1
File No. 333-_________
As filed with the Securities and Exchange Commission
on August 7, 1998
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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:
NASDAQ GOLD(sm) TRUST, SERIES l
B. Name of Depositor (Sponsor):
INVESTMENT PRODUCT SERVICES, INC.
C. Complete address of Sponsor's principal executive offices:
INVESTMENT PRODUCT SERVICES, INC.
c/o THE NASDAQ STOCK MARKET, INC.
1735 K Street, N.W.
Washington, D.C. 20006
D. Name and complete address of agent for service:
John L. Jacobs
INVESTMENT PRODUCT SERVICES, INC.
c/o THE NASDAQ STOCK MARKET, INC.
1735 K Street, N.W.
Washington, D.C. 20006
Copy to:
David M. Mahle
JONES, DAY, REAVIS & POGUE
599 Lexington Avenue, 32nd Floor
New York, New York 10022
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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. Approximate date of proposed sale to public:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THE REGISTRATION
STATEMENT.
[ ] Check box if it is proposed that this filing will become effective on
(date) at (time) pursuant to Rule 487.
The Registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933, as amended, or until this
Registration Statement shall become effective on such date as the Securities and
Exchange Commission, acting pursuant to said Section 8(a), may determine.
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NASDAQ GOLD(sm) 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)
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
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I. Organization and General Information
---------------------------------------
l. (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 sponsor........................................................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; The Trust;
Administration of the Trust -
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.....................................................................*
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* Not applicable, answer negative or not required.
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II. General Description of the Trust and Securities of the Trust
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10. (a) Registered or bearer securities................................................The Trust - Book-Entry-Only
System
(b) Cumulative or distributive.....................................................Prospectus Summary -
Distributions
(c) Rights of holders as to withdrawal or redemption...............................Prospectus Summary -
Redemption; Redemption of
Nasdaq GOLD;
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 of Nasdaq
GOLD
(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 sponsor and trustee.......................................Resignation, Removal and
Liability - The Trustee; - The
Sponsor
(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
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* Not applicable, answer negative or not required.
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(3) Provisions of Trust Agreement.........................................Same as set forth in 10(h)(2)
(4) Identity of sponsor and trustee ......................................Resignation, Removal and
Liability - The Sponsor; - The
Trustee
(i) Other principal features of the securities.....................................Prospectus Summary
11. Type of securities comprising units.....................................................The Prospectus - Front
Cover; Prospectus Summary -
The Trust; The Portfolio; The
Index
12. Certain information regarding securities comprising
periodic payment certificates...........................................................*
13. (a) Certain information regarding loads, fees, expenses
and charges....................................................................Expenses of the Trust;
Redemption of Nasdaq
GOLD - Procedure for
Redemption of Nasdaq
GOLD
(b) Certain information regarding periodic payment
plan certificates..............................................................*
(c) Certain percentages............................................................Expenses of the Trust; The
Trust - Creation of Creation
Units; Redemption of Nasdaq
GOLD - Procedure for
Redemption of Nasdaq
GOLD
(d) Reasons for certain differences in price.......................................*
(e) Certain other loads, fees or charges payable by
holders........................................................................Prospectus Summary -
Transaction Fee; The Trust -
Creation of Creation Units;
Redemption of Nasdaq
GOLD - Procedure for
Redemptions of Nasdaq
GOLD
(f) Certain profits receivable by sponsor, principal
underwriters, custodian, trustee or affiliated persons.........................Same as set forth in 13(a) and
also The Portfolio -
Adjustments to the Portfolio;
License Agreement
(g) Ratio of annual charges and deductions to income...............................*
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* Not applicable, answer negative or not required.
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14. Issuance of Trust's securities..........................................................The Trust - Creation of
Creation Units; - Book-Entry-
Only System
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; Redemption of
Nasdaq GOLD - Procedure
for Redemption of Nasdaq
GOLD
17. (a) Withdrawal or redemption by holders............................................Administration of the Trust -
Register of Ownership and
Transfer; - Rights of
Beneficial Owners;
Redemption of Nasdaq
GOLD
(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 distributions..................................................Dividend Reinvestment
Service
(c) Reserves or special funds......................................................Same as set forth in 18(a)
(d) Schedule of distributions......................................................*
19. Records, accounts and reports...........................................................Administration of the Trust -
Records; - Distributions to
Beneficial Owners; -
Statements to Beneficial
Owners; - Register of
Ownership and Transfer
20. Certain miscellaneous provisions of Trust Agreement
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* Not applicable, answer negative or not required.
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(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 sponsor..............................................Resignation, Removal and
Liability - The Sponsor
(f) Successor sponsor..............................................................Same as set forth in 20(c) and
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 Sponsor
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25. Organization of sponsor.................................................................Sponsor
26. Fees received by sponsor................................................................License Agreement
27. Business of sponsor.....................................................................Sponsor
28. Certain information as to officials and affiliated persons
of sponsor..............................................................................Sponsor
29. Ownership of voting securities of sponsor...............................................Sponsor
30. Persons controlling sponsor.............................................................*
31. Renumeration of officers of sponsor to Trust............................................*
32. Renumeration of directors of sponsor....................................................*
33. Remuneration of employees of sponsor for certain
services rendered to Trust..............................................................*
34. Compensation of other persons for certain services
rendered to Trust.......................................................................*
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* Not applicable, answer negative or not required.
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IV. Distribution and Redemption of Securities
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35. Distribution of Trust's securities in states............................................Distribution of Nasdaq
GOLD; Continuous offering
of Nasdaq GOLD
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;
Marketplace Listing;
Continuous Offering of
Nasdaq GOLD
(b) Underwriting agreements........................................................Prospectus Summary -
Underwriting; - Distribution;
Continuous Offering of
Nasdaq GOLD; The Trust -
Placement of Creation Orders
using the Nasdaq GOLD
Clearing Process
(c) Selling agreements.............................................................Same as set forth in 38(b)
39. (a) Organization of principal underwriter..........................................Prospectus Summary -
Underwriting
(b) NASD membership of principal underwriter.......................................Prospectus Summary -
Underwriting
40. Certain fees received by principal underwriters.........................................*
41. (a) Business of principal underwriters.............................................Prospectus Summary -
Underwriting
(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....................................*
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* Not applicable, answer negative or not required.
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(c) Variation in offering price to certain persons.................................*
45. Suspension of redemption rights.........................................................*
46. (a) Certain information regarding redemption or Valuation; Redemption of
withdrawal valuation...........................................................Nasdaq GOLD
(b) Schedule as to components of redemption price..................................*
47. Maintenance of position in underlying securities........................................The Trust; The Portfolio;
Valuation; Administration of
the Trust - Distributions to
Beneficial Owners;
Redemption of Nasdaq Gold;
Continuous Offering of
Nasdaq GOLD
V. Information Concerning the Trustee or Custodian
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48. Organization and regulation of trustee..................................................Trustee
49. Fees and expenses of trustee............................................................Prospectus Summary -
Transaction Fee; Expenses of
the Trust
50. Trustee's lien..........................................................................Expenses of the Trust;
Redemption of Nasdaq
GOLD
VI. Information Concerning Insurance of Holders of Securities
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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..........................................................*
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* Not applicable, answer negative or not required.
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VII. Policy of Registrant
--------------------------
52. (a) Method of selecting and eliminating securities from
the Trust......................................................................The Trust - Creation of
Creation Units; The
Portfolio; Administration of
the Trust; Redemption of
Nasdaq GOLD - Procedure
for Redemption of Nasdaq
GOLD
(b) Elimination of securities from the Trust.......................................*
(c) Policy of Trust regarding substitution and
elimination 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(a)
VIII. Financial and Statistical Information
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54. Information regarding the Trust's last ten fiscal years.................................*
55. Certain information regarding periodic payment plan
certificates............................................................................*
56. Certain information regarding periodic payment plan
certificates............................................................................*
57. Certain information regarding periodic payment plan
certificates............................................................................*
58. Certain information regarding periodic payment plan
certificates............................................................................*
59. Financial statements (Instruction 1(c) to Form S-6).....................................*
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* Not applicable, answer negative or not required.
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THIS PROSPECTUS AND THE INFORMATION CONTAINED HEREIN IS SUBJECT TO CHANGE,
COMPLETION AND AMENDMENT WITHOUT NOTICE. NASDAQ GOLD MAY NOT BE SOLD NOR MAY AN
OFFER TO BUY BE ACCEPTED PRIOR TO THE TIME THE PROSPECTUS IS DELIVERED IN FINAL
FORM. UNDER NO CIRCUMSTANCES SHALL THIS PROSPECTUS CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY, NOR SHALL THERE BE ANY SALE OF NASDAQ
GOLD, IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION, OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OF QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH JURISDICTION.
SUBJECT TO COMPLETION, DATED AUGUST 7, 1998
PRELIMINARY PROSPECTUS
NASDAQ GOLD(SM) TRUST, SERIES 1
A UNIT INVESTMENT TRUST
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The Nasdaq GOLD Trust, Series 1 (the "Trust") was formed by Investment
Product Services, Inc., a Delaware corporation (the "Sponsor") and a
wholly-owned subsidiary of The Nasdaq Stock Market, Inc. ("Nasdaq"), 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 securities, in substantially the same weighting, as the component
securities of the Nasdaq-100 Index(R) (the "Index").* While the investment
objective of the Trust is to provide investment results that generally
correspond to the price and yield performance of the 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 share of Nasdaq
GOLD(sm) ("Nasdaq GOLD"(sm)).* The value of the Securities and, consequently,
the value of Nasdaq GOLD, will fluctuate. The minimum number of shares of
Nasdaq GOLD 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."
Nasdaq GOLD has been approved for listing on [the Nasdaq Stock Market/the
American Stock Exchange ("Amex")] subject to official notice of issuance. Once
created, Nasdaq GOLD may be traded in the secondary market on a per share of
Nasdaq GOLD basis, and need not be traded in Creation Unit size aggregations.
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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 __________, 1998
----------------------------------
NASDAQ GOLD(SM)
----------------------------------
Investors are advised to read and retain this Prospectus for future
reference.
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* The "Nasdaq-100 Index(R)", "Nasdaq-100(R)", "Nasdaq(R)", "The Nasdaq Stock
Market(R)", and "Nasdaq GOLD(sm)" are trademarks and service marks of
Nasdaq and have been licensed for use for certain purposes by Investment
Product Services, Inc. pursuant to a License Agreement with Nasdaq.
COPYRIGHT (C) 1998 by Investment Product Services, Inc.
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ESSENTIAL INFORMATION AS OF _____________, 1998+
Number of shares of Nasdaq GOLD ______________
Fractional Undivided Interest
in Trust Represented by each
share of Nasdaq GOLD 1/__________th
Trustee's Annual Fee: From 6/100 of one percent (0.06%) to 10/100 of one percent
(0.10%), based on the net asset value of the Trust.++
Estimated Ordinary Based on undertakings by the Sponsor, not to exceed 18/100 of
Operating Expenses of the Trust: one percent (0.18%) per annum of the net asset value of the Trust
(inclusive of the Trustee's annual fee) for each fiscal year up to
and including the fiscal year ending September 30, 2000.++
Dividend Payment Dates: Quarterly, on the last Business Day of April, July, October, and
January. Distributions (if any) will be of the dividends
accumulated in respect of the Securities held by the Trust net of
Trust fees and expenses. Based on historical rates of dividend
payments of the portfolio of securities comprising the Index and
estimated ordinary operating expenses of the Trust, little or no
net dividend distributions to Beneficial Owners of Nasdaq GOLD
are expected to be made.+++
Record Dates: Quarterly, on the second Business Day following the third Friday
in each of March, June, September, and December.+++
Net Asset Value per share of Nasdaq
GOLD (based on the value of the
Securities, other net assets of the
Trust, and the number of shares of
Nasdaq GOLD outstanding) $_____
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Evaluation Time: Closing time of the regular trading session on the Nasdaq
Stock Market (ordinarily 4:00 p.m. New York time).
Licensor: The Nasdaq Stock Market, Inc.
Mandatory Termination Date: The first to occur of (i) _________, 2123 or (ii) the date 20
years after the death of the last survivor of fifteen persons named
in the Trust Agreement, the oldest of whom was born in 1986 and the
youngest of whom was born in 1996.
Discretionary Termination The 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 $150,000,000 or if at any time on or after three years
following the Initial Date of Deposit the value of the
Securities held by the Trust is less than $350,000,000, as such
amount shall be adjusted for inflation.++++
- ------------------
+ The Trust Agreement became effective and the initial deposit was made on
____________, 1998 (the "Initial Date of Deposit").
++ Until further notice, the Sponsor has undertaken that on each day during
each fiscal year up to and including the fiscal year ending September 30,
2000, the ordinary operating expenses of the Trust as calculated by the
Trustee will not be permitted to exceed an amount which, on a per-annum
basis, is 0.18% of the daily net asset value of the Trust. After
September 30, 2000, the Sponsor may, in its sole discretion, discontinue
its undertaking to limit ordinary operating expenses of the Trust or
renew this undertaking for an additional period of time, and if renewed
such 0.18% level may be changed and may exceed 0.18%. See "Expenses of
the Trust."
+++ See "Administration of the Trust--Distributions to Beneficial Owners" and
"Special Considerations and Risk Factors--Little or No Expected Net
Dividend Distributions to Beneficial Owners."
++++ The Trust may also be terminated under other circumstances. See
"Administration of the Trust --Termination."
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more
detailed information appearing elsewhere in this Prospectus.
OBJECTIVES
The Sponsor 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
securities, in substantially the same weighting, as the component securities of
the Nasdaq-100 Index(R) (the "Index") in the form of a security that closely
tracks the 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
securities of the Index (the component securities of the Index are sometimes
referred to herein as "Index Securities"). There can be no assurance that this
investment objective will be met fully. For example, it may not be possible for
the Trust to replicate and maintain exactly the composition 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 also 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 shares of Nasdaq GOLD, are
subject to changes in the value of common stocks generally and to other factors.
Further, the payment, if any, of dividends (net of Trust fees and expenses) and
the maintenance of capital are subject to a number of conditions, including the
financial condition of the issuers of the Securities (see "Special
Considerations and Risk Factors").
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,
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a corporation organized under the laws of the State of New York with trust
powers (the "Trustee"), and the Sponsor dated and executed as of ___________,
1998.
DISTRIBUTOR
The Distributor for Nasdaq GOLD is ________________________, a
registered broker-dealer and a member of the National Association of Securities
Dealers, Inc. (see "Underwriting").
PORTFOLIO DEPOSITS
All orders to create Nasdaq GOLD in Creation Unit size aggregations
must be placed with the Distributor (see "Underwriting" and "The
Trust--Procedures for Creation of Creation Units"). To be eligible to place
orders with the Distributor to create Creation Unit size aggregations of Nasdaq
GOLD, an entity or person either must be (1) a "Participating Party", as
hereinafter defined or (2) a Depository Trust Company Participant (see "Book
Entry Ownership of Nasdaq GOLD"), and in each case must have executed a Nasdaq
GOLD Participant Agreement, as hereinafter defined (see "The Trust--Procedures
for Creation of Creation Units" and "The Trust--Placement of Creation Orders
Using the Nasdaq GOLD Clearing Process"). As used herein, the term
"Participating Party" means a broker-dealer or other participant in the Nasdaq
GOLD 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 Nasdaq
GOLD, the Distributor will transmit such order to the Trustee and instruct the
Trustee to initiate the book entry movement of the appropriate number of Nasdaq
GOLD to the account of the entity placing the order. Payment for orders to
create Nasdaq GOLD will be made by deposits with the Trustee of a portfolio
- -----------------------
* As of July 31, 1998, National Clearing Corporation, a wholly owned
subsidiary of the National Association of Securities Dealers, Inc.,
owns 33 1/3% of the issued and outstanding shares of common stock of
NSCC. The National Association of Securities Dealers, Inc. is also
the parent company of Nasdaq.
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of securities that is substantially similar in composition and weighting to the
Index Securities (see "The Trust--Creation of Nasdaq GOLD"), together, in
certain cases, with a cash payment in an amount which shall be equal to the
Income Net of Expense Amount (as hereinafter defined), plus or minus, as the
case may be, the Balancing Amount (as hereinafter defined). The "Income Net of
Expense Amount" is an amount equal, on a per Creation Unit basis, to the
dividends on all the Securities with ex-dividend dates within the period
beginning on the most recent ex-dividend date for Nasdaq GOLD (generally, the
third Friday in each of March, June, September, and December, see
"--Distributions") through and including the current Business Day (the
"Accumulation Period") as if all of the Securities had been held for such
period, net of accrued expenses and liabilities for such period not previously
deducted (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")). The "Balancing Amount" serves the function of compensating for any
differences between the value of the portfolio of securities deposited with the
Trustee in connection with a creation of Nasdaq GOLD and the net asset value of
the Trust on a per Creation Unit basis (see "The Portfolio--Adjustments to the
Portfolio Deposit" for a further description thereof).
The Income Net of Expense Amount 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 an order to create Nasdaq
GOLD on any given day, the Cash Component of the Portfolio Deposit may be
payable either by the Trustee on behalf of the Trust to the creator of Nasdaq
GOLD or by the creator of Nasdaq GOLD to the Trustee on behalf of the Trust,
depending upon the respective amounts of the Income Net of Expense Amount and
the Balancing Amount. For example, if the sum of dividends
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on all Securities with ex-dividend dates within the Accumulation Period, plus
or minus the Balancing Amount, exceeds the accrued expenses and liabilities of
the Trust for such period (i.e., the Cash Component has a positive value), then
the creator of Nasdaq GOLD will be obligated to pay such amount to the Trustee
on behalf of the Trust in connection with an order to create Nasdaq GOLD.
Conversely, if the sum of dividends on all Securities with ex-dividend dates
within the Accumulation Period, plus or minus the Balancing Amount, is less
than the accrued expenses and liabilities of the Trust for such period (i.e.,
the Cash Component has a negative value), then the Trustee on behalf of the
Trust will pay such Cash Component to the entity placing an order to create
Nasdaq GOLD.
All matters as to the number of shares of each of the Index Securities
and the amount of the Cash Component comprising the Portfolio Deposit shall be
determined by the Trustee in its discretion, whose determination shall be final
and binding. In certain instances, the securities portion of the Portfolio
Deposit may differ in composition and weighting relative to the composition and
weighting of the securities in the Index. For example, in connection with the
creation of Nasdaq GOLD, in the event that the Trustee determines, in its
discretion, that one or more Index Securities are likely to be unavailable for
delivery or available in insufficient quantity for delivery to the Trust upon
the creation of Nasdaq GOLD 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 in the calculation 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--Adjustments to the Portfolio
Deposit").
Similarly, in connection with the creation of Nasdaq GOLD, 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
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such Index Security or Index Securities as of the Evaluation Time on the date
such creation order is deemed received by the Distributor, in the calculation
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
the creator will pay the Trustee the standard Transaction Fee described below,
plus an additional amount per Creation Unit not to exceed three (3) times the
Transaction Fee applicable for one Creation Unit.
An entity or person placing creation orders with the Distributor must
either (i) initiate instructions pertaining to Portfolio Deposits through the
CNS clearing processes of NSCC, as such processes have been enhanced to effect
creations and redemption of Creation Unit size aggregations of Nasdaq GOLD,
such processes being referred to herein as the "Nasdaq GOLD Clearing Process",
or (ii) deposit Portfolio Deposits with the Trustee outside the Nasdaq GOLD
Clearing Process (i.e., through the facilities of The Depository Trust
Company).
TRANSACTION FEE
A transaction fee is payable to the Trustee in connection with each
creation and each redemption made through the Nasdaq GOLD Clearing Process of
Creation Unit size aggregations of Nasdaq GOLD (the "Transaction Fee"), subject
to the changes, modifications or waivers, if any, described below. Such
Transaction Fee is non-refundable, regardless of the net asset value of the
Trust.
Until further notice is given as described below, the Transaction Fee
charged in connection with each creation of Creation Units through the Nasdaq
GOLD Clearing Process (see "The Trust--Procedures for Creation of Creation
Units") is $1,000 per Participating Party per day, regardless of the number of
Creation Units created on such day by such Participating Party. Likewise, until
further notice is given as described below, the Transaction Fee charged in
connection with the redemption of Creation Units through the Nasdaq GOLD
Clearing Process is $1,000 per
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Participating Party per day, regardless of the number of Creation Units
redeemed on such day by such Participating Party. This Transaction Fee may
subsequently be changed by the Trustee, upon the advice of the Sponsor in its
sole discretion, but will not in any event exceed 10/100 of one percent (10
basis points) of the value of a Creation Unit at the time of creation or
redemption as the case may be (the "10 Basis Point Limit").* No modifications
to, or reductions, discounts or waivers of, the Transaction Fee charged in
connection with the creation of Creation Units are scheduled or currently
contemplated by the Sponsor.
If Creation Units are created or redeemed outside the Nasdaq GOLD
Clearing Process, an additional amount not to exceed three (3) times the
applicable Transaction Fee will be charged to the creator or redeemer. Under the
current schedule, therefore, the total fee charged in connection with the
creation or redemption of Creation Units outside the Nasdaq GOLD Clearing
Process would be $1,000 (the Transaction Fee for the creation or redemption of a
Creation Unit) plus an additional amount not to exceed $3,000 (3 times $1,000)
for a total of $4,000.
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 creations and/or redemptions outside the
Nasdaq GOLD Clearing Process) may be increased, decreased, or otherwise modified
or waived in its entirety for certain lot-size creations and/or redemptions of
Nasdaq GOLD, or for creations and/or redemptions made under certain specified
circumstances, in each case without the consent of Beneficial Owners, subject to
certain conditions (see "The Trust--Creation of Creation Units" and "The
Trust--Procedures for Redemption of Nasdaq GOLD"). The Sponsor also reserves the
right, from time to time, to vary the lot-size of the creations and/or
redemptions of Nasdaq GOLD subject to an increase or decrease or waiver of the
Transaction Fee. Any change so made will not cause the amount of the Transaction
Fee to exceed the 10 Basis Point Limit at the time of a creation,
- -----------------------
* The amount of the Transaction Fee currently in effect will be available
from the Trustee.
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or redemption, as the case may be. Such changes or variations will be effected
by an amendment to the current Trust prospectus. The amount of the Transaction
Fee in effect at any given time will be available from the Trustee.
SIZE OF CREATION UNIT AGGREGATIONS OF NASDAQ GOLD
Nasdaq GOLD may be created or redeemed only in Creation Unit size
aggregations of 25,000 shares, or in multiples thereof (e.g., 50,000, 75,000,
100,000 shares of Nasdaq GOLD), and in no event will fractional Creation Units
be created or redeemed. The Sponsor reserves the right to direct the Trustee to
declare a split or reverse split in the number of shares of Nasdaq GOLD
outstanding and a corresponding change in the number of shares of Nasdaq GOLD
constituting a Creation Unit in the event that the per share of Nasdaq GOLD
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 shares of Nasdaq GOLD in a Creation Unit size
aggregation of Nasdaq GOLD would double (e.g., from 25,000 to 50,000 shares of
Nasdaq GOLD per Creation Unit).
PORTFOLIO ADJUSTMENTS
To maintain the correspondence between the composition and weighting of
Securities held in the Trust and that of the Index Securities, the composition
and weighting of the Securities are adjusted from time to time to conform to
periodic changes in the composition and weighting of the Index Securities made
by Nasdaq. The Trustee aggregates certain of these adjustments and makes
conforming changes to the Trust's portfolio at least monthly; adjustments are
made more frequently, however, in the case of changes to the Index that are
significant (see "The Portfolio--Adjustments to the Portfolio"). The composition
and weighting of the securities portion of a Portfolio Deposit are also adjusted
to conform to changes in the 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 Nasdaq Stock Market is open for
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business) on which the change to the Index takes effect. Changes to the Index
are made after the close of the market (see "The Portfolio--Adjustments to the
Portfolio Deposit").
BOOK ENTRY OWNERSHIP OF NASDAQ GOLD
The Depository Trust Company, New York, New York, a limited purpose
trust company organized under the laws of the State of New York (referred to
herein as "DTC" or the "Depository") or its nominee will be the record or
registered owner of all outstanding shares of Nasdaq GOLD. Beneficial ownership
of Nasdaq GOLD will be shown on the records of the Depository or its
participants. Certificates will not be issued for Nasdaq GOLD, whether in
Creation Unit size aggregations or otherwise (see "The Trust--Book-Entry-Only
System").
EXPENSES
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."
If the income received by the Trust in the form of dividends and other
distributions on the Securities is insufficient to cover Trust fees and expenses
(which would currently be the case if the Trust were in existence and its
ordinary operating expenses were 0.18% per annum of the net asset value of the
Trust consistent with the Sponsor's undertaking to limit the Trust's ordinary
operating expenses, see "Expenses of the Trust"), then the Trustee will be
required to sell Securities in an amount sufficient to pay the shortfall. Such a
sale of Securities will be required to occur whenever the Trustee determines
that accrued fees and expenses exceed Trust accrued income by more than 1/100 of
one percent (0.01%) of the net asset value of the Trust and will be made no
later than the next occurring adjustment to the Securities held in the Trust to
conform to changes in the composition and weighting of the Index Securities (see
"Expenses of the Trust" and "The Portfolio--Adjustments to the Portfolio").
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FEDERAL INCOME TAX CONSIDERATIONS
The Trust intends to adopt a fiscal year ending on September 30 of each
year. 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 quarterly
distributions, if any, made by the Trust will be based on the dividend
performance of the Securities held during such quarterly distribution period,
net of Trust fees and expenses, rather than the actual taxable income of the
Trust. (See "Administration of the Trust--Distributions to Beneficial Owners.")
As a result, a portion of any such 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 Nasdaq GOLD,
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
Nasdaq GOLD is permitted by the documents and instruments governing the Plan and
whether the investment satisfies the exclusive benefit, prudence, and
diversification requirements of ERISA.
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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 transactions rules of ERISA and
Section 4975 of the Code will not apply to transactions involving the Trust's
assets while Nasdaq GOLD is 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 Nasdaq GOLD.
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 Nasdaq
GOLD represents 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 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 Nasdaq GOLD by registered investment companies is
subject to the restrictions set forth in section 12(d)(l) 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 of the Securities will be adjusted,
however, to conform to changes in the composition of the Index Securities in the
manner set forth in the Trust Agreement as described herein (see "The
Portfolio--Adjustments to the Portfolio").
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DISTRIBUTIONS
Distributions by the Trust will be made quarterly to the extent that
dividends accumulated in respect of the Securities and other income, if any,
received by the Trust exceed Trust fees and expenses accrued during the
quarterly Accumulation Period which ends on the Business Day preceding each
ex-dividend date for Nasdaq GOLD. The regular quarterly ex-dividend date with
respect to net dividends, if any, for Nasdaq GOLD 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"). (See "Administration of the
Trust--Distributions to Beneficial Owners.")
At present, and possibly for extended periods of time during the life
of the Trust, the expenses of the Trust may be as great as or in excess of the
dividend and other income to be received by the Trust during any quarter and,
under such circumstances, no quarterly net dividend distributions would be made
(see "Special Consideration and Risk Factors--Little or No Expected Net Dividend
Distributions to Beneficial Owners"). Distributions (if any) will be made on
Dividend Payment Dates to Beneficial Owners via the Depository and its
participants (see "The Trust--Book-Entry-Only System"). For federal income tax
purposes, a portion of any net dividend distributions may result in a return of
capital to Beneficial Owners of Nasdaq GOLD (see "Tax Status of the Trust").
Any net capital gains recognized by the Trust in any taxable year will
be distributed at least annually. The Trust may make additional distributions
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 income distributions, if
any, are currently planned to be made on a quarterly basis, the Trustee reserves
the right to vary the frequency of distributions (see "Administration of the
Trust--Distributions to Beneficial Owners").
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REDEMPTION
Nasdaq GOLD in Creation Unit size aggregations is ordinarily redeemable
in kind only and is not redeemable for cash except under certain circumstances
(see "Redemption of Nasdaq GOLD"). Nasdaq GOLD can be redeemed only in Creation
Unit size aggregations effected by a Participating Party (with respect to
redemptions through the Nasdaq GOLD Clearing Process) or a DTC Participant (with
respect to redemptions outside the Nasdaq GOLD Clearing Process), in either case
which has executed a Nasdaq GOLD Participant Agreement (see "Redemption of
Nasdaq GOLD--Procedure for Redemption of Nasdaq GOLD"). Individual shares of
Nasdaq GOLD 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, Nasdaq GOLD owners may aggregate
individual shares of Nasdaq GOLD to Creation Unit size or multiples thereof
(e.g., 25,000, 50,000 shares, etc.) and request that the Trustee redeem the
Nasdaq GOLD so aggregated. There can be no assurance, however, that there will
always be sufficient depth and liquidity in the public trading market to
complete all such transactions (see "Special Considerations and Risk Factors").
Owners of Nasdaq GOLD in less than Creation Unit size aggregations may have to
pay brokerage fees and commissions to acquire sufficient Nasdaq GOLD (i.e.,
25,000 shares) to constitute a Creation Unit. Persons redeeming Nasdaq GOLD in
Creation Unit size aggregations may also be entitled to receive, or be required
to pay, a Cash Redemption Amount (as hereinafter defined, see "Redemption of
Nasdaq GOLD--Procedure for Redemption of Nasdaq GOLD"). On any given Business
Day, the Cash Redemption Amount will be an amount typically identical to the
Cash Component of a Portfolio Deposit.
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 Nasdaq
GOLD in Creation Unit size aggregations, then the Trustee shall have the right
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in its discretion to include 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 "Redemption of Nasdaq GOLD"), in the calculation of
the Cash Redemption Amount in lieu of delivering the Index Security or Index
Securities to the redeeming investor.
Similarly, in connection with the redemption of Nasdaq GOLD, if a
redeeming investor requests redemption in cash, rather than in kind, with
respect to one or more Index Securities (for example, because a redeeming
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 include 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 the Nasdaq
GOLD Clearing Process"), in the calculation of the Cash Redemption Amount in
lieu of delivering such Index Security or Index Securities to the redeeming
investor. In all such cases, such investor will pay the Trustee the standard
Transaction Fee, plus an additional amount not to exceed three (3) times the
Transaction Fee applicable for a Creation Unit.
The Trustee, in its discretion, upon the request of a redeeming
investor, may redeem Creation Units in whole or in part by providing such
redeeming investor with a Portfolio Deposit differing in composition, but not
differing in net asset value, from the then-current Portfolio Deposit. Such a
redemption might be made if it were determined to be appropriate in order to
maintain the Trust Portfolio's correspondence to the composition and weighting
of the Index when a change to the composition and/or weighting of the Index
Securities occurs (see "The Portfolio", "The Index", and "The Index--Rebalancing
of the Index").
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The Transaction Fee will be charged in connection with the redemption
of Creation Unit size aggregations of Nasdaq GOLD. If a request for redemption
is made directly to the Trustee outside the Nasdaq GOLD Clearing Process, an
additional amount not to exceed three (3) times the Transaction Fee applicable
for a Creation Unit will be charged to the redeemer due to the increased expense
associated with delivery outside the Nasdaq GOLD Clearing Process (see
"Transaction Fee").
TERMINATION
The Trust will terminate by its terms on the first to occur of: (i) the
date one hundred twenty-five (125) years from the Initial Date of Deposit (i.e.,
__________, 2123) or (ii) the date twenty (20) years after the death of the last
survivor of fifteen persons named in the Trust Agreement, the oldest of whom was
born in 1986 and the youngest of whom was born in 1996 (the "Mandatory
Termination Date"). The Trust may also be terminated earlier upon the agreement
of the Beneficial Owners of 66 2/3% of the then outstanding shares of Nasdaq
GOLD and will be terminated in the event that Nasdaq GOLD is delisted from the
[Nasdaq Stock Market/Amex] and is not subsequently relisted on a national
securities exchange or a quotation medium operated by a national securities
association (see "Marketplace Listing"). The Sponsor will also have the
discretionary right to direct the Trustee to terminate the Trust if at anytime
after six months following and prior to three years following the Initial Date
of Deposit the net asset value of the Trust falls below $150,000,000 and if on
or after three years following the Initial Date of Deposit the net asset value
of the Trust is less than $350,000,000, 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
- ---------------------------
* 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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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 month preceding the month in which such
adjustment is made. The Trustee shall 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 Nasdaq GOLD, or if the Trustee is no
longer a member of NSCC; (d) Nasdaq ceases publishing the Index; or (e) the
License Agreement (as hereinafter defined) is terminated. The License Agreement
currently is scheduled to terminate five years from the commencement date of
trading of Nasdaq GOLD, subject to a five-year renewal period following such
date (see "License Agreement"). The Trust shall also terminate if the Trustee
resigns or becomes incapable of discharging its duties and a successor is not
appointed (see "Administration of the Trust Termination").
UNDERWRITING
________________________________ (the "Distributor") acts as
underwriter of Nasdaq GOLD on an agency basis. All orders to create Nasdaq GOLD
in Creation Unit size aggregations must be placed with the Distributor, and it
is 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 will reject any order which is
not submitted in proper form. Upon acceptance of an order to create Nasdaq GOLD,
the Distributor will instruct the Trustee to initiate the book-entry movement of
the appropriate number of shares of Nasdaq GOLD to the account of the entity
placing the order. The Distributor is also responsible for delivering a
prospectus to those persons creating Nasdaq GOLD. The Distributor also maintains
records of both the orders placed with it for the creation of Nasdaq GOLD and
the confirmations of acceptance issued by it.
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In addition, the Distributor maintains a record of the instructions given to
implement delivery of Nasdaq GOLD 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 under the laws of the State of _________ and is located at
____________________________________________. The Distributor is a registered
broker-dealer and a member of the National Association of Securities Dealers,
Inc. The Sponsor pays the Distributor for its services a flat annual fee. The
Sponsor will not seek reimbursement for such payment from the Trust without
obtaining prior exemptive relief from the 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, the value of common stocks
generally, and other factors. The composition and weighting of the Index
Securities and hence the composition and weighting of the Securities held in the
Trust also change from time to time (see "The Portfolio--Adjustments to the
Portfolio", "The Portfolio--Selection and Acquisition of Securities", and "The
Index--Rebalancing of the Index"). 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 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 Nasdaq GOLD). 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
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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 securities held by the Trust will not be
disposed of as a result of or in anticipation of normal fluctuations in the
market.
Holders of common stocks of any given issuer incur more risk than
holders of preferred stocks and debt obligations of such issuer because common
stockholders, as owners of such issuer, have generally inferior rights to
receive payments from such issuer in comparison with the rights of creditors of,
or holders of debt obligations or preferred stocks issued by, such 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 may therefore 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").
All of the Securities are currently listed on the Nasdaq Stock Market.
The existence of a liquid trading market for certain Securities may depend on
whether dealers will make a market in such Securities. There can be no assurance
that a market will be made 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 will not be able to replicate exactly the performance of the
Index because the total return generated by the
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Securities will be reduced by transaction costs incurred in adjusting the actual
balance of the Securities and other Trust expenses, whereas such transaction
costs and expenses are not included in the calculation of the Index. It is also
possible that for a short period of time, the Trust may not fully replicate the
performance of the Index due to the temporary unavailability of certain Index
Securities in the secondary market or due to other extraordinary circumstances.
Such events are unlikely to continue for an extended period of time, because the
Trustee is required to correct such imbalances by means of adjusting the
composition of Portfolio Securities (see "The Portfolio--Adjustments to the
Portfolio"). It is also possible that the composition of the Trust may not
exactly replicate the composition of the Index if the Trust has to adjust its
Portfolio holdings in order to continue to qualify as a "regulated investment
company" under the Code (see "Tax Status of the Trust").
Neither the Depository nor Beneficial Owners of Nasdaq GOLD 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 has
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 Nasdaq GOLD in connection with creation and redemption
activity within the Nasdaq GOLD Clearing Process as set forth herein are based
on NSCC's current "regular way" settlement period of three (3) days during which
NSCC is open for business (each such day an "NSCC Business Day"). NSCC may, in
the future, reduce or increase such "regular way" settlement period, in which
case it is anticipated that there would be a corresponding reduction or increase
in settlement periods applicable to Nasdaq GOLD 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.
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LITTLE OR NO EXPECTED NET DIVIDEND DISTRIBUTIONS TO BENEFICIAL OWNERS
The Trust Agreement provides for quarterly distributions to Beneficial
Owners via the Depository and its participants (see "The Trust--Book-Entry-Only
System") on Dividend Payment Dates in the event that dividends accumulated in
respect of the Securities and other income, if any, received by the Trust exceed
Trust fees and expenses accrued during the quarterly Accumulation Period which
ends on the Business Day preceding each Ex-Dividend Date (see "Administration of
the Trust--Distributions to Beneficial Owners"). Historically, the portfolio of
securities comprising the Index has paid relatively low dividends when compared
to the securities comprising other broad-based stock indices. For example, for
the 1995, 1996, and 1997 calendar years, the ratio of the aggregate dividends
paid to total capitalization for the securities comprising the Index in those
periods was 0.26%, 0.11%, and 0.13%, respectively. In comparison, the comparable
dividend ratio for the securities comprising the Standard & Poor's 500 Index (R)
in those periods was 2.24%, 2.01%, and 1.60%, respectively. (See "The Index" for
the historical aggregate dividend yields of the securities comprising the
Index.)
The Sponsor has undertaken that on each day during each fiscal year up
to and including the fiscal year ending September 30, 2000, the ordinary
operating expenses of the Trust will not be permitted to exceed an amount which
is 18/100 of one percent (0.18%) per annum of the daily net asset value of the
Trust (see "Expenses of the Trust"). Notwithstanding such limitation on Trust
expenses, the fees and expenses of the Trust may exceed the dividend and other
income on the Securities received by the Trust during each quarter. In such
event, no net dividend distributions would be made by the Trust. Based on the
1997 dividend yield noted above of the securities comprising the Index in that
year, no net dividend distributions would have been made by Trust if it were in
existence during the 1997 calendar year and if ordinary operating expenses were
0.18% per
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annum of the net asset value of the Trust consistent with the Sponsor's
undertaking to limit the Trust's ordinary operating expenses.
Moreover, after September 30, 2000, the Sponsor may, in its sole
discretion, discontinue its undertaking to limit ordinary operating expenses of
the Trust, or may renew this undertaking for an additional period of time but at
a different level which may be higher than 0.18%. In such event, the likelihood
may increase that expenses of the Trust would exceed the dividend and other
income received by the Trust during each quarter. The Trust will pay any such
excess expenses with the proceeds realized from the sale of Securities effected
whenever the Trustee determines that accrued fees and expenses exceed Trust
accrued income by more than 1/100 of one percent (0.01%) of the net asset value
of the Trust (see "Expenses of the Trust"). Such a sale of Securities will be
required to occur no later than the next occurring adjustment to the Securities
held in the Trust to conform to changes in the composition and weighting of the
Index Securities (see "The Portfolio--Adjustments to the Portfolio").
Dividend payment rates of the securities comprising the Index may
change based on numerous factors, including the financial condition of the
issuers and general economic conditions, as well as from changes to the price
level of Index Securities, and from changes to the composition of Index
Securities (i.e., the substitution of one security in the Index with another
paying higher or lower dividends than the security being replaced). (See "The
Index" for a discussion of the selection criteria for determining the Index
Securities.) In addition, the Trust has no operating history by which to measure
Trust expenses and although the amounts of certain ordinary Trust expenses can
be estimated, the growth rate of the Trust, which cannot be anticipated, will
directly affect the level of Trust expenses as a percentage of the Trust's net
asset value (i.e., as the Trust grows in net asset value, certain relatively
fixed Trust expenses will be borne by a greater number of holders of Nasdaq
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GOLD). Accordingly, no assurances can be given as to the actual level of
dividends payable by the issuers of the Securities or the actual level of Trust
expenses, and no representations are being made as to the level of net dividend
distributions, if any, that may be payable by the Trust.
NET ASSET VALUE AND MARKET PRICES
The Trust's assets consist primarily of the Securities. Therefore, the
net asset value of Nasdaq GOLD in Creation Unit size aggregations and,
proportionately, the net asset value per share of Nasdaq GOLD changes as
fluctuations occur in the market value of the Securities. Investors should also
be aware that the aggregate public trading market price of 25,000 shares of
Nasdaq GOLD may be different from the net asset value of a Creation Unit
aggregation of Nasdaq GOLD (i.e., 25,000 shares of Nasdaq GOLD 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 share of Nasdaq GOLD may be
different from the net asset value of a Creation Unit on a per share of Nasdaq
GOLD basis (see " --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 Nasdaq GOLD will be closely related to, but not identical to, the
same forces influencing the prices of the Index component securities trading
individually or in the aggregate at any point in time. The expenses of the Trust
are reflected in the net asset value of Nasdaq GOLD in Creation Unit size
aggregations and the expenses of the Trust are accrued daily (see "Expenses of
the Trust").
TRADING CONSIDERATIONS
Prior to the date of this Prospectus, there has been no market for
shares of Nasdaq GOLD 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 Nasdaq GOLD may trade.
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Further, there can be no assurance that Nasdaq GOLD will experience
trading or pricing patterns similar to those of market-traded securities which
are issued by investment companies based upon indexes other than the Index
(e.g., SPDRs(R), MidCap SPDRs(TM), DIAMONDS(sm), and WEBS(sm)).*
The Sponsor's aim in designing Nasdaq GOLD was to provide investors
with a security whose initial market value would approximate one-tenth (1/10th)
the value of the Index. Thus, for example, if the Index were at 1200, investors
might expect a share of Nasdaq GOLD to trade initially at approximately $120.
Investors should be aware, however, that the market price of a share of Nasdaq
GOLD may be affected by supply and demand, market volatility, sentiment, and
other factors. In addition, due to these factors as well as other factors
including required distributions for tax purposes (see "Tax Status of the
Trust") or the sale of Securities to meet Trust expenses in excess of the
dividends received on the Securities (see "Expenses of the Trust"), the
one-tenth (1/10th) relationship between the initial value of a share of Nasdaq
GOLD and the value of the Index is not expected to persist indefinitely.
The Sponsor does not maintain a secondary market in Nasdaq GOLD. Nasdaq
GOLD has been accepted for listing on the [Nasdaq Stock Market/Amex] subject to
official notice of issuance.** The market symbol for Nasdaq GOLD will be "____".
Trading in Nasdaq GOLD on the [Nasdaq Stock Market/Amex] may be halted due to
market conditions or, in light of [Nasdaq Stock Market/Amex] rules and
procedures, for reasons that, in the view of the [Nasdaq Stock Market/Amex],
make trading in Nasdaq GOLD inadvisable. In addition, trading in Nasdaq GOLD
- --------------------------
* SPDRs(R) and MidCap SPDRs(TM) are trademarks of the McGraw-Hill Companies,
Inc., DIAMONDS(sm) is a service mark of Dow Jones & Company, Inc., and
WEBS(sm) is a service mark of Morgan Stanley, Dean Witter, Discover & Co.
** A decision as to where shares of Nasdaq GOLD will be listed will be
made prior to the effective date of the Trust.
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on the [Nasdaq Stock Market/Amex] is subject to trading halts caused by
extraordinary market volatility pursuant to [Nasdaq Stock Market/Amex] "circuit
breaker" rules that require trading in securities on the [Nasdaq Stock
Market/Amex] to be halted for a specified time period based on a specified
market decline. There can be no assurance that the requirements of the [Nasdaq
Stock Market/Amex] necessary to maintain the listing of Nasdaq GOLD will
continue to be met or will remain unchanged. The Trust will be terminated in
the event Nasdaq GOLD is delisted from the [Nasdaq Stock Market/Amex] and is
not subsequently relisted on a national securities exchange or a quotation
medium operated by a national securities association. (For a description of the
conditions for the listing of Nasdaq GOLD and the circumstances under which the
[Nasdaq Stock Market/Amex] would consider the suspension of trading in or the
delisting of Nasdaq GOLD, see "Marketplace Listing.") Further, the Trust may be
terminated, among other reasons, in the event that the net asset value of the
Trust falls below a specified level (see "Administration of the
Trust--Termination").
MARKET RISKS
Nasdaq GOLD is subject to the risks of an investment in a broad market
portfolio of equity securities, including the risk that the general level of
stock prices may decline, thereby adversely affecting the value of such
investment. Nasdaq GOLD is also subject to the risks of an investment in a
portfolio of equity securities in economic sectors in which the Index may be
highly concentrated (e.g., technology, see "The Index") as well as to the risks
specific to the performance of a few individual component securities which
currently represent a highly concentrated weighting
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in the Index (e.g., Microsoft Corporation and Intel Corporation, see "The
Index"). These include the risks that the level of stock prices in these sectors
or the stock prices of these specific companies may decline, thereby adversely
affecting the value of Nasdaq GOLD. Furthermore, investors should be aware that
in the event that one or more stocks which currently have a highly concentrated
weighting in the Index were to leave the Nasdaq Stock Market, if a company with
a large market capitalization were to list its shares on the Nasdaq Stock
Market, or if there were a significant rebalancing of the Index (see "The Index
- -- Rebalancing of the Index"), then the composition and weighting of the Index,
and hence the composition and weighting of the Securities in the Trust, would
change significantly and the performance of Nasdaq GOLD would reflect the
performance of the new Index as reconfigured (see "The Portfolio--Adjustments to
the Portfolio").
Furthermore, due to the concentration of the Index in sectors
characterized by relatively higher volatility in price performance when compared
to other economic sectors, the performance of the Index may be more volatile
when compared to other broad based stock indices. For example, the annual
volatility of the Index for the 12 months ending June 30, 1998 was 26.1%, while
the annual volatility of the Standard & Poor's 100 Index(R) and the Standard &
Poor's 500 Index(R) for the same period was 18.4% and 17.5%, respectively. For
this reason, it is anticipated that the price volatility of Nasdaq GOLD may be
greater than the price volatility of other market-traded securities which are
issued by investment companies based upon indices other than the Index.
Nasdaq GOLD is also subject to risks other than those associated with
an investment in a broad market portfolio of equity securities in that the
selection of the securities 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 Nasdaq GOLD as compared with trading in a broad market portfolio of
equity securities. Nasdaq GOLD is 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, NSCC, or Nasdaq (as the
licensor of the Index and the Index calculator) 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.
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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 ordinarily deliver a portfolio of Securities for each
Creation Unit size aggregation of Nasdaq GOLD delivered for redemption,
identical in composition to the Securities portion of a Portfolio Deposit as in
effect on the date a request for redemption is deemed received by the Trustee
(see "Redemption of Nasdaq GOLD"). If a redemption is processed through the
Nasdaq GOLD 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 on a daily basis 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 of the Nasdaq GOLD Clearing Process that are not delivered to such
redeemer are not covered by NSCC's guarantee of completion of such delivery.
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 Nasdaq
GOLD in Creation Unit size aggregations is created and redeemed. Such
fluctuations in Trust size should not adversely impact the net asset value per
share of Nasdaq GOLD at any time because the amount of the Cash Component or the
Cash Redemption Amount upon creations or redemptions, respectively, of Nasdaq
GOLD in Creation
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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 such request is deemed received by
the Trustee (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 Nasdaq GOLD resulting from the
distribution, if any, of Trust net dividends and sales of Nasdaq GOLD, as well
as the sale of underlying Securities held by the Trust in connection with
redemptions or changes in the Index under certain circumstances (see "Tax Status
of the Trust--Tax Consequences to Beneficial Owners").
AFFILIATED RELATIONSHIPS AND TRANSACTIONS
Investors in the Trust should be aware that the Sponsor of the Trust is a
wholly-owned subsidiary of Nasdaq. Nasdaq is the proprietor of the Index as well
as the operator of the Nasdaq Stock Market, the marketplace where the Index
Securities trade and [where Nasdaq GOLD has been approved for listing] or [which
is affiliated through the National Association of Securities Dealers, Inc. with
the Amex, where Nasdaq GOLD has been approved for listing]. Under the terms of a
license agreement with Nasdaq, the Sponsor has been granted a license to use the
Index as a basis for determining the composition of the Trust and to use certain
trademarks of Nasdaq in connection with the Trust (see "License Agreement").
Under the terms of the license agreement, the Sponsor pays to Nasdaq an annual
licensing fee for use of the Index. The Sponsor ordinarily will seek
reimbursement from the Trust for the amount of licensing fees (see "Expenses of
the Trust"). However, the Sponsor has committed not to seek reimbursement from
the Trust for licensing fees to Nasdaq for the period through the Trust's fiscal
year ending September 30, 1999. Thereafter, the Sponsor intends to charge the
Trust for the annual licensing fee. The Trust is not required to pay a
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listing fee to the [Nasdaq Stock Market/Amex] in connection with the listing of
Nasdaq GOLD on the [Nasdaq Stock Market/Amex].
The Index is determined, composed, and calculated by Nasdaq without
regard to the Sponsor, the Trust, or the Beneficial Owners of Nasdaq GOLD.
Nasdaq has complete control and sole discretion in determining, composing, or
calculating the Index or in modifying in any way its method for determining,
composing, or calculating the Index in the future.
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NASDAQ GOLD TRUST, SERIES 1
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
[to be provided upon completion of audit]
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NASDAQ GOLD TRUST, SERIES 1
STATEMENT OF FINANCIAL CONDITION
OPENING OF BUSINESS, __________, 1998
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44
NASDAQ GOLD TRUST, SERIES 1
SCHEDULE OF INVESTMENTS
SECURITIES REQUIRED FOR A PORTFOLIO DEPOSIT
ON THE OPENING OF BUSINESS, __________, 1998
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45
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 equity securities or, in the case of securities not
yet delivered in connection with purchases made by the Trust or 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 via instructions submitted through the clearing processes of
NSCC, following placement with the Distributor of orders to create Nasdaq GOLD.
The Distributor shall reject any order that is not submitted in proper form. To
permit the Trustee to ensure that the process of settlement is working
satisfactorily, there shall be no further Portfolio Deposits accepted by the
Trustee for a period of three (3) Business Days following the Initial Date of
Deposit, and the Sponsor and the Trustee shall jointly announce the day
thereafter on which further Portfolio Deposits will be accepted, and trading of
Nasdaq GOLD on the [Nasdaq Stock Market/Amex] shall not commence until such
date. On or after such date, Portfolio Deposits may be deposited with the
Trustee via instructions submitted through the clearing processes of NSCC,
following placement with the Distributor of orders to create Nasdaq GOLD.
Investors may deposit Portfolio Deposits through the Nasdaq GOLD Clearing
Process or directly with the Trustee outside the Nasdaq GOLD Clearing Process.
The Transaction Fee will be
- ----------------------
* Reference is hereby made to the Trust Agreement (a copy of which is
available to prospective purchasers of Nasdaq GOLD at the corporate
trust office of the Trustee at 101 Barclay Street, New York, New York
10286 during normal business hours), and any statements contained
herein are qualified in their entirety by the provisions of the Trust
Agreement.
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charged at the time of creation of a Creation Unit size aggregation of Nasdaq
GOLD. An additional amount not to exceed three (3) times the Transaction Fee
applicable for a Creation Unit will be charged to a creator creating outside the
Nasdaq GOLD Clearing Process (i.e., depositing Portfolio Deposits directly with
the Trustee through DTC), in part due to the increased expense associated with
settlement outside the Nasdaq GOLD Clearing Process. 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, if any. The shares of the common stock of the Index
Securities in a Portfolio Deposit on the Initial Date of Deposit had an
aggregate market value of $_______________ (see "Schedule of Investments").
There will be a cash amount included in the Portfolio Deposit on the Initial
Date of Deposit in order to make the value of each share of Nasdaq GOLD equal to
1/10th of the value of the Index (see "Marketplace Listing").
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, may 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 Nasdaq GOLD
Clearing Process) for certain lot-size creations and/or redemptions of Nasdaq
GOLD, whether applied solely to creations and/or redemptions made through the
Nasdaq GOLD Clearing Process (see "Procedures for Creation of Creation Units"),
solely to creations and/or redemptions made outside the Nasdaq GOLD 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 Nasdaq GOLD subject to such an increase and/or decrease or
waiver of the Transaction Fee and the additional amounts charged in connection
with creations and/or redemptions outside the Nasdaq GOLD 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
- ----------------
* Such increase is subject to the 10 Basis Point Limit discussed above
under "Prospectus Summary--Transaction Fee."
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disclosed in the current Nasdaq GOLD 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
in connection with the creation or redemption of Nasdaq GOLD or of the
additional amounts charged in connection with the creation or redemption of
Nasdaq GOLD outside the Nasdaq GOLD Clearing Process beyond that which is
discussed herein under the caption "Prospectus Summary--Transaction Fee."
The shares of common stock of the securities portion of a Portfolio
Deposit on any date of deposit will reflect the composition and weighting of the
component securities of the Index on such day. The portfolio of Index Securities
that is the basis for a Portfolio Deposit varies 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 Income Net of
Expense Amount 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 share amounts of the Index Securities of the
Portfolio Deposit on the previous Business Day. The identity and share amounts
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, on each Business Day, the Income
Net of Expense Amount effective through and including the previous Business Day
per outstanding share of Nasdaq GOLD. The Sponsor may also choose within its
discretion to make available, frequently throughout each Business Day, a number
representing, on a per share of Nasdaq GOLD basis, the sum of the
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Income Net of Expense Amount 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 "The Portfolio--Adjustments to the Portfolio
Deposit"). If the Sponsor elects to make such information available, it would 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. If the Sponsor
elects to make such information available, the inability of the Sponsor or its
designee to provide such information for any period of time will not in itself
result in a halt in the trading of Nasdaq GOLD on the [Nasdaq Stock
Market/Amex]. If such information is made available, investors interested in
creating Nasdaq GOLD or purchasing Nasdaq GOLD 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 Index, the Index
Securities, and financial instruments based on the Index).
Upon receipt of a Portfolio Deposit or Deposits, following placement
with the Distributor of an order to create Nasdaq GOLD, the Trustee will deliver
Nasdaq GOLD in Creation Unit size aggregations to the Depository. In turn, the
Nasdaq GOLD 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 "Procedures for Creation
of Creation Units" and "Book-Entry-Only System"). Each share of Nasdaq GOLD will
represent a fractional undivided interest in the Trust in an amount equal to one
(1) divided by the total number of shares of Nasdaq GOLD 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
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the issuance to such depositor(s) of Nasdaq GOLD, would own eighty percent (80%)
or more of the outstanding shares of Nasdaq GOLD (see "Tax Status of the
Trust"). The Trustee also may reject any Portfolio Deposit or any component
thereof under certain other circumstances (see "Procedures for Creation of
Creation Units").
Additional Nasdaq GOLD in Creation Unit size aggregations will be
created upon receipt of the appropriate Portfolio Deposits from creators. As
additional Nasdaq GOLD in Creation Unit size aggregations is created, the
aggregate value of the Portfolio will be increased and the fractional undivided
interest in the Trust represented by each share of Nasdaq GOLD 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 Trust 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, shares of Nasdaq GOLD 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 shares of Nasdaq GOLD.
The identity and appropriate number of shares of the Index Securities
required for a Portfolio Deposit are 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
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Portfolio" and "The Portfolio--Adjustments to the Portfolio Deposit"). The
composition and weighting of the Index Securities to be delivered as part of a
Portfolio Deposit are determined daily and reflect the composition of the Index
and, together with the Cash Component, 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 is also adjusted from
time to time to conform to changes to the Index as described herein and as set
forth in the Trust Agreement. As the composition and weighting of the Index
Securities change, substantially identical changes to the composition and
weighting of the securities portion of the required Portfolio Deposit are made
contemporaneously. Corresponding adjustments to the composition and weighting of
the Portfolio, however, are not necessarily made contemporaneously with
adjustments to the required Portfolio Deposit, but in all cases 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
and weighting of the securities portion of a Portfolio Deposit 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 (which may itself have a positive or negative
value, as the case may be), 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 Nasdaq
GOLD in Creation Unit size aggregations, an entity or person must be (1) a
Participating Party, with respect to creations through the Nasdaq GOLD Clearing
Process or (2) a DTC Participant with respect to creations/redemptions outside
the Nasdaq GOLD Clearing Process. All Nasdaq GOLD, however
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51
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 Nasdaq GOLD must be placed in multiples of 25,000
shares of Nasdaq GOLD (Creation Unit size). All orders to create Nasdaq GOLD,
whether through the Nasdaq GOLD Clearing Process or outside the Nasdaq GOLD
Clearing Process, must be received by the Distributor by no later than the
closing time of the regular trading session on the Nasdaq Stock Market ("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 Nasdaq GOLD 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 Nasdaq GOLD Participant Agreement, as described
below (see "Placement of Creation Orders Using the Nasdaq GOLD Clearing Process"
and "Placement of Creation Orders Outside the Nasdaq GOLD Clearing Process").
Severe economic or market changes or disruptions, or telephone or other
communication failure, may impede the ability to reach the Trustee, the
Distributor, a Participating Party, or a DTC Participant.
Orders to create Creation Unit size aggregations of Nasdaq GOLD 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 Nasdaq GOLD
Participant Agreement, and that, therefore, orders to create Creation Unit size
aggregations of Nasdaq GOLD may have to be placed by the investor's broker
through a Participating Party or a DTC Participant who has executed a Nasdaq
GOLD Participant Agreement. At any given time there may be only a limited number
of broker-dealers that have executed a Nasdaq GOLD
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52
Participant Agreement. Those placing orders to create Nasdaq GOLD through the
Nasdaq GOLD 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 Nasdaq GOLD Clearing
Process are likely to require transmittal by the DTC Participant earlier on the
Transmittal Date than orders effected using the Nasdaq GOLD Clearing Process.
Those persons placing orders outside the Nasdaq GOLD 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 the Cash Component (if
required) The DTC Participant notified of an order to create Nasdaq GOLD outside
the Nasdaq GOLD 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 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 (if
required) through the Federal Reserve Bank wire 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 (if required) by 1:00 p.m. on the Business Day
immediately following the Transmittal Date, such order shall be canceled. Upon
written notice to the Distributor, such canceled 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. If the Cash Component has a negative
value, requiring payment of such amount by the Trustee on behalf of the Trust to
the creator of Nasdaq GOLD outside the Nasdaq GOLD Clearing Process (i.e., if
the sum of dividends on all Securities with ex-dividend dates within the
Accumulation Period, plus or minus the Balancing Amount, is less than the
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53
accrued expenses and liabilities of the Trust for such period) then payment of
such amount by the Trustee to the creator of Nasdaq GOLD via the Depository and
the DTC Participants is required to be made no later than 1:00 p.m. on the third
(3rd) Business Day immediately following the Transmittal Date.
All questions as to the number of shares of each of the Index
Securities, the amount and identity of the payor of the Cash Component (i.e.,
the Trustee on behalf of the Trust or the Nasdaq GOLD creator), 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 Nasdaq GOLD ordered,
would own 80% or more of the current outstanding shares of Nasdaq GOLD (see "Tax
Status of the Trust"); (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 Nasdaq GOLD. 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 Nasdaq GOLD Participant Agreement (as hereinafter defined) is
available at the office of the Trustee at 101 Barclay
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Street, New York, New York 10286 and the office of the Distributor at
___________________________ during normal business hours.
PLACEMENT OF CREATION ORDERS USING THE NASDAQ GOLD CLEARING PROCESS
Portfolio Deposits created through the Nasdaq GOLD 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 "Nasdaq GOLD Participant Agreement"). The
Nasdaq GOLD 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
third (3rd) NSCC Business Day) and the Cash Component (if required) to the
Trustee, together with such additional information as may be required by the
Trustee. An order to create Nasdaq GOLD through the Nasdaq GOLD 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 Nasdaq GOLD
Participant Agreement are properly followed.
Nasdaq GOLD may also be created in advance of the receipt by the
Trustee of all or a portion of the Portfolio Deposit relating to such shares of
Nasdaq GOLD. In such cases, the Participating Party will remain liable for the
full deposit of the missing portion(s) of the Portfolio Deposit and will be
required to post collateral with the Trustee consisting of cash at least equal
to 115% of the marked-to-market value of such missing portion(s). The Trustee
will hold such collateral in an account separate and apart from the Trust.
Information concerning the procedures for such cash
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collateralization is available from the Distributor. The Nasdaq GOLD Participant
Agreement for any Participating Party intending to follow such procedures will
contain terms and conditions permitting the Trust to use such collateral to buy
the missing portion(s) of the Portfolio Deposit at any time and will subject
such Participating Party to liability for any shortfall between the cost to the
Trust of purchasing such securities and the value of such collateral. The Trust
will have no liability for any such shortfall. The Trustee will return any
unused portion of the collateral to the Participating Party once the entire
Portfolio Deposit has been properly received by the Trustee and deposited into
the Trust.
PLACEMENT OF CREATION ORDERS OUTSIDE THE NASDAQ GOLD CLEARING PROCESS
Portfolio Deposits created outside the Nasdaq GOLD Clearing Process
must be delivered through a DTC Participant that has executed a Nasdaq GOLD
Participant Agreement with the Distributor and with the Trustee. A DTC
Participant who wishes to place an order creating Nasdaq GOLD to be effected
outside the Nasdaq GOLD Clearing Process need not be a Participating Party, but
such orders must state that the DTC Participant is not using the Nasdaq GOLD
Clearing Process and that the creation of Nasdaq GOLD 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. All questions as to the number of Index
Securities to be delivered, and the validity, form, and eligibility (including
time of receipt) for the deposit of any tendered securities will be determined
by the Trustee, whose determination shall be final and binding. On days when the
Cash Component is an amount payable to the Trustee (i.e., when the Cash
Component has a positive value), the cash equal to the Cash Component must be
transferred directly to the Trustee through the
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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 Nasdaq GOLD outside the Nasdaq GOLD
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 Nasdaq
GOLD Participant Agreement are properly followed. However, if the Trustee does
not receive both the requisite Index Securities and the Cash Component (if
required) in a timely fashion on the next Business Day immediately following the
Transmittal Date, such order will be canceled. Upon written notice to the
Distributor, such canceled 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 Nasdaq GOLD so created will occur no later
than the third (3rd) Business Day following the day on which the creation order
is deemed received by the Distributor. The payment of the Cash Component (at
times when such amount is to be paid to the creator of Nasdaq GOLD from the
Trustee) is required to be made through the Federal Reserve wire system no later
than the third (3rd) Business Day immediately following the Transmittal Date.
Under the current schedule, the total fee charged in connection with the
creation of one Creation Unit outside the Nasdaq GOLD Clearing Process would be
an amount not to exceed $4,000 (see "Prospectus Summary--Transaction Fee").
BOOK-ENTRY-ONLY SYSTEM
The Depository acts as securities depository for Nasdaq GOLD. Shares of
Nasdaq GOLD are represented by a single global security (the "Global Security"),
which is 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 Nasdaq GOLD.
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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.
Upon the settlement date of any creation, transfer, or redemption of
Nasdaq GOLD, the Depository will credit or debit, on its book-entry registration
and transfer system, the number of shares of Nasdaq GOLD 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 Nasdaq GOLD Clearing
Process, or by the Trustee and the DTC Participant, in the case of a creation or
redemption transacted outside of the
- ---------------------------
* As of July 31, 1998, the National Association of Securities Dealers,
Inc., the parent company of Nasdaq, owns 4.65211% of the issued and
outstanding shares of common stock of the Depository. Also as of such
date, the Trustee owns 4.19892% of the issued and outstanding shares of
the common stock of the Depository.
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Nasdaq GOLD Clearing Process (see "The Trust--Procedures for Creation of
Creation Units" and "Redemption of Nasdaq GOLD"). Beneficial ownership of Nasdaq
GOLD is limited to DTC Participants, Indirect Participants, and persons holding
interests through DTC Participants and Indirect Participants. Ownership of
beneficial interests in Nasdaq GOLD (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 Nasdaq GOLD.
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
Nasdaq GOLD.
So long as Cede & Co., as nominee of the Depository, is the registered
owner of Nasdaq GOLD, references herein to the registered or record owners of
Nasdaq GOLD shall mean Cede & Co. and shall not mean the Beneficial Owners of
Nasdaq GOLD. Beneficial Owners of Nasdaq GOLD will not be entitled to have
Nasdaq GOLD 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
Nasdaq GOLD under the Trust Agreement. The Trustee and the Sponsor understand
that under existing industry practice, in the event the Trustee requests any
action of Nasdaq GOLD holders, or a Beneficial Owner desires to take any action
that the Depository, as the record owner of all
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outstanding shares of Nasdaq GOLD, 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 recognizes the Depository or its
nominee as the owner of all Nasdaq GOLD for all purposes except as expressly set
forth in the Trust Agreement. Conveyance of all notices, statements, and other
communications to Beneficial Owners is 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 Nasdaq GOLD holdings of each DTC
Participant. The Trustee shall inquire of each such DTC Participant as to the
number of Beneficial Owners holding Nasdaq GOLD, 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
Trustee on behalf of 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.
Nasdaq GOLD distributions shall be made to the Depository or its
nominee, Cede & Co., as the registered owner of all Nasdaq GOLD. The Trustee and
the Sponsor expect that the Depository or its nominee, upon receipt of any
payment of distributions in respect of Nasdaq GOLD, shall credit immediately DTC
Participants' accounts with payments in amounts proportionate to their
respective
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beneficial interests in Nasdaq GOLD 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 Nasdaq GOLD held
through such DTC Participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts of
customers in bearer form or registered in a "street name," and will be the
responsibility of such DTC Participants. Neither the Trustee nor the Sponsor has
or will have any responsibility or liability for any aspect of the records
relating to or notices to Beneficial Owners, or payments made on account of
beneficial ownership interests in Nasdaq GOLD, 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.
The Depository may determine to discontinue providing its service with
respect to Nasdaq GOLD 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 Index,
the Portfolio will at any time consist of as many of the Index Securities as is
practicable and under most circumstances, all of the Index
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Securities. It is anticipated that cash or cash items 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 correspondence between the investment performance of
the Index and that derived from ownership of Nasdaq GOLD.
ADJUSTMENTS TO THE PORTFOLIO
The Index is a modified capitalization-weighted index of 100 of the
largest non-financial companies listed on the Nasdaq National Market tier of the
Nasdaq Stock Market (see "The Index"). At any moment in time, the value of the
Index equals the aggregate value of the then-current Index share weights of
each of the component 100 Index Securities multiplied by each such security's
respective last sale price on the Nasdaq Stock Market, and divided by a factor
(the "divisor") which scales such aggregate value to a lower order of magnitude
which becomes the basis for the reported Index value.
Periodically (typically, several times per quarter), Nasdaq may
determine that total shares outstanding have changed in one or more Index
Securities due to secondary offerings, repurchases, conversions, or other
corporate actions. Under such circumstances, in accordance with Nasdaq policies
and procedures for making adjustments to the Index, the Index share weights
would be adjusted by the same percentage amounts by which the total shares
outstanding have changed in such Index Securities. Additionally, Nasdaq may
periodically (ordinarily, several times per quarter) replace one or more
component securities in the Index due to mergers, acquisitions, bankruptcies, or
other market conditions, or due to delistings if an issuer chooses to list its
securities on another marketplace, or if the issuers of such component
securities fail to meet the criteria for continued inclusion in the Index (see
"The Index"). For example, for the 1996 and 1997 calendar years, there
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were 7 and 8 company changes, respectively, made during those years due to
corporate actions (e.g., mergers, acquisitions, bankruptcies) and 15 and 11
other company changes, respectively, made at year-end in connection with
Nasdaq's annual evaluation process for determining the securities comprising the
Index for the upcoming year (see "The Index--Index Security Eligibility Criteria
and Annual Ranking Review"). The ratio of the market capitalization of the
securities replaced in the Index in 1996 and 1997 to the total market
capitalization of the securities comprising the Index at year-end was 9.0% and
5.7%, respectively.
The Index share weights, which are based upon the total shares
outstanding in each of the 100 Index Securities, are additionally subject, in
certain cases, to a rebalancing in order to ensure that the relative weightings
of the Index Securities continue to meet minimum pre-established requirements
for a diversified portfolio (see "The Index--Rebalancing of the Index").
Ordinarily, whenever there is a change in Index share weights or a change in a
component security included in the Index, Nasdaq adjusts the divisor to assure
that there is no discontinuity in the value of the 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
Index, composition and weighting changes, and associated divisor changes to the
Index, create the need for the Trust to make corresponding Portfolio adjustments
as described below.
The Trustee adjusts the composition of the Portfolio from time to time
to conform to changes in the composition and/or weighting of the Index
Securities. The Trustee aggregates certain of these adjustments and makes
conforming changes to the Trust's portfolio at least monthly; however,
adjustments are made more frequently in the case of changes to the Index that
are significant. Specifically, the Trustee is required to adjust the composition
of the Portfolio at any time that there
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is a change in the identity of any Index Security (i.e., a substitution of one
security in replacement of another), which adjustment is to be made within three
(3) Business Days before or after the day on which the change in the identity of
the 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 Index, it is not always efficient to
replicate identically the share composition of the 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 are generally permitted
within the guidelines set forth below. The Trustee is required to adjust the
composition of the Portfolio at any time that the weighting of any Security
varies in excess of one hundred and fifty percent (150%) of a specified
percentage, which percentage varies 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 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 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
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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 or (2) cannot be delivered to
the Trustee due to restrictions prohibiting a creator from engaging in a
transaction involving such Index Security. Upon receipt of an order for a
Creation Unit that 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 below, the Trustee may hold 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 shall calculate the required
adjustments and shall 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
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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 weighting in the
Index, although the Misweighting of such Index Securities may not be in excess
of the applicable Misweighting Amount.
In addition to adjustments to the Portfolio from time to time to
conform to changes in the composition or weighting of the Index Securities, the
Trustee is also required to sell Securities to obtain sufficient cash proceeds
for the payment of Trust fees and expenses at any time that accrued fees and
expenses exceed dividends on the Securities and other Trust accrued income by
more than 1/100 of one percent (0.01%) of the net asset value of the Trust (see
"Expenses of the Trust"). Whenever the 0.01% threshold is exceeded, the Trustee
will sell sufficient Securities to cover such excess no later than the next
occasion it is required to make adjustments to the portfolio due to a
Misweighting. At that time, the Trustee shall first sell Securities that are
over-weighted in the Portfolio as compared to their relative weighting in the
Index.
All adjustments to the Portfolio held by the Trustee shall be made by
the Trustee pursuant to the foregoing specifications and as set forth in the
Trust Agreement and shall 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 ensure the
continued qualification of the Trust as a regulated investment
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company (see "Tax Status of the Trust"). The adjustments provided herein are
intended to conform the composition and weighting of the Portfolio, to the
extent practicable, to the composition and weighting of the Index Securities.
Such adjustments are based upon the Index as it is currently determined by
Nasdaq. To the extent that the method of determining the Index is changed by
Nasdaq 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 Index is maintained.
In making the adjustments described herein, the Trustee shall rely on
information made publicly available by Nasdaq as to the composition and
weighting 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 weighting 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 weighting
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
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use the composition and weighting of the Securities held in the Trust as of such
notice date (as opposed to the composition and weighting of the Index
Securities) for the purpose and determination of all redemptions or other
required uses of the securities portion of the Portfolio Deposit.
From time to time Nasdaq may make adjustments to the composition of the
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 would-be acquirors of the issuer. The Trustee is not permitted to
accept any such offers until such time as it has been determined that the
securities of the issuer will be removed from the Index. Since securities of an
issuer may be removed from the Index only after the consummation of a merger or
acquisition of such issuer, in selling the securities of such issuer the Trust
may receive, to the extent that market prices do not provide a more attractive
alternative, whatever consideration is being offered to the shareholders of such
issuer that have not tendered their shares prior to such time. Any cash received
in such transactions 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
attained but nevertheless will continue to be the objective of the Trust in
connection with all acquisitions and dispositions of Securities.
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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, is not managed. Instead, the only purchases and sales that are
made with respect to the Portfolio will be those necessary to create, to the
extent feasible, a portfolio that is designed to replicate the 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 Index.
The Trust will be liquidated on the fixed Mandatory Termination Date
unless terminated earlier under certain circumstances (see "Administration of
the Trust--Termination"). In addition, Beneficial Owners of Nasdaq GOLD in
Creation Unit size aggregations have the right to redeem in kind (see
"Redemption of Nasdaq GOLD").
ADJUSTMENTS TO THE PORTFOLIO DEPOSIT
On each Business Day following the Initial Date of Deposit (each such
day an "Adjustment Day") , the number of shares and/or identity of each of the
Index Securities in a Portfolio Deposit is adjusted in accordance with the
following procedure. At the close of the market on each Adjustment Day, the
Trustee calculates the net asset value of the Trust (see "Valuation"). The net
asset value is divided by the number of all outstanding shares of Nasdaq GOLD
multiplied by 25,000 shares in one Creation Unit aggregation resulting in a net
asset value per Creation Unit (the "NAV Amount"). The Trustee then calculates
the number of shares (without rounding) of each of the component securities of
the 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
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Portfolio Deposit on Request Day, together with the Income Net of Expense Amount
effective for requests to create or redeem on Adjustment Day, equals the NAV
Amount and (2) the identity and weighing of each of the securities in a
Portfolio Deposit mirrors proportionately the identity and weighting of the
securities in the Index, each as in effect on Request Day. For each security,
the number resulting from such calculation is rounded to the nearest whole
share, with a fraction of 0.50 being rounded up. The identities and number of
shares of the securities so calculated 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 ordinarily to be delivered
by the Trustee in the event of a request for redemption of Nasdaq GOLD in
Creation Unit size aggregations on Request Day and thereafter until the
following Adjustment Day (see "Redemption of Nasdaq GOLD"). 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 Index divisor, the Portfolio Deposit shall be
adjusted to take account of such stock split, stock dividend, or reverse 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, with a fraction of
0.50 being rounded up.
On Request Day and on each day that a request for the creation or
redemption of Nasdaq GOLD in Creation Unit size aggregations is deemed received,
the Trustee calculates 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
adds to that amount the Income Net of Expense Amount effective for requests to
create or redeem on Request Day (such market value and Income Net of Expense
Amount are collectively referred to herein as the "Portfolio Deposit Amount").
The Trustee then calculates the NAV
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Amount, based on the close of the market on Request Day. The difference between
the NAV Amount so calculated and the Portfolio Deposit Amount is the "Balancing
Amount." The Balancing Amount serves the function of compensating for any
differences between the value of the Portfolio Deposit Amount and the NAV Amount
at the close of trading on Request Day due to, for example, (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 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 weighting 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 sum of the Income Net of Expense Amount
and the Balancing Amount in effect at the close of business on Request Day are
collectively referred to as the Cash Component (with respect to creations of
Nasdaq GOLD) or the Cash Redemption Amount (with respect to redemptions of
Nasdaq GOLD) (see "Prospectus Summary--Portfolio Deposits" and
- -----------------
* Nasdaq normally publicly announces changes in the identity and/or
weighting of the Index Securities in advance of the actual changes.
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"Prospectus Summary-- Redemption"). If the resulting Cash Component has a
positive value, then the creator of Nasdaq GOLD will be obligated to pay such
cash to the Trustee in connection with orders to create Nasdaq GOLD; if the
resulting Cash Component has a negative value, then such cash shall be paid by
the Trustee on behalf of the Trust to the creator of Nasdaq GOLD. Similarly, if
the resulting Cash Redemption Amount has a positive value, then such cash shall
be transferred to a redeemer by the Trustee on behalf of the Trust in connection
with orders to redeem Nasdaq GOLD; if the resulting Cash Redemption Amount has a
negative value, then such cash shall be paid by the redeemer of Nasdaq GOLD to
the Trustee on behalf of the Trust.
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 Nasdaq GOLD in Creation Unit size aggregations and upon the
redemption of Nasdaq GOLD in Creation Unit size aggregations for all purposes
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 Nasdaq GOLD.
In connection with the creation or redemption of Nasdaq GOLD, if an
investor is restricted by regulation or otherwise from investing or engaging in
a transaction in one or more Index Securities, the Trustee, in its discretion,
shall have the right to include the cash equivalent value of such Index
Securities in the Portfolio Deposit in the calculation of the Cash Component (or
the Cash Redemption Amount as the case may be) in lieu of the inclusion of such
Index Securities in the securities portion of the Portfolio Deposit for the
particular affected investor. The amount of such
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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 shall pay the
Trustee the standard Transaction Fee, plus an additional amount per Creation
Unit aggregation not to exceed (3) times the Transaction Fee applicable for a
Creation Unit.
The Trustee, in its discretion, upon the request of the redeeming
investor, may redeem Creation Units in whole or in part by providing such
redeemer with a portfolio of Securities differing in exact composition from the
Index Securities but not differing in net asset value from the then-current
Portfolio Deposit. Such a redemption might be made, for example, if it were to
be determined that this composition would be appropriate in order to maintain
the Portfolio of the Trust in correlation to the modified
capitalization-weighted composition of the Index, for instance in connection
with a replacement of one of the Index Securities (e.g., due to a merger,
acquisition, or bankruptcy).
SELECTION AND ACQUISITION OF SECURITIES
In prescribing the method described above for selecting the Index
Securities that constitute the prescribed Portfolio Deposit from time to time,
the Sponsor intends to replicate, to the extent practicable, the composition and
weighting of the Index Securities as of the relevant date.
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 size and composition (see "The Portfolio--Adjustments to the
Portfolio"). Also, the deposit of additional Portfolio Deposits and the
redemption of Nasdaq GOLD in Creation Unit size aggregations will affect the
size and composition of the Trust. Neither the
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Sponsor nor the Trustee shall be liable in any way for any default, failure, or
defect in any of the Securities.
THE INDEX
The Sponsor selected the Nasdaq-100 Index(R) as the basis for the
selection of the Securities to be held by the Trust because, in the opinion of
the Sponsor, the Index constitutes a broadly diversified segment of the largest
and most actively traded securities listed on the Nasdaq Stock Market.
Additionally, the Index has achieved wide acceptance by both investors and
market professionals. Specifically, the Index is composed of 100 of the largest
and most actively traded non-financial companies listed on the Nasdaq National
Market tier of the Nasdaq Stock Market.
The Index was first published in January 1985, and includes companies
across a variety of major industry groups. As of _______, 1998, the major
industry groups covered in the Index (listed according to their respective
capitalization in the Index) were as follows: computer and office equipment
(___%), computer software/services (___%), telecommunications (___%),
retail/wholesale trade (___%), biotechnology (___%), services (___%), health
care (___%), manufacturing (___%) and transportation (___%). The identity and
capitalization weightings of the five largest companies represented in the Index
as of ______, 1998 were as follows: Microsoft Corporation (____%), Intel
Corporation (___%), Cisco Systems, Inc. (___%), Dell Computer Corporation
(___%), and WorldCom, Inc. (___%). As of _______, 1998, all Index Securities had
a minimum market capitalization of $500 million. Current information regarding
the market value of the Index is available from Nasdaq as well as numerous
market information services. The Index is determined, comprised, and calculated
by Nasdaq without regard to the Trust.
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The Sponsor, which is wholly-owned by Nasdaq, has been granted a
license to use the Index as a basis for determining the composition of the Trust
and to use certain trademarks of Nasdaq in connection with the Trust (see
"License Agreement"). Nasdaq is not responsible for and shall not participate in
the creation or sale of Nasdaq GOLD 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 following table shows the actual performance of the Index for the
years 1985 through June 1998. Stock prices fluctuated widely during this period
and were higher at the end than at the beginning. The results shown should not
be considered as a representation of the income yield or capital gain or loss
that may be generated by the Index in the future, nor should the results be
considered as a representation of the performance of the Trust.
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POINT CHANGE IN YEAR % CALENDAR
CALENDAR YEAR-END INDEX VALUE* INDEX FOR CHANGE YEAR-END
YEAR (JANUARY 31, 1985= 125.00) CALENDAR YEAR* IN INDEX* DIVIDEND YIELD**
- ------------------------------------------------------------------------------------------------------------
1985*** 132.29 7.29 5.83% N/A
1986 ......... 141.41 9.12 6.89% 0.33%
1987 ......... 156.25 14.84 10.49% 0.41%
1988 ......... 177.41 21.16 13.54% 0.47%
1989 ......... 223.84 46.43 26.17% 0.91%
1990 ......... 200.53 -23.31 -10.41% 1.07%
1991 ......... 330.86 130.33 64.99% 0.53%
1992 ......... 360.19 29.33 8.86% 0.55%
1993 ......... 398.28 38.09 10.57% 0.52%
1994 ......... 404.27 5.99 1.50% 0.46%
1995 ......... 576.23 171.96 42.54% 0.26%
1996 ......... 821.36 245.13 42.54% 0.11%
1997 ......... 990.80 169.44 20.63% 0.13%
1998 (as of June 30, 1998) 1192.07 201.27 20.31% 0.10%****
* Source: Nasdaq. Year-end index values shown do not reflect
reinvestment of dividends or costs, such as brokerage charges and
transaction costs.
** Source: Nasdaq. Dividend yields are obtained by dividing the
aggregate cash dividends for the year by the aggregate market value of
the component securities in the Index at year-end.
*** 1985 data is for the eleven month period from January 31, 1985 through
December 31, 1985.
**** Twelve month dividend yield for the period from July 1, 1997 through
June 30, 1998.
The Index share weights of the component securities of the Index at any
time are based upon the total shares outstanding in each of the 100 Index
Securities and are additionally subject, in certain
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cases, to rebalancing to ensure that the relative weighting of the Index
Securities continues to meet minimum pre-established requirements for a
diversified portfolio (see "Rebalancing of the Index"). Accordingly, each Index
Security's influence on the value of the Index is directly proportional to the
value of its Index share weight. The percentage of the Trust's assets invested
in each of the Index Securities is intended to approximate the percentage each
Index Security represents in the Index.
INDEX SECURITY ELIGIBILITY CRITERIA AND ANNUAL RANKING REVIEW
To be eligible for inclusion in the Index, a security must be traded on
the Nasdaq National Market tier of the Nasdaq Stock Market and meet the
following criteria:
- - the security must be of a non-financial company;
- - only one class of security per issuer is allowed;
- - the security may not be issued by an issuer currently in bankruptcy
proceedings;
- - the security must have average daily trading volume of at least 100,000
shares per day;
- - the security must have "seasoned" on the Nasdaq Stock Market or another
recognized market (generally, a company is considered to be seasoned by
Nasdaq if it has been listed on a market for at least two years; in the
case of spin-offs, the operating history of the spin-off will be
considered);
- - if a security would otherwise qualify to be in the top 25% of the
issuers included in the Index by market capitalization, then the
"seasoning" criteria would not apply; and
- - if the security is of a foreign issuer, the company must have a
worldwide market value of at least $10 billion, a U.S. market value of
at least $4 billion, and average trading volume on the Nasdaq Stock
Market of at least 200,000 shares per day; in addition, foreign
securities must be eligible for listed options trading.
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The Index Securities are evaluated annually based on market data as of
the end of October as follows (such evaluation is referred to herein as the
"Annual Ranking Review"). Securities listed on the Nasdaq Stock Market which
meet the above eligibility criteria are ranked by market value as of the end of
October. Index-eligible securities which are already in the Index and which are
in the top 150 eligible securities (based on market value) are retained in the
Index provided that such security was ranked in the top 100 eligible securities
as of the previous year's annual review. Securities not meeting such criteria
are replaced. The replacement securities chosen are those Index-eligible
securities not currently in the Index which have the largest market
capitalization. The list of annual additions and deletions is publicly announced
via a press release in the early part of December. Replacements are made
effective after the close of trading on the third Friday in December. Moreover,
if at any time during the year an Index Security is no longer traded on the
Nasdaq Stock Market, or is otherwise determined by Nasdaq to become ineligible
for continued inclusion in the Index, the security will be replaced with the
largest market capitalization security not currently in the Index and meeting
the Index eligibility criteria listed above.
In addition to the Annual Ranking Review, the securities in the Index are
monitored every day by Nasdaq with respect to changes in total shares
outstanding arising from secondary offerings, stock repurchases, conversions, or
other corporate actions. Nasdaq has adopted the following quarterly scheduled
weight adjustment procedures with respect to such changes. If the change in
total shares outstanding arising from such corporate action is greater than or
equal to 5.0%, such change is ordinarily made to the Index on the evening prior
to the effective date of such corporate action. Otherwise, if the change in
total shares outstanding is less then 5%, then all such changes are accumulated
and made effective at one time on a quarterly basis after the close of trading
on the third Friday in each of March, June, September, and December. In either
case, the Index Share weights for such Index
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Securities are adjusted by the same percentage amount by which the total shares
outstanding have changed in such Index Securities. Ordinarily, whenever there is
a change in Index share weights or a change in a component security included in
the Index, Nasdaq adjusts the divisor to assure that there is no discontinuity
in the value of the Index which might otherwise be caused by any such change.
REBALANCING OF THE INDEX
Effective as of ____________, the Index has been calculated under a
"modified capitalization-weighted" methodology, which is a hybrid between equal
weighting and conventional capitalization weighting. This methodology is
expected to: (1) retain in general the economic attributes of capitalization
weighting; (2) promote portfolio weight diversification (thereby limiting
domination of the Index by a few large stocks); (3) reduce Index performance
distortion by preserving the capitalization ranking of companies; and (4) reduce
market impact on the smallest component securities from necessary weight
rebalancings.
Under the methodology employed, on a quarterly basis coinciding with
Nasdaq's quarterly scheduled weight adjustment procedures, the Index Securities
are categorized as either "Large Stocks" or "Small Stocks" depending on whether
their current percentage weights (after taking into account such scheduled
weight adjustments due to stock repurchases, secondary offerings, or other
corporate actions) are greater than, or less than or equal to, the average
percentage weight in the Index (i.e., as a 100-stock index, the average
percentage weight in the Index is 1.0%).
Such quarterly examination will result in an Index rebalancing if
either one or both of the following two weight distribution requirements are not
met: (1) the current weight of the single largest market capitalization stock in
the Index must be less than or equal to 24.0% and (2) the "collective weight" of
those stocks whose individual current weights are in excess of 4.5%, when
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added together, must be less than or equal to 48.0%. As of ________, 1998 the
current weights of Microsoft Corporation and Intel Corporation, the two largest
market capitalization stocks in the Index, were equal to _____% and _____%,
respectively, and the collective weight of the _______ ( ) stocks whose
individual current weights are in excess of 4.5% was _____%.
If either one or both of these weight distribution requirements are not met
upon quarterly review, a weight rebalancing will be performed in accordance with
the following plan. First, relating to weight distribution requirement (1)
above, if the current weight of the single largest stock in the Index exceeds
24.0%, then the weights of all Large Stocks will be scaled down proportionately
towards 1.0% by enough for the adjusted weight of the largest stock to be set to
20.0%. Second, relating to weight distribution requirement (2) above, for those
stocks whose individual current weights or adjusted weights in accordance with
the preceding step are in excess of 4.5%, if their "collective weight" exceeds
48.0%, then the weights of all Large Stocks will be scaled down proportionately
towards 1.0% by just enough for the "collective weight," so adjusted, to be set
to 40.0%.
The aggregate weight reduction among the Large Stocks resulting from
either or both of the above rescalings will then be redistributed to the Small
Stocks in the following iterative manner. In the first iteration, the weight of
the largest Small Stock will be scaled upwards by a factor which sets it equal
to the average index weight of 1.0%. The weights of each of the smaller
remaining Small Stocks will be scaled up by the same factor reduced in relation
to each stock's relative ranking among the Small Stocks such that the smaller
the stock in the ranking, the less the scale-up of its weight.
In the second iteration, the weight of the second largest Small Stock,
already adjusted in the first iteration, will be scaled upwards by a factor
which sets it equal to the average index weight of 1.0%. The weights of each of
the smaller remaining Small Stocks will be scaled up by this same
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factor reduced in relation to each stock's relative ranking among the Small
Stocks such that, once again, the smaller the stock in the ranking, the less the
scale-up of its weight.
Additional iterations will be performed until the accumulated increase
in weight among the Small Stocks exactly equals the aggregate weight reduction
among the Large Stocks from rebalancing in accordance with weight distribution
requirement (1) and/or weight distribution requirement (2).
Then, to complete the rebalancing procedure, once the final percent
weights of each stock in the Index are set, the Index share weights will be
determined based upon the last sale prices and aggregate capitalization of the
Index at the close of trading on the Thursday in the week immediately preceding
the week of the third Friday in March, June, September, and December. Changes to
the Index weights will be made effective after the close of trading on the third
Friday in March, June, September, and December and an adjustment to the Index
divisor will be made to ensure continuity of the Index.
LICENSE AGREEMENT
Under the terms of a license agreement with Nasdaq (the "License
Agreement"), the Sponsor has been granted a license to use the Index as a basis
for determining the composition of the Trust and to use certain trade names,
trademarks, and service marks of Nasdaq 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 Nasdaq GOLD. Currently, the License Agreement is
scheduled to expire five years from the commencement date of trading of Nasdaq
GOLD, in accordance with its terms and is subject to a five year renewal period
following such date. The parties thereto may extend the term of the License
Agreement beyond such date without the consent of any of the Beneficial Owners
of Nasdaq GOLD.
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Under the terms of the License Agreement, the Sponsor pays to Nasdaq an
annual licensing fee for use of the Index. The Sponsor ordinarily will seek
reimbursement from the Trust for the amount of licensing fees (see "Expenses of
the Trust"). However, the Sponsor has committed not to seek reimbursement from
the Trust for licensing fees to Nasdaq for the period through the Trust's fiscal
year ending September 30, 1999. Thereafter, the Sponsor intends to charge the
Trust for the annual licensing fee.
None of the Trust, the Trustee, the Distributor, the Depository, or any
Beneficial Owner of Nasdaq GOLD is entitled to any rights whatsoever under the
foregoing licensing arrangements or to use the trademarks and service marks
"Nasdaq-100 Index(R)", "Nasdaq-100(R)", "Nasdaq(R)", "The Nasdaq Stock
Market(R)", or "Nasdaq GOLD(sm)" or to use the Index except as specifically
described herein or as may be specified in the Trust Agreement.
The Index is determined, composed, and calculated by Nasdaq without
regard to the Sponsor, the Trust, or the Beneficial Owners of Nasdaq GOLD.
Nasdaq has complete control and sole discretion in determining, comprising, or
calculating the Index or in modifying in any way its method for determining,
comprising, or calculating the Index in the future.
NASDAQ DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE
INDEX OR ANY DATA USED TO CALCULATE THE INDEX OR DETERMINE THE INDEX COMPONENTS.
NASDAQ DOES NOT GUARANTEE THE UNINTERRUPTED OR UN-DELAYED CALCULATION OR
DISSEMINATION OF THE INDEX. NASDAQ SHALL HAVE NO LIABILITY FOR ANY ERRORS,
OMISSIONS, OR INTERRUPTIONS THEREIN. NASDAQ DOES NOT GUARANTEE THAT THE INDEX
ACCURATELY REFLECTS PAST, PRESENT, OR FUTURE MARKET PERFORMANCE. NASDAQ MAKES NO
WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE
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OBTAINED BY THE SPONSOR, THE TRUST, BENEFICIAL OWNERS OF NASDAQ GOLD, OR ANY
OTHER PERSON OR ENTITY FROM THE USE OF THE INDEX OR ANY DATA INCLUDED THEREIN.
NASDAQ MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL
WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, WITH
RESPECT TO THE INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE
FOREGOING, IN NO EVENT SHALL NASDAQ HAVE ANY LIABILITY FOR ANY LOST PROFITS OR
INDIRECT, PUNITIVE, SPECIAL, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS),
EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
MARKETPLACE LISTING
Nasdaq GOLD has been approved for listing on the [Nasdaq Stock
Market/Amex], subject to official notice of issuance. Transactions involving
Nasdaq GOLD in the public trading market are subject to customary brokerage
charges and commissions.
The Sponsor's aim in designing Nasdaq GOLD was to provide investors
with a security whose initial market value would approximate one-tenth (1/10th)
the value of the Index. Thus, for example, if the Index were at 1200, investors
might expect a Nasdaq GOLD share to trade initially at approximately $120. Note,
however, that the market price of a Nasdaq GOLD share may be affected by supply
and demand, market volatility, sentiment, and other factors (see "Special
Considerations and Risk Factors"). Note also, that due to these factors as well
as other factors including required distributions for tax purposes (see "Tax
Status of the Trust") or the sale of Securities to meet Trust expenses in excess
of the dividends received on the Securities (see "Expenses
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of the Trust"), the one-tenth (1/10th) relationship between the initial value of
a share of Nasdaq GOLD and the value of the Index is not expected to persist
indefinitely.
There can be no assurance that Nasdaq GOLD will always be listed on the
[Nasdaq Stock Market/Amex]. The [Nasdaq Stock Market/Amex] will consider the
suspension of trading in or removal from listing of Nasdaq GOLD:
(a) if the Trust has more than 60 days remaining until termination and
there are fewer than 50 record and/or beneficial holders of Nasdaq GOLD
for 30 or more consecutive trading days;
(b) if the Index is no longer calculated or available; or
(c) if such other event shall occur or condition exists which, in the
opinion of the [Nasdaq Stock Market/Amex], makes further dealings on
the [Nasdaq Stock Market/Amex] inadvisable.
The Trust is not required to pay a listing fee to the [Nasdaq Stock
Market/Amex].
The Trust will be terminated in the event that Nasdaq GOLD is delisted
from the [Nasdaq Stock Market/Amex] and is not subsequently relisted on a
national securities exchange or a quotation medium operated by a national
securities association (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. The Trust intends
to adopt a year ending on September 30 of each year. 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
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other disposition of stock, securities or foreign currencies, or certain other
sources, (b) meet certain diversification tests, and (c) 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).
TAX CONSEQUENCES TO BENEFICIAL OWNERS
Any net dividends paid by the Trust from its investment company taxable
income (which includes dividends, interest, and the excess of net short-term
capital gains over net long-term capital losses) will be taxable to Beneficial
Owners as ordinary income. A net dividend, if any, 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 net dividend
was declared in the preceding October, November, or December to Beneficial
Owners of record 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 the excess of net long-term
capital gains over net short-term capital losses ("net capital gain") are
taxable as long-term capital gain, regardless of the length of time an investor
has owned Nasdaq GOLD. 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, net dividends from net investment income (but not return of capital
distributions or capital gain dividends) generally will
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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 quarterly net dividends
paid by the Trust, if any, 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 net of accrued expenses and liabilities 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 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 Nasdaq GOLD. Return of capital distributions may result, for example,
if a portion of the net dividends, if any, 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 any
quarterly net dividends of the Trust could be treated as return of capital
distributions. Such circumstances may be more likely to occur in periods during
which the number of outstanding shares of Nasdaq GOLD 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, if any, paid shortly after a purchase or creation of
Nasdaq GOLD may be taxable even though in effect it may represent a return of
capital. Under the Taxpayer Relief Act of 1997, capital gains realized on the
sale of property held for more than one year but not more than eighteen months
are considered "mid-term gains." In the case of individuals,
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mid-term gains are taxed at lower rates than ordinary income, but not as
favorably as capital gains on property held for more than eighteen months. The
Trustee will identify in the annual tax information statement provided to
Beneficial Owners the breakdown of capital gain distributions between mid-term
gains and long-term gains.
The sale of Nasdaq GOLD 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 Nasdaq GOLD 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 Nasdaq GOLD 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 U.S. 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 Nasdaq GOLD in Creation Unit
size aggregations should consult their own tax advisors as to the consequences
to them of the redemption of Nasdaq GOLD.
Net dividend distributions, capital gains distributions, and capital
gains from sales or redemptions may also be subject to state, local and foreign
taxes.
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Deposit of a Portfolio Deposit with the Trustee in exchange for Nasdaq
GOLD 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 Nasdaq GOLD
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 has 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 Nasdaq GOLD ordered, would own eighty percent (80%) or more of the
outstanding shares of Nasdaq GOLD, 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 has the right to require information regarding Nasdaq GOLD
ownership pursuant to the Nasdaq GOLD 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.
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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.
Backup withholding at a rate of 31% will apply to dividends, capital
gain distributions, redemptions and sales of Nasdaq GOLD unless (a) the
Beneficial Owner is a corporation or comes within certain other exempt
categories and, when required, demonstrates this fact, or (b) provides a
taxpayer identification number, certifies as to no loss of exemption from backup
withholding, and otherwise complies with applicable requirements of the backup
withholding rules. The amount of any backup withholding from a payment to a
Beneficial Owner will be allowed as a credit against the holder's U.S. federal
income tax liability and may entitle such holder to a refund from the IRS,
provided that the required information is furnished to the IRS.
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, INCLUDING THE EFFECT OF POSSIBLE LEGISLATIVE CHANGES.
CONTINUOUS OFFERING OF NASDAQ GOLD
Nasdaq GOLD 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--Procedures
for Creation of Creation Units"). A list of the identity and number of shares
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of each of the Index Securities in the current Portfolio Deposit and the amount
of the Income Net of Expense Amount effective through and including the previous
Business Day is 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 shares of Nasdaq GOLD that
may be created as described herein is 25,000 or one Creation Unit. Persons
making Portfolio Deposits and creating Creation Unit size aggregations of Nasdaq
GOLD will receive no fees, commissions, or 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 Nasdaq GOLD. Notwithstanding the above, the Sponsor
reserves the right, in its sole discretion, to periodically reimburse in whole
or in part the Transaction Fees paid by eligible entities in connection with the
creation or redemption of certain lot-sizes of Nasdaq GOLD.
Because new Nasdaq GOLD 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, as amended (the "Securities Act"), 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 shares of Nasdaq GOLD, and sells the Nasdaq GOLD directly to its
customers, or if it chooses to couple the creation of a supply of new Nasdaq
GOLD with an active selling effort involving solicitation of secondary market
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demand for Nasdaq GOLD. 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 Nasdaq GOLD 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.
The Sponsor intends to market Nasdaq GOLD through broker-dealers who are
members of the National Association Securities Dealers, Inc. Investors
intending to create or redeem Creation Unit size aggregations of Nasdaq GOLD 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
Until further notice, the Sponsor has undertaken that on each day
during each fiscal year up to and including the fiscal year ending September 30,
2000, the ordinary operating expenses of the Trust as calculated by the Trustee
will not be permitted to exceed an amount which is 18/100 of one percent (0.18%)
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 0.18% level,
the Sponsor will reimburse the Trust or assume invoices on behalf of the Trust
for 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 fiscal year expenses fall below the 0.18% per annum
level on any
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given day. For purposes of this undertaking by the Sponsor, ordinary operating
expenses of the Trust shall not include taxes, brokerage commissions, and 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. After
September 30, 2000, the Sponsor may discontinue its undertaking to limit
ordinary operating expenses of the Trust or renew this undertaking for an
additional period of time, or may choose to reimburse or assume certain Trust
expenses in later periods in order to keep Trust expenses at a level lower than
what would reflect ordinary operating expenses of the Trust, 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 0.18% per annum.
Subject to any applicable cap, 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 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 Nasdaq GOLD (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 Nasdaq GOLD (whether in Creation Unit size aggregations or otherwise); (g)
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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 Nasdaq GOLD 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.
In addition to the specific expenses discussed in the previous
paragraph, the following expenses are or may be charged to the Trust: (a)
reimbursement to the Sponsor of amounts paid by it to Nasdaq in respect of
annual licensing fees pursuant to the License Agreement (the Sponsor has
committed not to seek reimbursement from the Trust for licensing fees paid for
the period through the Trust's fiscal year ending September 30, 1999, see
"License Agreement"), (b) federal and state annual registration fees for the
issuance of Nasdaq GOLD, and (c) expenses of the Sponsor relating to the
printing and distribution of marketing materials describing Nasdaq GOLD and the
Trust (including, but not limited to, associated legal, consulting, advertising,
and marketing costs and other out-of-pocket expenses such as printing). Pursuant
to the provisions of an exemptive order, the expenses set forth in this
paragraph may be charged to the Trust by the Trustee in an amount equal to the
actual costs incurred, but in no case shall such charges exceed 30/100 of 1%
(0.30%) per annum of the daily net asset value of the Trust.
Trust fees and expenses will first be paid out of income received by
the Trust in the form of dividends and other distributions on the Securities. It
is currently expected that Trust income may be insufficient to cover Trust fees
and expenses (see "Special Considerations and Risk Factors--Little or No
Expected Net Dividend Distributions to Beneficial Owners"). In such
circumstances, the
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Trustee will sell Securities in an amount sufficient to pay the excess of
accrued fees and expenses over the dividends and other Trust accrued income.
Specifically, the Trustee is required to sell Securities whenever the Trustee
determines that accrued fees and expenses exceed dividends and other Trust
accrued income by more than 1/100 of one percent (0.01%) of the net asset value
of the Trust. Whenever the 0.01% threshold is exceeded, the Trustee will sell
sufficient Securities to cover such excess no later than the next occasion it is
required to make adjustments to the Portfolio due to a Misweighting (see "The
Portfolio--Adjustments to the Portfolio"). At that time, the Trustee shall first
sell Securities that are over-weighted in the Portfolio as compared to their
relative weighting in the Index.
The Trustee may also make advances to the Trust to cover 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 may 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 are reflected in the net asset
value of the Trust (see "Valuation").
For services performed under the Trust Agreement, the Trustee is paid
by the Trust a fee at an annual rate of 6/100 of 1% to 10/100 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
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is computed on each Business Day on the basis of the net asset value of the
Trust on such day, and the amount thereof is accrued daily and paid monthly. The
Trustee, in its discretion, may waive all or a portion of such fee.
Notwithstanding the fee schedule set forth in the table below, the Trustee shall
be paid a minimum annual fee of $180,000 per annum. To the extent that the
amount of the Trustee's compensation is less than such minimum annual fee, the
Sponsor has agreed to pay the amount of any such shortfall.
TRUSTEE FEE SCALE
Net Asset Value Fee as a Percentage of Net
of the Trust Asset Value of the Trust
$0-$499,999,999...................................... 10/100 of 1% per annum*
$500,000,000-$2,499,999,999.......................... 8/100 of 1% per annum*
$2,500,000,000 and above............................. 6/100 of 1% per annum*
________________
* The fee indicated applies to that portion of the net asset value of the
Trust which falls in the size category indicated.
REDEMPTION OF NASDAQ GOLD
Nasdaq GOLD in Creation Unit size aggregations is ordinarily redeemable
in kind only and is not redeemable for cash except under certain circumstances.
Nasdaq GOLD in Creation Unit size aggregations may be redeemed by submitting a
request for redemption, the requisite number of shares of Nasdaq GOLD, and the
Cash Redemption Amount (as defined below), if applicable, to the Trustee in the
manner specified below. Beneficial Owners of Nasdaq GOLD may sell Nasdaq GOLD in
the
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secondary market, but must accumulate enough shares of Nasdaq GOLD to constitute
a Creation Unit (i.e., 25,000 shares) in order to redeem through the Trust.
Nasdaq GOLD 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 Nasdaq GOLD Clearing Process) or a
single DTC Participant (with respect to redemptions outside the Nasdaq GOLD
Clearing Process). Nasdaq GOLD will remain outstanding until redeemed or until
the termination of the Trust.
PROCEDURE FOR REDEMPTION OF NASDAQ GOLD
Requests for redemptions of Creation Units may be made on any Business
Day through the Nasdaq GOLD 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 directly to the Trustee outside the Nasdaq GOLD Clearing Process.
Requests for redemption shall not be made to the Distributor. In the case of
redemptions made through the Nasdaq GOLD Clearing Process, the Transaction Fee
will be deducted from the amount delivered to the redeemer or added to the
amount owed by the redeemer to the Trustee, as applicable. In case of
redemptions tendered directly to the Trustee outside the Nasdaq GOLD Clearing
Process, a total fee will be charged equal to the Transaction Fee plus an
additional amount not to exceed three (3) times the Transaction Fee applicable
for a Creation Unit (due in part to the increased expense associated with
delivery outside the Nasdaq GOLD Clearing Process), and such amount will be
deducted from the amount delivered to the redeemer or added to the amount owed
by the redeemer to the Trustee on behalf of the Trust, as applicable (see
"Prospectus Summary--Transaction Fee"). In all cases, the tender of Nasdaq GOLD
for redemption and distributions to the redeemer (or payments to the Trustee, as
applicable) in respect of Nasdaq GOLD
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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 Nasdaq GOLD delivered, typically
identical in composition and weighting 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 Nasdaq GOLD Clearing Process or outside the Nasdaq GOLD 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"). Each
redemption also includes a cash amount, the "Cash Redemption Amount," which will
either be paid to the Trustee by the redeemer or paid to the redeemer by the
Trustee on behalf of the Trust as described below. On any given Business Day,
the Cash Redemption Amount is typically an amount identical to the amount of the
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
accrued 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 the sum of dividends on all Securities with
ex-dividend dates within the Accumulation Period, plus or minus the Balancing
Amount, exceeds the accrued expenses and liabilities of the Trust for such
period (i.e., the Cash
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Redemption Amount has a positive value), then the Trustee on behalf of the Trust
will transfer payment thereof via the relevant DTC Participant(s) to the
redeeming Beneficial Owner. Conversely, to the extent the sum of dividends on
all Securities with ex-dividend dates within the Accumulation Period, plus or
minus the Balancing Amount, is less than the accrued expenses and liabilities of
the Trust for such period (i.e., the Cash Redemption Amount has a negative
value), then such Beneficial Owner shall be required to deliver payment thereof
via the relevant DTC Participant(s) to the Trustee on behalf of the Trust. In
the case of redemptions made through the Nasdaq GOLD Clearing Process, the
Trustee on behalf of the Trust will effect a transfer of the Cash Redemption
Amount (if required) and the securities to the redeeming Beneficial Owner by the
third (3rd) NSCC Business Day following the date on which request for redemption
is deemed received. In the case of redemptions made outside the Nasdaq GOLD
Clearing Process, the Trustee on behalf of the Trust will transfer the Cash
Redemption Amount (if required) and the securities to the redeeming Beneficial
Owner by the third (3rd) Business Day following the date on which the request
for redemption is deemed received. In cases in which the Cash Redemption Amount
is payable by the redeemer to the Trustee, the redeeming Beneficial Owner (via
the Depository and the relevant DTC Participants(s)) is required to make payment
of such cash amount by the third (3rd) NSCC Business Day, for redemptions made
through the Nasdaq GOLD Clearing Process, or the first (1st) Business Day, for
redemptions outside the Nasdaq GOLD Clearing Process, following the date on
which the request for redemption is deemed received. The Trustee will cancel all
Nasdaq GOLD 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 Nasdaq GOLD in Creation Unit
size aggregations, the Trustee shall have the right in its discretion to include
the cash equivalent value of such Index Security or Index Securities, based on
the market
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value of such Index Security or Index Securities as of the Evaluation Time on
the date such redemption is deemed received by the Trustee (see "Placement of
Redemption Orders Using the Nasdaq GOLD Clearing Process"), in the calculation
of the Cash Redemption Amount in lieu of delivering such Index Security or Index
Securities to the redeemer.
In connection with the redemption of Nasdaq GOLD, if a redeeming
investor requests redemption in cash, rather than in kind, with respect to one
or more Securities (for example, because such 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
include 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 the Nasdaq GOLD Clearing
Process"), in the calculation of the Cash Redemption Amount 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 not to exceed three (3) times the Transaction Fee applicable
for a Creation Unit (see "Prospectus Summary--Transaction Fee").
The Trustee, in its discretion, upon the request of a redeeming
investor, may redeem Creation Units in whole or in part by providing such
redeemer with a portfolio of Securities differing in exact composition from the
Index Securities but not differing in net asset value from the then-current
Portfolio Deposit. Such a redemption might be made, for example, if it were to
be determined that this composition would be appropriate in order to maintain
the Portfolio's correlation to the composition and weighting of the Index, for
instance in connection with a replacement of one of the Index Securities (e.g.,
due to a merger, acquisition or bankruptcy). (See "The Portfolio" and "The
Index".)
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The Trustee may sell Securities to obtain sufficient cash proceeds to
deliver to the redeeming Beneficial Owner. To the extent cash proceeds are
received by the Trustee in excess of the 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 Amount to a redeemer of Nasdaq GOLD, the Trustee may advance out
of its own funds any amounts necessary in respect of redemptions of Nasdaq GOLD;
otherwise, the Trustee may sell Securities in an amount sufficient to effect
such redemptions. The Trustee may reimburse itself in the amount of such
advance, plus any amounts required by the Federal Reserve Board which are
related to such advance, 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 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 (1) for any period
during which the New York Stock Exchange is closed; (2) for any period during
which
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an emergency exists as a result of which disposal or evaluation of the
Securities is not reasonably practicable; or (3) 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 Nasdaq GOLD
in Creation Unit size aggregations, an entity or person must be (1) a
Participating Party, with respect to redemptions through the Nasdaq GOLD
Clearing Process, or (2) a DTC Participant, with respect to redemptions outside
the Nasdaq GOLD Clearing Process.
All orders to redeem Nasdaq GOLD must be placed in multiples of 25,000
shares (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 Nasdaq GOLD Participant Agreement.
Severe economic or market changes or disruptions, or telephone or other
communication failure, may impede the ability to reach the Trustee, a
Participating Party, or a DTC Participant.
Orders to redeem Creation Unit size aggregations of Nasdaq GOLD 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 Nasdaq GOLD
Participant Agreement, and that, therefore, orders to redeem Creation Unit size
aggregations of Nasdaq GOLD may have to be placed by the investor's broker
through a Participating Party or a DTC Participant who has executed a Nasdaq
GOLD Participant Agreement. At any given time there may be only a limited number
of broker-dealers that have executed a Nasdaq GOLD Participant Agreement. Those
placing orders to redeem Nasdaq GOLD should afford sufficient time to permit (1)
proper submission of the order by a Participating Party or DTC Participant to
the
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Trustee and (2) the receipt of the Nasdaq GOLD to be redeemed and the Cash
Redemption Amount, if any, by the Trustee in a timely manner, as described
below. Orders for redemption that are effected outside the Nasdaq GOLD Clearing
Process are likely to require transmittal by the DTC Participant earlier on the
Transmittal Date than orders effected using the Nasdaq GOLD Clearing Process.
Those persons placing orders outside the Nasdaq GOLD 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 Nasdaq GOLD and Cash Redemption
Amount. These deadlines will vary by institution. The Participant notified of an
order to redeem outside the Nasdaq GOLD Clearing Process will be required to
transfer Nasdaq GOLD through DTC and the Cash Redemption Amount, if any, through
the Federal Reserve Bank wire system in a timely manner (see "Placement of
Redemption Orders Outside the Nasdaq GOLD Clearing Process"). Information
regarding the Cash Redemption Amount, number of outstanding shares of Nasdaq
GOLD, and Transaction Fees may be obtained from the Trustee at the toll-free
number: ____________.
PLACEMENT OF REDEMPTION ORDERS USING THE NASDAQ GOLD CLEARING PROCESS
Orders to redeem Nasdaq GOLD in Creation Unit size aggregations through
the Nasdaq GOLD Clearing Process must be delivered through a Participating Party
(see "Prospectus Summary--Portfolio Deposit") that has executed the Nasdaq GOLD
Participant Agreement with the Distributor and with the Trustee (as the same may
be from time to time amended in accordance with its terms). An order to redeem
Nasdaq GOLD using the Nasdaq GOLD 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 Nasdaq GOLD Participant Agreement are properly
followed; such order will be effected based on the net
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asset value of the Trust as determined as of the Evaluation Time on the
Transmittal Date. An order to redeem Nasdaq GOLD using the Nasdaq GOLD 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 Nasdaq GOLD 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 third (3rd) NSCC
Business Day following the date on which such request for redemption is deemed
received, and the Cash Redemption Amount, if any. If the Cash Redemption Amount
is owed by the Beneficial Owner to the Trustee, such amount must be delivered by
the third (3rd) NSCC Business Day following the date on which the redemption
request is deemed received. The calculation of the value of the Securities and
the Cash Redemption Amount 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 THE NASDAQ GOLD CLEARING PROCESS
Orders to redeem Nasdaq GOLD outside the Nasdaq GOLD Clearing Process
must be delivered through a DTC Participant that has executed the Nasdaq GOLD
Participant Agreement with the Distributor and with the Trustee. A DTC
Participant who wishes to place an order for redemption of Nasdaq GOLD to be
effected outside the Nasdaq GOLD Clearing Process need not be a Participating
Party, but such orders must state that the DTC Participant is not using the
Nasdaq GOLD Clearing Process and that redemption of Nasdaq GOLD will instead be
effected through transfer of Nasdaq GOLD directly through DTC. An order to
redeem Nasdaq GOLD outside the
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Nasdaq GOLD 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 shares of Nasdaq GOLD 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 Nasdaq GOLD Participant Agreement are properly
followed. The Cash Redemption Amount 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 Nasdaq
GOLD 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 three Business Days) and the Cash Redemption
Amount to the redeeming Beneficial Owner (where such amount is payable from the
Trustee to the Beneficial Owner) by the third (3rd) 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
Amount 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 Nasdaq GOLD is
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 Amount 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 the Closing Time on a Transmittal Date but either (1) the
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requisite Nasdaq GOLD is 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 Amount
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 Nasdaq
GOLD is 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 share of Nasdaq GOLD 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 shares of Nasdaq GOLD.
The aggregate value of the Securities shall be determined by the
Trustee in good faith in the following manner. The value of a Security shall
generally be based on the closing sale price for the Security on that day
(unless the Trustee deems such price inappropriate as a basis for evaluation) on
the Nasdaq Stock Market or, if there is no such appropriate closing sale price
on the Nasdaq Stock Market, at the closing bid price (unless the Trustee
deems such price inappropriate as a basis for evaluation). If a Security is not
so quoted on the Nasdaq Stock Market or, if so quoted and the principal market
therefor is other than on the Nasdaq Stock Market or there is no such closing
bid price available, such evaluation shall generally be made by the Trustee in
good faith based (a) on the closing price for the Security on another market on
which the Security is traded (unless the Trustee
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deems such price inappropriate as a basis for evaluation) or if there is no
such appropriate closing price, at the closing bid price on such other market,
(b) on current bid prices on the Nasdaq Stock Market or such other markets, (c)
if bid prices are not available, on the basis of current bid prices for
comparable securities, (d) by the Trustee's appraising the value of the
securities in good faith on the bid side of the market, or (e) 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 shares of Nasdaq GOLD in
Creation Unit size aggregations are also maintained by the Distributor. Record
of ownership of Nasdaq GOLD 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 has the right to vote all of the voting securities in the
Trust. The Trustee votes the voting securities of each issuer in the same
proportionate relationship as all other shares of each such issuer are voted to
the extent permissible and, if not permitted, abstains from voting.
DISTRIBUTIONS TO BENEFICIAL OWNERS
Distributions by the Trust will be made quarterly in the event that
dividends accumulated in respect of the Securities and other income, if any,
received by the Trust, exceed Trust fees and
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expenses accrued during the quarterly Accumulation Period which ends on the
Business Day preceding each Ex-Dividend Date. Based on historical dividend
payment rates of the portfolio of securities comprising the Index and estimated
ordinary operating expenses of the Trust, little or no such distributions are
currently anticipated (see "Special Considerations and Risk Factors--Little or
No Expected Net Dividend Distributions to Beneficial Owners").
The regular quarterly Ex-Dividend Date with respect to net dividends,
if any, for Nasdaq GOLD 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. Beneficial
Owners as reflected on the records of the Depository and the DTC Participants on
the second Business Day following the Ex-Dividend Date (the "Record Date") are
entitled to receive an amount, if any, representing dividends accumulated on the
Securities through the quarterly Accumulation 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 the fees and expenses of
the Trust, accrued daily for such period. For the purposes of such
distributions, dividends per share of Nasdaq GOLD are calculated at least to the
nearest 1/100th of $0.01. When net dividend payments are to be made by the
Trust, payment 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. Nasdaq GOLD is
registered in book entry only, which records are kept by the Depository (see
"The Trust--Book-Entry-Only System").
Dividends payable to the Trust in respect of the Securities are
credited by the Trustee to a non-interest bearing account as of the date on
which the Trust receives such dividends. Other moneys received by the Trustee in
respect of the Securities, including but not limited to the Cash Component,
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the Cash Redemption Amount, 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 are also credited by the Trustee to a non-interest
bearing account. All funds collected or received are held by the Trustee without
interest until distributed or otherwise utilized 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 is 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, payment of the expenses of the Trust, 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) any amount by
which estimated Trust investment company taxable income and net capital gains
for a fiscal 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
after the actual
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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 by
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 any such additional
distributions. In that case, the Trustee typically 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 weighting in the Index first
and then from among all other Securities in a manner so as to maintain the
weighting 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, if any, are to be made from the Trust (e.g., from
quarterly to semi-annually) 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 Nasdaq
GOLD to another regular date if it is determined by the Sponsor and the Trustee,
in their discretion, that such a change would be advantageous to the Trust.
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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, together
with interest thereon at a percentage rate equal to then current overnight
federal funds rate, plus Federal Reserve Bank requirements, 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 Nasdaq GOLD 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 Nasdaq GOLD"
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").
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All distributions are 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").
The settlement date for the creation of Nasdaq GOLD in Creation Unit
size aggregations or the purchase of Nasdaq GOLD in the secondary market must
occur on or prior to the Record Date in order for such creator or purchaser to
receive any distributions made by the Trust on the next Dividend Payment Date.
If the settlement date for such creation or a secondary market purchase occurs
after the Record Date, the distribution will be made to the prior security
holder or Beneficial Owner as of such Record Date.
TRUST SUPERVISION
The Trust's Portfolio Securities are not managed and therefore the
adverse financial condition of an issuer of securities in the Trust does 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 share of
Nasdaq GOLD.
Promptly after the end of each fiscal year, the Trustee will furnish to
the DTC Participants, for distribution to each person who was a Beneficial Owner
of Nasdaq GOLD at the end of such
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fiscal year, an annual report of the Trust containing financial statements
audited by independent accountants of nationally recognized standing and such
other information as may be required by applicable laws, rules, and regulations.
REGISTER OF OWNERSHIP AND TRANSFER
The Trustee maintains a record of the creation and redemption of Nasdaq
GOLD in Creation Unit size aggregations. The Depository maintains a record on
its book-entry system of the DTC Participant ownership of Nasdaq GOLD and the
number of shares of Nasdaq GOLD owned (see "The Trust--Book-Entry-Only System").
Certificates are not issued for Nasdaq GOLD, 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 Nasdaq GOLD through the Depository by instructing the DTC
Participant(s) holding the Nasdaq GOLD for such Beneficial Owner in accordance
with standard securities industry procedures.
RIGHTS OF BENEFICIAL OWNERS
Nasdaq GOLD in Creation Unit size aggregations (i.e., 25,000 shares of
Nasdaq GOLD) may be tendered to the Trustee for redemption (see "Redemption of
Nasdaq GOLD"). Beneficial Owners may sell Nasdaq GOLD in the secondary market,
but must accumulate enough shares of Nasdaq GOLD (i.e., 25,000 shares) 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. By its purchase of a Nasdaq GOLD share, each Beneficial
Owner expressly waives any right he or she may have under law to require the
Trustee at any time to account, in any manner other than as expressly provided
in the
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Trust Agreement, for the Securities or moneys from time to time received, held,
and applied by the Trustee under the Trust.
Beneficial Owners shall 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 or advisable in the event that NSCC or the Depository is unable or
unwilling to continue to perform its functions as set forth therein; (e) to add
or change any provision thereof to conform the adjustments to the Portfolio and
the Portfolio Deposit to changes, if any, made by Nasdaq in its method of
determining the Index; (f) to add or charge any provision thereof as may be
necessary to implement a dividend reinvestment plan or service; and (g) to make
changes to the Transaction Fee and to other amounts charged in connection with
creations and redemptions of Nasdaq GOLD within the original parameter 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 shares of Nasdaq GOLD to add
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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 shares of Nasdaq GOLD 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 Nasdaq GOLD. The Trustee shall inquire of
each such DTC Participant as to the number of Beneficial Owners for whom such
DTC Participant holds Nasdaq GOLD, 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 has 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 falls below $150,000,000 or if at any time on
or after three years following the Initial Date of Deposit the net asset value
of the Trust is less than $350,000,000, 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
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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 is less than $100,000. The Trust will also
terminate in the event that Nasdaq GOLD is delisted from the [Nasdaq Stock
Market/Amex] and is not subsequently relisted on a national securities exchange
or a quotation medium operated by a national securities association. The [Nasdaq
Stock Market/Amex] will consider the suspension of trading in or the delisting
of Nasdaq GOLD as discussed above (see "Marketplace Listing").
The Trust may also be terminated (a) by the agreement of the Beneficial
Owners of 66 2/3% of outstanding shares of Nasdaq GOLD; (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 Nasdaq GOLD, or if the
Trustee is no longer a participant in NSCC; (d) if Nasdaq ceases publishing the
Index; and (e) if the License Agreement is terminated. Currently, the License
Agreement is scheduled to expire five years from the commencement date of
trading of Nasdaq GOLD in accordance with its terms and is subject to a five
year renewal period following such date. The Trust will also terminate by its
terms on the Mandatory Termination Date.
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
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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 Nasdaq GOLD (whether in
Creation Unit size aggregations or otherwise) will receive in cash the net asset
value of the Nasdaq GOLD 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, and that, as of the date
thereof and thereafter, the portfolio of Securities delivered upon redemption
shall be essentially 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 request for redemption is deemed
received. Beneficial Owners of Nasdaq GOLD in Creation Unit size aggregations
may, in advance of the Termination Date, redeem in kind directly from the Trust
(see "Redemption of Nasdaq GOLD").
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, the outbreak of hostilities, or
the collapse of the economy. Upon receipt of proceeds from the sale of the last
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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. Nasdaq
GOLD 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 shares of Nasdaq GOLD required.
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 Nasdaq GOLD 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 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
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as provided in the Trust Agreement. Notice of such discharge and appointment
shall be mailed by the Sponsor to the Depository and the DTC Participants for
distribution to Beneficial Owners.
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 shares of Nasdaq GOLD
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 is not liable for any
action taken in reasonable reliance on properly executed documents or for the
disposition of moneys 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 is the Trustee 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 or act, the
Trustee may act and is not liable for any such action taken by it in good faith.
The Trustee is not 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
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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 "Administration of the
Trust--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
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
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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 "Administration of the Trust--Termination").
The dissolution of the Sponsor or its ceasing to exist as a legal
entity for any reason 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 Nasdaq GOLD.
The Trust Agreement provides that the Sponsor is not liable to the
Trustee, the Trust, or to the Beneficial Owners of Nasdaq GOLD for taking any
action or for refraining from taking any action made in good faith or for errors
in judgment, but is 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 is not 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 (including counsel fees) of defending against any claim or liability.
SPONSOR
The Sponsor of the Trust is Investment Product Services, Inc., a
Delaware corporation incorporated on August 7, 1998 with offices c/o The Nasdaq
Stock Market, Inc., 1735 K Street
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NW, Washington, DC 20006-1500. The Sponsor's Internal Revenue Service Employer
Identification Number is __________. Nasdaq owns all of the Sponsor's
outstanding shares of common stock. Nasdaq is a "control person" of the Sponsor
as such term is defined in the Securities Act.
The Sponsor, at its own expense, may from time to time provide
additional promotional incentives to brokers who sell Nasdaq GOLD 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 shares of Nasdaq GOLD within a
specified time period.
TRUSTEE
The Trustee is The Bank of New York, a corporation organized under the
laws of the State of New York with trust powers. The Trustee has a trust office
at 101 Barclay Street, New York, New York 10286 and its 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, acts as Depository for
Nasdaq GOLD. The Depository receives customary fees for its services.
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LEGAL OPINION
The legality of the shares of Nasdaq GOLD offered hereby has been
passed upon by Jones, Day, Reavis & Pogue, New York, New York, as counsel for
the Sponsor.
INDEPENDENT AUDITORS AND FINANCIAL STATEMENTS
The financial statements as of __________, 1998 included in this
Prospectus have been so included in reliance upon the report of Ernst & Young
LLP, independent auditors, given on the authority of said firm as experts in
auditing and accounting.
INFORMATION AND COMPARISON RELATING TO TRUST, SECONDARY MARKET TRADING,
NET ASSET SIZE, PERFORMANCE, AND TAX TREATMENT
Information regarding various aspects of the Trust, including the net
asset size thereof, as well as the secondary market trading, the performance,
and the tax treatment of Nasdaq GOLD, 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
principles 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 Nasdaq GOLD in the secondary market,
such as margin requirements, types of orders that may be entered, and
information concerning short sales. Similarly, market data symbols, trading
fractions, other trading information, and the CUSIP number relating to Nasdaq
GOLD may be included in such information.
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Comparisons with other investment vehicles, such as mutual funds, may be made
with respect to the application of such requirements, costs of fund management
and administration, costs and advantages of intraday trading, and rules
applicable to short sales.
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 shares of Nasdaq GOLD
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 may be provided to investors regarding the ability to
engage in short sales of Nasdaq GOLD, including reference to any applicable
exemption from the ["bid test" provision of the Nasdaq Stock Market's "short
sale rule"] -- if Nasdaq Stock Market listing or ["tick test" provision of the
Commission's "short sale rule" (Rule 10a-1 under the Securities Exchange Act of
1934)] -- if Amex listing, to permit short sales on "minus" or "zero-minus"
[ticks/bids]. Selling short refers to the sale of securities which the seller
does not own, but which the seller arranges to borrow prior to effecting the
sale. Institutional investors may be advised that lending their shares of Nasdaq
GOLD to short sellers may generate stock loan credits which may supplement the
return they can earn from an investment in Nasdaq GOLD. These stock loan credits
may provide a useful source of additional income for certain institutional
investors who can arrange to lend Nasdaq GOLD. Potential short sellers may be
advised that a short rebate (functionally equivalent to partial use of proceeds
of the short sale) may reduce their cost of selling short.
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123
Information may be provided to investors regarding capital gains
distributions by the Trust, including historical information relating to such
distributions. Comparisons between the Trust and other investment vehicles such
as mutual funds may be made regarding such capital gains distributions, as well
as relative tax efficiencies between the Trust and such other investment
vehicles (e.g., realization of capital gains or losses to the Trust and to such
other investment vehicles in connection with redemption of their respective
securities). (See "Tax Status of the Trust" for discussion of tax consequences
to Beneficial Owners of Nasdaq GOLD in connection with the sale or redemption of
Nasdaq GOLD.) Based on projected differences between Nasdaq GOLD and
conventional mutual funds with regard to capital gains distributions,
projections may be made regarding comparative capital gains distributions and
tax rates for taxable investors holding Nasdaq GOLD over a long period of time.
Comparisons may also be provided regarding the probable tax impact resulting
from rebalancing of the Trust portfolio (see "The Portfolio--Adjustments to the
Portfolio") and adjustments to the portfolio of an actively managed investment
vehicle.
Specifically, information may be provided to prospective or current
investors comparing and contrasting the tax efficiencies of conventional mutual
funds with Nasdaq GOLD. Both conventional mutual funds and the Trust may be
required to recognize capital gains incurred as a result of adjustments to the
composition and weighting of the Index and therefore to their respective
portfolios. From a tax perspective, however, a significant difference between a
conventional mutual fund and the Trust is the process by which their shares are
redeemed. In cases where a conventional mutual fund experiences redemptions in
excess of subscriptions ("net redemptions") and has insufficient cash available
to fund such net redemptions, such fund may have to sell stocks held in its
portfolio to raise and pay cash to redeeming shareholders. A mutual fund will
generally experience a taxable gain or loss when it sells such portfolio stocks
in order to pay cash to redeeming fund
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shareholders. In contrast, the redemption mechanism for Nasdaq GOLD does not
ordinarily involve selling the Securities held by the Trust in the event of a
redemption. Instead, the Trust delivers an actual portfolio of securities in an
"in-kind" exchange to any person redeeming Nasdaq GOLD in Creation Unit size
aggregations (i.e., 25,000 shares of Nasdaq GOLD per Creation Unit). While this
"in-kind" exchange is a taxable transaction to the redeeming entity (usually a
broker/dealer) making the exchange, it generally does not constitute a taxable
transaction at the Trust level and, consequently, there is no realization of
taxable gain or loss by the Trust with respect to such "in-kind" exchanges. In a
period of market appreciation of the Index and, consequently, appreciation of
Nasdaq GOLD, this "in-kind" redemption mechanism has the effect of eliminating
the recognition and distribution of those net unrealized gains at the Trust
level. Investors should note that although the same result would occur for
conventional mutual funds utilizing an "in-kind" redemption mechanism, the
opportunities to redeem fund shares by delivering portfolio stocks "in-kind" are
limited in most mutual funds.
Investors may be informed that, while no unequivocal statement can be
made as to the net tax impact on a conventional mutual fund resulting from the
purchases and sales of its portfolio stocks over a period of time, conventional
funds that have accumulated substantial unrealized capital gains, if they
experience net redemptions and do not have sufficient available cash, may be
required to make taxable capital gains distributions that are generated by
changes in such fund's portfolio. In contrast, the "in-kind" redemption
mechanism of Nasdaq GOLD may make them more tax efficient investments under most
circumstances than comparable conventional mutual fund shares. As discussed
above, the "in-kind" redemption feature of the Trust tends to lower the amount
of annual net capital gains distributions to Nasdaq GOLD holders as compared to
their conventional mutual fund counterparts. Since shareholders are generally
required to pay income tax on capital gains distributions, the smaller
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the amount of such distributions, the less taxes that are payable currently. To
the extent that the Trust is not required to recognize capital gains, the Nasdaq
GOLD holder is able, in effect, to defer tax on such gains until he sells or
otherwise disposes of his shares, or the Trust terminates. If such holder
retains his shares until his death, under current law the tax basis of such
shares would be adjusted to their then fair market value.
Information regarding the secondary market trading activity of Nasdaq
GOLD also may be presented over one or more stated time periods, such as for
daily, monthly, quarterly, or annual periods. Nasdaq GOLD secondary market
trading volume information may be compared with similar information relating to
other issues trading on the [Nasdaq Stock Market/Amex] during the same reporting
period. Average daily secondary market trading volume of shares of Nasdaq GOLD
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
investors or current Beneficial Owners comparing and contrasting the relative
advantages of investing in Nasdaq GOLD 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 Nasdaq
GOLD to other investment vehicles, current economic, financial and political
conditions, investment philosophy or techniques, or the desirability of owning
Nasdaq GOLD.
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126
In addition, information on the performance of Nasdaq GOLD on the basis
of changes in price per share of Nasdaq GOLD with or without reinvesting all
dividends, if any, and/or any distributions of capital in additional shares of
Nasdaq GOLD may be included from time to time in such information. Average
annualized performance may 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. Total return measures the percentage growth
in the total dollar value of an investment in Nasdaq GOLD (reflecting dividends,
if any, and capital appreciation but without provision for any income taxes
payable).
Information on the 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 Index (provided information is also given
reflecting the performance of the Trust in comparison to the 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 database of tax-exempt
funds) or mutual funds such as those reported by Lipper Analytical Services
Inc., Money Magazine Fund Watch, Wiesenberger Investment Companies Service,
Morningstar Incorporated, and Value Line Investment Survey, 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 Composite Index, the Nasdaq Composite Index (indices of stocks traded
on the New York and American Stock Exchanges and the Nasdaq Stock Market,
respectively), the S&P 500 Index(R) (a broad-based index of 500 publicly traded
companies), the S&P MidCap 400 Index(TM) (a broad-based index of 400 publicly
traded middle capitalization companies), the Dow Jones Industrial Average(SM)
(an index currently comprising 30 publicly traded large capitalization
companies), or similar domestic or foreign
116
127
measurement standards during the same period of time. In addition to all other
sources of comparative information, comparative performance figures published by
other funds or money managers may be included from time to 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 Nasdaq GOLD in
relation to other securities and/or indices 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 minus one hundred percent
(-100%) (i.e., perfect negative linear association) to positive one hundred
percent (100%) (i.e., perfect positive linear association).
One important difference between Nasdaq GOLD and conventional mutual
fund shares is that Nasdaq GOLD is available for purchase or sale on an intraday
basis on the [Nasdaq Stock Market/Amex]. An investor who buys shares in a
conventional mutual fund will usually buy or sell shares at a price at or
related to the closing net asset value per share, as determined by the fund. In
contrast, Nasdaq GOLD is not offered for purchase or redeemed for cash at a
fixed relationship to closing NAV. Information may be presented to help
investors evaluate potential advantages and disadvantages of Nasdaq GOLD
relative to funds sold and redeemed at prices related to closing NAV.
Information relating to the relative price performance of Nasdaq GOLD
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
117
128
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. For example, the performance of
Nasdaq GOLD 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 Nasdaq GOLD 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 Nasdaq GOLD and the investment categories, indices, or
compilations chosen, and no guarantees can be made of future results regarding
the performance of either Nasdaq GOLD or the asset classes chosen for such
comparisons.
DIVIDEND REINVESTMENT SERVICE
The Sponsor reserves the right in the future to make the DTC book-entry
Dividend Reinvestment Service (the "Service") available for use by Beneficial
Owners through DTC Participants for reinvestment of their cash proceeds, if any.
The Sponsor may choose to make the Service available within its discretion and
without the consent of Beneficial Owners. Some or all DTC Participants may not
elect to utilize the Service; therefore, if the Service is made available for
Nasdaq GOLD, an interested Nasdaq GOLD investor may wish to contact his or her
broker to ascertain the availability of the Service through such broker at such
time. Interested Beneficial
118
129
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
investors should ascertain from their broker such necessary details at the time
when the Service is made available for Nasdaq GOLD.
If and when the Service is utilized, the Trustee will use the cash
proceeds of dividends received from all Beneficial Owners participating in
reinvestment through the Service to obtain Index Securities necessary to create
the requisite number of shares of Nasdaq GOLD at the close of business on each
Nasdaq GOLD distribution date. Any cash balance remaining after the requisite
number of shares of Nasdaq GOLD have been created will be distributed, on a pro
rata basis, to all Beneficial Owners who participated in the Service. Brokerage
commissions, if any, incurred in obtaining the Index Securities necessary to
create additional Nasdaq GOLD with the cash from the distributions will be an
expense of the Trust.
Nasdaq GOLD acquired pursuant to the Service will be held by the
Beneficial Owners in the same manner, and subject to the same terms and
conditions, as original ownership of Nasdaq GOLD. Distributions reinvested in
additional shares of Nasdaq GOLD through the Service will nevertheless be
taxable dividends to Beneficial Owners to the same extent as if received in
cash.
ADDITIONAL INFORMATION
A Registration Statement on Form S-6, including amendments thereto,
relating to the Trust, of which this Prospectus forms a part, has been filed
with the Commission. This Prospectus does not contain all of the information set
forth in the Registration Statement and the exhibits thereto. Statements
contained in this Prospectus as to the contents of any contract or other
document referred to are not necessarily complete and in each instance reference
is made to the copy of such contract or other document filed as an exhibit to
the Registration Statement, each such statement being
119
130
qualified in all respects by such reference. For further information with
respect to the Trust, reference is made to such Registration Statement and the
exhibits thereto. A copy of the Registration Statement may be inspected by
anyone without charge at the Commission's principal office located at 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549, the Northeast Regional
Office located at 7 World Trade Center, 13th Floor, New York, New York 10048,
and the Midwest Regional Office located at Citicorp Center, 500 West Madison
Street, 14th Floor, Chicago, Illinois 60661-2511, and copies of all or any part
thereof may be obtained from the Public Reference Branch of the Commission upon
the payment of certain fees prescribed by the Commission. In addition, the
Registration Statement may be accessed electronically at the Commission's site
on the World Wide Web located at http://www.sec.gov. Such information is also
available at the offices of the Sponsor c/o The Nasdaq Stock Market, Inc., 1735
K Street NW, Washington, DC 20006-1500.
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131
GLOSSARY OF DEFINED TERMS
Page
----
"10 Basis Point Limit".....................................................9
"1940 Act"................................................................13
"Accumulation Period"......................................................6
"Adjustment Day"..........................................................58
["Amex"]...................................................................1
"Annual Ranking Review"...................................................67
"Balancing Amount"........................................................60
"Beneficial Owners".......................................................48
"Business Day"............................................................10
"Cash Component"...........................................................6
"Cash Redemption Amount"..................................................86
"Closing Time"............................................................41
"Code"....................................................................12
"Commission"...............................................................5
"CPI"....................................................................117
"CPI-U"...................................................................17
"Creation Unit"............................................................1
"Depository Agreement"....................................................49
"Depository"..............................................................11
"Distributor".............................................................18
"Dividend Payment Date"...................................................96
"DTC".....................................................................11
"DTC Participants"........................................................47
"DTC Cut-Off Time"........................................................93
"ERISA"...................................................................12
"Evaluation Time"..........................................................3
"Ex-Dividend Date"........................................................14
"Global Security".........................................................46
"Income Net of Expense Amount".............................................6
"Index Securities".........................................................4
"Index"....................................................................1
"Indirect Participants"...................................................47
"Initial Date of Deposit"..................................................3
"IRA".....................................................................13
"Large Stocks"............................................................68
"License Agreement".......................................................70
"Mandatory Termination Date"..............................................17
"Nasdaq"...................................................................1
"Nasdaq GOLD"..............................................................1
"Nasdaq GOLD Clearing Process".............................................8
"Nasdaq GOLD Participant Agreement".......................................44
"NAV Amount"..............................................................58
121
132
"NSCC Business Day".......................................................22
"NSCC".....................................................................5
"Participating Party"......................................................5
"Plans"...................................................................12
"Portfolio Deposit Amount"................................................59
"Portfolio Deposit"........................................................6
"Portfolio"...............................................................35
"Record Date".............................................................96
"Request Day".............................................................58
"Securities Act"..........................................................79
"Securities"...............................................................1
"Service"................................................................118
"Small Stocks"............................................................68
"Sponsor"..................................................................1
"Sponsor Indemnified Party"..............................................109
"Termination Date".......................................................105
"Transaction Fee"..........................................................8
"Transmittal Date"........................................................41
"Trust Agreement"..........................................................4
"Trust"....................................................................1
"Trustee"..................................................................5
"Trustee Indemnified Party"..............................................108
122
133
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 SHARES OF
NASDAQ GOLD HAVE BEEN GUARANTEED, SPONSORED, RECOMMENDED OR APPROVED BY THE
UNITED STATES OR ANY STATE OR ANY AGENCY OR OFFICER THEREOF.
- ------------------
Until _____________, 1998, all dealers effecting transactions in the
registered securities, whether or not participating in this distribution, may be
required to deliver a prospectus.
NASDAQ GOLD(sm) TRUST
SERIES 1
---------------------------------
NASDAQ GOLD(SM)
------------------------
PROSPECTUS
------------------------
SPONSOR
INVESTMENT PRODUCT
SERVICES, INC.
------------------------------------
TABLE OF CONTENTS
Page
----
ESSENTIAL INFORMATION.........................................................2
PROSPECTUS SUMMARY............................................................4
SPECIAL CONSIDERATIONS AND RISK FACTORS......................................20
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS..........................32
STATEMENT OF FINANCIAL CONDITION.............................................33
SCHEDULE OF INVESTMENTS......................................................34
THE TRUST....................................................................35
THE PORTFOLIO................................................................50
THE INDEX....................................................................63
LICENSE AGREEMENT............................................................70
MARKETPLACE LISTING..........................................................72
TAX STATUS OF THE TRUST......................................................73
CONTINUOUS OFFERING OF NASDAQ GOLD...........................................78
EXPENSES OF THE TRUST........................................................80
REDEMPTION OF NASDAQ GOLD....................................................84
VALUATION....................................................................94
ADMINISTRATION OF THE TRUST..................................................95
RESIGNATION, REMOVAL AND LIABILITY..........................................106
SPONSOR.....................................................................109
TRUSTEE.....................................................................110
DEPOSITORY..................................................................110
LEGAL OPINION...............................................................111
INDEPENDENT AUDITORS AND FINANCIAL STATEMENTS...............................111
INFORMATION AND COMPARISON RELATING TO TRUST, SECONDARY MARKET TRADING,
NET ASSET SIZE, PERFORMANCE, AND TAX TREATMENT .................111
DIVIDEND REINVESTMENT SERVICE...............................................118
ADDITIONAL INFORMATION......................................................119
GLOSSARY OF DEFINED TERMS...................................................121
__________, 1998
134
PART II - ADDITIONAL INFORMATION NOT REQUIRED IN PROSPECTUS
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.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement on Form S-6 comprises the following papers and
documents:
The facing sheet.
The cross-reference sheet.
The prospectus.
The undertaking to file reports.
The signatures.
The following exhibits:
1. Ex. - 5.1 - Opinion of Jones, Day, Reavis & Pogue as to
legality of securities being registered.*
2. Ex. - 8.1 - Opinion of Jones, Day, Reavis & Pogue as to certain
tax aspects of the Trust.*
3. Ex. - 23.1 - Consent of Ernst & Young LLP, Independent
Auditors.*
4. Ex. - 23.2 - Consent of Jones, Day, Reavis & Pogue (included in
Exhibit 5.1).
5. Ex. - 24.1 - Power of Attorney (set forth on page II - 4 of this
Registration Statement).
6. Ex. - 27 - Financial Data Schedule*
* To be supplied by amendment
II-1
135
7. Ex. - 99.A(1)(a) - Standard Terms and Conditions of Trust
between Investment Product Services, Inc., as Sponsor (the
"Sponsor"), and The Bank of New York, as Trustee (the
"Trustee").*
8. Ex. - 99.A(1)(b) - Trust Indenture and Agreement between the
Sponsor and the Trustee.*
9. Ex. -99.A(3) - Distribution Agreement among the Sponsor, the
Trust, and the Distributor.*
10. Ex. - A6 - Certificate of Incorporation and By-Laws of the
Sponsor.*
11. Ex. - 99.A9(a) - Depository Agreement between The Depository
Trust Company and the Trustee.*
12. Ex. - 99.A9(b) - License Agreement among The NASDAQ Stock
Market, Inc., the Sponsor and the Trustee.*
13. Ex. - 99.A9(c) - Form of Participant Agreement to be entered
into among the Trustee, the Distributor and various
broker-dealers, as participants.*
FINANCIAL STATEMENTS
l. Statement of Financial Condition of the Trust as shown in the
current Prospectus for this series herewith.*
2. Financial Statements of Investment Product Services, Inc., the
Sponsor.*
* To be supplied by amendment
II-2
136
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Nasdaq GOLD(sm) Trust, Series 1, has duly caused this Registration
Statement to be signed on its behalf by the undersigned thereunto duly
authorized, all in the District of Columbia, on the 7th day of August, 1998.
NASDAQ GOLD TRUST, SERIES 1
---------------------------
(Name of Registrant)
By: INVESTMENT PRODUCT SERVICES, INC.
---------------------------------
(Sponsor)
By: /s/ JOHN L. JACOBS
--------------------------------
John L. Jacobs
Executive Vice President
II-3
137
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the directors and
officers of Investment Product Services, Inc., the Sponsor, whose signature
appears below hereby constitutes and appoints each of John L. Jacobs and Joel
Rothstein Wolfson, jointly and severally, as his or her true and lawful
attorneys-in-fact and agents with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities to sign any or all amendments to this Registration Statement
(including any amendment and any post-effective amendments), and to file the
same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto each of said
attorneys-in-fact and agents, acting alone, full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises, as fully for all intents and purposes as he or she might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, acting alone, or his substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED ON BEHALF OF INVESTMENT PRODUCT SERVICES,
INC., THE SPONSOR, BY THE FOLLOWING PERSONS WHO CONSTITUTE A MAJORITY OF ITS
BOARD OF DIRECTORS AND BY THE NAMED PERSONS WHO ARE IN THE FOLLOWING CAPACITIES
ON THE DATE ABOVE INDICATED.
INVESTMENT PRODUCT SERVICES, INC.
/s/ J. PATRICK CAMPBELL Director, Chairman
- -----------------------------
J. Patrick Campbell
/s/ SALVATORE F. SODANO Director, Chief Operating Officer and
- ----------------------------- Chief Financial Officer
Salvatore F. Sodano
/s/ L. BRIAN HOLLAND Director, President and
- ----------------------------- Chief Executive Officer
L. Brian Holland
/s/ JOHN L. JACOBS
- ----------------------------- Director, Executive Vice President
John L. Jacobs
/s/ DOUGLAS A. PATTERSON Director, Senior Vice President
- ----------------------------- and Secretary
Douglas A. Patterson
/s/ JAMES R. ALLEN Director, Senior Vice President
- ----------------------------- and Treasurer
James R. Allen
/s/ BETH E. WEIMER Director, Senior Vice President
- -----------------------------
Beth E. Weimer
II-4