HOLDRS (HOLding Company Depository ReceiptS) are trust�issued receipts that represent an investor�s ownership of a specific group of securities. The shareholder is treated as owner of the underlying securities and is entitled to benefits such as proxy votes and dividends. HOLDRs can be exchanged for the underlying securities for a cancellation fee.
HOLDRs are listed in the ETF universe in Morningstar Direct, but there are many differences between HOLDRs and traditional exchange traded funds. For example, the portfolio is fixed and changes only in case of a corporate event such as merger, acquisition or a spin-off. The specific underlying stocks and the respective share amounts represented in each round-lot of 100 HOLDRs are established on a date prior to the IPO. These share amounts will not change unless there is a corporate restructuring. However, because the relative weightings of the stocks are a function of market prices, these weightings will change substantially over time. Also, because HOLDRs are structured as grantors trusts, they are not required to file prospectuses or annual reports. No expense ratio or similar fees applicable to registered companies apply to HOLDRs.