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Introduction
What is NASDAQ-100 Index Tracking Stock?
NASDAQ-100 Index Tracking Stock represents units of beneficial interest in a unit
investment trust that holds the component securities of the NASDAQ-100 Index®. NASDAQ-100 Index Tracking Stock trades like shares of common stock and can normally be traded at
any time during the trading day on The Nasdaq Stock Exchange. NASDAQ-100 Index Tracking
Stock trades under the symbol "QQQQ" and is designed to provide investment results that generally correspond to the performance of the underlying NASDAQ-100 Index.
Who should invest in NASDAQ-100 Index
Tracking Stock?
By purchasing even a single share of NASDAQ-100 Index Tracking Stock, investors can
instantly gain a broad market portfolio in one of the most closely followed indexes in the
United States. NASDAQ-100 Index Tracking Stock offers investors a low-cost means to gain
either long or short term exposure to the NASDAQ-100 Index, one of the most closely
followed benchmarks for the U.S. stock market.
Are there risks involved in investing in
NASDAQ-100 Index Tracking Stock?
Yes. Holders of NASDAQ-100 Index Tracking Stock are subject to risks similar to those of
holders of other stock portfolios. One primary consideration is that the general level of
stock prices may decline, and thus the value of NASDAQ-100 Index Tracking Stock, because
they represent interests in a broadly based stock portfolio, will also decline. NASDAQ-100 Index Tracking Stock is also subject to risks of an investment in a portfolio of
equity securities in which the Index may be highly concentrated (e.g., technology) and,
due to concentration in sectors characterized by relatively higher volatility in price
performance, may be more volatile when compared to other broad-based stock indexes.
NASDAQ-100 Index Tracking Stock is also subject to the risks specific to the performance
of a few individual component securities that currently represent a highly concentrated
weighting in the Index (e.g., Microsoft Corporation and Intel Corporation). In addition,
the overall depth and liquidity of the secondary market in these shares may fluctuate.
Although NASDAQ-100 Index Tracking Stock
is designed to provide investment results that generally correspond to the price
performance of the NASDAQ-100 Index, the Trust may not be able to exactly replicate the
performance of the Index because of Trust expenses and other factors.
In addition, the level of the Index and
the value of NASDAQ-100 Index Tracking Stock will continue to be reported even if trading
is interrupted in some or all of the NASDAQ-100 Index component securities. As a result,
reported Index levels and NASDAQ-100 Index Tracking Stock price quotations may at time be
based on non-current price information with respect to some or even all of the securities
in the NASDAQ-100 Index. NASDAQ-100 Index Tracking Stock may trade below, at, or above net asset value. Trading of NASDAQ-100 Index Tracking Stock will be halted
whenever The Nasdaq Stock Market trading in equity securities generally is halted as a
result of activation of market-wide "circuit breakers" that are tied to large
decreases in the Dow Jones Industrial Average. Trading in NASDAQ-100 Index Tracking Stock
may also be halted if Exchange officials determine that such action is appropriate in the
interest of a fair and orderly market or to protect investors. Although passive management
and diversification are intended to reduce risk, indexing is not necessarily safer than
active management.
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About the NASDAQ-100 Index
The NASDAQ-100 Index is composed on 100 of the largest non-financial companies listed on the NASDAQ National Market tier of The Nasdaq Stock
Market. The Index was first published in January of 1985 and has achieved wide acceptance
by both investors and market professionals. It reflects NASDAQ’s largest companies
across major industry groups, including computer and office equipment, computer
software/services, telecommunications, retail/wholesale trade, and biotechnology. In order
to limit domination of the Index by a few large stocks, the Index is calculated under a
"modified capitalization-weighted" methodology. This capitalization weight
distribution is evaluated on a quarterly basis and is rebalanced, if necessary.
How are component securities selected? Do
they change?
To be eligible for inclusion in the NASDAQ-100 Index, a security must be traded on the
NASDAQ National Market tier of The Nasdaq Stock Market and meet several specific trading
volume and issuer criteria. Index securities are ranked by market value and are evaluated
annually based on these rankings to determine which securities will be included in the
Index. The list of annual additions and deletions is publicly announced via a press
release in the early part of December. Replacements are made effective after the close of
trading on the third Friday in December. Moreover, if at any time during the year an Index
security is no longer trading on the Nasdaq Stock Market, or is otherwise determined by
NASDAQ to become ineligible for continued inclusion in the Index, the security will be
replaced with the largest market capitalization security not currently in the Index that
meets the Index eligibility criteria.
What are the benefits to NASDAQ- 100 Index Tracking Stock trading as stocks?
Trading offers several advantages to NASDAQ-100 Index Tracking Stock
investors:
- buy and sell at any time during the trading day, subject to any trading halts
- instantly acquire a broad-market portfolio
- ability to buy on margin
- no sales loads, although brokerage commission rates will apply
- no high management and sponsor fees
- ability to sell short on a "downtick"
How can NASDAQ-100 Index Tracking Stock be sold short?
NASDAQ-100 Index Tracking Stock 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. NASDAQ-100 Index Tracking Stock, unlike common stock, is
exempt from the rule that requires shares to be sold short only on an "uptick"
(i.e., a last sale price higher than that of the security’s preceding last sale).
Thus, NASDAQ-100 Index Tracking Stock may be sold short on a downtick - a key feature for
active investors. Note that investors are required to make arrangements to borrow securities before selling short.
Can NASDAQ-100 Index Tracking Stock be
used in retirement accounts?
Yes. NASDAQ-100 Index Tracking Stock may be offered through 401(k) retirement plans and it
can be purchased for Individual Retirement Accounts (IRAs), both of which can be tax
deferred.
What are NASDAQ-100 Index Tracking Stock
options?
NASDAQ-100 Index Tracking Stock options are standardized put and call options on
underlying NASDAQ-100 Index Tracking Stock. Like all options, NASDAQ-100 Index Tracking
Stock options are tools that can help you fine tune the performance of your NASDAQ-100
Index Tracking Stock investments. Click here for a display of NASDAQ-100 Index Tracking Stock options.
Is NASDAQ-100 Index Tracking Stock
eligible for covered call writing?
Yes, this strategy is used both to increase the return on your NASDAQ-100 Index Tracking
Stock and to provide a limited amount of downside protection. It is implemented by writing
(selling) a call against the NASDAQ-100 Index Tracking Stock that you own by
simultaneously purchasing NASDAQ-100 Index Tracking Stock and writing calls on it.
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Investing in NASDAQ-100 Index Tracking
Stock
What are the symbols for NASDAQ-100 Index
Tracking Stock?
A current NASDAQ-100 Index Tracking Stock price quotation is available from market
information sources under the ticker symbol "QQQQ." Several symbols are
used to provide other relevant information.
QXV - Intraday Portfolio Value (IPV)
QQQQN - Net Asset Value
QQQQS - Shares Outstanding
QQQQM - Estimated Cash Amount Per Creation Units
QQQQD - Estimated Cash Amount Per Share (Net Accrued Dividend)
QQQQT - Total Cash Amount Per Creation Unit
IXNDX - Underlying Index Value
How are prices determined for NASDAQ-100
Index Tracking Stock?
NASDAQ-100 Index Tracking Stock is designed to initially trade at roughly 1/40 the level
of the NASDAQ-100 Index. For instance, if the Index was at 1,000, you could reasonably
expect NASDAQ-100 Index Tracking Stock to trade at about $25 per share.
Do the values fluctuate?
NASDAQ-100 Index Tracking Stock is subject to economic factors and the vagaries of the
market and therefore can be expected to rise and fall as the Index fluctuates. Because of
factors such as supply and demand, transaction costs and expenses incurred by the Trust
and the possibility that some securities in the Index may be temporarily unavailable, the
price level of NASDAQ-100 Index Tracking Stock may not exactly correspond with the level
of the Index and the initial 1/40th relationship is not expected to persist
indefinitely.
How easy is it to buy and sell NASDAQ-
100 Index Tracking Stock? Where can I buy it?
NASDAQ-100 Index Tracking Stock trades with the ease and efficiency of any stock listed on
The Nasdaq Stock Market. Just ask, and your broker can purchase NASDAQ-100 Index
Tracking Stock for your account. Brokerage commission rates will apply to purchases and
sales of NASDAQ-100 Index Tracking Stock.
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NASDAQ-100 Trust Expenses
What are the expenses?
Trust expenses for NASDAQ-100 Index Tracking Stock are generally lower than the management
fees for most competing index funds currently on the market. Nasdaq Financial Products Services,
Inc., the sponsor of the Trust, has undertaken that the ordinary operating expenses of the
Trust will not be permitted to exceed .20% (20 basis points) per year until further notice.
In other words, the annual cost of a $10,000 investment in NASDAQ-100 Index Tracking Stock
would be $20.00. NASDAQ-100 Index Tracking Stock is subject to ordinary brokerage commissions,
which vary among brokers.
How do the fees and expenses compare to conventional funds? Are there sales charges?
Fees for NASDAQ-100 Index Tracking Stock are expected to be lower than conventional funds.
NASDAQ-100 Index Tracking Stock does not incur high management and sponsor fees. In
addition, NASDAQ-100 Index Tracking Stock does not carry sales loads.
How do the expenses compare to actively
managed funds?
Fees for funds that are passively managed are typically lower than actively managed funds,
since they usually require fewer investment, research, and trading decisions. Active
managers often incur heavy research expenses and transaction costs, which vary with
portfolio turnover rates. Many equity funds expenses range from 1.0% and 1.5% per year.
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NASDAQ-100 Index Tracking Stock
Performance
How closely correlated is the performance of NASDAQ-100 Index Tracking Stock with the
underlying Index?
The investment performance of NASDAQ-100 Index Tracking Stock can be expected to generally correspond to the
performance of the underlying Index. Because the NASDAQ-100 Trust portfolio is
comprised of the component securities of the NASDAQ-100 Index, it is expected to closely
follow fluctuations in the Index. However, there is no assurance that this level of
correlation can be maintained or will continue, or that the performance of the NASDAQ-100 Index can be fully matched.
How does the performance of NASDAQ-100 Index Tracking Stock compare with the performance of the NASDAQ-100 Index?
NASDAQ-100 Index Tracking Stock is designed to provide investment results that
generally correspond to the price and yield performance of the underlying NASDAQ-100
Index. One market mechanism that helps to keep NASDAQ-100 Index Tracking Stock
trading at a price close to the value of its underlying portfolio is arbitrage.
Because NASDAQ-100 Index Tracking Stock is both redeemable into the stocks of the
NASDAQ-100 Index and can be created from the stocks of the NASDAQ-100 Index on any
day, arbitrage traders may move to profit from any price discrepancies between the
NASDAQ-100 Index and NASDAQ-100 Index Tracking Stock which in turn helps to close
the price gap between the two. (NASDAQ-100 Index Tracking Stock creations and redemptions
are restricted to large transactions in multiples of 50,000 shares of NASDAQ-100 Index Tracking
Stock, usually carried out by institutional investors.) Of course, because of the
forces of supply and demand and other market factors, there may be times when NASDAQ-100
Index Tracking Stock trade at a premium or discount to its fair value.
How can the performance of NASDAQ-100
Index Tracking Stock diverge from the underlying Index?
Because the underlying NASDAQ-100 Index is not an investment instrument, it incurs no
expenses, which are therefore not reflected in the NASDAQ-100 Index Tracking Stock. The
net asset value of NASDAQ-100 Index Tracking Stock reflects Trust expenses and accrued
dividends, if any. Also, over time, NASDAQ-100 Trust securities may be rebalanced to
reflect changes in the Index resulting in additional transaction costs.
Where can I get up-to-date information?
Because, the pricing of NASDAQ-100 Index Tracking Stock is continuous during NASDAQ trading
hours, you’ll be able to obtain up-to-the-minute share prices from your broker or
financial advisor as well as our Web site at www.nasdaq.com on a delayed basis.
Click
here for a live NASDAQ-100 Index Tracking Stock quote.
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Income from NASDAQ-100 Index Tracking
Stock
Does NASDAQ-100 Index Tracking Stock pay dividends or capital gains?
NASDAQ-100 Index Tracking Stock may make annual capital gains distributions. However,
NASDAQ-100 Index Tracking Stock is not expected to pay quarterly dividends because the
dividend yield of the NASDAQ-100 Index portfolio is characteristically lower than the
expected expenses of the Trust. So, after expenses, there is no expected net dividend to
be distributed. In the future, if the dividend yield of the NASDAQ-100 Index portfolio
were to increase above the expenses of the Trust by more than .05% in any quarter, then a
net dividend distribution to shareholders would be made at that time.
Is there withholding tax on income? What
are the federal income tax implications of dividend and capital gains distributions?
Withholding tax on dividend distributions, if any, will generally not be required except
in certain instances. Capital gains, if any, are not subject to withholding tax but are
subject to the applicable capital gains tax rate. For further information, see the
discussion of taxes in the prospectus or consult with your tax advisor.
Do investors receive the gross amount of
NASDAQ-100 Index Tracking Stock dividends and capital gains?
NASDAQ-100 Index Tracking Stock expenses are deducted from all income and capital gains,
with the net amount, if any, distributed to investors.
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Where Does NASDAQ-100 Index
Tracking Stock Come From?
How is NASDAQ-100 Index Tracking Stock created and redeemed?
Most NASDAQ-100 Index Tracking Stock holders buy and sell in the secondary trading market.
But units are initially created when they are issued by the Trust to an investor who,
after placing an order, deposits with the trustee a specified number of shares of Index
securities and cash corresponding to accumulated dividends, net of expenses, if any. While
investors can trade in any amount of NASDAQ-100 Index Tracking Stock, it can only be
created and redeemed from the Trust in "creation units" of 50,000 NASDAQ-100
Index Tracking Stock shares (or multiples thereof).
What are "creation units?"
A creation unit is simply a specified number of NASDAQ-100 Index Tracking Stock shares. A
NASDAQ-100 Index Tracking Stock creation unit consists of 50,000 NASDAQ-100 Index Stock
shares. NASDAQ-100 Index Tracking Stock can be created or redeemed only in aggregations of
50,000 NASDAQ-100 Index Tracking Stock shares (or multiples thereof).
Who can create them?
An investor who has executed a NASDAQ-100 Participant Agreement with the distributor and
trustee for the NASDAQ-100 Trust and who makes a deposit of the required securities and
cash, as well as the fees to cover transaction costs, is eligible to create NASDAQ-100
Index Tracking Stock creation units.
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NASDAQ-100 Index
Tracking Stock Administration and History
When was NASDAQ-100 Index Tracking Stock introduced?
The NASDAQ-100 Index Tracking Stock began trading on the Amex on March 10, 1999, and moved to the Nasdaq Stock Market on December 1st, 2004.
Who issues NASDAQ-100 Index Tracking
Stock?
The NASDAQ-100 Trust is sponsored by Nasdaq Financial Products Services, Inc., a
wholly-owned subsidiary of The Nasdaq Stock Market, Inc. The distributor is ALPS Distributors, Inc., a
registered broker-dealer.
Who is the trustee?
The trustee bank for NASDAQ-100 Tracking Stock Index is The Bank of New York.
Investment returns and principal value will fluctuate so that an investor's shares, when redeemed or sold, may be worth more or less than the original cost.
For more complete information about NASDAQ-100 Index Tracking StockSM, including charges, expenses and potential risks, obtain a prospectus from your broker, or call 888-627-3837 or visit our web site at www.nasdaq-100.com. Read it carefully before you invest. The NASDAQ-100 Index Tracking Stock is subject to risks similar to those of stocks, including those regarding short selling and margin account maintenance. While there is no assurance that the performance of the NASDAQ-100 Index can be fully matched, the NASDAQ-100 Index Tracking Stock is designed to provide investment results that generally correspond to the performance of the NASDAQ-100 Index.
The sponsor of the NASDAQ-100 TrustSM, a unit investment trust, is Nasdaq Financial Products Services, Inc. ("NFPS"), a wholly owned subsidiary of The Nasdaq Stock Market, Inc. ("NASDAQ," and collectively with its affiliates except NFPS, the "Corporations").
"NASDAQ" and related marks are trademarks or service marks of NASDAQ and have been licensed for use for certain purposes by NFPS. The NASDAQ-100 Index is composed and calculated by NASDAQ without regard to NASDAQ-100 Shares. The Corporations make no warranty, express or implied, and bear no liability with respect to NASDAQ-100 Shares. The Corporations and NFPS make no warranty, express or implied, and bear no liability with respect to the NASDAQ-100 Index, its use or any data included therein.
ALPS Distributors, Inc. a registered broker-dealer, is distributor for the Trust.
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