AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 16, 1998
REGISTRATION NOS.: 333-57791
811-08837
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. 2 [X]
Post-Effective Amendment No. ___ [ ]
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and/or
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 2
(Check appropriate box or boxes)
THE SELECT SECTOR SPDR(R) TRUST
(Exact Name of Registrant as Specified in Charter)
225 Franklin Street
Boston, Massachusetts 02110
(Address of Principal Executive Offices)
Registrant's Telephone Number: (303) 623-2577
Joseph J. McBrien, Esq.
Vice President and Counsel
State Street Bank and Trust Company
1776 Heritage Drive, A4N
North Quincy, Massachusetts 02171-2197
(Name and Address of Agent for Service)
Copies to:
Stuart M. Strauss, Esq.
Gordon Altman Butowsky Weitzen Shalov & Wein
147 West 47th Street, 20th Floor
New York, New York 10036
Kathleen H. Moriarty, Esq.
Carter Ledyard & Milburn
2 Wall Street
New York, NY 10005
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after the effective date of this registration
statement.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THE REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
CROSS REFERENCE SHEET
N-1A Item No.
(PART A)
Item 1. Cover Page
Item 2. Synopsis
Item 3. Condensed Financial Information
Item 4. General Description of Registrant
Item 5. Management of the Fund
Item 5A. Management's Discussion of Fund Performance
Item 6. Capital Stock and Other Securities
Item 7. Purchase of Securities Being Offered
Item 8. Redemption or Repurchase
Item 9. Legal Proceedings
(PART B)
Item 10. Cover Page
Item 11. Table of Contents
Item 12. General Information and History
Item 13. Investment Objectives and Policies
Item 14. Management of the Registrant
Item 15. Control Persons and Principal Holders of Securities
Item 16. Investment Advisory and Other Services
Item 17. Brokerage Allocation
Item 18. Capital Stock and Other Securities
Item 19. Purchase, Redemption and Pricing of Securities
Being Offered
Item 20. Tax Status
Item 21. Underwriters
Item 22. Calculations of Performance Data
Item 23. Financial Statements
(PART C)
Item 24. Financial Statements and Exhibits
Item 25. Persons Controlled by or Under Common Control
Item 27. Number of Holders of Securities
Item 27. Indemnification
Item 29. Business and Other Connections of Investment
Adviser
Item 30. Location of Accounts and Records
Item 31. Management Services
Item 32. Undertakings
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A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION BUT HAS NOT YET BECOME EFFECTIVE. INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED NOVEMBER 16, 1998
THE SELECT SECTOR SPDR(R) TRUST
The Select Sector SPDR Trust (the "Trust") is an "index fund" consisting of a number of separate investment portfolios (each a "Select Sector SPDR Fund" or a "Fund" and collectively the "Select Sector SPDR Funds" or the "Funds"). The Funds offered by this Prospectus are: The Basic Industries Select Sector SPDR Fund; The Consumer Services Select Sector SPDR Fund; The Consumer Staples Select Sector SPDR Fund; The Cyclical/Transportation Select Sector SPDR Fund; The Energy Select Sector SPDR Fund; The Financial Select Sector SPDR Fund; The Industrial Select Sector SPDR Fund; The Technology Select Sector SPDR Fund; and The Utilities Select Sector SPDR Fund.
The investment objective of each Select Sector SPDR Fund is to provide investment results that, before expenses, correspond generally to the price and yield performance of publicly traded equity securities of companies in a particular sector or group of industries, as represented by a specified market sector index (each a "Select Sector Index"). Each Select Sector SPDR Fund is managed by State Street Bank and Trust Company.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC") OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. SHARES IN EACH SELECT SECTOR SPDR FUND ARE NOT GUARANTEED OR INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER AGENCY OF THE U.S. GOVERNMENT, NOR ARE SHARES DEPOSITS OR OBLIGATIONS OF ANY BANK.
This Prospectus (dated 1998) explains concisely the information you ought to know before investing in the Select Sector SPDR Funds. We suggest that you keep it for future reference.
A Statement of Additional Information (dated 1998), which has been filed with the SEC, provides more information about each Select Sector SPDR Fund. The Statement of Additional Information is incorporated herein by reference (i.e., is legally part of this Prospectus). It may be obtained without charge by writing to the Distributor, ALPS Mutual Funds Services, Inc., at 370 17th Street, Suite 3100, Denver, CO 80202, or by calling the following number:
Investor Information: (800) 843-2639
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER OF A SELECT SECTOR SPDR FUND'S SHARES, AND, IF GIVEN OR MADE, THE INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE TRUST OR ANY SELECT SECTOR SPDR FUND. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE OF SHARES SHALL UNDER ANY CIRCUMSTANCE IMPLY THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE AFTER THE DATE OF THIS PROSPECTUS.
DEALERS EFFECTING TRANSACTIONS IN A SELECT SECTOR SPDR FUND'S SHARES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, ARE GENERALLY REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO ANY OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS.
"Standard & Poor's(R)", "S&P(R)", "S&P 500(R)", "Standard & Poor's 500(R)", "500", "Standard & Poor's Depositary Receipts(R)", "SPDRs(R)", "Select Sector SPDR", "Select Sector SPDRs" and "Select Sector Standard & Poor's Depositary Receipts" are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use in connection with the listing and trading of Select Sector SPDRs on the AMEX.
TABLE OF CONTENTS
PAGE
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Prospectus Summary.......................................... 1
Summary of Select Sector SPDR Fund Expenses................. 4
The Select Sector SPDR Funds and their Investment
Objectives................................................ 6
Who Should Invest?.......................................... 6
Investment Policies and Strategies.......................... 7
Investment Limitations...................................... 10
Investment Considerations and Risks......................... 11
Management.................................................. 14
Index License............................................... 16
Shareholder Guide........................................... 16
Determination of Net Asset Value.......................... 16
Buying and Selling Select Sector SPDRs.................... 16
Creation and Redemption of Creation Units................. 17
Distributions............................................. 19
Tax Matters............................................... 19
General Information....................................... 20
Additional Information.................................... 21
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EACH SELECT SECTOR INDEX IS BASED ON EQUITY SECURITIES OF PUBLIC COMPANIES THAT ARE COMPONENTS OF THE STANDARD & POOR'S 500 COMPOSITE STOCK INDEX, SELECTED ON THE BASIS OF GENERAL INDUSTRY CLASSIFICATION, AND INCLUDED AS CONSTITUENT SECURITIES OF A PARTICULAR SELECT SECTOR INDEX BY MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED ("MERRILL LYNCH" AND SOMETIMES REFERRED TO AS THE "INDEX COMPILATION AGENT") IN CONSULTATION WITH STANDARD & POOR'S, ("S&P"), A DIVISION OF THE MCGRAW-HILL COMPANIES, INC. THE AMEX ACTS AS "INDEX CALCULATION AGENT" IN CONNECTION WITH THE CALCULATION AND DISSEMINATION OF EACH SELECT SECTOR INDEX.
SELECT SECTOR SPDRS ARE NOT SPONSORED, ENDORSED, SOLD OR PROMOTED BY S&P. S&P MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, TO THE OWNERS OF THE SELECT SECTOR SPDRS OR ANY MEMBER OF THE PUBLIC REGARDING THE ADVISABILITY OF INVESTING IN SECURITIES GENERALLY OR IN THE SELECT SECTOR SPDRS PARTICULARLY OR THE ABILITY OF A SELECT SECTOR SPDR FUND TO TRACK THE PERFORMANCE OF THE VARIOUS SECTORS REPRESENTED IN THE STOCK MARKET. THE STOCKS INCLUDED IN EACH SELECT SECTOR INDEX WERE SELECTED BY THE INDEX COMPILATION AGENT IN CONSULTATION WITH S&P FROM A UNIVERSE OF COMPANIES REPRESENTED BY THE S&P 500 INDEX. THE COMPOSITION AND WEIGHTINGS OF THE STOCKS INCLUDED IN EACH SELECT SECTOR INDEX CAN BE EXPECTED TO DIFFER FROM THE COMPOSITION AND WEIGHTING OF STOCKS INCLUDED IN THE CORRESPONDING S&P 500 SECTOR INDEX THAT IS PUBLISHED AND DISSEMINATED BY S&P. S&P'S ONLY RELATIONSHIP TO THE INDEX COMPILATION AGENT IS THE LICENSING OF CERTAIN TRADEMARKS AND TRADE NAMES OF S&P AND OF THE S&P 500 INDEX WHICH IS DETERMINED, COMPOSED AND CALCULATED BY S&P WITHOUT REGARD TO THE INDEX COMPILATION AGENT OR ANY SELECT SECTOR SPDR FUND. S&P HAS NO OBLIGATION TO TAKE THE NEEDS OF THE INDEX COMPILATION AGENT, THE TRUST OR THE OWNERS OF THE SELECT SECTOR SPDRS INTO CONSIDERATION IN DETERMINING, COMPOSING OR CALCULATING THE S&P 500 INDEX. S&P IS NOT RESPONSIBLE FOR AND HAS NOT PARTICIPATED IN ANY DETERMINATION OR CALCULATION MADE WITH RESPECT TO ISSUANCE OR REDEMPTION OF THE SELECT SECTOR SPDRS. S&P HAS NO OBLIGATION OR LIABILITY IN CONNECTION WITH THE ADMINISTRATION, MARKETING OR TRADING OF THE SELECT SECTOR SPDRS.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR COMPLETENESS OF THE S&P 500 INDEX, THE SELECT SECTOR INDEXES OR ANY DATA INCLUDED THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE INDEX COMPILATION AGENT, THE TRUST, OWNERS OF THE PRODUCT, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P 500 INDEX, THE SELECT SECTOR INDEXES OR ANY DATA INCLUDED THEREIN IN CONNECTION WITH THE RIGHTS LICENSED UNDER THE LICENSE AGREEMENT OR FOR ANY OTHER USE. S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE S&P 500 INDEX, THE SELECT SECTOR INDEXES 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 LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
THE SHARES ARE NOT SPONSORED OR PROMOTED BY EITHER THE INDEX CALCULATION
AGENT OR THE INDEX COMPILATION AGENT.
NEITHER THE INDEX CALCULATION AGENT NOR THE INDEX COMPILATION AGENT MAKES ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, TO THE OWNERS OF THE SHARES OF ANY SELECT SECTOR SPDR FUND OR ANY MEMBER OF THE PUBLIC REGARDING THE ABILITY OF THE INDEXES IDENTIFIED HEREIN TO TRACK STOCK MARKET PERFORMANCE. THE SELECT SECTOR INDEXES IDENTIFIED HEREIN ARE DETERMINED, COMPOSED AND CALCULATED WITHOUT REGARD TO THE SHARES OF ANY SELECT SECTOR SPDR FUND OR THE ISSUER THEREOF. THE INDEX CALCULATION AGENT AND THE INDEX COMPILATION AGENT ARE NOT RESPONSIBLE FOR, NOR HAVE THEY PARTICIPATED IN, THE DETERMINATION OF THE TIMING OF, PRICES OF, OR QUANTITIES OF THE SHARES OF ANY SELECT SECTOR SPDR FUND TO BE ISSUED, NOR IN THE DETERMINATION OR CALCULATION OF THE EQUATION BY WHICH THE SHARES ARE REDEEMABLE. THE INDEX CALCULATION AGENT AND THE INDEX COMPILATION AGENT HAVE NO OBLIGATION OR LIABILITY TO OWNERS OF THE SHARES OF ANY SELECT SECTOR SPDR FUND IN CONNECTION WITH THE ADMINISTRATION, MARKETING OR TRADING OF THE SHARES OF ANY SELECT SECTOR SPDR FUND.
ALTHOUGH MERRILL LYNCH -- AS THE INDEX COMPILATION AGENT -- SHALL OBTAIN AND PROVIDE INFORMATION TO THE AMEX -- AS THE INDEX CALCULATION AGENT -- FROM SOURCES WHICH IT CONSIDERS RELIABLE, THE INDEX COMPILATION AGENT AND THE INDEX CALCULATION AGENT DO NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF ANY SELECT SECTOR INDEX OR ANY DATA INCLUDED THEREIN. THE INDEX COMPILATION AGENT AND THE INDEX CALCULATION AGENT MAKE NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE TRUST AS LICENSEE, LICENSEE'S CUSTOMERS AND COUNTERPARTIES, OWNERS OF THE SHARES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE SELECT SECTOR INDEXES OR ANY DATA INCLUDED THEREIN IN CONNECTION WITH THE RIGHTS LICENSED AS DESCRIBED HEREIN OR FOR ANY OTHER USE. THE INDEX COMPILATION AGENT AND THE INDEX CALCULATION AGENT MAKE NO EXPRESS OR IMPLIED WARRANTIES, AND EACH HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE SELECT SECTOR INDEXES OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL THE INDEX COMPILATION AGENT OR THE INDEX CALCULATION AGENT HAVE ANY LIABILITY FOR ANY DIRECT, INDIRECT, SPECIAL, PUNITIVE, CONSEQUENTIAL OR ANY OTHER DAMAGES (INCLUDING LOST PROFITS) EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
PROSPECTUS SUMMARY
The Select Sector SPDR Funds
and their Investment
Objectives.................. The Select Sector SPDR Funds offered by this
Prospectus are: The Basic Industries Select
Sector SPDR Fund; The Consumer Services Select
Sector SPDR Fund; The Consumer Staples Select
Sector SPDR Fund; The Cyclical/Transportation
Select Sector SPDR Fund; The Energy Select
Sector SPDR Fund; The Financial Select Sector
SPDR Fund; The Industrial Select Sector SPDR
Fund; The Technology Select Sector SPDR Fund;
and The Utilities Select Sector SPDR Fund. Each
Select Sector SPDR Fund is a separate
investment portfolio of the Trust.
The investment objective of each Select Sector
SPDR Fund is to provide investment results
that, before expenses, correspond generally to
the price and yield performance of publicly
traded equity securities of companies in a
particular sector or group of industries as
represented by a specified Select Sector Index
published by the AMEX. The companies included
in each Select Sector Index are selected on the
basis of general industry classification from a
universe of companies defined by the Standard &
Poor's 500 Composite Stock Index (the "S&P
500"). The nine Select Sector Indexes upon
which the Select Sector SPDR Funds are based
together comprise all of the companies that are
included in the S&P 500. See "Description of
the Select Sector Indexes -- Construction and
Maintenance Standards for the Select Sector
Indexes," "The Select Sector SPDR Funds and
their Investment Objectives," and "Investment
Policies and Strategies."
Exchange-Traded Shares and
Creation Units................ The Shares have been approved for listing on
the AMEX, subject to notice of issuance. The
Shares will trade on the AMEX at market prices.
These prices may differ from the Shares' net
asset value. The initial price per Share of
each Select Sector SPDR Fund is expected to be
between $17 and $30, although there can be no
assurance that Shares will trade in this range
or that an active trading market will develop.
Trading of Select Sector SPDR
Fund Shares on the AMEX..... The respective AMEX trading symbols of the
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Select Sector SPDR Funds are as follows:
TRADING
SELECT SECTOR SPDR FUND SYMBOL
----------------------- -------
The Basic Industries Select Sector SPDR Fund................ XLB
The Consumer Services Select Sector SPDR Fund............... XLV
The Consumer Staples Select Sector SPDR Fund................ XLP
The Cyclical/Transportation Select Sector SPDR Fund......... XLY
The Energy Select Sector SPDR Fund.......................... XLE
The Financial Select Sector SPDR Fund....................... XLF
The Industrial Select Sector SPDR Fund...................... XLI
The Technology Select Sector SPDR Fund...................... XLK
The Utilities Select Sector SPDR Fund....................... XLU
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Each Select Sector SPDR Fund issues and redeems Shares at their net asset value only in a large specified number of Shares called a "Creation Unit." A Creation Unit of each Select Sector SPDR Fund consists of 50,000 Shares. Each Select Sector SPDR Fund
generally issues and redeems Creation Units only in kind in exchange for a designated portfolio of equity securities included in its Select Sector Index and a relatively small cash payment. EXCEPT WHEN AGGREGATED IN CREATION UNITS, THE SHARES ARE NOT REDEEMABLE SECURITIES
OF THE SELECT SECTOR SPDR FUNDS. See "Buying
and Selling Exchange-Traded Shares" and
"Creation and Redemption of Creation Units."
Risks......................... Unlike many investment companies, the Select
Sector SPDR Funds are not actively "managed."
Therefore, a Select Sector SPDR Fund would not
sell a stock because the stock's issuer was in
financial trouble, unless that stock is removed
from the Select Sector SPDR Fund's benchmark
Select Sector Index. An investment in a Select
Sector SPDR Fund involves risks similar to
those of investing in any fund of equity
securities traded on exchanges, such as market
fluctuations caused by such factors as economic
and political developments, changes in interest
rates and perceived trends in stock prices. You
should anticipate that the value of the Shares
will decline, more or less, in correspondence
with any decline in value of the Select Sector
SPDR Fund's applicable Select Sector Index.
Select Sector SPDR Funds are subject to certain
other risks, described under "Investment
Considerations and Risks." Among other things,
each Select Sector SPDR Fund is subject to the
additional risks associated with concentrating
its investments in companies in the market
sector that its benchmark Select Sector Index
targets.
Who Should Invest?............ Each Select Sector SPDR Fund is designed for
investors who seek a relatively low-cost
"passive" approach for investing in a portfolio
of equity securities of companies in a
particular sector or group of industries as
represented by a specified Select Sector Index.
Taken together, the Select Sector SPDR Funds
are designed to represent all of the 500 stocks
included in the S&P 500. Bought and sold
separately, the Select Sector SPDR Funds are
designed to enable investors to tailor asset
allocations within the universe of S&P 500
companies to fit their particular investment
needs. Each Select Sector SPDR Fund seeks to
provide investment results that, before
expenses, correspond generally to the price and
yield performance of its benchmark Select
Sector Index. See "Who Should Invest?" and
"Investment Considerations and Risks."
Management of the Trust....... Adviser. State Street Bank and Trust Company
("State Street" or the "Adviser") is the
investment adviser to each Select Sector SPDR
Fund. The Adviser is responsible for the
investment management of each Select Sector
SPDR Fund, subject to the supervision of the
Trust's Board of Trustees.
Administrator. State Street is the
Administrator of each Select Sector SPDR Fund
and will perform certain clerical, fund
accounting, recordkeeping and bookkeeping
services in such capacity.
Custodian and Transfer Agent. State Street
serves as the Custodian for the cash and
portfolio securities of each Select Sector SPDR
Fund. State Street also serves as the Transfer
Agent for each Select Sector SPDR Fund
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Distributor. ALPS Mutual Funds Services, Inc.
serves as the principal underwriter and
Distributor of each Select Sector SPDR Fund's
Creation Units. The Distributor does not
maintain a secondary market in the Shares. See
"Investment Considerations and Risks" and
"Management."
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SUMMARY OF SELECT SECTOR SPDR FUND EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
Exchange-Traded Shares. When buying or selling exchange-listed Shares, you will incur customary brokerage commissions and charges.
Creation Units. In order to create (i.e., purchase) Creation Units of Shares, an investor generally must deposit a designated portfolio of equity securities included in the relevant Select Sector Index and make a small cash payment. See "Creation and Redemption of Creation Units" in this Prospectus and in the Statement of Additional Information for more detail. As of October 29, 1998, the approximate value of the securities comprising a deposit of designated equity securities necessary for an in-kind purchase of a Creation Unit ranged from approximately $1,000,000 to $1,400,000 depending on the Select Sector SPDR Fund (assuming the inclusion of all stocks in the relevant Select Sector Index in their exact weighting). A fixed transaction fee of $1,000 is applicable to each creation or redemption transaction regardless of the number of Creation Units created or redeemed in the transaction. An additional charge of up to three (3) times the fixed transaction fee (for a total charge of $4,000) may be charged with respect to transactions effected outside the Continuous Net Settlement System of the National Securities Clearing Corporation (the "NSCC") (discussed under "Shareholder Guide -- Creation and Redemption of Creation Units") and in the limited circumstances in which any cash may be used in lieu of securities to create or redeem Creation Units.
ANNUAL FUND OPERATING EXPENSES
"ANNUAL FUND OPERATING EXPENSES" ARE THE ESTIMATED EXPENSES YOU WOULD INCUR
AS A SHAREHOLDER OF A SELECT SECTOR SPDR FUND. ACTUAL EXPENSES MAY VARY.
"Management Fees" are paid to the Adviser by each Select Sector SPDR Fund to
provide the Fund with investment management services. In addition, a "unitary"
fee is paid by each Select Sector SPDR Fund to State Street for the
administration, custody and transfer agency services it provides to the Funds.
The unitary fee is calculated based upon the aggregate net assets of the Trust
and allocated pro rata to each Select Sector SPDR Fund based upon the relative
net assets of each Fund. The unitary fee is equal to the greater of: (a) a
sliding scale fee calculated as follows: (i) .10% of average daily net assets of
the Trust up to the first $4.5 billion of net assets (such $4.5 billion to be
increased by $500 million each time a new Select Sector SPDR Fund is added);
(ii) .08% of average daily net assets up to the next $4.5 billion of net assets
of the Trust (such $4.5 billion to be increased by $500 million each time a new
Select Sector SPDR Fund is added); and (iii) .06% of average daily net assets on
the remainder of net assets; or (b) a minimum fee of $3.15 million increased by
$350,000 each time a new Select Sector SPDR Fund is added. The minimum fee will
not be in effect for the first two years of the Trust's operation. Each Select
Sector SPDR Fund will also bear all other expenses of its operation.
THE BASIC THE CONSUMER THE CONSUMER THE CYCLICAL/
INDUSTRIES SELECT SERVICES SELECT STAPLES SELECT TRANSPORTATION
SECTOR SECTOR SECTOR SELECT SECTOR
SPDR FUND SPDR FUND SPDR FUND SPDR FUND
----------------- --------------- -------------- --------------
I. SHAREHOLDER TRANSACTION EXPENSES
A. CREATION TRANSACTION EXPENSES
Through NSCC(a).............................. $1,000 $1,000 $1,000 $1,000
Outside NSCC(a).............................. Up to Up to Up to Up to
$4,000 $4,000 $4,000 $4,000
B. REDEMPTION TRANSACTION EXPENSES
Through NSCC(b).............................. $1,000 $1,000 $1,000 $1,000
Outside NSCC(b).............................. Up to Up to Up to Up to
$4,000 $4,000 $4,000 $4,000
II. ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees.............................. .05% .05% .05% .05%
12b-1 Fees(c)................................ .25% .25% .25% .25%
Other Estimated Operating Expenses........... .35% .35% .35% .35%
------ ------ ------ ------
Total Expenses............................... .65% .65% .65% .65%
THE
THE ENERGY THE FINANCIAL THE INDUSTRIAL TECHNOLOGY THE UTILITIES
SELECT SECTOR SELECT SECTOR SELECT SECTOR SELECT SECTOR SELECT SECTOR
SPDR FUND SPDR FUND SPDR FUND SPDR FUND SPDR FUND
------------- ------------- --------------- ------------- -------------
I. SHAREHOLDER TRANSACTION EXPENSES
A. CREATION TRANSACTION EXPENSES
Through NSCC(a).............................. $1,000 $1,000 $1,000 $1,000 $1,000
Outside NSCC(a).............................. Up to Up to Up to Up to Up to
$4,000 $4,000 $4,000 $4,000 $4,000
B. REDEMPTION TRANSACTION EXPENSES
Through NSCC(b).............................. $1,000 $1,000 $1,000 $1,000 $1,000
Outside NSCC(b).............................. Up to Up to Up to Up to Up to
$4,000 $4,000 $4,000 $4,000 $4,000
II. ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees.............................. .05% .05% .05% .05% .05%
12b-1 Fees(c)................................ .25% .25% .25% .25% .25%
Other Estimated Operating Expenses........... .35% .35% .35% .35% .35%
------ ------ ------ ------ ------
Total Expenses............................... .65% .65% .65% .65% .65%
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(b) The redemption transaction fee is the same regardless of the number of Creation Units being redeemed pursuant to any one redemption order. One Creation Unit consists of 50,000 Shares.
(c) Subject to an aggregate maximum of .25% per annum of the average net assets of each Select Sector SPDR Fund, the Distributor (i) will receive a distribution fee pursuant to such Select Sector SPDR Fund's Rule 12b-1 plan (adopted by the Board of Trustees) as compensation for certain distribution-related services, will be paid an asset-based fee for its administrative services with respect to the Rule 12b-1 plan and will be reimbursed for certain expenditures related to the distribution of Shares; and (ii) may enter into agreements whereby certain broker-dealers or other persons may receive a portion of the Rule 12b-1 fee(s) not to exceed , in the case of any such broker-dealer or other entity, .10% per annum of such Select Sector SPDR Fund's average daily net assets, as compensation for services provided to shareholders and educational and promotional services relating to the Shares. See "Management -- Distributor" in this Prospectus. A long-term shareholder of a Select Sector SPDR Fund may pay more in total sales charges than the economic equivalent of the maximum front-end sales charges otherwise permitted by the rules of the National Association of Securities Dealers, Inc.
EXAMPLES OF EXPENSES.
Each Select Sector SPDR Fund sells and redeems Shares in Creation Units
principally on an in-kind basis for portfolio securities of the relevant Select
Sector Index. SHARES IN LESS THAN CREATION UNIT AGGREGATIONS ARE NOT REDEEMABLE.
An investor purchasing a Creation Unit on an in-kind basis would pay the
following expenses on a $10,000 investment (payment with a deposit of securities
included in the relevant Select Sector Index), assuming a 5% annual return.
INVESTORS SHOULD NOTE THAT THE PRESENTATION BELOW OF A $10,000 INVESTMENT IN A
CREATION UNIT IS FOR ILLUSTRATION PURPOSES ONLY, AS SHARES WILL BE ISSUED BY THE
SELECT SECTOR SPDR FUNDS ONLY IN CREATION UNITS. FURTHER, THE RETURN OF 5% AND
ESTIMATED EXPENSES ARE FOR ILLUSTRATION PURPOSES ONLY AND SHOULD NOT BE
CONSIDERED INDICATIONS OF EXPECTED SELECT SECTOR SPDR FUND EXPENSES OR
PERFORMANCE, WHICH MAY BE GREATER OR LESSER THAN THE ESTIMATES.
An investor would pay the following expenses, assuming no redemptions:
1 YEAR 3 YEARS
($) ($)
------ -------
The Basic Industries Select Sector SPDR Fund................ 66.63 208.66
The Consumer Services Select Sector SPDR Fund............... 66.63 208.66
The Consumer Staples Select Sector SPDR Fund................ 66.63 208.66
The Cyclical/Transportation Select Sector SPDR Fund......... 66.63 208.66
The Energy Select Sector SPDR Fund.......................... 66.63 208.66
The Financial Select Sector SPDR Fund....................... 66.63 208.66
The Industrial Select Sector SPDR Fund...................... 66.63 208.66
The Technology Select Sector SPDR Fund...................... 66.63 208.66
The Utilities Select Sector SPDR Fund....................... 66.63 208.66
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THE SELECT SECTOR SPDR FUNDS AND THEIR INVESTMENT OBJECTIVES
Each Select Sector SPDR Fund is a separate investment portfolio of the Trust, which is an open-end management investment company registered under the Investment Company Act of 1940 (the "1940 Act"). Each Select Sector SPDR Fund is classified as a "non-diversified" investment company under the 1940 Act.
The investment objective of each Select Sector SPDR Fund is to provide investment results that, before expenses, correspond generally to the price and yield performance of publicly traded securities in a particular sector or group of industries as represented by a specified Select Sector Index published by the AMEX. The companies included in each Select Sector Index are selected on the basis of general industry classification from the universe of companies defined by the S&P 500. The nine Select Sector Indexes upon which the Select Sector SPDR Funds are based together comprise all of the companies that are included in the S&P 500. Each Select Sector SPDR Fund's investment objective is a fundamental policy and cannot be changed unless a majority of shareholders approves the change.
There can be no assurance that a Select Sector SPDR Fund will achieve its investment objective. In this regard, please refer to the "Investment Policies and Strategies" and "Investment Considerations and Risks" sections in this Prospectus and the Statement of Additional Information.
WHO SHOULD INVEST?
Each Select Sector SPDR Fund is designed for investors who seek a relatively low-cost "passive" approach for investing in a portfolio of equity securities of companies in a particular sector or group of industries represented by a specified market Select Sector Index published by the AMEX. Taken together, the Select Sector SPDR Funds are designed to represent each of the 500 stocks included in the S&P 500. Bought and sold separately, the Select Sector SPDR Funds are intended to enable investors to tailor asset allocations within the universe of S&P 500 companies to fit their particular investment needs. Unlike actively managed equity mutual funds that attempt to "beat" market averages, each Select Sector SPDR Fund seeks to provide
investment results that, before expenses, correspond generally to the price and yield performance of its benchmark Select Sector Index.
Select Sector SPDR Funds may be suitable for long term investment in the market or market segment represented in the relevant Select Sector Index. Shares of each Select Sector SPDR Fund may also be used as an asset allocation tool or as a speculative trading instrument. Unlike many conventional mutual funds which are only bought and sold at closing net asset values, each Select Sector SPDR Fund's Shares have been designed to be tradable in a secondary market on the AMEX on an intraday basis and to be created and redeemed principally in kind in Creation Units at each day's next calculated net asset value. These arrangements are designed to protect ongoing shareholders from adverse effects on the portfolio of a Select Sector SPDR Fund that could arise from frequent cash creation and redemption transactions that affect the net asset value of such Fund. Moreover, in contrast to conventional mutual funds where redemptions can have an adverse tax impact on taxable shareholders because of the need to sell portfolio securities which, in turn, may generate taxable gain, the in-kind redemption mechanism of the Select Sector SPDR Funds generally will not lead to a tax event for ongoing shareholders.
INVESTMENT POLICIES AND STRATEGIES
Indexing Investment Approach. The Select Sector SPDR Funds are not managed according to traditional methods of "active" investment management, which involve the buying and selling of securities based upon economic, financial and market analysis and investment judgment. Instead, each Select Sector SPDR Fund, utilizing a "passive" or indexing investment approach, attempts to approximate the investment performance of its benchmark Select Sector Index by investing in a portfolio of stocks that seeks to replicate the relevant Select Sector Index or through the use of quantitative analytical procedures to approximate Select Sector Index performance.
The Adviser anticipates that, generally, each of the Select Sector SPDR Funds will hold all of the securities which comprise its benchmark Select Sector Index. There may, however, be instances where a stock in the applicable Select Sector Index is not held or is not held in the same weightings as in the Select Sector Index. In certain instances, the Adviser may choose to overweight another stock in the Select Sector Index, purchase securities not included within the Select Sector Index which the Adviser believes are appropriate to substitute for the Select Sector Index securities or utilize various combinations of other available investment techniques in seeking to track accurately the benchmark Select Sector Index or for the reasons described below. To the extent that a Select Sector SPDR Fund does not invest in every component security of its applicable Select Sector Index in the proportions dictated by the Select Sector Index, it may not track the Select Sector Index with the same degree of accuracy as an investment vehicle which does. The Adviser believes that, over time, the "tracking error" of a Select Sector SPDR Fund relative to the performance of its benchmark Select Sector Index, adjusted for the effect of Fund expenses, will be less than 5%. A tracking error of 5% means that there is a 68% probability that the net asset value of each Select Sector SPDR Fund (adjusted for the effect of Fund expenses) will be within plus or minus 5% of the relevant Select Sector Index level after one year, without modifying (or "rebalancing") the Select Sector Index or the Select Sector SPDR Fund's portfolio composition. Over time, the securities holdings of each Select Sector SPDR Fund may be rebalanced to reflect changes in the composition of the relevant Select Sector Index. A Select Sector SPDR Fund would incur transaction costs and other expenses as a result of a rebalancing. Factors such as timing differences on rebalancing, Fund expenses, taxes, the need to comply with the diversification and other requirements of the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"), and the existence of uninvested assets in a Select Sector SPDR Fund may also impact a Select Sector SPDR Fund's performance in tracking the Select Sector Index. The Adviser regularly monitors the correlation between each Select Sector SPDR Fund and its benchmark Select Sector Index and in the event that tracking error exceeds 5%, the Adviser will determine what, if any, additional investment changes may need to be made.
Each Select Sector SPDR Fund has the policy to remain as fully invested as practicable in a pool of equity securities. Each Select Sector SPDR Fund will normally invest at least 95% of its total assets in common stocks that comprise the relevant Select Sector Index. A lesser percentage may be so invested to the
extent that the Adviser needs additional flexibility to comply with the requirements of the Internal Revenue Code and other regulatory requirements or, in limited circumstances, to assist in meeting shareholder redemptions of Creation Units.
Each Select Sector SPDR Fund may invest its remaining assets in money market instruments or funds which invest exclusively in money market instruments (subject to applicable limitations under the 1940 Act), in repurchase agreements, in stocks that are in the relevant market but not the relevant Select Sector Index (as indicated above), in convertible securities, structured notes (notes on which the amount of principal repayment and interest payments are based on the movement of one or more specified factors such as the movement of a particular stock or stock index), exchange traded stock index futures, exchange traded options on futures, stock or stock indexes as well as options on the Shares. These investments may also be made temporarily to invest uncommitted cash balances or, in limited circumstances, to assist in meeting shareholder redemptions of Creation Units. See "Investment Policies and Restrictions" in the Statement of Additional Information for a discussion of the risks of these investments. At present, there are no exchange traded futures or options on the Select Sector Indexes but these investments may be available in the future. The AMEX has advised the Trust that it currently anticipates that options on the Shares will be listed on the AMEX at the same time that the Shares are available for trading, although there is no assurance in this regard. The Select Sector SPDR Funds will not use these instruments to leverage their securities holdings or for speculative purposes. Certain of the risks typically associated with such contracts, e.g., that the portfolio manager's view of future market movements may be mistaken, therefore would not be applicable to the Trust. The Select Sector SPDR Funds also will not invest in money market instruments as part of a temporary defensive strategy to protect against potential stock market declines.
Although the Select Sector Index underlying each Select Sector SPDR Fund will generally not be subject to frequent or large changes, giving the underlying portfolio many of the characteristics of a long-term investment, periodic changes in the Select Sector Index may occur as a result of capital changes, e.g., mergers, spin offs, or a change in the business or character of a component company, or additions to, or removals from, the S&P 500. Because of the passive investment management approach of each Select Sector SPDR Fund, the portfolio turnover rate is expected to be under 50%, a generally lower turnover rate than for many other investment companies. The Adviser anticipates that it will take approximately three business days for additions and deletions to the S&P 500 to be reflected in the portfolio composition of each Select Sector SPDR Fund.
Lending Securities. Each Select Sector SPDR Fund may lend securities from its holdings to brokers, dealers and other financial institutions desiring to borrow securities to complete transactions and for other purposes. Because U.S. government securities or other assets that are pledged as collateral to the Select Sector SPDR Funds in connection with these loans generate income, securities lending may enable each Select Sector SPDR Fund to earn income that may partially offset its expenses. This may reduce the effect that expenses have on a Select Sector SPDR Fund's ability to provide investment results that correspond generally to the performance of its benchmark Select Sector Index. Each Select Sector SPDR Fund will receive collateral equal to at least 100% of the current market value of the loaned securities. The Select Sector SPDR Funds may invest cash collateral in high quality short-term debt securities or in funds which invest exclusively in such securities.
Borrowing Money. Each Select Sector SPDR Fund may borrow money from a bank up to a limit of 10% of the value of its assets, but only for temporary or emergency purposes. To the extent that a Select Sector SPDR Fund borrows money, it may be leveraged; at such times, the Select Sector SPDR Fund may appreciate or depreciate in value more rapidly than its benchmark Select Sector Index.
Investment Concentration. Each Select Sector SPDR Fund will concentrate its investments in an industry to the extent that its relevant Select Sector Index concentrates in such industry.
Fundamental Policies. The concentration policy of each Select Sector SPDR Fund is a fundamental policy that may be changed only with shareholder approval. Each of the other investment policies is a non-fundamental policy that may be changed by the Board of Trustees without shareholder approval. However, shareholders would be notified prior to any material change in these policies.
DESCRIPTION OF THE SELECT SECTOR INDEXES
Each Select Sector Index is intended to give investors an efficient, modified market capitalization-based way to track the movement of baskets of the equity securities of public companies that are components of the S&P 500 selected on the basis of general industry classification.
CONSTRUCTION AND MAINTENANCE STANDARDS FOR THE SELECT SECTOR INDEXES
Each Select Sector Index has been developed and will be maintained in accordance with the following criteria:
- Each of the component securities in a Select Sector Index will be a constituent company of the S&P 500.
- Each stock in the S&P 500 will be allocated to one and only one of the Select Sector Indexes.
- Each constituent stock of the S&P 500 has been assigned to a Select Sector Index by the Index Compilation Agent. The Index Compilation Agent, after consultation with Standard & Poor's, assigns a company's stock to a particular Select Sector Index on the basis of such company's sales and earnings composition and the sensitivity of the company's stock price and business results to the common factors that affect other companies in each Select Sector Index. Standard & Poor's has sole control over the removal of stocks from the S&P 500 and the selection of replacement stocks to be added to the S&P 500. However, Standard & Poor's plays only a consulting role in the Select Sector Index assignment of the S&P 500 component stocks, which is the sole responsibility of the Index Compilation Agent.
- Each Select Sector Index is calculated by the AMEX's Index Services Group using a modified "market capitalization" methodology. This design ensures that each of the component stocks within a Select Sector Index is represented in a proportion consistent with its percentage with respect to the total market capitalization of such Select Sector Index. Under certain conditions, however, the number of shares of a component stock within the Select Sector Index may be adjusted to conform to Internal Revenue Code requirements. See "Construction and Maintenance Standards for the Select Sector Indexes" in the Statement of Additional Information.
THE BASIC INDUSTRIES SELECT SECTOR INDEX
The Basic Industries Select Sector Index consists of certain public companies that are components of the S&P 500 and that are in basic industries. Basic Industries include integrated steel products, chemicals, fibers, paper and gold. This Index was composed of 58 component stocks as of September 30, 1998.
THE CONSUMER SERVICES SELECT SECTOR INDEX
The Consumer Services Select Sector Index consists of certain public companies that are components of the S&P 500 and that are consumer services firms. Consumer services include entertainment and publishing, prepared foods, medical services, lodging and gaming. This Index was composed of 45 component stocks as of September 30, 1998.
THE CONSUMER STAPLES SELECT SECTOR INDEX
The Consumer Staples Select Sector Index consists of certain public companies that are components of the S&P 500 and that are involved in the development and production of consumer staples. Consumer staples include cosmetic and personal care, pharmaceuticals, soft drinks, tobacco and food products. This Index was composed of 69 component stocks as of September 30, 1998.
THE CYCLICAL/TRANSPORTATION SELECT SECTOR INDEX
The Cyclical/Transportation Select Sector Index consists of certain public companies that are components of the S&P 500 and that are in the development and production of cyclical products or the transportation
industry. Cyclical and transportation products include building materials, retailers, appliances, housewares, air transportation, automotive manufacturing, shipping and trucking. This Index was composed of 69 component stocks as of September 30, 1998.
THE ENERGY SELECT SECTOR INDEX
The Energy Select Sector Index consists of certain public companies that are components of the S&P 500 and that are involved in the development and production of energy products. Energy companies in the Index develop and produce crude oil and natural gas, and provide drilling and other energy related services. This Index was composed of 33 component stocks as of September 30, 1998.
THE FINANCIAL SELECT SECTOR INDEX
The Financial Select Sector Index consists of certain public companies that are components of the S&P 500 and that are involved in the development and production of financial products. Companies in the Index include a wide array of diversified financial services firms whose business lines range from investment management to commercial and business banking. This Index was composed of 75 component stocks as of September 30, 1998.
THE INDUSTRIAL SELECT SECTOR INDEX
The Industrial Select Sector Index consists of certain public companies that are components of the S&P 500 and that are involved in the development and production of industrial products, including electrical equipment, construction equipment, waste management services and industrial machinery products. This Index was composed of 35 component stocks as of September 30, 1998.
THE TECHNOLOGY SELECT SECTOR INDEX
The Technology Select Sector Index consists of certain public companies that are components of the S&P 500 and that are involved in the development and production of technology products. Technology products include products developed by defense manufacturers, telecommunications equipment, microcomputer components, integrated computer circuits and process monitoring systems. This Index was composed of 77 component stocks as of September 30, 1998.
THE UTILITIES SELECT SECTOR INDEX
The Utilities Select Sector Index consists of certain public companies that are components of the S&P 500 and are in the utilities industry. Utilities include communication services, electrical power providers and natural gas distributors. This Index was composed of 39 component stocks as of September 30, 1998.
INVESTMENT LIMITATIONS
Each Select Sector SPDR Fund intends to observe certain limitations on its investment practices. Generally, a Select Sector SPDR Fund may not:
- lend cash or other assets, except that a Select Sector SPDR Fund may lend its securities holdings in an amount not to exceed 33% of the value of its total assets;
- borrow money, except from banks for temporary or emergency purposes in an amount up to 10% of the value of its total assets, and a Select Sector SPDR Fund will not purchase securities while borrowings in excess of 5% of its total assets are outstanding (this limitation on purchases does not apply to acceptance by the Select Sector SPDR Fund of a deposit principally of securities included in the relevant Select Sector Index for creation of Creation Units);
- pledge or otherwise encumber its assets, except to secure permitted borrowings (for these purposes collateral arrangements with respect to options and futures are not deemed to involve a pledge of assets).
These investment limitations and certain additional limitations described in the Statement of Additional Information may be changed only with shareholder approval.
INVESTMENT CONSIDERATIONS AND RISKS
General Risks
You can lose money by investing in a Select Sector SPDR Fund.
Unlike many investment companies, the Select Sector SPDR Funds are not actively "managed." Therefore, a Select Sector SPDR Fund would not sell a stock because the stock's issuer was in financial trouble, unless that stock is removed from the Select Sector SPDR Fund's benchmark Select Sector Index. An investment in a Select Sector SPDR Fund involves risks similar to those of investing in any fund of equity securities traded on exchanges, such as market fluctuations caused by such factors as economic and political developments, changes in interest rates and perceived trends in stock prices. You should anticipate that the value of the Shares will decline, more or less, in correspondence with any decline in value of the Select Sector SPDR Fund's applicable Select Sector Index.
Lack of Diversification. Each Select Sector SPDR Fund intends to maintain the required level of diversification so as to qualify as a "regulated investment company" for purposes of the Internal Revenue Code, in order to avoid liability for federal income tax to the extent that its earnings are distributed to shareholders. Compliance with the diversification requirements of the Internal Revenue Code could limit the investment flexibility of a Select Sector SPDR Fund.
The stocks of particular issuers, or of issuers in particular industries, may represent a large portion of a Select Sector Index. Consequently, a Select Sector SPDR Fund may be more adversely affected by the performance of one security (or group of securities) and be subject to greater price volatility than a more diversified investment company. Also, a Select Sector SPDR Fund may be more susceptible to any single economic, political or regulatory occurrence than the securities holdings of an investment company that is more broadly diversified than the Select Sector SPDR Fund.
Absence of Prior Active Market. Each Select Sector SPDR Fund is a newly organized series of an investment company with no operating history. While the Shares have been approved for listing on the AMEX, subject to notice of issuance, there can be no assurance that active trading markets for the Shares will develop or be maintained. The Distributor does not maintain a secondary market in the Shares. The fact that a number of similar products, such as SPDRs, MidCap SPDRs, DIAMONDS(SM)* and 17 series of World Equity Benchmark Shares(SM) ("WEBS")**, have traded on the AMEX for varying periods of time (up to five and one half years) may or may not be indicative of the chances for active trading and liquidity in the Shares of the Funds described herein.
Trading Issues. Trading in Shares on the AMEX may be halted due to market conditions or for reasons that, in the view of the AMEX, make trading in Shares inadvisable. In addition, trading in Shares on the AMEX is subject to trading halts caused by extraordinary market volatility pursuant to AMEX "circuit breaker" rules. There can be no assurance that the requirements of the AMEX necessary to maintain the listing of a Select Sector SPDR Fund will continue to be met or will remain unchanged.
Fluctuation of Net Asset Value. The net asset value of the Shares will fluctuate with changes in the market value of a Select Sector SPDR Fund's securities holdings. The market prices of Shares will fluctuate in accordance with changes in net asset value and supply and demand on the AMEX. The Adviser cannot predict whether Shares will trade below, at or above their net asset value. Price differences may be due, in large part, to the fact that supply and demand forces at work in the secondary trading market for Shares will be closely related to, but not identical to, the same forces influencing the prices of the stocks of the Select Sector Index trading individually or in the aggregate at any point in time. However, given that Shares can be created
* DIAMONDS is a service mark of Dow Jones, Inc.
** WEBS and World Equity Benchmark Shares are service marks of Morgan
Stanley Group, Inc.
and redeemed in Creation Units (unlike shares of many closed-end funds, which frequently trade at appreciable discounts from, and sometimes at premiums to, their net asset value), the Adviser believes that large discounts or premiums to the net asset value of Shares should not be sustained.
Foreign Investments. Each Select Sector SPDR Fund may invest in foreign securities or American Depository Receipts, if any, included in its benchmark Select Sector Index. Foreign investments may involve additional risks and considerations. These risks include, for example, fluctuations in foreign currency, as well as the political and economic risks of an issuer's country. Securities of foreign companies may be more volatile than securities of U.S. companies. In addition, many European countries are about to adopt a single European currency, the euro (the "Euro Conversion"). The consequences of the Euro Conversion for foreign exchange rates, interest rates and the value of European securities eligible for purchase by a Select Sector SPDR Fund are presently unclear. Such consequences may adversely affect the value and/or increase the volatility of securities held by a Select Sector SPDR Fund.
Lending of Securities. Although each Select Sector SPDR Fund receives collateral in connection with all loans of its securities holdings, a Select Sector SPDR Fund would be exposed to a risk of loss should a borrower default on its obligation to return the borrowed securities (e.g., the loaned securities may have appreciated beyond the value of the collateral held by the Fund). In addition, a Select Sector SPDR Fund bears the risk of loss of any cash collateral that it invests.
Leverage. To the extent that a Select Sector SPDR Fund borrows money, it may be leveraged. Leveraging generally exaggerates the effect on net asset value of any increase or decrease in the market value of a Select Sector SPDR Fund's portfolio securities.
Year 2000. The services provided to the Select Sector SPDR Funds by their various service providers depend on the smooth functioning of their computer systems. Many computer software systems in use today cannot recognize the year 2000, but revert to 1900 or some other date, due to the manner in which dates were encoded and calculated. That failure could have a negative impact on the handling of securities trades, pricing and account services. The Select Sector SPDR Funds' service providers have been working actively on necessary changes to their own computer systems to prepare for the year 2000 and expect that their systems will be adapted before that date, but there can be no assurance that they will be successful, or that interaction with other non-complying computer systems will not impair their services at that time.
ADDITIONAL RISKS OF EACH SELECT SECTOR SPDR FUND
Each Select Sector SPDR Fund is subject to the additional risks associated with concentrating its investments in companies in the market sector that its benchmark Select Sector Index targets. These risks include:
The Basic Industries Select Sector SPDR Fund. Basic industries in this Select Sector Index include integrated steel products, chemicals, fibers, paper and gold. Many companies in this sector are significantly affected by the level and volatility of commodity prices, the exchange value of the dollar, import controls, and worldwide competition. At times, worldwide production of industrial materials has exceeded demand as a result of over-building or economic downturns, leading to poor investment returns or losses. Other risks may include liability for environmental damage, depletion of resources, and mandated expenditures for safety and pollution control. The success of equipment manufacturing and distribution companies is closely tied to overall capital spending levels, which are influenced by an individual company's profitability and broader factors such as interest rates and cross-border competition. The industrial sector may also be affected by economic cycles, technical progress, labor relations, and government regulations.
The Consumer Services Select Sector SPDR Fund. The success of consumer product manufacturers and retailers is tied closely to the performance of the overall domestic and international economy, interest rates, competition, and consumer confidence. Success depends heavily on disposable household income and consumer spending. Changes in demographics and consumer tastes can also affect the demand for, and success of, consumer products in the marketplace.
The Consumer Staples Select Sector SPDR Fund. Companies in this Select Sector Index are involved in the development and production of consumer staples. These products include cosmetic and personal care, pharmaceuticals, soft drinks, tobacco and food products. Such companies are subject to government regulation affecting the permissibility of using various food additives and production methods, which regulations could affect company profitability. Tobacco companies may be adversely affected by the adoption of proposed legislation and/or by litigation. Also, the success of food, soft drink, and fashion-related products may be strongly affected by fads, marketing campaigns and other factors affecting supply and demand.
The Cyclical/Transportation Select Sector SPDR Fund. Companies in this Select Sector Index are in the transportation industry or involved in the development of cyclical products. These products include building materials, retailers, appliances, housewares, air transportation, automotive manufacturing, shipping and trucking. Companies involved in the building industry may be affected by a variety of factors such as government spending on housing subsidies, public works, and transportation facilities. Other factors include changes in interest rates, consumer confidence and spending, taxation, demographic patterns, the level of new and existing home sales and other economic activity. Transportation stocks are cyclical and have occasional sharp price movements which may result from changes in the economy, fuel prices, labor agreements and insurance costs. The United States has been deregulating these industries but it is uncertain whether this trend will continue and what its effect will be. See also "The Consumer Services Select Sector SPDR Fund".
The Energy Select Sector SPDR Fund. Energy companies in this Select Sector Index develop and produce crude oil and natural gas and provide drilling and other energy resources production and distribution related services. Stock prices for these types of companies are affected by supply and demand both for their specific product or service and for energy products in general. The price of oil and gas, exploration and production spending, government regulation, world events and economic conditions will likewise affect the performance of these companies. Correspondingly, securities of companies in the energy field are subject to swift price and supply fluctuations caused by events relating to international politics, energy conservation, the success of exploration projects, and tax and other governmental regulatory policies. Weak demand for the companies' products or services or for energy products and services in general, as well as negative developments in these other areas, would adversely impact this Select Sector SPDR Fund's performance.
The Financial Select Sector SPDR Fund. Companies in this Select Sector Index include a wide array of diversified financial services firms whose business lines range from investment management to commercial and business banking. Financial services companies are subject to extensive governmental regulation which may limit both the amounts and types of loans and other financial commitments they can make, and the interest rates and fees they can charge. Profitability is largely dependent on the availability and cost of capital funds, and can fluctuate significantly when interest rates change. Credit losses resulting from financial difficulties of borrowers can negatively impact the sector. Insurance companies may be subject to severe price competition. Legislation is currently being considered that would reduce the separation between commercial and investment banking businesses. If enacted, this legislation could significantly impact the sector and the Fund.
The Industrial Select Sector SPDR Fund. Companies in this Select Sector Index are involved in the development and production of industrial products, including construction equipment, waste management services, and industrial machinery products. Stock prices for these types of companies are affected by supply and demand both for their specific product or service and for industrial sector products in general. Government regulation, world events and economic conditions will likewise affect the performance of these companies. See also "The Basic Industries Select Sector SPDR Fund", "The Consumer Services Select Sector SPDR Fund" and "The Cyclical/Transportation Select Sector SPDR Fund".
The Technology Select Sector SPDR Fund. Technology companies in this Select Sector Index include companies that are involved in the development and production of technology products. Those products include products developed by defense manufacturers, telecommunications equipment, microcomputer components, integrated computer circuits and process monitoring systems. The financial condition of, and investor interest in, defense companies are heavily influenced by governmental defense spending policies. Defense spending is under pressure from efforts to control the U.S. budget. Competitive pressures may have a
significant effect on the financial condition of companies in the technology sector. Also, many of the products and services offered by technology companies are subject to the risk of rapid obsolescence.
The Utilities Select Sector SPDR Fund. Utilities included in this Select Sector Index include communication services, electrical power providers and natural gas distributors. The rates that traditional regulated utility companies may charge their customers generally are subject to review and limitation by governmental regulatory commissions. Although rate changes of a utility usually fluctuate in approximate correlation with financing costs due to political and regulatory factors, rate changes ordinarily occur only following a delay after the changes in financing costs. This factor will tend to favorably affect a regulated utility company's earnings and dividends in times of decreasing costs, but conversely, will tend to affect adversely earnings and dividends when costs are rising. The value of regulated utility debt securities (and, to a lesser extent, equity securities) tends to have an inverse relationship to the movement of interest rates. Certain utility companies have experienced full or partial deregulation in recent years. These utility companies are frequently more similar to industrial companies in that they are subject to greater competition and have been permitted by regulators to diversify outside of their original geographic regions and their traditional lines of business. These opportunities may permit certain utility companies to earn more than their traditional regulated rates of return. Some companies, however, may be forced to defend their core business and may be less profitable.
Among the risks that may affect utility companies are the following: risks of increases in fuel and other operating costs; the high cost of borrowing to finance capital construction during inflationary periods; restrictions on operations and increased costs and delays associated with compliance with environmental and nuclear safety regulations; and the difficulties involved in obtaining natural gas for resale or fuel for generating electricity at reasonable prices. Other risks include those related to the construction and operation of nuclear power plants; the effects of energy conservation and the effects of regulatory changes, such as the possible adverse effects on profits of recent increased competition among telecommunications companies and the uncertainties resulting from such companies' diversification into new domestic and international businesses, as well as agreements by any such companies linking future rate increases to inflation or other factors not directly related to the actual operating profits of the enterprise.
You should consider the risks of investing in each Select Sector SPDR Fund that are more fully discussed in the Statement of Additional Information.
MANAGEMENT
Board of Trustees. The Board of Trustees of the Trust has responsibility for the overall management of each Select Sector SPDR Fund, including general supervision of the Adviser and other service providers. A list of the Trustees and the Trust officers, and their present positions and principal occupations are provided in the Statement of Additional Information.
Adviser. Under the terms of an Investment Advisory Agreement, State Street serves as the Adviser to each Select Sector SPDR Fund and, subject to the supervision of the Board of Trustees, will be responsible for the investment management of the Select Sector SPDR Funds. As of June 30, 1998, the Adviser managed approximately $470.3 billion in assets, including $225.2 billion in index funds. The Adviser's principal business address is 225 Franklin Street, Boston, Massachusetts 02210.
For the services provided to the Select Sector SPDR Funds under the Investment Advisory Agreement, each Fund will pay the Adviser monthly fees based on a percentage of each Fund's average daily net assets at the annual rate of .05%. From time to time, the Adviser may waive all or a portion of its fee.
Administrator, Custodian, and Transfer Agent. State Street is the
administrator (the "Administrator") for each Select Sector SPDR Fund, the
custodian (the "Custodian") of each Select Sector SPDR Fund's assets, and
provides transfer agency services (the "Transfer Agent") to the Select Sector
SPDR Funds. State Street is paid a "unitary fee" for these services. See "Annual
Fund Operating Expenses." The unitary fee is equal to the greater of: (a) a
sliding scale fee calculated as follows: (i) .10% of average daily net assets of
the Trust up to the first $4.5 billion of net assets (such $4.5 billion to be
increased by $500 million each time a new Select Sector SPDR Fund is added);
(ii) .08% of average daily net assets up to the next $4.5 billion of net
assets of the Trust (such $4.5 billion to be increased by $500 million each time a new Select Sector SPDR Fund is added); and (iii) .06% of average daily net assets on the remainder of net assets; or (b) a minimum fee of $3.15 million increased by $350,000 each time a new Select Sector SPDR Fund is added. The minimum fee will not be in effect for the first two years of the Trust's operation. Each Select Sector SPDR Fund will also bear all other expenses of its operation.
Lending Agent. State Street, the lending agent for the Trust, will cause the delivery of loaned securities from each Select Sector SPDR Fund to borrowers, arrange for the return of loaned securities to the Select Sector SPDR Fund at the termination of the loans, request deposit of collateral, monitor daily the value of the loaned securities and collateral, request that borrowers add to the collateral when required by the loan agreements, and provide recordkeeping and accounting services necessary for the operation of the program. For its services, the lending agent will receive a portion of the net investment income, if any, earned on the collateral for the securities loaned.
Distributor. ALPS Mutual Funds Services, Inc. is the Distributor of each Select Sector SPDR Fund's Shares. The Distributor will not distribute Shares in less than Creation Units, and it does not maintain a secondary market in the Shares. The Distributor may enter into selected dealer agreements with other broker-dealers or other qualified financial institutions for the sale of Creation Units of Shares.
The Board of Trustees of the Trust has adopted for each Select Sector SPDR Fund a distribution plan pursuant to Rule 12b-1 under the 1940 Act. In accordance with its Rule 12b-1 plan, each Fund is authorized to pay an amount up to .25% of its average daily net assets per annum for certain distribution-related activities. Payments will be made by each Select Sector SPDR Fund to compensate the Distributor for distribution-related services in an amount calculated daily and payable monthly as follows: (1) the Fund's allocable portion of the amount of $225,000 per annum for acting as agent of the Fund with respect to the sale of Creation Units of its Shares; and (2) for administering the Select Sector SPDR Funds' 12b-1 plans, each Fund's allocable portion of .01% per annum of the average aggregate daily net assets of all Funds that have adopted a 12b-1 plan up to and including aggregate net assets of $1 billion; plus .0075% per annum of aggregate net assets in excess of $1 billion up to and including $2.5 billion; plus .005% per annum of aggregate net assets in excess of $2.5 billion up to and including $5 billion plus .0025% of aggregate net assets in excess of $5 billion. Subject to the approval of the Board of Trustees of the Trust, including a majority of the Trustees who are not "interested persons" of the Trust (as such term is defined in the 1940 Act) and have no direct or indirect financial interest in the operation of the Rule 12b-1 plans, additional fees not to exceed .25% of average daily net assets per annum after taking into account the compensation payments to the Distributor (described above) may be paid pursuant to investor services agreements entered into by the Distributor with broker-dealers or other financial institutions to provide distribution assistance and shareholder support, account maintenance and educational and promotional services (which may include compensation and sales incentives to the registered brokers or other sales personnel of the broker-dealer or other financial entity that is a party to an investor services agreement). Fees paid to any one broker-dealer or financial institution pursuant to an investor services agreement may not exceed .10% per annum of a Fund's average daily net assets. To the extent any additional payments may be made without exceeding .25% of average daily net assets per annum after taking into account compensation payments to the Distributor and payments pursuant to investor services agreements, payments may be made to reimburse the Distributor or another party pursuant to arrangements with the Distributor for promotional and marketing activities related to the sale of Shares including, but not limited to, printing and distribution of prospectuses and statements of additional information for investors and the production and distribution of advertisement and other promotional, sales and marketing materials relating to the sale of Shares. Distribution expenses incurred in any one year in excess of .25% of a Fund's average daily net assets may be reimbursed in subsequent years subject to the annual .25% limit. The fees paid by a Select Sector SPDR Fund under its 12b-1 plan as compensation for distribution, marketing or shareholder services for that Fund may exceed the expenses actually incurred by the recipients of such fees. Each 12b-1 plan and related agreement is subject to approval annually by the Board of Trustees in accordance with the requirements of Rule 12b-1. For additional information, see "Management of the Trust -- The Distributor" in the Statement of Additional Information. The Distributor's principal business address is 370 17th Street, Suite 3100, Denver, CO 80202.
INDEX LICENSE
Standard & Poor's, the AMEX and Merrill Lynch have entered into a license agreement with respect to each Select Sector SPDR Fund's Select Sector Index. Pursuant to such license agreement, the Trust has entered into a sub-license agreement which provides that each Select Sector SPDR Fund will pay a one time fee to Standard & Poor's of $5,000 (the "One Time Fee"). In addition, the Trust will pay a sub-license fee per annum (i) to Standard & Poor's equal to the greater of .03% of the aggregate net assets of the Trust or $450,000 (the "Minimum Annual Fee"), and (ii) to Merrill Lynch equal to .03% of the aggregate net assets of the Trust. The Minimum Annual Fee (plus the One Time Fee) is payable in full to Standard & Poor's during the first year of the sub-license agreement six months from the date after the first day of trading of any Select Sector SPDR Fund on the AMEX (the "First Trading Day"). Thereafter, the Minimum Annual Fee is payable in full on each anniversary of the First Trading Day. The fee to Merrill Lynch is payable on a quarterly basis. Each Select Sector SPDR Fund will pay its proportionate share of the annual sub-license fees based on the relative net assets of such Fund.
SHAREHOLDER GUIDE
DETERMINATION OF NET ASSET VALUE
Net asset value per Share for each Select Sector SPDR Fund is computed by dividing the value of the net assets of such Select Sector SPDR Fund (i.e., the value of its total assets less total liabilities) by its total number of Shares outstanding. Expenses and fees, including the management, administration and distribution fees, are accrued daily and taken into account for purposes of determining net asset value. The net asset value of each Select Sector SPDR Fund is calculated by the Custodian and determined each business day after the close of trading (ordinarily 4:00 p.m., Eastern time) of the New York Stock Exchange ("NYSE").
BUYING AND SELLING SELECT SECTOR SPDRS
The Select Sector SPDRs have been approved for listing and secondary trading on the AMEX, subject to notice of issuance. If you buy or sell Select Sector SPDRs in the secondary market, you will 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. The Select Sector SPDRs will trade on the AMEX at prices that may differ to varying degrees from the daily net asset values of the Shares. Given, however, that Select Sector SPDRs can be issued and redeemed in Creation Units, the Adviser believes that large discounts and premiums to net asset value should not be sustained for very long.
The AMEX disseminates every fifteen (15) seconds through the facilities of the Consolidated Tape Association the value of each Select Sector Index and an amount representing on a per Share basis the sum of the "Dividend Equivalent Payment" effective through and including the previous business day, plus the current value of the "Deposit Securities" (see "Creation and Redemption of Creation Units"). The Select Sector SPDR Funds are not involved in, or responsible for, the calculation or dissemination of such amount and make no warranty as to its accuracy.
The Depository Trust Corporation ("DTC") serves as securities depository for the Shares. The Shares may be held only in book-entry form; stock certificates will not be issued. DTC, or its nominee, is the record or registered owner of all outstanding Select Sector SPDR Fund Shares. Beneficial ownership of Shares will be shown on the records of DTC or its participants (described below). Beneficial owners of Shares are not entitled to have Shares registered in their names, will not receive or be entitled to receive physical delivery of certificates in definitive form and are not considered the registered holder thereof. Accordingly, to exercise any rights of a holder of Shares, each beneficial owner must rely on the procedures of (i) DTC; (ii) "DTC Participants", i.e., securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations, some of whom (and/or their representatives) own DTC; and (iii) "Indirect Participants", i.e., brokers, dealers, banks and trust companies that clear through or maintain a custodial relationship with a DTC Participant, either directly or indirectly, through which such beneficial owner holds its interests. The Trust understands that under existing industry practice, in the event the Trust requests any action of holders of Shares, or a beneficial owner desires to take any action that DTC, as the record owner of all outstanding
Shares, is entitled to take, DTC would authorize the DTC Participants to take such action and that the DTC Participants would authorize the Indirect Participants and beneficial owners acting through such DTC Participants to take such action and would otherwise act upon the instructions of beneficial owners owning through them. As described above, the Trust recognizes DTC or its nominee as the owner of all Shares for all purposes. For more information, see the section entitled "Book Entry Only System" in the Statement of Additional Information.
The Trust will issue through DTC Participants to its shareholders semi-annual reports containing unaudited financial statements and annual reports containing financial statements audited by independent auditors approved by the Trust's Trustees and by the shareholders when meetings are held and such other information as may be required by applicable laws, rules and regulations. Beneficial owners also receive annually notification as to the tax status of the Trust's distributions.
CREATION AND REDEMPTION OF CREATION UNITS
Each Select Sector SPDR Fund issues Shares (through the Distributor) and redeems Shares (through the Transfer Agent) only in Creation Units (50,000 Shares per Creation Unit) at their net asset value on a continuous basis. Set forth below is a brief description of the procedures applicable to creation and redemption of Creation Units. For more detailed information, see "Creation and Redemption of Creation Units" in the Statement of Additional Information.
Creation
In order to create (i.e., purchase) Creation Units of a Select Sector SPDR Fund, an investor must deposit a designated portfolio of equity securities constituting a substantial replication, or a representation, of the stocks included in the relevant Select Sector SPDR Fund's Select Sector Index (the "Deposit Securities") and generally make a small cash payment referred to as the "Cash Component." The list of the names and the number of shares of the Deposit Securities is made available by the Custodian through the facilities of the National Securities Clearing Corporation, immediately prior to the opening of business on the AMEX. The Cash Component represents the difference between the net asset value of a Creation Unit and the Deposit Securities, and includes the Dividend Equivalent Payment. The Dividend Equivalent Payment is an amount intended to enable a Select Sector SPDR Fund to make a distribution of dividends on the next dividend payment date as if all the portfolio securities of the Fund had been held for the entire dividend period. See the Statement of Additional Information for a description as to the manner in which the Dividend Equivalent Payment is calculated
Orders must be placed in proper form by or through either (i) a "Participating Party", i.e., a broker-dealer or other participant in the clearing process of the Continuous Net Settlement System of the National Securities Clearing Corporation (the "Clearing Process"); or (ii) a DTC Participant, that, in either case, has entered into an agreement with the Trust, the Distributor and the Transfer Agent, with respect to creations and redemptions of Creation Units ("Participant Agreement"). Investors should contact the Distributor for the names of Participating Parties and/or DTC Participants that have signed a Participant Agreement. All orders must be placed for one or more whole Creation Units of Shares of a Select Sector SPDR Fund and must be received by the Distributor in proper form no later than the closing time of the NYSE (ordinarily 4:00 p.m. New York time) ("Closing Time") in order to be effected based on the net asset value of Shares of such Select Sector SPDR Fund as determined on such date.
Orders may be effected through the Clearing Process or outside the Clearing Process. An order to create Creation Units through the Clearing Process (through a Participating Party), or outside the Clearing Process (through a DTC Participant), is deemed received by the Distributor on the date transmitted if the order is received by the Distributor no later than the Closing Time on such date and all other procedures set forth in the Participant Agreement are followed. However, in the case of orders effected outside the Clearing Process, if the Custodian does not receive the requisite Deposit Securities and the Cash Component by 11:00 a.m. and 2:00 p.m. New York time, respectively, on the next business day immediately following the transmittal date,
the order will be cancelled. Any order may be rejected under certain limited circumstances which are specified in the Statement of Additional Information.
A fixed transaction fee of $1,000 is applicable to each creation transaction regardless of the number of Creation Units created in the transaction. An additional charge of up to three (3) times the fixed transaction fee (for a total charge of $4,000) may be imposed with respect to transactions effected outside the Clearing Process (through a DTC Participant) and in the limited circumstances specified in the Statement of Additional Information in which any cash can be used in lieu of Deposit Securities to create Creation Units. Shares may be issued in advance of receipt of Deposit Securities subject to various conditions including a requirement to maintain on deposit with the Trust cash at least equal to 115% of the market value of the missing Deposit Securities. Any such transaction effected must be effected outside the Clearing Process. See "Creation and Redemption of Creation Units" in the Statement of Additional Information.
Legal Restrictions on Transactions in Certain Stocks. An investor subject to a legal restriction with respect to a particular stock required to be deposited in connection with the creation of a Creation Unit may, at the Fund's discretion, be permitted to deposit an equivalent amount of cash in substitution for any stock which would otherwise be included in the Deposit Securities applicable to the creation of a Creation Unit.
Redemption
Shares may be redeemed only in Creation Units at their net asset value and only on a day the NYSE is open for business. The Custodian makes available immediately prior to the opening of business on the AMEX, through the facilities of the National Securities Clearing Corporation, the list of the names and the number of Shares of each Select Sector SPDR Fund's portfolio securities that will be applicable that day to redemption requests in proper form ("Fund Securities"). Fund Securities received on redemption may not be identical to Deposit Securities which are applicable to creations of Creation Units. Unless cash redemptions are available or specified for a particular Select Sector SPDR Fund, the redemption proceeds consist of the Fund Securities, plus cash in an amount equal to the difference between the net asset value of the Shares being redeemed as next determined after receipt of a redemption request in proper form, and the value of the Fund Securities (the "Cash Redemption Amount"), less the applicable redemption fee. Should the Fund Securities have a value greater than the net asset value of the Shares, a compensating cash payment to the Trust equal to the differential will be required to be arranged for by or on behalf of the redeeming shareholder by the Participating Party or DTC Participant, as the case may be. The calculation of the value of the Fund Securities and the Cash Redemption Amount to be delivered to the redeeming shareholder(s) will be made by the Custodian according to procedures set forth herein under "Determination of Net Asset Value" (and in the Statement of Additional Information) computed on the business day on which a redemption order is deemed received by the Distributor. For more detail, see "Creation and Redemption of Creation Units" in the Statement of Additional Information.
Orders to redeem Creation Units of a Select Sector SPDR Fund may only be
effected by or through a Participating Party (with respect to redemptions
through the Clearing Process) or a DTC Participant (with respect to redemptions
outside the Clearing Process). An order to redeem through the Clearing Process
is deemed received on the date of transmittal if such order is received by the
Transfer Agent prior to the Closing Time on the date of transmittal and all
other procedures set forth in the Participant Agreement are properly followed.
An order to redeem outside the Clearing Process is deemed received by the
Transfer Agent on the date of transmittal if: (i) such order is received by the
Transfer Agent no later than 4:00 p.m., New York time, on the transmittal date;
(ii) such order is accompanied or proceeded by the requisite number of Shares
specified in the order, which delivery must be made through DTC to the Custodian
no later than 11:00 a.m., New York time, on the next business day after the
transmittal date; and (iii) all other procedures set forth in the Participant
Agreement are followed.
A fixed transaction fee of $1,000 is applicable to each redemption transaction regardless of the number of Creation Units redeemed in the transaction. An additional charge of up to three (3) times the fixed transaction fee (for a total charge of $4,000) may be charged with respect to transactions effected outside the
Clearing Process and in the limited circumstances specified in the Statement of Additional Information in which any cash may be used in lieu of securities to redeem Creation Units.
Investors must accumulate enough Shares of a Select Sector SPDR Fund in the secondary market to constitute a Creation Unit in order to redeem such Shares. The accumulation of such Shares requires that there be sufficient liquidity in the public market to assemble the required number of Shares and will be subject to brokerage and other costs. See "Shareholder Transaction Expenses" under "Summary of Select Sector Fund Expenses" for the approximate cost of a Creation Unit of Shares.
Legal Restrictions on Transactions in Certain Stocks. An investor subject to a legal restriction with respect to a particular stock included in the Fund Securities applicable to the redemption of a Creation Unit may, at the Fund's discretion, be paid an equivalent amount of cash.
DISTRIBUTIONS
Dividends and Capital Gains. As a Select Sector SPDR Fund shareholder, you are entitled to your share of the Fund's income and net realized gains on its investments. Each Select Sector SPDR Fund pays out substantially all of its net earnings to its shareholders as "distributions."
Each Select Sector SPDR Fund typically earns income dividends from stocks and interest from debt securities. These amounts, net of expenses, are passed along to Fund shareholders as "income dividend distributions." Each Select Sector SPDR Fund realizes capital gains or losses whenever it sells securities. Net capital gains are distributed to shareholders as "capital gain distributions."
Income dividends, if any, are distributed to shareholders quarterly. Net capital gains are distributed at least annually. Dividends may be declared and paid more frequently to improve Select Sector Index tracking or to comply with the distribution requirements of the Internal Revenue Code. In addition, each Select Sector SPDR Fund intends to distribute at least annually amounts representing the full dividend yield net of expenses on the underlying investment securities, as if the Select Sector SPDR Fund owned the underlying investment securities for the entire dividend period. As a result, some portion of each distribution may result in a return of capital. You will be notified regarding the portion of the distribution which represents a return of capital.
Distributions in cash may be reinvested automatically in additional whole Shares if the broker through which you purchased Shares makes such option available.
TAX MATTERS
As with any investment, you should consider how your Select Sector SPDR Fund investment will be taxed. The tax information in this Prospectus is provided as general information. You should consult your own tax professional about the tax consequences of an investment in a Select Sector SPDR Fund.
Unless your investment in a Select Sector SPDR Fund is through a tax-exempt entity or taxed-deferred retirement account, such as a 401(k) plan, you need to be aware of the possible tax consequences when:
- The Select Sector SPDR Fund makes distributions,
- You sell Shares listed on the AMEX, and
- You create or redeem Creation Units.
Taxes on Distributions. Each Select Sector SPDR Fund will distribute any net investment income quarterly, and any net realized long-term or short-term capital gains annually. Each Select Sector SPDR Fund may also pay a special distribution at the end of the calendar year to comply with federal tax requirements. In general, your distributions are subject to federal income tax when they are paid, whether you take them in cash or reinvest them in a Select Sector SPDR Fund. Dividends paid out of a Select Sector SPDR Fund's income and net short-term gains, if any, are taxable as ordinary income. Distributions of net long-term capital gains, if any, in excess of net short-term capital losses are taxable as long-term capital gains, regardless of how long you have held the Shares.
Distributions in excess of a Select Sector SPDR Fund's current and accumulated earnings and profits are treated as a tax-free return of capital to the extent of your basis in the Shares, and as capital gain thereafter. A distribution will reduce a Select Sector SPDR Fund's net asset value per Share and may be taxable to you as ordinary income or capital gain even though, from an investment standpoint, it may constitute a return of capital.
If you are neither a lawful permanent resident nor a citizen of the United States or if you are a foreign entity, each Select Sector SPDR Fund's ordinary income dividends (which include distributions of net short-term capital gains) will generally be subject to a 30% U.S. withholding tax, unless a lower treaty rate applies.
Dividends and interest received by each Select Sector SPDR Fund may give rise to withholding and other taxes imposed by foreign countries. Tax conventions between certain countries and the United States may reduce or eliminate such taxes.
By law, your Select Sector SPDR Fund must withhold 31% of your distributions and proceeds if you have not provided a taxpayer identification number or social security number.
Taxes on AMEX-Listed Share Sales. Currently, any capital gain or loss realized upon a sale of Shares is generally treated as long-term capital gain or loss if the Shares have been held for more than one year and as short-term capital gain or loss if the Shares have been held for one year or less.
Taxes on Creations and Redemptions of Creation Units. A person who exchanges equity securities for Creation Units generally will recognize a gain or loss. The gain or loss will be equal to the difference between the market value of the Creation Units at the time and the exchanger's aggregate basis in the securities surrendered and the Cash Component paid. A person who exchanges Creation Units for equity securities will generally recognize a gain or loss equal to the difference between the exchanger's basis in the Creation Units and the aggregate market value of the securities received and the Cash Redemption Amount. The Internal Revenue Service, however, may assert that a loss realized upon an exchange of securities for Creation Units cannot be deducted currently under the rules governing "wash sales," or on the basis that there has been no significant change in economic position. Persons exchanging securities should consult their own tax advisor with respect to whether wash sale rules apply and when a loss might be deductible.
Under current federal tax laws, any capital gain or loss realized upon a redemption of Creation Units is generally treated as long-term capital gain or loss if the Shares have been held for more than one year and as a short-term capital gain or loss if the Shares have been held for one year or less.
If you create or redeem Creation Units, you will be sent a confirmation statement showing how many Shares you purchased or sold and at what price.
The foregoing discussion summarizes some of the consequences under current federal tax law of an investment in a Select Sector SPDR Fund. It is not a substitute for personal tax advice. Consult your personal tax adviser about the potential tax consequences of an investment in a Select Sector SPDR Fund under all applicable tax laws.
GENERAL INFORMATION
The Trust was organized as a Massachusetts business trust on June 10, 1998. If shareholders are required to vote on any matters, each Share outstanding would be entitled to one vote. Annual meetings of shareholders will not be held except as required by the 1940 Act and other applicable law. See the Statement of Additional Information for more information concerning the Trust's form of organization.
For purposes of the 1940 Act, Shares of the Select Sector SPDR Funds are issued by the respective Funds and the acquisition of Shares by investment companies is subject to the restrictions of section 12(d)(1) of the Act.
Each Select Sector SPDR Fund expects that, immediately prior to the commencement of trading in the Fund's Shares, ALPS Mutual Fund Services, Inc. will be the sole shareholder of its outstanding Shares. Each
Select Sector SPDR Fund cannot predict the length of time that ALPS Mutual Fund Services, Inc. will remain a control person of the Fund.
From time to time, the Select Sector SPDR Funds advertise yield and total return figures. Yield is an historical measure of dividend income, and total return is a measure of past dividend income (assuming that it has been reinvested) plus capital appreciation. Neither yield nor total return should be used to predict the future performance of a Select Sector SPDR Fund. For a more detailed description of how each Select Sector SPDR Fund computes its performance figures and how these numbers may be used in advertisements, please consult the Statement of Additional Information.
Gordon Altman Butowsky Weitzen Shalov & Wein serve as counsel to the Trust, including each Select Sector SPDR Fund. PricewaterhouseCoopers LLP serves as independent accountants and will audit each Fund's financial statement annually.
ADDITIONAL INFORMATION
This Prospectus does not contain all the information included in the Registration Statement filed with the SEC with respect to each Select Sector SPDR Fund's Shares. The Registration Statement, including this Prospectus, the Statement of Additional Information, and the exhibits may be examined at the offices of the SEC (450 Fifth Street, N.W., Washington D.C. 20549) or at the SEC's Web site (http://(1)www.sec.gov). These documents and other information concerning the Trust also may be inspected at the offices of the AMEX (86 Trinity Place, New York, New York 10006).
Shareholder inquiries may be directed to the Select Sector SPDR Funds in writing to ALPS Mutual Fund Services, Inc. at 370 17th Street, Suite 3100, Denver, CO 80202.
THE SELECT SECTOR SPDR(R) TRUST
PROSPECTUS -- 1998
A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION BUT HAS NOT YET BECOME EFFECTIVE. INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. NEITHER THIS STATEMENT OF ADDITIONAL INFORMATION NOR THE PROSPECTUS TO WHICH IT RELATES SHALL CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED NOVEMBER 16, 1998
PART B
THE SELECT SECTOR SPDR(R) TRUST
STATEMENT OF ADDITIONAL INFORMATION
DATED ___________, 1998
This Statement of Additional Information is not a Prospectus. It should be read in conjunction with the Prospectus dated , 1998 (the "Prospectus") for the Select Sector SPDR Trust (the "Trust"), as it may be revised from time to time. Capitalized terms used herein that are not defined have the same meaning as in the Prospectus, unless otherwise noted. A copy of the Prospectus for the Trust may be obtained without charge by writing to the Trust's Distributor, ALPS Mutual Funds Services, Inc., at 370 17th Street, Suite 3100, Denver, CO 80202.
"Standard & Poor's(R)", "S&P(R)", "S&P 500(R)", "Standard & Poor's
500(R)", "500", "Standard & Poor's Depositary Receipts(R)", "SPDRs(R)", "Select
Sector SPDR", "Select Sector SPDRs" and "Select Sector Standard & Poor's
Depositary Receipts" are trademarks of The McGraw-Hill Companies, Inc. and have
been licensed for use in connection with the listing and trading of Select
Sector SPDRs on the American Stock Exchange LLC (the "AMEX")
agreement. The Trust, however, is not sponsored by or affiliated with Standard & Poor's, the AMEX or Merrill Lynch.
TABLE OF CONTENTS
General Description of the Trust..................................................................................6 Investment Policies and Restrictions.............................................................................25 Special Considerations and Risks.................................................................................30 Exchange Listing and Trading.....................................................................................31 Management of the Trust..........................................................................................32 Brokerage Transactions...........................................................................................40 Book Entry Only System...........................................................................................41 Creation and Redemption of Creation Units........................................................................43 Determination of Net Asset Value.................................................................................52 Dividends and Distributions......................................................................................52 Taxes ........................................................................................................53 Capital Stock and Shareholder Reports............................................................................56 Performance and Other Information................................................................................57 Counsel and Independent Auditors.................................................................................60 Report of Independent Accountants................................................................................61 Exhibit A........................................................................................................66 |
The information contained herein regarding the Select Sector Indexes, securities markets and The Depository Trust Company ("DTC") was obtained from publicly available sources.
EACH SELECT SECTOR INDEX IS BASED ON EQUITY SECURITIES OF PUBLIC
COMPANIES THAT ARE COMPONENTS OF THE STANDARD & POOR'S 500 COMPOSITE STOCK INDEX, SELECTED ON THE BASIS OF GENERAL INDUSTRIAL CLASSIFICATION, AND INCLUDED AS CONSTITUENT SECURITIES OF A PARTICULAR SELECT SECTOR INDEX BY MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED ("MERRILL LYNCH" AND SOMETIMES REFERRED TO AS THE "INDEX COMPILATION AGENT") IN CONSULTATION WITH STANDARD & POOR'S, ("S&P"), A DIVISION OF THE MCGRAW-HILL COMPANIES, INC. THE AMERICAN STOCK EXCHANGE ACTS AS "INDEX CALCULATION AGENT" IN CONNECTION WITH THE CALCULATION AND DISSEMINATION OF EACH SELECT SECTOR INDEX.
SELECT SECTOR SPDRS ARE NOT SPONSORED, ENDORSED, SOLD OR PROMOTED BY S&P. S&P MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, TO THE OWNERS OF THE SELECT SECTOR SPDRS OR ANY MEMBER OF THE PUBLIC REGARDING THE ADVISABILITY OF INVESTING IN SECURITIES GENERALLY OR IN THE SELECT SECTOR SPDRS PARTICULARLY OR THE ABILITY OF A SELECT SECTOR SPDR FUND TO TRACK THE PERFORMANCE OF THE VARIOUS SECTORS REPRESENTED IN THE STOCK MARKET. THE STOCKS INCLUDED IN EACH SELECT SECTOR INDEX WERE SELECTED BY THE INDEX COMPILATION AGENT IN CONSULTATION WITH S&P FROM A UNIVERSE OF COMPANIES REPRESENTED BY THE S&P 500 INDEX. THE COMPOSITION AND WEIGHTINGS OF THE STOCKS INCLUDED IN EACH SELECT SECTOR INDEX CAN BE EXPECTED TO DIFFER FROM THE COMPOSITION AND WEIGHTING OF STOCKS INCLUDED IN THE CORRESPONDING S&P 500 SECTOR INDEX THAT IS PUBLISHED AND DISSEMINATED BY S&P. S&P'S ONLY RELATIONSHIP TO THE INDEX COMPILATION AGENT IS THE LICENSING OF CERTAIN TRADEMARKS AND TRADE NAMES OF S&P AND OF THE S&P 500 INDEX WHICH IS DETERMINED, COMPOSED AND CALCULATED BY S&P WITHOUT REGARD TO THE INDEX COMPILATION AGENT OR ANY SELECT SECTOR SPDR FUND. S&P HAS NO OBLIGATION TO TAKE THE NEEDS OF THE INDEX COMPILATION AGENT, THE TRUST OR THE OWNERS OF THE SELECT SECTOR SPDRS INTO CONSIDERATION IN DETERMINING, COMPOSING OR CALCULATING THE S&P 500 INDEX. S&P IS NOT RESPONSIBLE FOR AND HAS NOT PARTICIPATED IN ANY DETERMINATION OR CALCULATION MADE WITH RESPECT TO ISSUANCE OR REDEMPTION OF THE SELECT SECTOR SPDRS. S&P HAS NO OBLIGATION OR LIABILITY IN CONNECTION WITH THE ADMINISTRATION, MARKETING OR TRADING OF THE SELECT SECTOR SPDRS.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR COMPLETENESS OF THE S&P 500 INDEX, THE SELECT SECTOR INDEXES OR ANY DATA INCLUDED THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE INDEX COMPILATION AGENT, THE TRUST, OWNERS OF THE PRODUCT, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P 500 INDEX, THE SELECT SECTOR INDEXES OR ANY DATA INCLUDED THEREIN IN CONNECTION WITH THE RIGHTS LICENSED UNDER THE LICENSE AGREEMENT OR FOR ANY OTHER USE. S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE S&P 500 INDEX,
THE SELECT SECTOR INDEXES 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 LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
THE SHARES ARE NOT SPONSORED OR PROMOTED BY EITHER THE INDEX
CALCULATION AGENT OR THE INDEX COMPILATION AGENT.
NEITHER THE INDEX CALCULATION AGENT NOR THE INDEX COMPILATION AGENT MAKES ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, TO THE OWNERS OF THE SHARES OF ANY SELECT SECTOR SPDR FUND OR ANY MEMBER OF THE PUBLIC REGARDING THE ABILITY OF THE INDEXES IDENTIFIED HEREIN TO TRACK STOCK MARKET PERFORMANCE. THE SELECT SECTOR INDEXES IDENTIFIED HEREIN ARE DETERMINED, COMPOSED AND CALCULATED WITHOUT REGARD TO THE SHARES OF ANY SELECT SECTOR SPDR FUND OR THE ISSUER THEREOF. THE INDEX CALCULATION AGENT AND THE INDEX COMPILATION AGENT ARE NOT RESPONSIBLE FOR, NOR HAVE THEY PARTICIPATED IN, THE DETERMINATION OF THE TIMING OF, PRICES OF, OR QUANTITIES OF THE SHARES OF ANY SELECT SECTOR SPDR FUND TO BE ISSUED, NOR IN THE DETERMINATION OR CALCULATION OF THE EQUATION BY WHICH THE SHARES ARE REDEEMABLE. THE INDEX CALCULATION AGENT AND THE INDEX COMPILATION AGENT HAVE NO OBLIGATION OR LIABILITY TO OWNERS OF THE SHARES OF ANY SELECT SECTOR SPDR FUND IN CONNECTION WITH THE ADMINISTRATION, MARKETING OR TRADING OF THE SHARES OF ANY SELECT SECTOR SPDR FUND.
ALTHOUGH MERRILL LYNCH -- AS THE INDEX COMPILATION AGENT -- SHALL OBTAIN AND PROVIDE INFORMATION TO THE AMEX -- AS THE INDEX CALCULATION AGENT -- FROM SOURCES WHICH IT CONSIDERS RELIABLE, THE INDEX COMPILATION AGENT AND THE INDEX CALCULATION AGENT DO NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF ANY SELECT SECTOR INDEX OR ANY DATA INCLUDED THEREIN. THE INDEX COMPILATION AGENT AND THE INDEX CALCULATION AGENT MAKE NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE TRUST AS LICENSEE, LICENSEE'S CUSTOMERS AND COUNTERPARTIES, OWNERS OF THE SHARES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE SELECT SECTOR INDEXES OR ANY DATA INCLUDED THEREIN IN CONNECTION WITH THE RIGHTS LICENSED AS DESCRIBED HEREIN OR FOR ANY OTHER USE. THE INDEX COMPILATION AGENT AND THE INDEX CALCULATION AGENT MAKE NO EXPRESS OR IMPLIED WARRANTIES, AND EACH HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE SELECT SECTOR INDEXES OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL THE INDEX COMPILATION AGENT OR THE INDEX CALCULATION AGENT HAVE ANY
LIABILITY FOR ANY DIRECT, INDIRECT, SPECIAL, PUNITIVE, CONSEQUENTIAL OR ANY OTHER DAMAGES (INCLUDING LOST PROFITS) EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
GENERAL DESCRIPTION OF THE TRUST
The Trust is an open-end management investment company. The Trust currently consists of nine investment series (each, a "Select Sector SPDR Fund" or "Fund" and collectively the "Select Sector SPDR Funds" or "Funds"). The Trust was organized as a Massachusetts business trust on June 10, 1998. The shares of each Select Sector SPDR Fund are referred to herein as "Shares." The Select Sector SPDR Funds offered by the Trust are: The Basic Industries Select Sector SPDR Fund; The Consumer Services Select Sector SPDR Fund; The Consumer Staples Select Sector SPDR Fund; The Cyclical/Transportation Select Sector SPDR Fund; The Energy Select Sector SPDR Fund; The Financial Select Sector SPDR Fund; The Industrial Select Sector SPDR Fund; The Technology Select Sector SPDR Fund; and The Utilities Select Sector SPDR Fund. The investment objective of each Select Sector SPDR Fund is to provide investment results that, before expenses, correspond generally to the price and yield performance of publicly traded equity securities of companies in a particular sector or group of industries, as represented by a specified market sector index (each a "Select Sector Index"). Each Select Sector SPDR Fund is managed by State Street Bank and Trust Company ("State Street" or the "Adviser").
Each Select Sector SPDR Fund offers and issues Shares at their net asset value only in aggregations of a specified number of Shares (each, a "Creation Unit") generally in exchange for a basket of equity securities included in its Select Sector Index ("Deposit Securities") together with the deposit of a specified cash payment ("Cash Component"). The Shares have been approved for listing and secondary trading on the AMEX, subject to notice of issuance. The Shares will trade on the AMEX at market prices. These prices may differ from the Shares' net asset value. The Shares are also redeemable only in Creation Unit aggregations, and generally in exchange for portfolio securities and a specified cash payment. A Creation Unit of each Select Sector SPDR Fund consists of 50,000 Shares.
The Trust reserves the right to offer a "cash" option for creations and redemptions of Shares (subject to applicable legal requirements) although it has no current intention of doing so. Shares may be issued in advance of receipt of Deposit Securities subject to various conditions including a requirement to maintain on deposit with the Trust cash at least equal to 115% of the market value of the missing Deposit Securities. See "Creation and Redemption of Creation Units." In each instance of such cash creations or redemptions, the Trust may impose transaction fees that will be higher than the transaction fees associated with in-kind creations or redemptions. In all cases, such fees will be limited in accordance with the requirements of the Securities and Exchange Commission (the "SEC") applicable to management investment companies offering redeemable securities.
THE SELECT SECTOR INDEXES AND RELEVANT EQUITY MARKETS
Each of the nine Select Sector Indexes which is the benchmark for a Select Sector SPDR Fund is intended to give investors an efficient, modified market capitalization-based way to track the movement of baskets of equity securities of public companies that are components of the Standard & Poor's 500 Composite Stock Index ("S&P 500") and are included in specific sectors.
CONSTRUCTION AND MAINTENANCE STANDARDS FOR THE SELECT SECTOR INDEXES
SELECTION CRITERIA
Each Select Sector Index has been developed and will be maintained in accordance with the following criteria:
- Each of the component stocks in a Select Sector Index (the "Component Stocks") has been selected from the universe of companies defined by the S&P 500.
- The nine Select Sector Indexes together will include all of the companies represented in the S&P 500 and each of the stocks in the S&P 500 will be allocated to one and only one of the Select Sector Indexes.
- The Component Stocks have been assigned to a Select Sector Index by the Index Compilation Agent. The Index Compilation Agent, after consultation with Standard & Poor's, assigns Component Stocks to a particular Select Sector Index on the basis of such company's sales and earnings composition and the sensitivity of the company's stock price and business results to the common factors that affect other companies in such Select Sector Index. Standard & Poor's has sole control over the removal of stocks from the S&P 500 and the selection of replacement stocks to be added to the S&P 500. However, Standard & Poor's plays only a consulting role in the assignment of the S&P 500 component securities to any Select Sector Index, which is the sole responsibility of the Index Compilation Agent.
- Each Select Sector Index is weighted based on the market capitalization of each of the Component Stocks, subject to the following asset diversification requirements: (i) the market capitalization-based weighted value of any single Component Stock measured on the last day of a calendar quarter may not exceed 24.99% of the total value of its respective Select Sector Index; and (ii) with respect to 50% of the total value of the Select Sector Index, the market capitalization-based weighted value of the Component Stocks must be diversified so that no single Component Stock measured on the last day of a calendar quarter represents more than 4.99% of the total value of its respective Select Sector Index.
- Rebalancing the Select Sector Indexes to meet the asset diversification requirements will be the responsibility of the American Stock Exchange Index Services Group ("ISG"). If shortly prior to the last business day of any
calendar quarter (a "Quarterly Qualification Date"), a Component Stock (or two or more Component Stocks) approaches the maximum allowable value limits set forth above (the "Asset Diversification Limits"), the percentage that such Component Stock (or Component Stocks) represents in the Select Sector Index will be reduced and the market capitalization-based weighted value of such Component Stock (or Component Stocks) will be redistributed across the Component Stocks that do not closely approach the Asset Diversification Limits in accordance with the following methodology: First, each Component Stock that exceeds 24% of the total value of the Select Sector Index will be reduced to 23% of the total value of the Select Sector Index and the aggregate amount by which all Component Stocks exceed 24% will be redistributed equally across the remaining Component Stocks that represent less than 23% of the total value of the Select Sector Index. If as a result of this redistribution, another Component Stock then exceeds 24%, the redistribution will be repeated as necessary. Second, with respect to the 50% of the value of the Select Sector Index accounted for by the lowest weighted Component Stocks, each Component Stock that exceeds 4.8% of the total value of the Select Sector Index will be reduced to 4.6% and the aggregate amount by which all Component Stocks exceed 4.8% will be distributed equally across all remaining Component Stocks that represent less than 4.6% of the total value of the Select Sector Index. If as a result of this redistribution another Component Stock that did not previously exceed 4.8% of the Select Sector Index value then exceeds 4.8%, the redistribution will be repeated as necessary until at least 50% of the value of the Select Sector Index is accounted for by Component Stocks representing no more than 4.8% of the total value of the Select Sector Index. If necessary, this reallocation process may take place more than once prior to a Quarterly Qualification Date to insure that the Select Sector Index and the Select Sector SPDR Fund portfolio based upon it conform to the requirements for qualification of the Fund as a regulated investment company.
- As detailed below, the Select Sector Indexes are calculated and disseminated by ISG. As of the market close on September 30, 1998, the weighting of each Select Sector Index in the S&P 500 based on the capitalization of the stocks in the index was as follows:
LIST OF THE INDEXES WEIGHTING ------------------- --------- The Basic Industries Select Sector Index 3.82% The Consumer Services Select Sector Index 5.69% The Consumer Staples Select Sector Index 23.16% The Cyclical/Transportation Select Sector Index 8.08% The Energy Select Sector Index 8.22% The Financial Select Sector Index 15.37% The Industrial Select Sector Index 6.41% The Technology Select Sector Index 21.61% |
The Utilities Select Sector Index 7.64%
-------
100.00%
|
- Periodically, the Index Compilation Agent will supply ISG with sector designations for a number of stocks deemed likely candidates for replacement selection by the Standard & Poor's 500 Index Committee. If a replacement not on the current list is selected by the Standard & Poor's 500 Index Committee, ISG will ask the Index Compilation Agent to assign the stock to one of the nine sectors promptly. AMEX will disseminate information on this assignment and on consequent changes in the Select Sector Index(es).
- The Index Compilation Agent at any time may determine that a Component Stock which has been assigned to one Select Sector Index has undergone such a transformation in the composition of its business that it should be removed from that Select Sector Index and assigned to a different Select Sector Index. In the event that the Index Compilation Agent notifies ISG that a Component Stock's Select Sector Index assignment should be changed, the AMEX will disseminate notice of the change following its standard procedure for announcing index changes and will implement the change in the affected Select Sector Indexes on a date no less than one week after the initial dissemination of information on the sector change to the maximum extent practicable. It is not anticipated that Component Stocks will change sectors frequently.
- Component Stocks removed from and added to the S&P 500 will be deleted from and added to the appropriate Select Sector Index on the same schedule used by Standard & Poor's for additions and deletions from the S&P 500 insofar as practicable.
Select Sector Index Calculations
With the exception of the weighting constraints described above, each Select Sector Index is calculated using the same methodology utilized by Standard & Poor's in calculating the S&P 500. In particular:
- Each Select Sector Index is calculated using a base-weighted aggregate methodology; that means the level of the Select Sector Index reflects the total market value of all of its Component Stocks relative to a particular base period. Statisticians refer to this type of index, one with a set of combined variables (such as price and number of shares), as a composite index.
- Total market value of a company is determined by multiplying the price of the stock by the number of common shares outstanding. An indexed number is used to represent the results of the aggregate market value calculation in order
to make the value easier to work with and track over time.
- The daily calculation of each Select Sector Index is computed by dividing the total market value of the companies in the Select Sector Index by a number called the "Index Divisor." By itself, the Index Divisor is an arbitrary number. However, in the context of the calculation of the Select Sector Index, it is the only link to the original base period value of the Select Sector Index. The Index Divisor keeps the Select Sector Index comparable over time and adjustments to the Index Divisor ensure that there are no changes in the Select Sector Index level as a result of non-market forces (corporate actions, replacements of stocks in a Select Sector Index, weighting changes, etc.).
- Four times a year on a Friday close to the end of each calendar quarter, the share totals of the companies in the S&P 500 are updated by Standard & Poor's. This information is utilized to update the share totals of companies in each Select Sector Index. After the totals are updated, the Index Divisor is adjusted to compensate for the net change in the market value of the Select Sector Index.
- Once a week the database containing the current common shares outstanding for the S&P 500 companies is compared by Standard & Poor's against the shares outstanding used to actually calculate the S&P 500. Any difference of 5% or more is screened for review by Standard & Poor's. If appropriate, a share change will be implemented by Standard & Poor's after the close of trading on the following Wednesday. Preannounced corporate actions such as restructurings and recapitalizations can significantly change a company's shares outstanding. Any changes over 5% are reviewed by Standard & Poor's and, when appropriate, an immediate adjustment is made to the number of shares outstanding used to calculate the Select Sector Index. Any adjustment made by Standard & Poor's in shares outstanding will result in a corresponding adjustment to each affected Select Sector Index.
- Standard & Poor's will advise ISG regarding the handling of nonroutine corporate actions which may arise from time to time and which may have an impact on the calculation of the S&P 500 and, consequently, on the calculation of the Select Sector Indexes. Corporate actions such as a merger or acquisition, stock splits, routine spin-offs, etc., which require adjustments in the Select Sector Index calculation, will be handled by the AMEX staff and Index Divisor adjustments calculated when necessary in the same manner they are handled by Standard & Poor's in its maintenance of the S&P 500. In the event a merger or acquisition changes the relative importance of a company's participation in two or more sectors in a major way, the Select Sector Index assignment of the stock may change. In any event, a new Index Divisor for affected Select Sector Indexes will be disseminated promptly by ISG.
Select Sector Index Dissemination
Similar to other stock index values published by the AMEX, the value of each Select Sector Index will be calculated continuously and disseminated every 15 seconds over the Consolidated Tape Association's Network B. The major electronic financial data vendors - Bloomberg, Quotron, Reuters and Bridge Information Systems - are expected to publish information on each Select Sector Index for their subscribers.
Brief descriptions of the Select Sector Indexes on which the Select Sector SPDR Funds are based and the equity markets in which the Select Sector SPDR Funds are invested are provided below. (All dollar figures reflected in the tables below are in millions.)
THE BASIC INDUSTRIES SELECT SECTOR INDEX
General Background
The Basic Industries Select Sector Index is intended to give investors an efficient, modified market capitalization-based way to track the movements of certain public companies that are components of the S&P 500 and are in basic industries. Basic industries include integrated steel products, chemicals, fibers, paper and gold. A list of the 58 Component Stocks included in the Index as of September 30, 1998 is included in Exhibit A hereto.
Constituent Stocks and Industries/Sectors
Summary:
Aggregate Market Capitalization (9/30/98): $310,836.38
10 Largest Components by Market Capitalization:
CUMULATIVE
MARKET MARKET INDEX INDEX
COMPANY NAME CAPITALIZATION WEIGHT WEIGHT WEIGHT
------------ -------------- ------ ------ ------
DUPONT (EI.) $63,655.93 20.48% 20.48% 20.48%
MONSANTO CO $33,800.34 10.87% 10.87% 31.35%
DOW CHEMICAL $19,148.17 6.16% 6.16% 37.51%
INTL PAPER $14,325.44 4.61% 4.61% 42.12%
ALUMINUM CO. OF AMERICA $13,259.53 4.27% 4.27% 46.39%
PPG INDUSTRIES $9,657.07 3.11% 3.11% 49.49%
WEYERHAEUSER $8,395.02 2.70% 2.70% 52.20%
|
CUMULATIVE
MARKET MARKET INDEX INDEX
COMPANY NAME CAPITALIZATION WEIGHT WEIGHT WEIGHT
------------ -------------- ------ ------ ------
BARRICK GOLD CORP $7,460.00 2.40% 2.40% 54.60%
AIR PRODUCTS AND CHEMICALS $6,885.34 2.22% 2.22% 56.81%
UNION CARBIDE $5,833.48 1.88% 1.88% 58.69%
|
10 Largest Industries (% Index Weight):
CUMULATIVE
MARKET MARKET INDEX INDEX
INDUSTRY CAPITALIZATION WEIGHT WEIGHT WEIGHT
-------- -------------- ------ ------ ------
MAJOR CHEMICALS $132,794.01 42.72% 42.72% 42.72%
SPECIALTY CHEM. $47,228.79 15.19% 15.19% 57.92%
PAPER & FOREST PROD. $46,942.00 15.10% 15.10% 73.02%
ALUMINUM $22,296.29 7.17% 7.17% 80.19%
GOLD MINING $18,662.47 6.00% 6.00% 86.19%
PACKAGING $12,764.59 4.11% 4.11% 90.30%
STEEL $12,007.79 3.86% 3.86% 94.16%
NON-FEROUS METALS $8,910.95 2.87% 2.87% 97.03%
METAL CONTAINERS $4,402.98 1.42% 1.42% 98.45%
GLASS CONTAINERS $3,883.65 1.25% 1.25% 99.70%
|
THE CONSUMER SERVICES SELECT SECTOR INDEX
General Background
The Consumer Services Select Sector Index is intended to give investors an efficient, modified market capitalization-based way to track the movements of certain public companies that are components of the S&P 500 and are consumer services firms. Consumer services include entertainment and publishing, prepared foods, medical services, lodging and gaming. A list of the 45 Component Stocks included in the Index as of September 30, 1998 is included in Exhibit A hereto.
Constituent Stocks and Industries/Sectors
Summary:
Aggregate Market Capitalization (9/30/98): $462,325.04
10 Largest Components by Market Capitalization:
CUMULATIVE
MARKET MARKET INDEX INDEX
COMPANY NAME CAPITALIZATION WEIGHT WEIGHT WEIGHT
------------ -------------- ------ ------ ------
TIME WARNER INC $52,476.56 11.35% 11.35% 11.35%
WALT DISNEY CO $51,985.51 11.24% 11.24% 22.59%
MCDONALD'S CORP $40,863.79 8.84% 8.84% 31.43%
MEDIAONE GROUP $27,080.43 5.86% 5.86% 37.29%
VIACOM INC $20,764.23 4.49% 4.49% 41.78%
TELE-COMM TCI GRP $20,475.83 4.43% 4.43% 46.21%
CBS CORP $17,361.13 3.76% 3.76% 49.97%
COMCAST CORP $17,330.17 3.75% 3.75% 53.71%
GANNETT INC $15,243.62 3.30% 3.30% 57.01%
COLUMBIA/HCA HLTHCR $12,947.05 2.80% 2.80% 59.81%
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10 Largest Industries (% Index Weight):
CUMULATIVE
MARKET MARKET INDEX INDEX
INDUSTRY CAPITALIZATION WEIGHT WEIGHT WEIGHT
-------- -------------- ------ ------ ------
ENTERTAINMENT $125,226.30 27.09% 27.09% 27.09%
MEDIA BROADCASTING $95,955.09 20.75% 20.75% 47.84%
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CUMULATIVE
MARKET MARKET INDEX INDEX
INDUSTRY CAPITALIZATION WEIGHT WEIGHT WEIGHT
-------- -------------- ------ ------ ------
NEWS - INFO SERVICES $63,224.82 13.68% 13.68% 61.52%
RESTAURANTS $51,881.55 11.22% 11.22% 72.74%
HOSPITAL MANAGEMENT $24,989.65 5.41% 5.41% 78.14%
HEALTH CARE INFO TECH $24,143.23 5.22% 5.22% 83.37%
LODGING & CRUISE $20,143.46 4.36% 4.36% 87.72%
HMOs $19,603.99 4.24% 4.24% 91.96%
ADVERTISING & MARKETING $14,982.73 3.24% 3.24% 95.20%
DEATH CARE $8,200.16 1.77% 1.77% 96.98%
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THE CONSUMER STAPLES SELECT SECTOR INDEX
General Background
The Consumer Staples Select Sector Index is intended to give investors an efficient, modified market capitalization-based way to track the movements of certain public companies that are components of the S&P 500 and are involved in the development and production of consumer products. Consumer staples include cosmetic and personal care, pharmaceuticals, soft drinks, tobacco and food products. A list of the 69 Component Stocks included in the Index as of September 30, 1998 is included in Exhibit A hereto.
Constituent Stocks and Industries/Sectors
Summary:
Aggregate Market Capitalization (9/30/98): $1,883,115.93
10 Largest Components by Market Capitalization:
CUMULATIVE
MARKET MARKET INDEX INDEX
COMPANY NAME CAPITALIZATION WEIGHT WEIGHT WEIGHT
------------ -------------- ------ ------ ------
MERCK & CO $154,298.31 8.19% 8.19% 8.19%
COCA COLA CO $142,074.09 7.54% 7.54% 15.74%
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CUMULATIVE
MARKET MARKET INDEX INDEX
COMPANY NAME CAPITALIZATION WEIGHT WEIGHT WEIGHT
------------ -------------- ------ ------ ------
PFIZER $138,172.42 7.34% 7.34% 23.08%
PHILIP MORRIS COMPANIES $112,484.21 5.97% 5.97% 29.05%
JOHNSON & JOHNSON $105,237.56 5.59% 5.59% 34.64%
BRISTOL MEYERS SQUIBB $103,325.40 5.49% 5.49% 40.12%
PROCTER AND GAMBLE $95,377.34 5.06% 5.06% 45.19%
LILLY (ELI) $86,246.50 4.58% 4.58% 49.77%
SCHERING-PLOUGH $76,106.63 4.04% 4.04% 53.81%
AMERICAN HOME PRODUCTS $69,244.76 3.68% 3.68% 57.49%
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10 Largest Industries (% Index Weight):
CUMULATIVE
MARKET MARKET INDEX INDEX
INDUSTRY CAPITALIZATION WEIGHT WEIGHT WEIGHT
-------- -------------- ------ ------ ------
DRUGS $722,441.40 38.36% 38.36% 38.36%
MEDICAL SUPPLIES $272,171.68 14.56% 14.56% 52.92%
HOUSEHOLD PRODUCTS $192,894.78 10.24% 10.24% 63.17%
BEVERAGES - SOFTDRINK $185,430.73 9.85% 9.85% 73.01%
FOODS $178,060.62 9.46% 9.46% 82.47%
TOBACCO $117,975.32 6.26% 6.26% 88.73%
FOOD RETAILER $58,180.69 3.09% 3.09% 91.82%
COSMETIC & PERSONAL CARE $57,368.60 3.05% 3.05% 94.87%
RETAIL - DRUG STORES $49,714.34 2.64% 2.64% 97.51%
BEVERAGES - BREWERS $46,877.77 2.49% 2.49% 100.00%
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THE CYCLICAL/TRANSPORTATION SELECT SECTOR INDEX
General Background
The Cyclical/Transportation Select Sector Index is intended to give investors an efficient, modified market capitalization-based way to track the movements of certain public companies that are components of the S&P 500 and are involved in the development and production of cyclical products or the transportation industry. Cyclical and transportation products include building materials, retailers, appliances, housewares, air transportation, automotive manufacturing, shipping and trucking. A list of the 69 Component Stocks included in the Index as of September 30, 1998 is included in Exhibit A hereto.
Constituent Stocks and Industries/Sectors
Summary:
Aggregate Market Capitalization (9/30/98): $657,412.97
10 Largest Components by Market Capitalization:
CUMULATIVE
MARKET MARKET INDEX INDEX
COMPANY NAME CAPITALIZATION WEIGHT WEIGHT WEIGHT
------------ -------------- ------ ------ ------
WAL-MART STORES $122,125.71 18.58% 18.58% 18.58%
HOME DEPOT $58,047.62 8.83% 8.83% 27.41%
FORD MOTOR $56,946.66 8.66% 8.66% 36.07%
GENERAL MOTORS CORP $35,899.28 5.46% 5.46% 41.53%
CHRYSLER CORP $30,962.20 4.71% 4.71% 46.24%
GAP INC $20,722.47 3.15% 3.15% 49.39%
SEARS ROEBUCK & CO $17,337.36 2.64% 2.64% 52.03%
DAYTON HUDSON CORP $15,696.72 2.39% 2.39% 54.42%
BURLINGTON NTHRN SANTA FE $15,255.54 2.32% 2.32% 56.74%
MAY DEPT STORES $11,896.09 1.81% 1.81% 58.55%
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10 Largest Industries (% Index Weight):
CUMULATIVE
MARKET MARKET INDEX INDEX
INDUSTRY CAPITALIZATION WEIGHT WEIGHT WEIGHT
-------- -------------- ------ ------ ------
RETAIL - MASS MERCHANDISE $161,617.84 24.58% 24.58% 24.58%
AUTO $123,808.14 18.83% 18.83% 43.42%
RETAIL - BUILDING MATERIALS $69,238.18 10.53% 10.53% 53.95%
RETAIL - DEPT STORES $51,673.64 7.86% 7.86% 61.81%
RAILROAD $46,006.85 7.00% 7.00% 68.81%
RETAIL - APPAREL $31,370.81 4.77% 4.77% 73.58%
AIRLINE $29,025.97 4.42% 4.42% 77.99%
SPECIALTY RETAIL $18,041.23 2.74% 2.74% 80.74%
BUILDING MATERIALS $13,938.48 2.12% 2.12% 82.86%
TOYS $12,082.79 1.84% 1.84% 84.70%
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THE ENERGY SELECT SECTOR INDEX
General Background
The Energy Select Sector Index is intended to give investors an efficient, modified market capitalization-based way to track the movements of certain public companies that are components of the S&P 500 and are involved in the development and production of energy products. Energy companies in the Index develop and produce crude oil and natural gas and provide drilling and other energy related services. A list of the 33 Component Stocks included in the Index as of September 30, 1998 is included in Exhibit A hereto.
Constituent Stocks and Industries/Sectors
Summary:
Aggregate Market Capitalization (9/30/98): $668,171.67
10 Largest Components by Market Capitalization:
CUMULATIVE
MARKET MARKET INDEX INDEX
COMPANY NAME CAPITALIZATION WEIGHT WEIGHT WEIGHT
------------ -------------- ------ ------ ------
EXXON CORP $171,145.69 25.61% 23.00% 23.00%
ROYAL DUTCH $102,122.10 15.28% 15.28% 38.37%
MOBIL CORP $59,360.88 8.88% 8.97% 47.33%
AMOCO CORP $51,407.31 7.69% 4.60% 51.93%
CHEVRON $55,013.19 8.23% 4.60% 56.53%
TEXACO INC $33,591.66 5.03% 4.60% 61.13%
SCHLUMBERGER LTD. $27,382.73 4.10% 4.45% 65.59%
ATLANTIC RICHFIELD $22,780.80 3.41% 3.77% 69.35%
ENRON CORP $17,400.72 2.60% 2.96% 72.31%
HALLIBURTON CO $12,537.40 1.88% 2.23% 74.54%
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6 Largest Industries (% Index Weight):
CUMULATIVE
MARKET MARKET INDEX INDEX
INDUSTRY CAPITALIZATION WEIGHT WEIGHT WEIGHT
-------- -------------- ------ ------ ------
INTL' OIL $377,725.89 56.53% 63.04% 63.04%
DOMESTIC OIL $119,923.41 17.95% 18.20% 81.24%
NATURAL GAS PIPELINE $64,452.71 9.65% 7.51% 88.75%
OIL SERVICES $64,437.96 9.64% 7.51% 96.26%
OIL & GAS PRODUCER $30,349.64 4.54% 2.76% 99.02%
OIL REFINING & MARKETING $11,282.07 1.69% 0.98% 100.00%
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THE FINANCIAL SELECT SECTOR INDEX
General Background
The Financial Select Sector Index is intended to give investors an efficient, modified market capitalization-based way to track the movements of certain public companies that are components of the S&P 500 and are involved in the development and production of financial products. Companies in the Index include a wide array of diversified financial services firms whose business lines range from investment management to commercial and business banking. A list of the 75 Component Stocks included in the Index as of September 30, 1998 is included in Exhibit A hereto.
Constituent Stocks and Industries/Sectors
Summary:
Aggregate Market Capitalization (9/30/98): $1,275,141.52
10 Largest Components by Market Capitalization:
CUMULATIVE
MARKET MARKET INDEX INDEX
COMPANY NAME CAPITALIZATION WEIGHT WEIGHT WEIGHT
------------ -------------- ------ ------ ------
BANKAMERICA CORP $92,952.61 7.29% 7.29% 7.29%
AMERICAN INT'L GROUP INC $82,293.91 6.45% 6.45% 13.74%
FEDERAL NAT'L MORTGAGE ASSN $66,620.83 5.22% 5.22% 18.97%
FIRST UNION CORP $49,603.35 3.89% 3.89% 22.86%
TRAVELERS GROUP INC $43,356.56 3.40% 3.40% 26.26%
CITICORP $42,029.68 3.30% 3.30% 29.55%
CHASE MANHATTAN $36,934.71 2.90% 2.90% 32.45%
AMERICAN EXPRESS $35,426.65 2.78% 2.78% 35.23%
ALLSTATE $34,383.62 2.70% 2.70% 37.93%
FREDDIE MAC $33,676.12 2.64% 2.64% 40.57%
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10 Largest Industries (% Index Weight):
CUMULATIVE
MARKET MARKET INDEX INDEX
INDUSTRY CAPITALIZATION WEIGHT WEIGHT WEIGHT
-------- -------------- ------ ------ ------
REGIONAL BANK $467,640.79 36.67% 36.67% 36.67%
MULTINATIONAL BANK $144,009.40 11.29% 11.29% 47.97%
INSURANCE - SPECIALTY $105,843.23 8.30% 8.30% 56.27%
GOV'T SPONSORED AGENCY $105,729.45 8.29% 8.29% 64.56%
INSURANCE - MULTILINE $86,414.20 6.78% 6.78% 71.34%
INSURANCE - LIFE $68,606.76 5.38% 5.38% 76.72%
INSURANCE - P&C $63,516.84 4.98% 4.98% 81.70%
BROKERAGE $59,084.78 4.63% 4.63% 86.33%
DIVERSIFIED FINANCIALS $51,565.86 4.04% 4.04% 90.38%
FINANCIAL - CONSUMER $45,682.92 3.58% 3.58% 93.96%
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THE INDUSTRIAL SELECT SECTOR INDEX
General Background
The Industrial Select Sector Index is intended to give investors an efficient, modified market capitalization-based way to track the movements of certain public companies that are components of the S&P 500 and are industrials. Industrials include electrical equipment, construction equipment, waste management services and industrial machinery products. A list of the 35 Component Stocks included in the Index as of September 30, 1998 is included in Exhibit A hereto.
Constituent Stocks and Industries/Sectors
Summary:
Aggregate Market Capitalization (9/30/98): $521,114.30
10 Largest Components by Market Capitalization:
CUMULATIVE
MARKET MARKET INDEX INDEX
COMPANY NAME CAPITALIZATION WEIGHT WEIGHT WEIGHT
------------ -------------- ------ ------ ------
GENERAL ELECTRIC $258,871.31 49.68% 23.71% 23.71%
TYCO INTL $32,356.72 6.21% 7.26% 30.97%
MINNESOTA MINING & MFG $29,760.76 5.71% 6.76% 37.72%
EMERSON ELECTRIC $27,418.51 5.26% 6.41% 44.14%
WASTE MANAGEMENT $27,481.61 5.27% 5.46% 49.60%
ALLIEDSIGNAL $19,854.75 3.81% 4.69% 54.29%
CATERPILLAR $16,254.35 3.12% 4.02% 58.30%
ILLINOIS TOOL WORKS $13,623.15 2.61% 3.47% 61.78%
TEXTRON $9,935.23 1.91% 2.77% 64.55%
HONEYWELL $8,081.16 1.55% 2.32% 66.87%
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10 Largest Industries (% Index Weight):
CUMULATIVE
MARKET MARKET INDEX INDEX
INDUSTRY CAPITALIZATION WEIGHT WEIGHT WEIGHT
-------- -------------- ------ ------ ------
ELECTRICAL EQUIP. $286,289.82 54.94% 30.12% 30.12%
CONGLOMERATE $100,055.34 19.20% 24.45% 54.58%
INDUSTRIAL MACHINERY $29,564.82 5.67% 9.90% 64.48%
HEAVY DUTY TRUCKS $17,326.10 3.32% 7.93% 72.41%
POLLUTION CONTROL $32,738.06 6.28% 7.28% 79.69%
MACHINERY - AG. $25,817.77 4.95% 7.24% 86.93%
SPECIALTY MACHINERY $12,599.18 2.42% 5.22% 92.15%
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CUMULATIVE
MARKET MARKET INDEX INDEX
INDUSTRY CAPITALIZATION WEIGHT WEIGHT WEIGHT
-------- -------------- ------ ------ ------
PROCESS CONTROLS $12,315.67 2.36% 5.06% 97.21%
ENGINEERING & CONSTRUCTION $3,802.26 0.73% 2.08% 99.29%
MACHINE TOOLS $605.54 0.12% 0.71% 100.00%
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THE TECHNOLOGY SELECT SECTOR INDEX
General Background
The Technology Select Sector Index is intended to give investors an efficient, modified market capitalization-based way to track the movements of certain public companies that are components of the S&P 500 and are involved in the development and production of technology products. Technology products include products developed by defense manufacturers, telecommunications equipment, microcomputer components, integrated computer circuits and process monitoring systems. A list of the 77 Component Stocks included in the Index as of September 30, 1998 is included in Exhibit A hereto.
Constituent Stocks and Industries/Sectors
Summary:
Aggregate Market Capitalization (9/30/98): $1,757,522.37
10 Largest Components by Market Capitalization:
CUMULATIVE
MARKET MARKET INDEX INDEX
COMPANY NAME CAPITALIZATION WEIGHT WEIGHT WEIGHT
------------ -------------- ------ ------ ------
MICROSOFT CORP $271,201.92 15.43% 15.43% 15.43%
INTEL CORP $144,060.00 8.20% 8.20% 23.63%
INTL BUSINESS MACHINES $119,898.60 6.82% 6.82% 30.45%
AT&T $105,557.88 6.01% 6.01% 36.46%
CISCO SYSTEMS INC $96,107.56 5.47% 5.47% 41.92%
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CUMULATIVE
MARKET MARKET INDEX INDEX
COMPANY NAME CAPITALIZATION WEIGHT WEIGHT WEIGHT
------------ -------------- ------ ------ ------
LUCENT TECHNOLOGIES INC $91,062.71 5.18% 5.18% 47.11%
MCI WORLDCOM INC $86,803.42 4.94% 4.94% 52.04%
DELL COMPUTER CORP $83,233.71 4.74% 4.74% 56.78%
HEWLETT-PACKARD $55,026.25 3.13% 3.13% 59.91%
COMPAQ COMPUTER CORP $52,845.38 3.01% 3.01% 62.92%
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10 Largest Industries (% Index Weight):
CUMULATIVE
MARKET MARKET INDEX INDEX
INDUSTRY CAPITALIZATION WEIGHT WEIGHT WEIGHT
-------- -------------- ------ ------ ------
COMPUTER SOFTWARE $339,014.33 19.29% 19.29% 19.29%
TELECOM - LONG DISTANCE $223,326.84 12.71% 12.71% 32.00%
COMPUTER SYSTEMS $214,067.84 12.18% 12.18% 44.18%
SEMICONDUCTOR $188,672.59 10.74% 10.74% 54.91%
PC - WORKSTATION $170,000.23 9.67% 9.67% 64.58%
TELECOM - EQUIPMENT $136,173.46 7.75% 7.75% 72.33%
TELECOM - NETWORK $113,075.51 6.43% 6.43% 78.77%
COMPUTER SERVICES $71,638.81 4.08% 4.08% 82.84%
TELECOM - WIRELESS $64,122.36 3.65% 3.65% 86.49%
AEROSPACE $59,947.28 3.41% 3.41% 89.90%
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THE UTILITIES SELECT SECTOR INDEX
General Background
The Utilities Select Sector Index is intended to give investors an efficient, modified market capitalization-based way to track the movements of certain public companies that are components of the S&P 500 and are in the utilities industry. Utilities include communication services, electrical power providers and natural gas distributors. A list of the 39 Component Stocks included in the Index as of September 30, 1998 is included in Exhibit A hereto.
Constituent Stocks and Industries/Sectors
Summary:
Aggregate Market Capitalization (9/30/98): $621,375.49
10 Largest Components by Market Capitalization:
CUMULATIVE
MARKET MARKET INDEX INDEX
COMPANY NAME CAPITALIZATION WEIGHT WEIGHT WEIGHT
------------ -------------- ------ ------ ------
SBC COMMUNICATIONS $81,529.66 13.12% 13.13% 13.13%
BELL ATLANTIC $75,246.40 12.11% 12.12% 25.25%
BELLSOUTH CORP $74,023.73 11.91% 11.92% 37.17%
GTE CORP $53,021.71 8.53% 8.54% 45.71%
AMERITECH $52,363.72 8.43% 4.58% 50.29%
U.S. WEST $26,333.06 4.24% 4.36% 54.65%
DUKE ENERGY CORP $23,899.25 3.85% 3.97% 58.62%
SOUTHERN CO $20,541.46 3.31% 3.42% 62.04%
TEXAS UTILITIES $13,014.03 2.09% 2.22% 64.25%
ALTEL CORP $12,919.70 2.08% 2.19% 66.44%
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3 Largest Industries (% Index Weight):
CUMULATIVE
MARKET MARKET INDEX INDEX
INDUSTRY CAPITALIZATION WEIGHT WEIGHT WEIGHT
-------- -------------- ------ ------ ------
TELECOM - LOCAL $380,132.73 61.18% 57.69% 57.69%
ELECTRIC UTILITY $236,057.90 37.99% 41.07% 98.76%
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CUMULATIVE
MARKET MARKET INDEX INDEX
INDUSTRY CAPITALIZATION WEIGHT WEIGHT WEIGHT
-------- -------------- ------ ------ ------
NATURAL GAS DISTRIBUTORS $5,184.86 0.83% 1.24% 100.00%
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INVESTMENT POLICIES AND RESTRICTIONS
LENDING PORTFOLIO SECURITIES
Each Select Sector SPDR Fund may lend portfolio securities to brokers, dealers and other financial institutions needing to borrow securities to complete transactions and for other purposes. Because the U.S. government securities or other assets that are pledged as collateral to each Select Sector SPDR Fund in connection with these loans generate income, securities lending may enable a Select Sector SPDR Fund to earn additional income that may partially offset the expenses of such Select Sector SPDR Fund, and thereby reduce the effect that expenses have on such Select Sector SPDR Fund's ability to provide investment results that substantially correspond to the price and yield performance of its respective Select Sector Index.
Loans of portfolio securities may not exceed 33% of a Select Sector SPDR Fund's total assets. The documentation for these loans provides that a Select Sector SPDR Fund will receive collateral equal to at least 100% of the current market value of the loaned securities, as marked to market each day that the net asset value of the Select Sector SPDR Fund is determined. Each Select Sector SPDR Fund will pay reasonable administrative and custodial fees in connection with the loan of securities and invests collateral in money market instruments or funds which invest exclusively in money market instruments.
Each Select Sector SPDR Fund will comply with the conditions for lending established by the SEC. Although each Select Sector SPDR Fund will receive collateral in connection with all loans of portfolio securities, and such collateral will be marked to market, each Select Sector SPDR Fund will be exposed to the risk of loss should a borrower default on its obligation to return the borrowed securities (e.g., the loaned securities may have appreciated beyond the value of the collateral held by the Select Sector SPDR Fund). In addition, each Select Sector SPDR Fund bears the risk of loss of any cash collateral that it invests in money market instruments.
REPURCHASE AGREEMENTS
Each Select Sector SPDR Fund may invest in repurchase agreements with commercial banks, brokers or dealers to generate income from its excess cash balances and to invest securities lending cash collateral. A repurchase agreement is an agreement under which a Select Sector SPDR Fund acquires a money market instrument (generally a security issued by the U.S. Government or an agency thereof, a banker's acceptance or a certificate of deposit) from a seller, subject to resale to the seller at an agreed upon price and date (normally, the next business day). A repurchase agreement may be considered a loan collateralized by securities. The resale price
reflects an agreed upon interest rate effective for the period the instrument is held by a Select Sector SPDR Fund and is unrelated to the interest rate on the underlying instrument.
In these repurchase agreement transactions, the securities acquired by a Select Sector SPDR Fund (including accrued interest earned thereon) must have a total value in excess of the value of the repurchase agreement and are held by the Trust's custodian bank until repurchased. In addition, the Trust's Board of Trustees ("Board" or "Trustees") monitors each Select Sector SPDR Fund's repurchase agreement transactions generally and has established guidelines and standards for review of the creditworthiness of any bank, broker or dealer counterparty to a repurchase agreement with a Select Sector SPDR Fund. No more than an aggregate of 15% of each Select Sector SPDR Fund's net assets will be invested in illiquid securities, including repurchase agreements having maturities longer than seven days and securities subject to legal or contractual restrictions on resale, or for which there are no readily available market quotations.
The use of repurchase agreements involves certain risks. For example, if the other party to the agreement defaults on its obligation to repurchase the underlying security at a time when the value of the security has declined, a Select Sector SPDR Fund may incur a loss upon disposition of the security. If the other party to the agreement becomes insolvent and subject to liquidation or reorganization under the U.S. Bankruptcy Code or other laws, a court may determine that the underlying security is collateral for a loan by a Select Sector SPDR Fund not within the control of the Select Sector SPDR Fund and, therefore, the Select Sector SPDR Fund may not be able to substantiate its interest in the underlying security and may be deemed an unsecured creditor of the other party to the agreement.
OTHER MONEY MARKET INSTRUMENTS
In addition to repurchase agreements, other money market instruments in which the Select Sector SPDR Funds may invest are certificates of deposit of U.S. domestic banks with assets of $1 billion or more, bankers' acceptances, time deposits, U.S. Government and U.S. Government agency securities, or commercial paper rated within the two highest grades by S&P or Moody's Investors Service, Inc., or, if not rated, are of comparable quality as determined by the Adviser, and which mature within one year from the date of purchase, and investment companies which invest exclusively in such money market instruments (subject to applicable limitations under Section 12(d)(1) of the Investment Company Act of 1940, as amended ("1940 Act").
FUTURES CONTRACTS, OPTIONS AND SWAP AGREEMENTS
Each Select Sector SPDR Fund may utilize exchange traded futures and options contracts and swap agreements.
FUTURES CONTRACTS AND OPTIONS
Futures contracts generally provide for the future sale by one party and purchase by another party of a specified commodity at a specified future time and at a specified price. Stock
index futures contracts are settled daily with a payment by one party to the other of a cash amount based on the difference between the level of the stock index specified in the contract from one day to the next. Futures contracts are standardized as to maturity date and underlying instrument and are traded on futures exchanges.
Futures traders are required to make a good faith margin deposit in cash or U.S. government securities with a broker or custodian to initiate and maintain open positions in futures contracts. A margin deposit is intended to assure completion of the contract (delivery or acceptance of the underlying commodity or payment of the cash settlement amount) if it is not terminated prior to the specified delivery date. Brokers may establish deposit requirements which are higher than the exchange minimums. Futures contracts are customarily purchased and sold on margin deposits which may range upward from less than 5% of the value of the contract being traded.
After a futures contract position is opened, the value of the contract is marked to market daily. If the futures contract price changes to the extent that the margin on deposit does not satisfy margin requirements, payment of additional "variation" margin will be required. Conversely, change in the contract value may reduce the required margin, resulting in a repayment of excess margin to the contract holder. Variation margin payments are made to and from the futures broker for as long as the contract remains open. In such case, a Select Sector SPDR Fund would expect to earn interest income on its margin deposits. Closing out an open futures position is done by taking an opposite position ("buying" a contract which has previously been "sold," or "selling" a contract previously "purchased") in an identical contract to terminate the position. Brokerage commissions are incurred when a futures contract position is opened or closed.
Each Select Sector SPDR Fund may use exchange traded futures and options, together with positions in cash and money market instruments, to simulate full investment in the underlying Select Sector SPDR Index. Exchange traded futures and options contracts are not currently available for the Select Sector Indexes. Under such circumstances, the Adviser may seek to utilize other instruments that it believes to be correlated to the underlying Select Sector Index components or a subset of the components. The AMEX currently anticipates that options on the Shares will be listed on the AMEX at the same time that the Shares are available for trading although there is no assurance in this regard.
RESTRICTIONS ON THE USE OF FUTURES AND OPTIONS
A Select Sector SPDR Fund would not enter into futures contract transactions for purposes other than hedging to the extent that, immediately thereafter, the sum of its initial margin deposits on open contracts exceeds 5% of the market value of a Select Sector SPDR
Fund's total assets after taking into account unrealized gains and unrealized losses on such contracts it has entered into. Each Select Sector SPDR Fund would take steps to prevent its futures positions from "leveraging" its securities holdings. When it has a long futures position, it will maintain with its custodian bank, cash or liquid securities having a value equal to the notional value of the contract (less any margin deposited in connection with the position). When it has a short futures position, it will maintain with its custodian bank assets substantially identical to those underlying the contract or cash and liquid securities (or a combination of the foregoing) having a value equal to the net obligation of the Select Sector SPDR Fund under the contract (less the value of any margin deposits in connection with the position).
SWAP AGREEMENTS
Swap agreements are contracts between parties in which one party agrees to make payments to the other party based on the change in market value or level of a specified rate, index or asset. In return, the other party agrees to make payments to the first party based on the return of a different specified rate, index or asset. Swap agreements will usually be done on a net basis, i.e., where the two parties make net payments with the Select Sector SPDR Fund receiving or paying, as the case may be, only the net amount of the two payments. The net amount of the excess, if any, of a Select Sector SPDR Fund's obligations over its entitlements with respect to each swap is accrued on a daily basis and an amount of cash or high liquid securities having an aggregate value at least equal to the accrued excess is maintained in an account at the Trust's custodian bank.
INVESTMENT RESTRICTIONS
The Trust has adopted the following investment restrictions as fundamental policies with respect to each Select Sector SPDR Fund. These restrictions cannot be changed with respect to a Select Sector SPDR Fund without the approval of the holders of a majority of such Select Sector SPDR Fund's outstanding voting securities. For purposes of the 1940 Act, a majority of the outstanding voting securities of a Select Sector SPDR Fund means the vote, at an annual or a special meeting of the security holders of the Trust, of the lesser of (1) 67% or more of the voting securities of the Select Sector SPDR Fund present at such meeting, if the holders of more than 50% of the outstanding voting securities of such Select Sector SPDR Fund are present or represented by proxy, or (2) more than 50% of the outstanding voting securities of the Select Sector SPDR Fund. Except with the approval of a majority of the outstanding voting securities, a Select Sector SPDR Fund may not:
1. Change its investment objective;
2. Lend any funds or other assets except through the purchase of all or a portion of an issue of securities or obligations of the type in which it is permitted to invest (including participation interests in such securities or obligations) and except that a Select Sector SPDR Fund may lend its portfolio securities in an amount not to exceed 33% of the value of its total assets;
3. Issue senior securities or borrow money, except borrowings from banks for temporary or emergency purposes in an amount up to 10% of the value of the Select Sector SPDR Fund's total assets (including the amount borrowed), valued at market, less liabilities (not including the amount borrowed) valued at the time the borrowing is made, and the Select Sector SPDR Fund will not purchase securities while borrowings in excess of 5% of the Select Sector SPDR Fund's total assets are outstanding, provided, that for purposes of this restriction, short-term credits necessary for the clearance of transactions are not considered borrowings (this limitation on purchases does not apply to acceptance by the Select Sector SPDR Fund of a deposit principally of securities included in the relevant Select Sector Index for creation of Creation Units);
4. Pledge, hypothecate, mortgage or otherwise encumber its assets, except to secure permitted borrowings. (The deposit of underlying securities and other assets in escrow and collateral arrangements with respect to initial or variation margin for futures contracts or options contracts will not be deemed to be pledges of the Select Sector SPDR Fund's assets);
5. Purchase, hold or deal in real estate, or oil, gas or mineral interests or leases, but a Select Sector SPDR Fund may purchase and sell securities that are issued by companies that invest or deal in such assets;
6. Act as an underwriter of securities of other issuers, except to the extent the Select Sector SPDR Fund may be deemed an underwriter in connection with the sale of securities in its portfolio;
7. Purchase securities on margin, except for such short-term credits as are necessary for the clearance of transactions, except that a Select Sector SPDR Fund may make margin deposits in connection with transactions in options, futures and options on futures;
8. Sell securities short; or
9. Invest in commodities or commodity contracts, except that a Select Sector SPDR Fund may transact in exchange traded futures contracts on securities, stock indexes and options on such futures contracts and make margin deposits in connection with such contracts.
In addition to the investment restrictions adopted as fundamental policies as set forth above, each Select Sector SPDR Fund observes the following restrictions, which may be changed by the Board of Trustees without a shareholder vote. A Select Sector SPDR Fund will not:
1. Invest in the securities of a company for the purpose of exercising management or
control, or in any event purchase and hold more than 10% of the securities of a single issuer, provided that the Trust may vote the investment securities owned by each Select Sector SPDR Fund in accordance with its views; or
2. Hold illiquid assets in excess of 15% of its net assets. An illiquid asset is any asset which may not be sold or disposed of in the ordinary course of business within seven days at approximately the value at which the Select Sector SPDR Fund has valued the investment.
If a percentage limitation is adhered to at the time of investment or contract, a later increase or decrease in percentage resulting from any change in value or total or net assets will not result in a violation of such restriction, except that the percentage limitations with respect to the borrowing of money and illiquid securities will be observed continuously.
SPECIAL CONSIDERATIONS AND RISKS
A discussion of the risks associated with an investment in a Select Sector SPDR Fund is contained in the Prospectus under the heading "Investment Considerations and Risks." The discussion below supplements, and should be read in conjunction with, such section of the Prospectus.
GENERAL
Investment in a Select Sector SPDR Fund should be made with an understanding that the value of a Select Sector SPDR Fund's portfolio securities may fluctuate in accordance with changes in the financial condition of the issuers of the portfolio securities, the value of common stocks generally and other factors.
An investment in a Select Sector SPDR Fund should also be made with an understanding of the risks inherent in an investment in equity securities, including the risk that the financial
condition of issuers may become impaired or that the general condition of the stock market may deteriorate (either of which may cause a decrease in the value of the portfolio securities and thus in the value of Shares). Common stocks are susceptible to general stock market fluctuations and to volatile increases and decreases in value as market confidence in and perceptions of their issuers change. These investor perceptions are based on various and unpredictable factors including expectations regarding government, economic, monetary and fiscal policies, inflation and interest rates, economic expansion or contraction, and global or regional political, economic and banking crises.
While Standard & Poor's often chooses a replacement company for the S&P 500 with some characteristics in common with a company or companies removed from the index, it is not uncommon for a replacement company to have little in common with the company it replaces. Consequently, the removal of one company and its replacement by another may affect two Select Sector Indexes and two Select Sector SPDR Funds, one of which included a company now removed from the S&P 500 and another which may have a company added to it.
Holders of common stocks incur more risk than holders of preferred stocks and debt obligations because common stockholders, as owners of the issuer, have generally inferior rights to receive payments from the issuer in comparison with the rights of creditors of, or holders of debt obligations or preferred stocks issued by, the issuer. Further, unlike debt securities which typically have a stated principal amount payable at maturity (whose value, however, will be subject to market fluctuations prior thereto), or preferred stocks which typically have a liquidation preference and which may have stated optional or mandatory redemption provisions, common stocks have neither a fixed principal amount nor a maturity. Common stock values are subject to market fluctuations as long as the common stock remains outstanding.
Although most of the securities in the Select Sector Indexes are listed on a national securities exchange, the principal trading market for some may be in the over-the-counter market. The existence of a liquid trading market for certain securities may depend on whether dealers will make a market in such securities. There can be no assurance that a market will be made or maintained or that any such market will be or remain liquid. The price at which securities may be sold and the value of a Select Sector SPDR Fund's Shares will be adversely affected if trading markets for a Select Sector SPDR Fund's portfolio securities are limited or absent or if bid/ask spreads are wide.
FUTURES AND OPTIONS TRANSACTIONS
Positions in futures contracts and options may be closed out only on an exchange which provides a secondary market therefor. However, there can be no assurance that a liquid secondary market will exist for any particular futures contract or option at any specific time. Thus, it may not be possible to close a futures or options position. In the event of adverse price movements, a Select Sector SPDR Fund would continue to be required to make daily cash payments to maintain its required margin. In such situations, if a Select Sector SPDR Fund has insufficient cash, it may have to sell portfolio securities to meet daily margin requirements at a time when it may be disadvantageous to do so. In addition, a Select Sector SPDR Fund may be required to make delivery of the instruments underlying futures contracts it has sold.
A Select Sector SPDR Fund will minimize the risk that it will be unable to close out a futures or options contract by only entering into futures and options for which there appears to be a liquid secondary market.
The risk of loss in trading futures contracts or uncovered call options in some strategies (e.g., selling uncovered stock index futures contracts) is potentially unlimited. The Select Sector SPDR Funds do not plan to use futures and options contracts, when available, in this way. The risk of a futures position may still be large as traditionally measured due to the low margin deposits required. In many cases, a relatively small price movement in a futures contract may result in immediate and substantial loss or gain to the investor relative to the size of a required margin deposit. The Select Sector SPDR Funds, however, intend to utilize futures and options
contracts in a manner designed to limit their risk exposure to that which is comparable to what they would have incurred through direct investment in stocks.
Utilization of futures transactions by a Select Sector SPDR Fund involves the risk of imperfect or even negative correlation to the benchmark Select Sector Index if the index underlying the futures contracts differs from the benchmark Select Sector Index. There is also the risk of loss by a Select Sector SPDR Fund of margin deposits in the event of bankruptcy of a broker with whom a Select Sector SPDR Fund has an open position in the futures contract or option.
Certain financial futures exchanges limit the amount of fluctuation permitted in futures contract prices during a single trading day. The daily limit establishes the maximum amount that the price of a futures contract may vary either up or down from the previous day's settlement price at the end of a trading session. Once the daily limit has been reached in a particular type of contract, no trades may be made on that day at a price beyond that limit. The daily limit governs only price movement during a particular trading day and therefore does not limit potential losses, because the limit may prevent the liquidation of unfavorable positions. Futures contract prices have occasionally moved to the daily limit for several consecutive trading days with little or no trading, thereby preventing prompt liquidation of futures positions and subjecting some futures traders to substantial losses.
RISKS OF SWAP AGREEMENTS
Swap agreements are subject to the risk that the swap counterparty will default on its obligations. If such a default occurs, a Select Sector SPDR Fund will have contractual remedies pursuant to the agreements related to the transaction, but such remedies may be subject to bankruptcy and insolvency laws which could affect such Fund's rights as a creditor.
CONTINUOUS OFFERING
The method by which Creation Units of Shares are created and traded may raise certain issues under applicable securities laws. Because new Creation Units of Shares are issued and sold by the Trust on an ongoing basis, at any point a "distribution," as such term is used in the Securities Act of 1933 (the "Securities Act"), may occur. Broker-dealers and other persons are cautioned that some activities on their part may, depending on the circumstances, 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.
For example, a broker-dealer firm or its client may be deemed a statutory underwriter if it takes Creation Units after placing an order with the Distributor, breaks them down into constituent Shares, and sells such Shares directly to customers, or if it chooses to couple the creation of a supply of new Shares with an active selling effort involving solicitation of secondary
market demand for Shares. A determination of whether one is an underwriter for purposes of the Securities Act 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 a categorization as an underwriter.
Broker-dealer firms should also note that dealers who are not "underwriters" but are effecting transactions in Shares, whether or not participating in the distribution of Shares, are generally required to deliver a prospectus. This is because the prospectus delivery exemption in Section 4(3) of the Securities Act is not available in respect of such transactions as a result of Section 24(d) of the 1940 Act. Firms that incur a prospectus-delivery obligation with respect to Shares of a Select Sector SPDR Fund are reminded that under Securities Act Rule 153, a prospectus-delivery obligation under Section 5(b)(2) of the Securities Act owed to an exchange member in connection with a sale on the AMEX is satisfied by the fact that such Select Sector SPDR Fund's prospectus is available at the AMEX upon request. The prospectus delivery mechanism provided in Rule 153 is only available with respect to transactions on an exchange.
EXCHANGE LISTING AND TRADING
A discussion of exchange listing and trading matters associated with an investment in the Select Sector SPDR Funds is contained under the headings "Investment Considerations and Risks", "Determination of Net Asset Value," and "Buying and Selling Select Sector SPDR Funds." The discussion below supplements, and should be read in conjunction with, such sections of the Prospectus.
The Shares of each Select Sector SPDR Fund have been approved for listing and trading on the AMEX, subject to notice of issuance. The Shares will trade on the AMEX at prices that may differ to some degree from their net asset value. There can be no assurance that the requirements of the AMEX necessary to maintain the listing of Shares of any Select Sector SPDR Fund will continue to be met.
The AMEX may but is not required to remove the Shares of a Select Sector SPDR Fund from listing if (1) following the initial twelve-month period beginning upon the commencement of trading of a Select Sector SPDR Fund, there are fewer than 50 beneficial holders of the Shares for 30 or more consecutive trading days; (2) the value of the underlying Select Sector Index or portfolio of securities on which such Select Sector SPDR Fund is based is no longer calculated or available; or (3) such other event shall occur or condition exists that, in the opinion of the AMEX, makes further dealings on the AMEX inadvisable. In addition, the AMEX will remove the Shares from listing and trading upon termination of the Trust.
As in the case of other stocks traded on the AMEX, brokers' commissions on transactions will be based on negotiated commission rates at customary levels.
MANAGEMENT OF THE TRUST
The following information supplements and should be read in conjunction with the section in the Prospectus entitled "Management."
TRUSTEES AND OFFICERS OF THE TRUST
The Board has responsibility for the overall management and operations of the Trust, including general supervision of the duties performed by the Adviser and other service providers. The Board currently consists of six (6) Trustees, none of whom is an "interested person" (as defined in the 1940 Act) of the Trust or any of the Select Sector SPDR Funds.
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NAME/ADDRESS/AGE POSITION WITH THE PRINCIPAL OCCUPATIONS
TRUST DURING THE PAST FIVE YEARS
======================================================================================================================
John W. English Trustee Private Investor, Chairman of the Board of The
P.O. Box 640 China Fund, Inc. (1992 to present); Trustee of
Summit, New Jersey Northern Trust Company's Institutional Funds
07902-0640 (1993 to present); Trustee of Washington Mutual's
Age 65 WM Funds (1994 to present); Chairman of the
Advisory Board of Andrew M. Carter & Company, an
investment adviser (1995 to present); Director, Adviser
or Trustee for numerous not-for-profit organizations
(1989 to present); formerly Vice President and Chief
Investment Officer of the Ford Foundation (1981-1993).
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George R. Gaspari Trustee Consultant to various financial services
100-38 75th Avenue organizations (1996 to present); Senior Vice
Forest Hills, New York President and Chief Financial and Administrative
11375 Officer of Evergreen Asset Management Co. , a
Age 58 subsidiary of First Union Corp. (1987-1996).
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NAME/ADDRESS/AGE POSITION WITH THE PRINCIPAL OCCUPATIONS
TRUST DURING THE PAST FIVE YEARS
======================================================================================================================
Burton G. Malkiel Trustee Director of Baker Fentress & Company, a closed-
Department of Economics end investment company traded on the New York
Princeton University Stock Exchange (1980 to present), Director of
Princeton, New Jersey Prudential Insurance Company of America (1977
08544 to present); Director of The Vanguard Group of
Age 66 Investment Companies (1977 to present);
Professor of Economics at Princeton University
(1964 to present); formerly Dean of Yale School
of Management (1981-1988); formerly Chairman
of the Economics Department and Director of the
Financial Research Center at Princeton University
(1974-1975 and 1977-1981); formerly Member,
President's Council of Economic Advisors (1975-
1977).
----------------------------------------------------------------------------------------------------------------------
Ernest J. Scalberg Trustee Dean of the Graduate School of Business
Fordham Graduate School Administration and Dean of Faculty of the School
of Business of Business at Fordham University (April 1994 to
113 West 60th Street present); Director, Adviser or Trustee to numerous
New York, New York non-profit organizations (1974 to present);
10023 formerly Founding Dean, School of Business and
Age 53 Management, Hong Kong University of Science
and Technology (1991-1993); formerly Associate
Dean of UCLA Graduate School of Management
(1981-1994).
----------------------------------------------------------------------------------------------------------------------
R. Charles Tschampion Trustee Managing Director of Investment Strategy and
General Motors Investment Asset Allocation, General Motors Investment
Management Corp. Management Corporation (1994 to present); Vice
767 Fifth Avenue Chairman of the Association for Investment
New York, New York Management Research (1989 to present);
10153 Governor of the Association for Investment
Age 52 Management Research (1995 to present); Director
of the India Magnum Fund (1994 to present),
Trustee of Lehigh University and Member of the
Investment Sub-Committee for the Lehigh
University Endowment Fund (October 1998 to
present).
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NAME/ADDRESS/AGE POSITION WITH THE PRINCIPAL OCCUPATIONS
TRUST DURING THE PAST FIVE YEARS
======================================================================================================================
Cheryl Burgermeister Trustee Director and Chief Officer of Finance of The
The Crabbe Huson Group, Crabbe Huson Group and Treasurer of the Crabbe
Inc. Huson Family of Funds (1987 to present);
121 S.W. Morrison formerly Senior Auditor at KPMG Peat Marwick
Suite 1400 (1982-1986).
Portland, Oregon 97204
Age 47
----------------------------------------------------------------------------------------------------------------------
Howard H. Fairweather, President and Retired; formerly Executive Vice President of
4 Parsons Street Secretary State Street Bank and Trust Company (1977 to
Newburyport, MA 02110 September 1996); formerly Vice President and
Age 60 head of the New England Division of Commercial
Lending and head of the National Division at State
Street Bank and Trust Company (1972-1977); formerly
Commercial Lending Officer at State Street Bank and
Trust Company (1965-1972).
----------------------------------------------------------------------------------------------------------------------
E. Davis Hawkes, Jr. Treasurer and Retired; formerly Vice President of State Street
47 Washington Street Assistant Secretary Bank and Trust Company (1954-1990).
Marblehead, MA 01945
Age 67
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REMUNERATION OF TRUSTEES AND OFFICERS
The Trust pays each Trustee an annual fee of $12,000 plus a per meeting fee of $2,000 for meetings of the Board of Trustees attended by the Trustee. The Trust also reimburses each Trustee for travel and other out-of-pocket expenses incurred by him/her in connection with attending such meetings.
Assuming that four (4) meetings of the Board of Trustees are held annually, it is estimated that the compensation paid to each Trustee during the fiscal year ended September 30, 1999 will be:
Name of Trustee Aggregate Compensation from Trust --------------- --------------------------------- John W. English $20,000 George R. Gaspari $20,000 Burton G. Malkiel $20,000 Ernest J. Scalberg $20,000 R. Charles Tschampion $20,000 Cheryl Burgermeister $20,000 |
The following table sets forth the total (estimated) remuneration of Trustees and officers of the Trust for the fiscal year ended September 30, 1999.
------------------------------------------------------------------------------------------------------------------
Name/ Aggregate Pension or Estimated Annual Total
Position Compensation from Retirement Benefits Upon Compensation
Trust Benefits Accrued Retirement from Trust &
as Part of Trust Trust Complex
Expenses paid to Trustees
==================================================================================================================
John W. English, $20,000 $0 $0 $20,000
Trustee
------------------------------------------------------------------------------------------------------------------
George R. $20,000 $0 $0 $20,000
Gaspari, Trustee
------------------------------------------------------------------------------------------------------------------
Burton G. $20,000 $0 $0 $20,000
Malkiel, Trustee
------------------------------------------------------------------------------------------------------------------
Ernest J. $20,000 $0 $0 $20,000
Scalberg,
Trustee
------------------------------------------------------------------------------------------------------------------
R. Charles $20,000 $0 $0 $20,000
Tschampion,
Trustee
------------------------------------------------------------------------------------------------------------------
Cheryl $20,000 $0 $0 $20,000
Burgermeister,
Trustee
------------------------------------------------------------------------------------------------------------------
Howard H. $20,000 $0 $0 $20,000
Fairweather,
President and
Secretary
------------------------------------------------------------------------------------------------------------------
E Davis Hawkes, $20,000 $0 $0 $20,000
Jr., Treasurer
and Assistant
Secretary
------------------------------------------------------------------------------------------------------------------
|
No Trustee or officer is entitled to any pension or retirement benefits from the Trust.
THE INVESTMENT ADVISER
State Street, through its State Street Global Advisors division, acts as investment adviser to the Trust and, subject to the supervision of the Board, is responsible for the investment management of each Select Sector SPDR Fund. State Street is a wholly owned subsidiary of State Street Boston Corporation, a publicly held bank holding company. State Street, with over $470.3 billion (U.S.) under management as of June 30, 1998, provides complete global investment management services from offices in the U.S., London, Sydney, Hong Kong, Tokyo, Toronto, Luxembourg, Montreal, Paris, Dublin, Munich and Brussels.
The Adviser serves as investment adviser to each Select Sector SPDR Fund pursuant to an Investment Advisory Agreement between the Trust and the Adviser. Under the Investment Advisory Agreement, the Adviser, subject to the supervision of the Board and in conformity with the stated investment policies of each Select Sector SPDR Fund, manages the investment of each Select Sector SPDR Fund's assets. The Adviser is responsible for placing purchase and sale orders and providing continuous supervision of the investment portfolio of each Select Sector SPDR Fund.
Pursuant to the Investment Advisory Agreement, the Trust has agreed to indemnify the Adviser for certain liabilities, including certain liabilities arising under the federal securities laws, unless such loss or liability results from willful misfeasance, bad faith or gross negligence in the performance of its duties or the reckless disregard of its obligations and duties.
THE ADMINISTRATOR
In addition to serving as Adviser to each Select Sector SPDR Fund, State Street, through its Global Investors Services Group, serves as Administrator for the Trust pursuant to an Administrative Services Agreement. Under the Administrative Services Agreement, State Street is obligated on a continuous basis to provide such administrative services as the Board of Trustees of the Trust reasonably deems necessary for the proper administration of the Trust and each Select Sector SPDR Fund. State Street will generally assist in all aspects of the Trust's and the Select Sector SPDR Funds' operations; supply and maintain office facilities (which may be in State Street's own offices), statistical and research data, data processing services, clerical, accounting, bookkeeping and record keeping services (including without limitation the maintenance of such books and records as are required under the 1940 Act and the rules thereunder, except as maintained by other agents), internal auditing, executive and administrative services, and stationery and office supplies; prepare reports to shareholders or investors; prepare and file tax returns; supply financial information and supporting data for reports to and filings with the SEC and various state Blue Sky authorities; supply supporting documentation for meetings of the Board of Trustees; provide monitoring reports and assistance regarding compliance with the Declaration of Trust, by-laws, investment objectives and policies and with federal and state securities laws; arrange for appropriate insurance coverage; and negotiate arrangements with, and supervise and coordinate the activities of, agents and others to supply services.
Pursuant to the Administrative Services Agreement, the Trust has agreed to indemnify the Administrator for certain liabilities, including certain liabilities arising under the federal securities laws, unless such loss or liability results from gross negligence or willful misconduct in the performance of its duties.
CUSTODIAN AND TRANSFER AGENT
State Street also serves as Custodian for the Select Sector SPDR Funds pursuant to a Custodian Agreement. As Custodian, State Street holds the Select Sector SPDR Funds' assets, calculates the net asset value of the Shares and calculates net income and realized capital gains or losses. State Street also serves as Transfer Agent of the Select Sector SPDR Funds pursuant to a Transfer Agency Agreement. State Street may be reimbursed by the Select Sector SPDR Funds for its out-of-pocket expenses. State Street and the Trust will comply with the self-custodian provisions of Rule 17f-2 under the 1940 Act.
Compensation. As compensation for its services under the Investment Advisory Agreement, State Street is paid a monthly fee based on a percentage of each Select Sector SPDR Fund's average daily net assets at the annual rate of .05%. From time to time, the Adviser may waive all or a portion of its fee. As compensation for its services under the Administrative Services Agreement, the Custodian Agreement and the Transfer Agency Agreement, State Street is paid a "unitary fee." See "Annual Fund Operating Expenses" in the Prospectus for a description of the unitary fee. Each Select Sector SPDR Fund will also bear all other expenses of its operation.
Term. The Investment Advisory Agreement with respect to each Select Sector SPDR Fund continues in effect for two years from its effective date, and thereafter is subject to annual approval by (1) the Board of Trustees or (2) vote of a majority of the outstanding voting securities (as defined in the 1940 Act) of the Select Sector SPDR Fund, provided that in either event such continuance also is approved by a majority of the Board of Trustees who are not interested persons (as defined in the 1940 Act) of the Trust by a vote cast in person at a meeting called for the purpose of voting on such approval. The Investment Advisory Agreement with respect to each Select Sector SPDR Fund is terminable without penalty, on 60 days notice, by the Board of Trustees or by a vote of the holders of a majority (as defined in the 1940 Act) of the applicable Select Sector SPDR Fund's outstanding voting securities. The Investment Advisory Agreement is also terminable upon 60 days notice by the Adviser and will terminate automatically in the event of its assignment (as defined in the 1940 Act).
BANKING AND REGULATORY MATTERS
State Street has been advised by its counsel that, in counsel's opinion, State Street currently may perform the services for the Trust and the Select Sector SPDR Funds contemplated by the Investment Advisory Agreement and other activities for the Trust and the Select Sector
SPDR Funds described in the Prospectus and this Statement of Additional Information without violation of the Glass-Steagall Act or other applicable banking laws or regulations. However, counsel has pointed out that future changes in either federal or state statutes and regulations concerning the permissible activities of banks or trust companies, as well as future judicial or administrative decisions or interpretations of present and future statutes and regulations, might prevent State Street from continuing to perform those services for the Trust and the Select Sector SPDR Funds. State laws on this issue may differ from the interpretations of relevant federal law and banks and financial institutions may be required to register as dealers pursuant to state securities law. If the circumstances described above should change, the Board of Trustees would review the relationships with State Street and consider taking all actions necessary in the circumstances.
THE DISTRIBUTOR
ALPS Mutual Funds Services, Inc. is the principal underwriter and Distributor of Shares. Its principal address is 370 17th Street, Suite 3100, Denver, CO 80202. Investor information can be obtained by calling 1-800-843-2639. The Distributor has entered into an agreement with the Trust which will continue for two years from its effective date, and which is renewable annually thereafter (the "Distribution Agreement"), pursuant to which it distributes Shares of each Select Sector SPDR Fund. Shares will be continuously offered for sale by the Trust through the Distributor only in Creation Units, as described in the Prospectus and below under "Creation and Redemption of Creation Units." Shares in less than Creation Units are not distributed by the Distributor. The Distributor will deliver the Prospectus and Statement of Additional Information to persons purchasing Creation Units and will maintain records of both orders placed with it and confirmations of acceptance furnished by it. The Distributor is a broker-dealer registered under the Securities Exchange Act of 1934 (the "Exchange Act") and a member of the National Association of Securities Dealers, Inc. ("NASD"). The Distributor has no role in determining the investment policies of the Trust or which securities are to be purchased or sold by the Trust.
The Board of Trustees, consisting of Independent Trustees described below, has adopted a distribution plan pursuant to Rule 12b-1 under the 1940 Act (each, a "Plan") for each Select Sector SPDR Fund. The terms of each Plan are described in the Prospectus.
Under its terms, each Select Sector SPDR Fund's Plan remains in effect from year to year, provided such continuance is approved annually by vote of the Board, including a majority of the "Independent Trustees" (Trustees who are not interested persons of the Fund (as defined in the 1940 Act) and have no direct or indirect financial interest in the operation of the Plan or any agreement related to the Plan). The Plan may not be amended to increase materially the amount to be spent for the services provided by the Distributor without approval by the shareholders of the Select Sector SPDR Fund to which the Plan applies, and all material amendments of the Plan also require Board approval (as described above). Each Plan may be terminated at any time, without penalty, by vote of a majority of the Independent Trustees, or, by a vote of a majority of
the outstanding voting securities of such Select Sector SPDR Fund (as such vote is defined in the 1940 Act). Pursuant to the Distribution Agreement, the Distributor will provide the Board with periodic reports of any amounts expended under the Plan and the purpose for which such expenditures were made.
The Distribution Agreement provides that it may be terminated at any
time, without the payment of any penalty, as to each Select Sector SPDR Fund:
(i) by vote of a majority of the Independent Trustees or (ii) by vote of a
majority (as defined in the 1940 Act) of the outstanding voting securities of
the Select Sector SPDR Fund, on at least 60 days written notice to the
Distributor. The Distribution Agreement is also terminable upon 60 days notice
by the Distributor and will terminate automatically in the event of its
assignment (as defined in the 1940 Act).
Pursuant to agreements entered into with such persons, the Distributor will make payments under each Select Sector SPDR Fund's Plan to certain broker-dealers or other persons ("Investor Services Organizations") that enter into investor services agreements with the Distributor in the form approved by the Board of Trustees to provide distribution assistance and shareholder support, account maintenance and educational and promotional services (which may include compensation and sales incentives to the registered brokers or other sales personnel of the broker-dealer or other financial entity that is a party to an investor services agreement) ("Investor Services Agreements"). Each of the Investor Services Agreement will be a "related agreement" under the Plan of such Select Sector SPDR Fund. No Investor Services Agreement will provide for annual fees of more than 0.10% of the average daily net assets of all Select Sector SPDR Funds subject to the applicable Investor Services Agreement.
Subject to an aggregate limitation of .25% of a Select Sector SPDR Fund's average net assets per annum, the fees paid by a Select Sector SPDR Fund under its Plan will be compensation for distribution, investor services or marketing services for that Fund. To the extent the Plan fees aggregate less than .25% per annum of the average daily net assets of a Select Sector SPDR Fund, each Fund may also reimburse the Distributor and other persons for their respective costs incurred in printing prospectuses and producing advertising or marketing material prepared at the request of the Fund. The aggregate payments under each Plan will not exceed, on an annualized basis, .25% of average daily net assets of any Select Sector SPDR Fund.
The continuation of the Distribution Agreement, any Investor Services Agreements and any other related agreements is subject to annual approval of the Board, including by a majority of the Independent Trustees, as described above.
Each of the Investor Services Agreements will provide that it may be terminated at any time, without the payment of any penalty, (i) by vote of a majority of the Independent Trustees or (ii) by vote of a majority of the outstanding voting securities (as defined in the 1940 Act) of the relevant Select Sector SPDR Fund, on at least 60 days' written notice to the other party. Each of the Distribution Agreement and the Investor Services Agreements is also terminable upon 60 days'
notice by the Distributor and will terminate automatically in the event of its assignment (as defined in the 1940 Act). Each Investor Services Agreement is also terminable by the applicable Investor Service Organization upon 60 days' notice to the other party thereto.
The allocation among the Select Sector SPDR Funds of fees and expenses payable under the Distribution Agreement and the Investor Services Agreements will be made pro rata in accordance with the daily net assets of the respective Funds.
The Distributor may also enter into agreements with securities dealers ("Soliciting Dealers") who will solicit purchases of Creation Unit aggregations of Select Sector SPDR Fund Shares. Such Soliciting Dealers may also be Participating Parties (as defined below), DTC Participants (as defined below) and/or Investor Services Organizations.
Pursuant to the Distribution Agreement, the Trust has agreed to indemnify the Distributor, and may indemnify Soliciting Dealers entering into agreements with the Distributor, for certain liabilities, including certain liabilities arising under the federal securities laws, unless such loss or liability results from willful misfeasance, bad faith or gross negligence in the performance of its duties or the reckless disregard of its obligations and duties under the Distribution Agreement or other agreement, as applicable.
ADDITIONAL EXPENSES
Standard & Poor's, the AMEX and Merrill Lynch have entered into a license agreement with respect to each Select Sector SPDR Fund's Select Sector Index. Pursuant to such license agreement, the Trust has entered into a sub-license agreement which provides that each Select Sector SPDR Fund will pay a one time fee to Standard & Poor's of $5,000 (the "One Time Fee"). In addition, the Trust will pay a sub-license fee per annum (i) to Standard & Poor's equal to the greater of .03% of the aggregate net assets of the Trust or $450,000 (the "Minimum Annual Fee"), and (ii) to Merrill Lynch equal to .03% of the aggregate net assets of the Trust. The Minimum Annual Fee (plus the One Time Fee) is payable in full to Standard & Poor's during the first year of the sub-license agreement six months from the date after the first day of trading of any Select Sector SPDR Fund on the Amex (the "First Trading Day"). Thereafter, the Minimum Annual Fee is payable in full on each anniversary of the First Trading Day. The fee to Merrill Lynch is payable on a quarterly basis. Each Select Sector SPDR Fund will pay its proportionate share of the annual sub-license fees based on the relative net assets of such Fund.
BROKERAGE TRANSACTIONS
The policy of the Trust regarding purchases and sales of securities for the Select Sector SPDR Funds is that primary consideration will be given to obtaining the most favorable prices and efficient executions of transactions. Consistent with this policy, when securities transactions are effected on a stock exchange, the Trust's policy is to pay commissions which are considered fair and reasonable without necessarily determining that the lowest possible commissions are paid in all circumstances. The Trust believes that a requirement always to seek the lowest possible commission cost could impede effective portfolio management and preclude the Select Sector SPDR Funds and the Adviser from obtaining a high quality of brokerage and research services. In seeking to determine the reasonableness of brokerage commissions paid in any transaction, the Adviser relies upon its experience and knowledge regarding commissions generally charged by
]various brokers and on its judgment in evaluating the brokerage and research services received from the broker effecting the transaction. Such determinations are necessarily subjective and imprecise, as in most cases an exact dollar value for those services is not ascertainable.
In seeking to implement the Trust's policies, the Adviser effects transactions with those brokers and dealers who the Adviser believes provides the most favorable prices and are capable of providing efficient executions. If the Adviser believes such price and execution are obtainable from more than one broker or dealer, it may give consideration to placing portfolio transactions with those brokers and dealers who also furnish research and other services to the Select Sector SPDR Funds or the Adviser. Such services may include, but are not limited to, information as to the availability of securities for purchase or sale and statistical information pertaining to corporate actions affecting stocks, including but not limited to, stocks within the S&P 500.
The Select Sector SPDR Funds will not deal with affiliates in principal transactions unless permitted by exemptive order or applicable rule or regulation.
The Adviser assumes general supervision over placing orders on behalf of the Trust for the purchase or sale of portfolio securities. If purchases or sales of portfolio securities of the Trust and one or more other investment companies or clients supervised by the Adviser are considered at or about the same time, transactions in such securities are allocated among the several investment companies and clients in a manner deemed equitable to all by the Adviser. In some cases, this procedure could have a detrimental effect on the price or volume of the security so far as the Trust is concerned. However, in other cases, it is possible that the ability to participate in volume transactions and to negotiate lower brokerage commissions will be beneficial to the Trust. The primary consideration is prompt execution of orders at the most favorable net price.
Portfolio turnover may vary from year to year, as well as within a year. High turnover rates are likely to result in comparatively greater brokerage expenses. The portfolio turnover rate for each Select Sector SPDR Fund is expected to be under 50%. See "Investment Policies and Strategies" in the Prospectus. The overall reasonableness of brokerage commissions is evaluated by the Adviser based upon its knowledge of available information as to the general level of commissions paid by other institutional investors for comparable services.
BOOK ENTRY ONLY SYSTEM
The following information supplements and should be read in conjunction with the section in the Prospectus entitled "Buying and Selling Select Sector SPDR Funds."
DTC acts as securities depositary for the Shares. Shares of each Select Sector SPDR Fund are represented by securities registered in the name of DTC or its nominee and deposited with, or on behalf of, DTC. Except in the limited circumstance provided below, certificates will not be issued for Shares.
DTC, a limited-purpose trust company, was created to hold securities of its participants (the "DTC Participants") and to facilitate the clearance and settlement of securities transactions among the DTC Participants in such securities through electronic book-entry changes in accounts of the DTC Participants, 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, some of whom (and/or their representatives) own DTC. More specifically, DTC is owned by a number of its DTC Participants and by the New York Stock Exchange ("NYSE"), the AMEX and the NASD. Access to the DTC system is also 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 (the "Indirect Participants").
Beneficial ownership of Shares is limited to DTC Participants, Indirect Participants and persons holding interests through DTC Participants and Indirect Participants. Ownership of beneficial interests in Shares (owners of such beneficial interests are referred to herein as "Beneficial Owners") is shown on, and the transfer of ownership is effected only through, records maintained by DTC (with respect to DTC Participants) and on the records of DTC Participants (with respect to Indirect Participants and Beneficial Owners that are not DTC Participants). Beneficial Owners will receive from or through the DTC Participant a written confirmation relating to their purchase of Shares.
Conveyance of all notices, statements and other communications to Beneficial Owners is effected as follows. Pursuant to the Depositary Agreement between the Trust and DTC, DTC is required to make available to the Trust upon request and for a fee to be charged to the Trust a listing of the Shares of each Fund held by each DTC Participant. The Trust shall inquire of each such DTC Participant as to the number of Beneficial Owners holding Shares, directly or indirectly, through such DTC Participant. The Trust shall provide each such DTC Participant with copies of such notice, statement or other communication, in such form, number and at such place as such DTC Participant may reasonably request, in order that such notice, statement or communication may be transmitted by such DTC Participant, directly or indirectly, to such Beneficial Owners. In addition, the Trust shall pay to each such DTC Participant a fair and reasonable amount as reimbursement for the expenses attendant to such transmittal, all subject to applicable statutory and regulatory requirements.
Share distributions shall be made to DTC or its nominee, Cede & Co., as the registered holder of all Shares. DTC or its nominee, upon receipt of any such distributions, shall credit immediately DTC Participants' accounts with payments in amounts proportionate to their respective beneficial interests in Shares of each Fund as shown on the records of DTC or its nominee. Payments by DTC Participants to Indirect Participants and Beneficial Owners of Shares 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.
The Trust has no 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 such Shares, 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 determine to discontinue providing its service with respect to Shares at any time by giving reasonable notice to the Trust and discharging its responsibilities with respect thereto under applicable law. Under such circumstances, the Trust 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 issue and deliver printed certificates representing ownership of Shares, unless the Trust makes other arrangements with respect thereto satisfactory to the AMEX.
CREATION AND REDEMPTION OF CREATION UNITS
CREATION
The Trust issues and sells Shares of each Select Sector SPDR Fund only in Creation Units on a continuous basis through the Distributor, without a sales load, at their net asset value next determined after receipt, on any Business Day (as defined below), of an order in proper form.
A "Business Day" with respect to each Select Sector SPDR Fund is any day on which the NYSE is open for business. As of the date of the Prospectus, the NYSE observes the following holidays: New Year's Day, Martin Luther King, Jr. Day, President's Day (Washington's Birthday), Good Friday, Memorial Day (observed), Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
FUND DEPOSIT
The consideration for purchase of a Creation Unit of a Select Sector SPDR Fund generally consists of the in-kind deposit of a designated portfolio of equity securities -- the "Deposit Securities" -- per each Creation Unit constituting a substantial replication, or a representation, of the stocks included in the relevant Select Sector SPDR Fund's Select Sector Index and an amount of cash -- the "Cash Component" -- computed as described below. Together, the Deposit Securities and the Cash Component constitute the "Fund Deposit," which represents the minimum initial and subsequent investment amount for a Creation Unit of any Select Sector SPDR Fund. The Cash Component is an amount equal to the Dividend Equivalent Payment (as defined below), plus or minus, as the case may be, a Balancing Amount (as defined below). The "Dividend Equivalent Payment" enables each Fund to make a complete distribution of dividends on the next dividend payment date, and is an amount equal, on a per Creation Unit basis, to the dividends on all the portfolio securities of the Fund ("Fund Securities") with ex-dividend dates within the
accumulation period for such distribution (the "Accumulation Period"), net of expenses and liabilities for such period, as if all of the Fund Securities had been held by the Fund for the entire Accumulation Period. The Accumulation Period begins on the ex-dividend date for each Fund and ends on the next ex-dividend date. The "Balancing Amount" is an amount equal to the difference between the net asset value of the Shares (per Creation Unit) and the "Deposit Amount" -- an amount equal to the sum of the market value of the Deposit Securities and the Dividend Equivalent Payment. If the Balancing Amount is a positive number (i.e., the net asset value per Creation Unit exceeds the Deposit Amount), the Cash Component shall be increased by such positive amount. If the Balancing Amount is a negative number (i.e., the net asset value per Creation Unit is less than the Deposit Amount), the Cash Component shall be decreased by such negative amount. If the negative number is greater than the Dividend Equivalent Payment, the creator will be entitled to receive cash in an amount equal to the differential. The Balancing Amount serves the function of compensating for any differences between the net asset value per Creation Unit and the Deposit Amount.
The Custodian, through the National Securities Clearing Corporation ("NSCC") (discussed below), makes available on each Business Day, immediately prior to the opening of business on the AMEX (currently 9:30 a.m., New York time), the list of the names and the required number of shares of each Deposit Security to be included in the current Fund Deposit (based on information at the end of the previous Business Day) for each Select Sector SPDR Fund. Such Fund Deposit is applicable, subject to any adjustments as described below, in order to effect creations of Creation Units of a given Select Sector SPDR Fund until such time as the next-announced composition of the Deposit Securities is made available.
The identity and number of shares of the Deposit Securities required for a Fund Deposit for each Select Sector SPDR Fund changes as rebalancing adjustments and corporate action events are reflected from time to time by the Adviser with a view to the investment objective of the Select Sector SPDR Fund. The composition of the Deposit Securities may also change in response to adjustments to the weighting or composition of the Component Stocks of the relevant Select Sector Index. In addition, the Trust reserves the right to permit or require the substitution of an amount of cash -- i.e., a "cash in lieu" amount -- to be added to the Cash Component to replace any Deposit Security which may not be available in sufficient quantity for delivery or which may not be eligible for transfer through the Clearing Process (discussed below), or which may not be eligible for trading by an Authorized Participant (as defined below) or the investor for which it is acting. Brokerage commissions incurred in connection with acquisition of Deposit Securities not eligible for transfer through the systems of DTC and hence not eligible for transfer through the Clearing Process (discussed below) will be at the expense of the Fund and will affect the value of all Shares; but the Adviser, subject to the approval of the Board of Trustees, may adjust the transaction fee within the parameters described above to protect ongoing shareholders. The adjustments described above will reflect changes, known to the Adviser on the date of announcement to be in effect by the time of delivery of the Fund Deposit, in the composition of the subject Select Sector Index being tracked by the relevant Select Sector SPDR Fund or resulting from certain corporate actions.
In addition to the list of names and numbers of securities constituting the current Deposit Securities of a Fund Deposit, the Custodian, through the NSCC, also makes available on each Business Day, the Dividend Equivalent Payment, effective through and including the previous Business Day, per outstanding Share of each Select Sector SPDR Fund.
PROCEDURES FOR CREATION OF CREATION UNITS
To be eligible to place orders with the Distributor to create a Creation Unit of a Select Sector SPDR Fund, an entity must be (i) a "Participating Party", i.e., a broker-dealer or other participant in the clearing process through the Continuous Net Settlement System of the NSCC (the "Clearing Process"), a clearing agency that is registered with the SEC; or (ii) a DTC Participant (see "Book Entry Only System"), and, in each case, must have executed an agreement with the Trust, the Distributor and the Transfer Agent with respect to creations and redemptions of Creation Units ("Participant Agreement") (discussed below). A Participating Party and DTC Participant are collectively referred to as an "Authorized Participant". Investors should contact the Distributor for the names of Authorized Participants that have signed a Participant Agreement. All Shares of Select Sector SPDR Funds, however created, will be entered on the records of DTC in the name of Cede & Co. for the account of a DTC Participant.
All orders to create Select Sector SPDR Funds must be placed for one or
more Creation Unit size aggregations of Shares (50,000 in the case of each
Fund). All orders to create Creation Units, whether through the Clearing Process
(through a Participating Party) or outside the Clearing Process (through a DTC
Participant), must be received by the Distributor no later than the closing time
of the regular trading session on the NYSE ("Closing Time") (ordinarily 4:00
p.m. New York time) in each case on the date such order is placed in order for
creation of Creation Units to be effected based on the net asset value of Shares
of each Select Sector SPDR Fund as determined on such date. The date on which an
order to create Creation Units (or an order to redeem Creation Units as
discussed below) is placed is referred to as the "Transmittal Date". Orders must
be transmitted by an Authorized Participant by telephone or other transmission
method acceptable to the Distributor pursuant to procedures set forth in the
Participant Agreement, as described below (see "Placement of Creation Orders
Using Clearing Process" and "Placement of Creation Orders Outside Clearing
Process"). Severe economic or market disruptions or changes, or telephone or
other communication failure, may impede the ability to reach the Distributor or
an Authorized Participant.
Orders to create Creation Units of Select Sector SPDR Funds shall be placed with an Authorized Participant, as applicable, in the form required by such Authorized Participant. In addition, the Authorized Participant may request the investor to make certain representations or enter into agreements with respect to the order, e.g., to provide for payments of cash, when required. Investors should be aware that their particular broker may not have executed a Participant Agreement, and that, therefore, orders to create Creation Units of Select Sector SPDR Funds have to be placed by the investor's broker through an Authorized Participant that 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. Those placing orders for Creation Units through the Clearing Process should afford sufficient time to permit proper submission of the order to the Distributor prior to the Closing Time on the Transmittal Date.
Orders for creation that are 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. Those persons placing orders outside the Clearing Process should ascertain the deadlines applicable to DTC and the Federal Reserve Bank wire system by contacting the operations department of the broker or depository institution effectuating such transfer of Deposit Securities and Cash Component.
PLACEMENT OF CREATION ORDERS USING CLEARING PROCESS
The Clearing Process is the process of creating or redeeming Creation Units through the Continuous Net Settlement System of the NSCC. Fund Deposits made through the Clearing Process must be delivered through a Participating Party that has executed a Participant Agreement. The Participant Agreement authorizes the Distributor to transmit through the Transfer Agent to NSCC, on behalf of the Participating Party, such trade instructions as are necessary to effect the Participating Party's creation order. Pursuant to such trade instructions to NSCC, the Participating Party agrees to deliver the requisite Deposit Securities and the Cash Component to the Trust, together with such additional information as may be required by the Distributor. An order to create Select Sector SPDR Funds in Creation Units through the Clearing Process is deemed received by the Distributor on the Transmittal Date if (i) such order is received by the Distributor not later than the Closing Time on such Transmittal Date and (ii) all other procedures set forth in the Participant Agreement are properly followed.
PLACEMENT OF CREATION ORDERS OUTSIDE CLEARING PROCESS
Fund Deposits made outside the Clearing Process must be delivered through a DTC Participant that has executed a Participant Agreement with the Trust, the Distributor and the Transfer Agent. A DTC Participant who wishes to place an order creating Creation Units to be effected outside the Clearing Process need not be a Participating Party, but such orders must state that the DTC Participant is not using the Clearing Process and that the creation of Creation Units will instead be effected through a transfer of securities and cash directly through DTC. The Fund Deposit transfer must be ordered by the DTC Participant on the Transmittal Date in a timely fashion so as to ensure the delivery of the requisite number of Deposit Securities through DTC to the account of the Trust by no later than 11:00 a.m., New York time, of the next Business Day immediately following the Transmittal Date. All questions as to the number of Deposit Securities to be delivered, and the validity, form and eligibility (including time of receipt) for the deposit of any tendered securities, will be determined by the Trust, whose determination shall be final and binding. The cash equal to the Cash Component must be transferred directly to the Custodian
through the Federal Reserve wire system in a timely manner so as to be received by the Custodian no later than 2:00 p.m., New York time, on the next Business Day immediately following such Transmittal Date. An order to create Creation Units of Select Sector SPDR Funds outside the Clearing Process is deemed received by the Distributor on the Transmittal Date if (i) such order is received by the Distributor not later than the Closing Time on such Transmittal Date; and (ii) all other procedures set forth in the Participant Agreement are properly followed. However, if the Custodian does not receive both the requisite Deposit Securities and the Cash Component by 11:00 a.m. and 2:00 p.m., respectively, on the next Business Day immediately following the Transmittal Date, such order will be cancelled. Upon written notice to the Distributor, such cancelled order may be resubmitted the following Business Day using a Fund Deposit as newly constituted to reflect the then current net asset value of the Fund. The delivery of Creation Units of Select Sector SPDR Funds so created will occur no later than the third (3rd) Business Day following the day on which the purchase order is deemed received by the Distributor.
Creation Units of Select Sector SPDR Funds may be created in advance of receipt by the Trust of all or a portion of the applicable Deposit Securities as described below. In these circumstances, the initial deposit will have a value greater than the net asset value of the Shares on the date the order is placed in proper form. In addition to available Deposit Securities, cash must be deposited in an amount equal to the sum of (i) the Cash Component, plus (ii) 115% of the market value of the undelivered Deposit Securities (the "Additional Cash Deposit"). The order shall be deemed to be received on the Business Day on which the order is placed provided that the order is placed in proper form prior to 4:00 p.m. on such date and federal funds in the appropriate amount are deposited with the Trust's Custodian by 11:00 a.m. the following Business Day. If the order is not placed in proper form by 4:00 p.m. or federal funds in the appropriate amount are not received by 11:00 a.m. the next Business Day, then the order may be deemed to be rejected and the investor shall be liable to the Trust for losses, if any, resulting therefrom. An additional amount of cash shall be required to be deposited with the Trust, pending delivery of the missing Deposit Securities to the extent necessary to maintain the Additional Cash Deposit with the Trust in an amount at least equal to 115% of the daily marked to market value of the missing Deposit Securities. To the extent that missing Deposit Securities are not received by 1:00 p.m. on the third Business Day following the day on which the purchase order is deemed received by the Distributor or in the event a mark to market payment is not made within one Business Day following notification by the Distributor that such a payment is required, the Trust may use the cash on deposit to purchase the missing Deposit Securities. Authorized Participants will be liable to the Trust for the costs incurred by the Trust in connection with any such purchases. These costs will be deemed to include the amount by which the actual purchase price of the Deposit Securities exceeds the market value of such Deposit Securities on the day the purchase order was deemed received by the Distributor plus the brokerage and related transaction costs associated with such purchases. The Trust will return any unused portion of the Additional Cash Deposit once all of the missing Deposit Securities have been properly received by the Custodian or purchased by the Trust and deposited into the Trust. In addition, a transaction fee of $4,000 will be charged in all cases. The delivery of Creation Units of Select Sector SPDR Funds so created will occur no later than the third Business Day following the day on which the purchase order is
deemed received by the Distributor.
ACCEPTANCE OF ORDERS FOR CREATION UNITS
The Trust reserves the absolute right to reject a creation order transmitted to it by the Distributor in respect of any Select Sector SPDR Fund if (a) the order is not in proper form; (b) the investor(s), upon obtaining the Shares ordered, would own 80% or more of the currently outstanding Shares of any Select Sector SPDR Fund; (c) the Deposit Securities delivered are not as disseminated through the facilities of the AMEX for that date by the Custodian, as described above; (d) acceptance of the Deposit Securities would have certain adverse tax consequences to the Select Sector SPDR Fund; (e) the acceptance of the Fund Deposit would, in the opinion of counsel, be unlawful; (f) the acceptance of the Fund Deposit would otherwise, in the discretion of the Trust or the Adviser, have an adverse effect on the Trust or the rights of beneficial owners; or (g) in the event that circumstances outside the control of the Trust, the Distributor and the Adviser make it for all practical purposes impossible to process creation orders. Examples of such circumstances include acts of God or public service or utility problems such as fires, floods, extreme weather conditions and power outages resulting in telephone, telecopy and computer failures; market conditions or activities causing trading halts; systems failures involving computer or other information systems affecting the Trust, the Adviser, the Distributor, DTC, NSCC or any other participant in the creation process, and similar extraordinary events. The Distributor shall notify a prospective creator of a Creation Unit and/or the Authorized Participant acting on behalf of the creator of a Creation Unit of its rejection of the order of such person. The Trust, the Transfer Agent, the Custodian and the Distributor are under no duty, however, to give notification of any defects or irregularities in the delivery of Fund Deposits nor shall either of them incur any liability for the failure to give any such notification.
All questions as to the number of shares of each security in the Deposit Securities and the validity, form, eligibility and acceptance for deposit of any securities to be delivered shall be determined by the Trust, and the Trust's determination shall be final and binding.
CREATION TRANSACTION FEE
To compensate the Trust for transfer and other transaction costs involved in creation transactions, investors will be required to pay a fixed creation transaction fee of $1,000 payable to the Trust. An additional charge of up to three (3) times the fixed transaction fee (expressed as a percentage of the value of the Deposit Securities) may be imposed for (i) creations effected outside the Clearing Process; and (ii) cash creations (to offset the Trust's brokerage and other transaction costs associated with using cash to purchase the requisite Deposit Securities), for a total charge of $4,000. Investors are responsible for the costs of transferring the securities constituting the Deposit Securities to the account of the Trust.
REDEMPTION
Shares may be redeemed only in Creation Units at their net asset value
next determined after receipt of a redemption request in proper form by the
Select Sector SPDR Fund through the Transfer Agent and only on a Business Day.
THE TRUST WILL NOT REDEEM SHARES IN AMOUNTS LESS THAN CREATION UNITS. Beneficial
Owners must accumulate enough Shares in the secondary market to constitute a
Creation Unit in order to have such Shares redeemed by the Trust. 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 Shares to constitute a redeemable Creation Unit. As of
October 29, 1998, a Creation Unit of the Select Sector SPDR Funds ranged in cost
from approximately $1,000,000 to $1,400,000.
With respect to each Select Sector SPDR Fund, the Custodian, through the NSCC, makes available immediately prior to the opening of business on the AMEX (currently 9:30 am, Eastern time) on each Business Day, the Fund Securities that will be applicable (subject to possible amendment or correction) to redemption requests received in proper form (as defined below) on that day. Fund Securities received on redemption may not be identical to Deposit Securities which are applicable to creations of Creation Units.
Unless cash redemptions are available or specified for a Select Sector SPDR Fund, the redemption proceeds for a Creation Unit generally consist of Fund Securities -- as announced by the Custodian on the Business Day of the request for redemption received in proper form -- plus cash in an amount equal to the difference between the net asset value of the Shares being redeemed, as next determined after a receipt of a request in proper form, and the value of the Fund Securities (the "Cash Redemption Amount"), less a redemption transaction fee of $1,000. In the event that the Fund Securities have a value greater than the net asset value of the Shares, a compensating cash payment equal to the differential is required to be made by or through an Authorized Participant by the redeeming shareholder.
REDEMPTION TRANSACTION FEE
A redemption transaction fee of $1,000 is paid to the Trust to offset transfer and other transaction costs that may be incurred in connection with the redemption of Creation Units. The redemption transaction fee is the same no matter how many Creation Units are being redeemed pursuant to any one redemption request. The Select Sector SPDR Funds, subject to approval by the Board of Trustees, may adjust the fee from time to time based upon actual experience. An additional charge for cash redemptions or partial cash redemptions (when cash redemptions are available) for each Select Sector SPDR Fund may be imposed. Investors who use the services of a broker or other such intermediary in addition to an Authorized Participant to effect a redemption of a Creation Unit may be charged a fee for such services.
PLACEMENT OF REDEMPTION ORDERS USING CLEARING PROCESS
Orders to redeem Creation Units of Select Sector SPDR Funds through the Clearing Process must be delivered through a Participating Party that has executed the Participant Agreement. An order to redeem Creation Units of Select Sector SPDR Funds using the Clearing Process is deemed received on the Transmittal Date if (i) such order is received by the Transfer Agent not later than 4:00 p.m. on such Transmittal Date; and (ii) all other procedures set forth in the Participant Agreement are properly followed; such order will be effected based on the net asset value of the Fund as next determined. An order to redeem Creation Units of a Select Sector SPDR Fund using the Clearing Process made in proper form but received by the Fund after 4:00 p.m. will be deemed received on the next Business Day immediately following the Transmittal Date and will be effected at the net asset value next determined on such Business Day. The requisite Fund Securities and the Cash Redemption Amount will be transferred by the third (3rd) NSCC Business Day following the date on which such request for redemption is deemed received.
PLACEMENT OF REDEMPTION ORDERS OUTSIDE CLEARING PROCESS
Orders to redeem Creation Units of Select Sector SPDR Funds outside the Clearing Process must be delivered through a DTC Participant that has executed the Participant Agreement. A DTC Participant who wishes to place an order for redemption of Creation Units of Select Sector SPDR Funds to be effected outside the Clearing Process need not be a Participating Party, but such orders must state that the DTC Participant is not using the Clearing Process and that redemption of Creation Units will instead be effected through transfer of Shares directly through DTC. An order to redeem Creation Units of Select Sector SPDR Funds outside the Clearing Process is deemed received by the Transfer Agent on the Transmittal Date if (i) such order is received by the Transfer Agent not later than 4:00 p.m., New York time, on such Transmittal Date; (ii) such order is accompanied or proceeded by the requisite number of Shares of Select Sector SPDR Funds specified in such order, which delivery must be made through DTC to the Custodian no later than 11:00 a.m., New York time, on the next Business Day following such Transmittal Date (the "DTC Cut-Off-Time"); and (iii) all other procedures set forth in the Participant Agreement are properly followed.
After the Transfer Agent has deemed an order for redemption outside the Clearing Process received, the Transfer Agent will initiate procedures to transfer the requisite Fund Securities which are expected to be delivered within three Business Days and the Cash Redemption Amount to the Authorized Participant on behalf of the redeeming Beneficial Owner by the third Business Day following the Transmittal Date on which such redemption order is deemed received by the Transfer Agent.
The calculation of the value of the Fund Securities and the Cash Redemption Amount to be delivered upon redemption will be made by the Custodian according to the procedures set forth under "Determination of Net Asset Value" computed on the Business Day on which a redemption order is deemed received by the Transfer Agent. Therefore, if a redemption order in proper form is submitted to the Transfer Agent by a DTC Participant not later than the Closing Time on the
Transmittal Date, and the requisite number of Shares of the relevant Select Sector SPDR Fund are delivered to the Custodian prior to the DTC Cut-Off-Time, then the value of the Fund Securities and the Cash Redemption Amount to be delivered will be determined by the Custodian on such Transmittal Date. If, however, a redemption order is submitted to the Distributor by a DTC Participant not later than the Closing Time on the Transmittal Date but either (1) the requisite number of Shares of the relevant Select Sector SPDR Fund are not delivered by the DTC Cut-Off-Time as described above on the next Business Day following the Transmittal Date or (2) the redemption order is not submitted in proper form, then the redemption order will not be deemed received as of the Transmittal Date. In such case, the value of the Fund Securities and the Cash Redemption Amount to be delivered will be computed on the Business Day that such order is deemed received by the Transfer Agent, i.e., the Business Day on which the Shares of the relevant Select Sector SPDR Funds are delivered through DTC to the Custodian by the DTC Cut-Off-Time on such Business Day pursuant to a properly submitted redemption order.
If it is not possible to effect deliveries of the Fund Securities, the Trust may in its discretion exercise its option to redeem such Shares in cash, and the redeeming Beneficial Owner will be required to receive its redemption proceeds in cash. In addition, an investor may request a redemption in cash which the Select Sector SPDR Fund may, in its sole discretion, permit. In either case, the investor will receive a cash payment equal to the net asset value of its Shares based on the net asset value of Shares of the relevant Select Sector SPDR Fund next determined after the redemption request is received in proper form (minus a redemption transaction fee and additional charge for requested cash redemptions specified above, to offset the Trust's brokerage and other transaction costs associated with the disposition of Fund Securities). The Select Sector SPDR Fund may also, in its sole discretion, upon request of a shareholder, provide such redeemer a portfolio of securities which differs from the exact composition of the Fund Securities but does not differ in net asset value.
Redemptions of Shares for Fund Securities will be subject to compliance with applicable federal and state securities laws and each Select Sector SPDR Fund (whether or not it otherwise permits cash redemptions) reserves the right to redeem Creation Units for cash to the extent that the Select Sector SPDR Fund could not lawfully deliver specific Fund Securities upon redemptions or could not do so without first registering the Fund Securities under such laws. An Authorized Participant or an investor for which it is acting subject to a legal restriction with respect to a particular stock included in the Fund Securities applicable to the redemption of a Creation Unit may, at the Fund's discretion, be paid an equivalent amount of cash. The Authorized Participant may request the redeeming Beneficial Owner of the Shares to complete an order form or to enter into agreements with respect to such matters as compensating cash payment, beneficial ownership of Shares or delivery instructions.
The right of redemption may be suspended or the date of payment
postponed with respect to any Select Sector SPDR Fund (1) for any period during
which the NYSE is closed (other than customary weekend and holiday closings);
(2) for any period during which trading on the NYSE is suspended or restricted;
(3) for any period during which an emergency exists as a result of
which disposal of the Shares of the Select Sector SPDR Fund or determination of the Shares' net asset value is not reasonably practicable; or (4) in such other circumstance as is permitted by the SEC.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction with the section in the Prospectus entitled "Determination of Net Asset Value."
Net asset value per share for each Select Sector SPDR Fund of the Trust is computed by dividing the value of the net assets of such Select Sector SPDR Fund (i.e., the value of its total assets less total liabilities) by the total number of Shares outstanding, rounded to the nearest cent. Expenses and fees, including the management, administration and distribution fees, are accrued daily and taken into account for purposes of determining net asset value. The net asset value of each Select Sector SPDR is calculated by the Custodian and determined as of the close of the regular trading session on the NYSE (ordinarily 4:00 p.m., New York time) on each day that such exchange is open.
In computing a Select Sector SPDR Fund's net asset value per Share, the Select Sector SPDR Fund's securities holdings are valued based on their last quoted current price. Price information on listed securities is taken from the exchange where the security is primarily traded. Securities regularly traded in an over-the-counter market are valued at the latest quoted bid price in such market. Other portfolio securities and assets for which market quotations are not readily available are valued based on fair value as determined in good faith by the Adviser in accordance with procedures adopted by the Board.
DIVIDENDS AND DISTRIBUTIONS
The following information supplements and should be read in conjunction with the section in the Prospectus entitled "Distributions."
GENERAL POLICIES
Dividends from net investment income, if any, are declared and paid quarterly by each Select Sector SPDR Fund. Distributions of net realized securities gains, if any, generally are declared and paid once a year, but the Trust may make distributions on a more frequent basis for certain Select Sector SPDR Funds to improve index tracking or to comply with the distribution requirements of the Internal Revenue Code, in all events in a manner consistent with the provisions of the 1940 Act. In addition, the Trust intends to distribute at least annually amounts representing the full dividend yield on the underlying portfolio securities of each Fund, net of expenses of such Select Sector SPDR, as if such Select Sector SPDR Fund owned such underlying portfolio securities for the entire dividend period. As a result, some portion of each
distribution may result in a return of capital for tax purposes for shareholders.
Dividends and other distributions on Shares are distributed, as described below, on a pro rata basis to Beneficial Owners of such Shares. Dividend payments are made through DTC Participants and Indirect Participants to Beneficial Owners then of record with proceeds received from the Trust.
The Trust makes additional distributions to the extent necessary (i) to distribute the entire annual taxable income of the Trust, plus any net capital gains and (ii) to avoid imposition of the excise tax imposed by Section 4982 of the Internal Revenue Code. Management of the Trust reserves the right to declare special dividends if, in its reasonable discretion, such action is necessary or advisable to preserve the status of each Select Sector SPDR Fund as a regulated investment company ("RIC") or to avoid imposition of income or excise taxes on undistributed income.
DIVIDEND REINVESTMENT SERVICE
Broker-dealers may make available the DTC book-entry Dividend Reinvestment Service for use by Beneficial Owners of Select Sector SPDR Funds through DTC Participants for reinvestment of their dividend distributions. If this service is used, dividend distributions of both income and realized gains will be automatically reinvested in additional whole Shares purchased in the secondary market of the same Select Sector SPDR Fund.
TAXES
The following information also supplements and should be read in conjunction with the section in the Prospectus entitled "Tax Matters."
Each Select Sector SPDR Fund intends to qualify for and to elect treatment as a separate RIC under Subchapter M of the Internal Revenue Code. To qualify for treatment as a RIC, a company must annually distribute at least 90% of its net investment company taxable income (which includes dividends, interest and net short-term capital gains) and meet several other requirements.
Each Select Sector SPDR Fund is treated as a separate corporation for federal income tax purposes. Each Fund therefore is considered to be a separate entity in determining its treatment under the rules for RICs described herein and in the Prospectus. Losses in one Select Sector SPDR Fund do not offset gains in another and the requirements (other than certain organizational requirements) for qualifying RIC status are determined at the Fund level rather than at the Trust level.
A Select Sector SPDR Fund will be subject to a 4% excise tax on certain undistributed
income if it does not distribute to its shareholders in each calendar year at least 98% of its ordinary income for the calendar year plus 98% of its capital gain net income for the twelve months ended September 30 of such year. Each Select Sector SPDR Fund intends to declare and distribute dividends and distributions in the amounts and at the times necessary to avoid the application of this 4% excise tax.
As a result of tax requirements, the Trust on behalf of each Select Sector SPDR Fund has the right to reject an order to purchase Shares if the purchaser (or group of purchasers) would, upon obtaining the Shares so ordered, own 80% or more of the outstanding Shares of a given Select Sector SPDR Fund and if, pursuant to section 351 of the Internal Revenue Code, the respective Select Sector SPDR Fund would have a basis in the Deposit Securities different from the market value of such securities on the date of deposit. The Trust also has the right to require information necessary to determine beneficial share ownership for purposes of the 80% determination. See "Creation and Redemption of Creation Units."
Dividends and interest received by a Select Sector SPDR Fund may give rise to withholding and other taxes imposed by foreign countries. Tax conventions between certain countries and the United States may reduce or eliminate such taxes.
Each Select Sector SPDR Fund will report to shareholders annually the amounts of dividends received from ordinary income, the amount of distributions received from capital gains and the portion of dividends which may qualify for the dividends received deduction.
A loss realized on a sale or exchange of shares of a Select Sector SPDR Fund will be disallowed if other Fund shares are acquired (whether through the automatic reinvestment of dividends or otherwise) within a sixty-one (61) day period beginning thirty (30) days before and ending thirty (30) days after the date that the shares are disposed of. In such a case, the basis of the shares acquired will be adjusted to reflect the disallowed loss. Any loss upon the sale or exchange of Shares held for six (6) months or less will be treated as long-term capital loss to the extent of any capital gain dividends received by the shareholders.
Distribution of ordinary income and capital gains may also be subject to state and local taxes.
Distributions reinvested in additional Shares of a Select Sector SPDR Fund through the means of the service (see "Dividend Reinvestment Service") will nevertheless be taxable dividends to Beneficial Owners acquiring such additional Shares to the same extent as if such dividends had been received in cash.
Distributions of ordinary income paid to shareholders who are nonresident aliens or foreign entities will be subject to a 30% United States withholding tax unless a reduced rate of withholding or a withholding exemption is provided under applicable treaty law. Nonresident
shareholders are urged to consult their own tax advisers concerning the applicability of the United States withholding tax.
Some shareholders may be subject to a 31% withholding tax on distributions of ordinary income, capital gains and any cash received on redemption of Creation Units ("backup withholding"). Generally, shareholders subject to backup withholding will be those for whom no certified taxpayer identification number is on file with the Select Sector SPDR Fund or who, to the Fund's knowledge, have furnished an incorrect number. When establishing an account, an investor must certify under penalty of perjury that such number is correct and that such investor is not otherwise subject to backup withholding.
The foregoing discussion is a summary only and is not intended as a substitute for careful tax planning. Purchasers of Shares of the Trust should consult their own tax advisors as to the tax consequences of investing in such shares, including under state, local and other tax laws. Finally, the foregoing discussion is based on applicable provisions of the Internal Revenue Code, regulations, judicial authority and administrative interpretations in effect on the date hereof. Changes in applicable authority could materially affect the conclusions discussed above, and such changes often occur.
FEDERAL TAX TREATMENT OF FUTURES AND OPTIONS CONTRACTS
Each Select Sector SPDR Fund is required for federal income tax purposes to mark to market and recognize as income for each taxable year its net unrealized gains and losses on certain futures contracts as of the end of the year as well as those actually realized during the year. Gain or loss from futures and options contracts on broad-based indexes required to be marked to market will be 60% long-term and 40% short-term capital gain or loss. Application of this rule may alter the timing and character of distributions to shareholders. A Select Sector SPDR Fund may be required to defer the recognition of losses on futures contracts, option contracts and swaps to the extent of any unrecognized gains on offsetting positions held by the Select Sector SPDR Fund.
In order for a Select Sector SPDR Fund to continue to qualify for
federal income tax treatment as a regulated investment company, at least 90% of
its gross income for a taxable year must be derived from qualifying income,
i.e., dividends, interest, income derived from loans of securities, gains from
the sale of securities or of foreign currencies or other income derived with
respect to the Select Sector SPDR Fund's business of investing in securities. It
is anticipated that any net gain realized from the closing out of futures or
options contracts will be considered gain from the sale of securities and
therefore will be qualifying income for purposes of the 90% requirement.
Each Select Sector SPDR Fund distributes to shareholders annually any net capital gains which have been recognized for federal income tax purposes (including unrealized gains at the end
of the Select Sector SPDR Fund's fiscal year) on futures or options transactions. Such distributions are combined with distributions of capital gains realized on the Select Sector SPDR Fund's other investments and shareholders are advised on the nature of the distributions.
CAPITAL STOCK AND SHAREHOLDER REPORTS
The Trust currently is comprised of nine Select Sector SPDR Funds. Each Select Sector SPDR Fund issues shares of beneficial interest, par value $.001 per Share. The Board of Trustees may designate additional Select Sector SPDR Funds.
Each Share issued by the Trust has a pro rata interest in the assets of the corresponding Select Sector SPDR Fund. Shares have no preemptive, exchange, subscription or conversion rights and are freely transferable. Each Share is entitled to participate equally in dividends and distributions declared by the Board with respect to the relevant Select Sector SPDR Fund, and in the net distributable assets of such Select Sector SPDR Fund on liquidation.
Each Share has one vote with respect to matters upon which a shareholder vote is required consistent with the requirements of the 1940 Act and the rules promulgated thereunder. Shares of all Select Sector SPDR Funds vote together as a single class except that if the matter being voted on affects only a particular Select Sector SPDR Fund it will be voted on only by that Select Sector SPDR Fund and if a matter affects a particular Select Sector SPDR Fund differently from other Select Sector SPDR Funds, that Select Sector SPDR Fund will vote separately on such matter. Under Massachusetts law, the Trust is not required to hold an annual meeting of shareholders unless required to do so under the 1940 Act. The policy of the Trust is not to hold an annual meeting of shareholders unless required to do so under the 1940 Act. All Shares of the Trust (regardless of the Select Sector SPDR Fund) have noncumulative voting rights for the election of Trustees. Under Massachusetts law, Trustees of the Trust may be removed by vote of the shareholders.
Under Massachusetts law, shareholders of a business trust may, under certain circumstances, be held personally liable as partners for obligations of the Trust. However, the Declaration of Trust contains an express disclaimer of shareholder liability for acts or obligations of the Trust, requires that Trust obligations include such disclaimer, and provides for indemnification and reimbursement of expenses out of the Trust's property for any shareholder held personally liable for the obligations of the Trust. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is limited to circumstances in which the Trust itself would be unable to meet its obligations. Given the above limitations on shareholder personal liability, and the nature of each Fund's assets and operations, the risk to shareholders of personal liability is believed to be remote.
Each Select Sector SPDR Fund expects that, immediately prior to the commencement of trading of Shares, ALPS Mutual Fund Services, Inc. will be the sole shareholder of its outstanding
Shares. Each Select Sector SPDR Fund cannot predict the length of time that ALPS Mutual Fund Services, Inc. will remain a control person of the Fund.
The Trust does not have information concerning the beneficial ownership of the Shares held in the names of such DTC Participants.
Shareholder inquiries may be made by writing to the Trust, c/o the Distributor, ALPS Mutual Funds Services, Inc., at 370 17th Street, Suite 3100, Denver, CO 80202.
Absent an applicable exemption or other relief from the SEC or its staff, officers and directors of the Trust and beneficial owners of 10% of the Shares of a Select Sector SPDR Fund ("Insiders") would be subject to the insider reporting, short-swing profit and short sale provisions in Section 16 of the Exchange Act and the SEC's rules thereunder. The Trust has applied for a "no action letter" seeking advice from the SEC staff that it will not recommend SEC enforcement action if Insiders do not file reports required by Section 16(a) of the Exchange Act and the rules thereunder with respect to transactions in a substantially similar investment product. There is no assurance that the SEC staff will issue the requested relief. Insiders should consult with their own legal counsel concerning their obligations under Section 16 of the Exchange Act, and should note that the no action letter does not address other requirements under the Exchange Act, including those imposed by Section 13(d) thereof and the rules thereunder.
PERFORMANCE AND OTHER INFORMATION
The performance of a Select Sector SPDR Fund may be quoted in advertisements, sales literature or reports to shareholders in terms of average annual total return, cumulative total return and yield.
Quotations of average annual total return are expressed in terms of the average annual rate of return of a hypothetical investment in a Select Sector SPDR Fund over periods of 1, 5 and 10 years (or the life of a Select Sector SPDR Fund, if shorter). Such total return figures will reflect the deduction of a proportional share of such Select Sector SPDR Fund's expenses on an annual basis, and will assume that all dividends and distributions are reinvested when paid.
Total return is calculated according to the following formula:
P(1 + T)(n) = ERV (where P = a hypothetical initial payment of $1,000, T = the
average annual total return, n = the number of years and ERV = the ending
redeemable value of a hypothetical $1,000 payment made at the beginning of the
1, 5 or 10 year period).
Quotations of a cumulative total return will be calculated for any specified period by assuming a hypothetical investment in a Select Sector SPDR Fund on the date of the commencement of the period and will assume that all dividends and distributions are reinvested on ex date. The net increase or decrease in the value of the investment over the period will be
divided by its beginning value to arrive at cumulative total return. Total return calculated in this manner will differ from the calculation of average annual total return in that it is not expressed in terms of an average rate of return.
The yield of a Select Sector SPDR Fund is the net annualized yield based on a specified 30-day (or one month) period assuming a semiannual compounding of income. Included in net investment income is the amortization of market premium or accretion of market and original issue discount on bonds. Yield is calculated by dividing the net investment income per share earned during the period by the maximum offering price per share on the last day of the period, according to the following formula: YIELD = (a-b) divided by 2[(cd + 1)(6)-1] (where a = dividends and interest earned during the period, b = expenses accrued for the period (net of reimbursements), c = the average daily number of shares outstanding during the period that were entitled to receive dividends, and d = the maximum offering price per share on the last day of the period).
Quotations of cumulative total return, average annual total return or yield reflect only the performance of a hypothetical investment in a Select Sector SPDR Fund during the particular time period on which the calculations are based. Such quotations for a Select Sector SPDR Fund will vary based on changes in market conditions and the level of such Select Sector SPDR Fund's expenses, and no reported performance figure should be considered an indication of performance which may be expected in the future.
The cumulative and average total returns and yields do not take into account federal or state income taxes which may be payable by shareholders; total returns and yields would, of course, be lower if such charges were taken into account.
A comparison of the quoted non-standard performance offered for various investments is valid only if performance is calculated in the same manner. Since there are different methods for calculating performance, investors should consider the effects of the methods used to calculate performance when comparing performance of the Funds with performance quoted with respect to other investment companies or types of investments.
From time to time, in advertising and marketing literature, the Funds' performance may be compared to the performance of broad groups of open-end and closed-end investment companies with similar investment goals, as tracked by independent organizations such as Investment Company Data, Inc., Lipper Analytical Services, Inc., CDA Investment Technologies, Inc., Morningstar, Inc., Value Line Mutual Fund Survey and other independent organizations. When these organizations' tracking results are used, the Funds will be compared to the appropriate fund category, that is, by fund objective and portfolio holdings, or to the appropriate volatility grouping, where volatility is a measure of a fund's risk.
In addition, in connection with the communication of the performance of the Funds to
current or prospective shareholders, the Trust also may compare those figures to the performance of certain unmanaged indexes which may assume the reinvestment of dividends or interest but generally do not reflect deductions for administrative and management costs. Examples of such indexes include, but are not limited to the following: Dow Jones Industrial Average; Consumer Price Index; Standard & Poor's 500 Composite Stock Price Index (S&P 500); Russell 1000 & NASDAQ non-financial 100 and their subsidiary sector indexes.
Performance of an index is historical and does not represent performance of the Trust, and is not a guarantee of future results.
In addition, information may be presented to current or prospective shareholders regarding the purchase of Select Sector SPDR Funds in the secondary market, such as margin requirements, types of orders that may be entered and information concerning short sales.
Evaluation of each Fund's performance or other relevant statistical information made by independent sources may also be used in advertisements and sales literature concerning the Trust, including reprints of, or selections from, editorials or articles about the Trust. Sources for Trust performance information and articles about the Trust include, but are not limited to, the following: American Association of Individual Investors' Journal, a monthly publication of the AAII that includes articles on investment analysis techniques; Barron's, a Dow Jones and Company, Inc. business and financial weekly that periodically reviews investment company performance data; Business Week, a national business weekly that periodically reports the performance rankings of investment companies; CDA Investment Technologies, an organization that provides performance and ranking information through examining the dollar results of hypothetical mutual fund investments and comparing these results against appropriate indexes; Forbes, a national business publication that from time to time reports the performance of specific investment companies; Fortune, a national business publication that periodically rates the performance of a variety of investment companies; The Frank Russell Company, a West-Coast investment management firm that periodically evaluates international stock markets and compares foreign equity market performance to U.S. stock market performance; Ibbotson Associates, Inc., a company specializing in investment research and data; Investment Company Data, Inc., an independent organization that provides performance ranking information for broad classes of mutual funds; Investor's Business Daily, a daily newspaper that features financial, economic, and business news; Kiplinger's Personal Finance Magazine, a monthly investment advisory publication that periodically features the performance of a variety of securities; Lipper Analytical Services, Inc.'s Mutual Fund Performance Analysis, a weekly publication of industry-wide mutual fund averages by type of fund; Money, a monthly magazine that from time to time features both specific funds and the mutual fund industry as a whole; The New York Times, a nationally distributed newspaper that regularly covers financial news; Smart Money, a national personal finance magazine published monthly by Dow Jones & Company, Inc. and The Hearst Corporation that focuses on ideas for investing, spending and saving; Value Line Mutual Fund Survey, an independent publication that provides biweekly performance and other information on mutual funds; The Wall Street Journal, a Dow Jones and Company, Inc. newspaper that regularly covers financial news; Wiesenberger
Investment Companies Services, an annual compendium of information about mutual funds and other investment companies, including comparative data on funds' backgrounds, management policies, salient features, management results, income and dividend records and price ranges; Worth, a national publication distributed ten times per year by Capital Publishing Company that focuses on personal finance.
COUNSEL AND INDEPENDENT AUDITORS
Gordon Altman Butowsky Weitzen Shalov & Wein, 114 West 47th Street, New York, New York 10036, are counsel to the Trust and have passed upon the validity of the Trust's shares.
PricewaterhouseCoopers LLP serves as the independent auditors of the Trust.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder and Board of Trustees of The Select Sector SPDR Trust
In our opinion, the accompanying statement of assets and liabilities and statement of operations presents fairly, in all material respects, the financial position of The Basic Industries Select Sector SPDR Fund, The Consumer Services Select Sector SPDR Fund, The Consumer Staples Select Sector SPDR Fund, The Cyclical/Transportation Select Sector SPDR Fund, The Energy Select Sector SPDR Fund, The Financial Select Sector SPDR Fund, The Industrial Select Sector SPDR Fund, The Technology Select Sector SPDR Fund and The Utilities Select Sector SPDR Fund, each a separate series of The Select Sector SPDR Trust (the "Trust"), at __________, 1998, in conformity with generally accepted accounting principles. This financial statement is the responsibility of the Trust's management; our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit of this financial statement in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for the opinion expressed above.
THE SELECT SECTOR SPDR TRUST
STATEMENTS OF ASSETS AND LIABILITIES
THE BASIC THE CONSUMER THE CONSUMER THE CYCLICAL/
INDUSTRIES SERVICES STAPLES TRANSPORTATION
SELECT SECTOR SELECT SECTOR SELECT SECTOR SELECT SECTOR
SPDR FUND SPDR FUND SPDR FUND SPDR FUND
ASSETS
Cash........................ $ 20,000 $ 20,000 $ 20,000 $ 20,000
--------- --------- --------- ---------
Total assets............ 20,000 20,000 20,000 20,000
LIABILITIES
Payable to State Street 8,889 8,889 8,889 8,889
(Note 1) --------- --------- --------- ---------
Total liabilities....... 8,889 8,889 8,889 8,889
--------- --------- --------- ---------
NET ASSETS.................. $ 11,111 $ 11,111 $ 11,111 $ 11,111
========= ========= ========= =========
NET ASSETS
Paid-in-capital............. $ 20,000 $ 20,000 $ 20,000 $ 20,000
Undistributed net
investment loss.......... (8,889) (8,889) (8,889) (8,889)
--------- --------- --------- ---------
NET ASSETS.................. $ 11,111 $ 11,111 $ 11,111 $ 11,111
========= ========= ========= =========
Shares outstanding
(unlimited amount
authorized, $0.001
par value)..................
------ ------ ------ ------
Net asset value,
offering price, and
redemption price
per share................... $ $ $ $
------ ------ ------ ------
|
The accompanying notes are an integral part of the financial statements.
THE ENERGY THE FINANCIAL THE INDUSTRIAL THE TECHNOLOGY THE UTILITIES
SELECT SECTOR SELECT SECTOR SELECT SECTOR SELECT SECTOR SELECT SECTOR
SPDR FUND SPDR FUND SPDR FUND SPDR FUND SPDR FUND
$ 20,000 $ 20,000 $ 20,000 $ 20,000 $ 15,000
--------- --------- --------- --------- ---------
20,000 20,000 20,000 20,000 15,000
8,889 8,889 8,889 8,889 3,888
--------- --------- --------- --------- ---------
8,889 8,889 8,889 8,889 3,888
--------- --------- --------- --------- ---------
$ 11,111 $ 11,111 $ 11,111 $ 11,111 $ 11,112
========= ========= ========= ========= =========
$ 20,000 $ 20,000 $ 20,000 $ 20,000 $ 15,000
(8,889) (8,889) (8,889) (8,889) (3,888)
--------- --------- --------- --------- ---------
$ 11,111 $ 11,111 $ 11,111 $ 11,111 $ 11,112
========= ========= ========= ========= =========
------- ------- ------- ------- -------
$ ------- $------ $------ $------ $------
|
THE SELECT SECTOR SPDR TRUST
STATEMENTS OF OPERATIONS
THE BASIC THE CONSUMER THE CONSUMER THE CYCLICAL/
INDUSTRIES SERVICES STAPLES TRANSPORTATION
SELECT SECTOR SELECT SECTOR SELECT SECTOR SELECT SECTOR
SPDR FUND SPDR FUND SPDR FUND SPDR FUND
EXPENSES (NOTE 2)
Organizational expense (Note 2) $ 8,889 $ 8,889 $ 8,889 $ 8,889
-------- --------- --------- ---------
Net expense.............. 8,889 8,889 8,889 8,889
-------- --------- --------- ---------
NET INVESTMENT LOSS $ (8,889) $ (8,889) $ (8,889) $ (8,889)
========= ========= ========= =========
THE ENERGY THE FINANCIAL THE INDUSTRIAL THE TECHNOLOGY THE UTILITIES
SELECT SECTOR SELECT SECTOR SELECT SECTOR SELECT SECTOR SELECT SECTOR
SPDR FUND SPDR FUND SPDR FUND SPDR FUND SPDR FUND
$ 8,889 $ 8,889 $ 8,889 $ 8,889 $ 3,888
--------- --------- --------- --------- ---------
8,889 8,889 8,889 8,889 3,888
--------- --------- --------- --------- ---------
$ (8,889) $ (8,889) $ (8,889) $ (8,889) $ (3,888)
========= ========= ========= ========= =========
|
The accompanying notes are an integral part of the financial statements.
THE SELECT SECTOR SPDR TRUST
NOTES TO FINANCIAL STATEMENTS
NOVEMBER XX, 1998
NOTE 1: ORGANIZATION
The Select Sector SPDR Trust (the "Trust"), which is registered under the
Investment Company Act of 1940, as amended, is an open-end non-diversified
management investment company that was organized as a Massachusetts business
trust on June 10, 1998. The Trust currently consists of nine portfolios, The
Basic Industry Select Sector SPDR Fund, The Consumer Services Select Sector SPDR
Fund, The Consumer Staples Select Sector SPDR Fund, The Cyclical/Transportation
Select Sector SPDR Fund, The Energy Select Sector SPDR Fund, The Financial
Select Sector SPDR Fund, The Industrial Select Sector SPDR Fund, The Technology
Select Sector SPDR Fund, and The Utilities Select Sector SPDR Fund, each of
which represents a separate series of beneficial interest in the Trust. The
Trust has had no operations to date other than matters relating to its
organization and registration and the sale of its shares to ALPS Mutual Funds
Services, Inc., the sole shareholder of each of the Funds. The financial
statements have been prepared in conformity with generally accepted accounting
principles which require management to make certain estimates and assumptions at
the date of the financial statements.
NOTE 2: FEES AND EXPENSES
It is anticipated that the Trust will pay the expenses of its operation,
including payments to Standard & Poors for a sub-license to use the S&P 500
index as a basis for determining the composition of the Trust's portfolios.
Expenses are apportioned to each portfolio of the Trust based on relative net
assets. State Street Bank and Trust, the Trust's advisor and administrator, has
agreed to bear a portion of all organizational and start-up costs.
NOTE 3: CAPITAL
Shares of each Fund are created and redeemed by the Trust only in Creation Unit
size aggregations of 50,000. Transaction fees at scheduled amounts ranging from
$1,000 to $4,000 per Creation Unit are charged to those persons creating or
redeeming Creation Units. Such transactions are generally only permitted on an
in-kind basis, with a separate cash payment equivalent to the undistributed net
investment income per unit and a balancing cash component to equate the
transaction to the net asset value per unit of each portfolio of the Trust on
the transaction date.
EXHIBIT A
SELECT SECTOR INDEXES
SYMBOL INDEX COMPONENTS
IXB Basic Industries Sector 58
IXE Energy Sector 33
IXI Industrial Sector 35
IXM Financial Sector 75
IXR Consumer Staples Sector 69
IXT Technology Sector 77
IXU Utilties Sector 39
IXV Consumer Services Sector 45
IXY Cyclical/Transportation Sector 69
500
|
IXB COMPONENT WEIGHTS
PRICE MARKET
COMPANY NAME TICKER SHARES MULTIPLIER 9/30/98 CAPITALIZATION
1 Du Pont EI de Nemours DD 131,661,000 1.00000 56.2500 $63,655.93
2 Monsanto Co MTC 600,895,000 1.00000 56.2500 $33,800.34
3 Dow Chemical Co DOW 224,119,000 1.00000 85.4375 $19,148.17
4 International Paper Co IP 307,248,000 1.00000 46.6250 $14,325.44
5 Aluminum Company of America AA 186,754,000 1.00000 71.0000 $13,259.53
6 PPG Industries Inc PPG 176,991,000 1.00000 54.5625 $9,657.07
7 Weyerhaeuser Co WY 198,993,000 1.00000 42.1875 $8,395.02
8 Barrick Gold Corp ABX 373,000,000 1.00000 20.0000 $7,460.00
9 Air Products and Chemicals Inc APD 231,440,000 1.00000 29.7500 $6,885.34
10 Union Carbide Corp UK 135,269,000 1.00000 43.1250 $5,833.48
11 Tenneco Inc TEN 169,641,000 1.00000 32.8750 $5,576.95
12 Alcan Aluminium Ltd AL 227,538,000 1.00000 23.4375 $5,332.92
13 Praxair Inc PX 158,169,000 1.00000 32.6875 $5,170.15
14 Avery Dennison Corp AVY 117,011,000 1.00000 43.6875 $5,111.92
15 Rohm and Haas Co ROH 178,236,000 1.00000 27.8125 $4,957.19
16 Georgia Pacific GP 93,271,000 1.00000 45.6250 $4,255.49
17 Eastman Chemical Co EMN 79,241,000 1.00000 50.4375 $3,996.72
18 Owens Illinois Inc OI 155,346,000 1.00000 25.0000 $3,883.65
19 Newmont Mining Corp NEM 156,512,000 1.00000 24.2500 $3,795.42
20 Reynolds Metals Co RLM 72,094,000 1.00000 51.3750 $3,703.83
21 Ecolab Inc ECL 129,641,000 1.00000 28.4375 $3,686.67
22 Nucor Corp NUE 88,070,000 1.00000 40.6250 $3,577.84
23 Allegheny Teledyne ALT 197,030,000 1.00000 17.8125 $3,509.60
24 Placer Dome Inc PDG 250,018,000 1.00000 13.8125 $3,453.37
25 Crown Cork and Seal Company Inc CCK 124,411,000 1.00000 26.7500 $3,327.99
26 Willamette Industries Inc WLL 111,433,000 1.00000 28.6875 $3,196.73
27 Phelps Dodge Corp PD 58,674,000 1.00000 52.1875 $3,062.05
28 Mead Corp MEA 103,849,000 1.00000 29.4375 $3,057.05
29 Champion International Corp CHA 95,635,000 1.00000 31.3125 $2,994.57
30 Sigma Aldrich Corp SIAL 100,589,000 1.00000 28.8750 $2,904.51
31 Morton International Inc MII 130,359,000 1.00000 21.8750 $2,851.60
32 Hercules Inc HPC 94,567,000 1.00000 30.0625 $2,842.92
33 Union Camp Corp UCC 69,334,000 1.00000 39.3750 $2,730.03
34 Temple Inland Inc TIN 55,597,000 1.00000 47.8750 $2,661.71
35 Sealed Air Corp SEE 83,272,000 1.00000 31.8750 $2,654.30
36 Homestake Mining Co HM 211,184,000 1.00000 12.1250 $2,560.61
37 Engelhard Corp EC 144,508,000 1.00000 17.6875 $2,555.99
38 Westvaco Corp W 101,314,000 1.00000 24.0000 $2,431.54
39 Great Lakes Chemical Corp GLK 59,072,000 1.00000 38.8750 $2,296.42
40 Louisiana Pacific Corp LPX 109,778,000 1.00000 20.3750 $2,236.73
41 Freeport McMoran Copper Gold FCX 179,873,000 1.00000 11.9375 $2,147.23
42 USX US Steel Group X 88,099,000 1.00000 23.8750 $2,103.36
43 Nalco Chemical Co NLC 65,903,000 1.00000 29.5000 $1,944.14
44 Bemis Company Inc BMS 53,380,000 1.00000 35.0625 $1,871.64
45 FMC Corp FMC 34,527,000 1.00000 51.5625 $1,780.30
46 Inco Ltd N 166,059,000 1.00000 10.2500 $1,702.10
47 Boise Cascade Corp BCC 56,330,000 1.00000 25.3125 $1,425.85
48 Battle Mountain Gold Co BMG 229,785,000 1.00000 6.0625 $1,393.07
49 Cyprus Amax Minerals Co CYM 93,664,000 1.00000 13.2500 $1,241.05
50 Worthington Industries Inc WTHG 96,657,000 1.00000 12.5000 $1,208.21
51 Ball Corp BLL 30,496,000 1.00000 35.2500 $1,074.98
52 Bethlehem Steel Corp BS 129,622,000 1.00000 8.2500 $1,069.38
53 Potlatch Corp PCH 29,009,000 1.00000 34.0625 $988.12
54 WR Grace and Co GRA 75,896,000 1.00000 12.4375 $943.96
|
MARKET INDEX MARKET INDEX CUMULATIVE
COMPANY NAME WEIGHT CAPITALIZATION WEIGHT WEIGHT
1 Du Pont EI de Nemours 20.48% $63,655.93 20.48% 20.48%
2 Monsanto Co 10.87% $33,800.34 10.87% 31.35%
3 Dow Chemical Co 6.16% $19,148.17 6.16% 37.51%
4 International Paper Co 4.61% $14,325.44 4.61% 42.12%
5 Aluminum Company of America 4.27% $13,259.53 4.27% 46.39%
6 PPG Industries Inc 3.11% $9,657.07 3.11% 49.49%
7 Weyerhaeuser Co 2.70% $8,395.02 2.70% 52.20%
8 Barrick Gold Corp 2.40% $7,460.00 2.40% 54.60%
9 Air Products and Chemicals Inc 2.22% $6,885.34 2.22% 56.81%
10 Union Carbide Corp 1.88% $5,833.48 1.88% 58.69%
11 Tenneco Inc 1.79% $5,576.95 1.79% 60.48%
12 Alcan Aluminium Ltd 1.72% $5,332.92 1.72% 62.20%
13 Praxair Inc 1.66% $5,170.15 1.66% 63.86%
14 Avery Dennison Corp 1.64% $5,111.92 1.64% 65.50%
15 Rohm and Haas Co 1.59% $4,957.19 1.59% 67.10%
16 Georgia Pacific 1.37% $4,255.49 1.37% 68.47%
17 Eastman Chemical Co 1.29% $3,996.72 1.29% 69.75%
18 Owens Illinois Inc 1.25% $3,883.65 1.25% 71.00%
19 Newmont Mining Corp 1.22% $3,795.42 1.22% 72.22%
20 Reynolds Metals Co 1.19% $3,703.83 1.19% 73.42%
21 Ecolab Inc 1.19% $3,686.67 1.19% 74.60%
22 Nucor Corp 1.15% $3,577.84 1.15% 75.75%
23 Allegheny Teledyne 1.13% $3,509.60 1.13% 76.88%
24 Placer Dome Inc 1.11% $3,453.37 1.11% 77.99%
25 Crown Cork and Seal Company Inc 1.07% $3,327.99 1.07% 79.06%
26 Willamette Industries Inc 1.03% $3,196.73 1.03% 80.09%
27 Phelps Dodge Corp 0.99% $3,062.05 0.99% 81.08%
28 Mead Corp 0.98% $3,057.05 0.98% 82.06%
29 Champion International Corp 0.96% $2,994.57 0.96% 83.02%
30 Sigma Aldrich Corp 0.93% $2,904.51 0.93% 83.96%
31 Morton International Inc 0.92% $2,851.60 0.92% 84.88%
32 Hercules Inc 0.91% $2,842.92 0.91% 85.79%
33 Union Camp Corp 0.88% $2,730.03 0.88% 86.67%
34 Temple Inland Inc 0.86% $2,661.71 0.86% 87.53%
35 Sealed Air Corp 0.85% $2,654.30 0.85% 88.38%
36 Homestake Mining Co 0.82% $2,560.61 0.82% 89.20%
37 Engelhard Corp 0.82% $2,555.99 0.82% 90.03%
38 Westvaco Corp 0.78% $2,431.54 0.78% 90.81%
39 Great Lakes Chemical Corp 0.74% $2,296.42 0.74% 91.55%
40 Louisiana Pacific Corp 0.72% $2,236.73 0.72% 92.27%
41 Freeport McMoran Copper Gold 0.69% $2,147.23 0.69% 92.96%
42 USX US Steel Group 0.68% $2,103.36 0.68% 93.63%
43 Nalco Chemical Co 0.63% $1,944.14 0.63% 94.26%
44 Bemis Company Inc 0.60% $1,871.64 0.60% 94.86%
45 FMC Corp 0.57% $1,780.30 0.57% 95.43%
46 Inco Ltd 0.55% $1,702.10 0.55% 95.98%
47 Boise Cascade Corp 0.46% $1,425.85 0.46% 96.44%
48 Battle Mountain Gold Co 0.45% $1,393.07 0.45% 96.89%
49 Cyprus Amax Minerals Co 0.40% $1,241.05 0.40% 97.29%
50 Worthington Industries Inc 0.39% $1,208.21 0.39% 97.68%
51 Ball Corp 0.35% $1,074.98 0.35% 98.02%
52 Bethlehem Steel Corp 0.34% $1,069.38 0.34% 98.37%
53 Potlatch Corp 0.32% $988.12 0.32% 98.68%
54 WR Grace and Co 0.30% $943.96 0.30% 98.99%
|
IXB COMPONENT WEIGHTS
PRICE MARKET
COMPANY NAME TICKER SHARES MULTIPLIER 9/30/98 CAPITALIZATION
55 Timken Co TKR 62,338,000 1.00000 15.1250 $942.86
56 Stone Container Corp STO 104,978,000 1.00000 8.6250 $905.44
57 Asarco Inc AR 39,661,000 1.00000 19.1250 $758.52
58 Armco Inc AS 107,879,000 1.00000 5.0000 $539.40
|
MARKET INDEX MARKET INDEX CUMULATIVE
COMPANY NAME WEIGHT CAPITALIZATION WEIGHT WEIGHT
55 Timken Co 0.30% $942.86 0.30% 99.29%
56 Stone Container Corp 0.29% $905.44 0.29% 99.58%
57 Asarco Inc 0.24% $758.52 0.24% 99.83%
58 Armco Inc 0.17% $539.40 0.17% 100.00%
|
IXE COMPONENT WEIGHTS
PRICE MARKET
COMPANY NAME TICKER SHARES MULTIPLIER 9/30/98 CAPITALIZATION
1 Exxon Corp XON 2,438,407,000 0.89795 70.1875 $171,145.69
2 Royal Dutch Petroleum RD 2,144,296,000 1.00534 47.6250 $102,122.10
3 Mobil Corp MOB 781,707,000 1.00919 75.9375 $ 59,360.88
4 Amoco Corp AN 954,196,000 0.59789 53.8750 $ 51,407.31
5 Chevron Corp CHV 654,432,000 0.55870 84.0625 $ 55,013.19
6 Texaco Inc TX 535,859,000 0.91499 62.6875 $ 33,591.66
7 Schlumberger Ltd SLB 544,253,000 1.08681 50.3125 $ 27,382.73
8 Atlantic Richfield Co ARC 321,139,000 1.10434 70.9375 $ 22,780.80
9 Enron Corp ENE 329,481,000 1.13660 52.8125 $ 17,400.72
10 Halliburton Co HAL 438,946,000 1.18959 28.5625 $ 12,537.40
11 Williams Companies Inc WMB 424,859,000 1.19460 28.7500 $ 12,214.70
12 Phillips Petroleum Co P 258,385,000 1.20387 45.1250 $ 11,659.62
13 USX Marathon Group ..Marathon Oil Bd MRO 290,589,000 1.23083 35.4375 $ 10,297.75
14 Unocal Corporation Delaware UCL 241,360,000 1.27168 36.2500 $ 8,749.30
15 Occidental Petroleum Corp OXY 353,034,000 1.31317 21.5000 $ 7,590.23
16 Coastal Corp CGP 212,590,000 1.33129 33.7500 $ 7,174.91
17 Baker Hughes Inc BHI 317,709,000 1.35733 20.9375 $ 6,652.03
18 Burlington Resources Inc BR 177,493,000 1.35832 37.3750 $ 6,633.80
19 Amerada Hess Corp AHC 90,958,000 1.45301 57.6875 $ 5,247.14
20 Consolidated Natural Gas Co CNG 95,880,000 1.45489 54.5000 $ 5,225.46
21 Columbia Energy Group CG 83,371,000 1.48633 58.6250 $ 4,887.62
22 Anadarko Petroleum Corp APC 120,083,000 1.50352 39.3125 $ 4,720.76
23 Ashland Inc ASH 76,470,000 1.67209 46.2500 $ 3,536.74
24 Sonat Inc SNT 110,035,000 1.72309 29.8750 $ 3,287.30
25 Union Pacific Resources Group Inc UPR 251,111,000 1.76881 12.3125 $ 3,091.80
26 Sun Company Inc SUN 93,479,000 1.79463 32.0000 $ 2,991.33
27 Apache Corp APA 98,605,000 1.89907 26.8125 $ 2,643.85
28 Kerr McGee Corp KMG 47,741,000 2.09428 45.5000 $ 2,172.22
29 Pennzoil Co PZL 47,756,000 2.41958 35.0625 $ 1,674.44
30 McDermott International Inc MDR 59,199,000 2.49059 26.9375 $ 1,594.67
31 Oryx Energy Co ORX 106,235,000 2.72946 12.9375 $ 1,374.42
32 Helmerich and Payne HP 50,299,000 3.25035 21.0000 $ 1,056.28
33 Rowan Companies Inc RDC 85,170,000 3.49465 11.1875 $ 952.84
$668,171.67
|
MARKET INDEX MARKET INDEX CUMULATIVE
COMPANY NAME WEIGHT CAPITALIZATION WEIGHT WEIGHT
1 Exxon Corp 25.61% $153,679.48 23.00% 23.00%
2 Royal Dutch Petroleum 15.28% $102,667.92 15.37% 38.37%
3 Mobil Corp 8.88% $ 59,906.69 8.97% 47.33%
4 Amoco Corp 7.69% $ 30,735.90 4.60% 51.93%
5 Chevron Corp 8.23% $ 30,735.90 4.60% 56.53%
6 Texaco Inc 5.03% $ 30,735.90 4.60% 61.13%
7 Schlumberger Ltd 4.10% $ 29,759.73 4.45% 65.59%
8 Atlantic Richfield Co 3.41% $ 25,157.80 3.77% 69.35%
9 Enron Corp 2.60% $ 19,777.72 2.96% 72.31%
10 Halliburton Co 1.88% $ 14,914.40 2.23% 74.54%
11 Williams Companies Inc 1.83% $ 14,591.70 2.18% 76.73%
12 Phillips Petroleum Co 1.75% $ 14,036.62 2.10% 78.83%
13 USX Marathon Group ..Marathon Oil Bd 1.54% $ 12,674.75 1.90% 80.72%
14 Unocal Corporation Delaware 1.31% $ 11,126.30 1.67% 82.39%
15 Occidental Petroleum Corp 1.14% $ 9,967.23 1.49% 83.88%
16 Coastal Corp 1.07% $ 9,551.91 1.43% 85.31%
17 Baker Hughes Inc 1.00% $ 9,029.03 1.35% 86.66%
18 Burlington Resources Inc 0.99% $ 9,010.80 1.35% 88.01%
19 Amerada Hess Corp 0.79% $ 7,624.14 1.14% 89.15%
20 Consolidated Natural Gas Co 0.78% $ 7,602.46 1.14% 90.29%
21 Columbia Energy Group 0.73% $ 7,264.63 1.09% 91.38%
22 Anadarko Petroleum Corp 0.71% $ 7,097.76 1.06% 92.44%
23 Ashland Inc 0.53% $ 5,913.74 0.89% 93.32%
24 Sonat Inc 0.49% $ 5,664.30 0.85% 94.17%
25 Union Pacific Resources Group Inc 0.46% $ 5,468.81 0.82% 94.99%
26 Sun Company Inc 0.45% $ 5,368.33 0.80% 95.79%
27 Apache Corp 0.40% $ 5,020.85 0.75% 96.54%
28 Kerr McGee Corp 0.33% $ 4,549.22 0.68% 97.23%
29 Pennzoil Co 0.25% $ 4,051.45 0.61% 97.83%
30 McDermott International Inc 0.24% $ 3,971.67 0.59% 98.43%
31 Oryx Energy Co 0.21% $ 3,751.42 0.56% 98.99%
32 Helmerich and Payne 0.16% $ 3,433.28 0.51% 99.50%
33 Rowan Companies Inc 0.14% $ 3,329.84 0.50% 100.00%
$668,171.67
|
IXI COMPONENT WEIGHTS
PRICE MARKET
COMPANY NAME TICKER SHARES MULTIPLIER 9/30/98 CAPITALIZATION
1 General Electric Co GE 3,253,685,000 0.46062 79.5625 $258,871.31
2 Tyco International TYC 585,642,000 1.12803 55.2500 $32,356.72
3 Minnesota Mining and Manufacturing MMM 403,878,000 1.14147 73.6875 $29,760.76
4 Emerson Electric Co EMR 440,458,000 1.17597 62.2500 $27,418.51
5 Waste Management Inc WMI 571,789,000 1.00000 48.0625 $27,481.61
6 AlliedSignal Inc ALD 561,265,000 1.18749 35.3750 $19,854.75
7 Caterpillar Inc CAT 364,754,000 1.24264 44.5625 $16,254.35
8 Illinois Tool Works Inc ITW 249,966,000 1.28224 54.5000 $13,623.15
9 Textron Inc TXT 163,880,000 1.40100 60.6250 $9,935.23
10 Honeywell Inc HON 126,145,000 1.44621 64.0625 $8,081.16
11 Dana Corp DCN 164,913,000 1.83083 37.3125 $6,153.32
12 Dover Corp DOV 223,115,000 1.61584 30.8750 $6,888.68
13 Corning Inc GLW 231,898,000 1.58319 29.4375 $6,826.50
14 Ingersoll Rand IR 165,246,000 1.64495 37.9375 $6,269.02
15 Deere and Co DE 244,854,000 1.35859 30.2500 $7,406.83
16 Browning Ferris Industries Inc BFI 173,767,000 1.73499 30.2500 $5,256.45
17 Eaton Corp ETN 71,400,000 1.84725 62.6875 $4,475.89
18 Cooper Industries Inc CBE 116,392,000 1.70917 40.7500 $4,742.97
19 Pall Corp PLL 123,996,000 2.84890 22.1875 $2,751.16
20 Johnson Controls Inc JCI 84,688,000 1.97210 46.5000 $3,937.99
21 Parker Hannifin Corp PH 110,578,000 2.11565 29.6875 $3,282.78
22 PACCAR Inc PCAR 78,124,000 2.15251 41.1875 $3,217.73
23 Fluor Corp FLR 78,956,000 2.12364 41.0625 $3,242.13
24 Briggs and Stratton Corp BGG 24,114,000 6.20993 41.1250 $991.69
25 General Signal GSX 43,708,000 3.99413 33.9375 $1,483.34
26 Navistar International Corp Holding NAV 67,067,000 3.36041 22.6250 $1,517.39
27 Crane Co CR 68,762,000 3.11795 23.5000 $1,615.91
28 Nacco Industries Inc Holding Co Cl A NC 8,164,000 5.45733 100.0000 $816.40
29 National Service Industries Inc NSI 41,447,000 3.17841 31.8750 $1,321.12
30 Cummins Engine Company Inc CUM 38,500,000 3.38992 29.7500 $1,145.38
31 Case Corporation CSE 74,445,000 2.30650 21.7500 $1,619.18
32 Foster Wheeler Corp FWC 40,737,000 6.38600 13.7500 $560.13
33 Milacron Inc MZ 39,225,000 5.89461 15.4375 $605.54
34 Aeroquip Vickers Inc ANV 28,237,000 3.85694 28.7500 $811.81
35 Harnischfeger Industries Inc HPH 47,770,000 4.47538 11.2500 $537.41
$521,114.30
|
MARKET INDEX MARKET INDEX CUMULATIVE
COMPANY NAME WEIGHT CAPITALIZATION WEIGHT WEIGHT
1 General Electric Co 49.68% $119,242.31 23.71% 23.71%
2 Tyco International 6.21% $36,499.50 7.26% 30.97%
3 Minnesota Mining and Manufacturing 5.71% $33,970.88 6.76% 37.72%
4 Emerson Electric Co 5.26% $32,243.26 6.41% 44.14%
5 Waste Management Inc 5.27% $27,481.61 5.46% 49.60%
6 AlliedSignal Inc 3.81% $23,577.30 4.69% 54.29%
7 Caterpillar Inc 3.12% $20,198.26 4.02% 58.30%
8 Illinois Tool Works Inc 2.61% $17,468.16 3.47% 61.78%
9 Textron Inc 1.91% $13,919.30 2.77% 64.55%
10 Honeywell Inc 1.55% $11,687.07 2.32% 66.87%
11 Dana Corp 1.18% $11,265.67 2.24% 69.11%
12 Dover Corp 1.32% $11,131.00 2.21% 71.32%
13 Corning Inc 1.31% $10,807.64 2.15% 73.47%
14 Ingersoll Rand 1.20% $10,312.19 2.05% 75.52%
15 Deere and Co 1.42% $10,062.86 2.00% 77.52%
16 Browning Ferris Industries Inc 1.01% $9,119.89 1.81% 79.34%
17 Eaton Corp 0.86% $8,268.07 1.64% 80.98%
18 Cooper Industries Inc 0.91% $8,106.54 1.61% 82.59%
19 Pall Corp 0.53% $7,837.79 1.56% 84.15%
20 Johnson Controls Inc 0.76% $7,766.12 1.54% 85.70%
21 Parker Hannifin Corp 0.63% $6,945.24 1.38% 87.08%
22 PACCAR Inc 0.62% $6,926.19 1.38% 88.45%
23 Fluor Corp 0.62% $6,885.12 1.37% 89.82%
24 Briggs and Stratton Corp 0.19% $6,158.32 1.22% 91.05%
25 General Signal 0.28% $5,924.66 1.18% 92.23%
26 Navistar International Corp Holding 0.29% $5,099.05 1.01% 93.24%
27 Crane Co 0.31% $5,038.32 1.00% 94.24%
28 Nacco Industries Inc Holding Co Cl A 0.16% $4,455.36 0.89% 95.13%
29 National Service Industries Inc 0.25% $4,199.07 0.83% 95.96%
30 Cummins Engine Company Inc 0.22% $3,882.73 0.77% 96.74%
31 Case Corporation 0.31% $3,734.63 0.74% 97.48%
32 Foster Wheeler Corp 0.11% $3,577.02 0.71% 98.19%
33 Milacron Inc 0.12% $3,569.40 0.71% 98.90%
34 Aeroquip Vickers Inc 0.16% $3,131.12 0.62% 99.52%
35 Harnischfeger Industries Inc 0.10% $2,405.12 0.48% 100.00%
$502,896.75
|
IXM COMPONENT WEIGHTS
PRICE MARKET
COMPANY NAME TICKER SHARES MULTIPLIER 9/30/98 CAPITALIZATION
1 BankAmerica Corp BAC 1,737,432,000 1.00000 53.5000 $92,952.61
2 American International Group Inc AIG 1,050,002,000 1.00000 78.3750 $82,293.91
3 Federal National Mortgage Assn FNM 1,036,900,000 1.00000 64.2500 $66,620.83
4 First Union Corp FTU 969,052,000 1.00000 51.1875 $49,603.35
5 Travelers Group Inc TRV 1,156,175,000 1.00000 37.5000 $43,356.56
6 Citicorp CCI 451,932,000 1.00000 93.0000 $42,029.68
7 Chase Manhattan Corp CMB 856,457,000 1.00000 43.1250 $36,934.71
8 American Express Co AXP 456,382,000 1.00000 77.6250 $35,426.65
9 Allstate Corp ALL 828,521,000 1.00000 41.5000 $34,383.62
10 Freddie Mac FRE 678,612,000 1.00000 49.6250 $33,676.12
11 Wells Fargo and Co WFC 85,137,000 1.00000 355.0000 $30,223.64
12 Bank One Corp ONE 704,861,000 1.00000 42.4375 $29,912.54
13 Norwest Corp NOB 765,783,000 1.00000 36.0000 $27,568.19
14 US Bancorp USB 742,901,000 1.00000 35.6250 $26,465.85
15 Morgan Stanley Dean Witter and Co MWD 585,695,000 1.00000 43.1250 $25,258.10
16 Associates First Capital Corp AFS 346,286,000 1.00000 65.2500 $22,595.16
17 National City Corp NCC 329,711,000 1.00000 65.9375 $21,740.32
18 Fleet Financial Group FLT 567,850,000 1.00000 36.7188 $20,850.74
19 Bank of New York Co Inc BK 747,294,000 1.00000 27.3750 $20,457.17
20 Washington Mutual WAMU 592,852,000 1.00000 33.7500 $20,008.76
21 First Chicago NBD Corp FCN 287,743,000 1.00000 68.5000 $19,710.40
22 Household International HI 492,408,000 1.00000 37.5000 $18,465.30
23 Wachovia Corp WB 206,623,000 1.00000 85.2500 $17,614.61
24 Merrill Lynch and Co Inc MER 348,251,000 1.00000 47.1875 $16,433.09
25 American General Corp AGC 253,099,000 1.00000 63.8750 $16,166.70
26 Fifth Third Bancorp FITB 267,896,000 1.00000 57.5000 $15,404.02
27 General Re Corp GRN 75,652,000 1.00000 203.0000 $15,357.36
28 JP Morgan and Co Inc JPM 176,560,000 1.00000 84.6250 $14,941.39
29 MBNA Corp KRB 751,782,000 1.00000 19.0833 $14,346.50
30 Mellon Bank Corp MEL 260,708,000 1.00000 55.0000 $14,338.94
31 Cigna Corp CI 212,280,000 1.00000 66.1250 $14,037.02
32 PNC Bank Corp PNC 301,538,000 1.00000 45.0000 $13,569.21
33 Suntrust Banks Inc STI 208,888,000 1.00000 62.0000 $12,951.06
34 Marsh and Mclennan Companies Inc MMC 255,664,000 1.00000 49.7500 $12,719.28
35 Keycorp KEY 439,868,000 1.00000 28.8750 $12,701.19
36 SunAmerica Inc SAI 195,742,000 1.00000 61.0000 $11,940.26
37 Hartford Financial Services Group HIG 233,443,000 1.00000 47.4375 $11,073.95
38 AON Corp AOC 168,857,000 1.00000 64.5000 $10,891.28
39 Charles Schwab Corp SCH 266,931,000 1.00000 39.3750 $10,510.41
40 Chubb Corp CB 165,613,000 1.00000 63.0000 $10,433.62
41 BankBoston Corp BKB 294,181,000 1.00000 33.0000 $9,707.97
42 Loews Corp LTR 114,711,000 1.00000 84.3750 $9,678.74
43 Conseco Inc CNC 312,423,000 1.00000 30.5625 $9,548.43
44 State Street Corp STT 161,486,000 1.00000 54.5625 $8,811.08
45 BB and T Corp BBK 286,210,000 1.00000 29.9375 $8,568.41
46 Comerica Inc CMA 155,455,000 1.00000 54.8125 $8,520.88
47 Lincoln National Corp LNC 100,522,000 1.00000 82.2500 $8,267.93
48 Progressive Corp PGR 72,656,000 1.00000 112.7500 $8,191.96
49 Providian Financial Corp PVN 95,024,000 1.00000 84.8125 $8,059.22
50 Regions Financial Corp RGBK 214,101,000 1.00000 36.2500 $7,761.16
51 St Paul Companies Inc SPC 236,103,000 1.00000 32.5000 $7,673.35
52 Northern Trust Corp NTRS 111,307,000 1.00000 68.2500 $7,596.70
53 Franklin Resources Inc BEN 253,031,000 1.00000 29.8750 $7,559.30
54 Mercantile Bancorporation Inc MTL 151,984,000 1.00000 48.3750 $7,352.23
55 Unum Corp UNM 138,286,000 1.00000 49.6875 $6,871.09
56 Capital One Financial Corp COF 66,074,000 1.00000 103.0625 $6,809.75
57 Transamerica Corp TA 62,554,000 1.00000 106.0000 $6,630.72
|
MARKET INDEX MARKET INDEX CUMULATIVE
COMPANY NAME WEIGHT CAPITALIZATION WEIGHT WEIGHT
1 BankAmerica Corp 7.29% $92,952.61 7.29% 7.29%
2 American International Group Inc 6.45% $82,293.91 6.45% 13.74%
3 Federal National Mortgage Assn 5.22% $66,620.83 5.22% 18.97%
4 First Union Corp 3.89% $49,603.35 3.89% 22.86%
5 Travelers Group Inc 3.40% $43,356.56 3.40% 26.26%
6 Citicorp 3.30% $42,029.68 3.30% 29.55%
7 Chase Manhattan Corp 2.90% $36,934.71 2.90% 32.45%
8 American Express Co 2.78% $35,426.65 2.78% 35.23%
9 Allstate Corp 2.70% $34,383.62 2.70% 37.93%
10 Freddie Mac 2.64% $33,676.12 2.64% 40.57%
11 Wells Fargo and Co 2.37% $30,223.64 2.37% 42.94%
12 Bank One Corp 2.35% $29,912.54 2.35% 45.28%
13 Norwest Corp 2.16% $27,568.19 2.16% 47.44%
14 US Bancorp 2.08% $26,465.85 2.08% 49.52%
15 Morgan Stanley Dean Witter and Co 1.98% $25,258.10 1.98% 51.50%
16 Associates First Capital Corp 1.77% $22,595.16 1.77% 53.27%
17 National City Corp 1.70% $21,740.32 1.70% 54.98%
18 Fleet Financial Group 1.64% $20,850.74 1.64% 56.61%
19 Bank of New York Co Inc 1.60% $20,457.17 1.60% 58.22%
20 Washington Mutual 1.57% $20,008.76 1.57% 59.79%
21 First Chicago NBD Corp 1.55% $19,710.40 1.55% 61.33%
22 Household International 1.45% $18,465.30 1.45% 62.78%
23 Wachovia Corp 1.38% $17,614.61 1.38% 64.16%
24 Merrill Lynch and Co Inc 1.29% $16,433.09 1.29% 65.45%
25 American General Corp 1.27% $16,166.70 1.27% 66.72%
26 Fifth Third Bancorp 1.21% $15,404.02 1.21% 67.93%
27 General Re Corp 1.20% $15,357.36 1.20% 69.13%
28 JP Morgan and Co Inc 1.17% $14,941.39 1.17% 70.30%
29 MBNA Corp 1.13% $14,346.50 1.13% 71.43%
30 Mellon Bank Corp 1.12% $14,338.94 1.12% 72.55%
31 Cigna Corp 1.10% $14,037.02 1.10% 73.65%
32 PNC Bank Corp 1.06% $13,569.21 1.06% 74.72%
33 Suntrust Banks Inc 1.02% $12,951.06 1.02% 75.73%
34 Marsh and Mclennan Companies Inc 1.00% $12,719.28 1.00% 76.73%
35 Keycorp 1.00% $12,701.19 1.00% 77.73%
36 SunAmerica Inc 0.94% $11,940.26 0.94% 78.66%
37 Hartford Financial Services Group 0.87% $11,073.95 0.87% 79.53%
38 AON Corp 0.85% $10,891.28 0.85% 80.38%
39 Charles Schwab Corp 0.82% $10,510.41 0.82% 81.21%
40 Chubb Corp 0.82% $10,433.62 0.82% 82.03%
41 BankBoston Corp 0.76% $9,707.97 0.76% 82.79%
42 Loews Corp 0.76% $9,678.74 0.76% 83.55%
43 Conseco Inc 0.75% $9,548.43 0.75% 84.30%
44 State Street Corp 0.69% $8,811.08 0.69% 84.99%
45 BB and T Corp 0.67% $8,568.41 0.67% 85.66%
46 Comerica Inc 0.67% $8,520.88 0.67% 86.33%
47 Lincoln National Corp 0.65% $8,267.93 0.65% 86.98%
48 Progressive Corp 0.64% $8,191.96 0.64% 87.62%
49 Providian Financial Corp 0.63% $8,059.22 0.63% 88.25%
50 Regions Financial Corp 0.61% $7,761.16 0.61% 88.86%
51 St Paul Companies Inc 0.60% $7,673.35 0.60% 89.46%
52 Northern Trust Corp 0.60% $7,596.70 0.60% 90.06%
53 Franklin Resources Inc 0.59% $7,559.30 0.59% 90.65%
54 Mercantile Bancorporation Inc 0.58% $7,352.23 0.58% 91.23%
55 Unum Corp 0.54% $6,871.09 0.54% 91.76%
56 Capital One Financial Corp 0.53% $6,809.75 0.53% 92.30%
57 Transamerica Corp 0.52% $6,630.72 0.52% 92.82%
|
IXM COMPONENT WEIGHTS
PRICE MARKET
COMPANY NAME TICKER SHARES MULTIPLIER 9/30/98 CAPITALIZATION
58 Summit Bancorp Inc SUB 173,805,000 1.00000 37.5000 $6,517.69
59 Jefferson Pilot JP 106,090,000 1.00000 60.5000 $6,418.45
60 Union Planters Corp UPC 127,129,000 1.00000 50.2500 $6,388.23
61 SAFECO Corp SAFC 141,188,000 1.00000 41.6875 $5,885.77
62 Bankers Trust Corp BT 96,169,000 1.00000 59.0000 $5,673.97
63 SLM Holding Corp SLM 167,476,000 1.00000 32.4375 $5,432.50
64 MBIA Inc MBI 99,261,000 1.00000 53.6875 $5,329.07
65 Huntington Bancshares Inc HBAN 211,689,000 1.00000 25.1250 $5,318.69
66 Synovus Financial Corp SNV 263,367,000 1.00000 19.7500 $5,201.50
67 Cincinnati Financial Corp CINF 167,170,000 1.00000 30.7500 $5,140.48
68 Torchmark Corp TMK 140,262,000 1.00000 35.9375 $5,040.67
69 Golden West Financial Corp GDW 57,600,000 1.00000 81.8125 $4,712.40
70 Countrywide Credit Industries CCR 111,050,000 1.00000 41.6250 $4,622.46
71 Provident Co Inc PVT 135,169,000 1.00000 33.7500 $4,561.95
72 Republic New York Corp RNB 107,901,000 1.00000 39.5000 $4,262.09
73 MGIC Investment Corp MTG 113,340,000 1.00000 36.8750 $4,179.41
74 Bear Stearns Companies Inc BSC 113,761,000 1.00000 31.0000 $3,526.59
75 Lehman Brothers Holdings Inc LEH 118,294,000 1.00000 28.3750 $3,356.59
$1,275,141.52
|
MARKET INDEX MARKET INDEX CUMULATIVE
COMPANY NAME WEIGHT CAPITALIZATION WEIGHT WEIGHT
58 Summit Bancorp Inc 0.51% $6,517.69 0.51% 93.33%
59 Jefferson Pilot 0.50% $6,418.45 0.50% 93.83%
60 Union Planters Corp 0.50% $6,388.23 0.50% 94.33%
61 SAFECO Corp 0.46% $5,885.77 0.46% 94.80%
62 Bankers Trust Corp 0.44% $5,673.97 0.44% 95.24%
63 SLM Holding Corp 0.43% $5,432.50 0.43% 95.67%
64 MBIA Inc 0.42% $5,329.07 0.42% 96.08%
65 Huntington Bancshares Inc 0.42% $5,318.69 0.42% 96.50%
66 Synovus Financial Corp 0.41% $5,201.50 0.41% 96.91%
67 Cincinnati Financial Corp 0.40% $5,140.48 0.40% 97.31%
68 Torchmark Corp 0.40% $5,040.67 0.40% 97.71%
69 Golden West Financial Corp 0.37% $4,712.40 0.37% 98.08%
70 Countrywide Credit Industries 0.36% $4,622.46 0.36% 98.44%
71 Provident Co Inc 0.36% $4,561.95 0.36% 98.80%
72 Republic New York Corp 0.33% $4,262.09 0.33% 99.13%
73 MGIC Investment Corp 0.33% $4,179.41 0.33% 99.46%
74 Bear Stearns Companies Inc 0.28% $3,526.59 0.28% 99.74%
75 Lehman Brothers Holdings Inc 0.26% $3,356.59 0.26% 100.00%
$1,275,141.52
|
IXR COMPONENT WEIGHTS
PRICE MARKET
COMPANY NAME TICKER SHARES MULTIPLIER 9/30/98 CAPITALIZATION
1 Merck and Company Inc MRK 1,190,918,000 1.00000 129.5625 $154,298.31
2 Coca Cola Co KO 2,465,494,000 1.00000 57.6250 $142,074.09
3 Pfizer Inc PFE 1,306,595,000 1.00000 105.7500 $138,172.42
4 Philip Morris Companies Inc MO 2,432,091,000 1.00000 46.2500 $112,484.21
5 Johnson and Johnson JNJ 1,344,889,000 1.00000 78.2500 $105,237.56
6 Bristol Myers Squibb Co BMY 994,709,000 1.00000 103.8750 $103,325.40
7 Procter and Gamble Co PG 1,340,982,000 1.00000 71.1250 $95,377.34
8 Eli Lilly and Company LLY 1,101,312,000 1.00000 78.3125 $86,246.50
9 Schering Plough Corp SGP 734,000,000 1.00000 103.6875 $76,106.63
10 American Home Products Corp AHP 1,315,815,000 1.00000 52.6250 $69,244.76
11 Abbott Laboratories ABT 1,539,855,000 1.00000 43.4375 $66,887.45
12 Warner Lambert Co WLA 820,899,000 1.00000 75.5000 $61,977.87
13 Pepsico Inc PEP 1,472,837,000 1.00000 29.4375 $43,356.64
14 Gillette Co G 1,122,903,000 1.00000 38.2500 $42,951.04
15 Unilever NV UN 640,164,000 1.00000 61.2500 $39,210.05
16 Medtronic Inc MDT 469,351,000 1.00000 58.0000 $27,222.36
17 Anheuser Busch Companies Inc BUD 482,140,000 1.00000 54.0000 $26,035.56
18 Pharmacia and UpJohn Inc PNU 508,046,000 1.00000 50.1875 $25,497.56
19 Sara Lee Corp SLE 467,084,000 1.00000 54.0000 $25,222.54
20 Campbell Soup Co CPB 449,068,000 1.00000 50.1875 $22,537.60
21 Kimberly Clark Corp KMB 547,404,000 1.00000 40.5000 $22,169.86
22 Walgreen Co WAG 497,457,000 1.00000 44.0625 $21,919.20
23 Colgate Palmolive Co CL 295,702,000 1.00000 68.7500 $20,329.51
24 HJ Heinz Co HNZ 362,051,000 1.00000 51.2500 $18,555.11
25 CVS Corp CVS 389,337,000 1.00000 43.8125 $17,057.83
26 Baxter International Inc BAX 285,405,000 1.00000 59.6875 $17,035.11
27 Bestfoods BFO 287,435,000 1.00000 48.4375 $13,922.63
28 Cardinal Health Inc CAH 133,304,000 1.00000 103.2500 $13,763.64
29 Kellogg Co K 407,075,000 1.00000 32.9375 $13,408.03
30 Albertsons Inc ABS 245,822,000 1.00000 54.1250 $13,305.12
31 ConAgra Inc CAG 487,961,000 1.00000 26.9375 $13,144.45
32 Kroger Co KR 256,525,000 1.00000 50.0000 $12,826.25
33 Guidant Corp GDT 150,798,000 1.00000 74.2500 $11,196.75
34 General Mills Inc GIS 154,800,000 1.00000 70.0000 $10,836.00
35 Becton Dickinson and Co BDX 247,232,000 1.00000 41.1250 $10,167.42
36 Boston Scientific Corp BSX 195,702,000 1.00000 51.3750 $10,054.19
37 Archer Daniels Midland Co ADM 599,068,000 1.00000 16.7500 $10,034.39
38 Seagram Company Ltd VO 346,301,000 1.00000 28.6875 $9,934.51
39 Hershey Foods Corp HSY 143,116,000 1.00000 68.4375 $9,794.50
40 Rite Aid Corp RAD 258,414,000 1.00000 35.5000 $9,173.70
41 Ralston-Ralston Purina Group RAL 312,218,000 1.00000 29.2500 $9,132.38
42 American Stores Co ASC 274,522,000 1.00000 32.1875 $8,836.18
43 Wm Wrigley Jr Co WWY 116,214,000 1.00000 76.0000 $8,832.26
44 Clorox Co CLX 103,882,000 1.00000 82.5000 $8,570.27
45 RJR Nabisco Holdings Corp RN 324,813,000 1.00000 25.1875 $8,181.23
46 Quaker Oats Co OAT 136,314,000 1.00000 59.0000 $8,042.53
47 Sysco Corp SYY 337,582,000 1.00000 23.5625 $7,954.28
48 Avon Products Inc AVP 263,378,000 1.00000 28.0625 $7,391.05
49 Fort James Corp FJ 220,579,000 1.00000 32.8125 $7,237.75
50 Pioneer Hi Bred Intl Inc PHB 241,580,000 1.00000 26.5625 $6,416.97
51 Fred Meyer Inc Holding Co FMY 154,019,000 1.00000 38.8750 $5,987.49
52 Winn Dixie Stores Inc WIN 148,531,000 1.00000 37.1875 $5,523.50
53 UST Inc UST 185,746,000 1.00000 29.5625 $5,491.12
54 Fortune Brands Inc FO 172,792,000 1.00000 29.6250 $5,118.96
|
MARKET INDEX MARKET INDEX CUMULATIVE
COMPANY NAME WEIGHT CAPITALIZATION WEIGHT WEIGHT
1 Merck and Company Inc 8.19% $154,298.31 8.19% 8.19%
2 Coca Cola Co 7.54% $142,074.09 7.54% 15.74%
3 Pfizer Inc 7.34% $138,172.42 7.34% 23.08%
4 Philip Morris Companies Inc 5.97% $112,484.21 5.97% 29.05%
5 Johnson and Johnson 5.59% $105,237.56 5.59% 34.64%
6 Bristol Myers Squibb Co 5.49% $103,325.40 5.49% 40.12%
7 Procter and Gamble Co 5.06% $95,377.34 5.06% 45.19%
8 Eli Lilly and Company 4.58% $86,246.50 4.58% 49.77%
9 Schering Plough Corp 4.04% $76,106.63 4.04% 53.81%
10 American Home Products Corp 3.68% $69,244.76 3.68% 57.49%
11 Abbott Laboratories 3.55% $66,887.45 3.55% 61.04%
12 Warner Lambert Co 3.29% $61,977.87 3.29% 64.33%
13 Pepsico Inc 2.30% $43,356.64 2.30% 66.63%
14 Gillette Co 2.28% $42,951.04 2.28% 68.91%
15 Unilever NV 2.08% $39,210.05 2.08% 71.00%
16 Medtronic Inc 1.45% $27,222.36 1.45% 72.44%
17 Anheuser Busch Companies Inc 1.38% $26,035.56 1.38% 73.82%
18 Pharmacia and UpJohn Inc 1.35% $25,497.56 1.35% 75.18%
19 Sara Lee Corp 1.34% $25,222.54 1.34% 76.52%
20 Campbell Soup Co 1.20% $22,537.60 1.20% 77.72%
21 Kimberly Clark Corp 1.18% $22,169.86 1.18% 78.89%
22 Walgreen Co 1.16% $21,919.20 1.16% 80.06%
23 Colgate Palmolive Co 1.08% $20,329.51 1.08% 81.14%
24 HJ Heinz Co 0.99% $18,555.11 0.99% 82.12%
25 CVS Corp 0.91% $17,057.83 0.91% 83.03%
26 Baxter International Inc 0.90% $17,035.11 0.90% 83.93%
27 Bestfoods 0.74% $13,922.63 0.74% 84.67%
28 Cardinal Health Inc 0.73% $13,763.64 0.73% 85.40%
29 Kellogg Co 0.71% $13,408.03 0.71% 86.11%
30 Albertsons Inc 0.71% $13,305.12 0.71% 86.82%
31 ConAgra Inc 0.70% $13,144.45 0.70% 87.52%
32 Kroger Co 0.68% $12,826.25 0.68% 88.20%
33 Guidant Corp 0.59% $11,196.75 0.59% 88.79%
34 General Mills Inc 0.58% $10,836.00 0.58% 89.37%
35 Becton Dickinson and Co 0.54% $10,167.42 0.54% 89.91%
36 Boston Scientific Corp 0.53% $10,054.19 0.53% 90.44%
37 Archer Daniels Midland Co 0.53% $10,034.39 0.53% 90.98%
38 Seagram Company Ltd 0.53% $9,934.51 0.53% 91.50%
39 Hershey Foods Corp 0.52% $9,794.50 0.52% 92.02%
40 Rite Aid Corp 0.49% $9,173.70 0.49% 92.51%
41 Ralston-Ralston Purina Group 0.48% $9,132.38 0.48% 93.00%
42 American Stores Co 0.47% $8,836.18 0.47% 93.47%
43 Wm Wrigley Jr Co 0.47% $8,832.26 0.47% 93.93%
44 Clorox Co 0.46% $8,570.27 0.46% 94.39%
45 RJR Nabisco Holdings Corp 0.43% $8,181.23 0.43% 94.82%
46 Quaker Oats Co 0.43% $8,042.53 0.43% 95.25%
47 Sysco Corp 0.42% $7,954.28 0.42% 95.67%
48 Avon Products Inc 0.39% $7,391.05 0.39% 96.07%
49 Fort James Corp 0.38% $7,237.75 0.38% 96.45%
50 Pioneer Hi Bred Intl Inc 0.34% $6,416.97 0.34% 96.79%
51 Fred Meyer Inc Holding Co 0.32% $5,987.49 0.32% 97.11%
52 Winn Dixie Stores Inc 0.29% $5,523.50 0.29% 97.40%
53 UST Inc 0.29% $5,491.12 0.29% 97.69%
54 Fortune Brands Inc 0.27% $5,118.96 0.27% 97.97%
|
IXR COMPONENT WEIGHTS
PRICE MARKET
COMPANY NAME TICKER SHARES MULTIPLIER 9/30/98 CAPITALIZATION
55 Brown Forman Corp BF.B 68,686,000 1.00000 60.0000 $4,121.16
56 Biomet Inc BMET 112,123,000 1.00000 34.6875 $3,889.27
57 Allergan Inc AGN 65,373,000 1.00000 58.3750 $3,816.15
58 Alza Corp AZA 86,589,000 1.00000 43.3750 $3,755.80
59 International Flavors and Fragrances IFF 107,199,000 1.00000 33.0000 $3,537.57
60 United States Surgical USS 77,139,000 1.00000 41.6875 $3,215.73
61 Supervalu Inc SVU 120,976,000 1.00000 23.3125 $2,820.25
62 Bausch and Lomb Inc BOL 55,888,000 1.00000 39.3750 $2,200.59
63 CR Bard Inc BCR 56,128,000 1.00000 36.8750 $2,069.72
64 St Jude Medical Inc STJ 84,165,000 1.00000 23.1250 $1,946.32
65 Adolph Coors Co ACCOB 36,301,000 1.00000 45.9375 $1,667.58
66 Longs Drug Stores Corp LDG 38,908,000 1.00000 40.1875 $1,563.62
67 Mallinckrodt Inc MKG 73,165,000 1.00000 20.3125 $1,486.16
68 Alberto Culver Co ACV 55,117,000 1.00000 23.3750 $1,288.36
69 Great Atlantic and Pacific Tea Co GAP 38,253,000 1.00000 24.2500 $927.64
$1,883,115.93
|
MARKET INDEX MARKET INDEX CUMULATIVE
COMPANY NAME WEIGHT CAPITALIZATION WEIGHT WEIGHT
55 Brown Forman Corp 0.22% $4,121.16 0.22% 98.18%
56 Biomet Inc 0.21% $3,889.27 0.21% 98.39%
57 Allergan Inc 0.20% $3,816.15 0.20% 98.59%
58 Alza Corp 0.20% $3,755.80 0.20% 98.79%
59 International Flavors and Fragrances 0.19% $3,537.57 0.19% 98.98%
60 United States Surgical 0.17% $3,215.73 0.17% 99.15%
61 Supervalu Inc 0.15% $2,820.25 0.15% 99.30%
62 Bausch and Lomb Inc 0.12% $2,200.59 0.12% 99.42%
63 CR Bard Inc 0.11% $2,069.72 0.11% 99.53%
64 St Jude Medical Inc 0.10% $1,946.32 0.10% 99.63%
65 Adolph Coors Co 0.09% $1,667.58 0.09% 99.72%
66 Longs Drug Stores Corp 0.08% $1,563.62 0.08% 99.80%
67 Mallinckrodt Inc 0.08% $1,486.16 0.08% 99.88%
68 Alberto Culver Co 0.07% $1,288.36 0.07% 99.95%
69 Great Atlantic and Pacific Tea Co 0.05% $927.64 0.05% 100.00%
$1,883,115.93
|
IXT COMPONENT WEIGHTS
PRICE MARKET
COMPANY NAME TICKER SHARES MULTIPLIER 9/30/98 CAPITALIZATION
1 Microsoft Corp MSFT 2,464,072,000 1.00000 110.0625 $271,201.92
2 Intel Corp INTC 1,680,000,000 1.00000 85.7500 $144,060.00
3 International Business Machines IBM IBM 933,063,000 1.00000 128.5000 $119,898.60
4 AT and T Corp T 1,806,338,000 1.00000 58.4375 $105,557.88
5 Cisco Systems Inc CSCO 1,554,824,000 1.00000 61.8125 $96,107.56
6 Lucent Technologies Inc LU 1,314,985,000 1.00000 69.2500 $91,062.71
7 MCI WorldCom Inc WCOM 1,776,029,000 1.00000 48.8750 $86,803.42
8 Dell Computer Corp DELL 1,265,912,000 1.00000 65.7500 $83,233.71
9 Hewlett-Packard Co HWP 1,039,457,000 1.00000 52.9375 $55,026.25
10 Compaq Computer Corp CPQ 1,671,000,000 1.00000 31.6250 $52,845.38
11 Boeing Co BA 1,010,704,000 1.00000 34.3125 $34,679.78
12 Airtouch Communications ATI 573,866,000 1.00000 57.0000 $32,710.36
13 Sprint Corp FON 430,077,000 1.00000 72.0000 $30,965.54
14 EMC Corp EMC 499,511,000 1.00000 57.3750 $28,659.44
15 Oracle Corporation ORCL 973,337,000 1.00000 29.1250 $28,348.44
16 Xerox Corp XRX 328,598,000 1.00000 84.7500 $27,848.68
17 Motorola Inc MOT 598,117,000 1.00000 42.8750 $25,644.27
18 Eastman Kodak Co EK 322,778,000 1.00000 76.8750 $24,813.56
19 Automatic Data Processing Inc AUD 301,025,000 1.00000 74.7500 $22,501.62
20 Northern Telecom Ltd NT 652,132,000 1.00000 32.0625 $20,908.98
21 Computer Associates International CA 561,254,000 1.00000 37.0000 $20,766.40
22 Texas Instruments Inc TXN 390,130,000 1.00000 53.0000 $20,676.89
23 Lockheed Martin Corp LMT 195,719,000 1.00000 100.8125 $19,730.92
24 Amgen Inc AMGN 253,927,000 1.00000 75.5625 $19,187.36
25 Sun Microsystems Inc SUNW 378,811,000 1.00000 49.8125 $18,869.52
26 Raytheon Co RTN.B 338,812,000 1.00000 53.9375 $18,274.67
27 United Technologies Corp UTX 228,030,000 1.00000 76.4375 $17,430.04
28 Electronic Data Systems Corp EDS 492,175,000 1.00000 33.1875 $16,334.06
29 Pitney Bowes Inc PBI 274,446,000 1.00000 52.5625 $14,425.57
30 Bmc Software Inc BMCS 206,338,000 1.00000 60.0625 $12,393.18
31 3Com Corp COMS 358,870,000 1.00000 30.0625 $10,788.53
32 First Data Corp FDC 446,808,000 1.00000 23.5000 $10,499.99
33 Applied Materials Inc AMAT 366,266,000 1.00000 25.2500 $9,248.22
34 Ascend Communications Inc ASND 197,824,000 1.00000 45.5000 $9,000.99
35 Computer Sciences Corp CSC 157,938,000 1.00000 54.5000 $8,607.62
36 Paychex Inc PAYX 163,188,000 1.00000 51.5625 $8,414.38
37 Gateway 2000 Inc GTW 155,768,000 1.00000 52.3125 $8,148.61
38 AMP Inc AMP 218,601,000 1.00000 35.7500 $7,814.99
39 Tellabs Inc TLAB 193,725,000 1.00000 39.8125 $7,712.68
40 Rockwell International ROK 191,193,000 1.00000 36.2500 $6,930.75
41 Micron Technology Inc MU 213,084,000 1.00000 30.4375 $6,485.74
42 General Dynamics Corp GD 126,573,000 1.00000 50.2500 $6,360.29
43 Seagate Technology Inc SEG 243,058,000 1.00000 25.0625 $6,091.64
44 Unisys Corp UIS 254,321,000 1.00000 22.7500 $5,785.80
45 Nextel Communications Inc NXTL 285,708,000 1.00000 20.1875 $5,767.73
46 TRW Inc TRW 121,910,000 1.00000 44.3750 $5,409.76
47 Equifax Inc EFX 147,983,000 1.00000 35.6875 $5,281.14
48 Apple Computer Inc AAPL 134,639,000 1.00000 38.1250 $5,133.11
49 Northrop Grumman Corporation NOC 68,796,000 1.00000 73.0000 $5,022.11
50 Novell Inc NOVL 353,436,000 1.00000 12.2500 $4,329.59
51 Ceridian Corp CEN 72,549,000 1.00000 57.3750 $4,162.50
52 WW Grainger Inc GWW 97,702,000 1.00000 42.1250 $4,115.70
53 Perkin Elmer Corp PKN 49,121,000 1.00000 68.6875 $3,374.00
54 General Instrument Corp GIC 150,883,000 1.00000 21.6250 $3,262.84
|
MARKET INDEX MARKET INDEX CUMULATIVE
COMPANY NAME WEIGHT CAPITALIZATION WEIGHT WEIGHT
1 Microsoft Corp 15.43% $271,201.92 15.43% 15.43%
2 Intel Corp 8.20% $144,060.00 8.20% 23.63%
3 International Business Machines IBM 6.82% $119,898.60 6.82% 30.45%
4 AT and T Corp 6.01% $105,557.88 6.01% 36.46%
5 Cisco Systems Inc 5.47% $96,107.56 5.47% 41.92%
6 Lucent Technologies Inc 5.18% $91,062.71 5.18% 47.11%
7 MCI WorldCom Inc 4.94% $86,803.42 4.94% 52.04%
8 Dell Computer Corp 4.74% $83,233.71 4.74% 56.78%
9 Hewlett-Packard Co 3.13% $55,026.25 3.13% 59.91%
10 Compaq Computer Corp 3.01% $52,845.38 3.01% 62.92%
11 Boeing Co 1.97% $34,679.78 1.97% 64.89%
12 Airtouch Communications 1.86% $32,710.36 1.86% 66.75%
13 Sprint Corp 1.76% $30,965.54 1.76% 68.51%
14 EMC Corp 1.63% $28,659.44 1.63% 70.14%
15 Oracle Corporation 1.61% $28,348.44 1.61% 71.76%
16 Xerox Corp 1.58% $27,848.68 1.58% 73.34%
17 Motorola Inc 1.46% $25,644.27 1.46% 74.80%
18 Eastman Kodak Co 1.41% $24,813.56 1.41% 76.21%
19 Automatic Data Processing Inc 1.28% $22,501.62 1.28% 77.49%
20 Northern Telecom Ltd 1.19% $20,908.98 1.19% 78.68%
21 Computer Associates International 1.18% $20,766.40 1.18% 79.86%
22 Texas Instruments Inc 1.18% $20,676.89 1.18% 81.04%
23 Lockheed Martin Corp 1.12% $19,730.92 1.12% 82.16%
24 Amgen Inc 1.09% $19,187.36 1.09% 83.26%
25 Sun Microsystems Inc 1.07% $18,869.52 1.07% 84.33%
26 Raytheon Co 1.04% $18,274.67 1.04% 85.37%
27 United Technologies Corp 0.99% $17,430.04 0.99% 86.36%
28 Electronic Data Systems Corp 0.93% $16,334.06 0.93% 87.29%
29 Pitney Bowes Inc 0.82% $14,425.57 0.82% 88.11%
30 Bmc Software Inc 0.71% $12,393.18 0.71% 88.82%
31 3Com Corp 0.61% $10,788.53 0.61% 89.43%
32 First Data Corp 0.60% $10,499.99 0.60% 90.03%
33 Applied Materials Inc 0.53% $9,248.22 0.53% 90.55%
34 Ascend Communications Inc 0.51% $9,000.99 0.51% 91.07%
35 Computer Sciences Corp 0.49% $8,607.62 0.49% 91.56%
36 Paychex Inc 0.48% $8,414.38 0.48% 92.03%
37 Gateway 2000 Inc 0.46% $8,148.61 0.46% 92.50%
38 AMP Inc 0.44% $7,814.99 0.44% 92.94%
39 Tellabs Inc 0.44% $7,712.68 0.44% 93.38%
40 Rockwell International 0.39% $6,930.75 0.39% 93.78%
41 Micron Technology Inc 0.37% $6,485.74 0.37% 94.14%
42 General Dynamics Corp 0.36% $6,360.29 0.36% 94.51%
43 Seagate Technology Inc 0.35% $6,091.64 0.35% 94.85%
44 Unisys Corp 0.33% $5,785.80 0.33% 95.18%
45 Nextel Communications Inc 0.33% $5,767.73 0.33% 95.51%
46 TRW Inc 0.31% $5,409.76 0.31% 95.82%
47 Equifax Inc 0.30% $5,281.14 0.30% 96.12%
48 Apple Computer Inc 0.29% $5,133.11 0.29% 96.41%
49 Northrop Grumman Corporation 0.29% $5,022.11 0.29% 96.70%
50 Novell Inc 0.25% $4,329.59 0.25% 96.94%
51 Ceridian Corp 0.24% $4,162.50 0.24% 97.18%
52 WW Grainger Inc 0.23% $4,115.70 0.23% 97.41%
53 Perkin Elmer Corp 0.19% $3,374.00 0.19% 97.61%
54 General Instrument Corp 0.19% $3,262.84 0.19% 97.79%
|
IXT COMPONENT WEIGHTS
PRICE MARKET
COMPANY NAME TICKER SHARES MULTIPLIER 9/30/98 CAPITALIZATION
55 Parametric Technology Corp PMTC 272,220,000 1.00000 10.0625 $2,739.21
56 Advanced Micro Devices Inc AMD 143,856,000 1.00000 18.5625 $2,670.33
57 Harris Corp HRS 80,005,000 1.00000 32.0000 $2,560.16
58 Thermo Electron Corp TMO 166,054,000 1.00000 15.0625 $2,501.19
59 BF Goodrich Co GR 73,987,000 1.00000 32.8125 $2,427.70
60 Adobe Systems Inc ADBE 67,198,000 1.00000 34.6875 $2,330.93
61 KLA-Tencor Corp KLAC 86,873,000 1.00000 24.8750 $2,160.97
62 Thomas and Betts Corp TNB 56,731,000 1.00000 38.0625 $2,159.32
63 Raychem Corp RYC 83,835,000 1.00000 24.3750 $2,043.48
64 Cabletron Systems Inc CS 164,429,000 1.00000 11.2500 $1,849.83
65 LSI Logic Corp LSI 140,945,000 1.00000 12.6250 $1,779.43
66 Silicon Graphics Inc SGI 188,789,000 1.00000 9.3750 $1,769.90
67 Scientific Atlanta Inc SFA 78,821,000 1.00000 21.1250 $1,665.09
68 National Semiconductor Corp NSM 164,234,000 1.00000 9.6875 $1,591.02
69 Autodesk Inc ADSK 47,019,000 1.00000 26.2500 $1,234.25
70 Andrew Corp ANDW 86,104,000 1.00000 13.2500 $1,140.88
71 Polaroid Corp PRD 44,109,000 1.00000 24.5625 $1,083.43
72 EG and G Inc EGG 45,957,000 1.00000 22.6250 $1,039.78
73 Ikon Office Solutions Inc IKN 135,556,000 1.00000 7.1875 $974.31
74 Moore Corporation Ltd MCL 88,449,000 1.00000 10.5625 $934.24
75 Millipore Corp MIL 43,852,000 1.00000 19.0625 $835.93
76 Tektronix Inc TEK 50,345,000 1.00000 15.5000 $780.35
77 Data General Corp DGN 49,502,000 1.00000 10.8125 $535.24
$1,757,522.37
|
MARKET INDEX MARKET INDEX CUMULATIVE
COMPANY NAME WEIGHT CAPITALIZATION WEIGHT WEIGHT
55 Parametric Technology Corp 0.16% $2,739.21 0.16% 97.95%
56 Advanced Micro Devices Inc 0.15% $2,670.33 0.15% 98.10%
57 Harris Corp 0.15% $2,560.16 0.15% 98.25%
58 Thermo Electron Corp 0.14% $2,501.19 0.14% 98.39%
59 BF Goodrich Co 0.14% $2,427.70 0.14% 98.53%
60 Adobe Systems Inc 0.13% $2,330.93 0.13% 98.66%
61 KLA-Tencor Corp 0.12% $2,160.97 0.12% 98.78%
62 Thomas and Betts Corp 0.12% $2,159.32 0.12% 98.90%
63 Raychem Corp 0.12% $2,043.48 0.12% 99.02%
64 Cabletron Systems Inc 0.11% $1,849.83 0.11% 99.13%
65 LSI Logic Corp 0.10% $1,779.43 0.10% 99.23%
66 Silicon Graphics Inc 0.10% $1,769.90 0.10% 99.33%
67 Scientific Atlanta Inc 0.09% $1,665.09 0.09% 99.42%
68 National Semiconductor Corp 0.09% $1,591.02 0.09% 99.51%
69 Autodesk Inc 0.07% $1,234.25 0.07% 99.58%
70 Andrew Corp 0.06% $1,140.88 0.06% 99.65%
71 Polaroid Corp 0.06% $1,083.43 0.06% 99.71%
72 EG and G Inc 0.06% $1,039.78 0.06% 99.77%
73 Ikon Office Solutions Inc 0.06% $974.31 0.06% 99.82%
74 Moore Corporation Ltd 0.05% $934.24 0.05% 99.88%
75 Millipore Corp 0.05% $835.93 0.05% 99.93%
76 Tektronix Inc 0.04% $780.35 0.04% 99.97%
77 Data General Corp 0.03% $535.24 0.03% 100.00%
$1,757,522.37
|
IXU COMPONENT WEIGHTS
PRICE MARKET
COMPANY NAME TICKER SHARES MULTIPLIER 9/30/98 CAPITALIZATION
1 SBC Communications Inc SBC 1,837,288,000 1.00000 44.3750 $81,529.66
2 Bell Atlantic Corp BEL 1,553,474,000 1.00000 48.4375 $75,246.40
3 Bellsouth Corp BLS 983,704,000 1.00000 75.2500 $74,023.73
4 GTE Corp GTE 964,031,000 1.00000 55.0000 $53,021.71
5 Ameritech Corp AIT 1,102,394,000 0.54309 47.5000 $52,363.72
6 US West Inc USW 501,582,000 1.02815 52.5000 $26,333.06
7 Duke Energy Corp DUK 361,084,000 1.03108 66.1875 $23,899.25
8 Southern Co SO 697,799,000 1.03437 29.4375 $20,541.46
9 Texas Utilities Co TXU 279,496,000 1.05704 46.5625 $13,014.03
10 Alltel Corp AT 274,158,000 1.05206 47.1250 $12,919.70
11 FPL Group Inc FPL 181,217,000 1.05805 69.6875 $12,628.56
12 Consolidated Edison Inc ED 233,829,000 1.06118 52.0000 $12,159.11
13 PG and E Corp PCG 381,992,000 1.05512 31.8750 $12,176.00
14 American Electric Power Co Inc AEP 190,884,000 1.07681 48.8125 $9,317.53
15 Houston Industries Inc HOU 296,040,000 1.07269 31.1250 $9,214.25
16 Public Service Enterprise Group Inc PEG 231,958,000 1.08308 39.3125 $9,118.85
17 Edison International Inc EIX 353,639,000 1.06198 25.6875 $9,084.10
18 Dominion Resources Inc D 196,508,000 1.08325 44.6250 $8,769.17
19 Peco Energy Co PE 222,896,000 1.10217 36.7500 $8,191.43
20 Unicom Corp UCM 217,013,000 1.08726 37.3750 $8,110.86
21 Entergy Corp ETR 246,602,000 1.09368 30.7500 $7,583.01
22 FirstEnergy Corp FE 237,069,000 1.09358 31.0625 $7,363.96
23 Carolina Power and Light Co CPL 151,331,000 1.10110 46.1875 $6,989.60
24 DTE Energy Holding Co DTE 145,075,000 1.11330 45.1875 $6,555.58
25 Sempra Energy SRE 240,808,000 1.09995 26.0625 $6,276.06
26 CINergy Corp CIN 158,535,000 1.12019 38.2500 $6,063.96
27 Central and South West Corp CSR 212,456,000 1.11632 28.6250 $6,081.55
28 Ameren Corp AEE 137,215,000 1.12168 41.9375 $5,754.45
29 Pacificorp PPW 297,269,000 1.09868 19.2500 $5,722.43
30 GPU Inc GPU 127,927,000 1.13725 42.5000 $5,436.90
31 Baltimore Gas and Electric Co BGE 148,673,000 1.14449 33.3750 $4,961.96
32 Frontier Corp FRO 171,499,000 1.12305 27.3750 $4,694.79
33 Northern States Power Co NSP 151,416,000 1.15381 28.0625 $4,249.11
34 PP and L Resources Holding Co PPL 151,266,000 1.17457 25.8750 $3,914.01
35 Niagara Mohawk Power Corp NMK 187,365,000 1.23718 15.3750 $2,880.74
36 Nicor Inc ..Bd Northern I GAS 47,751,000 1.34476 41.4375 $1,978.68
37 Peoples Energy Corp PGL 35,387,000 1.48673 36.0000 $1,273.93
38 Oneok Inc OKE 31,516,000 1.52717 34.0000 $1,071.54
39 Eastern Enterprises EFU 20,432,000 1.75791 42.1250 $860.70
$621,375.49
|
MARKET INDEX MARKET INDEX CUMULATIVE
COMPANY NAME WEIGHT CAPITALIZATION WEIGHT WEIGHT
1 SBC Communications Inc 13.12% $81,529.66 13.13% 13.13%
2 Bell Atlantic Corp 12.11% $75,246.40 12.12% 25.25%
3 Bellsouth Corp 11.91% $74,023.73 11.92% 37.17%
4 GTE Corp 8.53% $53,021.71 8.54% 45.71%
5 Ameritech Corp 8.43% $28,438.27 4.58% 50.29%
6 US West Inc 4.24% $27,074.37 4.36% 54.65%
7 Duke Energy Corp 3.85% $24,641.99 3.97% 58.62%
8 Southern Co 3.31% $21,247.48 3.42% 62.04%
9 Texas Utilities Co 2.09% $13,756.41 2.22% 64.25%
10 Alltel Corp 2.08% $13,592.27 2.19% 66.44%
11 FPL Group Inc 2.03% $13,361.59 2.15% 68.59%
12 Consolidated Edison Inc 1.96% $12,903.03 2.08% 70.67%
13 PG and E Corp 1.96% $12,847.13 2.07% 72.74%
14 American Electric Power Co Inc 1.50% $10,033.17 1.62% 74.36%
15 Houston Industries Inc 1.48% $9,884.05 1.59% 75.95%
16 Public Service Enterprise Group Inc 1.47% $9,876.45 1.59% 77.54%
17 Edison International Inc 1.46% $9,647.10 1.55% 79.09%
18 Dominion Resources Inc 1.41% $9,499.23 1.53% 80.62%
19 Peco Energy Co 1.32% $9,028.35 1.45% 82.08%
20 Unicom Corp 1.31% $8,818.64 1.42% 83.50%
21 Entergy Corp 1.22% $8,293.42 1.34% 84.83%
22 FirstEnergy Corp 1.19% $8,053.09 1.30% 86.13%
23 Carolina Power and Light Co 1.12% $7,696.25 1.24% 87.37%
24 DTE Energy Holding Co 1.06% $7,298.34 1.18% 88.54%
25 Sempra Energy 1.01% $6,903.37 1.11% 89.66%
26 CINergy Corp 0.98% $6,792.79 1.09% 90.75%
27 Central and South West Corp 0.98% $6,788.97 1.09% 91.84%
28 Ameren Corp 0.93% $6,454.63 1.04% 92.88%
29 Pacificorp 0.92% $6,287.11 1.01% 93.90%
30 GPU Inc 0.87% $6,183.13 1.00% 94.89%
31 Baltimore Gas and Electric Co 0.80% $5,678.91 0.91% 95.81%
32 Frontier Corp 0.76% $5,272.50 0.85% 96.66%
33 Northern States Power Co 0.68% $4,902.65 0.79% 97.44%
34 PP and L Resources Holding Co 0.63% $4,597.29 0.74% 98.19%
35 Niagara Mohawk Power Corp 0.46% $3,564.00 0.57% 98.76%
36 Nicor Inc ..Bd Northern I 0.32% $2,660.85 0.43% 99.19%
37 Peoples Energy Corp 0.21% $1,893.99 0.31% 99.49%
38 Oneok Inc 0.17% $1,636.43 0.26% 99.76%
39 Eastern Enterprises 0.14% $1,513.03 0.24% 100.00%
$620,941.79
|
IXV COMPONENT WEIGHTS
PRICE MARKET
COMPANY NAME TICKER SHARES MULTIPLIER 9/30/98 CAPITALIZATION
1 Time Warner Inc TWX 599,304,000 1.00000 87.5625 52,476.56
2 Walt Disney Co DIS 2,048,690,000 1.00000 25.3750 51,985.51
3 McDonalds Corp MCD 684,629,000 1.00000 59.6875 40,863.79
4 MediaOne Group Inc UMG 609,405,000 1.00000 44.4375 27,080.43
5 Viacom Inc VIA.B 358,004,000 1.00000 58.0000 20,764.23
6 Tele Communications Inc TCI Group TCOMA 523,344,000 1.00000 39.1250 20,475.83
7 CBS Corp CBS 715,923,000 1.00000 24.2500 17,361.13
8 Comcast Corp CMCSK 369,218,000 1.00000 46.9375 17,330.17
9 Gannett Inc GCI 284,595,000 1.00000 53.5625 15,243.62
10 Columbia HCA Healthcare Corp COL 645,336,000 1.00000 20.0625 12,947.05
11 HBO and Co HBOC 430,993,000 1.00000 28.8750 12,444.92
12 Clear Channel Communications Inc CCU 248,333,000 1.00000 47.5000 11,795.82
13 IMS Health Inc RX 166,077,000 1.00000 61.9375 10,286.39
14 Aetna Inc AET 144,369,000 1.00000 69.5000 10,033.65
15 Cendant Corp CD 857,984,000 1.00000 11.6250 $9,974.06
16 Tenet Healthcare Corp THC 308,254,000 1.00000 28.7500 $8,862.30
17 Service Corporation International SRV 257,260,000 1.00000 31.8750 $8,200.16
18 McGraw Hill Co Inc MHP 99,300,000 1.00000 79.2500 $7,869.53
19 Omnicom Group Inc OMC 169,718,000 1.00000 45.0000 $7,637.31
20 Interpublic Group of Companies Inc IPG 136,184,000 1.00000 53.9375 $7,345.42
21 United Healthcare Corp UNH 195,331,000 1.00000 35.0000 $6,836.59
22 Tribune Co TRB 121,949,000 1.00000 50.3125 $6,135.56
23 Marriott International Inc MAR 250,133,000 1.00000 23.8750 $5,971.93
24 Tricon Global Restaurants Inc YUM 152,524,000 1.00000 39.1250 $5,967.50
25 New York Times Co NYT 189,516,000 1.00000 27.5000 $5,211.69
26 RR Donnelley and Sons Co DNY 139,150,000 1.00000 35.1875 $4,896.34
27 Dun and Bradstreet Corp. DNB 170,870,000 1.00000 27.0000 $4,613.49
28 Times Mirror Co TMC 86,737,000 1.00000 53.1250 $4,607.90
29 Healthsouth Corporation HRC 422,618,000 1.00000 10.5000 $4,437.49
30 H and R Block Inc HRB 106,515,000 1.00000 41.3750 $4,407.06
31 Dow Jones And Company Inc DJ 93,729,000 1.00000 46.5000 $4,358.40
32 Hilton Hotels Corp HLT 246,910,000 1.00000 17.0000 $4,197.47
33 Knight Ridder Inc KRI 78,827,000 1.00000 44.5000 $3,507.80
34 HCR Manor Care Inc HCR 108,496,000 1.00000 29.3125 $3,180.29
35 Mirage Resorts Inc MIR 179,735,000 1.00000 16.7500 $3,010.56
36 Wendys International Inc WEN 127,248,000 1.00000 22.1875 $2,823.32
37 American Greetings Corp AM 70,616,000 1.00000 39.5625 $2,793.75
38 Humana Inc HUM 166,947,000 1.00000 16.3750 $2,733.76
39 Deluxe Corp DLX 80,781,000 1.00000 28.4375 $2,297.21
40 Darden Restaurants Inc DRI 139,184,000 1.00000 16.0000 $2,226.94
41 King World Productions Inc KWP 73,175,000 1.00000 26.1250 $1,911.70
42 Meredith Corp MDP 52,798,000 1.00000 32.0000 $1,689.54
43 Shared Medical Systems Corp SMS 26,546,000 1.00000 53.1875 $1,411.92
44 Harrahs Entertainment Inc HET 101,287,000 1.00000 13.3750 $1,354.71
45 Jostens Inc JOS 36,831,000 1.00000 20.7500 $764.24
$462,325.04
|
MARKET INDEX MARKET INDEX CUMULATIVE
COMPANY NAME WEIGHT CAPITALIZATION WEIGHT WEIGHT
1 Time Warner Inc 11.35% $52,476.56 11.35% 11.35%
2 Walt Disney Co 11.24% $51,985.51 11.24% 22.59%
3 McDonalds Corp 8.84% $40,863.79 8.84% 31.43%
4 MediaOne Group Inc 5.86% $27,080.43 5.86% 37.29%
5 Viacom Inc 4.49% $20,764.23 4.49% 41.78%
6 Tele Communications Inc TCI Group 4.43% $20,475.83 4.43% 46.21%
7 CBS Corp 3.76% $17,361.13 3.76% 49.97%
8 Comcast Corp 3.75% $17,330.17 3.75% 53.71%
9 Gannett Inc 3.30% $15,243.62 3.30% 57.01%
10 Columbia HCA Healthcare Corp 2.80% $12,947.05 2.80% 59.81%
11 HBO and Co 2.69% $12,444.92 2.69% 62.50%
12 Clear Channel Communications Inc 2.55% $11,795.82 2.55% 65.06%
13 IMS Health Inc 2.22% $10,286.39 2.22% 67.28%
14 Aetna Inc 2.17% $10,033.65 2.17% 69.45%
15 Cendant Corp 2.16% $9,974.06 2.16% 71.61%
16 Tenet Healthcare Corp 1.92% $8,862.30 1.92% 73.53%
17 Service Corporation International 1.77% $8,200.16 1.77% 75.30%
18 McGraw Hill Co Inc 1.70% $7,869.53 1.70% 77.00%
19 Omnicom Group Inc 1.65% $7,637.31 1.65% 78.65%
20 Interpublic Group of Companies Inc 1.59% $7,345.42 1.59% 80.24%
21 United Healthcare Corp 1.48% $6,836.59 1.48% 81.72%
22 Tribune Co 1.33% $6,135.56 1.33% 83.05%
23 Marriott International Inc 1.29% $5,971.93 1.29% 84.34%
24 Tricon Global Restaurants Inc 1.29% $5,967.50 1.29% 85.63%
25 New York Times Co 1.13% $5,211.69 1.13% 86.76%
26 RR Donnelley and Sons Co 1.06% $4,896.34 1.06% 87.82%
27 Dun and Bradstreet Corp. 1.00% $4,613.49 1.00% 88.81%
28 Times Mirror Co 1.00% $4,607.90 1.00% 89.81%
29 Healthsouth Corporation 0.96% $4,437.49 0.96% 90.77%
30 H and R Block Inc 0.95% $4,407.06 0.95% 91.72%
31 Dow Jones And Company Inc 0.94% $4,358.40 0.94% 92.67%
32 Hilton Hotels Corp 0.91% $4,197.47 0.91% 93.57%
33 Knight Ridder Inc 0.76% $3,507.80 0.76% 94.33%
34 HCR Manor Care Inc 0.69% $3,180.29 0.69% 95.02%
35 Mirage Resorts Inc 0.65% $3,010.56 0.65% 95.67%
36 Wendys International Inc 0.61% $2,823.32 0.61% 96.28%
37 American Greetings Corp 0.60% $2,793.75 0.60% 96.89%
38 Humana Inc 0.59% $2,733.76 0.59% 97.48%
39 Deluxe Corp 0.50% $2,297.21 0.50% 97.98%
40 Darden Restaurants Inc 0.48% $2,226.94 0.48% 98.46%
41 King World Productions Inc 0.41% $1,911.70 0.41% 98.87%
42 Meredith Corp 0.37% $1,689.54 0.37% 99.24%
43 Shared Medical Systems Corp 0.31% $1,411.92 0.31% 99.54%
44 Harrahs Entertainment Inc 0.29% $1,354.71 0.29% 99.83%
45 Jostens Inc 0.17% $764.24 0.17% 100.00%
$462,325.04
|
IXY COMPONENT WEIGHTS
PRICE MARKET
COMPANY NAME TICKER SHARES MULTIPLIER 9/30/98 CAPITALIZATION
1 Wal-Mart Stores Inc WMT 2,235,711,000 1.00000 54.6250 $122,125.71
2 Home Depot Inc HD 1,469,560,000 1.00000 39.5000 $58,047.62
3 Ford Motor Company F 1,211,631,000 1.00000 47.0000 $56,946.66
4 General Motors Corp GM 654,201,000 1.00000 54.8750 $35,899.28
5 Chrysler Corporation C 646,730,000 1.00000 47.8750 $30,962.20
6 Gap Inc GPS 392,843,000 1.00000 52.7500 $20,722.47
7 Sears Roebuck and Co S 392,359,000 1.00000 44.1875 $17,337.36
8 Dayton Hudson Corp DH 439,069,000 1.00000 35.7500 $15,696.72
9 Burlington Northern Santa Fe Corp BNI 473,040,000 1.00000 32.2500 $15,255.54
10 May Department Stores Co MAY 230,992,000 1.00000 51.5000 $11,896.09
11 JC Penney Company Inc JCP 253,074,000 1.00000 44.9375 $11,372.51
12 Lowes Companies Inc LOW 351,766,000 1.00000 31.8125 $11,190.56
13 Norfolk Southern Corp NSC 378,951,000 1.00000 29.0625 $11,013.26
14 Nike Inc NKE 287,727,000 1.00000 36.8125 $10,591.95
15 Union Pacific Corp UNP 247,307,000 1.00000 42.6250 $10,541.46
16 Costco Companies Inc COST 216,477,000 1.00000 47.3750 $10,255.60
17 AMR Corp AMR 182,343,000 1.00000 55.4375 $10,108.64
18 CSX Corp CSX 218,641,000 1.00000 42.0625 $9,196.59
19 Masco Corp MAS 340,161,000 1.00000 24.7500 $8,418.98
20 Mattel Inc MAT 292,654,000 1.00000 28.0000 $8,194.31
21 Goodyear Tire and Rubber Co GT 157,009,000 1.00000 51.5000 $8,085.96
22 Federated Department Stores Inc FD 210,865,000 1.00000 36.3750 $7,670.21
23 Newell Co NWL 162,623,000 1.00000 46.0625 $7,490.82
24 Delta Air Lines Inc DAL 75,746,000 1.00000 97.2500 $7,366.30
25 Southwest Airlines Co LUV 335,774,000 1.00000 20.2500 $6,799.42
26 FDX Corp Holding Co FDX 147,450,000 1.00000 44.8125 $6,607.60
27 Kohls Corp KSS 157,987,000 1.00000 39.0000 $6,161.49
28 Kmart Corp KM 492,348,000 1.00000 12.0000 $5,908.18
29 TJX Companies Inc TJX 317,162,000 1.00000 17.8125 $5,649.45
30 Genuine Parts Co GPC 178,689,000 1.00000 30.0625 $5,371.84
31 Tandy Corp TAN 100,367,000 1.00000 53.5000 $5,369.63
32 Limited Inc LTD 227,870,000 1.00000 21.9375 $4,998.90
33 Dollar General Corp DG 184,799,000 1.00000 26.3750 $4,874.07
34 US Airways Group Inc U 93,859,000 1.00000 50.6250 $4,751.61
35 VF Corporation VFC 121,469,000 1.00000 37.5000 $4,555.09
36 Toys R Us Holding Co TOY 275,794,000 1.00000 16.1875 $4,464.42
37 Maytag Corp MYG 91,465,000 1.00000 47.7500 $4,367.45
38 ITT Industries Inc Indiana IIN 118,445,000 1.00000 33.8750 $4,012.32
39 Hasbro Inc HAS 131,534,000 1.00000 29.5625 $3,888.47
40 Black and Decker Corp BDK 92,957,000 1.00000 41.6250 $3,869.34
41 Autozone Inc AZO 152,734,000 1.00000 24.6250 $3,761.07
42 Sherwin Williams Co SHW 172,895,000 1.00000 21.7500 $3,760.47
43 Nordstrom Inc NOBE 148,786,000 1.00000 24.7500 $3,682.45
44 Rubbermaid Inc RBD 149,950,000 1.00000 23.9375 $3,589.43
45 Whirlpool Corp WHR 75,993,000 1.00000 47.0000 $3,571.67
46 Harcourt General Inc H 70,865,000 1.00000 48.3750 $3,428.09
47 Circuit City Stores Circuit City Grp CC 100,005,000 1.00000 33.3125 $3,331.42
48 Dillards Inc DDS 110,855,000 1.00000 28.3125 $3,138.58
49 Laidlaw Inc LDW 329,774,000 1.00000 9.4375 $3,112.24
50 Stanley Works SWK 88,773,000 1.00000 29.7500 $2,641.00
51 Consolidated Stores Corp CNS 109,346,000 1.00000 19.6250 $2,145.92
52 Armstrong World Industries Inc ACK 40,015,000 1.00000 53.5000 $2,140.80
53 Centex Corp CTX 59,613,000 1.00000 34.5000 $2,056.65
54 Snap On Inc SNA 59,117,000 1.00000 30.8125 $1,821.54
|
MARKET INDEX MARKET INDEX CUMULATIVE
COMPANY NAME WEIGHT CAPITALIZATION WEIGHT WEIGHT
1 Wal-Mart Stores Inc 18.58% $122,125.71 18.58% 18.58%
2 Home Depot Inc 8.83% $58,047.62 8.83% 27.41%
3 Ford Motor Company 8.66% $56,946.66 8.66% 36.07%
4 General Motors Corp 5.46% $35,899.28 5.46% 41.53%
5 Chrysler Corporation 4.71% $30,962.20 4.71% 46.24%
6 Gap Inc 3.15% $20,722.47 3.15% 49.39%
7 Sears Roebuck and Co 2.64% $17,337.36 2.64% 52.03%
8 Dayton Hudson Corp 2.39% $15,696.72 2.39% 54.42%
9 Burlington Northern Santa Fe Corp 2.32% $15,255.54 2.32% 56.74%
10 May Department Stores Co 1.81% $11,896.09 1.81% 58.55%
11 JC Penney Company Inc 1.73% $11,372.51 1.73% 60.28%
12 Lowes Companies Inc 1.70% $11,190.56 1.70% 61.98%
13 Norfolk Southern Corp 1.68% $11,013.26 1.68% 63.65%
14 Nike Inc 1.61% $10,591.95 1.61% 65.26%
15 Union Pacific Corp 1.60% $10,541.46 1.60% 66.87%
16 Costco Companies Inc 1.56% $10,255.60 1.56% 68.43%
17 AMR Corp 1.54% $10,108.64 1.54% 69.97%
18 CSX Corp 1.40% $9,196.59 1.40% 71.36%
19 Masco Corp 1.28% $8,418.98 1.28% 72.65%
20 Mattel Inc 1.25% $8,194.31 1.25% 73.89%
21 Goodyear Tire and Rubber Co 1.23% $8,085.96 1.23% 75.12%
22 Federated Department Stores Inc 1.17% $7,670.21 1.17% 76.29%
23 Newell Co 1.14% $7,490.82 1.14% 77.43%
24 Delta Air Lines Inc 1.12% $7,366.30 1.12% 78.55%
25 Southwest Airlines Co 1.03% $6,799.42 1.03% 79.58%
26 FDX Corp Holding Co 1.01% $6,607.60 1.01% 80.59%
27 Kohls Corp 0.94% $6,161.49 0.94% 81.52%
28 Kmart Corp 0.90% $5,908.18 0.90% 82.42%
29 TJX Companies Inc 0.86% $5,649.45 0.86% 83.28%
30 Genuine Parts Co 0.82% $5,371.84 0.82% 84.10%
31 Tandy Corp 0.82% $5,369.63 0.82% 84.92%
32 Limited Inc 0.76% $4,998.90 0.76% 85.68%
33 Dollar General Corp 0.74% $4,874.07 0.74% 86.42%
34 US Airways Group Inc 0.72% $4,751.61 0.72% 87.14%
35 VF Corporation 0.69% $4,555.09 0.69% 87.83%
36 Toys R Us Holding Co 0.68% $4,464.42 0.68% 88.51%
37 Maytag Corp 0.66% $4,367.45 0.66% 89.18%
38 ITT Industries Inc Indiana 0.61% $4,012.32 0.61% 89.79%
39 Hasbro Inc 0.59% $3,888.47 0.59% 90.38%
40 Black and Decker Corp 0.59% $3,869.34 0.59% 90.97%
41 Autozone Inc 0.57% $3,761.07 0.57% 91.54%
42 Sherwin Williams Co 0.57% $3,760.47 0.57% 92.11%
43 Nordstrom Inc 0.56% $3,682.45 0.56% 92.67%
44 Rubbermaid Inc 0.55% $3,589.43 0.55% 93.22%
45 Whirlpool Corp 0.54% $3,571.67 0.54% 93.76%
46 Harcourt General Inc 0.52% $3,428.09 0.52% 94.28%
47 Circuit City Stores Circuit City Grp 0.51% $3,331.42 0.51% 94.79%
48 Dillards Inc 0.48% $3,138.58 0.48% 95.27%
49 Laidlaw Inc 0.47% $3,112.24 0.47% 95.74%
50 Stanley Works 0.40% $2,641.00 0.40% 96.14%
51 Consolidated Stores Corp 0.33% $2,145.92 0.33% 96.47%
52 Armstrong World Industries Inc 0.33% $2,140.80 0.33% 96.79%
53 Centex Corp 0.31% $2,056.65 0.31% 97.11%
54 Snap On Inc 0.28% $1,821.54 0.28% 97.38%
|
IXY COMPONENT WEIGHTS
PRICE MARKET
COMPANY NAME TICKER SHARES MULTIPLIER 9/30/98 CAPITALIZATION
55 Ryder System Inc R 73,225,000 1.00000 24.8750 $1,821.47
56 Owens Corning Inc OWC 54,020,000 1.00000 32.5625 $1,759.03
57 Liz Claiborne Inc LIZ 66,034,000 1.00000 26.1875 $1,729.27
58 Cooper Tire And Rubber Co CTB 77,442,000 1.00000 18.0000 $1,393.96
59 Brunswick Corp BC 99,074,000 1.00000 13.0000 $1,287.96
60 Venator Group Inc Z 135,286,000 1.00000 8.6875 $1,175.30
61 Fruit of The Loom Inc FTL 72,093,000 1.00000 15.0625 $1,085.90
62 Pulte Corp PHM 43,115,000 1.00000 24.6875 $1,064.40
63 Fleetwood Enterprises Inc FLE 34,427,000 1.00000 30.1875 $1,039.27
64 Russell Corp RML 36,218,000 1.00000 26.2500 $950.72
65 Kaufman and Broad Home Corp KBH 39,854,000 1.00000 23.4375 $934.08
66 Pep Boys Manny Moe and Jack PBY 63,775,000 1.00000 13.6250 $868.93
67 Reebok International Ltd RBK 56,445,000 1.00000 13.5625 $765.54
68 Tupperware Corp TUP 57,722,000 1.00000 11.7500 $678.23
69 Springs Industries Inc SMI 18,460,000 1.00000 34.7500 $641.49
$657,412.97
|
MARKET INDEX MARKET INDEX CUMULATIVE
COMPANY NAME WEIGHT CAPITALIZATION WEIGHT WEIGHT
55 Ryder System Inc 0.28% $1,821.47 0.28% 97.66%
56 Owens Corning Inc 0.27% $1,759.03 0.27% 97.93%
57 Liz Claiborne Inc 0.26% $1,729.27 0.26% 98.19%
58 Cooper Tire And Rubber Co 0.21% $1,393.96 0.21% 98.40%
59 Brunswick Corp 0.20% $1,287.96 0.20% 98.60%
60 Venator Group Inc 0.18% $1,175.30 0.18% 98.78%
61 Fruit of The Loom Inc 0.17% $1,085.90 0.17% 98.94%
62 Pulte Corp 0.16% $1,064.40 0.16% 99.11%
63 Fleetwood Enterprises Inc 0.16% $1,039.27 0.16% 99.26%
64 Russell Corp 0.14% $950.72 0.14% 99.41%
65 Kaufman and Broad Home Corp 0.14% $934.08 0.14% 99.55%
66 Pep Boys Manny Moe and Jack 0.13% $868.93 0.13% 99.68%
67 Reebok International Ltd 0.12% $765.54 0.12% 99.80%
68 Tupperware Corp 0.10% $678.23 0.10% 99.90%
69 Springs Industries Inc 0.10% $641.49 0.10% 100.00%
$657,412.97
|
IXB INDUSTRY GROUPS
MARKET MARKET INDEX MARKET INDEX CUMULATIVE
INDUSTRY CAPITALIZATION WEIGHT CAPITALIZATION WEIGHT INDEX WEIGHT
Major Chemicals $132,794.01 42.72% $132,794.01 42.72% 42.72%
Specialty Chem. $47,228.79 15.19% $47,228.79 15.19% 57.92%
Paper & Forest Prod $46,942.00 15.10% $46,942.00 15.10% 73.02%
Aluminum $22,296.29 7.17% $22,296.29 7.17% 80.19%
Gold Mining $18,662.47 6.00% $18,662.47 6.00% 86.19%
Packaging $12,764.59 4.11% $12,764.59 4.11% 90.30%
Steel $12,007.79 3.86% $12,007.79 3.86% 94.16%
Non-Ferous Metals $8,910.95 2.87% $8,910.95 2.87% 97.03%
Metal Containers $4,402.98 1.42% $4,402.98 1.42% 98.45%
Glass Container $3,883.65 1.25% $3,883.65 1.25% 99.70%
Metal Fabricators $942.86 0.30% $942.86 0.30% 100.00%
TOTAL $310,836.38 100.00% $310,836.38 100.00%
|
IXE INDUSTRY GROUPS
MARKET MARKET INDEX MARKET INDEX CUMULATIVE
INDUSTRY CAPITALIZATION WEIGHT CAPITALIZATION WEIGHT INDEX WEIGHT
Intl' Oil $377,725.89 56.53% $421,233.51 63.04% 63.04%
Domestic Oil $119,923.41 17.95% $121,578.81 18.20% 81.24%
Natural Gas Pipeline $64,452.71 9.65% $50,190.70 7.51% 88.75%
Oil Services $64,437.96 9.64% $50,175.95 7.51% 96.26%
Oil & Gas Producer $30,349.64 4.54% $18,464.63 2.76% 99.02%
Oil Refining & Marketing $11,282.07 1.69% $6,528.07 0.98% 100.00%
TOTAL $668,171.67 100.00% $668,171.67 100.00%
|
IXI INDUSTRY GROUPS
MARKET MARKET INDEX MARKET INDEX CUMULATIVE
INDUSTRY CAPITALIZATION WEIGHT CAPITALIZATION WEIGHT INDEX WEIGHT
Electrical Equip. $286,289.82 54.94% $151,485.57 30.12% 30.12%
Conglomerate $100,055.08 19.20% $122,973.68 24.45% 54.58%
Industrial Machinery $29,564.82 5.67% $49,811.33 9.90% 64.48%
Heavy Duty Trucks $17,326.10 3.32% $39,897.07 7.93% 72.41%
Pollution Control $32,738.06 6.28% $36,601.50 7.28% 79.69%
Machinery - Ag. $25,817.77 4.95% $36,400.87 7.24% 86.93%
Specialty Machinery $12,599.18 2.42% $26,245.67 5.22% 92.15%
Process Controls $12,315.67 2.36% $25,449.52 5.06% 97.21%
Engineering & Construc. $3,802.26 0.73% $10,462.13 2.08% 99.29%
Machine Tools $605.54 0.12% $3,569.40 0.71% 100.00%
TOTAL $521,114.30 100.00% $502,896.75 100.00%
|
IXM INDUSTRY GROUPS
MARKET MARKET INDEX MARKET INDEX CUMULATIVE
INDUSTRY CAPITALIZATION WEIGHT CAPITALIZATION WEIGHT INDEX WEIGHT
Regional Bank $467,640.79 36.67% $467,640.79 36.67% 36.67%
Multinational Bank $144,009.40 11.29% $144,009.40 11.29% 47.97%
Insurance - Specialty $105,843.23 8.30% $105,843.23 8.30% 56.27%
Govt Sponsored Agency $105,729.45 8.29% $105,729.45 8.29% 64.56%
Insurance - Multiline $86,414.20 6.78% $86,414.20 6.78% 71.34%
Insurance - Life $68,606.76 5.38% $68,606.76 5.38% 76.72%
Insurance - P&C $63,516.84 4.98% $63,516.84 4.98% 81.70%
Brokerage $59,084.78 4.63% $59,084.78 4.63% 86.33%
Diversified Financials $51,565.86 4.04% $51,565.86 4.04% 90.38%
Financial - Consumer $45,682.92 3.58% $45,682.92 3.58% 93.96%
Savings & Loan $24,721.16 1.94% $24,721.16 1.94% 95.90%
Insurance - Broker $23,610.56 1.85% $23,610.56 1.85% 97.75%
Credit Card $21,156.26 1.66% $21,156.26 1.66% 99.41%
Investment Advisors $7,559.30 0.59% $7,559.30 0.59% 100.00%
TOTAL $1,275,141.52 100.00% $1,275,141.52 100.00%
|
IXR INDUSTRY GROUPS
MARKET MARKET INDEX MARKET INDEX CUMULATIVE
INDUSTRY CAPITALIZATION WEIGHT CAPITALIZATION WEIGHT INDEX WEIGHT
Drugs $722,441.40 38.36% $722,441.40 38.36% 38.36%
Medical Supplies $274,171.68 14.56% $274,171.68 14.56% 52.92%
Household Products $192,894.78 10.24% $192,894.78 10.24% 63.17%
Beverages - Softdrink $185,430.73 9.85% $185,430.73 9.85% 73.01%
Foods $178,060.62 9.46% $178,060.62 9.46% 82.47%
Tobacco $117,975.32 6.26% $117,975.32 6.26% 88.73%
Food Retailer $58,180.69 3.09% $58,180.69 3.09% 91.82%
Cosmetic & Personal Care $57,368.60 3.05% $57,368.60 3.05% 94.87%
Retail - Drug Stores $49,714.34 2.64% $49,714.34 2.64% 97.51%
Beverages - Brewers $46,877.77 2.49% $46,877.77 2.49% 100.00%
GRAND TOTAL $1,883,115.93 100.00% $1,883,115.93 100.00%
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IXT INDUSTRY GROUPS
MARKET MARKET INDEX MARKET INDEX CUMULATIVE
INDUSTRY CAPITALIZATION WEIGHT CAPITALIZATION WEIGHT INDEX WEIGHT
Computer Software $339,014.33 19.29% $339,014.33 19.29% 19.29%
Telecom - Long Distance $223,326.84 12.71% $223,326.84 12.71% 32.00%
Computer Systems $214,067.84 12.18% $214,067.84 12.18% 44.18%
Semiconductor $188,672.59 10.74% $188,672.59 10.74% 54.91%
PC - Workstation $170,000.23 9.67% $170,000.23 9.67% 64.58%
Telecom - Equipment $136,173.46 7.75% $136,173.46 7.75% 72.33%
Telecom - Network $113,075.51 6.43% $113,075.51 6.43% 78.77%
Computer Services $71,638.81 4.08% $71,638.81 4.08% 82.84%
Telecom - Wireless $64,122.36 3.65% $64,122.36 3.65% 86.49%
Aerospace $59,947.28 3.41% $59,947.28 3.41% 89.90%
Defense Electronics $57,358.52 3.26% $57,358.52 3.26% 93.17%
Office Equipment $44,182.80 2.51% $44,182.80 2.51% 95.68%
Imaging $25,896.99 1.47% $25,896.99 1.47% 97.15%
Biotech $19,187.36 1.09% $19,187.36 1.09% 98.24%
Connectors $16,133.48 0.92% $16,133.48 0.92% 99.16%
Electronics - Instrumentation $7,491.46 0.43% $7,491.46 0.43% 99.59%
Info Processing - Peripherials $6,091.64 0.35% $6,091.64 0.35% 99.94%
Wireless Equipment $1,140.88 0.06% $1,140.88 0.06% 100.00%
TOTAL $1,757,522.37 100.00% $1,757,522.37 100.00%
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IXU INDUSTRY GROUPS
MARKET MARKET INDEX MARKET INDEX CUMULATIVE
INDUSTRY CAPITALIZATION WEIGHT CAPITALIZATION WEIGHT INDEX WEIGHT
Telecom - Local $380,132.73 61.18% $358,198.90 57.69% 57.69%
Electric Utility $236,057.90 37.99% $255,038.58 41.07% 98.76%
Natural Gas Distributors $5,184.86 0.83% $7,704.31 1.24% 100.00%
TOTAL $621,375.49 100.00% $620,941.79 100.00%
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IXV INDUSTRY GROUPS
MARKET MARKET INDEX MARKET INDEX CUMULATIVE
INDUSTRY CAPITALIZATION WEIGHT CAPITALIZATION WEIGHT INDEX WEIGHT
Entertainment $125,226.30 27.09% $125,226.30 27.09% 27.09%
Media Broadcasting $95,955.09 20.75% $95,955.09 20.75% 47.84%
News - Info Services $63,224.82 13.68% $63,224.82 13.68% 61.52%
Restaurants $51,881.55 11.22% $51,881.55 11.22% 72.74%
Hospital Management $24,989.65 5.41% $24,989.65 5.41% 78.14%
Health Care Info Tech $24,143.23 5.22% $24,143.23 5.22% 83.37%
Lodging & Cruise $20,143.46 4.36% $20,143.46 4.36% 87.72%
HMOs $19,603.99 4.24% $19,603.99 4.24% 91.96%
Advertising & Marketing $14,982.73 3.24% $14,982.73 3.24% 95.20%
Death Care $8,200.16 1.77% $8,200.16 1.77% 96.98%
Misc. Service $5,171.30 1.12% $5,171.30 1.12% 98.10%
Alternative Site Care $4,437.49 0.96% $4,437.49 0.96% 99.06%
Gaming - Casino $4,365.27 0.94% $4,365.27 0.94% 100.00%
TOTAL $462,325.04 100.00% $462,325.04 100.00%
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IXY INDUSTRY GROUPS
MARKET MARKET INDEX MARKET INDEX CUMULATIVE
INDUSTRY CAPITALIZATION WEIGHT CAPITALIZATION WEIGHT INDEX WEIGHT
Retail - Mass Merchandize $161,617.84 24.58% $161,617.84 24.58% 24.58%
Auto $123,808.14 18.83% $123,808.14 18.83% 43.42%
Retail - Building Materials $69,238.18 10.53% $69,238.18 10.53% 53.95%
Retail - Dept. Stores $51,673.64 7.86% $51,673.64 7.86% 61.81%
Railroad $46,006.85 7.00% $46,006.85 7.00% 68.81%
Retail - Apparel $31,370.81 4.77% $31,370.81 4.77% 73.58%
Airline $29,025.97 4.42% $29,025.97 4.42% 77.99%
Specialty Retail $18,041.23 2.74% $18,041.23 2.74% 80.74%
Building Materials $13,938.48 2.12% $13,938.48 2.12% 82.86%
Toys $12,082.79 1.84% $12,082.79 1.84% 84.70%
Housewares $11,758.48 1.79% $11,758.48 1.79% 86.48%
Shoes $11,357.49 1.73% $11,357.49 1.73% 88.21%
Auto Parts $11,205.71 1.70% $11,205.71 1.70% 89.92%
Tires $9,479.92 1.44% $9,479.92 1.44% 91.36%
Retail - Consumer Elec. $8,701.05 1.32% $8,701.05 1.32% 92.68%
Apparel Manufacturers $8,320.98 1.27% $8,320.98 1.27% 93.95%
Appliances $7,939.12 1.21% $7,939.12 1.21% 95.16%
Airfreight $6,607.60 1.01% $6,607.60 1.01% 96.16%
Hardware & Tools $6,510.33 0.99% $6,510.33 0.99% 97.15%
Truckers $4,933.71 0.75% $4,933.71 0.75% 97.90%
Retail - Auto Parts $4,630.01 0.70% $4,630.01 0.70% 98.61%
Home Builders $4,055.13 0.62% $4,055.13 0.62% 99.22%
Home Furnishings $2,140.80 0.33% $2,140.80 0.33% 99.55%
Rec. Equipment $1,287.96 0.20% $1,287.96 0.20% 99.74%
Manufactured Housing $1,039.27 0.16% $1,039.27 0.16% 99.90%
Textiles $641.49 0.10% $641.49 0.10% 100.00%
TOTAL $657,412.97 100.00% $657,412.97 100.00%
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PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITs
(a) Financial Statements:
Part B: Statements of Assets and Liabilities as of _________, 1998
Statements of Operations as of ________, 1998
(b) Exhibits:
(1) Amended and Restated Declaration of Trust.
(2) By-Laws of the Trust.
(3) Not applicable.
(4) Form of global certificate evidencing shares
of the Beneficial Interest, $.001 par value,
of each Select Sector SPDR Fund.
(5) Investment Advisory Agreement between the
Trust and State Street Bank and Trust
Company.
(6)(a) Distribution Agreement between the Trust
and ALPS Mutual Funds Services, Inc.
(6)(b) Form of Participant Agreement.
(6)(c) Form of Investor Services Agreement.
(6)(d) Forms of Soliciting Dealer Agreement.
(7) Not applicable.
(8) Custodian Agreement between the Trust and
State Street Bank and Trust Company.
(9)(a) Administration Agreement between the Trust
and State Street Bank and Trust Company.
(9)(b) Transfer Agency Services Agreement between
the Trust and State Street Bank and Trust
Company.
(9)(c) Sub-License Agreement between the Trust,
Merrill Lynch and Standard & Poor's
Corporation.*
(9)(d) Form of DTC Letter of Representation.
(10) Opinion of Gordon Altman Butowsky Weitzen
Shalov & Wein.
(11) Consent of Independent Accountants.
(12) Not applicable.
(13) Form of Subscription Agreement(s) between
the Trust and ALPS Mutual Funds Services,
Inc.
|
(14) Not applicable. (15) Form of 12b-1 Plan. (16) Not applicable (17) Financial Data Schedule.* (18) Not applicable. Other Powers of Attorney. |
* To be filed by amendment.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Immediately prior to the contemplated public offering of the Trust Shares, ALPS Mutual Fund Services, Inc. will be the sole shareholder of the Trust.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of , 1998, the sole holder of beneficial interest, par value $.001 per share, of each of the initial nine Select Sector SPDR Funds of the Trust was ALPS Mutual Fund Services, Inc.
ITEM 27. INDEMNIFICATION
Pursuant to Section 5.3 of the Registrant's Amended and Restated Declaration of Trust and under Section 4.8 of the Registrant's By-Laws, the Trust will indemnify any person who is, or has been, a Trustee, officer, employee or agent of the Trust against all expenses reasonably incurred or paid by him/her in connection with any claim, action, suit or proceeding in which he/she becomes involved as a party or otherwise by virtue of his/her being or having been a Trustee, officer, employee or agent and against amounts paid or incurred by him/her in the settlement thereof, if he/she acted in good faith and in a manner he/she reasonably believed to be in or not opposed to the best interests of the Trust, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his/her conduct was unlawful. In addition, indemnification is permitted only if it is determined that the actions in question did not render him/her liable by reason of willful misfeasance, bad faith or gross negligence in the performance of his/her duties or by reason of reckless disregard of his/her obligations and duties to the Registrant. The Registrant may also advance money for litigation expenses provided that Trustees, officers, employees and/or agents give their undertakings to repay the Registrant unless their conduct is later determined to permit indemnification.
Pursuant to Section 5.2 of the Registant's Amended and Restated Declaration of Trust, no Trustee, officer, employee or agent of the Registrant shall be liable for any action or failure to act, except in the case of willful misfeasance, bad faith or gross negligence or reckless disregard of duties to the Registrant. Pursuant to paragraph 9 of the Registrant's Investment Advisory Agreement, the Adviser shall not be liable for any action or failure to act, except in the case of willful misfeasance, bad faith or gross negligence or reckless disregard of duties to the Registrant.
Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions of Rule 484 under the Act, or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
The Registrant hereby undertakes that it will apply the indemnification provision of its by-laws in a manner consistent with Release 11330 of the Securities and Exchange Commission under the Investment Company Act of 1940, so long as the interpretation of Sections 17(h) and 17(i) of such Act remains in effect.
The Registrant maintains insurance on behalf of any person who is or was a Trustee, officer, employee or agent of Registrant, or who is or was serving at the request of Registrant as a trustee, director, officer, employee or agent of another trust or corporation, against any liability asserted against him/her and incurred by him/her or arising out of his/her position. However, in no event will Registrant maintain insurance to indemnify any such person for any act for which Registrant itself is not permitted to indemnify him/her.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
See "Management of the Trust" in the Statement of Additional Information. Neither the investment adviser of the Registrant nor any director, officer or partner of the investment adviser is, or has been, at any time during the past two years, engaged for his own account or in the capacity of director, officer, employee, partner or trustee, in any other business, profession, vocation or employment of a substantial nature.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) ALPS Mutual Funds Services, Inc. is the Trust's principal underwriter/distributor. ALPS also acts as a principal underwriter/distributor for various other unrelated investment companies.
(b) The following is a list of the executive officers and directors of ALPS Mutual Funds Services, Inc.:
Name Positions and Offices Positions and Offices
and Principal Business Address * with Underwriter with Registrant
================================= ================================= ============================
W. Robert Alexander Chairman and Chief Executive None
Officer
Arthur J. L. Lucey President and Secretary None
Thomas A. Carter Vice President and Chief None
Financial Officer
Edmund J. Burke Executive Vice President None
James V. Hyatt General Counsel None
Jeremy O. May Vice President None
William N. Paston Vice President None
John S. Hannon, Jr. Director None
Rick A. Pederson Director None
Chris Woessner Director None
|
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books and other documents required to be maintained by Section
31(a) of the 1940 Act and the Rules thereunder will be maintained at the offices
of the Administrator, State Street Bank & Trust Company, 1776 Heritage Drive,
AFB-4, North Quincy, Massachusetts
02171.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
* All addresses are 370 Seventeenth Street, Suite 3100, Denver, Colorado 80202.
ITEM 32. UNDERTAKINGS
The Trust hereby undertakes that it will file an amendment to the registration statement with certified financial statements showing the initial capital received before accepting subscriptions from any persons in excess of 25 if the Trust proposes to raise its initial capital pursuant to Section 14(a)(3) of the 1940 Act (15 U.S.C. 80a-14(a)(3)).
The Trust hereby undertakes to call a meeting of the shareholders for the purpose of voting upon the question of removal of any Trustee when requested in writing to do so by the holders of at least 10% of the Trust's outstanding shares of common stock and, in connection with such meeting, to comply with the provisions of Section 16(c) of the 1940 Act relating to shareholder communications.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant has duly caused this Amendment No. 2 to Registrant's Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Boston and State of Massachusetts on the 5th day of November 1998.
THE SELECT SECTOR SPDR(R) TRUST
By /s/ Howard Fairweather
-----------------------
Howard H. Fairweather
President
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Pursuant to the requirements of the Securities Act of 1933, this Amendment No. 2 to Registrant's Registration Statement has been signed below by the following person in the capacities and on the date indicated.
SIGNATURE TITLE DATE
1. Principal Executive Officer
---------------------------
/s/ Howard Fairweather President and November 5, 1998
--------------------------
Howard H. Fairweather Secretary
2. Principal Financial Officer
---------------------------
E. Davis Hawkes, Jr.* Treasurer and November 4, 1998
Assistant Secretary
3. Majority of Trustees
---------------------------
John W. English* Trustee November 4, 1998
George R. Gaspari* Trustee November 4, 1998
*By: /s/ Stuart M. Strauss
---------------------
Stuart M. Strauss, Esq.
Attorney-in-Fact
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Power of Attorney Dated: October 26, 1998
SIGNATURE TITLE DATE
Burton G. Malkiel* Trustee November 4, 1998
Ernest J. Scalberg* Trustee November 4, 1998
R. Charles Tschampion* Trustee November 4, 1998
Cheryl Burgermeister* Trustee November 4, 1998
*By: /s/ Stuart M. Strauss
---------------------
Stuart M. Strauss, Esq.
Attorney-in-Fact
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Power of Attorney Dated: October 26, 1998
Exhibit No. Description
----------- -----------
(1) Amended and Restated Declaration of Trust.
(2) By-Laws of the Trust.
(4) Form of global certificate evidencing shares
of the Beneficial Interest, $.001 par value,
of each Select Sector SPDR Fund.
(5) Investment Advisory Agreement between the
Trust and State Street Bank and Trust Company.
(6)(a) Distribution Agreement between the Trust
and ALPS Mutual Funds Services, Inc.
(6)(b) Form of Participant Agreement.
(6)(c) Form of Investor Services Agreement.
(6)(d) Forms of Soliciting Dealer Agreement.
(8)(a) Custodian Agreement between the Trust and
State Street Bank and Trust Company.
(9)(a) Administration Agreement between the Trust
and State Street Bank and Trust Company.
(9)(b) Transfer Agency Services Agreement between
the Trust and State Street Bank and Trust Company.
(9)(d) Form of DTC Letter of Representation.
(10) Opinion of Gordon Altman Butowsky Weitzen
Shalov & Wein.
(11) Consent of Independent Accountants.
(13) Form of Subscription Agreement(s) between
the Trust and ALPS Mutual Funds Services, Inc.
(15) Form of 12b-1 Plan.
Other Powers of Attorney.
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EXHIBIT 1
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
THE SELECT SECTOR SPDR(R) TRUST
THE AMENDED AND RESTATED DECLARATION OF TRUST of The Select Sector SPDR(R) Trust, made the 23rd day of October, 1998 by the signatory hereto, as trustee (such person, so long as he shall continue in office in accordance with the terms of this Declaration of Trust, and all other persons who at the time in question have been duly elected or appointed as trustees in accordance with the provisions of this Declaration of Trust and are then in office, being hereinafter called the "Trustees")
WITNESSETH:
WHEREAS, it is the intention that the Trust constitute a trust fund under
the laws of Massachusetts for the investment and reinvestment of funds
contributed thereto; and
WHEREAS, it is provided that the beneficial interest in the trust assets
be divided into transferable shares of beneficial interest as hereinafter
provided; and
WHEREAS, the Trustees intend, by the execution of this Amended and
Restated Declaration of Trust within the Commonwealth of Massachusetts, to
ensure that the provisions of Section 11-2 of this Amended and Restated
Declaration of Trust be given full force and effect for all purposes;
NOW, THEREFORE, the Trustees hereby declare that they will hold in trust,
all money and property contributed to the trust fund to manage and dispose of
the same for the benefit of the holders from time to time of the shares of
beneficial interest issued hereunder and subject to the provisions hereof, to
wit:
ARTICLE I
NAME AND DEFINITIONS
SECTION 1.1 NAME. The name of the trust created hereby is the "Sector SPDR(R) Trust," and so far as may be practicable the Trustees shall conduct the Trust's activities, execute all documents and sue or be sued under that name, which name (and the word "Trust" wherever herein used) shall refer to the Trustees as Trustees, and not as individuals, or personally, and shall not refer to the officers, agents, employees or Shareholders of the Trust. Should the Trustees determine that the use of such name is not advisable, they may use such other name for the Trust as they deem proper and the Trust may hold its property and conduct its activities under such other name.
SECTION 1.2 DEFINITIONS. Wherever they are used herein, the following terms have the following respective meanings:
(a) "Bylaws" means the Bylaws referred to in Section 3.9 hereof, as from time to time amended.
(b) The terms "Commission," "Affiliated Person" and "Interested Person"
have the meanings given them in the 1940 Act.
(c) "Declaration" means this Declaration of Trust as amended from time to
time. Reference in this Declaration of Trust to "Declaration," "hereof,"
"herein," and "hereunder" shall be deemed to refer to this Declaration rather
than the article or section in which such words appear.
(d) "Distributor" means the party, other than the Trust, to a contract
described in Section 4.3 hereof.
(e) "Fundamental Policies" shall mean the investment policies and
restrictions set forth in the Prospectus and Statement of Additional Information
and designated as fundamental policies therein.
(f) "Investment Adviser" means any party other than the Trust, to an
investment advisory contract described in Section 4.1 hereof.
(g) "Majority Shareholder Vote" means the vote of the holders of a
majority of Shares, which shall consist of: (i) a majority of Shares represented
in person or by proxy and entitled to vote at a meeting of Shareholders at which
a quorum, as determined in accordance with the Bylaws, is present; (ii) a
majority of Shares issued and outstanding and entitled to vote when action is
taken by written consent of Shareholders; and (iii) a "majority of the
outstanding voting securities," as the phrase is defined in the 1940 Act, when
any action is required by the 1940 Act by such majority as so defined.
(h) "Manager" means any party, other than the Trust, to a management
contract described in Section 4.1 hereof.
(i) "1940 Act" means the Investment Company Act of 1940 and the rules and
regulations thereunder as amended from time to time.
(j) "Person" means and includes individuals, corporations, partnerships,
trusts, associations, joint ventures and other entities, whether or not legal
entities, and governments and agencies and political subdivisions thereof.
(k) "Prospectus" means the Prospectus and Statement of Additional
Information constituting parts of the Registration Statement of the Trust under
the Securities Act of 1933 as such Prospectus and Statement of Additional
Information may be amended or supplemented and filed with the Commission from
time to time.
(l) "Series" means one of the separately managed components of the Trust
(or, if the Trust shall have only one such component, then that one) as set
forth in Section 6.1 hereof or as may be established and designated from time to
time by the Trustees pursuant to that section.
(m) "Shareholder" means a record owner of outstanding Shares.
(n) "Shares" means the units of interest into which the beneficial
interest in the Trust shall be divided from time to time, including the shares
of any and all series or classes which may be established by the Trustees, and
includes fractions of Shares as well as whole Shares.
(o) "Transfer Agent" means the party, other than the Trust, to the
contract described in Section 4.4 hereof.
(p) "Trust" means the Sector SPDR(R) Trust.
(q) "Trust Property" means any and all property real or personal,
tangible or intangible, which is owned or held by or for the account of the
Trust or the Trustees.
(r) "Trustees" means the persons who have signed the Declaration, so long
as they shall continue in office in accordance with the terms hereof, and all
other persons who may from time to time be duly elected or appointed, qualified
and serving as Trustees in accordance with the provisions hereof, and reference
herein to a Trustee or the Trustees shall refer to such person or persons in
their capacity as trustees hereunder.
ARTICLE II
TRUSTEES
SECTION 2.1 NUMBER OF TRUSTEES. The Trustees serving as such, whether named above or hereafter becoming Trustees, may increase or decrease the number of Trustees to a number other than the number theretofore determined.
SECTION 2.2 ELECTION AND TERM. Trustees may become such by election by a Majority Shareholder Vote or by the Trustees then in office pursuant to Section 2.4 hereof. The Trustees shall have the power to set and alter the terms of office of the Trustees, and they may at any time lengthen or lessen their own terms or make their terms of unlimited duration, subject to the resignation and removal provisions of Section 2.3 hereof. The Trustees may adopt Bylaws that divide the Trustees into classes and proscribe the tenure of office of the several classes. Subject to Section 16(a) of the 1940 Act, the Trustees may elect their own successors and may, pursuant to Section 2.4 hereof, appoint Trustees to fill vacancies. The Trustees shall adopt Bylaws not inconsistent with this
Declaration or any provision of law to provide for election of Trustees by Shareholders at such time or times as the Trustees shall determine to be necessary or advisable. The provisions of this Section 2.2 may not be amended except by a vote of three-fourths of the Shares outstanding and entitled to vote thereupon.
SECTION 2.3 RESIGNATION AND REMOVAL. Any Trustee may resign his trust
(without need for prior or subsequent accounting) by an instrument in writing
signed by him and delivered to the other Trustees and such resignation shall be
effective upon such delivery, or at a later date according to the terms of the
instrument. Any of the Trustees may be removed (provided the aggregate number of
Trustees after such removal shall not be less than the number required by
Section 2.1 hereof) by the action of two-thirds of the remaining Trustees or by
the action of the Shareholders of record of not less than three-fourths of the
Shares outstanding (for purposes of determining the circumstances and procedures
under which such removal by the Shareholders may take place, the provisions of
Section 16(c) of the 1940 Act shall be applicable to the same extent as if the
Trust were subject to the provisions of that Section). Upon the resignation or
removal of a Trustee, or his otherwise ceasing to be a Trustee, he shall execute
and deliver such documents as the remaining Trustees shall require for the
purpose of conveying to the Trust or the remaining Trustees any Trust Property
held in the name of the resigning or removed Trustee. Upon the incapacity or
death of any Trustee, his legal representative shall execute and deliver on his
behalf such documents as the remaining Trustees shall require as provided in the
preceding sentence. The provisions of this Section 2.3 may not be amended except
by a vote of three-fourths of the Shares outstanding and entitled to vote
thereupon.
SECTION 2.4 VACANCIES. The term of office of a Trustee shall terminate and
a vacancy shall occur in the event of the death, resignation, removal,
bankruptcy, adjudicated incompetence or other incapacity to perform the duties
of the office of a Trustee. No such vacancy shall operate to annul the
Declaration or to revoke any existing agency created pursuant to the terms of
the Declaration. In the case of an existing vacancy existing by reason of an
increase in the number of Trustees, subject to the provisions of Section 16(a)
of the 1940 Act, the remaining Trustees or, prior to the public offering of
Shares of the Trust, if only one Trustee shall then remain in office, the
remaining Trustee, shall fill such vacancy by the appointment of such other
person as they or he, in their or his discretion, shall see fit, made by a
written instrument signed by a majority of the remaining Trustees or by the
remaining Trustee, as the case may be. Any such appointment shall not become
effective, however, until the person named in the written instrument of
appointment shall have accepted in writing such appointment and agreed in
writing to be bound by the terms of the Declaration. An appointment of a Trustee
may be made in anticipation of a vacancy to occur at a later date by reason of
retirement, resignation or increase in the number of Trustees, provided that
such appointment shall not become effective prior to such retirement,
resignation or increase in the number of Trustees. Whenever a vacancy in the
number of Trustees shall occur, until such vacancy is filled as provided in this
Section 2.4, the Trustees in office, regardless of their number, shall have all
the powers granted to the Trustees and shall discharge all the duties imposed
upon the Trustees by the Declaration. A written instrument certifying the
existence of such vacancy signed by a majority of the Trustees shall be
conclusive evidence of the existence of such vacancy.
SECTION 2.5 DELEGATION OF POWER TO OTHER TRUSTEES. Any Trustee may, by power of attorney, delegate his power for a period not exceeding six (6) months at any one time to any other Trustee or Trustees; provided that in no case shall less than two (2) Trustees personally exercise the powers granted to the Trustees under the Declaration except as herein otherwise expressly provided.
ARTICLE III
POWERS OF TRUSTEES
SECTION 3.1 GENERAL. The Trustees shall have exclusive and absolute control over the Trust Property and over the business of the Trust to the same extent as if the Trustees were the sole owners of the Trust Property
and business in their own right, but with such powers of delegation as may be permitted by the Declaration. The Trustees shall have power to conduct the business of the Trust and carry on its operations in any and all of its branches and maintain offices both within and without The Commonwealth of Massachusetts, in any and all states of the United States of America, in the District of Columbia, and in any and all commonwealths, territories, dependencies, colonies, possessions, agencies or instrumentalities wheresoever in the world they may be located as they deem necessary, proper or desirable in order to promote the interests of the Trust although such things are not herein specifically mentioned. Any determination as to what is in the interests of the Trust made by the Trustees in good faith shall be conclusive. In construing the provisions of the Declaration, the presumption shall be in favor of a grant of power to the Trustees.
The enumeration of any specific power herein shall not be construed as limiting the aforesaid power. Such powers of the Trustees may be exercised without order of or resort to any court.
SECTION 3.2 INVESTMENTS. The Trustees shall have the power to:
(a) conduct, operate and carry on the business of an investment company;
(b) subscribe for, invest in, reinvest in, purchase or otherwise acquire,
hold, pledge, sell, assign, transfer, exchange, distribute, lend or otherwise
deal in or dispose of negotiable or nonnegotiable instruments, obligations,
evidences of indebtedness, certificates of deposit or indebtedness, commercial
paper, repurchase agreements, reverse repurchase agreements, options,
commodities, commodity futures contracts and related options, currencies,
currency futures and forward contracts, and other securities, investment
contracts and other instruments of any kind, including, without limitation,
those issued, guaranteed or sponsored by any and all Persons including, without
limitation, states, territories and possessions of the United States, the
District of Columbia and any of the political subdivisions, agencies or
instrumentalities thereof, and by the United States Government or its agencies
or instrumentalities, foreign or international instrumentalities, or by any bank
or savings institution, or by any corporation or organization organized under
the laws of the United States or of any state, territory or possession thereof,
and of corporations or organizations organized under foreign laws, or in "when
issued" contracts for any such securities, or retain Trust assets in cash and
from time to time change the investments of the assets of the Trust; and to
exercise any and all rights, powers and privileges of ownership or interest in
respect of any and all such investments of every kind and description,
including, without limitation, the right to consent and otherwise act with
respect thereto, with power to designate one or more persons, firms,
associations or corporations to exercise any of said rights, powers and
privileges in respect of any of said instruments; and the Trustees shall be
deemed to have the foregoing powers with respect to any additional securities in
which the Trust may invest should the Fundamental Policies be amended.
The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Trust, nor shall the Trustees be limited
by any law limiting the investments which may be made by fiduciaries.
SECTION 3.3 LEGAL TITLE. Legal title to all the Trust Property shall be vested in the Trustees as joint tenants except that the Trustees shall have power to cause legal title to any Trust Property to be held by or in the name of one or more of the Trustees, or in the name of the Trust, or in the name of any other Person as nominee, on such terms as the Trustees may determine, provided that the interest of the Trust therein is appropriately protected. The right, title and interest of the Trustees in the Trust Property shall vest automatically in each Person who may hereafter become a Trustee. Upon the resignation, removal or death of a Trustee he shall automatically cease to have any right, title or interest in any of the Trust Property, and the right, title and interest of such Trustee in the Trust Property shall vest automatically in the remaining Trustees. Such vesting and cessation of title shall be effective whether or not conveyancing documents have been executed and delivered.
SECTION 3.4 ISSUANCE AND REPURCHASE OF SECURITIES. The Trustees shall have the power to issue, sell, repurchase, redeem, retire, cancel, acquire, hold, resell, reissue, dispose of, transfer, and otherwise deal in Shares and, subject to the provisions set forth in Articles VII, VIII and IX and Section 6.9 hereof, to apply to any such
repurchase, redemption, retirement, cancellation or acquisition of Shares any funds or property of the Trust, whether capital or surplus or otherwise, to the full extent now or hereafter permitted by the laws of The Commonwealth of Massachusetts governing business corporations.
SECTION 3.5 BORROWING MONEY; LENDING TRUST ASSETS. Subject to the Fundamental Policies, the Trustees shall have power to borrow money or otherwise obtain credit and to secure the same by mortgaging, pledging or otherwise subjecting as security the assets of the Trust, to endorse, guarantee, or undertake the performance of any obligation, contract or engagement of any other Person and to lend Trust assets.
SECTION 3.6 DELEGATION; COMMITTEES. The Trustees shall have power, consistent with their continuing exclusive authority over the management of the Trust and the Trust Property, to delegate from time to time to such of their number or to officers, employees or agents of the Trust the doing of such things and the execution of such instruments either in the name of the Trust or the names of the Trustees or otherwise as the Trustees may deem expedient.
SECTION 3.7 COLLECTION AND PAYMENT. Subject to Section 6.9 hereof, the Trustees shall have power to collect all property due to the Trust; to pay all claims, including taxes, against the Trust Property; to prosecute, defend, compromise or abandon any claims relating to the Trust Property; to foreclose any security interest securing any obligations, by virtue of which any property is owed to the Trust; and to enter into releases, agreements and other instruments.
SECTION 3.8 EXPENSES. Subject to Section 6.9 hereof, the Trustees shall have the power to incur and pay any expenses which in the opinion of the Trustees are necessary or incidental to carry out any of the purposes of the Declaration, and to pay reasonable compensation from the funds of the Trust to themselves as Trustees. The Trustees shall fix the compensation of all officers, employees and Trustees.
SECTION 3.9 MANNER OF ACTING; BYLAWS. Except as otherwise provided herein or in the Bylaws or by any provision of law, any action to be taken by the Trustees may be taken by a majority of the Trustees present at a meeting of Trustees (a quorum being present), including any meeting held by means of a conference telephone circuit or similar communications equipment by means of which all persons participating in the meeting can hear each other, or by written consents of all the Trustees. The Trustees may adopt Bylaws not inconsistent with this Declaration to provide for the conduct of the business of the Trust and may amend or repeal such Bylaws to the extent such power is not reserved to the Shareholders.
SECTION 3.10 MISCELLANEOUS POWERS. The Trustees shall have the power to:
(a) employ or contract with such Persons as the Trustees may deem desirable for
the transaction of the business of the Trust or any Series thereof; (b) enter
into joint ventures, partnerships and any other combinations or associations;
(c) remove Trustees or fill vacancies in or add to their number, elect and
remove such officers and appoint and terminate such agents or employees as they
consider appropriate, and appoint from their own number, and terminate, any one
or more committees which may exercise some or all of the power and authority of
the Trustees as the Trustees may determine; (d) purchase and pay for out of
Trust Property or the property of the appropriate Series of the Trust, insurance
policies insuring the Shareholders, Trustees, officers, employees, agents,
investment advisers, distributors, selected dealers or independent contractors
of the Trust against all claims arising by reason of holding any such position
or by reason of any action taken or omitted to be taken by any such Person in
such capacity, whether or not constituting negligence, or whether or not the
Trust would have the power to indemnify such Person against such liability; (e)
establish pension, profit-sharing, Share purchase, and other retirement,
incentive and benefit plans for any Trustees, officers, employees and agents of
the Trust; (f) indemnify, to the extent permitted by law, any person with whom
the Trust or any Series thereof has dealings, including any Investment Adviser,
Distributor, Transfer Agent and selected dealers, to such extent as the Trustees
shall determine;
(g) guarantee indebtedness or contractual obligations of others; (h) determine and change the fiscal year of the Trust or any Series thereof and the method by which its accounts shall be kept; and (i) adopt a seal for the Trust but the absence of such seal shall not impair the validity of any instrument executed on behalf of the Trust.
SECTION 3.11 PRINCIPAL TRANSACTIONS. Except in transactions permitted by the 1940 Act or any rule or regulation thereunder, or any order of exemption issued by the Commission, or effected to implement the provisions of any agreement to which the Trust is a party, the Trustees shall not, on behalf of the Trust, buy any securities (other than Shares) from or sell any securities (other than Shares) to, or lend any assets of the Trust or any Series thereof to, any Trustee or officer of the Trust or any firm of which any such Trustee or officer is a member acting as principal or have any such dealings with any Investment Adviser, Distributor or Transfer Agent or with any Affiliated Person of such Person; but the Trust or any Series thereof may employ any such Person, or firm or company in which such Person is an Interested Person, as broker, legal counsel, registrar, transfer agent, dividend disbursing agent or custodian upon customary terms.
SECTION 3.12 LITIGATION. The Trustees shall have the power to engage in and to prosecute, defend, compromise, abandon, or adjust, by arbitration, or otherwise, any actions, suits, proceedings, disputes, claims, and demands relating to the Trust, and out of the assets of the Trust or any Series thereof to pay or to satisfy any debts, claims or expenses incurred in connection therewith, including those of litigation, and such power shall include, without limitation, the power of the Trustees or any appropriate committee thereof, in the exercise of their or its good faith business judgment, to dismiss any action, suit, proceeding, dispute, claim, or demand, derivative or otherwise, brought by any person, including a Shareholder in its own name or the name of the Trust, whether or not the Trust or any of the Trustees may be named individually therein or the subject matter arises by reason of business for or on behalf of the Trust.
ARTICLE IV
INVESTMENT ADVISER, MANAGER, DISTRIBUTOR, CUSTODIAN
AND TRANSFER AGENT
SECTION 4.1 INVESTMENT ADVISER AND MANAGER. Subject to applicable provisions of the 1940 Act, the Trustees may in their discretion from time to time enter into one or more investment advisory and management contracts or, if the Trustees establish multiple Series, separate investment advisory and management contracts with respect to one or more Series whereby the other party or parties to any such contracts shall undertake to furnish the Trust or such Series such management, investment advisory, administration, accounting, legal, statistical and research facilities and services, promotional or marketing activities, and such other facilities and services, if any, as the Trustees shall from time to time consider desirable and all upon such terms and conditions as the Trustees may in their discretion determine. Notwithstanding any provisions of the Declaration, the Trustees may authorize the Investment Advisers, or any of them, under any such contracts (subject to such general or specific instructions as the Trustees may from time to time adopt) to effect purchases, sales, loans or exchanges of portfolio securities and other investments of the Trust on behalf of the Trustees or may authorize any officer, employee or Trustee to effect such purchases, sales, loans or exchanges pursuant to recommendations of such Investment Advisers, or any of them (and all without further action by the Trustees). Any such purchases, sales, loans and exchanges shall be deemed to have been authorized by all of the Trustees. The Trustees may, in their sole discretion, call a meeting of Shareholders in order to submit to a vote of Shareholders at such meeting the approval or continuance of any such investment advisory or management contract. If the Shareholders of any one or more of the Series of the Trust should fail to approve any such investment advisory or management contract, the Investment Adviser may nonetheless serve as Investment Adviser with respect to any Series whose Shareholders approve such contract.
SECTION 4.2 ADMINISTRATIVE SERVICES. The Trustees may in their discretion from time to time contract
for administrative personnel and services whereby the other party shall agree to provide the Trustees or the Trust administrative personnel and services to operate the Trust on a daily or other basis, on such terms and conditions as the Trustees may in their discretion determine. Such services may be provided by one or more persons or entities.
SECTION 4.3 DISTRIBUTOR. The Trustees may in their discretion from time to time enter into one or more contracts, providing for the sale of Shares to net the Trust or the applicable Series of the Trust not less than the net asset value per Share (as described in Article VIII hereof) and pursuant to which the Trust may either agree to sell the Shares to the other parties to the contracts, or any of them, or appoint any such other party its sales agent for such Shares. In either case, any such contract shall be on such terms and conditions as the Trustees may in their discretion determine not inconsistent with the provisions of this Article IV including, without limitation, the provision for the repurchase or sale of shares of the Trust by such other party as principal or as agent of the Trust.
SECTION 4.4 TRANSFER AGENT. The Trustees may in their discretion from time to time enter into a transfer agency and shareholder service contract whereby the other party to such contract shall undertake to furnish transfer agency and shareholder services to the Trust. The contract shall have such terms and conditions as the Trustees may in their discretion determine not inconsistent with the Declaration. Such services may be provided by one or more Persons.
SECTION 4.5 CUSTODIAN. The Trustees may appoint or otherwise engage one or more banks, broker-dealers or trust companies, to serve as Custodian with authority as its agent, but subject to applicable requirements of the 1940 Act and to such restrictions, limitations and other requirements, if any, as may be contained in the Bylaws of the Trust.
SECTION 4.6 PARTIES TO CONTRACT. Any contract of the character described in Sections 4.1, 4.2, 4.3, 4.4 or 4.5 of this Article IV and any other contract may be entered into with any Person, although one or more of the Trustees or officers of the Trust may be an officer, director, trustee, shareholder, or member of such other party to the contract, and no such contract shall be invalidated or rendered voidable by reason of the existence of any such relationship; nor shall any Person holding such relationship be liable merely by reason of such relationship for any loss or expense to the Trust under or by reason of said contract or accountable for any profit realized directly or indirectly therefrom, provided that the contract when entered into was not inconsistent with the provisions of this Article IV. The same Person may be the other party to any contracts entered into pursuant to Sections 4.1, 4.2, 4.3, 4.4 or 4.5 above or otherwise, and any individual may be financially interested or otherwise affiliated with Persons who are parties to any or all of the contracts mentioned in this Section 4.6.
ARTICLE V
LIMITATIONS OF LIABILITIES OF SHAREHOLDERS,
TRUSTEES AND OTHERS
SECTION 5.1 NO PERSONAL LIABILITY OF SHAREHOLDERS, TRUSTEES, ETC. No Shareholder shall be subject to any personal liability whatsoever to any Person in connection with Trust Property or the acts, obligations or affairs of the Trust. The Trust shall indemnify out of the property of the Trust and hold each Shareholder harmless from and against all claims and liabilities, to which such Shareholder may become subject by reason of his being or having been a Shareholder, and shall reimburse such Shareholder for all legal and other expenses reasonably incurred by him in connection with any such claim or liability; provided that, in the event the Trust shall consist of more than one Series, Shareholders of a particular Series who are faced with claims or liabilities solely by reason of their status as Shareholders of that Series shall be limited to the assets of that Series for recovery of such loss and related expenses. The rights accruing to a Shareholder under this Section 5.1 shall not exclude any other right to which such Shareholder may be lawfully entitled, nor shall anything herein contained
restrict the right of the Trust to indemnify or reimburse a Shareholder in any appropriate situation even though not specifically provided herein.
SECTION 5.2 NONLIABILITY OF TRUSTEES, ETC. No Trustee, officer, employee or agent of the Trust shall be liable to the Trust, its Shareholders, or to any Shareholder, Trustee, officer, employee or agent thereof for any action or failure to act (including, without limitation, the failure to compel in any way any former or acting Trustee to redress any breach of trust) except for his own bad faith, willful misfeasance, gross negligence or reckless disregard of his duties, and all such Persons shall look solely to the Trust Property, or to the Property of one or more specific Series of the Trust if the claim arises from the conduct of such Trustee, officer, employee or agent with respect to only such Series, for satisfaction of claims of any nature arising in connection with the affairs of the Trust.
SECTION 5.3 INDEMNIFICATION. (a) The Trustees shall provide for
indemnification by the Trust, or by one or more Series thereof if the claim
arises from his or her conduct with respect to only such Series, of any person
who is, or has been, a Trustee, officer, employee or agent of the Trust against
all liability and against all expenses reasonably incurred or paid by him in
connection with any claim, action, suit or proceeding in which he becomes
involved as a party or otherwise by virtue of his being or having been a
Trustee, officer, employee or agent and against amounts paid or incurred by him
in the settlement thereof, in such manner as the Trustees may provide from time
to time in the Bylaws.
(b) The word "claim," "action," "suit," or "proceeding" shall apply to all
claims, actions, suits and proceedings (civil, criminal, or other, including
appeals), actual or threatened; and the words "liability" and "expenses" shall
include, without limitation, attorneys' fees, costs, judgments, amounts paid in
settlement, fines, penalties and other liabilities.
SECTION 5.4 NO BOND REQUIRED OF TRUSTEES. No Trustee shall be obligated to give any bond or other security for the performance of any of his duties hereunder.
SECTION 5.5 NO DUTY OF INVESTIGATION; NOTICE IN TRUST INSTRUMENTS, ETC. No purchaser, lender, transfer agent or other Person dealing with the Trustees or any officer, employee or agent of the Trust or a Series thereof shall be bound to make any inquiry concerning the validity of any transaction purporting to be made by the Trustees or by said officer, employee or agent or be liable for the application of money or property paid, loaned or delivered to or on the order of the Trustees or of said officer, employee or agent. Every obligation, contract, instrument, certificate, Share, other security of the Trust or a Series thereof or undertaking, and every other act or thing whatsoever executed in connection with the Trust shall be conclusively presumed to have been executed or done by the executors thereof only in their capacity as officers, employees or agents of the Trust or a Series thereof. Every written obligation, contract, instrument, certificate, Share, other security of the Trust or undertaking made or issued by the Trustees shall recite that the same is executed or made by them not individually, but as Trustees under the Declaration, and that the obligations of the Trust or a Series thereof under any such instrument are not binding upon any of the Trustees or Shareholders, individually, but bind only the Trust Estate (or, in the event the Trust shall consist of more than one Series, in the case of any such obligation which relates to a specific Series, only the Series which is a party thereto), and may contain any further recital which they or he may deem appropriate, but the omission of such recital shall not affect the validity of such obligation, contract instrument, certificate, Share, security or undertaking and shall not operate to bind the Trustees or Shareholders individually. The Trustees shall at all times maintain insurance for the protection of the Trust Property, its Shareholders, Trustees, officers, employees and agents in such amount as the Trustees shall deem adequate to cover possible tort liability, and such other insurance as the Trustees in their sole judgment shall deem advisable.
SECTION 5.6 RELIANCE ON EXPERTS, ETC. Each Trustee and officer or employee of the Trust shall, in the performance of his duties, be fully and completely justified and protected with regard to any act or any failure to
act resulting from reliance in good faith upon the books of account or other records of the Trust, upon an opinion of counsel, or upon reports made to the Trust by any of its officers or employees or by any Investment Adviser, Distributor, Transfer Agent, selected dealers, accountants, appraisers or other experts or consultants selected with reasonable care by the Trustees, officers or employees of the Trust, regardless of whether such counsel or expert may also be a Trustee.
ARTICLE VI
SHARES OF BENEFICIAL INTEREST
SECTION 6.1 BENEFICIAL INTEREST. The interest of the beneficiaries hereunder shall be divided into transferable shares of beneficial interest of $.01 par value. The number of such shares of beneficial interest authorized hereunder is unlimited. The Trustees shall have the authority to establish and designate one or more Series or classes of shares. Each share of any Series shall represent an equal proportionate share in the assets of that Series with each other Share in that Series. The Trustees may divide or combine the shares of any Series into a greater or lesser number of shares in that Series without thereby changing the proportionate interests in the assets of that Series. Subject to the provisions of Section 6.9 hereof, the Trustees may also authorize the creation of additional series of shares (the proceeds of which may be invested in separate, independently managed portfolios) and additional classes of shares within any series. All Shares issued hereunder including, without limitation, Shares issued in connection with a dividend in Shares or a split in Shares, shall be fully paid and nonassessable.
SECTION 6.2 RIGHTS OF SHAREHOLDERS. The ownership of the Trust Property of every description and the right to conduct any business herein before described are vested exclusively in the Trustees, and the Shareholders shall have no interest therein other than the beneficial interest conferred by their Shares, and they shall have no right to call for any partition of division of any property, profits, rights or interests of the Trust nor can they be called upon to assume any losses of the Trust or suffer an assessment of any kind by virtue of their ownership of Shares. The Shares shall be personal property giving only the rights in the Declaration specifically set forth. The Shares shall not entitle the holder to preference, preemptive, appraisal, conversion or exchange rights, except as the Trustees may determine with respect to any series of Shares.
SECTION 6.3 TRUST ONLY. It is the intention of the Trustees to create only the relationship of Trustee and beneficiary between the Trustees and each Shareholder from time to time. It is not the intention of the Trustees to create a general partnership, limited partnership, joint stock association, corporation, bailment or any form of legal relationship other than a trust. Nothing in the Declaration shall be construed to make the Shareholders, either by themselves or with the Trustees, partners or members of a joint stock association.
SECTION 6.4 ISSUANCE OF SHARES. The Trustees, in their discretion may, from time to time without vote of the Shareholders, issue Shares of any Series, in addition to the then issued and outstanding Shares and Shares held in the treasury, to such party or parties and for such amount and type of consideration, including cash or property, at such time or times and on such terms as the Trustees may deem best, and may in such manner acquire other assets (including the acquisition of assets subject to, and in connection with the assumption of liabilities) and businesses. In connection with any issuance of Shares, the Trustees may issue fractional Shares. The Trustees may from time to time divide or combine the Shares of any Series into a greater or lesser number without thereby changing the proportionate beneficial interests in that Series. Contributions to the Trust may be accepted for, and Shares shall be redeemed as, whole Shares and/or fractions of a Share as described in the Prospectus.
SECTION 6.5 REGISTER OF SHARES. A register shall be kept in respect of each Series at the principal office of the Trust or at an office of the Transfer Agent which shall contain the names and addresses of the Shareholders
and the number of Shares of each Series held by them respectively and a record of all transfers thereof. Such register may be in written form or any other form capable of being converted into written form within a reasonable time for visual inspection. Such register shall be conclusive as to who are the holders of the Shares and who shall be entitled to receive dividends or distributions or otherwise to exercise or enjoy the rights of Shareholders. No Shareholder shall be entitled to receive payment of any dividend or distribution, nor to have notice given to him as herein or in the Bylaws provided, until he has given his address to the Transfer Agent or such other officer or agent of the Trustees as shall keep the said register for entry thereon. It is not contemplated that certificates will be issued for the Shares; however, the Trustees, in their discretion, may authorize the issuance of Share certificates and promulgate appropriate rules and regulations as to their use.
SECTION 6.6 TRANSFER OF SHARES. Shares shall be transferable on the records of the Trust only by the record holder or by his agent thereunto duly authorized in writing, upon delivery to the Trustees or the Transfer Agent of a duly executed instrument of transfer, together with such evidence of the genuineness of each such execution and authorization and of other matters as may reasonably be required. Upon such delivery the transfer shall be recorded on the register of the Trust. Until such record is made, the "shareholder of record" shall be deemed to be the holder of such Shares for all purposes hereunder and neither the Trustees nor any Transfer Agent or registrar nor any officer, employee or agent of the Trust shall be affected by any notice of the proposed transfer. Any person becoming entitled to any Shares in consequence of the death, bankruptcy, or incompetence of any Shareholder, or otherwise by operation of law, shall be recorded on the register of Shares as the holder of such Shares upon production of the proper evidence thereof to the Trustees or the Transfer Agent, but until such record is made, the Shareholder of record shall be deemed to be the holder of such Shares for all purposes hereunder and neither the Trustees nor any Transfer Agent or registrar, nor any officer or agent of the Trust shall be affected by any notice of such death, bankruptcy or incompetence, or other operation of law, except as may otherwise be provided by the laws of the Commonwealth of Massachusetts.
SECTION 6.7 NOTICES. Any and all notices to which any Shareholder may be entitled and any and all communications shall be deemed duly served or given if mailed, postage prepaid, addressed to any Shareholder of record at his last known address as recorded on the register of the Trust. Annual reports and proxy statements need not be sent to a shareholder if: (i) an annual report and proxy statement for two consecutive annual meetings, or (ii) all, and at least two, checks (if sent by first class mail) in payment of dividends or interest and shares during a twelve month period have been mailed to such shareholder's address and have been returned undelivered. However, delivery of such annual reports and proxy statements shall resume once a Shareholder's current address is determined.
SECTION 6.8 VOTING POWERS. The Shareholders shall have power to vote only
(i) for the election of Trustees as provided in Section 2.2 hereof, (ii) for the
removal of Trustees as provided in Section 2.3 hereof, (iii) with respect to
termination of the Trust as provided in Section 9.2, (iv) with respect to any
amendment of the Declaration to the extent and as provided in Section 9.3, (v)
with respect to any merger, consolidation or sale of assets as provided in
Section 9.4, (vi) with respect to incorporation of the Trust to the extent and
as provided in Section 9.5, (vii) to the same extent as the stockholders of a
Massachusetts business corporation as to whether or not a court action,
proceeding or claim should or should not be brought or maintained derivatively
or as a class action on behalf of the Trust or the Shareholders (provided that
Shareholders of a Series are not entitled to vote in connection with the
bringing of a derivative or class action with respect to any matter which only
affects another Series or its Shareholders), and (viii) with respect to such
additional matters relating to the Trust as may be required by law, the
Declaration, the Bylaws or any registration of the Trust with the Commission (or
any successor agency) or any state, or as and when the Trustees may consider
necessary or desirable. Each whole Share shall be entitled to one vote as to any
matter on which it is entitled to vote and each fractional Share shall be
entitled to a proportionate fractional vote, except that Shares held in the
treasury of the Trust as of the record date, as determined in accordance with
the Bylaws, shall not be voted. On any matter submitted to a vote of
Shareholders, all Shares shall be voted by individual Series except (1) when required by the 1940 Act, Shares shall be voted in the aggregate and not by individual Series; and (2) when the Trustees have determined that the matter affects only the interests of one or more Series, then only the Shareholders of such Series shall be entitled to vote thereon. The Trustees may, in conjunction with the establishment of any further Series or any classes of Shares, establish conditions under which the several series or classes of Shares shall have separate voting rights or no voting rights. There shall be no cumulative voting in the election of Trustees. Until Shares are issued, the Trustees may exercise all rights of Shareholders and may take any action required by law, the Declaration or the Bylaws to be taken by Shareholders. The Bylaws may include further provisions for Shareholders' votes and meetings and related matters.
SECTION 6.9 SERIES OR CLASSES OF SHARES. The following provisions are applicable regarding the Series of Shares of the Trust established in Section 6.1 hereof and shall be applicable if the Trustees shall establish additional Series or shall divide the shares of any Series into two or more classes, also as provided in Section 6.1 hereof, and all provisions relating to the Trust shall apply equally to each Series thereof except as the context requires:
(a) The number of authorized shares and the number of shares of each
Series or of each class that may be issued shall be unlimited. The Trustees may
classify or reclassify any unissued shares or any shares previously issued and
reacquired of any Series or class into one or more Series or one or more classes
that may be established and designated from time to time. The Trustees may hold
as treasury shares (of the same or some other Series or class), reissue for such
consideration and on such terms as they may determine, or cancel any shares of
any Series or any class reacquired by the Trust at their discretion from time to
time.
(b) The power of the Trustees to invest and reinvest the Trust Property
shall be governed by Section 3.2 of this Declaration with respect to any one or
more Series which represents the interests in the assets of the Trust
immediately prior to the establishment of any additional Series and the power of
the Trustees to invest and reinvest assets applicable to any other Series shall
be as set forth in the instrument of the Trustees establishing such series which
is hereinafter described.
(c) All consideration received by the Trust for the issue or sale of
shares of a particular Series or class together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to that Series or class for all purposes, subject only to the
rights of creditors, and shall be so recorded upon the books of account of the
Trust. In the event that there are any assets, income, earnings, profits, and
proceeds thereof, funds, or payments which are not readily identifiable as
belonging to any particular Series or class, the Trustees shall allocate them
among any one or more of the Series or classes established and designated from
time to time in such manner and on such basis as they, in their sole discretion,
deem fair and equitable. Each such allocation by the Trustees shall be
conclusive and binding upon the shareholders of all Series or classes for all
purposes. No holder of Shares of any Series shall have any claim on or right to
any assets allocated or belonging to any other Series.
(d) The assets belonging to each particular Series shall be charged with
the liabilities of the Trust in respect of that Series and all expenses, costs,
charges and reserves attributable to that Series. All expenses and liabilities
incurred or arising in connection with a particular Series, or in connection
with the management thereof, shall be payable solely out of the assets of that
Series and creditors of a particular Series shall be entitled to look solely to
the property of such Series for satisfaction of their claims. Any general
liabilities, expenses, costs, charges or reserves of the Trust which are not
readily identifiable as belonging to any particular Series shall be allocated
and charged by the Trustees to and among any one or more of the series
established and designed from time to time in such manner and on such basis as
the Trustees in their sole discretion deem fair and equitable. Each allocation
of liabilities, expenses, costs, charges and reserves by the Trustees shall be
conclusive and binding upon the holders of all Series for all purposes. The
Trustees shall have full discretion, to the extent not
inconsistent with the 1940 Act, to determine which items shall be treated as
income and which items as capital; and each such determination and allocation
shall be conclusive and binding upon the shareholders.
(e) The power of the Trustees to pay dividends and make distributions
shall be governed by Section 8.2 of this Declaration with respect to any one or
more Series or classes which represents the interests in the assets of the Trust
immediately prior to the establishment of any additional Series or classes. With
respect to any other Series or class, dividends and distributions on shares of a
particular Series or class may be paid with such frequency as the Trustees may
determine, which may be daily or otherwise, pursuant to a standing resolution or
resolutions adopted only once or with such frequency as the Trustees may
determine, to the holders of shares of that Series or class, from such of the
income and capital gains, accrued or realized, from the assets belonging to that
Series or class, as the Trustees may determine, after providing for actual and
accrued liabilities belonging to that Series or class. All dividends and
distributions on shares of a particular Series or class shall be distributed pro
rata to the holders of that Series or class in proportion to the number of
shares of that Series or class held by such holders at the date and time of
record established for the payment of such dividends or distributions.
(f) The Trustees shall have the power to determine the designations,
preferences, privileges, limitations and rights, including voting and dividend
rights, of each class and Series of Shares.
(g) Subject to compliance with the requirements of the 1940 Act, the
Trustees shall have the authority to provide that the holders of Shares of any
Series or class shall have the right to convert or exchange said Shares into
Shares of one or more Series of Shares in accordance with such requirements and
procedures as may be established by the Trustees.
(h) The establishment and designation of any Series or class of shares in
addition to those established in Section 6.1 hereof shall be effective upon the
execution by a majority of the then Trustees of an instrument setting forth such
establishment and designation and the relative rights, preferences, voting
powers, restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption of such Series or class, or as otherwise provided in
such instrument. At any time that there are no shares outstanding of any
particular Series or class previously established and designated, the Trustees
may by an instrument executed by a majority of their number abolish that Series
or class and the establishment and designation thereof. Each instrument referred
to in this paragraph shall have the status of an amendment to this Declaration.
(i) Shareholders of a Series shall not be entitled to participate in a
derivative or class action with respect to any matter which only affects another
Series or its Shareholders.
Each Share of a Series of the Trust shall represent a beneficial interest
in the net assets of such Series. Each holder of Shares of a Series shall be
entitled to receive his pro rata share of distributions of income and capital
gains made with respect to such Series. In the event of the liquidation of a
particular Series, the Shareholders of that Series which has been established
and designated and which is being liquidated shall be entitled to receive, when
and as declared by the Trustees, the excess of the assets belonging to that
Series over the liabilities belonging to that Series. The holders of Shares of
any Series shall not be entitled hereby to any distribution upon liquidation of
any other Series. The assets so distributable to the Shareholders of any Series
shall be distributed among such Shareholders in proportion to the number of
Shares of that Series held by them and recorded on the books of the Trust. The
liquidation of any particular Series in which there are Shares then outstanding
may be authorized by an instrument in writing, without a meeting, signed by a
majority of the Trustees then in office, subject to the approval of a majority
of the outstanding voting securities of that Series, as that phrase is defined
in the 1940 Act.
ARTICLE VII
REDEMPTIONS
SECTION 7.1 REDEMPTIONS. Each Shareholder of a particular Series shall have the right at such times as may be permitted by the Trust to require the Trust to redeem all or any part of his Shares of that Series, upon and subject to the terms and conditions provided in this Article VII, in accordance with and pursuant to procedures or methods prescribed or approved by the Trustees and, in the case of any Series now or hereafter authorized, if
so determined by the Trustees, shall be redeemable only in aggregations of such number of shares and at such times as may be determined by, or determined pursuant to procedures or methods prescribed by or approved by, the Trustees from time to time with respect to such Series. The number of shares comprising an aggregation for purposes of redemption or repurchase so determined from time to time with respect to any Series shall be referred to herein as a "Creation Unit" and collectively, as "Creation Units". The Trustees shall have the unrestricted power to determine from time to time the number of shares constituting a Creation Unit by resolutions adopted at any regular or special meeting of the Trustees. Each holder of a Creation Unit aggregation of a Series, upon request to the Trust accompanied by surrender of the appropriate stock certificate or certificates in proper form for transfer if certificates have been issued to such holder, or in accordance with such other procedures as may from time to time be in effect if certificates have not been issued, shall be entitled to require the Trust to redeem all or any number of such holder's shares standing in the name of such holder on the books of the Trust, but in the case of shares of any Series as to which the Trustees have determined that such shares shall be redeemable in Creation Unit aggregations, only in such Creation Unit aggregations of shares of such Series as the Trustees may determine from time to time in accordance with this Section 7.1. The Trust shall, upon application of any Shareholder or pursuant to authorization from any Shareholder, redeem or repurchase from such Shareholder outstanding shares for an amount per share determined by the Trustees in accordance with any applicable laws and regulations; provided that (i) such amount per share shall not exceed the cash equivalent of the proportionate interest of each share or of any class or Series of shares in the assets of the Trust at the time of the redemption or repurchase and (ii) if so authorized by the Trustees, the Trust may, at any time and from time to time, charge fees for effecting such redemption or repurchase, at such rates as the Trustees may establish, as and to the extent permitted under the 1940 Act and the rules and regulations promulgated thereunder, and may, at any time and from time to time, pursuant to such Act and such rules and regulations, suspend such right of redemption. The procedures for effecting and suspending redemption shall be as set forth in the Prospectus from time to time. Payment may be in cash, securities or a combination thereof, as determined by or pursuant to the direction of the Trustees from time to time.
SECTION 7.2 REDEMPTION AT THE OPTION OF THE TRUST. Each Share of the Trust or any Series of the Trust shall be subject to redemption at the option of the Trust at the redemption price which would be applicable if such Share were then being redeemed by the Shareholder pursuant to Section 7.1: (i) at any time, if the Trustees determine in their sole discretion that failure to so redeem may have materially adverse consequences to the holders of the Shares of the Trust or of any Series, or (ii) upon such other conditions with respect to maintenance of Shareholder accounts of a minimum amount as may from time to time be determined by the Trustees and set forth in the then current Prospectus of the Trust. Upon such redemption the holders of the Shares so redeemed shall have no further right with respect thereto other than to receive payment of such redemption price.
SECTION 7.3 EFFECT OF SUSPENSION OF DETERMINATION OF NET ASSET VALUE. If, pursuant to Section 7.4 hereof, the Trustees shall declare a suspension of the determination of net asset value with respect to Shares of the Trust or of any Series thereof, the rights of Shareholders (including those who shall have applied for redemption pursuant to Section 7.1 hereof but who shall not yet have received payment) to have Shares redeemed and paid for by the Trust or a Series thereof shall be suspended until the termination of such suspension is declared. Any record holder who shall have his redemption right so suspended may, during the period of such suspension, by appropriate written notice of revocation at the office or agency where application was made, revoke any application for redemption not honored and withdraw any certificates on deposit. The redemption price of Shares for which redemption applications have not been revoked shall be the net asset value of such Shares next determined as set forth in Section 8.1 after the termination of such suspension.
SECTION 7.4 SUSPENSION OF RIGHT OF REDEMPTION. The Trust may declare a suspension of the right of redemption or postpone the date of payment or redemption for the whole or any part of any period (i) during which the New York Stock Exchange is closed other than customary weekend and holiday closings, (ii) during
which trading on the New York Stock Exchange is restricted, (iii) during which an emergency exists as a result of which disposal by the Trust or a Series thereof of securities owned by it is not reasonably practicable or it is not reasonably practicable for the Trust or a Series thereof fairly to determine the value of its net assets, or (iv) during any other period when the Commission may, for the protection of security holders of the Trust, by order permit suspension of the rights of redemption or postponement of the date of payment or redemption; provided that applicable rules and regulations of the Commission shall govern as to whether the conditions prescribed in (ii), (iii) or (iv) exist. Such suspension shall take effect at such time as the Trust shall specify but not later than the close of business on the business day next following the declaration of suspension, and thereafter there shall be no right of redemption or payment on redemption until the Trust shall declare the suspension at an end, except that the suspension shall terminate in any event on the first day on which said stock exchange shall have reopened- or the period specified in (ii) or (iii) shall have expired (as to which, in the absence of an official ruling by the Commission, the determination of the Trust shall be conclusive). In the case of a suspension of the right of redemption, a Shareholder may either withdraw his request for redemption or receive payment based on the net asset value existing after the termination of the suspension.
ARTICLE VIII
DETERMINATION OF NET ASSET VALUE,
NET INCOME AND DISTRIBUTIONS
SECTION 8.1 NET ASSET VALUE. The net asset value of each outstanding Share of each Series of the Trust shall be determined on such days and at such time or times as the Trustees may determine. The method of determination of net asset value shall be determined by the Trustees and shall be as set forth in the Prospectus. The power and duty to make the daily calculations may be delegated by the Trustees to any Investment Adviser, Manager, the Custodian, the Transfer Agent or such other person as the Trustees by resolution may determine. The Trustees may suspend the daily determination of net asset value to the extent permitted by the 1940 Act.
SECTION 8.2 DISTRIBUTIONS TO SHAREHOLDERS. The Trustees shall from time to
time distribute ratably among the Shareholders of the Trust or of any Series
such proportion of the net income, earnings, profits, gains, surplus (including
paid-in surplus), capital, or assets of the Trust or of such Series held by the
Trustees as they may deem proper. Such distribution may be made in cash or
property including, without limitation, any type of obligations of the Trust or
of such Series or any assets thereof, and the Trustees may distribute ratably
among the Shareholders of the Trust or of that Series additional Shares issuable
hereunder in such manner, at such times, and on such terms as the Trustees may
deem proper. Such distributions may be among the Shareholders of record
(determined in accordance with the Prospectus) of the Trust or of such Series at
the time of declaring a distribution, or among the Shareholders of record of the
Trust or of such Series at such later date as the Trustees shall determine. The
Trustees may always retain from the net income, earnings, profits or gains of
the Trust or of such Series such amount as they may deem necessary to pay the
debts or expenses of the Trust or of such Series or to meet obligations of the
Trust or of such Series, or as they may deem desirable to use in the conduct of
its affairs or to retain for future requirements or extensions of the business.
The Trustees may adopt and offer to Shareholders of the Trust or of any Series
such dividend reinvestment plans, cash dividend payout plans or related plans as
the Trustees deem appropriate.
Inasmuch as the computation of net income and gains for Federal income tax
purposes may vary from the computation thereof on the books, the above
provisions shall be interpreted to give the Trustees the power in their
discretion to distribute for any fiscal year as ordinary dividends and as
capital gains distributions, respectively, additional amounts sufficient to
enable the Trust to avoid or reduce liability for taxes.
SECTION 8.3 DETERMINATION OF NET INCOME. The Trustees shall have the power to determine the net income of any Series of the Trust and from time to time to distribute such net income ratably among the Shareholders as dividends in cash or additional Shares of such Series issuable hereunder. The determination of
net income and the resultant declaration of dividends shall be as set forth in the Prospectus. The Trustees shall have full discretion to determine whether any cash or property received by any Series of the Trust shall be treated as income or as principal and whether any item of expense shall be charged to the income or the principal account, and their determination made in good faith shall be conclusive upon the Shareholders. In the case of stock dividends received, the Trustees shall have full discretion to determine, in the light of the particular circumstances, how much, if any, of the value thereof shall be treated as income, the balance, if any, to be treated as principal.
SECTION 8.4 POWER TO MODIFY FOREGOING PROCEDURES. Notwithstanding any of
the foregoing provisions of this Article VIII, the Trustees may prescribe, in
their absolute discretion, such other bases and times for determining the per
Share net asset value of the Shares or net income, or the declaration and
payment of dividends and distributions, as they may deem necessary or desirable
to enable the Trust to comply with any provision of the 1940 Act, or any rule or
regulation thereunder, including any rule or regulation adopted pursuant to
Section 22 of the 1940 Act by the Commission or any securities association
registered under the Securities Exchange Act of 1934, or any order of exemption
issued by said Commission, all as in effect now or hereafter amended or
modified. Without limiting the generality of the foregoing, the Trustees may
establish classes or additional Series of Shares in accordance with Section 6.9.
ARTICLE IX
DURATION; TERMINATION OF TRUST; AMENDMENT; MERGERS,
ETC.
SECTION 9.1 DURATION. The Trust shall continue without limitation of time but subject to the provisions of this Article IX.
SECTION 9.2 TERMINATION OF TRUST OR A SERIES. The Trust or any Series may
be terminated (i) by the affirmative vote of the holders of not less than
three-fourths of the Shares outstanding and entitled to vote at any meeting of
Shareholders of the Trust or the appropriate Series thereof, (ii) by a Majority
Shareholder Vote of such Shares of the Trust or the appropriate Series thereof
if such termination is recommended by the Trustees, (iii) by an instrument in
writing, without a meeting, signed by a majority of the Trustees and consented
to by the holders of not less than a Majority Shareholder Vote of such Shares of
the Trust or the appropriate Series thereof, or by such other vote as may be
established by the Trustees with respect to any class or Series of Shares, or
(iii) with respect to a Series as provided in Section 6.9(h). The foregoing
provisions may not be amended except by the approval of at least three-fourths
of the Shares outstanding and entitled to vote thereupon. Upon the termination
of the Trust or the Series:
(a) The Trust or the Series shall carry on no business except for the
purpose of winding up its affairs.
(b) The Trustees shall proceed to wind up the affairs of the Trust or the
Series and all of the powers of the Trustees under this Declaration shall
continue until the affairs of the Trust shall have been wound up, including the
power to fulfill or discharge the contracts of the Trust or the Series, collect
its assets, sell, convey, assign, exchange, transfer or otherwise dispose of all
or any part of the remaining Trust Property or Trust Property allocated or
belonging to such Series to one or more persons at public or private sale for
consideration which may consist in whole or in part of cash, securities or other
property of any kind, discharge or pay its liabilities, and to do all other acts
appropriate to liquidate its business; provided that any sale, conveyance,
assignment, exchange, transfer or other disposition of all or substantially all
the Trust Property or Trust Property allocated or belonging to such Series shall
require Shareholder approval in accordance with Section 9.4 hereof.
(c) After paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities and refunding
agreements, as they deem necessary for their protection, the Trustees may
distribute the remaining Trust Property or Trust Property allocated or belonging
to such Series, in cash or in kind or partly each, among the Shareholders of the
Trust according to their respective rights.
SECTION 9.3 AMENDMENT PROCEDURE. (a) This Declaration may be amended by a
Majority Shareholder Vote, at a meeting of Shareholders, or by written consent
without a meeting. If this Declaration specifically so provides, however, any
such amendment may be affected only upon the vote of three-fourths of the Shares
outstanding and entitled to vote thereupon. The provisions of the preceding
sentence may not be amended except by vote of three-fourths of the Shares
outstanding and entitled to vote thereupon. The Trustees may also amend this
Declaration without the vote or consent of Shareholders (i) to change the name
of the Trust or any Series or classes of Shares, (ii) to supply any omission, or
cure, correct or supplement any ambiguous, defective or inconsistent provision
hereof, (iii) if they deem it necessary to conform this declaration to the
requirements of applicable federal or state laws or regulations or the
requirements of the Internal Revenue Code, or to eliminate or reduce any
federal, state or local taxes which are or may be payable by the Trust or the
Shareholders, but the Trustees shall not be liable for failing to do so, or (iv)
for any other purpose which does not adversely affect the rights of any
Shareholder with respect to which the amendment is or purports to be applicable.
(b) No amendment may be made under this Section 9.3 which would change any
rights with respect to any Shares of the Trust or of any Series of the Trust by
reducing the amount payable thereon upon liquidation of the Trust or of such
Series of the Trust or by diminishing or eliminating any voting rights
pertaining thereto, except with the vote or consent of the holders of two-thirds
of the Shares of the Trust or of such Series outstanding and entitled to vote,
or by such other vote as may be established by the Trustees with respect to any
Series or class of Shares. Nothing contained in this Declaration shall permit
the amendment of this Declaration to impair the exemption from personal
liability of the Shareholders, Trustees, officers, employees and agents of the
Trust or to permit assessment upon Shareholders.
(c) A certificate signed by a majority of the Trustees or by the Secretary
or any Assistant Secretary of the Trust, setting forth an amendment and reciting
that it was duly adopted by the Shareholders or by the Trustees as aforesaid or
a copy of the Declaration, as amended and executed by a majority of the Trustees
or certified by the Secretary or any Assistant Secretary of the Trust, shall be
conclusive evidence of such amendment when lodged among the records of the
Trust. Unless such amendment or such certificate sets forth some later time for
the effectiveness of such amendment, such amendment shall be effective when
lodged among the records of the Trust. Notwithstanding any other provision
hereof, until such time as a Registration Statement under the Securities Act of
1933, as amended, covering the first public offering of securities of the Trust
shall have become effective, this Declaration may be terminated or amended in
any respect by the affirmative vote of a majority of the Trustees or by an
instrument signed by a majority of the Trustees.
SECTION 9.4 MERGER, CONSOLIDATION AND SALE OF ASSETS. The Trust or any Series thereof may merge or consolidate with any other corporation, association, trust or other organization or may sell, lease or exchange all or substantially all of the Trust Property or Trust Property allocated or belonging to such Series, including its good will, upon such terms and conditions and for such consideration when and as authorized, at any meeting of Shareholders called for the purpose, by the affirmative vote of the holders of not less than three-fourths of the Shares of the Trust or such Series outstanding and entitled to vote, or by an instrument or instruments in writing without a meeting, consented to by the holders of not less than three-fourths of such Shares, or by such other vote as may be established by the Trustees with respect to any series or class of Shares; provided, however, that, if such merger, consolidation, sale, lease or exchange is recommended by the Trustees, a Majority Shareholder Vote shall be sufficient authorization; and any such merger, consolidation, sale, lease or exchange shall be deemed for all purposes to have been accomplished under and pursuant to the laws of the Commonwealth of Massachusetts.
SECTION 9.5 INCORPORATION. With approval of a Majority Shareholder Vote, or by such other vote as may be established by the Trustees with respect to any Series or class of Shares, the Trustees may cause to be organized or assist in organizing a corporation or corporations under the laws of any jurisdiction or any other trust, partnership, association or other organization to take over all of the Trust Property or the Trust Property allocated or belonging to such Series or to carry on any business in which the Trust shall directly or indirectly
have any interest, and to sell, convey and transfer the Trust Property or the Trust Property allocated or belonging to such Series to any such corporation, trust, partnership, association or organization in exchange for the shares or securities thereof or otherwise, and to lend money to, subscribe for the shares or securities of, and enter into any contracts with any such corporation, trust, partnership, association or organization in which the Trust or such Series holds or is about to acquire shares or any other interest. The Trustees may also cause a merger or consolidation between the Trust or any successor thereto and any such corporation, trust, partnership, association or other organization if and to the extent permitted by law, as provided under the law then in effect. Nothing contained herein shall be construed as requiring approval of Shareholders for the Trustees to organize or assist in organizing one or more corporations, trusts, partnerships, associations or other organizations and selling, conveying or transferring a portion of the Trust Property to such organization or entities.
ARTICLE X
REPORTS TO SHAREHOLDERS
The Trustees shall at least semiannually submit or cause the officers of the Trust to submit to the Shareholders a written financial report of each Series of the Trust, including financial statements which shall at least annually be certified by independent public accountants.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 FILING. This Declaration and any amendment hereto shall be filed in the office of the Secretary of The Commonwealth of Massachusetts and in such other places as may be required under the laws of Massachusetts and may also be filed or recorded in such other places as the Trustees deem appropriate. Each amendment so filed shall be accompanied by a certificate signed and acknowledged by a Trustee or by the Secretary or any Assistant Secretary of the Trust stating that such action was duly taken in a manner provided herein. A restated Declaration, integrating into a single instrument all of the provisions of the Declaration which are then in effect and operative, may be executed from time to time by a majority of the Trustees and shall, upon filing with the Secretary of The Commonwealth of Massachusetts, be conclusive evidence of all amendments contained therein and may thereafter be referred to in lieu of the original Declaration and the various amendments thereto.
SECTION 11.2 GOVERNING LAW. This Declaration is executed by the Trustees and delivered in The Commonwealth of Massachusetts and with reference to the laws thereof and the rights of all parties and the validity and construction of every provision hereof shall be subject to and construed according to the laws of said Commonwealth.
SECTION 11.3 COUNTERPARTS. The Declaration may be simultaneously executed in several counterparts, each of which shall be deemed to be an original, and such counterparts, together, shall constitute one and the same instrument, which shall be sufficiently evidenced by any such original counterpart.
SECTION 11.4 RELIANCE BY THIRD PARTIES. Any certificate executed by an individual who, according to the records of the Trust, appears to be a Trustee hereunder, or Secretary or Assistant Secretary of the Trust, certifying to: (a) the number or identity of Trustees or Shareholders, (b) the due authorization of the execution of any instrument or writing, (c) the form of any vote passed at a meeting of Trustees or Shareholders, (d) the fact that the number of Trustees or Shareholders present at any meeting or executing any written instrument satisfies the requirements of this Declaration, (e) the form of any Bylaws adopted by or the identity of any officers elected by the Trustees, or (f) the existence of any fact or facts which in any manner relate to the affairs of the Trust, shall be conclusive evidence as to the matters so certified in favor of any Person dealing with the Trustees and their
successors.
SECTION 11.5 PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS. (a) The
provisions of the Declaration are severable, and if the Trustees shall
determine, with the advice of counsel, that any of such provisions is in
conflict with the 1940 Act, the regulated investment company provisions of the
Internal Revenue Code or with other applicable laws and regulations, the
conflicting provisions shall be deemed superseded by such law or regulation to
the extent necessary to eliminate such conflict; provided, however, that such
determination shall not affect any of the remaining provisions of the
Declaration or render invalid or improper any action taken or omitted prior to
such determination.
(b) If any provision of the Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
pertain only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of the
Declaration in any jurisdiction.
SECTION 11.6 PRINCIPAL PLACE OF BUSINESS; RESIDENT AGENT. The principal place of business of the Trust shall be 225 Franklin Street, Boston, Massachusetts 02110, or such other location as the Trustees may designate from time to time. To the extent required, the Trustees shall have the power to appoint a resident agent for service of process on the Trust in The Commonwealth of Massachusetts, and from time to time to replace the resident agent so appointed. State Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts 02110, is hereby designated as the initial resident agent for the Trust in Massachusetts. The Trustees may, without the approval of the Shareholders, change the resident agent of the Trust or the principal place of business of the Trust.
IN WITNESS WHEREOF, the undersigned has executed this Declaration of Trust this 23rd day of October, 1998.
/s/ E. Davis Hawkes, Jr. ----------------------------------------------- E. Davis Hawkes, Jr. as trustee and not individually |
On this 23rd day of October 1998, E. Davis Hawkes, Jr., known to me and known to be the individual described in and who executed the foregoing instrument, personally appeared before me and acknowledged the foregoing instrument to be his free act and deed.
/s/ Elizabeth C. Dion
Notary Public
|
EXHIBIT 2
BY-LAWS
OF
THE SELECT SECTOR SPDR(R) TRUST
ARTICLE I
DEFINITIONS
All words and terms capitalized in these By-Laws shall have the meaning or meanings set forth for such words or terms in the Declaration of Trust of The Select Sector SPDR(R) Trust, dated June 10, 1998, as amended from time to time.
ARTICLE II
OFFICES
Section 2.1. Principal Office. Until changed by the Trustees, the principal office of the trust in the Commonwealth of Massachusetts shall be in the City of Boston, County of North Quincy.
Section 2.2. Other Offices. In addition to its principal office in the Commonwealth of Massachusetts, the Trust may have an office or offices in the City of New York, State of New York, and at such other places within and without the Commonwealth as the Trustees may from time to time designate or the business of the Trust may require.
ARTICLE III
SHAREHOLDERS' MEETINGS
Section 3.1. Place of Meetings. Meetings of Shareholders shall be held at such place, within or without the Commonwealth of Massachusetts, as may be designated from time to time by the Trustees.
Section 3.2. Meetings. Meetings of Shareholders of the Trust shall be held
whenever called by the Trustees or the President of the Trust and whenever
election of a Trustee or Trustees by Shareholders is required by the provisions
of Section 16(a) of the 1940 Act, for that purpose. Meetings of Shareholders
shall also be called by the Secretary upon the written request of the holders of
Shares entitled to vote not less than twenty-five percent (25%) of all the votes
entitled to be cast at such meeting except to the extent otherwise required by
Section 16(c) of the 1940 Act, as is made
applicable to the Trust by the provisions of Section 2.3 of the Declaration. Such request shall state the purpose or purposes of such meeting and the matters proposed to be acted on thereat. The Secretary shall inform such Shareholders of the reasonable estimated cost of preparing and mailing such notice of the meeting, and upon payment to the Trust of such costs, the Secretary shall give notice stating the purpose or purposes of the meeting to all entitled to vote at such meeting. No meeting need be called upon the request of the holders of Shares entitled to cast less than a majority of all votes entitled to be cast at such meeting, to consider any matter which is substantially the same as a matter voted upon at any meeting of Shareholders held during the preceding twelve months.
Section 3.3. Notice of Meetings. Written or printed notice of every Shareholders' meeting stating the place, date, and purpose or purposes thereof, shall be given by the Secretary not less than ten (10) nor more than ninety (90) days before such meeting to each Shareholder entitled to vote at such meeting. Such notice shall be deemed to be given when deposited in the United States mail, postage prepaid, directed to the Shareholder at his address as it appears on the records of the Trust.
Section 3.4. Quorum and Adjournment of Meetings. Except as otherwise provided by law, by the Declaration or by these By-Laws, at all meetings of Shareholders, the holders of a majority of the Shares issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall be requisite and shall constitute a quorum for the transaction of business. In the absence of a quorum, the Shareholders present or represented by proxy and entitled to vote thereat shall have the power to adjourn the meeting from time to time. The Shareholders present in person or represented by proxy at any meeting and entitled to vote thereat also shall have the power to adjourn the meeting from time to time if the vote required to approve or reject any proposal described in the original notice of such meeting is not obtained (with proxies being voted for or against adjournment consistent with the votes for and against the proposal for which the required vote has not been obtained). The affirmative vote of the holders of a majority of the Shares then present in person or represented by proxy shall be required to adjourn any meeting. Any adjourned meeting may be reconvened without further notice or change in record date. At any reconvened meeting at which a quorum shall be present, any business may be transacted that might have been transacted at the meeting as originally called.
Section 3.5. Voting Rights, Proxies. At each meeting of Shareholders, each holder of record of Shares entitled to vote thereat shall be entitled to one vote in person or by proxy, executed in writing by the Shareholder or his duly authorized attorney-in-fact, for each Share of beneficial interest of the Trust and for the fractional portion of one vote for each fractional Share entitled to vote so registered in his name on the records of the Trust on the date fixed as the record date for the determination of Shareholders entitled to vote at such meeting. No proxy shall be valid after eleven months from its date, unless otherwise provided in the proxy. At all meetings of Shareholders, unless the voting is conducted by inspectors, all questions relating to the qualification of voters and the validity of proxies and the acceptance or rejection of votes shall be decided by the chairman of the meeting. Pursuant to a resolution of a majority of the Trustees, proxies may be solicited in the name of one or more Trustees or Officers of the Trust.
Section 3.6. Vote Required. Except as otherwise provided by law, by the Declaration, or by these By-Laws, at each meeting of Shareholders at which a quorum is present, all matters shall be decided by Majority Shareholder Vote.
Section 3.7. Inspectors of Election. In advance of any meeting of Shareholders, the Trustees may appoint Inspectors of Election to act at the meeting or any adjournment thereof. If Inspectors of Election are not so appointed, the chairman of any meeting of Shareholders may, and on the request of any Shareholder or his proxy shall, appoint Inspectors of Election of the meeting. In case any person appointed as Inspector fails to appear or refuses to act, the vacancy may be filled by appointment made by the Trustees in advance of the convening of the meeting or at the meeting by the person acting as chairman. The Inspectors of Election shall determine the number of Shares outstanding, the Shares represented at the meeting, the existence of a quorum, the authenticity, validity and effect of proxies, shall receive votes, ballots or consents, shall hear and determine all challenges and questions in any way arising in connection with the right to vote, shall count and tabulate all votes or consents, determine the results, and do such other acts as may be proper to conduct the election or vote with fairness to all Shareholders. On request of the chairman of the meeting, or of any Shareholder or his proxy, the Inspectors of Election shall make a report in writing of any challenge or question or matter determined by them and shall execute a certificate of any facts found by them.
Section 3.8. Inspection of Books and Records. Shareholders shall have such rights and procedures of inspection of the books and records of the Trust as are granted to Shareholders under the Corporations and Associations Law of the State of Massachusetts.
Section 3.9. Action by Shareholders Without Meeting. Except as otherwise provided by law, the provisions of these By-Laws relating to notices and meetings to the contrary notwithstanding, any action required or permitted to be taken at any meeting of Shareholders may be taken without a meeting if a majority of the Shareholders entitled to vote upon the action consent to the action in writing and such consents are filed with the records of the Trust. Such consent shall be treated for all purposes as a vote taken at a meeting of Shareholders.
Section 3.10. Presence at Meetings. Presence at meetings of Shareholders requires physical attendance by the Shareholder or his or her proxy at the meeting site and does not encompass attendance by telephonic or other electronic means.
ARTICLE IV
TRUSTEES
Section 4.1. Meetings of the Trustees. The Trustees may in their discretion provide for regular or special meetings of the Trustees. Regular meetings of the Trustees may be held at such
time and place as shall be determined from time to time by the Trustees without further notice. Special meetings of the Trustees may be called at any time by the Chairman and shall be called by the President or the Secretary upon the written request of any two (2) Trustees.
Section 4.2. Notice of Special Meetings. Written notice of special meetings of the Trustees, stating the place, date and time thereof, shall be given not less than two (2) days before such meeting to each Trustee, personally, by telegram, by mail, or by leaving such notice at his place of residence or usual place of business. If mailed, such notice shall be deemed to be given when deposited in the United States mail, postage prepaid, directed to the Trustee at his address as it appears on the records of the Trust. Subject to the provisions of the 1940 Act, notice or waiver of notice need not specify the purpose of any special meeting.
Section 4.3. Telephone Meetings. Subject to the provisions of the 1940 Act, any Trustee, or any member or members of any committee designated by the Trustees, may participate in a meeting of the Trustees, or any such committee, as the case may be, by means of a conference telephone or similar communications equipment if all persons participating in the meeting can hear each other at the same time. Participation in a meeting by these means constitutes presence in person at the meeting.
Section 4.4. Quorum, Voting and Adjournment of Meetings. At all meetings of the Trustees, a majority of the Trustees shall be requisite to and shall constitute a quorum for the transaction of business. If a quorum is present, the affirmative vote of a majority of the Trustees present shall be the act of the Trustees, unless the concurrence of a greater proportion is expressly required for such action by law, the Declaration or these By-Laws. If at any meeting of the Trustees there be less than a quorum present, the Trustees present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall have been obtained.
Section 4.5. Action by Trustees Without Meeting. The provisions of these By-Laws covering notices and meetings to the contrary notwithstanding, and except as required by law, any action required or permitted to be taken at any meeting of the Trustees may be taken without a meeting if a consent in writing setting forth the action shall be signed by all of the Trustees entitled to vote upon the action and such written consent is filed with the minutes of proceedings of the Trustees.
Section 4.6. Expenses and Fees. Each Trustee may be allowed expenses, if any, for attendance at each regular or special meeting of the Trustees, and each Trustee who is not an officer or employee of the Trust or of its investment manager or underwriter or of any corporate affiliate of any of said persons shall receive for services rendered as a Trustee of the Trust such compensation as may be fixed by the Trustees. Nothing herein contained shall be construed to preclude any Trustee from serving the Trust in any other capacity and receiving compensation therefor.
Section 4.7. Execution of Instruments and Documents and Signing of Checks
and Other Obligations and Transfers. All instruments, documents and other papers
shall be executed in the name and on behalf of the Trust and all checks, notes,
drafts and other obligations for the payment of money by the Trust shall be
signed, and all transfer of securities standing in the name of the Trust shall
be executed, by the Chairman, the President, any Vice President or the Treasurer
or by any one or more officers or agents of the Trust as shall be designated for
that purpose by vote of the Trustees; notwithstanding the above, nothing in this
Section 4.7 shall be deemed to preclude the electronic authorization, by
designated persons, of the Trust's Custodian (as described herein in Section
9.1) to transfer assets of the Trust, as provided for herein in Section 9.1
Section 4.8. Indemnification of Trustees, Officers, Employees and Agents.
(a) The Trust shall indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the Trust) by reason of the fact that he is or
was a Trustee, officer, employee, or agent of the Trust. The indemnification
shall be against expenses, including attorneys' fees, judgments, fines, and
amounts paid in settlement, actually and reasonably incurred by him in
connection with the action, suit, or proceeding, if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best interests
of the Trust, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the Trust,
and, with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
(b) The Trust shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or on behalf of the Trust to obtain a judgment or decree in its favor by reason of the fact that he is or was a Trustee, officer, employee, or agent of the Trust. The indemnification shall be against expenses, including attorneys' fees actually and reasonably incurred by him in connection with the defense or settlement of the action or suit, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Trust; except that no indemnification shall be made in respect of any claim, issue, or matter as to which the person has been adjudged to be liable for negligence or misconduct in the performance of his duty to the Trust, except to the extent that the court in which the action or suit was brought, or a court of equity in the county in which the Trust has its principal office, determines upon application that, despite the adjudication of liability but in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for those expenses which the court shall deem proper, provided such Trustee, officer, employee or agent is not adjudged to be liable by reason of his willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office.
(c) To the extent that a Trustee, officer, employee, or agent of the Trust has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsection (a)
or (b) or in defense of any claim, issue or matter therein, he shall be indemnified against expenses, including attorneys' fees, actually and reasonably incurred by him in connection therewith.
(d) (1) Unless a court orders otherwise, any indemnification under subsections (a) or (b) of this section may be made by the Trust only as authorized in the specific case after a determination that indemnification of the Trustee, officer, employee, or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in subsections (a) or (b).
(2) The determination shall be made:
(i) By the Trustees, by a majority vote of a quorum which consists of Trustees who were not parties to the action, suit or proceeding; or
(ii) If the required quorum is not obtainable, or if a quorum of disinterested Trustees so directs, by independent legal counsel in a written opinion; or
(iii) By the Shareholders.
(3) Notwithstanding any provision of this Section 4.8, no person shall be entitled to indemnification for any liability, whether or not there is an adjudication of liability, arising by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of duties as described in Section 17(h) and (i) of the 1940 Act ("disabling conduct"). A person shall be deemed not liable by reason of disabling conduct if, either:
(i) a final decision on the merits is made by a court or other body before whom the proceeding was brought that the person to be indemnified ("indemnitee") was not liable by reason of disabling conduct; or
(ii) in the absence of such a decision, a reasonable determination, based upon a review of the facts, that the indemnitee was not liable by reason of disabling conduct, is made by either --
(A) a majority of a quorum of Trustees who are neither "interested persons" of the Trust, as defined in Section 2(a)(19) of the 1940 Act, nor parties to the action, suit or proceeding, or
(B) an independent legal counsel in a written opinion.
(e) Expenses, including attorneys' fees, incurred by a Trustee, officer, employee or agent of the Trust in defending a civil or criminal action, suit or proceeding may be paid by the Trust in advance of the final disposition thereof if:
(1) authorized in the specific case by the Trustees; and
(2) the Trust receives an undertaking by or on behalf of the Trustee, officer, employee or agent of the Trust to repay the advance if it is not ultimately determined that such person is entitled to be indemnified by the Trust; and
(3) either, (i) such person provides a security for his undertaking, or
(ii) the Trust is insured against losses by reason of any lawful advances, or
(iii) a determination, based on a review of readily available facts, that there is reason to believe that such person ultimately will be found entitled to indemnification, is made by either --
(A) a majority of a quorum of Trustees who are neither
"interested persons" of the Trust, as defined in Section 2(a)
(19) of the 1940 Act, nor parties to the action, suit or
proceeding, or
(B) an independent legal counsel in a written opinion.
(f) The indemnification provided by this Section shall not be deemed exclusive of any other rights to which a person may be entitled under any by-law, agreement, vote of Shareholders or disinterested Trustees or otherwise, both as to action in his official capacity and as to action in another capacity while holding the office, and shall continue as to a person who has ceased to be a Trustee, officer, employee, or agent and inure to the benefit of the heirs, executors and administrators of such person; provided that no person may satisfy any right of indemnity or reimbursement granted herein or to which he may be otherwise entitled except out of the property of the Trust, and no Shareholder shall be personally liable with respect to any claim for indemnity or reimbursement or otherwise.
(g) The Trust may purchase and maintain insurance on behalf of any person who is or was a Trustee, officer, employee, or agent of the Trust, against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such. However, in no event will the Trust purchase insurance to indemnify any officer or Trustee against liability for any act for which the Trust itself is not permitted to indemnify him.
(h) Nothing contained in this Section shall be construed to protect any Trustee or officer of the Trust against any liability to the Trust or to its security holders to which he would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office.
ARTICLE V
COMMITTEES
Section 5.1. Executive and Other Committees. The Trustees, by resolution adopted by a majority of the Trustees, may designate an Executive Committee and/or committees, each committee to consist of two (2) or more of the Trustees of the Trust and may delegate to such committees, in the intervals between meetings of the Trustees, any or all of the powers of the Trustees in the management of the business and affairs of the Trust. In the absence of any member of any such committee, the members thereof present at any meeting, whether or not they constitute a quorum, may appoint a Trustee to act in place of such absent member. Each such committee shall keep a record of its proceedings.
The Executive Committee and any other committee shall fix its own rules or procedures, but the presence of at least fifty percent (50%) of the members of the whole committee shall in each case be necessary to constitute a quorum of the committee and the affirmative vote of the majority of the members of the committee present at the meeting shall be necessary to take action.
All actions of the Executive Committee shall be reported to the Trustees at the meeting thereof next succeeding to the taking of such action.
Section 5.2. Advisory Committee. The Trustees may appoint an advisory committee which shall be composed of persons who do not serve the Trust in any other capacity and which shall have advisory functions with respect to the investments of the Trust but which shall have no power to determine that any security or other investment shall be purchased, sold or otherwise disposed of by the Trust. The number of persons constituting any such advisory committee shall be determined from time to time by the Trustees. The members of any such advisory committee may receive compensation for their services and may be allowed such fees and expenses for the attendance at meetings as the Trustees may from time to time determine to be appropriate.
Section 5.3. Committee Action Without Meeting. The provisions of these By-Laws covering notices and meetings to the contrary notwithstanding, and except as required by law, any action required or permitted to be taken at any meeting of any Committee of the Trustees appointed pursuant to Section 5.1 of these By-Laws may be taken without a meeting if a consent in writing setting forth the action shall be signed by all members of the Committee entitled to vote upon the action and such written consent is filed with the records of the proceedings of the Committee.
ARTICLE VI
OFFICERS
Section 6.1. Executive Officers. The executive officers of the Trust shall be a Chairman, a President, one or more Vice Presidents, a Secretary and a Treasurer. The Chairman shall be selected from among the Trustees but none of the other executive officers need be a Trustee. Two or more offices, except those of President and any Vice President, may be held by the same person, but no officer shall execute, acknowledge or verify any instrument in more than one capacity. The executive officers of the Trust shall be elected annually by the Trustees and each executive officer so elected shall hold office until his successor is elected and has qualified.
Section 6.2. Other Officers and Agents. The Trustees may also elect one or more Assistant Vice Presidents, Assistant Secretaries and Assistant Treasurers and may elect, or may delegate to the President the power to appoint, such other officers and agents as the Trustees shall at any time or from time to time deem advisable.
Section 6.3. Term and Removal and Vacancies. Each officer of the Trust shall hold office until his successor is elected and has qualified. Any officer or agent of the Trust may be removed by the Trustees whenever, in their judgment, the best interests of the Trust will be served thereby, but such removal shall be without prejudice to the contractual rights, if any, of the person so removed.
Section 6.4. Compensation of Officers. The compensation of officers and agents of the Trust shall be fixed by the Trustees, or by the President to the extent provided by the Trustees with respect to officers appointed by the President.
Section 6.5. Power and Duties. All officers and agents of the Trust, as between themselves and the Trust, shall have such authority and perform such duties in the management of the Trust as may be provided in or pursuant to these By-Laws, or to the extent not so provided, as may be prescribed by the Trustees; provided, that no rights of any third party shall be affected or impaired by any such By-Law or resolution of the Trustees unless he has knowledge thereof.
Section 6.6. The Chairman. The Chairman shall preside at all meetings of the Shareholders and of the Trustees; shall be a signatory on all Annual and Semi-Annual Reports as may be sent to shareholders, and he shall perform such other duties as the Trustees may from time to time prescribe.
Section 6.7. The President. 1.0.1. The President shall be the chief executive officer of the Trust; he shall have general and active management of the business of the Trust, shall see that all orders and resolutions of the Board of Trustees are carried into effect, and, in connection therewith, shall be authorized to delegate to one or more Vice Presidents such of his powers and duties at such times and in such manner as he may deem advisable.
(b) In the absence of the Chairman, the President shall preside at all meetings of the shareholders and the Board of Trustees; and he shall perform such other duties as the Board of Trustees may from time to time prescribe.
Section 6.8. The Vice Presidents. The Vice Presidents shall be of such number and shall have such titles as may be determined from time to time by the Trustees. The Vice President, or, if there be more than one, the Vice Presidents in the order of their seniority as may be determined from time to time by the Trustees or the President, shall, in the absence or disability of the President, exercise the powers and perform the duties of the President, and he or they shall perform such other duties as the Trustees or the President may from time to time prescribe.
Section 6.9. The Assistant Vice Presidents. The Assistant Vice President, or, if there be more than one, the Assistant Vice Presidents, shall perform such duties and have such powers as may be assigned them from time to time by the Trustees or the President.
Section 6.10. The Secretary. The Secretary shall attend all meetings of the Trustees and all meetings of the Shareholders and record all the proceedings of the meetings of the Shareholders and of the Trustees in a book to be kept for that purpose, and shall perform like duties for the standing committees when required. He shall give, or cause to be given, notice of all meetings of the Shareholders and special meetings of the Trustees, and shall perform such other duties and have such powers as the Trustees, or the President, may from time to time prescribe. He shall keep in safe custody the seal of the Trust and affix or cause the same to be affixed to any instrument requiring it, and, when so affixed, it shall be attested by his signature or by the signature of an Assistant Secretary.
Section 6.11. The Assistant Secretaries. The Assistant Secretary, or, if there be more than one, the Assistant Secretaries in the order determined by the Trustees or the President, shall, in the absence or disability of the Secretary, perform the duties and exercise the powers of the Secretary and shall perform such duties and have such other powers as the Trustees or the President may from time to time prescribe.
Section 6.12. The Treasurer. The Treasurer shall be the chief financial officer of the Trust. He shall keep or cause to be kept full and accurate accounts of receipts and disbursements in books belonging to the Trust, and he shall render to the Trustees and the President, whenever any of them require it, an account of his transactions as Treasurer and of the financial condition of the Trust; and he shall perform such other duties as the Trustees, or the President may from time to time prescribe.
Section 6.13. The Assistant Treasurers. The Assistant Treasurer, or, if there shall be more than one, the Assistant Treasurers in the order determined by the Trustees or the President, shall, in the absence or disability of the Treasurer, perform the duties and exercise the powers of the Treasurer and shall perform such other duties and have such other powers as the Trustees, or the President, may from time to time prescribe.
Section 6.14. Delegation of Duties. Whenever an officer is absent or disabled, or whenever for any reason the Trustees may deem it desirable, the Trustees may delegate the powers and duties of an officer or officers to any other officer or officers or to any Trustee or Trustees.
ARTICLE VII
DIVIDENDS AND DISTRIBUTIONS
Subject to any applicable provisions of law and the Declaration, dividends and distributions upon the Shares may be declared at such intervals as the Trustees may determine, in cash, in securities or other property, or in Shares, from any sources permitted by law, all as the Trustees shall from time to time determine.
Inasmuch as the computation of net income and net profits from the sales of securities or other properties for federal income tax purposes may vary from the computation thereof on the records of the Trust, the Trustees shall have power, in their discretion, to distribute as income dividends and as capital gain distributions, respectively, amounts sufficient to enable the Trust to avoid or reduce liability for federal income taxes.
ARTICLE VIII
CERTIFICATES OF SHARES
Section 8.1. Certificates of Shares. Certificates for Shares of each series or class of Shares shall be in such form and of such design as the Trustees shall approve, subject to the right of the Trustees to change such form and design at any time or from time to time, and shall be entered in the records of the Trust as they are issued. Each such certificate shall bear a distinguishing number; shall exhibit the holder's name and certify the number of full Shares owned by such holder; shall be signed by or in the name of the Trust by the President, or a Vice President, and countersigned by the Secretary or an Assistant Secretary or the Treasurer and an Assistant Treasurer of the Trust; shall be sealed with the seal; and shall contain such recitals as may be required by law. Where any certificate is signed by a Transfer Agent or by a Registrar, the signature of such officers and the seal may be facsimile, printed or engraved. The Trust may, at its option, determine not to issue a certificate or certificates to evidence Shares owned of record by any Shareholder.
In case any officer or officers who shall have signed, or whose facsimile signature or signatures shall appear on, any such certificate or certificates shall cease to be such officer or officers of the Trust, whether because of death, resignation or otherwise, before such certificate or certificates shall have been delivered by the Trust, such certificate or certificates shall, nevertheless, be adopted by the Trust and be issued and delivered as though the person or persons who signed such certificate
or certificates or whose facsimile signature or signatures shall appear therein had not ceased to be such officer or officers of the Trust.
No certificate shall be issued for any share until such share is fully paid.
Section 8.2. Lost, Stolen, Destroyed and Mutilated Certificates. The Trustees may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Trust alleged to have been lost, stolen or destroyed, upon satisfactory proof of such loss, theft, or destruction; and the Trustees may, in their discretion, require the owner of the lost, stolen or destroyed certificate, or his legal representative, to give to the Trust and to such Registrar, Transfer Agent and/or Transfer Clerk as may be authorized or required to countersign such new certificate or certificates, a bond in such sum and of such type as they may direct, and with such surety or sureties, as they may direct, as indemnity against any claim that may be against them or any of them on account of or in connection with the alleged loss, theft or destruction of any such certificate.
ARTICLE IX
CUSTODIAN
Section 9.1. Appointment and Duties. The Trust shall at times employ a bank or trust company having capital, surplus and undivided profits of at least five million dollars ($5,000,000) as custodian with authority as its agent, but subject to such restrictions, limitations and other requirements, if any, as may be contained in these By-Laws and the 1940 Act:
(1) to receive and hold the securities owned by the Trust and deliver the same upon written or electronically transmitted order;
(2) to receive and hold any monies due to the Trust and deposit the same in its own banking department or elsewhere as the Trustees may direct;
(3) to disburse such funds upon orders or vouchers;
all upon such basis of compensation as may be agreed upon between the Trustees and the custodian. If so directed by a Majority Shareholder Vote, the custodian shall deliver and pay over all property of the Trust held by it as specified in such vote.
The Trustees may also authorize the custodian to employ one or more sub-custodians from time to time to perform such of the acts and services of the custodian and upon such terms and conditions as may be agreed upon between the custodian and such sub-custodian and approved by the Trustees.
Section 9.2. Central Certificate System. Subject to such rules, regulations and orders as the Commission may adopt, the Trustees may direct the custodian to deposit all or any part of the securities owned by the Trust in a system for the central handling of securities established by a national securities exchange or a national securities association registered with the Commission under the Securities Exchange Act of 1934, or such other person as may be permitted by the Commission, or otherwise in accordance with the 1940 Act, pursuant to which system all securities of any particular class or series of any issuer deposited within the system are treated as fungible and may be transferred or pledged by bookkeeping entry without physical delivery of such securities, provided that all such deposits shall be subject to withdrawal only upon the order of the Trust.
ARTICLE X
WAIVER OF NOTICE
Whenever any notice of the time, place or purpose of any meeting of Shareholders, Trustees, or of any committee is required to be given in accordance with law or under the provisions of the Declaration or these By-Laws, a waiver thereof in writing, signed by the person or persons entitled to such notice and filed with the records of the meeting, whether before or after the holding thereof, or actual attendance at the meeting of Shareholders, Trustees or committee, as the case may be, in person, shall be deemed equivalent to the giving of such notice to such person.
ARTICLE XI
MISCELLANEOUS
Section 11.1. Location of Books and Records. The books and records of the Trust may be kept outside the Commonwealth of Massachusetts at such place or places as the Trustees may from time to time determine, except as otherwise required by law.
Section 11.2. Record Date. The Trustees may fix in advance a date as the record date for the purpose of determining the Shareholders entitled to (i) receive notice of, or to vote at, any meeting of Shareholders, or (ii) receive payment of any dividend or the allotment of any rights, or in order to make a determination of Shareholders for any other proper purpose. The record date, in any case, shall not be more than one hundred eighty (180) days, and in the case of a meeting of Shareholders not less than ten (10) days, prior to the date on which such meeting is to be held or the date on which such other particular action requiring determination of Shareholders is to be taken, as the case may be. In the case of a meeting of Shareholders, the meeting date set forth in the notice to Shareholders accompanying the proxy statement shall be the date used for purposes of calculating the 180 day or 10 day period, and any adjourned meeting may be reconvened without a change in record date. In lieu of fixing a record date, the Trustees may provide that the
transfer books shall be closed for a stated period but not to exceed, in any case, twenty (20) days. If the transfer books are closed for the purpose of determining Shareholders entitled to notice of a vote at a meeting of Shareholders, such books shall be closed for at least ten (10) days immediately preceding the meeting.
Section 11.3. Seal. The Trustees shall adopt a seal, which shall be in such form and shall have such inscription thereon as the Trustees may from time to time provide. The seal of the Trust may be affixed to any document, and the seal and its attestation may be lithographed, engraved or otherwise printed on any document with the same force and effect as if it had been imprinted and attested manually in the same manner and with the same effect as if done by a Massachusetts business corporation under Massachusetts law.
Section 11.4. Fiscal Year. The fiscal year of the Trust shall end on such date as the Trustees may by resolution specify, and the Trustees may by resolution change such date for future fiscal years at any time and from time to time.
Section 11.5. Orders for Payment of Money. All orders or instructions for the payment of money of the Trust, and all notes or other evidences of indebtedness issued in the name of the Trust, shall be signed by such officer or officers or such other person or persons as the Trustees may from time to time designate, or as may be specified in or pursuant to the agreement between the Trust and the bank or trust company appointed as Custodian of the securities and funds of the Trust.
ARTICLE XII
COMPLIANCE WITH FEDERAL REGULATIONS
The Trustees are hereby empowered to take such action as they may deem to be necessary, desirable or appropriate so that the Trust is or shall be in compliance with any federal or state statute, rule or regulation with which compliance by the Trust is required.
ARTICLE XIII
AMENDMENTS
These By-Laws may be amended, altered, or repealed, or new By-Laws may be adopted, (a) by a Majority Shareholder Vote, or (b) by the Trustees; provided, however, that no By-Law may be amended, adopted or repealed by the Trustees if such amendment, adoption or repeal requires, pursuant to law, the Declaration, or these By-Laws, a vote of the Shareholders. The Trustees shall in no event adopt By-Laws which are in conflict with the Declaration, and any apparent inconsistency shall be construed in favor of the related provisions in the Declaration.
ARTICLE XIV
DECLARATION OF TRUST
The Declaration of Trust establishing The Select Sector SPDR(R) Trust, dated June 9, 1998, a copy of which, together with all amendments thereto, is on file in the office of the Secretary of the Commonwealth of Massachusetts, provides that the name The Select Sector SPDR(R) Trust refers to the Trustees under the Declaration collectively as Trustees, but not as individuals or personally; and no Trustee, Shareholder, officer, employee or agent of The Select Sector SPDR(R) Trust shall be held to any personal liability, nor shall resort be had to their private property for the satisfaction of any obligation or claim or otherwise, in connection with the affairs of said The Select Sector SPDR(R) Trust, but the Trust Estate only shall be liable.
EXHIBIT 4
GLOBAL CERTIFICATE OF BENEFICIAL INTEREST
-Evidencing-
Shares of Beneficial Interest
-in-
THE ___________ FUND, A SERIES OF
THE SELECT SECTOR SPDR(R) TRUST
CUSIP Number:
This is to certify that _______________ is the owner and registered holder of this Certificate evidencing the ownership of all of the shares of beneficial interest in the _______________ Fund (the "Fund"), a series of The Select Sector SPDR Trust (the "Trust") ("Select Sector SPDRs"), a registered open-end investment company organized as a Massachusetts Business Trust under the terms of the Declaration of Trust (the "Declaration of Trust").
At any given time this Certificate shall represent all shares of beneficial in the Fund ("Shares") which shall be the total number of Creation Unit size aggregations of Fund Shares.
The Fund hereby grants and conveys all of it's rights, title and interest in and to the Shares to the registered holder of this Certificate subject to and in pursuance of the Prospectus, all the terms, conditions and covenants of which are incorporated herein as if fully set forth at length.
The registered holder of this Certificate is entitled at any time upon tender of this Certificate to the Fund, endorsed in blank or accompanied by all necessary instruments of assignment and transfer in proper form, at its Quincy office in the Commonwealth of Massachusetts and, upon payment of any transaction fee disclosed in the Prospectus, any tax or other governmental charges, to receive on or before the seventh calendar day following the day on which such tender is made or, if such calendar day is not a Business Day, on the next succeeding Business Day following such calendar day, the Fund Securities, and any Cash Redemption Amount, each as defined in the Prospectus.
The holder hereof may be required to pay a charge specified in the Prospectus in connection with the issuance, transfer or interchange of this Certificate and any tax or other governmental charge that may be imposed in connection with the transfer, interchange or other surrender of this Certificate.
The holder of this Certificate, by virtue of the purchase and acceptance hereof, assents to and shall be bound by the terms of the Prospectus.
The Fund may deem and treat the person in whose name this Certificate is registered upon the books of the Fund as the owner hereof for all purposes and the Fund shall not be affected by any notice to the contrary.
This Certificate shall not become valid or binding for any purpose until properly executed by the Fund.
Unless this Certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC"), to the Fund or its agent for registration of transfer, exchange, or payment, and any certificate issued is registered in the name of _____________ or in such other name as is requested by an authorized representative of DTC (and any payment is made to __________________ or to such other entity as is required by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OF OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL inasmuch as the registered owner hereof, _____________ has an interest herein.
IN WITNESS WHEREOF, the Fund, has caused this Certificate to be manually executed in its name by an authorized officer.
THE __________ FUND, A SERIES OF
THE SELECT SECTOR SPDR(R) TRUST,
By: ____________________________
Authorized Officer
Date: ______________, 1998
EXHIBIT 5
INVESTMENT ADVISORY AGREEMENT
BETWEEN
STATE STREET BANK AND TRUST COMPANY
AND
THE SELECT SECTOR SPDR(R) TRUST
This Agreement is made as of this _____________ day of _______, 1998, between The Select Sector SPDR Trust, a Massachusetts business trust (the "Trust"), and State Street Bank and Trust Company, a Massachusetts bank (the "Adviser").
WHEREAS, the Trust is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the "1940 Act"), currently consisting of the nine separate portfolio series set forth on Exhibit A to this Agreement (each a "Fund" and collectively, the "Initial Funds"), each having its own investment policies; and
WHEREAS, the Adviser is in the business of providing, among other things, fiduciary and investment advisory services; and
WHEREAS, the Trust desires to retain the Adviser to render investment advisory services to the Trust with respect to the Initial Funds and such other series subsequently established by the Trust and made subject to this Agreement in accordance with paragraph 1(b) (the "Additional Funds") (the Initial Funds together with the Additional Funds being referred to herein as the "Funds"), and the Adviser is willing to render such services;
NOW, THEREFORE, in consideration of the mutual agreements contained herein, the Trust and Adviser agree as follows:
1. APPOINTMENT OF ADVISER.
(a) Initial Funds: The Trust hereby appoints the Adviser to act as investment adviser to the Initial Funds for the period and on the terms set forth in this Agreement. The Adviser accepts such appointment and agrees to render the services herein set forth, for the compensation herein provided. The Trust warrants that the Adviser has been duly appointed to act hereunder.
(b) Additional Funds: In the event that the Trust establishes one or more series other than the Initial Funds with respect to which it desires to retain the Adviser to render investment advisory services hereunder, it shall so notify the Adviser in writing, indicating the advisory fee to be payable with respect to each Additional Fund. If the Adviser is willing to render such services, it shall so notify the Trust in writing, whereupon each such Additional Fund shall become a Fund hereunder. In such event, a writing signed by both the Trust and the Adviser shall be annexed hereto as a part hereof indicating that each such Additional Fund has become a Fund hereunder and reflecting the agreed-upon fee schedule for each such Additional Fund.
2. ADVISORY DUTIES. Subject to the supervision of the Board of Trustees of the Trust (the "Board"), the Adviser shall manage the investment operations and determine the composition of the portfolio of each Fund, including the purchase, retention and disposition of the securities and other instruments held by the Fund, in accordance with such Fund's investment objective and policies as stated in the then current prospectus and Statement of Additional Information for such Fund contained in the Trust's Registration Statement on Form N-1A (the "Registration Statement"), as such prospectus and Statement of Additional Information are amended or supplemented from time to time. The Adviser's duties hereunder are subject to the following understandings:
(a) The Adviser shall provide supervision of investments, furnish a continuous investment program for the Funds, determine from time to time what investments or securities will be purchased, retained or sold by the Funds, and what portion of the assets will be invested or held uninvested as cash;
(b) The Adviser, in the performance of its duties and obligations under this Agreement, shall act in conformity with the Trust's Declaration of Trust, By-Laws, Registration Statement and the terms and conditions of the order of exemption under the 1940 Act of the Securities and Exchange Commission (IC Release No. ) (______________, 1998) granted pursuant to the ________ Amended and Restated Application No. 812-10662, and with the instructions and directions of the Board, provided, however, the Adviser shall not be responsible for acting contrary to any of the foregoing that are changed without notice of such change to the Adviser; and the Adviser shall conform to and comply with the applicable requirements of the 1940 Act and all other applicable federal or state laws and regulations;
(c) The Adviser shall promptly communicate to the officers and Trustees of the Trust such information relating to transactions of the Funds as they may reasonably request. On occasions when the Adviser deems the purchase or sale of a security to be in the best interest of a Fund as well as other clients, the Adviser, to the extent permitted by applicable laws and regulations, may aggregate the securities to be sold or purchased, provided that all accounts are treated equitably and fairly. In such event, allocation of the securities so purchased or sold, as well as the expenses incurred in the transactions, shall be made by the Adviser in the manner it considers to be the most equitable and consistent with its fiduciary obligations to the Trust and to such other clients;
(d) The Adviser shall maintain books and records with respect to the Trust's securities transactions and shall render to the Board such periodic and special reports as the Board may reasonably request;
(e) The Adviser shall provide the Trust with a list of all securities transactions as reasonably requested by the Trust;
(f) The investment advisory services of the Adviser to the Trust under this Agreement are not to be deemed exclusive, and the Adviser shall be free to render similar services to others; and
(g) The Adviser shall initially determine and make such modifications to the identity and number of shares of the Deposit Securities required for a Fund Deposit for each Fund as may be necessary as a result of rebalancing adjustments and corporate action events (and may give directions to the Trust's Custodian with respect to such designation).
3. EXECUTION AND ALLOCATION OF PORTFOLIO BROKERAGE COMMISSIONS. The Adviser, subject to and in accordance with any directions which the Board may issue from time to time, shall place, in the name of the Trust, orders for the execution of the securities transactions in which any Fund is authorized to invest. When placing such orders, the primary objective of the Adviser shall be to obtain the best net price and execution ("best execution") for the Trust but this requirement shall not be deemed to obligate the Adviser to place any order solely on the basis of obtaining the lowest commission rate if the other standards set forth in this section have been satisfied. The Trust recognizes that there are likely to be many cases in which different brokers are equally able to provide such best execution and that, in selection among such brokers with respect to particular trades, it is desirable to choose those brokers who furnish "brokerage and research services" (as defined in Section 28(e)(3) of the Securities and Exchange Act of 1934) or statistical quotations and other information to the Trust and/or the Adviser in accordance with the standards set forth below. Moreover, to the extent that it continues to be lawful to do so and so long as the Board determines as a matter of general policy that the Trust and the respective Funds will benefit, directly or indirectly, by doing so, the Adviser may place orders with a broker who charges a higher commission than another broker would have charged for effecting that transaction,
provided that the excess commission is reasonable in relation to the value of brokerage and research services provided by that broker. Accordingly, the Trust and the Adviser agree that the Adviser shall select brokers for the execution of any Fund's securities transactions from among:
a. Those brokers and dealers who provide brokerage and research services, or statistical quotations and other information to the Trust, specifically including the quotations necessary to determine the Trust's net assets, in such amount of total brokerage as may reasonably be required in light of such services.
b. Those brokers and dealers who provide brokerage and research services to the Adviser which relate directly to portfolio securities, actual or potential, of the Trust, or which place the Adviser in a better position to make decisions in connection with the management of the Trust's assets, whether or not such data may also be useful to the Adviser in managing other portfolios or advising other clients, in such amount of total brokerage as may reasonably be required.
The Adviser agrees that no investment decision will be made or influenced by a desire to provide brokerage for allocation in accordance with the foregoing, and that the right to make such allocation of brokerage shall not interfere with the Adviser's primary duty to obtain the best execution for the Trust.
4. BOOKS AND RECORDS. The Adviser shall keep the Trust's books and records required to be maintained by it pursuant to paragraph 2(d) hereof. The Adviser agrees that all records which it maintains for the Trust are the property of the Trust and it shall surrender promptly to the Trust any of such records upon the Trust's request. The Adviser further agrees to preserve for the periods prescribed by Rule 31a-2 of the Securities and Exchange Commission (the "Commission") under the 1940 Act any such records as are required to be maintained by Rule 31a-1(f) of the Commission under the 1940 Act. Nothing herein shall prevent the Adviser from maintaining its own records as required by law, which may be a duplication of the Trust's records.
5. REPORTS TO ADVISER. The Trust agrees to furnish the Adviser at its principal office all prospectuses, proxy statements, reports to stockholders, sales literature or other material prepared for distribution to shareholders of the Trust or the public, which refer in any way to the Adviser, if reasonably practicable ten (10) days prior to use thereof and not to use such material if the Adviser should object thereto in writing within seven (7) days after receipt of such material; provided, however, that the Adviser hereby approves all uses of its name which merely refer in accurate terms to its appointment as investment adviser hereunder, which merely identifies the Trust, or which are required by the Commission or a state securities commission. In the event of termination of this Agreement, the Trust shall, on written request of the Adviser, forthwith delete any reference to the Adviser from any materials described in the preceding sentence. The Trust shall furnish or otherwise make available to the Adviser such other information relating to the business affairs of the Trust as the Adviser at any time, or from time to time, reasonably requests in order to discharge its obligations hereunder.
6. PROXIES. Unless the Trust gives written instructions to the contrary, the Adviser shall vote or not vote all proxies solicited by or with respect to the issuers of securities in which assets of any Fund may be invested. The Adviser shall use its best good faith judgment to vote or not vote such proxies in a manner which best serves the interests of the Trust's shareholders.
7. EXPENSES. During the term of this Agreement, the Adviser shall pay all of its own expenses incurred by it in connection with its activities under this Agreement and each Fund of the Trust shall bear all expenses that are incurred in its operations not specifically assumed by the Adviser.
Expenses borne by each Fund will include but not be limited to the following (or the Fund's proportionate share of the following): (a) brokerage commissions relating to securities purchased or sold by the Fund or any losses incurred in connection therewith; (b) fees payable to and expenses incurred on behalf of the Fund by the
Trust's administrator; (c) expenses of organizing the Trust and the Fund; (d)
fees and expenses of registering and maintaining the registration of the Fund's
shares and the Trust under federal securities laws and making and maintaining
any notice filings required under any state securities laws; (e) fees and
salaries payable to the Trust's Trustees and officers who are not officers or
employees of the Adviser or any underwriter of the Trust; (f) taxes (including
any income or franchise taxes) and governmental fees; (g) costs of any
liability, uncollectible items of deposit and other insurance or fidelity bonds;
(h) any costs, expenses or losses arising out of any liability of or claim for
damage or other relief asserted against the Trust or the Fund for violation of
any law; (i) legal, accounting and auditing expenses, including legal fees of
special counsel for the independent Trustees, if any; (j) charges of custodians,
transfer agents and other agents; (k) costs of preparing share certificates (if
any); (l) expenses of setting in type and printing prospectuses and Statements
of Additional Information and supplements thereto for existing shareholders,
reports and statements to shareholders and proxy material; (m) any extraordinary
expenses (including fees and disbursements of counsel) incurred by the Trust or
the Fund; and (n) fees and other expenses incurred in connection with membership
in investment company organizations.
8. COMPENSATION OF THE ADVISER. For the services to be rendered by the Adviser as provided in this Agreement, the Trust shall pay to the Adviser such compensation as is designated in Exhibit A to this Agreement, so long as the Adviser has not waived all or a portion of such compensation.
9. LIMITATION OF ADVISER'S LIABILITY. In the absence of (a) willful misfeasance, bad faith or gross negligence on the part of the Adviser in performance of its obligations and duties hereunder, (b) reckless disregard by the Adviser of its obligations and duties hereunder, or (c) a loss resulting from a breach of fiduciary duty with respect to the receipt of compensation for services (in which case, any award of damages shall be limited to the period and the amount set forth in Section 36(b)(3) of the 1940 Act), the Adviser shall not be subject to any liability whatsoever to the Trust, or to any shareholder of the Trust, for any error of judgment, mistake of law or any other act or omission in the course of, or connected with, rendering services hereunder including, without limitation, for any losses that may be sustained in connection with the purchase, holding, redemption or sale of any security on behalf of the Trust.
10. DURATION AND TERMINATION.
(a) This Agreement shall become effective with respect to each Initial Fund on the date hereof, or, with respect to any Additional Fund on the date of the written notification specified in Section 1(b). This Agreement, unless sooner terminated as provided herein, shall continue for each Fund for two years following the effective date of this Agreement with respect to the Fund, and thereafter shall continue for periods of one year so long as such continuance is specifically approved at least annually (a) by the vote of a majority of those members of the Board who are not parties to this Agreement or "interested persons" (as defined in the 1940 Act) of any such party, cast in person at a meeting called for the purpose of voting such approval, and (b) by the Board or by vote of a majority of the outstanding voting securities of the Fund in accordance with the provisions of the 1940 Act.
(b) This Agreement may be terminated by the Trust at any time, without the payment of any penalty, by the Board or by the majority vote of either the entire Board or by vote of a majority of the outstanding voting securities of the Fund (in accordance with the provisions of the 1940 Act) on 60 days' written notice to the Adviser. This Agreement may also be terminated by the Adviser on 90 days' written notice to the Trust. This Agreement will automatically and immediately terminate in the event of its assignment (as defined in the 1940 Act and the rules thereunder).
11. CHOICE OF LAW. This Agreement shall be construed in accordance with the laws of The Commonwealth of Massachusetts and any applicable federal law.
12. LIMITATION OF LIABILITY. The Declaration of Trust dated June 10, 1998, establishing the Trust, which is hereby referred to and a copy of which is on file with the Secretary of The Commonwealth of Massachusetts, provides that the name The Select Sector SPDR(R) Trust means the Trustees from time to time serving (as Trustees but not personally) under such Declaration of Trust. It is expressly acknowledged and agreed that the obligations of the Trust hereunder shall not be binding upon any of the shareholders, Trustees, officers, employees or agents of the Trust, personally, but shall bind only the trust property of the Trust, as provided in its Declaration of Trust. The execution and delivery of this Agreement have been authorized by the Trustees of the Trust and signed by an officer of the Trust, acting as such, and neither such authorization by such Trustees nor such execution and delivery by such officer shall be deemed to have been made by any of them individually or to impose any liability on any of them personally, but shall bind only the trust property of the Trust as provided in its Declaration of Trust.
IN WITNESS WHEREOF, the due execution hereof as of the date first above written.
Attest: THE SELECT SECTOR SPDR(R) TRUST
By: By:
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(Name)
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Attest: STATE STREET BANK AND TRUST COMPANY
By: By:
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(Name)
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EXHIBIT A
As consideration for the Adviser's services to each of the following Funds, the Adviser shall receive from each Fund an annual advisory fee, accrued daily at the rate of 1/365th of the applicable fee rate and payable monthly on the first business day of each month, of the following annual percentages of the Fund's average daily net assets during the month:
Annual percentage of
Fund average daily net assets
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THE BASIC INDUSTRIES SELECT SECTOR SPDR FUND .05%
THE CONSUMER SERVICES SELECT SECTOR SPDR FUND .05%
THE CONSUMER STAPLES SELECT SECTOR SPDR FUND .05%
THE CYCLICAL/TRANSPORTATION SELECT SECTOR SPDR FUND .05%
THE ENERGY SELECT SECTOR SPDR FUND .05%
THE FINANCIAL SELECT SECTOR SPDR FUND .05%
THE INDUSTRIAL SELECT SECTOR SPDR FUND .05%
THE TECHNOLOGY SELECT SECTOR SPDR FUND .05%
THE UTILITIES SELECT SECTOR SPDR FUND .05%
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EXHIBIT 6(a)
DISTRIBUTION AGREEMENT
Distribution Agreement made this ___ day of __________, 1998, by and between The Select Sector SPDR(R) Trust, a Massachusetts business trust (the "Trust"), and ALPS Mutual Funds Services, Inc., a Colorado corporation (the "Distributor").
WHEREAS, the Trust is a registered open-end management investment company organized as a series trust offering a number of portfolios of securities (each a "Fund" and collectively the "Funds"), each investing primarily in equity securities selected to reflect the performance of a specified securities index, having filed with the Securities and Exchange Commission (the "Commission") a registration statement on Form N-1A (Registration No. 333-57791; 811-08837) under the Securities Act of 1933, as amended (the "1933 Act"), and the Investment Company Act of 1940, as amended;
WHEREAS, the Trust intends to create and redeem shares of beneficial interest, par value $.001 per Share (the "Shares") of each Fund on a continuous basis at their net asset value only in aggregations constituting a Creation Unit, as such term is defined in the Registration Statement;
WHEREAS, the Shares of each Fund will be listed on the American Stock Exchange LLC (the "AMEX") and traded under the symbols set forth in Annex I hereto;
WHEREAS, the Trust desires to retain the Distributor to act as the distributor with respect to the issuance and distribution of Creation Units of Shares of each Fund, hold itself available to receive and process orders for such Creation Units in the manner set forth in the Trust's Prospectus, and to enter into arrangements with broker-dealers and others to provide for servicing of shareholder accounts and for distribution assistance, including broker-dealer and shareholder support;
WHEREAS, the Board of Trustees of the Trust has adopted a plan of distribution (each a "12b-1 Plan") pursuant to Rule 12b-1 under the 1940 Act with respect to each Fund and may make payments to the Distributor pursuant to such 12b-1 Plans, subject to and in accordance with the terms and conditions thereof and any related agreements;
WHEREAS, the Distributor is a registered broker-dealer under the Securities Exchange Act of 1934, as amended (the "1934 Act") and a member of the National Association of Securities Dealers ("NASD"); and
WHEREAS, the Distributor desires to provide such services to the Trust.
NOW, THEREFORE, in consideration of the mutual promises and undertakings herein contained, the parties agree as follows:
1. Appointment. The Trust hereby appoints the Distributor as the exclusive distributor for Creation Unit aggregations of Shares of each Fund listed in Annex I hereto, as may be amended by the parties from time to time, on the terms and for the period set forth in this Agreement and subject to the registration requirements of the 1933 Act and of the laws governing the sale of securities in the various states, and the Distributor hereby accepts such appointment and agrees to act in such capacity hereunder.
2. Definitions. Wherever they are used herein, the following terms have the following respective meanings:
a. "1940 Act" means the Investment Company Act of 1940 and the rules and regulations thereunder as amended from time to time;
b. "Prospectus" means the Prospectus and Statement of Additional Information constituting parts of the Registration Statement of the Trust under the 1933 Act and the 1940 Act as such Prospectus and Statement of Additional Information may be amended or supplemented and filed with the Commission from time to time;
c. "Registration Statement" means the registration statement most recently filed from time to time by the Trust with the Commission and effective under the 1933 Act and the 1940 Act, as such registration statement is amended by any amendments thereto at the time in effect;
d. All capitalized terms used but not defined in this Agreement shall have the meanings ascribed to such terms in the Registration Statement and the Prospectus.
3. Duties of the Distributor.
(a) The Trust grants to the Distributor the exclusive right to receive all orders for purchases of Creation Units of each Fund from Participating Parties or DTC Participants which have executed a Participant Agreement ("Authorized Participants") and to transmit such orders to the Trust in accordance with the Registration Statement and Prospectus; provided, however, that nothing herein shall affect or limit the right and ability of the Trust to accept Deposit Securities and related Cash Components through or outside the Clearing Process, and as provided in and in accordance with the Registration Statement and Prospectus. The Trust acknowledges that the Distributor shall not be obligated to accept any certain number of orders for Creation Units and nothing herein shall prevent the Distributor from entering into like distribution arrangements with other investment companies.
(b) The Distributor agrees to act as agent of the Trust with respect to the continuous distribution of Creation Units of each Fund as set forth in the Registration Statement and in accordance with the provisions thereof. The Distributor further agrees as follows: (a) at the request of the Trust, the Distributor shall enter into Participant Agreements between and among Authorized Participants, the Distributor and the Transfer Agent in accordance with the Registration Statement and Prospectus and in the form attached hereto as Exhibit A; (b) the Distributor shall generate and transmit confirmations of purchases of Creation Units to the purchaser; (c) the Distributor shall deliver copies of the Prospectus to purchasers of such Creation Units and upon request the Statement of Additional Information; and (d) the Distributor shall maintain telephonic, facsimile and/or access to direct computer communications links with the Trust's Transfer Agent.
(c) (i) The Distributor agrees to use all reasonable efforts, consistent with its other business, to facilitate the purchase of Creation Units through Authorized Participants in accordance with the procedures set forth in the Prospectus and the Participant Agreement.
(ii) The Distributor shall, at its own expense, execute the following agreements in the forms and as approved by the Board of Trustees of the Trust, providing for activities which the Distributor deems reasonable and appropriate and which are primarily intended to result in the sale of such Creation Units: (A) selected or soliciting dealer agreements ("Soliciting Dealer Agreements") with registered broker-dealers and other eligible entities providing for the purchase of Creation Units of Shares of the Funds and related promotional activities, and (B) investor services agreements ("Investor Services Agreements") with broker-dealers or other financial institutions providing for broker-dealer, investor and stockholder support, account maintenance and educational and promotional services relating to the Shares and facilitation through broker-dealers and other persons of communications with beneficial owners of Shares. Pursuant to this Agreement, the Dealer Agreements and the Investor Services Agreements, the Distributor shall facilitate the coordination of the performance of any marketing and promotional services, including advertising; the development and implementation of any marketing
plan; and clearing and filing all advertising, sales, marketing and promotional materials of the Funds with the NASD as provided below.
(d) The Distributor agrees to administer the Distribution and Service Plan on behalf of the Trust. The Distributor shall, at its own expense, set up and maintain a system of recording and payments for fees and reimbursement of expenses disseminated pursuant to this Agreement and any other related agreements under the Funds' Rule 12b-1 Plans and shall, pursuant to the 1940 Act, report such payment activity under the Distribution and Service Plan to the Trust at least quarterly.
(e) The Distributor shall provide toll-free lines, by way of the American Stock Exchange Index Share Product Hotline (1800-THE-AMEX) for direct investor and shareholder use between the hours of 7:30 a.m. and 2:00 p.m. Mountain time on each day the New York Stock Exchange is open for business, with appropriate NASD licensed order taking and distribution services staff.
(f) All activities by the Distributor and its agents and employees which are primarily intended to result in the sale of Creation Units shall comply with the Registration Statement and Prospectus, the instructions of the Board of Trustees of the Trust and all applicable laws, rules and regulations including, without limitation, all rules and regulations made or adopted pursuant to the 1940 Act by the Commission or any securities association registered under the 1934 Act, including the NASD and the AMEX.
(g) Except as otherwise noted in the Registration Statement and Prospectus, the offering price for all Creation Units of Shares will be the aggregate net asset value of the Shares per Creation Unit of the relevant Fund, as determined in the manner described in the Registration Statement and Prospectus.
(h) If and whenever the determination of net asset value is suspended and until such suspension is terminated, no further orders for Creation Units will be processed by the Distributor except such unconditional orders as may have been placed with the Distributor before it had knowledge of the suspension. In addition, the Trust reserves the right to suspend sales and Distributor's authority to process orders for Creation Units on behalf of the Trust, upon due notice to the Distributor, if, in the judgment of the Trust, it is in the best interests of the Trust to do so. Suspension will continue for such period as may be determined by the Trust.
(i) The Distributor is not authorized by the Trust to give any information or to make any representations other than those contained in the Registration Statement or Prospectus or contained in shareholder reports or other material that may be prepared by or on behalf of the Trust for the Distributor's use. The Distributor shall be entitled to rely on and shall not be responsible in any way for information provided to it by the Trust and its respective service providers and shall not be liable or responsible for the errors and omissions of such service providers, provided that the foregoing shall not be construed to protect the Distributor against any liability to the Trust or the Trust's shareholders to which the Distributor would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence in the performance of its duties or by reason of its reckless disregard of its obligations and duties under this Agreement.
(j) The Board of Trustees shall approve the form of any Dealer Agreement or Investor Services Agreement to be entered into by the Distributor.
(k) At the request of the Trust, the Distributor shall enter into agreements in the form specified by the Trust (each a "Participant Agreement") with participants in the system for book-entry of The Depository Trust Company and the NSCC as described in the Prospectus.
(l) The Distributor shall ensure that all direct requests for Prospectuses and Statements of Additional of Information are fulfilled. In addition, the Distributor shall arrange to provide the AMEX (and any
other national stock exchange on which the Shares may be listed) with copies of Prospectuses to be provided to purchasers in the secondary market. The Distributor will generally make it known in the brokerage community that prospectuses and statements of additional information are available, including by (i) advising the AMEX on behalf of its member firms of the same, (ii) making such disclosure in all marketing and advertising materials prepared and/or filed by the Distributor with the NASD, and (iii) as may otherwise be required by the Commission.
(m) The Distributor agrees to make available, at the Trust's request one or more members of its staff to attend Board meetings of the Trust in order to provide information with regard to the ongoing distribution process and for such other purposes as may be requested by the Board of Trustees of the Trust.
4. Duties of the Trust.
(a) The Trust agrees to issue Creation Unit aggregations of Shares of each Fund and to request The Depository Trust Company to record on its books the ownership of such Shares in accordance with the book-entry system procedures described in the Prospectus in such amounts as the Distributor has requested through the Trust's transfer agent in writing or other means of data transmission, as promptly as practicable after receipt by the Trust of the requisite Deposit Securities and Cash Component (together with any fees) and acceptance of such order, upon the terms described in the Registration Statement. The Trust may reject any order for Creation Units or stop all receipts of such orders at any time upon reasonable notice to the Distributor, in accordance with the provisions of the Prospectus.
(b) The Trust agrees that it will take all action necessary to register an indefinite number of shares under the 1933 Act. The Trust will make available to the Distributor such number of copies of its then currently effective Prospectus as the Distributor may reasonably request. The Trust will furnish to the Distributor copies of all information, financial statements and other papers which the Distributor may reasonably request for use in connection with the distribution of Creation Units. The Trust shall keep the Distributor informed of the jurisdictions in which Shares of the Trust are authorized for sale and shall promptly notify the Distributor of any change in this information. The Distributor shall not be liable for damages resulting from the sale of shares in authorized jurisdictions where the Distributor had no information from the Trust that such sale or sales were unauthorized at the time of such sale or sales.
(c) The Trust represents to the Distributor that the Registration Statement and Prospectus filed by the Trust with the Commission with respect to the Trust have been prepared in conformity with the requirements of the 1933 Act, the 1940 Act and the rules and regulations of the Commission thereunder. The Trust will notify the Distributor promptly of any amendment to the Registration Statement or supplement to the Prospectus and any stop order suspending the effectiveness of the Registration Statement.
5. Fees and Expenses.
(a) The Trust will, with respect to each Fund, pay to the Distributor all fees and expenses pursuant to the terms of the Distribution and Service Plan in effect for each respective Fund.
(b) The Distributor will bear the following costs and expenses relating to the distribution of Creation Units of the Funds: (a) the costs of processing and maintaining records of creations of Creation Units; (b) the costs of maintaining the records required of a broker-dealer registered under the 1934 Act; (c) the expenses of maintaining its registration or qualification as a dealer or broker under federal or state laws; (d) the expenses incurred by the Distributor in connection with normal (non-expedited) NASD filing fees; and (e) all other expenses incurred in connection with the distribution services contemplated herein, except as specifically provided in this Agreement.
(c) The Distributor shall pay, from the fees received by it from the
Funds pursuant to the Rule 12b-1 Plan, all fees and make reimbursement of
expenses, pursuant to and in accordance with any and all Investor Services
Agreements, as approved by the Board of Trustees of the Trust, as set forth in
Section 3 of this Agreement. Further, the Distributor will pay, from the fees
received by it from the Funds pursuant to the Rule 12b-1 Plan, all fees with
respect to expedited NASD filing fees.
6. Indemnification.
(a) The Trust agrees to indemnify and hold harmless the Distributor and any soliciting dealer that enters into a Soliciting Dealer Agreement with the Distributor, which provides for such indemnification, in the form approved by the Board of Trustees (each an "Indemnified Dealer") and each of the directors, officers, agents and employees and any person who controls the Distributor or the Indemnified Dealer within the meaning of Section 15 of the 1933 Act (any of the Distributor, any Indemnified Dealer, their officers, agents, employees and directors or such control persons, for purposes of this paragraph, an "Indemnitee") against any loss, liability, claim, damages or expense (including the reasonable cost of investigating or defending any alleged loss, liability, claim, damages or expense and reasonable counsel fees incurred in connection therewith) arising out of or based upon the claim that the Registration Statement, Prospectus, shareholder reports or other information filed or made public by the Trust (as from time to time amended) included an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein (and in the case of the Prospectus, in light of the circumstances under which they were made) not misleading under the 1933 Act, or any other statute or the common law. However, the Trust does not agree to indemnify the Distributor or hold it harmless to the extent that the statement or omission was made in reliance upon, and in conformity with information furnished to the Trust by or on behalf of the Distributor. The Trust will also not indemnify any Indemnitee with respect to any untrue statement or omission made in the Registration Statement or Prospectus that is subsequently corrected in such document (or an amendment thereof or supplement thereto) if a copy of the Prospectus (or such amendment or supplement) was not sent or given to the person asserting any such loss, liability, claim, damage or expense at or before the written confirmation to such person in any case where such delivery is required by the 1933 Act and the Trust had notified the Distributor of the amendment or supplement prior to the sending of the confirmation. In no case (i) is the indemnity of the Trust in favor of any Indemnitee to be deemed to protect the Indemnitee against any liability to the Trust or its shareholders to which the Indemnitee would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence in the performance of its duties or by reason of its reckless disregard of its obligations and duties under this Agreement, or (ii) is the Trust to be liable under its indemnity agreement contained in this paragraph with respect to any claim made against any Indemnitee unless the Indemnitee shall have notified the Trust in writing of the claim within a reasonable time after the summons or other first written notification giving information of the nature of the claim shall have been served upon Indemnitee (or after Indemnitee shall have received notice of service on any designated agent). However, failure to notify the Trust of any claim shall not relieve the Trust from any liability which it may have to any Indemnitee against whom such action is brought otherwise than on account of its indemnity agreement contained in this paragraph. The Trust shall be entitled to participate at its own expense in the defense, or, if it so elects, to assume the defense of any suit brought to enforce any claims, but if the Trust elects to assume the defense, the defense shall be conducted by counsel chosen by it and satisfactory to Indemnitee, defendant or defendants in the suit. In the event the Trust elects to assume the defense of any suit and retain counsel, Indemnitee, defendant or defendants in the suit, shall bear the fees and expenses of any additional counsel retained by them. If the Trust does not elect to assume the defense of any suit, it will reimburse the Indemnitee, defendant or defendants in the suit, for the reasonable fees and expenses of any counsel retained by them. The Trust agrees to notify the Distributor and any Indemnified Dealer promptly of the commencement of any litigation or proceedings against it or any of its officers or trustees in connection with the issuance or sale of any of the Creation Units or the Shares.
(b) The Distributor agrees to indemnify and hold harmless the Trust and each of its Trustees and officers and any person who controls the Trust within the meaning of Section 15 of the 1933 Act (for purposes of this paragraph, the Trust and each of its Trustees and officers and its controlling persons are collectively referred to as the "Trust Affiliates") against any loss, liability, claim, damages or expense (including the reasonable cost of investigating or defending any alleged loss, liability, claim, damages or expense and reasonable counsel fees incurred in connection therewith) which the Trust Affiliate may incur under the 1933 Act or any other statute or common law, but only to the extent that such loss, liability, claim, damages or expense shall arise out of or be based upon (i) the allegation of any wrongful act of the Distributor or any of its employees or (ii) allegation that the Registration Statement, Prospectus, shareholder reports or other information filed or made public by the Trust (as from time to time amended) included an untrue statement of a material fact or omitted to state a material fact required to be stated or necessary in order to make the statements not misleading, insofar as the statement or omission was made in reliance upon, and in conformity with information furnished to the Trust by or on behalf of the Distributor. In no case (i) is the indemnity of the Distributor in favor of any Trust Affiliate to be deemed to protect any Trust Affiliate against any liability to the Trust or its security holders to which such Trust Affiliate would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence in the performance of its duties or by reason of its reckless disregard of its obligations and duties under this Agreement, or (ii) is the Distributor to be liable under its indemnity agreement contained in this paragraph with respect to any claim made against any Trust Affiliate unless the Trust Affiliate shall have notified the Distributor in writing of the claim within a reasonable time after the summons or the first written notification giving information of the nature of the claim shall have been served upon the Trust Affiliate (or after the Trust Affiliate shall have received notice of service on any designated agent). However, failure to notify the Distributor of any claim shall not relieve the Distributor from any liability which it may have to the Trust Affiliate against whom the action is brought otherwise than on account of its indemnity agreement contained in this paragraph. The Distributor shall be entitled to participate at its own expense in the defense or, if it so elects, to assume the defense of any suit brought to enforce the claim, but if the Distributor elects to assume the defense, the defense shall be conducted by counsel chosen by it and satisfactory to the Trust, its officers and Board and to any controlling person or persons, defendant or defendants in the suit. In the event that Distributor elects to assume the defense of any suit and retain counsel, the Trust or controlling person or persons, defendant or defendants in the suit, shall bear the fees and expenses of any additional counsel retained by them. If the Distributor does not elect to assume the defense of any suit, it will reimburse the Trust, its officers and Board or controlling person or persons, defendant or defendants in the suit, for the reasonable fees and expenses of any counsel retained by them. The Distributor agrees to notify the Trust promptly of the commencement of any litigation or proceedings against it in connection with the issuance and sale of any of the shares.
(c) Neither the Trust nor the Distributor shall settle any claim against it for which it intends to seek indemnification from the other party, under the terms of section 6(a) or 6(b) above, without the prior written notice to and consent from the indemnifying party, which consent shall not be unreasonably withheld. Neither the Trust nor the Distributor shall settle any claim unless the settlement contains a full release of liability with respect to the other party in respect of such action. This section 6 shall survive the termination of this Agreement.
7. Representations.
(a) The Distributor represents and warrants that (i) it is duly organized as a Colorado corporation and is and at all times will remain duly authorized and licensed to carry out its services as contemplated herein; (ii) the execution, delivery and performance of this Agreement are within its power and have been duly authorized by all necessary action; and (iii) its entering into this Agreement or providing the services contemplated hereby does not conflict with or constitute a default or require a consent under or breach of any provision of any agreement or document to which the Distributor is a party or by which it is bound and (iv) it is registered as a broker-dealer under the 1934 Act and is a member of the NASD.
(b) The Trust represents and warrants that (i) it is duly organized as a Massachusetts business trust and is and at all times will remain duly authorized to carry out its obligations as contemplated herein; (ii) it is registered as an investment company under the 1940 Act; (iii) the execution, delivery and performance of this Agreement are within its power and have been duly authorized by all necessary action; and (iv) its entering into this Agreement does not conflict with or constitute a default or require a consent under or breach of any provision of any agreement or document to which the Trust is a party or by which it is bound.
8. Duration, Termination and Amendment.
(a) This Agreement shall be effective on ________________, 1998, and unless terminated as provided herein, shall continue for two years from its effective date, and thereafter from year to year, provided such continuance is approved annually by the vote of a majority of the Board of Trustees, and by the vote of those Trustees who are not "interested persons" of the Trust (the "Independent Trustees") and, if a plan under Rule 12b-1 under the 1940 Act is in effect, by the vote of those Trustees who are not "interested persons" of the Trust and who are not parties to such plan or this Agreement and have no financial interest in the operation of such plan or in any agreements related to such plan, cast in person at a meeting called for the purpose of voting on the approval. This Agreement may be terminated at any time, without the payment of any penalty, as to each Fund (i) by vote of a majority of the Independent Trustees or (ii) by vote of a majority (as defined in the 1940 Act) of the outstanding voting securities of the Fund, on at least sixty (60) days prior written notice to the Distributor. In addition, this Agreement may be terminated at any time by the Distributor upon at least sixty (60) days prior written notice to the Trust. This Agreement shall automatically terminate in the event of its assignment. As used in this paragraph, the terms "assignment" and "interested persons" shall have the respective meanings specified in the 1940 Act.
(b) During such period as the Distributor receives compensation pursuant to the 12b-1 Plans, and this Agreement constitutes a 12b-1 Plan related agreement, (i) any material amendment to this Agreement requires the approval provided for in paragraph (a) with respect to annual renewals of this Agreement, and (ii) any amendment that materially increases the amount to be spent for distribution services requires the additional approval of the majority of the Trust's outstanding voting securities (as defined in the 1940 Act) of each affected Fund; and (iii) the selection and nomination of those Trustees who are not "interested persons" (as defined in the 1940 Act) of the Trust shall be committed to the discretion of the Trustees of the Trust who are not such "interested persons" of the Trust;
(c) No provision of this Agreement may be changed, waived, discharged or terminated except by an instrument in writing signed by the party against which an enforcement of the change, waiver, discharge or termination is sought.
9. Notice. Any notice or other communication authorized or required by this
Agreement to be given to either party shall be in writing and deemed to have
been given when delivered in person or by confirmed facsimile, or posted by
certified mail, return receipt requested, to the following address (or such
other address as a party may specify by written notice to the other): if to the
Distributor: ALPS Mutual Funds Services, Inc., 370 17th Street, Suite 3100,
Denver, CO 80202, Attn.:General Counsel, fax: (303)623-7850; if to the Trust:
[ADDRESS], Attn.: [NAME], fax: [FAX].
10. Limitation of Liability. The Distributor is expressly put on notice of the limitation of shareholder liability as set forth in the Declaration of Trust of the Trust and agrees that the obligations assumed by the Trust under this contract shall be limited in all cases to the Trust and its assets. The Distributor shall not seek satisfaction of any such obligation from the shareholders or any shareholder of the Trust, nor shall the Distributor seek satisfaction of any such obligation from the Trustees or any individual Trustee of the Trust. The Distributor understands that the rights and obligations
of each series of shares of the Trust under the Declaration of Trust are separate and distinct from those of any and all other series.
11. Choice of Law. This Agreement shall be governed by, and construed in accordance with, the laws of The Commonwealth of Massachusetts, without giving effect to the choice of laws provisions thereof.
12. Counterparties. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
13. Severability. If any provisions of this Agreement shall be held or made invalid, in whole or in part, then the other provisions of this Agreement shall remain in force. Invalid provisions shall, in accordance with this Agreement's intent and purpose, be amended, to the extent legally possible, by valid provisions in order to effectuate the intended results of the invalid provisions.
14. Insurance. The Distributor will maintain at its expense an errors and omissions insurance policy which covers services by the Distributor hereunder.
15. Segregation of Fees and Expenses. Amounts paid by each Fund to the Distributor under its 12b-1 Plan either for distribution related services or shareholder services shall not be used to pay for the distribution of Shares of, or shareholder servicing in respect of, any other Fund. However, fees under the 12b-1 Plan attributable to the Trust as a whole shall be allocated to each Fund according to the method adopted by the Trust's Board of Trustees. Fees attributable to the Trust as a whole shall include any amounts payable under the 12b-1 Plans to the Distributor for its services rendered hereunder. The Distributor's allocation of such 12b-1 Plan fees shall be subject to review by the Trust's Board of Trustees.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their officers designated below as of the date first set forth above.
THE SELECT SECTOR SPDR(R) TRUST
ALPS MUTUAL FUNDS SERVICES, INC.
Annex I
The Basic Industries Select Sector SPDR Fund
The Consumer Services Select Sector SPDR Fund
The Consumer Staples Select Sector SPDR Fund
The Cyclical/Transportation Select Sector SPDR Fund
The Energy Select Sector SPDR Fund
The Financial Select Sector SPDR Fund
The Industrial Select Sector SPDR Fund
The Technology Select Sector SPDR Fund
The Utilities Select Sector SPDR Fund
As in effect November xx, 1998
EXHIBIT 6.B
PARTICIPANT AGREEMENT
This Participant Agreement (the "Agreement") is entered into by and between ALPS Mutual Funds Services, Inc. (the "Distributor"), State Street Bank and Trust Company, as transfer agent (the "Transfer Agent") and (the "Participant") and is subject to acceptance by The Select Sector SPDR(R) Trust (the "Trust"). The Distributor has been retained to provide certain services with respect to acting as principal underwriter of the Trust in connection with the creation and distribution of shares of series of the Trust (each a "Fund" and together, the "Funds"). The Transfer Agent has been retained to provide certain services with respect to the creation and redemption of shares of the Funds. As specified in the Trust's prospectus and Statement of Additional Information (together, the "Prospectus"), shares of each Fund may be created or redeemed only in aggregations of 50,000 shares, referred to therein and herein as a "Creation Unit". The Prospectus provides that Creation Units be shall issued in exchange for a Fund Deposit delivered by the Participant on behalf of the investor (which may be the Participant) to the Trust. The Prospectus also provides that Creation Units shall be redeemed in exchange for Fund Securities and an amount of cash. Capitalized terms not otherwise defined herein are used herein as defined in the Prospectus.
This Agreement is intended to set forth certain premises and the
procedures by which the Participant may create and/or redeem Creation Units (i)
through the Continuous Net Settlement ("CNS") clearing process of NSCC as such
processes have been enhanced to effect creations and redemptions of Creation
Units, such processes being referred to herein as the "Clearing Process", or
(ii) outside the Clearing Process (i.e., through the facilities of The
Depository Trust Company ("DTC"). The parties hereto in consideration of the
premises and of the mutual agreements contained herein agree as follows:
1. Status of Participant. The Participant hereby represents, covenants and warrants that (i) with respect to orders for the creation or redemption of Creation Units by means of the Clearing Process, it is a member of NSCC and a participant in the CNS System of NSCC (as defined in the Prospectus, a "Participating Party"); and (ii) with respect to orders for the creation or redemption of Creation Units outside the Clearing Process, it is a DTC Participant (as defined in the Prospectus, a "DTC Participant"). The Participant may place orders for the creation or redemption of Creation Units either through the Clearing Process or outside the Clearing Process, subject to the procedures for creation and redemption referred to in paragraph 2 of this Agreement ("Execution of Orders"). Any change in the foregoing status of Participant shall terminate this Agreement and Participant shall give notice to the Distributor, Transfer Agent and the Trust of such change.
2. Execution of Orders. All orders for the creation or redemption of Creation Units shall be handled by each party hereto in accordance with the terms of the Prospectus and the procedures described in Attachment A to this Agreement. Each party hereto agrees to comply with the provisions of such documents to the extent applicable to it. In the event the procedures include the use of recorded telephone lines, the Participant hereby consents to such use. The Trust reserves the right to issue additional or other procedures relating to the manner of creating or redeeming Creation Units and the Participant, the Transfer Agent and the Distributor each agrees to comply with such procedures as may be issued from time to time.
3. NSCC. Solely with respect to orders for the creation or redemption of Creation Units through the Clearing Process, the Participant as a Participating Party hereby authorizes the Transfer Agent to transmit to NSCC on behalf of the Participant such instructions, including share and cash amounts as are necessary with respect to the creation and redemption of Creation Units consistent with the
instructions issued by the Participant to the telephone representative of the Distributor. The Participant agrees to be bound by the terms of such instructions issued by the Transfer Agent (or the Distributor on behalf of the Trust) and reported to NSCC as though such instructions were issued by the Participant directly to NSCC.
4. Role of Participant. The Participant shall have no authority in any transaction to act as agent of the Distributor, Transfer Agent or the Trust.
5. Fees. In connection with the creation or redemption of Creation Units, the Trust shall charge and the Participant agrees to pay on behalf of the investor to the Trust the Transaction Fee prescribed in the Prospectus applicable to creation or redemption through the Clearing Process, or the Transaction Fee and such additional fee as may be prescribed pursuant to the Prospectus applicable to creation or redemption outside the Clearing Process. The Trust reserves the right to adjust the Transaction Fee subject to any limitation as prescribed in the Prospectus.
6. Authorized Persons. Concurrently with the execution of this Agreement and from time to time thereafter, the Participant shall deliver to the Distributor, the Transfer Agent and the Trust, duly certified as appropriate by its secretary or other duly authorized official, a certificate, in the form set forth in Attachment B, setting forth the names and signatures of all persons authorized to give instructions relating to activity contemplated hereby or any other notice, request or instruction on behalf of the Participant (each an "Authorized Person"). Such certificate may be accepted and relied upon by the Distributor and the Trust as conclusive evidence of the facts set forth therein and shall be considered to be in full force and effect until delivery to the Distributor and the Trust of a superseding certificate bearing a subsequent date. The Distributor shall issue to each Authorized Person a unique personal identification number ("PIN Number") by which such Authorized Person and the Participant shall be identified and instructions issued by the Participant hereunder shall be authenticated. Upon the termination or revocation of authority of such Authorized Person by the Participant, the Participant shall give immediate written notice of such fact to the Distributor and the Trust and such notice shall be effective upon receipt by the Distributor and the Trust.
7. Redemption. The Participant represents and warrants that it will not obtain an Order Number (as described in Attachment A) for the purpose of redeeming a Creation Unit unless it or the party for which it is acting, as the case may be, first owns the requisite number of shares to be redeemed as a Creation Unit.
8. Beneficial Ownership. The Participant represents and warrants to the Distributor, Transfer Agent and the Trust that it does not hold for the account of any single Beneficial Owner of shares of a given Fund of the Trust 80 percent (80%) or more of outstanding shares of a given Fund of The Select Sector SPDR Trust such as to cause the respective Fund of The Select Sector SPDR Trust to have a basis in the Deposit Securities deposited with the Trust different from the market value of such Deposit Securities on the date of such deposit, pursuant to Section 351 of the Internal Revenue Code. The Transfer Agent shall have the right to require information from the Participant regarding share ownership, and to rely thereon to the extent necessary to make a determination regarding ownership of 80 percent (80%) or more of outstanding shares of a given Fund of The Select Sector SPDR Trust by a Beneficial Owner as a condition to the acceptance of a Fund Deposit.
9. Indemnification. The Participant hereby agrees to indemnify and hold harmless the Distributor, Transfer Agent and the Trust and their respective subsidiaries, affiliates, directors, officers,
employees and agents (each an "Indemnified Party") from and against any loss, liability, cost and expense incurred by such Indemnified Party as a result of (i) any breach by the Participant of any provision of this Agreement; or (ii) any actions of such Indemnified Party in reliance upon any instructions issued in accordance with Attachment A (as may be amended from time to time) believed by the Distributor and/or Trust to be genuine and to have been given by the Participant. This paragraph shall survive the termination of this Agreement.
10. Additional Payment on Redemption. In the event that the Participant receives Fund Securities the value of which exceeds net asset value at the time of redemption, the Participant agrees to pay, or cause the beneficial owner(s) of the shares redeemed to pay, to the Trust an amount in cash equal to the difference.
11. Acknowledgment. The Participant acknowledges receipt of the Prospectus and represents it has reviewed such document and understands the terms thereof. The Distributor agrees to process orders for creation in accordance with the provisions of the Prospectus. The Transfer Agent agrees to process orders for redemptions in accordance with the provisions of the Prospectus.
12. Notices. Except as otherwise specifically provided in this Agreement, all notices required or permitted to be given pursuant to this Agreement shall be given in writing and delivered by personal delivery or by postage prepaid registered or certified United States first class mail, return receipt requested, or by telex, telegram or facsimile or similar means of same day delivery (with a confirming copy by mail as provided herein). Unless otherwise notified in writing, all notices to the Trust shall be given or sent as follows: State Street Bank and Trust Company, Global Client Support, P.O. Box 1978, Boston, MA 02105, Attn.: The Select Sector SPDR Trust.
All notices to the Participant and the Distributor or the Transfer Agent, as the case may be, shall be directed to the address or telephone, facsimile or telex numbers indicated below the signature line of such party.
13. Termination and Amendment. This Agreement shall become effective in this form as of the date accepted by the Trust and may be terminated at any time by any party upon thirty days prior notice to the other parties (i) unless earlier terminated by the Trust in the event of a breach of this Agreement or the procedures described herein by the Participant or (ii) in the event that the Trust is terminated pursuant to the Trust's Declaration of Trust, dated June 10, 1998. This Agreement supersedes any prior such agreement between the parties. This Agreement may be amended by the Trust from time to time by the following procedure. The Trust will mail a copy of the amendment to the Distributor, the Transfer Agent and the Participant. If neither the Distributor, the Transfer Agent nor the Participant objects in writing to the amendment within ten days after its receipt, the amendment will become part of this Agreement in accordance with its terms.
14. Counterparts. This Agreement may be simultaneously executed in several counterparts, each of which shall be an original and all shall constitute but one and the same instrument.
15. Governing Law. This Agreement shall be governed by and interpreted in accordance with the laws of The Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date and year first written above.
ALPS MUTUAL FUNDS SERVICES, INC.
BY: ______________________________________________ TITLE: ______________________________________________ ADDRESS: ______________________________________________ TELEPHONE: ______________________________________________ FACSIMILE: ______________________________________________ TELEX: ______________________________________________ |
STATE STREET BANK AND TRUST COMPANY
BY: ______________________________________________ TITLE: ______________________________________________ ADDRESS: ______________________________________________ TELEPHONE: ______________________________________________ FACSIMILE: ______________________________________________ TELEX: ______________________________________________ [ ] BY: ______________________________________________ TITLE: ______________________________________________ ADDRESS: ______________________________________________ TELEPHONE: ______________________________________________ FACSIMILE: ______________________________________________ TELEX: ______________________________________________ |
ACCEPTED BY:
THE SELECT SECTOR SPDR TRUST
BY: ______________________________________________
TITLE: ______________________________________________
ATTACHMENT A
This document supplements the Prospectus with respect to the procedures to be used by (i) the Distributor in processing an order for the creation of Creation Units of each series of The Select Sector SPDR Trust (each a "Fund") and (ii) the Transfer Agent in processing an order for redemption of Creation Units.
A Participant is required to have signed the Participant Agreement. Upon acceptance of the Participant Agreement by the Trust, the Distributor will assign a personal identification number to each Authorized Person authorized to act for the Participant. This will allow a Participant through its Authorized Person(s) to place an order with respect to Creation Units.
TO PLACE AN ORDER FOR CREATION OR REDEMPTION OF CREATION UNITS
1. Call to Receive an Order Number. For creations, an Authorized Person for the Participant will call the telephone representative at 800-250-9508 not later than the closing time of the regular trading session on the New York Stock Exchange (the "NYSE Closing Time") (ordinarily 4:00 p.m. New York time) to receive an Order Number. For redemptions, an Authorized Person for the Participant will call the telephone representative at 877-222-3639 not later than the NYSE Closing Time to receive an Order Number.
Upon verifying the authenticity of the caller (as determined by the use
of the appropriate PIN Number) and the terms of the order, the
telephone representative will issue a unique Order Number. All orders
with respect to the creation or redemption of Creation Units are
required to be in writing and accompanied by the designated Order
Number. Incoming telephone calls are queued and will be handled in the
sequence received. Calls placed before the NYSE Closing Time will be
processed even if the call is taken after this cut-off time.
ACCORDINGLY, DO NOT HANG UP AND REDIAL. INCOMING CALLS THAT ARE
ATTEMPTED LATER THAN THE NYSE CLOSING TIME WILL NOT BE ACCEPTED.
NOTE THAT THE TELEPHONE CALL IN WHICH THE ORDER NUMBER IS ISSUED INITIATES THE ORDER PROCESS BUT DOES NOT ALONE CONSTITUTE THE ORDER. AN ORDER IS ONLY COMPLETED AND PROCESSED UPON RECEIPT OF WRITTEN INSTRUCTIONS CONTAINING THE DESIGNATED ORDER NUMBER AND PIN NUMBER AND TRANSMITTED BY FACSIMILE OR TELEX (the "Order").
2. Place the Order. An Order Number is only valid for a limited time. The Order for creation or redemption of Creation Units must be sent by facsimile or telex to the telephone representative within 20 minutes of the issuance of the Order Number. In the event that the Order is not received within such time period, the telephone representative will attempt to contact the Participant to request immediate transmission of the Order. Unless the Order is received by the telephone representative upon the earlier of (i) within 15 minutes of contact with the Participant or (ii) 45 minutes after the NYSE Closing Time, the order will be deemed invalid.
3. Await Receipt of Confirmation.
A. Clearing Process. The Distributor (in the case of creations) or the Transfer Agent (in the case of redemptions) shall issue a confirmation of Order acceptance within 15 minutes of its receipt of an Order received in good form. In the event the Participant does not receive
a timely confirmation from the Distributor or the Transfer Agent, it should contact the telephone representative at the business number indicated.
B. Outside the Clearing Process. In lieu of receiving a confirmation of Order acceptance, the DTC Participant will receive an acknowledgment of Order acceptance. The DTC Participant shall deliver on trade date plus one the Deposit Securities and Cash Component (in the case of creations) or the Creation Unit size aggregation of shares (in the case of redemptions) to the Trust through DTC. The Trust shall settle the transaction within three (3) Business Days.
4. Ambiguous Instructions. In the event that an Order contains terms that differ from the information provided in the telephone call at the time of issuance of the Order Number, the telephone representative will attempt to contact the Participant to request confirmation of the terms of the order. If an Authorized Person confirms the terms as they appear in the Order then the order will be accepted and processed. If an Authorized Person contradicts its terms, the Order will be deemed invalid and a corrected Order must be received by the telephone representative not later than the earlier of (i) within 15 minutes of such contact with the Participant or (ii) 45 minutes after the NYSE Closing Time. If the telephone representative is not able to contact an Authorized Person, then the Order shall be accepted and processed in accordance with its terms notwithstanding any inconsistency from the terms of the telephone information. In the event that an Order contains terms that are illegible, as determined in the sole discretion of the Distributor (in the case of creations) or the Transfer Agent (in the case of redemptions), the Order will be deemed invalid and the telephone representative will attempt to contact the Participant to request retransmission of the Order. A corrected Order must be received by the telephone representative not later than the earlier of (i) within 15 minutes of such contact with the Participant or (ii) 45 minutes after the NYSE Closing Time.
5. Processing an Order. The Distributor reserves the right to suspend an Order in the event that its acceptance would appear to result in the Participant or a Beneficial Owner owning 80 percent (80%) or more of all outstanding shares of a given Fund. In such event, the telephone representative will attempt to contact an Authorized Person for purposes of confirmation of the fact that with respect to such Participant no Beneficial Owner would own 80 percent (80%) or more of all outstanding shares of a given Fund upon execution of the Order. In the event that (i) the telephone representative is unable to contact an Authorized Person or (ii) the Participant fails to transmit an identical Order containing a representation and warranty as to such fact, then the Order shall be deemed invalid.
6. Creation of Creation Units Prior to Receipt of Deposit Securities. Creation Units of Select Sector SPDR Funds may be created in advance of receipt by the Trust of all or a portion of the applicable Deposit Securities, provided that the Participant deposits an initial deposit of cash with the Trust having a value greater than the net asset value of the shares on the date the order is placed in proper form. In addition to available Deposit Securities, cash must be deposited in an amount equal to the sum of (i) the Cash Component, plus (ii) 115% of the market value of the undelivered Deposit Securities (the "Additional Cash Deposit"). The order shall be deemed to be received on the Business Day on which the order is placed provided that the order is placed in proper form prior to 4:00 p.m. on such date and federal funds in the appropriate amount are deposited with the Trust's Custodian by 11:00 a.m. the following Business Day. If the order is not placed in proper form by 4:00 p.m. or federal funds in the appropriate amount are not received by 11:00 a.m. the next Business Day, then the order may be deemed to be rejected and the investor shall be liable to the Trust for losses, if any, resulting therefrom. An additional amount of cash shall be required to be
deposited with the Trust, pending delivery of the missing Deposit Securities to the extent necessary to maintain an amount of cash on deposit with the Trust at least equal to 115% of the daily marked to market value of the missing Deposit Securities. To the extent that missing Deposit Securities are not received by 1:00 p.m. on the third Business Day following the day on which the purchase order is deemed received by the Distributor or in the event a mark to market payment is not made within one Business Day following notification by the Distributor that such a payment is required, the Trust may use the cash on deposit to purchase the missing Deposit Securities. The Participant will be liable to the Trust for the costs incurred by the Trust in connection with any such purchases. These costs will be deemed to include the amount by which the actual purchase price of the Deposit Securities exceeds the market value of such Deposit Securities on the day the purchase order was deemed received by the Distributor plus the brokerage and related transaction costs associated with such purchases. The Trust will return any unused portion of the Additional Cash Deposit once all of the missing Deposit Securities have been properly received by the Custodian or purchased by the Trust and deposited into the Trust. In addition, a transaction fee of $4,000 will be charged in all cases. The delivery of Creation Units of Select Sector SPDR Funds so created will occur no later than the third Business Day following the day on which the purchase order is deemed received by the Distributor.
ATTACHMENT B
The following individuals are Authorized Persons pursuant to Section 6 of the Participant Agreement between ALPS Mutual Funds Services, Inc., State Street Bank and Trust Company and [ ]:
[ ]
By: _________________________________________
EXHIBIT 6(c)
ALPS Mutual Funds Services, Inc.
370 17th Street, Suite 3100
Denver, Colorado 80202
INVESTOR SERVICES AGREEMENT
Gentlemen:
As distributor and principal underwriter (the "Distributor") of The Select Sector SPDR Trust (the "Trust"), an open-end, management investment company registered under the Investment Company Act of 1940, as amended (the "1940 Act"), currently consisting of nine separate portfolio series (each a "Fund"), we wish to enter into this Investor Services Agreement (this "Agreement") with you concerning (i) your provision of broker-dealer and shareholder support services to your customers ("Clients") who may from time to time beneficially own issued and outstanding shares of beneficial interest (the "Shares") of the initial nine Funds of the Trust indicated on Appendix A hereto (each, an "Initial Fund"), and each additional Fund subsequently established by the Trust and made subject to this Agreement in accordance with Appendix B hereto (each, an "Additional Fund" and, together with the Initial Funds, the "Funds") and (ii) your educational and promotional activities in the secondary market for the Shares listed and traded on the American Stock Exchange. Capitalized terms, unless otherwise defined herein, shall have the meanings attributed to them in the Trust's current Prospectus and Statement of Additional Information.
This Agreement is a related agreement as contemplated by Rule 12b-1 under the 1940 Act with respect to the Rule 12b-1 plan (each a "12b-1 Plan" and together the "12b-1 Plans") of each Initial Fund of the Trust, and subject to the approval of the Board of Trustees pursuant to Rule 12b-1 of each Additional Fund. Both you and we and the Trust expect that your shareholder support services in connection with Shares pursuant to this Agreement will tend to increase investor interest in and the use and trading of Shares on the secondary market and thus promote further sales of additional Creation Units of Shares.
The terms and conditions of this Agreement are as follows:
Section 1. Shareholder Services. You agree to perform shareholder account administrative, maintenance and servicing functions, which shall include one or more of the following: (a) answering Client inquiries regarding account status and history and maintaining account information for Clients with respect to Shares beneficially owned by Clients; (b) processing dividend and distribution payments on behalf of Clients; (c) providing information periodically to Clients showing their positions in Shares; (d) at your discretion, providing and maintaining elective services such as check writing on the Client's account and wire transfer services; (e) acting as a participant (a "DTC Participant") in the book-entry facilities of The Depository Trust Company ("DTC") on behalf of Clients holding beneficial interests in Shares; (f) issuing confirmations of transactions in Shares; (g) forwarding shareholder communications from us or on behalf of the Trust (such as proxies, shareholder reports, annual and semi-annual financial statements and dividend, distribution and tax notices); (h) producing and mailing to Clients monthly statements, confirmations or other reports, including year-end tax information; (i) making any elections with respect to Series dividends on behalf of Clients; and (j) such other services analogous to the foregoing as you customarily provide to Clients with respect to holdings of shares of open-end investment companies or exchange-listed stocks as the Trust or a Client may reasonably request from time to time, and may engage in educational and promotional services relating to Shares (which may include compensation and sales incentives to your registered brokers or other sales personnel) and facilitation through
broker-dealers and other persons of communications to the extent you are permitted to do so under applicable statutes, rules and regulations.
Section 2. Fees. In consideration of the services provided by you hereunder, subject to the terms and conditions of the 12b-1 Plans and to the provisions set forth on Appendix B hereto, in our capacity as the Distributor implementing the 12b-1 Plans we will pay to you and you agree to accept as full payment therefor, a fee at the annual rate of _________ of the average daily net asset value of Shares held by you. Such fee will be computed daily and payable monthly. The calculation of such fees by us shall be based on the report of holdings of Shares by the Trust's transfer agent and by you as confirmed to us in writing. Such calculation shall be final and conclusive for all purposes hereunder. In consideration of the receipt of fees under the 12b-1 Plan, you acknowledge and agree to all of the provisions set forth in Appendix B hereto. In the event that any Additional Fund becomes subject to this Agreement, we will pay to you in our capacity as Distributor, for the services and facilities to be provided by you hereunder with respect to such Additional Fund a fee at the rate set forth in or pursuant to the 12b-1 Plan approved by the Board of Trustees of the Trust with respect to such Additional Fund. In no event may the fee payable to you under this Agreement exceed an annual rate of .10% of the average daily net assets of Shares held by you.
Section 3. Information Pertaining to Shares, Etc. (a) You and your officers, employees and agents are not authorized to make any representations concerning the Trust or the Shares except to communicate to Clients accurately factual information contained in the Trust's Prospectus and Statement of Additional Information, any marketing materials filed by us, if required, on behalf of the Trust with the National Association of Securities Dealers, Inc. and objective historical performance information, provided that the foregoing shall not apply to any materials produced for your brokers, registered representatives, or other employees for internal use only. You shall act as agent for Clients only in your capacity as shareholder servicing agent hereunder furnishing information regarding the Trust or the Shares and shall have no authority to act as agent, partner, joint venture participant or in any similar capacity for us or the Trust in any matter or in any respect.
(b) You understand that neither the Trust nor any Fund will be advertised or marketed as an open-end investment company, i.e., as a mutual fund, which offers redeemable securities. Any advertising materials, including the Trust prospectus, will prominently disclose that the Shares are not redeemable units of beneficial interest in the Trust. You further understand that the creation of any communications, literature or advertisements in all media formats regarding the Trust or Shares (other than for internal use by your brokers, representatives and employees) must be approved by us prior to printing or dissemination and must follow our internal procedures for such approvals, including, if necessary, approval by the NASD. In addition, any shareholder communications with respect to the Trust or Shares, including the Trust prospectus, will disclose that the owners of Shares may acquire and tender those shares for redemption to the Trust in Creation Unit aggregations only.
(c) During the term of this Agreement, we or the Trust shall furnish or otherwise make available to you such information relating to the business affairs of the Trust as you at any time, or from time to time, reasonably request in order to discharge your obligations hereunder. You and your officers and employees will, upon reasonable request, be available during normal business hours to consult with us or our designees concerning the performance of your responsibilities under this Agreement.
Section 4. Representations and Warranties. By your written acceptance of this Agreement, you represent, warrant and agree that you are, and at all times will remain, a DTC Participant and that you will comply with all applicable laws and regulations and the rules and procedures of DTC governing the book-entry system in connection with the performance of your obligations hereunder and will inform us of any change in applicable
laws or regulations (or interpretations thereof) that would prevent or impair full performance of any of your obligations hereunder.
Section 5. Term and Termination. Unless sooner terminated, this Agreement will continue for one year following the date of its adoption. Thereafter, this Agreement will continue automatically for successive annual periods provided that such continuance is specifically approved at least annually by the Trust in the manner described in Appendix B. This Agreement is terminable in accordance with Appendix B. This Agreement may be amended in writing by the parties hereto.
Section 6. Notice. All notices and other communications to either you or us will be duly given if mailed, telegraphed, faxed or transmitted by similar telecommunications device to us at the address shown above and to you at the address shown below.
Section 7. Governing Law. This Agreement will be construed in accordance with the laws of the State of New York.
If you agree to be bound by the provisions of this Agreement, please sign two copies of this letter where indicated below and promptly return it to us, c/o Legal Department, ALPS Mutual Funds Services, Inc., 370 17th Street, Suite 3100, Denver, Colorado 80202. We will return one signed copy for your files.
Very truly yours,
ALPS MUTUAL FUNDS SERVICES, INC.
Dated: , 199 By:
--------------- ---- ----------------------------
Thomas Carter
Chief Financial Officer
|
Accepted and Agreed to:
Name
-------------------------------
Title
Dated: , 199
--------------- ----
|
Appendix A
|
Shares
Trading CUSIP
Series Symbol No.
------ ------ ---
The Basic Industries Select Sector SPDR Fund Index Series
The Consumer Services Select Sector SPDR Fund Index Series
The Consumer Staples Select Sector SPDR Fund Index Series
The Cyclical/Transportation Select Sector SPDR Fund Index Series
The Energy Select Sector SPDR Fund Index Series
The Financial Select Sector SPDR Fund Index Series
The Industrial Select Sector SPDR Fund Index Series
The Technology Select Sector SPDR Fund Index Series
The Utilities Select Sector SPDR Fund Index Series
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Appendix B
1. Rule 12b-1 Information. You will provide to us and the Trust's Board of Trustees such information as we and the Trust's Board of Trustees may reasonably request in order to enable us and the Board of Trustees to fulfill the requirements of Rule 12b-1 and the 12b-1 Plan, including, without limitation, any reports required by paragraph (b)(3)(ii) of Rule 12b-1. In addition, you will furnish us or our designees with such information as we or they may reasonably request and will otherwise cooperate with us and our designees (including, without limitation, any auditors designated by us or the Trust), in connection with preparation of reports to the Trust's Board of Trustees concerning this Agreement and the monies paid or payable to you by us in connection with your services hereunder as well as any other reports or filings that may be required by law. During the time that this Agreement is in effect, the reelection and nomination of those trustees of the Trust who are not "interested persons" (as defined in the 1940 Act) of the Trust shall be committed to the discretion of the trustees of the Trust who are not such "interested persons" of the Trust.
2. Compliance with Laws. By your written acceptance of this Agreement, you represent, warrant and agree that you understand that this Agreement is a Rule 12b-1 related agreement under the 1940 Act, subject to the provisions of such Rule, as well as any other applicable rules or regulations of the Securities and Exchange Commission; agree to conform to any compliance standards adopted by us governing the services to be provided by you hereunder with respect to Shares, as in effect from time to time; and agree to comply with applicable federal and state securities laws and regulations, and regulations of relevant self-regulatory organizations, pertaining to transactions in Shares.
3. Approvals. This Agreement, and each Rule 12b-1 Plan, is subject to annual approval by vote of (i) the Trust's Board of Trustees and (ii) of a majority of those Trustees who are not "interested persons" (as defined in the 1940 Act) of the Trust and have no direct or indirect financial interest in the operation of the 12b-1 Plans adopted by the Trust regarding the provision of support services to the beneficial owners of Shares of the respective Funds or in any agreement related thereto ("Disinterested Trustees") cast in person at a meeting called for the purpose of voting on such approval.
4. Termination. This Agreement is terminable, without penalty, at any time (a) by the Trust by a vote of a majority of the Disinterested Trustees or by vote of the holders of a majority of the voting securities (as such terms is defined in the 1940 Act) of such Funds or by you, upon 60 days' notice in writing to the other party hereto, (b) upon the termination of the Distribution Agreement between the Trust and us or (c) as to any Fund, upon the termination of its 12b-1 Plan. This Agreement shall also terminate automatically upon its assignment (as defined in the 1940 Act).
Exhibit
6.D
FORM OF
SOLICITING DEALER AGREEMENT
_____________ __, 1998
Ladies and Gentlemen:
The Select Sector SPDR Trust (the "Trust") is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the "1940 Act"), organized as a series fund and formed under the laws of the Commonwealth of Massachusetts. The Trust will consist initially of nine series (each a "Fund") and will issue shares of beneficial interest, par value $.001, of each Fund (the "Shares"). The Trust will only sell and redeem Shares in aggregations of a specified number of Shares of a Fund (each a "Creation Unit") set forth in Annex I hereto. Pursuant to a Distribution Agreement between the Trust and us (the "Distribution Agreement"), we will act as distributor (the "Distributor") and principal underwriter of Creation Units of Shares of the Funds listed on Annex I as exclusive agent on behalf of the Trust. Capitalized terms not defined herein shall have the meanings attributed to them in the current prospectus and statement of additional information of the Trust relating to the Shares. Creation Units of Shares of each Fund will be sold at their net asset value, without a sales charge, for the Deposit Securities designated for delivery on a business day for a Fund and the Cash Component. Individual Shares of each Fund will be listed and traded on the American Stock Exchange ("AMEX").
In consideration of the mutual covenants contained herein, it is hereby agreed that our respective rights and obligations shall be as follows:
1. ROLE OF DISTRIBUTOR
Pursuant to and in accordance with the provisions of the Distribution Agreement, we will make arrangements for securities dealers that may wish from time to time to solicit from the public orders to purchase Creation Units of Shares of a Fund. You are hereby invited to become one of the securities dealers referred to herein as a "Soliciting Dealer". This will confirm our mutual agreement as to the terms and conditions applicable to your participation as a Soliciting Dealer, such agreement to be effective on your confirmation hereof.
2. ROLE OF SOLICITING DEALERS
As a Soliciting Dealer, you may, at your election, from time to time, offer and solicit purchase orders for Creation Units of Shares. As, when and if you generate a customer request for the purchase of Creation Units of Shares of any Fund and you determine to transmit such request to us in your capacity as Soliciting Dealer, you shall comply with the procedures for the purchase of Creation Units of Shares set forth in the then current prospectus and statement of additional information applicable to the Shares. We agree that you shall not be obligated to solicit any certain number of orders for the purchase of Creation Units. You understand that all orders for the purchase of Creation Units of Shares of each Fund must be placed with us and may be placed only through an Authorized Participant that has entered into a Participant Agreement with us and the Trust. During any period you are an Authorized Participant, you may submit purchase orders to us in such capacity. Your duties and obligations as an Authorized Participant are determined by the terms and conditions of the Participant Agreement and not pursuant
hereto. The procedures relating to orders and the handling thereof will be subject to the terms of the then current prospectus and statement of additional information of the Trust, the Participant Agreement and instructions in writing received by you from us or the Trust's transfer agent from time to time. Unless otherwise mutually agreed in writing, each transaction shall be promptly confirmed by us in writing to the customer on a fully disclosed basis and a copy of each confirmation shall be sent simultaneously to you. You agree that upon receipt of duplicate confirmations you will examine the same and promptly notify us of any errors or discrepancies which you discover and shall promptly bring to our attention and the Trust's any errors in such confirmations claimed by your customers.
3. PURCHASE OF FUND SHARES FOR SALE TO CUSTOMERS
Except as may be otherwise agreed to in writing by the National Association of Securities Dealers, Inc. (the "NASD"):
(a) You agree that all purchases by you through us shall be made only to cover orders received by you from your customers or for your own bona fide investment.
(b) You agree to sell Shares of the Funds to your customers subject to minimum investment requirements applicable to each order and at the applicable public offering price described in the prospectus and statement of additional information of such Fund in effect on the date of the sale (the prospectus and statement of additional information as of any such sale date or of any applicable redemption or repurchase date being sometimes referred to together herein as the "then current prospectus"), provided, however, that it is understood that you assume no responsibility or liability for the determination of such price.
(c) You shall not withhold placing orders received from your customers so as to profit yourself as a result of such withholding (e.g., by a change in the net asset value from that used in determining the public offering price to your customers).
(d) You understand that all orders are subject to acceptance or rejection by us or the Trust in the sole discretion of either. No conditional order will be accepted by the Trust on any basis other than a definite price. The handling of orders by the parties shall be subject to such procedures as may be mutually agreed upon from time to time.
(e) Payment for Creation Units of Shares purchased shall be made in accordance with the provisions described in the then current prospectus. If such payment is not received, we reserve the right, without notice, either to cancel the sale, or, at our option, to sell the Shares ordered back to such Fund, and in either case, we may hold you responsible for any direct loss suffered by us or by such Fund resulting from your failure to make payment as aforesaid.
4. SELLING PROCEDURES/SALES MATERIALS
(a) "Sales Material," as used herein, shall include, without limitation, promotional materials, sales literature, advertisements, press releases, announcements, circulars, research reports, market letters, performance reports or summaries, form letters, posters, signs and other similar materials, whether in print, hypertext, video, audio or other media, and any items derived from the foregoing, and including sales materials intended for wholesale use (i.e., broker/dealer use only) or retail use.
(b) You shall not make any representation concerning the Funds or their securities except those contained in the then current prospectus or any Sales Materials furnished by us relating to the Funds. (You assume no responsibility or liability for representations contained in
any of such documents, except to the extent of any information provided by you in writing expressly for use therein as specifically authorized by you in a given particular instance.) We agree to notify you in writing at the address specified in paragraph (c) of any change to the prospectus or statement of additional information of each Fund, specifying such change, at least 10 days before making such change, provided that if such notice is not reasonably practicable, we may provide you with the required notice within such other period as is reasonable under the circumstances, but, in any event, not later than concurrently with such change.
(c) We agree to supply to you, at no cost to you, additional copies of the prospectus, statement of additional information, shareholder materials, periodic reports and proxy statements for each of the Funds and any printed supplemental material in reasonable quantities upon request. You agree to deliver copies of the above materials to customers and potential customers in accordance with applicable law and the rules of the Securities and Exchange Commission ("SEC"). Further, we agree to provide to your Mutual Funds Marketing Department (the "Marketing Department") copies of the most recent amended or supplemented prospectus and statement of additional information of each Fund, and such other SEC filings as you may request, in reasonable quantities upon our request. Such material shall be mailed to you at _________________________.
(d) We agree not to distribute any Sales Materials (other than copies of the then current prospectus) to any of your employees or sales offices unless the distribution of such materials has been approved in writing by your Marketing Department in accordance with written procedures (as amended from time to time) distributed by the Marketing Department. In approving such materials for distribution within your offices or through your sales offices to your
customers, you assume no responsibility or liability for the representations or any omissions contained in any Sales Materials nor for representations or any omissions contained in the prospectus or statement of additional information relating to the Funds.
(e) With the exception of (i) listings of product offerings; (ii) materials in the public domain (e.g., magazine articles and trade publications); and (iii) materials used by you on an internal basis only, you agree not to furnish or cause to be furnished to any third parties or to display publicly or publish any Sales Materials, except such Sales Materials relating to the Funds as may be provided to you by us or the Trust or approved for distribution by us upon your request (including materials prepared by the AMEX).
5. REDEMPTION/REPURCHASE/TRANSFER OF FUND SHARES AND EXCHANGES
(a) If you purchase Shares from your customers for redemption by any Fund, you agree to pay such customers not less than the applicable redemption price (i.e., the currently quoted net asset value minus any applicable sales charges or redemption fees) determined as set forth in the then current prospectus of the applicable Fund, provided, however, that it is understood that you assume no responsibility or liability for the determination of such price.
(b) You shall not withhold placing redemption or repurchase orders received from your customers so as to profit yourself as a result of such withholding (e.g., by a change in the net asset value from that used in determining the public offering price to your customers).
(c) Redemption and repurchase orders are subject to such procedures as may be mutually agreed upon from time to time, provided that any order placed by you regarding the redemption or repurchase of Shares is subject to timely receipt by us or the applicable Fund's transfer agent of all required documents and compliance with the applicable procedures.
(d) You and we understand that the Shares may be held solely through the book-entry system of The Depository Trust Company. If at any time, the Shares shall no longer be held exclusively through The Depository Trust Company, we and you shall amend this Agreement upon mutually satisfactory terms.
(e) Exchanges of Shares between Funds, if permitted, will be effected in the manner and subject to the restrictions and charges described in the then current prospectuses of the relevant Funds. The handling of exchanges will be further subject to such other procedures as may be mutually agreed upon from time to time.
6. COMPENSATION
(a) We and you understand that no sales loads or charges for sales (except for transaction fees disclosed in the then current prospectus) of the Shares in Creation Unit aggregations are in effect. Should sales loads or charges be established for any of the Funds, this Agreement shall be amended appropriately upon mutually satisfactory terms.
(b) The Board of Trustee of the Trust has for each of the Funds adopted, and may, in the future, adopt a plan for any funds which may be added to those subject to this Agreement (each a "Plan"), pursuant to Rule 12b-1 under the 1940 Act. To the extent you provide services under the terms of the Plans in connection with the servicing of the accounts of your customers, we shall pay you a fee upon the terms and conditions as set forth in the Plans and your Investor Services Agreement as provided in the Plans, and in the then current prospectus of such Fund.
7. NASD MEMBERSHIP
(a) You and we are registered and/or licensed as a broker and/or dealer under the federal and applicable state laws. You and we represent and warrant to each other that you and we are each members of the NASD.
(b) Each of us agrees to notify the other immediately if we cease to be registered or licensed as a broker or dealer or fail to be a member in good standing of the NASD.
(c) You and we agree to abide by the rules and regulations of the NASD, including, without limitation, Rule 2830 of the NASD Conduct Rules, except as may be permitted by a writing from the NASD addressing the Trust in specific terms.
8. COMPLIANCE WITH REGULATORY REQUIREMENTS
We represent and warrant to you the following:
(a) The Trust has filed with respect to each Fund a registration statement (a "Registration Statement") with the SEC relating to its Shares under the Securities Act of 1933 (the "1933 Act") on Form N-1A, including a prospectus and a statement of additional information. The Registration Statement (including the prospectus and the statement of addition information) conforms in all respects to the requirements of the 1933 Act, the 1940 Act and the rules thereunder.
(b) To the extent required by law, each Fund is registered and its Shares are qualified for sale in all states and other jurisdictions in the United States unless you are notified in writing to the contrary. You may rely solely on such representation in selling the Shares, but we assume no responsibility or obligation as to your right as a broker-dealer to sell Shares of the Funds in any state or jurisdiction.
(c) The then current prospectus for each of the Funds contains such disclosure with respect to fees paid and charges imposed in connection with the sale of the Shares as is necessary to comply with the rules and regulations of the NASD, including, without limitation, disclosure of all compensation of the type described herein as required by Rule 2830 of the NASD Conduct Rules. Such fees and charges will be in compliance with the rules and regulations of the NASD, including, without limitation, Rule 2830 of the NASD Conduct Rules.
(d) The investment adviser of each Fund is State Street Bank and Trust Company, a bank not required to be registered as an investment adviser under the Investment Advisers Act of 1940, but which is registered in any state where registration is required to serve as investment adviser to each Fund.
(e) The Registration Statement (including the prospectus and statement of additional information) and any Sales Materials relating to the Funds provided by us to you do not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading.
(f) All Sales Materials will comply in all material respects with the rules and regulations of the SEC, the NASD and any states having such rules and regulations and will be filed with the NASD or SEC and the relevant states as required by the rules and regulations of the NASD, the SEC and such states, respectively.
(g) The foregoing representations and warranties will be true and correct at all times during the term of this Agreement (with references to the Registration Statement being deemed
to refer to the Registration Statement in effect at the time such reference is made and to the then current prospectus of the Funds).
9. INDEMNIFICATION
We have represented to you that pursuant to Section 6 of the Distribution Agreement the Trust has agreed to provide indemnification, subject to the terms of such Section, to us and soliciting dealers that have entered into a dealer agreement with us in a form approved by the Board of Trustees of the Trust including a provision for such indemnification. We hereby confirm to you that you are such a soliciting dealer and that you, your officers, directors, agents and employees and controlling persons, are entitled to indemnification by the Trust as third party beneficiaries of the indemnification provisions of the Distribution Agreement. This Section 10 shall survive the termination of this Agreement.
10. TERMINATION
Either party hereto may cancel this Agreement upon 30 days' prior written notice to the other. This Agreement shall be in substitution of any prior agreement between us regarding the distribution of the Shares.
11. MISCELLANEOUS
(a) You understand and agree that you are acting as principal under this Agreement, and that you are in no way responsible for the manner of our performance or for any of our acts or omissions in connection therewith. Nothing shall constitute us as a syndicate, association, joint venture, partnership, unincorporated business, or other separate entity or otherwise partners with you.
(b) Each Fund reserves the right in its discretion and we reserve the right, in our discretion and without notice to you, subject to applicable law, to suspend sales or redemptions or to withdraw the offering of Shares of the Funds.
(c) All communication shall be sent to you at your offices at ____________________ and to us at the address we have provided at the end of this Agreement. Notice shall be deemed to have been given on the date it was either delivered personally to the other party or any officer or member thereof or was either received by express delivery or telecopy (with receipt) by the other party at his or her address specified in this Agreement. Either party may change the address to which communications to it shall be sent by giving notice thereof in accordance with this provision.
(d) We may amend this Agreement mutually, at any time and from time to time, to add additional fund(s) established by the Trust to Annex I hereof, if permitted by applicable SEC order, by delivery to you by us of a new or amended Annex I containing the names of the additional fund(s). Both of us hereby agree that any such amendment shall become effective and part of this Agreement and be deemed binding upon the first sale by you of any shares of such additional fund(s).
(e) This Agreement shall become effective as of the date when it is executed and dated by us below. This Agreement shall be governed by the laws of the State of New York without giving effect to conflict of law provisions.
(f) If a dispute arises between us with respect to this Agreement which the parties are unable to resolve themselves, it shall be settled by arbitration in accordance with the then existing NASD Code of Arbitration Procedure (the "NASD Code"). The parties agree, that to the extent permitted by the NASD Code, the arbitrator(s) shall be selected from the securities industry.
ALPS MUTUAL FUNDS SERVICES, INC.
By:______________________________
(Authorized Signature)
Accepted:
FIRM NAME:
By:______________________________
Address:_________________________
Date:____________________________
Exhibit 6.D
(cont.)
FORM OF
SOLICITING DEALER AGREEMENT
_____________ __, 1998
Ladies and Gentlemen:
The Select Sector SPDR Trust (the "Trust") is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the "1940 Act"), organized as a series fund and formed under the laws of the Commonwealth of Massachusetts. The Trust will consist initially of nine series (each a "Fund") and will issue shares of beneficial interest, par value $.001, of each Fund (the "Shares"). The Trust will only sell and redeem Shares in aggregations of a specified number of Shares of a Fund (each a "Creation Unit") set forth in Annex I hereto. Pursuant to a Distribution Agreement between the Trust and us (the "Distribution Agreement"), we will act as distributor (the "Distributor") and principal underwriter of Creation Units of Shares of the Funds listed on Annex I as exclusive agent on behalf of the Trust. Capitalized terms not defined herein shall have the meanings attributed to them in the current prospectus and statement of additional information of the Trust relating to the Shares. Creation Units of Shares of each Fund will be sold at their net asset value, without a sales charge, for the Deposit Securities designated for delivery on a business day for a Fund and the Cash Component. Individual Shares of each Fund will be listed and traded on the American Stock Exchange ("AMEX").
In consideration of the mutual covenants contained herein, it is hereby agreed that our respective rights and obligations shall be as follows:
1. ROLE OF DISTRIBUTOR
Pursuant to and in accordance with the provisions of the Distribution Agreement, we will make arrangements for securities dealers that may wish from time to time to solicit from the public orders to purchase Creation Units of Shares of a Fund. You are hereby invited to become one of the securities dealers referred to herein as a "Soliciting Dealer". This will confirm our mutual agreement as to the terms and conditions applicable to your participation as a Soliciting Dealer, such agreement to be effective on your confirmation hereof.
2. ROLE OF SOLICITING DEALERS
As a Soliciting Dealer, you may, at your election, from time to time, offer and solicit purchase orders for Creation Units of Shares. As, when and if you generate a customer request for the purchase of Creation Units of Shares of any Fund and you determine to transmit such request to us in your capacity as Soliciting Dealer, you shall comply with the procedures for the purchase of Creation Units of Shares set forth in the then current prospectus and statement of additional information applicable to the Shares. We agree that you shall not be obligated to solicit any certain number of orders for the purchase of Creation Units. You understand that all orders for the purchase of Creation Units of Shares of each Fund must be placed with us and may be placed only through an Authorized Participant that has entered into a Participant Agreement with us and the Trust. During any period you are an Authorized Participant, you may submit purchase orders to us in such capacity. Your duties and obligations as an Authorized Participant are determined by the terms and conditions of the Participant Agreement and not pursuant
hereto. The procedures relating to orders and the handling thereof will be subject to the terms of the then current prospectus and statement of additional information of the Trust, the Participant Agreement and instructions in writing received by you from us or the Trust's transfer agent from time to time. Unless otherwise mutually agreed in writing, each transaction shall be promptly confirmed by us in writing to the customer on a fully disclosed basis and a copy of each confirmation shall be sent simultaneously to you. You agree that upon receipt of duplicate confirmations you will examine the same and promptly notify us of any errors or discrepancies which you discover and shall promptly bring to our attention and the Trust's any errors in such confirmations claimed by your customers.
3. PURCHASE OF FUND SHARES FOR SALE TO CUSTOMERS
Except as may be otherwise agreed to in writing by the National Association of Securities Dealers, Inc. (the "NASD"):
(a) You agree that all purchases by you through us shall be made only to cover orders received by you from your customers or for your own bona fide investment.
(b) You agree to sell Shares of the Funds to your customers subject to minimum investment requirements applicable to each order and at the applicable public offering price described in the prospectus and statement of additional information of such Fund in effect on the date of the sale (the prospectus and statement of additional information as of any such sale date or of any applicable redemption or repurchase date being sometimes referred to together herein as the "then current prospectus"), provided, however, that it is understood that you assume no responsibility or liability for the determination of such price.
(c) You shall not withhold placing orders received from your customers so as to profit yourself as a result of such withholding (e.g., by a change in the net asset value from that used in determining the public offering price to your customers).
(d) You understand that all orders are subject to acceptance or rejection by us or the Trust in the sole discretion of either. No conditional order will be accepted by the Trust on any basis other than a definite price. The handling of orders by the parties shall be subject to such procedures as may be mutually agreed upon from time to time.
(e) Payment for Creation Units of Shares purchased shall be made in accordance with the provisions described in the then current prospectus. If such payment is not received, we reserve the right, without notice, either to cancel the sale, or, at our option, to sell the Shares ordered back to such Fund, and in either case, we may hold you responsible for any direct loss suffered by us or by such Fund resulting from your failure to make payment as aforesaid.
4. SELLING PROCEDURES/SALES MATERIALS
(a) "Sales Material," as used herein, shall include, without limitation, promotional materials, sales literature, advertisements, press releases, announcements, circulars, research reports, market letters, performance reports or summaries, form letters, posters, signs and other similar materials, whether in print, hypertext, video, audio or other media, and any items derived from the foregoing, and including sales materials intended for wholesale use (i.e., broker/dealer use only) or retail use.
(b) You shall not make any representation concerning the Funds or their securities except those contained in the then current prospectus or any Sales Materials furnished by us relating to the Funds. (You assume no responsibility or liability for representations contained in
any of such documents, except to the extent of any information provided by you in writing expressly for use therein as specifically authorized by you in a given particular instance.) We agree to notify you in writing at the address specified in paragraph (c) of any change to the prospectus or statement of additional information of each Fund, specifying such change, at least 10 days before making such change, provided that if such notice is not reasonably practicable, we may provide you with the required notice within such other period as is reasonable under the circumstances, but, in any event, not later than concurrently with such change.
(c) We agree to supply to you, at no cost to you, additional copies of the prospectus, statement of additional information, shareholder materials, periodic reports and proxy statements for each of the Funds and any printed supplemental material in reasonable quantities upon request. You agree to deliver copies of the above materials to customers and potential customers in accordance with applicable law and the rules of the Securities and Exchange Commission ("SEC"). Further, we agree to provide to your Mutual Funds Marketing Department (the "Marketing Department") copies of the most recent amended or supplemented prospectus and statement of additional information of each Fund, and such other SEC filings as you may request, in reasonable quantities upon our request. Such material shall be mailed to you at _________________________.
(d) We agree not to distribute any Sales Materials (other than copies of the then current prospectus) to any of your employees or sales offices unless the distribution of such materials has been approved in writing by your Marketing Department in accordance with written procedures (as amended from time to time) distributed by the Marketing Department. In approving such materials for distribution within your offices or through your sales offices to your
customers, you assume no responsibility or liability for the representations or any omissions contained in any Sales Materials nor for representations or any omissions contained in the prospectus or statement of additional information relating to the Funds.
(e) With the exception of (i) listings of product offerings; (ii) materials in the public domain (e.g., magazine articles and trade publications); and (iii) materials used by you on an internal basis only, you agree not to furnish or cause to be furnished to any third parties or to display publicly or publish any Sales Materials, except such Sales Materials relating to the Funds as may be provided to you by us or the Trust or approved for distribution by us upon your request (including materials prepared by the AMEX).
5. REDEMPTION/REPURCHASE/TRANSFER OF FUND SHARES AND EXCHANGES
(a) If you purchase Shares from your customers for redemption by any Fund, you agree to pay such customers not less than the applicable redemption price (i.e., the currently quoted net asset value minus any applicable sales charges or redemption fees) determined as set forth in the then current prospectus of the applicable Fund, provided, however, that it is understood that you assume no responsibility or liability for the determination of such price.
(b) You shall not withhold placing redemption or repurchase orders received from your customers so as to profit yourself as a result of such withholding (e.g., by a change in the net asset value from that used in determining the public offering price to your customers).
(c) Redemption and repurchase orders are subject to such procedures as may be mutually agreed upon from time to time, provided that any order placed by you regarding the redemption or repurchase of Shares is subject to timely receipt by us or the applicable Fund's transfer agent of all required documents and compliance with the applicable procedures.
(d) You and we understand that the Shares may be held solely through the book-entry system of The Depository Trust Company. If at any time, the Shares shall no longer be held exclusively through The Depository Trust Company, we and you shall amend this Agreement upon mutually satisfactory terms.
(e) Exchanges of Shares between Funds, if permitted, will be effected in the manner and subject to the restrictions and charges described in the then current prospectuses of the relevant Funds. The handling of exchanges will be further subject to such other procedures as may be mutually agreed upon from time to time.
6. COMPENSATION
(a) We and you understand that no sales loads or charges for sales (except for transaction fees disclosed in the then current prospectus) of the Shares in Creation Unit aggregations are in effect. Should sales loads or charges be established for any of the Funds, this Agreement shall be amended appropriately upon mutually satisfactory terms.
(b) The Board of Trustee of the Trust has for each of the Funds adopted, and may, in the future, adopt a plan for any funds which may be added to those subject to this Agreement (each a "Plan"), pursuant to Rule 12b-1 under the 1940 Act. To the extent you provide services under the terms of the Plans in connection with the servicing of the accounts of your customers, we shall pay you a fee upon the terms and conditions as set forth in the Plans and your Investor Services Agreement as provided in the Plans, and in the then current prospectus of such Fund.
7. NASD MEMBERSHIP
(a) You and we are registered and/or licensed as a broker and/or dealer under the federal and applicable state laws. You and we represent and warrant to each other that you and we are each members of the NASD.
(b) Each of us agrees to notify the other immediately if we cease to be registered or licensed as a broker or dealer or fail to be a member in good standing of the NASD.
(c) You and we agree to abide by the rules and regulations of the NASD, including, without limitation, Rule 2830 of the NASD Conduct Rules, except as may be permitted by a writing from the NASD addressing the Trust in specific terms.
8. COMPLIANCE WITH REGULATORY REQUIREMENTS
We represent and warrant to you the following:
(a) The Trust has filed with respect to each Fund a registration statement (a "Registration Statement") with the SEC relating to its Shares under the Securities Act of 1933 (the "1933 Act") on Form N-1A, including a prospectus and a statement of additional information. The Registration Statement (including the prospectus and the statement of addition information) conforms in all respects to the requirements of the 1933 Act, the 1940 Act and the rules thereunder.
(b) To the extent required by law, each Fund is registered and its Shares are qualified for sale in all states and other jurisdictions in the United States unless you are notified in writing to the contrary. You may rely solely on such representation in selling the Shares, but we assume no responsibility or obligation as to your right as a broker-dealer to sell Shares of the Funds in any state or jurisdiction.
(c) The then current prospectus for each of the Funds contains such disclosure with respect to fees paid and charges imposed in connection with the sale of the Shares as is necessary to comply with the rules and regulations of the NASD, including, without limitation, disclosure of all compensation of the type described herein as required by Rule 2830 of the NASD Conduct Rules. Such fees and charges will be in compliance with the rules and regulations of the NASD, including, without limitation, Rule 2830 of the NASD Conduct Rules.
(d) The investment adviser of each Fund is State Street Bank and Trust Company, a bank not required to be registered as an investment adviser under the Investment Advisers Act of 1940, but which is registered in any state where registration is required to serve as investment adviser to each Fund.
(e) The Registration Statement (including the prospectus and statement of additional information) and any Sales Materials relating to the Funds provided by us to you do not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading.
(f) All Sales Materials will comply in all material respects with the rules and regulations of the SEC, the NASD and any states having such rules and regulations and will be filed with the NASD or SEC and the relevant states as required by the rules and regulations of the NASD, the SEC and such states, respectively.
(g) The foregoing representations and warranties will be true and correct at all times during the term of this Agreement (with references to the Registration Statement being deemed
to refer to the Registration Statement in effect at the time such reference is made and to the then current prospectus of the Funds).
9. TERMINATION
Either party hereto may cancel this Agreement upon 30 days' prior written notice to the other. This Agreement shall be in substitution of any prior agreement between us regarding the distribution of the Shares.
10. MISCELLANEOUS
(a) You understand and agree that you are acting as principal under this Agreement, and that you are in no way responsible for the manner of our performance or for any of our acts or omissions in connection therewith. Nothing shall constitute us as a syndicate, association, joint venture, partnership, unincorporated business, or other separate entity or otherwise partners with you.
(b) Each Fund reserves the right in its discretion and we reserve the right, in our discretion and without notice to you, subject to applicable law, to suspend sales or redemptions or to withdraw the offering of Shares of the Funds.
(c) All communication shall be sent to you at your offices at ____________________ and to us at the address we have provided at the end of this Agreement. Notice shall be deemed to have been given on the date it was either delivered personally to the other party or any officer or member thereof or was either received by express delivery or telecopy (with receipt) by the other party at his or her address specified in this Agreement. Either party may change the address to which communications to it shall be sent by giving notice thereof in accordance with this provision.
(d) We may amend this Agreement mutually, at any time and from time to time, to add additional fund(s) established by the Trust to Annex I hereof, if permitted by applicable SEC order, by delivery to you by us of a new or amended Annex I containing the names of the additional fund(s). Both of us hereby agree that any such amendment shall become effective and part of this Agreement and be deemed binding upon the first sale by you of any shares of such additional fund(s).
(e) This Agreement shall become effective as of the date when it is executed and dated by us below. This Agreement shall be governed by the laws of the State of New York without giving effect to conflict of law provisions.
(f) If a dispute arises between us with respect to this Agreement which the parties are unable to resolve themselves, it shall be settled by arbitration in accordance with the then existing NASD Code of Arbitration Procedure (the "NASD Code"). The parties agree, that to the extent permitted by the NASD Code, the arbitrator(s) shall be selected from the securities industry.
ALPS MUTUAL FUNDS SERVICES, INC.
By: ____________________________
(Authorized Signature)
Accepted:
FIRM NAME:
By: ____________________________
Address: _______________________
Date: __________________________
EXHIBIT 8
CUSTODIAN CONTRACT
This Contract between The Select Sector SPDR Trust, a business trust organized and existing under the laws of the Commonwealth of Massachusetts, having its principal place of business at 225 Franklin Street, Boston, Massachusetts, 02110, hereinafter called the "Trust", and State Street Bank and Trust Company, a Massachusetts trust company, having its principal place of business at 225 Franklin Street, Boston, Massachusetts, 02110, hereinafter called the "Custodian",
WITNESSETH:
WHEREAS, the Trust is registered as an open-end management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust is authorized to issue shares in separate series, with each such series representing interests in a separate portfolio of securities and other assets; and
WHEREAS, the Trust intends to initially offer shares (the "Shares") in nine (9) series, The Basic Industries Select Sector SPDR Fund, The Consumer Services Select Sector SPDR Fund, The Consumer Staples Select Sector SPDR Fund, The Cyclical/Transportation Select Sector SPDR Fund, The Energy Select Sector SPDR Fund, The Financial Select Sector SPDR Fund, The Industrial Select Sector SPDR Fund, The Technology Select Sector SPDR Fund, and The Utilities Select Sector SPDR Fund (such series together with all other series subsequently established by the Trust and made subject to this Contract in accordance with paragraph 17, being herein referred to as the "Fund(s)");
WHEREAS, the Trust will issue and redeem shares of each Fund only in aggregations of shares known as "Creation Units" (currently 50,000 shares in the case of each Fund) principally in kind for portfolio securities of the respective Fund, as more fully described in the prospectus and statement of additional information of the Trust (together, the "Prospectus") included in its registration statement on Form N-1A (the "Registration Statement") (Reg. Nos. 333-57791; 811-08837);
NOW THEREFORE, in consideration of the mutual covenants and agreements hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
The Trust hereby employs the Custodian as the custodian of the assets of the Funds of the Trust pursuant to the provisions of the Declaration of Trust. The Trust on behalf of the Fund(s) agrees to deliver to the Custodian all securities and cash of the Funds, and all payments of income, payments of principal or capital distributions received by it with respect to all securities owned by the Fund(s) from time to time, and the consideration received by it for such new or treasury Shares as may be issued or sold from time to time. The Custodian shall not be responsible for any property of a Fund held or received by the Fund and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Article
4), the Custodian shall on
behalf of the applicable Fund(s) from time to time employ one or more sub-custodians, but only in accordance with an applicable vote by the Board of Trustees of the Trust on behalf of the applicable Fund(s), and provided that the Custodian shall have no more or less responsibility or liability to the Trust on account of any actions or omissions of any sub-custodian so employed than any such sub-custodian has to the Custodian.
2. Duties of the Custodian with Respect to Property of the Trust Held By the Custodian
2.1 Holding Securities. The Custodian shall hold and physically segregate
for the account of each Fund all non-cash property, including all
securities owned by such Fund, other than (a) securities which are
maintained pursuant to Section 2.10 in a clearing agency registered
with the United States Securities and Exchange Commission (the "SEC")
under Section 17A of the Exchange Act, which acts as a securities
depository, or in the book-entry system authorized by the U.S.
Department of the Treasury and certain federal agencies (each, a "U.S.
Securities System") and (b) commercial paper of an issuer for which
State Street Bank and Trust Company acts as issuing and paying agent
("Direct Paper") which is deposited and/or maintained in the Direct
Paper System (the "Direct Paper System") of the Custodian pursuant to
Section 2.11.
2.2 Delivery of Securities. The Custodian shall release and deliver securities owned by a Fund held by the Custodian or in a Securities System account of the Custodian or in the Custodian's Direct Paper book entry system account ("Direct Paper System Account") only upon receipt of Proper Instructions from the Trust on behalf of the applicable Fund, which may be continuing instructions when deemed appropriate by the parties, and only in the following cases:
1) Upon sale of such securities for the account of the Fund and receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase agreement related to such securities entered into by the Fund;
3) In the case of a sale effected through a Securities System, in accordance with the provisions of Section 2.10 hereof;
4) To the depository agent in connection with tender or other similar offers for securities of the Fund;
5) To the issuer thereof or its agent when such securities are called, redeemed, retired or otherwise become payable; provided that, in any such case, the cash or other consideration is to be delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the name of the Fund or into the name of any nominee or nominees of the Custodian or into the name or nominee name of any agent appointed pursuant to Section 2.9 or into the name or nominee name of any sub-custodian appointed pursuant to Article 1; or for exchange for a different number of
bonds, certificates or other evidence representing the same aggregate face amount or number of units; provided that, in any such case, the new securities are to be delivered to the Custodian;
7) Upon the sale of such securities for the account of the Fund, to the broker or its clearing agent, against a receipt, for examination in accordance with "street delivery" custom; provided that in any such case, the Custodian shall have no responsibility or liability for any loss arising from the delivery of such securities prior to receiving payment for such securities except as may arise from the Custodian's own negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger, consolidation, recapitalization, reorganization or readjustment of the securities of the issuer of such securities, or pursuant to provisions for conversion contained in such securities, or pursuant to any deposit agreement; provided that, in any such case, the new securities and cash, if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the surrender thereof in the exercise of such warrants, rights or similar securities or the surrender of interim receipts or temporary securities for definitive securities; provided that, in any such case, the new securities and cash, if any, are to be delivered to the Custodian;
10) For delivery in connection with any loans of securities made by the Fund, but only against receipt of adequate collateral as agreed upon from time to time by the Custodian and the Trust on behalf of the Fund, which may be in the form of cash or obligations issued by the United States government, its agencies or instrumentalities, except that in connection with any loans for which collateral is to be credited to the Custodian's account in the book-entry system authorized by the U.S. Department of the Treasury, the Custodian will not be held liable or responsible for the delivery of securities owned by the Fund prior to the receipt of such collateral;
11) For delivery as security in connection with any borrowings by the Trust on behalf of the Fund requiring a pledge of assets by the Trust on behalf of the Fund, but only against receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any agreement among the Trust on behalf of the Fund, the Custodian and a broker-dealer registered under the Securities Exchange Act of 1934 (the "Exchange Act") and a member of The National Association of Securities Dealers, Inc. ("NASD"), relating to compliance with the rules of The Options Clearing Corporation and of any registered national securities exchange, or of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Fund of the Trust;
13) For delivery in accordance with the provisions of any agreement among the Trust on
behalf of the Fund, the Custodian, and a futures commission merchant registered under the Commodity Exchange Act, relating to compliance with the rules of the Commodity Futures Trading Commission ("CFTC") and/or any contract market, or any similar organization or organizations, regarding account deposits in connection with transactions by the Fund of the Trust;
14) Upon receipt of instructions from the transfer agent for the Trust (the "Transfer Agent") for delivery to such Transfer Agent or to the holders of Shares in connection with distributions in kind, as may be described from time to time in the Prospectus, in satisfaction of requests by holders of Shares for repurchase or redemption; and
15) For any other proper trust purpose, but only upon receipt of Proper Instructions from the Trust on behalf of the applicable Fund specifying the securities of the Fund to be delivered, setting forth the purpose for which such delivery is to be made, declaring such purpose to be a proper trust purpose, and naming the person or persons to whom delivery of such securities shall be made.
2.3 Registration of Securities. Securities held by the Custodian (other than bearer securities) shall be registered in the name of the Fund or in the name of any nominee of the Trust on behalf of the Fund or of any nominee of the Custodian which nominee shall be assigned exclusively to the Fund, unless the Trust has authorized in writing the appointment of a nominee to be used in common with other registered investment companies having the same investment adviser as the Fund, or in the name or nominee name of any agent appointed pursuant to Section 2.9 or in the name or nominee name of any sub-custodian appointed pursuant to Article 1. All securities accepted by the Custodian on behalf of the Fund under the terms of this Contract shall be in "street name" or other good delivery form. If, however, the Trust directs the Custodian to maintain securities in "street name", the Custodian shall utilize its best efforts only to timely collect income due the Trust on such securities and to notify the Trust on a best efforts basis only of relevant corporate actions including, without limitation, pendency of calls, maturities, tender or exchange offers.
2.4 Bank Accounts. The Custodian shall open and maintain a separate bank account or accounts in the name of each Fund of the Trust, subject only to draft or order by the Custodian acting pursuant to the terms of this Contract, and shall hold in such account or accounts, subject to the provisions hereof, all cash received by it from or for the account of the Fund, other than cash maintained by the Fund in a bank account established and used in accordance with Rule 17f-3 under the Investment Company Act of 1940, as amended (the "1940 Act"). Funds held by the Custodian for a Fund may be deposited by it to its credit as Custodian in the Banking Department of the Custodian or in such other banks or trust companies as it may in its discretion deem necessary or desirable; provided, however, that every such bank or trust company shall be qualified to act as a custodian under the 1940 Act and that each such bank or trust company and the funds to be deposited with each such bank or trust company shall on behalf of each applicable Fund be approved by vote of a majority of the Board of Trustees of the Trust. Such funds shall be deposited by the Custodian in its capacity as Custodian and shall be withdrawable by the
Custodian only in that capacity.
2.5 Determination of Fund Deposit, etc. Subject to and in accordance with the directions of the investment adviser for the Funds, the Custodian shall determine for each Fund after the end of each trading day on the New York Stock Exchange, in accordance with the respective Fund's policies as adopted from time to time by the Board of Trustees and in accordance with the procedures set forth in the Prospectus, (i) the identity and weighting of the securities in the Deposit Securities and the Fund Securities, (ii) the Cash Component (including the Dividend Equivalent Amount), and (iii) the amount of cash redemption proceeds (all as defined in the Registration Statement) required for the issuance or redemption, as the case may be, of Shares in Creation Unit aggregations of such Fund on such date. The Custodian shall provide or cause to be provided this information to the Funds' distributor and other persons according to the policy established by the Trust's Board of Trustees and shall disseminate such information on each day that the American Stock Exchange is open, including through the facilities of the National Securities Clearing Corporation, prior to the opening of trading on the American Stock Exchange.
2.6 Collection of Income. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other payments
with respect to registered securities held hereunder to which each Fund
shall be entitled either by law or pursuant to custom in the securities
business, and shall collect on a timely basis all income and other
payments with respect to bearer securities if, on the date of payment
by the issuer, such securities are held by the Custodian or its agent
thereof and shall credit such income, as collected, to such Fund's
custodian account. Without limiting the generality of the foregoing,
the Custodian shall detach and present for payment all coupons and
other income items requiring presentation as and when they become due
and shall collect interest when due on securities held hereunder.
Income due each Fund on securities loaned pursuant to the provisions of
Section 2.2 (10) shall be the responsibility of the Trust. The
Custodian will have no duty or responsibility in connection therewith,
other than to provide the Trust with such information or data as may be
necessary to assist the Trust in arranging for the timely delivery to
the Custodian of the income to which the Fund is properly entitled.
2.7 Payment of Trust Monies. Upon receipt of Proper Instructions from the Trust on behalf of the applicable Fund, which may be continuing instructions when deemed appropriate by the parties, the Custodian shall pay out monies of a Fund in the following cases only:
1) Upon the purchase of domestic securities, options, futures contracts or options on futures contracts for the account of the Fund but only (a) against the delivery of such securities or evidence of title to such options, futures contracts or options on futures contracts to the Custodian (or any bank, banking firm or trust company doing business in the United States or abroad which is qualified under the 1940 Act, as amended, to act as a custodian and has been designated by the Custodian as its agent for this purpose) registered in the name of the Fund or in the name of a nominee of the Custodian referred to in Section 2.3 hereof or in proper form for transfer; (b) in the case of a purchase effected through a U.S. Securities System, in accordance with the conditions set forth in Section 2.10 hereof; (c)
in the case of a purchase involving the Direct Paper System,
in accordance with the conditions set forth in Section 2.11;
(d) in the case of repurchase agreements entered into between
the Trust on behalf of the Fund and the Custodian, or another
bank, or a broker-dealer which is a member of NASD, (i)
against delivery of the securities either in certificate form
or through an entry crediting the Custodian's account at the
Federal Reserve Bank with such securities or (ii) against
delivery of the receipt evidencing purchase by the Fund of
securities owned by the Custodian along with written evidence
of the agreement by the Custodian to repurchase such
securities from the Fund or (e) for transfer to a time deposit
account of the Trust in any bank, whether domestic or foreign;
such transfer may be effected prior to receipt of a
confirmation from a broker and/or the applicable bank pursuant
to Proper Instructions from the Trust as defined herein;
2) In connection with conversion, exchange or surrender of securities owned by the Fund as set forth in Section 2.2 hereof;
3) For the redemption or repurchase of Creation Unit aggregations of Shares issued as set forth in Article 4 hereof;
4) For the payment of any expense or liability incurred by the Fund, including but not limited to the following payments for the account of the Fund: interest, taxes, management, accounting, transfer agent and legal fees, and operating expenses of the Trust whether or not such expenses are to be in whole or part capitalized or treated as deferred expenses;
5) For the payment of any dividends on Shares declared pursuant to the governing documents of the Trust;
6) For repayment of loans made to a Fund or upon redelivery of collateral for loans of securities made by a Fund or for payment in connection with a foreign exchange transaction;
7) For any other proper Trust purpose, but only upon receipt of Proper Instructions from the Trust on behalf of the Fund specifying the amount of such payment, setting forth the purpose for which such payment is to be made, declaring such purpose to be a proper Trust purpose, and naming the person or persons to whom such payment is to be made.
2.8 [Reserved].
2.9 Appointment of Agents. The Custodian may at any time or times, in compliance with the 1940 Act, in its discretion appoint (and may at any time remove) any other bank or trust company which is itself qualified under the 1940 Act to act as a custodian, as its agent to carry out such of the provisions of this Article 2 as the Custodian may from time to time direct; provided, however, that the appointment of any agent shall not relieve the Custodian of its responsibilities or liabilities hereunder.
2.10 Deposit of Trust Assets in U.S. Securities Systems. The Custodian may
deposit and/or maintain securities owned by a Fund in a U.S. Securities
System in accordance with applicable Federal Reserve Board and SEC
rules and regulations, if any, and subject to the following provisions:
1) The Custodian may keep securities of the Fund in a U.S.
Securities System provided that such securities are
represented in an account of the Custodian in the U.S.
Securities System (the "U.S. Securities System Account") which
account shall not include any assets of the Custodian other
than assets held as a fiduciary, custodian or otherwise for
customers;
2) The records of the Custodian with respect to securities of the
Fund which are maintained in a U.S. Securities System shall
identify by book-entry those securities belonging to the Fund;
3) The Custodian shall pay for securities purchased for the
account of the Fund upon (i) receipt of advice from the U.S.
Securities System that such securities have been transferred
to the U.S. Securities System Account, and (ii) the making of
an entry on the records of the Custodian to reflect such
payment and transfer for the account of the Fund. The
Custodian shall transfer securities sold for the account of
the Fund upon (i) receipt of advice from the U.S. Securities
System that payment for such securities has been transferred
to the U.S. Securities System Account, and (ii) the making of
an entry on the records of the Custodian to reflect such
transfer and payment for the account of the Fund. Copies of
all advices from the U.S. Securities System of transfers of
securities for the account of the Fund shall identify the
Fund, be maintained for the Fund by the Custodian and be
provided to the Trust at its request. Upon request, the
Custodian shall furnish the Trust on behalf of the Fund
confirmation of each transfer to or from the account of the
Fund in the form of a written advice or notice and shall
furnish to the Trust on behalf of the Fund copies of daily
transaction sheets reflecting each day's transactions in the
U.S. Securities System for the account of the Fund;
4) The Custodian shall provide the Trust with any report obtained
by the Custodian on the U.S. Securities System's accounting
system, internal accounting control and procedures for
safeguarding securities deposited in the U.S. Securities
System;
5) The Custodian shall have received from the Trust on behalf of
the Fund the initial or annual certificate, as the case may
be, required by Article 14 hereof;
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Trust for the benefit of the
Fund for any loss or damage to the Fund resulting from use of
the U.S. Securities System by reason of any negligence,
misfeasance or misconduct of the Custodian or any of its
agents or of any of its or their employees or from failure of
the Custodian or any such agent to enforce effectively such
rights as it may have against the U.S. Securities System; at
the election of the Trust, it shall be entitled to be
subrogated to the rights of the Custodian with respect to any
claim against the U.S.
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Securities System or any other person which the Custodian may
have as a consequence of any such loss or damage if and to the
extent that the Fund has not been made whole for any such loss
or damage.
2.11 Trust Assets Held in the Custodian's Direct Paper System. The Custodian
may deposit and/or maintain securities owned by a Fund in the Direct
Paper System of the Custodian subject to the following provisions:
1) No transaction relating to securities in the Direct Paper
System will be effected in the absence of Proper Instructions
from the Trust on behalf of the Fund;
2) The Custodian may keep securities of the Fund in the Direct
Paper System only if such securities are represented in the
Direct Paper System Account which account shall not include
any assets of the Custodian other than assets held as a
fiduciary, custodian or otherwise for customers;
3) The records of the Custodian with respect to securities of the
Fund which are maintained in the Direct Paper System shall
identify by book-entry those securities belonging to the Fund;
4) The Custodian shall pay for securities purchased for the
account of the Fund upon the making of an entry on the records
of the Custodian to reflect such payment and transfer of
securities to the account of the Fund. The Custodian shall
transfer securities sold for the account of the Fund upon the
making of an entry on the records of the Custodian to reflect
such transfer and receipt of payment for the account of the
Fund;
5) The Custodian shall furnish the Trust on behalf of the Fund
confirmation of each transfer to or from the account of the
Fund, in the form of a written advice or notice, of Direct
Paper on the next business day following such transfer and
shall furnish to the Trust on behalf of the Fund copies of
daily transaction sheets reflecting each day's transaction in
the Direct Paper System for the account of the Fund;
6) The Custodian shall provide the Trust on behalf of the Fund
with any report on its system of internal accounting control
as the Trust may reasonably request from time to time.
2.12 Segregated Account. The Custodian shall upon receipt of Proper
Instructions from the Trust on behalf of each applicable Fund establish
and maintain a segregated account or accounts for and on behalf of each
such Fund, into which account or accounts may be transferred cash
and/or securities, including securities maintained in an account by the
Custodian pursuant to Section 2.10 hereof, (i) in accordance with the
provisions of any agreement among the Trust on behalf of the Fund, the
Custodian and a broker-dealer registered under the Exchange Act and a
member of the NASD (or any futures commission merchant registered under
the Commodity Exchange Act), relating to compliance with the rules of
The Options Clearing Corporation and of any registered national
securities exchange (or the CFTC or any registered contract market), or
of any similar
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organization or organizations, regarding escrow or other arrangements
in connection with transactions by the Fund, (ii) for purposes of
segregating cash or securities in connection with options purchased,
sold or written by the Fund or commodity futures contracts or options
thereon purchased or sold by the Fund, (iii) for the purposes of
compliance by the Fund with the procedures required by Investment
Company Act Release No. 10666, or any subsequent release of the SEC, or
interpretative opinion of the staff of the SEC relating to the
maintenance of segregated accounts by registered investment companies,
(iv) for purposes of segregating cash deposits, representing 115% of
missing Deposit Securities, made pending delivery of such missing
Deposit Securities and utilized by the Trust to cover costs of
acquiring such missing Deposit Securities as provided for in the
Prospectus, and (v) for other proper trust purposes, but only, in the
case of clause (v), upon receipt of Proper Instructions from the Trust
on behalf of the applicable Fund setting forth the purpose or purposes
of such segregated account and declaring such purpose to be a proper
trust purpose.
2.13 Ownership Certificates for Tax Purposes. The Custodian shall execute
ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other
payments with respect to securities of each Fund held by it and in
connection with transfers of securities.
2.14 Proxies. The Custodian shall, with respect to the securities held
hereunder, cause to be promptly executed by the registered holder of
such securities, if the securities are registered otherwise than in the
name of the Fund or a nominee of the Fund, all proxies, without
indication of the manner in which such proxies are to be voted, and
shall promptly deliver to the Fund such proxies, all proxy soliciting
materials and all notices relating to such securities.
2.15 Communications Relating to Fund Securities. Subject to the provisions
of Section 2.3, the Custodian shall transmit promptly to the Trust for
each Fund all written information (including, without limitation,
pendency of calls and maturities of securities and expirations of
rights in connection therewith and notices of exercise of call and put
options written by the Trust on behalf of any Fund and the maturity of
futures contracts purchased or sold by a Fund) received by the
Custodian from issuers of the securities being held for such Fund. With
respect to tender or exchange offers, the Custodian shall transmit
promptly to a Fund all written information received by the Custodian
from issuers of the securities held by such Fund whose tender or
exchange is sought and from the party (or his agents) making the tender
or exchange offer. If the Trust desires to take action with respect to
any tender offer, exchange offer or any other similar transaction, the
Trust shall notify the Custodian at least three business days prior to
the date on which the Custodian is to take such action.
3. Payments for Repurchases or Redemptions and Sales of Shares of the
Trust
From such funds and securities as may be available for the purpose but
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subject to the limitations of the Declaration of Trust and any applicable votes of the Board of Trustees of the Trust pursuant thereto, the Custodian shall, upon receipt of instructions from the Transfer Agent, make funds and securities available for payment to, or in accordance with the instructions of, Authorized Participants (as
defined in the Prospectus) who have delivered to the Transfer Agent a Proper Instructions for the redemption or repurchase of their Shares, in Creation Unit aggregations, which shall have been accepted by the Transfer Agent, the applicable Fund Securities (as defined in the Prospectus) (or such securities in lieu thereof as may be designated by the investment adviser of the Trust in accordance with the Prospectus) for such Fund and the cash redemption payment, if applicable, less any applicable cash redemption transaction fee. The Custodian will transfer the applicable Trust Securities to or on the order of the Authorized Participant through the Clearing Process (as defined in the Prospectus) or, at the election of the Authorized Participant, outside the Clearing Process through the DTC system (as defined in the Prospectus). Any cash redemption payment (less any applicable cash redemption transaction fees) due to the Authorized Participant on redemption shall be effected through the Clearing Process or through wire transfer in the case of redemptions effected outside of the Clearing Process through the DTC system.
4. Proper Instructions
Proper Instructions as used throughout this Contract means a writing signed or initialed by one or more person or persons as the Board of Trustees shall have from time to time authorized. Each such writing shall set forth the specific transaction or type of transaction involved, including a specific statement of the purpose for which such action is requested. Oral instructions will be considered Proper Instructions if the Custodian reasonably believes them to have been given by a person authorized to give such instructions with respect to the transaction involved. The Trust shall cause all oral instructions to be confirmed in writing. Proper Instructions may include communications effected directly between electro-mechanical or electronic devices provided that the Trust and the Custodian agree to security procedures, including but not limited to, the security procedures selected by the Trust in the Funds Transfer Addendum attached hereto. For purposes of this Section, Proper Instructions shall include instructions received by the Custodian pursuant to any three-party agreement which requires a segregated asset account in accordance with Section 2.12.
5. Actions Permitted without Express Authority
The Custodian may in its discretion, without express authority from the Trust on behalf of each applicable Fund:
1) make payments to itself or others for minor expenses of handling securities or other similar items relating to its duties under this Contract, provided that all such payments shall be accounted for to the Trust on behalf of the Fund;
2) surrender securities in temporary form for securities in definitive form;
3) endorse for collection, in the name of the Fund, checks, drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection with the sale, exchange, substitution, purchase, transfer and other dealings with the securities and property of the
Fund except as otherwise directed by the Board of Trustees of the Trust.
6. Evidence of Authority
The Custodian shall be protected in acting upon any instructions, notice, request, consent, certificate or other instrument or paper believed by it to be genuine and to have been properly executed by or on behalf of the Trust. The Custodian may receive and accept a certified copy of a vote of the Board of Trustees of the Trust as conclusive evidence (a) of the authority of any person to act in accordance with such vote or (b) of any determination or of any action by the Board of Trustees pursuant to the Declaration of Trust as described in such vote; and such vote may be considered as in full force and effect until receipt by the Custodian of written notice to the contrary.
7. Duties of Custodian with Respect to the Books of Account and Calculation of Net Asset Value, Net Income and Other Information
The Custodian shall keep the books of account of each Fund and compute the net asset value per Share of the outstanding Shares. The Custodian shall transmit the net asset value per share of each Fund to the Transfer Agent, the Distributor, the American Stock Exchange (the "AMEX") and to such other entities as directed in writing by the Trust. If directed in writing by the Trust to do so, the Custodian shall also calculate daily the net income of the Fund as described in the Prospectus and shall advise the Trust, the Distributor and the Transfer Agent daily of the total amounts of such net income and, if instructed in writing by an officer of the Trust to do so, shall advise the Transfer Agent periodically of the division of such net income among its various components. The calculations of the net asset value per Share and the daily income of each Fund shall be made at the time or times described from time to time in the Prospectus. The Custodian shall on each day a Fund is open for the purchase or redemption of Shares of such Fund compute the number of Shares of each Deposit Security (as defined in the Prospectus) to be included in the current Trust Deposit, the Dividend Equivalent Payment (as defined in the Prospectus) and the Fund Securities (as defined in the Prospectus) and shall transmit such information to the AMEX.
8. Records
The Custodian shall with respect to each Fund create and maintain all records relating to its activities and obligations under this Contract in such manner as will meet the obligations of the Trust under the 1940 Act, with particular attention to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder. All such records shall be the property of the Trust and shall at all times during the regular business hours of the Custodian be open for inspection by duly authorized officers, employees or agents of the Trust and employees and agents of the SEC. The Custodian shall, at the Trust's request, supply the Trust with a tabulation of securities owned by each Fund and held by the Custodian and shall, when requested to do so by the Trust and for such compensation as shall be agreed upon between the Trust and the Custodian, include certificate numbers in such tabulations.
9. Opinion of Trust's Independent Accountant
The Custodian shall take all reasonable action, as the Trust on behalf of each applicable Fund may
from time to time request, to obtain from year to year favorable opinions from the Trust's independent accountants with respect to its activities hereunder in connection with the preparation of the Trust's Form N-1A, and Form N-SAR or other annual reports to the SEC and with respect to any other requirements thereof.
10. Report to Trust by Independent Public Accountants
The Custodian shall provide the Trust, on behalf of each of the Funds at such times as the Trust may reasonably require, with reports by independent public accountants on the accounting system, internal accounting control and procedures for safeguarding securities, futures contracts and options on futures contracts, including securities deposited and/or maintained in a U.S. Securities System relating to the services provided by the Custodian under this Contract such reports, shall be of sufficient scope and in sufficient detail, as may reasonably be required by the Trust to provide reasonable assurance that any material inadequacies would be disclosed by such examination, and, if there are no such inadequacies, the reports shall so state.
11. Compensation of Custodian
The Custodian shall receive from the Trust such compensation for the Custodian's services provided pursuant to this Agreement as may be agreed to from time to time in a written fee schedule approved by the parties and described in the then current Prospectus, and initially set forth as a "Unitary Fee" in the Custody, Accounting, Transfer Agent, Stock Transfer, Fund Administration and Advisory Fee Schedule to this Agreement.
12. Responsibility of Custodian
So long as and to the extent that it is in the exercise of reasonable care, the Custodian shall not be responsible for the title, validity or genuineness of any property or evidence of title thereto received by it or delivered by it pursuant to this Contract and shall be held harmless in acting upon any notice, request, consent, certificate or other instrument reasonably believed by it to be genuine and to be signed by the proper party or parties, including any futures commission merchant acting pursuant to the terms of a two-party or three-party futures or options agreement. The Custodian shall be held to the exercise of reasonable care in carrying out the provisions of this Contract but shall be kept indemnified by and shall be without liability to the Trust for any action taken or omitted by it in good faith without negligence. It shall be entitled to rely on and may act upon advice of counsel (who may be counsel for the Trust) on all matters, and shall be without liability for any action reasonably taken or omitted pursuant to such advice.
If the Trust on behalf of a Fund requires the Custodian to take any action with respect to securities, which action involves the payment of money or which action may, in the opinion of the Custodian, result in the Custodian or its nominee assigned to the Trust or the Fund being liable for the payment of money or incurring liability of some other form, the Trust on behalf of the Fund, as a prerequisite to requiring the Custodian to take such action, shall provide indemnity to the Custodian in an amount and form satisfactory to it.
If the Trust requires the Custodian, its affiliates, subsidiaries or agents, to advance cash or securities for any purpose (including but not limited to securities settlements, foreign exchange contracts and assumed settlement) or in the event that the Custodian or its nominee shall incur or be assessed any taxes, charges, expenses, assessments, claims or liabilities in connection with the performance of this Contract except such as may arise from its or its nominee's own negligent action, negligent failure to act or willful misconduct, any property at any time held for the account of the applicable Fund shall be security therefor and should the Trust fail to repay the Custodian promptly, the Custodian shall be entitled to utilize available cash and to dispose of such Fund's assets to the extent necessary to obtain reimbursement.
In no event shall the Custodian be liable for indirect, special or consequential damages.
13. Effective Period, Termination and Amendment
This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter provided, may
be amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than thirty (30) after the date of such delivery or mailing; provided, however
that the Custodian shall not with respect to a Fund act under Section 2.10
hereof in the absence of receipt of an initial certificate of the Secretary or
an Assistant Secretary that the Board has approved the initial use of a
particular Securities System by such Fund, as required by Rule 17f-4 under the
1940 Act and that the Custodian shall not with respect to a Fund act under
Section 2.11 hereof in the absence of receipt of an initial certificate of the
Secretary or an Assistant Secretary that the Board has approved the initial use
of the Direct Paper System by such Fund; provided further, however, that the
Trust shall not amend or terminate this Contract in contravention of any
applicable federal or state regulations, or any provision of the Declaration of
Trust, and further provided, that the Trust on behalf of one or more of the
Trust's may at any time by action of its Board (i) substitute another bank or
trust company for the Custodian by giving notice as described above to the
Custodian, or (ii) immediately terminate this Contract Agreement in the event of
the appointment of a conservator or receiver for the Custodian by the
Comptroller of the Currency or upon the happening of a like event at the
direction of an appropriate regulatory agency or court of competent
jurisdiction.
Upon termination of the Contract the Trust on behalf of each applicable Fund shall pay to the Custodian such compensation as may be due as of the date of such termination and shall likewise reimburse the Custodian for its reasonable costs, expenses and disbursements.
14. Successor Custodian
If a successor custodian for one or more Funds shall be appointed by the Board, the Custodian shall, upon termination, deliver to such successor custodian at the office of the Custodian, duly endorsed and in the form for transfer, all securities of each applicable Fund then held by it hereunder and shall transfer to an account of the successor custodian all of the securities of each such Fund held in a Securities System.
If no such successor custodian shall be appointed, the Custodian shall, in like manner, upon receipt of a Certified Resolution, deliver at the office of the Custodian and transfer such securities, funds and other properties in accordance with such resolution.
In the event that no written order designating a successor custodian or Certified Resolution shall have been delivered to the Custodian on or before the date when such termination shall become effective, then the Custodian shall have the right to deliver to a bank or trust company, which is a "bank" as defined in the 1940 Act, doing business in Boston, Massachusetts, or New York, New York, of its own selection, having an aggregate capital, surplus, and undivided profits, as shown by its last published report, of not less than $25,000,000, all securities, funds and other properties held by the Custodian on behalf of each applicable Fund and all instruments held by the Custodian relative thereto and all other property held by it under this Contract on behalf of each applicable Fund and to transfer to an account of such successor custodian all of the securities of each such Fund held in any Securities System. Thereafter, such bank or trust company shall be the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the possession of the Custodian after the date of termination hereof owing to failure of the Trust to procure the Certified Resolution to appoint a successor custodian, the Custodian shall be entitled to fair compensation for its services during such period as the Custodian retains possession of such securities, funds and other properties and the provisions of this Contract relating to the duties and obligations of the Custodian shall remain in full force and effect.
15. Interpretive and Additional Provisions
In connection with the operation of this Contract, the Custodian and the Trust on behalf of each of the Funds, may from time to time agree on such provisions interpretive of or in addition to the provisions of this Contract as may in their joint opinion be consistent with the general tenor of this Contract. Any such interpretive or additional provisions shall be in a writing signed by both parties and shall be annexed hereto, provided that no such interpretive or additional provisions shall contravene any applicable federal or state regulations or any provision of the Declaration of Trust of the Trust. No interpretive or additional provisions made as provided in the preceding sentence shall be deemed to be an amendment of this Contract.
16. Additional Trusts
In the event that the Trust establishes one or more series of Shares in addition to The Basic Industries Select Sector SPDR Fund, The Consumer Services Select Sector SPDR Fund, The Consumer Staples Select Sector SPDR Fund, The Cyclical/Transportation Select Sector SPDR Fund, The Energy Select Sector SPDR Fund, The Financial Select Sector SPDR Fund, The Industrial Select Sector SPDR Fund, The Technology Select Sector SPDR Fund, and The Utilities Select Sector SPDR Fund with respect to which it desires to have the Custodian render services as custodian under the terms hereof, it shall so notify the Custodian in writing, and if the Custodian agrees in writing to provide such services, such series of Shares shall become a Fund hereunder.
17. Massachusetts Law to Apply
This Contract shall be construed and the provisions thereof interpreted under and in accordance with laws of The Commonwealth of Massachusetts.
18. Prior Contracts
This Contract supersedes and terminates, as of the date hereof, all prior contracts between the Trust on behalf of each of the Funds and the Custodian relating to the custody of the Trust's assets.
18A. Notices
Any notice, instruction or other instrument required to be given hereunder may be delivered in person to the offices of the parties as set forth herein during normal business hours or delivered prepaid registered mail or by telex, cable or telecopy to the parties at the following addresses or such other addresses as may be notified by any party from time to time.
To the Trust: The Select Sector SPDR Trust
c/o State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Attention:
Telephone:
Telecopy:
To the Custodian: State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
Attention:
Telephone:
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Telecopy:
Such notice, instruction or other instrument shall be deemed to have been served in the case of a registered letter at the expiration of five business days after posting, in the case of cable twenty-four hours after dispatch and, in the case of telex, immediately on dispatch and if delivered outside normal business hours commence and in the case of cable, telex or telecopy on the business day after the receipt thereof. Evidence that the notice was properly addressed, stamped and put into the post shall be conclusive evidence of posting.
19. Reproduction of Documents
This Contract and all schedules, exhibits, attachments and amendments hereto may be reproduced by any photographic, photostatic, microfilm, micro-card, miniature photographic or other similar process. The parties hereto all/each agree that any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding, whether or not the original is in existence and whether or not such reproduction was made by a party in the regular course of business, and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence.
19A. Data Access Services Addendum
The Custodian and the Trust agree to be bound by the terms of the Data Access Services Addendum attached hereto.
20. Shareholder Communications Election
SEC Rule 14b-2 requires banks which hold securities for the account of customers to respond to requests by issuers of securities for the names, addresses and holdings of beneficial owners of securities of that issuer held by the bank unless the beneficial owner has expressly objected to disclosure of this information. In order to comply with the rule, the Custodian needs the Trust to indicate whether it authorizes the Custodian to provide the Trust's name, address, and share position to requesting companies whose securities the Trust owns. If the Trust tells the Custodian "no", the Custodian will not provide this information to requesting companies. If the Trust tells the Custodian "yes" or does not check either "yes" or "no" below, the Custodian is required by the rule to treat the Trust as consenting to disclosure of this information for all securities owned by the Trust or any funds or accounts established by the Trust. For the Trust's protection, the Rule prohibits he requesting company from using the Trust's name and address for any purpose other than corporate communications. Please indicate below whether the Trust consents or objects by checking one of the alternatives below.
YES [ ] The Custodian is authorized to release the Trust's
name, address, and share positions.
NO [ ] The Custodian is not authorized to release the Trust's
name, address, and share positions.
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21. Limitation of Liability
The Declaration of Trust dated June 10, 1998, establishing the Trust, which is hereby referred to and a copy of which is on file with the Secretary of The Commonwealth of Massachusetts, provides that the name The select Sector SPDR(R) Trust means the Trustees from time to time serving (as Trustees but not personally) under such Declaration of Trust. It is expressly acknowledged and agreed that the obligations of the Trust hereunder shall not be binding upon any of the shareholders, Trustees, officers, employees or agents of the Trust, personally, but shall bind only the trust property of the Trust, as provided in its Declaration of Trust. The execution and delivery of this Agreement have been authorized by the Trustees of the Trust and signed by an officer of the Trust, acting as such, and neither such authorization by such Trustees nor such execution and delivery by such officer shall be deemed to have been made by any of them individually or to impose any liability on any of them personally, but shall bind only the trust property of the Trust as provided in its Declaration of Trust.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be executed in its name and behalf by its duly authorized representative and its seal to be hereunder affixed as of the day of , 1998.
ATTEST
THE SELECT SECTOR SPDR TRUST
ATTEST
STATE STREET BANK AND TRUST COMPANY
FUNDS TRANSFER ADDENDUM
OPERATING GUIDELINES
1. OBLIGATION OF THE SENDER: State Street is authorized to promptly debit Client's (as named below) account(s) upon the receipt of a payment order in compliance with the selected Security Procedure chosen for funds transfer and in the amount of money that State Street has been instructed to transfer. State Street shall execute payment orders in compliance with the Security Procedure and with the Client's instructions on the execution date provided that such payment order is received by the customary deadline for processing such a request, unless the payment order specifies a later time. All payment orders and communications received after this time will be deemed to have been received on the next business day.
2. SECURITY PROCEDURE: The Client acknowledges that the Security Procedure it has designated on the Selection Form was selected by the Client from Security Procedures offered by State Street. The Client shall restrict access to confidential information relating to the Security Procedure to authorized persons as communicated in writing to State Street. The Client must notify State Street immediately if it has reason to believe unauthorized persons may have obtained access to such information or of any change in the Client's authorized personnel. State Street shall verify the authenticity of all instructions according to the Security Procedure.
3. ACCOUNT NUMBERS: State Street shall process all payment orders on the basis of the account number contained in the payment order. In the event of a discrepancy between any name indicated on the payment order and the account number, the account number shall take precedence and govern.
4. REJECTION: State Street reserves the right to decline to process or delay the processing of a payment order which (a) is in excess of the collected balance in the account to be charged at the time of State Street's receipt of such payment order; (b) if initiating such payment order would cause State Street, in State Street's sole judgment, to exceed any volume, aggregate dollar, network, time, credit or similar limits upon wire transfers which are applicable to State Street; or (c) if State Street, in good faith, is unable to satisfy itself that the transaction has been properly authorized.
5. CANCELLATION OR AMENDMENT: State Street shall use reasonable efforts to act on all authorized requests to cancel or amend payment orders received in compliance with the Security Procedure provided that such requests are received in a timely manner affording State Street reasonable opportunity to act. However, State Street assumes no liability if the request for amendment or cancellation cannot be satisfied.
6. ERRORS: State Street shall assume no responsibility for failure to detect any erroneous payment order provided that State Street complies with the payment order instructions as received and State Street complies with the Security Procedure. The Security Procedure is established for the purpose of authenticating payment orders only and not for the detection of errors in payment orders.
7. INTEREST AND LIABILITY LIMITS: State Street shall assume no responsibility for lost interest with respect to the refundable amount of any unauthorized payment order, unless State Street is notified of the unauthorized payment order within thirty (30) days of notification by State Street of the acceptance of such payment order. In no event shall State Street be liable for special, indirect or consequential damages, even if advised of the possibility of such damages and even for failure to execute a payment order.
8. AUTOMATED CLEARING HOUSE ("ACH") CREDIT ENTRIES/PROVISIONAL PAYMENTS: When a Client initiates or receives ACH credit and debit entries pursuant to these Guidelines and the rules of the National Automated Clearing House Association and the New England Clearing House
FUNDS TRANSFER ADDENDUM
Association, State Street will act as an Originating Depository Financial Institution and/or Receiving Depository Institution, as the case may be, with respect to such entries. Credits given by State Street with respect to an ACH credit entry are provisional until State Street receives final settlement for such entry from the Federal Reserve Bank. If State Street does not receive such final settlement, the Client agrees that State Street shall receive a refund of the amount credited to the Client in connection with such entry, and the party making payment to the Client via such entry shall not be deemed to have paid the amount of the entry.
9. CONFIRMATION STATEMENTS: Confirmation of State Street's execution of payment orders shall ordinarily be provided within 24 hours notice which may be delivered through State Street's proprietary information systems, such as, but not limited to Horizon and GlobalQuest(R), or by facsimile or callback. The Client must report any objections to the execution of a payment order within 30 days.
FUNDS TRANSFER ADDENDUM
Security Procedure(s) Selection Form
Please select one or more of the funds transfer security procedures indicated below.
/ /SWIFT
SWIFT (Society for Worldwide Interbank Financial Telecommunication) is a cooperative society owned and operated by member financial institutions that provides telecommunication services for its membership. Participation is limited to securities brokers and dealers, clearing and depository institutions, recognized exchanges for securities, and investment management institutions. SWIFT provides a number of security features through encryption and authentication to protect against unauthorized access, loss or wrong delivery of messages, transmission errors, loss of confidentiality and fraudulent changes to messages. SWIFT is considered to be one of the most secure and efficient networks for the delivery of funds transfer instructions. Selection of this security procedure would be most appropriate for existing SWIFT members.
/ /STANDING INSTRUCTIONS
Standing Instructions may be used where funds are transferred to a broker on the Client's established list of brokers with which it engages in foreign exchange transactions. Only the date, the currency and the currency amount are variable. In order to establish this procedure, State Street will send to the Client a list of the brokers that State Street has determined are used by the Client. The Client will confirm the list in writing, and State Street will verify the written confirmation by telephone. Standing Instructions will be subject to a mutually agreed upon limit. If the payment order exceeds the established limit, the Standing Instruction will be confirmed by telephone prior to execution.
/ /REMOTE BATCH TRANSMISSION
Wire transfer instructions are delivered via Computer-to-Computer (CPU-CPU) data communications between the Client and State Street. Security procedures include encryption and or the use of a test key by those individuals authorized as Automated Batch Verifiers. Clients selecting this option should have an existing facility for completing CPU-CPU transmissions. This delivery mechanism is typically used for high-volume business.
/ /GLOBAL HORIZON INTERCHANGE(SM) FUNDS TRANSFER SERVICE
Global Horizon Interchange Funds Transfer Service (FTS) is a State Street proprietary microcomputer-based wire initiation system. FTS enables Clients to electronically transmit authenticated Fedwire, CHIPS or internal book transfer instructions to State Street. This delivery mechanism is most appropriate for Clients with a low-to-medium number of transactions (5-75 per day), allowing Clients to enter, batch, and review wire transfer instructions on their PC prior to release to State Street.
/ /TELEPHONE CONFIRMATION (CALLBACK)
Telephone confirmation will be used to verify all non-repetitive funds transfer instructions received via untested facsimile or phone. This procedure requires Clients to designate individuals as authorized initiators and authorized verifiers. State Street will verify that the instruction contains the signature of an authorized person and prior to execution, will contact someone other than the originator at the Client's location to authenticate the instruction. Selection of this alternative is appropriate for Clients who do not have the capability to use other security procedures.
/ /REPETITIVE WIRES
For situations where funds are transferred periodically (minimum of one instruction per calendar quarter) from an existing authorized account to the same payee (destination bank and account number) and only the date and currency amount are variable, a repetitive wire may be implemented. Repetitive wires will be subject to a mutually agreed upon limit. If
FUNDS TRANSFER ADDENDUM
the payment order exceeds the established limit, the instruction will be confirmed by telephone prior to execution. Telephone confirmation is used to establish this process. Repetitive wire instructions must be reconfirmed annually.
This alternative is recommended whenever funds are frequently transferred between the same two accounts.
/ /TRANSFERS INITIATED BY FACSIMILE
The Client faxes wire transfer instructions directly to State Street Mutual Fund Services. Standard security procedure requires the use of a random number test key for all transfers. Every six months the Client receives test key logs from State Street. The test key contains alpha-numeric characters, which the Client puts on each document faxed to State Street. This procedure ensures all wire instructions received via fax are authorized by the Client.
We provide this option for Clients who wish to batch wire instructions and transmit these as a group to State Street Mutual Fund Services once or several times a day.
/ /AUTOMATED CLEARING HOUSE (ACH)
State Street receives an automated transmission or a magnetic tape from a Client for the initiation of payment (credit) or collection (debit) transactions through the ACH network. The transactions contained on each transmission or tape must be authenticated by the Client. Clients using ACH must select one or more of the following delivery options:
FUNDS TRANSFER ADDENDUM
/ /GLOBAL HORIZON INTERCHANGE AUTOMATED CLEARING HOUSE SERVICE
Transactions are created on a microcomputer, assembled into batches and delivered to State Street via fully authenticated electronic transmissions in standard NACHA formats.
/ /Transmission from Client PC to State Street Mainframe with Telephone Callback
/ /Transmission from Client Mainframe to State Street Mainframe with Telephone Callback
/ /Transmission from DST Systems to State Street Mainframe with Encryption
/ /Magnetic Tape Delivered to State Street with Telephone Callback
State Street is hereby instructed to accept funds transfer instructions only via the delivery methods and security procedures indicated. The selected delivery methods and security procedure(s) will be effective _____________________ for payment orders initiated by our organization.
KEY CONTACT INFORMATION
Whom shall we contact to implement your selection(s)?
CLIENT OPERATIONS CONTACT ALTERNATE CONTACT
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Name Name
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Address Address
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City/State/Zip Code City/State/Zip Code
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Telephone Number Telephone Number
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Facsimile Number Facsimile Number
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SWIFT Number
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Telex Number
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INSTRUCTION(S)
TELEPHONE CONFIRMATION
AUTHORIZED INITIATORS
Please Type or Print
Please provide a listing of your staff members who are currently authorized to INITIATE wire transfer instructions to State Street:
NAME TITLE (Specify whether position SPECIMEN SIGNATURE
is with Client or Investment
Manager)
------------------------- ------------------------- ---------------
------------------------- ------------------------- ---------------
------------------------- ------------------------- ---------------
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AUTHORIZED VERIFIERS
Please Type or Print
Please provide a listing of your staff members who will be CALLED BACK to verify the initiation of repetitive wires of $10 million or more and all non repetitive wire instructions:
NAME CALLBACK PHONE NUMBER DOLLAR LIMITATION (IF ANY) ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- |
DATA ACCESS SERVICES ADDENDUM TO CUSTODIAN AGREEMENT
AGREEMENT between The Select Sector SPDR Trust (the "Customer") and State Street Bank and Trust Company ("State Street").
PREAMBLE
WHEREAS, State Street has been appointed as custodian of certain assets of the Customer pursuant to a certain Custodian Agreement (the "Custodian Agreement") dated as of ________________, 1998;
WHEREAS, State Street has developed and utilizes proprietary accounting and other systems, including State Street's proprietary Multicurrency HORIZON(SM) Accounting System, in its role as custodian of the Customer, and maintains certain Customer-related data ("Customer Data") in databases under the control and ownership of State Street (the "Data Access Services"); and
WHEREAS, State Street makes available to the Customer certain Data Access Services solely for the benefit of the Customer, and intends to provide additional services, consistent with the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, and for other good and valuable consideration, the parties agree as follows:
1. SYSTEM AND DATA ACCESS SERVICES
(a) System. Subject to the terms and conditions of this Agreement, State Street hereby agrees to provide the Customer with access to State Street's Multicurrency HORIZON(SM) Accounting System and the other information systems (collectively, the "System") as described in Attachment A, on a remote basis for the purpose of obtaining reports and information, solely on computer hardware, system software and telecommunication links as listed in Attachment B (the "Designated Configuration") of the Customer, or certain third parties approved by State Street that serve as independent auditors, investment advisors or investment managers ("Investment Advisor"), or in other service capacities, of the Customer or other third parties such as the Customer's independent auditors, solely with respect to the Customer or on any designated substitute or back-up equipment configuration with State Street's written consent, such consent not to be unreasonably withheld.
(b) Data Access Services. State Street agrees to make available to the
Customer the Data Access Services subject to the terms and conditions of this
Agreement and data access operating standards and procedures as may be issued by
State Street from time to time. The ability of the Customer to originate
electronic instructions to State Street on behalf of the Customer in order to
(i) effect the transfer or movement of cash or securities held under custody by
State Street or (ii) transmit accounting or other information (such transactions
are referred to herein as "Client Originated Electronic Financial
Instructions"), and (iii) access data for the purpose of reporting and analysis,
shall be deemed to be Data Access Services for purposes of this Agreement.
(c) Additional Services. State Street may from time to time agree to make available to
the Customer additional Systems that are not described in the attachments to this Agreement. In the absence of any other written agreement concerning such additional systems, the term "System" shall include, and this Agreement shall govern, the Customer's access to and use of any additional System made available by State Street and/or accessed by the Customer.
2. NO USE OF THIRD PARTY SYSTEMS-LEVEL SOFTWARE
State Street and the Customer acknowledge that in connection with the Data Access Services provided under this Agreement, the Customer will have access, through the Data Access Services, to Customer Data and to functions of State Street's proprietary systems; provided, however that in no event will the Customer have direct access to any third party systems-level software that retrieves data for, stores data from, or otherwise supports the System.
3. LIMITATION ON SCOPE OF USE
a. Designated Equipment; Designated Location. The System and the Data Access Services shall be used and accessed solely on and through the Designated Configuration at the offices of the Customer or the Investment Advisor located in Boston, Massachusetts ("Designated Location").
b. Designated Configuration; Trained Personnel. State Street shall be responsible for supplying, installing and maintaining the Designated Configuration at the Designated Location. State Street and the Customer agree that each will engage or retain the services of trained personnel to enable both parties to perform their respective obligations under this Agreement. State Street agrees to use commercially reasonable efforts to maintain the System so that it remains serviceable, provided, however, that State Street does not guarantee or assure uninterrupted remote access use of the System.
c. Scope of Use. The Customer will use the System and the Data Access Services only for the processing of securities transactions, the keeping of books of account for the Customer and accessing data for purposes of reporting and analysis. The Customer shall not, and shall cause its employees and agents not to (i) permit any third party to use the System or the Data Access Services, (ii) sell, rent, license or otherwise use the System or the Data Access Services in the operation of a service bureau or for any purpose other than as expressly authorized under this Agreement, (iii) use the System or the Data Access Services for any fund, trust or other investment vehicle without the prior written consent of State Street, (iv) allow access to the System or the Data Access Services through terminals or any other computer or telecommunications facilities located outside the Designated Locations, (v) allow or cause any information (other than Fund holdings, valuations of Fund holdings, and other information reasonably necessary for the management or distribution of the assets of the Customer) transmitted from State Street's databases, including data from third party sources, available through use of the System or the Data Access Services to be redistributed or retransmitted to another computer, terminal or other device for other than use for or on behalf of the Customer or (vi) modify the System in any way, including without limitation, developing any software for or attaching any devices or computer programs to any equipment, system, software or database which forms a part of or is resident on the Designated Configuration.
d. Other Locations. Except in the event of an emergency or of a planned System shutdown, the Customer's access to services performed by the System or to Data Access Services at the Designated Location may be transferred to a different location only upon the prior written consent of State Street. In the event of an emergency or System shutdown, the Customer may use any back-up site included in the Designated Configuration or any other back-up site agreed to by State Street, which agreement will not be unreasonably withheld. The Customer may secure from State Street the right to access the System or the Data Access Services through computer and telecommunications facilities or devices complying with the Designated Configuration at additional locations only upon the prior written consent of State Street and on terms to be mutually agreed upon by the parties.
e. Title. Title and all ownership and proprietary rights to the System, including any enhancements or modifications thereto, whether or not made by State Street, are and shall remain with State Street.
f. No Modification. Without the prior written consent of State Street, the Customer shall not modify, enhance or otherwise create derivative works based upon the System, nor shall the Customer reverse engineer, decompile or otherwise attempt to secure the source code for all or any part of the System.
g. Security Procedures. The Customer shall comply with data access operating standards and procedures and with user identification or other password control requirements and other security procedures as may be issued from time to time by State Street for use of the System on a remote basis and to access the Data Access Services. The Customer shall have access only to the Customer Data and authorized transactions agreed upon from time to time by State Street and, upon notice from State Street, the Customer shall discontinue remote use of the System and access to Data Access Services for any security reasons cited by State Street; provided, that, in such event, State Street shall, for a period not less than 180 days (or such other shorter period specified by the Customer) after such discontinuance, assume responsibility to provide accounting services under the terms of the Custodian Agreement.
h. Inspections. State Street shall have the right to inspect the use of the System and the Data Access Services by the Customer and the Investment Advisor to ensure compliance with this Agreement. The on-site inspections shall be upon prior written notice to the Customer and the Investment Advisor and at reasonably convenient times and frequencies so as not to result in an unreasonable disruption of the Customer's or the Investment Advisor's business.
4. PROPRIETARY INFORMATION
a. Proprietary Information. The Customer acknowledges and State Street represents that the System and the databases, computer programs, screen formats, report formats, interactive design techniques, documentation and other information made available to the Customer by State Street as part of the Data Access Services and through the use of
the System constitute copyrighted, trade secret, or other proprietary information of substantial value to State Street. Any and all such information provided by State Street to the Customer shall be deemed proprietary and confidential information of State Street (hereinafter "Proprietary Information"). The Customer agrees that it will hold such Proprietary Information in the strictest confidence and secure and protect it in a manner consistent with its own procedures for the protection of its own confidential information and to take appropriate action by instruction or agreement with its employees who are permitted access to the Proprietary Information to satisfy its obligations hereunder. The Customer further acknowledges that State Street shall not be required to provide the Investment Advisor with access to the System unless it has first received from the Investment Advisor an undertaking with respect to State Street's Proprietary Information in the form of Attachment C to this Agreement. The Customer shall use all commercially reasonable efforts to assist State Street in identifying and preventing any unauthorized use, copying or disclosure of the Proprietary Information or any portions thereof or any of the logic, formats or designs contained therein.
b. Cooperation. Without limitation of the foregoing, the Customer shall advise State Street immediately in the event the Customer learns or has reason to believe that any person to whom the Customer has given access to the Proprietary Information, or any portion thereof, has violated or intends to violate the terms of this Agreement, and the Customer will, at its expense, co-operate with State Street in seeking injunctive or other equitable relief in the name of the Customer or State Street against any such person.
c. Injunctive Relief. The Customer acknowledges that the disclosure of any Proprietary Information, or of any information which at law or equity ought to remain confidential, will immediately give rise to continuing irreparable injury to State Street inadequately compensable in damages at law. In addition, State Street shall be entitled to obtain immediate injunctive relief against the breach or threatened breach of any of the foregoing undertakings, in addition to any other legal remedies which may be available.
d. Survival. The provisions of this Section 4 shall survive the termination of this Agreement.
5. LIMITATION ON LIABILITY
a. Limitation on Amount and Time for Bringing Action. The Customer agrees that any liability of State Street to the Customer or any third party arising out of State Street's provision of Data Access Services or the System under this Agreement shall be limited to the amount paid by the Customer for the preceding 24 months for such services. In no event shall State Street be liable to the Customer or any other party for any special, indirect, punitive or consequential damages even if advised of the possibility of such damages. No action, regardless of form, arising out of this Agreement may be brought by the Customer more than two years after the Customer has knowledge that the cause of action has arisen.
b. Limited Warranties. NO OTHER WARRANTIES, WHETHER EXPRESS OR
IMPLIED, INCLUDING, WITHOUT LIMITATION, THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, ARE
MADE BY STATE STREET.
c. Third-Party Data. Organizations from which State Street may obtain certain data included in the System or the Data Access Services are solely responsible for the contents of such data, and State Street shall have no liability for claims arising out of the contents of such third-party data, including, but not limited to, the accuracy thereof.
d. Regulatory Requirements. As between State Street and the Customer, the Customer shall be solely responsible for the accuracy of any accounting statements or reports produced using the Data Access Services and the System and the conformity thereof with any requirements of law.
e. Force Majeure. Neither party shall be liable for any costs or damages due to delay or nonperformance under this Agreement arising out of any cause or event beyond such party's control, including without limitation, cessation of services hereunder or any damages resulting therefrom to the other party, or the Customer as a result of work stoppage, power or other mechanical failure, computer virus, natural disaster, governmental action, or communication disruption.
6. INDEMNIFICATION
The Customer agrees to indemnify and hold State Street harmless from any loss, damage or expense including reasonable attorney's fees, (a "loss") suffered by State Street arising from (i) the negligence or willful misconduct in the use by the Customer of the Data Access Services or the System, including any loss incurred by State Street resulting from a security breach at the Designated Location or committed by the Customer's employees or agents or the Investment Advisor and (ii) any loss resulting from incorrect Client Originated Electronic Financial Instructions. State Street shall be entitled to rely on the validity and authenticity of Client Originated Electronic Financial Instructions without undertaking any further inquiry as long as such instruction is undertaken in conformity with security procedures established by State Street from time to time.
7. FEES
Fees and charges for the use of the System and the Data Access Services and related payment terms shall be as set forth in the Custody Fee Schedule in effect from time to time between the parties (the "Fee Schedule"). Any tariffs, duties or taxes imposed or levied by any government or governmental agency by reason of the transactions contemplated by this Agreement, including, without limitation, federal, state and local taxes, use, value added and personal property taxes (other than income, franchise or similar taxes which may be imposed or assessed against State Street) shall be borne by the Customer. Any claimed exemption from such tariffs, duties or taxes shall be supported by proper documentary evidence delivered to State Street.
8. TRAINING, IMPLEMENTATION AND CONVERSION
a. Training. State Street agrees to provide training, at a designated State Street training facility or at the Designated Location, to the Customer's personnel in connection with the use of the System on the Designated Configuration. The Customer agrees that it will set aside, during regular business hours or at other times agreed upon by both parties, sufficient time to enable all operators of the System and the Data Access Services, designated by the Customer, to receive the training offered by State Street pursuant to this Agreement.
b. Installation and Conversion. State Street shall be responsible for the technical installation and conversion ("Installation and Conversion") of the Designated Configuration. The Customer shall have the following responsibilities in connection with Installation and Conversion of the System:
(i) The Customer shall be solely responsible for the timely acquisition and maintenance of the hardware and software that attach to the Designated Configuration in order to use the Data Access Services at the Designated Location.
(ii) State Street and the Customer each agree that they will assign qualified personnel to actively participate during the Installation and Conversion phase of the System implementation to enable both parties to perform their respective obligations under this Agreement.
9. SUPPORT
During the term of this Agreement, State Street agrees to provide the support services set out in Attachment D to this Agreement.
10. TERM OF AGREEMENT
a. Term of Agreement. This Agreement shall become effective on the date of its execution by State Street and shall remain in full force and effect until terminated as herein provided.
b. Termination of Agreement. Either party may terminate this Agreement
(i) for any reason by giving the other party at least one-hundred and eighty
days' prior written notice in the case of notice of termination by State Street
to the Customer or thirty days' notice in the case of notice from the Customer
to State Street of termination; or (ii) immediately for failure of the other
party to comply with any material term and condition of the Agreement by giving
the other party written notice of termination. In the event the Customer shall
cease doing business, shall become subject to proceedings under the bankruptcy
laws (other than a petition for reorganization or similar proceeding) or shall
be adjudicated bankrupt, this Agreement and the rights granted hereunder shall,
at the option of State Street, immediately terminate with notice to the
Customer. This Agreement shall in any event terminate as to any Customer within
90 days after the termination of the Custodian Agreement applicable to such
Customer.
c. Termination of the Right to Use. Upon termination of this Agreement for any reason, any right to use the System and access to the Data Access Services shall terminate and the Customer shall immediately cease use of the System and the Data Access Services. Immediately upon termination of this Agreement for any reason, the Customer shall return to State Street all copies of documentation and other Proprietary Information in its possession; provided, however, that in the event that either party terminates this Agreement or the Custodian Agreement for any reason other than the Customer's breach, State Street shall provide the Data Access Services for a period of time and at a price to be agreed upon by the parties.
11. MISCELLANEOUS
a. Assignment; Successors. This Agreement and the rights and obligations of the Customer and State Street hereunder shall not be assigned by either party without the prior written consent of the other party, except that State Street may assign this Agreement to a successor of all or a substantial portion of its business, or to a party controlling, controlled by, or under common control with State Street.
b. Survival. All provisions regarding indemnification, warranty, liability and limits thereon, and confidentiality and/or protection of proprietary rights and trade secrets shall survive the termination of this Agreement.
c. Entire Agreement. This Agreement and the attachments hereto constitute the entire understanding of the parties hereto with respect to the Data Access Services and the use of the System and supersedes any and all prior or contemporaneous representations or agreements, whether oral or written, between the parties as such may relate to the Data Access Services or the System, and cannot be modified or altered except in a writing duly executed by the parties. This Agreement is not intended to supersede or modify the duties and liabilities of the parties hereto under the Custodian Agreement or any other agreement between the parties hereto except to the extent that any such agreement specifically refers to the Data Access Services or the System. No single waiver of any right hereunder shall be deemed to be a continuing waiver.
d. Severability. If any provision or provisions of this Agreement shall be held to be invalid, unlawful, or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired.
e. Governing Law. This Agreement shall be interpreted and construed in accordance with the internal laws of The Commonwealth of Massachusetts without regard to the conflict of laws provisions thereof.
ATTACHMENT A
Multicurrency HORIZON(SM) Accounting System System Product Description
I. The Multicurrency HORIZON(SM) Accounting System is designed to provide lot level Fund and general ledger accounting for SEC and ERISA type requirements and includes the following services: 1) recording of general ledger entries; 2) calculation of daily income and expense; 3) reconciliation of daily activity with the trial balance, and 4) appropriate automated feeding mechanisms to (i) domestic and international settlement systems, (ii) daily, weekly and monthly evaluation services, (iii) Fund performance and analytic services, (iv) customer's internal computing systems and (v) various State Street provided information services products.
II. GlobalQuest(R) is designed to provide customer access to the following
information maintained on The Multicurrency HORIZON(SM) Accounting System: 1)
cash transactions and balances; 2) purchases and sales; 3) income receivables;
4) tax reFund receivables; 5) daily priced positions; 6) open trades; 7)
settlement status; 8) foreign exchange transactions; 9) trade history, and 10)
daily, weekly and monthly evaluation services.
III. HORIZON(R) Gateway. HORIZON(R) Gateway provides customers with the ability to (i) generate reports using information maintained on the Multicurrency HORIZON(R) Accounting System which may be viewed or printed at the customer's location; (ii) extract and download data from the Multicurrency HORIZON(R) Accounting System; and (iii) access previous day and historical data. The following information which may be accessed for these purposes: 1) holdings; 2) holdings pricing; 3) transactions, 4) open trades; 5) income; 6) general ledger and 7) cash.
IV. SaFiRe(SM). SaFiRe(SM) is designed to provide the customer with the ability to prepare its own financial reports by permitting the customer to access customer information maintained on the Multicurrency HORIZON(R) Accounting System, to organize such information in a flexible reporting format and to have such reports printed on the customer's desktop or by its printing provider.
V. State Street Interchange. State Street Interchange is an open information delivery architecture wherein proprietary communication products, data formats and workstation tools are replaced by industry standards and is designed to enable the connection of State Street's network to customer networks, thereby facilitating the sharing of information.
ATTACHMENT B
DESIGNATED CONFIGURATION
ATTACHMENT B
ADVISOR/SUBADVISOR
STATE STREET [GRAPHIC]
BANK AND
TRUST
COMPANY
MULTICURRENCY HORIZON(R)
GLOBALQUEST(R),
HORIZON(R) GATEWAY, SOFTWARE IS INSTALLED FOR ACCESS.
INSIGHT(R) AND CLICK ON ICON FOR ACCESS.
SAFIRE(SM)
DIAL UP ACCESS
CONFIGURATION
|
ATTACHMENT C
UNDERTAKING
The Undersigned understands that in the course of its employment as Investment Advisor to THE SELECT SECTOR SPDR TRUST (the "Customer") it will have access to State Street Bank and Trust Company's ("State Street") Multicurrency HORIZON(SM) Accounting System and other information systems (collectively, the "System").
The Undersigned acknowledges that the System and the databases, computer programs, screen formats, report formats, interactive design techniques, documentation and other information made available to the Undersigned by State Street as part of the Data Access Services provided to the Customer and through the use of the System constitute copyrighted, trade secret, or other proprietary information of substantial value to State Street. Any and all such information provided by State Street to the Undersigned shall be deemed proprietary and confidential information of State Street (hereinafter "Proprietary Information"). The Undersigned agrees that it will hold such Proprietary Information in confidence and secure and protect it in a manner consistent with its own procedures for the protection of its own confidential information and to take appropriate action by instruction or agreement with its employees who are permitted access to the Proprietary Information to satisfy its obligations hereunder.
The Undersigned will not attempt to intercept data, gain access to data in transmission, or attempt entry into any system or files for which it is not authorized. It will not intentionally adversely affect the integrity of the System through the introduction of unauthorized code or data, or through unauthorized deletion.
Upon notice by State Street for any reason, any right to use the System and access to the Data Access Services shall terminate and the Undersigned shall immediately cease use of the System and the Data Access Services. Immediately upon notice by State Street for any reason, the Undersigned shall return to State Street all copies of documentation and other Proprietary Information in its possession.
State Street Global Advisors, Inc.
ATTACHMENT D
SUPPORT
During the term of this Agreement, State Street agrees to provide the following on-going support services:
a. Telephone Support. The Customer Designated Persons may contact State Street's Multicurrency HORIZON(SM) Help Desk and Customer Assistance Center between the hours of 8 a.m. and 6 p.m. (Eastern time) on all business days for the purpose of obtaining answers to questions about the use of the System, or to report apparent problems with the System. From time to time, the Customer shall provide to State Street a list of persons, not to exceed five in number, who shall be permitted to contact State Street for assistance (such persons being referred to as "the Customer Designated Persons").
b. Technical Support. State Street will provide technical support to assist the Customer in using the System and the Data Access Services. The total amount of technical support provided by State Street shall not exceed 10 resource days per year. State Street shall provide such additional technical support as is expressly set forth in the fee schedule in effect from time to time between the parties (the "Fee Schedule"). Technical support, including during installation and testing, is subject to the fees and other terms set forth in the Fee Schedule.
c. Maintenance Support. State Street shall use commercially reasonable efforts to correct system functions that do not work according to the System Product Description as set forth on Attachment A in priority order in the next scheduled delivery release or otherwise as soon as is practicable.
d. System Enhancements. State Street will provide to the Customer any enhancements to the System developed by State Street and made a part of the System; provided that, sixty (60) days prior to installing any such enhancement, State Street shall notify the Customer and shall offer the Customer reasonable training on the enhancement. Charges for system enhancements shall be as provided in the Fee Schedule. State Street retains the right to charge for related systems or products that may be developed and separately made available for use other than through the System.
e. Custom Modifications. In the event the Customer desires custom modifications in connection with its use of the System, the Customer shall make a written request to State Street providing specifications for the desired modification. Any custom modifications may be undertaken by State Street in its sole discretion in accordance with the Fee Schedule.
f. Limitation on Support. State Street shall have no obligation to support the Customer's use of the System: (i) for use on any computer equipment or telecommunication facilities which does not conform to the Designated Configuration or (ii) in the event the Customer has modified the System in breach of this Agreement.
EXHIBIT 9(a)
ADMINISTRATION AGREEMENT
Agreement dated as of , 1998 by and between State Street Bank and Trust Company, a Massachusetts trust company (the "Administrator"), and The Select Sector SPDR Trust (the "Trust").
WHEREAS, the Trust is registered as an open-end, management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, shares of beneficial interests (the "Shares") of each initial series of the Trust (each a "Fund" and together the "Funds") will be listed on the American Stock Exchange LLC (the "AMEX"); and
WHEREAS, the Trust desires to retain the Administrator to furnish certain administrative services to the Trust, and the Administrator is willing to furnish such services, on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the parties hereto agree as follows:
1. APPOINTMENT OF ADMINISTRATOR
The Trust hereby appoints the Administrator to act as administrator with respect to the Trust for purposes of providing certain administrative services for the period and on the terms set forth in this Agreement. The Administrator accepts such appointment and agrees to render the services stated herein.
The Trust will initially consist of the Funds listed in Schedule A to this Agreement. In the event that the Trust establishes one or more additional Funds with respect to which it wishes to retain the Administrator to act as administrator hereunder, the Trust shall notify the Administrator in writing. Upon written acceptance by the Administrator, such Fund shall become subject to the provisions of this Agreement to the same extent as the existing Funds, except to the extent that such provisions (including those relating to the compensation and expenses payable by the Trust and its Funds) may be modified with respect to each additional Fund in writing by the Trust and the Administrator at the time of the addition of the Fund.
2. DELIVERY OF DOCUMENTS
The Trust will promptly deliver to the Administrator copies of each of the following documents and all future amendments and supplements, if any:
a. The Trust's Declaration of Trust;
b. The Trust's currently effective registration statement under the Securities Act of 1933, as amended (the "1933 Act"), and the 1940 Act and the Trust's Prospectus(es) and Statement(s) of Additional Information relating to all Funds and all amendments and supplements thereto as in effect from time to time;
c. Certified copies of the resolutions of the Board of Trustees of the Trust (the "Board") authorizing (1) the Trust to enter into this Agreement and (2) certain individuals on behalf
of the Trust to (a) give instructions to the Administrator pursuant to this Agreement and (b) sign checks and pay expenses;
d. A copy of the investment advisory agreement between the Trust and its investment adviser;
e. A copy of the distribution agreement between the Trust and its distributor; and
f. Such other certificates, documents or opinions which the Administrator may, in its reasonable discretion, deem necessary or appropriate in the proper performance of its duties.
3. REPRESENTATIONS AND WARRANTIES OF THE ADMINISTRATOR
The Administrator represents and warrants to the Trust that:
a. It is a Massachusetts trust company, duly organized and existing under the laws of The Commonwealth of Massachusetts;
b. It has the corporate power and authority to carry on its business in The Commonwealth of Massachusetts;
c. All requisite corporate proceedings have been taken to authorize it to enter into and perform this Agreement;
d. No legal or administrative proceedings have been instituted or threatened which would impair the Administrator's ability to perform its duties and obligations under this Agreement; and
e. Its entrance into this Agreement shall not cause a material breach or be in material conflict with any other agreement or obligation of the Administrator or any law or regulation applicable to it.
4. REPRESENTATIONS AND WARRANTIES OF THE TRUST
The Trust represents and warrants to the Administrator that:
a. It is a business trust, duly organized, existing and in good standing under the laws of The Commonwealth of Massachusetts;
b. It has the corporate power and authority under applicable laws and by its Declaration of Trust and by-laws to enter into and perform this Agreement;
c. All requisite proceedings have been taken to authorize it to enter into and perform this Agreement;
d. It is an investment company properly registered under the 1940 Act;
e. A registration statement under the 1933 Act and the 1940 Act has been filed and will be effective and remain effective during the term of this Agreement. The Trust also warrants to the Administrator that as of the effective date of this Agreement, all necessary filings under the securities laws of the states in which the Trust offers or sells its shares have been made;
f. No legal or administrative proceedings have been instituted or threatened which would impair the Trust's ability to perform its duties and obligations under this Agreement;
g. Its entrance into this Agreement will not cause a material breach or be in material conflict with any other agreement or obligation of the Trust or any law or regulation applicable to it; and
h. As of the close of business on the date of this Agreement, the Trust is authorized to issue shares of beneficial interest, and it will initially offer shares, in the authorized amounts as set forth in Schedule A to this Agreement.
5. ADMINISTRATION SERVICES
The Administrator shall provide the following services, in each case, subject to the control, supervision and direction of the Trust and the review and comment by the Trust's auditors and legal counsel and in accordance with procedures which may be established from time to time between the Trust and the Administrator:
a. Oversee the determination and publication of the Trust's net asset value in accordance with the Trust's policy as adopted from time to time by the Board;
b. Oversee the maintenance by the Trust's custodian of certain books and records of the Trust as required under Rule 31a-1(b) of the 1940 Act;
c. Prepare the Trust's federal, state and local income tax returns for review by the Trust's independent accountants and filing by the Trust's treasurer;
d. Review calculation, submit for approval by officers of the Trust and arrange for payment of the Trust's expenses;
e. Prepare for review and approval by officers of the Trust financial information for the Trust's semi-annual and annual reports, proxy statements and other communications required or otherwise to be sent to Trust shareholders, and arrange for the printing and dissemination of such reports and communications to record and beneficial shareholders through The Depository Trust Company;
f. Prepare for review by an officer of and legal counsel for the Trust the Trust's periodic financial reports required to be filed with the Securities and Exchange Commission ("SEC") on Form N-SAR and financial information required by Form N-1A and such other reports, forms or filings as may be mutually agreed upon;
g. Prepare reports relating to the business and affairs of the Trust as may be mutually agreed
upon and not otherwise prepared by the Trust's investment adviser, custodian, legal counsel or independent accountants;
h. Prepare recommendations as to each Fund's income and capital gains available for distribution; calculate such distributions for each Fund in accordance with applicable regulations and the distribution policies set forth in the Trust's registration statement, and assist Trust management in making final determination of distribution amounts;
i. Make such reports and recommendations to the Board concerning the performance of the independent accountants as the Board may reasonably request;
j. Make such reports and recommendations to the Board concerning the performance and fees of the Trust's custodian and transfer and dividend disbursing agent ("Transfer Agent") as the Board may reasonably request or deems appropriate;
k. Oversee and review calculations of fees paid to the Trust's investment adviser, custodian and Transfer Agent;
l. Consult with the Trust's officers, independent accountants, legal counsel, custodian and Transfer Agent in establishing the accounting policies of the Trust;
m. Respond to, or refer to the Trust's officers or the Distributor or the Transfer Agent, shareholder inquiries relating to the Trust;
n. Provide periodic testing of portfolios to assist the Trust's investment adviser in complying with Internal Revenue Code mandatory qualification requirements, the requirements of the 1940 Act and Trust prospectus limitations as may be mutually agreed upon;
o. Review and provide assistance on shareholder communications;
p. Maintain general corporate calendar;
q. Maintain copies of the Trust's Declaration of Trust and by-laws;
r. File annual and semi-annual shareholder reports with the appropriate regulatory agencies; review text of "President's letters" to shareholders and "Management's Discussion of Trust Performance" (which shall also be subject to review by the Trust's legal counsel);
s. Organize, attend and prepare minutes of shareholder meetings;
t. Provide consultation on regulatory matters relating to portfolio management, Trust operations and any potential changes in the Trust's investment policies, operations or structure; act as liaison to legal counsel to the Trust and, where applicable, to legal counsel to the Trust's independent Board members;
u. Maintain continuing awareness of significant emerging regulatory and legislative developments which may affect the Trust, update the Board and the investment adviser
on
those developments and provide related planning assistance where requested or appropriate;
v. Develop or assist in developing guidelines and procedures to improve overall compliance by the Trust and its various agents;
w. Counsel and assist the Trust in the handling of routine regulatory examinations and work closely with the Trust's legal counsel in response to any non-routine regulatory matters;
Subject to review and comment by the Trust's legal counsel:
x. Prepare and file with the SEC amendments to the Trust's registration statement, including updating the Prospectus and Statement of Additional Information, where applicable;
y. Prepare and file with the SEC proxy statements; provide consultation on proxy solicitation matters;
z. Prepare agenda and background materials for Board meetings, make presentations where appropriate, prepare minutes and follow-up on matters raised at Board meetings;
aa. Prepare and file with the SEC Rule 24f-2 notices;
bb. Perform Blue Sky services pursuant to the specific instructions of the Trust and as detailed in Schedule B to this Agreement; and
cc. Prepare or oversee the preparation of all press releases and notices to the AMEX.
The Administrator shall provide the office facilities and the personnel required by it to perform the services contemplated herein.
6. FEES; EXPENSES; EXPENSE REIMBURSEMENT
The Administrator shall receive from the Trust such compensation for the Administrator's services provided pursuant to this Agreement as may be agreed to from time to time in a written fee schedule approved by the parties and described in the then current Prospectus, and initially set forth as a "Unitary Fee" in the Custody, Accounting, Transfer Agent, Stock Transfer, Fund Administration and Advisory Fee Schedule to this Agreement. The fees are accrued daily and billed monthly and shall be due and payable upon receipt of the invoice. Upon the termination of this Agreement before the end of any month, the fee for the part of the month before such termination shall be prorated according to the proportion which such part bears to the full monthly period and shall be payable upon the date of termination of this Agreement. In addition, the Trust shall reimburse the Administrator for its out-of-pocket costs incurred in connection with this Agreement.
The Trust agrees promptly to reimburse the Administrator for any equipment and supplies specially ordered by or for the Trust through the Administrator and for any other expenses not contemplated by this Agreement that the Administrator may incur on the Trust's behalf at the Trust's request or with the Trust's consent.
The Trust will bear all expenses that are incurred in its operation and not specifically assumed by the
Administrator or another party. Expenses to be borne by the Trust, include, but are not limited to: organizational expenses; cost of services of independent accountants and outside legal and tax counsel (including such counsel's review of the Trust's registration statement, proxy materials, federal and state tax qualification as a regulated investment company and other reports and materials prepared by the Administrator under this Agreement); cost of any services contracted for by the Trust directly from parties other than the Administrator; cost of trading operations and brokerage fees, commissions and transfer taxes in connection with the purchase and sale of securities for the Trust; investment advisory fees; taxes, insurance premiums and other fees and expenses applicable to its operation; costs incidental to any meetings of shareholders including, but not limited to, legal and accounting fees, proxy filing fees and the costs of preparation, printing and mailing of any proxy materials; costs incidental to Board meetings, including fees and expenses of Board members; the salary and expenses of any officer, director\trustee or employee of the Trust; costs incidental to the preparation, printing and distribution of the Trust's registration statements and any amendments thereto and shareholder reports; cost of typesetting and printing of prospectuses; cost of preparation and filing of the Trust's tax returns, Form N-1A and Form N-SAR, and all notices, registrations and amendments associated with applicable federal and state tax and securities laws; all applicable registration fees and filing fees required under federal and state securities laws; fidelity bond and directors' and officers' liability insurance; and cost of independent pricing services used in computing the Trust's net asset value.
The Administrator is authorized to and may employ or associate with such person or persons as the Administrator may deem desirable to assist it in performing its duties under this Agreement; provided, however, that the compensation of such person or persons shall be paid by the Administrator and that the Administrator shall be as fully responsible to the Trust for the acts and omissions of any such person or persons as it is for its own acts and omissions.
7. INSTRUCTIONS AND ADVICE
At any time, the Administrator may apply to any officer of the Trust for instructions and may consult with its own legal counsel or outside counsel for the Trust or the independent accountants for the Trust at the expense of the Trust, with respect to any matter arising in connection with the services to be performed by the Administrator under this Agreement. The Administrator shall not be liable, and shall be indemnified by the Trust, for any action taken or omitted by it in good faith in reliance upon any such instructions or advice or upon any paper or document believed by it to be genuine and to have been signed by the proper person or persons. The Administrator shall not be held to have notice of any change of authority of any person until receipt of written notice thereof from the Trust. Nothing in this paragraph shall be construed as imposing upon the Administrator any obligation to seek such instructions or advice, or to act in accordance with such advice when received.
8. LIMITATION OF LIABILITY AND INDEMNIFICATION
The Administrator shall be responsible for the performance of only such duties as are set forth in this Agreement and, except as otherwise provided under Section 6, shall have no responsibility for the actions or activities of any other party, including other service providers. The Administrator shall have no liability for any error of judgment or mistake of law or for any loss or damage resulting from the performance or nonperformance of its duties hereunder unless solely caused by or resulting from the gross negligence or willful misconduct of the Administrator, its officers or employees. The Administrator shall not be liable for any special, indirect, incidental, or consequential damages of any kind whatsoever (including, without limitation, attorneys' fees) under any provision of this Agreement or for any such damages arising out of any act or failure to act hereunder. In any event, the Administrator's liability under this Agreement shall be limited to its total annual compensation earned and fees paid hereunder during the preceding twelve months for any liability or loss suffered by the Trust including, but not limited to, any liability relating
to qualification of the Trust as a regulated investment company or any liability relating to the Trust's compliance with any federal or state tax or securities statute, regulation or ruling.
The Administrator shall not be responsible or liable for any failure or delay in performance of its obligations under this Agreement arising out of or caused, directly or indirectly, by circumstances beyond its control, including without limitation, work stoppage, power or other mechanical failure, computer virus, natural disaster, governmental action or communication disruption.
The Trust shall indemnify and hold the Administrator harmless from all loss, cost, damage and expense, including reasonable fees and expenses for counsel, incurred by the Administrator resulting from any claim, demand, action or suit in connection with the Administrator's acceptance of this Agreement, any action or omission by it in the performance of its duties hereunder, or as a result of acting upon any instructions reasonably believed by it to have been duly authorized by the Trust, provided that this indemnification shall not apply to actions or omissions of the Administrator, its officers or employees in cases of its or their own gross negligence or willful misconduct.
The indemnification contained herein shall survive the termination of this Agreement.
9. CONFIDENTIALITY
The Administrator agrees that, except as otherwise required by law or in connection with any required disclosure to a banking or other regulatory authority, it will keep confidential all records and information in its possession relating to the Trust or its shareholders or shareholder accounts and will not disclose the same to any person except at the request or with the written consent of the Trust.
10. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS; RECORDS
The Trust assumes full responsibility for complying with all securities, tax, commodities and other laws, rules and regulations applicable to it.
In compliance with the requirements of Rule 31a-3 under the 1940 Act, the Administrator agrees that all records which it maintains for the Trust shall at all times remain the property of the Trust, shall be readily accessible during normal business hours, and shall be promptly surrendered upon the termination of the Agreement or otherwise on written request. The Administrator further agrees that all records which it maintains for the Trust pursuant to Rule 31a-1 under the 1940 Act will be preserved for the periods prescribed by Rule 31a- 2 under the 1940 Act unless any such records are earlier surrendered as provided above. Records shall be surrendered in usable machine-readable form.
11. SERVICES NOT EXCLUSIVE
The services of the Administrator to the Trust are not to be deemed exclusive, and the Administrator shall be free to render similar services to others. The Administrator shall be deemed to be an independent contractor and shall, unless otherwise expressly provided herein or authorized by the Trust from time to time, have no authority to act or represent the Trust in any way or otherwise be deemed an agent of the Trust.
12. TERM, TERMINATION AND AMENDMENT
This Agreement shall become effective on the date of its execution and shall remain in full force and effect from the effective date for an initial term of two years from the effective date and shall automatically continue in
full force and effect after such initial term unless either party terminates this Agreement by written notice to the other party at least sixty (60) days prior to the expiration of the initial term. Either party may terminate this Agreement at any time after the initial term upon at least sixty (60) days' prior written notice to the other party. Termination of this Agreement with respect to any given Fund shall in no way affect the continued validity of this Agreement with respect to any other Fund. Upon termination of this Agreement, the Trust shall pay to the Administrator such compensation and any reimbursable expenses as may be due under the terms hereof as of the date of such termination, including reasonable out-of-pocket expenses associated with such termination. This Agreement may be modified or amended from time to time by mutual written agreement of the parties hereto.
13. NOTICES
Any notice or other communication authorized or required by this Agreement to be given to either party shall be in writing and deemed to have been given when delivered in person or by confirmed facsimile, or posted by certified mail, return receipt requested, to the following address (or such other address as a party may specify by written notice to the other): if to the Trust: , Attn: , fax: ; if to the Administrator: State Street Bank and Trust Company, 1776 Heritage Drive, AFB-4, North Quincy, Massachusetts 02171, Attn: Fund Administration Legal Department, fax: 617-537-2578.
14. NON-ASSIGNABILITY
This Agreement shall not be assigned by either party hereto without the prior consent in writing of the other party, except that the Administrator may assign this Agreement to a successor of all or a substantial portion of its business, or to a party controlling, controlled by or under common control with the Administrator.
15. SUCCESSORS
This Agreement shall be binding on and shall inure to the benefit of the Trust and the Administrator and their respective successors and permitted assigns.
16. ENTIRE AGREEMENT
This Agreement contains the entire understanding between the parties hereto with respect to the subject matter hereof and supersedes all previous representations, warranties or commitments regarding the services to be performed hereunder whether oral or in writing.
17. WAIVER
The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver nor shall it deprive such party of the right thereafter to insist upon strict adherence to that term or any term of this Agreement. Any waiver must be in writing signed by the waiving party.
18. SEVERABILITY
If any provision of this Agreement is invalid or unenforceable, the balance of the Agreement shall remain in effect, and if any provision is inapplicable to any person or circumstance it shall nevertheless remain applicable to all other persons and circumstances.
19. GOVERNING LAW
This Agreement shall be construed and the provisions thereof interpreted under and in accordance with the laws of The Commonwealth of Massachusetts.
20. REPRODUCTION OF DOCUMENTS
This Agreement and all schedules, exhibits, attachments and amendments hereto may be reproduced by any photographic, photostatic, microfilm, micro-card, miniature photographic or other similar process. The parties hereto all/each agree that any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding, whether or not the original is in existence and whether or not such reproduction was made
by a party in the regular course of business, and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence.
21. Limitation of Liability
The Declaration of Trust dated June 10, 1998, establishing the Trust, which is hereby referred to and a copy of which is on file with the Secretary of The Commonwealth of Massachusetts, provides that the name The select Sector SPDR(R) Trust means the Trustees from time to time serving (as Trustees but not personally) under such Declaration of Trust. It is expressly acknowledged and agreed that the obligations of the Trust hereunder shall not be binding upon any of the shareholders, Trustees, officers, employees or agents of the Trust, personally, but shall bind only the trust property of the Trust, as provided in its Declaration of Trust. The execution and delivery of this Agreement have been authorized by the Trustees of the Trust and signed by an officer of the Trust, acting as such, and neither such authorization by such Trustees nor such execution and delivery by such officer shall be deemed to have been made by any of them individually or to impose any liability on any of them personally, but shall bind only the trust property of the Trust as provided in its Declaration of Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their officers designated below as of the date first written above.
THE SELECT SECTOR SPDR(R) TRUST
By:
Name:
Title:
STATE STREET BANK AND TRUST COMPANY
By: Name: Kathleen C. Cuocolo Title: Senior Vice President |
ADMINISTRATION AGREEMENT
SCHEDULE A
LISTING OF FUNDS AND AUTHORIZED SHARES
Fund Authorized Shares
The Basic Industries Select Sector SPDR Fund Unlimited
The Consumer Services Select Sector SPDR Fund Unlimited
The Consumer Staples Select Sector SPDR Fund Unlimited
The Cyclical/Transportation Select Sector SPDR Fund Unlimited
The Energy Select Sector SPDR Fund Unlimited
The Financial Select Sector SPDR Fund Unlimited
The Industrial Select Sector SPDR Fund Unlimited
The Technology Select Sector SPDR Fund Unlimited
The Utilities Select Sector SPDR Fund Unlimited
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ADMINISTRATION AGREEMENT
SCHEDULE B
NOTICE FILING WITH
STATE SECURITIES ADMINISTRATORS
AT THE SPECIFIC DIRECTION OF THE TRUST, THE ADMINISTRATOR WILL PREPARE REQUIRED DOCUMENTATION AND MAKE NOTICE FILINGS IN ACCORDANCE WITH THE SECURITIES LAWS OF EACH JURISDICTION IN WHICH TRUST SHARES ARE TO BE OFFERED OR SOLD PURSUANT TO INSTRUCTIONS GIVEN TO THE ADMINISTRATOR BY THE TRUST.
THE TRUST SHALL BE SOLELY RESPONSIBLE FOR THE DETERMINATION (i) OF THOSE JURISDICTIONS IN WHICH NOTICE FILINGS ARE TO BE SUBMITTED AND (ii) THE NUMBER OF TRUST SHARES TO BE PERMITTED TO BE SOLD IN EACH SUCH JURISDICTION. IN THE EVENT THAT THE ADMINISTRATOR BECOMES AWARE OF (a) THE SALE OF TRUST SHARES IN A JURISDICTION IN WHICH NO NOTICE FILING HAS BEEN MADE OR (b) THE SALE OF TRUST SHARES IN EXCESS OF THE NUMBER OF TRUST SHARES PERMITTED TO BE SOLD IN SUCH JURISDICTION, THE ADMINISTRATOR SHALL REPORT SUCH INFORMATION TO THE TRUST, AND IT SHALL BE THE TRUST'S RESPONSIBILITY TO DETERMINE APPROPRIATE CORRECTIVE ACTION AND INSTRUCT THE ADMINISTRATOR WITH RESPECT THERETO.
The Blue Sky services shall consist of the following:
1. Filing of Trust's Initial Notice Filings, as directed by the Trust;
2. Filing of Trust's renewals and amendments as required;
3. Filing of amendments to the Trust's registration statement where required;
4. Filing Trust sales reports where required;
5. Payment at the expense of the Trust of all Trust Notice Filing fees;
6. Filing the Prospectuses and Statements of Additional Information and any amendments or supplements thereto where required;
7. Filing of annual reports and proxy statements where required; and
8. The performance of such additional services as the Administrator and the Trust may agree upon in writing.
Unless otherwise specified in writing by the Administrator, Blue Sky services by the Administrator shall not include determining the availability of exemptions under a jurisdiction's blue sky law. Any such determination shall be made by the Trust or its legal counsel. In connection with the services described herein, the Trust shall issue in favor of the Administrator a power of attorney to submit Notice Filings on behalf of the Trust, which power of attorney shall be substantially in the form of Exhibit I attached hereto.
EXHIBIT I
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, as of , 1998 that The Select Sector SPDR(R) Trust with principal offices at 225 Franklin Street, Boston, Massachusetts 02110 (the "Trust") makes, constitutes, and appoints STATE STREET BANK AND TRUST COMPANY (the "Administrator") with principal offices at 225 Franklin Street, Boston, Massachusetts its lawful attorney-in-fact for it to do as if it were itself acting, the following:
1. REGISTRATION OF TRUST SHARES. The power to register shares of each series of the Trust in each jurisdiction in which each series of Trust shares are offered or sold and in connection therewith the power to prepare, execute, and deliver and file any and all Trust applications, including without limitation, applications to register shares, consents, including consents to service of process, reports, including without limitation, all periodic reports, claims for exemption, or other documents and instruments now or hereafter required or appropriate in the judgment of the Administrator in connection with the registration of Trust shares.
2. AUTHORIZED SIGNERS. Pursuant to this Limited Power of Attorney, individuals holding the titles of Officer, Blue Sky Manager, or Senior Blue Sky Administrator at the Administrator shall have authority to act on behalf of the Trust with respect to item 1 above.
The execution of this limited power of attorney shall be deemed coupled with an interest and shall be revocable only upon receipt by the Administrator of such termination of authority. Nothing herein shall be construed to constitute the appointment of the Administrator as or otherwise authorize the Administrator to act as an officer, director or employee of the Trust.
IN WITNESS WHEREOF, the Trust has caused this Agreement to be executed in its name and on its behalf by and through its duly authorized officer, as of the date first written above.
By:
Name:
Title:
EXHIBIT 9(b)
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the day of , 1998, by and between THE SELECT SECTOR SPDR TRUST, a Massachusetts business trust, having its principal office and place of business at 225 Franklin Street, Boston, Massachusetts 02110 (the "Trust"), and STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust company having its principal office and place of business at 225 Franklin Street, Boston, Massachusetts 02110 (the "Bank").
WHEREAS, the Trust is registered as an open-end management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust is authorized to issue shares in separate series, with each such series representing interests in a separate portfolio of securities and other assets;
WHEREAS, the Trust intends to initially offer shares in nine (9) series, The Basic Industries Select Sector SPDR Fund, The Consumer Services Select Sector SPDR Fund, The Consumer Staples Select Sector SPDR Fund, The Cyclicals/Transportation Select Sector SPDR Fund, The Energy Sector Select SPDR Fund, The Financial Select Sector SPDR Fund, The Industrial Select Sector SPDR Fund, The Technology Select Sector SPDR Fund, and The Utilities Select Sector SPDR Fund (each such series, together with all other series subsequently established by the Trust and made subject to this Agreement in accordance with Article 10, being herein referred to as a "Fund", and collectively as the "Funds");
WHEREAS, the Trust will issue and redeem shares of each Fund only in aggregations of shares known as "Creation Units" (currently 50,000 shares in the case of each Fund) (each a "Creation Unit") principally in kind for portfolio securities of the respective Fund, as more fully described in the prospectus and statement of additional information of the Trust (together, the "Prospectus") included in its registration statement on Form N-1A (the "Registration Statement") (Reg. Nos. 333-57791; 811-08837); and
WHEREAS, the shares of each of the initial nine Funds have been approved for listing on the American Stock Exchange LLC (the "AMEX"), subject to notice of issuance;
WHEREAS, The Depository Trust Company, a limited purpose trust company organized under the laws of the State of New York ("DTC"), or its nominee, will be the initial record or registered owner (the "Shareholder") of all shares;
WHEREAS, the Trust on behalf of the Funds desires to appoint the Bank as its transfer agent, dividend disbursing agent, and agent in connection with certain other activities, and the Bank desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree as follows:
l. Terms of Appointment; Duties of the Bank
1.1 Subject to the terms and conditions set forth in this Agreement, the Trust, on behalf of the Funds, hereby employs and appoints the Bank to act as, and the Bank agrees to act as its transfer agent for the authorized and issued shares of beneficial interest, $ 0.001 par value of each Fund listed on Annex A hereto ("Shares"), and as the Trust's dividend disbursing agent.
1.2 The Bank agrees that it will perform the following services:
(a) In accordance with procedures established from time to time by agreement between the Trust on behalf of each of the Funds, as applicable, and the Bank, the Bank shall:
(i) Review upon receipt from the Trust's distributor (the "Distributor") orders for the purchase of Creation Unit aggregations of Shares which have been submitted to the Distributor and based on its records and the records of DTC determine whether the order if accepted will result in the depositor of the Fund Deposit owning or appearing to own eighty percent (80%) of the outstanding Shares of such Fund and provide advice of the same to the Distributor;
(ii) Receive from the Distributor purchase orders from Authorized Participants (as defined in the Prospectus) for Creation Unit aggregations of Shares received in good form and accepted by or on behalf of the Trust by the Distributor, transmit appropriate trade instructions to the National Securities Clearance Corporation, if applicable, and pursuant to such orders issue the appropriate number of Shares of the applicable Fund and hold such Shares in the account of the Shareholder for each of the respective Funds of the Trust;
(iii) Receive from Authorized Participants (as defined in the Prospectus) redemption requests; deliver the appropriate documentation thereof to the authorized custodian of the Trust (the "Custodian"); generate and transmit or cause to be generated and transmitted confirmation of receipt of such redemption requests to the Authorized Participants submitting the same; transmit appropriate trade instructions to the National Securities Clearance Corporation, if applicable; and redeem the appropriate number of Creation Unit Aggregations of Shares held in the account of the Shareholder;
(iv) Prepare and transmit by means of DTC's book-entry system payments for dividends and distributions declared by the Trust on behalf of the applicable Fund;
(v) Maintain the record of the name and address of the Shareholder and the number of Shares issued by each Fund of the Trust and held by the Shareholder;
(vi) Record the issuance of Shares of the Trust and maintain pursuant to SEC Rule 17Ad-10(e) a record of the total number of Shares of the Trust, and of each Fund, which are authorized, based upon data provided to it by the Trust, and
issued and outstanding. The Bank shall also provide the Trust on a regular basis with the total number of Shares of each Fund which are authorized and issued and outstanding and shall have no obligation, when recording the issuance of Shares, to monitor the issuance of such Shares or to take cognizance of any laws relating to the issue or sale of such Shares, which functions shall be the sole responsibility of the Trust.
(vii) Prepare and transmit to the Trust and the Administrator all information with respect to purchases and redemptions of Shares as may be required to be reported to the AMEX and any other applicable securities exchange;
(viii) On days that a Fund may accept orders for purchases or redemptions, calculate and transmit to the Custodian and the Trust's administrator the number of outstanding Shares for each Fund;
(ix) On days that a Fund may accept orders for purchases or redemptions, transmit to the Custodian, the Trust and DTC the amount of Shares purchased or redeemed for such Fund;
(x) Confirm to DTC the number of Shares evidenced by each global certificate in registered form (the "Global Certificate") issued to the Shareholder, as DTC may reasonably request;
(xi) Prepare and deliver other reports, information and documents to DTC as DTC may reasonably request;
(xii) Extend the voting rights to the Shareholder and/or beneficial owners of Shares in accordance with the policies and procedures of DTC for book-entry only securities;
(xiii) Maintain those books and records of the Trust that are required under Rule 31a-1(b)(2)(D) of the 1940 Act unless otherwise directed by the Trust;
(b) In addition to and neither in lieu nor in contravention of the
services set forth in the above paragraph (a), the Bank shall:
(i) perform the customary services of a transfer agent and
dividend disbursing agent including but not limited to:
maintaining the account of the Shareholder, obtaining a list
of DTC participants holding interests in the Global
Certificate at the request of the Trust, mailing proxy
materials, shareholder reports and prospectuses to the
Shareholder or DTC participants or beneficial owners of Shares
at the request of the Trust.
(c) For so long as Shares are represented by Global Certificates, the following shall be delivered to DTC for delivery to beneficial owners in accordance with the procedures for book-entry only securities of DTC:
(i) Annual and semi-annual reports of the Trust;
(ii) Proxies, proxy statements and other proxy soliciting materials;
(iii) Prospectus and amendments and supplements to the Prospectus, including stickers; and
(iv) Other communications as may be required by law or reasonably requested by the Trust.
(d) The Bank shall provide additional services on behalf of the Trust (i.e., escheatment services) which may be agreed upon in writing between the Trust and the Bank.
2. Fees and Expenses
2.1 For the performance by the Bank pursuant to this Agreement, the Trust agrees on behalf of each of the Funds to pay the Bank a "unitary fee" as set out in the initial fee schedule attached hereto and in the Prospectus. Such fees and out-of-pocket expenses and advances identified under Section 2.2 below may be changed from time to time subject to mutual written agreement between the Trust and the Bank and as described in the then current Prospectus.
2.2 In addition to the fee paid under Section 2.1 above, the Trust agrees on behalf of each of the Funds to reimburse the Bank for out-of-pocket expenses, including but not limited to confirmation production, postage, forms, telephone, microfilm, microfiche, tabulating proxies, records storage, or advances incurred by the Bank for the items set out in the fee schedule attached hereto. In addition, any other expenses incurred by the Bank at the request or with the consent of the Trust, will be reimbursed by the Trust on behalf of the applicable Fund.
2.3 The Trust agrees on behalf of each of the Funds to pay all fees and reimbursable expenses within five days following the receipt of the respective billing notice. Postage for mailing of dividends, proxies, Trust reports and other mailings to all shareholder accounts shall be advanced to the Bank by the Trust at least seven (7) days prior to the mailing date of such materials.
3. Representations and Warranties of the Bank
The Bank represents and warrants to the Trust that:
3.1 It is a trust company duly organized and existing and in good standing under the laws of The Commonwealth of Massachusetts.
3.2 It is duly qualified to carry on its business in The Commonwealth of Massachusetts.
3.3 It is empowered under applicable laws and by its Charter and By-Laws to act as transfer agent and dividend disbursing agent and to enter into and perform this Agreement.
3.4 All requisite corporate proceedings have been taken to authorize it to enter into and perform this Agreement.
3.5 It has and will continue to have access to the necessary facilities, equipment and personnel to perform its duties and obligations under this Agreement.
4. Representations and Warranties of the Trust
The Trust represents and warrants to the Bank that:
4.1 It is a business trust duly organized and existing and in good standing under the laws of The Commonwealth of Massachusetts.
4.2 It is empowered under applicable laws and by its Declaration of Trust and By-Laws to enter into and perform this Agreement.
4.3 All corporate proceedings required by said Declaration of Trust and By-Laws have been taken to authorize it to enter into and perform this Agreement.
4.4 It is an open-end management investment company registered under the Investment Company Act of 1940, as amended.
4.5 A registration statement under the Securities Act of 1933, as amended, on behalf of each of the Funds is currently effective and will remain effective, and appropriate state securities law filings have been made and will continue to be made, with respect to all Shares of the Trust being offered for sale.
5. Data Access and Proprietary Information
5.1 The Trust acknowledges that the data bases, computer programs, screen formats, report formats, interactive design techniques, and documentation manuals furnished to the Trust by the Bank as part of the Trust's ability to access certain Trust-related data ("Customer Data") maintained by the Bank on data bases under the control and ownership of the Bank or other third party ("Data Access Services") constitute copyrighted, trade secret, or other proprietary information (collectively, "Proprietary Information") of substantial value to the Bank or other third party. In no event shall Proprietary Information be deemed Customer Data. The Trust agrees to treat all Proprietary Information as proprietary to the Bank and further agrees that it shall not divulge any Proprietary Information to any person or organization except as may be provided hereunder. Without limiting the foregoing, the Trust agrees for itself and its employees and agents:
(a) to access Customer Data solely from locations as may be designated in writing by the Bank and solely in accordance with the Bank's applicable user documentation;
(b) to refrain from copying or duplicating in any way the Proprietary Information;
(c) to refrain from obtaining unauthorized access to any portion of the Proprietary Information, and if such access is inadvertently obtained, to inform in a timely manner of such fact and dispose of such information in accordance with the Bank's instructions;
(d) to refrain from causing or allowing the data acquired hereunder from being retransmitted to any other computer facility or other location, except with the prior written consent of the Bank;
(e) that the Trust shall have access only to those authorized transactions agreed upon by the parties;
(f) to honor all reasonable written requests made by the Bank to protect at the Bank's expense the rights of the Bank in Proprietary Information at common law, under federal copyright law and under other federal or state law.
Each party shall take reasonable efforts to advise its employees of their obligations pursuant to this Section 5. The obligations of this Section shall survive any earlier termination of this Agreement.
5.2 If the Trust notifies the Bank that any of the Data Access Services do
not operate in material compliance with the most recently issued user
documentation for such services, the Bank shall endeavor in a timely
manner to correct such failure. Organizations from which the Bank may
obtain certain data included in the Data Access Services are solely
responsible for the contents of such data and the Trust agrees to make
no claim against the Bank arising out of the contents of such
third-party data, including, but not limited to, the accuracy thereof.
DATA ACCESS SERVICES AND ALL COMPUTER PROGRAMS AND SOFTWARE
SPECIFICATIONS USED IN CONNECTION THEREWITH ARE PROVIDED ON AN AS IS,
AS AVAILABLE BASIS. THE BANK EXPRESSLY DISCLAIMS ALL WARRANTIES EXCEPT
THOSE EXPRESSLY STATED HEREIN INCLUDING, BUT NOT LIMITED TO, THE
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE.
5.3 If the transactions available to the Trust include the ability to originate electronic instructions to the Bank in order to (i) effect the transfer or movement of cash or Shares or (ii) transmit Shareholder information or other information, then in such event the Bank shall be entitled to rely on the validity and authenticity of such instruction without undertaking any further inquiry as long as such instruction is undertaken in conformity with security procedures established by the Bank from time to time.
6. Indemnification
6.1 The Bank shall not be responsible for, and the Trust shall on behalf of the applicable Fund indemnify and hold the Bank harmless from and against, any and all losses, damages, costs, charges, counsel fees, payments, expenses and liability arising out of or attributable to:
(a) All actions of the Bank or its agents or subcontractors required to be taken pursuant to this Agreement, provided that such actions are taken in good faith and without negligence or willful misconduct.
(b) The Trust's negligence, willful misconduct or lack of good faith which arise out of the breach of any representation or warranty of the Trust hereunder.
(c) The reliance on or use by the Bank or its agents or subcontractors of information, records, documents or services which (i) are received by the Bank or its agents or subcontractors, and (ii) have been prepared, maintained or performed by the Trust or any other person or firm on behalf of the Trust including but not limited to any previous transfer agent or registrar.
(d) The reliance on, or the carrying out by the Bank or its agents or subcontractors of any instructions or requests of the Trust on behalf of the applicable Fund.
(e) The offer or sale of Shares in violation of any requirement under the federal securities laws or regulations or the securities laws or regulations of any state that such Shares be registered in such state or in violation of any stop order or other determination or ruling by any federal agency or any state with respect to the offer or sale of such Shares in such state.
6.2 At any time the Bank may apply to any officer of the Trust for instructions, and may consult with legal counsel with respect to any matter arising in connection with the services to be performed by the Bank under this Agreement, and the Bank and its agents or subcontractors shall not be liable and shall be indemnified by the Trust on behalf of the applicable Fund for any action taken or omitted by it in reliance upon such instructions or upon the opinion of such counsel. The Bank, its agents and subcontractors shall be protected and indemnified in acting upon any paper or document, reasonably believed to be genuine and to have been signed by the proper person or persons, or upon any instruction, information, data, records or documents provided the Bank or its agents or subcontractors by machine readable input, telex, CRT data entry or other similar means authorized by the Trust, and shall not be held to have notice of any change of authority of any person, until receipt of written notice thereof from the Trust.
6.3 In order that the indemnification provisions contained in this Section 6 shall apply, upon the assertion of a claim for which the Trust may be required to indemnify the Bank, the Bank shall promptly notify the Trust of such assertion, and shall keep the Trust advised with respect to all developments concerning such claim. The Trust shall have the option to participate with the Bank in the defense of such claim or to defend against said claim in its own name or in the name of the Bank. The Bank shall in no case confess any claim or make any compromise in any case in which the Trust may be required to indemnify the Bank except with the Trust's prior written consent.
7. Standard of Care
The Bank shall at all times act in good faith and agrees to use its best efforts within reasonable limits to insure the accuracy of all services performed under this Agreement, but assumes no responsibility and shall not be liable for loss or damage due to errors unless said errors are caused by its negligence, bad faith, or willful misconduct or that of its employees.
8. Covenants of the Trust and the Bank
8.1 The Trust shall on behalf of each of the Funds promptly furnish to the Bank the following:
(a) A certified copy of the resolution of the Board of Trustees of the Trust authorizing the appointment of the Bank and the execution and delivery of this Agreement.
(b) A copy of the Declaration of Trust and By-Laws of the Trust and all amendments thereto.
8.2 The Bank shall keep records relating to the services to be performed hereunder, in the form and manner as it may deem advisable. To the extent required by Section 31 of the Investment Company Act of 1940, as amended, and the Rules thereunder, the Bank agrees that all such records prepared or maintained by the Bank relating to the services to be performed by the Bank hereunder are the property of the Trust and will be preserved, maintained and made available in accordance with such Section and Rules, and will be surrendered promptly to the Trust on and in accordance with its request.
8.3 The Bank and the Trust agree that all books, records, information and data pertaining to the business of the other party which are exchanged or received pursuant to the negotiation or the carrying out of this Agreement shall remain confidential, and shall not be voluntarily disclosed to any other person, except as may be required by law.
8.4 In case of any requests or demands for the inspection of the Shareholder records of the Trust, the Bank will endeavor to notify the Trust and to secure instructions from an authorized officer of the Trust as to such inspection. The Bank reserves the right, however, to exhibit the Shareholder records to any person whenever it is advised by its counsel that it may be held liable for the failure to exhibit the Shareholder records to such person.
9. Termination of Agreement
9.1 This Agreement may be terminated by either party upon thirty (30) days written notice to the other.
9.2 Should the Trust exercise its right to terminate, all out-of-pocket expenses associated with the movement of records and material will be borne by the Trust on behalf of the applicable Fund(s). Additionally, the Bank reserves the right to charge for any other reasonable expenses associated with such termination and/or a charge equivalent to the average of three (3) months' fees.
10. Additional Series
In the event that the Trust establishes one or more series of Shares in
addition to the Funds with respect to which it desires to have the Bank
render services as transfer agent under the terms hereof, it shall so
notify the Bank in writing, and if the Bank agrees in writing to
provide such services, such series of Shares shall become a Fund
hereunder.
11. Assignment
11.1 Except as provided in Section 11.3 below, neither this Agreement nor
any rights or obligations hereunder may be assigned by either party
without the written consent of the other party.
11.2 This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
11.3 The Bank may, without further consent on the part of the Trust,
subcontract for the performance, in whole or in part, of this Agreement
with (i) Boston Financial Data Services, Inc., a Massachusetts
corporation ("BFDS") which is duly registered as a transfer agent
pursuant to Section 17A(c)(2) of the Securities Exchange Act of 1934,
as amended ("Section 17A(c)(2)"), (ii) a BFDS subsidiary duly
registered as a transfer agent pursuant to Section 17A(c)(2), (iii) a
BFDS affiliate or (iv) Boston EquiServe Trust Company, N.A.; provided,
however, that the Bank shall be as fully responsible to the Trust for
the acts and omissions of any subcontractor as it is for its own acts
and omissions.
12. Amendment
This Agreement may be amended or modified by a written agreement
executed by both parties and authorized or approved by a resolution of
the Board of Trustees of the Trust.
13. Massachusetts Law to Apply
This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of The Commonwealth
of Massachusetts.
14. Force Majeure
In the event either party is unable to perform its obligations under
the terms of this Agreement because of acts of God, strikes, equipment
or transmission failure or damage reasonably beyond its control, or
other causes reasonably beyond its control, such party shall not be
liable for damages to the other for any damages resulting from such
failure to perform or otherwise from such causes.
15. Consequential Damages
Neither party to this Agreement shall be liable to the other party for
consequential damages
9
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under any provision of this Agreement or for any consequential damages
arising out of any act or failure to act hereunder.
16. Merger of Agreement
This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject
matter hereof whether oral or written.
17. Limitations of Liability of the Trustees and Shareholders
A copy of the Declaration of Trust of the Trust is on file with the
Secretary of The Commonwealth of Massachusetts, and notice is hereby
given that this instrument is executed on behalf of the Trustees of the
Trust as Trustees and not individually and that the obligations of this
instrument are not binding upon any of the Trustees or Shareholders
individually but are binding only upon the assets and property of the
Trust.
18. Counterparts
This Agreement may be executed by the parties hereto on any number of
counterparts, and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.
19. Reproduction of Documents
This Agreement and all schedules, exhibits, attachments and amendments
hereto may be reproduced by any photographic, photostatic, microfilm,
micro-card, miniature photographic or other similar process. The
parties hereto all/each agree that any such reproduction shall be
admissible in evidence as the original itself in any judicial or
administrative proceeding, whether or not the original is in existence
and whether or not such reproduction was made by a party in
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the regular course of business, and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in their names and on their behalf by and through their duly authorized officers, as of the day and year first above written.
THE SELECT SECTOR SPDR TRUST
BY:
ATTEST:
STATE STREET BANK AND TRUST
COMPANY
BY:
Executive Vice President
ATTEST:
ANNEX A
The Basic Industries Select Sector SPDR Fund
The Consumer Services Select Sector SPDR Fund
The Consumer Staples Select Sector SPDR Fund
The Cyclical/Transportation Select Sector SPDR Fund
The Energy Sector Select SPDR Fund
The Financial Select Sector SPDR Fund
The Industrial Select Sector SPDR Fund
The Technology Select Sector SPDR Fund
The Utilities Select Sector SPDR Fund
Dated: November , 1998
EXHIBIT 9(d)
BOOK-ENTRY-ONLY INVESTMENT COMPANY ISSUES
Letter of Representations
THE SELECT SECTOR SPDR TRUST
[Date]
Attention: General Counsel's Office
The Depository Trust Company
55 Water Street 49th Floor
New York, NY 10041-0099
Re: THE SELECT SECTOR SPDR TRUST
[Issue Description, including CUSIP number]
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Ladies and Gentlemen:
This letter sets forth our understanding with respect to certain matters
relating to the above referenced shares of beneficial interest (the
"Securities") CUSIP number . The Securities in an investment
company were created by a declaration of trust or other such document
authorizing the issuance of the Securities dated June 9,1998. The Trust is
distributing the Securities through The Depository Trust Company ("DTC").
To induce DTC to accept the Securities as eligible for deposit at DTC, and to act in accordance with its Rules with respect to the Securities, the Trust makes the following representations to DTC:
1. Prior to closing on the Securities on there shall be deposited with the Trust as custodian for DTC, one or more Security certificates registered in DTC's nominee, Cede & Co., representing 100% of the Securities on deposit with DTC, as set forth on Schedule A hereto. The Security certificate(s) shall remain in the Trust's custody as a "Balance Certificate" subject to the provisions of the Balance Certificate Agreement between the Trust and DTC currently in effect. If, however, the aggregate offering value of any Security exceeds $200 million, one certificate will be issued with respect to each $200 million of offering value and an additional certificate will be issued with respect to any remaining offering value. Each Security certificate shall bear the legend below:
Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC"), to the Trust or its agent for registration of transfer, exchange, or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein.
2. The Trust (a) understands that DTC has no obligation to, and will not, communicate to its participants ("Participants') or to any person having an interest in the Securities any information contained in the Security certificate(s); and (b) acknowledges that neither DTC's Participants nor any person having an interest in the Securities shall be deemed to have notice of the provisions of the Security certificate(s) by virtue of submission of such certificate(s) to DTC.
3. In the event of any solicitation of consents from or voting by holders of the Securities, the Trust shall establish a record date for such purposes (with no provision for revocation of consents or votes by subsequent holders) and shall send notice of such record date to DTC not less than 15 calendar days in advance of such record date. Notices to DTC pursuant to this Paragraph by telecopy shall be sent to DTC's Reorganization Department at (212) 855-5181 or (212) 855-5182, and receipt of such notices shall be confirmed by telephoning (212) 855-5202. Notices to DTC pursuant to this Paragraph by mail or by any other means shall be sent to DTC's Reorganization Department as indicated in Paragraph 6.
4. On each day on which the Trust is open for business and on which it receives an instruction originated by a DTC Participant through DTC's Deposit/Withdrawal at Custodian ("DWAC") system to increase the Participant's account by a specified number of shares of beneficial interest (a "Deposit Instruction"), the Trust shall, before 6:30 p.m. (Eastern Time) that day, either approve or cancel the Deposit Instruction through the DWAC system.
On each day on which the Trust is open for business and on which it receives an instruction originated by a Participant through DTC's Deposit/Withdrawal at Custodian ("DWAC") system to decrease ant's account by a specified number of units of interest (a "Withdrawal Instruction"), the Trust shall, before 6:30 p.m. (Eastern Time) that day, either approve or cancel the Withdrawal Instruction through the DWAC system.
The Trust agrees that its approval of a Deposit or Withdrawal Instruction shall be deemed to be the receipt by DTC of a new reregistered certificated security on registration of transfer to the name of Cede & Co. for the quantity of Securities evidenced by the Balance Certificate after the Deposit or Withdrawal Instruction is effected.
5. The Trust shall confirm in writing the number of shares of beneficial interest represented by the Balance Certificate as often as DTC may reasonably request.
6. Except for termination of the Trust, the Securities will not be callable or otherwise redeemable except at the option of the holders. In the event of termination, except by vote of the holders, and to the extent possible in the event of termination by vote of the holders, the Trust shall give DTC notice of such event not less than 30 days nor more than 60 days prior to the termination date.
Such notice, if by telecopy, shall be sent to DTC's Reorganization Department at (212) 855-5488 and receipt of such notice shall be confirmed by telephoning (212) 855-5290. Notices to DTC pursuant to the above by mail or by any other means shall be sent to:
Manager; Reorganization Department Reorganization Window
The Depository Trust Company 55 Water Street 50th Floor New York, NY 10041-0099
7. In the event of a distribution or payment with respect to the Securities, the Trust shall establish a record date for such purposes and shall send notice to DTC not less than 15 calendar days in advance of such record date. The Trust shall also notify DTC of the distribution date for any distribution of income with respect to the Securities. On the record date., the Trust shall notify DTC of the amount per unit of any such distribution. This notice shall be marked "TIME CRITICAL" and forwarded by telecopy to DTC's Dividend Department at (212) 855-4555 or by hand delivery (with receipt)to:
Manager; Announcements Dividend Department The Depository Trust Company 55 Water Street 25th Floor New York, NY 10041-0099
8. General notices, other than notices of distributions, to DTC shall be forwarded by telecopy to DTC's Reorganization Department at (212) 855-5488 , and receipt of such notices shall be confirmed by telephoning (212) 855-5135. Such notices sent by mail or by any other means shall be sent to the address set forth in paragraph 6.
9. DTC shall provide to the Trust, at it's request and expense, listings of the positions of Participants ("Security Position Listings") with respect to the Securities. The Trust shall provide DTC's Proxy Unit, with a written request indicating: (a) the CUSIP number; (b) the purpose of the request; and (c) the request dates of such listing(s). The Trust will also provide DTC with such exemplars of signatures and authorizations to act as may reasonably be deemed necessary by DTC to permit DTC to discharge its obligations to its Participants and regulatory authorities upon DTC's request.
Requests for Security Position Listings shall be sent to DTC's Reorganization Department by telecopy at (212) 855-5183 and receipt of such requests shall be confirmed by telephoning (212) 855-5200. Requests by mail or any other means shall be addressed to:
Supervisor; Proxy Unit Reorganization Department The Depository Trust Company 55 Water Street 50th Floor New York, NY 10041-0099
10. All notices and payment advices sent to DTC shall contain the CUSIP number of the Securities and the accompanying description of such Securities as indicated on Schedule A hereto and the accompanying description of such Securities.
11. After establishing the dividend or distribution payment to be made on the Securities in question, the Trust will notify DTC's Dividend Department of the payment and payment date not less than five business days prior to the effective date for such transaction.
12. The Trust shall provide a written notice of dividend payment information to a standard dividend announcement service subscribed to by DTC as soon as the information is available. The Trust shall also
provide such notice directly to DTC electronically, as previously arranged by the Trust and DTC, as soon as the payment information is available. If electronic transmission has not been arranged, such notice shall be sent by telecopy to DTC's Dividend Department at (212) 855-4555 or (212) 855-4556, and receipt of such notice shall be confirmed by telephoning (212) 8554550. Notice to DTC pursuant to the above by mail or by any other means shall be sent to:
Manager; Announcements Dividend Department The Depository Trust Company 55 Water Street 25th Floor New York, NY 10041-0099
13. Dividend payments and distributions shall be received by Cede & Co. as nominee of DTC, or its registered assigns, in same-day funds no later than 2:30 p.m. (Eastern Time) on each payment date. Absent any other arrangements between the Trust and DTC, such funds shall be wired as follows:
The Chase Manhattan Bank
ABA # 021 000 021
For credit to a/c Cede & Co.
c/o The Depository Trust Company
Dividend Deposit Account # 066-026776
14. The Trust shall provide DTC, no later than 12:00 noon (Eastern Time) on each payment date, automated notification of CUSIP-level detail. If the circumstances prevent the funds paid to DTC from equaling the dollar amount associated with the detail payments by 12:00 noon (Eastern Time), the Trust must provide CUSIP-level reconciliation to DTC no later than 2:30 p.m. (Eastern Time). Reconciliation can be provided by automated means or written format.
15. DTC may direct the Trust to use any other number or address as the number or address to which notices or payments of dividends or distributions may be sent.
16. In the event that the Trust determines that beneficial owners of Securities shall be able to obtain certificated Securities, the Trust shall notify DTC of the availability of certificates. In such event, the Trust shall issue, transfer and exchange certificates in appropriate amounts, as required by DTC and others.
17. DTC may discontinue providing its services as securities depository with respect to the Securities at any time by giving reasonable notice to the Trust (at which time DTC will confirm with the Trustee aggregate principal amount of Securities outstanding). Under such circumstances, at DTC's request, the Trust shall cooperate fully with DTC by taking appropriate action to make available one or more separate certificates evidencing Securities to any DTC Participant having Securities credited to its DTC accounts.
18. This Letter of Representations may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original, but all such counterparts together shall constitute but one and the same instrument.
19. This Letter of Representations is governed by, and shall be constructed in accordance with, the laws of the State of New York without giving effect to principles of conflicts of law.
20. The following rider(s), attached hereto. are hereby incorporated into this Letter of Representations:
Notes:
A. If there is an Agent (as defined in this Letter of Representations), Agent,
as well as Issuer, must sign this Letter. If there is no Agent. in signing this
Letter Issuer itself undertakes to perform all of the obligations set forth
herein.
B. Schedule B contains statements that DTC believes accurately describe DTC, the method of effecting book-entry transfers of securities distributed through DTC. and certain related matters.
Very truly yours,
By:
(Authorized Officer's Signature)
By:
(Authorized Officer's Signature)
Received and Accepted:
THE DEPOSITORY TRUST COMPANY
By:
cc: Underwriter
Underwriter's Counsel
SCHEDULE A
(Describe Issue)
CUSIP Number Share Total Offering ($) Value
------------ ----------- ------------------
SCHEDULE B
SAMPLE OFFERING DOCUMENT LANGUAGE
DESCRIBING BOOK-ENTRY-ONLY ISSUANCE
(Prepared by DTC-bracketed material may be applicable only to certain issues)
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1. The Depository Trust Company ("DTC'), New York NY, will act as securities depository for the securities (the "Securities"). The Securities will be issued as fully-registered securities registered in Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Security certificate will be issued for [each issue of] Securities, [each] in the aggregate principal amount of such issue, and will be deposited with DTC. [If, however. the aggregate principal amount of [any] issue exceeds $200 million, one certificate will be issued with respect to each $200 million of principal amount and an additional certificate will be issued with respect to any remaining principal amount of such issue].
2. DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, 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 holds Securities that its participants ("Participants") deposit with DTC. DTC also facilitates the settlements among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in Participants' accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is, owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks, and trust companies that clear through or maintain a custodial relationship, with a Direct Participant, either directly or indirectly ("Indirect Participants"). The Rules, applicable to DTC and its Participants are on file with the Securities and Exchange Commission.
3. Purchases of Securities under the DTC system must be made by or through Direct Participants, which Will receive a credit for the Securities on DTC's records. The ownership interest of each actual purchaser of each Security ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial owners. Beneficial Owners will not receive certificates representing their ownership interests in Securities, except in the event that use of the book-entry system for the Securities is discontinued.
4. To facilitate subsequent transfers, all Securities deposited by Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co. or such other name as may be requested by an authorized representative of DTC. The deposit of Securities with DTC and their registration in the name of Cede & Co. or such other nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Securities; DTC's records reflect only the identity of the Direct Participants to whose accounts such Securities are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers.
5. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. [Beneficial Owners of Securities may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Securities, such as redemptions, tenders, defaults. and proposed amendments to the Security documents. Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their benefit has agreed to obtain and transmit notices to Beneficial Owners, or in the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.]
[6. Redemption notices shall be sent to DTC. If less than all of the Securities within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.]
7. Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to Securities. Under its usual procedures, DTC mails an Omnibus Proxy to the Trust as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct
Participants to whose accounts the. Securities are credited on the record date
(identified in a listing attached to the Omnibus Proxy)
8. Redemption proceeds, distributions, and dividend payments on the Securities will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts, upon DTC's receipt of funds and corresponding detail information from the Trust, on payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, or the Trust, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment or redemptions proceeds, distributions, and dividends to Cede & Co. is the responsibility of the Trust disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants.
[9. A Beneficial Owner shall give notice to elect to have its
Securities purchased or tendered, through its Participant, to
[Tender/Remarketing Agent or] or the Trust, shall effect delivery or such
Securities by causing the Direct Participant to transfer the participant's
interest in the Securities on DTC's records, to [Tender/Remarketing Agent or)
the Trust. The requirement for physical delivery of Securities in connection
with an optional tender or a mandatory purchase will be deemed satisfied when
the ownership rights in the Securities are transferred by Direct Participants on
DTC's records and followed by a book-entry credit of tendered securities to
[Tender/Remarketing Agent's or] the Trusts DTC account.]
10. DTC may discontinue providing its services as securities depository with respect to the Securities at any time-by giving reasonable notice to the Trust. Under such circumstances, in the event that a successor securities depository is not obtained, Security certificates are required to be printed and delivered.
11. The Trust may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered.
12. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that the Trust believes to be reliable, but the Trust takes no responsibility for the accuracy thereof.
EXHIBIT 10
GORDON ALTMAN BUTOWSKY WEITZEN SHALOV & WEIN
November 16, 1998
The Select Sector SPDR Trust
225 Franklin Street
Boston, Massachusetts 02110
Ladies and Gentlemen:
This opinion is being furnished to The Select Sector SPDR Trust, a Massachusetts business trust (the "Trust"), in connection with the Registration Statement on Form N-1A (the "Registration Statement") to be filed by the Trust with the Securities and Exchange Commission for the purpose of registering under the Securities Act of 1933, as amended (the "1933 Act") an indefinite number of shares of beneficial interest of $.001, par value of the Trust (the "Shares").
We have examined such statutes, regulations, corporate records and other documents and reviewed such questions of law as we deemed necessary or appropriate for the purposes of this opinion.
As to matters of Massachusetts law contained in this opinion, we have relied upon the opinion of Ropes & Gray, dated November 13, 1998.
Based upon the foregoing, we are of the opinion that proper trust proceedings have been taken by the Trust so that the Shares have been validly authorized; and when the Shares are issued and sold in accordance with the terms of the Distribution Agreement referred to in the Registration Statement, the Shares will be legally issued, fully paid and non-assessable (except for the potential liability of shareholders described in the Trust's Statement of Additional Information under the caption "Capital Stock and Shareholder Reports").
We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to us under the caption "General Information" in the Prospectus forming a part of the Registration Statement. We do not thereby admit that we are within the category of persons whose consent is required under Section 7 of the 1933 Act or the rules and regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
/s/ Gordon Altman Butowsky Weitzen
Shalov & Wein
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EXHIBIT 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the references to our firm under the headings "General Information" in the Prospectus and "Counsel and Independent Auditors" in the Statement of Additional Information constituting parts of Pre-Effective Amendment No. 2 to the registration statement on Form N-1A for The Select Sector SPDR Trust.
/s/ Pricewaterhouse Coopers LLP --------------------------------- PricewaterhouseCoopers LLP Boston, Massachusetts |
EXHIBIT 13
THE SELECT SECTOR SPDR TRUST
1. Share Purchase. ALPS Mutual Funds Services, Inc. ("ALPS") hereby purchases from The Select Sector SPDR Trust (the "Trust"), a series-type investment company having nine investment portfolios (the "Funds"), the following shares of beneficial interest ("Shares") of the below named Funds at the per-share purchase price indicated below, on the terms and conditions set forth herein and in the registration statement described below:
Amount Price Shares
Funds Purchased Per Share Purchased
----- --------- --------- ---------
THE BASIC INDUSTRIES SELECT SECTOR SPDR FUND
THE CONSUMER SERVICES SELECT SECTOR SPDR FUND
THE CONSUMER STAPLES SELECT SECTOR SPDR FUND
THE CYCLICAL/TRANSPORTATION SELECT SECTOR SPDR FUND
THE ENERGY SELECT SECTOR SPDR FUND,
THE FINANCIAL SELECT SECTOR SPDR FUND,
THE INDUSTRIAL SELECT SECTOR SPDR FUND,
THE TECHNOLOGY SELECT SECTOR SPDR FUND
THE UTILITIES SELECT SECTOR SPDR FUND
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ALPS hereby acknowledges receipt of a purchase confirmation reflecting the purchase of the Shares, and the Trust hereby acknowledges receipt from ALPS of funds in the amount of $180,000 in full payment of the Shares.
ALPS understands that the Trust has filed with the Securities and Exchange Commission a Registration Statement which contains the prospectus describing the Trust and the Shares to be issued thereunder. By its signature hereto, the undersigned hereby acknowledges receipt of a copy of the Registration Statement.
2. Representations and Warranties. ALPS hereby represents and warrants to the Trust as follows:
(a) It is aware that no federal or state agency has made any findings or determinations as to the fairness for investment, nor any recommendations or endorsement, of the Trust's shares;
(b) It has such knowledge and experience of financial and business matters as will enable it to utilize the information made available to it in connection with the offering described in the Trust's Registration Statement, to evaluate the merits and risks of the prospective investment and to make an informed investment decision;
(c) It recognizes that the Trust has only recently been organized and has no financial or operating history and, further, that investment in the Trust involves certain risks related to the purchase of the Trust's shares, and it acknowledges that it has suitable financial resources and anticipated income to bear the economic risk of such an investment;
(d) It is purchasing the Shares for its own account, for investment, in order to provide initial capital or "seed money," for each of the Funds and not with any intent to distribute or resell the Shares, either in whole or in part, and with no present intent to sell or otherwise dispose of the Shares, either in whole or in part;
(e) It will not sell the Shares purchased by it without registration of such Shares under the Securities Act of 1933 except in reliance upon an exemption therefrom;
(f) It has been furnished with, and has carefully read, this purchase agreement and the Registration Statement and such material documents relating to the Trust as its has requested and as have been provided to it by the Trust; and
(g) It has had the opportunity to ask questions of, and receive answers from, the Trust concerning each Fund and the terms of the offering.
IN WITNESS WHEREOF, the undersigned have executed this instrument as of October , 1998.
ALPS Mutual Funds Services, Inc.
By:
[name]
[title]
The Select Sector SPDR Trust
By:
[name]
[title]
EXHIBIT 15
DISTRIBUTION AND SERVICE PLAN
Select Sector SPDR Fund
1. The Trust. The Select Sector SPDR(R) Trust (the "Trust") is an open-end management investment company registered as such under the Investment Company Act of 1940, as amended (the "1940 Act"), and organized as a series trust (each such series is referred to herein as a "Fund").
2. The Plan. The Trust desires to adopt a plan of distribution pursuant to Rule 12b-1 under the 1940 Act with respect to the shares of beneficial interest ("Shares") of each Fund, and the Board of Trustees of the Trust (the "Board of Trustees") has determined that there is a reasonable likelihood that adoption of this Distribution and Service Plan (the "Plan") will benefit the Select Sector SPDR Fund (the "Designated Fund") and its holders of Shares. Accordingly, the Designated Fund hereby adopts this Plan in accordance with Rule 12b-1 under the 1940 Act on the following terms and conditions (capitalized terms not otherwise defined herein have the meanings assigned thereto in the Funds' registration statement under the 1940 Act and under the Securities Act of 1933, as amended, as such registration statement is amended by any amendments thereto at the time in effect).
3. The Distributor. The Trust has entered into a written Distribution Agreement with ALPS Mutual Funds Services, Inc. (the "Distributor"), pursuant to which the Distributor will act as the exclusive distributor with respect to the creation and distribution of Creation Unit size aggregations of Shares as described in the Funds' registration statement ("Creation Units") of each Fund.
4. Payments. The Designated Fund will pay fees, in the amounts and on the terms set forth below, or as may hereafter be determined by the Board of Trustees, that collectively will not exceed, on an annualized basis, .25% of the Designated Fund's average daily net assets for purposes permitted by Rule 12b-1. Such fees may include payments made on the following basis:
(a) a portion of the fees (the "Distributor's Fee"), calculated daily and payable quarterly, equal to such Designated Fund's allocable portion of the amount of $225,000 per annum payable to the Distributor for its distribution-related services to all Funds that have adopted the Distribution Agreement and the plan under Rule 12b-1, including, without limitation, for (A) acting as agent of the Designated Fund with respect to the sale of Shares in "Creation Unit" size aggregations as set forth in the Fund's registration statement referred to above, (B) generating and transmitting confirmations of purchases of Creation Unit aggregations of Shares and delivering copies of the Fund's Prospectus and/or Statement of Additional Information included in the registration statement in connection with purchases thereof and to prospective purchases; (C) clearing and filing all advertising, sales and marketing and promotional materials of the Trust with the National Association of Securities Dealers, Inc. (the "NASD"); (D) maintaining access to telephonic, facsimile or direct computer communications links with The Depository Trust Company ("DTC") and State Street Bank and Trust Company as the Fund's custodian, administrator and transfer agent; and (E) such other services and obligations as are set forth in the Distribution Agreement;
(b) a portion of the fees (the "12b-1 Administration Fee"), calculated
daily and payable quarterly, equal to the Designated Fund's allocable portion of
(i) .01% per annum of the average aggregate daily net assets, calculated on a
daily basis ("Aggregate Net Assets"), of all Funds that have adopted the
Distribution Agreement and the plan under Rule 12b-1, up to and including
Aggregate Net Assets of $1.0 billion, plus (ii) .0075% per annum of Aggregate
Net Assets of all such Funds in excess of $1.0 billion up to and including $2.5
billion, plus (iii) .005% per annum of Aggregate Net Assets of
all such Funds in excess of $2.5 billion up to and including $5 billion, plus
(iv) .0025% per annum of Aggregate Net Assets of all such Funds in excess of
$5.0 billion, shall be paid to the Distributor, quarterly in arrears, for
administering this 12b-1 Plan in accordance with the terms hereof, including
preparing reports, keeping appropriate records, making payments and
reimbursements to third parties as provided for hereby and verifying the
appropriateness of such payments;
(c) the remainder of the fees, not to exceed, on an annualized basis, .25% of the average daily net assets of the Designated Fund, less any applicable Distributor's Fee and 12b-1 Administration Fee, paid or payable by the Designated Fund to the Distributor, shall be used, subject to the provisions of this Plan, to pay for any activities primarily intended to result in the sale of Shares of the Designated Fund in Creation Unit aggregations or secondary market trading or for the provision of investor and shareholder services to holders of Shares, including, but not limited to:
(i) payments to registered broker-dealers, banks and/or other persons (each, an "Investor Services Organization" or "ISO") of investor and shareholder services fees ("Investor Services Fees"), to be computed daily and payable quarterly, in each case pursuant to a separate agreement with the Distributor, in substantially the forms approved by the Board of Trustees and attached as exhibits hereto (each an "Investor Services Agreement"), as compensation for broker-dealer, investor and shareholder support, account maintenance and educational and promotional services relating to the Shares (which may include compensation and sales incentives to the registered brokers or other sales personnel of an ISO under an Investor Services Agreement and facilitation through broker-dealers and other persons of communications with beneficial owners of Shares), which shall be provided by the respective ISO pursuant to such agreement with respect to all Funds subject thereto. Such compensation to any ISO shall be in an amount as set forth in the individual Investor Services Agreement, provided that, no ISO shall be entitled to receive Investor Services Fees of more than .10% of average daily net assets per annum of the Designated Fund attributable to the Shares subject to such Agreement;
(ii) reimbursing the Distributor, or another party or parties pursuant to arrangements with the Distributor, to the extent of any amounts remaining under this Plan after payment of the fees provided for pursuant to subparagraphs (a), (b) and (c)(i) hereof, not to exceed, on an annualized basis, .25% of the Designated Fund's average daily net assets together with all other amounts to be paid hereunder, for promotional and marketing activities related to the sale of Shares of the Designated Fund in Creation Unit aggregations or in secondary market trading, including, but not limited to, payment for (A) the printing and distribution costs of the Funds' Prospectus and Statement of Additional Information, except for such printing and distribution costs as are incurred by the Designated Fund directly in connection with Prospectuses and/or Statements of Additional Information required to be sent to existing shareholders; and (B) the production and distribution of advertisements and other promotional, sales and marketing materials relating to the sale of Shares of the Designated Fund (other than as provided above).
(d) Distribution-related expenses incurred in any one year to the Distributor under paragraph (c)(ii) above in reimbursement of certain expenses of marketing or promotional activities of
the Designated Fund shall not be used to pay for reimbursement of similar expenses with respect to any other Fund. The aggregate Distributor's Fee and 12b-1 Administration Fees payable by all Funds shall be allocated among the Funds pro rata in accordance with the average daily net assets of each Fund, and reimbursement of expenses for such activities and services attributable to the Funds as a whole shall be allocated to each Fund according to the method adopted by the Board of Trustees. The Distributor's allocation of fees and other expenditures hereunder shall be subject to the annual review of the Board of Trustees.
Any agreement between the Trust and the Distributor or the Distributor
and any other party referred to above shall be approved by the Board of Trustees
as a related agreement under this Plan. All agreements related to this Plan
(including the Distribution Agreement and each Investor Services Agreement)
shall be in writing and shall provide: (A) that such agreement may be terminated
at any time, without payment of any penalty, by vote of a majority of the
Independent Trustees (as defined in subparagraph (e) below) or by a vote of a
majority of the outstanding voting securities (as defined in the 1940 Act) of
the Designated Fund, on not more than 60 days' written notice to any other party
to the agreement, and (B) that such agreement shall terminate automatically in
the event of its assignment (as defined in the 1940 Act). The Investor Services
Agreement shall require the ISO to provide the Distributor with such information
as is reasonably necessary to permit the Distributor to comply with the
reporting requirements set forth in paragraph 9 hereof. For purposes thereof,
each Investor Services Agreement shall provide that the ISO claiming Investor
Services Fees under this Plan must represent in writing in connection with the
reports and information to be provided to the Distributor: (i) that it has been
engaged in the requisite activities enumerated in subparagraph (c)(i) of this
Plan and the respective Investor Services Agreement, and (ii) that the positions
reported as representing its holdings of Shares at each of the three month ends
in any quarterly period hereunder are true, accurate and complete.
(e) Distribution expenses incurred in any one year in excess of 0.25% of each Fund's average daily net assets may be reimbursed in subsequent years subject to the annual 0.25% limit and subject further to the approval of the Board of Trustees including a majority of the Trustees who are not "interested persons" of the Trust (as defined in the 1940 Act) and who have no direct or indirect financial interest in the operation of this Plan or in any agreement related to this Plan (the "Independent Trustees").
5. Effective Date. This Plan shall become effective upon approval by a vote of both a majority of the Board of Trustees and a majority of the Independent Trustees, cast in person at a meeting called for the purpose of voting on this Plan.
6. Term. This Plan shall, unless terminated as hereinafter provided, remain in effect with respect to the Designated Fund for one year from its effective date and shall continue thereafter, provided that its continuance is specifically approved at least annually by a vote of both a majority of the Trustees and a majority of Independent Trustees, cast in person at a meeting called for the purpose of voting on this Plan.
7. Amendment. This Plan may be amended at any time by the Board of Trustees, provided that (a) any amendment to increase materially the amount to be spent for the services provided for in paragraph 4 hereof shall be effective only upon approval by a vote of a majority of the outstanding voting securities (as such term is defined in the 1940 Act) of the Designated Fund, and (b) any material amendment of this Plan shall be effective only upon approval by a vote of both a majority of the Board of Trustees and a majority of the Independent Trustees, cast in person at a meeting called for the purpose of voting on such amendment.
8. Termination. This Plan may be terminated at any time, without payment of any penalty, by vote of a majority of the Independent Trustees, or by vote of a majority of the outstanding voting securities (as such term is defined in the 1940 Act) of the Designated Fund. In the event of termination or non- continuance of this Plan, the Trust may reimburse any expense which it incurred prior to such termination or non-continuance, provided that such reimbursement is specifically approved by both a majority of the Board of Trustees and a majority of the Independent Trustees.
9. Reports. While this Plan is in effect, the Distributor shall provide to the Trustees, and the Trustees shall review, at least quarterly, a written report of the amounts expended pursuant to the Plan and the purposes for which such expenditures were made.
10. Records. The Trust shall preserve copies of this Plan, each agreement related hereto and each report referred to in paragraph 9 hereof for a period of at least six years from the date of the Plan, agreement and report, the first two years in an easily accessible place.
11. Independent Trustees. While this Plan is in effect, the selection and nomination of Independent Trustees shall be committed to the discretion of the Trustees who are not "interested persons" of the Trust (as defined in the 1940 Act).
12. Severability. If any provision of the Plan shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of the Plan shall not be affected thereby.
Plan adopted , 1998
EXHIBIT "OTHER"
POWERS OF ATTORNEY
The undersigned does hereby constitute and appoint Joseph J. McBrien, Michael Gillespie and Stuart M. Strauss, and each of them, each with full power of substitution, his/her true and lawful attorneys and agents to execute in his/her name, place and stead, in his/her capacity as trustee or officer, or both, of The Select Sector SPDR Trust (the "Trust"), the Registration Statement of the Trust on Form N-1A, and any and all amendments thereto, and any and all other documents necessary or incidental in connection therewith, making such changes as the person(s) so acting deems appropriate, and to file the same with the United States Securities and Exchange Commission.
SIGNATURE TITLE DATE
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/s/ E. Davis Hawkes, Jr. Treasurer and October 26, 1998
--------------------------- Assistant Secretary
E. Davis Hawkes, Jr.
/s/ John W. English Trustee October 26, 1998
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John W. English
/s/ George R. Gaspari Trustee October 26, 1998
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George R. Gaspari
/s/ Burton G. Malkiel Trustee October 26, 1998
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Burton G. Malkiel
/s/ Ernest J. Scalberg Trustee October 26, 1998
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Ernest J. Scalberg
/s/ Charles Tschampion Trustee October 26, 1998
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R. Charles Tschampion
/s/ Cheryl Burgermeister Trustee October 26, 1998
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Cheryl Burgermeister
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