Stock Trading.

• buy and sell at any time during the trading day

• instantly get exposure to a portfolio of stocks of your choice

• ability to buy on margin (see below for details)

• no sales loads, although brokerage commissions will apply

• no high management and sponsor fees

• tax efficiencies

Are there any tax benefits trading Index Shares?
There may be tax advantages as well -- ETFs can't be forced to sell profitable stock positions if too many shareholders cash out at once like index funds can. That has always been one of the disadvantages of index funds. No one likes an unexpected capital gain. Besides having to pay the taxes on it, there's the hassle of reporting it.

Can ETFs be sold short?
Yes. All ETFs may be sold short, representing the sale of "borrowed" shares in anticipation of lower prices when the borrowed shares must be replaced. Certain ETF products are also exempt from the rule that requires shares to be sold short only on an "up tick" (i.e., a last sale price higher than that of a security’s preceding last sale. Investors are required to make arrangements to borrow securities before selling short.

Can ETFs be purchased on margin?
ETFs may be purchased on margin, generally subject to the same terms that apply to common stocks. You should contact your broker regarding initial and maintenance margin requirements.

Do I get paid dividends and/or capital gains?
ETF holders are eligible to receive their portion of dividends, if any, accumulated on the stocks held in trust, less fees and expenses of the trust. Of course, little if any dividend distributions can be expected on certain stock portfolios, based on past performance of the stocks.

Where do ETFs initially come from?
ETFs are "created" by large investors and institutions in block- sized units of shares (or multiples thereof) known as "Creation Units" of a respective ETF. A creation requires a deposit with the trustee of a specified number of shares of a portfolio of stocks closely approximating the composition of a specific index and cash equal to accumulated dividends in return for specific Index Shares. Similarly, block-sized units of ETFs can be redeemed in return for a portfolio of stocks approximating the index and a specified amount of cash. A unit of 50,000 shares (or multiples thereof) is required to create SDPRs, Nasdaq-100 Index Tracking Stock, Select Sector Funds and DIAMONDS, while a unit of 25,000 shares is required to create MidCap SPDRs.

Where can I find ETFs listed in the newspaper?
You can find ETFs listed in the financial section of many newspapers under the heading "American Stock Exchange Listed Stocks".

Where can I get up-to-date price information?
The pricing of ETFs is continuous on the Amex during normal trading hours. Investors can obtain this information from their broker, stock quotation systems, or on a delayed basis from the Amex’s Web site at www.amex.com. The closing prices are also published in major newspapers on the following business day.

How do taxes on SPDR and MidCap SPDR investments compare with those for mutual funds?
Because there is limited purchasing or selling of component stocks by the SPDR Trust and MidCap SPDR Trust, SPDRs and MidCap SPDRs may be more tax-efficient than many actively managed mutual funds with higher portfolio turnover rates. Generally, investors in mutual funds or SPDRs and MidCap SPDRs will pay income taxes on dividends paid by funds and SPY or MDY. Mutual fund investors will also pay taxes and distributions of net capital gains by their fund, while SPDR and MidCap SPDR investors pay taxes at applicable capital gains tax rates on profits from their sale of SPY and MDY shares.

What are the benefits to SPDRs and MidCap SPDRs trading as stocks?
Listing on the Amex offers several advantages to SPDR and MidCap SPDR investors:

• buy and sell at any time during the trading day

• instantly acquire a diversified portfolio

• earn quarterly cash dividends

• no sales loads, although brokerage commission will apply

• no high management and sponsor fees

• ability to sell short

How are prices determined for SPDRs and MidCap SPDRs?
SPDRs are designed to trade at roughly 1/10 the level of the SP 500. If the Index is at 1,300, SPY will trade at about $130 per unit. MidCap SPDRs trade at about 1/5 the level of the SP MidCap 400 Index. If the Index is at 400, MDY will trade at about $80 per unit.

What are the Standard & Poor’s Indexes?
As closely followed benchmarks, the SP 500 and SP MidCap 400 Indexes are used to describe the U.S. market for large and medium-sized stocks, respectively. Standard & Poor’s developed the Indexes to perfect a measure of U.S. stock market performance. The SP 500 was introduced in 1957 and has become a leading indicator of the U.S. equity market. The SP MidCap 400 was introduced in 1991 and has fast become a leading measure of the mid-sized segment of the market.

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