e497
Filed pursuant to Rule 497(b)
Registration File No. 333-31247
PROSPECTUS
DATED FEBRUARY 24, 2012
SPDR®
DOW JONES INDUSTRIAL
AVERAGEsm
ETF TRUST
(SPDR DJIA TRUST)
(formerly known as
DIAMONDS®
Trust, Series 1)
(A Unit Investment Trust constituted outside Singapore and
organised in the United States)
PROSPECTUS
ISSUED PURSUANT TO
DIVISION 2 OF PART XIII OF THE SECURITIES
AND FUTURES ACT, CHAPTER 289 OF SINGAPORE
This
Prospectus incorporates the US Prospectus dated February 22,
2012
issued by the SPDR DJIA Trust, attached hereto
The collective investment scheme offered in this Prospectus
is a recognised scheme under the Securities and Futures Act,
Chapter 289 of Singapore (the Act). A copy of
this Prospectus has been lodged with and registered by the
Monetary Authority of Singapore (the Authority). The
Authority assumes no responsibility for the contents of the
Prospectus. Registration of the Prospectus by the Authority does
not imply that the Act or any other legal or regulatory
requirements have been complied with. The Authority has not, in
any way, considered the investment merits of the collective
investment scheme. The date of registration of this Prospectus
with the Authority is February 24, 2012. This Prospectus will
expire on February 24, 2013 (12 months after the date of
registration).
The SPDR DJIA Trust has been admitted to the Official List of
the Singapore Exchange Securities Trading Limited
(SGX-ST), and permission has been granted by the
SGX-ST to deal in and for quotation on the SGX-ST Mainboard of
all the units in the SPDR DJIA Trust (Units) already
issued as well as those Units which may be issued from time to
time. The SGX-ST assumes no responsibility for the correctness
of any of the statements made or opinions expressed in this
Prospectus and admission to the Official List of the SGX-ST is
not to be taken as an indication of the merits of the SPDR DJIA
Trust or the Units.
IMPORTANT: If you are in doubt about the contents of this
Prospectus, you should consult your stockbroker, bank manager,
solicitor, accountant or other financial adviser.
SPDR®
DOW JONES INDUSTRIAL
AVERAGEsm
ETF TRUST
(SPDR DJIA Trust)
PROSPECTUS
TABLE OF
CONTENTS
|
|
|
|
|
|
|
Page
|
|
|
|
|
S-2
|
|
|
|
|
S-5
|
|
|
|
|
S-6
|
|
|
|
|
S-9
|
|
|
|
|
S-10
|
|
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), an affiliate of
The McGraw-Hill Companies, Inc., 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
AVERAGEsm
ETF TRUST
This Prospectus, relating to the
SPDR®
Dow Jones Industrial
Averagesm
ETF Trust (SPDR DJIA Trust or Trust),
which is issued pursuant to Division 2 of Part XIII of
the Securities and Futures Act, Chapter 289 of Singapore
has been lodged with and registered by the Monetary Authority of
Singapore who assumes no responsibility for its contents.
This Prospectus incorporates the attached US prospectus, dated
February 22, 2012 issued by the Trust (US
Prospectus). Terms defined in the US Prospectus shall have
the same meaning when used in this Prospectus.
The Trust is a unit investment trust organised in the United
States (US), and is a single fund that issues
securities called Trust Units or
Units, which represent an undivided ownership
interest in the portfolio of stocks held by the Trust. The Trust
intends to provide investment results that, before expenses,
generally correspond to the price and yield performance of the
Dow Jones Industrial Average (DJIA). The
Trusts Portfolio consists of substantially all of the
component common stocks which comprise the DJIA and are weighted
in accordance with the terms of the Trust Agreement
(defined below).
The top ten constituents (by weight) of the Trust as of
26 January 2012 are set out below:
|
|
|
|
|
|
|
|
|
No.
|
|
|
|
Name
|
|
|
Weighting
|
|
1.
|
|
|
|
International Business Machines Corp.
|
|
|
11.35%
|
|
2.
|
|
|
|
Caterpillar, Inc.
|
|
|
6.62%
|
|
3.
|
|
|
|
Chevron Corp.
|
|
|
6.33%
|
|
4.
|
|
|
|
McDonalds Corp.
|
|
|
5.89%
|
|
5.
|
|
|
|
Exxon Mobil Corp.
|
|
|
5.20%
|
|
6.
|
|
|
|
3M Co.
|
|
|
5.13%
|
|
7.
|
|
|
|
United Technologies Corp.
|
|
|
4.60%
|
|
8.
|
|
|
|
Boeing Co.
|
|
|
4.48%
|
|
9.
|
|
|
|
Coca Cola Co.
|
|
|
4.04%
|
|
10.
|
|
|
|
Johnson & Johnson
|
|
|
3.90%
|
|
|
|
|
|
|
|
|
|
For additional details regarding the Trusts Portfolio,
please consult pages 41 to 45 in the US Prospectus attached
hereto. All Units are denominated in US dollars.
PDR Services LLC (Sponsor or PDR), the
sponsor of the Trust, accepts full responsibility for the
accuracy of information contained in this Prospectus, other than
that given in the US 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, the facts stated and the opinions
expressed in this
S-3
Prospectus are fair and accurate in all material respects as at
the date of this Prospectus and there are no other facts the
omission of which would make any statement in this Prospectus
misleading.
The Trust is governed by an amended trust agreement
(Trust Agreement) between State Street Bank and
Trust Company (Trustee), the trustee of the
Trust, and the Sponsor dated as of January 1, 1998 and
effective as of January 13, 1998, as amended by an
amendment dated as of November 1, 2004; by an amendment
dated February 14, 2008; by an amendment dated as of
October 24, 2008; and by an amendment dated as of
December 22, 2009 and effective as of February 26,
2010. Terms defined in the Trust Agreement shall have the
same meaning when used in this Prospectus.
Copies of the Trust Agreement are available for inspection,
free of charge, at the offices of State Street Bank and
Trust Company at One Lincoln Street, Boston, Massachusetts,
US 02111 during normal US business hours, or State Street Global
Advisors Singapore
Limited1,
at 168 Robinson Road, #33-01, Capital Tower, Singapore
068912 during normal Singapore business hours.
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 Units.
Investors in the Trust are advised to carefully consider the
risk factors set out under the heading RISK FACTORS
on pages 11 to 14 of the US Prospectus, and to refer to
pages S-15
to S-19 of this Prospectus for a discussion of the US and
Singapore tax consequences of an investment in Units.
ENQUIRIES
All enquiries about the Trust or requests for additional copies
of this Prospectus should be directed to an investors
local broker.
|
|
IMPORTANT:
|
READ AND
RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE
|
1 State
Street Global Advisors Singapore Limited will hold copies of the
Trust Agreement for inspection by investors; however, it is not
in any way acting as an agent for or acting as the Trustee.
S-4
CORPORATE
INFORMATION
|
|
|
Sponsor to the Trust:
|
|
PDR Services LLC
c/o NYSE
Euronext
11 Wall Street
New York, New York
US 10005
|
|
|
|
Legal advisers to the Sponsor
as to US law:
|
|
Davis Polk & Wardwell LLP
450 Lexington Avenue
New York, New York
US 10017
|
|
|
|
Legal advisers to the Sponsor
as to Singapore law:
|
|
Stamford Law Corporation
10 Collyer Quay
#27-00 Ocean Financial Centre
Singapore 049315
Singapore
|
|
|
|
Trustee:
|
|
State Street Bank and Trust Company
One Lincoln Street
Boston, Massachusetts
US 02111
|
|
|
|
Legal advisers to the Trustee
as to Singapore law:
|
|
Allen & Gledhill LLP
One Marina Boulevard, #28-00
Singapore 018989
Singapore
|
|
|
|
Auditors:
|
|
PricewaterhouseCoopers LLP
125 High Street
Boston, Massachusetts
US 02110
|
|
|
|
US Distributor of Creation Units:
|
|
ALPS Distributors, Inc.
1290 Broadway, Suite 1100
Denver, Colorado
US 80203
|
S-5
TRADING
AND SETTLEMENT
Trust Units are listed for trading on the Singapore
Exchange Securities Trading Limited (SGX-ST) where
they may be bought and sold in the secondary market at any time
during the trading day. Market prices for Units traded on the
SGX-ST are available on the SGX-ST website
http://www.sgx.com/wps/portal/sgxweb/home/marketinfo/securities/etfs.
Units may also be purchased by Authorized Participants directly
from the Trust in the US by placing orders with the US
Distributor, as facilitated through the Trustee, in a minimum
unit, called a Creation Unit, of 50,000 Units or
multiples thereof. Creation Units may also be redeemed through a
tender to the Trustee in the US. All Creation Unit purchases and
redemptions are made in kind only in the US, that
is, through the delivery or receipt of a specified portfolio of
securities. Such purchases and redemptions can be made only in
the US at the then-current valuation as described herein on
pages S-6
to S-8 and
page S-11
under the heading Redemption. For additional details
on trading and settlement, please consult pages 3 to 6 and
32 to 41 in the US Prospectus attached hereto.
The primary trading market for Units is in the US, where Units
are listed on NYSE Arca, Inc. (NYSE Arca). Investors
should note that trading in Units may be halted under certain
circumstances. Please refer to page 51 to 52 in the US
Prospectus for more details.
As with other securities, investors will pay negotiated
brokerage commissions and typical Singapore clearing fees and
applicable taxes. In addition, cash dividends to be distributed
to investors in Singapore will be net of expenses incurred by
CDP (defined below), and where such expenses equal or exceed the
amount of the dividends, the investors will not receive any
distributions. Brokerage commissions may be subject to Goods and
Services Tax (GST) at the prevailing standard rate
of seven percent (7%). There will be a Singapore clearing fee,
which is currently at the rate of 0.04% of the transacted value
(up to a maximum of SGD600 per transaction or its equivalent in
foreign currencies). Clearing fees may be subject to GST in
Singapore at the prevailing standard rate of seven percent (7%).
Units are traded in US dollars on the SGX-ST in 10 unit
round lots.
The term market day as used in this Prospectus means
a business day in which transactions in Units can be executed
and settled. Trading of Units on the SGX-ST may be halted if the
Trust fails to comply with continuing listing requirements and
advertising guidelines of the SGX-ST.
With respect to holders of Units in Singapore, the trading and
settlement process, the system through which they receive
distributions or the manner in which information may be made
available, among other aspects, may differ from the information
set forth in the US Prospectus. Holders of Units in Singapore
should read this Prospectus carefully and all enquiries in
relation hereto should be directed to their local brokers.
Units are issued by the Trust in the form of scripless
securities which are eligible book-entry-only
securities of The Depository Trust Company
(DTC). As book- entry-only securities,
Units are represented as global securities on the DTC system and
S-6
are registered in the name of Cede & Co. as nominee
for DTC and deposited with, or on behalf of, DTC.
The Central Depository (Pte) Limited (CDP) maintains
an accountAccount No. 5700 (DTC
Account)with DTC. CDP may receive Units from or
deliver Units to accounts maintained by member participants in
DTC (DTC Participants).
Settlement of dealings through the CDP system may be effected
only by Depository Agents of CDP or holders of Units who have
their own direct securities accounts with CDP. Investors may
open a direct securities account with CDP or a securities
sub-account
with any Depository Agent to hold their Units in CDP. The term
Depository Agent shall have the same meaning as that
ascribed to it in section 130A of the Companies Act,
Chapter 50 of Singapore.
Through the delivery mechanisms discussed below, it is possible
for investors to purchase Units in Singapore and sell them in
the US and vice versa. Although both CDP and DTC, within their
own respective market settlements, provide for Delivery Versus
Payment and
Free-of-Payment
transfers of securities, all of the linked transfers between the
two depositories are effected only on a
Free-of-Payment
basis (i.e., there is no related cash movement to
parallel the securities movement. Any related cash transfers may
only be effected outside DTC and CDP directly between the buyer
and seller through their own arrangements). Investors should be
aware that Singapore time is generally 12 hours ahead of
Eastern Daylight Saving Time (13 hours Eastern Standard
time) in New York, and that NYSE Arca and the SGX-ST are not
open at the same time. Because of this time difference between
the Singapore and US markets, trading in Units between the two
markets cannot occur simultaneously.
All dealings in, and transactions of, Units in Singapore must be
effected for settlement through the computerised book-entry
(scripless) settlement system in the CDP. Investors should
ensure that Units sold on the SGX-ST are available for
settlement in their CDP account no later than the third market
day following the transaction date.
Investors holdings of Units in their CDP account will be
credited or debited for settlement on the third market day
following the transaction date, i.e., T+3, T being the
transaction date. If Units are not in an investors CDP
account for settlement by 12 noon on T+3, the investor will be
subject to the buy-in cycle on that afternoon.
In the absence of unforeseen circumstances, the delivery of
Units into and out of CDP will take a minimum of one market day
after the duly completed documentation has been submitted to CDP
for processing, assuming that the investor has given proper
instructions to his or her DTC Participant. Instructions and
forms received by CDP after 1 p.m. Singapore time on a
given market day will be treated as being received on the next
market day and, as such, will be processed on the next market
day.
|
|
2.
|
Delivery
of Units to CDP for Trading on the SGX-ST
|
Investors who hold Units in DTCs system in the US and wish
to trade them on the SGX-ST can direct delivery of the Units to
CDP; this book-entry transfer to CDPs DTC Account may be
effected only on a
Free-of-Payment
basis, and is subject to special
S-7
procedures that will help to identify the relevant CDP
Depository Agent. Investors may deliver their Units by informing
their Singapore broker or Depository Agent to submit delivery
instructions to CDP, together with the applicable CDP delivery
fee and GST, no later than 1 p.m. Singapore time on the
specified delivery date. Investors must concurrently instruct
their DTC Participant to deliver such Units into the DTC Account
on the delivery date. Upon notification that its DTC Account has
been credited, CDP will accordingly credit Units to the
investors account.
Investors should ensure that their Units are delivered into
their securities account with CDP in time for settlement. In the
event an investor cannot deliver the Units for settlement
pursuant to the trade, the CDP may buy-in against him or her.
|
|
3.
|
Delivery
of Units out of CDP for Trading on NYSE Arca
|
Investors who hold Units with CDP and wish to trade on NYSE Arca
must arrange to deliver the Units into their accounts with their
DTC Participant for settlement of any such trade, which will
occur on the third market day following the transaction date.
For such delivery, investors must submit a duly completed CDP
delivery form together with the applicable CDP delivery fee and
GST through their Singapore broker or Depository Agent, no later
than 1 p.m. Singapore time on the third market day
following the specified delivery date in the US. Investors must
concurrently instruct their DTC Participant to expect receipt of
the relevant number of Units from the DTC Account. Upon receipt
of the duly completed CDP delivery form, CDP will debit the
investors securities account for the relevant number of
Units and then instruct DTC to deliver the Units to the DTC
Participant account as specified by the investor.
S-8
EXCHANGE
RATES AND RISKS
Units traded on the SGX-ST are denominated and traded in US
dollars. Units may only be created or redeemed in US dollars at
the then-current value calculated in US dollars in the manner
set out in the US Prospectus. Similarly, the Trust holds only
Portfolio Securities that are denominated in US dollars and the
distributions which may be made by the Trustee are in US dollars.
The Trust has no ability to manage its investments to hedge
against fluctuations in exchange rates between the US dollar and
the Singapore dollar. To the extent a Singapore investor wishes
to convert such US dollar holdings or distributions to Singapore
dollars, fluctuations in the exchange rate between the Singapore
dollar and the US dollar may affect the value of the proceeds
following a currency conversion.
S-9
GENERAL
AND STATUTORY INFORMATION
|
|
1.
|
Appointment
of Auditors
|
The Trust Agreement provides that the accounts of the Trust
shall be audited, as required by US law, by independent
registered public accountants designated from time to time by
the Trustee.
|
|
2.
|
Duties
and Obligations of the Trustee
|
The key duties and obligations imposed on the Trustee under the
Trust Agreement are summarized as follows:
(i) the Trustee will accept on behalf of the Trust deposits
of Portfolio Deposits and be authorized to effect registration
or transfer of the Portfolio Securities in its name or the name
of its nominee or the nominee of its agent;
(ii) the Trustee must hold money received pursuant to the
Trust Agreement as a deposit for the account of the Trust;
(iii) the Trustee shall not be liable for the disposition
of money or securities or evaluation performed under the
Trust Agreement except by reason of its own gross
negligence, bad faith, wilful misconduct, wilful malfeasance or
reckless disregard of its duties and obligations under the
Trust Agreement;
(iv) the Trustee is not obligated to appear in, prosecute
or defend any action if it is of the opinion that it may involve
it in expense or liability unless it is furnished with
reasonable security and indemnity against such expense or
liability; if reasonable indemnity is provided, the Trustee
shall, in its discretion, undertake such action as it may deem
necessary to protect the Trust and the rights and interest of
all beneficial owners;
(v) the Trustee must provide to brokers/underwriters
accounts of the Trust audited by the auditors of the Trust, and
the brokers/underwriters will deliver such accounts to
beneficial owners;
(vi) in performing its functions under the
Trust Agreement the Trustee will not be held liable except
by reason of its own gross negligence, bad faith, wilful
misconduct or wilful malfeasance for any action taken or
suffered to be taken by it in good faith and believed by it to
be authorized or within the discretion, rights or powers
conferred on it or reckless disregard of its duties and
obligations;
(vii) the Trustee must ensure that no payment made to the
Sponsor is for expenses of the Trust, except for payments not in
excess of amounts and for purposes prescribed by the US
Securities and Exchange Commission and authorized by the
Trust Agreement;
(viii) the Trustee must keep proper books of record and
account of all transactions under the Trust Agreement,
including the creation and redemption of Creation Units, at its
offices, and keep such books open for inspection by any
beneficial owner at all reasonable times during usual business
hours;
S-10
(ix) the Trustee must make, or cause to be made, such
reports and file such documents as are required by the
Securities Act of 1933, the Securities Exchange Act of 1934, the
Investment Company Act of 1940 and US state or federal tax laws
and regulations;
(x) the Trustee must keep a certified copy of the
Trust Agreement, together with the Indenture for each
Trust Series then in effect and a current list of Portfolio
Securities therein, on file at its office and make the same
available for inspection; and
(xi) the Trustee must charge and direct from the assets of
the Trust all expenses and disbursements incurred under the
Trust Agreement, or shall reimburse itself from the assets
of the Trust or the sale of securities in the Trust for any
advances made out of its own funds for such expenses and
disbursements.
A holder of a Unit is not required, obliged or entitled in
connection with the Trust to enter into any contract with any
person or corporation whether by way of lease or otherwise.
|
|
4.
|
Vesting
of Assets in the Trust
|
The Trustee has legal title to all securities and other property
in which funds of the Trust are invested, all funds held for
such investment, all equalisation, redemption, and other special
funds of the Trust, and all income upon accretions to, and
proceeds of such property and funds, and the Trustee is required
to segregate and hold the same in trust until distribution
thereof to the holders of the Units.
The Trust is not administered by a management company, and there
is no obligation on the Sponsor or the Trustee to redeem any
Units. As described on pages 38 to 41 in the US Prospectus,
it is the Trust itself that is obligated to effect the
redemption (although it is the Trustee acting as agent for the
Trust that will actually effect the redemption).
Only Units in Creation Units may be redeemed at their
then-current valuation, which is calculated on the Business Day
on which the redemption order is properly received, as of the
Evaluation Time, which is the closing time of the regular
trading session on the New York Stock Exchange, LLC. Please
refer to pages 1, 38 to 41 and 65 of the US Prospectus for
a further description of this process.
Investors owning Units in an amount less than a whole Creation
Unit (i.e., less than 50,000 Units) or multiples thereof,
are not permitted to tender their Units to the Trustee for
redemption. Such investors can only dispose of their Units by
selling them on the secondary market at any time during the
trading day at market prices.
As described on
pages S-6
to S-7 of this Prospectus, Cede & Co., as nominee for
DTC, will be the registered owner of all outstanding Units on
the DTC system. Beneficial
S-11
ownership of Units will be shown on the records of DTC or its
participants. Beneficial ownership records for holders of Units
in Singapore will be maintained at CDP.
No certificates will be issued in respect of Units. Transfers of
Units between investors will normally occur through the trading
mechanism of the SGX-ST or NYSE Arca as described on
pages S-6
to S-8 in this Prospectus and pages 35 to 38 in the US
Prospectus.
|
|
7.
|
Meetings
of Holders of Units; Voting; Distribution of Annual
Reports
|
The Trust is not required by law to convene meetings of
beneficial owners of the Units.
The Sponsor, the Trustee and CDP have entered into a Depository
Agreement dated May 18, 2001, as supplemented by a
supplemental depository agreement dated May 22, 2009
(CDP Depository Agreement), pursuant to which CDP
has agreed to act as the depository for Units in Singapore.
CDPs duties under the CDP Depository Agreement include,
among other things: (i) acting as a bare trustee on behalf
of individuals who hold securities accounts with CDP and
Depository Agents authorized to maintain
sub-accounts
with CDP in respect of Units, (ii) distributing to CDP
account holders and Depository Agents any applicable payments or
cash distributions in respect of Units, and (iii) providing
the list of its Depository Agents and holders of Units who have
their own direct securities accounts with CDP, if so requested
by the Sponsor or the Trustee.
The Trustee arranges for the annual report of the Trust to be
mailed to all holders of Units, including the holders of Units
in Singapore, no later than the 60th day after the end of
the Trusts fiscal year. The most recent semi-annual report
of the Trust may be found on the website
https://www.spdrs.com/product/fund.seam?ticker=DIA.
The Sponsor or the Trustee will ensure that in the event that it
is necessary to collect and collate any consents or votes of, or
distribute notices, statements, reports, prospectuses, consent
instructions, consent forms or other written communications to
the holders of Units in Singapore, the relevant materials will
be mailed to the holders of Units in Singapore.
It is hereby declared that no Units shall be created or issued
pursuant to this Prospectus later than 12 months, or such
other period as may be prescribed by the law for the time being
in force, after the date of this Prospectus.
A Distribution Agreement was entered into as of November 1,
2011, between (1) the Sponsor, (2) the Trust and
(3) ALPS Distributors, Inc. (ALPS), the US
Distributor, pursuant to which the Trust and the Sponsor
retained ALPS to:
(i) act as the exclusive distributor for the creation and
distribution of Units in aggregations of 50,000 Units;
(ii) hold itself available to receive and process orders
for Creation Units of Units; and
(iii) enter into arrangements with dealers.
S-12
It is the duty of the Trust and the Sponsor to create the
aggregations of 50,000 Units and to request DTC to record on its
books the ownership of such Units in such amounts as ALPS has
requested, as promptly as practicable after receipt by the
Trustee of the requisite portfolio of securities and any
applicable cash component from the creator of the Creation Units
or other entities having a Participant Agreement with the
Trustee. Participant Agreements must be entered into between the
Trustee and all other persons who are creating Creation Units.
There are no borrowing powers conveyed in the
Trust Agreement.
Sponsor
PDR was originally organised as a corporation under Delaware US
law, and was subsequently converted into a limited liability
company in Delaware on April 6, 1998. On October 1,
2008, NYSE Euronext acquired the American Stock Exchange LLC
(Amex) and all of its subsidiaries, including PDR,
which is the Sponsor for the Trust. PDR was formed to act as
sponsor for Amexs exchange traded funds and other unit
investment trusts. PDR will remain the Sponsor of the Trust
until it is removed, it is replaced by a successor, it resigns
or the Trust Agreement is terminated. Currently, the
Sponsor is not permitted to receive remuneration for the
services it renders as Sponsor.
Trustee
State Street Bank and Trust Company is a bank and trust
company organised under the laws of the Commonwealth of
Massachusetts, US, which traces its beginnings to the founding
of the Union Bank. The Trustees current charter was
authorized by a special act of the Massachusetts Legislature in
1891, and its present name was adopted in 1960. The Trustee is a
wholly owned subsidiary of State Street Corporation, a financial
holding company. The Trustee will remain the Trustee of the
Trust until it is removed, it resigns or the
Trust Agreement is terminated. The remuneration received by
the Trustee in its capacity as Trustee of the Trust is described
in the US Prospectus and reflected in the financial statements
contained therein. Absent gross negligence, bad faith, wilful
misconduct or wilful malfeasance on its part or reckless
disregard of its duties and obligations under the
Trust Agreement, the Trustee shall be indemnified from the
Trust and held harmless against any loss, liability or expense
incurred arising out of or in connection with the acceptance or
administration of the Trust and any action taken in accordance
with the provisions of the Trust Agreement.
|
|
12.
|
Exercise
of Voting Rights on Underlying Securities
|
The Trustee (rather than the beneficial owners of Units) has the
right to vote all of the voting stocks in the Trust, as Trustee.
It must vote the voting stocks of each issuer in the same
proportionate relationship as all other shares of each such
issuer to the extent permissible and, if not permitted, abstain
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
S-13
matters. There are no restrictions on the Trustees right
to vote securities or Units when such securities or Units are
owned by the Trustee in its individual capacity.
|
|
13.
|
Adjustments
to Securities Held by the Trust
|
The Trusts Portfolio Securities are not managed and the
Trustee adjusts such securities from time to time to maintain
the correspondence between the composition and weightings of the
securities held by the Trust and the DJIA.
|
|
14.
|
Use of
Financial Derivatives
|
The Trustee may not use or invest in financial derivatives on
behalf of the Trust.
|
|
15.
|
Securities
Lending and Repurchase Transactions
|
The Trustee may not engage in any securities lending
transactions or repurchase transactions on behalf of the Trust.
|
|
16.
|
Distributions
to Beneficial Owners
|
The Trustee receives all dividends and other cash distributed
with respect to the underlying securities in the Trust
(including monies realized by the Trustee from the sale of
securities, options, warrants or other similar rights received
on such securities), and distributes them (less fees, expenses
and any applicable taxes) through DTC and the DTC Participants
to the beneficial owners of the Units. A description of the
distribution process is contained on pages 65 to 67 of the
US Prospectus. These distribution arrangements will be the same
for holders of Units in Singapore, who will receive their
entitlements through CDP. Cash dividends distributed to
investors in Singapore will be net of expenses incurred by CDP.
Where such expenses equal or exceed the amount of the dividend,
investors will not receive any dividend.
PricewaterhouseCoopers LLP, as the auditor of the Trust, has
given and has not withdrawn its written consent to the issue of
this Prospectus with the inclusion herein of, and reference to,
as the case may be, (i) its name and (ii) its report,
in the form and context in which it is referred to in this
Prospectus. The report referred to in this Prospectus was not
prepared by PricewaterhouseCoopers LLP for the purpose of
inclusion in this Prospectus.
Davis Polk & Wardwell LLP (as legal advisers to the
Sponsor as to US law) has given and has not withdrawn its
written consent to the inclusion in this Prospectus or
references to its name in the form and context which it appears
in this Prospectus.
|
|
18.
|
Important
Tax Information
|
|
|
A.
|
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 does not apply to a Non-US Holder who is a
S-14
nonresident alien individual and is present in the United States
for 183 days or more during any taxable year or is an
expatriate. Such Non-US Holders should consult their tax
advisors with respect to the particular tax consequences to them
of an investment in the Trust. 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 or 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 advisors 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
advisors 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). There is
currently no income tax treaty between the US and Singapore.
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 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.
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
S-15
Holder will generally be exempt from US federal income tax on
any gains realized upon the sale or exchange of Units.
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 TaxesTax
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 backup
withholding on certain distributions in respect of the Units or
on 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. Any amounts
withheld pursuant to the backup withholding rules will be
allowed as a credit against the Non-US Holders US 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.
Under Sections 1471 through 1474 of the Code
(FATCA), a 30% withholding tax will be imposed on
payments of US-source dividends and the gross proceeds of
dispositions of property that can produce US-source dividends
that are made to certain foreign entities (including financial
intermediaries), unless the relevant foreign entity satisfies
various US information reporting and due diligence requirements
and provides certain certifications and other information
(generally relating to ownership by US persons of interests in,
or accounts with, those entities). The withholding agent will be
required to report certain of the information to the IRS. This
legislation will apply to payments of dividends made after
December 31, 2013 and payments of gross proceeds made after
December 31, 2014. A Non-U.S. Holder may be able to obtain
a refund of the FATCA tax, provided that it files a tax return
with the IRS and complies with other procedural requirements.
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 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-16
|
|
B.
|
CERTAIN
SINGAPORE TAX CONSIDERATIONS
|
The following is a general description of material Singapore
income tax, stamp duty and estate duty consequences of the
ownership and disposal of Units. The summary discussion below is
not intended to be, and does not purport to be, a comprehensive
analysis of all the tax consequences relating to ownership and
disposal of Units by a person who, for purposes of taxation in
Singapore, is regarded as a Singapore resident taxpayer or
otherwise. Prospective investors of Units should consult their
own tax advisors concerning the tax consequences of their
particular situations. This description, which is not intended
to and does not constitute legal or tax advice, is based on
laws, regulations and interpretations now in effect and
available as of the date of this Prospectus. The laws,
regulations and interpretations, however, may change at any
time, and any change could be retroactive to the date of
ownership of the Units. These laws and regulations are also
subject to various interpretations and the relevant tax
authorities or the courts could later disagree with the
explanations or conclusions set out below.
General
Subject to certain exceptions, Singapore tax resident and
non-resident companies are subject to Singapore income tax on
income accruing in or derived from Singapore and on foreign
income received or deemed received in Singapore.
Foreign-sourced income in the form of branch profits, dividends
and service income received or deemed received in Singapore by a
resident corporate taxpayer is, however, tax-exempt (subject to
certain conditions) if:
(a) the income is subject to tax of a similar character to
income tax under the law of the territory from which the income
is received;
(b) at the time the income is received in Singapore, the
highest rate of tax of a similar character to income tax under
the law of the territory from which the income is received on
any gains or profits from any trade or business carried on by
any company in that territory at that time is not less than
15%; and
(c) the Comptroller of Income Tax is satisfied that the tax
exemption would be beneficial to the person resident in
Singapore.
The above exemption has been extended to include branch profits,
dividends and service income which is exempted from tax of a
similar character to income tax as a result of tax incentive
granted by a foreign jurisdiction for carrying out substantive
activities in that foreign jurisdiction. Tax exemption will also
be granted on all foreign-sourced income accrued on or before
January 21, 2009 to a resident company and which is
received or deemed received in Singapore from January 22,
2009 to January 21, 2010 (both dates inclusive). For the
purpose of the tax exemption on foreign-sourced income remitted
to Singapore during the said period, the conditions specified in
paragraphs (a) and (b) above will be temporarily
lifted.
Resident and non-resident individuals are generally taxed on
income arising in or derived from Singapore.
S-17
All foreign-sourced personal income received or deemed received
in Singapore on or after January 1, 2004 by a Singapore tax
resident individual (except where such income is received
through a partnership in Singapore) will be exempt from tax in
Singapore. Certain investment income derived from Singapore
sources by individuals on or after January 1, 2004 will
also be exempt from tax.
A company is regarded as a tax resident in Singapore if the
control and management of its business is exercised in Singapore
(for example, if the board of directors meets and makes
policy-level decisions in Singapore). An individual is regarded
as a tax resident in Singapore for income tax purposes if, in
the calendar year preceding the year of assessment, he is
physically present in Singapore or exercised an employment in
Singapore (other than as a director of a company) for
183 days or more, or if he is a Singaporean or Singapore
permanent resident if he has established his permanent home in
Singapore.
Tax rates
The corporate tax rate is 17% from the Year of Assessment 2010
(i.e., financial year ending in 2009). With effect from the Year
of Assessment 2008, three-quarters of the first SGD10,000 of a
companys chargeable income, and one-half of the next
SGD290,000 of a companys chargeable income is exempt from
corporate tax. The remaining chargeable income (after the
partial tax exemption) will be taxed at the applicable corporate
tax rate. The above tax exemption does not apply to normal
Singapore franked dividends received by companies.
Effective from the Year of Assessment 2005, a qualifying newly
incorporated Singapore company that is a tax resident in
Singapore will be eligible for full tax exemption on the first
SGD100,000 of its normal chargeable income (other than Singapore
taxable dividends) for each of the companys first three
consecutive Years of Assessment. With effect from the Year of
Assessment 2008, a further 50% tax exemption is given on the
next SGD200,000 of a qualifying companys normal chargeable
income (excluding Singapore taxable dividends) for each of the
first three consecutive Years of Assessment. The remaining
chargeable income (after the tax exemption as described) will be
taxed at the applicable corporate tax rate. The qualifying
conditions (relating to shareholders) for the tax exemption for
new start-up
companies has been revised with effect from the Year of
Assessment 2009.
Singapore tax resident individuals are subject to tax based on a
progressive scale. Since the Year of Assessment 2007 (i.e.,
calendar year 2006), the top marginal rate is 20%.
Income received by non-Singapore resident individuals will
generally be taxed at 20% (subject to certain exemptions).
All tax residents in Singapore will be affected by tax rebates
and exemptions granted by the Singapore government from time to
time in line with its current financial and fiscal policies.
S-18
Ordinary Income Dividends
Dividends paid by the Trust on Units received by a Singapore
resident individual in Singapore will generally be exempt from
tax in Singapore (except where such income is received through a
partnership).
Dividends on Units received by a Singapore resident company in
Singapore will be liable to tax in Singapore at the corporate
income tax rate, unless an exemption or concessionary rates are
applicable to them.
Gains on Disposal of the Units
Singapore does not impose tax on capital gains. However, gains
or profits from any trade, business, profession or vocation will
be subject to Singapore income tax. Any profits from the
disposal of Units are not taxable in Singapore unless the seller
is regarded as having derived gains of an income nature, in
which case, such profits would be taxable. In addition, holders
of the Units who are adopting Financial Reporting Standards 39
(FRS 39) for Singapore income tax purposes may be
required to recognise gains or losses, irrespective of disposal,
in accordance with FRS 39. Please see the section below on
Adoption of FRS 39 treatment for Singapore income tax
purposes.
Adoption of FRS 39 treatment for Singapore income tax
purposes
On December 30, 2005, the Inland Revenue Authority of
Singapore issued a circular entitled Income Tax
Implications arising from the adoption of FRS 39-Financial
Instruments: Recognition and Measurement (as revised
subsequently) (the FRS 39 Circular).
The Income Tax (Amendment) Act 2007 that contains legislative
amendments to give effect to the FRS 39 Circular was gazetted on
February 13, 2007. The relevant provisions shall be deemed
to have come into operation on January 1, 2005 and
generally apply, subject to certain opt-out
provisions, to taxpayers who are required to comply with FRS 39
for financial reporting purposes.
Holders of the Units who may be subject to the tax treatment
under the FRS 39 Circular should consult their own accounting
and tax advisors regarding the Singapore income tax consequences.
Stamp Duty
Stamp duty is not applicable to electronic transfers of the
Units through the CDP system.
Estate Duty
The Singapore government announced on February 15, 2008
that the estate duty would be abolished for deaths occurring on
and after February 15, 2008.
S-19
Prospectus
SPDR®
DOW JONES INDUSTRIAL
AVERAGEsm
ETF
TRUST
(SPDR
DJIA TRUST)
(A
Unit Investment Trust)
|
|
|
SPDR DJIA Trust is an exchange traded fund designed to generally
correspond to the price and yield performance of the Dow Jones
Industrial Average.
|
|
|
SPDR DJIA Trust holds all of the Dow Jones Industrial Average
stocks.
|
|
|
Each Trust Unit represents an undivided ownership interest
in the SPDR DJIA Trust.
|
|
|
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.
|
|
|
Individual Trust Units trade on NYSE Arca, Inc., like any
other equity security.
|
|
|
Minimum trading unit: 1 Trust Unit.
|
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 22, 2012
COPYRIGHT 2012 PDR Services
LLC
SPDR DJIA
TRUST
TABLE OF
CONTENTS
|
|
|
|
|
|
|
Page
|
|
|
|
|
|
1
|
|
|
|
|
1
|
|
|
|
|
3
|
|
|
|
|
11
|
|
|
|
|
15
|
|
|
|
|
16
|
|
|
|
|
17
|
|
|
|
|
18
|
|
|
|
|
19
|
|
|
|
|
20
|
|
|
|
|
28
|
|
|
|
|
30
|
|
|
|
|
32
|
|
|
|
|
32
|
|
|
|
|
34
|
|
|
|
|
35
|
|
|
|
|
35
|
|
|
|
|
36
|
|
|
|
|
38
|
|
|
|
|
38
|
|
|
|
|
41
|
|
|
|
|
41
|
|
|
|
|
41
|
|
|
|
|
42
|
|
|
|
|
44
|
|
|
|
|
45
|
|
|
|
|
49
|
|
|
|
|
51
|
|
|
|
|
52
|
|
|
|
|
53
|
|
|
|
|
55
|
|
|
|
|
58
|
|
|
|
|
59
|
|
|
|
|
60
|
|
|
|
|
61
|
|
|
|
|
62
|
|
|
|
|
64
|
|
|
|
|
65
|
|
|
|
|
65
|
|
|
|
|
65
|
|
|
|
|
67
|
|
|
|
|
67
|
|
|
|
|
68
|
|
|
|
|
68
|
|
|
|
|
70
|
|
|
|
|
71
|
|
|
|
|
72
|
|
|
|
|
72
|
|
|
|
|
73
|
|
|
|
|
73
|
|
|
|
|
73
|
|
|
|
|
73
|
|
|
|
|
80
|
|
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), an affiliate of
The McGraw-Hill Companies, Inc., 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
Essential
Information as of October 31, 2011*
|
|
|
Glossary:
|
|
All defined terms used in this Prospectus and page numbers on
which their definitions appear are listed in the Glossary.
|
|
|
|
Total Trust Assets:
|
|
$11,103,092,926
|
|
|
|
Net Trust Assets:
|
|
$11,080,664,259
|
|
|
|
Number of Trust Units:
|
|
92,892,867
|
|
|
|
Fractional Undivided Interest in the Trust Represented by
each Unit:
|
|
1/92,892,867
|
|
|
|
Dividend Record Dates:
|
|
Monthly, on the second
(2nd )
Business Day after the third
(3rd )
Friday.
|
|
|
|
Dividend Payment Dates:
|
|
Monthly, on the Monday preceding the third
(3rd )
Friday of the next calendar month.
|
|
|
|
Trustees Annual Fee:
|
|
From 0.06% to 0.10%, based on the NAV of the Trust, as the same
may be adjusted by certain amounts.
|
|
|
|
Estimated Ordinary Operating Expenses of the Trust:
|
|
Estimated not to exceed 0.18% (inclusive of Trustees
annual fee and Sponsor reimbursement of certain expenses, if
any).**
|
|
|
|
NAV per Unit (based on the value of the Portfolio Securities,
other net assets of the Trust and number of Units outstanding):
|
|
$119.28
|
|
|
|
Evaluation Time:
|
|
Closing time of the regular trading session on the New York
Stock Exchange LLC. (ordinarily 4:00 p.m. New York time).
|
|
|
|
Licensor:
|
|
Dow Jones & Company, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
Mandatory Termination Date:
|
|
The Trust is scheduled to terminate no later than January 13,
2123, but may terminate earlier under certain circumstances.
|
|
|
|
Discretionary Termination:
|
|
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.
|
|
|
|
Market Symbol:
|
|
Units trade on NYSE Arca, Inc. under the symbol DIA.
|
|
|
|
Fiscal Year End:
|
|
October 31
|
|
|
|
CUSIP:
|
|
78467X109
|
|
|
|
* |
|
The Trust Agreement became effective and the initial
deposit was made on January 13, 1998 (Initial Date of
Deposit). The Trust commenced operation on January 14,
1998. |
|
|
|
** |
|
As of the fiscal year ended October 31, 2011, gross
ordinary operating expenses of the Trust were 0.17% 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 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, 2011, 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 TrustTrustee Fee
Scale for a description of the Trustees fee. |
2
HIGHLIGHTS
|
|
|
Units are
Ownership Interests in the SPDR DJIA Trust
|
SPDR DJIA Trust (the 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 (the
Trustee) and PDR Services LLC (the
Sponsor), dated and executed as of January 13,
1998, as amended (the 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
(Portfolio Securities or, collectively,
Portfolio) of the Dow Jones Industrial Average
(DJIA).
|
|
|
Units
Should Closely Track the Value of the Stocks Included in the
DJIA
|
The investment objective of the Trust is 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 Portfolio Securities 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 (as defined below in Highlights
Creation Orders Must be Placed with the Distributor)
effective on any day that the New York Stock Exchange LLC (the
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
SPDR DJIA Trust: Bid/Ask Price vs. Net Asset Value (NAV) as of
12/31/11
herein.
3
|
|
|
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, which are 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. (the
Distributor) as facilitated through the Trustee,
deposit with the Trustee a specified portfolio of securities
substantially similar in composition and weighting to the Index
Securities in the DJIA, and a cash payment, if any, generally
equal to dividends on the securities (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, in lieu
thereof, 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 (as defined below in
Highlights Creation Orders Must be Placed with
the Distributor). 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, in lieu of the
inclusion of such Index Securities in the stock portion of the
Portfolio Deposit, 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.
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 (as defined below in Redemption of
Trust Units Procedures for Redemption of
Creation Units) that on any given Business Day is an
amount
* 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
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, in lieu thereof, 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.
|
|
|
Creation
Orders Must be Placed with the Distributor
|
All orders for Creation Units must be placed with the
Distributor as facilitated through the Trustee. 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
(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 in The
Portfolio Adjustments to the Portfolio
Deposit). 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, (ii) accrued fees of the Trustee and
(iii) other expenses of the Trust (including legal and
auditing 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 the 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 must deposit Portfolio Deposits either
(i) through the CNS clearing process of NSCC (the
Clearing Process) or (ii) with the Trustee
outside the Clearing Process (i.e., through the facilities of
DTC).
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.
5
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 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.
The expenses of the Trust are accrued daily and reflected in the
NAV of the Trust.
|
|
|
|
|
Shareholder Fees:
|
|
|
None*
|
|
(fees paid directly from your investment)
|
|
|
|
|
|
|
|
|
|
Estimated Trust Annual Ordinary Operating Expenses:
|
|
|
|
|
|
|
|
|
|
Current Trust Annual Ordinary
|
|
As a % of Trust
|
|
Operating Expenses
|
|
Average Net Assets
|
|
|
Trustees Fee
|
|
|
0.06
|
%
|
Dow Jones License Fee
|
|
|
0.04
|
%
|
Marketing
|
|
|
0.06
|
%
|
Other Operating Expenses
|
|
|
0.01
|
%
|
Net Expenses**
|
|
|
0.17
|
%
|
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 HighlightsA 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 HighlightsBrokerage 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, 2011, 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
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.
|
6
The bar chart below (Bar Chart) and the table on the
next page entitled Average Annual Total Returns (For
Periods Ending December 31, 2011) (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,
2011. During the period shown above (January 1, 2002
through December 31, 2011), 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,
2011)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Past
|
|
|
Past
|
|
|
Past
|
|
|
|
One Year
|
|
|
Five Years
|
|
|
Ten Years
|
|
|
SPDR DJIA Trust
|
|
|
|
|
|
|
|
|
|
|
|
|
Return Before
Taxes(1)(2)(3)
|
|
|
8.18
|
%
|
|
|
2.22
|
%
|
|
|
4.39
|
%
|
Return After Taxes on
Distributions(1)(2)(3)
|
|
|
7.78
|
%
|
|
|
1.82
|
%
|
|
|
3.94
|
%
|
Return After Taxes on Distributions and Sale or Redemption of
Creation
Units(1)(2)(3)
|
|
|
5.83
|
%
|
|
|
1.84
|
%
|
|
|
3.67
|
%
|
DJIA(4)
|
|
|
8.38
|
%
|
|
|
2.37
|
%
|
|
|
4.57
|
%
|
|
|
|
*
|
|
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
Highlights Estimated Trust Annual
Ordinary Operating Expenses.
|
|
|
|
(2)
|
|
Does not include the Transaction
Fee, which is payable to the Trustee only by persons purchasing
and redeeming Creation Units, as discussed below in
Highlights 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 that would be incurred by persons who
make purchases and sales of Units in the secondary market, as
discussed above in Highlights 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.
|
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.
|
8
|
|
|
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 0.10% (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.
|
|
|
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 Creation of Creation
UnitsSecurities 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 (as defined below in
Administration of the TrustDistributions to
Beneficial Owners). 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
9
certain distribution requirements imposed by the Internal
Revenue Code of 1986, as amended (the 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, 2011, 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 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 as capital gain for U.S. 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.
10
|
|
|
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 pursuant to 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
shares, (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.
Risk
Factors
Investors can lose money by investing in Units. Prospective
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 change from time to time.
The financial condition of issuers of Portfolio Securities 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
11
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 subordinate 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.
The Trust may have significant investments in one or more
specific industries or sectors, subjecting it to risks greater
than general market risk.
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.
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
12
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 ownership and disposition of
Trust Units. For a discussion of certain U.S. federal
income tax consequences of the 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 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 stocks within capitalization ranges. Large capitalization
companies usually cannot respond as quickly as smaller companies
to competitive challenges and their growth rates tend to lag the
growth rates of well-managed smaller companies during strong
economic periods. Also,
13
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.
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.
14
SPDR DOW
JONES INDUSTRIAL AVERAGE ETF TRUST
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,
2011, and 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 audits. We conducted our audits 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 audits, which included confirmation of
securities at October 31, 2011 by correspondence with the
custodian, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 16, 2011
15
SPDR Dow Jones Industrial Average ETF Trust
October 31, 2011
|
|
|
|
|
|
Assets
|
|
|
|
|
Investments in securities, at value
|
|
$
|
11,074,408,768
|
|
Cash
|
|
|
14,676,691
|
|
Receivable for units of fractional undivided interest
(Units) issued in-kind
|
|
|
12,589
|
|
Dividends receivable
|
|
|
13,994,878
|
|
|
|
|
|
|
Total Assets
|
|
|
11,103,092,926
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Income distribution payable
|
|
|
16,715,237
|
|
Accrued Trustee expense
|
|
|
518,368
|
|
Accrued expenses and other liabilities
|
|
|
5,195,062
|
|
|
|
|
|
|
Total Liabilities
|
|
|
22,428,667
|
|
|
|
|
|
|
Net Assets
|
|
$
|
11,080,664,259
|
|
|
|
|
|
|
|
|
|
|
|
Net Assets Consist of:
|
|
|
|
|
Paid in Capital (Note 4)
|
|
$
|
14,175,120,930
|
|
Undistributed net investment income
|
|
|
163,512
|
|
Accumulated net realized loss on investments
|
|
|
(1,517,476,227
|
)
|
Net unrealized depreciation on investments
|
|
|
(1,577,143,956
|
)
|
|
|
|
|
|
Net Assets
|
|
$
|
11,080,664,259
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value per Unit
|
|
$
|
119.28
|
|
|
|
|
|
|
Units outstanding, unlimited Units authorized, $0.00 par
value
|
|
|
92,892,867
|
|
|
|
|
|
|
|
|
|
|
|
Cost of investments
|
|
$
|
12,651,552,724
|
|
|
|
|
|
|
See accompanying notes to financial statements.
16
SPDR Dow
Jones Industrial Average ETF Trust
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year
|
|
|
For the Year
|
|
|
For the Year
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
|
October 31, 2011
|
|
|
October 31, 2010
|
|
|
October 31, 2009
|
|
|
Investment Income
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend income
|
|
$
|
245,115,563
|
|
|
$
|
222,616,182
|
|
|
$
|
258,082,109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Trustee expense
|
|
|
5,743,266
|
|
|
|
5,170,959
|
|
|
|
4,465,047
|
|
Marketing expense
|
|
|
5,660,417
|
|
|
|
4,956,465
|
|
|
|
4,583,583
|
|
DJIA license fee
|
|
|
3,873,611
|
|
|
|
3,404,310
|
|
|
|
3,155,722
|
|
Legal and audit services
|
|
|
219,322
|
|
|
|
436,458
|
|
|
|
199,547
|
|
Other expenses
|
|
|
593,467
|
|
|
|
596,111
|
|
|
|
337,558
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Expenses
|
|
|
16,090,083
|
|
|
|
14,564,303
|
|
|
|
12,741,457
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Investment Income
|
|
|
229,025,480
|
|
|
|
208,051,879
|
|
|
|
245,340,652
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized and Unrealized Gain (Loss) on Investments
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized gain (loss) on investment transactions
|
|
|
684,673,417
|
|
|
|
56,806,457
|
|
|
|
(1,286,963,860
|
)
|
Net change in unrealized appreciation (depreciation)
|
|
|
(84,349,814
|
)
|
|
|
908,029,583
|
|
|
|
1,286,025,132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Realized and Unrealized Gain (Loss) on Investments
|
|
|
600,323,603
|
|
|
|
964,836,040
|
|
|
|
(938,728
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Increase in Net Assets Resulting from Operations
|
|
$
|
829,349,083
|
|
|
$
|
1,172,887,919
|
|
|
$
|
244,401,924
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 2011
|
|
|
October 31, 2010
|
|
|
October 31, 2009
|
|
|
Increase (decrease) in net assets resulting from
operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
$
|
229,025,480
|
|
|
$
|
208,051,879
|
|
|
$
|
245,340,652
|
|
Net realized gain (loss) on investment transactions
|
|
|
684,673,417
|
|
|
|
56,806,457
|
|
|
|
(1,286,963,860
|
)
|
Net change in unrealized appreciation (depreciation)
|
|
|
(84,349,814
|
)
|
|
|
908,029,583
|
|
|
|
1,286,025,132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in net assets resulting from operations:
|
|
|
829,349,083
|
|
|
|
1,172,887,919
|
|
|
|
244,401,924
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net equalization credits and charges
|
|
|
(718,146
|
)
|
|
|
(6,394,413
|
)
|
|
|
(12,761,900
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions to unitholders from net investment income
|
|
|
(251,674,959
|
)
|
|
|
(201,712,941
|
)
|
|
|
(231,359,719
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in net assets from Unit transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net proceeds from sale of Units
|
|
|
21,998,536,680
|
|
|
|
13,886,085,189
|
|
|
|
24,458,446,137
|
|
Net proceeds from reinvestment of distributions
|
|
|
|
|
|
|
70,649
|
|
|
|
1,820,420
|
|
Cost of Units repurchased
|
|
|
(19,554,185,652
|
)
|
|
|
(14,187,655,154
|
)
|
|
|
(26,198,575,593
|
)
|
Net income equalization
|
|
|
718,146
|
|
|
|
6,394,413
|
|
|
|
12,761,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in net assets from issuance and
redemption of Units
|
|
|
2,445,069,174
|
|
|
|
(295,104,903
|
)
|
|
|
(1,725,547,136
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in net assets during period
|
|
|
3,022,025,152
|
|
|
|
669,675,662
|
|
|
|
(1,725,266,831
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets at beginning of period
|
|
|
8,058,639,107
|
|
|
|
7,388,963,445
|
|
|
|
9,114,230,276
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets at end of period*
|
|
$
|
11,080,664,259
|
|
|
$
|
8,058,639,107
|
|
|
$
|
7,388,963,445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unit transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Units sold
|
|
|
185,350,000
|
|
|
|
131,950,000
|
|
|
|
286,350,000
|
|
Units issued from reinvestment of distributions
|
|
|
|
|
|
|
679
|
|
|
|
21,340
|
|
Units redeemed
|
|
|
(164,900,000
|
)
|
|
|
(135,550,000
|
)
|
|
|
(308,100,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease)
|
|
|
20,450,000
|
|
|
|
(3,599,321
|
)
|
|
|
(21,728,660
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*Includes undistributed (distributions in excess of) net
investment income
|
|
$
|
163,512
|
|
|
$
|
22,812,991
|
|
|
$
|
16,474,053
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
18
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,
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Net asset value, beginning of year
|
|
$
|
111.24
|
|
|
$
|
97.17
|
|
|
$
|
93.22
|
|
|
$
|
139.17
|
|
|
$
|
120.69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income(1)
|
|
|
2.88
|
|
|
|
2.64
|
|
|
|
2.76
|
|
|
|
2.96
|
|
|
|
2.85
|
|
Net realized and unrealized gain (loss)
|
|
|
8.37
|
|
|
|
14.14
|
|
|
|
4.01
|
|
|
|
(45.91
|
)
|
|
|
18.57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total from investment operations
|
|
|
11.25
|
|
|
|
16.78
|
|
|
|
6.77
|
|
|
|
(42.95
|
)
|
|
|
21.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net equalization credits and charges(1)
|
|
|
(0.01
|
)
|
|
|
(0.08
|
)
|
|
|
(0.14
|
)
|
|
|
0.02
|
|
|
|
(0.24
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less distributions from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
(3.20
|
)
|
|
|
(2.63
|
)
|
|
|
(2.68
|
)
|
|
|
(3.02
|
)
|
|
|
(2.70
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value, end of year
|
|
$
|
119.28
|
|
|
$
|
111.24
|
|
|
$
|
97.17
|
|
|
$
|
93.22
|
|
|
$
|
139.17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investment return(2)
|
|
|
10.17
|
%
|
|
|
17.36
|
%
|
|
|
7.56
|
%
|
|
|
(31.23
|
)%
|
|
|
17.72
|
%
|
Ratios and supplemental data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio to average net assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
2.43
|
%
|
|
|
2.52
|
%
|
|
|
3.21
|
%
|
|
|
2.49
|
%
|
|
|
2.19
|
%
|
Total expenses
|
|
|
0.17
|
%
|
|
|
0.18
|
%
|
|
|
0.17
|
%
|
|
|
0.17
|
%
|
|
|
0.16
|
%
|
Total expenses excluding Trustee earnings credit
|
|
|
0.17
|
%
|
|
|
0.18
|
%
|
|
|
0.17
|
%
|
|
|
0.17
|
%
|
|
|
0.14
|
%
|
Portfolio turnover rate(3)
|
|
|
0.00
|
%
|
|
|
0.12
|
%
|
|
|
5.39
|
%
|
|
|
11.27
|
%
|
|
|
1.45
|
%
|
Net assets, end of year (000s)
|
|
$
|
11,080,664
|
|
|
$
|
8,058,639
|
|
|
$
|
7,388,963
|
|
|
$
|
9,114,230
|
|
|
$
|
9,339,891
|
|
|
|
(1)
|
Per Unit numbers have been calculated using the average shares
method, which more appropriately presents per Unit 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 rate does not include securities received or
delivered from processing creations or redemptions of Units.
|
See accompanying notes to financial statements.
19
SPDR Dow
Jones Industrial Average ETF Trust
October 31, 2011
SPDR Dow Jones Industrial Average ETF Trust (the
Trust) 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.
On February 15, 2011, NYSE Euronext (the parent of the
Sponsor) and Deutsche Börse AG announced that they have
entered into a business combination agreement which was
subsequently approved by their shareholders. This transaction is
subject to approval by the relevant regulatory authorities in
the U.S. and Europe, and other closing conditions.
|
|
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. These
financial statements are presented in United States dollars.
20
SPDR Dow
Jones Industrial Average ETF Trust
Notes to Financial Statements (continued)
October 31, 2011
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 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
21
SPDR Dow
Jones Industrial Average ETF Trust
Notes to Financial Statements (continued)
October 31, 2011
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 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 conflict, 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
Events or transactions occurring after the year end through the
date the financial statements were issued have been evaluated by
management in the preparation of the financial statements and no
items were noted requiring additional disclosure or adjustment.
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 were removed from the DJIA.
22
SPDR Dow
Jones Industrial Average ETF Trust
Notes to Financial Statements (continued)
October 31, 2011
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.
Distributions
to Unitholders
The Trust declares and distributes dividends from net investment
income to its holders of Units (Unitholders)
monthly. The Trust declares and distributes net realized capital
gains, if any, at least annually.
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.
U.S. Federal
Income Tax
For U.S. federal income tax purposes, the Trust has
qualified as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (a
RIC) and 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
Unitholders, 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 has reviewed the tax positions for the open tax years
as of October 31, 2011 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 remain subject to examination by the
Trusts major tax jurisdictions, which include
23
SPDR Dow
Jones Industrial Average ETF Trust
Notes to Financial Statements (continued)
October 31, 2011
the United States of America and the State of New York. The
Trust recognizes interest and penalties, if any, related to tax
liabilities as income tax expense in the Statement Operations.
There were none for the year ending October 31, 2011.
On December 22, 2010, the Regulated Investment Company
Modernization Act of 2010 was enacted. The Act modernizes
several of the federal income and excise tax provisions related
to RICs, and, with certain exceptions, is effective for taxable
years beginning after December 22, 2010. Among the changes
made are changes to the capital loss carryforward rules allowing
for capital losses to be carried forward indefinitely. Rules in
effect previously limit the carryforward period to eight years.
Capital loss carryforwards generated in taxable years beginning
after effective date of the Act must be fully used before
capital loss carryforwards generated in taxable years prior to
effective date of the Act; therefore, under certain
circumstances, capital loss carryforwards available as of the
report date, if any, may expire unused.
During the year ended October 31, 2011, the Trust
reclassified $688,055,722 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, 2011,
the cost of investments for federal income tax purposes was
$12,653,118,708; accordingly, gross unrealized appreciation was
$196,829,766 and gross unrealized depreciation was
$1,775,539,706, resulting in net unrealized depreciation of
$1,578,709,940.
At October 31, 2011, the Trust had capital loss
carryforwards which may be used to offset any net realized
gains, expiring October 31:
|
|
|
|
2012
|
|
$
|
221,460,584
|
2014
|
|
|
52,316
|
2016
|
|
|
506,750,845
|
2017
|
|
|
779,537,215
|
2018
|
|
|
4,715,695
|
2019
|
|
|
3,393,588
|
During the tax year ended October 31, 2011, $68,716,435 of
capital loss carryforwards expired.
The tax character of distributions paid during the years ended
October 31, 2011, 2010 and 2009 were as follows:
|
|
|
|
|
|
|
Distributions paid from:
|
|
2011
|
|
2010
|
|
2009
|
Ordinary Income
|
|
$251,674,959
|
|
$201,712,941
|
|
$231,359,719
|
24
SPDR Dow
Jones Industrial Average ETF Trust
Notes to Financial Statements (continued)
October 31, 2011
As of October 31, 2011, the components of distributable
earnings (excluding unrealized appreciation/depreciation) on the
tax basis were undistributed ordinary income of $16,878,749,
undistributed long term capital gain of $0 and unrealized
depreciation of $1,578,709,940.
|
|
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 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, 2011:
|
|
|
|
|
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,
2011, the Adjustment Amount reduced the Trustees fee by
$527,613. The Adjustment Amount included an excess of net
transaction fees from processing orders of $506,415 and a
Trustee earning credit of $21,198.
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, 2011, October 31, 2010 and
October 31, 2009.
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
25
SPDR Dow
Jones Industrial Average ETF Trust
Notes to Financial Statements (continued)
October 31, 2011
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 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
|
UNITHOLDER
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 and
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.
26
SPDR Dow
Jones Industrial Average ETF Trust
Notes to Financial Statements (continued)
October 31, 2011
|
|
NOTE 5
|
INVESTMENT
TRANSACTIONS
|
For the year ended October 31, 2011, the Trust had net
in-kind contributions, net in-kind redemptions, purchases and
sales of investment securities of $13,905,575,250,
$11,461,062,135, $0 and $14,071,990, respectively. Net realized
gain (loss) on investment transactions in the Statement of
Operations includes net gains resulting from in-kind
transactions of $688,067,005.
|
|
NOTE 6
|
EVENT
(UNAUDITED) SUBSEQUENT TO THE DATE OF THE INDEPENDENT
AUDITORS REPORT
|
As indicated in Note 1 to the Financial Statements, on
February 15, 2011, NYSE Euronext (the parent of the
Sponsor) and Deutsche Börse AG announced that they had
entered into a business combination agreement, which was
subsequently approved by their shareholders. The transaction was
subject to approval by the relevant regulatory authorities in
the U.S. and Europe, and other closing conditions. On
February 1, 2012, the EU Competition Commission issued a
formal decision disapproving the proposed business combination.
In light of the EU Commissions decision, on
February 2, 2012, NYSE Euronext and Deutsche Börse
announced that they mutually agreed to terminate the business
combination agreement.
27
SPDR Dow
Jones Industrial Average ETF Trust
October 31, 2011 (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, 2011 is
100.00%.
For the fiscal year ended October 31, 2011 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 2011
Form 1099-DIV.
FREQUENCY
DISTRIBUTION OF DISCOUNTS AND PREMIUMS
Bid/Ask
Price(1) vs. Net Asset Value
As of
October 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
2011
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
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
|
Comparison
of Total Returns Based on Nav and Bid/Ask Price(1)
As of October 31, 2011
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.
Cummulative
Total Return
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Year
|
|
|
5 Year
|
|
|
10 Year
|
|
|
SPDR DJIA Trust
|
|
|
|
|
|
|
|
|
|
|
|
|
Return Based on NAV
|
|
|
10.17
|
%
|
|
|
12.60
|
%
|
|
|
65.77
|
%
|
Return Based on Bid/Ask Price
|
|
|
10.15
|
%
|
|
|
12.71
|
%
|
|
|
66.10
|
%
|
DJIA
|
|
|
10.39
|
%
|
|
|
13.41
|
%
|
|
|
68.57
|
%
|
28
SPDR Dow
Jones Industrial Average ETF Trust
October 31, 2011 (Unaudited)
Average
Annual Total Return
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Year
|
|
|
5 Year
|
|
|
10 Year
|
|
|
SPDR DJIA Trust
|
|
|
|
|
|
|
|
|
|
|
|
|
Return Based on NAV
|
|
|
10.17
|
%
|
|
|
2.40
|
%
|
|
|
5.18
|
%
|
Return Based on Bid/Ask Price
|
|
|
10.15
|
%
|
|
|
2.42
|
%
|
|
|
5.21
|
%
|
DJIA
|
|
|
10.39
|
%
|
|
|
2.55
|
%
|
|
|
5.36
|
%
|
|
|
(1) |
The Bid/Ask Price is the midpoint of the NYSE Arca 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.
|
29
SPDR Dow
Jones Industrial Average ETF Trust
October 31, 2011
|
|
|
|
|
|
|
|
|
Common Stocks
|
|
Shares
|
|
|
Value
|
|
|
3M Co.
|
|
|
7,010,850
|
|
|
$
|
553,997,367
|
|
Alcoa, Inc.
|
|
|
7,010,850
|
|
|
|
75,436,746
|
|
American Express Co.
|
|
|
7,010,850
|
|
|
|
354,889,227
|
|
AT&T, Inc.
|
|
|
7,010,850
|
|
|
|
205,488,013
|
|
Bank of America Corp.
|
|
|
7,010,850
|
|
|
|
47,884,106
|
|
Caterpillar, Inc.
|
|
|
7,010,850
|
|
|
|
662,244,891
|
|
Chevron Corp.
|
|
|
7,010,850
|
|
|
|
736,489,792
|
|
Cisco Systems, Inc.
|
|
|
7,010,850
|
|
|
|
129,911,051
|
|
E. I. du Pont de Nemours & Co.
|
|
|
7,010,850
|
|
|
|
337,011,560
|
|
Exxon Mobil Corp.
|
|
|
7,010,850
|
|
|
|
547,477,276
|
|
General Electric Co.
|
|
|
7,010,850
|
|
|
|
117,151,304
|
|
Hewlett-Packard Co.
|
|
|
7,010,850
|
|
|
|
186,558,719
|
|
Intel Corp.
|
|
|
7,010,850
|
|
|
|
172,046,259
|
|
International Business Machines Corp.
|
|
|
7,010,850
|
|
|
|
1,294,413,235
|
|
Johnson & Johnson
|
|
|
7,010,850
|
|
|
|
451,428,631
|
|
JPMorgan Chase & Co.
|
|
|
7,010,850
|
|
|
|
243,697,146
|
|
Kraft Foods, Inc. (Class A)
|
|
|
7,010,850
|
|
|
|
246,641,703
|
|
McDonalds Corp.
|
|
|
7,010,850
|
|
|
|
650,957,422
|
|
Merck & Co., Inc.
|
|
|
7,010,850
|
|
|
|
241,874,325
|
|
Microsoft Corp.
|
|
|
7,010,850
|
|
|
|
186,698,936
|
|
Pfizer, Inc.
|
|
|
7,010,850
|
|
|
|
135,028,971
|
|
The Boeing Co.
|
|
|
7,010,850
|
|
|
|
461,243,821
|
|
The
Coca-Cola
Co.
|
|
|
7,010,850
|
|
|
|
478,981,272
|
|
The Home Depot, Inc.
|
|
|
7,010,850
|
|
|
|
250,988,430
|
|
The Procter & Gamble Co.
|
|
|
7,010,850
|
|
|
|
448,624,291
|
|
The Travelers Cos., Inc.
|
|
|
7,010,850
|
|
|
|
409,083,098
|
|
The Walt Disney Co.
|
|
|
7,010,850
|
|
|
|
244,538,448
|
|
United Technologies Corp.
|
|
|
7,010,850
|
|
|
|
546,706,083
|
|
Verizon Communications, Inc.
|
|
|
7,010,850
|
|
|
|
259,261,233
|
|
Wal-Mart Stores, Inc.
|
|
|
7,010,850
|
|
|
|
397,655,412
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Common Stocks(a) (Cost $12,651,552,724)
|
|
|
|
|
|
$
|
11,074,408,768
|
|
|
|
|
|
|
|
|
|
|
|
|
(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, 2011
INDUSTRY BREAKDOWN AS OF
OCTOBER 31, 2011*
|
|
|
|
|
|
|
Percent of
|
|
Industry
|
|
Net Assets**
|
|
|
|
|
IT Services
|
|
|
11.68
|
%
|
Oil, Gas & Consumable Fuels
|
|
|
11.59
|
|
Aerospace & Defense
|
|
|
9.10
|
|
Pharmaceuticals
|
|
|
7.48
|
|
Industrial Conglomerates
|
|
|
6.06
|
|
Machinery
|
|
|
5.98
|
|
Hotels, Restaurants & Leisure
|
|
|
5.87
|
|
Beverages
|
|
|
4.32
|
|
Diversified Telecommunication Services
|
|
|
4.19
|
|
Household Products
|
|
|
4.05
|
|
Insurance
|
|
|
3.69
|
|
Food & Staples Retailing
|
|
|
3.59
|
|
Consumer Finance
|
|
|
3.20
|
|
Chemicals
|
|
|
3.04
|
|
Diversified Financial Services
|
|
|
2.63
|
|
Specialty Retail
|
|
|
2.27
|
|
Food Products
|
|
|
2.23
|
|
Media
|
|
|
2.21
|
|
Software
|
|
|
1.68
|
|
Computers & Peripherals
|
|
|
1.68
|
|
Semiconductors & Semiconductor Equipment
|
|
|
1.55
|
|
Communications Equipment
|
|
|
1.17
|
|
Metals & Mining
|
|
|
0.68
|
|
Other Assets & Liabilities
|
|
|
0.06
|
|
|
|
|
|
|
Total
|
|
|
100.00
|
%
|
|
|
|
|
|
|
|
* |
SPDR DJIA Trusts industry breakdown is expressed as a
percentage of Total Net Assets 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, a registered investment company, is an exchange
traded fund or ETF. The Trust continuously issues
and redeems in-kind its Trust Units only in
large lot sizes, known as Creation Units, at their once-daily
NAV. Units are listed individually for trading on the Exchange
at prices established throughout the trading day, like any other
listed equity security trading on the Exchange in the secondary
market.
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 through the Clearing
Process or outside the Clearing Process 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 Trustee
not later than the Closing Time (as defined below in
Creation of Creation Units Procedures for
Creation of Creation Units) 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 within one (1) Business Day before or after the day on
which the change to the DJIA takes effect.
* Any such increase is subject to the 10 Basis
Point Limit discussed above under HighlightsA
Transaction Fee is Payable for Each Creation and for Each
Redemption of Creation Units.
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, 2011, is set
forth in the above Schedule of Investments. The Sponsor makes
available (a) on each Business Day, the Dividend Equivalent
Payment, on a per Unit basis, effective through and including
the previous Business Day 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 by itself result in a halt
in the trading of Units on the Exchange.
Upon receipt of one or more Portfolio Deposits, following
acceptance by 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(s) 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 received by the Trustee to the time the requisite
Index Securities are purchased and delivered will affect the
value of all Units.
** As of December 31, 2011, 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 0.4% of the
issued and outstanding shares of common stock of DTCC
(DTCC Shares), and the Trustee owned 6.22% of DTCC
Shares.
33
Procedures
for Creation of Creation Units
All creation orders must be placed in Creation Units and must be
received by the Trustee 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 will have 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. An order will be deemed received on the
Business Day on which it is placed so long as (a) the order
is placed in proper form before the Closing Time on such
Business Day and (b) 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 (1) 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 Portfolio Deposit. The Trustee
will return any unused portion of the Additional Cash Deposit
only 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
34
Payable for Each Creation and for Each Redemption of Creation
Units. The delivery of Creation Units created as described
above 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 a 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 will 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.
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,
35
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 the 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 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
* As of December 31, 2011, DTCC owned 100%
of the issued and outstanding shares of the common stock of DTC.
36
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 any 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. DTC or its
nominee, upon receipt of any payment of distributions in respect
of Units, is required immediately to credit DTC
Participants accounts with payments in amounts
proportionate 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.
37
DTC may discontinue providing its service with respect to Units
at any time by giving notice to the Trustee and the Sponsor,
provided that it discharges its responsibilities with respect
thereto in accordance with 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 HighlightsTermination
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 by the Trustee of the Units to
be redeemed and any Excess Cash Amounts (as defined below) 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 required to
transfer Units through DTC and 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 (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
38
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, (ii) accrued fees of the Trustee and
(iii) other expenses of the Trust (including legal and
auditing expenses) not previously deducted, 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.
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
39
the Trustee and applied in accordance with the guidelines
applicable to residual cash set forth under The
PortfolioPortfolio 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, pursuant to procedures set forth in
the Participant Agreement
and/or
described in this Prospectus, so as to be received by the
Trustee not later than the Closing Time on the Transmittal Date.
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 (as defined below in
Redemption of Trust Units Placement of
Redemption Orders Outside the Clearing Process) on
such Transmittal Date, then the value of the stocks and the Cash
Redemption Payment to be delivered to the Beneficial Owner
will be 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
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 will be 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, or
(c) 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.
40
Placement
of Redemption Orders Using the Clearing Process
A redemption order made through the Clearing Process will be
deemed received on the Transmittal Date so long as (a) the
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 a 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 will transfer (a) 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 (b) 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 will be 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, (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 (3) Business Days and the Cash
Redemption Payment to the redeeming Beneficial Owner by the
third (3rd) Business Day following the Transmittal Date.
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 the 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
41
may at any time fail to own certain Index Securities, the Trust
generally will be substantially invested in Index Securities,
which should result in a close correspondence between the
performance of the DJIA and the performance of the Trust.
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 for 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.
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.
42
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, 0.5% of the value of the Portfolio. If the
Trustee has made all required adjustments and is left with cash
in excess of 0.5% 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 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 determination of all redemptions or other
purposes.
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
43
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 required for 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 the 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), such that (a) the
market value at the close of the market on the Adjustment Day of
the stocks to be included in the 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
44
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 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.
45
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 25% of the $13.87
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 2011. 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 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
|
|
|
2011
|
|
|
12217.56
|
|
|
|
640.05
|
|
|
|
5.53
|
%
|
|
|
318.70
|
|
|
|
2.71
|
%
|
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
|
|
46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
|
|
DJIA
|
|
|
Point
|
|
|
Year %
|
|
|
|
|
|
%
|
|
Ended
|
|
Close
|
|
|
Change
|
|
|
Change
|
|
|
Divs
|
|
|
Yield
|
|
|
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
|
|
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
|
|
47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
|
|
DJIA
|
|
|
Point
|
|
|
Year %
|
|
|
|
|
|
%
|
|
Ended
|
|
Close
|
|
|
Change
|
|
|
Change
|
|
|
Divs
|
|
|
Yield
|
|
|
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
|
|
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.
48
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
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
* 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
49
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 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.
50
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, State Street Global Advisors or their 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 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 since
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
51
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 (1) 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
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 or 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;
|
|
|
|
U.S. Holders (as defined below) whose functional currency
for U.S. federal income tax purposes is not the
U.S. dollar;
|
|
|
|
entities classified as partnerships or other pass-through
entities for U.S. federal income tax purposes;
|
|
|
|
former U.S. citizens and certain expatriated entities;
|
|
|
|
tax-exempt entities, including an individual retirement
account or Roth IRA; or
|
|
|
|
insurance companies.
|
52
If an entity that is classified as a partnership for
U.S. federal income tax purposes is a Beneficial Owner of
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. Partnerships that are Beneficial
Owners of Units and partners in such partnerships should consult
their tax advisors 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
(i) an individual who is a citizen or resident of the
United States; (ii) a corporation, or other entity that is
treated as a corporation for U.S. federal income tax
purposes, 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
advisors 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 October 31, 2011,
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 the holders of
its Units.
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
53
respect of any one issuer, to an amount not greater than 5% 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 the 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 (determined prior to the dividends-paid
deduction that a RIC may claim) 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 gain net income 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 the Trusts earnings and
profits would be taxable as dividend income. Such distributions
generally would be eligible for the dividends-received deduction
in the case of corporate U.S. Holders and, in taxable years
of individual U.S. Holders beginning
54
before January 1, 2013, would constitute qualified
dividend income for individual U.S. Holders. See
Federal Income TaxesTax Consequences to
U.S. HoldersDistributions. 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 U.S. 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. It is unclear whether any legislation will be
enacted that 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.
55
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
share 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. In general,
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 gain (that
is, the excess of net long-term capital gains over net
short-term capital losses) 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.
Losses recognized by a U.S. Holder on the sale or other
disposition 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.
56
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 (x) the
aggregate fair market value, as of the redemption date, of the
stocks and cash received in the redemption and (y) 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 as of 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 that equal or exceed an applicable threshold
amount, 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 that the U.S. Holder pays 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
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;
FATCA. 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
57
may entitle the U.S. Holder to a refund, provided that the
required information is furnished to the IRS on a timely basis.
Under FATCA (as defined in Tax Consequence to
Non-U.S. Holders),
a 30% withholding tax will be imposed after December 31,
2013 on payments of
U.S.-source
dividends, and after December 31, 2014 on payments of gross
proceeds of dispositions of property that can produce
U.S.-source
dividends, that are made to certain foreign entities. If a
U.S. Holder does not provide appropriate certifications as
to its status, payments to such U.S. Holder may be subject
to this tax. A U.S. Holder would generally be able to
credit this tax against its liability for U.S. federal
income tax and, to the extent it exceeded that liability, to
claim a refund.
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 discussion below does not apply to a
Non-U.S. Holder
who is a nonresident alien individual and is present in the
United States for 183 days or more during any taxable year
or is an expatriate. Such
Non-U.S. Holders
should consult their tax advisors with respect to the particular
tax consequences to them of an investment in the Trust. 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 generally 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 the income from the Trust is effectively
connected with a trade or business carried on by a
Non-U.S. Holder
in the United States, any distributions of
58
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 IRS in connection
with certain payments on the Units. A
Non-U.S. Holder
may be subject to backup withholding on certain 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.
Under Sections 1471 through 1474 of the Code
(FATCA), a 30% withholding tax will be imposed on
payments of
U.S.-source
dividends and the gross proceeds of dispositions of property
that can produce
U.S.-source
dividends that are made to certain foreign entities (including
financial intermediaries), unless the relevant foreign entity
satisfies various U.S. information reporting and due
diligence requirements and provides certain certifications and
other information (generally relating to ownership by
U.S. persons of interests in, or accounts with, those
entities). The withholding agent will be required to report
certain of the information to the IRS. This legislation will
apply to payments of dividends made after December 31, 2013
and payments of gross proceeds made after December 31,
2014. A Non-U.S. Holder may be able to obtain a refund of the
FATCA tax, provided that it files a tax return with the IRS and
complies with other procedural requirements.
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.
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 or entities whose
underlying assets include plan assets within the
meaning of the
59
Employee Retirement Income Security Act of 1974, as amended
(ERISA) (collectively, Plans) subject to
the fiduciary responsibility requirements of 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.
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
60
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, 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 Securities
Act of 1933. 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.
Broker-dealer firms should also note that dealers who are not
underwriters but are effecting transactions in
Units, whether or not participating in the distribution of
Units, generally are required to deliver a prospectus. This is
because the prospectus delivery exemption in Section 4(3)
of the Securities Act of 1933 is not available in respect of
such transactions as a result of Section 24(d) of the
Investment Company Act of 1940. As a result, broker-dealer firms
should note that dealers who are not underwriters
but are participating in a distribution (as contrasted with
engaging in ordinary secondary market transactions), and thus
dealing with the Units that are part of an overallotment within
the meaning of Section 4(3)(C) of the Securities Act of
1933 will be unable to take advantage of the prospectus-delivery
exemption provided by Section 4(3) of the Securities Act of
1933. For delivery of prospectuses to exchange members, the
prospectus delivery mechanism of Rule 153 under the
Securities Act of 1933 is only available with respect to
transactions on a national exchange.
The Sponsor intends to qualify Units in states selected by the
Sponsor and through broker-dealers who are members of FINRA.
Persons intending to create or redeem Creation Units in
transactions not involving a broker-dealer registered in such
persons 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
61
reinvestment service offered by such broker dealer.
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.
Ordinary operating expenses of the Trust are currently being
accrued at an annual rate of less than 0.17%. 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 0.17% 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 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 any 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);
62
(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
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 0.06% to 0.10% of the
NAV of the Trust, as shown below, depending on the NAV of the
Trust, plus or minus the Adjustment Amount. The compensation is
computed on each Business Day based on 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,
63
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
|
|
|
|
|
Fee as a Percentage of
|
Net Asset Value of the Trust
|
|
Net Asset Value of the Trust
|
|
$0 $499,999,999
|
|
0.10% per annum plus or minus the Adjustment Amount*
|
$500,000,000 $2,499,999,999
|
|
0.08% per annum plus or minus the Adjustment Amount*
|
$2,500,000,000 and above
|
|
0.06% 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, 2011, and as of December 31, 2011,
the NAV of the Trust was $11,080,664,259 and $10,818,031,479,
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. The 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 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
** The excess earnings on cash amount is currently
calculated, and applied, on a monthly
basis.
64
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, as
shown under SummaryEssential Information as of
October 31, 2011, 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 therefor or, if there is no such appropriate
closing sale price on such exchange, at the closing bid price
(unless the Trustee deems such price inappropriate as a basis
for evaluation). If the securities 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 bid 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 securities, (c) by the Trustees appraising
the value of the securities in good faith on the bid side of the
market, or (d) by any combination thereof.
ADMINISTRATION
OF THE TRUST
Distributions
to Beneficial Owners
The regular monthly ex-dividend date for Units is the third
(3rd) 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 (2nd) 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
65
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 be subject to tax 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
exceeded 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 the actual annual
investment company taxable income and net capital
gain of the Trust have been computed, of the amount, if any, by
which such actual income and gain 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 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
RIC or to avoid imposition of income or excise taxes on
undistributed income. In addition, the Trust may 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 RICs or
would otherwise be advantageous to the Trust. The Trustee may
also change the regular ex-dividend date for Units to another
date within the month or the quarter if the Sponsor and the
Trustee determine that such a change would be advantageous to
66
the Trust. Notice of any such variance or change will 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.
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 will 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
67
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 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.
68
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 to all Beneficial Owners at least twenty (20) days
before termination of the Trust. 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 will be closed. The notice must further state that, as of
the date thereof and thereafter, the Trust will accept neither
requests to create additional Creation Units nor Portfolio
Deposits, 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 Trusts termination
date, the Trustee will, 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 will not be liable 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 will
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.
69
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
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
which by the terms of the Trust Agreement are required to
be undertaken or performed by it, and such failure is not cured
within fifteen (15) Business Days following receipt of
notice from the Trustee of such failure, or resigns, or if the
Sponsor is adjudged bankrupt or insolvent, or a receiver of the
Sponsor or of its property is appointed, or a trustee or
liquidator or any public officer takes charge or control of the
Sponsor or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation, the Trustee may
appoint a successor Sponsor, agree to act as Sponsor itself, or
terminate the Trust Agreement and liquidate the Trust. Upon
the Trustees and a successor Sponsors execution of
an instrument of appointment and assumption, the successor
Sponsor would succeed to all of the rights, powers, duties and
obligations of the original Sponsor. A successor Sponsor shall
not be under any liability under the Trust Agreement for
occurrences or omissions prior to the execution of such
instrument. Any successor Sponsor may be compensated at rates
deemed by the Trustee to be reasonable, but not exceeding the
amounts prescribed by the SEC.
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 Trustee shall
terminate the Trust Agreement and liquidate the Trust if,
within sixty (60) days following the date on which a notice
of resignation was delivered by the Sponsor, a successor Sponsor
has not been appointed or the Trustee has not agreed to act as
Sponsor.
The Trust Agreement provides that the Sponsor is not liable
to the Trustee, the Trust or to the Beneficial Owners of Units
for taking or refraining from taking any action 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
70
or loss incurred by the Trust because of the purchase or sale of
any Portfolio Securities. The Trust Agreement further
provides that the Sponsor and its directors, shareholders,
officers, employees, subsidiaries 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
arising out of or in connection with 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 (including counsel fees) of defending against any claim
or liability.
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.
Information regarding Cash Redemption Payment amounts,
number of outstanding Trust Units and Transaction Fees may
be obtained from the Trustee toll-free at
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 acceptance
of the appointment as Trustee for the Trust by the successor
Trustee. The Sponsor, upon receiving notice of such resignation,
is obligated to use its best efforts promptly to appoint a
successor Trustee in the manner and meeting the qualifications
provided in the Trust Agreement. If no successor is
appointed within sixty (60) days after the date such notice
of resignation is given, the Trustee shall terminate the
Trust Agreement and liquidate the Trust.
If the Trustee becomes incapable of acting as such, or fails to
undertake or perform or becomes incapable of undertaking or
performing any of the duties which by the terms of the
Trust Agreement are required to be undertaken or performed
by it, and such failure is not be cured within fifteen
(15) Business Days following receipt of notice from the
Sponsor of such failure, or is adjudged bankrupt or insolvent,
or a receiver of the Trustee or its property is appointed, or a
trustee or liquidator or any
71
public officer takes charge or control of such Trustee or of its
property or affairs for the purposes of rehabilitation,
conservation or liquidation, then the Sponsor may remove the
Trustee and appoint a successor Trustee as provided in the
Trust Agreement. The Sponsor shall mail notice of such
appointment of a successor Trustee via the DTC Participants to
Beneficial Owners. Upon a successor Trustees execution of
a written acceptance and acknowledgment of an instrument
accepting 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 bank, trust company, corporation or national banking
association organized and 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
profits 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 and in the Trust Agreement.
The Trust Agreement limits the Trustees liabilities.
It provides, among other things, that the Trustee is not liable
for (a) any action taken in good faith reliance on properly
executed documents or for the disposition of monies or
securities 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 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.
72
The financial statements as of October 31, 2011 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 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 value 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,
73
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.
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 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,
74
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, a 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
12/31/11,
the distribution relationships of high, low and closing prices
over the same period, and distribution of bid/ask spreads for
2011. 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
12/31/11.
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.
75
Daily
Percentage Price Ranges: Average and Frequency Distribution
for
Dow Jones Industrial Average and SPDR DJIA Trust:
Highs and Lows vs. Close*
(From
Inception of Trading through
12/31/11)
Dow Jones
Industrial Average
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daily % Price Range
|
|
|
Intraday High Value Above Closing Value
|
|
|
Intraday Low Value Below Closing Value
|
|
Range
|
|
Frequency
|
|
|
% of Total
|
|
|
Frequency
|
|
|
% of Total
|
|
|
Frequency
|
|
|
% of Total
|
|
|
0 0.25%
|
|
|
1
|
|
|
|
0.03
|
%
|
|
|
1157
|
|
|
|
32.94
|
%
|
|
|
875
|
|
|
|
24.91
|
%
|
0.25 0.5%
|
|
|
151
|
|
|
|
4.30
|
%
|
|
|
699
|
|
|
|
19.90
|
%
|
|
|
764
|
|
|
|
21.75
|
%
|
0.5 1.0%
|
|
|
1033
|
|
|
|
29.41
|
%
|
|
|
805
|
|
|
|
22.92
|
%
|
|
|
940
|
|
|
|
26.77
|
%
|
1.0 1.5%
|
|
|
997
|
|
|
|
28.39
|
%
|
|
|
382
|
|
|
|
10.88
|
%
|
|
|
463
|
|
|
|
13.18
|
%
|
1.5 2.0%
|
|
|
618
|
|
|
|
17.60
|
%
|
|
|
217
|
|
|
|
6.18
|
%
|
|
|
214
|
|
|
|
6.09
|
%
|
2.0 2.5%
|
|
|
307
|
|
|
|
8.74
|
%
|
|
|
115
|
|
|
|
3.27
|
%
|
|
|
121
|
|
|
|
3.45
|
%
|
2.5 3.0%
|
|
|
179
|
|
|
|
5.10
|
%
|
|
|
54
|
|
|
|
1.54
|
%
|
|
|
55
|
|
|
|
1.57
|
%
|
3.0 3.5%
|
|
|
81
|
|
|
|
2.31
|
%
|
|
|
31
|
|
|
|
0.88
|
%
|
|
|
30
|
|
|
|
0.85
|
%
|
> 3.5%
|
|
|
145
|
|
|
|
4.13
|
%
|
|
|
52
|
|
|
|
1.48
|
%
|
|
|
50
|
|
|
|
1.42
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3512
|
|
|
|
100
|
%
|
|
|
3512
|
|
|
|
100
|
%
|
|
|
3512
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Daily Range: 1.5167%
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
|
|
|
|
0.11
|
%
|
|
|
1146
|
|
|
|
32.63
|
%
|
|
|
842
|
|
|
|
23.97
|
%
|
0.25 0.5%
|
|
|
185
|
|
|
|
5.27
|
%
|
|
|
751
|
|
|
|
21.38
|
%
|
|
|
797
|
|
|
|
22.69
|
%
|
0.5 1.0%
|
|
|
1080
|
|
|
|
30.75
|
%
|
|
|
799
|
|
|
|
22.75
|
%
|
|
|
1018
|
|
|
|
28.99
|
%
|
1.0 1.5%
|
|
|
1023
|
|
|
|
29.13
|
%
|
|
|
391
|
|
|
|
11.13
|
%
|
|
|
451
|
|
|
|
12.84
|
%
|
1.5 2.0%
|
|
|
553
|
|
|
|
15.75
|
%
|
|
|
203
|
|
|
|
5.78
|
%
|
|
|
191
|
|
|
|
5.44
|
%
|
2.0 2.5%
|
|
|
305
|
|
|
|
8.68
|
%
|
|
|
105
|
|
|
|
2.99
|
%
|
|
|
79
|
|
|
|
2.25
|
%
|
2.5 3.0%
|
|
|
156
|
|
|
|
4.44
|
%
|
|
|
46
|
|
|
|
1.31
|
%
|
|
|
67
|
|
|
|
1.91
|
%
|
3.0 3.5%
|
|
|
78
|
|
|
|
2.22
|
%
|
|
|
28
|
|
|
|
0.80
|
%
|
|
|
21
|
|
|
|
0.60
|
%
|
> 3.5%
|
|
|
128
|
|
|
|
3.64
|
%
|
|
|
43
|
|
|
|
1.22
|
%
|
|
|
46
|
|
|
|
1.31
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3512
|
|
|
|
100
|
%
|
|
|
3512
|
|
|
|
100
|
%
|
|
|
3512
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Daily Range: 1.4629%
* Source: Bloomberg
76
Frequency
Distribution of Discounts and Premiums for the SPDR DJIA Trust:
Closing Price vs. Net Asset Value (NAV) as of
12/31/11(1)(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Calendar
|
|
|
Calendar
|
|
|
Calendar
|
|
|
Calendar
|
|
|
|
|
|
From
|
|
|
|
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Calendar
|
|
|
1/20/1998
|
|
|
|
|
|
|
Ending
|
|
|
Ending
|
|
|
Ending
|
|
|
Ending
|
|
|
Year
|
|
|
Through
|
Range
|
|
|
3/31/2011
|
|
|
6/30/2011
|
|
|
9/30/2011
|
|
|
12/31/2011
|
|
|
2011
|
|
|
12/31/2011
|
> 200
|
|
|
Days
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis Points
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
150 200
|
|
|
Days
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis Points
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100 150
|
|
|
Days
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis Points
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50 100
|
|
|
Days
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis Points
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25 50
|
|
|
Days
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
163
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis Points
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 25
|
|
|
Days
|
|
|
|
28
|
|
|
|
|
33
|
|
|
|
|
33
|
|
|
|
|
36
|
|
|
|
|
130
|
|
|
|
|
1591
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis Points
|
|
|
%
|
|
|
|
45.2
|
%
|
|
|
|
52.4
|
%
|
|
|
|
51.6
|
%
|
|
|
|
57.1
|
%
|
|
|
|
51.6
|
%
|
|
|
|
45.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Days
|
|
|
Days
|
|
|
|
28
|
|
|
|
|
33
|
|
|
|
|
33
|
|
|
|
|
36
|
|
|
|
|
130
|
|
|
|
|
1780
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
at Premium
|
|
|
%
|
|
|
|
45.2
|
%
|
|
|
|
52.4
|
%
|
|
|
|
51.6
|
%
|
|
|
|
57.1
|
%
|
|
|
|
51.6
|
%
|
|
|
|
50.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing Price
|
|
|
Days
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
61
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equal to NAV
|
|
|
%
|
|
|
|
0.0
|
%
|
|
|
|
0.0
|
%
|
|
|
|
0.0
|
%
|
|
|
|
0.0
|
%
|
|
|
|
0.0
|
%
|
|
|
|
1.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Days
|
|
|
Days
|
|
|
|
34
|
|
|
|
|
30
|
|
|
|
|
31
|
|
|
|
|
27
|
|
|
|
|
122
|
|
|
|
|
1671
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
at Discount
|
|
|
%
|
|
|
|
54.8
|
%
|
|
|
|
47.6
|
%
|
|
|
|
48.4
|
%
|
|
|
|
42.9
|
%
|
|
|
|
48.4
|
%
|
|
|
|
47.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 −25
|
|
|
Days
|
|
|
|
34
|
|
|
|
|
30
|
|
|
|
|
31
|
|
|
|
|
27
|
|
|
|
|
122
|
|
|
|
|
1481
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis Points
|
|
|
%
|
|
|
|
54.8
|
%
|
|
|
|
47.6
|
%
|
|
|
|
48.4
|
%
|
|
|
|
42.9
|
%
|
|
|
|
48.4
|
%
|
|
|
|
42.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
−25 −50
|
|
|
Days
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
160
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis Points
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
−50 −100
|
|
|
Days
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis Points
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
−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 89% of the time from
January 20, 1998 (the first day of trading on the AMEX)
through December 31, 2011.
Source: NYSE Euronext
77
Frequency
Distribution of Discounts and Premiums for the SPDR DJIA
Trust:
Bid/Ask Price vs. Net Asset Value (NAV) as of
12/31/11(1)(2)