SPDR® Dow Jones Industrial AverageSM ETF Trust
A Unit Investment Trust
Semi-Annual Report
April 30, 2014
(Unaudited)
“Dow Jones Industrial AverageSM”, “DJIA®”, “Dow Jones®”, “The Dow®” and “DIAMONDS®” are trademarks and service marks of Standard & Poor’s Financial Services LLC and have been licensed for use by S&P Dow Jones Indices LLC (“S&P”) and sublicensed for use by State Street Global Markets, LLC. SPDR Dow Jones Industrial Average ETF Trust (the “Trust”), PDR Services LLC and NYSE Arca, Inc. are permitted to use these trademarks and service marks pursuant to separate sublicenses. The Trust is not sponsored, endorsed, sold or promoted by S&P, its affiliates or its third party licensors.
“SPDR®” is a trademark of Standard & Poor’s Financial Services LLC and has been licensed for use by S&P and sublicensed for use by State Street Global Markets, LLC. No financial product offered by State Street Global Markets, LLC or its affiliates is sponsored, endorsed, sold or promoted by S&P, its affiliates or its third party licensors.
Precise in a world that isn’t.TM
SPDR Dow Jones Industrial Average ETF Trust
Schedule of Investments
April 30, 2014 (Unaudited)
| Common Stocks | Shares | Value | ||||||
| 3M Co. |
4,469,983 | $ | 621,729,935 | |||||
| American Express Co. |
4,469,983 | 390,810,614 | ||||||
| AT&T, Inc. |
4,469,983 | 159,578,393 | ||||||
| Caterpillar, Inc. |
4,469,983 | 471,136,208 | ||||||
| Chevron Corp. |
4,469,983 | 561,072,266 | ||||||
| Cisco Systems, Inc. |
4,469,983 | 103,301,307 | ||||||
| E. I. du Pont de Nemours & Co. |
4,469,983 | 300,919,256 | ||||||
| Exxon Mobil Corp. |
4,469,983 | 457,770,959 | ||||||
| General Electric Co. |
4,469,983 | 120,197,843 | ||||||
| Intel Corp. |
4,469,983 | 119,303,846 | ||||||
| International Business Machines Corp. |
4,469,983 | 878,217,560 | ||||||
| Johnson & Johnson |
4,469,983 | 452,764,578 | ||||||
| JPMorgan Chase & Co. |
4,469,983 | 250,229,648 | ||||||
| McDonald’s Corp. |
4,469,983 | 453,166,877 | ||||||
| Merck & Co., Inc. |
4,469,983 | 261,762,205 | ||||||
| Microsoft Corp. |
4,469,983 | 180,587,313 | ||||||
| NIKE, Inc. (Class B) |
4,469,983 | 326,085,260 | ||||||
| Pfizer, Inc. |
4,469,983 | 139,821,068 | ||||||
| The Boeing Co. |
4,469,983 | 576,717,207 | ||||||
| The Coca-Cola Co. |
4,469,983 | 182,330,607 | ||||||
| The Goldman Sachs Group, Inc. |
4,469,983 | 714,392,683 | ||||||
| The Home Depot, Inc. |
4,469,983 | 355,408,348 | ||||||
| The Procter & Gamble Co. |
4,469,983 | 368,997,097 | ||||||
| The Travelers Cos., Inc. |
4,469,983 | 404,891,060 | ||||||
| The Walt Disney Co. |
4,469,983 | 354,648,451 | ||||||
| United Technologies Corp. |
4,469,983 | 528,933,088 | ||||||
| UnitedHealth Group, Inc. |
4,469,983 | 335,427,524 | ||||||
| Verizon Communications, Inc. |
4,469,983 | 208,882,306 | ||||||
| Visa, Inc. (Class A) |
4,469,983 | 905,663,256 | ||||||
| Wal-Mart Stores, Inc. |
4,469,983 | 356,302,345 | ||||||
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| Total Common Stocks(a) |
$ | 11,541,049,108 | ||||||
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| (a) | The values of the securities of the Trust are determined based on Level 1 inputs (Note 2). |
See accompanying notes to financial statements.
1
SPDR Dow Jones Industrial Average ETF Trust
Schedule of Investments (continued)
April 30, 2014 (Unaudited)
INDUSTRY BREAKDOWN AS OF APRIL 30, 2014*
| Industry | Percent of Net Assets** |
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| IT Services |
15.45 | % | ||
| Aerospace & Defense |
9.57 | |||
| Oil, Gas & Consumable Fuels |
8.82 | |||
| Pharmaceuticals |
7.40 | |||
| Industrial Conglomerates |
6.42 | |||
| Capital Markets |
6.19 | |||
| Machinery |
4.08 | |||
| Hotels, Restaurants & Leisure |
3.92 | |||
| Insurance |
3.51 | |||
| Consumer Finance |
3.38 | |||
| Household Products |
3.20 | |||
| Diversified Telecommunication Services |
3.19 | |||
| Food & Staples Retailing |
3.09 | |||
| Specialty Retail |
3.08 | |||
| Media |
3.07 | |||
| Health Care Providers & Services |
2.90 | |||
| Textiles, Apparel & Luxury Goods |
2.82 | |||
| Chemicals |
2.61 | |||
| Diversified Financial Services |
2.17 | |||
| Beverages |
1.58 | |||
| Software |
1.56 | |||
| Semiconductors & Semiconductor Equipment |
1.03 | |||
| Communications Equipment |
0.89 | |||
| Other Assets & Liabilities |
0.07 | |||
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| Total |
100.00 | % | ||
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| * | The Trust’s industry breakdown is expressed as a percentage of net assets and may change over time. |
| ** | Each security is valued based on Level 1 inputs. (Note 2) |
See accompanying notes to financial statements.
2
SPDR Dow Jones Industrial Average ETF Trust
Statement of Assets and Liabilities
April 30, 2014 (Unaudited)
| Assets |
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| Investments in securities, at value |
$ | 11,541,049,108 | ||
| Cash |
13,698,034 | |||
| Dividends receivable |
11,227,559 | |||
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| Total Assets |
11,565,974,701 | |||
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| Liabilities |
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| Income distribution payable |
9,714,996 | |||
| Payable for units of fractional undivided interest (“Units”) redeemed in-kind |
76,592 | |||
| Accrued Trustee expense |
591,898 | |||
| Accrued marketing expense |
4,136,007 | |||
| Accrued expenses and other liabilities |
2,404,505 | |||
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| Total Liabilities |
16,923,998 | |||
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| Net Assets |
$ | 11,549,050,703 | ||
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| Net Assets Consist of: |
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| Paid in capital (Note 4) |
13,169,641,736 | |||
| Undistributed net investment income |
2,652,885 | |||
| Accumulated net realized loss on investments |
(1,916,262,191 | ) | ||
| Net unrealized appreciation on investments |
293,018,273 | |||
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| Net Assets |
$ | 11,549,050,703 | ||
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| Net asset value per Unit |
$ | 165.48 | ||
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| Units outstanding, unlimited Units authorized, $0.00 par value |
69,792,867 | |||
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| Cost of investments |
$ | 11,248,030,835 | ||
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See accompanying notes to financial statements.
3
SPDR Dow Jones Industrial Average ETF Trust
Statements of Operations
| For the Six Months Ended April 30, 2014 (Unaudited) |
For the Year Ended October 31, 2013 |
For the Year Ended October 31, 2012 |
For the Year Ended October 31, 2011 |
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| Investment Income |
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| Dividend income |
$ | 133,166,352 | $ | 297,471,842 | $ | 308,340,757 | $ | 245,115,563 | ||||||||
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| Expenses |
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| Trustee expense |
3,530,117 | 6,928,624 | 6,983,198 | 5,743,266 | ||||||||||||
| Marketing expense |
3,466,664 | 6,925,953 | 6,848,079 | 5,660,417 | ||||||||||||
| DJIA license fee |
2,360,698 | 4,717,302 | 4,665,386 | 3,873,611 | ||||||||||||
| Legal and audit services |
235,548 | 481,315 | 811,001 | 219,322 | ||||||||||||
| Other expenses |
236,957 | 480,187 | 383,313 | 593,467 | ||||||||||||
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| Total Expenses |
9,829,984 | 19,533,381 | 19,690,977 | 16,090,083 | ||||||||||||
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| Net Investment Income |
123,336,368 | 277,938,461 | 288,649,780 | 229,025,480 | ||||||||||||
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| Realized and Unrealized Gain (Loss) on Investments |
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| Net realized gain on investment transactions |
546,267,901 | 536,002,077 | 710,150,395 | 684,673,417 | ||||||||||||
| Net change in unrealized appreciation (depreciation) |
179,641,984 | 1,389,629,705 | 300,890,540 | (84,349,814 | ) | |||||||||||
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| Net Realized and Unrealized Gain on Investments |
725,909,885 | 1,925,631,782 | 1,011,040,935 | 600,323,603 | ||||||||||||
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| Net Increase in Net Assets Resulting From Operations |
$ | 849,246,253 | $ | 2,203,570,243 | $ | 1,299,690,715 | $ | 829,349,083 | ||||||||
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See accompanying notes to financial statements.
4
SPDR Dow Jones Industrial Average ETF Trust
Statements of Changes in Net Assets
| For the Six Months Ended April 30, 2014 (Unaudited) |
For the Year Ended October 31, 2013 |
For the Year Ended October 31, 2012 |
For the Year Ended October 31, 2011 |
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| Increase (decrease) in net assets resulting from operations: |
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| Net investment income |
$ | 123,336,368 | $ | 277,938,461 | $ | 288,649,780 | $ | 229,025,480 | ||||||||
| Net realized gain (loss) on investment transactions |
546,267,901 | 536,002,077 | 710,150,395 | 684,673,417 | ||||||||||||
| Net change in unrealized appreciation (depreciation) on investment transactions |
179,641,984 | 1,389,629,705 | 300,890,540 | (84,349,814 | ) | |||||||||||
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| Net increase in net assets resulting from operations: |
849,246,253 | 2,203,570,243 | 1,299,690,715 | 829,349,083 | ||||||||||||
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| Net equalization credits and charges |
244,979 | (4,218,198 | ) | (2,139,967 | ) | (718,146 | ) | |||||||||
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| Distributions to unitholders from net investment income |
(120,699,367 | ) | (274,075,501 | ) | (286,360,368 | ) | (251,674,959 | ) | ||||||||
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| Increase (decrease) in net assets from Unit transactions: |
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| Proceeds from issuance of Units |
8,307,547,726 | 21,443,691,450 | 15,600,705,314 | 21,998,536,680 | ||||||||||||
| Cost of Units redeemed |
(8,855,673,758 | ) | (22,313,393,725 | ) | (17,385,862,538 | ) | (19,554,185,652 | ) | ||||||||
| Net income equalization (Note 2) |
(244,979 | ) | 4,218,198 | 2,139,967 | 718,146 | |||||||||||
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| Net increase (decrease) in net assets from issuance and redemption of Units |
(548,371,011 | ) | (865,484,077 | ) | (1,783,017,257 | ) | 2,445,069,174 | |||||||||
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| Net increase (decrease) in net assets during period |
180,420,854 | 1,059,792,467 | (771,826,877 | ) | 3,022,025,152 | |||||||||||
| Net assets beginning of period |
11,368,629,849 | 10,308,837,382 | 11,080,664,259 | 8,058,639,107 | ||||||||||||
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| Net assets end of period* |
$ | 11,549,050,703 | $ | 11,368,629,849 | $ | 10,308,837,382 | $ | 11,080,664,259 | ||||||||
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| Unit transactions: |
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| Units sold |
51,700,000 | 148,650,000 | 123,250,000 | 185,350,000 | ||||||||||||
| Units redeemed |
(55,200,000 | ) | (154,250,000 | ) | (137,250,000 | ) | (164,900,000 | ) | ||||||||
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| Net increase (decrease) |
(3,500,000 | ) | (5,600,000 | ) | (14,000,000 | ) | 20,450,000 | |||||||||
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| *Includes undistributed net investment income |
$ | 2,652,885 | $ | 15,884 | $ | 2,452,924 | $ | 163,512 | ||||||||
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See accompanying notes to financial statements.
5
SPDR Dow Jones Industrial Average ETF Trust
Financial Highlights
Selected data for a Unit outstanding throughout each period
| For the Six Months Ended April 30, 2014 (Unaudited) |
For the Year Ended October 31, 2013 |
For the Year Ended October 31, 2012 |
For the Year Ended October 31, 2011 |
For the Year Ended October 31, 2010 |
For the Year Ended October 31, 2009 |
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| Net asset value, beginning of year |
$ | 155.11 | $ | 130.67 | $ | 119.28 | $ | 111.24 | $ | 97.17 | $ | 93.22 | ||||||||||||
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| Investment operations: |
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| Net investment income(1) |
1.71 | 3.49 | 3.22 | 2.88 | 2.64 | 2.76 | ||||||||||||||||||
| Net realized and unrealized gain (loss) on investments |
10.34 | 24.48 | 11.41 | 8.37 | 14.14 | 4.01 | ||||||||||||||||||
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| Total from investment operations |
12.05 | 27.97 | 14.63 | 11.25 | 16.78 | 6.77 | ||||||||||||||||||
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| Net equalization credits and charges(1) |
(0.00 | )(2) | (0.05 | ) | (0.02 | ) | (0.01 | ) | (0.08 | ) | (0.14 | ) | ||||||||||||
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| Less distributions from: |
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| Net investment income |
(1.68 | ) | (3.48 | ) | (3.22 | ) | (3.20 | ) | (2.63 | ) | (2.68 | ) | ||||||||||||
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| Net asset value, end of year |
$ | 165.48 | $ | 155.11 | $ | 130.67 | $ | 119.28 | $ | 111.24 | $ | 97.17 | ||||||||||||
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| Total return(3) |
7.79 | % | 21.55 | % | 12.31 | % | 10.17 | % | 17.36 | % | 7.56 | % | ||||||||||||
| Ratios and supplemental data |
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| Ratio to average net assets: |
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| Net investment income |
2.13 | %(4) | 2.41 | % | 2.53 | % | 2.43 | % | 2.52 | % | 3.21 | % | ||||||||||||
| Total expenses |
0.17 | %(4) | 0.17 | % | 0.17 | % | 0.17 | % | 0.18 | % | 0.17 | % | ||||||||||||
| Total expenses excluding Trustee earnings credit |
0.17 | %(4) | 0.17 | % | 0.17 | % | 0.17 | % | 0.18 | % | 0.17 | % | ||||||||||||
| Portfolio turnover rate(5) |
0.00 | % | 18.00 | % | 5.52 | % | 0.00 | % | 0.12 | % | 5.39 | % | ||||||||||||
| Net assets, end of year (000’s) |
$ | 11,549,051 | $ | 11,368,630 | $ | 10,308,837 | $ | 11,080,664 | $ | 8,058,639 | $ | 7,388,963 | ||||||||||||
| (1) | Per Unit numbers have been calculated using the average shares method, which more appropriately presents per Unit data for the period. |
| (2) | Amount shown represents less than $0.005 per share. |
| (3) | Total return is calculated assuming a purchase of Units at net asset value per Unit on the first day and a sale at net asset value per Unit on the last day of each period reported. Distributions are assumed, for the purposes of this calculation, to be reinvested at the net asset value per Unit on the respective payment dates of the Trust. Total return for a period of less than one year is not annualized. Broker commission charges are not included in this calculation. |
| (4) | Annualized. |
| (5) | Portfolio turnover rate does not include securities received or delivered from processing creations or redemptions of Units. |
See accompanying notes to financial statements.
6
SPDR Dow Jones Industrial Average ETF Trust
Notes to Financial Statements
April 30, 2014 (Unaudited)
Note 1 — Organization
SPDR Dow Jones Industrial Average ETF Trust (the “Trust”) is a unit investment trust created under the laws of the State of New York and registered under the Investment Company Act of 1940, as amended. The Trust was created to provide investors with the opportunity to purchase a security representing a proportionate undivided interest in a portfolio of securities consisting of substantially all of the component common stocks, in substantially the same weighting, which comprise the Dow Jones Industrial Average (the “DJIA”). Each unit of fractional undivided interest in the Trust is referred to as a “Unit.” The Trust commenced operations on January 14, 1998 upon the initial issuance of 500,000 Units (equivalent to ten “Creation Units” — see Note 4) in exchange for a portfolio of securities assembled to reflect the intended portfolio composition of the Trust.
Under the Amended and Restated Standard Terms and Conditions of the Trust, as amended (the “Trust Agreement”), PDR Services LLC, as sponsor of the Trust (the “Sponsor”), and State Street Bank and Trust Company, as trustee of the Trust (the “Trustee”), are indemnified against certain liabilities arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust enters into contracts that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. However, based on experience, the Trust expects the risk of material loss to be remote.
On November 13, 2013, Intercontinental Exchange, Inc. (formerly known as IntercontinentalExchange Group, Inc.) (“ICE”) announced the completion of its acquisition of NYSE Holdings LLC (the parent company of the Sponsor, formerly known as NYSE Euronext Holdings LLC) (“NYSE Holdings”). Upon the closing of the acquisition, Intercontinental Exchange Holdings, Inc. (formerly known as IntercontinentalExchange, Inc.) and NYSE Holdings became wholly owned subsidiaries of ICE. As the parent company, ICE is the publicly-traded entity, trading on the New York Stock Exchange under the symbol “ICE”.
Note 2 — Significant Accounting Policies
The following is a summary of significant accounting policies followed by the Trust in the preparation of its financial statements:
The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. The financial statements are presented in United States dollars.
Security Valuation
The value of the Trust’s portfolio securities is based on the market price of the securities, which generally means a valuation obtained from an exchange or other market (or based on a price quotation or other equivalent indication of value supplied by an exchange or other market) or a valuation obtained from an independent pricing service. If a security’s market price is not readily available or does not otherwise accurately reflect the fair value of the security, the security will be valued by another method that the Trustee believes will better reflect fair
7
SPDR Dow Jones Industrial Average ETF Trust
Notes to Financial Statements — (continued)
April 30, 2014 (Unaudited)
Note 2 — Significant Accounting Policies – (continued)
value in accordance with the Trust’s valuation policies and procedures. The Trustee has established a Pricing and Investment Committee (the “Committee”) for the purpose of valuing securities for which market quotations are not readily available or do not otherwise accurately reflect the fair value of the security. The Committee, subject to oversight by the Trustee, may use fair value pricing in a variety of circumstances, including but not limited to, situations when trading in a security has been suspended or halted. Fair value pricing involves subjective judgments and it is possible that the fair value determination for a security is materially different than the value that could be received on the sale of the security. Fair value pricing involves subjective judgments and it is possible that the fair value determination for a security is materially different from the value that could be received upon the sale of such security.
The Trust continues to follow the authoritative guidance for fair value measurements and the fair value option for financial assets and financial liabilities. The guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. The guidance establishes three levels of inputs that may be used to measure fair value:
| • | Level 1 — quoted prices in active markets for identical investments |
| • | Level 2 — other significant observable inputs (including, but not limited to, quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) |
| • | Level 3 — significant unobservable inputs (including the Trust’s own assumptions in determining the fair value of investments) |
Investments that use Level 2 or Level 3 inputs may include, but are not limited to: (i) an unlisted security related to corporate actions; (ii) a restricted security (i.e., one that may not be publicly sold without registration under the Securities Act of 1933, as amended); (iii) a security whose trading has been suspended or which has been de-listed from its primary trading exchange; (iv) a security that is thinly traded; (v) a security in default or bankruptcy proceedings for which there is no current market quotation; (vi) a security affected by currency controls or restrictions; and (vii) a security affected by a significant event (i.e., an event that occurs after the close of the markets on which the security is traded, but before the time as of which the Trust’s net assets are computed and that may materially affect the value of the Trust’s investments). Examples of events that may be “significant events” are government actions, natural disasters, armed conflicts, acts of terrorism, and significant market fluctuations.
Fair value pricing could result in a difference between the prices used to calculate the Trust’s NAV and the prices used by the DJIA, which, in turn, could result in a difference between the Trust’s performance and the performance of the DJIA. The inputs or methodology used for valuation are not necessarily an indication of the risk associated with investing in those investments. Each security identified in the Schedule of Investments, which also includes a breakdown of the Trust’s investments by industry, is valued based on Level 1 inputs.
8
SPDR Dow Jones Industrial Average ETF Trust
Notes to Financial Statements — (continued)
April 30, 2014 (Unaudited)
Note 2 — Significant Accounting Policies – (continued)
The Trust did not hold any investments valued using Level 2 or 3 inputs as of April 30, 2014 and did not have any transfers between levels for the six months ended April 30, 2014.
Investment Risk
The Trust’s investments are exposed to risks, such as market risk. Due to the level of risk associated with certain investments it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the financial statements.
An investment in the Trust involves risks similar to those of investing in any fund of equity securities, such as market fluctuations caused by such factors as economic and political developments, changes in interest rates and perceived trends in stock prices. The value of a Unit will decline, more or less, in correlation with any decline in value of the DJIA. The values of equity securities could decline generally or could underperform other investments. The Trust would not sell an equity security because the security’s issuer was in financial trouble unless that security was removed from the DJIA.
Investment Transactions
Investment transactions are recorded on the trade date. Realized gains and losses from the sale or disposition of securities are recorded on the identified cost basis. Dividend income is recorded on the ex-dividend date.
Distributions to Unitholders
The Trust declares and distributes dividends from net investment income to its holders of Units (“Unitholders”) monthly. The Trust declares and distributes net realized capital gains, if any, at least annually.
Equalization
The Trust follows the accounting practice known as “Equalization” by which a portion of the proceeds from sales and costs of reacquiring the Trust’s Units, equivalent on a per Unit basis to the amount of distributable net investment income on the date of the transaction, is credited or charged to undistributed net investment income. As a result, undistributed net investment income per Unit is unaffected by sales or reacquisitions of the Trust’s Units.
U.S. Federal Income Tax and Certain Other Tax Matters
For U.S. federal income tax purposes, the Trust has qualified as a “regulated investment company” under Subchapter M of the Internal Revenue Code of 1986, as amended (a “RIC”) and intends to continue to qualify as a RIC. As a RIC, the Trust will generally not be subject to U.S. federal income tax for any taxable year on income, including net capital gains, that it distributes to its Unitholders, provided that it distributes on a timely basis at least 90% of its “investment company taxable income” determined prior to the deduction for dividends
9
SPDR Dow Jones Industrial Average ETF Trust
Notes to Financial Statements — (continued)
April 30, 2014 (Unaudited)
Note 2 — Significant Accounting Policies – (continued)
paid by the Trust (generally, its taxable income other than net capital gain) for such taxable year. In addition, provided that the Trust distributes substantially all of its ordinary income and capital gains during each calendar year, the Trust will not be subject to U.S. federal excise tax.
Accounting Standards Codification 740, Income Taxes (“ASC 740”) established financial accounting and disclosure requirements for recognition and measurement of tax positions taken, and whether those tax positions are more likely than not to be sustained upon examination by the applicable taxing authority based on the technical merits of the position. For the open tax years as of October 31, 2013, the Trust has determined that no provision for income tax is required in the Trust’s financial statements. In addition, the Trust has not recognized any liabilities relating to tax positions considered to be uncertain tax positions for the current year or prior years. The Trust may be subject to potential examinations by certain taxing authorities, including the United States of America and the State of New York, for all open tax years (the current and prior three tax years). The Trust would recognize interest and penalties, if any, related to tax liabilities as income tax expense in the Statements of Operations. There were no such expenses for the year ending October 31, 2013. Any potential tax liability is also subject to ongoing interpretation of laws by taxing authorities. The tax treatment of the Trust’s investments may change over time based on factors including, but not limited to new tax laws, regulations, and interpretations thereof.
At October 31, 2013, the Trust had the following capital loss carryforwards that may be utilized to offset any net realized gains, expiring October 31 of the year indicated:
| 2014 |
$ | 52,316 | ||
| 2016 |
506,750,845 | |||
| 2017 |
779,537,215 | |||
| 2018 |
4,715,695 | |||
| 2019 |
3,393,588 | |||
| Non-Expiring – Short Term |
32,827,331 | |||
| Non-Expiring – Long Term |
588,985,285 |
During the tax year ended October 31, 2013, the Trust utilized capital loss carryforwards of $0 and had $0 of capital loss carryforwards expire.
During the six months ended April 30, 2014, the Trust reclassified $546,267,817 of non-taxable security gains realized from the in-kind redemption of Creation Units (Note 4) as an increase to paid in capital in the Statement of Assets and Liabilities. At April 30, 2014, the $11,248,030,835 cost of investments for U.S. federal income tax purposes was equal to the cost for financial reporting purposes. Gross unrealized appreciation was $512,688,805 and gross unrealized depreciation was $219,670,532, resulting in net unrealized appreciation of $293,018,273.
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SPDR Dow Jones Industrial Average ETF Trust
Notes to Financial Statements — (continued)
April 30, 2014 (Unaudited)
Note 3 — Transactions with the Trustee and Sponsor
In accordance with the Trust Agreement, the Trustee maintains the Trust’s accounting records, acts as custodian and transfer agent to the Trust, and provides administrative services, including the filing of certain regulatory reports. The Trustee is also responsible for determining the composition of the portfolio of securities which must be delivered and/or received in exchange for the issuance and/or redemption of Creation Units of the Trust, and for adjusting the composition of the Trust’s portfolio from time to time to conform to changes in the composition and/or weighting structure of the DJIA. For these services, the Trustee received a fee of $3,530,117 at the following annual rates for the six months ended April 30, 2014:
| Net asset value of the Trust |
Fee as a percentage of net asset value of the Trust | |
| $0 – $499,999,999 |
0.10% per annum plus or minus the Adjustment Amount | |
| $500,000,000 – $2,499,999,999 |
0.08% per annum plus or minus the Adjustment Amount | |
| $2,500,000,000 – and above |
0.06% per annum plus or minus the Adjustment Amount |
The Adjustment Amount is the sum of (a) the excess or deficiency of transaction fees received by the Trustee, less the expenses incurred in processing orders for creation and redemption of Units and (b) the amounts earned by the Trustee with respect to the cash held by the Trustee for the benefit of the Trust. During the six months ended April 30, 2014, the Adjustment Amount reduced the Trustee’s fee by $234,082. The Adjustment Amount included an excess of net transaction fees from processing orders of $226,304 and a Trustee earnings credit of $7,778.
The Sponsor agreed to reimburse the Trust for, or assume, the ordinary operating expenses of the Trust which exceeded 18/100 of 1% per annum of the daily NAV of the Trust. There were no such reimbursements by the Sponsor for the six months ended April 30, 2014 and the fiscal years ended October 31, 2013, October 31, 2012 and October 31, 2011.
S&P Dow Jones Indices LLC (“S&P”) and State Street Global Markets, LLC (“SSGM” or the “Marketing Agent”) have entered into a License Agreement. The License Agreement grants SSGM, an affiliate of the Trustee, a license to use the DJIA and to use certain trade names and trademarks of S&P in connection with the Trust. The DJIA also serves as a basis for determining the composition of the Trust’s portfolio. The Trustee (on behalf of the Trust), the Sponsor and NYSE Arca, Inc. (“NYSE Arca”) have each received a sublicense from SSGM for the use of the DJIA and certain trade names and trademarks in connection with their rights and duties with respect to the Trust. The License Agreement may be amended without the consent of any of the owners of beneficial interests of Units. Currently, the License Agreement is scheduled to terminate on December 31, 2017, but its term may be extended without the consent of any of the owners of beneficial interests of Units. Pursuant to such arrangements and in accordance with the Trust Agreement, the Trust reimburses the Sponsor for payment of fees under the License Agreement to S&P equal to 0.05% on the first
11
SPDR Dow Jones Industrial Average ETF Trust
Notes to Financial Statements — (continued)
April 30, 2014 (Unaudited)
Note 3 — Transactions with the Trustee and Sponsor – (continued)
$1 billion of the then rolling average asset balance, and 0.04% on any excess rolling average asset balance over and above $1 billion. The minimum annual license fee for the Trust is $1 million.
The Sponsor has entered into an agreement with the Marketing Agent pursuant to which the Marketing Agent has agreed to market and promote the Trust. The Marketing Agent is reimbursed by the Sponsor for the expenses it incurs for providing such services out of amounts that the Trust reimburses the Sponsor. Expenses incurred by the Marketing Agent include but are not limited to: printing and distribution of marketing materials describing the Trust, associated legal, consulting, advertising and marketing costs and other out-of-pocket expenses.
Note 4 — Unitholder Transactions
Units are issued and redeemed by the Trust only in Creation Unit size aggregations of 50,000 Units. Such transactions are only permitted on an in-kind basis, with a separate cash payment that is equivalent to the undistributed net investment income per Unit (income equalization) and a balancing cash component to equate the transaction to the NAV per Unit of the Trust on the transaction date. There is a transaction fee payable to the Trustee in connection with each creation and redemption of Creation Units made through the clearing process (“Transaction Fee”). The Transaction Fee is non-refundable, regardless of the NAV of the Trust. The Transaction Fee is $1,000 per participating party per day, regardless of the number of Creation Units created or redeemed on such day. The $1,000 charge is subject to a limit not to exceed 0.10% (10 basis points) of the value of one Creation Unit at the time of creation. For creations and redemptions outside the clearing process, including orders from a participating party restricted from engaging in transactions in one or more of the common stocks that are included in the DJIA, an additional amount not to exceed three (3) times the Transaction Fee applicable for one Creation Unit is charged per Creation Unit per day.
Note 5 — Investment Transactions
For the six months ended April 30, 2014, the Trust had net in-kind contributions, net in-kind redemptions, purchases and sales of investment securities of $5,155,657,141, $5,703,975,431, $0 and $0, respectively. Net realized gain (loss) on investment transactions in the Statements of Operations includes net gains resulting from in-kind transactions of $546,267,817.
12
SPDR Dow Jones Industrial Average ETF Trust
Other Information
April 30, 2014 (Unaudited)
Comparison of Total Returns Based on NAV and Bid/Ask Price (1)
The table below is provided to compare the Trust’s total pre-tax returns at NAV with the total pre-tax returns based on bid/ask price and the performance of the DJIA. Past performance is not necessarily an indication of how the Trust will perform in the future.
Cumulative Total Return
| 1 Year | 5 Year | 10 Year | ||||||||||
| SPDR DJIA Trust |
||||||||||||
| Return Based on NAV |
14.22 | % | 129.50 | % | 105.97 | % | ||||||
| Return Based on Bid/Ask Price |
14.25 | % | 129.53 | % | 105.78 | % | ||||||
| DJIA |
14.44 | % | 131.92 | % | 109.65 | % | ||||||
Average Annual Total Return
| 1 Year | 5 Year | 10 Year | ||||||||||
| SPDR DJIA Trust |
||||||||||||
| Return Based on NAV |
14.22 | % | 18.07 | % | 7.49 | % | ||||||
| Return Based on Bid/Ask Price |
14.25 | % | 18.08 | % | 7.48 | % | ||||||
| DJIA |
14.44 | % | 18.32 | % | 7.68 | % | ||||||
| (1) | Currently, the bid/ask price is the midpoint of the best bid and best offer prices on NYSE Arca at the time the Trust’s NAV is calculated, ordinarily 4:00 p.m. Through November 28, 2008, the bid/ask price was the midpoint of the best bid and best offer prices on NYSE Alternext US (formerly the American Stock Exchange and now NYSE MKT) at the close of trading, ordinarily 4:00 p.m. |
13
SPDR Dow Jones Industrial Average ETF Trust
Sponsor
PDR Services LLC
c/o NYSE Holdings LLC
11 Wall Street
New York, NY 10005
Trustee
State Street Bank and Trust Company
One Lincoln Street
Boston, MA 02111
Distributor
ALPS Distributors, Inc.
1290 Broadway, Suite 1100
Denver, CO 80203
Independent Registered Public Accounting Firm
PricewaterhouseCoopers LLP
125 High Street
Boston, MA 02110
SPDRDIA SAR