nv30d
 
 
 
SPDR® Dow Jones Industrial AverageSM ETF Trust
 
(“SPDR DJIA TRUST”)
 
A Unit Investment Trust
 
Semi-Annual Report
 
April 30, 2010
 
(Unaudited)
 
 
“Dow Jones Industrial Averagesm”, “DJIA®”, “Dow Jones®”, “The Dow®” and “DIAMONDS®” are trademarks and service marks of Dow Jones & Company, Inc. (“Dow Jones”) and have been licensed for use for certain purposes by State Street Global Markets, LLC pursuant to a “License Agreement” with Dow Jones and have been sublicensed for use for certain purposes to the Trust, PDR Services LLC and NYSE Arca, Inc. pursuant to separate “Sublicenses.” SPDR DJIA Trust is not sponsored, endorsed, sold or promoted by Dow Jones and Dow Jones makes no representation regarding the advisability of investing in the Trust.
 
“SPDR®” is a registered trademark of Standard & Poor’s Financial Services LLC (“S&P”) and has been licensed for use by State Street Corporation. No financial product offered by State Street Corporation or its affiliates is sponsored, endorsed, sold or promoted by S&P or its Affiliates, and S&P and its affiliates make no representation, warranty or condition regarding the advisability of buying, selling or holding units/shares in such products.

 

SPDR Dow Jones Industrial Average ETF Trust
Schedule of Investments
April 30, 2010 (Unaudited)
 
                 
Common Stocks   Shares     Value  
 
 
3M Co. 
    6,246,760     $ 553,900,209  
Alcoa, Inc. 
    6,246,760       83,956,454  
American Express Co. 
    6,246,760       288,100,571  
AT&T, Inc. 
    6,246,760       162,790,566  
Bank of America Corp. 
    6,246,760       111,379,731  
Caterpillar, Inc. 
    6,246,760       425,341,889  
Chevron Corp. 
    6,246,760       508,736,135  
Cisco Systems, Inc.*
    6,246,760       168,162,779  
E.I. du Pont de Nemours & Co. 
    6,246,760       248,870,918  
Exxon Mobil Corp. 
    6,246,760       423,842,666  
General Electric Co. 
    6,246,760       117,813,894  
Hewlett-Packard Co. 
    6,246,760       324,644,117  
Intel Corp. 
    6,246,760       142,613,531  
International Business Machines Corp. 
    6,246,760       805,832,040  
Johnson & Johnson
    6,246,760       401,666,668  
JPMorgan Chase & Co. 
    6,246,760       265,987,041  
Kraft Foods, Inc. (Class A)
    6,246,760       184,904,096  
McDonald’s Corp. 
    6,246,760       440,958,789  
Merck & Co., Inc. 
    6,246,760       218,886,470  
Microsoft Corp. 
    6,246,760       190,776,050  
Pfizer, Inc. 
    6,246,760       104,445,827  
The Boeing Co. 
    6,246,760       452,452,827  
The Coca-Cola Co. 
    6,246,760       333,889,322  
The Home Depot, Inc. 
    6,246,760       220,198,290  
The Procter & Gamble Co. 
    6,246,760       388,298,602  
The Travelers Cos., Inc. 
    6,246,760       316,960,602  
The Walt Disney Co. 
    6,246,760       230,130,638  
United Technologies Corp. 
    6,246,760       468,194,662  
Verizon Communications, Inc. 
    6,246,760       180,468,896  
Wal-Mart Stores, Inc. 
    6,246,760       335,138,674  
                 
                 
                 
Total Common Stocks (a) (Cost $10,666,304,951)
          $ 9,099,342,954  
                 
*   Non-income producing security.
 
(a)  Unless otherwise indicated, the values of the securities of the Trust are determined based on Level 1 inputs. (Note 2)
 
See accompanying notes to financial statements.


1

 

SPDR Dow Jones Industrial Average ETF Trust
Schedule of Investments (continued)
April 30, 2010 (Unaudited)
 
INDUSTRY BREAKDOWN AS OF APRIL 30, 2010*
 
         
Industry**   Value  
 
 
Computers & Peripherals
  $ 1,130,476,157  
Oil, Gas & Consumable Fuels
    932,578,801  
Aerospace & Defense
    920,647,489  
Pharmaceuticals
    724,998,965  
Industrial Conglomerates
    671,714,103  
Hotels, Restaurants & Leisure
    440,958,789  
Machinery
    425,341,889  
Household Products
    388,298,602  
Diversified Financial Services
    377,366,772  
Diversified Telecommunication Services
    343,259,462  
Food & Staples Retailing
    335,138,674  
Beverages
    333,889,322  
Insurance
    316,960,602  
Consumer Finance
    288,100,571  
Chemicals
    248,870,918  
Media
    230,130,638  
Specialty Retail
    220,198,290  
Software
    190,776,050  
Food Products
    184,904,096  
Communications Equipment
    168,162,779  
Semiconductors & Semiconductor Equipment
    142,613,531  
Metals & Mining
    83,956,454  
         
Total
  $ 9,099,342,954  
         
*   SPDR DJIA Trust’s industry breakdown is expressed as market value by industry and may change over time.
 
**  Each security is valued based on Level 1 inputs.
 
See accompanying notes to financial statements.


2

 

SPDR Dow Jones Industrial Average ETF Trust
Statement of Assets and Liabilities
April 30, 2010 (Unaudited)
         
 
ASSETS
       
Investments in securities, at value
  $ 9,099,342,954  
Cash
    10,257,276  
Receivable for units of fractional undivided interest (“Units”) issued in-kind
    24,490  
Dividends receivable
    11,903,756  
         
Total Assets
    9,121,528,476  
         
         
LIABILITIES
       
Income distribution payable
    7,172,535  
Accrued trustee expense
    434,058  
Accrued expenses and other liabilities
    2,532,598  
         
Total Liabilities
    10,139,191  
         
NET ASSETS
  $ 9,111,389,285  
         
         
NET ASSETS CONSIST OF:
       
Paid in capital (Note 4)
  $ 12,238,451,733  
Distribution in excess of net investment income
    20,059,678  
Accumulated net realized loss on investments
    (1,580,160,129 )
Net unrealized depreciation on investments
    (1,566,961,997 )
         
NET ASSETS
  $ 9,111,389,285  
         
         
NET ASSET VALUE PER UNIT
  $ 110.12  
         
UNITS OUTSTANDING, UNLIMITED UNITS AUTHORIZED, $0.00 PAR VALUE
    82,742,867  
         
         
COST OF INVESTMENTS
  $ 10,666,304,951  
         
 
See accompanying notes to financial statements.


3

 

SPDR Dow Jones Industrial Average ETF Trust
Statements of Operations
                                 
    For the Six Months Ended
 		                   
    April 30, 2010
 		    For the Year Ended
 		    For the Year Ended
 		    For the Year Ended
 		 
    (Unaudited)     October 31, 2009     October 31, 2008     October 31, 2007  
 
INVESTMENT INCOME
                               
Dividend income
  $ 110,995,095     $ 258,082,109     $ 234,266,377     $ 172,683,551  
                                 
                                 
EXPENSES
                               
Trustee expense
    2,618,585       4,465,047       4,878,701       4,232,050  
Marketing expense
    2,523,944       4,583,583       5,319,946       4,437,144  
DJIA license fee
    1,732,219       3,155,722       4,152,507       2,555,000  
Legal and audit services
    197,672       199,547       181,128       174,890  
Other expenses
    174,690       337,558       389,842       218,083  
                                 
Total Expenses
    7,247,110       12,741,457       14,922,124       11,617,167  
Trustee earnings credits
    —       —       —       (965,742 )
                                 
Net Expenses after Trustee earnings credits
    7,247,110       12,741,457       14,922,124       10,651,425  
                                 
NET INVESTMENT INCOME
    103,747,985       245,340,652       219,344,253       162,032,126  
                                 
                                 
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
                               
Net realized gain (loss) on investment transactions (Note 5)
    136,836,826       (1,286,963,860 )     (172,099,218 )     854,766,927  
Net change in unrealized appreciation (depreciation)
    833,861,728       1,286,025,132       (3,238,666,792 )     139,514,977  
                                 
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
    970,698,554       (938,728 )     (3,410,766,010 )     994,281,904  
                                 
                                 
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS
  $ 1,074,446,539     $ 244,401,924     $ (3,191,421,757 )   $ 1,156,314,030  
                                 
 
See accompanying notes to financial statements.


4

 

SPDR Dow Jones Industrial Average ETF Trust
Statements of Changes in Net Assets
                                 
    For the Six Months
 		                   
    Ended
 		    For the Year
 		    For the Year
 		    For the Year
 		 
    April 30, 2010
 		    Ended
 		    Ended
 		    Ended
 		 
    (Unaudited)     October 31, 2009     October 31, 2008     October 31, 2007  
 
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS:
                               
Net investment income
  $ 103,747,985     $ 245,340,652     $ 219,344,253     $ 162,032,126  
Net realized gain (loss) on investment transactions
    136,836,826       (1,286,963,860 )     (172,099,218 )     854,766,927  
Net change in unrealized appreciation (depreciation)
    833,861,728       1,286,025,132       (3,238,666,792 )     139,514,977  
                                 
                                 
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS:
    1,074,446,539       244,401,924       (3,191,421,757 )     1,156,314,030  
                                 
                                 
NET EQUALIZATION CREDITS AND CHARGES
    (2,949,278 )     (12,761,900 )     1,639,517       (13,594,558 )
                                 
                                 
DISTRIBUTIONS TO UNITHOLDERS FROM NET INVESTMENT INCOME
    (100,162,360 )     (231,359,719 )     (218,527,182 )     (147,731,248 )
                                 
                                 
INCREASE (DECREASE) IN NET ASSETS FROM UNIT TRANSACTIONS:
                               
Net Proceeds from sale of units
    8,257,916,601       24,458,446,137       43,007,862,019       37,094,855,531  
Net Proceeds from reinvestment of distributions
    70,649       1,820,420       1,388,124       1,275,186  
Cost of units repurchased
    (7,509,845,589 )     (26,198,575,593 )     (39,824,961,718 )     (35,324,440,592 )
Net income equalization
    2,949,278       12,761,900       (1,639,517 )     13,594,558  
                                 
                                 
NET INCREASE (DECREASE) IN NET ASSETS FROM ISSUANCE AND REDEMPTION OF UNITS
    751,090,939       (1,725,547,136 )     3,182,648,908       1,785,284,683  
                                 
                                 
NET INCREASE (DECREASE) IN NET ASSETS DURING PERIOD
    1,722,425,840       (1,725,266,831 )     (225,600,514 )     2,780,272,907  
                                 
NET ASSETS BEGINNING OF PERIOD
    7,388,963,445       9,114,230,276       9,339,890,790       6,559,617,883  
                                 
                                 
NET ASSETS END OF PERIOD*
  $ 9,111,389,285     $ 7,388,963,445     $ 9,114,230,276     $ 9,339,890,790  
                                 
UNIT TRANSACTIONS:
                               
Units sold
    78,050,000       286,350,000       366,850,000       283,800,000  
Units issued from reinvestment of distributions
    679       21,340       11,778       9,870  
Units redeemed
    (71,350,000 )     (308,100,000 )     (336,200,000 )     (271,050,000 )
                                 
                                 
NET INCREASE (DECREASE)
    6,700,679       (21,728,660 )     30,661,778       12,759,870  
                                 
*Includes Undistributed (distribution in excess of) net investment income
  $ 20,059,678     $ 16,474,053     $ 2,493,120     $ 17,835,012  
                                 
 
See accompanying notes to financial statements.


5

 

SPDR Dow Jones Industrial Average ETF Trust
Financial Highlights
Selected data for a Unit outstanding throughout each period
                                                 
    For the Six
 		                               
    Months
 		                               
    Ended
 		    For the Year
 		    For the Year
 		    For the Year
 		    For the Year
 		    For the Year
 		 
    4/30/2010
 		    Ended
 		    Ended
 		    Ended
 		    Ended
 		    Ended
 		 
    (Unaudited)     10/31/2009     10/31/2008     10/31/2007     10/31/2006     10/31/2005  
 
Net asset value, beginning of period
  $ 97.17     $ 93.22     $ 139.17     $ 120.69     $ 104.31     $ 100.48  
                                                 
Investment operations:
                                               
Net investment income(1)
    1.29       2.76       2.96       2.85       2.45       2.39 (2)
Net realized and unrealized gain (loss) on investments
    13.00       4.01       (45.91 )     18.57       16.37       3.91  
                                                 
                                                 
Total from investment operations
    14.29       6.77       (42.95 )     21.42       18.82       6.30  
                                                 
Net equalization credits and charges(1)
    (0.04 )     (0.14 )     0.02       (0.24 )     (0.03 )     (0.03 )
                                                 
Less distributions from:
                                               
Net investment income
    (1.30 )     (2.68 )     (3.02 )     (2.70 )     (2.41 )     (2.44 )
                                                 
Net asset value, end of period
  $ 110.12     $ 97.17     $ 93.22     $ 139.17     $ 120.69     $ 104.31  
                                                 
Total investment return(3)
    14.71 %     7.56 %     (31.23 )%     17.72 %     18.23 %     6.23 %
Ratios and supplemental data
                                               
Ratio to average net assets:
                                               
Net investment income
    2.47 %     3.21 %     2.49 %     2.19 %     2.21 %     2.27 %
Total expenses
    0.17 %     0.17 %     0.17 %     0.16 %     0.18 %     0.18 %
Total expenses excluding Trustee earnings credit
    0.17 %     0.17 %     0.17 %     0.14 %     0.17 %     0.17 %
Portfolio turnover rate(4)
    — %     5.39 %     11.27 %     1.45 %     0.01 %     7.69 %
Net assets, end of period (000’s)
  $ 9,111,389     $ 7,388,963     $ 9,114,230     $ 9,339,891     $ 6,559,618     $ 7,409,986  
(1)  Per Unit numbers have been calculated using the average shares method.
 
(2)  Net investment income per Unit reflects receipt of a special one time dividend from a portfolio holding (Microsoft Corp.). The effect of this dividend amounted to $0.22 per unit.
 
(3)  Total return is calculated assuming a purchase of Unit at net asset value per Unit on the first day and a sale at net asset value per Unit on the last day of each period reported. Distributions are assumed, for the purposes of this calculation, to be reinvested at the net asset value per unit on the respective payment dates of the Trust. Total return for a period of less than one year is not annualized. Broker commission charges are not included in this calculation.
 
(4)  Portfolio turnover ratio excludes securities received or delivered from processing creations or redemptions of units.
 
See accompanying notes to financial statements.


6

 

SPDR Dow Jones Industrial Average ETF Trust
Notes to Financial Statements
April 30, 2010 (Unaudited)
 
Note 1 — Organization
SPDR Dow Jones Industrial Average ETF Trust (the “Trust”) is a unit investment trust created under the laws of the State of New York and registered under the Investment Company Act of 1940, as amended. The Trust was created to provide investors with the opportunity to purchase a security representing a proportionate undivided interest in a portfolio of securities consisting of substantially all of the component common stocks, in substantially the same weighting, which comprise the Dow Jones Industrial Average (the “DJIA”). Each unit of fractional undivided interest in the Trust is referred to as a “Unit”. The Trust commenced operations on January 14, 1998 upon the initial issuance of 500,000 Units (equivalent to ten “Creation Units” — see Note 4) in exchange for a portfolio of securities assembled to reflect the intended portfolio composition of the Trust.
 
Under the Amended and Restated Standard Terms and Conditions of the Trust, as amended (“Trust Agreement”), PDR Services, LLC, as Sponsor of the Trust (“Sponsor”), and State Street Bank and Trust Company, as Trustee of the Trust (“Trustee”), are indemnified against certain liabilities arising from the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. However, based on experience the Trust expects the risk of material loss to be remote.
 
Note 2 — Significant Accounting Policies
The following is a summary of significant accounting policies followed by the Trust in the preparation of its financial statements:
 
The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from these estimates.
 
Security Valuation
The value of the Trust’s portfolio securities is based on the market price of the securities, which generally means a valuation obtained from an exchange or other market (or based on a price quotation or other equivalent indication of value supplied by an exchange or other market) or a valuation obtained from an independent pricing service. If a security’s market price is not readily available or does not otherwise accurately reflect the fair value of the security, the security will be valued by another method that the Trustee believes will better reflect fair value in accordance with the Trust’s valuation policies and procedures. The Trustee has delegated the process of valuing securities for which market quotations are not readily available or do not otherwise accurately reflect the fair value of the security to the Pricing and Investment Committee (the “Committee”). The Committee, subject to oversight by the Trustee, may use fair value pricing in a variety of circumstances, including but not limited to, situations when trading in a security has been suspended or halted. Accordingly, the Trust’s net asset value may reflect certain portfolio securities’ fair values rather than their market prices. Fair value pricing involves subjective judgments and it is possible that the fair value determination for a security is materially different than the value that could be received on the sale of the security.


7

 

SPDR Dow Jones Industrial Average ETF Trust
Notes to Financial Statements — (continued)
April 30, 2010 (Unaudited)
 
 
Note 2 — Significant Accounting Policies – (continued)
 
Effective November 1, 2008, the first day of the Trust’s fiscal year 2009, the Trust adopted the authoritative guidance for fair value measurements and the fair value option for financial assets and financial liabilities. The guidance for the fair value option for financial assets and financial liabilities provides the Trust the irrevocable option to measure many financial assets and liabilities at fair value with changes in fair value recognized in earnings. The guidance also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. The guidance establishes three levels of inputs that may be used to measure fair value:
 
•  Level 1— quoted prices in active markets for identical investments
 
•  Level 2— other significant observable inputs (including, but not limited to, quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)
 
•  Level 3— significant unobservable inputs (including the Trust’s own assumptions in determining the fair value of investments)
 
Investments that use Level 2 or Level 3 inputs may include, but are not limited to: (i) an unlisted security related to corporate actions; (ii) a restricted security (e.g., one that may not be publicly sold without registration under the Securities Act of 1933, as amended); (iii) a security whose trading has been suspended or which has been de-listed from its primary trading exchange; (iv) a security that is thinly traded; (v) a security in default or bankruptcy proceedings for which there is no current market quotation; (vi) a security affected by currency controls or restrictions; and (vii) a security affected by a significant event (e.g., an event that occurs after the close of the markets on which the security is traded but before the time as of which the Trust’s net assets are computed and that may materially affect the value of the Trust’s investments). Examples of events that may be “significant events” are government actions, natural disasters, armed conflict, acts of terrorism, and significant market fluctuations.
 
Fair value pricing could result in a difference between the prices used to calculate the Trust’s net asset value and the prices used by the DJIA, which, in turn, could result in a difference between the Trust’s performance and the performance of the DJIA. The inputs or methodology used for valuation are not necessarily an indication of the risk associated with investing in those investments. The type of inputs used to value each security is identified in the schedule of investments, which also includes a breakdown of the Trust’s investment by industry.
 
Subsequent Events
Management has determined there are no subsequent events or transactions that would have materially impacted the Trust’s financial statements as presented.
 
Investment Risk
The Trust invests in various investments which are exposed to risks, such as market risk. Due to the level of risk associated with certain investments it is at least reasonably possible that changes in the values of investment


8

 

SPDR Dow Jones Industrial Average ETF Trust
Notes to Financial Statements — (continued)
April 30, 2010 (Unaudited)
 
 
Note 2 — Significant Accounting Policies – (continued)
 
securities will occur in the near term and that such changes could materially affect the amounts reported in the financial statements.
 
An investment in the Trust involves risks similar to those of investing in any fund of equity securities, such as market fluctuations caused by such factors as economic and political developments, changes in interest rates and perceived trends in stock prices. The value of a Unit will decline, more or less, in correlation with any decline in value of the DJIA. The values of equity securities could decline generally or could underperform other investments. Generally, the Trust would not sell an equity security because the security’s issuer was in financial trouble unless that security is removed from the DJIA.
 
Investment Transactions
Investment transactions are recorded on the trade date. Realized gains and losses from the sale or disposition of securities are recorded on the identified cost basis. Dividend income is recorded on the ex-dividend date.
 
Distributions to Unitholders
The Trust declares and distributes dividends from net investment income to its unitholders monthly. The Trust declares and distributes net realized capital gains, if any, at least annually.
 
Effective October 30, 2009 the Trust’s Dividend Reinvestment Service is no longer available. Broker-dealers, at their own discretion, may offer a dividend reinvestment service under which additional Units are purchased in the secondary market at current market prices. Investors should consult their broker-dealer for further information regarding any dividend reinvestment service offered by such broker-dealer.
 
Equalization
The Trust follows the accounting practice known as “Equalization” by which a portion of the proceeds from sales and costs of reacquiring the Trust’s Units, equivalent on a per Unit basis to the amount of distributable net investment income on the date of the transaction, is credited or charged to undistributed net investment income. As a result, undistributed net investment income per Unit is unaffected by sales or reacquisitions of the Trust’s Units.
 
Federal Income Tax
The Trust has qualified and intends to continue to qualify as a “regulated investment company” under Subchapter M of the Internal Revenue Code of 1986, as amended. By so qualifying and electing, the Trust will not be subject to federal income taxes to the extent it distributes its taxable income, including any net realized capital gains, for each fiscal year. In addition, by distributing during each calendar year substantially all of its net investment income and capital gains, if any, the Trust will not be subject to federal excise tax. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from those determined in accordance with U.S. generally accepted accounting principles. These differences are primarily due to differing treatments for income equalization, in-kind transactions and losses deferred due to wash sales. Net investment income per unit calculations in the financial highlights for all years presented exclude these differences.


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SPDR Dow Jones Industrial Average ETF Trust
Notes to Financial Statements — (continued)
April 30, 2010 (Unaudited)
 
 
Note 2 — Significant Accounting Policies – (continued)
 
The Trust has reviewed the tax positions for the open tax years as of October 31, 2009 and has determined that no provision for income tax is required in the Trusts’ Financial Statements. The Trust’s federal tax returns for the prior three fiscal years remain subject to examination by the Trust’s major tax jurisdictions, which include the United States of America and the State of New York.
 
During the six months ended April 30, 2010, the Trust reclassified $136,836,826 of non-taxable security gains realized in the in-kind redemption of Creation Units (Note 4) as an increase to paid in capital in the Statement of Assets and Liabilities. At April 30, 2010, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes. Accordingly, the cost was $10,666,304,951, gross unrealized appreciation was $73,551,217 and gross unrealized depreciation was $1,640,513,214, resulting in net unrealized depreciation of $1,566,961,997.
 
At October 31, 2009, the Trust had the following capital loss carryforwards which may be used to offset any net realized gains, expiring October 31:
 
       
2010
  $ 2,065,467
2011
    68,716,435
2012
    221,460,584
2014
    52,316
2016
    506,750,845
2017
    779,537,215
 
Note 3 — Transactions with the Trustee and Sponsor
In accordance with the Trust Agreement, the Trustee maintains the Trust’s accounting records, acts as custodian and transfer agent to the Trust, and provides administrative services, including filing of certain regulatory reports. The Trustee is also responsible for determining the composition of the portfolio of securities which must be delivered and/or received in exchange for the issuance and/or redemption of Creation Units of the Trust, and for adjusting the composition of the Trust’s portfolio from time to time to conform to changes in the composition and/or weighting structure of the DJIA. For these services, the Trustee received a fee at the following annual rates for the six months ended April 30, 2010:
 
     
Net asset value of the Trust
 
Fee as a percentage of net asset value of the Trust
 
$0 – $499,999,999
  10/100 of 1% per annum plus or minus the Adjustment Amount
$500,000,000 – $2,499,999,999
  8/100 of 1% per annum plus or minus the Adjustment Amount
$2,500,000,000 – and above
  6/100 of 1% per annum plus or minus the Adjustment Amount
 
The Adjustment Amount is the sum of (a) the excess or deficiency of transaction fees received by the Trustee, less the expenses incurred in processing orders for creation and redemption of units and (b) the amounts earned by the Trustee with respect to the cash held by the Trustee for the benefit of the Trust. During the six months ended


10

 

SPDR Dow Jones Industrial Average ETF Trust
Notes to Financial Statements — (continued)
April 30, 2010 (Unaudited)
 
 
Note 3 — Transactions with the Trustee and Sponsor – (continued)
 
April 30, 2010, the Adjustment Amount reduced the Trustee’s fee by $202,893. The Adjustment Amount included an excess of net transaction fees from processing orders of $193,832 and a Trustee earning credit of $9,061. Prior to 2008, the Trustee earnings credits were presented separately on the Statement of Operations.
 
Effective November 1, 2006, the Trustee changed the method of computing the Adjustment Amount to the Trustee Fee such that all income earned with respect to cash held for the benefit of the Trust is credited against the Trustee’s Fee. In addition during the period from December 1, 2006 through December 31, 2006, the Trustee applied incremental cash balance credits of $374,030 which is included in the Trustee earnings credit of $965,742.
 
The Sponsor, a wholly-owned subsidiary of NYSE Euronext, agreed to reimburse the Trust for, or assume, the ordinary operating expenses of the Trust which exceeded 18.00/100 of 1% per annum of the daily net asset value of the Trust. There were no such reimbursements by the Sponsor for the six months ended April 30, 2010, and the fiscal years ended October 31, 2009, October 31, 2008, and October 31, 2007.
 
Dow Jones & Company, Inc. (“Dow Jones”) and State Street Global Markets, LLC (“SSGM”) have entered into a License Agreement. The License Agreement grants SSGM, an affiliate of the Trustee, a license to use the DJIA as a basis for determining the composition of the Portfolio and to use certain trade names and trademarks of Dow Jones in connection with the Portfolio. The Trustee on behalf of the Trust, the Sponsor and NYSE Arca, Inc. have each received a sublicense from SSGM for the use of the DJIA and such trade names and trademarks in connection with their rights and duties with respect to the Trust. The License Agreement may be amended without the consent of any of the owners of beneficial interest of Units. Currently, the License Agreement is scheduled to terminate on December 31, 2017, but its term may be extended without the consent of any of the owners of beneficial interests of Units. Pursuant to such arrangements and in accordance with the Trust Agreement, the Trust reimburses the Sponsor for payment of fees under the License Agreement to Dow Jones equal to 0.05% on the first $1 billion of the then rolling average asset balance, and 0.04% on any excess rolling average asset balance over and above $1 billion. The minimum annual fee for the Trust is $1 million.
 
The Sponsor has entered into an agreement with SSGM (the “Marketing Agent”) pursuant to which the Marketing Agent has agreed to market and promote the Trust. The Marketing Agent is reimbursed by the Sponsor for the expenses it incurs for providing such services out of amounts that the Trust reimburses the Sponsor. Expenses incurred by the Marketing Agent include but are not limited to: printing and distribution of marketing materials describing the Trust, associated legal, consulting, advertising and marketing costs and other out-of-pocket expenses.
 
Note 4 — Shareholder Transactions
Units are issued and redeemed by the Trust only in Creation Unit size aggregations of 50,000 Units. Such transactions are only permitted on an in-kind basis, with a separate cash payment which is equivalent to the undistributed net investment income per unit (income equalization) and a balancing cash component to equate the transaction to the net asset value per Unit of the Trust on the transaction date. A transaction fee of $1,000 is charged in connection with each creation or redemption of Creation Units through the clearing process per participating party per day, regardless of the number of Creation Units created or redeemed. In the case of creations and redemptions outside of the clearing process, the Transaction Fee plus an additional amount not to exceed three (3) times the Transaction Fee applicable for one Creation Unit per Creation Unit redeemed, and such amount is


11

 

SPDR Dow Jones Industrial Average ETF Trust
Notes to Financial Statements — (continued)
April 30, 2010 (Unaudited)
 
 
Note 4 — Shareholder Transactions – (continued)
 
deducted from the amount delivered to the redeemer. Transaction fees are received by the Trustee and used to defray the expense of processing orders.
 
Note 5 — Investment Transactions
For the six months ended April 30, 2010, the Trust had net in-kind contributions, net in-kind redemptions, purchases and sales of investment securities of $6,074,887,714, $5,323,942,481, $0 and $0 respectively. Net realized gain (loss) on investment transactions in the Statement of Operations includes net gains resulting from in-kind transactions of $136,836,826.


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SPDR Dow Jones Industrial Average ETF Trust
Other Information
April 30, 2010 (Unaudited)
 
Comparison of Total Returns Based on NAV and Bid/Ask Price (1)
The table below is provided to compare the Trust’s total pre-tax returns at NAV with the total pre-tax returns based on bid/ask price and the performance of the DJIA. Past performance is not necessarily an indication of how the Trust will perform in the future.
 
 
Cumulative Total Return
 
                         
    1 Year     5 Year     10 Year  
 
SPDR DJIA Trust
                       
Return Based on NAV
    38.37 %     22.18 %     27.32 %
Return Based on Bid/Ask Price
    38.39 %     22.31 %     27.12 %
DJIA
    38.69 %     23.10 %     29.14 %
 
Average Annual Total Return
 
                         
    1 Year     5 Year     10 Year  
 
SPDR DJIA Trust
                       
Return Based on NAV
    38.37 %     4.09 %     2.44 %
Return Based on Bid/Ask Price
    38.39 %     4.11 %     2.43 %
DJIA
    38.69 %     4.24 %     2.59 %
 
 
(1)  The Bid/Ask Price is the midpoint of the Consolidated Bid/Ask price at the time the Trust’s NAV is calculated. From April 3, 2001 to November 28, 2008, the Bid/Ask price was the Bid/Ask price on the NYSE Amex (formerly the American Stock Exchange) at the close of trading, ordinarily 4:00 p.m. Prior to April 3, 2001, the Bid/Ask price was the Bid/Ask price at the close of trading on the American Stock Exchange, ordinarily 4:15 p.m.


13

 

SPDR Dow Jones Industrial Average ETF Trust
 
Sponsor
PDR Services LLC
c/o NYSE Euronext
11 Wall Street
New York, NY 10005
 
Trustee
State Street Bank and Trust Company
One Lincoln Street
Boston, MA 02111
 
Distributor
ALPS Distributors, Inc.
1290 Broadway, Suite 1100
Denver, CO 80203
 
Independent Registered Public Accounting Firm
PricewaterhouseCoopers LLP
125 High Street
Boston, MA 02110
 
Legal Counsel
Katten Muchin Rosenman LLP
575 Madison Avenue
New York, NY 10022