851
|
|
Machinery
|
|
|
430,384,282
|
|
Hotels, Restaurants & Leisure
|
|
|
425,839,512
|
|
Household Products
|
|
|
348,085,608
|
|
Beverages
|
|
|
335,765,448
|
|
Diversified Telecommunication Services
|
|
|
333,848,978
|
|
Insurance
|
|
|
302,254,610
|
|
Food & Staples Retailing
|
|
|
296,614,715
|
|
Diversified Financial Services
|
|
|
268,689,017
|
|
Chemicals
|
|
|
258,887,645
|
|
Computers & Peripherals
|
|
|
230,304,872
|
|
Consumer Finance
|
|
|
227,019,495
|
|
Media
|
|
|
197,724,891
|
|
Food Products
|
|
|
176,698,483
|
|
Specialty Retail
|
|
|
169,087,362
|
|
Software
|
|
|
145,870,703
|
|
Communications Equipment
|
|
|
125,008,564
|
|
Semiconductors & Semiconductor Equipment
|
|
|
109,895,834
|
|
Metals & Mining
|
|
|
71,894,982
|
|
|
|
|
|
|
Total
|
|
$
|
8,044,134,113
|
|
|
|
|
|
|
|
|
*
|
SPDR Dow Jones Industrial Average ETF Trusts industry
breakdown is expressed as market value by industry and may
change over time.
|
|
**
|
Each security is valued based on Level 1 inputs.
(Note 2)
|
See accompanying notes to financial statements.
31
THE
TRUST
The Trust, an exchange traded fund or ETF, is a
registered investment company that both (a) continuously
issues and redeems in-kind its Trust Units only in
large lot sizes called Creation Units at their once-daily NAV
and (b) lists Units individually for trading on the
Exchange at prices established throughout the trading day, like
any other listed equity security trading in the secondary market
on the Exchange.
Creation
of Creation Units
Before trading on the Exchange in the secondary market,
Trust Units are created at NAV in Creation Units. This
occurs when Portfolio Deposits are made either through the
Clearing Process or outside the Clearing Process, but only by a
person who executed a Participant Agreement with the Distributor
and the Trustee. The Distributor will reject any order that is
not submitted in proper form. A creation order is deemed
received by the Distributor on the date on which it is placed
(Transmittal Date) if (a) such order is
received by the Distributor not later than the Closing Time on
such Transmittal Date and (b) all other procedures set
forth in the Participant Agreement are properly followed. The
Transaction Fee is charged at the time of creation of a Creation
Unit, and an additional amount not to exceed three
(3) times the Transaction Fee applicable for one Creation
Unit is charged for creations outside the Clearing Process, in
part due to the increased expense associated with settlement.
The Trustee, at the direction of the Sponsor, may
increase,* reduce or waive
the Transaction Fee (and/or the additional amounts charged in
connection with creations
and/or
redemptions outside the Clearing Process) for certain lot-size
creations
and/or
redemptions of Creation Units. The Sponsor has the right to vary
the lot-size of Creation Units subject to such an increase,
reduction or waiver. The existence of any such variation will be
disclosed in the then current Prospectus.
The DJIA is a price-weighted stock index; that is, the component
stocks of the DJIA are represented in exactly equal share
amounts and therefore are accorded relative importance in the
DJIA based on their prices. The shares of common stock of the
stock portion of a Portfolio Deposit on any date of deposit will
reflect the composition of the component stocks of the DJIA on
such day. The portfolio of Index Securities that is the basis
for a Portfolio Deposit varies as changes are made in the
composition of the Index Securities. Further, the Trustee is
permitted to take account of changes to the identity or
weighting of any Index Security resulting from a change to the
Index by making a corresponding adjustment to the Portfolio
Deposit on the day prior to the day on which the change to the
DJIA takes effect.
* Such increase is
subject to the 10 Basis Point Limit.
32
The Trustee makes available to
NSCC**
before the commencement of trading on each Business Day a
list of the names and required number of shares of each of the
Index Securities in the current Portfolio Deposit as well as the
amount of the Dividend Equivalent Payment for the previous
Business Day. Under certain extraordinary circumstances which
may make it impossible for the Trustee to provide such
information to NSCC on a given Business Day, NSCC will use the
information regarding the identity of the Index Securities of
the Portfolio Deposit on the previous Business Day. The identity
of each Index Security required for a Portfolio Deposit, as in
effect on October 31, 2010, is set forth in the above
Schedule of Investments. The Sponsor makes available (a) on
each Business Day, the Dividend Equivalent Payment effective
through and including the previous Business Day, per outstanding
Unit, and (b) every 15 seconds throughout the day at the
Exchange a number representing, on a per Unit basis, the sum of
the Dividend Equivalent Payment effective through and including
the previous Business Day, plus the current value of the
securities portion of a Portfolio Deposit as in effect on such
day (which value may occasionally include a cash in lieu amount
to compensate for the omission of a particular Index Security
from such Portfolio Deposit). Such information is calculated
based upon the best information available to the Sponsor and may
be calculated by other persons designated to do so by the
Sponsor. The inability of the Sponsor to provide such
information will not in itself result in a halt in the trading
of Units on the Exchange.
Upon receipt of one or more Portfolio Deposits following
placement with the Distributor of an order to create Units, the
Trustee (a) delivers one or more Creation Units to DTC,
(b) removes the Unit position from its account at DTC and
allocates it to the account of the DTC Participant acting on
behalf of the investor creating Creation Unit(s),
(c) increases the aggregate value of the Portfolio, and
(d) decreases the fractional undivided interest in the
Trust represented by each Unit.
Under certain circumstances, (a) a portion of the stock
portion of a Portfolio Deposit may consist of contracts to
purchase certain Index Securities or (b) a portion of the
Cash Component may consist of cash in an amount required to
enable the Trustee to purchase such Index Securities. If there
is a failure to deliver Index Securities that are the subject of
such contracts to purchase, the Trustee will acquire such Index
Securities in a timely manner. To the extent the price of any
such Index Security increases or decreases between the time of
creation and the time of its purchase and delivery, Units will
represent fewer or more shares of such Index Security.
Therefore, price fluctuations during the period from the time
the cash is
** As of
December 31, 2010, the Depository Trust and Clearing
Corporation (DTCC) owned 100% of the issued and
outstanding shares of common stock of NSCC. Also as of such
date, NYSE Euronext, the parent company of the Sponsor, and its
affiliates collectively owned less than 0.40% of the issued and
outstanding shares of common stock of DTCC (DTCC
Shares), and the Trustee owned 6.19% of DTCC Shares.
33
received by the Trustee to the time the requisite Index
Securities are purchased and delivered will affect the value of
all Units.
Procedures
for Creation of Creation Units
All creation orders must be placed in Creation Units and must be
received by the Distributor by no later than the closing time of
the regular trading session on the NYSE (Closing
Time) (ordinarily 4:00 p.m. New York time), in each
case on the date such order is placed, in order for creation to
be effected based on the NAV of the Trust as determined on such
date. Orders must be transmitted by telephone, through the
Internet or other transmission method(s) acceptable to the
Distributor and the Trustee, pursuant to procedures set forth in
the Participant Agreement
and/or
described in this Prospectus. In addition, orders submitted
through the Internet must also comply with the terms and
provisions of the State Street Fund Connect Buy-Side User
Agreement and other applicable agreements and documents,
including but not limited to the applicable Fund Connect
User Guide or successor documents. Severe economic or market
disruptions or changes, or telephone or other communication
failure, may impede the ability to reach the Distributor, the
Trustee, a Participating Party or a DTC Participant.
Units may be created in advance of receipt by the Trustee of all
or a portion of the Portfolio Deposit. In these circumstances,
the initial deposit has a value greater than the NAV of the
Units on the date the order is placed in proper form, because in
addition to available Index Securities, cash collateral must be
deposited with the Trustee in an amount equal to the sum of
(a) the Cash Component, plus (b) 115% of the market
value of the undelivered Index Securities (Additional Cash
Deposit). The Trustee holds such Additional Cash Deposit
as collateral in an account separate and apart from the Trust.
The order is deemed received on the Business Day on which the
order is placed if the order is placed in proper form before the
Closing Time on such date and federal funds in the appropriate
amount are deposited with the Trustee by
11:00 a.m. New York time the next Business Day.
If the order is not placed in proper form by the Closing Time or
federal funds in the appropriate amount are not received by
11:00 a.m. New York time on the next Business Day, the
order may be deemed to be rejected and the investor will be
liable to the Trust for any losses resulting therefrom. An
additional amount of cash must be deposited with the Trustee,
pending delivery of the missing Index Securities, to the extent
necessary to maintain the Additional Cash Deposit with the
Trustee in an amount at least equal to 115% of the daily
mark-to-market
value of the missing Index Securities. If missing Index
Securities are not received by 1:00 p.m. New York time on
the third Business Day following the day on which the purchase
order is deemed received and if a
mark-to-market
payment is not made within one Business Day following
notification by the Distributor that such a payment is required,
the Trustee may use the Additional Cash Deposit to purchase the
missing Index Securities of the
34
Portfolio Deposit. The Trustee will return any unused portion of
the Additional Cash Deposit once all of the missing Index
Securities have been properly received or purchased by the
Trustee and deposited into the Trust. In addition, a Transaction
Fee will be imposed in an amount not to exceed that charged for
creations outside the Clearing Process as disclosed under the
heading Highlights A Transaction Fee is
Payable for Each Creation and for Each Redemption of Creation
Units. The delivery of Creation Units so created will
occur no later than the third (3rd) Business Day following the
day on which the purchase order is deemed received. The
Participant Agreement for any Participating Party intending to
follow these procedures contains terms and conditions permitting
the Trustee to buy the missing portion(s) of the Portfolio
Deposit at any time and will subject the Participating Party to
liability for any shortfall between the cost to the Trust of
purchasing such stocks and the value of such collateral. The
Participating Party is liable to the Trust for the costs
incurred by the Trust in connection with any such purchases. The
Trust will have no liability for any such shortfall.
All questions as to the number of shares of each Index Security,
the amount of the Cash Component and the validity, form,
eligibility (including time of receipt) and acceptance for
deposit of any Index Securities to be delivered are resolved by
the Trustee. The Trustee may reject a creation order if
(a) the depositor or group of depositors, upon obtaining
the Units ordered, would own 80% or more of the current
outstanding Units, (b) the Portfolio Deposit is not in
proper form; (c) acceptance of the Portfolio Deposit would
have certain adverse tax consequences; (d) the acceptance
of the Portfolio Deposit would, in the opinion of counsel, be
unlawful; (e) the acceptance of the Portfolio Deposit would
otherwise have an adverse effect on the Trust or the rights of
Beneficial Owners; or (f) circumstances outside the control
of the Trustee make it for all practical purposes impossible to
process creations of Units. The Trustee and the Sponsor are
under no duty to give notification of any defects or
irregularities in the delivery of Portfolio Deposits or any
component thereof and neither of them shall incur any liability
for the failure to give any such notification.
Placement
of Creation Orders Using the Clearing Process
Creation Units created through the Clearing Process must be
delivered through a Participating Party that has executed a
Participant Agreement. The Participant Agreement authorizes the
Trustee to transmit to the Participating Party such trade
instructions as are necessary to effect the creation order.
Pursuant to the trade instructions from the Trustee to NSCC, the
Participating Party agrees to transfer the requisite Index
Securities (or contracts to purchase such Index Securities that
are expected to be delivered through the Clearing Process in a
regular way manner by the third NSCC Business Day)
and the Cash Component to the Trustee, together with such
additional information as may be required by the Trustee.
35
Placement
of Creation Orders Outside the Clearing Process
Creation Units created outside the Clearing Process must be
delivered through a DTC Participant that has executed a
Participant Agreement and has stated in its order that it is not
using the Clearing Process and that creation will instead be
effected through a transfer of stocks and cash. The requisite
number of Index Securities must be delivered through DTC to the
account of the Trustee by no later than 11:00 a.m. of the
next Business Day immediately following the Transmittal Date.
The Trustee, through the Federal Reserve Bank wire transfer
system, must receive the Cash Component no later than
2:00 p.m. New York time on the next Business Day
immediately following the Transmittal Date. If the Trustee does
not receive both the requisite Index Securities and the Cash
Component in a timely fashion, the order will be cancelled. Upon
written notice to the Distributor, the cancelled order may be
resubmitted the following Business Day using a Portfolio Deposit
as newly constituted to reflect the current NAV of the Trust.
The delivery of Units so created will occur no later than the
third (3rd) Business Day following the day on which the creation
order is deemed received by the Distributor.
Securities
Depository; Book-Entry-Only System
DTC acts as securities depository for Trust Units. Units
are represented by one or more global securities, registered in
the name of Cede & Co., as nominee for DTC and
deposited with, or on behalf of, DTC.
DTC is a limited-purpose trust company organized under the laws
of the State of New York, a member of the Federal Reserve
System, a clearing corporation within the meaning of
the New York Uniform Commercial Code, and a clearing
agency registered pursuant to the provisions of
Section 17A of the Securities Exchange Act of 1934.
DTC*
was created to hold securities of its participants referred to
herein as DTC Participants and to facilitate the clearance and
settlement of securities transactions among the DTC Participants
through electronic book-entry changes in their accounts, thereby
eliminating the need for physical movement of securities
certificates. DTC Participants include securities brokers and
dealers, banks, trust companies, clearing corporations, and
certain other organizations. Access to the DTC system also is
available to others, such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial
relationship with a DTC Participant, either directly or
indirectly (Indirect Participants).
Upon the settlement date of any creation, transfer or redemption
of Units, DTC credits or debits, on its book-entry registration
and transfer system, the amount of Units so created, transferred
or redeemed to the accounts of the appropriate DTC Participants.
The accounts to be credited and charged are designated by the
Trustee to
* As of
December 31, 2010 , DTCC owned 100% of the issued and
outstanding shares of the common stock of DTC.
36
NSCC, in the case of a creation or redemption through the
Clearing Process, or by the Trustee and the DTC Participant, in
the case of a creation or redemption outside of the Clearing
Process. Beneficial ownership of Units is limited to DTC
Participants, Indirect Participants and persons holding
interests through DTC Participants and Indirect Participants.
Ownership of beneficial interests in Units (owners of such
beneficial interests are referred to herein as Beneficial
Owners) is shown on, and the transfer of ownership is
effected only through, records maintained by DTC (with respect
to DTC Participants) and on the records of DTC Participants
(with respect to Indirect Participants and Beneficial Owners
that are not DTC Participants). Beneficial Owners are expected
to receive from or through the DTC Participant a written
confirmation relating to their purchase of Units. The laws of
some jurisdictions may require that certain purchasers of
securities take physical delivery of such securities in
definitive form. Such laws may impair the ability of certain
investors to acquire beneficial interests in Units.
As long as Cede & Co., as nominee of DTC, is the
registered owner of Units, references to the registered or
record owner of Units shall mean Cede & Co. and shall
not mean the Beneficial Owners of Units. Beneficial Owners of
Units are not entitled to have Units registered in their names,
will not receive or be entitled to receive physical delivery of
certificates in definitive form and will not be considered the
record or registered holders thereof under the
Trust Agreement. Accordingly, each Beneficial Owner must
rely on the procedures of DTC, the DTC Participant and any
Indirect Participant through which such Beneficial Owner holds
its interests, to exercise any rights under the
Trust Agreement.
The Trustee recognizes DTC or its nominee as the owner of all
Units for all purposes except as expressly set forth in the
Trust Agreement. Pursuant to the agreement between the
Trustee and DTC (Depository Agreement), DTC is
required to make available to the Trustee upon request and for a
fee to be charged to the Trust a listing of the Units holdings
of each DTC Participant. The Trustee inquires of each such DTC
Participant as to the number of Beneficial Owners holding Units,
directly or indirectly, through the DTC Participant. The Trustee
provides each such DTC Participant with copies of such notice,
statement or other communication, in the form, number and at the
place as the DTC Participant may reasonably request, in order
that the notice, statement or communication may be transmitted
by the DTC Participant, directly or indirectly, to the
Beneficial Owners. In addition, the Trust pays to each such DTC
Participant a fair and reasonable amount as reimbursement for
the expense attendant to such transmittal, all subject to
applicable statutory and regulatory requirements. The foregoing
interaction between the Trustee and DTC Participants may be
direct or indirect (i.e., through a third party.)
Distributions are made to DTC or its nominee, Cede &
Co. DTC or Cede & Co., upon receipt of any payment of
distributions in respect of Units, is required immediately to
credit DTC Participants accounts with payments in amounts
proportionate
37
to their respective beneficial interests in Units, as shown on
the records of DTC or its nominee. Payments by DTC Participants
to Indirect Participants and Beneficial Owners of Units held
through such DTC Participants will be governed by standing
instructions and customary practices, as is now the case with
securities held for the accounts of customers in bearer form or
registered in a street name, and will be the
responsibility of such DTC Participants. Neither the Trustee nor
the Sponsor has or will have any responsibility or liability for
any aspects of the records relating to or notices to Beneficial
Owners, or payments made on account of beneficial ownership
interests in Units, or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests or
for any other aspect of the relationship between DTC and the DTC
Participants or the relationship between such DTC Participants
and the Indirect Participants and Beneficial Owners owning
through such DTC Participants.
DTC may discontinue providing its service with respect to Units
at any time by giving notice to the Trustee and the Sponsor and
discharging its responsibilities with respect thereto under
applicable law. Under such circumstances, the Trustee and the
Sponsor shall take action either to find a replacement for DTC
to perform its functions at a comparable cost or, if such a
replacement is unavailable, to terminate the Trust.
REDEMPTION OF
TRUST UNITS
Trust Units are redeemable only in Creation Units. Creation
Units are redeemable in kind only and are not redeemable for
cash except as described under Summary
Highlights Termination of the Trust.
Procedures
for Redemption of Creation Units
Redemption orders must be placed with a Participating Party (for
redemptions through the Clearing Process) or DTC Participant
(for redemptions outside the Clearing Process), as applicable,
in the form required by such Participating Party or DTC
Participant. A particular broker may not have executed a
Participant Agreement, and redemption orders may have to be
placed by the broker through a Participating Party or a DTC
Participant who has executed a Participant Agreement. At any
given time, there may be only a limited number of broker-dealers
that have executed a Participant Agreement. Redeemers should
afford sufficient time to permit (a) proper submission of
the order by a Participating Party or DTC Participant to the
Trustee and (b) the receipt of the Units to be redeemed and
any Excess Cash Amounts (as defined below) by the Trustee in a
timely manner. Orders for redemption effected outside the
Clearing Process are likely to require transmittal by the DTC
Participant earlier on the Transmittal Date than orders effected
using the Clearing Process. These deadlines vary by institution.
Persons redeeming outside the Clearing Process are
38
required to transfer Units through DTC and the Excess Cash
amounts, if any, through the Federal Reserve Bank wire transfer
system in a timely manner.
Requests for redemption may be made on any Business Day to the
Trustee and not to the Distributor. In the case of redemptions
made through the Clearing Process, the Transaction Fee is
deducted from the amount delivered to the redeemer. In the case
of redemptions outside the Clearing Process, the Transaction Fee
plus an additional amount not to exceed three (3) times the
Transaction Fee applicable for one Creation Unit per Creation
Unit redeemed, and such amount is deducted from the amount
delivered to the redeemer.
The Trustee transfers to the redeeming Beneficial Owner via DTC
and the relevant DTC Participant(s) a portfolio of stocks for
each Creation Unit delivered, generally identical in weighting
and composition to the stock portion of a Portfolio Deposit as
in effect (a) on the date a request for redemption is
deemed received by the Trustee or (b) in the case of the
termination of the Trust, on the date that notice of the
termination of the Trust is given. The Trustee also transfers
via the relevant DTC Participant(s) to the redeeming Beneficial
Owner a Cash Redemption Payment, which on any
given Business Day is an amount identical to the amount of the
Cash Component and is equal to a proportional amount of the
following: dividends on the Portfolio Securities for the period
through the date of redemption, net of expenses and liabilities
for such period including, without limitation, (i) taxes or
other governmental charges against the Trust not previously
deducted if any, and (ii) accrued fees of the Trustee and
other expenses of the Trust, as if the Portfolio Securities had
been held for the entire accumulation period for such
distribution, plus or minus the Balancing Amount. The redeeming
Beneficial Owner must deliver to the Trustee any amount by which
the amount payable to the Trust by such Beneficial Owner exceeds
the amount of the Cash Redemption Payment (Excess
Cash Amounts). For redemptions through the Clearing
Process, the Trustee effects a transfer of the Cash
Redemption Payment and stocks to the redeeming Beneficial
Owner by the third (3rd) NSCC Business Day following the date on
which request for redemption is deemed received. For redemptions
outside the Clearing Process, the Trustee transfers the Cash
Redemption Payment and the stocks to the redeeming
Beneficial Owner by the third (3rd) Business Day following the
date on which the request for redemption is deemed received. The
Trustee will cancel all Units delivered upon redemption.
If the Trustee determines that an Index Security is likely to be
unavailable or available in insufficient quantity for delivery
by the Trust upon redemption, the Trustee may elect to deliver
the cash equivalent value of any such Index Securities, based on
its market value as of the Evaluation Time on the date such
redemption is deemed received by the Trustee as a part of the
Cash Redemption Payment in lieu thereof.
39
If a redeemer is restricted by regulation or otherwise from
investing or engaging in a transaction in one or more Index
Securities, the Trustee may elect to deliver the cash equivalent
value based on the market value of any such Index Securities as
of the Evaluation Time on the date of the redemption as a part
of the Cash Redemption Payment in lieu thereof. In such
case, the investor will pay the Trustee the standard Transaction
Fee, and may pay an additional amount equal to the actual
amounts incurred in connection with such transaction(s) but in
any case not to exceed three (3) times the Transaction Fee
applicable for one Creation Unit.
The Trustee upon the request of a redeeming investor, may elect
to redeem Creation Units in whole or in part by providing such
redeemer, with a portfolio of stocks differing in exact
composition from Index Securities but not differing in NAV from
the then-current Portfolio Deposit. Such a redemption is likely
to be made only if it were determined that it would be
appropriate in order to maintain the Trusts correspondence
to the composition and weighting of the DJIA Index.
The Trustee may sell Portfolio Securities to obtain sufficient
cash proceeds to deliver to the redeeming Beneficial Owner. To
the extent cash proceeds are received by the Trustee in excess
of the required amount, such cash proceeds shall be held by the
Trustee and applied in accordance with the guidelines applicable
to residual cash set forth under The Portfolio
Portfolio Securities Conform to the DJIA.
All redemption orders must be transmitted to the Trustee by
telephone, through the Internet or by other transmission method
acceptable to the Trustee so as to be received by the Trustee
not later than the Closing Time on the Transmittal Date,
pursuant to procedures set forth in the Participant Agreement
and/or
described in this Prospectus. In addition, orders submitted
through the Internet must also comply with the terms and
provisions of the State Street Fund Connect Buy-Side User
Agreement and other applicable agreements and documents,
including but not limited to the applicable Fund Connect
User Guide or successor documents. Severe economic or market
disruption or changes, or telephone or other communication
failure, may impede the ability to reach the Trustee, a
Participating Party, or a DTC Participant.
The calculation of the value of the stocks and the Cash
Redemption Payment to be delivered to the redeeming
Beneficial Owner is made by the Trustee according to the
procedures set forth under Valuation and is computed
as of the Evaluation Time on the Business Day on which a
redemption order is deemed received by the Trustee. Therefore,
if a redemption order in proper form is submitted to the Trustee
by a DTC Participant not later than the Closing Time on the
Transmittal Date, and the requisite Units are delivered to the
Trustee prior to DTC Cut-Off Time on such Transmittal Date, then
the value of the stocks and the Cash Redemption Payment to
be delivered to the Beneficial Owner is determined by the
Trustee as of the Evaluation Time on such Transmittal Date. If,
however, a redemption order is submitted not later than the
Closing Time on a Transmittal Date but either (a) the
requisite Units are not delivered by DTC Cut-Off Time on the
next Business Day immediately following such
40
Transmittal Date or (b) the redemption order is not
submitted in proper form, then the redemption order is not
deemed received as of such Transmittal Date. In such case, the
value of the stocks and the Cash Redemption Payment to be
delivered to the Beneficial Owner is computed as of the
Evaluation Time on the Business Day that such order is deemed
received by the Trustee, i.e., the Business Day on which the
Units are delivered through DTC to the Trustee by DTC Cut-Off
Time on such Business Day pursuant to a properly submitted
redemption order.
The Trustee may suspend the right of redemption, or postpone the
date of payment of the NAV for more than five (5) Business
Days following the date on which the request for redemption is
deemed received by the Trustee (a) for any period during
which the NYSE is closed, (b) for any period during which
an emergency exists as a result of which disposal or evaluation
of the Portfolio Securities is not reasonably practicable,
(c) or for such other period as the SEC may by order permit
for the protection of Beneficial Owners. Neither the Sponsor nor
the Trustee is liable to any person or in any way for any loss
or damages that may result from any such suspension or
postponement.
Placement
of Redemption Orders Using the Clearing Process
A redemption order made through the Clearing Process is deemed
received on the Transmittal Date if (a) such order is
received by the Trustee not later than the Closing Time on such
Transmittal Date and (b) all other procedures set forth in
the Participant Agreement are properly followed. The order is
effected based on the NAV of the Trust as determined as of the
Evaluation Time on the Transmittal Date. A redemption order made
through the Clearing Process and received by the Trustee after
the Closing Time will be deemed received on the next Business
Day immediately following the Transmittal Date. The Participant
Agreement authorizes the Trustee to transmit to NSCC on behalf
of the Participating Party such trade instructions as are
necessary to effect the Participating Partys redemption
order. Pursuant to such trade instructions from the Trustee to
NSCC, the Trustee transfers the requisite stocks (or contracts
to purchase such stocks which are expected to be delivered in a
regular way manner) by the third (3rd) NSCC Business
Day following the date on which the request for redemption is
deemed received, and the Cash Redemption Payment.
Placement
of Redemption Orders Outside the Clearing Process
A DTC Participant who wishes to place an order for redemption of
Units to be effected outside the Clearing Process need not be a
Participating Party, but its order must state that the DTC
Participant is not using the Clearing Process and that
redemption will instead be effected through transfer of Units
directly through DTC. An order is deemed received by the Trustee
on the Transmittal Date if (a) such order is received by
the Trustee not later than the Closing Time on such Transmittal
Date,
41
(b) such order is preceded or accompanied by the requisite
number of Units specified in such order, which delivery must be
made through DTC to the Trustee no later than 11:00 a.m. on
the next Business Day immediately following such Transmittal
Date (DTC Cut-Off Time) and (c) all other
procedures set forth in the Participant Agreement are properly
followed. Any Excess Cash Amounts owed by the Beneficial Owner
must be delivered no later than 2:00 p.m. on the next
Business Day immediately following the Transmittal Date.
The Trustee initiates procedures to transfer the requisite
stocks (or contracts to purchase such stocks that are expected
to be delivered within three Business Days and the Cash
Redemption Payment to the redeeming Beneficial Owner by the
third Business Day following the Transmittal Date.
42
THE
PORTFOLIO
Because the objective of the Trust is to provide investment
results that, before expenses, generally correspond to the price
and yield performance of the DJIA, the Portfolio at any time
will consist of as many of Index Securities as is practicable.
It is anticipated that cash or cash items (other than dividends
held for distribution) normally would not be a substantial part
of the Trusts net assets. Although the Trust may at any
time fail to own certain of Index Securities, the Trust will be
substantially invested in Index Securities and the Sponsor
believes that such investment should result in a close
correspondence between the investment performance of the DJIA
and that derived from ownership of Units.
Portfolio
Securities Conform to the DJIA
The DJIA is a price-weighted index of 30 component common
stocks, the components of which are determined by the editors of
The Wall Street Journal, without any consultation with
the companies, the respective stock exchange or any official
agency.
The Trust is not managed and therefore the adverse financial
condition of an issuer does not require the sale of stocks from
the Portfolio. The Trustee on a non-discretionary basis adjusts
the composition of the Portfolio to conform to changes in the
composition
and/or
weighting structure of Index Securities. To the extent that the
method of determining the DJIA is changed by Dow Jones in a
manner that would affect the adjustments provided for herein,
the Trustee and the Sponsor have the right to amend the
Trust Agreement, without the consent of DTC or Beneficial
Owners, to conform the adjustments to such changes and to
maintain the objective of tracking the DJIA.
The Trustee directs its stock transactions only to brokers or
dealers, which may include affiliates of the Trustee, from whom
it expects to obtain the most favorable prices or execution of
orders. Adjustments are made more frequently in the case of
significant changes to the DJIA. Specifically, the Trustee is
required to adjust the composition of the Portfolio whenever
there is a change in the identity of any Index Security (i.e., a
substitution of one security for another) within three
(3) Business Days before or after the day on which the
change is scheduled to take effect. While other DJIA changes may
lead to adjustments in the Portfolio, the most common changes
are likely to occur as a result of changes in the Index
Securities included in the DJIA and as a result of stock splits.
The Trust Agreement sets forth the method of adjustments
which may occur thereunder as a result of corporate actions to
the DJIA, such as stock splits or changes in the identity of the
component stocks.
43
For example, in the event of an Index Security change (in which
the common stock of one issuer held in the DJIA is replaced by
the common stock of another), the Trustee may sell all shares of
the Portfolio Security corresponding to the old Index Security
and use the proceeds of such sale to purchase the replacement
Portfolio Security corresponding to the new Index Security. If
the share price of the removed Portfolio Security was higher
than the price of its replacement, the Trustee will calculate
how to allocate the proceeds of the sale of the removed
Portfolio Security between the purchase of its replacement and
purchases of additional shares of other Portfolio Securities so
that the number of shares of each Portfolio Security after the
transactions would be as nearly equal as practicable. If the
share price of the removed Portfolio Security was lower than the
price of its replacement, the Trustee will calculate the number
of shares of each of the other Portfolio Securities that must be
sold in order to purchase enough shares of the replacement
Portfolio Security so that the number of shares of each
Portfolio Security after the transactions would be as nearly
equal as practicable.
In the event of a stock split, the price weighting of the stock
which is split will drop. The Trustee may make the corresponding
adjustment by selling the additional shares of the Portfolio
Security received from the stock split. The Trustee may then use
the proceeds of the sale to buy an equal number of shares of
each Portfolio Security-including the Portfolio Security which
had just experienced a stock split. In practice, of course, not
all the shares received in the split would be sold: enough of
those shares would be retained to make an increase in the number
of split shares equal to the increase in the number of shares in
each of the other Portfolio Securities purchased with the
proceeds of the sale of the remaining shares resulting from such
split.
As a result of the purchase and sale of stock in accordance with
these requirements, or the creation of Creation Units, the Trust
may hold some amount of residual cash (other than cash held
temporarily due to timing differences between the sale and
purchase of stock or cash delivered in lieu of Index Securities
or undistributed income or undistributed capital gains). This
amount may not exceed, for more than two (2) consecutive
Business Days, 5/10th of 1 percent of the value of the
Portfolio. If the Trustee has made all required adjustments and
is left with cash in excess of 5/10th of 1 percent of
the value of the Portfolio, the Trustee will use such cash to
purchase additional Index Securities.
All portfolio adjustments are made as described herein unless
such adjustments would cause the Trust to lose its status as a
regulated investment company under Subchapter M of
the Code. Additionally, the Trustee is required to adjust the
composition of the Portfolio at any time to insure the continued
qualification of the Trust as a regulated investment company.
The Trustee relies on Dow Jones for information as to the
composition and weightings of Index Securities. If the Trustee
becomes incapable of obtaining or
44
processing such information or NSCC is unable to receive such
information from the Trustee on any Business Day, the Trustee
shall use the composition and weightings of Index Securities for
the most recently effective Portfolio Deposit for the purposes
of all adjustments and determinations (including, without
limitation, determination of the stock portion of the Portfolio
Deposit) until the earlier of (a) such time as current
information with respect to Index Securities is available or
(b) three (3) consecutive Business Days have elapsed.
If such current information is not available and three
(3) consecutive Business Days have elapsed, the composition
and weightings of Portfolio Securities (as opposed to Index
Securities) shall be used for the purposes of all adjustments
and determinations (including, without limitation, determination
of the stock portion of the Portfolio Deposit) until current
information with respect to Index Securities is available.
If the Trust is terminated, the Trustee shall use the
composition and weightings of Portfolio Securities as of such
notice date for the purpose and determination of all redemptions
or other required uses of the basket.
From time to time Dow Jones may adjust the composition of the
DJIA because of a merger or acquisition involving one or more
Index Securities. In such cases, the Trust, as shareholder of an
issuer that is the object of such merger or acquisition
activity, may receive various offers from would-be acquirors of
the issuer. The Trustee is not permitted to accept any such
offers until such time as it has been determined that the stocks
of the issuer will be removed from the DJIA. As stocks of an
issuer are often removed from the DJIA only after the
consummation of a merger or acquisition of such issuer, in
selling the securities of such issuer the Trust may receive, to
the extent that market prices do not provide a more attractive
alternative, whatever consideration is being offered to the
shareholders of such issuer that have not tendered their shares
prior to such time. Any cash received in such transactions is
reinvested in Index Securities in accordance with the criteria
set forth above.
Any stocks received as a part of the consideration that are not
Index Securities are sold as soon as practicable and the cash
proceeds of such sale are reinvested in accordance with the
criteria set forth above.
Adjustments
to the Portfolio Deposit
On each Business Day (each such day an Adjustment
Day), the number of shares and identity of each Index
Security in a Portfolio Deposit are adjusted in accordance with
the following procedure. At the close of the market the Trustee
calculates the NAV of the Trust. The NAV is divided by the
number of outstanding Units multiplied by 50,000 Units in one
Creation Unit, resulting in a NAV per Creation Unit (NAV
Amount). The Trustee then calculates the number of shares
(without rounding) of each of the component stocks of the DJIA
in a Portfolio Deposit for the following Business Day
(Request Day), so that (a) the market value at
the close of the market on the Adjustment Day of the stocks to
be included in the
45
Portfolio Deposit on Request Day, together with the Dividend
Equivalent Payment effective for requests to create or redeem on
the Adjustment Day, equals the NAV Amount and (b) the
identity and weighting of each of the stocks in a Portfolio
Deposit mirrors proportionately the identity and weightings of
the stocks in the DJIA, each as in effect on Request Day. For
each stock, the number resulting from such calculation is
rounded down to the nearest whole share. The identities and
weightings of the stocks so calculated constitute the stock
portion of the Portfolio Deposit effective on Request Day and
thereafter until the next subsequent Adjustment Day, as well as
Portfolio Securities to be delivered by the Trustee in the event
of request for redemption on the Request Day and thereafter
until the following Adjustment Day.
In addition to the foregoing adjustments, if a corporate action
such as a stock split, stock dividend or reverse split occurs
with respect to any Index Security that results in an adjustment
to the DJIA divisor, the Portfolio Deposit shall be adjusted to
take into account the corporate action in each case rounded to
the nearest whole share. Further, the Trustee is permitted to
take account of changes to the identity or weighting of any
Index Security resulting from a change to the Index by making a
corresponding adjustment to the Portfolio Deposit on the day
prior to the day on which the change to the DJIA takes effect.
On the Request Day and on each day that a request for the
creation or redemption is deemed received, the Trustee
calculates the market value of the stock portion of the
Portfolio Deposit as in effect on the Request Day as of the
close of the market and adds to that amount the Dividend
Equivalent Payment effective for requests to create or redeem on
Request Day (such market value and Dividend Equivalent Payment
are collectively referred to herein as Portfolio Deposit
Amount). The Trustee then calculates the NAV Amount, based
on the close of the market on the Request Day. The difference
between the NAV Amount so calculated and the Portfolio Deposit
Amount is the Balancing Amount. The Balancing Amount
serves the function of compensating for any differences between
the value of the Portfolio Deposit Amount and the NAV Amount at
the close of trading on Request Day due to, for example,
(a) differences in the market value of the securities in
the Portfolio Deposit and the market value of the Securities on
Request Day and (b) any variances from the proper
composition of the Portfolio Deposit.
The Dividend Equivalent Payment and the Balancing Amount in
effect at the close of business on the Request Date are
collectively referred to as the Cash Component or the Cash
Redemption Payment. If the Balancing Amount is a positive
number (i.e., if the NAV Amount exceeds the Portfolio Deposit
Amount) then, with respect to creation, the Balancing Amount
increases the Cash Component of the then effective Portfolio
Deposit transferred to the Trustee by the creator. With respect
to redemptions, the Balancing Amount is added to the cash
transferred to the redeemer by the Trustee. If the Balancing
Amount is a negative number (i.e., if the NAV Amount is less
than the Portfolio Deposit Amount) then, with respect to
creation, this
46
amount decreases the Cash Component of the then effective
Portfolio Deposit to be transferred to the Trustee by the
creator or, if such cash portion is less than the Balancing
Amount, the difference must be paid by the Trustee to the
creator. With respect to redemptions, the Balancing Amount is
deducted from the cash transferred to the redeemer or, if such
cash is less than the Balancing Amount, the difference must be
paid by the redeemer to the Trustee.
If the Trustee has included the cash equivalent value of one or
more Index Securities in the Portfolio Deposit because the
Trustee has determined that such Index Securities are likely to
be unavailable or available in insufficient quantity for
delivery, or if a creator or redeemer is restricted from
investing or engaging in transactions in one or more of such
Index Securities, the Portfolio Deposit so constituted shall
determine the Index Securities to be delivered in connection
with the creation of Units in Creation Unit size aggregations
and upon the redemption of Units until the time the stock
portion of the Portfolio Deposit is subsequently adjusted.
THE
DJIA
The DJIA was first published in 1896. Initially comprised of
12 companies, the DJIA has evolved into the most
recognizable stock indicator in the world, and the only index
composed of companies that have sustained earnings performance
over a significant period of time. In its second century, the
DJIA is the oldest continuous barometer of the U.S. stock
market, and the most widely quoted indicator of U.S. stock
market activity.
The companies represented by the 30 stocks now comprising the
DJIA are all leaders in their respective industries, and their
stocks are widely held by individuals and institutional
investors. These stocks represent more than 16% of the
$15.47 trillion market value of all US common stocks.
Dow Jones is not responsible for and shall not participate in
the creation or sale of Units or in the determination of the
timing of, prices at, or quantities and proportions in which
purchases or sales of Index Securities or Securities shall be
made. The information in this Prospectus concerning Dow Jones
and the DJIA has been obtained from sources that the Sponsor
believes to be reliable, but the Sponsor takes no responsibility
for the accuracy of such information.
The following table shows the actual performance of the DJIA for
the years 1896 through 2010. Stock prices fluctuated widely
during this period and were higher at the end than at the
beginning. The results shown should not be considered as a
representation of the income yield or capital gain or loss that
may be generated by the
47
DJIA in the future, nor should the results be considered as a
representation of the performance of the Trust.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
|
|
DJIA
|
|
|
Point
|
|
|
Year %
|
|
|
|
|
|
%
|
|
Ended
|
|
Close
|
|
|
Change
|
|
|
Change
|
|
|
Divs
|
|
|
Yield
|
|
|
2010
|
|
|
11577.51
|
|
|
|
1149.46
|
|
|
|
11.02
|
%
|
|
|
286.88
|
|
|
|
2.54
|
%
|
2009
|
|
|
10428.05
|
|
|
|
1651.66
|
|
|
|
18.82
|
|
|
|
277.38
|
|
|
|
2.63
|
|
2008
|
|
|
8776.39
|
|
|
|
−4488.42
|
|
|
|
−33.84
|
|
|
|
316.40
|
|
|
|
3.61
|
|
2007
|
|
|
13264.82
|
|
|
|
801.67
|
|
|
|
6.43
|
|
|
|
298.97
|
|
|
|
2.35
|
|
2006
|
|
|
12463.15
|
|
|
|
1745.65
|
|
|
|
16.29
|
|
|
|
267.75
|
|
|
|
2.24
|
|
2005
|
|
|
10717.50
|
|
|
|
−65.51
|
|
|
|
−.61
|
|
|
|
246.85
|
|
|
|
2.30
|
|
2004
|
|
|
10783.01
|
|
|
|
329.09
|
|
|
|
3.15
|
|
|
|
239.27
|
|
|
|
2.22
|
|
2003
|
|
|
10453.92
|
|
|
|
2112.29
|
|
|
|
25.32
|
|
|
|
209.42
|
|
|
|
2.00
|
|
2002
|
|
|
8341.63
|
|
|
|
−1679.87
|
|
|
|
−16.76
|
|
|
|
189.68
|
|
|
|
2.27
|
|
2001
|
|
|
10021.50
|
|
|
|
−765.35
|
|
|
|
−7.10
|
|
|
|
181.07
|
|
|
|
1.81
|
|
2000
|
|
|
10786.85
|
|
|
|
−710.27
|
|
|
|
−6.18
|
|
|
|
172.08
|
|
|
|
1.60
|
|
1999
|
|
|
11497.12
|
|
|
|
2315.69
|
|
|
|
25.20
|
|
|
|
168.52
|
|
|
|
1.47
|
|
1998
|
|
|
9181.43
|
|
|
|
1273.18
|
|
|
|
16.10
|
|
|
|
151.13
|
|
|
|
1.65
|
|
1997
|
|
|
7908.25
|
|
|
|
1459.98
|
|
|
|
22.60
|
|
|
|
136.10
|
|
|
|
1.72
|
|
1996
|
|
|
6448.27
|
|
|
|
1331.20
|
|
|
|
26.00
|
|
|
|
131.14
|
|
|
|
2.03
|
|
1995
|
|
|
5117.12
|
|
|
|
1282.70
|
|
|
|
33.50
|
|
|
|
116.56
|
|
|
|
2.28
|
|
1994
|
|
|
3834.44
|
|
|
|
80.30
|
|
|
|
2.10
|
|
|
|
105.66
|
|
|
|
2.76
|
|
1993
|
|
|
3754.09
|
|
|
|
453.00
|
|
|
|
13.70
|
|
|
|
99.66
|
|
|
|
2.65
|
|
1992
|
|
|
3301.11
|
|
|
|
132.30
|
|
|
|
4.20
|
|
|
|
100.72
|
|
|
|
3.05
|
|
1991
|
|
|
3168.83
|
|
|
|
535.20
|
|
|
|
20.30
|
|
|
|
95.18
|
|
|
|
3.00
|
|
1990
|
|
|
2633.66
|
|
|
|
−119.50
|
|
|
|
−4.30
|
|
|
|
103.70
|
|
|
|
3.94
|
|
1989
|
|
|
2753.20
|
|
|
|
584.60
|
|
|
|
27.00
|
|
|
|
103.00
|
|
|
|
3.74
|
|
1988
|
|
|
2168.57
|
|
|
|
229.70
|
|
|
|
11.80
|
|
|
|
79.53
|
|
|
|
3.67
|
|
1987
|
|
|
1938.83
|
|
|
|
42.90
|
|
|
|
2.30
|
|
|
|
71.20
|
|
|
|
3.67
|
|
1986
|
|
|
1895.95
|
|
|
|
349.30
|
|
|
|
22.60
|
|
|
|
67.04
|
|
|
|
3.54
|
|
1985
|
|
|
1546.67
|
|
|
|
335.10
|
|
|
|
27.70
|
|
|
|
62.03
|
|
|
|
4.01
|
|
1984
|
|
|
1211.57
|
|
|
|
−47.10
|
|
|
|
−3.70
|
|
|
|
60.63
|
|
|
|
5.00
|
|
1983
|
|
|
1258.64
|
|
|
|
212.10
|
|
|
|
20.30
|
|
|
|
56.33
|
|
|
|
4.48
|
|
1982
|
|
|
1046.54
|
|
|
|
171.50
|
|
|
|
19.60
|
|
|
|
54.14
|
|
|
|
5.17
|
|
1981
|
|
|
875.00
|
|
|
|
−89.00
|
|
|
|
−9.20
|
|
|
|
56.22
|
|
|
|
6.43
|
|
1980
|
|
|
963.99
|
|
|
|
125.30
|
|
|
|
14.90
|
|
|
|
54.36
|
|
|
|
5.64
|
|
1979
|
|
|
838.74
|
|
|
|
33.70
|
|
|
|
4.20
|
|
|
|
50.98
|
|
|
|
6.08
|
|
1978
|
|
|
805.01
|
|
|
|
−26.20
|
|
|
|
−3.10
|
|
|
|
48.52
|
|
|
|
6.03
|
|
1977
|
|
|
831.17
|
|
|
|
−173.50
|
|
|
|
−17.30
|
|
|
|
45.84
|
|
|
|
5.52
|
|
1976
|
|
|
1004.65
|
|
|
|
152.20
|
|
|
|
17.90
|
|
|
|
41.40
|
|
|
|
4.12
|
|
1975
|
|
|
852.41
|
|
|
|
236.20
|
|
|
|
38.30
|
|
|
|
37.46
|
|
|
|
4.39
|
|
1974
|
|
|
616.24
|
|
|
|
−234.60
|
|
|
|
−27.60
|
|
|
|
37.72
|
|
|
|
6.12
|
|
1973
|
|
|
850.86
|
|
|
|
−169.20
|
|
|
|
−16.60
|
|
|
|
35.33
|
|
|
|
4.15
|
|
1972
|
|
|
1020.02
|
|
|
|
129.80
|
|
|
|
14.60
|
|
|
|
32.27
|
|
|
|
3.16
|
|
1971
|
|
|
890.20
|
|
|
|
51.30
|
|
|
|
6.10
|
|
|
|
30.86
|
|
|
|
3.47
|
|
1970
|
|
|
838.92
|
|
|
|
38.60
|
|
|
|
4.80
|
|
|
|
31.53
|
|
|
|
3.76
|
|
1969
|
|
|
800.36
|
|
|
|
−143.40
|
|
|
|
−15.20
|
|
|
|
33.90
|
|
|
|
4.24
|
|
1968
|
|
|
943.75
|
|
|
|
38.60
|
|
|
|
4.30
|
|
|
|
31.34
|
|
|
|
3.32
|
|
1967
|
|
|
905.11
|
|
|
|
119.40
|
|
|
|
15.20
|
|
|
|
30.19
|
|
|
|
3.34
|
|
48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
|
|
DJIA
|
|
|
Point
|
|
|
Year %
|
|
|
|
|
|
%
|
|
Ended
|
|
Close
|
|
|
Change
|
|
|
Change
|
|
|
Divs
|
|
|
Yield
|
|
|
1966
|
|
|
785.69
|
|
|
|
−183.60
|
|
|
|
−18.90
|
|
|
|
31.89
|
|
|
|
4.06
|
|
1965
|
|
|
969.26
|
|
|
|
95.10
|
|
|
|
10.90
|
|
|
|
28.61
|
|
|
|
2.95
|
|
1964
|
|
|
874.13
|
|
|
|
111.20
|
|
|
|
14.60
|
|
|
|
31.24
|
|
|
|
3.57
|
|
1963
|
|
|
762.95
|
|
|
|
110.90
|
|
|
|
17.00
|
|
|
|
23.41
|
|
|
|
3.07
|
|
1962
|
|
|
652.10
|
|
|
|
−79.00
|
|
|
|
−10.80
|
|
|
|
23.30
|
|
|
|
3.57
|
|
1961
|
|
|
731.14
|
|
|
|
115.30
|
|
|
|
18.70
|
|
|
|
22.71
|
|
|
|
3.11
|
|
1960
|
|
|
615.89
|
|
|
|
−63.50
|
|
|
|
−9.30
|
|
|
|
21.36
|
|
|
|
3.47
|
|
1959
|
|
|
679.36
|
|
|
|
95.70
|
|
|
|
16.40
|
|
|
|
20.74
|
|
|
|
3.05
|
|
1958
|
|
|
583.65
|
|
|
|
148.00
|
|
|
|
34.00
|
|
|
|
20.00
|
|
|
|
3.43
|
|
1957
|
|
|
435.69
|
|
|
|
−63.80
|
|
|
|
−12.80
|
|
|
|
21.61
|
|
|
|
4.96
|
|
1956
|
|
|
499.47
|
|
|
|
11.10
|
|
|
|
2.30
|
|
|
|
22.99
|
|
|
|
4.60
|
|
1955
|
|
|
488.40
|
|
|
|
84.00
|
|
|
|
20.80
|
|
|
|
21.58
|
|
|
|
4.42
|
|
1954
|
|
|
404.39
|
|
|
|
123.50
|
|
|
|
44.00
|
|
|
|
17.47
|
|
|
|
4.32
|
|
1953
|
|
|
280.90
|
|
|
|
−11.00
|
|
|
|
−3.80
|
|
|
|
16.11
|
|
|
|
5.74
|
|
1952
|
|
|
291.90
|
|
|
|
22.70
|
|
|
|
8.40
|
|
|
|
15.43
|
|
|
|
5.29
|
|
1951
|
|
|
269.23
|
|
|
|
33.80
|
|
|
|
14.40
|
|
|
|
16.34
|
|
|
|
6.07
|
|
1950
|
|
|
235.41
|
|
|
|
35.30
|
|
|
|
17.60
|
|
|
|
16.13
|
|
|
|
6.85
|
|
1949
|
|
|
200.13
|
|
|
|
22.80
|
|
|
|
12.90
|
|
|
|
12.79
|
|
|
|
6.39
|
|
1948
|
|
|
177.30
|
|
|
|
−3.90
|
|
|
|
−2.10
|
|
|
|
11.50
|
|
|
|
6.49
|
|
1947
|
|
|
181.16
|
|
|
|
4.00
|
|
|
|
2.20
|
|
|
|
9.21
|
|
|
|
5.08
|
|
1946
|
|
|
177.20
|
|
|
|
−15.70
|
|
|
|
−8.10
|
|
|
|
7.50
|
|
|
|
4.23
|
|
1945
|
|
|
192.91
|
|
|
|
40.60
|
|
|
|
26.60
|
|
|
|
6.69
|
|
|
|
3.47
|
|
1944
|
|
|
152.32
|
|
|
|
16.40
|
|
|
|
12.10
|
|
|
|
6.57
|
|
|
|
4.31
|
|
1943
|
|
|
135.89
|
|
|
|
16.50
|
|
|
|
13.80
|
|
|
|
6.30
|
|
|
|
4.64
|
|
1942
|
|
|
119.40
|
|
|
|
8.40
|
|
|
|
7.60
|
|
|
|
6.40
|
|
|
|
5.36
|
|
1941
|
|
|
110.96
|
|
|
|
−20.20
|
|
|
|
−15.40
|
|
|
|
7.59
|
|
|
|
6.84
|
|
1940
|
|
|
131.13
|
|
|
|
−19.10
|
|
|
|
−12.70
|
|
|
|
7.06
|
|
|
|
5.38
|
|
1939
|
|
|
150.24
|
|
|
|
−4.50
|
|
|
|
−2.90
|
|
|
|
6.11
|
|
|
|
4.07
|
|
1938
|
|
|
154.76
|
|
|
|
33.90
|
|
|
|
28.10
|
|
|
|
4.98
|
|
|
|
3.22
|
|
1937
|
|
|
120.85
|
|
|
|
−59.10
|
|
|
|
−32.80
|
|
|
|
8.78
|
|
|
|
7.27
|
|
1936
|
|
|
179.90
|
|
|
|
35.80
|
|
|
|
24.80
|
|
|
|
7.05
|
|
|
|
3.92
|
|
1935
|
|
|
144.13
|
|
|
|
40.10
|
|
|
|
38.50
|
|
|
|
4.55
|
|
|
|
3.16
|
|
1934
|
|
|
104.04
|
|
|
|
4.10
|
|
|
|
4.10
|
|
|
|
3.66
|
|
|
|
3.52
|
|
1933
|
|
|
99.90
|
|
|
|
40.00
|
|
|
|
66.70
|
|
|
|
3.40
|
|
|
|
3.40
|
|
1932
|
|
|
59.93
|
|
|
|
−18.00
|
|
|
|
−23.10
|
|
|
|
4.62
|
|
|
|
7.71
|
|
1931
|
|
|
77.90
|
|
|
|
−86.70
|
|
|
|
−52.70
|
|
|
|
8.40
|
|
|
|
10.78
|
|
1930
|
|
|
164.58
|
|
|
|
−83.90
|
|
|
|
−33.80
|
|
|
|
11.13
|
|
|
|
6.76
|
|
1929
|
|
|
248.48
|
|
|
|
−51.50
|
|
|
|
−17.20
|
|
|
|
12.75
|
|
|
|
5.13
|
|
1928
|
|
|
300.00
|
|
|
|
97.60
|
|
|
|
48.20
|
|
|
|
NA
|
|
|
|
NA
|
|
1927
|
|
|
202.40
|
|
|
|
45.20
|
|
|
|
28.80
|
|
|
|
NA
|
|
|
|
NA
|
|
1926
|
|
|
157.20
|
|
|
|
0.50
|
|
|
|
0.30
|
|
|
|
NA
|
|
|
|
NA
|
|
1925
|
|
|
156.66
|
|
|
|
36.20
|
|
|
|
30.00
|
|
|
|
NA
|
|
|
|
NA
|
|
1924
|
|
|
120.51
|
|
|
|
25.00
|
|
|
|
26.20
|
|
|
|
NA
|
|
|
|
NA
|
|
1923
|
|
|
95.52
|
|
|
|
−3.20
|
|
|
|
−3.30
|
|
|
|
NA
|
|
|
|
NA
|
|
1922
|
|
|
98.73
|
|
|
|
17.60
|
|
|
|
21.70
|
|
|
|
NA
|
|
|
|
NA
|
|
1921
|
|
|
81.10
|
|
|
|
9.10
|
|
|
|
12.70
|
|
|
|
NA
|
|
|
|
NA
|
|
1920
|
|
|
71.95
|
|
|
|
−35.30
|
|
|
|
−32.90
|
|
|
|
NA
|
|
|
|
NA
|
|
49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
|
|
DJIA
|
|
|
Point
|
|
|
Year %
|
|
|
|
|
|
%
|
|
Ended
|
|
Close
|
|
|
Change
|
|
|
Change
|
|
|
Divs
|
|
|
Yield
|
|
|
1919
|
|
|
107.23
|
|
|
|
25.00
|
|
|
|
30.50
|
|
|
|
NA
|
|
|
|
NA
|
|
1918
|
|
|
82.20
|
|
|
|
7.80
|
|
|
|
10.50
|
|
|
|
NA
|
|
|
|
NA
|
|
1917
|
|
|
74.38
|
|
|
|
−20.60
|
|
|
|
−21.70
|
|
|
|
NA
|
|
|
|
NA
|
|
1916
|
|
|
95.00
|
|
|
|
−4.20
|
|
|
|
−4.20
|
|
|
|
NA
|
|
|
|
NA
|
|
1915
|
|
|
99.15
|
|
|
|
44.60
|
|
|
|
81.70
|
|
|
|
NA
|
|
|
|
NA
|
|
1914
|
|
|
54.58
|
|
|
|
−24.20
|
|
|
|
−30.70
|
|
|
|
NA
|
|
|
|
NA
|
|
1913
|
|
|
78.78
|
|
|
|
−9.10
|
|
|
|
−10.30
|
|
|
|
NA
|
|
|
|
NA
|
|
1912
|
|
|
87.87
|
|
|
|
6.20
|
|
|
|
7.60
|
|
|
|
NA
|
|
|
|
NA
|
|
1911
|
|
|
81.68
|
|
|
|
0.30
|
|
|
|
0.40
|
|
|
|
NA
|
|
|
|
NA
|
|
1910
|
|
|
81.36
|
|
|
|
−17.70
|
|
|
|
−17.90
|
|
|
|
NA
|
|
|
|
NA
|
|
1909
|
|
|
99.05
|
|
|
|
12.90
|
|
|
|
15.00
|
|
|
|
NA
|
|
|
|
NA
|
|
1908
|
|
|
86.15
|
|
|
|
27.40
|
|
|
|
46.60
|
|
|
|
NA
|
|
|
|
NA
|
|
1907
|
|
|
58.75
|
|
|
|
−35.60
|
|
|
|
−37.70
|
|
|
|
NA
|
|
|
|
NA
|
|
1906
|
|
|
94.35
|
|
|
|
−1.90
|
|
|
|
−1.90
|
|
|
|
NA
|
|
|
|
NA
|
|
1905
|
|
|
96.20
|
|
|
|
26.60
|
|
|
|
38.20
|
|
|
|
NA
|
|
|
|
NA
|
|
1904
|
|
|
69.61
|
|
|
|
20.50
|
|
|
|
41.70
|
|
|
|
NA
|
|
|
|
NA
|
|
1903
|
|
|
49.11
|
|
|
|
−15.20
|
|
|
|
−23.60
|
|
|
|
NA
|
|
|
|
NA
|
|
1902
|
|
|
64.29
|
|
|
|
−0.30
|
|
|
|
−0.40
|
|
|
|
NA
|
|
|
|
NA
|
|
1901
|
|
|
64.56
|
|
|
|
−6.10
|
|
|
|
−8.70
|
|
|
|
NA
|
|
|
|
NA
|
|
1900
|
|
|
70.71
|
|
|
|
4.60
|
|
|
|
7.00
|
|
|
|
NA
|
|
|
|
NA
|
|
1899
|
|
|
66.08
|
|
|
|
5.60
|
|
|
|
9.20
|
|
|
|
NA
|
|
|
|
NA
|
|
1898
|
|
|
60.52
|
|
|
|
11.10
|
|
|
|
22.50
|
|
|
|
NA
|
|
|
|
NA
|
|
1897
|
|
|
49.41
|
|
|
|
9.00
|
|
|
|
22.20
|
|
|
|
NA
|
|
|
|
NA
|
|
1896
|
|
|
40.45
|
|
|
|
NA
|
|
|
|
NA
|
|
|
|
NA
|
|
|
|
NA
|
|
Source: Dow Jones Indexes. Year-end index values reflect neither
reinvestment of dividends nor costs associated with investing,
such as brokerage commissions. Yields are calculated by dividing
the sum of the most recent four quarterly per-share dividend
payments of all components by the sum of the component prices.
The DJIA is a price-weighted stock index, meaning that the
component stocks of the DJIA are accorded relative importance
based on their prices. In this regard, the DJIA is unlike many
other stock indexes which weight their component stocks by
market capitalization (price times shares outstanding). The DJIA
is called an average because originally it was
calculated by adding up the component stock prices and then
dividing by the number of stocks. The method remains the same
today, but the number of significant digits in the divisor (the
number that is divided into the total of the stock prices) has
been increased to eight significant digits to minimize
distortions due to rounding and has been adjusted over time to
insure continuity of the DJIA after component stock changes and
corporate actions, as discussed below.
The DJIA divisor is adjusted due to corporate actions that
change the price of any of its component shares. The most
frequent reason for such an adjustment is a stock split. For
example, suppose a company in the DJIA issues one new share for
50
each share outstanding. After this
two-for-one
split, each share of stock is worth half what it was
immediately before, other things being equal. But without an
adjustment in the divisor, this split would produce a distortion
in the DJIA. An adjustment must be made to compensate so that
the average will remain unchanged. At Dow Jones,
this adjustment is handled by changing the
divisor.* The formula used
to calculate divisor adjustments is:
|
|
|
|
|
|
|
|
|
|
|
Current Divisor x Adjusted Sum of Prices
|
|
|
New Divisor
|
|
=
|
|
|
|
|
|
|
|
|
Unadjusted Sum of Prices
|
|
|
Changes in the composition of the DJIA are made entirely by the
editors of The Wall Street Journal without consultation
with the companies, the respective stock exchange, or any
official agency. Additions or deletions of components may be
made to achieve better representation of the broad market and of
American industry.
In selecting components for the DJIA, the following criteria are
used: (a) the company is not a utility or in the
transportation business; (b) the company has a premier
reputation in its field; (c) the company has a history of
successful growth; and (d) there is wide interest among
individual and institutional investors. Whenever one component
is changed, the others are reviewed. For the sake of historical
continuity, composition changes are made rarely.
LICENSE
AGREEMENT
The License Agreement grants SSGM, an affiliate of the Trustee,
a license to use the DJIA as a basis for determining the
composition of the Portfolio and to use certain trade names and
trademarks of Dow Jones in connection with the Portfolio. The
Trustee on behalf of the Trust, the Sponsor and the Exchange
have each received a sublicense from SSGM for the use of the
DJIA and certain trade names and trademarks in connection with
their rights and duties with respect to the Trust. The License
Agreement may be amended without the consent of any of the
Beneficial Owners of Trust Units. Currently, the License
Agreement is scheduled to terminate on December 31, 2017,
but its term may be extended without the consent of any of the
Beneficial Owners of Trust Units.
None of the Trust, the Trustee, the Exchange, the Sponsor, SSGM,
the Distributor, DTC, NSCC, any Authorized Participant, any
Beneficial Owner of Trust Units or any other person is
entitled to any rights whatsoever under the foregoing licensing
arrangements or to use the trademarks and service marks
Dow Jones, The Dow, DJIA or
Dow Jones Industrial Average or to use
* Currently, the
divisor is adjusted after the close of business on the day prior
to the occurrence of the split; the divisor is not adjusted for
regular cash dividends.
51
the DJIA except as specifically described in the License
Agreement or sublicenses or as may be specified in the
Trust Agreement.
The Trust is not sponsored, endorsed, sold or promoted by Dow
Jones and Dow Jones makes no representation or warranty, express
or implied, to the Beneficial Owners of Trust Units or any
member of the public regarding the advisability of investing in
securities generally or in the Trust particularly. Dow
Jones only relationship to the Trust is the licensing of
certain trademarks, trade names and service marks of Dow Jones
and of the DJIA which is determined, comprised and calculated by
Dow Jones without regard to the Trust or the Beneficial Owners
of Trust Units. Dow Jones has no obligation to take the
needs of the Sponsor, the Exchange, the Trust or the Beneficial
Owners of Trust Units into consideration in determining,
comprising or calculating the DJIA. Dow Jones is not responsible
for and has not participated in any determination or calculation
made with respect to issuance or redemption of Trust Units.
Dow Jones has no obligation or liability in connection with the
administration, marketing or trading of Trust Units.
DOW JONES DOES NOT GUARANTEE THE ACCURACY AND/OR THE
COMPLETENESS OF THE DJIA OR ANY DATA INCLUDED THEREIN AND DOW
JONES SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR
INTERRUPTIONS THEREIN. DOW JONES MAKES NO WARRANTY, EXPRESS OR
IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE SPONSOR, THE
EXCHANGE, THE TRUST, BENEFICIAL OWNERS OF TRUST UNITS OR
ANY OTHER PERSON OR ENTITY FROM THE USE OF THE DJIA OR ANY DATA
INCLUDED THEREIN. DOW JONES MAKES NO EXPRESS OR IMPLIED
WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, WITH
RESPECT TO THE DJIA OR ANY DATA INCLUDED THEREIN. WITHOUT
LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL DOW JONES HAVE
ANY LIABILITY FOR ANY LOST PROFITS OR INDIRECT, PUNITIVE SPECIAL
OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF
NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES. THERE ARE NO THIRD
PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN
DOW JONES, THE SPONSOR AND THE EXCHANGE.
SPDR
Trademark
The SPDR trademark is used under license from
Standard & Poors Financial Services, LLC, an
affiliate of The McGraw-Hill Companies, Inc.
(S&P). No financial product offered by the
Trust, or its affiliates is sponsored, endorsed, sold or
promoted by S&P. S&P makes no representation or
warranty, express or implied, to the owners of any financial
product or any member of the public regarding the advisability
of investing in securities generally or in financial products
particularly or
52
the ability of the index on which financial products are based
to track general stock market performance. S&P is not
responsible for and has not participated in any determination or
calculation made with respect to issuance or redemption of
financial products. S&P has no obligation or liability in
connection with the administration, marketing or trading of
financial products.
WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL
S&P HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT,
OR CONSEQUENTIAL DAMAGES (INCLUDING, BUT NOT LIMITED TO, LOST
PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
EXCHANGE
LISTING
On October 1, 2008, NYSE Euronext acquired the American
Stock Exchange LLC, which was renamed NYSE Alternext
US and subsequently renamed NYSE Amex.
Following the acquisition, the listing and trading of all
exchange traded funds on NYSE Euronext US markets was
consolidated on a single trading venue, NYSE Arca. The Sponsor
and the Trustee therefore decided to move the listing for the
Trust from NYSE Alternext US (now NYSE Amex) to NYSE Arca and
Trust Units have been listed on NYSE Arca as of
November 7, 2008. The Trust was not required to pay an
initial listing fee to the Exchange. Transactions involving
Trust Units in the public trading market are subject to
customary brokerage charges and Commissions.
Trust Units also are listed and traded on the Singapore
Exchange Securities Trading Limited and Euronext Amsterdam. In
the future, Trust Units may be listed and traded on other
non-U.S. exchanges
pursuant to similar arrangements. Euronext Amsterdam is an
indirect wholly owned subsidiary of NYSE Euronext.
There can be no assurance that Units will always be listed on
the Exchange. The Trust will be terminated if Trust Units
are delisted. Trading in Units may be halted under certain
circumstances as set forth in the Exchange rules and procedures.
The Exchange will consider the suspension of trading in or
removal from listing of Units if: (a) the Trust has more
than 60 days remaining until termination and there are
fewer than 50 record
and/or
beneficial holders of Units for 30 or more consecutive trading
days; (b) the value of the DJIA is no longer calculated or
available; or (c) such other event occurs or condition
exists which, in the opinion of the Exchange, makes further
dealings on the Exchange inadvisable. In addition, trading is
subject to trading halts caused by extraordinary market
volatility pursuant to Exchange circuit breaker
rules that require trading to be halted for a specified period
based on a specified market decline. The Exchange also must halt
trading if required intraday valuation information is not
disseminated for longer than one Business Day.
The Sponsors aim in designing the Trust was to provide
investors with a security whose initial market value would
approximate one-hundredth (1/100th) the value of the DJIA. Of
course, the market value of a Unit is affected by a variety of
53
factors, including capital gains distributions made, and
expenses incurred, by the Trust, and therefore, over time, a
Unit may no longer approximate (1/100th) the value of the DJIA.
The market price of a Unit should reflect its share of the
dividends accumulated on Portfolio Securities and may be
affected by supply and demand, market volatility, sentiment and
other factors.
FEDERAL
INCOME TAXES
The following is a description of the material U.S. federal
income tax consequences of owning and disposing of Units. The
discussion below provides general tax information relating to an
investment in Units, but it does not purport to be a
comprehensive description of all the U.S. federal income
tax considerations that may be relevant to a particular
persons decision to invest in Units. This discussion does
not describe all of the tax consequences that may be relevant in
light of a Beneficial Owners particular circumstances. For
example, this summary does not include any discussion of
U.S. estate taxes. In addition, this discussion does not
describe alternative minimum tax consequences and tax
consequences applicable to Beneficial Owners subject to special
rules, such as:
|
|
|
|
|
certain financial institutions;
|
|
|
|
regulated investment companies;
|
|
|
|
real estate investment trusts;
|
|
|
|
dealers or traders in securities who use a
mark-to-market
method of tax accounting;
|
|
|
|
persons holding Units as part of a hedging transaction,
straddle, wash sale, conversion transaction or integrated
transaction or persons entering into a constructive sale with
respect to the Units;
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U.S. Holders (as defined below) whose functional currency
for U.S. federal income tax purposes is not the
U.S. dollar;
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entities classified as partnerships or other pass-through
entities for U.S. federal income tax purposes;
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former U.S. citizens and certain expatriated entities;
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tax-exempt entities, including an individual retirement
account or Roth IRA; or
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insurance companies.
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If an entity that is classified as a partnership for
U.S. federal income tax purposes holds Units, the
U.S. federal income tax treatment of a partner will
generally depend on the status of the partner and the activities
of the partnership.
54
Partnerships holding Units and partners in such partnerships
should consult their tax advisers as to the particular
U.S. federal income tax consequences of holding and
disposing of the Units.
The following discussion applies only to a Beneficial Owner of
Units that (i) is treated as the beneficial owner of such
Units for U.S. federal income tax purposes, (ii) holds
such Units as capital assets and (iii), unless otherwise noted,
is a U.S. Holder. A U.S. Holder is a
person that, for U.S. federal income tax purposes, is a
beneficial owner of Units and is (i) an individual who is a
citizen or resident of the United States; (ii) a
corporation, or other entity taxable as a corporation, created
or organized in or under the laws of the United States, any
state therein or the District of Columbia; or (iii) an
estate or trust the income of which is subject to
U.S. federal income taxation regardless of its source.
This discussion is based on the Code, administrative
pronouncements, judicial decisions, and final, temporary and
proposed Treasury regulations all as of the date hereof, any of
which is subject to change, possibly with retroactive effect.
Prospective purchasers of Units are urged to consult their tax
advisers with regard to the application of the U.S. federal
income tax laws to their particular situations, as well as any
tax consequences arising under the laws of any state, local or
foreign taxing jurisdiction.
Taxation
of the Trust
The Trust believes that it qualified as a RIC under Subchapter M
of the Code for its taxable year ended September 30, 2010,
and it intends to qualify as a RIC in the current and future
taxable years. Assuming that the Trust so qualifies and that it
satisfies the distribution requirements described below, the
Trust generally will not be subject to U.S. federal income
tax on income distributed in a timely manner to its unitholders.
To qualify as a RIC for any taxable year, the Trust must, among
other things, satisfy both an income test and an asset
diversification test for such taxable year. Specifically,
(i) at least 90% of the Trusts gross income for such
taxable year must consist of dividends; interest; payments with
respect to certain securities loans; gains from the sale or
other disposition of stock, securities or foreign currencies;
other income (including, but not limited to, gains from options,
futures or forward contracts) derived with respect to its
business of investing in such stock, securities or currencies;
and net income derived from interests in qualified
publicly traded partnerships (such income,
Qualifying RIC Income) and (ii) the
Trusts holdings must be diversified so that, at the end of
each quarter of such taxable year, (a) at least 50% of the
value of the Trusts total assets is represented by cash
and cash items, securities of other RICs, U.S. government
securities and other securities, with such other securities
limited, in respect of any one issuer, to an amount not greater
than 5%
55
of the value of the Trusts total assets and not greater
than 10% of the outstanding voting securities of such issuer and
(b) not more than 25% of the value of the Trusts
total assets is invested (x) in securities (other than
U.S. government securities or securities of other RICs) of
any one issuer or of two or more issuers that the Trust controls
and that are engaged in the same, similar or related trades or
businesses or (y) in the securities of one or more
qualified publicly traded partnerships. A
qualified publicly traded partnership is generally
defined as an entity that is treated as a partnership for
U.S. federal income tax purposes if (i) interests in
such entity are traded on an established securities market or
are readily tradable on a secondary market or the substantial
equivalent thereof and (ii) less than 90% of such
entitys gross income for the relevant taxable year
consists of Qualifying RIC Income. The Trusts share of
income derived from a partnership other than a qualified
publicly traded partnership will be treated as Qualifying
RIC Income only to the extent that such income would have
constituted Qualifying RIC Income if derived directly by the
Trust.
In order to be exempt from U.S. federal income tax on its
distributed income, the Trust must distribute to its Unitholders
on a timely basis at least 90% of its investment company
taxable income and at least 90% of its net tax-exempt
interest income for each taxable year. In general, a RICs
investment company taxable income for any taxable
year is its taxable income, determined without regard to net
capital gain (that is, the excess of net long-term capital gains
over net short-term capital losses) and with certain other
adjustments. Any taxable income, including any net capital gain,
that the Trust does not distribute to its Unitholders in a
timely manner will be subject to U.S. federal income tax at
regular corporate rates.
A RIC will be subject to a nondeductible 4% excise tax on
certain amounts that it fails to distribute during each calendar
year. In order to avoid this excise tax, a RIC must distribute
during each calendar year an amount at least equal to the sum of
(i) 98% of its ordinary taxable income for the calendar
year, (ii) 98.2% of its capital gain net income for the
one-year period ended on October 31 of the calendar year and
(iii) any ordinary income and capital gains for previous
years that were not distributed during those years. For purposes
of determining whether the Trust has met this distribution
requirement, (i) certain ordinary gains and losses that
would otherwise be taken into account for the portion of the
calendar year after October 31 will be treated as arising on
January 1 of the following calendar year and (ii) the Trust
will be deemed to have distributed any income or gains on which
it has paid U.S. federal income tax.
If the Trust failed to qualify as a RIC or failed to satisfy the
90% distribution requirement in any taxable year, the Trust
would be subject to U.S. federal income tax at regular
corporate rates on its taxable income, including its net capital
gain, even if such income were distributed to its Unitholders,
and all distributions out of earnings and profits would be
taxable as dividend income. Such distributions generally would
56
be eligible for the dividends-received deduction in the case of
corporate U.S. Holders and, prior to January 1, 2013,
would constitute qualified dividend income for
individual U.S. Holders. See Tax Consequences to
U.S. Holders Distributions. In addition,
the Trust could be required to recognize unrealized gains, pay
taxes and make distributions (which could be subject to interest
charges) before requalifying for taxation as a RIC. If the Trust
fails to satisfy the income test or diversification test
described above, however, it may be able to avoid losing its
status as a RIC by timely curing such failure, paying a tax
and/or
providing notice of such failure to the Internal Revenue Service
(the IRS).
In order to meet the distribution requirements necessary to be
exempt from U.S. federal income tax on its distributed
income, the Trust may be required to make distributions in
excess of the yield performance of the Portfolio Securities.
Tax
Consequences to U.S. Holders
Distributions. Distributions of the
Trusts ordinary income and net short-term capital gains
will, except as described below with respect to distributions of
qualified dividend income, generally be taxable to
U.S. Holders as ordinary income to the extent such
distributions are paid out of the Trusts current or
accumulated earnings and profits, as determined for
U.S. federal income tax purposes. Distributions (or deemed
distributions, as described below), if any, of net capital gains
will be taxable as long-term capital gains, regardless of the
length of time the U.S. Holder has owned Units. A
distribution of an amount in excess of the Trusts current
and accumulated earnings and profits will be treated as a return
of capital that will be applied against and reduce the
U.S. Holders basis in its Units. To the extent that
the amount of any such distribution exceeds the
U.S. Holders basis in its Units, the excess will be
treated as gain from a sale or exchange of the Units.
The ultimate tax characterization of the distributions that the
Trust makes during any taxable year cannot be determined until
after the end of the taxable year. As a result, it is possible
that the Trust will make total distributions during a taxable
year in an amount that exceeds its current and accumulated
earnings and profits.
Return-of-capital
distributions may result if, for example, the Trust makes
distributions of cash amounts deposited in connection with
Portfolio Deposits.
Return-of-capital
distributions may be more likely to occur in periods during
which the number of outstanding Units fluctuates significantly.
Distributions of qualified dividend income to an
individual or other non-corporate U.S. Holder during a
taxable year of such U.S. Holder beginning before
January 1, 2013 will be treated as qualified dividend
income and will therefore be taxed at rates applicable to
long-term capital gains, provided that the U.S. Holder
meets certain holding period and other requirements with respect
to its Units and that the Trust meets certain holding period and
other requirements with respect to the underlying shares of
stock. It is unclear whether any legislation will be enacted
that
57
would extend this treatment to taxable years beginning on or
after January 1, 2013. Qualified dividend
income generally includes dividends from domestic
corporations and dividends from foreign corporations that meet
certain specified criteria.
Dividends distributed by the Trust to a corporate
U.S. Holders will qualify for the dividends-received
deduction only to the extent that the dividends consist of
distributions of qualifying dividends received by the Trust. In
addition, any such dividends-received deduction will be
disallowed or reduced if the corporate U.S. Holder fails to
satisfy certain requirements, including a holding period
requirement, with respect to its Units.
The Trust intends to distribute its net capital gains at least
annually. If, however, the Trust retains any net capital gains
for reinvestment, it may elect to treat such net capital gains
as having been distributed to its Unitholders. If the Trust
makes such an election, each U.S. Holder will be required
to report its share of such undistributed net capital gain as
long-term capital gain and will be entitled to claim its share
of the U.S. federal income taxes paid by the Trust on such
undistributed net capital gain as a credit against its own
U.S. federal income tax liability, if any, and to claim a
refund on a properly-filed U.S. federal income tax return
to the extent that the credit exceeds such tax liability. In
addition, each U.S. Holder will be entitled to increase the
adjusted tax basis of its Units by the difference between its
shares of such undistributed net capital gain and the related
credit. There can be no assurance that the Trust will make this
election if it retains all or a portion of its net capital gain
for a taxable year.
Because the taxability of a distribution depends upon the
Trusts current and accumulated earnings and profits, a
distribution received shortly after an acquisition of Units may
be taxable, even though, as an economic matter, the distribution
represents a return of the U.S. Holders initial
investment.
Although dividends generally will be treated as distributed when
paid, dividends declared in October, November or December,
payable to Unitholders of record on a specified date in one of
those months, and paid during the following January, will be
treated as having been distributed by the Trust and received by
the Unitholders on December 31, of the year in which
declared.
Sales and Redemptions of Units. Upon the sale
or other disposition of Units, a U.S. Holder will recognize
gain or loss in an amount equal to the difference, if any,
between the amount realized on the sale or other disposition and
the U.S. Holders adjusted tax basis in the relevant
Units. Such gain or loss generally will be long-term gain
capital gain or loss if the U.S. Holders holding
period for the relevant Units is more than one year. Under
current law, net capital gains recognized by non-corporate
U.S. Holders are generally subject to U.S. federal
income tax at lower rates than the rates applicable to ordinary
income.
58
Losses recognized by a U.S. Holder on the sale or exchange
of Units held for six months or less will be treated as
long-term capital losses to the extent of any distribution of
long-term capital gain received (or deemed received, as
discussed above) with respect to such Units. In addition, no
loss will be allowed on a sale or other disposition of Units if
the U.S. Holder acquires, or enters into a contract or
option to acquire, Units within 30 days before or after
such sale or other disposition. In such a case, the basis of the
Units acquired will be adjusted to reflect the disallowed loss.
If a U.S. Holder receives an in-kind distribution in
redemption of Units, the U.S. Holder will recognize gain or
loss in an amount equal to the difference between the sum of the
aggregate fair market value as of the redemption date of the
stocks and cash received in the redemption and the
U.S. Holders adjusted tax basis in the relevant
Units. The U.S. Holder will generally have an initial tax
basis in the distributed stocks equal to their respective fair
market values on the redemption date. The IRS may assert that
any resulting loss may not be deducted on the ground that there
has been no material change in the U.S. Holders
economic position. The Trust will not recognize gain or loss for
U.S. federal income tax purposes on an in-kind distribution
of stocks.
Under U.S. Treasury regulations, if a U.S. Holder
recognizes losses with respect to Units of $2 million or
more for an individual U.S. Holder or $10 million or
more for a corporate U.S. Holder, the U.S. Holder must
file with the IRS a disclosure statement on IRS Form 8886.
Direct shareholders of portfolio securities are in many cases
exempted from this reporting requirement, but under current
guidance, shareholders of a RIC are not exempted. The fact that
a loss is reportable under these regulations does not affect the
legal determination of whether the U.S. Holders
treatment of the loss is proper. Certain states may have similar
disclosure requirements.
Portfolio Deposits. Upon the transfer of a
Portfolio Deposit to the Trust, a U.S. Holder will
generally recognize gain or loss with respect to each stock
included in the Portfolio Deposit in an amount equal to the
difference, if any, between the amount realized with respect to
such stock and the U.S. Holders basis in the stock.
The amount realized with respect to each stock included in a
Portfolio Deposit is determined by allocating among all of the
stocks included in the Portfolio Deposit an amount equal to the
fair market value of the Creation Units received (determined as
of the date of transfer of the Portfolio Deposit) plus the
amount of any cash received from the Trust, reduced by the
amount of any cash paid to the Trust. This allocation is made
among such stocks in accordance with their relative fair market
values as of the date of transfer of the Portfolio Deposit. The
IRS may assert that any loss resulting from the transfer of a
Portfolio Deposit to the Trust may not be deducted on the ground
that there has been no material change in the economic position
of the
59
U.S. Holder. The Trust will not recognize gain or loss for
U.S. federal income tax purposes on the issuance of
Creation Units in exchange for Portfolio Deposits.
Backup Withholding and Information
Returns. Payments on the Units and proceeds from
a sale or other disposition of Units will generally be subject
to information reporting. A U.S. Holder will be subject to
backup withholding on all such amounts unless (i) the
U.S. Holder is an exempt recipient or (ii) the
U.S. Holder provides its correct taxpayer identification
number (generally, on IRS
Form W-9)
and certifies that it is not subject to backup withholding.
Backup withholding is not an additional tax. Any amounts
withheld pursuant to the backup withholding rules will be
allowed as a credit against the U.S. Holders
U.S. federal income tax liability and may entitle the
U.S. Holder to a refund, provided that the required
information is furnished to the IRS on a timely basis.
Tax
Consequences to
Non-U.S.
Holders
A
Non-U.S. Holder
is a person that, for U.S. federal income tax purposes, is
a beneficial owner of Units and is a nonresident alien
individual, a foreign corporation, a foreign trust or a foreign
estate. The U.S. federal income taxation of a
Non-U.S. Holder
depends on whether the income that the
Non-U.S. Holder
derives from the Trust is effectively connected with
a trade or business that the
Non-U.S. Holder
conducts in the United States.
If the income that a
Non-U.S. Holder
derives from the Trust is not effectively connected
with a U.S. trade or business conducted by such
Non-U.S. Holder,
distributions of investment company taxable income
to such
Non-U.S. Holder
will be subject to U.S. federal withholding tax at a rate
of 30% (or lower rate under an applicable tax treaty). Provided
that certain requirements are satisfied, however, this
withholding tax will not be imposed on dividends paid by the
Trust in its taxable years beginning before January 1, 2012
to the extent that the underlying income out of which the
dividends are paid consists of
U.S.-source
interest income or short-term capital gains that would not have
been subject to U.S. withholding tax if received directly
by the
Non-U.S. Holder
(interest-related dividends and short-term
capital gain dividends, respectively). It is unclear
whether any legislation will be enacted that would extend this
exemption from withholding to the Trusts taxable years
beginning on or after January 1, 2012.
A
Non-U.S. Holder
whose income from the Trust is not effectively
connected with a U.S. trade or business will
generally be exempt from U.S. federal income tax on capital
gain dividends and any amounts retained by the Trust that are
designated as undistributed capital gains. In addition, such a
Non-U.S. Holder
will generally be exempt from U.S. federal income tax on
any gains realized upon the sale or exchange of Units. If,
however, such a
Non-U.S. Holder
is a nonresident alien individual and is physically present in
the United States for 183 days or more during the taxable
year and meets certain other requirements, such capital gain
dividends, undistributed
60
capital gains and gains from the sale or exchange of Units, net
of certain U.S. source capital losses, will be subject to a
30% U.S. tax.
If the income from the Trust is effectively
connected with a U.S. trade or business carried on by
a
Non-U.S. Holder,
any distributions of investment company taxable
income, any capital gain dividends, any amounts retained
by the Trust that are designated as undistributed capital gains
and any gains realized upon the sale or exchange of Units will
be subject to U.S. federal income tax, on a net income
basis at the rates applicable to U.S. Holders. If the
Non-U.S. Holder
is a corporation, it may also be subject to the U.S. branch
profits tax.
Information returns will be filed with the Internal Revenue
Service (the IRS) in connection with certain
payments on the Units. A
Non-U.S. Holder
may be subject to backup withholding on distributions in respect
of the Units or on proceeds from a sale or other disposition of
Units if such
Non-U.S. Holder
does not certify its
non-U.S. status
under penalties of perjury or otherwise establish an exemption.
Backup withholding is not an additional tax. Any amounts
withheld pursuant to the backup withholding rules will be
allowed as a credit against the
Non-U.S. Holders
U.S. federal income tax liability, if any, and may entitle
the
Non-U.S. Holder
to a refund, provided that the required information is furnished
to the IRS on a timely basis.
Recent legislation generally imposes withholding at a rate of
30% on payments to certain foreign entities (including financial
intermediaries), after December 31, 2012, of
U.S.-source
dividends and the gross proceeds of dispositions of property
that can produce
U.S.-source
dividends, unless the relevant foreign entity satisfies various
U.S. information reporting and due diligence requirements
(generally relating to ownership by U.S. persons of
interests in, or accounts with, those entities).
Non-U.S. Holders
should consult their tax advisors regarding the possible
implications of this legislation on their investment in Units.
In order to qualify for the exemption from U.S. withholding tax
on interest-related dividends, to qualify for an
exemption from U.S. backup withholding and to qualify for a
reduced rate of U.S. withholding tax on Trust distributions
pursuant to an income tax treaty, a
Non-U.S. Holder
must generally deliver to the Trust a properly executed IRS form
(generally,
Form W-8BEN).
In order to claim a refund of any Trust-level taxes imposed on
undistributed net capital gains, any withholding taxes or any
backup withholding, a
Non-U.S. Holder
must obtain a U.S. taxpayer identification number and file
a U.S. federal income tax return, even if the
Non-U.S. Holder
would not otherwise be required to obtain a U.S. taxpayer
identification number or file a U.S. income tax return.
61
BENEFIT
PLAN INVESTOR CONSIDERATIONS
In considering the advisability of an investment in Units,
fiduciaries of pension, profit sharing or other tax-qualified
retirement plans and funded welfare plans (collectively,
Plans) subject to the fiduciary responsibility
requirements of the Employee Retirement Income Security Act of
1974, as amended (ERISA), should consider whether an
investment in Units (a) is permitted by the documents and
instruments governing the Plan, (b) is made solely in the
interest of participants and beneficiaries of the Plans,
(c) is consistent with the prudence and diversification
requirements of ERISA, and that the acquisition and holding of
Units does not result in a non-exempt prohibited
transaction under Section 406 of ERISA or
Section 4975 of the Code. Individual retirement account
(IRA) investors and certain other investors not
subject to ERISA, such as Keogh Plans, should consider that such
arrangements may make only such investments as are authorized by
the governing instruments and that IRAs, Keogh Plans and certain
other types of arrangements are subject to the prohibited
transaction rules of Section 4975 of the Code. Employee
benefit plans that are government plans (as defined in
Section 3(32) of ERISA), certain church plans (as defined
in Section 3(33) of ERISA) and
non-U.S. plans
(as described in Section 4(b)(4) of ERISA) are not subject
to the requirements of ERISA or Section 4975 of the Code.
The fiduciaries of governmental plans should, however, consider
the impact of their respective state pension codes or other
applicable law, which may include restrictions similar to ERISA
and Section 4975 of the Code, on investments in Units and
the considerations discussed above, to the extent such
considerations apply. Each purchaser and transferee of a Unit
who is subject to ERISA or Section 4975 of the Code or any
similar laws will be deemed to have represented by its
acquisition and holding of each Unit that its acquisition and
holding of any Units does not give rise to a non-exempt
prohibited transaction under ERISA, the Code or any similar law.
As described in the preceding paragraph, ERISA imposes certain
duties on Plan fiduciaries, and ERISA
and/or
Section 4975 of the Code prohibit certain transactions
involving plan assets between Plans or IRAs and
persons who have certain specified relationships to the Plan or
IRA (that is, parties in interest as defined in
ERISA or disqualified persons as defined in the
Code). The fiduciary standards and prohibited transaction rules
that apply to an investment in Units by a Plan will not apply to
transactions involving the Trusts assets because the Trust
is an investment company registered under the Investment Company
Act of 1940. As such, the Trusts assets are not deemed to
be plan assets under ERISA and U.S. Department
of Labor regulations by virtue of Plan
and/or IRA
investments in Units.
Each purchaser or transferee should consult legal counsel before
purchasing the Units. Nothing herein shall be construed as a
representation that an investment in the Units would meet any or
all of the relevant legal requirements with respect to
investments by, or is appropriate for, an employee benefit plan
subject to ERISA or Section 4975 of the Code or a similar
law.
62
CONTINUOUS
OFFERING OF UNITS
Creation Units are offered continuously to the public by the
Trust through the Distributor. Persons making Portfolio Deposits
and creating Creation Units receive no fees, commissions or
other form of compensation or inducement of any kind from the
Sponsor or the Distributor, and no such person has any
obligation or responsibility to the Sponsor or Distributor to
effect any sale or resale of Units.
Because new Units can be created and issued on an ongoing basis,
at any point during the life of the Trust, a
distribution, as such term is used in the Securities
Act of 1933 (1933 Act), may be occurring.
Broker-dealers and other persons are cautioned that some of
their activities may result in their being deemed participants
in a distribution in a manner which could render them statutory
underwriters and subject them to the prospectus-delivery and
liability provisions of the 1933 Act. For example, a
broker-dealer firm or its client may be deemed a statutory
underwriter if it takes Creation Units after placing a creation
order with the Distributor, breaks them down into the
constituent Units and sells the Units directly to its customers;
or if it chooses to couple the creation of a supply of new Units
with an active selling effort involving solicitation of
secondary market demand for Units. A determination of whether
one is an underwriter must take into account all the facts and
circumstances pertaining to the activities of the broker-dealer
or its client in the particular case, and the examples mentioned
above should not be considered a complete description of all the
activities that could lead to categorization as an underwriter.
Dealers who are not underwriters but are
participating in a distribution (as contrasted to ordinary
secondary trading transactions), and thus dealing with Units
that are part of an unsold allotment within the
meaning of Section 4(3)(C) of the 1933 Act, would be
unable to take advantage of the prospectus-delivery exemption
provided by Section 4(3) of the 1933 Act.
The Sponsor intends to qualify Units in states selected by the
Sponsor and through broker-dealers who are members of FINRA.
Investors intending to create or redeem Creation Units in
transactions not involving a broker-dealer registered in such
investors state of domicile or residence should consult
their legal advisor regarding applicable broker-dealer or
securities regulatory requirements under the state securities
laws prior to such creation or redemption.
DIVIDEND
REINVESTMENT SERVICE
No dividend reinvestment service is provided by the Trust.
Broker-dealers, at their own discretion, may offer a dividend
reinvestment service under which additional Units are purchased
in the secondary market at current market prices. Investors
should consult their broker dealer for further information
regarding any dividend reinvestment service offered by such
broker dealer.
63
Distributions in cash that are reinvested in additional Units
through of a dividend reinvestment service, if offered by an
investors broker-dealer, will nevertheless be taxable
dividends to the same extent as if such dividends had been
received in cash.
EXPENSES
OF THE TRUST
Ordinary operating expenses of the Trust are currently being
accrued at an annual rate of less than 0.18%. Future accruals
will depend primarily on the level of the Trusts net
assets and the level of Trust expenses. There is no guarantee
that the Trusts ordinary operating expenses will not
exceed 0.18% of the Trusts daily net asset value and such
rate may be changed without notice.
Until further notice, the Sponsor has undertaken that it will
not permit the ordinary operating expenses of the Trust, as
calculated by the Trustee, to exceed an amount that is 18/100 of
1% (0.18%) per annum of the daily NAV of the Trust after taking
into account any expense offset credits. To the extent the
ordinary operating expenses of the Trust do exceed such 0.18%
amount, the Sponsor will reimburse the Trust for, or assume, the
excess. The Sponsor retains the ability to be repaid by the
Trust for expenses so reimbursed or assumed to the extent that
subsequently during the fiscal year expenses fall below the
0.18% per annum level on any given day. For purposes of this
undertaking, ordinary operating expenses of the Trust do not
include taxes, brokerage commissions and any extraordinary
non-recurring expenses, including the cost of any litigation to
which the Trust or the Trustee may be a party. The Sponsor may
discontinue this undertaking or renew it for a specified period
of time, or may choose to reimburse or assume certain Trust
expenses in later periods to keep Trust expenses at a level it
believes to be attractive to investors. In any event, on any day
and during any period over the life of the Trust, total fees and
expenses of the Trust may exceed 0.18% per annum.
Subject to any applicable cap, the Sponsor may charge the Trust
a special fee for certain services the Sponsor may provide to
the Trust which would otherwise be provided by the Trustee in an
amount not to exceed the actual cost of providing such services.
The Sponsor or the Trustee from time to time may voluntarily
assume some expenses or reimburse the Trust so that total
expenses of the Trust are reduced. Neither the Sponsor nor the
Trustee is obligated to do so and either one or both parties may
discontinue such voluntary assumption of expenses or
reimbursement at any time without notice.
The following charges are or may be accrued and paid by the
Trust: (a) the Trustees fee; (b) fees payable to
transfer agents for the provision of transfer agency services;
(c) fees of the Trustee for extraordinary services
performed under the Trust Agreement; (d) various
governmental charges; (e) any taxes, fees and charges
payable by the Trustee with respect to Units (whether in
Creation Units or otherwise);
64
(f) expenses and costs of any action taken by the Trustee
or the Sponsor to protect the Trust and the rights and interests
of Beneficial Owners of Units (whether in Creation Units or
otherwise); (g) indemnification of the Trustee or the
Sponsor for any losses, liabilities or expenses incurred by it
in the administration of the Trust; (h) expenses incurred
in contacting Beneficial Owners of Units during the life of the
Trust and upon termination of the Trust; and (i) other
out-of-pocket expenses of the Trust incurred pursuant to actions
permitted or required under the Trust Agreement.
In addition, the following expenses are or may be charged to the
Trust: (a) reimbursement to the Sponsor of amounts paid by
it to Dow Jones in respect of annual licensing fees pursuant to
the License Agreement; (b) federal and state annual
registration fees for the issuance of Units; and
(c) expenses of the Sponsor relating to the printing and
distribution of marketing materials describing Units and the
Trust (including, but not limited to, associated legal,
consulting, advertising, and marketing costs and other
out-of-pocket
expenses such as printing). Pursuant to the provisions of an
exemptive order, the expenses set forth in this paragraph may be
charged to the Trust by the Trustee in an amount equal to the
actual costs incurred, but in no case shall such charges exceed
20/100 of 1% (0.20%) per annum of the daily NAV of the Trust.
With respect to the marketing expenses described in item
(c) above, the Sponsor has entered into an agreement with
the Marketing Agent, pursuant to which the Marketing Agent has
agreed to market and promote the Trust, the Marketing Agent is
reimbursed by the Sponsor for the expenses it incurs for
providing such services out of amounts that the Trust reimburses
the Sponsor.
If the income received by the Trust in the form of dividends and
other distributions on Portfolio Securities is insufficient to
cover Trust expenses, the Trustee may make advances to the Trust
to cover such expenses. Otherwise, the Trustee may sell
Portfolio Securities in an amount sufficient to pay such
expenses. The Trustee may reimburse itself in the amount of any
such advance, together with interest thereon at a percentage
rate equal to the then current overnight federal funds rate, by
deducting such amounts from (a) dividend payments or other
income of the Trust when such payments or other income is
received, (b) the amounts earned or benefits derived by the
Trustee on cash held by the Trustee for the benefit of the
Trust, and (c) the sale of Portfolio Securities.
Notwithstanding the foregoing, if any advance remains
outstanding for more than forty-five (45) Business Days,
the Trustee may sell Portfolio Securities to reimburse itself
for such advance and any accrued interest thereon. These
advances will be secured by a lien on the assets of the Trust in
favor of the Trustee. The expenses of the Trust are reflected in
the NAV of the Trust.
For services performed under the Trust Agreement, the
Trustee is paid a fee at an annual rate of 6/100 of 1% to 10/100
of 1% of the NAV of the Trust, as shown below, such percentage
amount to vary depending on the NAV of the Trust, plus or minus
the Adjustment Amount. The compensation is computed on each
Business Day based on
65
the NAV of the Trust on such day, and the amount thereof is
accrued daily and paid quarterly. To the extent that the amount
of the Trustees compensation, before any adjustment in
respect of the Adjustment Amount, is less than specified
amounts, the Sponsor has agreed to pay the amount of any such
shortfall. Notwithstanding the fee schedule set forth in the
table below, in the fourth year of the Trusts operation
and in subsequent years, the Trustee shall be paid a minimum fee
of $400,000 per annum as adjusted by the CPI-U to take effect at
the beginning of the fourth year and each year thereafter. To
the extent that the amount of the Trustees compensation,
prior to any adjustment in respect of the Adjustment Amount, is
less than specified amounts, the Sponsor has agreed to pay the
amount of any such shortfall. The Trustee also may waive all or
a portion of such fee.
Trustee
Fee Scale
|
|
|
Net Asset Value of the Trust
|
|
Fee as a Percentage of Net Asset Value of the Trust
|
|
$0 $499,999,999
|
|
10/100 of 1% per annum plus or minus the Adjustment Amount*
|
$500,000,000 $2,499,999,999
|
|
8/100 of 1% per annum plus or minus the Adjustment Amount*
|
$2,500,000,000 and above
|
|
6/100 of 1% per annum plus or minus the Adjustment Amount*
|
|
|
|
*
|
|
The fee indicated applies to that
portion of the net asset value of the Trust which falls in the
size category indicated.
|
As of October 31, 2010, and as of December 31, 2010,
the NAV of the Trust was $8,058,639,107 and $8,692,197,339,
respectively. No representation is made as to the actual NAV of
the Trust on any future date as it is subject to change at any
time due to fluctuations in the market value of the Portfolio
Securities or to creations or redemptions made in the future.
The Adjustment Amount is calculated at the end of each quarter
and applied against the Trustees fee for the following
quarter. Adjustment Amount is an amount which is
intended, depending upon the circumstances, either to
(a) reduce the Trustees fee by the amount that the
Transaction Fees paid on creation and redemption exceed the
costs of those activities, and by the amount of excess earnings
on cash held for the benefit of the
Trust** or (b) increase
the Trustees fee by the amount that the Transaction Fee
(plus additional amounts paid in connection with creations or
redemptions outside the Clearing Process), paid on creations or
redemptions, falls short of the actual costs of these
activities. If in any quarter the Adjustment Amount exceeds the
fee payable to the Trustee as set forth above, the Trustee uses
such excess amount to reduce other Trust expenses, subject to
certain federal tax limitations. To the extent that the amount
of such excess exceeds the Trusts expenses for such
quarter, any remaining excess is retained by the Trustee as part
of its compensation. If in any quarter the costs of processing
creations and redemptions exceed the amounts charged as a
Transaction Fee (plus the additional amounts paid in connection
with
** The excess earnings
on cash amount is currently calculated, and applied, on a
monthly basis.
66
creations or redemptions outside the Clearing Process) net of
the excess earnings, if any, on cash held for the benefit of the
Trust, the Trustee will augment the Trustees fee by the
resulting Adjustment Amount. The net Adjustment Amount is
usually a credit to the Trust. The amount of the earnings credit
will be equal to the then current Federal Funds Rate, as
reported in nationally distributed publications, multiplied by
each days daily cash balance in the Trusts cash
account, reduced by the amount of reserves for that account
required by the Federal Reserve Board of Governors.
VALUATION
The NAV of the Trust is computed as of the Evaluation Time shown
under Summary Essential Information on
each Business Day. The NAV of the Trust on a per Unit basis is
determined by subtracting all liabilities (including accrued
expenses and dividends payable) from the total value of the
Portfolio and other assets and dividing the result by the total
number of outstanding Units. For the most recent NAV
information, please go to www.spdrs.com.
The value of the Portfolio is determined by the Trustee in good
faith in the following manner. If Portfolio Securities are
listed on one or more national securities exchanges, such
evaluation is generally based on the closing sale price on that
day (unless the Trustee deems such price inappropriate as a
basis for evaluation) on the exchange which is deemed to be the
principal market thereof or, if there is no such appropriate
closing price on such exchange at the last sale price (unless
the Trustee deems such price inappropriate as a basis for
evaluation). If the stocks are not so listed or, if so listed
and the principal market therefor is other than on such exchange
or there is no such closing sale price available, such
evaluation shall generally be made by the Trustee in good faith
based on the closing price on the
over-the-counter
market (unless the Trustee deems such price inappropriate as a
basis for evaluation) or if there is no such appropriate closing
price, (a) on current bid prices, (b) if bid prices
are not available, on the basis of current bid prices for
comparable stocks, (c) by the Trustees appraising the
value of the stocks in good faith on the bid side of the market,
or (d) by any combination thereof.
67
ADMINISTRATION
OF THE TRUST
Distributions
to Beneficial Owners
The regular monthly ex-dividend date for Units is the third
Friday in each calendar month, unless such day is not a Business
Day, in which case the ex-dividend date is the immediately
preceding Business Day (Ex-Dividend Date).
Beneficial Owners reflected on the records of DTC and the DTC
Participants on the second Business Day following the
Ex-Dividend Date (Record Date) are entitled to
receive an amount representing dividends accumulated on
Portfolio Securities through the monthly dividend period which
ends on the Business Day preceding such Ex-Dividend Date
(including stocks with ex-dividend dates falling within such
monthly dividend period), net of fees and expenses, accrued
daily for such period. For the purposes of all dividend
distributions, dividends per Unit are calculated at least to the
nearest 1/1000th of $0.01. The payment of dividends is made
on the Monday preceding the third (3rd) Friday of the next
calendar month or the next subsequent Business Day if such
Monday is not a Business Day (Dividend Payment
Date). Dividend payments are made through DTC and the DTC
Participants to Beneficial Owners then of record with funds
received from the Trustee.
Dividends payable to the Trust in respect of Portfolio
Securities are credited by the Trustee to a non-interest bearing
account as of the date on which the Trust receives such
dividends. Other moneys received by the Trustee in respect of
the Portfolio, including but not limited to the Cash Component,
the Cash Redemption Payment, all moneys realized by the
Trustee from the sale of options, warrants or other similar
rights received or distributed in respect of Portfolio
Securities as dividends or distributions and capital gains
resulting from the sale of Portfolio Securities are credited by
the Trustee to a non-interest bearing account. All funds
collected or received are held by the Trustee without interest
until distributed in accordance with the provisions of the
Trust Agreement. To the extent the amounts credited to the
account generate interest income or an equivalent benefit to the
Trustee, such interest income or benefit is used to reduce the
Trustees annual fee.
Any additional distributions the Trust may need to make so as to
continue to qualify as a RIC under the Code and to avoid
U.S. federal excise tax would consist of (a) an
increase in the distribution scheduled for January to include
any amount by which the Trusts estimated investment
company taxable income and net capital gains for a year
exceeds the amount of Trust taxable income previously
distributed with respect to such year or, if greater, the
minimum amount required to avoid imposition of such excise tax,
and (b) a distribution soon after actual annual investment
company taxable income and net capital gains of the Trust have
been computed, of the amount, if any, by which such actual
income exceeds the distributions already made. The NAV of the
Trust is reduced in direct proportion to the amount of such
additional distributions. The magnitude of the additional
68
distributions, if any, depends upon a number of factors,
including the level of redemption activity experienced by the
Trust. Because substantially all proceeds from the sale of
stocks in connection with adjustments to the Portfolio are used
to purchase shares of Index Securities, the Trust may have no
cash or insufficient cash with which to pay such additional
distributions. In that case, the Trustee typically has to sell
an approximately equal number of shares of each of the Portfolio
Securities sufficient to produce the cash required to make such
additional distributions.
The Trustee may declare special dividends if such action is
necessary or advisable to preserve the status of the Trust as a
regulated investment company or to avoid imposition of income or
excise taxes on undistributed income, and to vary the frequency
with which periodic distributions are made (e.g., from monthly
to quarterly) if it is determined by the Sponsor and the Trustee
that such a variance would be advisable to facilitate compliance
with the rules and regulations applicable to regulated
investment companies or would otherwise be advantageous to the
Trust. In addition, the Trustee may change the regular
ex-dividend date for Units to another date within the month or
the quarter if it is determined by the Sponsor and the Trustee
that such a change would be advantageous to the Trust. Notice of
any such variance or change shall be provided to Beneficial
Owners via DTC and the DTC Participants.
As soon as practicable after notice of termination of the Trust,
the Trustee will distribute via DTC and the DTC Participants to
each Beneficial Owner redeeming Creation Units before the
termination date specified in such notice a portion of Portfolio
Securities and cash as described above. Otherwise, the Trustee
will distribute to each Beneficial Owner (whether in Creation
Unit size aggregations or otherwise), as soon as practicable
after termination of the Trust, such Beneficial Owners pro
rata share of the NAV of the Trust.
All distributions are made by the Trustee through DTC and the
DTC Participants to Beneficial Owners as recorded on the book
entry system of DTC and the DTC Participants.
The settlement date for the creation of Units or the purchase of
Units in the secondary market must occur on or before the Record
Date in order for such creator or purchaser to receive a
distribution on the next Dividend Payment Date. If the
settlement date for such creation or a secondary market purchase
occurs after the Record Date, the distribution will be made to
the prior securityholder or Beneficial Owner as of such Record
Date.
Statements
to Beneficial Owners; Annual Reports
With each distribution, the Trustee furnishes for distribution
to Beneficial Owners a statement setting forth the amount being
distributed, expressed as a dollar amount per Unit.
69
Promptly after the end of each fiscal year, the Trustee
furnishes to the DTC Participants for distribution to each
person who was a Beneficial Owner of Units at the end of such
fiscal year, an annual report of the Trust containing financial
statements audited by independent accountants of nationally
recognized standing and such other information as may be
required by applicable laws, rules and regulations.
Rights of
Beneficial Owners
Beneficial Owners may sell Units in the secondary market, but
must accumulate enough Units to constitute a full Creation Unit
in order to redeem through the Trust. The death or incapacity of
any Beneficial Owner does not operate to terminate the Trust nor
entitle such Beneficial Owners legal representatives or
heirs to claim an accounting or to take any action or proceeding
in any court for a partition or winding up of the Trust.
Beneficial Owners shall not (a) have the right to vote
concerning the Trust, except with respect to termination and as
otherwise expressly set forth in the Trust Agreement,
(b) in any manner control the operation and management of
the Trust, or (c) be liable to any other person by reason
of any action taken by the Sponsor or the Trustee. The Trustee
has the right to vote all of the voting stocks in the Trust. The
Trustee votes the voting stocks of each issuer in the same
proportionate relationship as all other shares of each such
issuer are voted to the extent permissible and, if not
permitted, abstains from voting. The Trustee shall not be liable
to any person for any action or failure to take any action with
respect to such voting matters.
Amendments
to the Trust Agreement
The Trust Agreement may be amended from time to time by the
Trustee and the Sponsor without the consent of any Beneficial
Owners (a) to cure any ambiguity or to correct or
supplement any provision that may be defective or inconsistent
or to make such other provisions as will not adversely affect
the interests of Beneficial Owners; (b) to change any
provision as may be required by the SEC; (c) to add or
change any provision as may be necessary or advisable for the
continuing qualification of the Trust as a regulated
investment company under the Code; (d) to add or
change any provision as may be necessary or advisable if NSCC or
DTC is unable or unwilling to continue to perform its functions;
and (e) to add or change any provision to conform the
adjustments to the Portfolio and the Portfolio Deposit to
changes, if any, made by Dow Jones in its method of determining
the DJIA. The Trust Agreement may also be amended by the
Sponsor and the Trustee with the consent of the Beneficial
Owners of 51% of the outstanding Units to add provisions to, or
change or eliminate any of the provisions of, the
Trust Agreement or to modify the rights of Beneficial
Owners; although, the Trust Agreement may not be amended
without the consent of the Beneficial Owners of all outstanding
Units if such amendment would (a) permit the
70
acquisition of any securities other than those acquired in
accordance with the terms and conditions of the
Trust Agreement; (b) reduce the interest of any
Beneficial Owner in the Trust; or (c) reduce the percentage
of Beneficial Owners required to consent to any such amendment.
Promptly after the execution of an amendment, the Trustee
receives from DTC, pursuant to the terms of the Depository
Agreement, a list of all DTC Participants holding Units. The
Trustee inquires of each such DTC Participant as to the number
of Beneficial Owners for whom such DTC Participant holds Units,
and provides each such DTC Participant with sufficient copies of
a written notice of the substance of such amendment for
transmittal by each such DTC Participant to Beneficial Owners.
Termination
of the Trust Agreement
The Trust Agreement provides that the Sponsor has the
discretionary right to direct the Trustee to terminate the Trust
if at any time the NAV of the Trust is less than $350,000,000,
as such dollar amount shall be adjusted for inflation in
accordance with the CPI-U. This adjustment is to take effect at
the end of the fourth year following the Initial Date of Deposit
and at the end of each year thereafter and to be made so as to
reflect the percentage increase in consumer prices as set forth
in the CPI-U for the twelve month period ending in the last
month of the preceding fiscal year.
The Trust may be terminated (a) by the agreement of the
Beneficial Owners of
662/3%
of outstanding Trust Units; (b) if DTC is unable or
unwilling to continue to perform its functions as set forth
under the Trust Agreement and a comparable replacement is
unavailable; (c) if NSCC no longer provides clearance
services with respect to Trust Units, or if the Trustee is
no longer a participant in NSCC; (d) if Dow Jones ceases
publishing the DJIA; (e) if the License Agreement is
terminated; or (f) if Trust Units are delisted from
the Exchange. The Trust will also terminate by its terms on the
Termination Date.
The Trust will terminate if either the Sponsor or the Trustee
resigns or is removed and a successor is not appointed. The
dissolution of the Sponsor or its ceasing to exist as a legal
entity for any cause whatsoever, however, will not cause the
termination of the Trust Agreement or the Trust unless the
Trustee deems termination to be in the best interests of
Beneficial Owners.
Prior written notice of the termination of the Trust must be
given at least twenty (20) days before termination of the
Trust to all Beneficial Owners. The notice must set forth the
date on which the Trust will be terminated, the period during
which the assets of the Trust will be liquidated, the date on
which Beneficial Owners of Trust Units (whether in Creation
Unit size aggregations or otherwise) will receive in cash the
NAV of the Units held, and the date upon which the books of the
Trust shall be closed. The notice shall further state that, as
of the date thereof and thereafter,
71
neither requests to create additional Creation Units nor
Portfolio Deposits will be accepted, and that, as of the date
thereof and thereafter, the portfolio of stocks delivered upon
redemption shall be identical in composition and weighting to
Portfolio Securities as of such date rather than the stock
portion of the Portfolio Deposit as in effect on the date
request for redemption is deemed received. Beneficial Owners of
Creation Units may, in advance of the Termination Date, redeem
in kind directly from the Trust.
Within a reasonable period after the Termination Date, the
Trustee shall, subject to any applicable provisions of law, use
its best efforts to sell all of the Portfolio Securities not
already distributed to redeeming Beneficial Owners of Creation
Units. The Trustee shall not be liable for or responsible in any
way for depreciation or loss incurred because of any such sale.
The Trustee may suspend such sales upon the occurrence of
unusual or unforeseen circumstances, including but not limited
to a suspension in trading of a stock, the closing or
restriction of trading on a stock exchange, the outbreak of
hostilities, or the collapse of the economy. The Trustee shall
deduct from the proceeds of sale its fees and all other expenses
and transmit the remaining amount to DTC for distribution,
together with a final statement setting forth the computation of
the gross amount distributed.
Trust Units not redeemed before termination of the Trust
will be redeemed in cash at NAV based on the proceeds of the
sale of Portfolio Securities, with no minimum aggregation of
Trust Units required.
SPONSOR
The Sponsor is a Delaware limited liability company incorporated
on April 6, 1998 with offices
c/o NYSE
Euronext, 11 Wall Street, New York, New York 10005. The
Sponsors Internal Revenue Service Employer Identification
Number is
26-4126158.
On October 1, 2008, the Sponsor became an indirect
wholly-owned subsidiary of NYSE Euronext following the
acquisition by NYSE Euronext of the American Stock Exchange LLC
(which was renamed NYSE Alternext US LLC and later,
NYSE Amex LLC) and all of its subsidiaries. NYSE
Euronext is a control person of the Sponsor as such
term is defined in the Securities Act of 1933.
The Sponsor, at its own expense, may from time to time provide
additional promotional incentives to brokers who sell Units to
the public. In certain instances, these incentives may be
provided only to those brokers who meet certain threshold
requirements for participation in a given incentive program,
such as selling a significant number of Units within a specified
period.
If at any time the Sponsor fails to undertake or perform or
becomes incapable of undertaking or performing any of the duties
required under the Trust Agreement, or resigns, or becomes
bankrupt or its affairs are taken over by public authorities,
the Trustee may appoint a successor Sponsor, agree to act as
Sponsor itself, or may
72
terminate the Trust Agreement and liquidate the Trust.
Notice of the resignation or removal of the Sponsor and the
appointment of a successor shall be mailed by the Trustee to DTC
and the DTC Participants for distribution to Beneficial Owners.
Upon a successor Sponsors execution of a written
acceptance of appointment as Sponsor of the Trust, the successor
Sponsor becomes vested with all of the rights, powers, duties
and obligations of the original Sponsor. Any successor Sponsor
may be compensated at rates deemed by the Trustee to be
reasonable.
The Sponsor may resign by executing and delivering to the
Trustee an instrument of resignation. Such resignation shall
become effective upon the appointment of a successor Sponsor and
the acceptance of appointment by the successor Sponsor, unless
the Trustee either agrees to act as Sponsor or terminates the
Trust Agreement and liquidates the Trust. The dissolution
of the Sponsor or its ceasing to exist as a legal entity for any
cause whatsoever will not cause the termination of the
Trust Agreement or the Trust unless the Trustee deems
termination to be in the best interests of the Beneficial Owners
of Units.
The Trust Agreement provides that the Sponsor is not liable
to the Trustee, the Trust or to the Beneficial Owners of Units
for taking any action, or for refraining from taking any action,
made in good faith or for errors in judgment, but is liable only
for its own gross negligence, bad faith, willful misconduct or
willful malfeasance in the performance of its duties or its
reckless disregard of its obligations and duties under the
Trust Agreement. The Sponsor is not liable or responsible
in any way for depreciation or loss incurred by the Trust
because of the sale of any Portfolio Securities. The
Trust Agreement further provides that the Sponsor and its
directors, subsidiaries, shareholders, officers, employees, and
affiliates under common control with the Sponsor shall be
indemnified from the assets of the Trust and held harmless
against any loss, liability or expense incurred without gross
negligence, bad faith, willful misconduct or willful malfeasance
on the part of any such party in the performance of its duties
or reckless disregard of its obligations and duties under the
Trust Agreement, including the payment of the costs and
expenses of defending against any claim or liability.
TRUSTEE
The Trustee is a bank and trust company organized under the laws
of the Commonwealth of Massachusetts with its principal place of
business at One Lincoln Street, Boston, Massachusetts 02111. The
Trustees Internal Revenue Service Employer Identification
Number is
04-1867445.
The Trustee is subject to supervision and examination by the
Federal Reserve as well as by the Massachusetts Commissioner of
Banks, the Federal Deposit Insurance Corporation, and the
regulatory authorities of those states and countries in which a
branch of the Trustee is located.
73
Information regarding Cash Redemption Payment amounts,
number of outstanding Trust Units and Transaction Fees may
be obtained from the Trustee at the toll-free number:
1-800-545-4189.
Complete copies of the Trust Agreement and a list of the
parties that have executed a Participant Agreement may be
obtained from the Trustees principal office.
The Trustee may resign and be discharged of the Trust created by
the Trust Agreement by executing a notice of resignation in
writing and filing such notice with the Sponsor and mailing a
copy of the notice of resignation to all DTC Participants
reflected on the records of DTC as owning Units for distribution
to Beneficial Owners as provided above not less than sixty
(60) days before the date such resignation is to take
effect. Such resignation becomes effective upon the appointment
of and the acceptance of the Trust by a successor Trustee. The
Sponsor, upon receiving notice of such resignation, is obligated
to use its best efforts to appoint a successor Trustee promptly.
If no successor is appointed within sixty (60) days after
the date such notice of resignation is given, the Trust shall
terminate.
If the Trustee becomes incapable of acting as such or is
adjudged bankrupt or is taken over by any public authority, the
Sponsor may discharge the Trustee and appoint a successor
Trustee as provided in the Trust Agreement. The Sponsor
shall mail notice of such discharge and appointment via the DTC
Participants to Beneficial Owners. Upon a successor
Trustees execution of a written acceptance of an
appointment as Trustee for the Trust, the successor Trustee
becomes vested with all the rights, powers, duties and
obligations of the original Trustee. A successor Trustee must be
(a) a trust company, corporation or national banking
association organized, doing business under the laws of the
United States or any state thereof; (b) authorized under
such laws to exercise corporate trust powers; and (c) at
all times have an aggregate capital, surplus and undivided
profit of not less than $50,000,000.
Beneficial Owners of 51% of the then outstanding Units may at
any time remove the Trustee by written instrument(s) delivered
to the Trustee and the Sponsor. The Sponsor shall thereupon use
its best efforts to appoint a successor Trustee as described
above.
The Trust Agreement limits the Trustees liabilities.
It provides, among other things, that the Trustee is not liable
for (a) any action taken in reasonable reliance on properly
executed documents or for the disposition of monies or stocks or
for the evaluations required to be made thereunder, except by
reason of its own gross negligence, bad faith, willful
malfeasance, willful misconduct, or reckless disregard of its
duties and obligations; (b) depreciation or loss incurred
by reason of the sale by the Trustee of any Portfolio
Securities; (c) any action the Trustee takes where the
Sponsor fails to act; and (d) any taxes or other
governmental charges imposed upon or in respect of Portfolio
Securities or upon the interest thereon or upon it as Trustee or
upon or in respect of the Trust which the Trustee may be
required to pay under any
74
present or future law of the United States of America or of any
other taxing authority having jurisdiction.
The Trustee and its directors, subsidiaries, shareholders,
officers, employees, and affiliates under common control with
the Trustee will be indemnified from the assets of the Trust and
held harmless against any loss, liability or expense incurred
without gross negligence, bad faith, willful misconduct, willful
malfeasance on the part of such party or reckless disregard of
its duties and obligations, arising out of, or in connection
with its acceptance or administration of the Trust, including
the costs and expenses (including counsel fees) of defending
against any claim or liability.
DEPOSITORY
DTC is a limited purpose trust company and member of the Federal
Reserve System.
LEGAL
OPINION
The legality of the Trust Units offered hereby has been
passed upon by Davis Polk & Wardwell LLP, New York,
New York.
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The financial statements as of October 31, 2010 included in
this Prospectus have been so included in reliance upon the
report of PricewaterhouseCoopers LLP, independent registered
public accounting firm, 125 High Street, Boston, Massachusetts,
given on the authority of said firm as experts in auditing and
accounting.
CODE OF
ETHICS
The Trust has adopted a code of ethics in compliance with
Rule 17j-1
requirements under the Investment Company Act of 1940. The code
is designed to prevent fraud, deception and misconduct against
the Trust and to provide reasonable standards of conduct. The
code is on file with the SEC and you may obtain a copy by
visiting the SEC at the address listed on the back cover of this
prospectus. The code is also available on the SECs
Internet site at http:/www.sec.gov. A copy may be obtained,
after paying a duplicating fee, by electronic request at
publicinfo@sec.gov, or by writing the SEC at the address listed
on the back cover of this prospectus.
DAILY
TRUST TRADING INFORMATION
The Sponsor makes available daily a list of the names and the
required number of shares of each of the securities in the
current Portfolio Deposit. The Sponsor also
75
intends to make available (a) on a daily basis, the
Dividend Equivalent Payment effective through and including the
previous Business Day, per outstanding Unit, and (b) every
15 seconds throughout the trading day at the Exchange a number
representing, on a per Unit basis, the sum of the Dividend
Equivalent Payment effective through and including the previous
Business Day, plus the current value of the securities portion
of a Portfolio Deposit as in effect on such day (which value may
include a cash in lieu amount to compensate for the omission of
a particular Index Security from such Portfolio Deposit).
Intra-day
information will be available with respect to trades and quotes
and underlying trading values will be published every 15 seconds
throughout the trading day. Information with respect to net
asset value, net accumulated dividend, final dividend amount to
be paid, shares outstanding, estimated cash amount and total
cash amount per Creation Unit will be available daily prior to
the opening of trading on the Exchange.
INFORMATION
AND COMPARISONS RELATING TO TRUST,
SECONDARY MARKET TRADING, NET ASSET SIZE, PERFORMANCE AND TAX
TREATMENT
Information regarding various aspects of the Trust, including
the net asset size thereof, as well as the secondary market
trading, the performance and the tax treatment of
Trust Units, may be included from time to time in
advertisements, sales literature and other communications and in
reports to current or prospective Beneficial Owners. Any such
performance-related information will reflect only past
performance of Trust Units, and no guarantees can be made
of future results.
Specifically, information may be provided to investors regarding
the ability to engage in short sales of Trust Units.
Selling short refers to the sale of securities which the seller
does not own, but which the seller arranges to borrow before
effecting the sale. Institutional investors may be advised that
lending their Trust Units to short sellers may generate
stock loan credits that may supplement the return they can earn
from an investment in Trust Units. These stock loan credits
may provide a useful source of additional income for certain
institutional investors who can arrange to lend
Trust Units. Potential short sellers may be advised that a
short rebate (functionally equivalent to partial use of proceeds
of the short sale) may reduce their cost of selling short.
In addition, information may be provided to prospective or
current investors comparing and contrasting the tax efficiencies
of conventional mutual funds with Trust Units. Both
conventional mutual funds and the Trust may be required to
recognize capital gains incurred as a result of adjustments to
the composition of the DJIA and therefore to their respective
portfolios. From a tax perspective, however, a significant
difference between a conventional mutual fund and the Trust is
the process by which their shares are redeemed. In cases where a
conventional mutual fund experiences redemptions in excess of
subscriptions (net redemptions) and has
76
insufficient cash available to fund such net redemptions, such
mutual fund may have to sell stocks held in its portfolio to
raise and pay cash to redeeming shareholders. A mutual fund will
generally experience a taxable gain or loss when it sells such
portfolio stocks in order to pay cash to redeeming fund
shareholders. In contrast, the redemption mechanism for
Trust Units typically does not involve selling the
portfolio stocks. Instead, the Trust delivers the actual
portfolio of stocks in an in-kind exchange to any person
redeeming Trust Units in Creation Unit size aggregations.
While this in-kind exchange is a taxable transaction to the
redeeming Unitholder (usually a broker/dealer), it generally
does not constitute a taxable transaction at the Trust level
and, consequently, there is no realization of taxable gain or
loss by the Trust with respect to such in-kind redemptions. In a
period of market appreciation of the DJIA and, consequently,
appreciation of the portfolio stocks held in the Trust, this
in-kind redemption mechanism has the effect of eliminating the
recognition and distribution of those net unrealized gains at
the Trust level. Although the same result would apply to
conventional mutual funds utilizing an in-kind redemption
mechanism, the opportunities to redeem fund shares by delivering
portfolio stocks in kind are limited in most mutual funds.
Investors may be informed that, while no unequivocal statement
can be made as to the net tax impact on a conventional mutual
fund resulting from the purchases and sales of its portfolio
stocks over a period of time, conventional funds that have
accumulated substantial unrealized capital gains, if they
experience net redemptions and do not have sufficient available
cash, may be required to make taxable capital gains
distributions that are generated by changes in such funds
portfolio. In contrast, the in-kind redemption mechanism of
Trust Units may make them more tax-efficient investments
under most circumstances than comparable conventional mutual
fund shares. As discussed above, this in-kind redemption feature
tends to lower the amount of annual net capital gains
distributions to Unitholders as compared to their conventional
mutual fund counterparts. Since Unitholders are generally
required to pay income tax on capital gains distributions, the
smaller the amount of such distributions, the smaller will be
the Unitholders tax liability. To the extent that the
Trust is not required to recognize capital gains, the Unitholder
is able, in effect, to defer tax on such gains until he sells or
otherwise disposes of his shares, or the Trust terminates. If
such Unitholder retains his shares until his death, under
current law the tax basis of such shares would be adjusted to
their then fair market value.
One important difference between Trust Units and
conventional mutual fund shares is that Trust Units are
available for purchase or sale on an intraday basis on the
Exchange. An investor who buys shares in a conventional mutual
fund will buy or sell shares at a price at or related to the
closing NAV per share, as determined by the fund. In contrast,
Trust Units are not offered for purchase or redeemed for
cash at a fixed relationship to closing NAV. The tables below
illustrate the distribution relationship of Trust Units
closing prices to NAV for the period
1/20/98 (the
first trading date of the Trust) through
12/31/10,
the distribution relationships of high, low and closing
77
prices over the same period, and distribution of bid/ask spreads
for 2010. These tables should help investors evaluate some of
the advantages and disadvantages of Trust Units relative to
funds sold and redeemed at prices related to closing NAV.
Specifically, the tables illustrate in an approximate way the
risks of buying or selling Trust Units at prices less
favorable than closing NAV and, correspondingly, the
opportunities to buy or sell at prices more favorable than
closing NAV.
The investor may wish to evaluate the opportunity to buy or sell
on an intraday basis versus the assurance of a transaction at or
related to closing NAV. To assist investors in making this
comparison, the table immediately below illustrates the
distribution of percentage ranges between the high and the low
price each day and between each extreme daily value and the
closing NAV for all trading days from
1/20/98
through
12/31/10.
The investor may wish to compare these ranges with the average
bid/ask spread on Trust Units and add any commissions
charged by a broker. The trading ranges for this period will not
necessarily be typical of trading ranges in future years and the
bid/ask spread on Trust Units may vary materially over time
and may be significantly greater at times in the future. There
is some evidence, for example, that the bid/ask spread will
widen in markets that are more volatile and narrow when markets
are less volatile. Consequently, the investor should expect
wider bid/ask spreads to be associated with wider daily spread
ranges.
78
Daily
Percentage Price Ranges: Average and Frequency Distribution
for
Dow Jones Industrial Average and DIAMONDS Trust:
Highs and Lows vs. Close*
(From
Inception of Trading through
12/31/2010)
Dow Jones
Industrial Average
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intraday High Value
|
|
|
Intraday Low Value
|
|
|
|
Daily % Price Range
|
|
|
Above Closing Value
|
|
|
Below Closing Value
|
|
Range
|
|
Frequency
|
|
|
% of Total
|
|
|
Frequency
|
|
|
% of Total
|
|
|
Frequency
|
|
|
% of Total
|
|
|
0 0.25%
|
|
|
1
|
|
|
|
0.03
|
%
|
|
|
1,067
|
|
|
|
32.73
|
%
|
|
|
823
|
|
|
|
25.25
|
%
|
0.25 0.5%
|
|
|
139
|
|
|
|
4.26
|
%
|
|
|
649
|
|
|
|
19.91
|
%
|
|
|
704
|
|
|
|
21.60
|
%
|
0.5 1.0%
|
|
|
954
|
|
|
|
29.26
|
%
|
|
|
754
|
|
|
|
23.13
|
%
|
|
|
863
|
|
|
|
26.47
|
%
|
1.0 1.5%
|
|
|
936
|
|
|
|
28.71
|
%
|
|
|
356
|
|
|
|
10.92
|
%
|
|
|
434
|
|
|
|
13.31
|
%
|
1.5 2.0%
|
|
|
570
|
|
|
|
17.48
|
%
|
|
|
204
|
|
|
|
6.26
|
%
|
|
|
200
|
|
|
|
6.13
|
%
|
2.0 2.5%
|
|
|
287
|
|
|
|
8.80
|
%
|
|
|
104
|
|
|
|
3.19
|
%
|
|
|
112
|
|
|
|
3.44
|
%
|
2.5 3.0%
|
|
|
164
|
|
|
|
5.03
|
%
|
|
|
50
|
|
|
|
1.53
|
%
|
|
|
49
|
|
|
|
1.50
|
%
|
3.0 3.5%
|
|
|
76
|
|
|
|
2.33
|
%
|
|
|
29
|
|
|
|
0.89
|
%
|
|
|
29
|
|
|
|
0.89
|
%
|
> 3.5%
|
|
|
133
|
|
|
|
4.08
|
%
|
|
|
47
|
|
|
|
1.44
|
%
|
|
|
46
|
|
|
|
1.41
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3,260
|
|
|
|
100.00
|
%
|
|
|
3,260
|
|
|
|
100.00
|
%
|
|
|
3,260
|
|
|
|
100.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
Daily Range: 1.5166%
SPDR DJIA
TRUST
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intraday High Value
|
|
|
Intraday Low Value
|
|
|
|
Daily % Price Range
|
|
|
Above Closing Value
|
|
|
Below Closing Value
|
|
Range
|
|
Frequency
|
|
|
% of Total
|
|
|
Frequency
|
|
|
% of Total
|
|
|
Frequency
|
|
|
% of Total
|
|
|
0 0.25%
|
|
|
4
|
|
|
|
0.12
|
%
|
|
|
1,051
|
|
|
|
32.24
|
%
|
|
|
787
|
|
|
|
24.14
|
%
|
0.25 0.5%
|
|
|
169
|
|
|
|
5.18
|
%
|
|
|
696
|
|
|
|
21.35
|
%
|
|
|
731
|
|
|
|
22.42
|
%
|
0.5 1.0%
|
|
|
984
|
|
|
|
30.18
|
%
|
|
|
749
|
|
|
|
22.98
|
%
|
|
|
937
|
|
|
|
28.74
|
%
|
1.0 1.5%
|
|
|
952
|
|
|
|
29.20
|
%
|
|
|
364
|
|
|
|
11.17
|
%
|
|
|
420
|
|
|
|
12.88
|
%
|
1.5 2.0%
|
|
|
519
|
|
|
|
15.92
|
%
|
|
|
189
|
|
|
|
5.80
|
%
|
|
|
183
|
|
|
|
5.61
|
%
|
2.0 2.5%
|
|
|
290
|
|
|
|
8.90
|
%
|
|
|
101
|
|
|
|
3.10
|
%
|
|
|
75
|
|
|
|
2.30
|
%
|
2.5 3.0%
|
|
|
148
|
|
|
|
4.54
|
%
|
|
|
43
|
|
|
|
1.32
|
%
|
|
|
64
|
|
|
|
1.96
|
%
|
3.0 3.5%
|
|
|
75
|
|
|
|
2.30
|
%
|
|
|
25
|
|
|
|
0.77
|
%
|
|
|
19
|
|
|
|
0.58
|
%
|
> 3.5%
|
|
|
119
|
|
|
|
3.65
|
%
|
|
|
42
|
|
|
|
1.29
|
%
|
|
|
44
|
|
|
|
1.35
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3,260
|
|
|
|
100.00
|
%
|
|
|
3,260
|
|
|
|
100.00
|
%
|
|
|
3,260
|
|
|
|
100.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
Daily Range: 1.4757%
79
Frequency
Distribution of Discounts and Premiums for the SPDR DJIA Trust:
Closing Price vs. Net Asset Value (NAV) as of
12/31/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Calendar
|
|
|
Calendar
|
|
|
Calendar
|
|
|
Calendar
|
|
|
|
|
|
From
|
|
|
|
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Calendar
|
|
|
1/20/1998
|
|
|
|
|
|
|
Ending
|
|
|
Ending
|
|
|
Ending
|
|
|
Ending
|
|
|
Year
|
|
|
Through
|
Range
|
|
|
3/31/2010
|
|
|
6/30/2010
|
|
|
9/30/2010
|
|
|
12/31/2010
|
|
|
2010
|
|
|
12/31/2010
|
> 200
|
|
|
Days
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis Points
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
150 200
|
|
|
Days
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis Points
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100 150
|
|
|
Days
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis Points
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50 100
|
|
|
Days
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis Points
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25 50
|
|
|
Days
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
1
|
|
|
163
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis Points
|
|
|
%
|
|
|
|
|
|
1.6%
|
|
|
|
|
|
|
|
|
0.4%
|
|
|
5.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 25
|
|
|
Days
|
|
|
27
|
|
|
38
|
|
|
32
|
|
|
37
|
|
|
134
|
|
|
1461
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis Points
|
|
|
%
|
|
|
44.3%
|
|
|
60.3%
|
|
|
50.0%
|
|
|
57.8%
|
|
|
53.2%
|
|
|
44.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Days
|
|
|
Days
|
|
|
27
|
|
|
39
|
|
|
32
|
|
|
37
|
|
|
135
|
|
|
1650
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
at Premium
|
|
|
%
|
|
|
44.3%
|
|
|
61.9%
|
|
|
50.0%
|
|
|
57.8%
|
|
|
53.6%
|
|
|
50.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing Price
|
|
|
Days
|
|
|
0
|
|
|
0
|
|
|
1
|
|
|
0
|
|
|
1
|
|
|
61
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equal to NAV
|
|
|
%
|
|
|
0.0%
|
|
|
0.0%
|
|
|
1.6%
|
|
|
0.0%
|
|
|
0.4%
|
|
|
1.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Days
|
|
|
Days
|
|
|
34
|
|
|
24
|
|
|
31
|
|
|
27
|
|
|
116
|
|
|
1549
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
at Discount
|
|
|
%
|
|
|
55.7%
|
|
|
38.1%
|
|
|
48.4%
|
|
|
42.2%
|
|
|
46.0%
|
|
|
47.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 −25
|
|
|
Days
|
|
|
34
|
|
|
24
|
|
|
31
|
|
|
25
|
|
|
114
|
|
|
1359
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis Points
|
|
|
%
|
|
|
55.7%
|
|
|
38.1%
|
|
|
48.4%
|
|
|
39.1%
|
|
|
45.2%
|
|
|
41.7%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
−25 −50
|
|
|
Days
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
2
|
|
|
160
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis Points
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
3.1%
|
|
|
0.8%
|
|
|
4.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
−50 −100
|
|
|
Days
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis Points
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
−100 −150
|
|
|
Days
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis Points
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
−150 −200
|
|
|
Days
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis Points
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
<−200
|
|
|
Days
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis Points
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Close was within 0.25% of NAV better than 88% of the time from
1/20/98 (the
first day of trading on the AMEX) through
12/31/2010.
Source: NYSE Euronext
80
Frequency
Distribution of Discounts and Premiums for the SPDR DJIA Trust:
Bid/Ask Price vs. Net Asset Value (NAV) as of
12/31/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Calendar
|
|
|
Calendar
|
|
|
Calendar
|
|
|
Calendar
|
|
|
|
|
|
From
|
|
|
|
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Calendar
|
|
|
1/20/1998
|
|
|
|
|
|
|
Ending
|
|
|
Ending
|
|
|
Ending
|
|
|
Ending
|
|
|
Year
|
|
|
Through
|
Range
|
|
|
3/31/2010
|
|
|
6/30/2010
|
|
|
9/30/2010
|
|
|
12/31/2010
|
|
|
2010
|
|
|
12/31/2010
|
> 200
|
|
|
Days
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis Points
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
150 200
|
|
|
Days
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis Points
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100 150
|
|
|
Days
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis Points
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50 100
|
|
|
Days
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis Points
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25 50
|
|
|
Days
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
1
|
|
|
117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis Points
|
|
|
%
|
|
|
|
|
|
1.6%
|
|
|
|
|
|
|
|
|
0.4%
|
|
|
3.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 25
|
|
|
Days
|
|
|
23
|
|
|
31
|
|
|
35
|
|
|
30
|
|
|
119
|
|
|
1477
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis Points
|
|
|
%
|
|
|
37.7%
|
|
|
49.2%
|
|
|
54.7%
|
|
|
46.9%
|
|
|
47.2%
|
|
|
45.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Days
|
|
|
Days
|
|
|
23
|
|
|
32
|
|
|
35
|
|
|
30
|
|
|
120
|
|
|
1610
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
at Premium
|
|
|
%
|
|
|
37.7%
|
|
|
50.8%
|
|
|
54.7%
|
|
|
46.9%
|
|
|
47.6%
|
|
|
49.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing Price
|
|
|
Days
|
|
|
0
|
|
|
0
|
|
|
1
|
|
|
0
|
|
|
1
|
|
|
73
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equal to NAV
|
|
|
%
|
|
|
0.0%
|
|
|
0.0%
|
|
|
1.6%
|
|
|
0.0%
|
|
|
0.4%
|
|
|
2.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Days
|
|
|
Days
|
|
|
38
|
|
|
31
|
|
|
28
|
|
|
34
|
|
|
131
|
|
|
1577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
at Discount
|
|
|
%
|
|
|
62.3%
|
|
|
49.2%
|
|
|
43.8%
|
|
|
53.1%
|
|
|
52.0%
|
|
|
48.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 −25
|
|
|
Days
|
|
|
38
|
|
|
31
|
|
|
28
|
|
|
34
|
|
|
131
|
|
|
1460
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis Points
|
|
|
%
|
|
|
62.3%
|
|
|
49.2%
|
|
|
43.8%
|
|
|
53.1%
|
|
|
52.0%
|
|
|
44.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
−25 −50
|
|
|
Days
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis Points
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
−50 −100
|
|
|
Days
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis Points
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
−100 −150
|
|
|
Days
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|