Notes to Financial Statements
[September 30, 2012]
[NOTE 1 — ORGANIZATION]
[SPDR
®
S&P MidCap 400
®
ETF Trust (“Trust”) is a unit investment trust that issues securities called “Trust Units” or “Units.” The Trust is organized under New York law and is governed by a trust agreement between The Bank of New York Mellon (formerly, The Bank of New York) (“Trustee”) and PDR Services LLC (“Sponsor”), dated and executed as of April 27, 1995, as amended (“
Trust Agreement”). The Trust is an investment company registered under the Investment Company Act of 1940. Trust Units represent an undivided ownership interest in a portfolio of all of the common stocks of the Standard & Poor’s MidCap 400 Index
tm
(“
S&P MidCap 400 Index”).]
[NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES]
[The financial statements of the Trust are prepared in accordance with accounting principles generally accepted in the United States of America (“
GAAP”).]
[The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America 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. The following is a summary of significant accounting policies followed by the Trust.]
[Security Valuation — Trust securities are generally valued based on the closing sale price on that day (unless the Trustee deems such price inappropriate as a basis for evaluation) on the exchange deemed to be the principal market for the security 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 Trustee’s appraising the value of the securities in good faith on the bid side of the market, or (d) by any combination thereof.]
[The Trust adopted the authoritative guidance for fair value measurements. 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. These levels of inputs are summarized at the end of the Schedule of Investments.]
[Investment Transactions — Investment transactions are recorded on the trade date. Realized gains and losses from the sale or disposition of securities are recorded on a specific identification basis. Dividend income is recorded on the ex-dividend date. The Trust records distributions received in excess of income from underlying investments as a reduction of cost of investments and/or realized gain. Such amounts are based on estimates. If actual amounts are not available then actual amounts of income, realized gain and return of capital may differ from the estimated amounts.]
[Distributions to Unitholders
— The Trust intends to declare and distribute dividends from net investment income quarterly. The Trust will distribute net realized capital gains, if any, at least annually, unless offset by available capital loss carryforwards.]
[U.S. Federal Income Tax and Certain Other Tax Matters — 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 its 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.]
[GAAP requires the evaluation of tax positions taken in the course of preparing the Trust’s tax returns to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority. Tax benefits of positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax expense in the current year. The Trustee has reviewed the tax positions for the tax years subject to audit as of September 30, 2012, and has determined that no provision for income taxes is necessary for the year ended September 30, 2012. The tax returns of the Trust’s 2009, 2010 and 2011 tax years and the year ended September 30, 2012 remain subject to audit. The Trust has no unrecognized tax benefits as of September 30, 2012.]
[NOTE 3 — TRANSACTIONS WITH THE TRUSTEE AND SPONSOR]
[In accordance with the Trust Agreement, The Bank of New York Mellon (the “Trustee”) maintains the Trust’s accounting records, acts as custodian and transfer agent to the Trust, and provides administrative services, including filing of all required regulatory reports. The Trustee is also responsible for determining the composition of the portfolio of securities which must be delivered in exchange for the issuance of Creation Units of the Trust, and for adjusting the composition of the Trust’s portfolio from time to time to conform to changes in the composition and/or weighting structure of the S&P MidCap 400 Index. For these services, the Trustee receives a fee based on the following annual rates:]
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[Net Asset Value of the Trust]
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[Fee as a Percentage of
Net Asset Value of the Trust]
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[$0 - $500,000,000*]
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[0.14% per annum]
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[$500,000,001 - $1,000,000,000*]
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[0.12% per annum]
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[$1,000,000,001 and above*]
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[0.10% per annum]
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____________
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*
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[The fee indicated applies to that portion of the net asset value of the Trust, which falls in the size category indicated.]
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[The Trustee voluntarily agreed to reduce its fee for the years ended September 30, 2012, 2011, and 2010 as disclosed in the Statements of Operations. The amount of the reduction equals the Federal Funds Rate, as published in the
Wall Street Journal
multiplied by the daily balance of the Trust’s cash account, reduced by the amount of reserves for that account required by the Federal Reserve Board of Governors. The Trustee reserves the right to discontinue this voluntary fee reduction in the future.]
[PDR Services LLC (the “Sponsor”), a wholly-owned subsidiary of NYSE Amex LLC (now NYSE MKT LLC), an indirect wholly-owned subsidiary of NYSE Euronext, agreed to reimburse the Trust for, or assume, the ordinary operating expenses of the Trust, to the extent such expenses exceed 0.30% per annum of the daily net asset value of the Trust as calculated by the Trustee. There were no expenses assumed by the Sponsor for the years ended September 30, 2012, 2011 and 2010.]
[The Sponsor retains the ability to be repaid by the Trust for expenses so reimbursed or assumed to the extent that subsequently during the year expenses fall below the expense limitation described above on any given day. At September 30, 2012, there is no outstanding amount to be repaid by the Trust to the Sponsor for expenses so reimbursed or assumed.]
[NOTE 4 — TRUST TRANSACTIONS IN UNITS]
[Transactions in Trust Units were as follows:]
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Year Ended
September 30, 2012
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Year Ended
September 30, 2011
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[Units sold]
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[_______]
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[_______]
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$ [_________]
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[Dividend reinvestment
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Units issued]
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[_______]
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[_________]
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[_________]
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[Units redeemed]
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[_______]
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[_________]
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[_______]
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[_________]
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[Net increase/(decrease)]
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$
[_________]
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[_______]
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$
[_________]
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Year Ended September 30, 2009
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Units
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Amount
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[Units sold]
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[_______]
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$ [_________]
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[Dividend reinvestment
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Units issued]
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[_______]
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[_________]
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[Units redeemed]
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[_______]
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[_________]
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[Net increase]
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[_______]
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$
[_________]
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[Except under the Trust’s dividend reinvestment plan, Units are issued and redeemed by the Trust for authorized participants only in Creation Units of 25,000 Units. Such transactions are permitted only on an in-kind basis, with a balancing cash component to equate the transaction to the net asset value per Unit of the Trust on the transaction date. Transaction fees, in the amount of the lesser of 0.20% of current market value of one Creation Unit or $3,000, are charged to those persons creating or redeeming Creation Units. Transaction fees are received by the Trustee directly from the authorized participants and used to offset the expense of processing orders. During the year ended September 30, 2012, the Trustee earned $[____] in transaction fees. The Trustee, in its sole discretion, may voluntarily reduce or waive its fee, or modify its transaction fee schedule, subject to certain limitations. There were no reductions or waivers of such fees for the year ended September 30, 2012.]
[At September 30, 2012, the Trustee and its affiliates held $[_______], or [___]% of fractional undivided interest in the Trust.]
[NOTE 5 — INVESTMENT TRANSACTIONS]
[For the year ended September 30, 2012 the Trust had net in-kind contributions, net in-kind redemptions, purchases and sales of investment securities of $[_______], $[_______], $[_______] and $[_______], respectively.]
[NOTE 6 — U.S. FEDERAL INCOME TAX STATUS]
[The following details the tax basis distributions and components of distributable earnings as of September 30, 2012. The tax basis components of distributable earnings differ from the amounts reflected in the Statement of Assets and Liabilities by temporary book/tax differences primarily arising from wash sales, distribution payable, post-October losses deferred and amortization of license fees.]
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[Cost of investments for federal income tax purposes]
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$
[_________]
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[Gross unrealized appreciation]
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$
[_________]
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[Gross unrealized depreciation]
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[_________]
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[Net unrealized depreciation]
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[Distributable earnings, ordinary income]
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[Capital loss carryforwards expiring:]
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[9/30/12]
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[9/30/16]
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[_________]
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[9/30/17]
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[_________]
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[9/30/18]
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[For the year ended September 30, 2012, $[_______] of the Trust’s capital loss carryforwards expired.]
[To the extent that capital losses are used to offset future capital gains, it is probable that gains that are offset will not be distributed.]
[Under rules in effect for taxable years beginning before December 22, 2010, the capital loss carryforward period of a RIC was limited to eight years. Capital loss carryforwards of RICs for subsequent taxable years may be carried forward indefinitely, but capital loss carryforwards generated in taxable years subject to the prior rules must be fully used before those generated in taxable years subject to the prior rules must be fully used before those generated in subsequent taxable years. Therefore, under certain circumstances, capital loss carryforwards available as of the report date, as described above, may expire unused.]
[At September 30, 2012 the Trust deferred $[_______] of capital losses arising subsequent to October 31, 2011. For tax purposes, such losses will be reflected in the year ending September 30, 2013.]
[All dividends paid during the years ending September 30, 2012, September 30, 2011 and September 30, 2010 were ordinary income.]
[As of September 30, 2012, the Trust had permanent book/tax differences primarily attributable to gains or losses from in-kind redemptions, expiration of capital loss carryforwards and distributions received from real estate investment trusts. To reflect reclassifications arising from these differences, accumulated net realized loss on investments was increased by $[_______], additional paid-in capital was increased by $[_______], and distributions in excess of net investment income was increased by $[_______].]
[NOTE 7 — REPRESENTATIONS AND INDEMNIFICATIONS]
[In the normal course of business the Trust enters into contracts that contain a variety of representations and warranties which provide general indemnifications. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims which may be made against the Trust that have not yet occurred. However, based on experience, the Trust expects the risk of loss to be remote.]
[NOTE 8 — RELATED PARTY TRANSACTIONS]
[The Trustee directs all portfolio securities transactions for the Trust to BNY ConvergEx Execution Solutions LLC (“ConvergEx”), an affiliate of the Trustee. During the fiscal years ended September 30, 2012, 2011 and 2010, the Trust paid $[_______], $[_______] and $[_______], respectively, in commissions on trades to ConvergEx.]
[NOTE 9 — LICENSE AGREEMENT]
[The License Agreement grants State Street Global Markets, LLC (
“SSGM”) a license to use the S&P MidCap 400 Index and to use certain trade names and trademarks of S&P in connection with the Portfolio. The S&P MidCap 400 Index also serves as a basis for determining the composition of the Portfolio. The Trustee on behalf of the Trust, the Sponsor and the Exchange have each received a sublicense from SSGM for the use of the S&P MidCap 400 Index 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 Beneficial Owners of Trust Units. Currently, the License Agreement is scheduled to terminate on April 27, 2020, but its term may be extended beyond such date without the consent of any of the Beneficial Owners of Trust Units.]
[Subsequent Event]
[On [___________], 2012, a dividend was declared. The distribution of $[___] per share is payable on [___________], 2012, to Unitholders of record at the close of business on [___________], 2012. The ex-dividend date is [___________], 2012.]
[The Trustee has evaluated subsequent transactions and events after the balance sheet date through the date on which these financial statements were issued and, except as already included in the notes to the financial statements, has determined that no additional items require disclosure.]
SPDR S&P MidCap 400 ETF Trust
[September 30, 2012]
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[________]
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[___________________]
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[______]
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[________]
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[___________________]
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[______]
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[________]
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[___________________]
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[______]
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[________]
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[___________________]
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[______]
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[________]
|
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[___________________]
|
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[______]
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[________]
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[___________________]
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[______]
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[________]
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[___________________]
|
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[______]
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[________]
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[___________________]
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[______]
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[________]
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[___________________]
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[______]
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[________]
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[___________________]
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[______]
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[________]
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[___________________]
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[______]
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[________]
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[___________________]
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[______]
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[________]
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[___________________]
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[______]
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[________]
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[___________________]
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[______]
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[________]
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[___________________]
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[______]
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[________]
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[___________________]
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[______]
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[________]
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[___________________]
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[______]
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[________]
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[___________________]
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[______]
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[________]
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[___________________]
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[______]
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[________]
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[___________________]
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[______]
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[________]
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[___________________]
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[______]
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[________]
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[___________________]
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[______]
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[________]
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[___________________]
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[______]
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[________]
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[___________________]
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[______]
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[________]
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|
[___________________]
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[______]
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[________]
|
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[___________________]
|
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[______]
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[________]
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[___________________]
|
|
[______]
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[________]
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[___________________]
|
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[______]
|
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[________]
|
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[___________________]
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[______]
|
|
[________]
|
|
[___________________]
|
|
[______]
|
|
[________]
|
|
[___________________]
|
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[______]
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|
[________]
|
|
[___________________]
|
|
[______]
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[________]
|
|
[___________________]
|
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[______]
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[________]
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[___________________]
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[______]
|
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[________]
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[___________________]
|
|
[______]
|
|
[________]
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[___________________]
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[______]
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[________]
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[___________________]
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[______]
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[________]
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[___________________]
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[______]
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[________]
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[___________________]
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[______]
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[________]
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[___________________]
|
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[______]
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[________]
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[___________________]
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[______]
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[________]
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[___________________]
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[______]
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[________]
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[___________________]
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[______]
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[________]
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[___________________]
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[______]
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[________]
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[___________________]
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[______]
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[________]
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[___________________]
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[______]
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[________]
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[___________________]
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[______]
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[________]
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[___________________]
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[______]
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[________]
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[___________________]
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[______]
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[________]
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[___________________]
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[______]
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[________]
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[___________________]
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[______]
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[________]
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[___________________]
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[______]
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[________]
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[___________________]
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[______]
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[________]
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[___________________]
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[______]
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[________]
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[___________________]
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[______]
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[________]
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[___________________]
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[______]
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[________]
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[___________________]
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[______]
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[________]
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[___________________]
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[______]
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[________]
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[___________________]
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[______]
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[________]
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[___________________]
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[______]
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[________]
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[___________________]
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[______]
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[________]
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|
[___________________]
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[______]
|
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[________]
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[___________________]
|
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[______]
|
|
[________]
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|
[___________________]
|
|
[______]
|
|
[________]
|
|
[___________________]
|
|
[______]
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|
[________]
|
|
[___________________]
|
|
[______]
|
|
[________]
|
|
[___________________]
|
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[______]
|
|
[________]
|
|
[___________________]
|
|
[______]
|
|
[________]
|
|
[___________________]
|
|
[______]
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[________]
|
|
[___________________]
|
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[______]
|
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[________]
|
|
[___________________]
|
|
[______]
|
|
[________]
|
|
[___________________]
|
|
[______]
|
|
[________]
|
|
[___________________]
|
|
[______]
|
|
[________]
|
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[___________________]
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[______]
|
|
[________]
|
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[___________________]
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|
[______]
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|
[________]
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|
[___________________]
|
|
[______]
|
|
[________]
|
|
[___________________]
|
|
[______]
|
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[________]
|
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[___________________]
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[______]
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[________]
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[___________________]
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[______]
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[Total Investments
(Cost $[__________])]
|
|
|
|
|
____________
[(*) Non-income producing security for the year ended September 30, 2012.]
[The securities of the SPDR S&P MidCap 400 ETF Trust’s investment portfolio categorized by industry group, as a percentage of total investments at value, are as follows:]
|
|
|
|
|
|
|
[______]
|
|
$[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
[_________]
|
|
[___]%
|
|
[______]
|
|
|
|
|
|
[Total]
|
|
|
|
|
[Various inputs are used in determining the value of the Trust’s investments. These inputs are summarized in the three broad levels listed below.]
[Level 1 — quoted prices in active markets for identical securities]
[Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)]
[Level 3 — significant unobservable inputs (including the Trust’s own assumptions in determining the fair value of investments)]
[The following is a summary of the inputs used as of September 30, 2012 in valuing the Trust’s assets carried at fair value:]
|
|
|
|
|
|
|
|
|
|
[Investments in Securities]
|
|
|
|
|
|
|
|
|
[Common Stocks]
|
|
†
|
|
|
|
|
|
|
[Total]
|
|
|
|
|
|
|
|
___________
[† Please refer to the Industry Classification section of the Schedule of Investments for a breakdown of valuations by industry type.]
[The accompanying notes are an integral part of these financial statements.]
ORGANIZATION OF THE TRUST
The Trust is a unit investment trust that issues Units. The Trust is organized under New York law and is governed by a trust agreement between the Trustee and the Sponsor, dated as of April 1, 1995 and effective as of April 27, 1995, as amended (the
“Trust Agreement”). The Trust is an investment company registered under the Investment Company Act of 1940. Units represent an undivided ownership interest in Portfolio Securities of the Trust.
The Trust has a specified lifetime term. The Trust is scheduled to terminate on the first to occur of (a) April 27, 2120 or (b) the date 20 years after the death of the last survivor of eleven persons named in the Trust Agreement, the oldest of whom was born in 1990 and the youngest of whom was born in 1993. Upon termination, the Trust may be liquidated and pro rata Units of the assets of the Trust, net of certain fees and expenses, distributed to holders of Units.
PURCHASES AND REDEMPTIONS OF CREATION UNITS
The Trust, a registered investment company, is an exchange traded fund or “
ETF.” The Trust continuously issues and redeems “in-kind” its Units only in specified large lots of 25,000 Units or multiples thereof, which are referred to as
“Creation Units,” at their once-daily NAV. Fractional Creation Units may be created or redeemed only in limited circumstances described herein. 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.
ALPS Distributors, Inc., the distributor of the Trust (the “Distributor”), acts as underwriter of 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 Units. The Distributor also maintains a record of the delivery instructions in response to orders and may provide certain other administrative services.
Purchase (Creation)
Before trading on the Exchange in the secondary market, Units are created at NAV in Creation Units. All orders for Creation Units must be placed with the Distributor. To be eligible to place these orders, an entity or person must be an “
Authorized Participant,” which is (a) either a
“
Participating Party” or a “
DTC Participant” and (b) 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 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 “Portfolio Adjustments—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 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) on such Transmittal Date and (b) all other procedures set forth in the Participant Agreement are properly followed. The Transaction Fee (as defined below) 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 may be 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, a reduction or waiver. The existence of any such variation shall be disclosed in the then current prospectus.
The Trustee makes available to NSCC before the commencement of trading on each business day that the New York Stock Exchange LLC (the “NYSE”) is open for business (“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. The identity and weightings of the Index Securities to be delivered as part of a Portfolio Deposit are determined daily and reflect the relative weighting of the current Index. The value of such Index Securities, together with the Cash Component, is equal to the NAV of the Trust on a per Creation Unit basis at the close of business on the day of the creation request. The identity of each Index Security required for a Portfolio Deposit, as in effect on September 30, 2012, is set forth in the above Schedule of Investments. The Sponsor makes available 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 occasionally may 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.
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. 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 closing time of the regular trading session on the NYSE (“
Closing Time”) (ordinarily 4:00 p.m. New York time) (the
“Evaluation Time”) on the date such creation order is deemed received by the Distributor as part of the Cash Component.
Procedures for Purchase of Creation Units.
All creation orders must be placed in Creation Units and must be received by the Distributor by no later than the Closing Time (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 or other transmission method acceptable to the Distributor and Trustee, including through the electronic order entry system offered by the Trustee pursuant to procedures set forth in the Participant Agreement and/or described in this prospectus. Severe economic or market disruptions or changes, or telephone, internet 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 on 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 Authorized Participant shall 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 the missing Index Securities are not received by 1:00 p.m. New York time on the third (3rd) 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 will return any unused portion of the Additional Cash Deposit only once all of the missing Index Securities of the Portfolio Deposit have been properly received or purchased by the Trustee and deposited into the Trust. In addition, a Transaction Fee of $4,000 is charged in all such cases to protect the existing Beneficial Owners (as defined below in “Book-Entry-Only System”) from the dilutive costs associated with the maintenance and valuation of the required collateral, as well as the cost of acquiring and missing Index Securities. 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.
Acceptance of Orders of Creation Units.
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 determined by the Trustee, whose determination shall be final and binding. The Trustee reserves the absolute right to reject a creation order if (a) the depositor or a 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.
Creation Transaction Fee.
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 the lesser of $3,000 or 0.20% (20 basis points) of the value of one Creation Unit at the time of creation (“
20 Basis Point Limit”) per Participating Party per day, regardless of the number of Creation Units created or redeemed on such day. The Transaction Fee is currently $3,000.
For creations and redemptions outside the Clearing Process, including orders from a Participating Party restricted from engaging in transactions in one or more Index Securities, an additional amount not to exceed three (3) times the Transaction Fee applicable for one Creation Unit may be charged per Creation Unit per day.
Placement of Creation Orders Using 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 day during which NSCC is open for business (each such day, an “
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 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 directly through DTC. The requisite number of Index Securities must be delivered through DTC to the account of the Trustee by no later than 11:00 a.m. of the next Business Day immediately following the Transmittal Date. The Trustee, through the Federal Reserve Bank wire transfer system, must receive the Cash Component no later than 1:00 p.m. 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.
Redemption
Units may be redeemed in-kind only in Creation Units at their NAV determined after receipt of a redemption request in proper form by the Trustee through the Depository and relevant DTC Participant and only on a Business Day. Units are not redeemable for cash. EXCEPT UPON LIQUIDATION OF THE TRUST, THE TRUST WILL NOT REDEEM UNITS IN AMOUNTS LESS THAN CREATION UNITS. Investors must accumulate enough Units in the secondary market to constitute a Creation Unit in order to have such Units redeemed by the Trust, and Units may be redeemed only by or through an Authorized Participant. There can be no assurance, however, that there will be sufficient liquidity in the public trading market at any time to permit assembly of a Creation Unit. Investors should expect to incur brokerage and other costs in connection with assembling a sufficient number of Units to constitute a redeemable Creation Unit.
With respect to the Trust, the Trustee, through NSCC, makes available immediately prior to the commencement of trading on the NYSE (currently 9:30 a.m., Eastern time) on each Business Day, a list of the names and required number of shares of each of the Index Securities and the amount of the Dividend Equivalent Payment for the previous Business Day that will be applicable (subject to possible amendment or correction) to redemption requests received in proper form (as discussed below) on that day. Index Securities received on redemption may not be identical to the stock portion of the Portfolio Deposit which is applicable to purchases of Creation Units.
Redemption Transaction Fee.
The Transaction Fee is non-refundable, regardless of the NAV of the Trust. The Transaction Fee is the lesser of $3,000 or the 20 Basis Point Limit per Participating Party per day, regardless of the number of Creation Units created or redeemed on such day. The Transaction Fee is currently $3,000.
For creations and redemptions outside the Clearing Process, including orders from a Participating Party restricted from engaging in transactions in one or more Index Securities, an additional amount not to exceed three (3) times the Transaction Fee applicable for one Creation Unit may be charged per Creation Unit per day.
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 directly 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 Index Securities (based on NAV of the Trust) for each Creation Unit delivered, generally identical in weighting and composition to the stock portion of a Portfolio Deposit as in effect (a) on the date a request for redemption is deemed received by the Trustee or (b) in the case of the termination of the Trust, on the date that notice of the termination of the Trust is given. The Trustee also transfers via the relevant DTC Participant(s) to the redeeming
Beneficial Owner a “
Cash Redemption Payment,” which on any given Business Day is an amount identical to the amount of the Cash Component and is equal to a proportional amount of the following: dividends on the Portfolio Securities for the period through the date of redemption, net of expenses and liabilities for such period including, without limitation, (i) taxes or other governmental charges against the Trust not previously deducted, if any, (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 the redemption of Creation Units, the Trustee may elect, in lieu thereof, 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 order is deemed received by the Trustee, as a part of the Cash Redemption Payment.
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 Authorized Participant 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 Authorized Participant, 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 Trust’s correspondence to the composition and weighting of the Index.
The Trustee may sell Portfolio Securities to obtain sufficient cash proceeds to deliver to the redeeming Beneficial Owner. To the extent cash proceeds are received by the Trustee in excess of the required amount, such cash proceeds shall be held by the Trustee and applied in accordance with the guidelines applicable to Misweighting (as defined below under “Portfolio Adjustments”).
All redemption orders must be transmitted to the Trustee by telephone or other transmission method acceptable to the Trustee, including through the electronic order entry system offered by 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. Severe economic or market disruption or changes, or telephone, internet 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 “Purchases and Redemptions of Creation Units—Redemption—Procedures for Redemption of Creation Units,” “Portfolio Adjustments—Adjustments to the Portfolio Deposit” and “Determination of NAV” 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 “Purchases and Redemptions of Creation Units—Redemption—Placement of Redemption Orders Outside 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.
Placement of Redemption Orders Using 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 Party’s 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 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 relevant DTC Participant on behalf of the redeeming Beneficial Owner by the third (3rd) Business Day following the Transmittal Date.
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. Beneficial ownership of Units is shown on the records of DTC or the DTC Participants (owners of such beneficial interests are referred to herein as “
Beneficial Owners”).
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 the 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 is shown on, and the transfer of ownership is effected only through, records maintained by DTC (with respect to DTC Participants) and on the records of DTC Participants (with respect to Indirect Participants and Beneficial Owners that are not DTC Participants). Beneficial Owners are expected to receive from or through the DTC Participant a written confirmation relating to their purchase of Units. The laws of some jurisdictions may require that certain purchasers of securities take physical delivery of such securities in definitive form. Such laws may impair the ability of certain investors to acquire beneficial interests in Units.
As long as Cede & Co., as nominee of DTC, is the registered owner of Units, references to the registered or record owner of Units shall mean Cede & Co. and shall not mean the Beneficial Owners of Units. Beneficial Owners of Units are not entitled to have Units registered in their names, will not receive or be entitled to receive physical delivery of certificates in definitive form and will not be considered the record or registered holders thereof under the Trust Agreement. Accordingly, each Beneficial Owner must rely on the procedures of DTC, the DTC Participant and any Indirect Participant through which such Beneficial Owner holds its interests, to exercise any rights under the Trust Agreement.
The Trustee recognizes DTC or its nominee as the owner of all Units for all purposes except as expressly set forth in the Trust Agreement. Pursuant to the agreement between the Trustee and DTC (“
Depository Agreement”), DTC is required to make available to the Trustee upon request and for a fee to be charged to the Trust a listing of the Unit 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.
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.
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.
NSCC is an affiliate of DTC and the Trustee and Sponsor, and/or their affiliates, own shares of DTC.
The Index is a float-adjusted capitalization weighted index of 400 securities calculated under the auspices of the
S&P Index Committee of S&P. At any moment in time, the value of the Index equals the aggregate market value of the available float shares outstanding in each of the component 400 Index Securities, evaluated at their respective last sale prices on their respective listing exchange, divided by a scaling factor (“
divisor”) which yields a resulting index value in the reported magnitude.
Periodically (typically, several times per quarter), S&P may determine that total shares outstanding have changed in one or more component Index Securities due to secondary offerings, repurchases, conversions or other corporate actions. S&P may also determine that the available float shares of one or more of the Index Securities has changed due to corporate actions, purchases or sales of securities by holders or other events. S&P may periodically (ordinarily, several times per quarter) replace one or more Index Securities due to mergers, acquisitions, bankruptcies, or other market conditions, or if the issuers of such Index Securities fail to meet the criteria for inclusion in the Index. In 2012, there were [___] company changes to the Index. Ordinarily, whenever there is a change in shares outstanding or a change in an Index Security of the Index, S&P adjusts the divisor to ensure that there is no discontinuity in the value of the Index.
The Trustee aggregates certain adjustments and makes conforming changes to the Portfolio at least monthly. 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 Index. 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. If the transaction costs incurred by the Trust in adjusting the Portfolio would exceed the expected variation between the composition of the Portfolio and the Index (“
Misweighting”), it may not be efficient identically to replicate the share composition of the Index. Minor Misweighting generally is permitted within the guidelines set forth below. The Trustee is required to adjust the composition of the Portfolio at any time that the weighting of any stock in the Portfolio varies in excess of one hundred and fifty percent (150%) of a specified percentage, which percentage varies from 0.02% to 0.25%, depending on the NAV of the Trust (in each case, “
Misweighting Amount”), from the weighting of the Index Security in the Index.
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 in the Index. To the extent that the method of determining the Index is changed by S&P 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 Index.
The Trustee examines each stock in the Portfolio on each Business Day, comparing its weighting to the weighting of the corresponding Index Security, based on prices at the close of the market on the preceding Business Day (a “
Weighting Analysis”). If there is a Misweighting in any stock in the Portfolio in excess of one hundred and fifty percent (150%) of the applicable Misweighting Amount, the Trustee calculates an adjustment to the Portfolio in order to bring the Misweighting within the Misweighting Amount, based on prices at the close of the market on the day on which such Misweighting occurs. Also, on a monthly basis, the Trustee performs a Weighting Analysis for each stock in the Portfolio, and in any case where there exists a Misweighting exceeding one hundred percent (100%) of the applicable Misweighting Amount, the Trustee calculates an adjustment to the Portfolio in order to bring the Misweighting within the applicable Misweighting Amount, based on prices at the close of the market on the day on which such Misweighting occurs. In the case of any adjustment to the Portfolio because of a Misweighting, the purchase or sale of stock necessitated by the adjustment is made within three (3) Business Days of the day on which such Misweighting is determined. In addition to the foregoing adjustments, the Trustee may make additional periodic adjustments to Portfolio Securities that may be misweighted by an amount within the applicable Misweighting Amount.
The foregoing guidelines with respect to Misweighting also apply to any Index Security that (a) is likely to be unavailable for delivery or available in insufficient quantity for delivery or (b) cannot be delivered to the Trustee due to restrictions prohibiting a creator from engaging in a transaction involving such Index Security. Upon receipt of an order for a Creation Unit that involves such an Index Security, the Trustee determines whether the substitution of cash for the stock would cause a Misweighting in the Portfolio. If a Misweighting results, the Trustee will purchase the required number of shares of the Index Security on the opening of the market on the following
Business Day. If a Misweighting does not result and the Trustee does not hold cash in excess of the permitted amounts, the Trustee may hold the cash or, if such excess would result, make the required adjustments to the Portfolio.
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 five (5) 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 that are underweighted in the Portfolio as compared to their relative weightings in the Index, such that the Misweighting of such Index Securities will not be in excess of the applicable Misweighting Amount.
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 industry sources 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 S&P may adjust the composition of the Index because of a merger or acquisition involving one or more Index Securities. In such cases, the Trust, as shareholder of an issuer that is the object of such merger or acquisition activity, may receive various offers from would-be acquirors of the issuer. The Trustee is not permitted to accept any such offers until such time as it has been determined that the stocks of the issuer will be removed from the Index. As stocks of an issuer are often removed from the Index 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 25,000 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 Index 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 Index, each as in effect on Request Day. For each stock, the number resulting from such calculation is rounded to the nearest whole share, with a fraction of 0.50 being rounded up. 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 does not result in an adjustment to the Index divisor, the Portfolio Deposit shall be adjusted to take into account the corporate action in each case rounded to the nearest whole share.
On the Request Day and on each day that a request for the creation or redemption is deemed received, the Trustee calculates the market value of the stock portion of the Portfolio Deposit as in effect on the Request Day as of the close of the market and adds to that amount the Dividend Equivalent Payment effective for requests to create or redeem on Request Day (such market value and Dividend Equivalent Payment are collectively referred to herein as “
Portfolio Deposit Amount”). The Trustee then calculates the NAV Amount, based on the close of the market on the Request Day. The difference between the NAV Amount so calculated and the Portfolio Deposit Amount is the “
Balancing Amount.” The Balancing Amount serves the function of compensating for any differences between the value of the Portfolio Deposit Amount and the NAV Amount at the close of trading on Request Day due to, for example, (a) differences in the market value of the securities in the Portfolio Deposit and the market value of the securities on Request Day and (b) any variances from the proper composition of the Portfolio Deposit.
On any Adjustment Day on which (a) no change in the identity and/or share weighting of any Index Security is scheduled to take effect that would cause the Index divisor to be adjusted after the close of the market on that Business Day,
1
and (b) no stock split, stock dividend or reverse stock split with respect to any Index Security has been declared to take effect on the corresponding Request Day, the Trustee may forego making any adjustment to the stock portion of the Portfolio Deposit and use the composition and weightings of Index Securities for the most recently effective Portfolio Deposit for the Request Day following such Adjustment Day. In addition, the Trustee may calculate the adjustment to the number of shares and identity of Index Securities in a Portfolio Deposit as described above except that such calculation would be employed two (2) Business Days rather than one (1) Business Day before the Request Day.
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.
EXCHANGE LISTING AND TRADING
The discussion below supplements the Summary with regard to exchange listing and trading matters associated with an investment in the Trust’s Units.
________________________
1
S&P publicly announces changes in the identity and/or weighting of Index Securities in advance of the actual change. The announcements regarding changes in the index components are made after the close of trading on such day.
Secondary Trading on Exchanges
The Units are listed for secondary trading on the Exchange and individual Trust Units may only be purchased and sold in the secondary market through a broker-dealer. The secondary markets are closed on weekends and also are generally closed on the following holidays: New Year’s Day, Dr. Martin Luther King, Jr. Day, Presidents’ Day, Good Friday, Memorial Day (observed), Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The Exchange may close early on the Business Day before certain holidays and on the day after Thanksgiving Day. Exchange holiday schedules are subject to change. If you buy or sell Units in the secondary market, you will pay the secondary market price for Units. In addition, you may incur customary brokerage commissions and charges and may pay some or all of the spread between the bid and the offered price in the secondary market on each leg of a round trip (purchase and sale) transaction.
There can be no assurance that the requirements of the Exchange necessary to maintain the listing of Units of the Trust will continue to be met or that Units will always be listed on the Exchange. The Trust will be terminated if 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 Index is no longer calculated or available; or (c) such other event occurs or condition exists which, in the opinion of the Exchange, makes further dealings on the Exchange inadvisable. In addition, trading is subject to trading halts caused by extraordinary market volatility pursuant to Exchange “circuit breaker” rules that require trading to be halted for a specified period based on a specified market decline. The Exchange also must halt trading if required intraday valuation information is not disseminated for longer than one (1) Business Day.
Trading Prices of Units
The trading prices of the Trust’s Units will fluctuate continuously throughout trading hours based on market supply and demand rather than the Trust’s NAV, which is calculated at the end of each Business Day. The Units will trade on the Exchange at prices that may be above (
i.e.,
at a premium) or below (
i.e.,
at a discount), to varying degrees, the daily NAV of the Units. While the creation/redemption feature is designed to make it likely that Units normally will trade close to the Trust’s NAV, disruptions to creations and redemptions and/or market volatility may result in trading prices that differ significantly from the Trust’s NAV.
See the table “Frequency Distribution of Discounts and Premiums for the Trust: Bid/Ask Price vs. NAV as of 12/31/12” herein.
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.
CONTINUOUS OFFERING OF U
NITS
Creation Units are offered continuously to the public by the Trust through the Distributor. Persons making Portfolio Deposits and creating Creation Units will receive no fees, commissions or other form of compensation or inducement of any kind from the Sponsor or the Distributor, and no such person has any obligation or responsibility to the Sponsor or Distributor to effect any sale or resale of Units.
Because new Units can be created and issued on an ongoing basis, at any point during the life of the Trust, a “distribution,” as such term is used in the Securities Act of 1933, 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 a 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.
As discussed in “Expenses of the Trust,” the Trustee uses the services of an affiliated broker-dealer, ConvergEx, for the execution of all brokerage transactions for the Trust.
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 person’s state of domicile or residence should consult their legal adviser regarding applicable broker-dealer or securities regulatory requirements under the state securities laws prior to such creation or redemption.
Ordinary operating expenses of the Trust are currently being accrued at an annual rate of [_____]%. Future accruals will depend primarily on the level of the Trust’s net assets and the level of Trust expenses. There is no guarantee that the Trust’s ordinary operating expenses will not exceed [_____]% of the Trust’s daily NAV 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 [0.30]% per annum of the daily NAV of the Trust. Thereafter, such amount may be changed and may exceed [0.30]%. There is no guarantee that the Trust’s ordinary operating expenses will not exceed such [0.30]% rate. To the extent the ordinary operating expenses of the Trust do exceed such [0.30]% 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 [0.30]% 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 [0.30]% 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 Trustee’s 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); (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; (i) brokerage commissions incurred by the Trustee when acquiring or selling Index Securities pursuant to the provisions of the Trust Agreement; and (j) other out-of-pocket expenses of the Trust incurred pursuant to actions permitted or required under the Trust Agreement.
Since 1999, the Trustee has used the services of BNY ConvergEx Execution Solutions LLC (“
ConvergEx”), an affiliated broker-dealer, for the execution of all brokerage transactions for the Trust, including adjustments to the Portfolio in connection with the addition or removal of Index Securities from the Index and acquisitions of Index Securities in connection with the Dividend Reinvestment Service. ConvergEx receives a fixed commission per Index Security share on all such brokerage transactions and, in return for such commission, seeks to execute purchases and sales of Index Security shares at the closing price or at a price more beneficial to the Trust. Any price improvement relative to the closing price of the Index Security that is obtained by ConvergEx is for the benefit of the Trust, and not the Trustee or ConvergEx.
The Trust Agreement requires the Trustee to direct its securities transactions only to brokers or dealers, which may include affiliates of the Trustee, from which the Trustee expects to obtain the most favorable prices for execution of orders. The Trustee has reviewed the execution services that ConvergEx provides to the Trust and has determined that they are consistent with the requirements of the Trust Agreement.
Aggregate annual brokerage commissions paid to ConvergEx by the Trust are included in [Note 8, Related Party Transactions], in the Notes to the Trust’s financial statements.
In addition, the following expenses are or may be charged to the Trust: (a) reimbursement to the Sponsor of amounts paid by it to S&P 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). With respect to the marketing expenses described in item (c) above, the Sponsor has entered into an agreement with State Street Global Markets, LLC (“SSGM”), pursuant to which SSGM has agreed to market and promote the Trust. SSGM is reimbursed by the Sponsor for the expenses it incurs for providing such services out of amounts that the Trust reimburses the Sponsor. 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 0.30% per annum of the daily NAV of the Trust.
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 0.10% to 0.14% of the NAV of the Trust, as shown below, depending on the NAV of the Trust. The compensation is computed on each Business Day on the basis of the NAV of the Trust on such day, and the amount thereof is accrued daily and paid monthly. During the first two years of the operation of the Trust, the Trustee’s fee was 0.12% per annum, regardless of the NAV of the Trust. The Trustee, in its discretion, may also waive all or a portion of such fee.
Trustee Fee Scale
|
Net Asset Value of the Trust
|
Fee as a Percentage of Net
Asset Value of the Trust
|
|
0–$500,000,000
|
0.14% per annum*
|
|
$500,000,001–$1,000,000,000
|
0.12% per annum*
|
|
$1,000,000,001 and above
|
0.10% per annum*
|
____________
|
*
|
[The fee indicated applies to that portion of the NAV of the Trust which falls in the size category indicated.]
|
[As of September 30, 2012, and as of December 31, 2012, the Net Assets of the Trust were $[_____] and $[_____], respectively. No representation is made as to the actual Net Assets 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 NAV of the Trust is computed as of the Evaluation Time, as shown under “Portfolio Adjustments—Adjustments to the Portfolio Deposit” 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 Trustee’s appraising the value of the securities in good faith on the bid side of the market, or (d) by any combination thereof.
ADDITIONAL RISK INFORMATION
The following section identifies additional risks. Prospective investors should carefully consider the additional information described below together with the information identified under “Summary—Principal Risks of Investing in the Trust.”
A liquid trading market for certain Portfolio Securities may not exist.
Although all of the Portfolio Securities are listed on a national securities exchange, 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.
Asset Category Risk.
The Portfolio Securities may underperform the returns of other securities or indexes that track other industries, groups of industries, markets, asset classes or sectors. Various types of securities or indexes tend to experience cycles of outperformance and underperformance in comparison to the general securities markets.
Trading Issues.
Units are listed for trading on the Exchange under the market symbol “MDY.” Trading in Units on the Exchange may be halted due to market conditions or for reasons that, in the view of the Exchange, make trading in Units inadvisable. In addition, trading in Units on the Exchange is subject to trading halts caused by extraordinary market volatility pursuant to Exchange “circuit breaker” rules. There can be no assurance that the requirements of the Exchange necessary to maintain the listing of the Trust will continue to be met or will remain unchanged or that
the Units will trade with any volume, or at all, on any stock exchange. The Trust will be terminated if the Units are delisted from the Exchange.
Fluctuation of NAV; Unit Premiums and Discounts.
The NAV of the Units will generally fluctuate with changes in the market value of the Trust’s securities holdings. The market prices of Units will generally fluctuate in accordance with changes in the Trust’s NAV and supply and demand of Units on the Exchange. It cannot be predicted whether Units will trade below, at or above their NAV. Price differences may be due, in large part, to the fact that supply and demand forces at work in the secondary trading market for Units will be closely related to, but not identical to, the same forces influencing the prices of the securities of the Index trading individually or in the aggregate at any point in time. The market prices of Units may deviate significantly from the NAV of the Units during periods of market volatility. While the creation/redemption feature is designed to make it likely that Units normally will trade close to the Trust’s NAV, disruptions to creations and redemptions and/or market volatility may result in trading prices that differ significantly from the Trust’s NAV. If an investor purchases Units at a time when the market price is at a premium to the NAV of the Units or sells at a time when the market price is at a discount to the NAV of the Units, then the investor may sustain losses that are in addition to any losses caused by a decrease in NAV.
Costs of Buying or Selling Units.
Investors buying or selling Units in the secondary market will pay brokerage commissions or other charges imposed by brokers as determined by that broker. Brokerage commissions are often a fixed amount and may be a significant proportional cost for investors seeking to buy or sell relatively small amounts of Units. In addition, secondary market investors will also incur the cost of the difference between the price that an investor is willing to pay for Units (the “bid” price) and the price at which an investor is willing to sell Units (the “ask” price). This difference in bid and ask prices is often referred to as the “spread” or “bid/ask spread.” The bid/ask spread varies over time for Units based on trading volume and market liquidity, and is generally lower if the Trust’s Units have more trading volume and market liquidity and higher if the Trust’s Units have little trading volume and market liquidity. Further, increased market volatility may cause increased bid/ask spreads. Due to the costs of buying or selling Units, including bid/ask spreads, frequent trading of Units may significantly reduce investment results and an investment in Units may not be advisable for investors who anticipate regularly making small investments.
Mid-Capitalization Companies Risk
. Many of the companies in which the Trust invests are considered mid-capitalization companies. Stock prices of mid-capitalization companies may be more volatile than those of large-capitalization companies and, therefore, the Trust’s Unit price may be more volatile than those of funds that invest a larger percentage of their assets in stocks issued by large-capitalization companies. Stock prices of mid-capitalization companies are also more vulnerable than those of large-capitalization companies to adverse business or economic developments, and the stocks of mid-capitalization companies may be less liquid, making it difficult for the Trust to buy and sell them. In addition, mid-capitalization companies generally have less diverse product lines than large-capitalization companies and are more susceptible to adverse developments related to their products.
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 Units. For a discussion of certain U.S. federal income tax consequences of the ownership and disposition of Units, see “Federal Income Taxes.”
Clearing and settlement of Creation Units may be delayed or fail
. Even if an order is processed through the continuous net settlement clearing process of NSCC, Portfolio Securities or Units, as applicable, may not be delivered on settlement date, due to liquidity or other constraints in the clearing process. Orders expected to settle outside of the continuous net settlement clearing process of NSCC are not covered by NSCC’s guarantee of completion of delivery.
ADDITIONAL INFORMATION REGARDING DIVIDENDS AND DISTRIBUTIONS
The following information supplements and should be read in conjunction with the section included in this prospectus entitled “Dividends and Distributions.”
General Policies
The regular quarterly ex-dividend date for Units is the third (3rd) Friday in each of March, June, September and December, 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 quarterly dividend period which ends on the Business Day preceding such Ex-Dividend Date (including stocks with ex-dividend dates falling within such quarterly 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 1/100th of $0.01. The payment of dividends is made on the last Business Day in the calendar month following each Ex-Dividend Date (“
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 Trustee’s annual fee.
Any additional distributions the Trust may need to make so as to continue to qualify as a RIC under the Code and to avoid U.S. federal excise tax would consist of (a) an increase in the distribution scheduled for January to include any amount by which the Trust’s estimated “investment company taxable income” (determined prior to the deduction for dividends paid by the Trust) 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 actual annual “investment company taxable income” (determined prior to the deduction for dividends paid by the Trust) 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 will have to sell shares of Portfolio Securities sufficient to produce the cash required to make such additional distributions. In selecting the stocks to be sold to produce cash for such distributions, the Trustee chooses among the stocks that are over-weighted in the Portfolio relative to their weightings in the Index first and then from among all other stocks in such a manner to maintain the weightings of Portfolio Securities within the applicable Misweighting Amount.
As specified in the Trust Agreement, the Trustee may declare special dividends if the Trustee deems such action 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 or deems such action otherwise advantageous to the Trust (subject to certain limitations). The Trust Agreement also permits the Trustee to vary the frequency with which periodic distributions are made (e.g., from quarterly to monthly) 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. In addition, the Trust Agreement permits the Trustee to change the regular Ex-Dividend Date for Units to another date within the month or quarter if it is determined by the Sponsor and the Trustee that such a change would be advantageous to the Trust. Notice of any such variance or change shall be provided to Beneficial Owners via DTC and the DTC Participants.
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. 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.
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.
Any Beneficial Owner interested in acquiring additional Units with proceeds received from distributions described above may elect dividend reinvestment through DTC Participants by means of the Dividend Reinvestment Service, if such service is available through the Beneficial Owner’s broker.
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 Owner’s pro rata share of the NAV of the Trust.
INVESTMENTS BY INVESTMENT COMPANIES
Purchases of 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 telephone 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 company’s outstanding Units, (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.
ANNUAL REPORTS
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.
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 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 Trust’s assets because the Trust is an investment company registered under the Investment Company Act of 1940. As such, the Trust’s 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.
INDEX LICENSE
A License Agreement between SSGM and S&P grants a license to SSGM to use the Index and to use certain trade names and trademarks of S&P in connection with the Trust. The Index also serves as a basis for determining the composition of the Portfolio. The Trustee (on behalf of the Trust), the Sponsor and the Exchange have each received a sublicense from SSGM for the use of the Index 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 Beneficial Owners of Units. Currently, the License Agreement is scheduled to terminate on April 27, 2020, but its term may be extended without the consent of any of the Beneficial Owners of Units.
None of the Trust, the Trustee, the Exchange, the Sponsor, SSGM, the Distributor, DTC, NSCC, any Authorized Participant, any Beneficial Owner of Units or any other person is entitled to use any rights whatsoever under the foregoing licensing arrangements or to use the trademarks “Standard & Poor’s,” “S&P,” “Standard & Poor’s MidCap 400 Index,” “Standard & Poor’s MidCap 400 Depositary Receipts” or “S&P MidCap 400 Index,” or to use the Index except as specifically described in the License Agreement and sublicenses or as may be specified in the Trust Agreement.
THE TRUST IS NOT SPONSORED, ENDORSED, SOLD OR PROMOTED BY S&P DOW JONES INDICES LLC, ITS AFFILIATES, AND/OR THIRD PARTY LICENSORS (INCLUDING, WITHOUT LIMITATION, DOW JONES & COMPANY, INC.) (COLLECTIVELY, FOR PURPOSES OF THIS PARAGRAPH AND THE NEXT PARAGRAPH, “S&P”). S&P MAKES NO REPRESENTATION, CONDITION OR WARRANTY, EXPRESS OR IMPLIED, TO THE OWNERS OF THE TRUST OR ANY MEMBER OF THE PUBLIC REGARDING THE ADVISABILITY OF INVESTING IN SECURITIES GENERALLY OR IN THE TRUST PARTICULARLY OR THE ABILITY OF THE INDEX TO TRACK MARKET PERFORMANCE AND/OR TO ACHIEVE ITS STATED OBJECTIVE AND/OR TO FORM THE BASIS OF A SUCCESSFUL INVESTMENT STRATEGY, AS APPLICABLE. S&P'S ONLY RELATIONSHIP TO THE TRUST IS THE LICENSING OF CERTAIN TRADEMARKS AND TRADE NAMES AND OF THE INDEX WHICH IS DETERMINED, COMPOSED AND CALCULATED BY S&P WITHOUT REGARD TO SSGM OR THE TRUST. S&P HAS NO OBLIGATION TO TAKE THE NEEDS OF THE TRUST OR THE OWNERS OF OR INVESTORS IN THE TRUST INTO CONSIDERATION IN DETERMINING, COMPOSING OR CALCULATING THE INDEX OR ANY DATA INCLUDED THEREIN OR USED TO CALCULATE THE INDEX. S&P DOW JONES INDICES LLC IS NOT AN ADVISOR TO THE TRUST. S&P IS NOT RESPONSIBLE FOR AND HAS NOT PARTICIPATED IN THE DETERMINATION OF THE PRICES AND AMOUNT OF THE TRUST OR THE TIMING OF THE ISSUANCE OR SALE OF THE TRUST OR IN THE DETERMINATION OR CALCULATION OF THE EQUATION BY WHICH THE TRUST UNITS ARE ISSUED OR REDEEMED. S&P HAS NO OBLIGATION OR LIABILITY IN CONNECTION WITH THE ADMINISTRATION, MARKETING, OR TRADING OF THE TRUST.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE INDEX OR ANY DATA INCLUDED THEREIN
OR USED TO CALCULATE THE INDEX AND S&P SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES NO WARRANTY OR CONDITION, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE SPONSOR, THE TRUSTEE, THE TRUST, OWNERS OF OR INVESTORS IN THE TRUST, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE INDEX OR ANY DATA INCLUDED THEREIN OR USED TO CALCULATE THE INDEX. S&P MAKES NO EXPRESS OR IMPLIED REPRESENTATIONS, WARRANTIES OR CONDITIONS, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OR CONDITIONS OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE AND ANY OTHER
EXPRESS OR IMPLIED WARRANTY OR CONDITION WITH RESPECT TO THE INDEX OR ANY DATA INCLUDED THEREIN. 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) RESULTING FROM THE USE OF THE INDEX OR ANY DATA INCLUDED THEREIN, EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
SPDR TRADEMARK. The “SPDR” trademark is used under license from Standard & Poor’s Financial Services LLC. No financial product offered by the Trust or its affiliates is sponsored, endorsed, sold or promoted by S&P or its affiliates. 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 OR ITS AFFILIATES 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.
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. 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, 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 Trustee’s and a successor Sponsor’s execution of an instrument of appointment and assumption, the successor Sponsor succeeds to all of the rights, powers, duties and obligations of the original Sponsor. The 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 or loss incurred by the Trust because of the purchase, continued holding 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 obligations 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 banking corporation organized under the laws of New York with trust powers. The Trustee's office is at 2 Hanson Place, 9th Floor, Brooklyn, NY 11217. The Trustee is subject to supervision and examination by the Federal Reserve Bank of New York and the New York State Financial Services Department.
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 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 Trustee’s execution of a written acceptance and acknowledgement 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 Trustee’s liabilities. It provides, among other things, that the Trustee is not liable for (a) any action taken in reasonable reliance on properly executed documents or for the disposition of monies or 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.
DTC is a limited purpose trust company and member of the Federal Reserve System.
DISTRIBUTOR
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. 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.
TRUST AGREEMENT
Beneficial Owners shall not (a) have the right to vote concerning the Trust, except with respect to termination and as otherwise expressly set forth in the Trust Agreement, (b) in any manner control the operation and management of the Trust, or (c) be liable to any other person by reason of any action taken by the Sponsor or the Trustee. The Trustee has the right to vote all of the voting stocks in the Trust. The Trustee votes the voting stocks of each issuer in the same proportionate relationship as all other shares of each such issuer are voted to the extent permissible and, if not permitted, abstains from voting. The Trustee shall not be liable to any person for any action or failure to take any action with respect to such voting matters.
The death or incapacity of any Beneficial Owner does not operate to terminate the Trust nor entitle such Beneficial Owner’s 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.
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 to implement a dividend reinvestment plan or service; (e) 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; (f) to add or change any provision to conform the adjustments to the Portfolio and the Portfolio Deposit to changes, if any, made by S&P in its method of determining the Index; and (g) to make changes to the Transaction Fee and related amounts as long as they do not exceed 0.30% of the NAV of the Trust per year. 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 inquires of each DTC Participant, either directly or through a third party, as to the number of Beneficial Owners for whom such DTC Participant holds Units, and provides each such DTC Participant or third party 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 $100,000,000, 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 April
27, 1995 and at the end of each year thereafter and to be made so as to reflect the percentage increase in consumer prices as set forth in the CPI-U for the twelve month period ending in the last month of the preceding fiscal year.
The Trust may be terminated (a) by the agreement of the Beneficial Owners of 66 2/3% of outstanding 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 S&P ceases publishing the Index; or (e) if the License Agreement is terminated. The Trust will be terminated if Units are delisted from the Exchange. The Trust is scheduled to terminate on the first to occur of (a) April 27, 2120 or (b) the date 20 years after the death of the last survivor of eleven persons named in the Trust Agreement, the oldest of whom was born in 1990 and the youngest of whom was born in 1993.
The Trust will terminate if either the Sponsor or the Trustee resigns and a successor is not appointed. The Trust will also terminate if the Trustee is removed or the Sponsor fails to undertake or perform or becomes incapable of undertaking or performing any of the duties required under the Trust Agreement 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 Trust is terminated as described above.
Prior written notice of the termination of the Trust must be given at least twenty (20) days before termination of the Trust to all Beneficial Owners. The notice must set forth the date on which the Trust will be terminated, the period during which the assets of the Trust will be liquidated, the date on which Beneficial Owners of Units (whether in Creation Unit size aggregations or otherwise) will receive in cash the NAV of the Units held, and the date upon which the books of the Trust shall be closed. The notice shall further state that, as of the date thereof and thereafter, neither requests to create additional Creation Units nor Portfolio Deposits will be accepted, and that, as of the date thereof and thereafter, the portfolio of stocks delivered upon redemption shall be identical in composition and weighting to Portfolio Securities as of such date rather than the stock portion of the Portfolio Deposit as in effect on the date request for redemption is deemed received. Beneficial Owners of Creation Units may, in advance of the Termination Date, redeem in kind directly from the Trust.
Within a reasonable period after the Termination Date, the Trustee shall, subject to any applicable provisions of law, sell all of the Portfolio Securities not already distributed to redeeming Beneficial Owners of Creation Units. The Trustee shall 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 shall deduct from the proceeds of sale its fees and all other expenses and transmit the remaining amount to DTC for distribution, together with a final statement setting forth the computation of the gross amount distributed. 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 Units required.
The legality of the Units offered hereby has been passed upon by [_________________], New York, New York.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
AND FINANCIAL STATEMENTS
The financial statements as of September 30, 2012 included in this prospectus have been so included in reliance upon the report of [_____________], independent registered public accounting firm, [_____________], given on the authority of said firm as experts in auditing and accounting.
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 SEC’s 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.
INFORMATION AND COMPARISONS RELATING TO
SECONDARY MARKET TRADING AND PERFORMANCE
One important difference between Units and conventional mutual fund shares is that 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, 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 Units closing prices to NAV for the period May 4, 1995 (the first trading date of the Trust) through December 31, 2012, the distribution relationships of high, low and closing prices over the same period, and distribution of bid/ask spreads for 2012. These tables should help investors evaluate some of the advantages and disadvantages of 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 Units at prices less favorable than closing NAV and, correspondingly, the opportunities to buy or sell at prices more favorable than closing NAV.
An investor may wish to evaluate the opportunity to buy or sell Units in the secondary market on an intraday basis versus the assurance of a transaction at or related to closing NAV that is provided by a mutual fund. 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 May 4, 1995 through December 31, 2012. The investor may wish to compare these ranges with the average bid/ask spread on 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 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.
[Daily Percentage Price Ranges: Average and Frequency Distribution for
the Trust and the Index:
Highs and Lows vs. Close*
(from inception of trading through 12/31/2012)
]
INDEX
|
|
|
|
|
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%
|
|
[__]
|
|
[__]%
|
|
[__]
|
|
[__]%
|
|
[__]
|
|
[__]%
|
|
0.25—0.5%
|
|
[__]
|
|
[__]%
|
|
[__]
|
|
[__]%
|
|
[__]
|
|
[__]%
|
|
0.5—1.0%
|
|
[__]
|
|
[__]%
|
|
[__]
|
|
[__]%
|
|
[__]
|
|
[__]%
|
|
1.0—1.5%
|
|
[__]
|
|
[__]%
|
|
[__]
|
|
[__]%
|
|
[__]
|
|
[__]%
|
|
1.5—2.0%
|
|
[__]
|
|
[__]%
|
|
[__]
|
|
[__]%
|
|
[__]
|
|
[__]%
|
|
2.0—2.5%
|
|
[__]
|
|
[__]%
|
|
[__]
|
|
[__]%
|
|
[__]
|
|
[__]%
|
|
2.5—3.0%
|
|
[__]
|
|
[__]%
|
|
[__]
|
|
[__]%
|
|
[__]
|
|
[__]%
|
|
3.0—3.5%
|
|
[__]
|
|
[__]%
|
|
[__]
|
|
[__]%
|
|
[__]
|
|
[__]%
|
|
>3.5%
|
|
[__]
|
|
[__]
%
|
|
[__]
|
|
[__]
%
|
|
[__]
|
|
[__]
%
|
|
Total
|
|
[__]
|
|
100.00
%
|
|
[__]
|
|
100.00
%
|
|
[__]
|
|
100.00
%
|
Average Daily Range: [____]%
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%
|
|
[__]
|
|
[__]%
|
|
[__]
|
|
[__]%
|
|
[__]
|
|
[__]%
|
|
0.25—0.5%
|
|
[__]
|
|
[__]%
|
|
[__]
|
|
[__]%
|
|
[__]
|
|
[__]%
|
|
0.5—1.0%
|
|
[__]
|
|
[__]%
|
|
[__]
|
|
[__]%
|
|
[__]
|
|
[__]%
|
|
1.0—1.5%
|
|
[__]
|
|
[__]%
|
|
[__]
|
|
[__]%
|
|
[__]
|
|
[__]%
|
|
1.5—2.0%
|
|
[__]
|
|
[__]%
|
|
[__]
|
|
[__]%
|
|
[__]
|
|
[__]%
|
|
2.0—2.5%
|
|
[__]
|
|
[__]%
|
|
[__]
|
|
[__]%
|
|
[__]
|
|
[__]%
|
|
2.5—3.0%
|
|
[__]
|
|
[__]%
|
|
[__]
|
|
[__]%
|
|
[__]
|
|
[__]%
|
|
3.0—3.5%
|
|
[__]
|
|
[__]%
|
|
[__]
|
|
[__]%
|
|
[__]
|
|
[__]%
|
|
>3.5%
|
|
[__]
|
|
[__]
%
|
|
[__]
|
|
[__]
%
|
|
[__]
|
|
[__]
%
|
|
Total
|
|
[__]
|
|
100.00
%
|
|
[__]
|
|
100.00
%
|
|
[__]
|
|
100.00
%
|
Average Daily Range: [____]%
____________
[
Frequency Distribution of Discounts and Premiums for the Trust:
Closing Price vs. NAV as of 12/31/12
(1)(2)
]
|
|
|
|
|
Calendar
|
|
Calendar
|
|
Calendar
|
|
Calendar
|
|
|
|
From
|
|
|
|
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Calendar
|
|
5/4/1995
|
|
|
|
|
|
Ending
|
|
Ending
|
|
Ending
|
|
Ending
|
|
Year
|
|
through
|
|
Range
|
|
|
|
3/31/2012
|
|
6/30/2012
|
|
9/30/2012
|
|
12/31/2012
|
|
2012
|
|
12/31/2012
|
|
> 200
|
|
Days
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
Basis Points
|
|
%
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
150—200
|
|
Days
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
Basis Points
|
|
%
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
100—150
|
|
Days
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
Basis Points
|
|
%
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
50—100
|
|
Days
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
Basis Points
|
|
%
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
25—50
|
|
Days
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
Basis Points
|
|
%
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
0—25
|
|
Days
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
Basis Points
|
|
%
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
Total Days
|
|
Days
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
at Premium
|
|
%
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
Closing Price
|
|
Days
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
Equal to NAV
|
|
%
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
Total Days
|
|
Days
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
at Discount
|
|
%
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
0— -25
|
|
Days
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
Basis Points
|
|
%
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
-25— -50
|
|
Days
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
Basis Points
|
|
%
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
-50— -100
|
|
Days
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
Basis Points
|
|
%
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
-100— -150
|
|
Days
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
Basis Points
|
|
%
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
-150— -200
|
|
Days
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
Basis Points
|
|
%
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
< -200
|
|
Days
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
Basis Points
|
|
%
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
[Close was within [0.50]% of NAV better than [___]% of the time from May 4, 1995 (the first day of trading) through December 31, 2012.]
____________
|
(1)
|
[Source: NYSE Euronext]
|
|
|
|
|
(2)
|
[Currently, the closing price is the last price on NYSE Arca. Through November 28, 2008, the closing price was the last price on the NYSE Alternext US (formerly the American Stock Exchange and now NYSE MKT).]
|
Frequency Distribution of Discounts and Premiums for the Trust:
Bid/Ask Price vs. NAV as of 12/31/12
(1)(2)
|
|
|
|
|
Calendar
|
|
Calendar
|
|
Calendar
|
|
Calendar
|
|
|
|
|
|
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Calendar
|
|
|
|
|
|
Ending
|
|
Ending
|
|
Ending
|
|
Ending
|
|
Year
|
|
Range
|
|
|
|
3/31/2012
|
|
6/30/2012
|
|
9/30/2012
|
|
12/31/2012
|
|
2012
|
|
> 200
|
|
Days
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
Basis Points
|
|
%
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
150—200
|
|
Days
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
Basis Points
|
|
%
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
100—150
|
|
Days
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
Basis Points
|
|
%
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
50—100
|
|
Days
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
Basis Points
|
|
%
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
25—50
|
|
Days
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
Basis Points
|
|
%
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
0—25
|
|
Days
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
Basis Points
|
|
%
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
Total Days
|
|
Days
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
at Premium
|
|
%
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
Closing Price
|
|
Days
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
Equal to NAV
|
|
%
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
Total Days
|
|
Days
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
at Discount
|
|
%
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
0— -25
|
|
Days
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
Basis Points
|
|
%
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
-25— -50
|
|
Days
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
Basis Points
|
|
%
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
-50— -100
|
|
Days
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
Basis Points
|
|
%
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
-100— -150
|
|
Days
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
Basis Points
|
|
%
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
-150— -200
|
|
Days
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
Basis Points
|
|
%
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
< -200
|
|
Days
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
Basis Points
|
|
%
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
|
[__]
|
[Close was within 0.25% of NAV better than [___]% of the time through December 31, 2012.]
____________
|
(1)
|
[Source: NYSE Euronext]
|
|
|
|
|
(2)
|
[Currently, the bid/ask price is the midpoint of the best bid and best offer prices on NYSE Arca at the time the Trust’s NAV is calculated, ordinarily 4:00 p.m.]
|
Comparison of Total Returns Based on NAV and Bid/Ask Price
(1)
as of 12/31/12*
Cumulative Total Return
|
|
1 Year
|
|
5 Year
|
|
10 Year
|
|
Trust
|
|
|
|
|
|
|
Return Based on NAV (2)(3)(4)(5)
|
[__]%
|
|
[__]%
|
|
[__]%
|
|
Return Based on Bid/Ask Price (2)(3)(4)(5)
|
[__]%
|
|
[__]%
|
|
[__]%
|
|
Index
|
[__]%
|
|
[__]%
|
|
[__]%
|
Average Annual Total Return**
|
|
1 Year
|
|
5 Year
|
|
10 Year
|
|
Trust
|
|
|
|
|
|
|
Return Based on NAV (2)(3)(4)(5)
|
[__]%
|
|
[__]%
|
|
[__]%
|
|
Return Based on Bid/Ask Price (2)(3)(4)(5)
|
[__]%
|
|
[__]%
|
|
[__]%
|
|
Index
|
[__]%
|
|
[__]%
|
|
[__]%
|
____________
|
(1)
|
[Currently, the bid/ask price is the midpoint of the best bid and best offer prices on NYSE Arca at the time the Trust’s NAV is calculated, ordinarily 4:00 p.m.
Through November 28, 2008, the bid/ask price was the midpoint of the best bid and best offer prices on NYSE Alternext US (formerly the American Stock Exchange and now NYSE MKT) at the close of trading, ordinarily 4:00 p.m.
]
|
|
|
|
|
(2)
|
Total return figures have been calculated in the manner described above in “Summary—Trust Performance.”
|
|
|
|
|
(3)
|
Includes all applicable ordinary operating expenses set forth above in “Summary—Fees and Expenses of the Trust.”
|
|
|
|
|
(4)
|
Does not include the Transaction Fee which is payable to the Trustee only by persons purchasing and redeeming Creation Units as discussed above in “Purchases and Redemptions of Creation Units.” If these amounts were reflected, returns to such persons would be less than those shown.
|
|
|
|
|
(5)
|
Does not include brokerage commissions and charges incurred only by persons who make purchases and sales of Units in the secondary market as discussed above in “Exchange Listing and Trading—Secondary Trading on Exchanges.” If these amounts were reflected, returns to such persons would be less than those shown.
|
|
|
|
|
*
|
Source: NYSE Euronext and The Bank of New York Mellon.
|
|
**
|
Total returns assume that dividends and capital gain distributions have been reinvested in the Trust at the net asset value per Unit.
|
SPDR S&P MIDCAP 400 ETF TRUST
(“MDY”)
SPONSOR:
PDR SERVICES LLC
This prospectus does not include all of the information with respect to MDY set forth in its Registration Statement filed with the SEC in Washington, D.C. under the:
|
|
•
|
Securities Act of 1933 (File No. 33-89088) and
|
|
|
•
|
Investment Company Act of 1940 (File No. 811-08972).
|
To obtain copies from the SEC at prescribed rates—
WRITE:
Public Reference Section of the SEC
100 F Street, N.E., Washington, D.C. 20549
CALL:
1-800-SEC-0330
VISIT:
http://www.sec.gov
No person is authorized to give any information or make any representation about MDY not contained in this prospectus, and you should not rely on any other information. Read and keep both parts of this prospectus for future reference.
PDR Services LLC has filed a registration statement on Form S-6 and Form N-8B-2 with the SEC covering the Units. While this prospectus is a part of the registration statement on Form S-6, it does not contain all the exhibits filed as part of the registration statement on Form S-6. You should consider reviewing the full text of those exhibits.
Prospectus dated [January __], 2013
CONTENTS OF REGISTRATION STATEMENT
This amendment to the Registration Statement on Form S-6 comprises the following papers and documents:
The facing sheet.
The cross-reference sheet.
The prospectus.
The undertaking to file reports.
The signatures.
Written consents of the following persons:
PricewaterhouseCoopers LLP (included in Exhibit 99.C1)
Davis Polk & Wardwell LLP (included in Exhibit 99.2)
The following exhibits:
|
EX-99.2
|
— Opinion of Counsel as to legality of securities being registered and consent of Counsel (1)
|
|
EX-99.A1(1)
|
— Standard Terms and Conditions of Trust dated as of April 1, 1995 and effective April 27, 1995, between PDR Services Corporation, as Sponsor and The Bank of New York, as Trustee (2)
|
|
EX-99.A1(2)
|
— Amendment dated as of January 26, 2006 and effective January 27, 2006 to the Standard Terms and Conditions of Trust dated as of April 1, 1995 and effective April 27, 1995, between PDR Services LLC, as Sponsor and The Bank of New York, as Trustee (3)
|
|
EX-99.A1(3)
|
— Amendment dated as of February 1, 2009 and effective February 13, 2009 to the Standard Terms and Conditions of Trust dated as of April 1, 1995 and effective April 27, 1995, as amended, between PDR Services LLC, as Sponsor and The Bank of New York Mellon, as Trustee (4)
|
|
EX-99.A1(4)
|
— Amendment No. 6 dated as of January 1, 2010 and effective January 27, 2010 to the Standard Terms and Conditions of Trust dated as of April 1, 1995 and effective April 27, 1995, as amended, between PDR Services LLC, as Sponsor and The Bank of New York Mellon, as Trustee (5)
|
|
EX-99.A1(5)
|
— Trust Indenture and Agreement dated and effective April 27, 1995 between PDR Services Corporation, as Sponsor and The Bank of New York, as Trustee (2)
|
|
EX-99.A1(6)
|
— Amendment dated as of December 29, 1995 to the Standard Terms and Conditions of Trust dated as of April 1, 1995 and to the Trust Indenture and Agreement dated April 27, 1995 between PDR Services Corporation, as Sponsor and The Bank of New York, as Trustee (6)
|
|
EX-99.A1(7)
|
— Amendment dated as of September 1, 1997 and effective September 30, 1997 to the Standard Terms and Conditions of Trust dated as of April 1, 1995 and to the Trust Indenture and Agreement dated April 27, 1995 between PDR Services Corporation, as Sponsor and The Bank of New York, as Trustee (7)
|
|
EX-99.A1(8)
|
— Amendment dated as of January 1, 1999 and effective January 25, 1999 to the Standard Terms and Conditions of Trust dated as of April 1, 1995 and to the Trust Indenture and Agreement dated April 27, 1995 between PDR Services LLC, as Sponsor and The Bank of New York, as Trustee (8)
|
|
EX-99.A3
|
— Distribution Agreement dated and effective November 1, 2011 (9)
|
|
EX-99.A4(1)
|
— Form of Global Certificates (5)
|
|
EX-99.A4(2)
|
— Form of Participant Agreement (10)
|
|
EX-99.A4(3)
|
— Sublicense Agreement entered into as of November 1, 2005 by and among PDR Services LLC, as Sublicensee, State Street Global Markets, LLC, as Licensee, and Standard & Poor’s (11)
|
|
EX-99.A4(4)
|
— Sublicense Agreement entered into as of November 1, 2005 by and among Bank of New York, as Sublicensee, State Street Global Markets, LLC, as Licensee, and Standard & Poor’s (11)
|
|
EX-99.A4(5)
|
— License Agreement entered into as of September 19, 1994 by and between Standard & Poor’s, the American Stock Exchange, Inc., and PDR Services Corporation (2)
|
|
EX-99.A9(1)
|
— Chief Compliance Officer Services Agreement dated and effective October 5, 2004 (12)
|
|
EX-99.A9(2)
|
— Addendum to Chief Compliance Officer Services Agreements dated and effective September 1, 2006 (12)
|
|
EX-99.A9(3)
|
— Amendment to Chief Compliance Officer Services Agreement dated October 1, 2009 (12)
|
|
EX-99.A9(4)
|
— Depository Agreement among The Bank of New York, as Trustee, PDR Services Corporation, as Sponsor and The Depository Trust Company as the Depository, dated April 17, 1995 (2)
|
|
EX-99.A11
|
— Code of Ethics dated and effective January 26, 2012 (12)
|
|
EX-99.C1
|
— Consent of Independent Registered Public Accounting Firm (1)
|
(1) To be filed by amendment.
(2) Filed on April 27, 1995 with registrant’s Registration Statement on Form S-6 (File Nos. 33-89088 and 811-08972) and incorporated by reference herein.
(3) Filed on January 27, 2006 with registrant’s Registration Statement on Form S-6 (File Nos. 33-89088 and 811-08972) and incorporated by reference herein.
(4) Filed on February 24, 2009 with registrant’s Registration Statement on Form S-6 (File Nos. 33-89088 and 811-08972) and incorporated by reference herein.
(5) Filed on January 27, 2010 with registrant’s Registration Statement on Form S-6 (File Nos. 33-89088 and 811-08972) and incorporated by reference herein.
(6) Filed on January 19, 1996 with registrant’s Registration Statement on Form S-6 (File Nos. 33-89088 and 811-08972) and incorporated by reference herein.
(7) Filed on September 30, 1997 with registrant’s Registration Statement on Form S-6 (File Nos. 33-89088 and 811-08972) and incorporated by reference herein.
(8) Filed on January 26, 1999 with registrant’s Registration Statement on Form S-6 (File Nos. 33-89088 and 811-08972) and incorporated by reference herein.
(9) Filed on November 28, 2011 with registrant’s Registration Statement on Form S-6 (File Nos. 33-89088 and 811-08972) and incorporated by reference herein.
(10) Filed on January 27, 2011 with registrant’s Registration Statement on Form S-6 (File Nos. 33-89088 and 811-08972) and incorporated by reference herein.
(11) Filed on January 26, 2007 with registrant’s Registration Statement on Form S-6 (File Nos. 33-89088 and 811-08972) and incorporated by reference herein.
(12) Filed on January 26, 2012 with registrant’s Registration Statement on Form S-6 (File Nos. 33-89088 and 811-08972) and incorporated by reference herein.
FINANCIAL STATEMENTS
|
1.
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Statement of Financial Condition of the Trust as shown in the current prospectus for this series herewith.
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2.
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Financial Statements of the Depositor:
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PDR Services LLC—Financial Statements, as part of NYSE Euronext’s current consolidated financial statements incorporated by reference to Form 10-K dated [__________], 2013.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant, SPDR S&P MidCap 400 ETF Trust, has duly caused this amendment to the Registration Statement to be signed on its behalf by the undersigned thereunto duly authorized, in the City of New York, and State of New York, on the 31st day of October, 2012.
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SPDR S&P MIDCAP 400 ETF TRUST
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(Registrant)
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By:
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PDR Services LLC
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By:
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/s/ Joe Mecane
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Name:
Joe Mecane
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Title:
President
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Pursuant to the requirements of the Securities Act of 1933, this amendment to the Registration Statement has been signed below on behalf of PDR Services LLC, the Depositor, by the following persons in the capacities and on the date indicated.
PDR SERVICES LLC
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Name
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Title/Office
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/s/ Joe Mecane
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President of PDR Services LLC*
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Joe Mecane
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s/ Laura Morrison
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Senior Vice President of PDR Services LLC
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Laura Morrison
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____________
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*
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The President of PDR Services LLC also undertakes all the duties and responsibilities of, and performs all functions of, the principal financial officer of PDR Services LLC.
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EXHIBIT INDEX
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EX-99.2
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— Opinion of Counsel as to legality of securities being registered and consent of Counsel (1)
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EX-99.A1(1)
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— Standard Terms and Conditions of Trust dated as of April 1, 1995 and effective April 27, 1995, between PDR Services Corporation, as Sponsor and The Bank of New York, as Trustee (2)
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EX-99.A1(2)
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— Amendment dated as of January 26, 2006 and effective January 27, 2006 to the Standard Terms and Conditions of Trust dated as of April 1, 1995 and effective April 27, 1995, between PDR Services LLC, as Sponsor and The Bank of New York, as Trustee (3)
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EX-99.A1(3)
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— Amendment dated as of February 1, 2009 and effective February 13, 2009 to the Standard Terms and Conditions of Trust dated as of April 1, 1995 and effective April 27, 1995, as amended, between PDR Services LLC, as Sponsor and The Bank of New York Mellon, as Trustee (4)
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EX-99.A1(4)
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— Amendment No. 6 dated as of January 1, 2010 and effective January 27, 2010 to the Standard Terms and Conditions of Trust dated as of April 1, 1995 and effective April 27, 1995, as amended, between PDR Services LLC, as Sponsor and The Bank of New York Mellon, as Trustee (5)
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EX-99.A1(5)
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— Trust Indenture and Agreement dated and effective April 27, 1995 between PDR Services Corporation, as Sponsor and The Bank of New York, as Trustee (2)
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EX-99.A1(6)
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— Amendment dated as of December 29, 1995 to the Standard Terms and Conditions of Trust dated as of April 1, 1995 and to the Trust Indenture and Agreement dated April 27, 1995 between PDR Services Corporation, as Sponsor and The Bank of New York, as Trustee (6)
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EX-99.A1(7)
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— Amendment dated as of September 1, 1997 and effective September 30, 1997 to the Standard Terms and Conditions of Trust dated as of April 1, 1995 and to the Trust Indenture and Agreement dated April 27, 1995 between PDR Services Corporation, as Sponsor and The Bank of New York, as Trustee (7)
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EX-99.A1(8)
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— Amendment dated as of January 1, 1999 and effective January 25, 1999 to the Standard Terms and Conditions of Trust dated as of April 1, 1995 and to the Trust Indenture and Agreement dated April 27, 1995 between PDR Services LLC, as Sponsor and The Bank of New York, as Trustee (8)
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EX-99.A3
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— Distribution Agreement dated and effective November 1, 2011 (9)
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EX-99.A4(1)
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— Form of Global Certificates (5)
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EX-99.A4(2)
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— Form of Participant Agreement (10)
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EX-99.A4(3)
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— Sublicense Agreement entered into as of November 1, 2005 by and among PDR Services LLC, as Sublicensee, State Street Global Markets, LLC, as Licensee, and Standard & Poor’s (11)
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EX-99.A4(4)
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— Sublicense Agreement entered into as of November 1, 2005 by and among Bank of New York, as Sublicensee, State Street Global Markets, LLC, as Licensee, and Standard & Poor’s (11)
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EX-99.A4(5)
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— License Agreement entered into as of September 19, 1994 by and between Standard & Poor’s, the American Stock Exchange, Inc., and PDR Services Corporation (2)
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EX-99.A9(1)
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— Chief Compliance Officer Services Agreement dated and effective October 5, 2004 (12)
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EX-99.A9(2)
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— Addendum to Chief Compliance Officer Services Agreements dated and effective September 1, 2006 (12)
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EX-99.A9(3)
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— Amendment to Chief Compliance Officer Services Agreement dated October 1, 2009 (12)
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EX-99.A9(4)
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— Depository Agreement among The Bank of New York, as Trustee, PDR Services Corporation, as Sponsor and The Depository Trust Company as the Depository, dated April 17, 1995 (2)
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EX-99.A11
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— Code of Ethics dated and effective January 26, 2012 (12)
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EX-99.C1
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— Consent of Independent Registered Public Accounting Firm (1)
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(1) To be filed by amendment.
(2) Filed on April 27, 1995 with registrant’s Registration Statement on Form S-6 (File Nos. 33-89088 and 811-08972) and incorporated by reference herein.
(3) Filed on January 27, 2006 with registrant’s Registration Statement on Form S-6 (File Nos. 33-89088 and 811-08972) and incorporated by reference herein.
(4) Filed on February 24, 2009 with registrant’s Registration Statement on Form S-6 (File Nos. 33-89088 and 811-08972) and incorporated by reference herein.
(5) Filed on January 27, 2010 with registrant’s Registration Statement on Form S-6 (File Nos. 33-89088 and 811-08972) and incorporated by reference herein.
(6) Filed on January 19, 1996 with registrant’s Registration Statement on Form S-6 (File Nos. 33-89088 and 811-08972) and incorporated by reference herein.
(7) Filed on September 30, 1997 with registrant’s Registration Statement on Form S-6 (File Nos. 33-89088 and 811-08972) and incorporated by reference herein.
(8) Filed on January 26, 1999 with registrant’s Registration Statement on Form S-6 (File Nos. 33-89088 and 811-08972) and incorporated by reference herein.
(9) Filed on November 28, 2011 with registrant’s Registration Statement on Form S-6 (File Nos. 33-89088 and 811-08972) and incorporated by reference herein.
(10) Filed on January 27, 2011 with registrant’s Registration Statement on Form S-6 (File Nos. 33-89088 and 811-08972) and incorporated by reference herein.
(11) Filed on January 26, 2007 with registrant’s Registration Statement on Form S-6 (File Nos. 33-89088 and 811-08972) and incorporated by reference herein.
(12) Filed on January 26, 2012 with registrant’s Registration Statement on Form S-6 (File Nos. 33-89088 and 811-08972) and incorporated by reference herein.
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