<PAGE>
File No. 33-89088
811-8972
As filed with the Securities and Exchange Commission
on January 19, 1996
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST EFFECTIVE AMENDMENT NO. 1
TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF
SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED
ON FORM N-8B-2
A. Exact name of Trust:
MIDCAP SPDR TRUST SERIES 1
B. Name of Depositor:
PDR SERVICES CORPORATION
C. Complete address of Depositor's principal executive office:
PDR SERVICES CORPORATION
c/o AMERICAN STOCK EXCHANGE, INC.
86 Trinity Place
New York, New York 10006
D. Name and complete address of agent for service:
James F. Duffy
PDR SERVICES CORPORATION
c/o AMERICAN STOCK EXCHANGE, INC.
86 Trinity Place
New York, New York 10006
Copy to:
Sam Scott Miller
ORRICK, HERRINGTON & SUTCLIFFE
666 Fifth Avenue
New York, New York 10103
<PAGE>
E. Title and amount of securities being registered:
An indefinite number of units of Beneficial Interest pursuant to Rule
24f-2 under the Investment Company Act of 1940.
F. Proposed maximum aggregate offering price to the public of the
securities being registered:
Indefinite pursuant to Rule 24f-2
G. Amount of filing fee:
In accordance with Rule 24f-2, a registration fee in the amount of
$500.00 was paid in connection with the preliminary registration of
the Trust.
H. Approximate date of proposed sale to public:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THE REGISTRATION
STATEMENT.
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<PAGE>
MIDCAP SPDR TRUST SERIES 1
Cross Reference Sheet
Pursuant to Regulation C
Under the Securities Act of 1933, as amended
(Form N-8B-2 Items required by Instruction 1
as to Prospectus in Form S-6)
<TABLE>
<CAPTION>
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
- ----------- ---------------------
<S> <C>
I. Organization and General Information
------------------------------------
1. (a) Name of Trust............... Prospectus Front Cover
(b) Title of securities issued.. Prospectus Front Cover
2. Name, address and Internal
Revenue Service Employer
Identification Number of
depositor....................... Sponsor
3. Name, address and Internal
Revenue Service Employer
Identification Number of
trustee......................... Trustee
4. Name, address and Internal
Revenue Service Employer
Identification Number
of principal underwriter........ *
5. State of organization of Trust.. Prospectus Summary - The Trust
6. (a) Dates of execution and
termination of Trust
Agreement................... Prospectus Summary - The Trust;
Prospectus Summary - Termination
(b) Dates of execution and
termination of Trust
Agreement................... Same as set forth in 6(a)
7. Changes of name................. *
8. Fiscal Year..................... *
9. Material Litigation............. *
</TABLE>
_____________________
*Not applicable, answer negative or not required.
i
<PAGE>
II. General Description of the Trust
and Securities of the Trust
--------------------------------
<TABLE>
<S> <C>
10. (a) Registered or bearer
securities.................. Prospectus Summary - The Trust
(b) Cumulative or distributive.. Prospectus Summary -Distributions
(c) Rights of holders as to
withdrawal or redemption.... Prospectus Summary -Redemption;
Redemption of MidCap SPDRs;
Administration of the Trust -
Rights of Beneficial Owners
(d) Rights of holders as to
conversion, transfer, etc... Prospectus Summary -Redemption;
Administration of the Trust -
Register of Ownership and
Transfer; - Rights of Beneficial
Owners; Redemption
(e) Lapses or defaults in
principal payments with
respect to periodic payment
plan certificates........... *
(f) Voting rights............... Administration of the Trust -
Voting
(g) Notice to holders as to
change in:
(1) Composition of Trust
assets.................. *
(2) Terms and conditions
of Trust's securities... Administration of the Trust -
Amendment
(3) Provisions of Trust
Agreement............... Same as set forth in 10(g)(2)
(4) Identity of depositor
and trustee............. Resignation, Removal and Liability
- The Trustee; - The Sponsor
</TABLE>
_____________________
*Not applicable, answer negative or not required.
ii
<PAGE>
<TABLE>
<S> <C>
(h) Consent of holders
required to change:
(1) Composition of Trust
assets................... *
(2) Terms and conditions
of Trust's securities.... Administration of the Trust -
Amendment
(3) Provisions of Trust
Agreement................ Same as set forth in 10(h)(2)
(4) Identity of depositor
and trustee.............. Resignation, Removal and Liability -
The Sponsor; - The Trustee
(i) Other principal
features of the securities... Prospectus Summary - The Trust
11. Type of securities
comprising units................. The Prospectus - Front Cover;
Prospectus Summary -The Trust; The
Portfolio; The S&P MidCap 400 Index
12. Certain information regarding
securities comprising periodic
payment certificates............. *
13. (a) Certain information regarding
loads, fees, expenses
and charges.................. Prospectus Summary -Redemption;
Expenses of the Trust; Redemption of
MidCap SPDRs
(b) Certain information regarding
periodic payment plan
certificates................. *
(c) Certain percentages.......... Same as set forth in 13(a)
(d) Reasons for certain
differences in prices........ *
(e) Certain other loads, fees, or
charges payable by holders... *
</TABLE>
_____________________
*Not applicable, answer negative or not required.
iii
<PAGE>
<TABLE>
<S> <C>
(f) Certain profits receivable
by depositor, principal
underwriters, custodian,
trustee or affiliated
persons...................... The Portfolio - Adjustments to the
Portfolio
(g) Ratio of annual charges and
deductions to income......... *
14. Issuance of Trust's securities... The Trust - Creation of Creation
Units
15. Receipt and handling of
payments from purchasers......... The Trust
16. Acquisition and disposition of
underlying securities............ The Trust - Creation of Creation
Units; The Portfolio;
Administration of the Trust
17. (a) Withdrawal or redemption by
holders...................... Administration of the Trust
- Rights of Beneficial
Owners; Redemption of MidCap
SPDRs
(b) Persons entitled or required
to redeem or repurchase
securities................... Same as set forth in 17(a)
(c) Cancellation or resale of
repurchased or redeemed
securities................... Same as set forth in 17(a)
18. (a) Receipt, custody and
disposition of income........ Administration of the Trust
- Distributions to Beneficial
Owners
(b) Reinvestment of distribu-
tions........................ *
(c) Reserves or special funds.... Same as set forth in 18(a)
(d) Schedule of distributions.... *
</TABLE>
_____________________
*Not applicable, answer negative or not required.
iv
<PAGE>
<TABLE>
<S> <C>
19. Records, accounts and reports... The S&P MidCap 400 Index; Distribution of
MidCap SPDRs; Expenses;
Administration of the Trust -
Records; - Distributions to
Beneficial Owners; -Statements to
Beneficial Owners; - Register of
Ownership and Transfer
20. Certain miscellaneous provi-
sions of Trust Agreement
(a) Amendments.................. Administration of the Trust
- Amendment
(b) Extension or termination.... Administration of the Trust
- Amendment; - Termination
(c) Removal or resignation of
trustee..................... Resignation, Removal and
Liability - The Trustee
(d) Successor trustee........... Same as set forth in 20(c)
(e) Removal or resignation of
depositor................... Resignation, Removal and
Liability - The Sponsor
(f) Successor depositor......... Same as set forth in 20(e)
21. Loans to security holders....... *
22. Limitations on liabilities...... Resignation, Removal and
Liability - The Trustee; -
The Sponsor
23. Bonding arrangements............ *
24. Other material provisions of
Trust Agreement................. *
III. Organization, Personnel and
Affiliated Persons of Depositor
-------------------------------
25. Organization of depositor....... Sponsor
26. Fees received by depositor...... *
</TABLE>
_____________________
*Not applicable, answer negative or not required.
v
<PAGE>
<TABLE>
<S> <C>
27. Business of depositor........... Sponsor
28. Certain information as to
officials and affiliated
persons of depositor............ Sponsor
29. Ownership of voting securities
of depositor.................... Sponsor
30. Persons controlling depositor... *
31. Payments by depositor for
certain services rendered
to Trust........................ *
32. Payments by depositor for
certain other services
rendered to Trust............... *
33. Remuneration of employees of
depositor for certain
services rendered to Trust...... *
34. Compensation of other persons
for certain services rendered
to Trust........................ *
IV. Distribution and Redemption of Securities
-----------------------------------------
35. Distribution of Trust's
securities in states............ Distribution of MidCap SPDRs
36. Suspension of sales of Trust's
securities...................... *
37. Denial or revocation of
authority to distribute......... *
38. (a) Method of distribution...... Prospectus Summary - Underwriting;
The Trust - Creation of Creation
Units; Distribution of MidCap SPDRs
(b) Underwriting agreements..... Prospectus Summary - Underwriting;
Distribution of MidCap SPDRs
(c) Selling agreements.......... Same as set forth in 38(b)
</TABLE>
_____________________
*Not applicable, answer negative or not required.
vi
<PAGE>
<TABLE>
<S> <C>
39. (a) Organization of principal
underwriter................. Underwriter
(b) NASD membership of
principal underwriter....... Prospectus Summary -Underwriting;
Underwriter
40. Certain fees received by
principal underwriters.......... *
41. (a) Business of principal
underwriters................ Prospectus Summary -Underwriting;
Underwriter
(b) Branch offices of
principal underwriters.......... *
(c) Salesmen of principal
underwriters.................... *
42. Ownership of Trust's securities
by certain persons.............. *
43. Certain brokerage commissions
received by principal
underwriters.................... *
44. (a) Method of valuation for
determining offering price...... The Portfolio; Valuation
(b) Schedule as to components of
offering price.................. *
(c) Variation in offering
price to certain persons.... *
45. Suspension of redemption
rights.......................... *
46. (a) Certain information
regarding redemption or
withdrawal valuation........ Valuation; Redemption of MidCap
SPDRs
(b) Schedule as to components
of redemption price......... *
</TABLE>
______________________
*Not applicable, answer negative or not required.
vii
<PAGE>
<TABLE>
<S> <C>
47. Maintenance of position in
underlying securities........... The Trust; The Portfolio; Distribution of
MidCap SPDRs; Valuation;
Administration of the Trust -
Distribution to Beneficial Owners
V. Information Concerning the Trustee or Custodian
-----------------------------------------------
48. Organization and regulation of
trustee......................... Trustee
49. Fees and expenses of trustee.... Expenses of the Trust; Redemptions
of MidCap SPDRs
50. Trustee's lien.................. Expenses of the Trust; Redemption
of MidCap SPDRs
VI. Information Concerning.Insurance of Holders of Securities
---------------------------------------------------------
51. (a) Name and address of
insurance company........... *
(b) Types of policies........... *
(c) Types of risks insured and
excluded.................... *
(d Coverage.................... *
(e) Beneficiaries............... *
(f) Terms and manner of
cancellation................ *
(g) Method of determining
premiums.................... *
(h) Aggregate premiums paid..... *
(i) Recipients of premiums...... *
(j) Other material provisions
of Trust Agreement relating
to insurance................ *
</TABLE>
_____________________
*Not applicable, answer negative or not required.
viii
<PAGE>
VII. Policy of Registrant
--------------------
<TABLE>
<S> <C>
52. (a) Method of selecting and
eliminating securities from
the Trust................... The Trust - Creation of Creation
Units; The Portfolio;
Administration of the Trust
(b) Elimination of securities
from the Trust.............. *
(c) Policy of Trust regarding
substitution and elimina-
tion of securities.......... Same as set forth in 52(a)
(d) Description of any other
fundamental policy of the
Trust....................... *
53. (a) Taxable status of the Trust. Tax Status of the Trust
(b) Qualification of the Trust
as a regulated investment
company..................... Same as set forth in 53(b)
VIII. Financial and Statistical Information
-------------------------------------
54. Information regarding the
Trust's last ten fiscal years... *
55. Certain information regarding
periodic payment plan certifi-
cates........................... *
56. Certain information regarding
periodic payment plan certifi-
cates........................... *
57. Certain information regarding
periodic payment plan certifi-
cates........................... *
</TABLE>
_____________________
*Not applicable, answer negative or not required.
ix
<PAGE>
<TABLE>
<S> <C>
58. Certain information regarding
periodic payment plan certifi-
cates........................... *
59. Financial statements
(Instruction 1(c) to Form S-6).. *
</TABLE>
x
<PAGE>
PROSPECTUS SUPPLEMENT DATED JUNE 16, 1995
This Prospectus Supplement dated June 16, 1995 modifies the prospectus for
SPDR Trust Series 1 dated April 24, 1995 (the "SPDR Prospectus") and the
prospectus for the MidCap SPDR Trust Series 1 dated April 27, 1995 (the "MidCap
SPDR Prospectus") attached hereto.
Due to the recent implementation of SEC Rule 15c6-1, transfers of securities
will be effected within three (3) Business Days following a securities trade as
set forth in the SPDR Trust Prospectus on page 10 and in the MidCap SPDR Trust
Prospectus on page 12. Accordingly, the Sponsor has determined to change the
Record Date set forth on page 2 of each prospectus from the fourth Business Day
after the third Friday in each of March, June, September and December to the
second Business Day after the third Friday in each of the same months.
<PAGE>
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PROSPECTUS SUPPLEMENT DATED
January 19, 1996
--------------------------------------------------------
This Prospectus Supplement dated January 19, 1996 modifies the
prospectus for the MidCap SPDR Trust Series 1 (the "Trust") dated April 27, 1995
(the "Base Prospectus") and the prospectus supplement dated June 16, 1995
attached thereto, both of which are attached hereto.
--------------------------------------------------------
The Mandatory Termination Date for the Trust currently listed on page
2 of the Base Prospectus as April 27, 2020 has been extended. The new Mandatory
Termination date is the earlier of (1) April 27, 2120 or (2) the date 20 years
after the death of the last survivor of eleven persons named in the Trust
Agreement, the oldest of whom was born in 1990 and the youngest of whom was born
in 1993.
--------------------------------------------------------
The Sponsor has determined to eliminate the waiver of the Transaction
Fee charged in connection with the creation of fifteen (15) or more Creation
Units, as more fully described on pages 5-6 and 28 of the Base Prospectus.
Therefore, effective January 19, 1996 until further notice, the Transaction Fee
payable for a creation through the MidCap SPDR Clearing Process of two (2) or
more Creation Units per Participating Party per day will be $3,000.
--------------------------------------------------------
<PAGE>
PROSPECTUS
STANDARD & POOR'S MIDCAP 400 DEPOSITARY RECEIPTS (TM) ("MIDCAP SPDRS") (TM)
MIDCAP SPDR TRUST, SERIES 1
A UNIT INVESTMENT TRUST
----------------
This Trust (the "Trust") is formed by PDR Services Corporation, a Delaware
corporation (the "Sponsor") and a wholly-owned subsidiary of the American Stock
Exchange, Inc. (the "Exchange"), to provide investors with the opportunity to
purchase units of beneficial interest in the Trust representing proportionate
undivided interests in the portfolio of securities held by the Trust (the
"Securities") consisting of substantially all of the common stocks, in
substantially the same weighting, as the component common stocks of the
Standard & Poor's MidCap 400 Index (the "S&P MidCap 400 Index").* While the
investment objective of the Trust is to provide investment results that
generally correspond to the price and yield performance of the S&P MidCap 400
Index, there is no assurance that this investment objective can be achieved.
Each unit of fractional undivided interest in the Trust is referred to as a
Standard & Poor's MidCap 400 Depositary Receipt ("MidCap SPDR"). The value of
the Securities and, consequently, the value of MidCap SPDRs, will fluctuate.
The minimum number of MidCap SPDRs that may be created or redeemed at any one
time as described below is 25,000, which aggregation is referred to herein as a
"Creation Unit".
MidCap SPDRs have been accepted for listing on the Exchange subject to
official notice of issuance. Once created, MidCap SPDRs may be traded in the
secondary market on a per-MidCap SPDR basis, and need not be traded in Creation
Unit size aggregations.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
----------------
Prospectus dated April 27, 1995
LOGO
Investors are advised to read and retain this Prospectus for future reference.
----------------
* "Standard & Poor's MidCap 400 Index", "S&P MidCap 400 Index", "Standard &
Poor's MidCap 400 Depositary Receipts" and "MidCap SPDRs" are trademarks of
McGraw-Hill, Inc. PDR Services Corporation and the American Stock Exchange,
Inc. are permitted to use these trademarks pursuant to a License Agreement
with Standard & Poor's, a division of McGraw-Hill, Inc. The Trust, however, is
not sponsored by or affiliated with Standard & Poor's or McGraw-Hill, Inc.
COPYRIGHT (C) 1994 BY PDR SERVICES CORPORATION
<PAGE>
ESSENTIAL INFORMATION AS OF APRIL 26, 1995+
Number of MidCap SPDRs: 375,000
Fractional Undivided
Interest in Trust
Represented by each MidCap 1/375,000th
SPDR:
Record Date: Quarterly, currently anticipated to be the
fourth Business Day after the third Friday in
each of March, June, September and December.++
Dividend Payment Dates: Quarterly, on the last Business Day of April,
July, October and January.++
Trustee's Annual Fee: From 10/100 of one percent to 14/100 of one
percent, based on net asset value of the Trust,
as the same may be reduced by certain amounts,
plus the Transaction Fee.+++
Estimated Ordinary Operating
Expenses of the Trust:
30/100 of one percent (inclusive of Trustee's
annual fee)+++
Net Asset Value per MidCap
SPDR (based on the value of
the Securities, other net
assets of the Trust and
number of MidCap SPDRs
outstanding):
$36.91
Evaluation Time: Closing time of the regular trading session on
the New York Stock Exchange, Inc. (ordinarily
4:00 p.m. New York time).
Licensor: Standard & Poor's, a division of McGraw-Hill,
Inc.
Mandatory Termination Date: April 27, 2020
Discretionary Termination: Trust may be terminated if at any time after
six months following and prior to three years
following the Initial Date of Deposit the value
of the securities held by the Trust is less
than $25,000,000 or if at any time after three
years following the Initial Date of Deposit
such value is less than $100,000,000, as such
amount shall be adjusted for inflation.++++
- --------
+ The Trust Agreement has become effective and the initial deposit has been
made on April 27, 1995 (the "Initial Date of Deposit").
++ See "Administration of the Trust--Distributions to Beneficial Owners".
+++ See "Expenses of the Trust".
++++ The Trust may also be terminated under other circumstances. See
"Administration of the Trust --Termination".
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus.
OBJECTIVES
The Sponsor has formed the Trust to provide investors with the opportunity to
purchase units of beneficial interest in the Trust representing proportionate
undivided interests in the Securities which consist of substantially all of the
common stocks, in substantially the same weighting, as the component common
stocks of the S&P MidCap 400 Index, in the form of a security that closely
tracks the S&P MidCap 400 Index and that may be traded as a share of common
stock. The investment objective of the Trust is to provide investment results
that generally correspond to the price and yield performance of the component
common stocks of the S&P MidCap 400 Index (the "Index Securities"). There can
be no assurance that this investment objective will be met fully because it may
not be possible for the Trust to replicate and maintain exactly the composition
and relative weightings of the Index Securities. It is also possible that, from
time to time, the Trust will be unable to purchase all of the Index Securities.
In certain circumstances, the Trust may be required to make distributions in
excess of the yield performance of the Index Securities (see "Tax Status of the
Trust"). The value of the Securities and, consequently, the value of MidCap
SPDRs, is subject to changes in the value of common stocks generally and to
other factors. Further, the payment of dividends and maintenance of capital are
subject to a number of conditions, including the financial condition of the
issuers of the Securities (see "Special Considerations").
THE TRUST
The Trust is a unit investment trust organized under the laws of the State of
New York. The Trust is governed by a trust agreement (the "Trust Agreement")
between The Bank of New York, a corporation organized under the laws of New
York with powers of a trust company under the New York Banking Law (the
"Trustee"), and the Sponsor dated and executed as of the Initial Date of
Deposit.
DISTRIBUTOR
The Distributor for MidCap SPDRs is PDR Distributors, Inc., a registered
broker-dealer, a member of the National Association of Securities Dealers, Inc.
and a wholly-owned subsidiary of Signature Financial Group, Inc. (see
"Underwriting").
PORTFOLIO DEPOSITS
All orders to create MidCap SPDRs in Creation Unit size aggregations must be
placed with the Distributor (see "Underwriting" and "Procedure for Creation of
Creation Units"). To be eligible to place orders with the Distributor to create
Creation Unit size aggregations of MidCap SPDRs, an entity or person either
must be a (1) Participating Party, as hereinafter defined or (2) a Depository
Trust Company Participant (see "Book-Entry Ownership of MidCap SPDRs"), and in
each case must have executed a Participant Agreement, as hereinafter defined
(see "The Trust--Procedures for Creation of Creation Units" and "The Trust--
Placement of Creation Orders Using MidCap SPDR Clearing Process"). As used
herein, the term "Participating Party" means a broker-dealer or other
participant in the MidCap SPDR Clearing Process, as hereinafter defined,
through the Continuous Net Settlement ("CNS") System of the National Securities
Clearing Corporation ("NSCC"), a clearing agency that is registered with the
Securities and Exchange Commission (the "Commission"). Upon acceptance of an
order to create MidCap SPDRS, the Distributor will transmit such order to the
Trustee and instruct the Trustee to initiate the book entry movement of the
appropriate number of MidCap SPDRs to the account of the entity placing the
order. Payment for orders to
3
<PAGE>
create MidCap SPDRs will be made by deposits with the Trustee of a portfolio of
securities that is substantially similar in composition and weighting to the
Index Securities (see "The Trust--Creation of MidCap SPDRs"), together with a
cash payment in an amount which shall be equal to the Dividend Equivalent
Payment (as hereinafter defined), plus or minus, as the case may be, the
Balancing Amount (as hereinafter defined--see "The Portfolio--Adjustments to
the Portfolio Deposit"). The "Dividend Equivalent Payment" enables the Trustee
to make a distribution of dividends on the next Dividend Payment Date (as
hereinafter defined), and is an amount equal, on a per Creation Unit basis, to
the dividends on all the Securities with ex-dividend dates within the
accumulation period, net of expenses and liabilities for such period
(including, without limitation, (x) taxes or other governmental charges against
the Trust not previously deducted, if any, and (y) accrued fees of the Trustee
and other expenses of the Trust (including legal and auditing expenses) and
other expenses not previously deducted (see "Expenses of the Trust")), as if
all of the Securities had been held for the entire accumulation period for such
distribution. For federal income tax purposes, a portion of dividend
distributions may result in a return of capital to Beneficial Owners (as
hereinafter defined) of MidCap SPDRs (see "Tax Status of the Trust").
The Dividend Equivalent Payment and the Balancing Amount are collectively
referred to herein as the "Cash Component" and the deposit of such a portfolio
of securities and the Cash Component are collectively referred to herein as a
"Portfolio Deposit". In connection with the creation of MidCap SPDRs, in the
event that the Trustee determines, in its discretion, that an Index Security is
likely to be unavailable for delivery or available in insufficient quantity for
delivery to the Trust upon the creation of MidCap SPDRs in Creation Unit size
aggregations, then the Trustee shall have the right in its discretion to permit
the cash equivalent value of such Index Security or Index Securities to be
included in the Portfolio Deposit as a part of the Cash Component in lieu of
the inclusion of such Index Security or Index Securities in the securities
portion of the Portfolio Deposit (see "The Portfolio--Creation of Creation
Units"). If an Index Security is not eligible for transfer through the MidCap
SPDR Clearing Process, the Trustee shall include the cash equivalent value of
such Index Security as a part of the Cash Component to be received from the
creator in the manner discussed in the preceding sentence. Such cash equivalent
value will be based on the market value of such Index Security or Index
Securities as of the Evaluation Time on the date such creation order is deemed
received by the Distributor (see "Procedures for Creation of Creation Units",
"Placement of Creation Orders Using MidCap SPDR Clearing Process" and
"Placement of Creation Orders Outside MidCap SPDR Clearing Process".) As of the
Initial Date of Deposit, one of the Index Securities, the common stock issued
by Overseas Shipholding Group Inc. ("OSG"), is not eligible for transfer
through the MidCap SPDR Clearing Process. Therefore, creators will provide the
Trustee with the cash equivalent value of OSG stock as a part of the Cash
Component in lieu of including OSG stock in the securities portion of a
Portfolio Deposit. Pursuant to the Trust Agreement, the Trustee will use such
cash to purchase the appropriate number of OSG shares and will hold such
securities in physical form. If OSG stock subsequently becomes eligible for
transfer through the MidCap SPDR Clearing Process, the Trustee shall notify the
Distributor and DTC. Thereafter, OSG stock would be included in the Portfolio
Deposit and would be treated in the same manner as other Index Securities.
In connection with the creation of MidCap SPDRs, if a creator is restricted
by regulation or otherwise from investing or engaging in a transaction in one
or more Index Securities, the Trustee shall have the right, in its discretion,
to permit the cash equivalent value of such Index Security or Index Securities
to be included in the Portfolio Deposit based on the market value of such Index
Security or Index Securities as of the Evaluation Time on the date such
creation order is deemed received by the Distributor (see "Placement of
Creation Orders Outside MidCap SPDR Clearing Process") as part of the Cash
Component in lieu of the inclusion of such Index Security or Index Securities
in the securities portion of the Portfolio Deposit. In such case such creator
will pay the Trustee the Standard Transaction Fee, plus an additional amount
per Creation Unit not to exceed three (3) times the Transaction Fee applicable
for one Creation Unit, subject to the current maximum charge of $12,000, as
described below.
4
<PAGE>
Investors should be aware that when the Trustee receives a Cash Component, a
portion of which is to be used to purchase certain Index Securities under
certain circumstances discussed above and under "The Trust--Creation of
Creation Units," the Trust will bear brokerage commissions incurred in
connection with the purchase of such Index Securities as well as the risk of
any market price increase or decrease that may occur with regard to such Index
Security until the cash is used by the Trustee to purchase such Index Security
(see "Special Considerations and Risk Factors--General").
An entity or person placing creation orders with the Distributor must deposit
Portfolio Deposits either (i) through the CNS clearing processes of NSCC, as
such processes have been enhanced to effect creations and redemptions of
Creation Unit size aggregations of MidCap SPDRs, such processes being referred
to herein as the "MidCap SPDR Clearing Process", or (ii) with the Trustee
outside the MidCap SPDR Clearing Process (i.e., through the facilities of DTC).
TRANSACTION FEE
Subject to the changes, modifications or waivers described below, a
transaction fee will be payable to the Trustee in connection with each creation
and redemption of Creation Unit size aggregations of MidCap SPDRs (the
"Transaction Fee"). Such Transaction Fee is non-refundable, regardless of the
net asset value of the Trust.
If Creation Units are created or redeemed outside the MidCap SPDR Clearing
Process, an additional amount not to exceed three (3) times the Transaction Fee
applicable for one Creation Unit will be charged to the creator or redeemer per
Creation Unit per day. Under the current schedule, therefore, the total fee
charged in connection with the creation or redemption of one Creation Unit
outside the MidCap SPDR Clearing Process would be $1,500 (the Transaction Fee
for the creation or redemption of one Creation Unit) plus an additional amount
of $4,500 (3 times $1,500) for a total of $6,000, subject to the current
maximum charge of $12,000, as described below.
The Transaction Fee charged in connection with the creation or redemption of
Creation Units through the MidCap SPDR Clearing Process shall be as set forth
in the table below:
CREATIONS OR REDEMPTIONS PER PARTICIPATING PARTY PER DAY
<TABLE>
<S> <C>
1-10 Creation Units $1,500 per Creation Unit
11-25 Creation Units $ 500* per Creation Unit
26 and more $ 250* per Creation Unit
</TABLE>
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* The Transaction Fee applies to the number of Creation Units that falls into
the size category indicated.
Following the Initial Date of Deposit, and until the Trust prospectus is
amended as described below, the Transaction Fee payable in connection with
creations made through the MidCap SPDR Clearing Process shall be modified so
that $1,500 will be charged for a creation order for one (1) Creation Unit per
Participating Party per day and $3,000 will be charged for two (2) or more
Creation Units per Participating Party per day. Further, the entire amount of
this maximum Transaction Fee (i.e., $3,000) will be waived for any
Participating Party creating at least fifteen (15) Creation Units through the
MidCap SPDR Clearing Process on any one day. In addition, until further notice
is given as described below, the total fee charged in connection with creations
made on any one day outside the MidCap SPDR Clearing Process (i.e., the
Transaction Fee plus additional amounts) will be subject to a maximum charge of
$12,000 per day. Under the current schedule, therefore, the Transaction Fee
plus additional amounts charged in connection with the creation of Creation
Units outside the MidCap SPDR Clearing Process on any day is $6,000 for one
Creation Unit and $12,000 for two or more Creation Units. No waiver of the
Transaction Fee or additional amounts
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incurred in connection with redemptions of MidCap SPDRs, whether made through
or outside the MidCap SPDR Clearing Process, is permitted under the current
schedule.
From time to time and for such periods as the Sponsor, in its sole
discretion, may determine, the Transaction Fee (as well as any additional
amounts charged in connection with creation and/or redemptions made outside the
MidCap SPDR Clearing Process) may be increased, decreased, otherwise modified
or waived in its entirety for certain lot-size creations and/or redemptions of
MidCap SPDRs, or for creations and/or redemptions made under certain specified
circumstances, without consent of Beneficial Owners, subject to certain
conditions (see "The Trust--Creation of Creation Units" and "Procedures for
Redemption of MidCap SPDRs"). The Sponsor also reserves the right, from time to
time, to vary the lot-size of the creations and/or redemptions of MidCap SPDRs
subject to such an increase or decrease and/or entitled to such waiver of the
Transaction Fee. Any change so made will not cause the amount of the
Transaction Fee to exceed 20/100 of one percent (twenty basis points) of the
value of one Creation Unit at the time of a creation, or redemption, as the
case may be. Such changes and variations will be effected by an amendment to
the current Trust prospectus. The Transaction Fee charged in connection with a
creation or redemption of Creation Units will never be an amount less than the
stated maximum charge currently in effect per Creation Unit (e.g., currently
$1,500) unless such amount is waived, decreased or otherwise modified pursuant
to the provisions discussed in the preceding paragraphs. The amount of the
Transaction Fee in effect at any given time will be available from the Trustee.
The Transaction Fee will be waived in connection with the creation of
Creation Units made under the circumstances described in the following
sentence. Such waiver of the Transaction Fee will apply to any Participating
Party creates a minimum of fifteen (15) Creation Units during the period
commencing on the Initial Date of Deposit and ending on the first day of
Exchange trading.
MidCap SPDRs may be created or redeemed only in Creation Unit size
aggregations of 25,000 MidCap SPDRs, or in multiples thereof (e.g., 50,000,
75,000, 100,000 MidCap SPDRs), and, other than in connection with the Service
(see "Administration of the Trust--Dividend Reinvestment Service"), no
fractional Creation Units will be created or redeemed. The Trustee reserves the
right to declare a split or reverse split in the number of MidCap SPDRs
outstanding and a corresponding change in the number of MidCap SPDRs
constituting a Creation Unit in the event that the per MidCap SPDR price in the
secondary market changes to an amount that the Sponsor believes falls outside a
desirable retail range. For example, if a 2-for-1 split were declared, the
number of MidCap SPDRs in a Creation Unit size aggregation of MidCap SPDRs
would double (e.g., from 25,000 to 50,000 MidCap SPDRs per Creation Unit).
PORTFOLIO ADJUSTMENTS
To maintain the correlation between the composition and weighting of
Securities and that of the Index Securities, the composition and weightings of
the Securities will be adjusted from time to time to conform to periodic
changes in the identity and/or relative weightings of the Index Securities made
by Standard & Poor's, a division of McGraw-Hill, Inc., ("Standard & Poor's" or
"S&P"). The Trustee will aggregate certain of these adjustments and make
conforming changes to the Trust's portfolio at least monthly; adjustments will
be made more frequently, however, in the case of changes to the S&P MidCap 400
Index that are significant (see "The Portfolio--Adjustments to the Portfolio").
The composition and weightings of the securities portion of a Portfolio Deposit
will also be adjusted to conform to changes in the S&P MidCap 400 Index. Any
change in the identity or weighting of an Index Security will result in a
corresponding adjustment to the prescribed Portfolio Deposit effective on the
Business Day (a "Business Day" being any day that the New York Stock Exchange
is open for business) following the third (3rd) day on which the change to the
S&P MidCap 400 Index takes effect after the close of the market (see "The
Portfolio--Adjustments to the Portfolio Deposit").
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BOOK ENTRY OWNERSHIP OF MIDCAP SPDRS
The Depository Trust Company, New York, New York, a limited purpose trust
company organized under the laws of the State of New York (the "Depository") or
its nominee will be the record or registered owner of all outstanding MidCap
SPDRs. Beneficial ownership of MidCap SPDRs will be shown on the records of the
Depository or its participants. Certificates will not be issued for MidCap
SPDRs, whether in Creation Unit size aggregations or otherwise (see "The
Trust--Book-Entry-Only System").
EXPENSES
The expenses incident to the organization of the Trust and its registration
as an investment company will be capitalized and amortized on a straight line
basis over five years following the Initial Date of Deposit (see "Expenses of
the Trust"). The Trustee's fees are set forth generally in the Summary of
Essential Information and more specifically in "Expenses of the Trust" below.
Other expenses of the Trust are also described more fully in "Expenses of the
Trust".
FEDERAL INCOME TAX CONSIDERATIONS
The Trust intends to qualify for and elect tax treatment as a "regulated
investment company" under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code") and to distribute annually its entire investment company
taxable income and net capital gain. Distributions that are taxable as ordinary
income to Beneficial Owners generally are expected to constitute dividend
income for federal income tax purposes and to be eligible for the dividends-
received deduction available to many corporations to the extent of qualifying
dividend income received by the Trust (see "Tax Status of the Trust"). The
Trust's regular quarterly distributions will be based on the dividend
performance of the Securities held during such quarterly distribution period
rather than the actual taxable income of the Trust. As a result, a portion of
the distributions of the Trust may be treated as a return of capital or a
capital gain dividend for federal income tax purposes or the Trust may be
required to make additional distributions to maintain its status as a regulated
investment company or to avoid imposition of income or excise taxes on
undistributed income (see "Tax Status of the Trust" and "Administration of the
Trust--Distributions to Beneficial Owners").
ERISA CONSIDERATIONS
In considering the advisability of an investment in MidCap SPDRs, fiduciaries
of pension, profit sharing or other tax-qualified retirement plans (including
Keogh Plans) and welfare plans (collectively, "Plans") subject to the fiduciary
responsibility requirements of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), should consider whether an investment in MidCap
SPDRs is permitted by the documents and instruments governing the Plan and
whether the investment satisfies the diversification requirements of ERISA.
Individual retirement account ("IRA") investors should consider that an IRA may
make only such investments as are authorized by its governing instruments.
The fiduciary standards and prohibited transaction rules of ERISA and the
Code will not apply to transactions involving the Trust's assets while MidCap
SPDRs are held by a Plan or IRA. Unlike many other investment vehicles offered
to Plans and IRAs, the Trust's assets will not be treated as "plan assets" of
the Plans or IRAs which acquire or purchase MidCap SPDRs. Although ERISA
imposes certain duties on Plan fiduciaries and ERISA and/or Section 4975 of the
Code prohibit certain transactions involving "plan assets" between Plans or
IRAs and their fiduciaries or certain related persons, those rules will not
apply to transactions involving the Trust's assets because MidCap SPDRs
represent an interest in the Trust, and the Trust is registered as an
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"). ERISA, the Code and U.S. Department of Labor regulations contain
unconditional language
7
<PAGE>
exempting the assets of registered investment companies from treatment as "plan
assets" in applying the fiduciary and prohibited transaction provisions of
ERISA and the Code.
RESTRICTIONS ON PURCHASES BY INVESTMENT COMPANIES
The acquisition of MidCap SPDRs by registered investment companies is subject
to the restrictions set forth in section 12(d)(1) of the 1940 Act.
INVESTMENT MANAGEMENT
The Trust will hold the Securities and cash and will not be actively
"managed" by traditional methods, which typically involve effecting changes in
the Securities on the basis of judgments made relating to economic, financial
and market considerations. The composition and relative weightings of the
Securities will, however, be adjusted to conform to changes in the composition
and weighting of the Index Securities in the manner set forth in the Trust
Agreement (see "The Portfolio--Adjustments to the Portfolio").
DISTRIBUTIONS
Quarterly distributions based on the amount of dividends payable with respect
to Securities held by the Trust and other income, if any, received by the
Trust, net of fees and expenses, will be made via the Depository and its
participants to Beneficial Owners (see "The Trust--Book-Entry-Only System") on
each Dividend Payment Date (see "Administration of the Trust--Distributions to
Beneficial Owners"). Any capital gain income recognized by the Trust in any
taxable year that is not previously treated as distributed during the year
ordinarily will be distributed at least annually in January of the following
taxable year. The Trust may make additional distributions shortly after the end
of the year in order to satisfy certain distribution requirements imposed by
the Code (see "Tax Status of the Trust" and "Administration of the Trust--
Distributions to Beneficial Owners"). Although all distributions will initially
be made quarterly, the Trustee reserves the right to vary the periodicity with
which distributions are made (see "Administration of the Trust--Distributions
to Beneficial Owners"). Those Beneficial Owners interested in reinvesting their
quarterly distributions may participate through DTC Participants in the DTC
book-entry Dividend Reinvestment Service (the "Service") available through
certain brokers (see "Administration of the Trust--Dividend Reinvestment
Service").
REDEMPTION
MidCap SPDRs in Creation Unit size aggregations are redeemable in kind only
and are not redeemable for cash (see "Redemption of MidCap SPDRs"). MidCap
SPDRs can be redeemed only in Creation Unit size aggregations effected by a
Participating Party (with respect to redemptions through the MidCap SPDR
Clearing Process) or a DTC Participant (with respect to redemptions outside the
MidCap SPDR Clearing Process), in either case which has executed a Participant
Agreement (see "Redemption of MidCap SPDRs--Procedure for Redemption of MidCap
SPDRs"). Individual MidCap SPDRs are not redeemable, but entitle the owners
thereof to certain payments upon termination of the Trust (see "Administration
of the Trust--Termination"). Prior to termination, MidCap SPDR owners may
aggregate individual MidCap SPDRs to Creation Unit size or multiples thereof
(e.g., 25,000, 50,000 MidCap SPDRs, etc.) and request that the Trustee redeem
the MidCap SPDRs so aggregated. There can be no assurance, however, that there
always will be sufficient depth and liquidity in the public trading market to
complete all such transactions (see "Special Considerations"). Owners of MidCap
SPDRs in less than Creation Unit size aggregations may have to pay brokerage
fees and commissions to acquire sufficient MidCap SPDRs (i.e., 25,000 MidCap
SPDRs) to constitute a Creation Unit. Each redemption will also be accompanied
by a Cash Redemption Payment (as hereinafter defined, see "Redemption of MidCap
SPDRs--Procedure for Redemption of MidCap SPDRs") which on any given Business
Day is an amount identical to the Cash Component of a Portfolio Deposit.
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<PAGE>
In the event that the Trustee determines, in its discretion, that an Index
Security is likely to be unavailable for delivery or available in insufficient
quantity for delivery by the Trust upon the redemption of MidCap SPDRs in
Creation Unit size aggregations, then the Trustee shall have the right in its
discretion to deliver the cash equivalent value of such Index Security or Index
Securities, based on the market value of such Index Security or Index
Securities as of the Evaluation Time on the date such redemption order is
deemed received by the Trustee (see "Placement of Redemption Orders Using
MidCap SPDR Clearing Process), as part of the Cash Redemption Payment in lieu
of delivering such Index Security or Index Securities to the redeemer. If an
Index Security is not eligible for transfer through the MidCap SPDR Clearing
Process, the Trustee shall include the cash equivalent value of such Index
Security as a part of the Cash Redemption Payment to the redeemer in the manner
discussed in the preceding sentence. As discussed above, OSG stock is currently
not eligible for transfer through the MidCap SPDR Clearing Process. Therefore,
the Trustee will deliver the cash equivalent value of OSG stock as a part of
the Cash Redemption Payment in lieu of delivering OSG stock to the redeemer. If
OSG stock subsequently becomes eligible for transfer through the MidCap SPDR
Process, the Trustee will deliver OSG stock to all redeemers in the same manner
as all the Index Securities transferring through the MidCap SPDR Clearing
Process.
In connection with the redemption of MidCap SPDRs, if a redeemer is
restricted by regulation or otherwise from investing or engaging in a
transaction in one or more Index Securities, the Trustee shall have the right
in its discretion to deliver the cash equivalent value of such Index Security
or Index Securities based on the market value of such Index Security or Index
Securities as of the Evaluation Time on the date such redemption order is
deemed received by the Trustee (see "Placement of Redemption Orders Outside
MidCap SPDR Clearing Process") as a part of the Cash Redemption Payment in lieu
of delivering such Index Security or Index Securities to the redeemer. In such
case, such investor will pay the Trustee the Standard Transaction Fee, plus an
additional amount per Creation Unit not to exceed three (3) times the
Transaction Fee applicable for one Creation Unit, subject to the current
maximum charge of $12,000.
MidCap SPDR owners may also be required to pay Excess Cash Amounts, (as
hereinafter defined) when applicable, in connection with a redemption of MidCap
SPDRs (See "Redemption of MidCap SPDRs--Procedure for Redemption of SPDRs.")
The Transaction Fee will be charged in connection with the redemption of each
Creation Unit size aggregation of MidCap SPDRs. If a request for redemption is
made directly to the Trustee outside the MidCap SPDR Clearing Process, an
additional amount not to exceed three (3) times the Transaction Fee applicable
for one Creation Unit will be charged to the redeemer due to the increased
expense associated with delivery outside the MidCap SPDR Clearing Process (see
"Prospectus Summary--Transaction Fee").
TERMINATION
The Trust will terminate by its terms in twenty-five (25) years or earlier
upon the agreement of the Beneficial Owners of 66 2/3% of the then outstanding
MidCap SPDRs or in the event that MidCap SPDRs are de-listed from the Exchange
(see "Exchange Listing"). The Sponsor will also have the discretionary right to
terminate the Trust if at any time after six months following and prior to
three years following the Initial Date of Deposit the net asset value of the
Trust shall fall below $25,000,000 or if at any time after three years
following the Initial Date of Deposit such value is less than $100,000,000, as
such dollar amount shall be adjusted for inflation in accordance with the
National Consumer Price Index for All Urban Consumers (the "CPI-U")* as
published by the United States Department of Labor, such adjustment to take
effect at the end of the fourth year following the Initial Date of Deposit and
at the end of each year thereafter and to be made so as to reflect the
percentage increase in consumer prices as set forth in the CPI-U for the twelve
month
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* The CPI-U, as published by the United States Department of Labor, measures
the inflation rate of specified commodities deemed representative of the
purchases of all urban consumers.
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<PAGE>
period ending in the month preceding the month in which such adjustment is
made. The Trustee shall also have the right to terminate the Trust in the event
that (a) the Sponsor resigns or becomes incapable of discharging its duties and
a successor is not appointed; (b) the Depository is unable or unwilling to
continue
to perform its functions as set forth under the Trust Agreement and a
comparable replacement is unavailable; (c) NSCC no longer provides clearance
services with respect to MidCap SPDRs, or if the Trustee is no longer a member
of NSCC; (d) Standard & Poor's ceases publishing the S&P MidCap 400 Index; or
(e) the License Agreement (as hereinafter defined) is terminated (see
"Administration of the Trust--Termination"). The Trust shall also terminate if
the Trustee resigns or becomes incapable of discharging its duties and a
successor is not appointed.
UNDERWRITING
PDR Distributors, Inc. (the "Distributor") will act as underwriter of MidCap
SPDRs on an agency basis. All orders to create MidCap SPDRs in Creation Unit
size aggregations must be placed with the Distributor, and it will be the
responsibility of the Distributor to transmit such orders to the Trustee. The
Distributor will furnish to those placing such orders confirmation that the
orders have been accepted, but the Distributor shall reject any order which is
not submitted in proper form. Upon acceptance of an order to create MidCap
SPDRs, the Distributor will instruct the Trustee to initiate the book-entry
movement of the appropriate number of MidCap SPDRs to the account of the entity
placing the order. The Distributor will also be responsible for delivering a
prospectus to those persons creating MidCap SPDRs. The Distributor will also
maintain records of both the orders placed with it for the creation of MidCap
SPDRs and the confirmations of acceptance issued by it. In addition, the
Distributor will maintain a record of the instructions given to implement
delivery of MidCap SPDRs in response to orders placed with it. The Distributor
may also provide certain other administrative services, such as those related
to state securities law compliance. The Distributor is a corporation organized
in 1991 under the laws of the State of Delaware and is located at 6 St. James
Avenue, Boston, MA 02116. The Distributor is a registered broker-dealer, a
member of the National Association of Securities Dealers, Inc. and a wholly-
owned subsidiary of Signature Financial Group, Inc. The Sponsor will pay the
Distributor for its services a flat annual fee. The Sponsor will not seek
reimbursement for such payment from the Trust without obtaining prior exemptive
relief from the Commission.
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SPECIAL CONSIDERATIONS AND RISK FACTORS
GENERAL
Investment in the Trust should be made with an understanding that the value
of the Securities may fluctuate in accordance with changes in the financial
condition of the issuers of the Securities (particularly those that are heavily
weighted in the S&P MidCap 400 Index), the value of common stocks generally and
other factors. The identity and weighting of the Index Securities and the
Securities also will change from time to time (see "The Portfolio--Adjustments
to the Portfolio" and "The Portfolio--Selection and Acquisition of
Securities"). There can be no assurance that the issuers of the Securities will
pay dividends on outstanding shares of common stock. Distributions on the
Securities will generally depend upon the declaration of dividends by the
issuers of the Securities; the declaration of such dividends generally depends
upon various factors, including the financial condition of the issuers and
general economic conditions. As discussed above, the Trust, unlike a managed
investment company, will not be actively "managed" by traditional methods, and
therefore the adverse financial condition of an issuer will not result in the
elimination of its securities from the Securities held by the Trust unless the
Securities of such issuer are removed from the S&P MidCap 400 Index (see "The
Portfolio--Adjustments to the Portfolio").
An investment in the Trust 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 the issuers of the Securities 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 Securities and thus in the value of
MidCap SPDRs). 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. As discussed above, the Trust
will not be actively "managed" and therefore common stocks held by the Trust
will not be disposed of as a result of normal fluctuations in the market.
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. The value of the Securities
thus may be expected to fluctuate over the entire life of the Trust to values
higher or lower than those prevailing on the Initial Date of Deposit (see
"Market Risks"). 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 for any of the Securities,
that any market for the Securities will be maintained or that any such market
will be or remain liquid. The price at which the Securities may be sold and the
value of the Trust will be adversely affected if trading markets for the
Securities are limited or absent.
An investment in the Trust should also be made with an understanding that the
Trust may never be able to replicate exactly the performance of the S&P MidCap
400 Index because the total return generated by the Securities will be reduced
by transaction costs incurred in adjusting the actual balance of the Portfolio
Securities and other Trust expenses, whereas such transaction costs and
expenses are not included in the calculation of the S&P MidCap 400 Index. It is
also possible that for a period of time, the Trust may not fully replicate the
performance of the S&P MidCap 400 Index due to the unavailability of certain
Index Securities in the secondary market or due to other extraordinary
circumstances. Such events are unlikely to
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continue for an extended period of time, because the Trustee is required to
correct such imbalances by means of adjusting the composition or weighting of
Portfolio Securities (see "The Portfolio--Adjustments to the Portfolio").
Investors should also be aware that when the Trustee receives a Cash
Component, a portion of which is to be used to purchase certain Index
Securities under the circumstances discussed under "The Trust--Creation of
Creation Units" (e.g., when a security is ineligible for transfer through the
MidCap SPDR Clearing Process), the Trust will bear the risk of any price
increase or decrease that may occur with regard to such Index Security during
the period beginning with the receipt of the Cash Component and ending when
such cash is used by the Trustee to purchase some or all of the appropriate
number of shares of such Index Security. Beneficial Owners of MidCap SPDRs will
also be at risk, therefore, because if the price of such Index Security were to
increase, Beneficial Owners would have an interest in fewer shares of such
Index Security than if such Index Security had been either tendered as part of
the Portfolio Deposit or purchased on the date on which the Cash Component was
delivered to the Trustee. Conversely, if the price of such Index Security were
to decrease, Beneficial Owners would have an interest in a greater number of
shares of such Index Security than if such Index Security had been either
tendered as part of the Portfolio Deposit or purchased on the date on which the
Cash Component was delivered to the Trustee.
Neither the Depository nor Beneficial Owners of MidCap SPDRs are entitled
either to dispose of any of the Securities in the Trust, as such, or to vote
the Securities. As the beneficial owner of the Securities, the Trustee will
have the right to vote all of the voting Securities (see "Administration of the
Trust--Voting").
Except as otherwise specifically noted, the time frames for delivery of
securities, cash, or MidCap SPDRs in connection with creation and redemption
activity within the MidCap SPDR Clearing Process as set forth herein are based
on NSCC's current "regular way" settlement period of five (5) days during which
NSCC is open for business (each such day an "NSCC Business Day").* NSCC will,
in the future, reduce
such "regular way" settlement period, in which case it is anticipated that
there would be a corresponding reduction in settlement periods applicable to
MidCap SPDR creations and redemptions. Investors should note that NSCC Business
Days do not always coincide with the days during which the Trustee is open for
business.
NET ASSET VALUE AND MARKET PRICES
The Trust's assets will consist primarily of the Securities. Therefore, the
net asset value of MidCap SPDRs in Creation Unit size aggregations and,
proportionately, the net asset value per MidCap SPDR, will change as
fluctuations occur in the market value of Securities. Investors should also be
aware that the aggregate public trading market price of 25,000 MidCap SPDRs may
be different from the net asset value of a Creation Unit aggregation of MidCap
SPDRs (i.e., 25,000 MidCap SPDRs may trade at a premium over or at a discount
to the net asset value of a Creation Unit) and similarly the public trading
market price per MidCap SPDR may be different from the net asset value of a
Creation Unit on a per MidCap SPDR basis (see "Special Considerations and Risk
Factors--Market Risks"). This price difference may be due, in large part, to
the fact that supply and demand forces at work in the secondary trading market
for MidCap SPDRs will be closely related to, but not identical to, the same
forces influencing the prices of the S&P MidCap 400 Index stocks trading
individually or in the aggregate at any point in time. The expenses of the
Trust will be reflected in the net asset value of MidCap SPDRs in Creation Unit
size aggregations and the expenses of the Trust will be accrued daily (see
"Expenses of the Trust").
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* Currently, "regular way" settlement takes place within five (5) NSCC
Business Days following a securities trade (generally expressed as "T+5").
Following the effective date of SEC Rule 15c6-1 requiring a shortened
settlement period for securities trades ("SEC Rule 15c6-1"), NSCC's "regular
way" settlement period will be shortened to three (3) NSCC Business Days
following a securities trade (generally expressed as "T+3"), except during
NSCC's "conversion period" during which trade settlements move from T+5 to
T+3 and hence may settle on the fourth (4th) NSCC Business Day following a
securities trade ("T+4").
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TRADING CONSIDERATIONS
Prior to the date of this Prospectus, there has been no market for MidCap
SPDRs trading individually or in Creation Unit size aggregations and,
consequently, there can be no assurance that active trading markets will
develop, nor is there an accurate basis for predicting the price levels at
which MidCap SPDRs may trade. The Sponsor will not maintain a secondary market
in MidCap SPDRs. MidCap SPDRs have been accepted for listing on the Exchange
subject to official notice of issuance. The market symbol for MidCap SPDRs will
be MDY. Trading in MidCap SPDRs on the Exchange may be halted due to market
conditions or, in light of Exchange rules and procedures, for reasons that, in
the view of the Exchange, make trading in MidCap SPDRs inadvisable. In
addition, trading in MidCap SPDRs on the Exchange will be subject to trading
halts caused by extraordinary market volatility pursuant to Exchange "circuit
breaker" rules that require trading in securities on the Exchange to be halted
for a specified time period based on a specified market decline. There can be
no assurance that the requirements of the Exchange necessary to maintain the
listing of MidCap SPDRs will continue to be met or will remain unchanged. The
Trust will be terminated in the event MidCap SPDRs are delisted from the
Exchange. For a description of the conditions to listing of MidCap SPDRs and
the circumstances under which the Exchange would consider the suspension of
trading in or the delisting of MidCap SPDRs, see "Exchange Listing". Further,
the Trust may be terminated, among other reasons, in the event that the License
Agreement is terminated or the net asset value of the Trust falls below a
specified level (see "Administration of the Trust--Termination").
MARKET RISKS
MidCap SPDRs are subject to the risks of an investment in a broad-based
portfolio of common stocks, including the risk that the general level of stock
prices may decline, thereby adversely affecting the value of such investment.
Investors should also note that the S&P MidCap 400 Index contains the stocks of
mid-capitalization issuers and such stocks may be subject to liquidity and
trading patterns and market and performance cycles different from those
experienced by stocks issued by larger capitalization issuers. MidCap SPDRs are
also subject to risks other than those associated with an investment in a
broadly based portfolio of common stocks in that the selection of the stocks
included in the Trust's portfolio, the expenses associated with the Trust or
other factors distinguishing an ownership interest in a trust from the direct
ownership of a portfolio of securities may affect trading in MidCap SPDRs as
compared with trading in a broadly based portfolio of common stocks. MidCap
SPDRs are further subject to the risk that extraordinary events may cause any
of the parties providing services to the Trust, such as the Trustee, the
Sponsor, the Distributor, the Depository or NSCC, to be closed or otherwise
unable to perform such party's obligations as set forth herein and in the
agreements between and among such parties. According to the terms of the Trust
Agreement, if any of the above named entities fails or is otherwise unable to
perform adequately its duties, a successor entity may be named or appointed to
assume all duties and obligations of its predecessor. If, however, no suitable
successor is available or willing to undertake all such duties and obligations,
under the Trust Agreement the Trust will then be terminated (see
"Administration of the Trust--Termination").
The Trustee will deliver a portfolio of Securities for each Creation Unit
size aggregation of MidCap SPDRs delivered for redemption, identical in
weighting and composition to the securities portion of a Portfolio Deposit as
in effect on the date request for redemption is made (see "Redemption of MidCap
SPDRs"). If a redemption is processed through the MidCap SPDR Clearing Process,
to the extent that the securities to be delivered on settlement date are not
delivered, they will be covered by NSCC's guarantee of the completion of such
delivery. Any Securities not received on settlement date will be marked to the
market until delivery is completed. The Trust, to the extent it has not already
done so, remains obligated to deliver such Securities to NSCC, and the market
risk of any increase in the value of such Securities until delivery is made by
the Trust to NSCC could adversely affect the net asset value of the Trust.
Investors should note that the Securities to be delivered to a redeemer
submitting a redemption request outside the MidCap SPDR Clearing Process that
are not delivered to such redeemer are not covered by NSCC's guarantee of
completion of such delivery.
13
<PAGE>
Investors should also note that the size of the Trust in terms of total
assets held may change substantially over time and from time to time as MidCap
SPDRs in Creation Unit size aggregations are created and redeemed. Such
fluctuations in Trust size should not adversely impact the net asset value at
any time, because the amount of the Cash Component or the Cash Redemption
Payment upon creations or redemptions, respectively, of MidCap SPDRs in
Creation Unit size aggregations is determined each day to equate the value of
the Portfolio Deposit to the net asset value of the Trust, on a per Creation
Unit basis, at the close of business on the day of such request (see "The
Portfolio--Adjustments to the Portfolio Deposit").
Investors in the Trust should also be aware that there are tax consequences
associated with the ownership of MidCap SPDRs resulting from the distribution
of Trust dividends and sales of MidCap SPDRs as well as the sales of underlying
Securities held by the Trust in connection with redemptions under certain
circumstances (see "Tax Status of the Trust--Tax Consequences to Beneficial
Owners").
14
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Unitholder and Trustee of MidCap SPDR Trust, Series 1
In our opinion, the accompanying statement of financial condition, including
the schedule of investments, presents fairly, in all material respects, the
financial position of MidCap SPDR Trust, Series 1 at April 27, 1995, 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 conformity 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 from
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, which included confirmation of securities at April 27, 1995 by
correspondence with the custodian and brokers, provides a reasonable basis for
the opinion expressed above.
Price Waterhouse LLP
New York, New York
April 27, 1995
15
<PAGE>
MIDCAP SPDR TRUST, SERIES 1
STATEMENT OF FINANCIAL CONDITION
OPENING OF BUSINESS, APRIL 27, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in Securities, at value (cost $13,841,812.49) (Note
1)........................................................... $13,841,812.49
Deferred organization expenses (Note 2)....................... 195,000.00
--------------
TOTAL ASSETS.................................................... 14,036,812.49
--------------
LIABILITIES AND INTEREST OF "MIDCAP SPDR" HOLDERS...............
Organization expenses payable................................. 195,000.00
--------------
TOTAL LIABILITIES............................................... 195,000.00
--------------
TOTAL NET ASSETS (applicable to 375,000 "MidCap SPDRs" outstand-
ing) (Note 3).................................................. $13,841,812.49
==============
NET ASSET VALUE PER "MIDCAP SPDR" (COMPRISED OF
$13,841,812.49/375,000 "MidCap SPDRs" outstanding) (Note 3).... $ 36.91
==============
</TABLE>
- --------
NOTES TO STATEMENT:
1. On the Initial Date of Deposit, Portfolio Deposits were received by The
Bank of New York, the Trust's Trustee, in the form of executed securities
transactions effected for all 400 Index Securities, which transactions will
settle within five Business Days of the Initial Date of Deposit, from
Susquehanna Investment Group, in exchange for 15 Creation Units of the Trust
equivalent to 375,000 "MidCap SPDRs". An irrevocable letter of credit issued by
Union Bank of Switzerland in the aggregate amount of $15,000,000, has been
delivered to the Trustee, to be drawn on if necessary, for the benefit of the
Trust to fund the settlement of the executed securities transactions. The value
of securities has been based on the April 26, 1995 closing sales price on the
exchange or market which is deemed the principal market therefor.
2. It is anticipated that the Trust will pay the expenses of its operation,
including the fees of its Trustee and payments to Standard & Poor's for a
license to use the Standard & Poor's MidCap 400 Index as a basis for
determining the composition of the Trust, as described under "Expenses of the
Trust" and "License Agreement" in this Prospectus. In addition, initial fees
and expenses totaling approximately $195,000 incurred in connection with the
organization of the Trust, will be capitalized and amortized over five years on
a straight-line basis by the Trust.
The Sponsor has undertaken that on each day during the fiscal period ending
December 31, 1995 the ordinary operating expenses of the Trust as calculated by
the Trustee will not be permitted to exceed an amount which is 30/100 of 1% per
annum of the daily net asset value of the Trust. To the extent during such
period the ordinary operating expenses of the Trust do exceed such 30/100 of 1%
amount, the Sponsor will reimburse the Trust for or assume such excess ordinary
operating expenses. The Sponsor retains the ability to be repaid by the Trust
for expenses so reimbursed or assumed to the extent that subsequently during
the year expenses fall below the 30/100 of 1% per annum level on any given day
(see "Expenses of the Trust" in this Prospectus.)
3. "MidCap SPDRs" are created and redeemed by the Trust only in Creation Unit
size aggregations of 25,000 units, other than in connection with the Service
(see "Administration of the Trust-Dividend Reinvestment Service"). Transaction
Fees at varying amounts may be charged those persons creating or redeeming
Creation Units. See "Prospectus Summary--Portfolio Deposits" and "The Trust--
Creation of Creation Units" in this Prospectus for further description.
16
<PAGE>
MIDCAP SPDR TRUST, SERIES 1
SCHEDULE OF INVESTMENTS
SECURITIES REQUIRED FOR A PORTFOLIO DEPOSIT
ON THE OPENING OF BUSINESS
APRIL 27, 1995
<TABLE>
<CAPTION>
Name of Issuer Shares Value
- -------------- ------ -----
<S> <C> <C>
Acuson Corp 810 $ 8,808.75
ADC Telecommunications 1,575 48,628.12
Adobe Systems 1,725 95,306.25
Advanced Technology Labs 375 5,906.25
AES Corp 2,085 34,923.75
AFLAC Inc 2,790 110,902.50
Air & Water Technologies 900 4,387.50
Airborne Freight 585 11,041.87
Alaska Air Group 375 6,140.62
Albany International 840 18,375.00
Albemarle Corp 1,845 25,368.75
Alexander & Baldwin 1,290 28,380.00
Allegheny Ludlum 1,980 43,312.50
Allegheny Power System 3,345 78,189.37
Altera Corp 585 47,385.00
Alumax, Inc 1,245 34,081.87
American Power Conversion 2,580 44,182.50
American Premier Group Inc 1,470 36,750.00
American President 765 17,021.25
Ametek, Inc 975 16,087.50
Anadarko Petroleum 1,650 66,412.50
Analog Devices 2,115 56,047.50
Angelica Corp 270 6,885.00
AnnTaylor Stores Corp 645 16,770.00
Aon Corp 2,865 105,288.75
Apache Corp 1,725 47,221.87
Applied Bioscience 795 4,322.41
Arnold Ind 750 13,406.25
Arrow Electronics 1,290 59,501.25
Arvin Industries 615 14,221.87
AST Research 900 16,200.00
Atlanta Gas Light 720 26,190.00
Atlantic Energy 1,515 27,459.37
Atlantic Southeast Airlines 945 19,608.75
Atmel Corp 1,275 53,709.37
Avnet, Inc 1,140 49,447.50
Bancorp Hawaii 1,185 33,328.12
Banta Corp 555 18,592.50
Battle Mountain Gold 2,265 25,481.25
</TABLE>
17
<PAGE>
MIDCAP SPDR TRUST, SERIES 1
SCHEDULE OF INVESTMENTS
SECURITIES REQUIRED FOR A PORTFOLIO DEPOSIT
ON THE OPENING OF BUSINESS
APRIL 27, 1995
<TABLE>
<CAPTION>
Name of Issuer Shares Value
- -------------- ------ -----
<S> <C> <C>
Bay Networks, Inc 3,060 $110,925.00
Bear Stearns 3,150 64,968.75
Beckman Instruments 810 22,680.00
Belo (AH) Corp 555 33,438.75
Bergen Brunswig 1,110 27,056.25
Best Buy Co, Inc 1,185 30,513.75
Betz Laboratories 780 32,662.50
Biogen, Inc 930 36,037.50
BJ Services 435 10,222.50
Black Hills 405 8,859.37
BMC Software 705 41,066.25
Bob Evans Farms 1,200 24,450.00
Bordland International 765 7,267.50
Bowater Inc 1,035 36,742.50
Brinker International 2,010 33,165.00
Brooklyn Union Gas 1,350 33,412.50
Brush Wellman 450 8,493.75
Buffets Inc 870 8,917.50
Burlington Industries 1,815 19,284.37
Cabletron Systems, Inc 2,010 96,982.50
Cabot Corp 1,065 41,535.00
Cadance Design Systems 1,080 31,590.00
Calgon Carbon Corp 1,125 13,218.75
California Energy Co 1,365 22,522.50
Callaway Golf Co 1,920 24,480.00
CalMat Co 645 12,658.12
Cardinal Health, Inc 1,170 54,843.75
Carlisle Companies 435 16,312.50
Carpenter Technology 225 13,528.12
Carter-Wallace 1,290 15,963.75
CBI Industries 1,065 27,024.37
Centocor 1,440 20,340.00
Central Fidelity Banks 1,095 28,196.25
Central Louisiana Electric 630 14,411.25
Central Maine Power 915 9,836.25
Century Telephone Enterprises 1,500 42,750.00
Chesapeake Corp 660 20,872.50
Chiron Corp 1,125 62,718.75
Chris-Craft Industries 825 27,843.75
</TABLE>
18
<PAGE>
MIDCAP SPDR TRUST, SERIES 1
SCHEDULE OF INVESTMENTS
SECURITIES REQUIRED FOR A PORTFOLIO DEPOSIT
ON THE OPENING OF BUSINESS
APRIL 27, 1995
<TABLE>
<CAPTION>
Name of Issuer Shares Value
- -------------- ------ -----
<S> <C> <C>
Church & Dwight 540 $ 9,720.00
Cintas Corporation 1,320 52,140.00
Circus Circus Enterprises 2,400 78,900.00
Cirrus Logic 840 34,545.00
City National Corp 1,260 12,915.00
Claire's Stores 585 8,116.87
Clayton Homes 2,100 33,862.50
Cleveland-Cliffs 345 12,635.62
CML Group 1,395 10,113.75
CMS Energy 2,430 56,497.50
Coca-Cola Enterprises 3,615 82,693.12
Comdisco, Inc 1,020 28,432.50
Comerica Inc 3,300 94,462.50
Compuware Corp 1,275 31,875.00
COMSAT Corp 1,335 26,199.37
Conner Peripherals 1,470 14,332.50
Consolidated Papers 1,230 61,346.25
Continental Medical Sys 1,080 11,880.00
Convex Computer 750 3,187.50
Coram Healthcare 1,080 21,600.00
Cordis Corp 450 32,737.50
CPI Corp 390 6,337.50
Cracker Barrel Old Country 1,680 35,280.00
Crestar Financial Corp 1,050 47,643.75
Crompton & Knowles 1,365 24,058.12
Cross (AT) Co 465 8,021.25
CUC International 3,195 127,800.00
Cypress Semiconductor 1,080 32,265.00
Danaher Corp 1,605 45,341.25
Datascope 450 8,212.50
Dauphin Deposit Corp 870 21,097.50
Dean Foods 1,125 32,343.75
Dell Computer 1,095 57,898.12
Delmarva Power & Light 1,665 33,091.87
Dentsply Int'l 780 27,397.50
Dexter Corp 675 15,356.25
Diagnostek Inc 675 12,933.75
Diagnostic Products 360 13,455.00
Diamond Shamrock 810 22,173.75
</TABLE>
19
<PAGE>
MIDCAP SPDR TRUST, SERIES 1
SCHEDULE OF INVESTMENTS
SECURITIES REQUIRED FOR A PORTFOLIO DEPOSIT
ON THE OPENING OF BUSINESS
APRIL 27, 1995
<TABLE>
<CAPTION>
Name of Issuer Shares Value
- -------------- ------ -----
<S> <C> <C>
Diebold, Ind 855 $35,268.75
Dole Foods 1,665 49,533.75
Dollar General 1,860 46,267.50
Donaldson Co 735 18,099.37
Dreyer's Grand Ice Cream 405 12,150.00
Duriron Co 525 11,353.12
Duty Free International 765 5,737.50
Edison Bros Stores 615 9,225.00
Edwards (AG), Inc 1,725 40,321.87
El Paso Natural Gas Co 990 28,957.50
EMC Corp 5,490 106,368.75
Ennis Business Forms 465 6,045.00
Enterra Corp 780 14,040.00
Equifax Inc 2,175 67,425.00
Ethyl Corp 3,315 35,636.25
Exabyte Corp 600 7,500.00
Family Dollar Stores 1,590 18,881.25
Federal Signal 1,275 28,846.87
Federal-Mogul 990 17,325.00
Ferro Corp 780 22,132.50
FHP International Corp 1,125 26,859.37
Fifth Third Bancorp 1,815 89,388.75
Fingerhut Companies, Inc 1,290 14,835.00
First Bank System 3,750 150,468.75
First Brands Corp 585 21,864.37
First Financial Management 1,755 127,676.25
First of America Bank Corp 1,755 60,766.87
First Security Corp (Utah) 1,380 33,637.50
First Tennessee National 945 39,926.25
First Virginia Banks 960 32,400.00
FIserv Inc 1,095 30,386.25
FlightSafety International 885 43,586.25
Florida Progress 2,670 81,435.00
Flowers Industries 1,080 18,360.00
Forest Laboratories 1,260 57,802.50
Foundation Health 1,590 43,725.00
Franklin Resources 2,280 91,770.00
Freeport-McMoRan Inc 4,260 73,485.00
Frontier Corp 2,295 45,613.12
</TABLE>
20
<PAGE>
MIDCAP SPDR TRUST, SERIES 1
SCHEDULE OF INVESTMENTS
SECURITIES REQUIRED FOR A PORTFOLIO DEPOSIT
ON THE OPENING OF BUSINESS
APRIL 27, 1995
<TABLE>
<CAPTION>
Name of Issuer Shares Value
- -------------- ------ -----
<S> <C> <C>
Fruit of the Loom 2,130 $ 55,113.75
Full (HB) Co 390 14,673.75
GATX Corp 555 25,113.75
GenCorp 900 11,250.00
Genzyme Corp 690 26,565.00
Georgia Gulf 1,170 38,317.50
Gibson Greeetings 450 4,556.25
Global Marine 4,620 20,212.50
Goulds Pumps 600 14,550.00
Granite Construction 330 6,641.25
Green Tree Financial 1,890 74,655.00
Hancock Fabrics 600 5,850.00
Hanna (MA) 1,005 24,873.75
Hannaford Bros 1,170 30,420.00
Harley-Davidson 2,130 49,256.25
Harsco Corp 705 33,046.87
Hartford Steam Boiler 570 25,151.25
Hawaiian Electric Industries 810 28,147.50
Health Care & Retirement 885 26,328.75
HealthCare COMPARE 945 26,932.50
Healthsource Inc 870 32,190.00
HEALTHSOUTH Corp 1,995 41,895.00
Heilig-Meyers Co 1,365 27,982.50
Home Shopping Network 2,640 18,150.00
HON Industries 870 22,620.00
Hospitality Franchise Sys 1,275 39,843.75
Houghton Mifflin 405 18,731.25
Hubbel Inc (Class B) 930 50,103.75
Hunt(JB) Transport Serv Inc 1,080 19,641.96
IBP, Inc 1,335 48,060.00
Idaho Power 1,050 25,593.75
Illinois Central Corp 1,200 42,150.00
Illinova Corp 2,115 48,909.37
IMC Global Inc 825 40,528.12
Indiana Energy 630 11,418.75
Information Resources 735 9,738.75
Informix Corp 1,815 70,785.00
Intelligent Electronics 930 9,067.50
International Dairy Queen 660 12,375.00
</TABLE>
21
<PAGE>
MIDCAP SPDR TRUST, SERIES 1
SCHEDULE OF INVESTMENTS
SECURITIES REQUIRED FOR A PORTFOLIO DEPOSIT
ON THE OPENING OF BUSINESS
APRIL 27, 1995
<TABLE>
<CAPTION>
Name of Issuer Shares Value
- -------------- ------ -----
<S> <C> <C>
International Game Technology 3,645 $46,929.37
International Multifoods 510 10,455.00
Iowa-Illinois Gas & Electric 825 17,325.00
IPALCO Enterprises 1,065 34,080.00
IVAX Corp 3,270 78,480.00
Jacobs Engineering Group 705 13,747.50
Kansas City Power & Light 1,740 39,802.50
Kansas City Southern Ind 1,215 46,018.12
Kaydon Corp 465 12,903.75
Kelly Services 1,065 35,677.50
Kemper Corp 960 43,560.00
Kennametal Inc 735 22,693.12
Keystone International 990 20,913.75
Kohl's Corp 1,035 45,022.50
Lancaster Colony 840 30,030.00
Lance, Inc 855 14,962.50
Lands' End 975 14,868.75
Lawson Products 360 9,630.00
Lawter International 1,260 17,010.00
LDDS Communications 4,740 114,945.00
Lee Enterprises 630 22,207.50
LEGENT Corp 1,005 27,888.75
Leggett & Platt 1,155 45,189.37
LG&E Energy 930 36,037.50
Lincoln Telecommunications 900 13,950.00
Linear Technology Corp 1,020 62,220.00
Litton Industries 1,290 45,311.25
Loctite Corp 990 49,500.00
Longview Fibre 1,455 23,825.62
LSI Logic 1,680 110,460.00
Lubrizol Corp 1,815 62,844.37
Lukens Inc 405 13,263.75
Lyondell Petrochemical 2,235 56,992.50
MacFrugal's Bargains 735 9,922.50
MagneTek, Inc 675 9,703.12
MAPCO 840 47,145.00
Mark IV Industries 1,605 29,291.25
Marshall & Ilsley Corp 2,655 53,763.75
MAXXAM Inc 240 7,530.00
</TABLE>
22
<PAGE>
MIDCAP SPDR TRUST, SERIES 1
SCHEDULE OF INVESTMENTS
SECURITIES REQUIRED FOR A PORTFOLIO DEPOSIT
ON THE OPENING OF BUSINESS
APRIL 27, 1995
<TABLE>
<CAPTION>
Name of Issuer Shares Value
- -------------- ------ -----
<S> <C> <C>
McCormick & Co 2,280 $50,730.00
McKesson Corp 1,230 48,738.75
MCN Corp 1,815 35,165.62
Measurex Corp 450 10,968.75
Media General 735 22,968.75
Mentor Graphics 1,365 21,157.50
Mercantile Bancorp 1,215 44,651.25
Mercantile Bankshares 1,290 27,573.75
Meridian Bancorp 1,620 51,840.00
Michael Foods 540 6,817.50
Miller (Herman) 690 13,627.50
Minnesota Power & Light 870 22,728.75
Mirage Resorts 2,550 77,137.50
Modine Mfg 825 27,225.00
Molex Inc 2,235 83,812.50
Montana Power 1,500 34,312.50
Morgan Stanley 2,130 149,632.50
Morrison Restaurants Inc 945 21,262.50
Multimedia, Inc 1,050 38,456.25
Murphy Oil 1,260 55,125.00
Mylan Laboratories 2,220 67,987.50
NY State Electric & Gas 2,010 44,973.75
Nabors Industries 2,355 20,311.87
National Fuel Gas 1,050 30,581.25
National Health Labs Hldgs 2,370 35,253.75
National Presto 210 9,738.75
NCH Corp 240 15,240.00
Nellcor, Inc 465 19,181.25
Nevada Power 1,260 24,885.00
New England Electric System 1,815 54,903.75
NEXTEL Communications 2,955 45,802.50
Nine West Group 975 30,712.50
NIPSCO Industries 1,800 58,275.00
Noble Affiliates 1,395 37,141.87
Nordson Corporation 510 28,942.50
Northeast Utilities 3,495 76,453.12
Northern Trust Corp 1,515 56,812.50
NovaCare 1,800 16,200.00
NPC Int'l Inc Cl A 690 4,053.75
</TABLE>
23
<PAGE>
MIDCAP SPDR TRUST, SERIES 1
SCHEDULE OF INVESTMENTS
SECURITIES REQUIRED FOR A PORTFOLIO DEPOSIT
ON THE OPENING OF BUSINESS
APRIL 27, 1995
<TABLE>
<CAPTION>
Name of Issuer Shares Value
- -------------- ------ -----
<S> <C> <C>
Octel Communications 660 $13,942.50
OEA, Inc 570 17,456.25
Office Depot 4,170 92,782.50
Oklahoma Gas & Electric 1,125 38,671.87
Olin Corp 600 33,375.00
Olsten Corp 1,155 39,847.50
Omnicom Group 1,020 55,335.00
Oregon Steel Mills 540 9,585.00
Overseas Shipholding Group 1,020 20,145.00
PH Glatfelter Co 1,245 22,254.37
PacifiCare Health Sys B 855 53,437.50
PaineWebber Group 2,805 48,386.25
Parametric Technology 1,605 75,435.00
Parker & Parsley Petroleum 975 20,840.62
Parker Drilling 1,545 7,531.87
Paychex Inc 840 39,270.00
Pentair Inc 510 23,172.87
Perrigo Co 2,130 24,495.00
PHH Corporation 465 18,600.00
Phillips-Van Heusen 750 11,531.25
Pinnacle West Capital 2,445 52,873.12
Policy Management Systems 540 27,337.50
Portland General 1,410 29,257.50
Potomac Electric Power 3,315 65,056.87
Precision Castparts 570 15,532.50
Progressive Corp 1,995 75,061.87
Provident Life & Accident 1,275 28,528.12
Public Service of Colorado 1,740 52,417.50
Public Service of New Mexico 1,170 14,771.25
Puget Sound Power & Light 1,785 38,154.37
Quaker State 885 12,721.87
Quantum Corp 1,290 23,703.75
Questar Corp 1,125 33,187.50
Ranger Oil 2,760 20,010.00
Rayonier Inc 825 26,503.12
Regions Financial Corp 1,260 43,627.50
Revco DS Inc 1,860 39,292.50
Reynolds & Reynolds 1,155 30,751.87
Rohr Inc 510 6,438.75
</TABLE>
24
<PAGE>
MIDCAP SPDR TRUST, SERIES 1
SCHEDULE OF INVESTMENTS
SECURITIES REQUIRED FOR A PORTFOLIO DEPOSIT
ON THE OPENING OF BUSINESS
APRIL 27, 1995
<TABLE>
<CAPTION>
Name of Issuer Shares Value
- -------------- ------ -----
<S> <C> <C>
Rollins Environmental 1,695 $7,415.62
Rollins, Inc 1,005 28,391.25
RPM, Inc 1,590 31,601.25
Ruddick Corp 645 12,980.62
Savannah Food & Industries 735 6,982.50
Sbarro, Inc 570 14,677.50
SCANA Corp 1,335 57,071.25
Scherer (RP) 660 31,350.00
Schulman (A), Inc 1,050 31,237.50
Schwab (Charles) 2,415 80,902.50
Seagate Technology 1,995 61,096.87
Seagull Energy 1,005 17,461.87
Sealed Air 555 23,656.87
Sensormatic Electronics 2,070 54,337.50
Sequa Corp 270 8,302.50
Sequent Computer Systems 870 14,681.25
Service Merchandise 2,775 13,528.12
Shaw Industries 3,900 52,162.50
Sizzler International 780 4,387.50
Smith International 1,110 19,286.25
Smucker (JM) 810 17,415.00
Sonoco Products 2,445 59,902.50
Sotheby's Holdings 1,560 20,475.00
Southdown 480 9,000.00
Southern New England Telecom 1,815 58,987.50
SouthTrust Corp 2,280 47,595.00
Southwestern Public Service 1,140 32,490.00
Standard Register 810 14,985.00
Stanhome Inc 540 15,255.00
Staples Inc 1,755 42,778.12
State Street Boston 2,310 73,053.75
Sterling Chemicals 1,560 20,085.00
Stewart & Stevenson Services 930 35,572.50
Storage Technology 1,470 30,870.00
Stratus Computer 675 19,321.87
Structural Dynamics Research 810 8,707.50
Stryker Corp 1,350 63,112.50
Sundstrand Corp 885 49,228.12
Superior Industries 825 21,759.37
</TABLE>
25
<PAGE>
MIDCAP SPDR TRUST, SERIES 1
SCHEDULE OF INVESTMENTS
SECURITIES REQUIRED FOR A PORTFOLIO DEPOSIT
ON THE OPENING OF BUSINESS
APRIL 27, 1995
<TABLE>
<CAPTION>
Name of Issuer Shares Value
- -------------- ------ -----
<S> <C> <C>
Surgical Care Affiliates 1,080 $24,975.00
Symantec Corp 1,035 24,969.37
Symbol Technologies 720 23,580.00
Tambrands Inc 1,020 41,947.50
TCA Cable TV 690 16,905.00
TECO Energy 3,255 69,168.75
Tecumseh Products Co 615 31,365.00
Teleflex 480 20,220.00
Telephone & Data Systems 1,545 56,392.50
Teradyne, Inc 1,005 51,380.60
Thermo Electron 1,500 81,375.00
Thiokol Corp 525 14,700.00
Tidewater Inc 1,485 33,783.75
Tiffany & Co 435 13,756.87
Topps Co 1,320 8,415.00
Tosco Corp 1,035 35,190.00
Transatlantic Holdings 645 39,586.87
Trinity Industries 1,125 43,593.75
Tyson Foods 4,035 95,326.87
US Shoe 1,305 36,376.87
UJB Financial 1,545 42,294.37
Unifi, Inc 1,905 49,530.00
Universal Corp 975 22,059.37
Universal Foods 735 23,703.75
UtiliCorp United 1,260 35,122.50
Valero Energy 1,230 26,291.25
Value Health, Inc 1,125 40,359.37
Vanguard Cellular Systems 1,080 23,760.00
Vacro Int'l 855 7,160.62
Varian Associates 945 43,470.00
Verifone 660 14,850.00
Vons Companies 1,215 24,603.75
Vulcan Materials 1,005 57,285.00
Waban Inc 930 15,810.00
Wallace Computer Services 630 20,790.00
Washington Gas Light 600 23,550.00
Washington Post 315 81,270.00
Watts Industries 825 18,768.75
Wausau Paper Mills 825 18,665.62
</TABLE>
26
<PAGE>
MIDCAP SPDR TRUST, SERIES 1
SCHEDULE OF INVESTMENTS
SECURITIES REQUIRED FOR A PORTFOLIO DEPOSIT
ON THE OPENING OF BUSINESS
APRIL 27, 1995
<TABLE>
<CAPTION>
Name of Issuer Shares Value
- -------------- ------ -----
<S> <C> <C>
Wellman, Inc 930 $ 25,923.75
West One Bancorp 1,035 27,945.00
Western Publishing 585 5,666.89
Willamette Industies 1,545 79,953.75
Wilmington Trust Corp 1,005 25,376.25
Wisconsin Energy 3,045 83,356.87
Witco Corp 1,575 43,706.25
WPL Holdings 855 24,581.25
Xilinx, Inc 645 49,503.75
York International 1,050 43,968.75
--------------
Total Investments - (Cost $13,841,812.49) $13,841,812.49
==============
</TABLE>
27
<PAGE>
THE TRUST
The Trust is a unit investment trust created under the laws of the State of
New York pursuant to the Trust Agreement*. The Securities held by the Trust
consist of a portfolio of common stocks or, in the case of securities not yet
delivered on the Initial Date of Deposit (or, subsequently, securities not yet
delivered in connection with purchases made by the Trust or subsequent
Portfolio Deposits), confirmations of contracts to purchase such securities
(collectively, the "Portfolio").
CREATION OF CREATION UNITS
On the Initial Date of Deposit, Portfolio Deposits will be deposited with the
Trustee through the clearing processes of NSCC, following placement with the
Distributor of orders to create MidCap SPDRs. The Distributor shall reject any
order that is not submitted in proper form. To permit the Trustee to insure
that the process of settlement is working satisfactorily, there shall be no
further Portfolio Deposits accepted by the Trust for a period of approximately
five (5) Business Days following the Initial Date of Deposit, and the Sponsor
and Trustee shall jointly announce the date thereafter on which further
Portfolio Deposits will be accepted, and Exchange trading of MidCap SPDRs shall
not commence until such date. It is currently estimated that the first day of
Exchange trading will be on or about May 4, 1995. On or after such date
investors may deposit Portfolio Deposits through the MidCap SPDR Clearing
Process or directly with the Trustee outside the MidCap SPDR Clearing Process.
The Transaction Fee will be charged at the time of creation of a Creation Unit
Size aggregation of MidCap SPDRs, and an additional amount not to exceed three
(3) times the Transaction Fee applicable for one Creation Unit will be charged
per Creation Unit to a creator creating outside the MidCap SPDR Clearing
Process by depositing directly with the Trustee through DTC, in part due to the
increased expense associated with settlement outside the MidCap SPDR Clearing
Process. Under certain circumstances, the Transaction Fee will be waived for
aggregate creations of at least fifteen (15) Creation Units made by a
Participating Party during the period commencing on the Initial Date of Deposit
and ending on the first day of Exchange trading. See "Prospectus Summary--
Transaction Fee" for a detailed description of the amount of the Transaction
Fee and the additional amounts and reductions, limitations and waivers
applicable thereto.
The Trustee, at the direction of the Sponsor in its sole discretion, from
time to time and for such periods as may be determined by the Sponsor in its
sole discretion, will increase or reduce the amount and/or waive the imposition
altogether of the Transaction Fee (and/or the additional amounts charged in
connection with creations and/or redemptions outside the MidCap SPDR Clearing
Process) for certain lot-size creations and/or redemptions of MidCap SPDRs,
whether applied solely to creations and/or redemptions made through the MidCap
SPDR Clearing Process (see "Procedures for Creation of Creation Units"), solely
to creations and/or redemptions made outside the MidCap SPDR Clearing Process,
or to both methods of creation and/or redemption. The Sponsor also reserves the
right, from time to time, to vary the lot-size of the creations and/or
redemptions of MidCap SPDRs subject to such an increase and/or entitled to such
a reduction or waiver of the Transaction Fee and the additional amounts charged
in connection with creations and/or redemptions outside the MidCap SPDR
Clearing Process. The existence of such increase, reduction or waiver of the
Transaction Fee (as well as any additional amounts, if applicable) and the lot-
size of Creation Units affected shall be disclosed in the current MidCap SPDR
Prospectus (see "Prospectus Summary-- Transaction Fee"). As of the date hereof,
the Sponsor does not contemplate the reduction, variation by lot-size or waiver
of Transaction Fees for the redemption of MidCap SPDRs or of the additional
amounts charged in connection with the creation of MidCap SPDRs outside the
MidCap SPDR Clearing Process beyond that which is discussed herein under the
caption "Prospectus Summary--Transaction Fee".
- --------
* Reference is hereby made to said Trust Agreement, and any statements
contained herein are qualified in their entirety by the provisions of said
Trust Agreement.
28
<PAGE>
The shares of common stock of the Index Securities in a Portfolio Deposit on
the Initial Date of Deposit will reflect the composition and relative
weightings of the Index Securities, and it is anticipated that they will have
an aggregate market value between $500,000 and $1,000,000. There will be no
Cash Component included in the Portfolio Deposit as in effect on the Initial
Date of Deposit. The accrual period for dividends payable on the first Dividend
Payment Date will commence on the Initial Date of Deposit. The portfolio of
Index Securities that is the basis for a Portfolio Deposit will vary as changes
are made in the composition and weighting of the Index Securities (see "The
Portfolio--Adjustments to the Portfolio Deposit").* The Trustee will make
available to NSCC** prior to the commencement of trading on each Business Day a
list of the names and required number of shares of each of the Index Securities
in the current Portfolio Deposit as well as the amount of the Dividend
Equivalent Payment for the previous Business Day. Under certain extraordinary
circumstances which may make it impossible for the Trustee to provide such
information to NSCC on a given Business Day, NSCC shall use the information
regarding the identity and weightings of the Index Securities of the Portfolio
Deposit on the previous Business Day. The identity and number of shares of each
of the Index Securities required for a Portfolio Deposit, as in effect on the
Initial Date of Deposit, is set forth in the above Schedule of Investments. The
Sponsor intends to make available (a) on each Business Day, the Dividend
Equivalent Payment effective through and including the previous Business Day,
per outstanding MidCap SPDR, and (b) on a minute-by-minute basis throughout the
day at the Exchange a number representing, on a per MidCap SPDR basis, the sum
of the Dividend Equivalent Payment effective through and including the previous
Business Day, plus the current value of the securities portion of a Portfolio
Deposit as in effect on such day (which value will occasionally include a cash
in lieu amount to compensate for the omission of a particular Index Security
from such Portfolio Deposit--see below and also "The Portfolio--Adjustments to
the Portfolio Deposit"). Such information will be calculated based upon the
best information available to the Sponsor and may be calculated by other
persons designated to do so by the Sponsor. The inability of the Sponsor to
provide such information will not in itself result in a halt in the trading of
MidCap SPDRs on the Exchange. Investors interested in creating MidCap SPDRs or
purchasing MidCap SPDRs in the secondary market should not rely solely on such
information in making investment decisions but should also consider other
market information and relevant economic and other factors (including, without
limitation, information regarding the S&P MidCap 400 Index and the Index
Securities).
In the event that an Index Security is not eligible for transfer through the
MidCap SPDR Clearing Process, the Trustee shall include the cash equivalent
value of such Index Security determined in accordance with the procedures
listed under "Valuation" as a part of the Cash Component in lieu of the
inclusion of such Index Security in the securities portion of the Portfolio
Deposit.
From time to time, the Trustee may determine, in its discretion, that one or
more of the Index Securities comprising a Portfolio Deposit is likely to be
unavailable for delivery or available in insufficient quantity for delivery to
the Trust upon the creation of MidCap SPDRs for the following Business Day or
for any period thereafter. In such cases, the Trustee shall have the right in
its discretion to permit the cash equivalent value of such Index Security or
Index Securities, based on the market value of such Index Security or Index
Securities as determined in accordance with the procedures listed under
"Valuation", as a part of the Cash Component in lieu of the inclusion of such
Index Security or Index Securities in the securities portion of the Portfolio
Deposit. In the event that such a determination is made, the Portfolio Deposit
so constituted shall dictate the Index Security or Index Securities to be
delivered in connection with the creation or redemption of MidCap SPDRs for all
purposes until such time as the securities portion of the Portfolio Deposit is
subsequently adjusted or the Index Security at issue becomes available.
- --------
* Subject to the maximum Transaction Fee per Creation Unit of 20/100 of one
percent (i.e. twenty basis points) of the value of a Creation Unit at the
time of a creation or redemption, as the case may be.
** As of December 31, 1994, the American Stock Exchange Clearing Corporation, a
wholly-owned subsidiary of the Exchange, owned 33 1/3% of the issued and
outstanding shares of common stock of NSCC.
29
<PAGE>
In connection with the creation of MidCap SPDRs, if an investor is restricted
by regulation or otherwise from investing or engaging in a transaction in one
or more Index Securities, the Trustee shall have the right in its discretion to
permit the cash equivalent value of such Index Security or Index Securities
based on the market value of such Index Security or Index Securities as of the
Evaluation Time on the date such creation order is deemed received by the
Distributor (see "Placement of Creation Orders Outside the MidCap SPDR Clearing
Process") in the Portfolio Deposit as a part of the Cash Component in lieu of
the inclusion of such Index Security or Index Securities in the securities
portion of the Portfolio Deposit for the particular affected investor. The
amount of such cash equivalent payment shall be used by the Trustee in
accordance with the guidelines regarding allowable Misweightings and permitted
amounts of cash (see "The Portfolio--Adjustments to the Portfolio") which may
require the Trustee to purchase the appropriate number of shares of the Index
Security that such investor was unable to purchase. In any such case such
investor will pay the Trustee the standard Transaction Fee, plus an additional
amount per Creation Unit not to exceed three (3) times the Transaction Fee
applicable for one Creation Unit, subject to the current maximum charge of
$12,000.
Brokerage commissions incurred in connection with the acquisition by the
Trustee of any Index Security with cash deposited in lieu of such Index
Security will be an expense of the Trust and hence will affect the value of all
MidCap SPDRs.
Upon receipt of a Portfolio Deposit or Deposits, following placement with the
Distributor of an order to create MidCap SPDRs, the Trustee will deliver MidCap
SPDRs in Creation Unit size aggregations to the Depository. In turn, the MidCap
SPDR position will be removed from the Trustee's account at the Depository and
will be allocated to the account of the DTC Participant acting on behalf of the
depositor creating Creation Unit(s) (see "The Trust--Procedures for Creation of
Creation Units" and "The Trust--Book-Entry-Only System"). Each MidCap SPDR
represents a fractional undivided interest in the Trust in an amount equal to
one (1) divided by the total number of MidCap SPDRs outstanding. The Trustee
may reject a request to create Creation Units made by any depositor or group of
depositors if such depositor(s), upon the acceptance by the Trustee of such
request and the issuance to such depositor(s) of MidCap SPDRs, would own eighty
percent (80%) or more of the outstanding MidCap SPDRs (see "Tax Status of the
Trust"). The Trustee also may reject any Portfolio Deposit or any component
thereof under certain other circumstances (see "The Trust--Procedures for
Creation of Creation Units").
Additional MidCap SPDRs in Creation Unit size aggregations will be created
upon receipt of the appropriate Portfolio Deposits from creators. As additional
MidCap SPDRs in Creation Unit size aggregations are created, the aggregate
value of the Portfolio will be increased and the fractional undivided interest
in the Trust represented by each MidCap SPDR will be decreased. As discussed
above, under certain circumstances (1) a portion of the securities portion of a
Portfolio Deposit may consist of contracts to purchase certain Index Securities
or (2) a portion of the Cash Component may consist of cash in an amount to
enable the Trustee to purchase such Index Securities. In the event there is a
failure to deliver the Index Securities which are the subject of such contracts
to purchase, the Trustee will be instructed pursuant to the Agreement to
acquire such Index Securities in an expeditious manner. To the extent the price
of any such Index Security increases or decreases between the time of creation
and the time any such Index Security is purchased and delivered, MidCap SPDRs
will represent fewer or more shares of such Index Security and more or fewer of
the other Index Securities in the Trust. Hence, price fluctuations during the
period from the time the cash is received by the Trustee to the time the
requisite Index Securities are purchased and delivered will affect the value of
all MidCap SPDRs.
The identity and number of shares of the Index Securities required for a
Portfolio Deposit will be determined in the manner described herein. Due to
changes in the composition and weighting of the Index Securities, the
composition and weighting of the Securities and the prescribed Portfolio
Deposit will also change from time to time (see "The Portfolio--Adjustments to
the Portfolio" and "The Portfolio--Adjustments to the Portfolio Deposit"). The
identity and weightings of the Index Securities to be delivered as part of a
Portfolio Deposit will be determined daily and will reflect the relative
weighting of the current
30
<PAGE>
S&P MidCap 400 Index and, together with the Cash Component, will have a value
equal to the net asset value of the Trust on a per Creation Unit basis at the
close of business on the day of request for creation. The composition of the
Portfolio will also be adjusted from time to time to conform to the changes to
the S&P MidCap 400 Index as described herein and as set forth in the Trust
Agreement. As the weightings and identities of the Index Securities change,
substantially identical changes to the composition of the required Portfolio
Deposit will be made contemporaneously. Corresponding adjustments to the
composition or weighting of the Portfolio, however, will not necessarily be
made contemporaneously with adjustments to the required Portfolio Deposit, but
will be made in accordance with the specifications set forth herein and in the
Trust Agreement (see "The Portfolio--Adjustments to the Portfolio"). Although
the composition of the securities portion of a Portfolio Deposit will change
from time to time, the interests of Beneficial Owners will not be adversely
affected because the composition of such securities and the aggregate value
thereof, together with the Cash Component, will be calculated based upon the
proportionate net asset value of the Trust (see "The Portfolio--Adjustments to
the Portfolio").
PROCEDURES FOR CREATION OF CREATION UNITS
To be eligible to place orders with the Distributor to create MidCap SPDRs in
Creation Unit size aggregations, an entity or person must be (1) a
Participating Party, with respect to creations through the MidCap SPDR Clearing
Process, or (2) a DTC Participant, with respect to creations outside the MidCap
SPDR Clearing Process. All MidCap SPDRs, however created, will be entered on
the records of the Depository in the name of Cede & Co. for the account of a
DTC Participant (see "The Trust--Book Entry Only System").
All orders to create MidCap SPDRs must be placed in multiples of 25,000
MidCap SPDRs (Creation Unit size). All orders to create MidCap SPDRs, whether
through the MidCap SPDR Clearing Process or outside the MidCap SPDR Clearing
Process must be received by the Distributor by no later than the closing time
of the regular trading session on the New York Stock Exchange, Inc. ("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 MidCap SPDRs to be effected based on
the net asset value of the Trust as determined on such date. The date on which
a creation order (or order to redeem as discussed below) is placed is herein
referred to as the "Transmittal Date". Orders must be transmitted by telephone
or other transmission method acceptable to the Distributor and Trustee,
pursuant to procedures set forth in the Participant Agreement, as described
below (see "Placement of Creation Orders Using MidCap SPDR Clearing Process"
and "Placement of Creation Orders Outside MidCap SPDR Clearing Process").
Orders to create Creation Unit sized aggregations of MidCap SPDRs shall be
placed with a Participating Party or DTC Participant, as applicable, in the
form required by such Participating Party or DTC Participant. Investors should
be aware that their particular broker may not have executed a Participant
Agreement, and that, therefore, orders to create Creation Unit sized
aggregations of MidCap SPDRs may have to be placed by the investor's broker
through a Participating Party or a DTC Participant who has executed a
Participant Agreement. At any given time there may be only a limited number of
broker-dealers that have executed a Participant Agreement. Those placing orders
to create MidCap SPDRs through the MidCap SPDR 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 MidCap SPDR Clearing
Process are likely to require transmittal by the DTC Participant earlier on the
Transmittal Date than orders effected using the MidCap SPDR Clearing Process.
Those persons placing orders outside the MidCap SPDR 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 securities and Cash Component. The
DTC Participant notified of an order to create MidCap SPDRs outside the MidCap
SPDR Clearing Process shall be required to effect a transfer of (1) the
requisite Index Securities through DTC by 11:00 a.m. on the next Business Day
immediately following the Transmittal Date in such a way as to replicate
31
<PAGE>
the Portfolio Deposit established on the Transmittal Date by the Trustee in
calculating the net asset value of the Trust and (2) the Cash Component through
the Federal Reserve wire transfer system so as to be received by the Trustee by
1:00 p.m. on the next Business Day immediately following the Transmittal Date.
If the Trustee does NOT receive both the Index Securities by 11:00 a.m. and the
Cash Component by 1:00 p.m. on the Business Day immediately following
Transmittal Date, such order shall be cancelled. Upon written notice to the
Distributor, such cancelled order may be resubmitted the following Business Day
using a Portfolio Deposit as newly constituted to reflect the current net asset
value of the Trust.
All questions as to the number of shares of each of the Index Securities, the
amount of the Cash Component and the validity, form, eligibility (including
time of receipt) and acceptance for deposit of any Index Securities to be
delivered shall be determined by the Trustee, whose determination shall be
final and binding. The Trustee reserves the absolute right to reject a creation
order transmitted to it by the Distributor in respect of any Portfolio Deposit
or any component thereof if (a) the depositor or group of depositors, upon
obtaining the MidCap SPDRs ordered, would own 80% or more of the current
outstanding MidCap SPDRs, (b) the Portfolio Deposit is not in proper form; (c)
acceptance of the Portfolio Deposit would have certain adverse tax consequences
(see "Tax Status of the Trust"); (d) the acceptance of the Portfolio Deposit
would, in the opinion of counsel, be unlawful; (e) the acceptance of the
Portfolio Deposit would otherwise, in the discretion of the Trustee, have an
adverse effect on the Trust or the rights of Beneficial Owners; or (f) in the
event that circumstances outside the control of the Trustee make it for all
practical purposes impossible to process creations of MidCap SPDRs. The Trustee
and the Sponsor are under no duty to give notification of any defects or
irregularities in the delivery of Portfolio Deposits or any component thereof
nor shall either of them incur any liability for the failure to give any such
notification.
A list of the Participating Parties or DTC Participants that have executed a
Participant Agreement (as hereinafter defined) is available at the office of
the Trustee at 101 Barclay Street, New York, New York 10286 and the office of
the Distributor at 6 St. James Avenue, Boston, Massachusetts 02116 during
normal business hours.
PLACEMENT OF CREATION ORDERS USING MIDCAP SPDR CLEARING PROCESS
Portfolio Deposits created through the MidCap SPDR Clearing Process must be
delivered through a Participating Party (see "Prospectus Summary--Portfolio
Deposits") that has executed a Participant Agreement with the Distributor and
with the Trustee (as the same may be from time to time amended in accordance
with its terms, the "Participant Agreement"). The Participant Agreement
authorizes the Trustee to transmit to NSCC on behalf of the Participating Party
such trade instructions as are necessary to effect the Participating Party's
creation order. Pursuant to such trade instructions from the Trustee to NSCC,
the Participating Party agrees to transfer the requisite Index Securities (or
contracts to purchase such Index Securities that are expected to be delivered
in a "regular way" manner by the fifth (5th) NSCC Business Day)* and the Cash
Component to the Trustee, together with such additional information as may be
required by the Trustee. An order to create MidCap SPDRs through the MidCap
SPDR 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 MIDCAP SPDR CLEARING PROCESS
Portfolio Deposits created outside the MidCap SPDR Clearing Process must be
delivered through a DTC Participant that has executed a Participant Agreement
with the Distributor and with the Trustee. A DTC Participant who wishes to
place an order creating MidCap SPDRs to be effected outside the MidCap SPDR
Clearing Process need not be a Participating Party, but such orders must state
that the DTC
- --------
* Following the effective date of SEC Rule 15c6-1, such period will be
shortened to the third (3rd) NSCC Business Day.
32
<PAGE>
Participant is not using the MidCap SPDR Clearing Process and that creation of
MidCap SPDRs will instead be effected through a transfer of securities and
cash. The Portfolio Deposit transfer must be ordered by the DTC Participant in
a timely fashion so as to ensure the delivery of the requisite number of Index
Securities through DTC to the account of the Trustee by no later than 11:00
a.m. of the next Business Day immediately following the Transmittal Date. The
cash equal to the Cash Component must be transferred directly to the Trustee
through the Federal Reserve wire system in a timely manner so as to be received
by the Trustee no later than 1:00 p.m. on the next Business Day immediately
following the Transmittal Date. An order to create MidCap SPDRs outside the
MidCap SPDR 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
Trustee does not receive BOTH the requisite Index Securities and the Cash
Component in a timely fashion 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 Portfolio Deposit as newly constituted to reflect the current net asset
value of the Trust. The delivery of MidCap SPDRs so created will occur no later
than the fifth (5th) or third (3rd) Business Day, as applicable, following the
day on which the creation order is deemed received by the Distributor. Until
further notice is given as described herein under the caption "Prospectus
Summary--Transaction Fee", the total fee charged in connection with creations
made outside the MidCap SPDR Clearing Process will be subject to a maximum
charge of $12,000 per day for creations of two or more Creation Units. No
waiver of the Transaction Fee or additional amounts for creations outside the
MidCap SPDR Clearing Process is currently permitted.
BOOK-ENTRY-ONLY SYSTEM
The Depository will act as securities depository for MidCap SPDRs. MidCap
SPDRs will be represented by a single global security (the "Global Security"),
which will be registered in the name of Cede & Co., as nominee for the
Depository and deposited with, or on behalf of, the Depository. Certificates
will not be issued for MidCap SPDRs.
The Depository has advised the Sponsor and the Trustee as follows: The
Depository is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Securities Exchange Act of 1934, as amended. The Depository 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 the Depository.* Access to the
Depository 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"). The Depository agrees with and represents to its participants
that it will administer its book-entry system in accordance with its rules and
by-laws and requirements of law.
- --------
* As of December 31, 1994, the Exchange owned 4.56162% of the issued and
outstanding shares of common stock of the Depository and an affiliate of the
Exchange, AMEX Clearing Corp., owned 0.00181% of the issued and outstanding
shares of common stock of the Depository. Also as of such date, the Trustee
owned 2.27798% of the issued and outstanding shares of common stock of the
Depository.
33
<PAGE>
Upon the settlement date of any creation, transfer or redemption of MidCap
SPDRs, the Depository will credit or debit, on its book-entry registration and
transfer system, the amount of MidCap SPDRs so created, transferred or redeemed
to the accounts of the appropriate DTC Participants. The accounts to be
credited and charged shall be designated by the Trustee to NSCC, in the case of
a creation or redemption through the MidCap SPDR Clearing Process, or by the
Trustee and the DTC Participant, in the case of a creation or redemption
transacted outside of the MidCap SPDR Clearing Process (see "The Trust--
Procedures for Creation of Creation Units" and "Redemption of MidCap SPDRs").
Beneficial ownership of MidCap SPDRs will be limited to DTC Participants,
indirect Participants and persons holding interests through DTC Participants
and indirect Participants. Ownership of beneficial interests in MidCap SPDRs
(owners of such beneficial interests are referred to herein as "Beneficial
Owners") will be shown on, and the transfer of ownership will be effected only
through, records maintained by the Depository (with respect to DTC
Participants) and on the records of DTC Participants (with respect to indirect
Participants and Beneficial Owners that are not DTC Participants). Beneficial
Owners are expected to receive from or through the DTC Participant a written
confirmation relating to their purchase of MidCap SPDRs. The laws of some
jurisdictions may require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such laws may impair the
ability of certain investors to acquire beneficial interests in MidCap SPDRs.
So long as Cede & Co., as nominee of the Depository, is the registered owner
of MidCap SPDRs, references herein to the registered or record owners of MidCap
SPDRs shall mean Cede & Co. and shall not mean the Beneficial Owners of MidCap
SPDRs. Beneficial Owners of MidCap SPDRs will not be entitled to have MidCap
SPDRs registered in their names, will not receive or be entitled to receive
physical delivery of certificates in definitive form and will not be considered
the record or registered holder thereof under the Trust Agreement. Accordingly,
each Beneficial Owner must rely on the procedures of the Depository, the DTC
Participant and any indirect Participant through which such Beneficial Owner
holds its interests, to exercise any rights of a holder of MidCap SPDRs under
the Trust Agreement. The Trustee and the Sponsor understand that under existing
industry practice, in the event the Trustee requests any action of MidCap SPDR
holders, or a Beneficial Owner desires to take any action that the Depository,
as the record owner of all outstanding MidCap SPDRs, is entitled to take, the
Depository 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 or would
otherwise act upon the instructions of Beneficial Owners owning through them.
As described above, the Trustee will recognize the Depository or its nominee
as the owner of all MidCap SPDRs for all purposes except as expressly set forth
in the Trust Agreement. Conveyance of all notices, statements and other
communications to Beneficial Owners will be effected as follows. Pursuant to
the agreement between the Trustee and the Depository (as the same may be from
time to time amended in accordance with its terms, the "Depository Agreement"),
the Depository is required to make available to the Trustee upon request and
for a fee to be charged to the Trust a listing of the MidCap SPDR holdings of
each DTC Participant. The Trustee shall inquire of each such DTC Participant as
to the number of Beneficial Owners holding MidCap SPDRs, directly or
indirectly, through such DTC Participant. The Trustee 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.
MidCap SPDR distributions shall be made to the Depository or its nominee,
Cede & Co., as the registered owner of all MidCap SPDRs. The Trustee and the
Sponsor expect that the Depository or its nominee, upon receipt of any payment
of distributions in respect of MidCap SPDRs, shall credit immediately DTC
Participants' accounts with payments in amounts proportionate to their
respective beneficial interests
34
<PAGE>
in MidCap SPDRs as shown on the records of the Depository or its nominee. The
Trustee and the Sponsor also expect that payments by DTC Participants to
indirect Participants and Beneficial Owners of MidCap SPDRs held through such
DTC Participants will be governed by standing instructions and customary
practices, as is now the case with securities held for the accounts of
customers in bearer form or registered in a "street name," and will be the
responsibility of such DTC Participants. Neither the Trustee nor the Sponsor
will have any responsibility or liability for any aspects of the records
relating to or notices to Beneficial Owners, or payments made on account of
beneficial ownership interests in MidCap SPDRs, or for maintaining, supervising
or reviewing any records relating to such beneficial ownership interests or for
any other aspect of the relationship between the Depository and the DTC
Participants or the relationship between such DTC Participants and the indirect
Participants and Beneficial Owners owning through such DTC Participants.
Beneficial Owners may elect to have their distributions reinvested in
additional MidCap SPDRs (see "Administration of the Trust--Dividend
Reinvestment Service").
The Depository may determine to discontinue providing its service with
respect to MidCap SPDRs at any time by giving notice to the Trustee and the
Sponsor and discharging its responsibilities with respect thereto under
applicable law. Under such circumstances, the Trustee and the Sponsor shall
take action either to find a replacement for the Depository to perform its
functions at a comparable cost or, if such a replacement is unavailable, to
terminate the Trust (see "Termination of the Trust").
THE PORTFOLIO
Because the objective of the Trust is to provide investment results that
correspond substantially to the price and yield performance of the S&P MidCap
400 Index, the Portfolio will at any time consist of as many of the Index
Securities as is practicable. It is anticipated that cash or cash items (other
than dividends held for distribution) normally would not be a substantial part
of the Trust's net assets. Although the Trust may at any time fail to own
certain of the Index Securities, the Trust will be substantially invested in
Index Securities and the Sponsor believes that such investment should result in
a close correlation between the investment performance of the S&P MidCap 400
Index and that derived from ownership of MidCap SPDRs.
ADJUSTMENTS TO THE PORTFOLIO
The S&P MidCap 400 Index is a capitalization-weighted index of 400 securities
calculated under the auspices of the S&P Committee of Standard and Poor's. At
any moment in time, the value of the Index equals the aggregate market value of
the total shares outstanding in each of the component 400 Index Securities,
evaluated at their respective last sale prices on the NYSE, AMEX, or NASDAQ,
divided by a scaling factor (the "divisor") which yields a resulting index
value in the reported magnitude.
Periodically (typically, several times per quarter), Standard & Poor's may
determine that total shares outstanding have changed in one or more component
Index Securities due to secondary offerings, repurchases, conversions or other
corporate actions. Additionally, the S&P Committee may periodically
(ordinarily, several times per quarter) replace one or more component
securities in the S&P MidCap 400 Index due to mergers, acquisitions,
bankruptcies or other market conditions, or if the issuers of such component
securities fail to meet the criteria for inclusion in the S&P MidCap 400 Index.
In 1994, there were 23 company changes to the MidCap Index. Ordinarily,
whenever there is a change in shares outstanding or a change in a component
security included in the S&P MidCap 400 Index, Standard & Poor's adjusts the
divisor to assure that there is no discontinuity in the value of the S&P MidCap
400 Index which might otherwise be caused by any such change.
Because the investment objective of the Trust is to provide investment
results that generally correspond to the price and yield performance of the S&P
MidCap 400 Index, such share, name, and divisor changes to
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<PAGE>
the S&P MidCap 400 Index create the need for the Trust to make corresponding
portfolio adjustments as described below.
The Trustee will adjust the composition of the Portfolio from time to time to
conform to changes in the composition and/or weighting structure of the Index
Securities. The Trustee will aggregate certain of these adjustments and make
conforming changes to the Trust's portfolio at least monthly; however,
adjustments will be made more frequently in the case of changes to the S&P
MidCap 400 Index that are significant. Specifically, the Trustee will be
required to adjust the composition of the Portfolio at any time that there is a
change in the identity of any Index Security (i.e., a substitution of one
security in replacement of another), which adjustment shall be made within
three (3) Business Days before or after the day on which the change in the
identity of such Index Security is scheduled to take effect at the close of the
market. Although the investment objective of the Trust is to provide investment
results which resemble the performance of the S&P MidCap 400 Index, it is not
always efficient to replicate identically the share composition of the S&P
MidCap 400 Index if the transaction costs incurred by the Trust in so adjusting
the Portfolio would exceed the expected misweighting that would ensue by
failing to replicate identically minor and insignificant share changes to the
Index. Accordingly, to further the investment objective of the Trust, minor
misweightings will generally be permitted within the guidelines set forth
below. The Trustee will be required to adjust the composition of the Portfolio
at any time that the weighting of any Security varies in excess of one hundred
and fifty percent (150%) of a specified percentage, which percentage will vary
from 25/100 of 1% to 2/100 of 1%, depending on the net asset value of the Trust
(in each case, the "Misweighting Amount"), from the weighting of such Security
in the S&P MidCap 400 Index (a "Misweighting").
The Trustee shall examine each Security in the Portfolio on each Business
Day, comparing the weighting of each such Security in the Portfolio to the
weighting of the corresponding Index Security in the S&P MidCap 400 Index,
based on prices at the close of the market on the preceding Business Day (a
"Weighting Analysis"). In the event that there is a Misweighting in any
Security in excess of one hundred and fifty percent (150%) of the applicable
Misweighting Amount, the Trustee shall calculate an adjustment to the Portfolio
in order to bring the Misweighting of such Security within the Misweighting
Amount, based on prices at the close of the market on the day on which such
Misweighting occurs. Also, on a monthly basis, the Trustee shall perform a
Weighting Analysis for each Security in the Portfolio, and in any case where
there exists a Misweighting exceeding one hundred percent (100%) of the
applicable Misweighting Amount, the Trustee shall calculate an adjustment to
the Portfolio in order to bring the Misweighting of such Security within the
applicable Misweighting Amount, based on prices at the close of the market on
the day on which such Misweighting occurs. In the case of any adjustment to the
Portfolio due to a Misweighting as described herein, the purchase or sale of
securities necessitated by such adjustment shall be made within three (3)
Business Days of the day on which such Misweighting is determined. In addition
to the foregoing adjustments, the Trustee reserves the right to make additional
adjustments periodically to Securities that may be misweighted by an amount
within the applicable Misweighting Amount in order to reduce the overall
Misweighting of the Portfolio.
The foregoing guidelines with respect to Misweightings shall also apply to
any Index Security that (1) is likely to be unavailable for delivery or
available in insufficient quantity for delivery, (2) cannot be delivered to the
Trustee due to restrictions prohibiting a creator from engaging in a
transaction involving such Index Security or (3) is not eligible to be
processed through the MidCap SPDR Clearing Process. (From time to time, an
Index Security may not be eligible for transfer through the MidCap SPDR
Clearing Process because such Security is not eligible for transfer through the
systems of the Depository.) Upon receipt of an order for a Creation Unit that
will involve such an Index Security, the Trustee shall determine whether the
substitution of cash for such Index Security will cause a Misweighting in the
Trust's Portfolio with respect to such Index Security. If a Misweighting
results, the Trustee shall purchase the required number of shares of such Index
Security on the opening of the market on the following Business Day. If a
Misweighting does not result and the Trustee would not hold cash in excess of
the permitted amounts described herein, the Trustee may hold
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<PAGE>
such cash or, if such an excess would result, make the required adjustments to
the Portfolio in accordance with the procedures described herein.
Pursuant to these guidelines the Trustee will calculate the required
adjustments and will purchase and sell the appropriate securities. As a result
of the purchase and sale of securities in accordance with these requirements,
or the creation of Creation Units, the Trust may hold some amount of residual
cash (other than cash held temporarily due to timing differences between the
sale and purchase of securities or cash delivered in lieu of Index Securities
or undistributed income or undistributed capital gains) as a result of such
transactions, which amount shall not exceed for more than five (5) consecutive
Business Days 5/10th of 1 percent of the aggregate value of the Securities. In
the event that the Trustee has made all required adjustments and is left with
cash in excess of 5/10th of 1 percent of the aggregate value of the Securities,
the Trustee shall use such cash to purchase additional Index Securities that
are under-weighted in the Portfolio as compared to their relative weightings in
the S&P MidCap 400 Index, although the Misweighting of such Index Securities
may not be in excess of the applicable Misweighting Amount.
All adjustments to the Portfolio held by the Trustee will be made by the
Trustee pursuant to the foregoing specifications and as set forth in the Trust
Agreement and will be non-discretionary. All portfolio adjustments will be made
as described herein unless such adjustments would cause the Trust to lose its
status as a "regulated investment company" under Subchapter M of the Internal
Revenue Code. Additionally, the Trustee is required to adjust the composition
of the Portfolio at any time if it is necessary to insure the continued
qualification of the Trust as a regulated investment company (see "Tax Status
of the Trust"). The adjustments provided herein are intended to conform the
composition and weightings of the Portfolio, to the extent practicable, to the
composition and weightings of the Index Securities. Such adjustments are based
upon the S&P MidCap 400 Index as it is currently determined by Standard &
Poor's. To the extent that the method of determining the S&P MidCap 400 Index
is changed by Standard & Poor's in a manner that would affect the adjustments
provided for herein, the Trustee and the Sponsor shall have the right to amend
the Trust Agreement, without the consent of the Depository or Beneficial
Owners, to conform the adjustments provided herein and in the Trust Agreement
to such changes so that the objective of tracking the S&P MidCap 400 Index is
maintained.
In making the adjustments described herein, the Trustee will rely on industry
sources for information as to the composition and weightings of the Index
Securities. If the Trustee becomes incapable of obtaining or processing such
information or NSCC is unable to receive such information from the Trustee on
any Business Day, then the Trustee shall use the composition and weightings of
the Index Securities for the most recently effective Portfolio Deposit for the
purposes of all adjustments and determinations described herein (including,
without limitation, determination of the securities portion of the Portfolio
Deposit) until the earlier of (a) such time as current information with respect
to the Index Securities is available or (b) three (3) consecutive Business Days
have elapsed. If such current information is not available and three (3)
consecutive Business Days have elapsed, the composition and weightings of the
Securities (as opposed to the Index Securities) shall be used for the purposes
of all adjustments and determinations herein (including, without limitation,
determination of the securities portion of the Portfolio Deposit) until current
information with respect to the Index Securities is available.
At such time as the Trustee gives written notice of the termination of the
Trust (see "Administration of the Trust--Termination"), from and after the date
of such notice the Trustee shall use the composition and weightings of the
Securities as of such date for the purpose and determination of all redemptions
or other required uses of the basket.
From time to time Standard & Poor's may make adjustments to the composition
of the S&P MidCap 400 Index as a result of a merger or acquisition involving
one or more of the Index Securities. In such cases, the Trust, as shareholder
of securities of an issuer that is the object of such merger or acquisition
activity, may receive various offers from a would-be acquiror of the issuer.
The Trustee will not be permitted to accept any such offers until such time as
it has been determined that the securities of the issuer will be removed
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<PAGE>
from the S&P MidCap 400 Index. Since securities of an issuer are often removed
from the S&P MidCap 400 Index only after the consummation of a merger or
acquisition of such issuer, in selling the securities of such issuer the Trust
may receive, to the extent that market prices do not provide a more attractive
alternative, whatever consideration is being offered to the shareholders of
such issuer that have not tendered their shares prior to such time. Any cash
received in such transactions will be reinvested in Index Securities in
accordance with the criteria set forth above. Any securities received as a part
of the consideration that are not Index Securities will be sold as soon as
practicable and the cash proceeds of such sale will be reinvested in accordance
with the criteria set forth above.
Purchases and sales of Securities resulting from the adjustments described
above will be made in the share amounts dictated by the foregoing
specifications, whether round lot or odd lot. Certain Index Securities,
however, may at times not be available in the quantities that the foregoing
calculations require. For this and other reasons, precise duplication of the
proportionate relationship between the Portfolio and the Index Securities may
not ever be possible but nevertheless will continue to be the objective in
connection with all acquisitions and dispositions of Securities.
The Trust is a unit investment trust registered under the 1940 Act and is not
a managed fund. Traditional methods of investment management for a managed fund
typically involve frequent changes to a portfolio of securities on the basis of
economic, financial and market analyses. The Portfolio held by the Trust,
however, will not be managed. Instead, the only purchases and sales that will
be made with respect to the Portfolio will be those necessary to create, to the
extent feasible, a portfolio that is designed to replicate the S&P MidCap 400
Index to the extent practicable, taking into consideration the adjustments
referred to above. Since no attempt is made to "manage" the Trust in the
traditional sense, the adverse financial condition of an issuer will not be the
basis for the sale of its securities from the Portfolio unless the issuer is
removed from the S&P MidCap 400 Index.
The Trust will be liquidated on a fixed date (see "Administration of the
Trust--Termination"). In addition, Beneficial Owners of MidCap SPDRs in
Creation Unit size aggregations will have the right to redeem in kind (see
"Redemption of MidCap SPDRs").
ADJUSTMENTS TO THE PORTFOLIO DEPOSIT
After the Initial Date of Deposit, on each Business Day thereafter (each such
day an "Adjustment Day"), the number of shares and/or identity of each of the
Index Securities in a Portfolio Deposit will be adjusted in accordance with the
following procedure. At the close of the market on each Adjustment Day, the
Trustee will calculate the net asset value of the Trust (see "Valuation"). The
net asset value will be divided by the number of outstanding MidCap SPDRs in
Creation Unit size aggregations, resulting in a net asset value per Creation
Unit (the "NAV Amount"). The Trustee will then calculate the number of shares
(without rounding) of each of the component stocks of the S&P MidCap 400 Index
in a Portfolio Deposit for the following Business Day ("Request Day"), such
that (1) the market value at the close of the market on Adjustment Day of the
securities to be included in the Portfolio Deposit on Request Day, together
with the Dividend Equivalent Payment effective for requests to create or redeem
on Adjustment Day, will equal the NAV Amount and (2) the identity and weighting
of each of the securities in a Portfolio Deposit will mirror proportionately
the identity and weightings of the securities in the S&P MidCap 400 Index, each
as in effect on Request Day. For each security, the number resulting from such
calculation will be rounded to the nearest whole share, with a fraction of 0.50
being rounded up. The identities and weightings of the securities so calculated
will constitute the securities portion of the Portfolio Deposit effective on
Request Day and thereafter until the next subsequent Adjustment Day, as well as
the Securities to be delivered by the Trustee in the event of request for
redemption of MidCap SPDRs in Creation Unit size aggregations on Request Day
and thereafter until the following Adjustment Day (see "Redemption of MidCap
SPDRs"). In addition to the foregoing adjustments, in the event that there
shall occur a stock split, stock dividend or reverse split with respect to any
Index Security that does not result in an adjustment to the S&P MidCap 400
Index divisor, the Portfolio Deposit shall be adjusted to take account of such
stock split, stock dividend or reverse
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<PAGE>
split by applying the stock split, stock dividend or reverse stock split
multiple (e.g., in the event of a two-for-one stock split of an Index Security,
by doubling the number of shares of such Index Security in the prescribed
Portfolio Deposit), in each case rounded to the nearest whole share.
On Request Day and on each day that a request for the creation or redemption
of MidCap SPDRs in Creation Unit size aggregations is deemed received, the
Trustee will calculate the market value of the securities portion of the
Portfolio Deposit as in effect on Request Day as of the close of the market and
add to that amount the Dividend Equivalent Payment effective for requests to
create or redeem on Request Day (such market value and Dividend Equivalent
Payment are collectively referred to herein as the "Portfolio Deposit Amount").
The Trustee will then calculate the NAV Amount, based on the close of the
market on Request Day. The difference between the NAV Amount so calculated and
the Portfolio Deposit Amount shall be the "Balancing Amount". The Balancing
Amount serves the function of compensating for any differences between the
value of the Portfolio Deposit Amount and the NAV Amount at the close of
trading on Request Day due to, for example, (1) differences in the market value
of the securities in the Portfolio Deposit and the market value of the
Securities on Request Day and (2) any variances from the proper composition of
the Portfolio Deposit.
Notwithstanding the foregoing, on any Adjustment Day on which (a) no change
in the identity and/or share weighting of any Index Security is scheduled to
take effect that would cause the S&P MidCap 400 Index divisor to be adjusted
after the close of the market on such Business Day,* and (b) no stock split,
stock dividend or reverse stock split with respect to any Index Security has
been declared to take effect on the corresponding Request Day, the Trustee
reserves the right to forego making any adjustment to the Securities portion of
the Portfolio Deposit and to use the composition and weightings of the Index
Securities for the most recently effective Portfolio Deposit for the Request
Day following such Adjustment Day. In addition, the Trustee further reserves
the right to calculate the adjustment to the number of shares and/or identity
of the Index Securities in a Portfolio Deposit as described above except that
such calculation would be employed two (2) Business Days rather than one (1)
Business Day prior to Request Day.
As previously discussed, the Dividend Equivalent Payment and the Balancing
Amount in effect at the close of business on Request Date are collectively
referred to as the Cash Component or the Cash Redemption Payment (see
"Prospectus Summary--Portfolio Deposits" and "Prospectus Summary--Redemption").
If the Balancing Amount is a positive number (i.e., if the NAV Amount exceeds
the Portfolio Deposit Amount) then, with respect to the creation of MidCap
SPDRs, the Balancing Amount shall increase the Cash Component of the then
effective Portfolio Deposit transferred to the Trustee by a creator, and with
respect to redemptions of MidCap SPDRs in Creation Unit size aggregations, the
Balancing Amount shall be added to the cash transferred to a redeemer by the
Trustee. If the Balancing Amount is a negative number (i.e., if the NAV Amount
is less than the Portfolio Deposit Amount) then, with respect to the creation
of MidCap SPDRs such amount shall decrease the Cash Component of the then
effective Portfolio Deposit to be transferred to the Trustee by the creator or,
if such cash portion is less than the Balancing Amount, the difference shall be
paid by the Trustee to the creator, and with respect to redemptions of MidCap
SPDRs in Creation Unit size aggregations, the Balancing Amount shall be
deducted from the cash transferred to the redeemer or, if such cash is less
than the Balancing Amount, the difference shall be paid by the redeemer to the
Trustee.
In the event that the Trustee has included the cash equivalent value of one
or more Index Securities in the Portfolio Deposit because the Trustee has
determined that such Index Securities are likely to be unavailable or available
in insufficient quantity for delivery, the Portfolio Deposit so constituted
shall dictate the Index Securities to be delivered in connection with the
creation of MidCap SPDRs in Creation Unit size aggregations and upon the
redemption of MidCap SPDRs in Creation Unit size aggregations for all purposes
- ---------------------
* Standard & Poor's publicly announces changes in the identity and/or the
weighting of the S&P MidCap 400 Index up to five business days in advance of
the actual change. The announcements are made after the close of trading on
such day.
39
<PAGE>
hereunder until such time as the securities portion of the Portfolio Deposit is
subsequently adjusted. Brokerage commissions incurred by the Trustee in
connection with the acquisition of any such Index Securities will be at the
expense of the Trust and will affect the value of all MidCap SPDRs.
SELECTION AND ACQUISITION OF SECURITIES
In prescribing the method described above for selecting the Index Securities
that constitute the prescribed Portfolio Deposit on the Initial Date of Deposit
and from time to time thereafter, the Sponsor intends to duplicate, to the
extent practicable, the composition and weighting of the Index Securities as of
the relevant date.
The yield and price of common stocks deposited in the Trust are dependent on
a variety of factors, including money market conditions and general conditions
of the corporate equity markets. The Schedule of Investments set forth above
contains information as of the Initial Date of Deposit with respect to the
number of shares of each of the Index Securities in the initial Portfolio
Deposit. The proportionate relationship among such Securities approximates
(although it does not exactly duplicate) the proportionate relationships of the
Index Securities.
Because certain of the Securities from time to time may be sold or their
relative percentages changed under certain circumstances as described herein,
no assurance can be given that the Trust will retain for any length of time its
present size and composition (see "The Portfolio--Adjustments to the
Portfolio"). Also, the deposit of additional Portfolio Deposits and the
redemption of MidCap SPDRs in Creation Unit size aggregations will affect the
size and composition of the Trust. Neither the Sponsor nor the Trustee shall be
liable in any way for any default, failure or defect in any of the Securities.
THE S&P MIDCAP 400 INDEX
The Sponsor selected the S&P MidCap 400 Index as the basis for the selection
of the securities held by the Trust because, in the opinion of the Sponsor, the
S&P MidCap 400 Index constitutes a broadly diversified representative segment
of the market for middle capitalization companies whose stock is publicly
traded in the United States and is an index which has achieved wide acceptance
by both investors and market professionals. The S&P MidCap 400 Index is
composed of 400 selected common stocks, all of which are listed on the
Exchange, the New York Stock Exchange or NASDAQ, and spans a broad range of
major industry groups. The 400 common stocks comprising the S&P MidCap 400
Index represented, as of December 31, 1994, approximately 10% of the market
value of all domestic common stocks. As of December 31, 1994, the five largest
industry segments comprising the S&P MidCap 400 Index were: Electric utilities
(10.74%), banks (8.81%), electric components and equipment (5.05%), chemicals
and materials (4.93%) and computer hardware (3.95%). Current information
regarding the market value of the S&P MidCap 400 Index is available from market
information services. The S&P MidCap 400 Index is determined, comprised and
calculated without regard to the Trust.
The Sponsor has been granted a license to use the S&P MidCap 400 Index as a
basis for determining the composition of the Trust and to use certain
trademarks of S&P in connection with the Trust (see "License Agreement"). S&P
is not responsible for and shall not participate in the creation or sale of
MidCap SPDRs or in the determination of the timing of, prices at, or quantities
and proportions in which purchases or sales of Index Securities or Securities
shall be made. The information in this Prospectus concerning S&P and the S&P
MidCap Index has been obtained from sources that the Sponsor believes to be
reliable, but the Sponsor takes no responsibility for the accuracy of such
information.
The following table shows the actual performance of the S&P MidCap 400 Index
for the years 1991-1994. Stock prices fluctuated widely during this period and
were higher at the end than at the beginning. The results shown should not be
considered as a representation of the income yield or capital gain or loss that
may be
40
<PAGE>
generated by the S&P MidCap 400 Index in the future, nor should the results be
considered as a representation of the performance of the Trust.
<TABLE>
<CAPTION>
YEAR-END CHANGE IN
INDEX VALUE* INDEX AVERAGE YIELD
YEAR DECEMBER 31, 1990 = 100 FOR YEAR FOR YEAR **
- ---- ----------------------- --------- -------------
<S> <C> <C> <C>
1990............................ 100.00 -- 3.16%
1991............................ 146.59 +46.59% 2.03
1992............................ 160.56 +9.53 1.96
1993............................ 179.33 +11.72 1.85
1994............................ 169.44 -5.54 2.10
</TABLE>
- --------
* Source: Standard & Poor's. Year-end index values shown do not reflect
reinvestment of dividends nor costs, such as brokerage charges and
transaction costs.
** Source: Standard & Poor's. Yields are obtained by dividing the aggregate
cash dividends by the aggregate market value of the stocks in the S&P MidCap
400 Index at year-end.
It is the understanding of the Sponsor that Standard & Poor's weights the
Index Securities primarily based on each stock's relative total market value;
that is, its market price per share times the number of shares outstanding.
Accordingly, each Index Security's influence on the value of the S&P MidCap 400
Index is directly proportionate to its market value. The percentage of the
Trust's assets invested in each of the Securities is calculated to approximate
the percentage each Index Security represents in the S&P MidCap 400 Index.
LICENSE AGREEMENT
Under the terms of a license agreement with Standard & Poor's (the "License
Agreement"), the Sponsor has been granted a license to use the S&P MidCap 400
Index as a basis for determining the composition of the Trust and to use
certain trade names and trademarks of Standard & Poor's in connection with the
Trust. The License Agreement may be amended by the parties thereto without the
consent of any of the Beneficial Owners of MidCap SPDRs.
None of the Trust, the Trustee, the Distributor, the Depository or any
Beneficial Owner of MidCap SPDRs is entitled to any rights whatsoever under the
foregoing licensing arrangements or to use the trademarks "S&P MidCap 400",
"S&P", "Standard & Poor's" or "Standard & Poor's MidCap 400" or to use the S&P
MidCap 400 Index except as specifically described herein or as may be specified
in the Trust Agreement.
The Trust is not sponsored, endorsed, sold or promoted by Standard & Poor's
and Standard & Poor's makes no representation or warranty, express or implied,
to the Trust, the Trustee, the Distributor, the Depository or Beneficial Owners
of MidCap SPDRs regarding the advisability of investing in Index Securities or
unit investment trusts generally or in the Trust particularly or the ability of
the S&P MidCap 400 Index to track general stock market performance. Standard &
Poor's only relationship to the Trust is the licensing of certain trademarks
and trade names of Standard & Poor's and of the S&P MidCap 400 Index which is
determined, comprised and calculated by Standard & Poor's without regard to the
Trust or the Beneficial Owners of MidCap SPDRs. Standard & Poor's has no
obligation to take the needs of the Trust or the Beneficial Owners of MidCap
SPDRs into consideration in determining, comprising or calculating the S&P
MidCap 400 Index. Standard & Poor's is not responsible for and has not
participated in any determination or calculation made with respect to issuance
or redemption of MidCap SPDRs. Standard & Poor's has no obligation or liability
in connection with the administration, marketing or trading of MidCap SPDRs.
STANDARD & POOR'S DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF
THE S&P MIDCAP 400 INDEX OR ANY DATA INCLUDED THEREIN. STANDARD & POOR'S MAKES
NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE SPONSOR,
THE TRUST, BENEFICIAL OWNERS OF MIDCAP SPDRS OR ANY OTHER PERSON OR ENTITY FROM
THE USE OF THE S&P MIDCAP 400 INDEX OR ANY
41
<PAGE>
DATA INCLUDED THEREIN IN CONNECTION WITH THE USE LICENSED UNDER THE LICENSE
AGREEMENT, OR FOR ANY OTHER USE. STANDARD & POOR'S MAKES NO EXPRESS OR IMPLIED
WARRANTIES, AND EXPRESSLY DISCLAIMS ALL SUCH WARRANTIES, INCLUDING WARRANTIES
OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT TO THE S&P
MIDCAP 400 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE
FOREGOING, IN NO EVENT SHALL STANDARD & POOR'S HAVE ANY LIABILITY FOR ANY
SPECIAL, PUNITIVE, INDIRECT OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS)
EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
EXCHANGE LISTING
As described above, MidCap SPDRs have been accepted for listing on the
Exchange subject to official notice of issuance. Transactions involving MidCap
SPDRs in the public trading market will be subject to customary brokerage
charges and commissions.
The Sponsor's aim in designing MidCap SPDRs was to provide investors with a
security whose market value would approximate 1/5th the value of the S&P MidCap
400 Index. Thus, for example, if the S&P MidCap 400 Index were at 175,
investors might expect a MidCap SPDR to trade at approximately $35. Note,
however, that the market price of a MidCap SPDR should also reflect its share
of the dividends accumulated on the Securities (see "Administration of the
Trust--Distributions to Beneficial Owners") and may also be affected by supply
and demand, market volatility, sentiment and other factors.
There can be no assurance that MidCap SPDRs will always be listed on the
Exchange. The Exchange will consider the suspension of trading in or removal
from listing of MidCap SPDRs:
(a) if the Trust has more than 60 days remaining until termination and
there are fewer than 50 record and/or beneficial holders of MidCap SPDRs
for 30 or more consecutive trading days;
(b) if the S&P MidCap 400 Index is no longer calculated or available; or
(c) if such other event shall occur or condition exists which, in the
opinion of the Exchange, makes further dealings on the Exchange
inadvisable.
The Trust will not be required to pay a listing fee to the Exchange.
The Trust will be terminated in the event that MidCap SPDRs are delisted (see
"Administration of the Trust--Termination").
TAX STATUS OF THE TRUST
The Trust intends to qualify for and elect tax treatment as a "regulated
investment company" under Subchapter M of the Code. To qualify as a regulated
investment company, the Trust must, among other things, (a) derive in each
taxable year at least 90% of its gross income from dividends, interest, gains
from the sale or other disposition of stock, securities or foreign currencies,
or certain other sources, (b) derive in each taxable year less than 30% of its
gross income from the sale or other disposition of stock, securities, certain
foreign positions, and certain other assets held for less than three months,
(c) meet certain diversification tests, and (d) distribute in each year at
least 90% of its investment company taxable income. If the Trust qualifies as a
regulated investment company, subject to certain conditions and requirements,
the Trust will not be subject to federal income tax to the extent its income is
distributed in a timely manner. Any undistributed income may be subject to tax,
including a four percent (4%) excise tax imposed by section 4982 of the Code on
certain undistributed income of a regulated investment company that does not
distribute to shareholders in a timely manner at least ninety-eight percent
(98%) of its taxable income (including capital gains).
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TAX CONSEQUENCES TO BENEFICIAL OWNERS
Dividends paid by the Trust from its investment company taxable income (which
includes dividends, interest and net short-term capital gains) will be taxable
to Beneficial Owners as ordinary income. A dividend paid in January will be
considered for federal income tax purposes to have been paid by the Trust and
received by Beneficial Owners on the preceding December 31 if the dividend was
declared in the preceding October, November or December to Beneficial Owners of
record as shown on the records of the Depository and the DTC Participants (see
"The Trust--Book-Entry-Only System") on a date in one of those months.
Distributions paid by the Trust from net long-term capital gains ("net
capital gain") are taxable as long-term capital gain, regardless of the length
of time an investor has owned MidCap SPDRs. Any loss on the sale or exchange of
a share held for six months or less may be treated as a long-term capital loss
to the extent of any capital gain dividends received by the Beneficial Owner.
For corporate investors, dividends from net investment income (but not return
of capital distributions or capital gain dividends) generally will qualify for
the corporate dividends-received deduction to the extent of qualifying dividend
income received by the Trust, subject to the limitations contained in the Code.
Investors should note that the regular quarterly dividends paid by the Trust
will not be based on the Trust's investment company taxable income and net
capital gain, but rather will be based on the dividends paid with respect to
the Securities. As a result, a portion of the distributions of the Trust may be
treated as a return of capital or a capital gain dividend for federal income
tax purposes or the Trust may make additional distributions in excess of the
yield performance of the Securities in order to distribute all of its
investment company taxable income and net capital gain.
Distributions in excess of the Trust's current or accumulated earnings and
profits (as specially computed) generally will be treated as a return of
capital for federal income tax purposes and will reduce a Beneficial Owner's
tax basis in MidCap SPDRs. Return of capital distributions may result, for
example, if a portion of the dividends declared represents cash amounts
deposited in connection with Portfolio Deposits rather than dividends actually
received by the Trust. Under certain circumstances, a significant portion of
the Trust's regular quarterly dividends could be treated as return of capital
distributions. Such circumstances may be more likely to occur in periods during
which the number of outstanding MidCap SPDRs fluctuates significantly, as may
occur during the initial years of the Trust. Beneficial Owners will receive
annually notification from the Trustee through the DTC Participants as to the
tax status of the Trust's distributions (see "The Trust--Book-Entry-Only
System"). A distribution paid shortly after a purchase or creation of MidCap
SPDRs may be taxable even though in effect it may represent a return of
capital.
Distributions reinvested in additional MidCap SPDRs through the means of the
Service (see "Administration of the Trust--Dividend Reinvestment Service") will
nevertheless be taxable dividends to Beneficial Owners acquiring such
additional MidCap SPDRs to the same extent as if such dividends had been
received in cash.
The sale of MidCap SPDRs by a Beneficial Owner is a taxable event, and may
result in a gain or loss, which generally should be a capital gain or loss for
Beneficial Owners that are not dealers in securities.
Under the Code, an in-kind redemption of MidCap SPDRs will not result in the
recognition of taxable gain or loss by the Trust but generally will constitute
a taxable event for the redeeming shareholder. Upon redemption, a Beneficial
Owner generally will recognize gain or loss measured by the difference on the
date of redemption between the aggregate value of the cash and securities
received and its tax basis in the MidCap SPDRs redeemed. Securities received
upon redemption (which will be comprised of the securities portion of the
Portfolio Deposit in effect on the date of redemption) generally will have an
initial tax basis equal to their respective market values on the date of
redemption. The Internal Revenue Service ("IRS") may assert that any resulting
loss may not be deducted by a Beneficial Owner on the basis that there has been
no material change in such Beneficial Owner's economic position or that the
transaction has no significant economic or business utility apart from the
anticipated tax consequences. Beneficial Owners of MidCap SPDRs in Creation
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Unit size aggregations should consult their own tax advisors as to the
consequences to them of the redemption of MidCap SPDRs.
Dividend distributions, capital gains distributions, and capital gains from
sales or redemptions may also be subject to state, local and foreign taxes.
Deposit of a Portfolio Deposit with the Trustee in exchange for MidCap SPDRs
in Creation Unit size aggregations will not result in the recognition of
taxable gain or loss by the Trust but generally will constitute a taxable event
to the depositor under the Code, and a depositor generally will recognize gain
or loss with respect to each security deposited equal to the difference between
the amount realized in respect of the security and the depositor's tax basis
therein. The amount realized with respect to a security deposited should be
determined by allocating the value on the date of deposit of the MidCap SPDRs
received (less any cash paid to the Trust, or plus any cash received from the
Trust, in connection with the deposit) among the securities deposited on the
basis of their respective fair market values at that time. The IRS may assert
that any resulting losses may not be deducted by a depositor on the basis that
there has been no material change in the depositor's economic position or that
the transaction has no significant economic or business utility or purpose
apart from the anticipated tax consequences. Depositors should consult their
own tax advisors as to the tax consequences to them of a deposit to the Trust.
After the initial deposit of Portfolio Deposits with the Trustee, the Trustee
shall have the right to reject the order to create Creation Units transmitted
to it by the Distributor if the depositor or group of depositors, upon
obtaining the MidCap SPDRs ordered, would own eighty percent (80%) or more of
the outstanding MidCap SPDRs, and if pursuant to section 351 of the Code such a
circumstance would result in the Trust having a basis in the securities
deposited different from the market value of such securities on the date of
deposit. The Trustee shall have the right to require information regarding
MidCap SPDR ownership pursuant to the Participant Agreement and from the
Depository and to rely thereon to the extent necessary to make the foregoing
determination as a condition to the acceptance of a Portfolio Deposit.
Ordinary income dividends received via the Depository by Beneficial Owners
who are non-resident aliens will be subject to a thirty percent (30%) United
States withholding tax unless a reduced rate of withholding or a withholding
exemption is provided under applicable tax treaties. Non-resident shareholders
are urged to consult their own tax advisors concerning the applicability of
United States withholding tax.
Thirty-one percent (31%) of the dividends, capital gains distributions, and
redemptions paid to shareholders who have not complied with IRS taxpayer
identification requirements will be withheld.
The tax discussion set forth above is included for general information only.
Prospective investors should consult their own tax advisors concerning the
federal, state, local and foreign tax consequences to them of an investment in
the Trust.
CONTINUOUS OFFERING OF MIDCAP SPDRS
MidCap SPDRs in Creation Unit size aggregations will be offered continuously
to the public by the Trust through the Distributor and will be delivered upon
the deposit of a Portfolio Deposit (see "The Trust -- Procedure for Creation of
Creation Units"). A list of the identity and number of shares of each of the
Index Securities in the current Portfolio Deposit and the amount of the
Dividend Equivalent Payment effective through and including the previous
Business Day will be made available by the Trustee to NSCC on each Business
Day. Under certain extraordinary circumstances which may make it impossible for
the Trustee to provide such information to NSCC on a given Business Day, NSCC
shall use the composition and weighting of the Index Securities for the most
recently effective Portfolio Deposit. The minimum number of MidCap SPDRs that
may be created as described herein is 25,000 or one Creation Unit. Persons
making Portfolio Deposits and creating Creation Unit aggregations of MidCap
SPDRs will receive no fees, commissions or
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other form of compensation or inducement of any kind from the Sponsor or the
Distributor, nor will any such person have any obligation or responsibility to
the Sponsor or Distributor to effect any sale or resale of MidCap SPDRs.
Because new MidCap SPDRs can be created and issued on an ongoing basis, at
any point during the life of the Trust a "distribution", as such term is used
in the Securities Act of 1933, may be occurring. Broker-dealers and other
persons are cautioned that some 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 a creation order with the
Distributor, breaks them down into the constituent MidCap SPDRs and sells the
MidCap SPDRs directly to its customers; or if it chooses to couple the creation
of a supply of new MidCap SPDRs with an active selling effort involving
solicitation of secondary market demand for MidCap SPDRs. A determination of
whether one is an underwriter must take into account all the facts and
circumstances pertaining to the activities of the broker-dealer or its client
in the particular case, and the examples mentioned above should not be
considered a complete description of all the activities that could lead to
categorization as an underwriter.
Dealers who are not "underwriters" but are participating in a distribution
(as contrasted to ordinary secondary trading transactions), and thus dealing
with MidCap SPDRs that are part of an "unsold allotment" within the meaning of
Section 4(3)(C) of the Securities Act, would be unable to take advantage of the
prospectus-delivery exemption provided by Section 4(3) of the Securities Act.
Firms that do incur a prospectus-delivery obligation with respect to MidCap
SPDRs are reminded that under Securities Act rule 153, a prospectus-delivery
obligation under Section 5(b)(2) of the Act owed to an Exchange member in
connection with a sale on the Exchange is satisfied by the fact that MidCap
SPDR prospectuses will be available at the Exchange upon request. Of course,
the prospectus-delivery mechanism provided in rule 153 is only available with
respect to transactions on an exchange.
The Sponsor intends to qualify MidCap SPDRs in states selected by the Sponsor
and through broker-dealers that are members of the National Association of
Securities Dealers, Inc. Investors intending to create or redeem Creation Unit
size aggregations of MidCap SPDRs in transactions not involving a broker-dealer
registered in such investor's state of domicile or residence should consult
counsel regarding applicable broker-dealer or securities regulatory
requirements under such state securities laws prior to such creation or
redemption.
EXPENSES OF THE TRUST
The following charges are or may be accrued and paid by the Trust: (a) the
Trustee's fee as discussed more fully below; (b) fees payable to transfer
agents for the provision of transfer agency services; (c) fees of the Trustee
for extraordinary services performed under the Trust Agreement; (d) various
governmental charges; (e) any taxes, fees and charges payable by the Trustee
with respect to MidCap SPDRs (whether in Creation Unit size aggregations or
otherwise); (f) expenses and costs of any action taken by the Trustee or the
Sponsor to protect the Trust and the rights and interests of Beneficial Owners
of MidCap SPDRs (whether in Creation Unit size aggregations or otherwise); (g)
indemnification of the Trustee or the Sponsor for any losses, liabilities or
expenses incurred by it in the administration of the Trust without gross
negligence, bad faith, wilful misconduct or wilful malfeasance on its part or
reckless disregard of its obligations and duties; (h) expenses incurred in
contacting Beneficial Owners of MidCap SPDRs during the life of the Trust and
upon termination of the Trust; (i) brokerage commissions incurred by the
Trustee when acquiring or selling Index Securities pursuant to the provisions
of the Trust Agreement and (j) other out-of-pocket expenses of the Trust
incurred pursuant to actions permitted or required under the Trust Agreement.
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In addition to those discussed above, the following expenses will be charged
to the Trust: (a) reimbursement to the Sponsor of amounts paid by it to S&P in
respect of annual licensing fees pursuant to the License Agreement (see
"License Agreement"), (b) federal and state annual registration fees for the
issuance of MidCap SPDRs, and (c) expenses of the Sponsor relating to the
printing and distribution of marketing materials describing MidCap SPDRs and
the Trust (including, but not limited to, associated legal, consulting,
advertising and marketing costs and other out-of-pocket expenses such as
printing). In addition, initial fees and expenses totaling approximately
$195,000, in connection with the organization of the Trust, will be capitalized
and amortized over five years on a straight-line basis and charged to the
Trust.
The Sponsor reserves the right to charge the Trust a special sponsor fee from
time to time in reimbursement for certain services it may provide to the Trust
which would otherwise be provided by the Trustee in an amount not to exceed the
actual cost of providing such services. The Sponsor or the Trustee from time to
time may voluntarily assume some expenses or reimburse the Trust so that total
expenses of the Trust are reduced, although neither the Sponsor nor the Trustee
is obligated to do so and either one or both parties may discontinue such
voluntary assumption of expenses or reimbursement at any time without notice.
The Sponsor has undertaken that on each day during the fiscal year ending
December 31, 1995, the ordinary operating expenses of the Trust as calculated
by the Trustee will not be permitted to exceed an amount which is 30/100 of 1%
per annum of the daily net asset value of the Trust. To the extent during such
period the ordinary operating expenses of the Trust do exceed such 30/100 of 1%
amount, the Sponsor will reimburse the Trust for or assume such excess ordinary
operating expenses. The Sponsor retains the ability to be repaid by the Trust
for expenses so reimbursed or assumed to the extent that subsequently during
the year expenses fall below the 30/100 of 1% per annum level on any given day.
For purposes of this undertaking by the Sponsor, ordinary operating expenses of
the Trust shall not include taxes, brokerage commissions and, of course, such
extraordinary non-recurring expenses as may arise, including, without
limitation, the cost of any litigation to which the Trust or Trustee may be a
party. The Sponsor may choose to reimburse or assume certain Trust expenses in
later periods in order to keep Trust expenses at a level it believes to be
attractive to investors, but is not obligated to do so. In any event, it is
possible that, on any day and during any period over the life of the Trust,
total fees and expenses of the Trust may exceed 30/100 of 1% per annum.
If the income received by the Trust in the form of dividends and other
distributions on the Securities is insufficient to cover Trust expenses, the
Trustee may make advances to the Trust to cover such expenses; otherwise the
Trustee may sell Securities in an amount sufficient to pay such expenses. The
Trustee may reimburse itself in the amount of any such advance, plus any
amounts required by the Federal Reserve Board which are related to such
advances, together with interest thereon at a percentage rate equal to the then
current overnight federal funds rate, by deducting such amounts from (1)
dividend payments or other income of the Trust when such payments or other
income is received, (2) the amounts earned or benefits derived by the Trustee
on cash held by the Trustee for the benefit of the Trust, and (3) the sale of
Securities. Notwithstanding the foregoing, in the event that any advance
remains outstanding for more than forty-five (45) Business Days, the Trustee
shall sell Securities to reimburse itself for the amount of such advance and
any accrued interest thereon. Such advances will be secured by a lien on the
assets of the Trust in favor of the Trustee. The expenses of the Trust will be
reflected in the net asset value of the Trust (see "Valuation").
For services performed under the Trust Agreement, the Trustee will be paid by
the Trust a fee at an annual rate of 10/100 of 1% to 14/100 of 1% of the net
asset value of the Trust, as shown below, such percentage amount to vary
depending on the net asset value of the Trust. Such compensation will be
computed on each Business Day on the basis of the net asset value of the Trust
on such day, and the amount thereof shall be accrued daily and paid monthly.
During the first two years of the operation of the Trust, the Trustee's fee
will be 12/100 of 1% per annum, regardless of the net asset value of the Trust.
The Trustee, in its discretion, may also waive all or a portion of such fee.
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TRUSTEE FEE SCALE
<TABLE>
<CAPTION>
NET ASSET VALUE FEE AS A PERCENTAGE OF NET
OF THE TRUST ASSET VALUE OF THE TRUST
--------------- --------------------------
<S> <C>
0-$500,000,000*...................................... 14/100 of 1% per annum
$500,000,001-$1,000,000,000*......................... 12/100 of 1% per annum
$1,000,000,001-and above*............................ 10/100 of 1% per annum
</TABLE>
- --------
* The fee indicated applies to that portion of the net asset value of the
Trust which falls in the size category indicated.
REDEMPTION OF MIDCAP SPDRS
MidCap SPDRs in Creation Unit size aggregations will be redeemable in kind
only and are not redeemable for cash. MidCap SPDRs in Creation Unit size
aggregations may be redeemed by submitting a request for redemption, the
requisite number of MidCap SPDRs and the Excess Cash Amount (as defined below),
if applicable, to the Trustee in the manner specified below. Beneficial Owners
of MidCap SPDRs may sell MidCap SPDRs in the secondary market, but must
accumulate enough MidCap SPDRs to constitute a Creation Unit (i.e., 25,000
MidCap SPDRs) in order to redeem through the Trust. MidCap SPDRs can be
redeemed only when Creation Unit size aggregations are owned by a Beneficial
Owner and held in the account of a single Participating Party (with respect to
redemptions through the MidCap SPDR Clearing Process) or a single DTC
Participant (with respect to redemptions outside the MidCap SPDR Clearing
Process). MidCap SPDRs will remain outstanding until redeemed or until the
termination of the Trust.
PROCEDURE FOR REDEMPTION OF MIDCAP SPDRS
Requests for redemptions of Creation Units may be made on any Business Day
through the MidCap SPDR Clearing Process to the Trustee at its trust office at
101 Barclay Street, New York, New York 10286 or at such other office as may be
designated by the Trustee. Requests for redemptions of Creation Units may also
be made to the Trustee outside the MidCap SPDR Clearing Process. Requests for
redemption shall not be made to the Distributor. In the case of redemptions
made through the MidCap SPDR Clearing Process, the Transaction Fee will be
deducted from the amount delivered to the redeemer. In case of redemptions
outside the MidCap SPDR Clearing Process, a total fee will be charged on a per
Creation Unit basis per day. Such fee will be equal to the Transaction Fee plus
an additional amount not to exceed three (3) times the Transaction Fee
applicable for one Creation Unit per Creation Unit redeemed (due in part to the
increased expense associated with delivery outside the MidCap SPDR Clearing
Process) and such amount will be deducted from the amount delivered to the
redeemer (see "Prospectus Summary--Transaction Fee"). In all cases, both the
tender of MidCap SPDRs for redemption and distributions to the redeemer in
respect of MidCap SPDRs redeemed will be effected through the Depository and
the relevant DTC Participant(s) to the Beneficial Owner thereof as recorded on
the book-entry system of the Depository or the relevant DTC Participant, as the
case may be (see "The Trust--Book-Entry-Only System").
The Trustee will transfer to the redeeming Beneficial Owner via the
Depository and the relevant DTC Participant(s) a portfolio of Securities for
each Creation Unit size aggregation of MidCap SPDRs delivered, identical in
weighting and composition to the securities portion of a Portfolio Deposit as
in effect (1) on the date a request for redemption is deemed received by the
Trustee as described below, in the case of redemptions made either through the
MidCap SPDR Clearing Process or outside the MidCap SPDR Clearing Process or (2)
on the date that notice of the termination of the Trust is given, in the case
of the termination of the Trust (see "Administration of the Trust--Termination"
and "The Portfolio--Adjustments to the Portfolio"). The Trustee will also
transfer via the relevant DTC Participant(s) to the redeeming Beneficial Owner
in cash the "Cash Redemption Payment", which on any given Business Day is an
amount identical to the amount of the
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Cash Component and is equal to a proportional amount of the following:
dividends on all the Securities for the period through the date of redemption,
net of expenses and liabilities for such period, including, without limitation,
(x) taxes or other governmental charges against the Trust not previously
deducted, if any, and (y) accrued fees of the Trustee and other expenses of the
Trust (including legal and auditing expenses) and other expenses not previously
deducted (see "Expenses of the Trust"), as if all the Securities had been held
for the entire accumulation period for such distribution, plus or minus the
Balancing Amount. To the extent that any amounts payable to the Trust by the
redeeming Beneficial Owner exceed the amount of the Cash Redemption Payment
("Excess Cash Amounts"), such Beneficial Owner shall be required to deliver
payment thereof to the Trustee. In the case of redemptions made through the
MidCap SPDR Clearing Process, the Trustee will effect a transfer of the Cash
Redemption Payment and the Securities to the redeeming Beneficial Owner on the
fifth (5th) or third (3rd) NSCC Business Day, as applicable, following the date
on which the request for redemption is deemed received. In the case of
redemptions made outside the MidCap SPDR Clearing Process, the Trustee will
transfer the Cash Redemption Payment and the Securities to the redeeming
Beneficial Owner by the fifth (5th) or third (3rd) Business Day, as applicable,
following the date on which the request for redemption is deemed received. The
Trustee will cancel all MidCap SPDRs delivered upon redemption.
In the event that the Trustee determines, in its discretion, that an Index
Security is likely to be unavailable or available in insufficient quantity for
delivery by the Trust upon the redemption of MidCap SPDRs in Creation Unit size
aggregations, then the Trustee shall have the right in its discretion to
deliver the cash equivalent value of such Index Security or Index Securities,
based on the market value of such Index Security or Index Securities as of the
Evaluation Time on the date such redemption order is deemed received by the
Trustee (see "Placement of Redemption Orders Using MidCap SPDR Clearing
Process") as a part of the Cash Redemption Payment in lieu of delivering such
Index Security or Index Securities to the redeemer. If an Index Security is not
eligible for transfer through the MidCap SPDR Clearing Process, the Trustee
shall deliver the cash equivalent value of such Index Security as a part of the
Cash Redemption Payment to the redeemer in the manner discussed in the
preceding sentence.
In connection with the redemption of MidCap SPDRs, if a redeemer is
restricted by regulation or otherwise from investing or engaging in a
transaction in one or more Index Securities, the Trustee shall have the right
in its discretion to deliver the cash equivalent value of such Index Security
or Index Securities based on the market value of such Index Security or Index
Securities as of the Evaluation Time on the date such redemption order is
deemed received by the Trustee (see "Placement of Redemption Orders Outside
MidCap SPDR Clearing Process") as a part of the Cash Redemption Payment in lieu
of delivering such Index Security or Index Securities to the redeemer. In such
case, such investor will pay the Trustee the Standard Transaction Fee, plus an
additional amount per Creation Unit not to exceed three (3) times the
Transaction Fee applicable for one Creation Unit, subject to the current
maximum charge of $12,000.
If the Trustee sells Securities to obtain sufficient cash proceeds to deliver
to the redeeming Beneficial Owner, brokerage commissions incurred in connection
with such a sale of Securities will be an expense of the Trust and will affect
the value of all MidCap SPDRs. To the extent cash proceeds are received by the
Trustee in excess of the amount required to be provided to the redeeming
Beneficial Owner, such cash amounts shall be held by the Trustee and shall be
applied in accordance with the guidelines applicable to Misweightings (see "The
Portfolio--Adjustments to the Portfolio").
If the income received by the Trust in the form of dividends and other
distributions on the Securities is insufficient to allow distribution of the
Cash Redemption Payment, the Trustee may advance out of its own funds any
amounts necessary in respect of redemptions of MidCap SPDRs; otherwise, the
Trustee may sell Securities in an amount sufficient to effect such redemptions.
The Trustee may reimburse itself in the amount of any such advance, plus any
amounts required by the Federal Reserve Board which are related to such
advances, together with interest thereon at a percentage rate equal to the then
current overnight federal funds rate, by deducting such amounts from (1)
dividend payments or other income of the Trust when such
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<PAGE>
payments or other income is received, (2) the amounts earned or benefits
derived by the Trustee on cash held by the Trustee for the benefit of the
Trust, and (3) the sale of Securities. Notwithstanding the foregoing, in the
event that any advance remains outstanding for more than forty-five (45)
Business Days, the Trustee shall sell Securities to reimburse itself for such
advance and any accrued interest thereon. Such advances will be secured by a
lien on the assets of the Trust in favor of the Trustee.
The Trustee may, in its discretion, and will when so directed by the Sponsor,
suspend the right of redemption, or postpone the date of payment of the net
asset value for more than five (5) Business Days following the date on which
the request for redemption is deemed received by the Trustee, for any period
during which the New York Stock Exchange is closed; for any period during which
an emergency exists as a result of which disposal or evaluation of the
Securities is not reasonably practicable; or for such other period as the
Commission may by order permit for the protection of Beneficial Owners. Neither
the Sponsor nor the Trustee is liable to any person or in any way for any loss
or damages which may result from any such suspension or postponement.
To be eligible to place orders with the Trustee to redeem MidCap SPDRs in
Creation Unit size aggregations, an entity or person must be (1) a
Participating Party, with respect to redemptions through the MidCap SPDR
Clearing Process, or (2) a DTC Participant, with respect to redemptions outside
the MidCap SPDR Clearing Process.
All orders to redeem MidCap SPDRs must be placed in multiples of 25,000
MidCap SPDRs (Creation Unit size). Orders must be transmitted to the Trustee by
telephone or other transmission method acceptable to the Trustee so as to be
received by the Trustee not later than the Closing Time on the Transmittal Date
pursuant to procedures set forth in the Participant Agreement. Severe economic
or market disruption or changes, or telephone or other communication failure,
may impede the ability to reach the Distributor, the Trustee, a Participating
Party or a DTC Participant.
Orders to redeem Creation Unit size aggregations of MidCap SPDRs shall be
placed with a Participating Party or DTC Participant, as applicable, in the
form required by such Participating Party or DTC Participant. Investors should
be aware that their particular broker may not have executed a Participant
Agreement, and that, therefore, orders to redeem Creation Unit size
aggregations of MidCap SPDRs may have to be placed by the investor's broker
through a Participating Party or a DTC Participant who has executed a
Participant Agreement. At any given time there may be only a limited number of
broker-dealers that have executed a Participant Agreement. Those placing orders
to redeem MidCap SPDRs should afford sufficient time to permit (1) proper
submission of the order by a Participating Party or DTC Participant to the
Trustee and (2) the receipt of MidCap SPDRs to be redeemed and the Excess Cash
Amounts, if any, by the Trustee in a timely manner, as described below. Orders
for redemption that are effected outside the MidCap SPDR Clearing Process are
likely to require transmittal by the DTC Participant earlier on the Transmittal
Date than orders effected using the MidCap SPDR Clearing Process. Those persons
placing orders outside the MidCap SPDR Clearing Process should ascertain the
deadlines applicable to DTC and the Federal Reserve Bank wire transfer system
by contacting the operations department of the broker or depository institution
effectuating such transfer of MidCap SPDRs and Cash Redemption Payment. These
deadlines will vary by institution. The Participant notified of an order to
redeem outside the MidCap SPDR Clearing Process will be required to transfer
MidCap SPDRs through DTC and the Excess Cash Amounts, if any, through the
Federal Reserve wire transfer system in a timely manner (see "Placement of
Redemption Orders outside the MidCap SPDR Clearing Process").
PLACEMENT OF REDEMPTION ORDERS USING MIDCAP SPDR CLEARING PROCESS
Orders to redeem MidCap SPDRs in Creation Unit size aggregations through the
MidCap SPDR Clearing Process must be delivered through a Participating Party
(see "Portfolio Deposit") that has executed the Participant Agreement with the
Distributor and with the Trustee (as the same may be from time to time
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<PAGE>
amended in accordance with its terms). An order to redeem MidCap SPDRs using
the MidCap SPDR Clearing Process is deemed received by the Trustee on the
Transmittal Date if (i) such order is received by the Trustee not later than
the Closing Time 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 Trust as determined as of the
Evaluation Time on the Transmittal Date. An order to redeem MidCap SPDRs using
the MidCap SPDR Clearing Process made in proper form but received by the
Trustee after the Closing Time will be deemed received on the next Business Day
immediately following the Transmittal Date. The Participant Agreement
authorizes the Trustee to transmit to NSCC on behalf of the Participating Party
such trade instructions as are necessary to effect the Participating Party's
redemption order. Pursuant to such trade instructions from the Trustee to NSCC,
the Trustee will transfer the requisite Securities (or contracts to purchase
such securities which are expected to be delivered in a "regular way" manner by
the fifth (5th) NSCC Business Day* and the Cash Redemption Payment. The
calculation of the value of the Securities and the Cash Redemption Payment to
be delivered by the Trustee to the redeeming Beneficial Owner will be made
according to the procedures set forth under "Valuation", computed as of the
Evaluation Time on the Business Day on which a redemption order is deemed
received by the Trustee.
PLACEMENT OF REDEMPTION ORDERS OUTSIDE MIDCAP SPDR CLEARING PROCESS
Orders to redeem MidCap SPDRs outside the MidCap SPDR Clearing Process must
be delivered through a DTC Participant that has executed the Participant
Agreement with the Distributor and with the Trustee. A DTC Participant who
wishes to place an order for redemption of MidCap SPDRs to be effected outside
the MidCap SPDR Clearing Process need not be a Participating Party, but such
orders must state that the DTC Participant is not using the MidCap SPDR
Clearing Process and that redemption of MidCap SPDRs will instead be effected
through transfer of MidCap SPDRs directly through DTC. An order to redeem
MidCap SPDRs outside the MidCap SPDRs Clearing Process is deemed received by
the Trustee on the Transmittal Date if (i) such order is received by the
Trustee not later than the Closing Time on such Transmittal Date, (ii) such
order is preceded or accompanied by the requisite number of MidCap SPDRs
specified in such order, which delivery must be made through DTC to the Trustee
no later than 11:00 a.m. on such Transmittal Date (the "DTC Cut-Off Time") and
(iii) all other procedures set forth in the Participant Agreement are properly
followed. The Excess Cash Amounts owed by the Beneficial Owner, if any, must be
delivered no later than 1:00 p.m. on the Business Day immediately following the
Transmittal Date.
After the Trustee has deemed an order for redemption outside the MidCap SPDR
Clearing Process received, the Trustee will initiate procedures to transfer the
requisite Securities (or contracts to purchase such Securities which are
expected to be delivered within five (5) Business Days*) and the Cash
Redemption Payment to the redeeming Beneficial Owner by the fifth (5th)
Business Day* following the Transmittal Date on which such redemption order is
deemed received by the Trustee.
The calculation of the value of the Securities and the Cash Redemption
Payment to be delivered to the redeeming Beneficial Owner will be made by the
Trustee according to the procedures set forth under "Valuation", computed as of
the Evaluation Time on the Business Day on which a redemption order is deemed
received by the Trustee. Therefore, if a redemption order in proper form is
submitted to the Trustee by a DTC Participant not later than the Closing Time
on the Transmittal Date, and the requisite MidCap SPDRs are delivered to the
Trustee prior to the DTC Cut-Off Time on such Transmittal Date, then the value
of the Securities and the Cash Redemption Payment to be delivered to the
Beneficial Owner will be determined by the Trustee as of the Evaluation Time on
such Transmittal Date. If, however, a redemption order is submitted to the
Trustee by a DTC Participant not later than Closing Time on a Transmittal Date
- --------
* Following the effective date of SEC Rule 15c6-1, such period will be
shortened to the third (3rd) NSCC Business Day.
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but either (1) the requisite MidCap SPDRs are NOT delivered by the DTC Cut-Off
Time on such Transmittal Date or (2) the redemption order is not submitted in
proper form, then the redemption order will NOT be deemed received as of such
Transmittal Date. In such case, the value of the Securities and the Cash
Redemption Payment to be delivered to the Beneficial Owner will be computed as
of the Evaluation Time on the Business Day that such order is deemed received
by the Trustee, i.e., the Business Day on which the MidCap SPDRs are delivered
through DTC to the Trustee by the DTC Cut-Off Time on such Business Day
pursuant to a properly submitted redemption order.
VALUATION
The net asset value of the Trust is computed as of the Evaluation Time shown
under "Essential Information" on each Business Day. The net asset value of the
Trust on a per MidCap SPDR basis is determined by subtracting all liabilities
(including accrued expenses and dividends payable) from the total value of the
Trust's investments and other assets and dividing the result by the total
number of outstanding MidCap SPDRs.
The aggregate value of the Securities shall be determined by the Trustee in
good faith in the following manner: If the Securities are listed on one or more
national securities exchanges, such evaluation shall generally be based on the
closing sale price on that day (unless the Trustee deems such price
inappropriate as a basis for evaluation) on the exchange which is deemed to be
the principal market therefor (the New York or American Stock Exchange if the
securities are listed thereon) or, if there is no such appropriate closing sale
price on such exchange, at the closing bid price (unless the Trustee deems such
price inappropriate as a basis for evaluation). If the Securities are not so
listed or, if so listed and the principal market therefor is other than on such
exchange or there is no such closing bid price available, such evaluation shall
generally be made by the Trustee in good faith based on the closing price on
the over-the-counter market (unless the Trustee deems such price inappropriate
as a basis for evaluation) or if there is no such appropriate closing price,
(a) on current bid prices, (b) if bid prices are not available, on the basis of
current bid prices for comparable securities, (c) by the Trustee's appraising
the value of the securities in good faith on the bid side of the market, or (d)
by any combination thereof.
ADMINISTRATION OF THE TRUST
RECORDS
The Trustee maintains records of the transactions of the Trust, including a
current list of the identity and number of shares of each of the Securities in
the Portfolio. Records of the creation of MidCap SPDRs in Creation Unit size
aggregations are also maintained by the Distributor. Record of ownership of
MidCap SPDRs is maintained by the Depository and by DTC Participants as
described above (see "The Trust--Book-Entry-Only System").
A complete copy of the Trust Agreement is maintained by the Trustee. A copy
of the Trust Agreement is available to Beneficial Owners at the corporate trust
office of the Trustee at 101 Barclay Street, New York, New York 10286 during
normal business hours.
VOTING
The Trustee will have the right to vote all of the voting stocks in the
Trust. The Trustee will vote the voting stocks of each issuer in the same
proportionate relationship as all other shares of each such issuer are voted to
the extent permissible and, if not permitted, shall abstain from voting.
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DISTRIBUTIONS TO BENEFICIAL OWNERS
The regular quarterly ex-dividend date for MidCap SPDRs will be the third
Friday in each of March, June, September and December, unless such day is not a
Business Day, in which case the ex-dividend date will be the immediately
preceding Business Day (the "Ex-Dividend Date"). Beneficial Owners as reflected
on the records of the Depository and the DTC Participants on the fourth
Business Day following the Ex-Dividend Date (the "Record Date") will be
entitled to receive an amount representing dividends accumulated on the
Securities through the quarterly dividend period which ends on the Business Day
preceding such Ex-Dividend Date (including Securities with ex-dividend dates
falling within such quarterly dividend period), net of fees and expenses,
accrued daily for such period. For the purposes of all dividend distributions,
dividends per MidCap SPDR will be calculated at least to the nearest 1/100th of
$0.01. The payment of dividends will be made on the last Business Day in the
calendar month following each Ex-Dividend Date (the "Dividend Payment Date").
Dividend payments will be made through the Depository and the DTC Participants
to Beneficial Owners then of record with funds received from the Trustee.
MidCap SPDRs will be registered in book entry-only, which records will be kept
by the Depository (see "The Trust--Book-Entry-Only System").
With respect to the first Dividend Payment Date, the accumulation period for
dividends will commence on the Initial Date of Deposit and extend through the
Business Day preceding the Ex-Dividend Date for such distribution. All
subsequent distributions will be made in accordance with the foregoing and
following paragraphs.
Amounts equal to any capital gain net income (i.e., the excess of capital
gains over capital losses) recognized by the Trust in any taxable year will be
distributed to Beneficial Owners of record as of December 31 of such year. Such
distribution will be made to such Beneficial Owners of record on the last
Business Day of January of the following calendar year.
Dividends payable to the Trust in respect of the Securities are to be
credited by the Trustee to a non-interest bearing account as of the date on
which the Trust receives such dividends. Other moneys received by the Trustee
in respect of the Securities, including but not limited to the Cash Component,
the Cash Redemption Payment, all moneys realized by the Trustee from the sale
of options, warrants or other similar rights received or distributed in respect
of the Securities as dividends or distributions and capital gains resulting
from the sale of Securities shall also be credited by the Trustee to a non-
interest bearing account. All funds collected or received will be held by the
Trustee without interest until distributed in accordance with the provisions of
the Trust Agreement. To the extent the amounts credited to such accounts
generate interest income or an equivalent benefit to the Trustee, such interest
income or benefit will be used to reduce any charges made in connection with
advances made by the Trustee on behalf of the Trust to cover Trust expenses in
those cases when the Trust income is insufficient to pay such expenses when due
(see "Expenses of the Trust").
The Trust intends to qualify as a regulated investment company for federal
income tax purposes. A regulated investment company is not subject to federal
income tax on its net investment income and capital gains that it distributes
to shareholders, so long as it meets certain overall distribution and
diversification requirements and other conditions under Subchapter M of the
Code. The Trust intends to satisfy these overall distribution and
diversification requirements and to otherwise satisfy any required conditions.
The Trustee intends to make additional distributions to the minimum extent
necessary (i) to distribute the entire annual investment company taxable income
of the Trust, plus any net capital gains (from sales of securities in
connection with adjustments to the Portfolio or to generate cash for such
distributions), and (ii) to avoid imposition of the excise tax imposed by
section 4982 of the Code (see "Tax Status of the Trust"). The additional
distributions, if needed, would consist of (a) an increase in the distribution
scheduled for January to include any amount by which estimated Trust investment
company taxable income and net capital gains for a year exceeds the amount of
Trust taxable income previously distributed with respect to such year or, if
greater, the minimum amount required to avoid imposition of such excise tax,
and (b) a distribution soon
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after actual annual investment company taxable income and net capital gains of
the Trust have been computed of the amount, if any, by which such actual income
exceeds the distributions already made. The net asset value of the Trust will
be reduced in direct proportion to the amount of such additional distributions.
The magnitude of the additional distributions, if any, will depend upon a
number of factors, including the level of redemption activity experienced by
the Trust. Because substantially all proceeds from the sale of securities in
connection with adjustments to the Portfolio will have been used to purchase
shares of Index Securities, the Trust may have no cash or insufficient cash
with which to pay such additional distributions. In that case, the Trustee will
have to sell shares of the Securities sufficient to produce the cash required
to make such additional distributions. In selecting the Securities to be sold
to produce cash for such distributions, the Trustee will choose among the
Securities that are over-weighted in the Portfolio relative to their weightings
in the S&P MidCap 400 Index first and then from among all other Securities in a
manner so as to maintain the weightings of the Securities within the applicable
Misweighting Amount (see "The Portfolio--Adjustments to the Portfolio").
The Trustee further reserves the right to declare special dividends if, in
its reasonable discretion, such action is necessary or advisable to preserve
the status of the Trust as a regulated investment company or to avoid
imposition of income or excise taxes on undistributed income.
The Trustee further reserves the right to vary the frequency with which
periodic distributions are made (e.g., from quarterly to monthly) if it is
determined by the Sponsor and the Trustee, in their discretion, that such a
variance would be advisable to facilitate compliance with the rules and
regulations applicable to regulated investment companies or would otherwise be
advantageous to the Trust. In addition, the Trustee reserves the right to
change the regular ex-dividend date for MidCap SPDRs to another date within the
month or quarter if it is determined by the Sponsor and the Trustee, in their
discretion, that such a change would be advantageous to the Trust. Notice of
any such variance or change (which notice shall include changes to the Record
Date, the Ex-Dividend Date, the Dividend Payment Date, and the accumulation
period resulting from such variance) shall be provided to Beneficial Owners via
the Depository and the DTC Participants (see "The Trust--Book-Entry-Only
System").
The Trustee may, in its discretion, advance out of its own funds any amounts
necessary to permit distributions via the Depository to Beneficial Owners. The
Trustee may reimburse itself in the amount of such advance, plus Federal
Reserve Board requirements, together with interest thereon at a percentage rate
equal to then current overnight federal funds rate, by deducting such amounts
from (1) dividend payments or other income of the Trust when such payments or
other income is received, (2) the amounts earned or benefits derived by the
Trustee on cash held by the Trustee for the benefit of the Trust, and (3) the
sale of Securities. Notwithstanding the foregoing, in the event that any
advance remains outstanding for more than forty-five (45) Business Days, the
Trustee shall sell Securities to reimburse itself for such advance and any
accrued interest thereon. Such advances will be secured by a lien on the assets
of the Trust in favor of the Trustee.
In addition, as soon as practicable after notice of termination of the Trust,
the Trustee will distribute via the Depository and the DTC Participants to each
Beneficial Owner redeeming MidCap SPDRs in Creation Unit size aggregations
prior to the termination date specified in such notice a portion of the
Securities and cash as described above (see "Redemption of MidCap SPDRs" and
"Administration of the Trust--Termination"). Otherwise, the Trustee will
distribute to each Beneficial Owner (whether in Creation Unit size aggregations
or otherwise), as soon as practical after termination of the Trust, such
Beneficial Owner's pro rata share of the net asset value of the Trust (see
"Administration of the Trust--Termination").
All distributions shall be made by the Trustee through the Depository and the
DTC Participants to Beneficial Owners as recorded on the book-entry system of
the Depository and the DTC Participants (see "The Trust--Book-Entry-Only
System").
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The settlement date for the creation of MidCap SPDRs in Creation Unit size
aggregations or the purchase of MidCap SPDRs in the secondary market must occur
on or prior to the Record Date in order for such creator or purchaser to
receive a distribution on the next Dividend Payment Date. If the settlement
date for such creation or purchase occurs after the Record Date, the
distribution will be made to the prior securityholder or Beneficial Owner as of
such Record Date. Any Beneficial Owner interested in acquiring additional
MidCap SPDRs with proceeds received from distributions described above may
elect dividend reinvestment through DTC Participants by means of the Service
described below if the Service is available through such Beneficial Owner's
broker.
TRUST SUPERVISION
The Trust's Portfolio Securities will not be managed and therefore the
adverse financial condition of an issuer of securities in the Trust will not,
in itself, require the sale of Securities from the Portfolio. The Trustee
shall, on a non-discretionary basis, make changes to the Portfolio as described
above (see "The Portfolio--Adjustments to the Portfolio").
The Trustee will direct its securities transactions only to brokers or
dealers, which may include affiliates of the Trustee, from whom it expects to
obtain the most favorable prices or execution of orders.
STATEMENTS TO BENEFICIAL OWNERS
With each distribution, the Trustee will furnish for distribution to
Beneficial Owners (see "The Trust--Book-Entry-Only System") a statement setting
forth the amount being distributed expressed as a dollar amount per MidCap
SPDR.
Promptly after the end of each calendar year, the Trustee will furnish to the
DTC Participants for distribution to each person who was a Beneficial Owner of
MidCap SPDRs at the end of such calendar year (1) an annual report of the Trust
containing financial statements, (2) a summary of transactions for the Trust,
(3) a summary of Securities purchased and sold, (4) amounts distributed to
Beneficial Owners expressed in reasonable detail both as an aggregate dollar
amount and a dollar amount per MidCap SPDR and (5) such other information as
may be required by applicable laws, rules and regulations.
REGISTER OF OWNERSHIP AND TRANSFER
The Trustee will maintain a record of the creation and redemption of MidCap
SPDRs in Creation Unit size aggregations. The Depository will maintain a record
on its book-entry system of the DTC Participant ownership of MidCap SPDRs and
the number of MidCap SPDRs owned (see "The Trust--Book-Entry-Only System").
Certificates will not be issued for MidCap SPDRs, whether in Creation Unit size
denominations or otherwise. Beneficial Owners have the rights accorded to
holders of "book-entry" securities under applicable law. Beneficial Owners may
transfer MidCap SPDRs through the Depository by instructing the DTC Participant
holding the MidCap SPDRs for such Beneficial Owner in accordance with standard
securities industry procedures.
RIGHTS OF BENEFICIAL OWNERS
MidCap SPDRs in Creation Unit size aggregations (i.e., 25,000 MidCap SPDRs)
may be tendered to the Trustee for redemption (see "Redemption of MidCap
SPDRs"). Beneficial Owners may sell MidCap SPDRs in the secondary market, but
must accumulate enough MidCap SPDRs (i.e., 25,000 MidCap SPDRs) to constitute a
full Creation Unit in order to redeem through the Trust. The death or
incapacity of any Beneficial Owner will not operate to terminate the Trust nor
entitle such Beneficial Owner's legal representatives or heirs to claim an
accounting or to take any action or proceeding in any court for a partition or
winding up of the Trust.
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Beneficial Owners will not have the right to vote concerning the Trust,
except as described below with respect to termination and as otherwise
expressly set forth in the Trust Agreement, or in any manner control the
operation and management of the Trust, nor shall any Beneficial Owner be liable
to any other person by reason of any action taken by the Sponsor or the
Trustee.
AMENDMENT
The Trust Agreement may be amended from time to time by the Trustee and the
Sponsor without the consent of any Beneficial Owners (a) to cure any ambiguity
or to correct or supplement any provision thereof which may be defective or
inconsistent or to make such other provisions in regard to matters or questions
arising thereunder as will not adversely affect the interests of Beneficial
Owners; (b) to change any provision thereof as may be required by the
Commission; (c) to add or change any provision as may be necessary or advisable
for the continuing qualification of the Trust as a "regulated investment
company" under the Code; (d) to add or change any provision thereof as may be
necessary to implement a dividend reinvestment plan or service; (e) to add or
change any provision thereof as may be necessary or advisable in the event that
NSCC or the Depository is unable or unwilling to continue to perform its
functions as set forth therein; (f) to add or change any provision thereof to
conform the adjustments to the Portfolio and the Portfolio Deposit to changes,
if any, made by Standard & Poor's in its method of determining the S&P MidCap
400 Index; and (g) to make changes to the Transaction Fee and to other amounts
charged in connection with creations and redemptions of MidCap SPDRs within the
original parameters set forth in the Trust Agreement. The Trust Agreement may
also be amended from time to time by the Sponsor and the Trustee with the
consent of the Beneficial Owners of 51% of the outstanding MidCap SPDRs to add
provisions to or change or eliminate any of the provisions of the Trust
Agreement or to modify the rights of Beneficial Owners; provided, however, that
the Trust Agreement may not be amended without the consent of the Beneficial
Owners of all outstanding MidCap SPDRs if such amendment would (1) permit,
except in accordance with the terms and conditions of the Trust Agreement, the
acquisition of any securities other than those acquired in accordance with the
terms and conditions of the Trust Agreement; (2) reduce the interest of any
Beneficial Owner in the Trust; or (3) reduce the percentage of Beneficial
Owners required to consent to any such amendment.
Promptly after the execution of any such amendment, the Trustee shall receive
from the Depository, pursuant to the terms of the Depository Agreement, a list
of all DTC Participants holding MidCap SPDRs. The Trustee shall inquire of each
such DTC Participant as to the number of Beneficial Owners for whom such DTC
Participant holds MidCap SPDRs, and provide each such DTC Participant with
sufficient copies of a written notice of the substance of such amendment for
transmittal by each such DTC Participant to such Beneficial Owners (see "The
Trust--Book-Entry-Only System").
TERMINATION
The Trust Agreement provides that the Sponsor will have the discretionary
right to direct the Trustee to terminate the Trust if at any time after six
months following and prior to three years following the Initial Date of Deposit
the net asset value of the Trust shall fall below $25,000,000 or if at any time
after three years following the Initial Date of Deposit such value is less than
$100,000,000, as such dollar amount shall be adjusted for inflation in
accordance with the CPI-U, such adjustment to take effect at the end of the
fourth year following the Initial Date of Deposit and at the end of each year
thereafter and to be made so as to reflect the percentage increase in consumer
prices as set forth in the CPI-U for the twelve-month period ending in the last
month of the preceding fiscal year. The Trust Agreement also provides that the
Trustee shall, at the direction of the Sponsor, terminate the Trust if, within
90 days from the Initial Date of Deposit, the net asset value of the Trust is
less than $100,000.
The Trust will terminate by its terms in twenty-five (25) years or earlier in
the event that MidCap SPDRs are delisted from the Exchange. The Exchange will
consider the suspension of trading in or the delisting of MidCap SPDRs as
discussed above (see "Exchange Listing").
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The Trust may also be terminated (a) by the agreement of the Beneficial
Owners of 66-2/3% of outstanding MidCap SPDRs; (b) if the Depository is unable
or unwilling to continue to perform its functions as set forth under the Trust
Agreement and a comparable replacement is unavailable; (c) if NSCC no longer
provides clearance services with respect to MidCap SPDRs, or if the Trustee is
no longer a participant in NSCC; (d) if Standard & Poor's ceases publishing the
S&P MidCap 400 Index; or (e) if the License Agreement is terminated.
If either the Sponsor or the Trustee shall resign or be removed and a
successor is not appointed, the Trust will terminate (see "Resignation, Removal
and Liability--The Trustee" and "Resignation, Removal and Liability--The
Sponsor"). The dissolution of the Sponsor or its ceasing to exist as a legal
entity for any cause whatsoever, however, will not cause the termination of the
Trust Agreement or the Trust unless the Trustee deems termination to be in the
best interests of Beneficial Owners.
Prior written notice of the termination of the Trust will be given at least
twenty (20) days prior to termination of the Trust to all Beneficial Owners in
the manner described above (see "The Trust--Book-Entry-Only System"). The
notice will set forth the date on which the Trust will be terminated (the
"Termination Date"), the period during which the assets of the Trust will be
liquidated, the date on which Beneficial Owners of MidCap SPDRs (whether in
Creation Unit size aggregations or otherwise) will receive in cash the net
asset value of the MidCap SPDRs held and the date determined by the Trustee
upon which the books of the Trust shall be closed. Such notice shall further
state that, as of the date thereof and thereafter, neither requests to create
additional Creation Units nor Portfolio Deposits will be accepted, that no
additional MidCap SPDRs will be created for the purpose of reinvesting dividend
distributions and that, as of the date thereof and thereafter, the portfolio of
Securities delivered upon redemption shall be identical in composition and
weighting to the Securities held in the Trust as of such date rather than the
securities portion of the Portfolio Deposit as in effect on the date the
request for redemption is deemed received. Beneficial Owners of MidCap SPDRs in
Creation Unit size aggregations may, in advance of the Termination Date, redeem
in kind directly from the Trust (see "Redemption of MidCap SPDRs").
Within a reasonable period of time after the Termination Date, the Trustee
shall, subject to any applicable provisions of law, use its best efforts to
sell all of the Securities not already distributed to redeeming Beneficial
Owners of Creation Units. The Trustee shall not be liable for or responsible in
any way for depreciation or loss incurred by reason of any such sale or sales.
The Trustee may suspend such sales upon the occurrence of unusual or unforeseen
circumstances, including but not limited to a suspension in trading of a
Security, the closing or restriction of trading on a stock exchange, the
outbreak of hostilities or the collapse of the economy. Upon receipt of
proceeds from the sale of the last Security, the Trustee shall deduct therefrom
its fees and all other expenses (see "Expenses of the Trust"). The remaining
amount shall be transmitted to the Depository for distribution via the DTC
Participants, together with a final statement setting forth the computation of
the gross amount distributed. MidCap SPDRs not redeemed prior to termination of
the Trust will be redeemed in cash at net asset value based on the proceeds of
the sale of the Securities. Such redemptions in cash at net asset value shall
be available to all Beneficial Owners, with no minimum aggregation of MidCap
SPDRs required (see "Administration of the Trust--Distributions to MidCap SPDR
Beneficial Owners").
RESIGNATION, REMOVAL AND LIABILITY
THE TRUSTEE
Under the Trust Agreement, the Trustee may resign and be discharged of the
Trust created by the Trust Agreement by executing a notice of resignation in
writing and filing such notice with the Sponsor and mailing a copy of the
notice of resignation to all DTC Participants that are reflected on the records
of the Depository as owning MidCap SPDRs for distribution to Beneficial Owners
as provided above (see "The Trust -- Book-Entry-Only System") not less than
sixty (60) days before the date such resignation is to take effect. Such
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resignation will become effective upon the appointment of and the acceptance of
the Trust by a successor Trustee or, if no successor is appointed within sixty
(60) days after the date such notice of resignation is
given, the Trust shall terminate (see "Administration of the Trust--
Termination"). The Sponsor, upon receiving notice of such resignation, is
obligated to use its best efforts to appoint a successor Trustee promptly.
In case the Trustee becomes incapable of acting as such or is adjudged a
bankrupt or is taken over by any public authority, the Sponsor may discharge
the Trustee and appoint a successor Trustee as provided in the Trust Agreement.
Notice of such discharge and appointment shall be mailed via the DTC
Participants to Beneficial Owners by the Sponsor.
Upon a successor Trustee's execution of a written acceptance of an
appointment as Trustee for the Trust, such successor Trustee will become vested
with all the rights, powers, duties and obligations of the original Trustee.
A successor Trustee is required to be a trust company, corporation or
national banking association organized and doing business under the laws of the
United States or any state thereof; to be authorized under such laws to
exercise corporate trust powers; and to have at all times an aggregate capital,
surplus and undivided profit of not less than $50,000,000.
Beneficial Owners of 51% of the then outstanding MidCap SPDRs may at any time
remove the Trustee by written instrument(s) delivered to the Trustee and the
Sponsor. The Sponsor shall thereupon use its best efforts to appoint a
successor Trustee in the manner specified above and in the Trust Agreement.
The Trust Agreement provides that the Trustee will not be liable for any
action taken in reasonable reliance on properly executed documents or for the
disposition of monies or Securities or for the evaluations required to be made
thereunder, except by reason of its own gross negligence, bad faith, wilful
malfeasance, wilful misconduct, or reckless disregard of its duties and
obligations, nor will the Trustee be liable or responsible in any way for
depreciation or loss incurred by reason of the sale by the Trustee of any
Securities in the Trust. In the event of the failure of the Sponsor to act, the
Trustee may act and will not be liable for any such action taken by it in good
faith. The Trustee will not be personally liable for any taxes or other
governmental charges imposed upon or in respect of the Securities or upon the
interest thereon or upon it as Trustee or upon or in respect of the Trust which
the Trustee may be required to pay under any present or future law of the
United States of America or of any other taxing authority having jurisdiction.
In addition, the Trust Agreement contains other customary provisions limiting
the liability of the Trustee. The Trustee and its directors, subsidiaries,
shareholders, officers, employees and affiliates under common control with the
Trustee (each a "Trustee Indemnified Party") will be indemnified from the
assets of the Trust and held harmless against any loss, liability or expense
incurred without gross negligence, bad faith, wilful misconduct, wilful
malfeasance on the part of such Trustee Indemnified Party or reckless disregard
of its duties and obligations, arising out of, or in connection with, its
acceptance or administration of the Trust, including the costs and expenses
(including counsel fees) of defending against any claim or liability.
THE SPONSOR
If at any time the Sponsor shall fail to undertake or perform or become
incapable of undertaking or performing any of the duties which by the terms of
the Trust Agreement are required of it to be undertaken or performed, or shall
resign, or shall become bankrupt or its affairs shall be taken over by public
authorities, the Trustee may appoint a successor Sponsor as shall be
satisfactory to the Trustee, agree to act as Sponsor itself, or may terminate
the Trust Agreement and liquidate the Trust (see "Termination"). Notice of the
resignation or removal of the Sponsor and the appointment of a successor shall
be mailed by the Trustee to the Depository and the DTC Participants for
distribution to Beneficial Owners (see "The Trust--Book-Entry-Only System").
Upon a successor Sponsor's execution of a written acceptance of such
appointment as Sponsor of the Trust, such successor Sponsor shall become vested
with all of the rights, powers, duties and
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obligations of the original Sponsor. Any successor Sponsor may be compensated
at rates deemed by the Trustee to be reasonable.
The Sponsor may resign by executing and delivering to the Trustee an
instrument of resignation. Such resignation shall become effective upon the
appointment of a successor Sponsor and the acceptance of such appointment by
the successor Sponsor, unless the Trustee either agrees to act as Sponsor or
terminates the Trust Agreement and liquidates the Trust, which the Trustee
shall do if no successor Sponsor is appointed (see "Termination").
The dissolution of the Sponsor or its ceasing to exist as a legal entity for
any cause whatsoever will not cause the termination of the Trust Agreement or
the Trust unless the Trustee deems termination to be in the best interests of
the Beneficial Owners of MidCap SPDRs.
The Trust Agreement provides that the Sponsor will not be liable to the
Trustee, the Trust or to the Beneficial Owners of MidCap SPDRs for taking any
action or for refraining from taking any action made in good faith or for
errors in judgment, but will be liable only for its own gross negligence, bad
faith, wilful misconduct or wilful malfeasance in the performance of its duties
or its reckless disregard of its obligations and duties under the Trust
Agreement. The Sponsor will not be liable or responsible in any way for
depreciation or loss incurred by the Trust by reason of the sale of any
Securities of the Trust. The Trust Agreement further provides that the Sponsor
and its directors, subsidiaries, shareholders, officers, employees, and
affiliates under common control with the Sponsor (each a "Sponsor Indemnified
Party") shall be indemnified from the assets of the Trust and held harmless
against any loss, liability or expense incurred without gross negligence, bad
faith, wilful misconduct or wilful malfeasance on the part of any Sponsor
Indemnified Party in the performance of its duties or reckless disregard of its
obligations and duties under the Trust Agreement, including the payment of the
costs and expenses of defending against any claim or liability.
SPONSOR
The Sponsor of the Trust is PDR Services Corporation, a Delaware corporation
incorporated on June 15, 1990 with offices c/o the Exchange, 86 Trinity Place,
New York, New York 10006. The Sponsor's Internal Revenue Service Employer
Identification Number is 13-3574560. The Exchange owns all of the Sponsor's
outstanding shares of common stock. The Exchange is a "control person" of the
Sponsor as such term is defined in the Securities Act of 1933, as amended (the
"1933 Act").
The Sponsor, at its own expense, may from time to time provide additional
promotional incentives to brokers who sell MidCap SPDRs to the public. In
certain instances, these incentives may be provided only to those brokers who
meet certain threshold requirements for participation in a given incentive
program, such as selling a significant number of MidCap SPDRs within a
specified time period.
TRUSTEE
The Trustee is the Bank of New York, a corporation organized under the laws
of New York with the powers of a trust company under the New York Banking law
with a trust office at 101 Barclay Street, New York, New York 10286. The
Trustee's Internal Revenue Service Employer Identification Number is 135-
160382. The Trustee is subject to supervision and examination by the Federal
Reserve Bank of New York, the Federal Deposit Insurance Corporation and the New
York State Banking Department.
DEPOSITORY
The Depository Trust Company, New York, New York, a limited purpose trust
company and member of the Federal Reserve System, will act as Depository for
MidCap SPDRs. The Depository will receive customary fees for its services.
LEGAL OPINION
The legality of the MidCap SPDRs offered hereby has been passed upon by
Orrick, Herrington & Sutcliffe, New York, New York, as counsel for the Sponsor.
Tanner Propp & Farber acts as counsel for the Trustee.
58
<PAGE>
ACCOUNTANTS
The Statement of Financial Condition and Schedule of Investments are included
herein in reliance upon the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
INFORMATION AND COMPARISONS RELATING TO TRUST, SECONDARY
MARKET TRADING VOLUME, NET ASSET SIZE AND PERFORMANCE
Information regarding various aspects of the Trust, including the net asset
size thereof, as well as the secondary market trading volume and the
performance of MidCap SPDRs, may be included from time to time in
advertisements, sales literature and other communications, as well as in
reports to current or prospective Beneficial Owners.
Information may be provided to prospective investors to help such investors
assess their specific investment goals and to aid in their understanding of
various financial strategies. Such information may present current economic and
political trends and conditions and may describe general principals of
investing such as asset allocation, diversification and risk tolerance, as well
as specific investment techniques such as indexing and hedging. In addition,
information may be presented to prospective or current Beneficial Owners
regarding the purchase of MidCap SPDRs in the secondary market, such as margin
requirements. Similarly, market data symbols, trading fractions, other trading
information and the CUSIP number relating to MidCap SPDRs may be included in
such information.
Information regarding the Trust's net asset size may be stated in
communications to prospective or current Beneficial Owners for one or more time
periods, including annual, year-to-date or daily periods. Such information may
also be expressed in terms of the total number of MidCap SPDRs outstanding as
of one or more time periods. Factors integral to the size of the Trust's net
assets, such as creation volume and activity, may also be discussed, and may be
specified from time to time or with respect to various periods of time.
Comparisons of such information during various periods may also be made, and
may be expressed by means of percentages.
Information regarding the secondary market trading activity of MidCap SPDRs
also may be presented over one or more stated time periods, such as for daily,
monthly, quarterly or annual periods. MidCap SPDR secondary market trading
volume information may be compared with similar information relating to other
issues trading on the Exchange during the same reporting period. Average daily
secondary market trading volume of MidCap SPDRs may also be reported from time
to time. Comparisons of such information during various periods may also be
made and may be expressed by means of percentages.
Information may also be provided in communications to prospective or current
Beneficial Owners comparing and contrasting the relative advantages of
investing in MidCap SPDRs as compared to other investment vehicles, such as
mutual funds, both on an individual and a group basis (e.g., stock index mutual
funds). Such information may include comparisons of costs and expense ratios,
expressed either in dollars or basis points, stock lending activities,
permitted investments and hedging activities (e.g., engaging in options or
futures transactions), and portfolio turnover data and analyses. In addition,
such information may quote, reprint or include portions of financial, scholarly
or business publications or periodicals, including model allocation schedules
or portfolios, as the foregoing relate to the comparison of MidCap SPDRs to
other investment vehicles, current economic, financial and political
conditions, investment philosophy or techniques, or the desirability of owning
MidCap SPDRs.
In addition, information on the performance of MidCap SPDRs on the basis of
changes in price per MidCap SPDR with or without reinvesting all dividends
and/or any distributions of capital in additional MidCap SPDRs may be included
from time to time in such information. Total return measures the percentage
59
<PAGE>
growth in the total dollar value of an investment in MidCap SPDRs (reflecting
dividends and capital appreciation but without provision for any income taxes
payable). Average annualized performance will be stated for various periods.
Total return figures may also be stated for a period from the Initial Date of
Deposit, a date at least twelve months prior to the end of the reporting period
or for annual periods for the life of the Trust. Information on the S&P MidCap
400 Index contained in this Prospectus, as updated from time to time, may also
be included from time to time in such material. The performance of the Trust,
of the S&P MidCap 400 Index (provided information is also given reflecting the
performance of the Trust in comparison to that Index) or both may also be
compared to the performance of money managers as reported in market surveys
such as SEI Fund Evaluation Survey (a leading data base of tax-exempt funds) or
mutual funds such as those reported by Lipper Analytical Services Inc., Money
Magazine Fund Watch or Wiesenberger Investment Companies Service, each of which
measures performance following their own specific and well-defined calculation
measures, or of the New York Stock Exchange Composite Index, the American Stock
Exchange Index (indices of stocks traded on the New York and American Stock
Exchanges, respectively), the Dow Jones Industrial Average (an index of 30
widely traded industrial common stocks) or the NASDAQ Composite Index (an
unmanaged index of over-the-counter stocks) or similar measurement standards
during the same period of time. Information may also be included regarding the
aggregate amount of assets committed to index investing generally by various
types of investors, such as pension funds and other institutional investors,
which currently exceeds $300 billion.
Information on the relative price performance of MidCap SPDRs in relation to
other securities and/or indexes may be represented in the form of
"correlation." Correlation is a standard measure of the degree of linear
association between two price series, and ranges from zero percent (0%) (i.e.,
no linear association) to one hundred percent (100%) (i.e., perfect linear
association).
Information relating to the relative price performance of MidCap SPDRs may be
compared against a wide variety of investment categories and asset classes,
including common stocks, small capitalization stocks, long and intermediate
term corporate and government bonds, Treasury bills, the rate of inflation in
the United States (based on the Consumer Price Index ("CPI")) and combinations
of various capital markets. Historical returns of these and other capital
markets in the United States may be provided by independent statistical studies
and sources, such as those provided by Ibbotson Associates of Chicago,
Illinois. The performance of these capital markets is based on the returns of
different indices. Information may be presented using the performance of these
and other capital markets to demonstrate general investment strategies. So, for
example, performance of MidCap SPDRs may be compared to the performance of
selected asset classes such as short-term U.S. Treasury bills, long term U.S.
Treasury bonds, long-term corporate bonds, mid-capitalization stocks, foreign
stocks and small capitalization stocks and may also be measured against the
rate of inflation as set forth in well-known indices (such as the CPI).
Performance comparisons may also include the value of a hypothetical investment
in any of these capital markets. Performance of MidCap SPDRs may also be
compared to that of other indices or compilations that may be developed and
made available to the investing public in the future. Of course, such
comparisons will only reflect past performance of MidCap SPDRs and the
investment categories, indices or compilations chosen and no guarantees can be
made of future results regarding the performance of either MidCap SPDRs or the
asset classes chosen for such comparisons.
DIVIDEND REINVESTMENT SERVICE
The Trust intends to make the DTC book-entry Dividend Reinvestment Service
(the "Service") available during calendar year 1995 for use by Beneficial
Owners through DTC Participants for reinvestment of their cash proceeds. Note
that some DTC Participants may not elect to utilize the Service; therefore,
after the Service is made available for MidCap SPDRs, an interested MidCap SPDR
investor may wish to contact such investor's broker to ascertain the
availability of the Service through such broker. Interested Beneficial Owners
should also note that each broker may require investors to adhere to specific
procedures and timetables in order to participate in the Service and such
investors should ascertain from their broker such necessary details. MidCap
SPDRs acquired pursuant to the Service will be held by the Beneficial Owners in
60
<PAGE>
the same manner, and subject to the same terms and conditions, as for original
ownership of MidCap SPDRs. The Trust will cause DTC Participants to be notified
when the Service is made available.
Distributions reinvested in additional MidCap SPDRs through the Service will
nevertheless be taxable dividends to Beneficial Owners to the same extent as if
received in cash.
The Trustee will utilize the cash proceeds of dividends received from all
Beneficial Owners participating in the Service to obtain Index Securities
necessary to create the requisite number of MidCap SPDRs at the close of
business on each MidCap SPDR distribution date. Any cash balance remaining
after the requisite number of MidCap SPDRs has been created will be
distributed, on a pro rata basis, to all Beneficial Owners who participated in
the Service. Note that brokerage commissions, if any, incurred in obtaining the
Index Securities necessary to create additional MidCap SPDRs with the cash from
the distributions will be an expense of the Trust.*
ADDITIONAL INFORMATION
This Prospectus does not include all of the information with respect to the
Trust set forth in its registration statement and the exhibits thereto filed
with the Commission, under the 1933 Act, and the 1940 Act, to which reference
is hereby made. Copies of such documents may be inspected without charge at the
Commission's offices at 450 Fifth Street, N.W., Washington, D.C. 20549, and
copies of all or any part thereof may be obtained from such office after
payment of the fees prescribed by the Commission. Such information is also
available at the offices of the Sponsor at 86 Trinity Place, New York, New
York.
- ---------------------
* It is difficult to estimate the annual dollar amount of brokerage
commissions that might be incurred in connection with the Service. As an
example, however, the Trustee estimates that the amount of annual brokerage
commissions incurred in implementing the Service would have been $.0004 per
MidCap SPDR, assuming that 9,275,000 MidCap SPDRs were outstanding and the
Trust's net asset value were $341,500,000, and assuming that during calendar
year 1994: (1) the annual dividends paid by the Trust were approximately
$.39 per MidCap SPDR and (2) 50% of all Beneficial Owners elected to
participate in the Service for the entire calendar year. There can be no
guarantee that either the size of the Trust or the number of outstanding
MidCap SPDRs will remain constant, or that the assumptions regarding
dividend payments, the cost of brokerage commissions incurred to purchase
Index Securities or Beneficial Owner participation will prove to be
accurate.
61
<PAGE>
GLOSSARY OF DEFINED TERMS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
"Adjustment Day"........................................................... 38
"Balancing Amount"......................................................... 39
"Beneficial Owners"........................................................ 34
"Business Day"............................................................. 6
"Cash Component"........................................................... 4
"Cash Redemption Payment".................................................. 47
"Closing Time"............................................................. 31
"CNS"...................................................................... 3
"Code"..................................................................... 7
"Commission"............................................................... 3
"CPI-U".................................................................... 9
"Creation Unit"............................................................ 1
"Depository Agreement"..................................................... 34
"Depository"............................................................... 7
"Distributor".............................................................. 10
"Dividend Equivalent Payment".............................................. 4
"Dividend Payment Date".................................................... 52
"DTC Cut-Off Time"......................................................... 50
"DTC Participants"......................................................... 33
"ERISA".................................................................... 7
"Ex-Dividend Date"......................................................... 52
"Excess Cash Amounts"...................................................... 48
"Exchange"................................................................. 1
"Global Security".......................................................... 33
"Index Securities"......................................................... 3
"indirect Participants".................................................... 33
"Initial Date of Deposit".................................................. 2
"License Agreement"........................................................ 41
"MidCap SPDR Clearing Process"............................................. 5
"MidCap SPDR".............................................................. 1
"Misweighting Amount"...................................................... 36
"Misweighting"............................................................. 36
"NAV Amount"............................................................... 38
"NSCC Business Day"........................................................ 12
"NSCC"..................................................................... 3
"Participant Agreement".................................................... 32
"Participating Party"...................................................... 3
"Portfolio Deposit Amount"................................................. 38
"Portfolio Deposit"........................................................ 4
"Portfolio"................................................................ 28
"Record Date".............................................................. 52
"Request Day".............................................................. 38
"S&P MidCap 400 Index"..................................................... 1
"S&P"...................................................................... 6
"SEC Rule 15c6-1".......................................................... 12
"Securities"............................................................... 1
"Service".................................................................. 60
"Sponsor".................................................................. 1
"Standard & Poor's"........................................................ 6
</TABLE>
62
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
"Termination Date"......................................................... 45
"Transaction Fee".......................................................... 5
"Transmittal Date"......................................................... 31
"Trust Agreement".......................................................... 3
"Trust".................................................................... 1
"Trustee".................................................................. 3
"Weighting Analysis"....................................................... 36
</TABLE>
63
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND ANY
INFORMATION OR REPRESENTATIONS NOT STATED IN IT, OR IN THE REGISTRATION
STATEMENT AND EXHIBITS OF WHICH IT IS A PART, MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE TRUST, THE SPONSOR OR THE TRUSTEE. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF ANY
OFFER TO BUY, ANY SECURITY OTHER THAN THE REGISTERED SECURITIES TO WHICH IT
RELATES, OR AN OFFER TO SELL, OR A SOLICITATION OF ANY OFFER TO BUY,
SECURITIES IN ANY JURISDICTION WHERE SUCH OFFER OR SOLICITATION WOULD BE
UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT THE
INFORMATION IN IT IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. HOWEVER,
IF ANY MATERIAL CHANGE OCCURS WHILE THIS PROSPECTUS IS REQUIRED TO BE
DELIVERED, THIS PROSPECTUS WILL BE AMENDED OR SUPPLEMENTED ACCORDINGLY.
THE TRUST IS REGISTERED AS A UNIT INVESTMENT TRUST UNDER THE INVESTMENT
COMPANY ACT OF 1940. REGISTRATION DOES NOT IMPLY THAT THE TRUST OR MIDCAP
SPDRS HAVE BEEN GUARANTEED, SPONSORED, RECOMMENDED OR APPROVED BY THE UNITED
STATES OR ANY STATE OR ANY AGENCY OR OFFICER THEREOF.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ESSENTIAL INFORMATION..................................................... 2
PROSPECTUS SUMMARY........................................................ 3
SPECIAL CONSIDERATIONS AND RISK FACTORS................................... 11
REPORT OF INDEPENDENT ACCOUNTANTS......................................... 15
STATEMENT OF FINANCIAL CONDITION.......................................... 16
SCHEDULE OF INVESTMENTS................................................... 17
THE TRUST................................................................. 28
THE PORTFOLIO............................................................. 35
THE S&P MIDCAP 400 INDEX.................................................. 40
LICENSE AGREEMENT......................................................... 41
EXCHANGE LISTING.......................................................... 42
TAX STATUS OF THE TRUST................................................... 42
CONTINUOUS OFFERING OF MIDCAP SPDRs....................................... 44
EXPENSES OF THE TRUST..................................................... 45
REDEMPTION OF MIDCAP SPDRS................................................ 47
VALUATION................................................................. 51
ADMINISTRATION OF THE TRUST............................................... 51
RESIGNATION, REMOVAL AND LIABILITY........................................ 56
SPONSOR................................................................... 58
TRUSTEE................................................................... 58
DEPOSITORY................................................................ 58
LEGAL OPINION............................................................. 58
ACCOUNTANTS............................................................... 59
INFORMATION AND COMPARISONS RELATING TO TRUST, SECONDARY MARKET TRADING
VOLUME, NET ASSET SIZE AND PERFORMANCE................................... 59
DIVIDEND REINVESTMENT SERVICE............................................. 60
ADDITIONAL INFORMATION.................................................... 61
GLOSSARY OF DEFINED TERMS................................................. 62
</TABLE>
---------------
UNTIL MAY 30, 1995 ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS.
STANDARD & POOR'S
MIDCAP 400 DEPOSITARY
RECEIPTS (TM)
("MIDCAP SPDRS") (TM)
MIDCAP SPDR TRUST, SERIES 1
---------------
PROSPECTUS
---------------
SPONSOR
PDR SERVICES CORPORATION
---------------
APRIL 27, 1995
LOGO
<PAGE>
Undertaking to File Reports
---------------------------
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to
file with the Securities and Exchange Commission such supplementary and
periodic information, documents, and reports as may be prescribed by
any rule or regulations of the Commission heretofore or hereafter duly
adopted pursuant to authority conferred in that section.
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This amendment to the Registration Statement on Form S-6 comprises the following
papers and documents:
The facing sheet.
The cross-reference sheet.
The prospectus consisting of __ pages.
The undertaking to file reports.
The signatures.
Written consents of the following persons:
Orrick, Herrington & Sutcliffe
(included in Exhibit 2)
Price Waterhouse, LLP
(included in Exhibit 3)
The following exhibits:
1. Amendment to Standard Terms and Conditions of Trust for MidCap SPDR
Trust Series 1 dated as of December 29, 1995 between PDR Services
Corporation, as Sponsor and Bank of New York, as Trustee.
2. Opinion of Counsel as to legality of securities being registered.
3. Consent of Price Waterhouse, LLP.
4. Power of Attorney.
FINANCIAL STATEMENTS
--------------------
1. Statement of Financial Condition of the Trust as shown in the current
Prospectus for this series herewith.
2. Financial Statements of the Depositor:
PDR Services Corporation - Statement of Financial Condition as of
December 29, 1994, incorporated by reference to Exhibit 3 contained in
---------
the Post-Effective Amendment No. 2 to Form S-6 for SPDR Trust Series 1
filed with the Securities and Exchange Commission on April 24, 1995
(File No. 33-46080).
<PAGE>
CONSENT OF COUNSEL
The consent of counsel to the use of their name in the Prospectus
included in this amendment to the Registration Statement has been set forth in
their opinion filed as Exhibit 2 to this amendment to the Registration
Statement.
-------------------
CONSENT OF AUDITORS
-------------------
The consent of Price Waterhouse, LLP to the use of their name in the
Prospectus included in this amendment to the Registration Statement has been set
forth in their consent filed as Exhibit 3 to this amendment to the Registration
Statement.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant, MidCap SPDR Trust Series 1, has duly caused this amendment to the
Registration Statement to be signed on its behalf by the undersigned thereunto
duly authorized, and its seal to be hereunto affixed and attested, all in the
City of New York, and State of New York, on the 19th day of January, 1996.
MIDCAP SPDR TRUST SERIES 1
(Registrant)
By: PDR Services Corporation
(Depositor)
____________________________
Joseph Stefanelli
President
Pursuant to the requirements of the Securities Act of 1933, this
amendment to the Registration Statement has been signed on behalf of PDR
Services Corporation the Depositor by the following persons who constitute a
majority of its Board of Directors and by the named persons who are in the
following capacities, in the City of New York and State of New York, on the date
indicated.
PDR SERVICES CORPORATION
Name Title/Office
- ---- ------------
Joseph Stefanelli President** and Director*
John Stimpfel Treasurer**
William Strauss Director**
Gary L. Gastineau Vice President and Director***
By
_____________________________
James F. Duffy
Attorney-in-fact*
_______________________
* Executed copies of the power of attorney were previously filed with the
Securities and Exchange Commission in connection with the Registration
Statement for SPDR Trust, Series 1 dated January 22, 1993, as Exhibit No. 9
(File No. 33-46080).
** Executed copies of the powers of attorney were previously filed with the
Securities and Exchange Commission in connection with the Post-Effective
Amendment No. 1 to the Registration Statement for SPDR Trust, Series 1
dated May 20, 1994, as Exhibit No. 3 (File No. 33-46080).
*** Executed copy of the Power of Attorney is being filed herewith in
connection with this Post Effective Amendment No. 1 to the Registration
Statement for MIDCAP SPDRs Trust, Series 1 dated January 19, 1996 and may
be found in Exhibit 4 of this filing.
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. TITLE OF DOCUMENT
- ----------- -----------------
[S] [C]
1. Amendment to Standard Terms and Conditions of Trust for MidCap
SPDR Trust Series 1 dated as of December 29, 1995 between PDR
Services Corporation, as Sponsor and Bank of New York, as
Trustee.
2. Copy of Opinion of Counsel as to legality
of securities being registered.
3. Consent of Price Waterhouse, LLP.
4. Power of Attorney.
<PAGE>
EXHIBIT 1
AMENDMENT TO
STANDARD TERMS AND CONDITIONS OF TRUST
FOR
STANDARD & POOR'S MIDCAP 400 DEPOSITARY
RECEIPTS ("MIDCAP SPDR") TRUST
DATED AS OF APRIL 1, 1995
BETWEEN
PDR SERVICES CORPORATION, AS SPONSOR,
AND
THE BANK OF NEW YORK, AS TRUSTEE
This Amendment (the "Amendment Agreement") dated as of December 29,
1995 between PDR Services Corporation as sponsor (the "Sponsor") and The Bank of
New York as trustee (the "Trustee") amends the document entitled "Standard &
Poor's MidCap 400 Depositary Receipts ("MidCap SPDR") Trust dated as of April 1,
1995 between PDR Services Corporation as Sponsor and The Bank of New York as
Trustee," effective April 27, 1995 (hereinafter called the "Standard Terms"),
and the document entitled "Trust Indenture and Agreement dated April 27, 1995
incorporating by reference Standard Terms and Conditions of Trust for Standard &
Poor's MidCap 400 Depositary Receipts ("MidCap SPDR") Trust Series 1 dated as of
April 1, 1995" (hereinafter called the "Trust Indenture") (the Standard Terms
and the Trust Indenture and any and all previous amendments thereto hereinafter
called the "Trust Documents").
<PAGE>
WITNESSETH THAT:
WHEREAS, the parties hereto have entered into the Trust Documents to
facilitate the creation of the Standard & Poor's MidCap 400 Depositary Receipts
("MidCap SPDR") Trust (the "Trust"); and
WHEREAS, the parties hereto desire to amend the Trust Documents as
more fully set forth below;
NOW THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the Sponsor and the Trustee agree as follows:
3. The fourth full paragraph of Section 9.01 of the Standard Terms
shall be deleted in its entirety and the following sentence shall be inserted in
replacement thereof;
"Notwithstanding the foregoing, the Agreement, the Indenture and the
Trust Fund in any event shall terminate by their terms on the
Mandatory Termination Date or the date 20 years after the death of the
last survivor of the eleven persons named in the Indenture, whichever
occurs first, unless sooner terminated as specified herein."
4. Section D of the Trust Indenture shall be deleted in its entirety
and the following text shall be inserted in replacement thereof:
(a) "The Mandatory Termination Date for the Trust shall be (1) one
hundred twenty five years from the date the Trust is declared effective under
the Securities Act of 1933, which is April 27, 1995 or (2) the date twenty
years after the death of the last survivor of the eleven persons named below
in subsection (b), whichever occurs first.
<PAGE>
(b) List of Measuring Lives:
------------------------
<TABLE>
<S> <C> <C>
Kevin Patrick McGrath 112-50 78th Avenue 11/11/92
Forest Hills, NY 10375
Paul Pavelka 461 Aurania Street 5/25/90
Philadelphia, PA 19128
Peter Pavelka 461 Aurania Street 5/7/92
Philadelphia, PA 19128
Alexander Nathan Most 3723 Alameda de Las Pulgas 7/30/92
Menlo Park, CA 94025
John Imwalle 415 Meadow Drive 1/7/93
Birmingham, AL
Rian Imwalle 415 Meadow Drive 1/7/93
Birmingham, AL
Emily Ann Weber 6 Chadwick Court 1/19/93
Denville, NJ 07834
Joseph Angelo Malefronte 16 Radcliffe Road 4/10/91
Staten Island, NY 10305
Jacklyn Bianculli 25 Miller Avenue 3/9/91
Floral Park, NY 11001
Julia Baker 15 Hubbard Court 5/7/92
Stamford, CT 06902
Elizabeth Juliet Angel 936 North Livingston Street 8/12/92
Arlington, VA 22205
</TABLE>
5. Pursuant to Section 10.01 of the Standard Terms, the parties
hereby agree that paragraphs (1) and (2) of this Amendment Agreement are made in
compliance with the provisions of Section 10.01(a) thereof and that the parties
hereto have determined in good faith that the changes contained in this
Amendment Agreement will not adversely affect the interests of Beneficial
Owners.
6. Pursuant to Section 10.01, the Trustee agrees that it shall
promptly furnish each DTC Participant with sufficient copies of a written notice
of the substance of the terms of this Amendment Agreement for transmittal by
each such DTC Participant to the Beneficial Owners of the Trust.
7. Except as amended hereby, the Trust Documents now in effect are in
all respects ratified and confirmed hereby and this Amendment Agreement and all
of its provisions shall be deemed to be a part of the Trust Documents.
<PAGE>
8. This Amendment Agreement may be simultaneously executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
Agreement to be duly executed as of the date hereof.
PDR SERVICES CORPORATION, as Sponsor
By: ________________________________
Title: President
ATTEST: _________________
TITLE:
THE BANK OF NEW YORK, as Trustee
as Trustee
By: ________________________________
Title:
ATTEST: _________________
TITLE:
<PAGE>
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On the 29th day of December in the year 1995 before me personally came
Joseph Stefanelli to me known, who, being by me duly sworn, did depose and say
that he is the President of PDR Services Corporation, the corporation described
in and which executed the above instrument; and that he signed his name thereto
by like authority.
-------------------------------
Notary Public
<PAGE>
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On this 29th day of December in the year 1995, before me personally
appeared ___________________________, to me known, who, being by me duly sworn,
did depose and say that he is _____________________________ of The Bank of New
York, the bank and trust company described in and which executed the above
instrument; and that he signed his name thereto by authority of the board of
directors of said bank and trust company.
-------------------------------
Notary Public
<PAGE>
EXHIBIT 2
January 5, 1996
PDR Services Corporation
c/o American Stock Exchange
86 Trinity Place
New York, New York 10006
The Bank of New York
101 Barclay Street
New York, New York 10286
Ladies and Gentlemen:
We have served as counsel to the American Stock Exchange (the
"Exchange") and PDR Services Corporation as sponsor (the "Sponsor") of MidCap
SPDR Trust Series 1 (hereinafter referred to as the "Trust") in connection with
the Amendment Agreement dated as of December 29, 1995 executed by and between
the Sponsor and The Bank of New York as Trustee for the Trust (the "Amendment
Agreement").
In this regard we have examined executed originals or copies of
(a) The Standard Terms and Conditions of the Trust dated as of April
1, 1995;
(b) The Trust Indenture and Agreement for the Trust dated April 27,
1995;
(c) The Amendment Agreement;
(d) The Certificate of PDR Services Corporation dated December 29,
1995; and
(e) such other pertinent records and documents as we have deemed
necessary.
With your permission, in such examination, we have assumed the
following: (a) the authenticity of original documents and the genuineness of all
signatures; (b) the conformity to the originals of all documents submitted to us
as copies; (c) the truth, accuracy, and completeness of the information,
representations, and warranties contained in the records, documents, instruments
and certificates as we have reviewed; (d) except as specifically covered in the
opinions set forth below, with due authorization, execution, and delivery on
behalf of the respective parties thereto of documents referred to herein and the
legal, valid and binding effect thereof on such parties; and (e) the absence of
any evidence extrinsic to the provisions of the
<PAGE>
written agreement(s) between the parties that the parties intended a meaning
contrary to that expressed by those provisions.
We express no opinion as to matters of law in jurisdictions other than
the State of New York and the United States.
Based on such examination, and having regard for legal considerations
which we deem relevant, we are of the opinion that:
(i) the Amendment Agreement conforms to the requirements of
Section 10.01 of the Standard Terms; and
(ii) the Amendment Agreement has been duly authorized, executed
and delivered by the Sponsor and, assuming the due authorization,
execution and delivery by the other parties thereto, is a valid and
binding agreement of the Sponsor, enforceable against the Sponsor in
accordance with its terms.
Our opinion that any document is valid, binding, or enforceable in
accordance with its terms is qualified as to:
(a) limitations imposed by bankruptcy, insolvency, reorganization,
arrangement, fraudulent conveyance, moratorium, or other laws relating to or
affecting the enforcement of creditors' right generally;
(b) rights to indemnification and contribution which may be limited
by applicable law or equitable principles; and
(c) general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
We hereby consent to the filing of this opinion as an exhibit to the
amended Registration Statement for the Trust and to the use of our name where it
appears in the amended Registration Statement for the Trust and the Prospectus.
Very truly yours,
Orrick, Herrington & Sutcliffe
<PAGE>
EXHIBIT 3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of
Post-Effective Amendment No. 1 to the registration statement on Form S-6 (the
Registration Statement) of our report dated April 27, 1995, relating to the
Statement of Financial Condition of MidCap SPDR Trust, Series I, including the
Schedule of Investments, which appears in such Prospectus. We also consent to
the reference to us under the heading "Accountants".
/s/ Price Waterhouse LLP
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
January 4, 1996
<PAGE>
EXHIBIT 4
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS that the undersigned officer and director
of PDR Services Corporation, a Delaware corporation, does hereby constitute and
appoint James F. Duffy, Michael Cavalier and Ivonne L. Nagy, and any of them, as
his true and lawful attorneys-in-fact for him and in his name to sign,
execute, deliver and file with the Securities and Exchange Commission
Registration Statements under the Securities Act of 1933 and Investment Company
Act of 1940 and any and all amendments thereto, and any and all certificates,
letters, applications or other documents connected therewith which such
attorneys-in-fact may deem necessary or advisable for the registration under
such Acts of Units of undivided fractional interest in all series of the SPDR
Trust Series 1 and the MidCap SPDR Trust, Series 1 and any other similar unit
investment trust for which the Corporation is a sponsor and to take any and all
action that the said attorneys-in-fact may deem necessary or advisable in order
to carry out fully the intent of the foregoing appointment, hereby ratifying and
approving the acts of said attorneys-in-fact.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 11th
day of January, 1996.
By: /s/ Gary L. Gastineau
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Gary L. Gastineau
