Vous êtes sur la page 1sur 24

United States

30 October 2001
Silvio Lotufo (1) 212 449-1123 Benjamin Bowler (1) 212 449-3199 John Davi (1) 212 449-7980

ETF Strategy
The ABCs of ETFs

Derivatives

US ETF Assets Continue Their Growth


Exchange traded funds (ETFs) are depository receipts on open-ended unit investment trusts or mutual funds that are indexed to selected benchmarks. ETF offerings include broad, style, sector, industry, country, and regional benchmarks. Over the past few years, the demand and offering of these products have grown exponentially. As the chart below shows, ETF assets have grown from an estimated $463 million in 1993 to roughly $70 billion currently. The goal of this report is to provide a thorough understanding of ETFs. First, we provide some basic information on how ETFs work. We discuss their sources of liquidity, dividends & management fees, and the creation/redemption process. Second, we list the advantages and disadvantages of ETFs. Third we discuss various ETF strategies to implement. Fourth, we provide a list of available ETFs that are currently trading in North America and useful information such as assets under management for each ETF, and daily turnover, management fees and initial index ratio. Fifth, we highlight fifteen select ETFs and provide important statistics and charts on liquidity and assets under management.

Growth in U.S. Exchange Traded Funds (ETFs) Since 1993


8 0 ,0 0 0 7 0 ,7 4 5 7 0 ,0 0 0 6 0 ,0 0 0 5 0 ,0 0 0 4 0 ,0 0 0 3 0 ,0 0 0 2 0 ,0 0 0 6 ,2 0 2 1 0 ,0 0 0 461 0 Dec-93 Dec-94 Dec-95 Dec-96 Dec-97 Dec-98 Dec-99 Dec-00 Oct-01 419 1 ,0 5 3 2 ,1 5 2 1 4 ,6 0 3 6 5 ,3 9 3

USD Assets (in millions)

T h e re h a s b e e n u n p r e c e d e n te d g r o w th in E T F a s s e ts s in c e 1 9 9 3

3 1 ,7 8 1

Merrill Lynch & Co. Global Securities Research & Economics Group Equity Derivatives Strategy Department
#14378 RC#60630302

Merrill Lynch, as a full-service firm, has or may have business relationships, including investment banking relationships, with the companies in this report.

ETF Strategy 30 October 2001

CONTENTS
n Section Introduction 1. Report Outline The Mechanics of ETFs 2. How do ETFs Work? What about Dividends & Management Fees? Why do ETFs Trade Close to NAV? What are the Sources of ETF Liquidity? How many ETF Shares to Trade? Advantages & Disadvantages of 3. Advantages Disadvantages ETFs Strategy Implementation with 4. Which Strategies can be Easily Achieved Through ETFs? ETFs Comprehensive List of Available 5. Where do ETFs Trade, What do They Cost and How Much do They Trade? ETFs Details on Select ETFs 6. ETF Statistics & Specifications Appendix 7. ETF Terminology ETF Ticker Reference Table Equity Derivatives Strategy Team 8. Page 3 4 4 4 5 5 6 6 7

8-10

11-18 19 20-22 23

We would like to thank Leslie Leeman for her invaluable contributions to this report.

ETF Strategy 30 October 2001

1. Introduction
n Why Should ETFs Interest You?

ETFs are depository receipts on index funds

Exchange traded funds (ETFs) are depository receipts on open-ended unit investment trusts or mutual funds that are indexed to selected benchmarks1. ETF offerings include broad, style, sector, industry, country, and regional benchmarks. Over the past few years, the demand and offering of these products have grown exponentially. As the chart below shows, ETF assets have grown from an estimated $463 million in 1993 to roughly $70 billion currently.

Key benefit is convenience

A key reason for their popularity is their convenience. Since ETFs trade and settle like a stock, there is no additional infrastructure or documentation required. By executing a single ETF transaction, an investor can obtain exposure to broad indices or sectors. For example, if an investor needs exposure to Large Cap Technology, he can obtain this exposure by purchasing the Technology Sector SPDR (Ticker: XLK) which represents the technology sector of the S&P500 Index. The goal of this report is to provide a thorough understanding of ETFs. The report is structured as follows:

Report outline

First we provide some basic information on how ETFs work. We discuss their sources of liquidity, dividends & management fees, and the creation/redemption process. Second, we list the advantages and disadvantages of ETFs. Third we discuss various ETF strategies to implement. Fourth, we provide a list of available ETFs that are currently trading in North America and useful information such as assets under management for each ETF, and daily turnover, management fees and initial index ratio. Fifth, we highlight fifteen select ETFs and provide important statistics and charts on liquidity and assets under management. In the appendix to the report, we provide an ETF ticker reference table.

US ETF asset growth since 1993

Growth in U.S. Exchange Traded Funds (ETFs) Since 1993


80,000 7 0,7 45 70,000 60,000 50,000 40,000 30,000 20,000 6,202 10,000 461 0 Dec-93 Dec-94 Dec-95 Dec-96 Dec-97 Dec-98 Dec-99 Dec-00 Oct-01 4 19 1,053 2,152 14,603 65,393

USD Assets (in millions)

There has been unprecedented grow th in E TF assets since 1993

31,781

We do not include HOLDRs in this report. For further details of this product, please contact us.

ETF Strategy 30 October 2001

2. The Mechanics of ETFs


n How do ETFs Work? The value of an ETF is based on the value of a basket of shares that tracks an index. Most ETFs will ensure accurate tracking by holding the underlying index constituents in the correct weights2.

ETF Creation & Redemption Process

The ETF structure allows designated participants to create or redeem shares of the ETF. Newly created shares are delivered by the ETF manager to the authorised participant or market maker in exchange for the entire portfolio of underlying shares. The stocks are held by the fund manager, while the newly created shares can be traded by the market maker in the secondary market. The redemption of ETF shares works in a similar way: the ETF manager delivers the underlying stocks to the market maker in exchange for ETF shares to be redeemed.
Exchange Traded Funds are Depository Receipts on Underlying Trust or Mutual Fund

ETFs traded in the market

Unit Trust or Mutual Fund

n What about Dividends & Management Fees?

Dividends are paid to investors regularly

Unless the underlying index is a total return index, ETFs pay dividends to investors on a regular basis. Dividends paid by the stocks held in the ETF are accrued and kept as cash until they are paid to the investor. The management fee is deducted from this cash on a daily basis. When the dividends of the underlying stocks are not sufficient to cover the management fee, a small portion of the underlying stocks in the ETF are liquidated to cover it. n Why do ETFs Trade Close to NAV?

NAV = value of constituents + dividends management fees

The NAV (Net Asset Value) of the ETF, expressed on a per share basis, is the value of the underlying constituents of the benchmark held by the ETF, plus the accrued dividends less the accrued management fee. Although the price at which an ETF trades is subject to the same supply and demand dynamics of a normal share, the creation/redemption process described above ensures that the price trades very close to the NAV. Since ETF shares can be created or redeemed at the NAV, a material discrepancy between the trading price of the ETF and its NAV can be arbitraged away.

ETFs may optimize their portfolio holdings. For example, the MSCITM EAFE iShare captures about 80% of the EAFE index.

ETF Strategy 30 October 2001 n What are the Sources of ETF Liquidity? There are two sources from which ETFs derive their liquidity: The main source is the liquidity of the underlying constituents or related futures since new shares can be created by depositing requisite baskets with the trust.

Key source of ETF liquidity: underlying equity or related futures

For intraday liquidity, market makers and arbitrageurs play an important role as they effectively transfer the liquidity of the underlying or futures to ETFs. Market makers could provide liquidity in the depository receipts and hedge their intraday position risk in the underlying or futures markets (hence, the transfer of intraday liquidity from the constituents to the Sector SPDRs), and later create or redeem new depository receipts as needed In order to assess ETF liquidity, investors should look at the underlying stock, and if available, futures liquidity (the primary sources of ETF liquidity). An ETF that has not posted high daily trading volume may have surprising depth if the underlying constituents or futures on the index are liquid enough.
Transfer of Liquidity from Underlying Stocks and Futures to ETF

Liquidity from Underlying Stocks ETF Liquidity Market Makers/ Arbitrageurs Liquidity from Futures (If Available)

n How Many ETF Shares to Trade?

Shares to trade equals notional divided by ETF price

Finally we demonstrate how the ETF calculation works. To calculate the number of shares to trade, the investor divides the notional dollar amount to trade by the prevailing ETF price.
Number of ETFs to Trade Given Notional Amount to Trade

Number of ETF Share to Trade =

Notional Dollar Amount to Trade ETF Price

ETF Strategy 30 October 2001

3. Advantages and Disadvantages of Using ETFs


n What are some advantages and disadvantages of ETFs? Below, we provide some of the key advantages and disadvantages of using ETFs.

Advantages of ETFs

Advantages

ETFs provide exposure to a diversified basket of names with a single execution. The depository receipts are treated like stocks, and therefore, no additional infrastructure or administrative set up is necessary. ETFs are available on a variety of indices ranging from sectors to broad indices. ETFs can be sold short without a plus tick. Potential flexibility in tax loss management.3 Depository receipts can be purchased on margin long positions require 50% and short positions require 150%. ETF shares can be created or redeemed. The creation-redemption activity is often performed by dealers and arbitrageurs.

Disadvantages of ETFs

Disadvantages

Management fees, which are deducted from dividends. If dividends are insufficient, then portions of funds are sold. Potential capital gains distributions. Certain funds may be restricted from owning another fund, which constrains their use of ETFs. For example, no registered company under the 1940 Investment Company Act may own: 1. 2. 3. More than 3% of the outstanding shares of another 1940 Act company. More then 5% of its own assets in a single 1940 Act company. More than 10% of its own assets in 1940 Act companies (in aggregate).

Bid-offer spread and typical premium/discount price to the NAV. Investors should bear in mind that these factors (particularly bid-offer spreads) can vary significantly from product to product. Such variations can lead to material differences in overall performance.

For details, please refer to Portfolio Trading Strategy: ETF Tax Loss Strategies to Bear in Mind, August 14, 2000.

ETF Strategy 30 October 2001

4. Strategy Implementation with ETFs


n Which Strategies Can be Easily Achieved Through ETFs? Below, we highlight eight strategies that can be implemented through the use of ETFs.

Potential ETF Strategies

1.

Efficient asset allocation

ETFs can be used by fund managers to quickly reduce or increase exposure to a particular sector, industry, country or region. 2. Equitization and cash flow management ETFs can be used to gain exposure to the market effectively, thus reducing a funds cash drag. 3. Index/portfolio changes ETFs can be used to manage flows arising from portfolio rebalancing events more effectively. 4. Hedging ETFs can be used to hedge a portfolio in various sectors, industries, regions, countries, etc. Since ETFs can be shorted on a downtick, this is a useful advantage. 5. Short term tactical exposure The convenience and speed of trading ETFs enables fund managers to take advantage of short-term opportunities. 6. Relative value strategies The ability to short-sell ETFs enables investors to take a view on the spread between two markets on a sector or country basis. 7. Efficient access Retail investors can gain access to a particular market very efficiently. The low cost and small denomination make them very attractive for retail investors. In addition, they may be used to provide exposure to non-domestic markets that may trade in different time-zones and currencies. 8. Arbitrage opportunities Professional market participants may exploit arbitrage opportunities between the ETF, the underlying market and the futures (if available).

ETF Strategy 30 October 2001

5. Comprehensive List of Available ETFs


104 ETFs currently trading in North America
n Where do ETFs Trade, What do They Cost and How Much do

They Trade?
In the accompanying table, we include useful information pertaining to the current ETFs trading in North America. For a list of various ETF tickers (i.e. NAV, shares outstanding, etc.), please refer to pages 20-22 of this report.

Useful ETF Information as of October 2001


Initial Fund Management Index Fee Ratio Advisor BGI 0.60% BGI 0.60% BGI 0.60% 1/5 BGI 0.60% 1/5 BGI 0.60% 1/5 BGI 0.60% 1/5 BGI 0.60% 1/5 BGI 0.60% 1/5 BGI 0.60% 1/5 BGI 0.60% BGI 0.60% BGI 0.60% 1/10 BGI 0.60% 1/5 BGI 0.20% 1/5 BGI 0.60% BGI 0.84% n/a BGI 0.84% n/a BGI 0.84% n/a BGI 0.99% n/a BGI 0.84% n/a BGI 0.84% n/a BGI 0.84% n/a BGI 0.84% n/a BGI 0.84% n/a BGI 0.84% n/a BGI 0.84% n/a BGI 0.84% n/a BGI 0.84% n/a BGI 0.84% n/a BGI 0.84% n/a BGI 0.99% n/a BGI 0.84% n/a BGI 0.84% n/a BGI 0.84% n/a BGI 0.99% n/a BGI 0.84% n/a BGI 0.35% n/a BGI 0.15% 1/10 BGI 0.20% 1/10 BGI 0.20% 1/10 BGI 0.20% 1/5 BGI 0.25% 1/5 BGI 0.25% 1/5 BGI 0.20% 1/10 BGI 0.25% 1/10 BGI 0.25% 1/10 Assets Under Daily Management Turnover (3 (10/12/2001) month avg) USD 000s USD 000s 12,530 130 1,958 167 24,605 342 25,056 196 61,737 1,842 69,597 570 28,546 278 172,760 1,577 31,633 102 13,046 351 69,615 2,653 95,448 1,574 51,863 412 77,671 498 34,280 584 55,296 266 10,010 31 9,232 45 11,513 280 23,760 110 82,400 1,147 53,820 452 105,534 667 51,543 349 30,596 138 524,190 4,409 65,340 172 40,500 474 22,035 163 63,921 471 34,913 308 24,008 139 9,785 46 30,012 185 93,250 361 111,788 933 468,200 16,334 218,538 2,559 395,340 3,668 447,300 5,515 1,590,996 46,437 254,773 6,493 550,944 12,129 1,029,000 7,984 19,025 444 60,939 413

Symbol Exchange Traded Fund


iShare Dow Jones U.S. Basic Materials iShare Dow Jones U.S. Chemicals iShare Dow Jones U.S. Consumer Cyclical iShare Dow Jones U.S. Consumer Non-Cyclical iShare Dow Jones U.S. Energy iShare Dow Jones U.S. Financial iShare Dow Jones U.S. Financial Services iShare Dow Jones U.S. Healthcare iShare Dow Jones U.S. Industrial iShare Dow Jones U.S. Internet iShare Dow Jones U.S. Real Estate iShare Dow Jones U.S. Technology iShare Dow Jones U.S. Telecommunications iShare Dow Jones U.S. Total Market iShare Dow Jones U.S. Utilities iShare MSCI Australia iShare MSCI Austria iShare MSCI Belgium iShare MSCI Brazil iShare MSCI Canada iShare MSCI EMU iShare MSCI France iShare MSCI Germany iShare MSCI Hong Kong iShare MSCI Italy iShare MSCI Japan iShare MSCI Malaysia (Free) iShare MSCI Mexico (Free) iShare MSCI Netherlands iShare MSCI Singapore iShare MSCI South Korea iShare MSCI Spain iShare MSCI Sweden iShare MSCI Switzerland iShare MSCI Taiwan iShare MSCI United Kingdom iShare MSCI EAFE iShare Russell 1000 iShare Russell 1000 Growth iShare Russell 1000 Value iShare Russell 2000 iShare Russell 2000 Growth iShare Russell 2000 Value iShare Russell 3000 iShare Russell 3000 Growth iShare Russell 3000 Value IYM IYD IYC IYK IYE IYF IYG IYH IYJ IYV IYR IYW IYZ IYY IDU EWA EWO EWK EWZ EWC EZU EWQ EWG EWH EWI EWJ EWM EWW EWN EWS EWY EWP EWD EWL EWT EWU EFA IWB IWF IWD IWM IWO IWN IWV IWZ IWW

Underlying Index
DJUSBM DJUSCH DJUSCY DJUSNC DJUSEN DJUSFN DJUSFV DJUSHC DJUSIN DJINET DJUSRE DJUSTC DJUSTL DJUS DJUSUT MSDUAS MSDUAT MSDUBE WWC WPB MSDUEMU MSDUFR MSDUGR MSDUHK MSDUIT MSDUJN MSDUMAF INW MSDUNE MSDUSGF MSEUSKO MSDUSP MSDUSW MSDUSZ MSEUSTW INU MXEA RIY RLG RLV RTY RUO RUJ RAY RAG RAV

Exchange
AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX

Launch Date
6/12/00 6/12/00 6/12/00 6/12/00 6/12/00 5/22/00 6/12/00 6/12/00 6/12/00 5/15/00 6/12/00 5/15/00 5/22/00 6/12/00 6/12/00 3/18/96 3/18/96 3/18/96 7/14/00 3/18/96 7/14/00 3/18/96 3/18/96 3/18/96 3/18/96 3/18/96 3/18/96 3/18/96 3/18/96 3/18/96 5/12/00 3/18/96 3/18/96 3/18/96 6/23/00 3/18/96 8/17/01 5/15/00 5/22/00 5/22/00 5/22/00 7/24/00 7/24/00 5/22/00 7/24/00 7/24/00

ETF Strategy 30 October 2001

Useful ETF Information (continued)


Initial Manageme Index nt Fee Ratio 0.20% 1/25 0.25% 1/8 0.25% 1/8 0.60% 1/20 0.20% 1/5 0.20% 1/2 0.18% 1/10 0.25% 1/2 0.25% 1/2 0.25% 1/2 0.25% 1/2 0.18% 1/10 0.50% 1/10 0.i09% 1/10 0.50% 1/4 0.35% 1/10 0.50% 1/4 0.50% 1/4 0.50% 1/4 0.50% 1/4 0.18% 1/40 0.25% 1/5 0.18% n/a 0.12% 1/10 0.28% 1/10 0.28% 1/10 0.27% 1/10 0.27% 1/10 0.28% 1/10 0.27% 1/10 0.28% 1/10 0.27% 1/10 0.27% 1/10 0.50% 1/3 0.20% 1/20 0.20% 1/10 0.25% 1/20 0.25% 1/10 0.20% 1/10 0.20% 1/10 0.50% 1/10 0.50% 1 0.25% 1 0.15% n/a 0.20% 1/10 0.20% 1/20 0.17% 1/10 0.55% 1/4 0.55% 1/4 0.55% 1/4 0.55% 1/4 0.55% 1/10 0.17% 1/10 0.30% n/a Assets Under Daily Management Turnover (3 (10/12/2001) month avg) USD 000s USD 000s 36,953 32 12,380 27 14,546 288 206,225 1,287 322,873 3,535 397,686 9,456 272,685 3,622 110,055 1,687 205,950 2,634 57,987 616 178,200 1,968 423,835 5,458 6,180 53 2,857,167 43,909 20,610 569 129,193 12,749 64,163 2,673 21,522 1,657 23,856 2,673 17,220 308 21,065,490 2,553,962 4,148,321 94,370 2,466,284 259,414 26,218,492 1,206,271 98,116 1,384 132,762 451 360,525 1,796 108,680 2,294 315,657 8,751 721,299 16,146 71,421 877 1,036,816 11,320 98,691 1,039 19,155 283 19,980 124 36,489 210 6,200 181 23,560 412 27,255 420 12,344 72 2,725 58 59,697 471 17,318 152 497,890 24,397 154,358 4,634 45,280 1,342 2,387,522 30,428 27,522 500 25,681 415 41,486 331 11,464 167 43,280 182 153,901 630 27,512 353

Symbol Exchange Traded Fund


iShare Russell Midcap Index Fund iShare Russell Midcap Growth Index Fund iShare Russell Midcap Value Index Fund iShare S&P Europe 350 iShare S&P MidCap iShare S&P SmallCap iShare S&P/BARRA Growth iShare S&P/BARRA MidCap Growth iShare S&P/BARRA MidCap Value iShare S&P/BARRA Small Cap Growth iShare S&P/BARRA Small Cap Value iShare S&P/BARRA Value iShare S&P/TSE 60 Index iShare S&P500 Index iShares Cohen & Steers Realty Majors Index Fund iShares Nasdaq Biotechnology Index Fund iShares Goldman Sachs Technology Index Fund . iShares Goldman Sachs Software Index Fund iShares Goldman Sachs Semiconductor Index Fund iShares Goldman Sachs Networking Index Fund Nasdaq 100 S&P Midcap SPDR Dow Jones Industrial Average Depository Receipt S&P 500 SPDR Select Sector SPDR Basic Industries Select Sector SPDR Consumer Services Select Sector SPDR Consumer Staples Select Sector SPDR Cyclical/Transport Select Sector SPDR Energy Select Sector SPDR Financial Select Sector SPDR Industrial Select Sector SPDR Technology Select Sector SPDR Utilities SSGA Dow Jones Global Titans SSGA Dow Jones Style Large Cap Growth SSGA Dow Jones Style Large Cap Value SSGA Dow Jones Style Small Cap Growth Index SSGA Dow Jones Style Small Cap Value Index SSGA Fortune 500 SSGA Fortune e50 SSGA Morgan Stanley Internet SSGA Morgan Stanley Technology SSGA Wilshire REIT Total Stock Market VIPERs Index Fund iShare S&P100 Index iShares S&P Global 100 Index Fund iUnits S&P/TSE 60 Index iUnits S&P/TSE Canadian Energy Index iUnits S&P/TSE Canadian Financials Index iUnits S&P/TSE Canadian Gold Index iUnits S&P/TSE Canadian Inform. Tech Index iUnits S&P/TSE Canadian MidCap Index iUnits S&P/TSE Capped 60 Index iUnits S&P 500 Index RSP Fund IWR IWP IWS IEV IJH IJR IVW IJK IJJ IJT IJS IVE IKC IVV ICF IBB IGM IGV IGW IGN QQQ MDY DIA SPY XLB XLV XLP XLY XLE XLF XLI XLK XLU DGT ELG ELV DSG DSV FFF FEF MII MTK RWR VTI OEF IOO XIU CN XEG CN XFN CN XGD CN XIT CN XMD CN XIC CN XSP CN

Underlying Launch Index Exchange Date RMC AMEX 7/20/01 RDG AMEX 7/20/01 RMV AMEX 7/20/01 SPEU AMEX 7/25/00
MID SML SGX MIDG MIDV SMLG SMLV SVX SPTSE SPX RMP NBI GTC GSO GSM GIP NDX MID DJX SPX IXB IXV IXR IXY IXE IXM IXI IXT IXU DJGT DJUSGL DJUSVL DJUSGS DJUSVS FFX FEX MOX MSH REW TSJ OEX OOI SPTSE SPTSEE SPTSEF SPTSEG SPTSET SPTSEM TRIV60CP SPX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX CBOE NYSE Toronto Toronto Toronto Toronto Toronto Toronto Toronto Toronto 5/22/00 5/22/00 5/22/00 7/24/00 7/24/00 7/24/00 7/24/00 5/22/00 6/12/00 5/15/00 1/26/01 2/2/01 3/19/01 7/13/01 7/13/01 7/13/01 3/10/99 5/4/95 1/20/98 1/29/93 12/22/98 12/22/98 12/22/98 12/22/98 12/22/98 12/22/98 12/22/98 12/22/98 12/22/98 9/29/00 9/29/00 9/29/00 9/29/00 9/29/00 10/10/00 10/10/00 9/29/00 9/29/00 4/27/01 5/31/01 10/27/00 12/8/00 10/4/99 3/22/01 3/29/01 3/29/01 3/22/01 3/8/01 2/22/01 5/29/01

Fund Advisor
BGI BGI BGI BGI BGI BGI BGI BGI BGI BGI BGI BGI BGI BGI BGI BGI BGI BGI BGI BGI BNY BNY SSgA SSgA SSgA SSgA SSgA SSgA SSgA SSgA SSgA SSgA SSgA SSgA SSgA SSgA SSgA SSgA SSgA SSgA SSgA SSgA SSgA Vanguard BGI BGI BGI BGI BGI BGI BGI BGI BGI BGI

ETF Strategy 30 October 2001

Useful ETF Information (continued)


Initial Management Index Fee Ratio 0.35% n/a 0.08% 0.25% 0.25% 1/20 n/a n/a Assets Under Daily Management Turnover (3 (10/12/2001) month avg) USD 000s USD 000s 12,764 356 128,509 49,874 99,249 249 349 659

Symbol Exchange Traded Fund


iUnits MSCI Provisional EAFE Index SSGA DJ Canada 40 TD TSE 300 Capped Index TD TSE 300 Index XIN CN DJF CN TCF CN TTF CN

Underlying Index
MSDLEAFE XLCAN TS300C TS300

Exchange
Toronto Toronto Toronto Toronto

Launch Date
9/11/01 10/3/00 2/23/01 2/23/01

Fund Advisor
BGI SSgA TD Asset Mgt. TD Asset Mgt

10

ETF Strategy 30 October 2001

6. Details on Select ETFs


In this section, we highlight fifteen various ETFs and include a table with helpful statistics and charts showing assets under management and liquidity.

S&P 500 SPDR (SPY)


ETF Specifications and Statistics
Specifications Investment Manager/Advisor Underlying Index Inception Date Annual Management Fee Ratio at Start (ETF Share to Index Level) State Street Global Advisors S&P 500 29-Jan-93 0.12% 1/10 Statistics Assets Under Management (10/12/01) $m Daily Turnover (3 month average) $m Bid-Offer Spread (3 month average) 26,218 1,367 0.07%

ETF Liquidity (Daily Average Volume and Turnover)


16,000 2,000,000 1,800,000 Daily Average Volume 1,600,000

Assets Under Management and Shares Outstanding


300,000 35,000

14,000

250,000 Assets under Management ($m)

30,000

Shares Outstanding (000s)

Daily Average Volume (000s)

12,000

Daily Average Turnover 1,400,000 1,200,000 1,000,000 800,000 600,000

200,000

Shares Outstanding (000s)

25,000

Turnover (000s)

10,000

20,000 150,000 15,000 100,000 10,000 50,000

8,000 6,000

4,000 400,000 2,000 200,000

5,000

21-Aug-96

iShares S&P 500 (IVV)


ETF Specifications and Statistics
Specifications Investment Manager/Advisor Underlying Index Inception Date Annual Management Fee Ratio at Start (ETF Share to Index Level) Barclays Global Investors S&P 500 15-May-00 0.09% 1/10 Statistics Assets Under Management (10/12/01) $m Daily Turnover (3 month average) $m Bid-Offer Spread (3 month average) 2,857 17 0.08%

ETF Liquidity (Daily Average Volume and Turnover)


600 80,000 70,000 60,000 50,000 300 40,000 30,000 200 20,000 100 10,000 0 Oct-00 Mar-01 Apr-01 May-00 Aug-00 Aug-01 May-01 Jun-00 Jan-01 Feb-01 Dec-00 Sep-00 Jun-01 Nov-00 Sep-01 Oct-01 Jul-00 Jul-01 0

Assets Under Management and Shares Outstanding


30,000 3,500

500

Daily Average Volume Daily Average Turnover

25,000

Assets under Management ($m) Shares Outstanding (000s)

17-Aug-01

08-May-97

30-Nov-00

30-Jun-99

29-Jan-93

21-Mar-95

26-Jan-98

05-Dec-95

16-Mar-00

15-Oct-93

05-Jul-94

12-Oct-98

0 Jul-93 Jul-94 Jul-95 Jul-96 Jul-97 Jul-98 Jul-99 Jul-00 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jul-01

3,000

Shares Outstanding (000s)

2,500 20,000 2,000 15,000 1,500 10,000 1,000 5,000

400

500

19-May-00 15-Aug-00 08-Nov-00 03-May-01 03-Jul-00 27-Sep-00 21-Dec-00 06-Feb-01 21-Mar-01 15-Jun-01 27-Jul-01 10-Sep-01

Assets Under Management ($m)

Daily Average Volume (000s)

Turnover (000s)

Assets Under Management ($m)

11

ETF Strategy 30 October 2001

Nasdaq 100 (QQQ)


ETF Specifications and Statistics
Specifications Investment Manager/Advisor Underlying Index Inception Date Annual Management Fee Ratio at Start (ETF Share to Index Level) Bank of New York Nasdaq 100 10-Mar-99 0.18% 1/40 Statistics Assets Under Management (10/12/01) $m Daily Turnover (3 month average) $m Bid-Offer Spread (3 month average) 21,065 994.8 0.15%

ETF Liquidity (Daily Average Volume and Turnover)


90,000 80,000 70,000 Daily Average Volume Daily Average Turnover 3,000,000 4,000,000

Assets Under Management and Shares Outstanding


700,000 30,000

3,500,000

600,000 Assets Under Management ($m) 500,000 Shares Oustanding (000s)

25,000

60,000

20,000 400,000 15,000 300,000 10,000 200,000

50,000 2,000,000 40,000 1,500,000 30,000 20,000 10,000 0 Sep-99 Dec-99 Sep-00 Dec-00 Sep-01 Mar-99 Mar-00 Mar-01 Jun-99 Jun-00 Jun-01 1,000,000

Turnover (000s)

2,500,000

100,000
500,000

5,000

30-Apr-99

28-Apr-00

23-Nov-99

12-Aug-99

10-Aug-00

21-Nov-00

30-Apr-01

09-Aug-01

14-Jan-00

16-Jan-01

04-Oct-99

02-Oct-00

10-Mar-99

22-Jun-99

08-Mar-00

20-Jun-00

08-Mar-01

S&P Midcap SPDR (MDY)


ETF Specifications and Statistics
Specifications Investment Manager/Advisor Underlying Index Inception Date Annual Management Fee Ratio at Start (ETF Share to Index Level) Bank of New York S&P 400 04-May-95 0.25% 1/5 Statistics Assets Under Management (10/12/01) $m Daily Turnover (3 month average) $m Bid-Offer Spread (3 month average) 4,148 73 0.22%

ETF Liquidity (Daily Average Volume and Turnover)


2,000 1,800 Daily Average Volume 1,600 Daily Average Turnover 1,400 1,200 100,000 1,000 80,000 800 60,000 600 400 200 0 May-97 May-98 May-99 May-00 May-01 Aug-96 Aug-97 Aug-98 Aug-99 Aug-00 Aug-01 Feb-97 Feb-98 Feb-99 Feb-00 Nov-96 Nov-97 Nov-98 Nov-99 Nov-00 Feb-01 40,000 140,000 180,000 160,000

Assets Under Management and Shares Outstanding


60,000 5,000 4,500 50,000 Assets under Management ($m) 4,000 Shares Outstanding (000s)

20-Jun-01

05-Oct-01

120,000

Shares Outstanding (000s)

3,500 40,000 3,000 30,000 2,500 2,000 20,000 1,500 1,000 10,000

20,000 0

500 21-Apr-99 04-May-95 25-Apr-97 24-Nov-98 16-Nov-00 13-Sep-99 12-Apr-01 11-Jul-96 06-Jul-98 26-Sep-95 02-Dec-96 17-Sep-97 04-Sep-01 03-Feb-00 16-Feb-96 10-Feb-98 27-Jun-00 -

12

Assets Under Management ($m)

Daily Average Volume (000s)

Turnover (000s)

Assets Under Management ($m)

Daily Average Volume (000s)

Shares Outstanding (000s)

ETF Strategy 30 October 2001

Dow Jones Industrial Average Depository Receipt (DIA)


ETF Specifications and Statistics
Fund Specifications Investment Manager/Advisor Underlying Index Inception Date Annual Management Fee Ratio at Start (ETF Share to Index Level) SSgA DJX 20-Jan-98 0.18% 1/100 Statistics Assets Under Management (10/12/01) $m Daily Turnover (3 month average) $m Bid-Offer Spread (3 month average) 2,466 325 0.10%

ETF Liquidity (Daily Average Volume and Turnover)


6,000 600,000

Assets Under Management and Shares Outstanding


35,000 3,500

30,000

5,000

Daily Average Volume Daily Average Turnover

Assets under Management ($m) Shares Outstanding (000s)

3,000

500,000

Daily Average Volume (000s)

4,000

400,000

Shares Outstanding (000s)

25,000

2,500

20,000

2,000

3,000

300,000

15,000

1,500

2,000

200,000

10,000

1,000

1,000

100,000

5,000

500

0 Jul-98 Jul-99 Jul-00 Mar-00 Mar-01 May-00 May-01 Mar-99 Jul-01 Mar-98 May-99 May-98 Jan-98 Jan-99 Jan-00 Jan-01 Sep-98 Sep-99 Sep-00 Sep-01 Nov-98 Nov-99 Nov-00

24-Aug-98 20-Aug-99 16-Aug-00 13-Aug-01 01-Apr-98 03-Nov-98 01-Nov-99 26-Oct-00 20-Jan-98 15-Jan-99 12-Jan-00 09-Jan-01 22-Mar-01 24-Mar-00 30-Mar-99 12-Jun-98 10-Jun-99 06-Jun-00 04-Jun-01

iShare Russell 2000 (IWM)


ETF Specifications and Statistics
Fund Specifications Investment Manager/Advisor Underlying Index Inception Date Annual Management Fee Ratio at Start (ETF Share to Index Level) Barclays Global Investors Russell 2000 22-May-00 0.20% 1/5 Statistics Assets Under Management (10/12/01) $m Daily Turnover (3 month average) $m Bid-Offer Spread (3 month average) 1,591 32 0.37%

ETF Liquidity (Daily Average Volume and Turnover)


500 450 400 Daily Average Volume Daily Average Turnover 50,000 45,000 40,000

Assets Under Management and Shares Outstanding


25,000 2,000 1,800 Assets under Management ($m) 20,000 Shares Outstanding (000s) 1,600 1,400 15,000 1,200 1,000 10,000 800 600 5,000 400 200 22-Aug-00 26-May-00 10-May-01 03-Aug-01 15-Nov-00 29-Dec-00 13-Feb-01 28-Mar-01 22-Jun-01 11-Jul-00 04-Oct-00 21-Sep-01 -

300 250 200 150 100 50 0 Aug-00 May-00 Aug-01 May-01 Nov-00 Apr-01 Jul-00 Jan-01 Jul-01 Sep-00 Dec-00 Sep-01 Oct-00 Feb-01 Mar-01 Jun-00 Jun-01 Oct-01

30,000 25,000 20,000 15,000 10,000 5,000 0

Shares Outstanding (000s)

350

35,000

Assets Under Management ($m)

Daily Average Volume (000s)

Turnover (000s)

13

Assets Under Management ($m)

Turnover (000s)

ETF Strategy 30 October 2001

Select Sector SPDR Basic Industries (XLB)


ETF Specifications and Statistics
Fund Specifications Investment Manager/Advisor Underlying Index Inception Date Annual Management Fee Ratio at Start (ETF Share to Index Level) SSGA Basic Industries Select Sector Index 22-Dec-98 0.28% 1/10 Statistics Assets Under Management (10/12/01) $m Daily Turnover (3 month average) $m Bid-Offer Spread (3 month average)
98 2.4 0.71%

ETF Liquidity (Daily Average Volume and Turnover)


250 6,000

Assets Under Management and Shares Outstanding


7000 Assets Under Management ($m) 160

Daily Average Volume 5,000 200 Daily Average Turnover

6000 Shares Outstanding (000s)

140

4,000 150 3,000 100 2,000

Shares Outstanding (000s)

5000 100 4000 80 3000 60 2000 40

50 1,000

1000

20

0 Dec-98 Jan-99 Feb-99 Mar-99 Apr-99 May-99 Jun-99 Jul-99 Aug-99 Sep-99 Oct-99 Nov-99 Dec-99 Jan-00 Feb-00 Mar-00 Apr-00 May-00 Jun-00 Jul-00 Aug-00 Sep-00 Oct-00 Nov-00 Dec-00 Jan-01 Feb-01 Mar-01 Apr-01 May-01 Jun-01 Jul-01 Aug-01 Sep-01 Oct-01

0 18-May-99 12-May-00 10-May-01 29-Jul-99 25-Jul-00 08-Oct-99 04-Oct-00 20-Jul-01 22-Dec-98 20-Dec-99 14-Dec-00 08-Mar-99 02-Mar-00 28-Feb-01 05-Oct-01

Select Sector SPDR Consumer Services (XLV)


ETF Specifications and Statistics
Fund Specifications Investment Manager/Advisor Underlying Index Inception Date Annual Management Fee
Ratio at Start (ETF Share to Index Level) SSGA Consumer Services Select Sector Index 22-Dec-98 0.28% 1/10

Statistics Assets Under Management (10/12/01) $m Daily Turnover (3 month average) $m Bid-Offer Spread (3 month average)

133 0.7 0.64%

ETF Liquidity (Daily Average Volume and Turnover)


160 4,500

Assets Under Management and Shares Outstanding


6,000 160

140

4,000 Daily Average Volume Daily Average Turnover 3,500

Assets Under Management ($m) 5,000 Shares Outstanding (000s)

140

Daily Average Volume (000s)

Shares Outstanding (000s)

120

120 4,000 100

3,000

2,500 80 2,000 60 1,500 40

Turnover (000s)

100

3,000

80

60 2,000 40

1,000

1,000 20

20

500

0 22-Aug-00 26-May-00
0 Dec-98 Jan-99 Feb-99 Mar-99 Apr-99 May-99 Jun-99 Jul-99 Aug-99 Sep-99 Oct-99 Nov-99 Dec-99 Jan-00 Feb-00 Mar-00 Apr-00 May-00 Jun-00 Jul-00 Aug-00 Sep-00 Oct-00 Nov-00 Dec-00 Jan-01 Feb-01 Mar-01 Apr-01 May-01 Jun-01 Jul-01 Aug-01 Sep-01 Oct-01 0

0 10-May-01 03-Aug-01 22-Mar-99 02-Mar-00 15-Nov-00 22-Dec-98 06-Dec-99 16-Jun-99 10-Sep-99 13-Feb-01

14

Assets Under Management ($m)

Assets Under Management ($m)

120

Daily Average Volume (000s)

Turnover (000s)

ETF Strategy 30 October 2001

Select Sector SPDR Consumer Staples (XLP)


ETF Specifications and Statistics
Fund Specifications Investment Manager/Advisor Underlying Index Inception Date Annual Management Fee Ratio at Start (ETF Share to Index Level) SSGA Consumer Staples Select Sector Index 22-Dec-98 0.27% 1/10 Statistics Assets Under Management (10/12/01) $m Daily Turnover (3 month average) $m Bid-Offer Spread (3 month average) 361 3.1 0.62%

ETF Liquidity (Daily Average Volume and Turnover)


600 12,000

Assets Under Management and Shares Outstanding


16,000 Assets Under Management ($m) 14,000 350 Shares Outstanding (000s) 400

500

Daily Average Volume Daily Average Turnover

10,000

Daily Average Volume (000s)

400

8,000

10,000

250

8,000

200

300

6,000

6,000

150

200

4,000

4,000

100

100

2,000

2,000

50

0 19-Apr-01 01-Aug-00 04-May-99 26-May-00


0 Dec-98 Jan-99 Feb-99 Mar-99 Apr-99 May-99 Jun-99 Jul-99 Aug-99 Sep-99 Oct-99 Nov-99 Dec-99 Jan-00 Feb-00 Mar-00 Apr-00 May-00 Jun-00 Jul-00 Aug-00 Sep-00 Oct-00 Nov-00 Dec-00 Jan-01 Feb-01 Mar-01 Apr-01 May-01 Jun-01 Jul-01 Aug-01 Sep-01 Oct-01 0

0 24-Aug-01 01-Mar-99 12-Nov-99 23-Mar-00 04-Oct-00 08-Jul-99 13-Feb-01 22-Dec-98 10-Sep-99 07-Dec-00 22-Jun-01 19-Jan-00

Select Sector SPDR Cyclical/Transport (XLY)


ETF Specifications and Statistics
Fund Specifications Investment Manager/Advisor Underlying Index Inception Date Annual Management Fee Ratio at Start (ETF Share to Index Level)
SSGA Cyclical/Transport Select Sector Index 22-Dec-98 0.27%

Statistics Assets Under Management (10/12/01) $m Daily Turnover (3 month average) $m Bid-Offer Spread (3 month average)

109 1.6 0.65%

1/10

ETF Liquidity (Daily Average Volume and Turnover)


1,000 900 800 Daily Average Volume Daily Average Turnover 700 600 500 400 300 10,000 15,000 20,000 25,000

Assets Under Management and Shares Outstanding


10,000 9,000 8,000 Assets Under Management ($m) 250 Shares Outstanding (000s) 300

Shares Outstanding (000s)

7,000 200 6,000 5,000 4,000 100 3,000 2,000 150

200 100

5,000

50 1,000 0 01-Aug-00 19-Apr-01 0 24-Aug-01 04-May-99 26-May-00 13-Feb-01 12-Nov-99 10-Sep-99 22-Dec-98 07-Dec-00 22-Jun-01 01-Mar-99 23-Mar-00 08-Jul-99 19-Jan-00 04-Oct-00

0 Dec-98 Jan-99 Feb-99 Mar-99 Apr-99 May-99 Jun-99 Jul-99 Aug-99 Sep-99 Oct-99 Nov-99 Dec-99 Jan-00 Feb-00 Mar-00 Apr-00 May-00 Jun-00 Jul-00 Aug-00 Sep-00 Oct-00 Nov-00 Dec-00 Jan-01 Feb-01 Mar-01 Apr-01 May-01 Jun-01 Jul-01 Aug-01 Sep-01 Oct-01

15

Assets Under Management ($m)

Daily Average Volume (000s)

Turnover (000s)

Assets Under Management ($m)

12,000

300

Shares Outstanding (000s)

Turnover (000s)

ETF Strategy 30 October 2001

Select Sector SPDR Energy (XLE)


ETF Specifications and Statistics
Fund Specifications Investment Manager/Advisor Underlying Index Inception Date Annual Management Fee Ratio at Start (ETF Share to Index Level)
SSGA Energy Select Sector Index 22-Dec-98 0.28% 1/10

Statistics Assets Under Management (10/12/01) $m Daily Turnover (3 month average) $m Bid-Offer Spread (3 month average)

316 5.7 0.61%

ETF Liquidity (Daily Average Volume and Turnover)


1,000 900 Daily Average Volume 800 Daily Average Turnover 30,000 35,000

Assets Under Management and Shares Outstanding


12,000 Assets Under Management ($m) 10,000 Shares Outstanding (000s) 300 350

Daily Average Volume (000s)

700 600 500 400 300 200

Shares Outstanding (000s)

25,000

250 8,000 200 6,000 150 4,000 100 2,000

20,000

15,000

10,000

5,000 100 0 Dec-98 Jan-99 Feb-99 Mar-99 Apr-99 May-99 Jun-99 Jul-99 Aug-99 Sep-99 Oct-99 Nov-99 Dec-99 Jan-00 Feb-00 Mar-00 Apr-00 May-00 Jun-00 Jul-00 Aug-00 Sep-00 Oct-00 Nov-00 Dec-00 Jan-01 Feb-01 Mar-01 Apr-01 May-01 Jun-01 Jul-01 Aug-01 Sep-01 Oct-01 0

50

0 01-Aug-00 04-May-99 26-May-00 24-Aug-01 12-Nov-99 19-Jan-00 22-Dec-98 10-Sep-99 01-Mar-99 23-Mar-00 07-Dec-00 13-Feb-01 19-Apr-01 08-Jul-99 04-Oct-00 22-Jun-01

Select Sector SPDR Financial (XLF)


ETF Specifications and Statistics
Fund Specifications Investment Manager/Advisor Underlying Index Inception Date Annual Management Fee Ratio at Start (ETF Share to Index Level)
SSGA Financial Select Sector Index 22-Dec-98 0.27% 1/10

Statistics Assets Under Management (10/12/01) $m Daily Turnover (3 month average) $m Bid-Offer Spread (3 month average)

721 14.4 0.52%

ETF Liquidity (Daily Average Volume and Turnover)


1,600 45,000

Assets Under Management and Shares Outstanding


35,000 1,000 900 30,000 Assets Under Management ($m) 800 Shares Outstanding (000s) 700 600 500 15,000 400 300 200
10,000

1,400

40,000 Daily Average Volume Daily Average Turnover 35,000

Assets Under Management ($m)


Assets Under Management ($m)

Daily Average Volume (000s)

30,000

Turnover (000s)

1,000 25,000 800 20,000 600 15,000 400

Shares Outstanding (000s)

1,200

Turnover (000s)

25,000

20,000

10,000

5,000 100

200

5,000

0 04-May-99 26-May-00 19-Apr-01 01-Aug-00


0 Dec-98 Jan-99 Feb-99 Mar-99 Apr-99 May-99 Jun-99 Jul-99 Aug-99 Sep-99 Oct-99 Nov-99 Dec-99 Jan-00 Feb-00 Mar-00 Apr-00 May-00 Jun-00 Jul-00 Aug-00 Sep-00 Oct-00 Nov-00 Dec-00 Jan-01 Feb-01 Mar-01 Apr-01 May-01 Jun-01 Jul-01 Aug-01 Sep-01 Oct-01 0

0 24-Aug-01 12-Nov-99 13-Feb-01 01-Mar-99 10-Sep-99 23-Mar-00 22-Dec-98 07-Dec-00 22-Jun-01 19-Jan-00 04-Oct-00 08-Jul-99

16

ETF Strategy 30 October 2001

Select Sector SPDR Industrial (XLI)


ETF Specifications and Statistics
Fund Specifications Investment Manager/Advisor Underlying Index Inception Date Annual Management Fee Ratio at Start (ETF Share to Index Level)
SSGA Industrial Select Sector Index 22-Dec-98 0.28% 1/10

Statistics Assets Under Management (10/12/01) $m Daily Turnover (3 month average) $m Bid-Offer Spread (3 month average)

71 0.6 0.59%

ETF Liquidity (Daily Average Volume and Turnover)


250 6,000

Assets Under Management and Shares Outstanding


5,500 5,000 160

140 Assets Under Management ($m)

Daily Average Turnover

Daily Average Volume (000s)

4,000 150 3,000 100 2,000

Shares Outstanding (000s)

4,000 3,500 3,000 2,500 2,000

Shares Outstanding (000s)

120

100

80

60

40
50 1,000

1,500 1,000 20

08-Apr-99

05-Apr-00

28-May-99

26-May-00

05-Apr-01

29-May-01

01-Nov-99

16-Feb-99

14-Feb-00

30-Oct-00

22-Dec-98

10-Sep-99

22-Dec-99

08-Sep-00

20-Dec-00

13-Feb-01

Select Sector SPDR Technology (XLK)


ETF Specifications and Statistics
Fund Specifications Investment Manager/Advisor Underlying Index Inception Date Annual Management Fee Ratio at Start (ETF Share to Index Level)
SSGA Technology Select Sector Index 22-Dec-98 0.27% 1/10

Statistics Assets Under Management (10/12/01) $m Daily Turnover (3 month average) $m Bid-Offer Spread (3 month average)

1,037 9.1 0.54%

ETF Liquidity (Daily Average Volume and Turnover)


2,500 80,000

Assets Under Management and Shares Outstanding


50,000 45,000 40,000
60,000

07-Sep-01

21-Jul-99

19-Jul-00

18-Jul-01

0 Apr-01 May-01 Jun-01 Apr-99 May-99 Jun-99 Jul-99 May-00 Jun-00 Jul-00 Aug-00 Aug-99 Sep-99 Oct-99 Nov-99 Jul-01 Aug-01 Sep-01 Oct-01 Mar-00 Apr-00 Sep-00 Oct-00 Nov-00 Dec-00 Jan-99 Feb-99 Mar-99 Dec-98 Dec-99 Jan-00 Feb-00 Jan-01 Feb-01 Mar-01

500

1600 Assets Under Management ($m) Shares Outstanding (000s) 1200

Daily Average Volume 2,000 Daily Average Turnover

70,000

1400

35,000 30,000 25,000 20,000 15,000 400 10,000 1000

1,500

40,000 1,000

Turnover (000s)

50,000

800

30,000

600

20,000 500 10,000

5,000
0 Dec-98 Jan-99 Feb-99 Mar-99 Apr-99 May-99 Jun-99 Jul-99 Aug-99 Sep-99 Oct-99 Nov-99 Dec-99 Jan-00 Feb-00 Mar-00 Apr-00 May-00 Jun-00 Jul-00 Aug-00 Sep-00 Oct-00 Nov-00 Dec-00 Jan-01 Feb-01 Mar-01 Apr-01 May-01 Jun-01 Jul-01 Aug-01 Sep-01 Oct-01 0

200

0 18-May-99 12-May-00 10-May-01 22-Dec-98 20-Dec-99 14-Dec-00 28-Feb-01 29-Jul-99 25-Jul-00 08-Mar-99 08-Oct-99 02-Mar-00 04-Oct-00 20-Jul-01 05-Oct-01

17

Assets Under Management ($m)

Daily Average Volume (000s)

Shares Outstanding (000s)

Assets Under Management ($m)

200

Daily Average Volume

5,000

4,500

Turnover (000s)

ETF Strategy 30 October 2001

Select Sector SPDR Utilities (XLU)


ETF Specifications and Statistics
Fund Specifications Investment Manager/Advisor Underlying Index Inception Date Annual Management Fee Ratio at Start (ETF Share to Index Level) SSGA Utilities Select Sector Index 22-Dec-98 0.27% 1/10 Statistics Assets Under Management (10/12/01) $m Daily Turnover (3 month average) $m Bid-Offer Spread (3 month average) 99 1.0 0.55%

ETF Liquidity (Daily Average Volume and Turnover)


600 16,000

Assets Under Management and Shares Outstanding


12,000 350

14,000 500 Daily Average Volume Daily Average Turnover 12,000

10,000

Assets Under Management ($m) Shares Outstanding (000s)

300

Shares Outstanding (000s)

250

Daily Average Volume (000s)

400

8,000 200 6,000 150 4,000 100 2,000

300

8,000

6,000 200 4,000 100 2,000

Turnover (000s)

10,000

50

0 04-May-99 26-May-00 12-Nov-99 01-Aug-00


0 Dec-98 Jan-99 Feb-99 Mar-99 Apr-99 May-99 Jun-99 Jul-99 Aug-99 Sep-99 Oct-99 Nov-99 Dec-99 Jan-00 Feb-00 Mar-00 Apr-00 May-00 Jun-00 Jul-00 Aug-00 Sep-00 Oct-00 Nov-00 Dec-00 Jan-01 Feb-01 Mar-01 Apr-01 May-01 Jun-01 Jul-01 Aug-01 Sep-01 Oct-01 0

0 24-Aug-01 22-Dec-98 10-Sep-99 01-Mar-99 19-Jan-00 07-Dec-00 23-Mar-00 13-Feb-01 19-Apr-01 08-Jul-99 04-Oct-00 22-Jun-01

18

Assets Under Management ($m)

ETF Strategy 30 October 2001

7. Appendix: ETF Reference Tables


In this appendix, we provide a comprehensive list of ETF tickers (beginning on the next page). The table below provides a summary of ETF terms and definitions.
ETF Terminology
Term Underlying Trading Value Net Asset Value Shares Outstanding Dividend Equivalent Payment Total Cash Amount per Creation Unit Final Quarterly Dividend Payments Net Accrued Dividends
Source: AMEX, BGI

Definition Measures the real time market value of the ETF. The price is updated every 15 seconds. Measures the net asset value based on the previous days cash close. The NAV is the market value of the fund minus the funds liabilities, measured on a per share basis. Reports the amount of shares outstanding for each fund. Represents the estimated cash amount in dollars per creation unit anticipated to be required in connection with the current trading days creation or redemption requests. This figure is obtained by totaling the funds accrued dividends net of expenses as of the prior days close. The actual total cash amount in dollars per creation unit, required in connection with the prior trading days creation or redemption requests. All creation and redemptions must be at NAV. This figure represents that total dollar amount that is required to bring the creation unit to NAV. The number incorporates the dividend equivalent payment and an unknown cash amount, which will balance the creation unit to NAV. Based on the actual dividends paid out for the ETF. Reported on a quarterly basis on the ex-dividend date. Accrued dividends, reported daily and net of expenses

19

ETF Strategy 30 October 2001

Current ETFs Available as of October 2001


Div Cash Equivalent Payment (Est Component per Creation Cash Shares Unit Outstanding Component) NLBSO NLBEU NLBTC NNESO NNEEU NNETC NLLSO NLLEU NLLTC NMJSO NMJEU NMJTC NLESO NLEEU NLETC NLFSO NLFEU NLFTC NAGSO NAGEU NAGTC NHGSO NHGEU NHGTC NIJSO NIJEU NIJTC NNUSO NNUEU NNUTC NLRSO NLREU NLRTC NJWSO NJWEU NJWTC NJZSO NJZEU NJZTC NLASO NLAEU NLATC NLUSO NLUEU NLUTC WBJSO WBJEU WBJTC INYSO INYEU INYTC INKSO INKEU INKTC WWCSO WWCEU WWCTC WPBSO WPBEU WPBTC WWESO WWEEU WWETC WBFSO WBFEU WBFTC WDGSO WDGEU WDGTC INHSO INHEU INHTC INESO INEEU INETC INJSO INJEU INJTC INMSO INMEU INMTC INWSO INWEU INWTC INNSO INNEU INNTC INRSO INREU INRTC WWKSO WWKEU WWKTC INPSO INPEU INPTC WBQSO WBQEU WBQTC INLSO INLEU INLTC WWMSO WWMEU WWMTC INUSO INUEU INUTC EFVSO EFVEU EFVTC NJBSO NJBEU NJBTC NBFSO NBFEU NBFTC NJUSO NJUEU NJUTC NJMSO NJMEU NJMTC NLOSO NLOEU NLOTC NAJSO NAJEU NAJTC NMVSO NMVEU NMVTC NBESO NBEEU NBETC NNWSO NNWEU NNWTC

Exchange Traded Fund iShare Dow Jones U.S. Basic Materials iShare Dow Jones U.S. Chemicals iShare Dow Jones U.S. Consumer Cyclical iShare Dow Jones U.S. Consumer Non-Cyc iShare Dow Jones U.S. Energy iShare Dow Jones U.S. Financial iShare Dow Jones U.S. Financial Services iShare Dow Jones U.S. Healthcare iShare Dow Jones U.S. Industrial iShare Dow Jones U.S. Internet iShare Dow Jones U.S. Real Estate iShare Dow Jones U.S. Technology iShare Dow Jones US Telecommunications iShare Dow Jones U.S. Total Market iShare Dow Jones U.S. Utilities iShare MSCI Australia iShare MSCI Austria iShare MSCI Belgium iShare MSCI Brazil iShare MSCI Canada iShare MSCI EMU iShare MSCI France iShare MSCI Germany iShare MSCI Hong Kong iShare MSCI Italy iShare MSCI Japan iShare MSCI Malaysia (Free) iShare MSCI Mexico (Free) iShare MSCI Netherlands iShare MSCI Singapore iShare MSCI South Korea iShare MSCI Spain iShare MSCI Sweden iShare MSCI Switzerland iShare MSCI Taiwan iShare MSCI United Kingdom iShare MSCI EAFE iShare Russell 1000 iShare Russell 1000 Growth iShare Russell 1000 Value iShare Russell 2000 iShare Russell 2000 Growth iShare Russell 2000 Value iShare Russell 3000 iShare Russell 3000 Growth iShare Russell 3000 Value

Symbol IYM IYD IYC IYK IYE IYF IYG IYH IYJ IYV IYR IYW IYZ IYY IDU EWA EWO EWK EWZ EWC EZU EWQ EWG EWH EWI EWJ EWM EWW EWN EWS EWY EWP EWD EWL EWT EWU EFA IWB IWF IWD IWM IWO IWN IWV IWZ IWW

Underlying Index DJUSBM DJUSCH DJUSCY DJUSNC DJUSEN DJUSFN DJUSFV DJUSHC DJUSIN DJINET DJUSRE DJUSTC DJUSTL DJUS DJUSUT MSDUAS MSDUAT MSDUBE WWC WPB MSDUEMU MSDUFR MSDUGR MSDUHK MSDUIT MSDUJN MSDUMAF INW MSDUNE MSDUSGF MSEUSKO MSDUSP MSDUSW MSDUSZ MSEUSTW INU MXEA RIY RLG RLV RTY RUO RUJ RAY RAG RAV

Exchange AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX

Intra-day Value NLBX NNE NLL NMJ NLE NLF NAG NHG NIJ NNU NLR NJW NJZ NLA NLU WBJ INY INK WWC WPB WWE WBF WDG INH INE INJ INM INW INN INR WWK INP WBQ INL WWM INU EFV NJB NBF NJU NJM NLO NAJ NMV NBE NNW

Net Asset Value NLBNV NNENV NLLNV NMJNV NLENV NLFNV NAGNV NHGNV NIJNV NNUNV NLRNV NJWNV NJZNV NLANV NLUNV WBJNV INYNV INKNV WWCNV WPBNV WWENV WBFNV WDGNV INHNV INENV INJNV INMNV INWNV INNNV INRNV WWKNV INPNV WBQNV INLNV WWMNV INUNV EFVNV NJBNV NBFNV NJUNV NJMNV NLONV NAJNV NMVNV NBENV NNWNV

20

ETF Strategy 30 October 2001

Current ETFs Available as of October 2001 (continued)


Div Cash Equivalent Payment (Est Component per Creation Cash Shares Unit Outstanding Component) NIZSO NIZEU NIZTC NIWSO NIWEU NIWTC NIVSO NIVEU NIVTC NLGSO NLGEU NLGTC NJHSO NJHEU NJHTC NIRSO NIREU NIRTC NJGSO NJGEU NJGTC NNKSO NNKEU NNKTC NJJSO NJJEU NJJTC NLTSO NLTEU NLTTC NJSSO NJSEU NJSTC NMESO NMEEU NMETC NLJSO NLJEU NLJTC NNVSO NNVEU NNVTC ICGSO ICGEU ICGTC IBFSO IBFEU IBFTC IPMSO IPMEU IPMTC NVVSO NVVEU NVVTC NVWSO NVWEU NVWTC NVKSO NVKEU NVKTC QXVSO QXVEU QXVTC MXVSO MXVEU MXVTC DXVSO DXVEU DXVTC SXVSO SXVEU SXVTC BXVSO BXVEU BXVTC NXVSO NXVEU NXVTC PXVSO PXVEU PXVTC YXVSO YXVEU YXVTC EXXSO EXXEU EXXTC FXVSO FXVEU FXVTC TXVSO TXVEU TXVTC KXVSO KXVEU KXVTC UXVSO UXVEU UXVTC UGTSO UGTEU UGTTC FLGSO FLGEU FLGTC FLVSO FLVEU FLVTC PSGSO PSGEU PSGTC PSVSO PSVEU PSVTC FFYSO FFYEU FFYTC FEYSO FEYEU FEYTC MMISO MMIEU MMITC JMTSO JMTEU JMTTC EWRSO EWREU EWRTC TSJSO TSJEU TSJTC OES OEP OEK OOS OOE OOU

Exchange Traded Fund iShare Russell Midcap Index Fund iShare Russell Midcap Growth Index Fund iShare Russell Midcap Value Index Fund iShare S&P Europe 350 iShare S&P MidCap iShare S&P SmallCap iShare S&P/BARRA Growth iShare S&P/BARRA MidCap Growth iShare S&P/BARRA MidCap Value iShare S&P/BARRA Small Cap Growth iShare S&P/BARRA Small Cap Value iShare S&P/BARRA Value iShare S&P/TSE 60 Index iShare S&P500 Index iShares Cohen & Steers Realty Majors Idx iShares Nasdaq Biotechnology Index Fund iShares Goldman Sachs Technology Index iShares Goldman Sachs Software Index iShares Goldman Sachs Semiconductor Ind iShares Goldman Sachs Networking Index Nasdaq 100 S&P Midcap SPDR Dow Jones Industrial Average S&P 500 SPDR Select Sector SPDR Basic Industries Select Sector SPDR Consumer Services Select Sector SPDR Consumer Staples Select Sector SPDR Cyclical/Transport Select Sector SPDR Energy Select Sector SPDR Financial Select Sector SPDR Industrial Select Sector SPDR Technology Select Sector SPDR Utilities SSGA Dow Jones Global Titans SSGA Dow Jones Style Large Cap Growth SSGA Dow Jones Style Large Cap Value SSGA Dow Jones Style Small Cap Growth SSGA Dow Jones Style Small Cap Value SSGA Fortune 500 SSGA Fortune e50 SSGA Morgan Stanley Internet SSGA Morgan Stanley Technology SSGA Wilshire REIT Total Stock Market VIPERs Index Fund iShare S&P100 Index iShares S&P Global 100 Index Fund

Symbol IWR IWP IWS IEV IJH IJR IVW IJK IJJ IJT IJS IVE IKC IVV ICF IBB IGM IGV IGW IGN QQQ MDY DIA SPY XLB XLV XLP XLY XLE XLF XLI XLK XLU DGT ELG ELV DSG DSV FFF FEF MII MTK RWR VTI OEF IOO

Underlying Index RMC RDG RMV SPEU MID SML SGX MIDG MIDV SMLG SMLV SVX SPTSE SPX RMP NBI GTC GSO GSM GIP NDX MID DJX SPX IXB IXV IXR IXY IXE IXM IXI IXT IXU DJGT DJUSGL DJUSVL DJUSGS DJUSVS FFX FEX MOX MSH REW TSJ OEX OOI

Exchange AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX AMEX CBOE NYSE

Intra-day Value NIZ NIW NIV NLG NJH NIR NJG NNK NJJ NLT NJS NME NLJ NNV ICG IBF IPM NVV NVW NVK QXV MXV DXV SXV BXV NXV PXV YXV EXX FXV TXV KXV UXV UGT FLG FLV PSG PSV FFY FEY MMI JMT EWR TSJ OEV OON

Net Asset Value NIZNV NIWNV NIVNV NLGNV NJHNV NIRNV NJGNV NNKNV NJJNV NLTNV NJSNV NMENV NLJNV NNVNV ICGNV IBFNV IPMNV NVVNV NVWNV NVKNV QXVNV MXVNV DXVNV SXVNV BXVNV NXVNV PXVNV YXVNV EXXNV FXVNV TXVNV KXVNV UXVNV UGTNV FLGNV FLVNV PSGNV PSVNV FFYNV FEYNV MMINV JMTNV EWRNV TSJNV OEL OOV

21

ETF Strategy 30 October 2001

Current ETFs Available as of October 2001 (continued)


Div Cash Equivalent Payment Component (Est Cash per Creation Shares Unit Outstanding Component)

Exchange Traded Fund iUnits S&P/TSE 60 Index Fund iUnits S&P/TSE Canadian Energy Index iUnits S&P/TSE Canadian Financials Index iUnits S&P/TSE Canadian Gold Index Fund iUnits S&P/TSE Canadian Inform. Tech iUnits S&P/TSE Canadian MidCap Index iUnits S&P/TSE Capped 60 Index Fund iUnits S&P 500 Index RSP Fund iUnits MSCI Provisional EAFE Index SSGA DJ Canada 40 Index Fund TD TSE 300 Capped Index Fund TD TSE 300 Index Fund

Symbol XIU CN XEG CN XFN CN XGD CN XIT CN XMD CN XIC CN XSP CN XIN CN DJF CN TCF CN TTF CN

Underlying Index SPTSE SPTSEE SPTSEF SPTSEG SPTSET SPTSEM TRIV60CP SPX MSDLEAFE XLCAN TS300C TS300

Exchange Toronto Toronto Toronto Toronto Toronto Toronto Toronto Toronto Toronto Toronto Toronto Toronto

Intra-day Value

Net Asset Value

22

ETF Strategy 30 October 2001

8. Global Equity Derivatives Strategy Team


n Global Equity Derivatives Strategy Group Richard Bernstein Chief Quantitative Strategist (1) 212 449 0905 Richard_Bernstein@ml.com n Europe Alex Ypsilanti (44) 20 7996 4394 Alex_Ypsilanti@ml.com Gaudi Schneider (44) 20 7996 4230 Gaudi_Schneider@ml.com n Americas Benjamin Bowler, Manager (1) 212 449 3199 Benjamin_Bowler@ml.com John Davi (1) 212 449 7980 John_Davi@ml.com n Japan Ken Chang, Manager (813) 3213 6909 Ken_Chang@exchange.japan.ml.com n Asia Pacific Todd Kennedy (852) 2536 3471 Todd_Kennedy@hk.ml.com Russell Cummer (852) 2536 3409 Russell_Cummer@hk.ml.com Denise Hu (852) 2536 3969 Denise_Hu@hk.ml.com Daniel Lam (852) 2536 3969 Daniel_Lam@hk.ml.com Raj Jain (813) 3213 6635 Raj_Jain@exchange.japan.ml.com Silvio Lotufo (1) 212 449 1123 Silvio_Lotufo@ml.com Arik Reiss (44) 20 7996 2278 Arik_Reiss@ml.com Michael Maras Director, Global Equity Derivatives +44 20 7996 2510 Michael_Maras@ml.com

The strategies described in this report may not be appropriate for some investors. Investors should read Characteristics and Risks of Standardized Options, a document published by Options Clearing Corporation, before using listed derivatives.

ETF Strategy 30 October 2001

Copyright 2001 Merrill Lynch, Pierce, Fenner & Smith Incorporated (MLPF&S). All rights reserved. Any unauthorized use or disclosure is prohibited. This report has been prepared and issued by MLPF&S and/or one of its affiliates and has been approved for publication in the United Kingdom by Merrill Lynch, Pierce, Fenner & Smith Limited, which is regulated by SFA; has been considered and distributed in Australia by Merrill Lynch Equities (Australia) Limited (ACN 006 276 795), a licensed securities dealer under the Australian Corporations Law; is distributed in Hong Kong by Merrill Lynch (Asia Pacific) Ltd, which is regulated by the Hong Kong SFC; and is distributed in Singapore by Merrill Lynch International Bank Ltd (Merchant Bank) and Merrill Lynch (Singapore) Pte Ltd, which are regulated by the Monetary Authority of Singapore. The information herein was obtained from various sources; we do not guarantee its accuracy or completeness. Additional information available. This research report is prepared for general circulation and is circulated for general information only. It does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. Investors should seek financial advice regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. Investors should note that income from such securities, if any, may fluctuate and that each securitys price or value may rise or fall. Accordingly, investors may receive back less than originally invested. Past performance is not necessarily a guide to future performance. Neither the information nor any opinion expressed constitutes an offer to buy or sell any securities or options or futures contracts. Foreign currency rates of exchange may adversely affect the value, price or income of any security or related investment mentioned in this report. In addition, investors in securities such as ADRs, whose values are influenced by the currency of the underlying security, effectively assume currency risk.

24