0000950135-01-503178.txt : 20011030
0000950135-01-503178.hdr.sgml : 20011030
ACCESSION NUMBER: 0000950135-01-503178
CONFORMED SUBMISSION TYPE: 485BPOS
PUBLIC DOCUMENT COUNT: 6
FILED AS OF DATE: 20011026
EFFECTIVENESS DATE: 20011026
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: STREETTRACKS SERIES TRUST
CENTRAL INDEX KEY: 0001064642
STANDARD INDUSTRIAL CLASSIFICATION: []
STATE OF INCORPORATION: MA
FILING VALUES:
FORM TYPE: 485BPOS
SEC ACT: 1933 Act
SEC FILE NUMBER: 333-57793
FILM NUMBER: 1766788
BUSINESS ADDRESS:
STREET 1: 225 FRANKLIN ST
STREET 2: C/O STATE STREET BANK & TRUST CO
CITY: BOSTON
STATE: MA
ZIP: 02210
BUSINESS PHONE: 2126260890
MAIL ADDRESS:
STREET 1: 225 FRANKLIN STREET
CITY: BOSTON
STATE: MA
ZIP: 02210
FORMER COMPANY:
FORMER CONFORMED NAME: INDEX EXCHANGE LISTED SECURITIES TRUST
DATE OF NAME CHANGE: 19980622
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: STREETTRACKS SERIES TRUST
CENTRAL INDEX KEY: 0001064642
STANDARD INDUSTRIAL CLASSIFICATION: []
STATE OF INCORPORATION: MA
FILING VALUES:
FORM TYPE: 485BPOS
SEC ACT: 1940 Act
SEC FILE NUMBER: 811-08839
FILM NUMBER: 1766789
BUSINESS ADDRESS:
STREET 1: 225 FRANKLIN ST
STREET 2: C/O STATE STREET BANK & TRUST CO
CITY: BOSTON
STATE: MA
ZIP: 02210
BUSINESS PHONE: 2126260890
MAIL ADDRESS:
STREET 1: 225 FRANKLIN STREET
CITY: BOSTON
STATE: MA
ZIP: 02210
FORMER COMPANY:
FORMER CONFORMED NAME: INDEX EXCHANGE LISTED SECURITIES TRUST
DATE OF NAME CHANGE: 19980622
485BPOS
1
b40821sse485bpos.txt
STATE STREET BANK AND TRUST
As filed with the Securities and Exchange Commission on October 26, 2001
Securities Act File No. 333-57793
Investment Company Act of 1940 File No.811-08839
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
Post-Effective Amendment No. 2 / X /
And
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X /
Amendment No. 5 / X /
streetTRACKS(SM) SERIES TRUST
(Exact Name of Registrant as Specified in Charter)
225 Franklin Street
Boston, Massachusetts 02110
(Address of Principal Executive Offices)
Registrant's Telephone Number: 617-662-3972
Michael E. Gillespie, Esq.
Vice President and Associate Counsel
State Street Bank and Trust Company
One Federal Street
Boston, Massachusetts 02110
(Name and Address of Agent for Service)
Copies to:
Stuart M. Strauss, Esq.
Mayer Brown & Platt
1675 Broadway
New York, New York 10019
It is proposed that this filing will become effective:
[X] immediately upon filing pursuant to Rule 485, paragraph (b)
[ ] on ___ pursuant to Rule 485, paragraph (b)
[ ] 60 days after filing pursuant to Rule 485, paragraph (a)(1)
[ ] on _________________ pursuant to Rule 485, paragraph (a)(1)
[ ] 75 days after filing pursuant to Rule 485, paragraph (a)(2)
[ ] on _________________ pursuant to Rule 485, paragraph (a)(2)
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
[STREETTRACKS LOGO]
PROSPECTUS
streetTRACKS(SM) DOW JONES U.S. LARGE CAP VALUE INDEX FUND
streetTRACKS(SM) DOW JONES U.S. LARGE CAP GROWTH INDEX FUND
streetTRACKS(SM) DOW JONES U.S. SMALL CAP VALUE INDEX FUND
streetTRACKS(SM) DOW JONES U.S. SMALL CAP GROWTH INDEX FUND
streetTRACKS(SM) DOW JONES GLOBAL TITANS INDEX FUND
streetTRACKS(SM) WILSHIRE REIT INDEX FUND
streetTRACKS(SM) MORGAN STANLEY TECHNOLOGY INDEX FUND
streetTRACKS(SM) MORGAN STANLEY INTERNET INDEX FUND
FORTUNE 500(R) INDEX FUND
FORTUNE E-50(R) INDEX FUND
OCTOBER 26, 2001
streetTRACKS(SM) Series Trust is an "index fund" consisting of ten separate
investment portfolios (each a "Fund" and collectively the "Funds"). The
investment objective of each Fund is to provide investment results that, before
expenses, correspond generally to the total return of a particular index (each
an "Index"). SSgA Funds Management, Inc. manages each Fund.
The shares of each Fund (the "Shares") are listed on the American Stock
Exchange (the "Exchange"). The Shares trade on the Exchange at market prices
that may differ to some degree from the Shares' net asset value. Each Fund
issues and redeems Shares on a continuous basis -- at net asset value -- only in
a large specified number of Shares called a "Creation Unit," principally in-kind
for securities included in the relevant Index. EXCEPT WHEN AGGREGATED IN
CREATION UNITS, THE SHARES ARE NOT REDEEMABLE SECURITIES OF THE FUNDS.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. SHARES IN EACH FUND ARE
NOT GUARANTEED OR INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY
OTHER AGENCY OF THE U.S. GOVERNMENT, NOR ARE SHARES DEPOSITS OR OBLIGATIONS OF
ANY BANK. SUCH SHARES INVOLVE INVESTMENT RISKS, INCLUDING THE LOSS OF PRINCIPAL.
TABLE OF CONTENTS
streetTRACKS(SM) Series Trust............................... 1
Who Should Invest......................................... 1
streetTRACKS(SM) Dow Jones U.S. Large Cap Value Index
Fund................................................... 2
streetTRACKS(SM) Dow Jones U.S. Large Cap Growth Index
Fund................................................... 6
streetTRACKS(SM) Dow Jones U.S. Small Cap Value Index
Fund................................................... 10
streetTRACKS(SM) Dow Jones U.S. Small Cap Growth Index
Fund................................................... 15
streetTRACKS(SM) Dow Jones Global Titans Index Fund....... 20
streetTRACKS(SM) Wilshire REIT Index Fund................. 26
streetTRACKS(SM) Morgan Stanley Technology Index Fund..... 31
streetTRACKS(SM) Morgan Stanley Internet Index Fund....... 36
FORTUNE 500(R) Index Fund................................. 40
FORTUNE e-50(R) Index Fund................................ 46
Fees and Expenses........................................... 50
Additional Investment Strategies, Risks and Other
Considerations............................................ 51
Additional Investment Strategies.......................... 51
Additional Risks.......................................... 51
Other Considerations...................................... 52
Management.................................................. 53
Index Licenses.............................................. 54
Determination of Net Asset Value............................ 58
Buying and Selling the Funds................................ 58
Creation and Redemption of Creation Units................... 59
Distributions............................................... 63
Tax Matters................................................. 63
General Information......................................... 65
Financial Highlights........................................ 66
Additional Information Concerning the Funds................. 70
i
streetTRACKS(SM) SERIES TRUST
streetTRACKS(SM) Series Trust (the "Trust") is an "index fund" consisting
of ten separate investment portfolios (each a "Fund" and collectively the
"Funds"). Each of the Funds is non-diversified.
The investment objective of each Fund is to provide investment results
that, before expenses, correspond generally to the total return of a specified
market index (each an "Index"). SSgA Funds Management, Inc. (the "Adviser")
manages each Fund.
The shares of each Fund (the "Shares") will be listed on the American Stock
Exchange (the "Exchange"). The Shares trade on the Exchange at market prices
that may differ to some degree from the Shares' net asset value. Each Fund
issues and redeems Shares on a continuous basis -- at net asset value -- only in
a large specified number of Shares called a "Creation Unit," principally in-kind
for securities included in the relevant Index. EXCEPT WHEN AGGREGATED IN
CREATION UNITS, THE SHARES ARE NOT REDEEMABLE SECURITIES OF THE FUNDS.
WHO SHOULD INVEST
Each Fund is designed for investors who seek a relatively low-cost
"passive" approach for investing in a portfolio of equity securities of
companies in a specified Index. The Funds may be suitable for long-term
investment in the market represented in the relevant Index. Shares of each Fund
may also be used as an asset allocation tool or as a speculative trading
instrument. Unlike many conventional mutual funds which are only bought and sold
at closing net asset values, each Fund's Shares have been designed to be
tradable in a secondary market on the Exchange on an intraday basis and to be
created and redeemed principally in kind in Creation Units at each day's next
calculated net asset value. These arrangements are designed to protect ongoing
shareholders from adverse effects on the portfolio of a Fund that could arise
from frequent cash creation and redemption transactions that affect the net
asset value of such Fund. Moreover, in contrast to conventional mutual funds
where redemptions can have an adverse tax impact on taxable shareholders because
of the need to sell portfolio securities which, in turn, may generate taxable
gain, the in-kind redemption mechanism of the Funds generally will not lead to a
tax event for ongoing shareholders.
1
streetTRACKS(SM) DOW JONES U.S. LARGE CAP VALUE INDEX FUND
(SYMBOL: ELV)
This section describes streetTRACKS(SM) Dow Jones U.S. Large Cap Value
Index Fund's investment objective, principal investment strategies, risks and
expenses.
Investment Objective. The Fund's investment objective is to replicate as
closely as possible, before expenses, the performance of the Dow Jones U.S.
Large Cap Value Index (the "U.S. Large Cap Value Index" or the "Index"). There
is no assurance that the Fund will achieve its investment objective.
Principal Investment Strategies. The Fund uses a passive management
strategy designed to track the performance of the U.S. Large Cap Value Index.
The Index includes common stocks, which are chosen by Dow Jones & Company, Inc.
("Dow Jones") based upon certain float-adjusted market capitalization and value
characteristics.
The Fund, using an "indexing" investment approach, attempts to replicate,
before expenses, the performance of the U.S. Large Cap Value Index. The Adviser
seeks a correlation of 0.95 or better between the Fund's performance and the
performance of the Index; a figure of 1.00 would represent perfect correlation.
The Fund generally will invest in all of the stocks comprising the Index in
proportion to their weightings in the Index. However, under various
circumstances, it may not be possible or practicable to purchase all of those
stocks in those weightings. In those circumstances, the Fund may purchase a
sample of the stocks in the Index in proportions expected by the Adviser to
replicate generally the performance of the Index as a whole. There may also be
instances in which the Adviser may choose to overweight another stock in the
Index, purchase securities not in the Index which the Adviser believes are
appropriate to substitute for the Index Securities, or utilize various
combinations of other available investment techniques, in seeking to track
accurately the Index. In addition, from time to time stocks are added to or
removed from the Index. The Fund may sell stocks that are represented in the
Index, or purchase stocks that are not yet represented in the Index, in
anticipation of their removal from or addition to the Index.
The Fund will normally invest at least 95% of its total assets in common
stocks that comprise the Index.
Principal risks of investing in the Fund. Unlike many investment
companies, the Fund is not actively "managed." Therefore, it would not sell a
stock because the stock's issuer was in financial trouble, unless that stock is
removed from the Index. An investment in the Fund involves risks similar to
those of
2
investing in any fund of equity securities traded on exchanges, such as market
fluctuations caused by such factors as economic and political developments,
changes in interest rates and perceived trends in stock prices. You should
anticipate that the value of the Shares will decline, more or less, in
correlation with any decline in value of the Index.
- Stock values could decline generally or could underperform other
investments.
- A "value" style of investing emphasizes undervalued companies with
characteristics for improved valuations. This style of investing is
subject to the risk that the valuations never improve or that the returns
on "value" equity securities are less than returns on other styles of
investing or the overall stock market. Different types of stocks tend to
shift in and out of favor depending on market and economic conditions.
Thus, the value of the Fund's investments will vary and at times may be
lower or higher than that of other types of investments.
- Returns on investments in stocks of large U.S. companies could trail the
returns on investments in stocks of smaller companies.
- The Fund's return may not match the return of the Index for a number of
reasons. For example, the Fund incurs a number of operating expenses not
applicable to the Index, and incurs costs in buying and selling
securities, especially when rebalancing the Fund's securities holdings to
reflect changes in the composition of the Index. The Fund may not be
fully invested at times, either as a result of cash flows into the Fund
or reserves of cash held by the Fund to meet redemptions. If the Fund
utilizes a sampling approach, or futures or other derivative positions
its return may not correlate as well with the return on the Index, as
would be the case if it purchased all of the stocks in the Index.
THE FUND'S SHARES WILL CHANGE IN VALUE, AND YOU COULD LOSE MONEY BY
INVESTING IN THE FUND. THE FUND MAY NOT ACHIEVE ITS OBJECTIVE. AN INVESTMENT IN
THE FUND IS NOT A DEPOSIT WITH A BANK AND IS NOT INSURED OR GUARANTEED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
OTHER INVESTMENT CONSIDERATIONS AND RISKS.
The U.S. Large Cap Value Index. The U.S. Large Cap Value Index is composed
of common stocks, which are chosen by Dow Jones, based upon float-adjusted
market capitalization and value characteristics. Each year, Dow Jones selects
the largest U.S. stocks by market capitalization in order to create the large
cap universe, which represents approximately 70% of the total U.S. equity
market. After the initial list of eligible large cap stocks is determined,
3
Dow Jones uses a proprietary model to identify the value stocks within the large
cap universe. Thus, the U.S. Large Cap Value Index is a subset of the large cap
universe. The purpose of the Index is to provide an effective representation of
the U.S. large cap value segment of the equity market. The inclusion of a stock
in the Index in no way implies that Dow Jones believes the stock to be an
attractive investment, nor is Dow Jones a sponsor or in any way affiliated with
the Fund. Each stock in the Index is weighted by its float-adjusted market
capitalization. That is, each security is weighted by its float-adjusted market
value relative to the total float-adjusted market values of all the securities
in the Index. The Index only includes common stocks domiciled in the U.S. and
its territories. You should also be aware that Dow Jones has retained editorial
control over the Index and has reserved the right to modify the Index and/or its
methodology at any time.
Changes in policies. The Trust's Trustees may change the Fund's investment
strategies and other policies without shareholder approval, except as otherwise
indicated. The Trustees will not materially change the Fund's investment
objective without shareholder approval.
PERFORMANCE
As of the date of this Prospectus, the Fund has not completed a full
calendar year of operations. For this reason, the bar chart and table showing
performance information and information on the Fund's best and worst calendar
quarters are not provided in this prospectus.
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
shares of the streetTRACKS(SM) Dow Jones U.S. Large Cap Value Index Fund.(1)
SHAREHOLDER FEES
(fees paid directly from your investment, but see
"Creation and Redemption of Creation Units" for a
discussion of Creation and Redemption Transaction
Fees)................................................ 0.00%
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from the Fund's assets)(2)
Management Fees...................................... 0.20%
Distribution and Services (12b-1) Fees(3)............ 0.00%
Other Expenses(4).................................... 0.01%
-----
TOTAL ANNUAL FUND OPERATING EXPENSES................... 0.21%
=====
4
--------------------
(1) You will incur customary brokerage commissions when buying and
selling shares of the Fund.
(2) Expressed as a percentage of average daily net assets.
(3) The Fund has adopted a Distribution and Service (12b-1) Plan
pursuant to which payments of up to 0.25% of average daily net
assets may be made, however, no such payments will be made during
the next 12 months of operation.
(4) The Trust's Investment Advisory Agreement provides that the
Adviser will pay the operating expenses of the Trust, except for
the management fee, brokerage, taxes, interest, fees and expenses
of the Independent Trustees (including any Trustee's counsel
fees), litigation expenses and other extraordinary expenses.
EXAMPLE
The streetTRACKS(SM) Dow Jones U.S. Large Cap Value Index Fund sells and
redeems Shares in Creation Units principally on an in-kind basis for portfolio
securities of the relevant Index. SHARES IN LESS THAN CREATION UNIT AGGREGATIONS
ARE NOT REDEEMABLE. An investor purchasing a Creation Unit on an in-kind basis
would pay the following expenses on a $10,000 investment (payment with a deposit
of securities included in the relevant Index), assuming a 5% annual return and
that the Fund's operating expenses remain the same. INVESTORS SHOULD NOTE THAT
THE PRESENTATION BELOW OF A $10,000 INVESTMENT IN A CREATION UNIT IS FOR
ILLUSTRATION PURPOSES ONLY, AS SHARES WILL BE ISSUED BY THE FUND ONLY IN
CREATION UNITS. FURTHER, THE RETURN OF 5% AND ESTIMATED EXPENSES ARE FOR
ILLUSTRATION PURPOSES ONLY AND SHOULD NOT BE CONSIDERED INDICATIONS OF EXPECTED
FUND EXPENSES OR PERFORMANCE, WHICH MAY BE GREATER OR LESSER THAN THE ESTIMATES.
YEAR EXPENSES
---- --------
1................................................... $ 22
3................................................... $ 68
5................................................... $118
10.................................................. $268
5
streetTRACKS(SM) DOW JONES U.S. LARGE CAP GROWTH INDEX FUND
(SYMBOL: ELG)
This section describes the streetTRACKS(SM) Dow Jones U.S. Large Cap Growth
Index Fund's goals, principal investment strategies, risks and expenses.
Investment Objective. The Fund's investment objective is to replicate as
closely as possible, before expenses, the performance of the Dow Jones U.S.
Large Cap Growth Index (the "U.S. Large Cap Growth Index" or the "Index"). There
is no assurance that the Fund will achieve its investment objective.
Principal Investment Strategies. The Fund uses a passive management
strategy designed to track the performance of the U.S. Large Cap Growth Index.
The Index includes common stocks, which are chosen by Dow Jones based upon
certain float-adjusted market capitalization and growth characteristics.
The Fund, using an "indexing" investment approach, attempts to replicate,
before expenses, the performance of the U.S. Large Cap Growth Index. The Adviser
seeks a correlation of 0.95 or better between the Fund's performance and the
performance of the Index; a figure of 1.00 would represent perfect correlation.
The Fund generally will invest in all of the stocks comprising the Index in
proportion to their weightings in the Index. However, under various
circumstances, it may not be possible or practicable to purchase all of those
stocks in those weightings. In those circumstances, the Fund may purchase a
sample of the stocks in the Index in proportions expected by the Adviser to
replicate generally the performance of the Index as a whole. There may also be
instances in which the Adviser may choose to overweight another stock in the
Index, purchase securities not in the Index which the Adviser believes are
appropriate to substitute for the Index Securities, or utilize various
combinations of other available investment techniques, in seeking to track
accurately the Index. In addition, from time to time stocks are added to or
removed from the Index. The Fund may sell stocks that are represented in the
Index, or purchase stocks that are not yet represented in the Index, in
anticipation of their removal from or addition to the Index.
The Fund will normally invest at least 95% of its total assets in common
stocks that comprise the Index.
Principal risks of investing in the Fund. Unlike many investment
companies, the Fund is not actively "managed." Therefore, it would not sell a
stock because the stock's issuer was in financial trouble, unless that stock is
removed from the Index. An investment in the Fund involves risks similar to
those of
6
investing in any fund of equity securities traded on exchanges, such as market
fluctuations caused by such factors as economic and political developments,
changes in interest rates and perceived trends in stock prices. You should
anticipate that the value of the Shares will decline, more or less, in
correlation with any decline in value of the Index.
- Stock values could decline generally or could underperform other
investments.
- Returns on investments in stocks of large U.S. companies could trail the
returns on investments in stocks of smaller companies.
- The Fund emphasizes a "growth" style of investing. The market values of
such securities may be more volatile than other types of investments. The
returns on "growth" securities may or may not move in tandem with the
returns on other styles of investing or the overall stock markets.
- The Fund's return may not match the return of the Index for a number of
reasons. For example, the Fund incurs a number of operating expenses not
applicable to the Index, and incurs costs in buying and selling
securities, especially when rebalancing the Fund's securities holdings to
reflect changes in the composition of the Index. The Fund may not be
fully invested at times, either as a result of cash flows into the Fund
or reserves of cash held by the Fund to meet redemptions. If the Fund
utilizes a sampling approach, or futures or other derivative positions
its return may not correlate as well with the return on the Index, as
would be the case if it purchased all of the stocks in the Index.
THE FUND'S SHARES WILL CHANGE IN VALUE, AND YOU COULD LOSE MONEY BY INVESTING IN
THE FUND. THE FUND MAY NOT ACHIEVE ITS OBJECTIVE. AN INVESTMENT IN THE FUND IS
NOT A DEPOSIT WITH A BANK AND IS NOT INSURED OR GUARANTEED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
OTHER INVESTMENT CONSIDERATIONS AND RISKS.
The U.S. Large Cap Growth Index. The U.S. Large Cap Growth Index is
composed of common stocks, which are chosen by Dow Jones, based upon
float-adjusted market capitalization and growth characteristics. Each year, Dow
Jones selects the largest U.S. stocks by market capitalization in order to
create the large cap universe, which represents approximately 70% of the total
U.S. equity market. After the initial list of eligible large cap stocks is
determined, Dow Jones uses a proprietary model to identify the growth stocks
within the large cap universe. Thus, the U.S. Large Cap Growth Index is a subset
of the large cap universe. The purpose of the Index is to provide an
7
effective representation of the U.S. large cap growth segment of the equity
market. The inclusion of a stock in the Index in no way implies that Dow Jones
believes the stock to be an attractive investment, nor is Dow Jones a sponsor or
in any way affiliated with the Fund. Each stock in the Index is weighted by its
float-adjusted market capitalization. That is, each security is weighted by its
float-adjusted market value relative to the total float-adjusted market values
of all the securities in the Index. The Index only includes common stocks
domiciled in the U.S. and its territories. You should also be aware that Dow
Jones has retained editorial control over the Index and has reserved the right
to modify the Index and/or its methodology at any time.
Changes in policies. The Trust's Trustees may change the Fund's investment
strategies and other policies without shareholder approval, except as otherwise
indicated. The Trustees will not materially change the Fund's investment
objective without shareholder approval.
PERFORMANCE
As of the date of this Prospectus, the Fund has not completed a full
calendar year of operations. For this reason, the bar chart and table showing
performance information and information on the Fund's best and worst calendar
quarters are not provided in this prospectus.
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold shares of the streetTRACKS(SM) Dow Jones U.S. Large Cap Growth Index
Fund.(1)
SHAREHOLDER FEES
(fees paid directly from your investment, but see
"Creation and Redemption of Creation Units" for a
discussion of Creation and Redemption Transaction
Fees)................................................ 0.00%
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from the Fund's assets)(2)
Management Fees...................................... 0.20%
Distribution and Services (12b-1) Fees(3)............ 0.00%
Other Expenses(4).................................... 0.02%
-----
TOTAL ANNUAL FUND OPERATING EXPENSES................... 0.22%
=====
---------------
(1) You will incur customary brokerage commissions when buying and
selling shares of the Fund.
8
(2) Expressed as a percentage of average daily net assets.
(3) The Fund has adopted a Distribution and Service (12b-1) Plan
pursuant to which payments of up to 0.25% of average daily net
assets may be made, however, no such payments will be made during
the next 12 months of operation.
(4) The Trust's Investment Advisory Agreement provides that the
Adviser will pay the operating expenses of the Trust, except for
the management fee, brokerage, taxes, interest, fees and expenses
of the Independent Trustees (including any Trustee's counsel
fees), litigation expenses and other extraordinary expenses.
EXAMPLE
The streetTRACKS(SM) Dow Jones U.S. Large Cap Growth Index Fund sells and
redeems Shares in Creation Units principally on an in-kind basis for portfolio
securities of the relevant Index. SHARES IN LESS THAN CREATION UNIT AGGREGATIONS
ARE NOT REDEEMABLE. An investor purchasing a Creation Unit on an in-kind basis
would pay the following expenses on a $10,000 investment (payment with a deposit
of securities included in the relevant Index), assuming a 5% annual return and
that the Fund's operating expenses remain the same. INVESTORS SHOULD NOTE THAT
THE PRESENTATION BELOW OF A $10,000 INVESTMENT IN A CREATION UNIT IS FOR
ILLUSTRATION PURPOSES ONLY, AS SHARES WILL BE ISSUED BY THE FUND ONLY IN
CREATION UNITS. FURTHER, THE RETURN OF 5% AND ESTIMATED EXPENSES ARE FOR
ILLUSTRATION PURPOSES ONLY AND SHOULD NOT BE CONSIDERED INDICATIONS OF EXPECTED
FUND EXPENSES OR PERFORMANCE, WHICH MAY BE GREATER OR LESSER THAN THE ESTIMATES.
YEAR EXPENSES
---- --------
1................................................... $ 23
3................................................... $ 71
5................................................... $124
10.................................................. $281
9
streetTRACKS(SM) DOW JONES U.S. SMALL CAP VALUE INDEX FUND
(SYMBOL: DSV)
This section describes the streetTRACKS(SM) Dow Jones U.S. Small Cap Value
Index Fund's goals, principal investment strategies, risks, expenses and
performance.
Investment Objective. The Fund's investment objective is to replicate as
closely as possible, before expenses, the performance of the Dow Jones U.S.
Small Cap Value Index (the "U.S. Small Cap Value Index" or the "Index"). There
is no assurance that the Fund will achieve its investment objective.
Principal Investment Strategies. The Fund uses a passive management
strategy designed to track the performance of the U.S. Small Cap Value Index.
The Index includes common stocks, which are chosen by Dow Jones based upon
certain float-adjusted market capitalization and value characteristics.
The Fund, using an "indexing" investment approach, attempts to replicate,
before expenses, the performance of the U.S. Small Cap Value Index. The Adviser
seeks a correlation of 0.95 or better between the Fund's performance and the
performance of the Index; a figure of 1.00 would represent perfect correlation.
The Fund generally will invest in all of the stocks comprising the Index in
proportion to their weightings in the Index. However, under various
circumstances, it may not be possible or practicable to purchase all of those
stocks in those weightings. In those circumstances, the Fund may purchase a
sample of the stocks in the Index in proportions expected by the Adviser to
replicate generally the performance of the Index as a whole. There may also be
instances in which the Adviser may choose to overweight another stock in the
Index, purchase securities not in the Index which the Adviser believes are
appropriate to substitute for the Index Securities, or utilize various
combinations of other available investment techniques, in seeking to track
accurately the Index. In addition, from time to time stocks are added to or
removed from the Index. The Fund may sell stocks that are represented in the
Index, or purchase stocks that are not yet represented in the Index, in
anticipation of their removal from or addition to the Index.
The Fund will normally invest at least 95% of its total assets in common
stocks that comprise the Index.
Principal risks of investing in the Fund. Unlike many investment
companies, the Fund is not actively "managed." Therefore, it would not sell a
stock because the stock's issuer was in financial trouble, unless that stock is
removed from the Index. An investment in the Fund involves risks similar to
those of investing in any fund of equity securities traded on exchanges, such as
market
10
fluctuations caused by such factors as economic and political developments,
changes in interest rates and perceived trends in stock prices. You should
anticipate that the value of the Shares will decline, more or less, in
correlation with any decline in value of the Index.
- Stock values could decline generally, or could underperform other
investments.
- Returns on investments in stocks of small U.S. companies could trail the
returns on investments in stocks of larger companies.
- A "value" style of investing emphasizes undervalued companies with
characteristics for improved valuations. This style of investing is
subject to the risk that the valuations never improve or that the returns
on "value" equity securities are less than returns on other styles of
investing or the overall stock market. Different types of stocks tend to
shift in and out of favor depending on market and economic conditions.
Thus, the value of the Fund's investments will vary and at times may be
lower or higher than that of other types of investments.
- Small companies may be more likely than mid-cap and large-cap companies
to have relatively limited product lines, markets or financial resources,
or depend on a few key employees.
- The Fund's return may not match the return of the Index for a number of
reasons. For example, the return on the securities and other investments
selected by the Adviser may not correlate precisely with the return on
the Index. The Fund incurs a number of operating expenses not applicable
to the Index, and incurs costs in buying and selling securities,
especially when rebalancing the Fund's securities holdings to reflect
changes in the composition of the Index. The Fund may not be fully
invested at times, either as a result of cash flows into the Fund or
reserves of cash held by the Fund to meet redemptions. If the Fund
utilizes a sampling approach, or futures or other derivative positions
its return may not correlate as well with the return on the Index, as
would be the case if it purchased all of the stocks in the Index.
THE FUND'S SHARES WILL CHANGE IN VALUE, AND YOU COULD LOSE MONEY BY INVESTING IN
THE FUND. THE FUND MAY NOT ACHIEVE ITS OBJECTIVE. AN INVESTMENT IN THE FUND IS
NOT A DEPOSIT WITH A BANK AND IS NOT INSURED OR GUARANTEED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
OTHER INVESTMENT CONSIDERATIONS AND RISKS.
The U.S. Small Cap Value Index. The U.S. Small Cap Value Index is composed
of common stocks, which are chosen by Dow Jones, based upon
11
float-adjusted market capitalization and value characteristics. Each year, Dow
Jones selects the smallest U.S. stocks by market capitalization in order to
create the small cap universe, which represents approximately 5% of the total
U.S. equity market. After the initial list of eligible small cap stocks is
determined, Dow Jones uses a proprietary model to identify value stocks within
the small cap universe. Thus, the U.S. Small Cap Value Index is a subset of the
small cap universe. The purpose of the Index is to provide an effective
representation of the U.S. small cap value segment of the equity market. The
inclusion of a stock in the Index in no way implies that Dow Jones believes the
stock to be an attractive investment, nor is Dow Jones a sponsor or in any way
affiliated with the Fund. Each stock in the Index is weighted by its float-
adjusted market capitalization. That is, each security is weighted by its float-
adjusted market value relative to the total float-adjusted market values of all
the securities in the Index. The Index only includes common stocks domiciled in
the U.S. and its territories. You should also be aware that Dow Jones has
retained editorial control over the Index and has reserved the right to modify
the Index and/or its methodology at any time.
Changes in policies. The Trust's Trustees may change the Fund's investment
strategies and other policies without shareholder approval, except as otherwise
indicated. The Trustees will not materially change the Fund's investment
objective without shareholder approval.
PERFORMANCE
As of the date of this Prospectus, the Fund has not completed a full
calendar year of operations. For this reason, the bar chart and table showing
performance information and information on the Fund's best and worst calendar
quarters are not provided in this prospectus.
12
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold shares of the streetTRACKS(SM) Dow Jones U.S. Small Cap Value Index
Fund.(1)
SHAREHOLDER FEES
(fees paid directly from your investment, but see
"Creation and Redemption of Creation Units" for a
discussion of Creation and Redemption Transaction
Fees)................................................ 0.00%
ANNUAL FUND OPERATING EXPENSES(expenses that are
deducted from the Fund's assets)(2)
Management Fees...................................... 0.25%
Distribution and Services (12b-1) Fees(3)............ 0.00%
Other Expenses(4).................................... 0.03%
TOTAL ANNUAL FUND OPERATING EXPENSES................... 0.28%
--------------------
(1) You will incur customary brokerage commissions when buying and
selling shares of the Fund.
(2) Expressed as a percentage of average daily net assets.
(3) The Fund has adopted a Distribution and Service (12b-1) Plan
pursuant to which payments of up to 0.25% of average daily net
assets may be made, however, no such payments will be made during
the next 12 months of operation.
(4) The Trust's Investment Advisory Agreement provides that the
Adviser will pay the operating expenses of the Trust, except for
the management fee, brokerage, taxes, interest, fees and expenses
of the Independent Trustees (including any Trustee's counsel
fees), litigation expenses and other extraordinary expenses.
EXAMPLE
The streetTRACKS(SM) Dow Jones U.S. Small Cap Value Index Fund sells and
redeems Shares in Creation Units principally on an in-kind basis for portfolio
securities of the relevant Index. SHARES IN LESS THAN CREATION UNIT AGGREGATIONS
ARE NOT REDEEMABLE. An investor purchasing a Creation Unit on an in-kind basis
would pay the following expenses on a $10,000 investment (payment with a deposit
of securities included in the relevant Index), assuming a 5% annual return and
that the Fund's operating expenses remain the same. INVESTORS SHOULD NOTE THAT
THE PRESENTATION BELOW OF A $10,000 INVESTMENT IN A CREATION UNIT IS FOR
ILLUSTRATION PURPOSES ONLY, AS SHARES WILL BE ISSUED BY THE FUND ONLY IN
CREATION UNITS. FURTHER, THE RETURN OF 5% AND ESTI-
13
MATED EXPENSES ARE FOR ILLUSTRATION PURPOSES ONLY AND SHOULD NOT BE CONSIDERED
INDICATIONS OF EXPECTED FUND EXPENSES OR PERFORMANCE, WHICH MAY BE GREATER OR
LESSER THAN THE ESTIMATES.
YEAR EXPENSES
---- --------
1................................................... $ 29
3................................................... $ 90
5................................................... $158
10.................................................. $356
14
STREETTRACKS(SM) DOW JONES U.S. SMALL CAP GROWTH INDEX FUND
(SYMBOL: DSG)
This section describes the streetTRACKS(SM) Dow Jones U.S. Small Cap Growth
Index Fund's goals, principal investment strategies, risks, expenses and
performance.
Investment Objective. The Fund's investment objective is to replicate as
closely as possible, before expenses, the performance of the Dow Jones U.S.
Small Cap Growth Index (the "U.S. Small Cap Growth Index" or the "Index"). There
is no assurance that the Fund will achieve its investment objective.
Principal Investment Strategies. The Fund uses a passive management
strategy designed to track the performance of the U.S. Small Cap Growth Index.
The Index includes common stocks, which are chosen by Dow Jones based upon
certain float-adjusted market capitalization and growth characteristics.
The Fund, using an "indexing" investment approach, attempts to replicate,
before expenses, the performance of the Small Cap Value Index. The Adviser seeks
a correlation of 0.95 or better between the Fund's performance and the
performance of the Index; a figure of 1.00 would represent perfect correlation.
The Fund generally will invest in all of the stocks comprising the Index in
proportion to their weightings in the Index. However, under various
circumstances, it may not be possible or practicable to purchase all of those
stocks in those weightings. In those circumstances, the Fund may purchase a
sample of the stocks in the Index in proportions expected by the Adviser to
replicate generally the performance of the Index as a whole. There may also be
instances in which the Adviser may choose to overweight another stock in the
Index, purchase securities not in the Index which the Adviser believes are
appropriate to substitute for the Index Securities, or utilize various
combinations of other available investment techniques, in seeking to track
accurately the Index. In addition, from time to time stocks are added to or
removed from the Index. The Fund may sell stocks that are represented in the
Index, or purchase stocks that are not yet represented in the Index, in
anticipation of their removal from or addition to the Index.
The Fund will normally invest at least 95% of its total assets in common
stocks that comprise the Index.
Principal risks of investing in the Fund. Unlike many investment
companies, the Fund is not actively "managed." Therefore, it would not sell a
stock because the stock's issuer was in financial trouble, unless that stock is
removed from the Index. An investment in the Fund involves risks similar to
those of
15
investing in any fund of equity securities traded on exchanges, such as market
fluctuations caused by such factors as economic and political developments,
changes in interest rates and perceived trends in stock prices. You should
anticipate that the value of the Shares will decline, more or less, in
correlation with any decline in value of the Index.
- Stock values could decline generally, or could underperform other
investments.
- Returns on investments in stocks of small U.S. companies could trail the
returns on investments in stocks of larger companies.
- The Fund emphasizes a "growth" style of investing. The market values of
such securities may be more volatile than other types of investments. The
returns on "growth" securities may or may not move in tandem with the
returns on other styles of investing or the overall stock markets.
- Small companies may be more likely than mid-cap and large-cap companies
to have relatively limited product lines, markets or financial resources,
or depend on a few key employees.
- The Fund's return may not match the return of the Index for a number of
reasons. For example, the return on the securities and other investments
selected by the Adviser may not correlate precisely with the return on
the Index. The Fund incurs a number of operating expenses not applicable
to the Index, and incurs costs in buying and selling securities,
especially when rebalancing the Fund's securities holdings to reflect
changes in the composition of the Index. The Fund may not be fully
invested at times, either as a result of cash flows into the Fund or
reserves of cash held by the Fund to meet redemptions. If the Fund
utilizes a sampling approach, or futures or other derivative positions
its return may not correlate as well with the return on the Index, as
would be the case if it purchased all of the stocks in the Index.
THE FUND'S SHARES WILL CHANGE IN VALUE, AND YOU COULD LOSE MONEY BY
INVESTING IN THE FUND. THE FUND MAY NOT ACHIEVE ITS OBJECTIVE. AN INVESTMENT IN
THE FUND IS NOT A DEPOSIT WITH A BANK AND IS NOT INSURED OR GUARANTEED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
OTHER INVESTMENT CONSIDERATIONS AND RISKS.
The U.S. Small Cap Growth Index. The U.S. Small Cap Growth Index is
composed of common stocks, which are chosen by Dow Jones, based upon
float-adjusted market capitalization and growth characteristics. Each year, Dow
Jones selects the smallest U.S. stocks by market capitalization in order to
create the small cap universe, which represents approximately 5% of the total
16
U.S. equity market. After the initial list of eligible small cap stocks is
determined, Dow Jones uses a proprietary model to identify growth stocks within
the small cap universe. Thus, the U.S. Small Cap Growth Index is a subset of the
small cap universe. The purpose of the Index is to provide an effective
representation of the U.S. small cap growth segment of the equity market. The
inclusion of a stock in the Index in no way implies that Dow Jones believes the
stock to be an attractive investment, nor is Dow Jones a sponsor or in any way
affiliated with the Fund. Each stock in the Index is weighted by its float-
adjusted market capitalization. That is, each security is weighted by its float-
adjusted market value relative to the total float-adjusted market values of all
the securities in the Index. The Index only includes common stocks domiciled in
the U.S. and its territories. You should also be aware that Dow Jones has
retained editorial control over the Index and has reserved the right to modify
the Index and/or its methodology at any time.
Changes in policies. The Trust's Trustees may change the Fund's investment
strategies and other policies without shareholder approval, except as otherwise
indicated. The Trustees will not materially change the Fund's investment
objective without shareholder approval.
PERFORMANCE
As of the date of this Prospectus, the Fund has not completed a full
calendar year of operations. For this reason, the bar chart and table showing
performance information and information on the Fund's best and worst calendar
quarters are not provided in this prospectus.
17
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold shares of the streetTRACKS(SM) Dow Jones U.S. Small Cap Growth Index
Fund.(1)
SHAREHOLDER FEES
(fees paid directly from your investment, but see
"Creation and Redemption of Creation Units" for a
discussion of Creation and Redemption Transaction
Fees)................................................ 0.00%
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from the Fund's assets)(2)
Management Fees...................................... 0.25%
Distribution and Services (12b-1) Fees(3)............ 0.00%
Other Expenses(4).................................... 0.05%
-----
TOTAL ANNUAL FUND OPERATING EXPENSES................... 0.30%
=====
--------------------
(1) You will incur customary brokerage commissions when buying and
selling shares of the Fund.
(2) Expressed as a percentage of average daily net assets.
(3) The Fund has adopted a Distribution and Service (12b-1) Plan
pursuant to which payments of up to 0.25% of average daily net
assets may be made, however, no such payments will be made during
the next 12 months of operation.
(4) The Trust's Investment Advisory Agreement provides that the
Adviser will pay the operating expenses of the Trust, except for
the management fee, brokerage, taxes, interest, fees and expenses
of the Independent Trustees (including any Trustee's counsel
fees), litigation expenses and other extraordinary expenses.
EXAMPLE
The streetTRACKS(SM) Dow Jones U.S. Small Cap Growth Index Fund sells and
redeems Shares in Creation Units principally on an in-kind basis for portfolio
securities of the relevant Index. SHARES IN LESS THAN CREATION UNIT AGGREGATIONS
ARE NOT REDEEMABLE. An investor purchasing a Creation Unit on an in-kind basis
would pay the following expenses on a $10,000 investment (payment with a deposit
of securities included in the relevant Index), assuming a 5% annual return and
that the Fund's operating expenses remain the same. INVESTORS SHOULD NOTE THAT
THE PRESENTATION BELOW OF A $10,000 INVESTMENT IN A CREATION UNIT IS FOR
ILLUSTRATION PURPOSES ONLY, AS SHARES WILL BE ISSUED
18
BY THE FUND ONLY IN CREATION UNITS. FURTHER, THE RETURN OF 5% AND ESTIMATED
EXPENSES ARE FOR ILLUSTRATION PURPOSES ONLY AND SHOULD NOT BE CONSIDERED
INDICATIONS OF EXPECTED FUND EXPENSES OR PERFORMANCE, WHICH MAY BE GREATER OR
LESSER THAN THE ESTIMATES.
YEAR EXPENSES
---- --------
1................................................... $ 31
3................................................... $ 97
5................................................... $169
10.................................................. $381
19
streetTRACKS(SM) DOW JONES GLOBAL TITANS INDEX FUND (SYMBOL: DGT)
This section describes the streetTRACKS(SM) Dow Jones Global Titans Index
Fund's goals, principal investment strategies, risks, expenses and performance.
Investment Objective. The Fund's investment objective is to replicate as
closely as possible, before expenses, the performance of the Dow Jones Global
Titans Index U.S. Close (the "Global Titans Index" or the "Index"). There is no
assurance that the Fund will achieve its investment objective.
Principal Investment Strategies. The Fund uses a passive management
strategy designed to track the performance of the Global Titans Index. The Index
includes 50 stocks, which are chosen by Dow Jones based on the combination of
market data and fundamental data.
The Fund, using an "indexing" investment approach, attempts to replicate,
before expenses, the performance of the Global Titans Index. The Adviser seeks a
correlation of 0.95 or better between the Fund's performance and the performance
of the Index; a figure of 1.00 would represent perfect correlation.
The Fund generally will invest in all of the stocks comprising the Index in
proportion to their weightings in the Index. However, under various
circumstances, it may not be possible or practicable to purchase all of those
stocks in those weightings. In those circumstances, the Fund may purchase a
sample of the stocks in the Index in proportions expected by the Adviser to
replicate generally the performance of the Index as a whole. There may also be
instances in which the Adviser may choose to overweight another stock in the
Index, purchase securities not in the Index which the Adviser believes are
appropriate to substitute for the Index Securities, or utilize various
combinations of other available investment techniques, in seeking to track
accurately the Index. In addition, from time to time stocks are added to or
removed from the Index. The Fund may sell stocks that are represented in the
Index, or purchase stocks that are not yet represented in the Index, in
anticipation of their removal from or addition to the Index.
The Fund will normally invest at least 95% of its total assets in common
stocks that comprise the Index.
Principal risks of investing in the Fund. Unlike many investment
companies, the Fund is not actively "managed." Therefore, it would not sell a
stock because the stock's issuer was in financial trouble, unless that stock is
removed from the Index. An investment in the Fund involves risks similar to
those of investing in any fund of equity securities traded on exchanges, such as
market fluctuations caused by such factors as economic and political
developments,
20
changes in interest rates and perceived trends in stock prices. You should
anticipate that the value of the Shares will decline, more or less, in
correlation with any decline in value of the Index.
- Stock values could decline generally or could underperform other
investments.
- Returns on investments in foreign stocks could be more volatile than, or
trail the returns on, investments in U.S. stocks.
- Returns on investments in stocks of large companies could trail the
returns on investments in stocks of smaller companies.
- The Fund's return may not match the return of the Index for a number of
reasons. For example, the Fund incurs a number of operating expenses not
applicable to the Index, and incurs costs in buying and selling
securities, especially when rebalancing the Fund's securities holdings to
reflect changes in the composition of the Index. The Fund may not be
fully invested at times, either as a result of cash flows into the Fund
or reserves of cash held by the Fund to meet redemptions. If the Fund
utilizes a sampling approach, or futures or other derivative positions
its return may not correlate as well with the return on the Index, as
would be the case if it purchased all of the stocks in the Index.
THE FUND'S SHARES WILL CHANGE IN VALUE, AND YOU COULD LOSE MONEY BY
INVESTING IN THE FUND. THE FUND MAY NOT ACHIEVE ITS OBJECTIVE. AN INVESTMENT IN
THE FUND IS NOT A DEPOSIT WITH A BANK AND IS NOT INSURED OR GUARANTEED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
OTHER INVESTMENT CONSIDERATIONS AND RISKS.
The Global Titans Index. The Global Titans Index is composed of 50 common
stocks, which are chosen by Dow Jones. The stock must, in the opinion of Dow
Jones, meet all four of the following criteria to qualify as a candidate for the
index: (1) It must be a well established company with a solid financial
situation and a broad client base; (2) It must be well known to global investors
for either its long history of success or its widely used products or services;
(3) It must be a market leader in its industry with either a dominant position
or a competitive advantage; (4) It must be among the largest of blue-chip
companies in the global arena. In constructing the Global Titans Index, a unique
multi-factor methodology is adopted. First the 5,000 stocks of the Dow Jones
Global Indexes are used as the Initial Pool with a view towards ensuring that
all candidates are investable, liquid and representative of the global markets.
Market capitalization is then used as the first screen to create the Final Pool
by selecting the top 100 companies. Dow Jones' rationale for this step is that
market value is a universal measurement across industries, and also
21
that its use is most appropriate for an index built for investment purposes.
Every company in the final pool of 100 must derive some revenue from outside its
home country. This screen is instituted to ensure that all of the Titans
selected are truly Global companies. The next step in index construction is to
combine the Final Pool components' market capitalization rankings with their
rankings according to four other indicators of size and leadership. These four
indicators, two from the balance sheet and two from the income statement, are
assets, book value, sales/revenue, and net profit. The combined rankings of
these four fundamental factors determine the fundamental rank of each company.
The fundamental rank and the market cap rank are used equally as the basis for
selecting the index components. The inclusion of a stock in the Index in no way
implies that Dow Jones believes the stock to be an attractive investment, nor is
Dow Jones a sponsor or in any way affiliated with the Fund. For purposes of
calculation of the Index value, securities for which the primary market is
outside of the U.S. are valued based on the last sale price on the primary
market. During periods when the primary market is closed, these securities are
valued based on the last sale price, if any, of any corresponding ADR. You
should also be aware that Dow Jones has retained editorial control over the
Index and has reserved the right to modify the Index and/or its methodology at
any time.
Foreign Securities. The Fund will invest in foreign securities, including
non-U.S. dollar-denominated securities traded outside of the United States and
dollar-denominated securities of foreign issuers traded in the United States.
Foreign securities also include investments such as American Depository Receipts
("ADRs") which are U.S. dollar-denominated receipts representing shares of
foreign-based corporations. ADRs are issued by U.S. banks or trust companies,
and entitle the holder to all dividends and capital gains that are paid out on
the underlying foreign shares. Investment in ADRs may be less liquid than the
liquidity of the underlying shares in their primary trading market.
Foreign securities involve special risks and costs. Investment in foreign
securities may involve higher costs than investment in U.S. securities,
including higher transaction and custody costs as well as the imposition of
additional taxes by foreign governments. Foreign investments may also involve
risks associated with the level of currency exchange rates, less complete
financial information about the issuers, less market liquidity, more market
volatility and political instability. Future political and economic
developments, the possible imposition of withholding taxes on dividend income,
the possible seizure or nationalization of foreign holdings, the possible
establishment of exchange controls or freezes on the convertibility of currency,
or the adoption of other governmental restrictions might adversely affect an
investment in foreign
22
securities. Additionally, foreign issuers may be subject to less stringent
regulation, and to different accounting, auditing and recordkeeping
requirements.
Forward Currency Exchange Contracts. The Fund may enter into forward
currency exchange contracts for hedging purposes to help reduce the risks and
volatility caused by changes in foreign currency exchange rates. Foreign
currency exchange contracts will be used at the discretion of the Adviser, and
the Fund is not required to hedge its foreign currency positions. A forward
currency contract is an obligation to exchange one currency for another on a
future date at a specified exchange rate. Forward currency contracts are
privately negotiated transactions, and can have substantial price volatility.
When used for hedging purposes, they tend to limit any potential gain that may
be realized if the value of the Fund's foreign holdings increases because of
currency fluctuations.
Changes in policies. The Trust's Trustees may change the Fund's investment
strategies and other policies without shareholder approval, except as otherwise
indicated. The Trustees will not materially change the Fund's investment
objective without shareholder approval.
PERFORMANCE
As of the date of this Prospectus, the Fund has not completed a full
calendar year of operations. For this reason, the bar chart and table showing
performance information and information on the Fund's best and worst calendar
quarters are not provided in this prospectus.
23
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold shares of the streetTRACKS(SM) Dow Jones Global Titans Index Fund.(1)
SHAREHOLDER FEES
(fees paid directly from your investment, but see
"Creation and Redemption of Creation Units" for a
discussion of Creation and Redemption Transaction
Fees)................................................ 0.00%
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from the Fund's assets)(2)
Management Fees...................................... 0.50%
Distribution and Services (12b-1) Fees(3)............ 0.00%
Other Expenses(4).................................... 0.02%
-----
TOTAL ANNUAL FUND OPERATING EXPENSES................... 0.52%
=====
--------------------
(1) You will incur customary brokerage commissions when buying and
selling shares of the Fund.
(2) Expressed as a percentage of average daily net assets.
(3) The Fund has adopted a Distribution and Service (12b-1) Plan
pursuant to which payments of up to 0.25% of average daily net
assets may be made, however, no such payments will be made during
the next 12 months of operation.
(4) The Trust's Investment Advisory Agreement provides that the
Adviser will pay the operating expenses of the Trust, except for
the management fee, brokerage, taxes, interest, fees and expenses
of the Independent Trustees (including any Trustee's counsel
fees), litigation expenses and other extraordinary expenses.
EXAMPLE
The streetTRACKS(SM) Dow Jones Global Titans Index Fund sells and redeems Shares
in Creation Units principally on an in-kind basis for portfolio securities of
the relevant Index. SHARES IN LESS THAN CREATION UNIT AGGREGATIONS ARE NOT
REDEEMABLE. An investor purchasing a Creation Unit on an in-kind basis would pay
the following expenses on a $10,000 investment (payment with a deposit of
securities included in the relevant Index), assuming a 5% annual return and that
the Fund's operating expenses remain the same. INVESTORS SHOULD NOTE THAT THE
PRESENTATION BELOW OF A $10,000 INVESTMENT IN A CREATION UNIT IS FOR
ILLUSTRATION PURPOSES ONLY, AS SHARES WILL BE ISSUED BY THE FUND ONLY IN
24
CREATION UNITS. FURTHER, THE RETURN OF 5% AND ESTIMATED EXPENSES ARE FOR
ILLUSTRATION PURPOSES ONLY AND SHOULD NOT BE CONSIDERED INDICATIONS OF EXPECTED
FUND EXPENSES OR PERFORMANCE, WHICH MAY BE GREATER OR LESSER THAN THE ESTIMATES.
YEAR EXPENSES
---- --------
1................................................... $ 53
3................................................... $167
5................................................... $291
10.................................................. $654
25
streetTRACKS(SM) WILSHIRE REIT INDEX FUND (SYMBOL: RWR)
This section describes the streetTRACKS(SM) Wilshire REIT Index Fund's
goals, principal investment strategies, risks, expenses and performance.
Investment Objective. The Fund's investment objective is to replicate as
closely as possible, before expenses, the performance of the Wilshire REIT Index
(the "Wilshire REIT Index" or the "Index"). There is no assurance that the Fund
will achieve its investment objective.
Principal Investment Strategies. The Fund uses a passive management
strategy designed to track the performance of the Wilshire REIT Index. The Index
is a market capitalization weighted index of publicly traded Real Estate
Investment Trusts ("REITs"). The Index is comprised of companies whose charters
are the equity ownership and operation of commercial real estate. As of
September 30, 2001, the Index was composed of 93 REITs.
The Fund, using an "indexing" investment approach, attempts to replicate,
before expenses, the performance of the Wilshire REIT Index. The Adviser seeks a
correlation of 0.95 or better between the Fund's performance and the performance
of the Index; a figure of 1.00 would represent perfect correlation.
The Fund generally will invest in all of the REITs comprising the Index in
proportion to their weightings in the Index. However, under various
circumstances, it may not be possible or practicable to purchase all of those
REITs in those weightings. In those circumstances, the Fund may purchase a
sample of the stocks in the Index in proportions expected by the Adviser to
replicate generally the performance of the Index as a whole. There may also be
instances in which the Adviser may choose to overweight another stock in the
Index, purchase securities not in the Index which the Adviser believes are
appropriate to substitute for the Index Securities, or utilize various
combinations of other available investment techniques, in seeking to track
accurately the Index. In addition, from time to time stocks are added to or
removed from the Index. The Fund may sell stocks that are represented in the
Index, or purchase stocks that are not yet represented in the Index, in
anticipation of their removal from or addition to the Index.
The Fund will normally invest at least 95% of its total assets in REITs
that comprise the Index.
Principal risks of investing in the Fund. Unlike many investment
companies, the Fund is not actively "managed." Therefore, it would not sell a
stock because the stock's issuer was in financial trouble, unless that stock is
removed from the Index. An investment in the Fund involves risks similar to
those of investing in any fund of equity securities traded on exchanges, such as
market
26
fluctuations caused by such factors as economic and political developments,
changes in interest rates and perceived trends in stock prices. You should
anticipate that the value of the Shares will decline, more or less, in
correspondence with any decline in value of the Index.
- The Fund will concentrate its investments in the real estate industry
sector. Adverse economic, business or political developments affecting
that industry sector could have a major effect on the value of the Fund's
investments.
- Investing in REITs may subject the Fund to risks associated with the
direct ownership of real estate, such as decreases in real estate values,
overbuilding, increased competition and other risks related to local or
general economic conditions, increases in operating costs and property
taxes, changes in zoning laws, casualty or condemnation losses, possible
environmental liabilities, regulatory limitations on rent and
fluctuations in rental income. Equity REITs generally experience these
risks directly through fee or leasehold interests, whereas mortgage REITs
generally experience these risks indirectly through mortgage interests,
unless the mortgage REIT forecloses on the underlying real estate.
- Changes in interest rates may also affect the value of the Fund's
investment in REITs. For instance, during periods of declining interest
rates, certain mortgage REITs may hold mortgages that the mortgagors
elect to prepay, this prepayment may diminish the yield on securities
issued by those REITs.
- Certain REITs have a relatively small market capitalization, which may
tend to increase the volatility of the market price of their securities.
- REITs are dependent upon specialized management skills, have limited
diversification and are, therefore, subject to risks inherent in
operating and financing a limited number of projects.
- REITs are also subject to heavy cash flow dependency, defaults by
borrowers and the possibility of failing to qualify for tax-free pass-
through of income under the Internal Revenue Code of 1986, as amended
(the "Code") and to maintain exemption from the registration requirements
of the 1940 Act.
- The Fund's return may not match the return of the Index for a number of
reasons. For example, the return on the securities and other investments
selected by the Adviser may not correlate precisely with the return on
the Index. The Fund incurs a number of operating expenses not applicable
to the Index, and incurs costs in buying and selling securities,
especially when rebalancing the Fund's securities holdings to reflect
changes in the composition of the Index. The Fund may not be
27
fully invested at times, either as a result of cash flows into the Fund
or reserves of cash held by the Fund to meet redemptions. If the Fund
utilizes a sampling approach, or futures or other derivative positions
its return may not correlate as well with the return on the Index, as
would be the case if it purchased all of the stocks in the Index.
THE FUND'S SHARES WILL CHANGE IN VALUE, AND YOU COULD LOSE MONEY BY INVESTING IN
THE FUND. THE FUND MAY NOT ACHIEVE ITS OBJECTIVE. AN INVESTMENT IN THE FUND IS
NOT A DEPOSIT WITH A BANK AND IS NOT INSURED OR GUARANTEED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
OTHER INVESTMENT CONSIDERATIONS AND RISKS.
The Wilshire REIT Index. The Wilshire REIT Index is comprised of companies
whose charters are the equity ownership and operation of commercial real estate
and which operate under the REIT Act of 1960. The Index was composed of 93
components with a total market capitalization of $122.8 billion as of September
30, 2001. The Index is generally rebalanced monthly, and returns are calculated
on a buy and hold basis except as necessary to reflect the occasional occurrence
of Index changes in the middle of the month. The inclusion of a REIT in the
Index in no way implies that Wilshire Associates believes the stock to be an
attractive investment, nor is Wilshire Associates a sponsor or in any way
affiliated with the Fund. Each REIT in the Index is weighted by its market
capitalization. That is, each security is weighted by its market value relative
to the total market values of all the securities in the Index.
Changes in policies. The Trust's Trustees may change the Fund's investment
strategies and other policies without shareholder approval, except as otherwise
indicated. The Trustees will not materially change the Fund's investment
objective without shareholder approval.
PERFORMANCE
As of the date of this Prospectus, the Fund has not completed a full
calendar year of operations. For this reason, the bar chart and table showing
performance information and information on the Fund's best and worst calendar
quarters are not provided in this prospectus.
28
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold shares of the streetTRACKS(SM) Wilshire REIT Index Fund.(1)
SHAREHOLDER FEES
(fees paid directly from your investment, but see
"Creation and Redemption of Creation Units" for a
discussion of Creation and Redemption Transaction
Fees)................................................ 0.00%
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from the Fund's assets)(2)
Management Fees...................................... 0.25%
Distribution and Services (12b-1) Fees(3)............ 0.00%
Other Expenses(4).................................... 0.06%
-----
TOTAL ANNUAL FUND OPERATING EXPENSES................... 0.31%
=====
--------------------
(1) You will incur customary brokerage commissions when buying and
selling shares of the Fund.
(2) Expressed as a percentage of average daily net assets.
(3) The Fund has adopted a Distribution and Service (12b-1) Plan
pursuant to which payments of up to 0.25% of average daily net
assets may be made, however, no such payments will be made during
the next 12 months of operation.
(4) The Trust's Investment Advisory Agreement provides that the
Adviser will pay the operating expenses of the Trust, except for
the management fee, brokerage, taxes, interest, fees and expenses
of the Independent Trustees (including any Trustee's counsel
fees), litigation expenses and other extraordinary expenses.
EXAMPLE
The streetTRACKS(SM) Wilshire REIT Index Fund sells and redeems Shares in
Creation Units principally on an in-kind basis for portfolio securities of the
relevant Index. SHARES IN LESS THAN CREATION UNIT AGGREGATIONS ARE NOT
REDEEMABLE. An investor purchasing a Creation Unit on an in-kind basis would pay
the following expenses on a $10,000 investment (payment with a deposit of
securities included in the relevant Index), assuming a 5% annual return and that
the Fund's operating expenses remain the same. INVESTORS SHOULD NOTE THAT THE
PRESENTATION BELOW OF A $10,000 INVESTMENT IN A CREATION UNIT IS FOR
ILLUSTRATION PURPOSES ONLY, AS SHARES WILL BE ISSUED BY THE FUND ONLY IN
CREATION UNITS. FURTHER, THE RETURN OF 5% AND ESTIMATED EXPENSES ARE FOR
29
ILLUSTRATION PURPOSES ONLY AND SHOULD NOT BE CONSIDERED INDICATIONS OF EXPECTED
FUND EXPENSES OR PERFORMANCE, WHICH MAY BE GREATER OR LESSER THAN THE ESTIMATES.
YEAR EXPENSES
---- --------
1................................................... $ 32
3................................................... $100
5................................................... $174
10.................................................. $394
30
streetTRACKS(SM) MORGAN STANLEY TECHNOLOGY INDEX FUND (SYMBOL: MTK)
(FORMERLY THE STREETTRACKS(SM) MORGAN STANLEY HIGH TECH 35 INDEX FUND)
This section describes the streetTRACKS(SM) Morgan Stanley Technology Index
Fund's goals, principal investment strategies, risks, expenses and performance.
Investment Objective. The Fund's investment objective is to replicate as
closely as possible, before expenses, the performance of the Morgan Stanley
Technology Index (formerly the Morgan Stanley High Tech 35 Index)(the
"Technology Index" or the "Index"). There is no assurance that the Fund will
achieve its investment objective.
Principal Investment Strategies. The Fund uses a passive management
strategy designed to track the performance of the Technology Index. The Index is
currently composed of 35 electronics-based technology companies. The Exchange
calculates the Index. Morgan Stanley & Co. Incorporated acts as consultant to
the Exchange in connection with the Exchange's maintenance of the Index.
The Fund, using an "indexing" investment approach, attempts to replicate,
before expenses, the performance of the Technology Index. The Adviser seeks a
correlation of 0.95 or better between the Fund's performance and the performance
of the Index; a figure of 1.00 would represent perfect correlation.
The Fund generally will invest in all of the stocks comprising the Index in
proportion to their weightings in the Index. However, under various
circumstances, it may not be possible or practicable to purchase all of those
stocks in those weightings. In those circumstances, the Fund may purchase a
sample of the stocks in the Index in proportions expected by the Adviser to
replicate generally the performance of the Index as a whole. There may also be
instances in which the Adviser may choose to overweight another stock in the
Index, purchase securities not in the Index which the Adviser believes are
appropriate to substitute for the Index Securities, or utilize various
combinations of other available investment techniques, in seeking to track
accurately the Index. In addition, from time to time stocks are added to or
removed from the Index. The Fund may sell stocks that are represented in the
Index, or purchase stocks that are not yet represented in the Index, in
anticipation of their removal from or addition to the Index.
The Fund will normally invest at least 95% of its total assets in common
stocks that comprise the Index.
Principal risks of investing in the Fund. Unlike many investment
companies, the Fund is not actively "managed." Therefore, it would not sell a
stock because the stock's issuer was in financial trouble, unless that stock is
removed
31
from the Index. An investment in the Fund involves risks similar to those of
investing in any fund of equity securities traded on exchanges, such as market
fluctuations caused by such factors as economic and political developments,
changes in interest rates and perceived trends in stock prices. You should
anticipate that the value of the Shares will decline, more or less, in
correlation with any decline in value of the Index.
- Stock values could decline generally, or could underperform other
investments.
- The Fund will concentrate in the technology industry. Market or economic
factors impacting that industry sector could have a major effect on the
value of the Fund's investments. The value of stocks of technology
companies is particularly vulnerable to rapid changes in technology
product cycles, government regulation and competition. Technology stocks,
especially those of smaller, less-seasoned companies, tend to be more
volatile than the overall market.
- The Fund's return may not match the return of the Index for a number of
reasons. For example, the return on the securities and other investments
selected by the Adviser may not correlate precisely with the return on
the Index. The Fund incurs a number of operating expenses not applicable
to the Index, and incurs costs in buying and selling securities,
especially when rebalancing the Fund's securities holdings to reflect
changes in the composition of the Index. The Fund may not be fully
invested at times, either as a result of cash flows into the Fund or
reserves of cash held by the Fund to meet redemptions. If the Fund
utilizes a sampling approach, or futures or other derivative positions
its return may not correlate as well with the return on the Index, as
would be the case if it purchased all of the stocks in the Index.
THE FUND'S SHARES WILL CHANGE IN VALUE, AND YOU COULD LOSE MONEY BY INVESTING IN
THE FUND. THE FUND MAY NOT ACHIEVE ITS OBJECTIVE. AN INVESTMENT IN THE FUND IS
NOT A DEPOSIT WITH A BANK AND IS NOT INSURED OR GUARANTEED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
OTHER INVESTMENT CONSIDERATIONS AND RISKS.
The Morgan Stanley Technology Index. The Index is composed purely of
electronics-based technology companies. The Index was the first listed
broad-market technology barometer dedicated exclusively to the electronics-
based technology industry. The Index comprises American companies drawn from the
following 11 technology sub-sectors: computer & business services; technical
software (CAD/CAM, EDA); enterprise software; Internet and PC
32
software; telecom equipment-wireline/wireless; Internet infrastructure/data
networking; server & enterprise hardware; PC hardware & data storage;
connectors/electronics manufacturing services; semi-conductor capital equipment;
and semiconductors. The Exchange calculates the Index. Morgan Stanley & Co.
Incorporated acts as consultant to the Exchange in connection with the
Exchange's maintenance of the Index. The Index is equal-dollar-weighted to
ensure that each of its component securities is represented in approximate equal
dollar value. To ensure that each component stock continues to represent
approximate equal market value in the Index, adjustments, if necessary, are made
annually after the close of trading on the third Friday of December. As of
September 30, 2001, the Morgan Stanley Technology Index consisted of 35
components with a total market capitalization of $1,330 billion.
Changes in policies. The Trust's Trustees may change the Fund's investment
strategies and other policies without shareholder approval, except as otherwise
indicated. The Trustees will not materially change the Fund's investment
objective without shareholder approval.
PERFORMANCE
As of the date of this Prospectus, the Fund has not completed a full
calendar year of operations. For this reason, the bar chart and table showing
performance information and information on the Fund's best and worst calendar
quarters are not provided in this prospectus.
33
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold shares of the streetTRACKS(SM) Morgan Stanley Technology Index Fund.(1)
SHAREHOLDER FEES
(fees paid directly from your investment, but see
"Creation and Redemption of Creation Units" for a
discussion of Creation and Redemption Transaction
Fees)................................................ 0.00%
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from the Fund's assets)(2)
Management Fees...................................... 0.50%
Distribution and Services (12b-1) Fees(3)............ 0.00%
Other Expenses(4).................................... 0.01%
-----
TOTAL ANNUAL FUND OPERATING EXPENSES................... 0.51%
=====
--------------------
(1) You will incur customary brokerage commissions when buying and
selling shares of the Fund.
(2) Expressed as a percentage of average daily net assets.
(3) The Fund has adopted a Distribution and Service (12b-1) Plan
pursuant to which payments of up to 0.25% of average daily net
assets may be made, however, no such payments will be made during
the next 12 months of operation.
(4) The Trust's Investment Advisory Agreement provides that the
Adviser will pay the operating expenses of the Trust, except for
the management fee, brokerage, taxes, interest, fees and expenses
of the Independent Trustees (including any Trustee's counsel
fees), litigation expenses and other extraordinary expenses.
34
EXAMPLE
The streetTRACKS(SM) Morgan Stanley Technology Index Fund sells and redeems
Shares in Creation Units principally on an in-kind basis for portfolio
securities of the relevant Index. SHARES IN LESS THAN CREATION UNIT AGGREGATIONS
ARE NOT REDEEMABLE. An investor purchasing a Creation Unit on an in-kind basis
would pay the following expenses on a $10,000 investment (payment with a deposit
of securities included in the relevant Index), assuming a 5% annual return and
that the Fund's operating expenses remain the same. INVESTORS SHOULD NOTE THAT
THE PRESENTATION BELOW OF A $10,000 INVESTMENT IN A CREATION UNIT IS FOR
ILLUSTRATION PURPOSES ONLY, AS SHARES WILL BE ISSUED BY THE FUND ONLY IN
CREATION UNITS. FURTHER, THE RETURN OF 5% AND ESTIMATED EXPENSES ARE FOR
ILLUSTRATION PURPOSES ONLY AND SHOULD NOT BE CONSIDERED INDICATIONS OF EXPECTED
FUND EXPENSES OR PERFORMANCE, WHICH MAY BE GREATER OR LESSER THAN THE ESTIMATES.
YEAR EXPENSES
---- --------
1................................................... $ 52
3................................................... $164
5................................................... $286
10.................................................. $642
35
streetTracks(SM) Morgan Stanley Internet Index Fund (Symbol: MII)
This section describes the streetTRACKS(SM) Morgan Stanley Internet Index
Fund's goals, principal investment strategies, risks, expenses and performance.
Investment Objective. The Fund's investment objective is to replicate as
closely as possible, before expenses, the performance of the Morgan Stanley
Internet Index (the "Internet Index" or the "Index"). There is no assurance that
the Fund will achieve its investment objective.
Principal Investment Strategies. The Fund uses a passive management
strategy designed to track the performance of the Internet Index. The Index is
composed of companies that are driving the growth of Internet usage. The
Exchange calculates the Index. Morgan Stanley & Co. Incorporated acts as
consultant to the Exchange in connection with the Exchange's maintenance of the
Index.
The Fund, using an "indexing" investment approach, attempts to replicate,
before expenses, the performance of the Internet Index. The Adviser seeks a
correlation of 0.95 or better between the Fund's performance and the performance
of the Index; a figure of 1.00 would represent perfect correlation.
The Fund generally will invest in all of the stocks comprising the Index in
proportion to their weightings in the Index. However, under various
circumstances, it may not be possible or practicable to purchase all of those
stocks in those weightings. In those circumstances, the Fund may purchase a
sample of the stocks in the Index in proportions expected by the Adviser to
replicate generally the performance of the Index as a whole. There may also be
instances in which the Adviser may choose to overweight another stock in the
Index, purchase securities not in the Index which the Adviser believes are
appropriate to substitute for the Index Securities, or utilize various
combinations of other available investment techniques, in seeking to track
accurately the Index. In addition, from time to time stocks are added to or
removed from the Index. The Fund may sell stocks that are represented in the
Index, or purchase stocks that are not yet represented in the Index, in
anticipation of their removal from or addition to the Index.
The Fund will normally invest at least 95% of its total assets in common
stocks that comprise the Index.
Principal risks of investing in the Fund. Unlike many investment
companies, the Fund is not actively "managed." Therefore, it would not sell a
stock because the stock's issuer was in financial trouble, unless that stock is
removed from the Index. An investment in the Fund involves risks similar to
those of investing in any fund of equity securities traded on exchanges, such as
market
36
fluctuations caused by such factors as economic and political developments,
changes in interest rates and perceived trends in stock prices. You should
anticipate that the value of the Shares will decline, more or less, in
correlation with any decline in value of the Index.
- Stock values could decline generally, or could underperform other
investments.
- The Fund will invest primarily in companies engaged in Internet and
Intranet related activities. The value of such companies is particularly
vulnerable to rapidly changing technology, extensive government
regulation and relatively high risk of obsolescence caused by scientific
and technological advances. The value of the Fund's shares may fluctuate
more than shares of a fund investing in a broader range of industries.
- The Fund's return may not match the return of the Index for a number of
reasons. For example, the return on the securities and other investments
selected by the Adviser may not correlate precisely with the return on
the Index. The Fund incurs a number of operating expenses not applicable
to the Index, and incurs costs in buying and selling securities,
especially when rebalancing the Fund's securities holdings to reflect
changes in the composition of the Index. The Fund may not be fully
invested at times, either as a result of cash flows into the Fund or
reserves of cash held by the Fund to meet redemptions. If the Fund
utilizes a sampling approach, or futures or other derivative positions
its return may not correlate as well with the return on the Index, as
would be the case if it purchased all of the stocks in the Index.
THE FUND'S SHARES WILL CHANGE IN VALUE, AND YOU COULD LOSE MONEY BY
INVESTING IN THE FUND. THE FUND MAY NOT ACHIEVE ITS OBJECTIVE. AN INVESTMENT IN
THE FUND IS NOT A DEPOSIT WITH A BANK AND IS NOT INSURED OR GUARANTEED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
OTHER INVESTMENT CONSIDERATIONS AND RISKS.
The Morgan Stanley Internet Index. The Index is composed of companies that
are driving the growth of Internet usage. The Index comprises stocks of American
companies drawn from the following eight Internet sub-sectors: Internet
infrastructure services, Internet infrastructure, Internet consulting/services,
Internet portals, Internet vertical portals, Internet commerce, Internet/B2B
software and B2B commerce. The companies are selected based on a demonstration
of current leadership, business momentum, market share and market
capitalization. The number of companies in the Index may be increased as
Internet-related businesses evolve. The Exchange calculates the Index. Morgan
Stanley & Co. Incorporated acts as consultant to the Exchange
37
in connection with the Exchange's maintenance of the Index. The Index is
equal-dollar-weighted so that each of its component securities is represented in
approximate equal dollar value. To ensure that these weightings remain equal,
adjustments, if necessary, are made quarterly after the close of trading on the
third Friday of March, June, September, and December. As of September 30, 2001,
the Morgan Stanley Internet Index consisted of 30 components with a total market
capitalization of $746.4 billion.
Changes in policies. The Trust's Trustees may change the Fund's investment
strategies and other policies without shareholder approval, except as otherwise
indicated. The Trustees will not materially change the Fund's investment
objective without shareholder approval.
PERFORMANCE
As of the date of this Prospectus, the Fund has not completed a full
calendar year of operations. For this reason, the bar chart and table showing
performance information and information on the Fund's best and worst calendar
quarters are not provided in this prospectus.
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold shares of the streetTRACKS(SM) Morgan Stanley Internet Index Fund.(1)
SHAREHOLDER FEES
(fees paid directly from your investment, but see
"Creation and Redemption of Creation Units" for a
discussion of Creation and Redemption Transaction
Fees)................................................ 0.00%
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from the Fund's assets)(2)
Management Fees...................................... 0.50%
Distribution and Services (12b-1) Fees(3)............ 0.00%
Other Expenses(4).................................... 0.03%
-----
TOTAL ANNUAL FUND OPERATING EXPENSES................... 0.53%
=====
--------------------
(1) You will incur customary brokerage commissions when buying and
selling shares of the Fund.
(2) Expressed as a percentage of average daily net assets.
(3) The Fund has adopted a Distribution and Service (12b-1) Plan pursuant
to which payments of up to 0.25% of average daily net assets may
38
be made, however, no such payments will be made during the next 12
months of operation.
(4) The Trust's Investment Advisory Agreement provides that the Adviser
will pay the operating expenses of the Trust, except for the management
fee, brokerage, taxes, interest, fees and expenses of the Independent
Trustees (including any Trustee's counsel fees), litigation expenses
and other extraordinary expenses.
EXAMPLE
The streetTRACKS(SM) Morgan Stanley Internet Index Fund sells and redeems
Shares in Creation Units principally on an in-kind basis for portfolio
securities of the relevant Index. SHARES IN LESS THAN CREATION UNIT AGGREGATIONS
ARE NOT REDEEMABLE. An investor purchasing a Creation Unit on an in-kind basis
would pay the following expenses on a $10,000 investment (payment with a deposit
of securities included in the relevant Index), assuming a 5% annual return and
that the Fund's operating expenses remain the same. INVESTORS SHOULD NOTE THAT
THE PRESENTATION BELOW OF A $10,000 INVESTMENT IN A CREATION UNIT IS FOR
ILLUSTRATION PURPOSES ONLY, AS SHARES WILL BE ISSUED BY THE FUND ONLY IN
CREATION UNITS. FURTHER, THE RETURN OF 5% AND ESTIMATED EXPENSES ARE FOR
ILLUSTRATION PURPOSES ONLY AND SHOULD NOT BE CONSIDERED INDICATIONS OF EXPECTED
FUND EXPENSES OR PERFORMANCE, WHICH MAY BE GREATER OR LESSER THAN THE ESTIMATES.
YEAR EXPENSES
---- --------
1................................................... $ 54
3................................................... $170
5................................................... $297
10.................................................. $666
39
FORTUNE 500(R) INDEX FUND (SYMBOL: FFF)
This section describes the FORTUNE 500(R) Index Fund's investment
objective, principal investment strategies, risks and expenses.
Investment Objective. The Fund's investment objective is to replicate as
closely as possible, before expenses, the total return performance of the
FORTUNE 500(R) Index. There is no assurance that the Fund will achieve its
investment objective.
Principal Investment Strategies. The FORTUNE 500(R) Index Fund uses a
passive management strategy designed to track the total return performance of
the FORTUNE 500(R) Index. The FORTUNE 500(R) Index is a capitalization-weighted
Index that tracks the price-only and total return performance of an investable
subset of the annual FORTUNE 500(R) List of the largest companies in the U.S.
ranked by revenues. As of September 30, 2001, the Index was comprised of 431
component companies representing 433 issues.
The Fund, using an "indexing" investment approach, attempts to replicate,
before expenses, the total return performance of the FORTUNE 500(R) Index. The
Adviser seeks a correlation of 0.95 or better between the Fund's performance and
the total return performance of the Index; a figure of 1.00 would represent
perfect correlation.
The Fund generally will invest in all of the stocks comprising the Index in
proportion to their weightings in the Index. However, under various
circumstances, it may not be possible or practicable to purchase all of those
stocks in those weightings. In those circumstances, the Fund may purchase a
sample of the stocks in the Index in proportions expected by the Adviser to
replicate generally the performance of the Index as a whole. There may also be
instances in which the Adviser may choose to overweight another stock in the
Index, purchase securities not in the Index which the Adviser believes are
appropriate to substitute for the Index Securities, or utilize various
combinations of other available investment techniques, in seeking to track
accurately the Index. In addition, from time to time stocks are added to or
removed from the Index. The Fund may sell stocks that are represented in the
Index, or purchase stocks that are not yet represented in the Index, in
anticipation of their removal from or addition to the Index.
The Fund will normally invest at least 95% of its total assets in common
stocks that comprise the Index.
Principal risks of investing in the Fund. Unlike many investment
companies, the Fund is not actively "managed." Therefore, it would not sell a
stock because the stock's issuer was in financial trouble, unless that stock is
removed from the Index. An investment in the Fund involves risks similar to
those of
40
investing in any fund of equity securities traded on exchanges, such as market
fluctuations caused by such factors as economic and political developments,
changes in interest rates and perceived trends in stock prices. You should
anticipate that the value of the Shares will decline, more or less, in
correlation with any decline in value of the Index.
- Stock values could decline generally or could underperform other
investments.
- Returns on investments in stocks of large U.S. companies could trail the
returns on investments in stocks of smaller companies.
- The Fund's return may not match the return of the Index for a number of
reasons. For example, the Fund incurs a number of operating expenses not
applicable to the Index, and incurs costs in buying and selling
securities, especially when rebalancing the Fund's securities holdings to
reflect changes in the composition of the Index. The Fund may not be fully
invested at times, either as a result of cash flows into the Fund or
reserves of cash held by the Fund to meet redemptions. If the Fund
utilizes a sampling approach, or futures or other derivative positions its
return may not correlate as well with the return on the Index, as would be
the case if it purchased all of the stocks in the Index.
THE FUND'S SHARES WILL CHANGE IN VALUE, AND YOU COULD LOSE MONEY BY
INVESTING IN THE FUND. THE FUND MAY NOT ACHIEVE ITS OBJECTIVE. AN INVESTMENT IN
THE FUND IS NOT A DEPOSIT WITH A BANK AND IS NOT INSURED OR GUARANTEED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
OTHER INVESTMENT CONSIDERATIONS AND RISKS.
FORTUNE 500(R) Index. The FORTUNE 500(R) Index is a capitalization-
weighted Index that tracks the price-only and total return performance of an
investable subset of the annual FORTUNE 500(R) List of largest companies in the
U.S. ranked by revenues. The Index was first calculated by FORTUNE in December
of 1999. At $8.8 trillion, the market capitalization of the Index represents 67%
of the market valuation of shares listed on the New York Stock Exchange (NYSE),
the American Stock Exchange (AMEX), and the Nasdaq National Market, combined, as
of September 30, 2001.
Index policies and procedures are established by the FORTUNE Index
Committee, from time to time, and address eligibility standards, stock
selection, Index-calculation methodology, scheduling, and pre-announcement of
Index adjustments, and the specific handling of Index adjustments in the context
of various corporate actions.
41
The administration of the FORTUNE 500(R) Index includes dealing with stock
additions, deletions, or corporate actions--including stock splits, rights
offerings, share issuances or repurchases, special cash dividends, stock
dividends, spin-offs, and corporate mergers.
The FORTUNE 500(R) List, on which the FORTUNE 500(R) Index is predicated,
is compiled each year by FORTUNE based on the latest financial data reported to
a government agency through January 31 of the year in which the FORTUNE 500(R)
List is compiled. Only domestic, U.S.-based companies that are not
majority-owned by another company qualify for inclusion in the FORTUNE 500(R)
List. The List is compiled on the basis of the following criteria:
1.Total operating revenue, determined on the basis of a company's latest
fiscal year. Revenues are as reported, including revenues from
discontinued operations when they are published (except when the divested
company's revenues equal 50% or more of the surviving company's revenues
on an annualized basis). The revenues for commercial banks and savings
institutions are interest and non-interest revenues. Such figures for
insurance companies include premium and annuity income, investment
income, and capital gains or losses, but exclude deposits. Revenue
figures for all companies include consolidated subsidiaries and exclude
excise taxes.
2.Companies must file an Annual Report to Shareholders (Form 10-K). Private
companies and cooperatives that produce a Form 10-K are included, while
subsidiaries of foreign companies incorporated in the U.S. are excluded.
Mutual insurance companies qualify, as their statutory reports are deemed
equivalent to a Form 10-K.
The FORTUNE 500(R) Index consists of the subset of companies, and their
publicly listed shares, that are selected from the FORTUNE 500(R) List on the
basis of the following additional guidelines:
1.A company's stock must be traded on the NYSE, AMEX, or Nasdaq National
Market.
2.A company's daily closing share price must be equal to or in excess of
$5.00 during the period of 25 consecutive trading days preceding initial
inclusion.
3.A company's shares must evidence a minimum average daily trading volume
of 100,000 shares during the period of 25 consecutive trading days
preceding initial inclusion.
42
4.A company's shares must have a minimum market capitalization equal to or
in excess of $100 million during the period of 25 consecutive trading
days preceding initial inclusion.
Tracking stocks with separate listings are eligible for inclusion in the
Index. As of September 30, 2001, 3 companies with tracking stocks were included
(after applying the additional guidelines noted above) in the Index.
On the basis of price, trading volume, and market-value guidelines, 31
companies and 31 stocks that otherwise comprised the FORTUNE 500(R) List of
companies as of September 30, 2001, were excluded from the FORTUNE 500(R) Index.
The FORTUNE Index Committee also reserves the authority to periodically
modify any of these eligibility standards.
Changes in policies. The Trust's Trustees may change the Fund's investment
strategies and other policies without shareholder approval, except as otherwise
indicated. The Trustees will not materially change the Fund's investment
objective without shareholder approval.
PERFORMANCE
As of the date of this prospectus, the Fund has not completed a full
calendar year of operations. For this reason, the bar chart and performance
table showing performance information and the Fund's best and worst calendar
quarters are not provided in this prospectus.
43
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold shares of the FORTUNE 500(R) Index Fund.(1)
SHAREHOLDER FEES
(fees paid directly from your investment, but see
"Creation and Redemption of Creation Units" for a
discussion of Creation and Redemption Transaction
Fees)................................................ 0.00%
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from the Fund's assets)(2)
Management Fees...................................... 0.20%
Other Expenses(3).................................... 0.01%
-----
TOTAL ANNUAL FUND OPERATING EXPENSES................... 0.21%
=====
--------------------
(1)You will incur customary brokerage commissions when buying and
selling shares of the Fund.
(2)Expressed as a percentage of average daily net assets.
(3)The Trust's Investment Advisory Agreement provides that the Adviser
will pay the operating expenses of the Trust, except for the
management fee, brokerage, taxes, interest, fees and expenses of
the Independent Trustees (including any Trustee's counsel fees),
litigation expenses and other extraordinary expenses.
EXAMPLE
The FORTUNE 500(R) Index Fund sells and redeems Shares in Creation Units
principally on an in-kind basis for portfolio securities of the relevant Index.
SHARES IN LESS THAN CREATION UNIT AGGREGATIONS ARE NOT REDEEMABLE. An investor
purchasing a Creation Unit on an in-kind basis would pay the following expenses
on a $10,000 investment (payment with a deposit of securities included in the
relevant Index), assuming a 5% annual return and that the Fund's operating
expenses remain the same. INVESTORS SHOULD NOTE THAT THE PRESENTATION BELOW OF A
$10,000 INVESTMENT IN A CREATION UNIT IS FOR ILLUSTRATION PURPOSES ONLY, AS
SHARES WILL BE ISSUED BY THE FUND ONLY IN CREATION UNITS. FURTHER, THE RETURN OF
5% AND ESTIMATED EXPENSES ARE FOR ILLUSTRATION PURPOSES ONLY AND SHOULD NOT BE
CONSIDERED INDICATIONS OF
44
EXPECTED FUND EXPENSES OR PERFORMANCE, WHICH MAY BE GREATER OR LESSER THAN THE
ESTIMATES.
YEAR EXPENSES
---- --------
1................................................... $ 22
3................................................... $ 68
5................................................... $118
10.................................................. $268
45
Fortune e-50(R) INDEX FUND (SYMBOL: FEF)
This section describes the FORTUNE e-50(R) Index Fund's goals, principal
investment strategies, risks and expenses.
Investment Objective. The Fund's investment objective is to replicate as
closely as possible, before expenses, the total return performance of the
FORTUNE e-50(R) Index. There is no assurance that the Fund will achieve its
investment objective.
Principal Investment Strategies. The Fund uses a passive management
strategy designed to track the total return performance of the FORTUNE e-50(R)
Index. The Index is a modified capitalization-weighted Index which includes 50
companies selected from the following subsectors: E-Companies, Internet
Communications Companies, Internet Hardware Companies, and Internet Software and
Services Companies.
The Fund, using an "indexing" investment approach, attempts to replicate,
before expenses, the total return performance of the FORTUNE e-50(R) Index. The
Adviser seeks a correlation of 0.95 or better between the Fund's performance and
the total return performance of the Index; a figure of 1.00 would represent
perfect correlation.
The Fund generally will invest in all of the stocks comprising the Index in
proportion to their weightings in the Index. However, under various
circumstances, it may not be possible or practicable to purchase all of those
stocks in those weightings. In those circumstances, the Fund may purchase a
sample of the stocks in the Index in proportions expected by the Adviser to
replicate generally the performance of the Index as a whole. There may also be
instances in which the Adviser may choose to overweight another stock in the
Index, purchase securities not in the Index which the Adviser believes are
appropriate to substitute for the Index Securities, or utilize various
combinations of other available investment techniques, in seeking to track
accurately the Index. In addition, from time to time stocks are added to or
removed from the Index. The Fund may sell stocks that are represented in the
Index, or purchase stocks that are not yet represented in the Index, in
anticipation of their removal from or addition to the Index.
The Fund will normally invest at least 95% of its total assets in common
stocks that comprise the Index.
Principal risks of investing in the Fund. Unlike many investment
companies, the Fund is not actively "managed." Therefore, it would not sell a
stock because the stock's issuer was in financial trouble, unless that stock is
removed from the Index. An investment in the Fund involves risks similar to
those of
46
investing in any fund of equity securities traded on exchanges, such as market
fluctuations caused by such factors as economic and political developments,
changes in interest rates and perceived trends in stock prices. You should
anticipate that the value of the Shares will decline, more or less, in
correspondence with any decline in value of the Index.
- Stock values could decline generally or could underperform other
investments.
- The Fund will invest primarily in E-Companies, Internet Communications
Companies, Internet Hardware Companies, and Internet Software and
Services Companies. The value of such companies is particularly
vulnerable to rapidly changing technology, extensive government
regulation and relatively high risk of obsolescence caused by scientific
and technological advances. The value of the Fund's shares may fluctuate
more than shares of a fund investing in a broader range of industries.
- The Fund's return may not match the return of the Index for a number of
reasons. For example, the Fund incurs a number of operating expenses not
applicable to the Index, and incurs costs in buying and selling
securities, especially when rebalancing the Fund's securities holdings to
reflect changes in the composition of the Index. The Fund may not be
fully invested at times, either as a result of cash flows into the Fund
or reserves of cash held by the Fund to meet redemptions. If the Fund
utilizes a sampling approach, or futures or other derivative positions
its return may not correlate as well with the return on the Index, as
would be the case if it purchased all of the stocks in the Index.
THE FUND'S SHARES WILL CHANGE IN VALUE, AND YOU COULD LOSE MONEY BY
INVESTING IN THE FUND. THE FUND MAY NOT ACHIEVE ITS OBJECTIVE. AN INVESTMENT IN
THE FUND IS NOT A DEPOSIT WITH A BANK AND IS NOT INSURED OR GUARANTEED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
OTHER INVESTMENT CONSIDERATIONS AND RISKS.
The FORTUNE e-50(R) Index. The FORTUNE e-50(R) Index currently includes 50
companies selected from the following subsectors: E-Companies, Internet
Communications Companies, Internet Hardware Companies, and Internet Software and
Services Companies. These companies are listed on the New York Stock Exchange
(NYSE), the American Stock Exchange (AMEX) or the Nasdaq National Market. The
Index was first calculated by FORTUNE in December of 1999.
47
Index policies and procedures are established by the FORTUNE Index
Committee, from time to time, and address eligibility standards, stock
selection, Index-calculation methodology, scheduling, and pre-announcement of
Index adjustments, and the specific handling of Index adjustments in the context
of various corporate actions.
The administration of the FORTUNE e-50(R) Index includes dealing with stock
additions, deletions, or corporate actions -- including stock splits, rights
offerings, share issuances or repurchases, special cash dividends, stock
dividends, spin-offs, and corporate mergers.
To be eligible for Index inclusion, a company must generate a minimum of
10% of its total revenues from Internet activities, broadly defined. The number
of Index components and the identification of the four principal Internet
subsectors, among other factors, may change over time, but no such change is
currently anticipated.
Issuers must have principal operations in the U.S., and component stocks
must be duly U.S.-registered or be subject to the ordinary reporting
requirements of U.S.-registered securities. ADRs, foreign securities, and global
shares are ordinarily ineligible for inclusion.
All Index components must be listed for trading on the NYSE, AMEX or the
Nasdaq National Market. Generally, FORTUNE will only consider stocks for Index
inclusion if they have a trading history of at least six months on one of these
marketplaces. However, if the trading history of a stock is shorter than six
months but no shorter than three months, FORTUNE may still determine to include
the stock in the Index if it would otherwise meet the initial inclusion
requirements. Index components must meet the following minimum price-level,
trading-volume and market-value requirements. For initial inclusion in the
Index, a stock must have had a minimum $5.00 daily closing price during the 25
days preceding initial inclusion, a minimum average daily trading volume of
100,000 shares during the 25 days preceding initial inclusion, and a minimum
$100 million market value during the 25 days preceding initial inclusion.
Selections are made by the FORTUNE Index Committee. Generally, the FORTUNE
Index Committee chooses those companies that it believes best represent the
Internet economy, broadly defined. In making its selection decisions, the
FORTUNE Index Committee considers the largest companies that operate in the
Internet economy based on total revenues as reported in recent 10-K/10-Q filings
with the SEC. The FORTUNE Index Committee may also consider other factors.
48
Once included in the Index, a component stock will generally remain in the
Index unless it falls below a price level of $5.00 per share, a daily trading
volume of 100,000 shares, and/or a total market capitalization of $100 million
for 25 consecutive trading days, in which case such stock will ordinarily be
removed from the Index.
These stated eligibility requirements notwithstanding, the FORTUNE Index
Committee reserves the authority to add one or more Index-eligible stocks at any
time or to remove one or more component stocks at any time if it believes such
stock(s) no longer provide(s) adequate representation of the Internet economy or
no longer maintain(s) the quality and/or character of the Index. In the case of
a stock removal, the FORTUNE Index Committee may choose to replace such stock
with an Index-eligible stock at any time but is not required to do so.
The FORTUNE Index Committee also reserves the authority to periodically
modify any of these eligibility standards to better represent the Internet
economy as it evolves.
The FORTUNE Index Committee maintains a proprietary list of publicly traded
companies determined to be operating in the Internet economy, broadly defined.
This proprietary list serves as the basis for an information and trading market
database, which is used for ongoing monitoring and screening purposes. Stocks in
the database include current Index component stocks, otherwise-eligible
non-Index stocks, and other stocks in the Internet economy that are not
currently eligible for Index inclusion. From among the otherwise-eligible
non-Index stocks, the FORTUNE Index Committee identifies the leading potential
replacement stocks in each of the four principal Internet subsectors and assigns
a priority ranking for the order in which such stocks would enter the Index as
necessary.
Changes in policies. The Trust's Trustees may change the Fund's investment
strategies and other policies without shareholder approval, except as otherwise
indicated. The Trustees will not materially change the Fund's investment
objective without shareholder approval.
PERFORMANCE
As of the date of this prospectus, the Fund has not completed a full
calendar year of operations. For this reason, the bar chart and performance
table showing performance information and the Fund's best and worst calendar
quarters are not provided in this prospectus.
49
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold shares of the FORTUNE e-50(R) Index Fund.(1)
SHAREHOLDER FEES
(fees paid directly from your investment, but see
"Creation and Redemption of Creation Units" for a
discussion of Creation and Redemption Transaction
Fees)................................................ 0.00%
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from the Fund's assets)(2)
Management Fees...................................... 0.20%
Other Expenses(3).................................... 0.02%
-----
TOTAL ANNUAL FUND OPERATING EXPENSES................... 0.22%
=====
--------------------
(1) You will incur customary brokerage commissions when buying and
selling shares of the Fund.
(2) Expressed as a percentage of average daily net assets.
(3) The Trust's Investment Advisory Agreement provides that the
Adviser will pay the operating expenses of the Trust, except for
the management fee, brokerage, taxes, interest, fees and expenses
of the Independent Trustees (including any Trustee's counsel
fees), litigation expenses and other extraordinary expenses.
EXAMPLE
The FORTUNE e-50(R) Index Fund sells and redeems Shares in Creation Units
principally on an in-kind basis for portfolio securities of the relevant Index.
SHARES IN LESS THAN CREATION UNIT AGGREGATIONS ARE NOT REDEEMABLE. An investor
purchasing a Creation Unit on an in-kind basis would pay the following expenses
on a $10,000 investment (payment with a deposit of securities included in the
relevant Index), assuming a 5% annual return and that the Fund's operating
expenses remain the same. INVESTORS SHOULD NOTE THAT THE PRESENTATION BELOW OF A
$10,000 INVESTMENT IN A CREATION UNIT IS FOR ILLUSTRATION PURPOSES ONLY, AS
SHARES WILL BE ISSUED BY THE FUNDS ONLY IN CREATION UNITS. FURTHER, THE RETURN
OF 5% AND ESTIMATED EXPENSES ARE FOR ILLUSTRATION PURPOSES ONLY AND SHOULD NOT
BE CONSIDERED INDICATIONS OF
50
EXPECTED FUND EXPENSES OR PERFORMANCE, WHICH MAY BE GREATER OR LESSER THAN THE
ESTIMATES.
YEAR EXPENSES
---- --------
1................................................... $ 23
3................................................... $ 71
5................................................... $124
10.................................................. $281
ADDITIONAL INVESTMENT STRATEGIES, RISKS AND OTHER CONSIDERATIONS
ADDITIONAL INVESTMENT STRATEGIES
Each Fund may invest its remaining assets in money market instruments
including repurchase agreements or funds which invest exclusively in money
market instruments (subject to applicable limitations under the 1940 Act), in
convertible securities, structured notes (notes on which the amount of principal
repayment and interest payments are based on the movement of one or more
specified factors such as the movement of a particular stock or stock index) and
in options and futures contracts. Options and futures contracts (and convertible
securities and structured notes) may be used by a Fund in seeking performance
that corresponds to its benchmark Index and in managing cash flows. The Funds
will not invest in money market instruments as part of a temporary defensive
strategy to protect against potential stock market declines. The Adviser
anticipates that it will take approximately three business days for additions
and deletions to the Index to be reflected in the portfolio composition of each
Fund.
Borrowing Money. Each Fund may borrow money from a bank up to a limit of
10% of the value of its assets, but only for temporary or emergency purposes.
ADDITIONAL RISKS
Lack of Diversification. Each Fund is non-diversified and as a result may
have greater exposure to volatility than other funds. Because a non-diversified
fund may invest a larger percentage of its assets in the securities of a single
company or a single industry than diversified funds, the performance of that
company or industry can have a substantial impact on the fund's share price.
Each Fund intends to maintain the required level of diversification so as
to qualify as a "regulated investment company" for purposes of the Internal
Revenue Code, in order to avoid liability for federal income tax to the extent
51
that its earnings are distributed to shareholders. Compliance with the
diversification requirements of the Internal Revenue Code could limit the
investment flexibility of a Fund.
Trading Issues. Trading in Shares on the Exchange may be halted due to
market conditions or for reasons that, in the view of the Exchange, make trading
in Shares inadvisable. In addition, trading in Shares on the Exchange is subject
to trading halts caused by extraordinary market volatility pursuant to Exchange
"circuit breaker" rules. There can be no assurance that the requirements of the
Exchange necessary to maintain the listing of a Fund will continue to be met or
will remain unchanged.
Fluctuation of Net Asset Value. The net asset value of the Shares will
generally fluctuate with changes in the market value of a Fund's securities
holdings. The market prices of Shares will generally fluctuate in accordance
with changes in net asset value and supply and demand on the Exchange. The
Adviser cannot predict whether Shares will trade below, at or above their net
asset value. Price differences may be due, in large part, to the fact that
supply and demand forces at work in the secondary trading market for Shares will
be closely related to, but not identical to, the same forces influencing the
prices of the stocks of the Index trading individually or in the aggregate at
any point in time. However, given that Shares can be created and redeemed in
Creation Units (unlike shares of many closed-end funds, which frequently trade
at appreciable discounts from, and sometimes at premiums to, their net asset
value), the Adviser believes that large discounts or premiums to the net asset
value of Shares should not be sustained.
Lending of Securities. Although each Fund that lends its portfolio
Securities will receive collateral in connection with all loans of its
securities holdings, a Fund would be exposed to a risk of loss should a borrower
default on its obligation to return the borrowed securities (e.g., the loaned
securities may have appreciated beyond the value of the collateral held by the
Fund). In addition, a Fund will bear the risk of loss of any cash collateral
that it invests.
OTHER CONSIDERATIONS
Distribution and Service Plan. Each Fund, except the FORTUNE 500(R) Index
Fund and the FORTUNE e-50(R) Index Fund has adopted a Distribution and Service
Plan pursuant to which payments of up to 0.25% of average daily net assets may
be made for the sale and distribution of its Shares. No payments pursuant to the
Distribution and Service Plan will be made for the next twelve (12) months of
operation. Because these fees would be paid out of each Fund's assets on an
on-going basis, if payments are made in the future,
52
these fees will increase the cost of your investment and may cost you more than
paying other types of sales charges.
MANAGEMENT
Adviser. SSgA Funds Management, Inc. serves as the Adviser to each Fund
and, subject to the supervision of the Board of Trustees, is responsible for the
investment management of the Funds. The Adviser, State Street Bank and Trust
Company ("State Street") and other affiliates of State Street make up State
Street Global Advisors ("SSgA"), the investment management arm of State Street.
As of June 30, 2001, SSgA managed approximately $758 billion in assets,
including approximately $380 billion in equity index funds. The Adviser's
principal business address is 2 International Place, Boston, Massachusetts
02210.
For the services provided to the Funds under the Investment Advisory
Agreement, each Fund pays the Adviser monthly fees based on a percentage of each
Fund's average daily net assets as shown in the following table.
FUND MANAGEMENT FEE
---- --------------
streetTRACKS(SM) Dow Jones U.S. Large Cap
Value Fund................................. 0.20%
streetTRACKS(SM) Dow Jones U.S. Large Cap
Growth Fund................................ 0.20%
streetTRACKS(SM) Dow Jones U.S. Small Cap
Value Fund................................. 0.25%
streetTRACKS(SM) Dow Jones U.S. Small Cap
Growth Fund................................ 0.25%
streetTRACKS(SM) Dow Jones Global Titans
Index Fund................................. 0.50%
streetTRACKS(SM) Wilshire REIT Index Fund.... 0.25%
streetTRACKS(SM) Morgan Stanley Technology
Index Fund................................. 0.50%
streetTRACKS(SM) Morgan Stanley Internet
Index Fund................................. 0.50%
FORTUNE 500(R) Index Fund.................... 0.20%
FORTUNE e-50(R) Index Fund................... 0.20%
From time to time, the Adviser may waive all or a portion of its fee. The
Adviser pays all expenses of each Fund other than the management fee, brokerage,
taxes, interest, fees and expenses of the Independent Trustees (including any
Trustee's counsel fees), litigation expenses and other extraordinary expenses.
53
Investment Sub-Adviser -- streetTRACKS(SM) Wilshire REIT Index Fund.
Pursuant to the Advisory Agreement between the streetTRACKS(SM) Wilshire REIT
Index Fund and the Adviser, the Adviser is authorized to engage one or more
sub-advisers for the performance of any of the services contemplated to be
rendered by the Adviser. The Adviser has retained The Tuckerman Group LLC
("Tuckerman") as sub-adviser, to be responsible for the day to day management of
the streetTRACKS(SM) Wilshire REIT Index Fund's investments, subject to
supervision of the Adviser and the Board of Trustees while the Adviser will
provide administrative, compliance and general management services to the Fund.
Since its organization on April 28, 1999, Tuckerman has provided investment
management services to institutional investors and other mutual funds. As of
August 31, 2001, Tuckerman managed approximately $800 million in assets.
Tuckerman's principal business address is 2 Manhattanville Road, Purchase, New
York 10577.
In accordance with the Sub-Advisory Agreement between the Adviser and
Tuckerman, the Adviser will pay Tuckerman an annual investment sub-advisory fee
equal to 0% of average daily net assets up to the first $50 million in net
assets and 0.05% thereafter with respect to the streetTRACKS(SM) Wilshire REIT
Index Fund.
Administrator, Custodian and Transfer Agent. State Street is Administrator
for each Fund, the Custodian for each Fund's assets and serves as Transfer Agent
to each Fund.
Lending Agent. State Street may act as a lending agent for the Trust. For
its services, the lending agent would typically receive a portion of the net
investment income, if any, earned on the collateral for the securities loaned.
Distributor. State Street Capital Markets, LLC is the Distributor of each
Fund's Shares. It is currently anticipated that the Distributor's name will be
changed to State Street Global Markets, LLC effective January 1, 2002. The
Distributor will not distribute Shares in less than Creation Units, and it does
not maintain a secondary market in the Shares. The Distributor may enter into
selected dealer agreements with other broker-dealers or other qualified
financial institutions for the sale of Creation Units of Shares.
INDEX LICENSES
Dow Indices. The streetTRACKS(SM) Dow Jones U.S. Large Cap Growth Index
Fund, streetTRACKS()(SM) Dow Jones U.S. Large Cap Value Index Fund,
streetTRACKS(SM) Dow Jones U.S. Small Cap Growth Index Fund, streetTRACKS(SM)
Dow Jones U.S. Small Cap Value Index Fund and streetTRACKS(SM) Dow Jones Global
Titans Index Fund are not sponsored, endorsed, sold or
54
promoted by Dow Jones. Dow Jones makes no representation or warranty, express or
implied, to the owners of the Funds or any member of the public regarding the
advisability of trading in the Funds. Dow Jones' only relationship to the
Adviser is the licensing of certain trademarks and trade names of Dow Jones and
of the Dow Jones U.S. Large Cap Growth Index, the Dow Jones U.S. Large Cap Value
Index, the Dow Jones U.S. Small Cap Growth Index, the Dow Jones U.S. Small Cap
Value Index and the Dow Jones Global Titans Index which are determined, composed
and calculated by Dow Jones without regard to the adviser or the Funds, Dow
Jones has no obligation to take the needs of the Adviser or the owners of the
Funds into consideration in determining, composing or calculating the Dow Jones
U.S. Large Cap Growth Index, the Dow Jones U.S. Large Cap Value Index, the Dow
Jones U.S. Small Cap Growth Index, the Dow Jones U.S. Small Cap Value Index and
the Dow Jones Global Titans Index. Dow Jones in not responsible for and has not
participated in the determination of the timing of, prices at, or quantities of
the Funds to be listed or in the determination of calculation of the equation by
which the Funds are to be converted into cash. Dow Jones has no obligation or
liability in connection with the administration, marketing or trading of the
Funds.
Dow Jones does not guarantee the accuracy and/or the completeness of the
Dow Jones U.S. Large Cap Growth Index, the Dow Jones U.S. Large Cap Value Index,
the Dow Jones U.S. Small Cap Growth Index, the Dow Jones U.S. Small Cap Value
Index and the Dow Jones Global Titans Index or any data included therein and Dow
Jones shall have no liability for any errors, omissions or interruptions
therein. Dow Jones makes no warranty, express or implied, as to results to be
obtained by the Adviser, owners of the Funds or any other person or entity from
the use of the Dow Jones U.S. Large Cap Growth Index, the Dow Jones U.S. Large
Cap Value Index, the Dow Jones U.S. Small Cap Growth Index, the Dow Jones U.S.
Small Cap Value Index and the Dow Jones Global Titans Index or any data included
therein. Dow Jones makes no express or implied warranties, and expressly
disclaims all warranties of merchantability or fitness for a particular purpose
or use with respect to the Dow Jones U.S. Large Cap Growth Index, the Dow Jones
U.S. Large Cap Value Index, the Dow Jones U.S. Small Cap Growth Index, the Dow
Jones U.S. Small Cap Value Index and the Dow Jones Global Titans Index or any
data included therein, without limiting any of the foregoing, in no event shall
Dow Jones have any liability for any lost profits or indirect, punitive, special
or consequential damages (including lost profits), even if notified of the
possibility of such damages. There are no third party beneficiaries of any
agreements or arrangements between Dow Jones and the Adviser.
55
Wilshire REIT Index. The streetTRACKS(SM) Wilshire REIT Index Fund is not
sponsored, endorsed, sold or promoted by Wilshire Associates Incorporated
("Wilshire") or any affiliate of Wilshire. Neither Wilshire nor any other party
makes any representation or warranty, express or implied, to the owners of the
Fund or any member of the public regarding the advisability of investing in
funds generally or in the Fund particularly or the ability of the Wilshire REIT
Index to track general stock market performance. Wilshire is the licensor of
certain trademarks, service marks, and trade names of Wilshire and of the
Wilshire REIT Index which is determined, composed and calculated by Wilshire
without regard to the issuer of this Fund. Wilshire has no obligation to take
the needs of the issuer of this Fund or the owners of this Fund into
consideration in determining, composing or calculating the Wilshire REIT Index.
Wilshire is not responsible for and has not participated in the determination of
the timing of, prices, or quantities of this Fund to be issued or in the
determination or calculation of the equation by which this Fund is redeemable
for cash. Neither Wilshire nor any other party has any obligation or liability
to owners of this Fund in connection with the administration, marketing or
trading of this Fund.
Wilshire does not guarantee the accuracy and/or the completeness of the
Wilshire REIT Index or any data included therein and Wilshire shall have no
liability for any errors, omissions or interruptions therein. Wilshire makes no
warranty, express or implied, as to results to be obtained by the Adviser,
owners of the Fund, or any other person or entity from the use of the Wilshire
REIT Index or any data included therein. Wilshire makes no express or implied
warranties, and expressly disclaims all warranties of merchantability or fitness
for a particular purpose or use with respect to the Wilshire REIT Index or any
data included therein, without limiting any of the foregoing. In no event shall
Wilshire have any liability for any lost profits or indirect, punitive, special
or consequential damages (including lost profits), even if notified of the
possibility of such damages. There are no third party beneficiaries of any
agreements or arrangements between Wilshire and the Adviser.
Morgan Stanley Indices. The streetTRACKS(SM) Morgan Stanley Technology
Index Fund and the streetTRACKS(SM) Morgan Stanley Internet Index Fund are not
sponsored, endorsed, sold or promoted by Morgan Stanley Dean Witter & Co. or any
of its affiliates (collectively "MSDW"). Neither MSDW nor any other party makes
any representation or warranty, express or implied, to the owners of this fund
or any member of the public regarding the advisability of investing in funds
generally or in this fund particularly or the ability of the Morgan Stanley
Technology Index and the Morgan Stanley Internet Index to track general stock
market performance. MSDW is the licensor of certain trademarks, service marks
and trade names of MSDW and the Morgan Stanley
56
Technology Index and the Morgan Stanley Internet Index which are determined,
composed and calculated by the Exchange without regard to the issuer of these
Funds or these Funds. Neither the Exchange nor MSDW has any obligation to take
the needs of the issuer of these Funds or the owners of these Funds into
consideration in determining, composing or calculating the Morgan Stanley
Technology Index or the Morgan Stanley Internet Index. MSDW is not responsible
for and has not participated in the determination of the timing of, prices at,
or quantities of these Funds to be issued or in determination or calculation of
the equation by which these Funds are redeemable for cash. Neither MSDW nor any
other party has any obligation or liability to owners of these Funds in
connection with the administration, marketing or trading of these Funds.
Although the Exchange and MSDW shall obtain information for inclusion in or
for use in the calculation of the Indexes from sources which they consider
reliable, neither the Exchange, MSDW nor any other party guarantees the accuracy
and/or the completeness of Indexes or any data included therein. Neither the
Exchange, MSDW nor any other party makes any warranty, express or implied, as to
results to be obtained by the Adviser, the Adviser's customers and
counterparties, owners of the Funds, or any other person or entity from the use
of the Indexes or any data included therein in connection with the rights
licensed hereunder or for any other use. Neither MSDW nor any other party makes
any express or implied warranties, and MSDW hereby expressly disclaims all
warranties or merchantability or fitness for a particular purpose with respect
to the Indexes or any data included therein. Without limiting any of the
foregoing, in no event shall MSDW or any other party have any liability for any
direct, indirect, special, punitive, consequential or any other damages
(including lost profits) even if notified of the possibility of such damages.
FORTUNE Indices. Neither The FORTUNE 500(R) Index Fund nor The FORTUNE
e-50(R) Index Fund (the "FORTUNE Funds") nor the shares of the FORTUNE Funds are
sponsored, endorsed, sold or promoted by FORTUNE. FORTUNE makes no
representation or warranty, express or implied, to the owners of the FORTUNE
Funds or any member of the public regarding the advisability of investing in
securities generally or in the shares of each FORTUNE Fund particularly or the
ability of the FORTUNE 500(R) Index and the FORTUNE e-50(R) Index (collectively
the "FORTUNE Stock Indices") to track general stock market performance.
FORTUNE's only relationship to the Adviser is the licensing of certain
trademarks of FORTUNE and the FORTUNE Stock Indices, which are determined,
compiled and calculated by FORTUNE without regard to the Adviser, the FORTUNE
Funds or the FORTUNE Funds' shares. FORTUNE has no obligation to take the needs
of the Adviser or the
57
owners of the FORTUNE Funds into consideration in determining, compiling or
calculating the FORTUNE Stock Indices. FORTUNE is not responsible for and has
not participated in any determination or calculation made with respect to
issuance, trading or redemption of the FORTUNE Funds' shares. FORTUNE has no
obligation or liability in connection with the FORTUNE Funds or the FORTUNE
Funds' shares including but not limited to, the creating, promoting, marketing,
trading or managing of the FORTUNE Funds or the FORTUNE Funds' shares.
FORTUNE does not guarantee the accuracy and/or the completeness of the
FORTUNE Stock Indices or any data included therein. FORTUNE makes no warranty,
express or implied, as to results to be obtained by the Adviser, owners of the
product, or any other person or entity from the use of the FORTUNE Stock Indices
or any data included therein in connection with the rights licensed hereunder or
for any other use. FORTUNE makes no express or implied warranties, and hereby
expressly disclaims all warranties of merchantability or fitness for a
particular purpose with respect to the FORTUNE Stock Indices or any data
included therein. Without limiting any of the foregoing, in no event shall
FORTUNE have any liability for any damages, including but not limited to,
special, punitive, indirect or consequential damages (including loss of
profits), even if notified of the possibility of such damages.
DETERMINATION OF NET ASSET VALUE
Net asset value per Share for each Fund is computed by dividing the value
of the net assets of such Fund (i.e., the value of its total assets less total
liabilities) by its total number of Shares outstanding. Expenses and fees,
including the management and distribution fees, if any, are accrued daily and
taken into account for purposes of determining net asset value. The net asset
value of each Fund is calculated by the Custodian and determined each business
day at the close of regular trading of the New York Stock Exchange ("NYSE")
(ordinarily 4:00 p.m. New York time).
BUYING AND SELLING THE FUNDS
The Shares are listed for secondary trading on the Exchange. If you buy or
sell Shares in the secondary market, you may incur customary brokerage
commissions and charges and may pay some or all of the spread between the bid
and the offered price in the secondary market on each leg of a round trip
(purchase and sale) transaction. The Shares will trade on the Exchange at prices
that may differ to varying degrees from the daily net asset values of the
58
Shares. Given, however, that Shares can be issued and redeemed daily in Creation
Units, the Adviser believes that large discounts and premiums to net asset value
should not be sustained for very long.
CREATION AND REDEMPTION OF CREATION UNITS
Each Fund issues Shares and redeems Shares only in Creation Units (50,000
Shares per Creation Unit) at their net asset value on a continuous basis only on
a day the NYSE is open for business. Set forth below is a brief description of
the procedures applicable to creation and redemption of Creation Units. For more
detailed information, see "CREATION AND REDEMPTION OF CREATION UNITS" in the
Statement of Additional Information.
Creation. In order to create (i.e., purchase) Creation Units of a Fund, an
investor must generally deposit a designated portfolio of equity securities
constituting a substantial replication, or a representation, of the stocks
included in the relevant Fund's Index (the "Deposit Securities") and generally
make a small cash payment referred to as the "Cash Component." The list of the
names and the number of shares of the Deposit Securities is made available by
the Custodian through the facilities of the NSCC immediately prior to the
opening of business on the Exchange. The Cash Component represents the
difference between the net asset value of a Creation Unit and the market value
of the Deposit Securities.
Orders must be placed in proper form by or through either (i) a
"Participating Party", i.e., a broker-dealer or other participant in the
clearing process of the Continuous Net Settlement System of the NSCC (the
"Clearing Process"); or (ii) a DTC Participant, that, in either case, has
entered into an agreement with the Trust, the Distributor and the Transfer
Agent, with respect to creations and redemptions of Creation Units ("Participant
Agreement"). Investors should contact the Distributor for the names of
Participating Parties and/or DTC Participants that have signed a Participant
Agreement. All orders must be placed for one or more whole Creation Units of
Shares of a Fund and must be received by the Distributor in proper form no later
than the close of regular trading on the NYSE (ordinarily 4:00 p.m., New York
time) ("Closing Time") in order to receive that day's closing net asset value
per Share.
Orders may be effected through the Clearing Process or outside the Clearing
Process. An order to create Creation Units through the Clearing Process (through
a Participating Party), or outside the Clearing Process (through a DTC
Participant), is considered received by the Distributor on the date transmitted
if the order is received by the Distributor no later than the
59
Closing Time on such date and all other procedures set forth in the Participant
Agreement are followed. However, in the case of orders effected outside the
Clearing Process, if the Custodian does not receive the requisite Deposit
Securities and the Cash Component by 11:00 a.m. and 2:00 p.m., New York time,
respectively, on the next business day immediately following the transmittal
date, the order will be canceled. Any order may be rejected under certain
limited circumstances which are specified in the Statement of Additional
Information.
A fixed transaction fee, in the amount described below, is applicable to
each creation transaction regardless of the number of Creation Units created in
the transaction. An additional charge of up to three (3) times the fixed
transaction fee may be imposed with respect to transactions effected outside the
Clearing Process (through a DTC Participant) and in the limited circumstances
specified in the Statement of Additional Information in which any cash can be
used in lieu of Deposit Securities to create Creation Units.
OUTSIDE THE
TRANSACTION CLEARING
FUND FEE PROCESS
---- ----------- -------------
streetTRACKS(SM) Dow Jones U.S.
Large Cap Value Index Fund $1,000 up to $4,000
streetTRACKS(SM) Dow Jones U.S.
Large Cap Growth Index Fund $1,000 up to $4,000
streetTRACKS(SM) Dow Jones U.S.
Small Cap Value Index Fund $1,500 up to $6,000
streetTRACKS(SM) Dow Jones U.S.
Small Cap Growth Index Fund $1,500 up to $6,000
streetTRACKS(SM) Dow Jones Global
Titans Index Fund $1,000 up to $4,000
streetTRACKS(SM) Wilshire REIT
Index Fund $1,000 up to $4,000
streetTRACKS(SM) Morgan Stanley
Technology Index Fund $ 500 up to $2,000
streetTRACKS(SM) Morgan Stanley
Internet Index Fund $ 500 up to $2,000
FORTUNE 500(R) Index Fund $2,000 up to $8,000
FORTUNE e-50(R) Index Fund $ 500 up to $2,000
60
Shares may be issued in advance of receipt of Deposit Securities subject to
various conditions including a requirement to maintain on deposit with the Trust
cash at least equal to 115% of the market value of the missing Deposit
Securities. Any such transaction effected must be effected outside the Clearing
Process. See "CREATION AND REDEMPTION OF CREATION UNITS" in the Statement of
Additional Information.
Legal Restrictions on Transactions in Certain Stocks. An investor subject
to a legal restriction with respect to a particular stock required to be
deposited in connection with the creation of a Creation Unit may, at the Fund's
discretion, be permitted to deposit an equivalent amount of cash in substitution
for any stock which would otherwise be included in the Deposit Securities
applicable to the creation of a Creation Unit.
Redemption. The Custodian makes available immediately prior to the opening
of business on the Exchange, through the facilities of the NSCC, the list of the
names and the number of Shares of each Fund's portfolio securities that will be
applicable that day to redemption requests in proper form ("Fund Securities").
Fund Securities received on redemption may not be identical to Deposit
Securities which are applicable to creations of Creation Units. Unless cash
redemptions are available or specified for a particular Fund, the redemption
proceeds consist of the Fund Securities, plus cash in an amount equal to the
difference between the net asset value of the Shares being redeemed as next
determined after receipt by the Transfer Agent of a redemption request in proper
form, and the value of the Fund Securities (the "Cash Redemption Amount"), less
the applicable redemption fee. Should the Fund Securities have a value greater
than the net asset value of the Shares, a compensating cash payment to the Trust
equal to the differential will be required to be arranged for by or on behalf of
the redeeming shareholder by the Participating Party or DTC Participant, as the
case may be. For more detail, see "CREATION AND REDEMPTION OF CREATION UNITS" in
the Statement of Additional Information.
Orders to redeem Creation Units of a Fund may only be effected by or
through a Participating Party (with respect to redemptions through the Clearing
Process) or a DTC Participant (with respect to redemptions outside the Clearing
Process). An order to redeem through the Clearing Process is deemed received on
the date of transmittal if such order is received by the Transfer Agent prior to
the Closing Time on the date of transmittal and all other procedures set forth
in the Participant Agreement are properly followed. An order to redeem outside
the Clearing Process is considered received by the Transfer Agent on the date of
transmittal if: (i) such order is received by the Transfer Agent no later than
the close of regular trading on the NYSE
61
(ordinarily 4:00 p.m. New York time) on the transmittal date; (ii) such order is
accompanied or proceeded by the requisite number of Shares specified in the
order, which delivery must be made through DTC to the Custodian no later than
11:00 a.m., New York time, on the next business day after the transmittal date;
and (iii) all other procedures set forth in the Participant Agreement are
followed.
A fixed transaction fee, described below, is applicable to each redemption
transaction regardless of the number of Creation Units redeemed in the
transaction. An additional charge of up to three (3) times the fixed transaction
fee may be charged with respect to transactions effected outside the Clearing
Process and in the limited circumstances specified in the Statement of
Additional Information in which any cash may be used in lieu of securities to
redeem Creation Units.
OUTSIDE THE
TRANSACTION CLEARING
FUND FEE PROCESS
---- ----------- -------------
streetTRACKS(SM) Dow Jones U.S.
Large Cap Value Index Fund.... $1,000 up to $4,000
streetTRACKS(SM) Dow Jones U.S.
Large Cap Growth Index Fund... $1,000 up to $4,000
streetTRACKS(SM) Dow Jones U.S.
Small Cap Value Index Fund.... $1,500 up to $6,000
streetTRACKS(SM) Dow Jones U.S.
Small Cap Growth Index Fund... $1,500 up to $6,000
streetTRACKS(SM) Dow Jones
Global Titans Index Fund...... $1,000 up to $4,000
streetTRACKS(SM) Wilshire REIT
Index Fund.................... $1,000 up to $4,000
streetTRACKS(SM) Morgan Stanley
Technology Index Fund......... $ 500 up to $2,000
streetTRACKS(SM) Morgan Stanley
Internet Index Fund........... $ 500 up to $2,000
FORTUNE 500(R) Index Fund....... $2,000 up to $8,000
FORTUNE e-50(R) Index Fund...... $ 500 up to $2,000
Legal Restrictions on Transactions in Certain Stocks. An investor subject
to a legal restriction with respect to a particular stock included in the Fund
Securities applicable to the redemption of a Creation Unit may be paid an
equivalent amount of cash.
62
DISTRIBUTIONS
Dividends and Capital Gains. As a Fund shareholder, you are entitled to
your share of the Fund's income and net realized gains on its investments. Each
Fund pays out substantially all of its net earnings to its shareholders as
"distributions."
Each Fund typically earns income dividends from stocks and interest from
debt securities. These amounts, net of expenses, are passed along to Fund
shareholders as "income dividend distributions." Each Fund realizes capital
gains or losses whenever it sells securities. Net long-term capital gains are
distributed to shareholders as "capital gain distributions."
Income dividend distributions, if any, are distributed to shareholders
quarterly. Net capital gains are distributed at least annually. Dividends may be
declared and paid more frequently to improve Index tracking or to comply with
the distribution requirements of the Internal Revenue Code.
Distributions in cash may be reinvested automatically in additional whole
Shares only if the broker through which you purchased Shares makes such option
available.
TAX MATTERS
As with any investment, you should consider how your Fund investment will
be taxed. The tax information in this Prospectus is provided as general
information. You should consult your own tax professional about the tax
consequences of an investment in a Fund.
Unless your investment in a Fund is through a tax-exempt entity or tax-
deferred retirement account, such as a 401(k) plan, you need to be aware of the
possible tax consequences when:
- The Fund makes distributions,
- You sell Shares listed on the Exchange, and
- You create or redeem Creation Units.
Taxes on Distributions. Each Fund will distribute any net investment
income quarterly, and any net realized long-term or short-term capital gains
annually. Each Fund may also pay a special distribution at the end of the
calendar year to comply with federal tax requirements. In general, your
distributions are subject to federal income tax when they are paid, whether you
take them in cash or reinvest them in a Fund. Dividends paid out of a Fund's
income and net short-term gains, if any, are taxable as ordinary income.
Distributions of net long-term capital gains, if any, in excess of net
63
short-term capital losses are taxable as long-term capital gains, regardless of
how long you have held the Shares.
Distributions in excess of a Fund's current and accumulated earnings and
profits are treated as a tax-free return of capital to the extent of your basis
in the Shares, and as capital gain thereafter. A distribution will reduce a
Fund's net asset value per Share and may be taxable to you as ordinary income or
capital gain even though, from an investment standpoint, the distribution may
constitute a return of capital.
If you are not a citizen of the United States, or if you are a foreign
entity or if you are not a permanent resident of the United States, each Fund's
ordinary income dividends (which include distributions of net short-term capital
gains) will generally be subject to a 30% U.S. withholding tax, unless a lower
treaty rate applies.
Dividends and interest received by each Fund may give rise to withholding
and other taxes imposed by foreign countries. Tax conventions between certain
countries and the United States may reduce or eliminate such taxes.
By law, your Fund must withhold a percentage of your distributions and
proceeds if you have not provided a taxpayer identification number or social
security number. The backup withholding rates are currently:
31% January 1, 2001 through August 6, 2001
30.5% August 7, 2001 through December 31, 2001
30% During 2002 and 2003
29% During 2004 and 2005
28% During 2006 through 2010
31% 2011 and thereafter.
Taxes on Exchange-Listed Share Sales. Currently, any capital gain or loss
realized upon a sale of Shares is generally treated as long-term capital gain or
loss if the Shares have been held for more than one year and as short-term
capital gain or loss if the Shares have been held for one year or less.
Taxes on Creations and Redemptions of Creation Units. A person who
exchanges equity securities for Creation Units generally will recognize a gain
or loss. The gain or loss will be equal to the difference between the market
value of the Creation Units at the time and the exchanger's aggregate basis in
the securities surrendered and the Cash Component paid. A person who exchanges
Creation Units for equity securities will generally recognize a gain or loss
equal to the difference between the exchanger's basis in the Creation Units and
the aggregate market value of the securities received and the Cash
64
Redemption Amount. The Internal Revenue Service, however, may assert that a loss
realized upon an exchange of securities for Creation Units cannot be deducted
currently under the rules governing "wash sales," or on the basis that there has
been no significant change in economic position. Persons exchanging securities
should consult their own tax adviser with respect to whether wash sale rules
apply and when a loss might be deductible.
Under current federal tax laws, any capital gain or loss realized upon a
redemption of Creation Units is generally treated as long-term capital gain or
loss if the Shares have been held for more than one year and as a short-term
capital gain or loss if the Shares have been held for one year or less.
If you create or redeem Creation Units, you will be sent a confirmation
statement showing how many Shares you purchased or sold and at what price.
The foregoing discussion summarizes some of the consequences under current
federal tax law of an investment in a Fund. It is not a substitute for personal
tax advice. Consult your personal tax adviser about the potential tax
consequences of an investment in a Fund under all applicable tax laws.
GENERAL INFORMATION
The Trust was organized as a Massachusetts business trust on June 12, 1998.
If shareholders are required to vote on any matters, you are entitled to one
vote for each dollar of net asset value you own. Annual meetings of shareholders
will not be held except as required by the 1940 Act and other applicable law.
See the Statement of Additional Information for more information concerning the
Trust's form of organization.
For purposes of the 1940 Act, Shares of the Funds are issued by the
respective Funds and the acquisition of Shares by investment companies is
subject to the restrictions of section 12(d)(1) of the Act.
From time to time, Funds advertise yield and total return figures. Yield is
an historical measure of dividend income, and total return is a measure of past
dividend income (assuming that it has been reinvested) plus capital
appreciation. Neither yield nor total return should be used to predict the
future performance of a Fund. For a more detailed description of how each Fund
computes its performance figures and how these numbers may be used in
advertisements, please consult the Statement of Additional Information.
Mayer, Brown & Platt serve as counsel to the Trust, including each Fund.
Ernst & Young LLP serves as independent auditors and will audit each Fund's
financial statements annually.
65
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand each
Fund's financial performance. Certain information reflects the performance
results for a single Fund share. The total returns in the table represent the
rate that an investor would have earned (or lost) on an investment in each Fund
(assuming reinvestment of all dividends and distributions)(1) . This information
has been audited by Ernst & Young LLP, the Trust's independent auditors, who's
report, along with each Fund's financial highlights and financial statements, we
included in the 2001 Annual Report to shareholders of each of the Funds, which
is available upon request. Selected data for a streetTRACKS share outstanding
throughout each period
STREETTRACKS(SM) DOW STREETTRACKS(SM) DOW STREETTRACKS(SM) DOW
JONES U.S. LARGE CAP JONES U.S. LARGE CAP JONES U.S. SMALL CAP
GROWTH INDEX FUND VALUE INDEX FUND GROWTH INDEX FUND
-------------------------- -------------------------- --------------------------
FOR THE PERIOD 9/25/2000*- FOR THE PERIOD 9/25/2000*- FOR THE PERIOD 9/25/2000*-
6/30/2001 6/30/2001 6/30/2001
Net asset value, beginning
of period.................. $ 97.36 $129.48 $100.26
------- ------- -------
Income (loss) from
investment operations:
Net investment income
(loss)..................... 0.06 1.70 (0.09)
Net realized and unrealized
gain (loss)................ (36.55) (0.06) (21.02)
------- ------- -------
Total from investment
operations................. (36.49) 1.64 (21.11)
------- ------- -------
Distributions to
shareholders from:
Net investment income....... (0.06) (1.68) --
In excess of net investment
income..................... --(+) -- --
Capital..................... -- -- --
Total distributions......... (0.06) (1.68) --
------- ------- -------
Net asset value, end of
period..................... $ 60.81 $129.44 $ 79.15
======= ======= =======
Total return(1)............. (37.48)% 1.28% (21.07)%
Net assets, end of period
(in 000's)................. $24,330 $38,842 $19,794
Ratio of expenses to average
net assets(2).............. 0.22% 0.21% 0.30%
Ratio of net investment
income (loss) to average
net assets(2).............. 0.10% 1.61% (0.22)%
Portfolio turnover
rate(3).................... 16% 12% 34%
STREETTRACKS(SM) DOW STREETTRACKS(SM) DOW
JONES U.S. SMALL CAP JONES GLOBAL TITANS
VALUE INDEX FUND INDEX FUND
-------------------------- --------------------------
FOR THE PERIOD 9/25/2000*- FOR THE PERIOD 9/25/2000*-
6/30/2001 6/30/2001
Net asset value, beginning
of period.................. $103.71 $ 84.28
------- -------
Income (loss) from
investment operations:
Net investment income
(loss)..................... 2.40 0.57
Net realized and unrealized
gain (loss)................ 25.10 (13.67)
------- -------
Total from investment
operations................. 27.50 (13.10)
------- -------
Distributions to
shareholders from:
Net investment income....... (2.26) (0.56)
In excess of net investment
income..................... -- --
Capital..................... -- (0.02)
Total distributions......... (2.26) (0.58)
------- -------
Net asset value, end of
period..................... $128.95 $ 70.60
======= =======
Total return(1)............. 26.69% (15.54)%
Net assets, end of period
(in 000's)................. $25,803 $21,189
Ratio of expenses to average
net assets(2).............. 0.28% 0.52%
Ratio of net investment
income (loss) to average
net assets(2).............. 2.70% 0.87%
Portfolio turnover
rate(3).................... 47% 16%
66
FINANCIAL HIGHLIGHTS -- (CONTINUED)
---------------
*Commencement of operations
(+) Amount is less than $0.01 per share
(1)Total return is calculated assuming a purchase of shares at net asset value
on the first day and a sale at net asset value on the last day of each period
reported. Distributions are assumed, for the purpose of this calculation, to
be reinvested at net asset value per share on the respective payment dates of
each Fund. Total return for periods of less than one year is not annualized.
Broker commission charges are not included in this calculation.
(2)Annualized
(3) Portfolio turnover rate excludes securities received or delivered from
processing of creations or redemptions on streetTRACKS.
67
FINANCIAL HIGHLIGHTS -- (CONTINUED)
STREETTRACKS(SM) STREETTRACKS(SM) STREETTRACKS(SM)
WILSHIRE REIT MORGAN STANLEY TECHNOLOGY MORGAN STANLEY INTERNET
INDEX FUND INDEX FUND INDEX FUND
-------------------------- -------------------------- --------------------------
FOR THE PERIOD 4/23/2001*- FOR THE PERIOD 9/25/2000*- FOR THE PERIOD 9/25/2000*-
6/30/2001 6/30/2001 6/30/2001
Net asset value, beginning
of period.................. $ 109.22 $ 97.81 $ 68.92
-------- -------- --------
Income (loss) from
investment operations:
Net investment income
(loss)..................... 1.41 (0.13) (0.21)
Net realized and unrealized
gain (loss)................ 10.83 (39.51) (49.35)
-------- -------- --------
Total from investment
operations................. 12.24 (39.64) (49.56)
-------- -------- --------
Distributions to
shareholders from:
Net investment income....... (0.73) -- --
In excess of net investment
income..................... -- -- --
Capital..................... -- -- --
Total distributions......... (0.73) -- --
-------- -------- --------
Net asset value, end of
period..................... $ 120.73 $ 58.17 $ 19.36
======== ======== ========
Total return(1)............. 11.22% (40.52)% (71.92)%
Net assets, end of period
(in 000's)................. $ 18,121 $ 72,724 $ 6,777
Ratio of expenses to average
net assets(2).............. 0.32% 0.51% 0.53%
Ratio of net investment
income (loss) to average
net assets(2).............. 6.88% (0.30)% (0.52)%
Portfolio turnover
rate(3).................... 2% 26% 76%
FORTUNE 500(R) FORTUNE E-50(R)
INDEX FUND INDEX FUND
-------------------------- --------------------------
FOR THE PERIOD 10/4/2000*- FOR THE PERIOD 10/4/2000*-
6/30/2001 6/30/2001
Net asset value, beginning
of period.................. $ 97.85 $ 84.48
-------- --------
Income (loss) from
investment operations:
Net investment income
(loss)..................... 0.72 (0.09)
Net realized and unrealized
gain (loss)................ (10.73) (44.01)
-------- --------
Total from investment
operations................. (10.01) (44.10)
-------- --------
Distributions to
shareholders from:
Net investment income....... (0.71) --
In excess of net investment
income..................... -- --
Capital..................... -- --
Total distributions......... (0.71) --
-------- --------
Net asset value, end of
period..................... $ 87.13 $ 40.38
======== ========
Total return(1)............. (10.22)% (52.20)%
Net assets, end of period
(in 000's)................. $ 47,933 $ 16,158
Ratio of expenses to average
net assets(2).............. 0.21% 0.22%
Ratio of net investment
income (loss) to average
net assets(2).............. 1.06% (0.15)%
Portfolio turnover
rate(3).................... 6% 30%
68
FINANCIAL HIGHLIGHTS -- (CONTINUED)
---------------
*Commencement of operations
(1)Total return is calculated assuming a purchase of shares at net asset value
on the first day and a sale at net asset value on the last day of each period
reported. Distributions are assumed, for the purpose of this calculation, to
be reinvested at net asset value per share on the respective payment dates of
each Fund. Total return for periods of less than one year is not annualized.
Broker commission charges are not included in this calculation.
(2)Annualized
(3)Portfolio turnover rate excludes securities received or delivered from
processing of creations or redemptions on streetTRACKS.
69
ADDITIONAL INFORMATION CONCERNING THE FUNDS
The following charts are provided to: (i) show the frequency at which the
closing price (last trade) for each of the Funds was at a discount or premium to
the daily net asset value (NAV); and (ii) compare each Fund's total return at
NAV with the total return based on market price and its benchmark index.
The discount or premium is the percentage difference between the NAV and
the closing price of a Fund. A discount is the amount that a fund is trading
below the reported NAV, expressed as a percentage of the NAV. A premium is the
amount that a fund is trading above the reported NAV, expressed as a percentage
of the NAV. Because a Fund's last trade may occur on a different date or at some
time prior to 4:00 p.m. New York time (when the Funds normally calculate their
NAV), a Fund's closing price may differ from the NAV of the Fund.
STREETTRACKS DOW JONES U.S. LARGE CAP VALUE INDEX FUND
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
CLOSING PRICE VS. NAV
AS OF SEPTEMBER 30, 2001
-----------------------------------------------------------
CLOSING PRICE ABOVE NAV CLOSING PRICE BELOW NAV
---------------------------- ----------------------------
50 - 99 100 - 199 >200 50 - 99 100 - 199 >200
BASIS BASIS BASIS BASIS BASIS BASIS
POINTS POINTS POINTS POINTS POINTS POINTS
------- --------- ------ ------- --------- ------
2001
Quarter Ending: 09/30/01............ 7 11 4 3 7 0
Quarter Ending: 06/30/01............ 4 2 0 5 7 0
Quarter Ending: 03/31/01............ 5 3 3 6 8 1
2000
Year Ending: 12/31/00*.............. 8 2 0 5 4 4
---------------
*Trading on the AMEX commenced on September 29, 2000
PERFORMANCE FOR THE PERIOD ENDING JUNE 30, 2001
-----------------------------------------------------
CUMULATIVE TOTAL RETURN
-----------------------------------------------------
DOW JONES
LARGE-CAP INDEX
DOW JONES (BROAD-BASED
NET ASSET MARKET U.S. LARGE CAP COMPARATIVE
VALUE VALUE VALUE INDEX INDEX)
--------- ------ -------------- ---------------
Since Inception of Trading(1).... -0.47% -0.65% -0.37% -19.36%
---------------
(1)For the period September 29, 2000 (commencement of trading on the AMEX) to
June 30, 2001.
70
STREETTRACKS DOW JONES U.S. LARGE CAP GROWTH INDEX FUND
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
CLOSING PRICE VS. NAV
AS OF SEPTEMBER 30, 2001
-----------------------------------------------------------
CLOSING PRICE ABOVE NAV CLOSING PRICE BELOW NAV
---------------------------- ----------------------------
50 - 99 100 - 199 >200 50 - 99 100 - 199 >200
BASIS BASIS BASIS BASIS BASIS BASIS
POINTS POINTS POINTS POINTS POINTS POINTS
------- --------- ------ ------- --------- ------
2001
Quarter Ending: 09/30/01......... 8 5 9 3 4 2
Quarter Ending: 06/30/01......... 8 9 4 7 2 3
Quarter Ending: 03/31/01......... 8 6 11 3 4 5
2000
Year Ending: 12/31/00*........... 7 9 13 3 7 14
---------------
*Trading on the AMEX commenced on September 29, 2000
CUMULATIVE TOTAL RETURN
-----------------------------------------------------
DOW JONES
LARGE-CAP INDEX
DOW JONES (BROAD-BASED
NET ASSET MARKET U.S. LARGE CAP COMPARATIVE
VALUE VALUE GROWTH INDEX INDEX)
--------- ------ -------------- ---------------
Since Inception of Trading(1)........ -36.21% -35.98% -36.11% -19.36%
---------------
(1)For the period September 29, 2000 (commencement of trading on the AMEX) to
June 30, 2001.
STREETTRACKS DOW JONES U.S. SMALL CAP VALUE INDEX FUND
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
CLOSING PRICE VS. NAV
AS OF SEPTEMBER 30, 2001
-----------------------------------------------------------
CLOSING PRICE ABOVE NAV CLOSING PRICE BELOW NAV
---------------------------- ----------------------------
50 - 99 100 - 199 >200 50 - 99 100 - 199 >200
BASIS BASIS BASIS BASIS BASIS BASIS
POINTS POINTS POINTS POINTS POINTS POINTS
------- --------- ------ ------- --------- ------
2001
Quarter Ending: 09/30/01...... 6 0 0 6 0 0
Quarter Ending: 06/30/01...... 5 0 2 4 2 0
Quarter Ending: 03/31/01...... 7 5 1 5 5 2
2000
Year Ending: 12/31/00*........ 7 4 5 5 7 11
---------------
*Trading on the AMEX commenced on September 29, 2000
71
PERFORMANCE FOR THE PERIOD ENDING JUNE 30, 2001
CUMULATIVE TOTAL RETURN
---------------------------------------------------------
DOW JONES
DOW JONES SMALL-CAP INDEX
NET ASSET MARKET U.S. SMALL CAP (BROAD-BASED
VALUE VALUE GROWTH INDEX COMPARATIVE INDEX)
--------- ------ -------------- -------------------
Since Inception of Trading(1)... 24.27% 23.38% 24.89% -2.70%
---------------
(1)For the period September 29, 2000 (commencement of trading on the AMEX) to
June 30, 2001.
STREETTRACKS DOW JONES U.S. SMALL CAP GROWTH INDEX FUND
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
CLOSING PRICE VS. NAV AS OF SEPTEMBER 30, 2001
-----------------------------------------------------
CLOSING PRICE ABOVE NAV CLOSING PRICE BELOW NAV
------------------------- -------------------------
50-99 100-199 >200 50-99 100-199 >200
BASIS BASIS BASIS BASIS BASIS BASIS
POINTS POINTS POINTS POINTS POINTS POINTS
------ ------- ------ ------ ------- ------
2001
Quarter Ending: 09/30/01........... 5 2 1 2 0 0
Quarter Ending: 06/30/01........... 8 4 2 6 3 0
Quarter Ending: 03/31/01........... 7 7 10 7 7 1
2000
Year Ending: 12/31/00*............. 6 9 3 6 6 12
---------------
*Trading on the AMEX commenced on September 29, 2000
PERFORMANCE FOR THE PERIOD ENDING JUNE 30, 2001
CUMULATIVE TOTAL RETURN
---------------------------------------------------------
DOW JONES
DOW JONES SMALL-CAP INDEX
NET ASSET MARKET U.S. SMALL CAP (BROAD-BASED
VALUE VALUE GROWTH INDEX COMPARATIVE INDEX)
--------- ------- -------------- ------------------
Since Inception of Trading(1).... -20.97% -22.74% -20.82% -2.70%
---------------
(1)For the period September 29, 2000 (commencement of trading on the AMEX) to
June 30, 2001.
72
STREETTRACKS DOW JONES GLOBAL TITANS INDEX FUND
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
CLOSING PRICE VS. NAV AS OF SEPTEMBER 30, 2001
-----------------------------------------------------
CLOSING PRICE ABOVE NAV CLOSING PRICE BELOW NAV
------------------------- -------------------------
50-99 100-199 >200 50-99 100-199 >200
BASIS BASIS BASIS BASIS BASIS BASIS
POINTS POINTS POINTS POINTS POINTS POINTS
------ ------- ------ ------ ------- ------
2001
Quarter Ending: 09/30/01........... 9 4 0 3 1 0
Quarter Ending: 06/30/01........... 3 1 1 4 2 0
Quarter Ending: 03/31/01........... 10 3 2 6 6 2
2000
Year Ending: 12/31/00*............. 7 10 3 3 2 1
---------------
*Trading on the AMEX commenced on September 29, 2000
PERFORMANCE FOR THE PERIOD ENDING JUNE 30, 2001
CUMULATIVE TOTAL RETURN
------------------------------------------------------------
DOW JONES
DOW JONES LARGE-CAP INDEX
NET ASSET MARKET GLOBAL TITANS (BROAD-BASED
VALUE VALUE U.S. CLOSE INDEX COMPARATIVE INDEX)
--------- ------- ---------------- -------------------
Since Inception of
Trading(1).................. -15.39% -15.60% -15.09% -19.36%
---------------
(1)For the period September 29, 2000 (commencement of trading on the AMEX) to
June 30, 2001.
STREETTRACKS WILSHIRE REIT INDEX FUND
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
CLOSING PRICE VS. NAV AS OF SEPTEMBER 30, 2001
-----------------------------------------------------
CLOSING PRICE ABOVE NAV CLOSING PRICE BELOW NAV
------------------------- -------------------------
50-99 100-199 >200 50-99 100-199 >200
BASIS BASIS BASIS BASIS BASIS BASIS
POINTS POINTS POINTS POINTS POINTS POINTS
------ ------- ------ ------ ------- ------
2001
Quarter Ending: 09/30/01........... 8 1 2 7 4 0
Quarter Ending: 06/30/01*.......... 2 1 0 6 7 2
---------------
*Trading on the AMEX commenced on April 27, 2001
73
PERFORMANCE FOR THE PERIOD ENDING JUNE 30, 2001
CUMULATIVE TOTAL RETURN
-------------------------------------------------------
DOW JONES
SMALL-CAP INDEX
NET ASSET MARKET WILSHIRE REIT (BROAD-BASED
VALUE VALUE INDEX COMPARATIVE INDEX)
--------- ------ ------------- ------------------
Since Inception of Trading(1)....... 8.51% 7.90% 8.61% 5.38%
---------------
(1)For the period April 27, 2001 (commencement of trading on the AMEX) to June
30, 2001.
STREETTRACKS MORGAN STANLEY TECHNOLOGY INDEX FUND
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
CLOSING PRICE VS. NAV AS OF SEPTEMBER 30, 2001
-----------------------------------------------------
CLOSING PRICE ABOVE NAV CLOSING PRICE BELOW NAV
------------------------- -------------------------
50-99 100-199 >200 50-99 100-199 >200
BASIS BASIS BASIS BASIS BASIS BASIS
POINTS POINTS POINTS POINTS POINTS POINTS
------ ------- ------ ------ ------- ------
2001
Quarter Ending: 09/30/01........... 12 4 1 6 2 1
Quarter Ending: 06/30/01........... 9 5 1 8 1 0
Quarter Ending: 03/31/01........... 4 2 0 4 0 1
2000
Year Ending: 12/31/00*............. 13 3 1 7 1 0
---------------
*Trading on the AMEX commenced on September 29, 2000
PERFORMANCE FOR THE PERIOD ENDING JUNE 30, 2001
CUMULATIVE TOTAL RETURN
----------------------------------------------------------
DOW JONES
MORGAN STANLEY LARGE-CAP INDEX
NET ASSET MARKET TECHNOLOGY (BROAD-BASED
VALUE VALUE INDEX COMPARATIVE INDEX)
--------- ------- -------------- -------------------
Since Inception of
Trading(1)................... -38.84% -38.45% -39.09% -19.36%
---------------
(1)For the period September 29, 2000 (commencement of trading on the AMEX) to
June 30, 2001.
74
STREETTRACKS MORGAN STANLEY INTERNET INDEX FUND
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
CLOSING PRICE VS. NAV
AS OF SEPTEMBER 30, 2001
-------------------------------------------------------
CLOSING PRICE ABOVE NAV CLOSING PRICE BELOW NAV
--------------------------- -------------------------
50-99 100-199 >200 50-99 100-199 >200
BASIS BASIS BASIS BASIS BASIS BASIS
POINTS POINTS POINTS POINTS POINTS POINTS
-------- ------- ------ ------ ------- ------
2001
Quarter Ending: 09/30/01............ 3 6 18 8 9 4
Quarter Ending: 06/30/01............ 8 6 17 9 9 7
Quarter Ending: 03/31/01............ 5 10 19 1 4 12
2000
Year Ending: 12/31/00*.............. 7 14 6 5 6 8
---------------
*Trading on the AMEX commenced on September 29, 2000
PERFORMANCE FOR THE PERIOD ENDING JUNE 30, 2001
---------------------------------------------------------
CUMULATIVE TOTAL RETURN
---------------------------------------------------------
DOW JONES LARGE-CAP
INDEX
NET ASSET MARKET MORGAN STANLEY (BROAD-BASED
VALUE VALUE INTERNET INDEX COMPARATIVE INDEX)
--------- ------ -------------- -------------------
Since Inception of Trading(1)... -70.56% -71.07% -70.17% -19.36%
---------------
(1)For the period September 29, 2000 (commencement of trading on the AMEX) to
June 30, 2001.
FORTUNE 500(R) INDEX FUND
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
CLOSING PRICE VS. NAV
AS OF SEPTEMBER 30, 2001
-------------------------------------------------------
CLOSING PRICE ABOVE NAV CLOSING PRICE BELOW NAV
--------------------------- -------------------------
50-99 100-199 >200 50-99 100-199 >200
BASIS BASIS BASIS BASIS BASIS BASIS
POINTS POINTS POINTS POINTS POINTS POINTS
-------- ------- ------ ------ ------- ------
2001
Quarter Ending: 09/30/01............ 3 1 0 1 0 0
Quarter Ending: 06/30/01............ 5 0 0 3 1 0
Quarter Ending: 03/31/01............ 4 2 0 7 0 0
2000
Year Ending: 12/31/00*.............. 8 4 0 7 2 4
---------------
*Trading on the AMEX commenced on October 10, 2000
75
PERFORMANCE FOR THE PERIOD ENDING JUNE 30, 2001
CUMULATIVE TOTAL RETURN
FORTUNE S&P 500 INDEX
NET ASSET MARKET 500(R) (BROAD-BASED
VALUE VALUE INDEX COMPARATIVE INDEX)
--------- ------ ------------ ------------------
Since Inception of Trading(1).... -7.41% -6.84% -7.22% -10.96%
---------------
(1)For the period October 10, 2000 (commencement of trading on the AMEX) to June
30, 2001.
FORTUNE E-50(R) INDEX FUND
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
CLOSING PRICE VS. NAV
AS OF SEPTEMBER 30, 2001
-------------------------------------------------------
CLOSING PRICE ABOVE
NAV CLOSING PRICE BELOW NAV
------------------------- ---------------------------
50-99 100-199 >200 50-99 100-199 >200
BASIS BASIS BASIS BASIS BASIS BASIS
POINTS POINTS POINTS POINTS POINTS POINTS
------ ------- ------ ------ --------- ------
2001
Quarter Ending: 09/30/01.............. 8 7 4 7 4 5
Quarter Ending: 06/30/01.............. 5 8 7 9 7 3
Quarter Ending: 03/31/01.............. 14 8 9 4 5 6
2000
Year Ending: 12/31/00*................ 5 9 4 5 3 7
---------------
*Trading on the AMEX commenced on October 10, 2000
PERFORMANCE FOR THE PERIOD ENDING JUNE 30, 2001
CUMULATIVE TOTAL RETURN
--------------------------------------------------------
DOW JONES LARGE-CAP
FORTUNE INDEX
NET ASSET MARKET E-50(R) (BROAD-BASED
VALUE VALUE INDEX COMPARATIVE INDEX)
--------- ------ ------------- -------------------
Since Inception of
Trading(1)................... -48.62% -48.06% -48.60% -15.95%
---------------
(1)For the period October 10, 2000 (commencement of trading on the AMEX) to June
30, 2001.
76
This Prospectus does not contain all the information included in the
Registration Statement filed with the SEC with respect to each Fund's Shares. A
Statement of Additional Information (dated October 26, 2001) and the annual and
semi-annual reports to shareholders, each of which was or will be filed with the
SEC, provide more information about each Fund. In the annual report, you will
find a discussion of the market conditions and investment strategies that
significantly affected each Fund's performance since its inception. The
Statement of Additional Information and the financial statements included in the
Trust's most recent annual reports to shareholders are incorporated herein by
reference (i.e., is legally part of this Prospectus). These materials may be
obtained without charge by writing to the Distributor, State Street Capital
Markets, LLC, 225 Franklin Street, Boston, Massachusetts 02110, or by calling
the following number:
Investor Information: 1-866-S-TRACKS
The Registration Statement, including this Prospectus, the Statement of
Additional Information, and the exhibits as well as the reports may be reviewed
and copied at the SEC's Public Reference Room (450 Fifth Street, N.W.,
Washington D.C. 20549) or on the EDGAR Database on the SEC's Web site
(http://www.sec.gov). Information on the operation of the public reference room
may be obtained by calling the SEC at 1-202-942-8090. You may get copies of this
and other information after paying a duplicating fee, by electronic request at
the following e-mail address: publicinfo@sec.gov, or by writing the Public
Reference Section of the SEC, Washington, D.C. 20549-0102.
Shareholder inquiries may be directed to the Funds in writing to State
Street Capital Markets, LLC, 225 Franklin Street, Boston, Massachusetts 02110.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH
THE OFFER OF A FUND'S SHARES, AND, IF GIVEN OR MADE, THE INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE TRUST
OR ANY FUND. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE OF SHARES
SHALL UNDER ANY CIRCUMSTANCE IMPLY THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE AFTER THE DATE OF THIS PROSPECTUS.
DEALERS EFFECTING TRANSACTIONS IN A FUND'S SHARES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, ARE GENERALLY REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO ANY OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS.
streetTRACKS(SM) SERIES TRUST
STATEMENT OF ADDITIONAL INFORMATION
DATED October 26, 2001
This Statement of Additional Information is not a Prospectus. It should be read
in conjunction with the Prospectus dated October 26, 2001 (the "Prospectus") for
the streetTRACKS(SM) Series Trust (the "Trust"), as it may be revised from time
to time. Capitalized terms used herein that are not defined have the same
meaning as in the Prospectus, unless otherwise noted. A copy of the Prospectus
for the Trust may be obtained without charge by writing to the Trust's
Distributor, State Street Capital Markets, LLC at 225 Franklin Street, Boston,
Massachusetts 02110.
TABLE OF CONTENTS
General Description of the Trust............................................ 2
Investment Policies and Restrictions........................................ 6
Special Considerations and Risks............................................ 7
Exchange Listing and Trading................................................ 9
Management of the Trust.....................................................10
Brokerage Transactions......................................................18
Book Entry Only System......................................................19
Creation and Redemption of Creation Units...................................23
Determination of Net Asset Value............................................31
Dividends and Distributions.................................................31
Taxes.......................................................................32
Capital Stock and Shareholder Reports.......................................34
Performance and Other Information...........................................35
Counsel and Independent Auditors............................................37
Financial Statements........................................................37
1
GENERAL DESCRIPTION OF THE TRUST
The Trust is an open-end management investment company. The Trust currently
consists of ten investment series (each a "Fund" and collectively the "Funds").
The Trust was organized as a Massachusetts business trust on June 12, 1998. The
shares of each Fund are referred to herein as "Shares." The Funds offered by the
Trust are: the streetTRACKS(SM) Dow Jones U.S. Large Cap Value Index Fund, the
streetTRACKS(SM) Dow Jones U.S. Large Cap Growth Index Fund, the
streetTRACKS(SM) Dow Jones U.S. Small Cap Value Index Fund, the streetTRACKS(SM)
Dow Jones U.S. Small Cap Growth Index Fund, the streetTRACKS(SM) Dow Jones
Global Titans Fund, the streetTRACKS(SM) Wilshire REIT Index Fund, the
streetTRACKS(SM) Morgan Stanley Technology Index Fund, streetTRACKS(SM) Morgan
Stanley Internet Index Fund, FORTUNE 500(R) Index Fund and FORTUNE e-50(R) Index
Fund.
The investment objective of each Fund is to provide investment results that,
before expenses, correspond generally to the total return of a specified market
index (each an "Index"). SSgA Funds Management, Inc. manages each Fund.
Each Fund offers and issues Shares at their net asset value only in aggregations
of a specified number of Shares (each, a "Creation Unit") generally in exchange
for a basket of equity securities included in its Index ("Deposit Securities")
together with the deposit of a specified cash payment ("Cash Component"). The
Shares have been approved for listing and secondary trading on the American
Stock Exchange (the "Exchange"). The Shares will trade on the Exchange at market
prices. These prices may differ from the Shares' net asset values. The Shares
are also redeemable only in Creation Unit aggregations, and generally in
exchange for portfolio securities and a specified cash payment. A Creation Unit
of each Fund consists of 50,000 Shares.
The Trust reserves the right to offer a "cash" option for creations and
redemptions of Shares (subject to applicable legal requirements) although it has
no current intention of doing so. Shares may be issued in advance of receipt of
Deposit Securities subject to various conditions including a requirement to
maintain on deposit with the Trust cash at least equal to 115% of the market
value of the missing Deposit Securities. See "CREATION AND REDEMPTION OF
CREATION UNITS." In each instance of such cash creations or redemptions, the
Trust may impose transaction fees that will be higher than the transaction fees
associated with in-kind creations or redemptions. In all cases, such fees will
be limited in accordance with the requirements of the Securities and Exchange
Commission (the "SEC") applicable to management investment companies offering
redeemable securities.
INVESTMENT POLICIES AND RESTRICTIONS
LENDING PORTFOLIO SECURITIES
Each Fund may lend portfolio securities to brokers, dealers and other financial
institutions needing to borrow securities to complete transactions and for other
purposes. Because the U.S. government securities or other assets that are
pledged as collateral to each Fund in connection with these loans generate
income, securities lending may enable a Fund to earn additional income that may
partially offset the expenses of such Fund, and thereby reduce the effect that
expenses have on such Fund's ability to provide investment results that
substantially correspond to the price and yield performance of its respective
Index.
Loans of portfolio securities may not exceed 33% of a Fund's total assets. The
documentation for these loans provides that a Fund will receive collateral equal
to at least 100% of the current market value of the
2
loaned securities, as marked to market each day that the net asset value of the
Fund is determined. Each Fund will pay reasonable administrative and custodial
fees in connection with the loan of securities and invests collateral in money
market instruments or funds which invest exclusively in money market
instruments.
Each Fund will comply with the conditions for lending established by the SEC.
Although each Fund will receive collateral in connection with all loans of
portfolio securities, and such collateral will be marked to market, each Fund
will be exposed to the risk of loss should a borrower default on its obligation
to return the borrowed securities (e.g., the loaned securities may have
appreciated beyond the value of the collateral held by the Fund). In addition,
each Fund bears the risk of loss of any cash collateral that it invests in money
market instruments.
REPURCHASE AGREEMENTS
Each Fund may invest in repurchase agreements with commercial banks, brokers or
dealers to generate income from its excess cash balances and to invest
securities lending cash collateral. A repurchase agreement is an agreement under
which a Fund acquires a money market instrument (generally a security issued by
the U.S. Government or an agency thereof, a banker's acceptance or a certificate
of deposit) from a seller, subject to resale to the seller at an agreed upon
price and date (normally, the next business day). A repurchase agreement may be
considered a loan collateralized by securities. The resale price reflects an
agreed upon interest rate effective for the period the instrument is held by a
Fund and is unrelated to the interest rate on the underlying instrument.
In these repurchase agreement transactions, the securities acquired by a Fund
(including accrued interest earned thereon) must have a total value in excess of
the value of the repurchase agreement and are held by the Custodian until
repurchased. No more than an aggregate of 15% of each Fund's net assets will be
invested in illiquid securities, including repurchase agreements having
maturities longer than seven days and securities subject to legal or contractual
restrictions on resale, or for which there are no readily available market
quotations.
The use of repurchase agreements involves certain risks. For example, if the
other party to the agreement defaults on its obligation to repurchase the
underlying security at a time when the value of the security has declined, a
Fund may incur a loss upon disposition of the security. If the other party to
the agreement becomes insolvent and subject to liquidation or reorganization
under the U.S. Bankruptcy Code or other laws, a court may determine that the
underlying security is collateral for a loan by a Fund not within the control of
the Fund and, therefore, the Fund may not be able to substantiate its interest
in the underlying security and may be deemed an unsecured creditor of the other
party to the agreement.
OTHER MONEY MARKET INSTRUMENTS
In addition to repurchase agreements, other money market instruments in which
the Funds may invest are certificates of deposit of U.S. domestic banks with
assets of $1 billion or more, bankers' acceptances, time deposits, U.S.
Government and U.S. Government agency securities, or commercial paper rated
within the two highest grades by S&P or Moody's Investors Service, Inc., or, if
not rated, are of comparable quality as determined by the Adviser, and which
mature within one year from the date of purchase, and investment companies which
invest exclusively in such money market instruments (subject to applicable
limitations under Section 12(d)(1) of the Investment Company Act of 1940, as
amended ("1940 Act").
3
FUTURES CONTRACTS, OPTIONS AND SWAP AGREEMENTS
Each Fund may utilize exchange-traded futures and options contracts and swap
agreements.
FUTURES CONTRACTS AND OPTIONS
Futures contracts generally provide for the future sale by one party and
purchase by another party of a specified commodity at a specified future time
and at a specified price. Stock index futures contracts are settled daily with a
payment by one party to the other of a cash amount based on the difference
between the level of the stock index specified in the contract from one day to
the next. Futures contracts are standardized as to maturity date and underlying
instrument and are traded on futures exchanges.
Futures traders are required to make a good faith margin deposit in cash or U.S.
government securities with a broker or custodian to initiate and maintain open
positions in futures contracts. A margin deposit is intended to assure
completion of the contract (delivery or acceptance of the underlying commodity
or payment of the cash settlement amount) if it is not terminated prior to the
specified delivery date. Brokers may establish deposit requirements which are
higher than the exchange minimums. Futures contracts are customarily purchased
and sold on margin deposits which may range upward from less than 5% of the
value of the contract being traded.
After a futures contract position is opened, the value of the contract is marked
to market daily. If the futures contract price changes to the extent that the
margin on deposit does not satisfy margin requirements, payment of additional
"variation" margin will be required. Conversely, change in the contract value
may reduce the required margin, resulting in a repayment of excess margin to the
contract holder. Variation margin payments are made to and from the futures
broker for as long as the contract remains open. In such case, a Fund would
expect to earn interest income on its margin deposits. Closing out an open
futures position is done by taking an opposite position ("buying" a contract
which has previously been "sold," or "selling" a contract previously
"purchased") in an identical contract to terminate the position. Brokerage
commissions are incurred when a futures contract position is opened or closed.
Each Fund may use exchange-traded futures and options, together with positions
in cash and money market instruments, to simulate full investment in the
underlying Index. Exchange-traded futures and options contracts are not
currently available for all of the Indexes. Under such circumstances, the
Adviser may seek to utilize other instruments that it believes to be correlated
to the underlying Index components or a subset of the components. The Exchange
currently anticipates that options on the Shares will be listed on the Exchange.
RESTRICTIONS ON THE USE OF FUTURES AND OPTIONS
A Fund would not enter into futures contract transactions for purposes other
than hedging to the extent that, immediately thereafter, the sum of its initial
margin deposits on open contracts exceeds 5% of the market value of a Fund's
total assets after taking into account unrealized gains and unrealized losses on
such contracts it has entered into. Each Fund would take steps to prevent its
futures positions from "leveraging" its securities holdings. When it has a long
futures position, it will maintain with its custodian bank, cash or liquid
securities having a value equal to the notional value of the contract (less any
margin deposited in connection with the position). When it has a short futures
position, it will maintain with its custodian bank assets substantially
identical to those underlying the contract or cash and liquid securities (or a
combination
4
of the foregoing) having a value equal to the net obligation of the Fund under
the contract (less the value of any margin deposits in connection with the
position).
REAL ESTATE INVESTMENT TRUSTS ("REITs") (streetTRACKS(SM) Dow Jones U.S. Small
Cap Value Fund and streetTRACKS(SM) Wilshire REIT Index Fund)
REITs pool investor's funds for investment primarily in income producing real
estate or real estate loans or interests. A REIT is not taxed on income
distributed to shareholders if it complies with several requirements relating to
its organization, ownership, assets, and income and a requirement that it
distribute to its shareholders at least 95% of its taxable income (other than
net capital gains) for each taxable year. REITs can generally be classified as
Equity REITs, Mortgage REITs and Hybrid REITs. Equity REITs, which invest the
majority of their assets directly in real property, derive their income
primarily from rents. Equity REITs can also realize capital gains by selling
properties that have appreciated in value. Mortgage REITs, which invest the
majority of their assets in real estate mortgages, derive their income primarily
from interest payments. Hybrid REITs combine the characteristics of both Equity
REITs and Mortgage REITs. The Fund will not invest in real estate directly, but
only in securities issued by real estate companies. However, the Fund may be
subject to risks similar to those associated with the direct ownership of real
estate (in addition to securities markets risks) because of its policy of
concentration in the securities of companies in the real estate industry. These
include declines in the value of real estate, risks related to general and local
economic conditions, dependency on management skill, heavy cash flow dependency,
possible lack of availability of mortgage funds, overbuilding, extended
vacancies of properties, increased competition, increases in property taxes and
operating expenses, changes in zoning laws, losses due to costs resulting from
the clean-up of environmental problems, liability to third parties for damages
resulting from environmental problems, casualty or condemnation losses,
limitations on rents, changes in neighborhood values, the appeal of properties
to tenants and changes in interest rates.
In addition to these risks, Equity REITs may be affected by changes in the value
of the underlying property owned by the trusts, while Mortgage REITs may be
affected by the quality of any credit extended. Further, Equity and Mortgage
REITs are dependent upon management skills and generally may not be diversified.
Equity and Mortgage REITs are also subject to heavy cash flow dependency,
defaults by borrowers and self-liquidation. In addition, Equity and Mortgage
REITs could possibly fail to qualify for the beneficial tax treatment available
to REITs under the Internal Revenue Code of 1986, as amended (the "Internal
Revenue "Code"), or to maintain their exemptions from registration under the
1940 Act. The above factors may also adversely affect a borrower's or a lessee's
ability to meet its obligations to the REIT. In the event of a default by a
borrower or lessee, the REIT may experience delays in enforcing its rights as a
mortgagee or lessor and may incur substantial costs associated with protecting
investments.
SWAP AGREEMENTS
Swap agreements are contracts between parties in which one party agrees to make
payments to the other party based on the change in market value or level of a
specified rate, index or asset. In return, the other party agrees to make
payments to the first party based on the return of a different specified rate,
index or asset. Swap agreements will usually be done on a net basis, i.e., where
the two parties make net payments with the Fund receiving or paying, as the case
may be, only the net amount of the two payments. The net amount of the excess,
if any, of a Fund's obligations over its entitlements with respect to each swap
is accrued on a daily basis and an amount of cash or high liquid securities
having an aggregate value at least equal to the accrued excess is maintained in
an account at the Trust's custodian bank.
5
INVESTMENT RESTRICTIONS
The Trust has adopted the following investment restrictions as fundamental
policies with respect to each Fund. These restrictions cannot be changed with
respect to a Fund without the approval of the holders of a majority of such
Fund's outstanding voting securities. For purposes of the 1940 Act, a majority
of the outstanding voting securities of a Fund means the vote, at an annual or a
special meeting of the security holders of the Trust, of the lesser of (1) 67%
or more of the voting securities of the Fund present at such meeting, if the
holders of more than 50% of the outstanding voting securities of such Fund are
present or represented by proxy, or (2) more than 50% of the outstanding voting
securities of the Fund. Except with the approval of a majority of the
outstanding voting securities, a Fund may not:
1. Lend any funds or other assets except through the purchase of all or a
portion of an issue of securities or obligations of the type in which it is
permitted to invest (including participation interests in such securities or
obligations) and except that a Fund may lend its portfolio securities in an
amount not to exceed 33% of the value of its total assets;
2. Issue senior securities or borrow money, except borrowings from banks
for temporary or emergency purposes in an amount up to 10% of the value of the
Fund's total assets (including the amount borrowed), valued at market, less
liabilities (not including the amount borrowed) valued at the time the borrowing
is made, and the Fund will not purchase securities while borrowings in excess of
5% of the Fund's total assets are outstanding, provided, that for purposes of
this restriction, short-term credits necessary for the clearance of transactions
are not considered borrowings (this limitation on purchases does not apply to
acceptance by the Fund of a deposit principally of securities included in the
relevant Index for creation of Creation Units);
3. Pledge, hypothecate, mortgage or otherwise encumber its assets, except
to secure permitted borrowings. (The deposit of underlying securities and other
assets in escrow and collateral arrangements with respect to initial or
variation margin for futures contracts or options contracts will not be deemed
to be pledges of the Fund's assets);
4. Purchase, hold or deal in real estate, or oil, gas or mineral interests
or leases, but a Fund may purchase and sell securities that are issued by
companies that invest or deal in such assets;
5. Act as an underwriter of securities of other issuers, except to the
extent the Fund may be deemed an underwriter in connection with the sale of
securities in its portfolio;
6. Purchase securities on margin, except for such short-term credits as
are necessary for the clearance of transactions, except that a Fund may make
margin deposits in connection with transactions in options, futures and options
on futures;
7. Sell securities short;
8. Invest in commodities or commodity contracts, except that a Fund may
transact in exchange traded futures contracts on securities, stock indexes and
options on such futures contracts and make margin deposits in connection with
such contracts; or
9. Change its investment objective.
6
In addition to the investment restrictions adopted as fundamental policies as
set forth above, each Fund observes the following restrictions, which may be
changed by the Board of Trustees without a shareholder vote. A Fund will not:
1. Invest in the securities of a company for the purpose of exercising
management or control, or in any event purchase and hold more than 10% of the
securities of a single issuer, provided that the Trust may vote the investment
securities owned by each Fund in accordance with its views; or
2. Hold illiquid assets in excess of 15% of its net assets. An illiquid
asset is any asset which may not be sold or disposed of in the ordinary course
of business within seven days at approximately the value at which the Fund has
valued the investment.
If a percentage limitation is adhered to at the time of investment or contract,
a later increase or decrease in percentage resulting from any change in value or
total or net assets will not result in a violation of such restriction, except
that the percentage limitations with respect to the borrowing of money and
illiquid securities will be observed continuously.
SPECIAL CONSIDERATIONS AND RISKS
A discussion of the risks associated with an investment in a Fund is contained
in the Prospectus under the heading "INVESTMENT CONSIDERATIONS AND RISKS." The
discussion below supplements, and should be read in conjunction with, such
section of the Prospectus.
GENERAL
Investment in a Fund should be made with an understanding that the value of a
Fund's portfolio securities may fluctuate in accordance with changes in the
financial condition of the issuers of the portfolio securities, the value of
common stocks generally and other factors.
An investment in a Fund should also be made with an understanding of the risks
inherent in an investment in equity securities, including the risk that the
financial condition of issuers may become impaired or that the general condition
of the stock market may deteriorate (either of which may cause a decrease in the
value of the portfolio securities and thus in the value of Shares). Common
stocks are susceptible to general stock market fluctuations and to volatile
increases and decreases in value as market confidence in and perceptions of
their issuers change. These investor perceptions are based on various and
unpredictable factors including expectations regarding government, economic,
monetary and fiscal policies, inflation and interest rates, economic expansion
or contraction, and global or regional political, economic and banking crises.
Holders of common stocks incur more risk than holders of preferred stocks and
debt obligations because common stockholders, as owners of the issuer, have
generally inferior rights to receive payments from the issuer in comparison with
the rights of creditors of, or holders of debt obligations or preferred stocks
issued by, the issuer. Further, unlike debt securities which typically have a
stated principal amount payable at maturity (whose value, however, will be
subject to market fluctuations prior thereto), or preferred stocks which
typically have a liquidation preference and which may have stated optional or
mandatory redemption provisions, common stocks have neither a fixed principal
amount nor a maturity. Common stock values are subject to market fluctuations as
long as the common stock remains outstanding.
7
Although most of the securities in the Indexes are listed on a national
securities exchange, the principal trading market for some may be in the
over-the-counter market. The existence of a liquid trading market for certain
securities may depend on whether dealers will make a market in such securities.
There can be no assurance that a market will be made or maintained or that any
such market will be or remain liquid. The price at which securities may be sold
and the value of a Fund's Shares will be adversely affected if trading markets
for a Fund's portfolio securities are limited or absent or if bid/ask spreads
are wide.
FUTURES AND OPTIONS TRANSACTIONS
Positions in futures contracts and options may be closed out only on an exchange
which provides a secondary market therefor. However, there can be no assurance
that a liquid secondary market will exist for any particular futures contract or
option at any specific time. Thus, it may not be possible to close a futures or
options position. In the event of adverse price movements, a Fund would continue
to be required to make daily cash payments to maintain its required margin. In
such situations, if a Fund has insufficient cash, it may have to sell portfolio
securities to meet daily margin requirements at a time when it may be
disadvantageous to do so. In addition, a Fund may be required to make delivery
of the instruments underlying futures contracts it has sold.
A Fund will minimize the risk that it will be unable to close out a futures or
options contract by only entering into futures and options for which there
appears to be a liquid secondary market.
The risk of loss in trading futures contracts or uncovered call options in some
strategies (e.g., selling uncovered stock index futures contracts) is
potentially unlimited. The Fund does not plan to use futures and options
contracts, when available, in this way. The risk of a futures position may still
be large as traditionally measured due to the low margin deposits required. In
many cases, a relatively small price movement in a futures contract may result
in immediate and substantial loss or gain to the investor relative to the size
of a required margin deposit. The Fund, however, intends to utilize futures and
options contracts in a manner designed to limit their risk exposure to that
which is comparable to what they would have incurred through direct investment
in stocks.
Utilization of futures transactions by a Fund involves the risk of imperfect or
even negative correlation to the benchmark Index if the index underlying the
futures contracts differs from the benchmark Index. There is also the risk of
loss by a Fund of margin deposits in the event of bankruptcy of a broker with
whom a Fund has an open position in the futures contract or option.
Certain financial futures exchanges limit the amount of fluctuation permitted in
futures contract prices during a single trading day. The daily limit establishes
the maximum amount that the price of a futures contract may vary either up or
down from the previous day's settlement price at the end of a trading session.
Once the daily limit has been reached in a particular type of contract, no
trades may be made on that day at a price beyond that limit. The daily limit
governs only price movement during a particular trading day and therefore does
not limit potential losses, because the limit may prevent the liquidation of
unfavorable positions. Futures contract prices have occasionally moved to the
daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of futures positions and subjecting some
futures traders to substantial losses.
8
RISKS OF SWAP AGREEMENTS
Swap agreements are subject to the risk that the swap counterparty will default
on its obligations. If such a default occurs, a Fund will have contractual
remedies pursuant to the agreements related to the transaction, but such
remedies may be subject to bankruptcy and insolvency laws which could affect
such Fund's rights as a creditor.
CONTINUOUS OFFERING
The method by which Creation Units of Shares are created and traded may raise
certain issues under applicable securities laws. Because new Creation Units of
Shares are issued and sold by the Trust on an ongoing basis, at any point a
"distribution," as such term is used in the Securities Act of 1933 (the
"Securities Act"), may occur. Broker-dealers and other persons are cautioned
that some activities on their part may, depending on the circumstances, result
in their being deemed participants in a distribution in a manner which could
render them statutory underwriters and subject them to the prospectus delivery
and liability provisions of the Securities Act.
For example, a broker-dealer firm or its client may be deemed a statutory
underwriter if it takes Creation Units after placing an order with the
Distributor, breaks them down into constituent Shares, and sells such Shares
directly to customers, or if it chooses to couple the creation of a supply of
new Shares with an active selling effort involving solicitation of secondary
market demand for Shares. A determination of whether one is an underwriter for
purposes of the Securities Act must take into account all the facts and
circumstances pertaining to the activities of the broker-dealer or its client in
the particular case, and the examples mentioned above should not be considered a
complete description of all the activities that could lead to a categorization
as an underwriter.
Broker-dealer firms should also note that dealers who are not "underwriters" but
are effecting transactions in Shares, whether or not participating in the
distribution of Shares, are generally required to deliver a prospectus. This is
because the prospectus delivery exemption in Section 4(3) of the Securities Act
is not available in respect of such transactions as a result of Section 24(d) of
the 1940 Act. Firms that incur a prospectus-delivery obligation with respect to
Shares of a Fund are reminded that under Securities Act Rule 153, a
prospectus-delivery obligation under Section 5(b)(2) of the Securities Act owed
to an exchange member in connection with a sale on the Exchange is satisfied by
the fact that such Fund's prospectus is available at the Exchange upon request.
The prospectus delivery mechanism provided in Rule 153 is only available with
respect to transactions on an exchange.
EXCHANGE LISTING AND TRADING
A discussion of exchange listing and trading matters associated with an
investment in the Funds is contained in the Prospectus under the "DETERMINATION
OF NET ASSET VALUE" and "BUYING AND SELLING THE FUNDS." The discussion below
supplements, and should be read in conjunction with, such sections of the
Prospectus.
The Shares of each Fund are approved for listing and trading on the Exchange,
subject to notice of issuance. The Shares trade on the Exchange at prices that
may differ to some degree from their net asset value. There can be no assurance
that the requirements of the Exchange necessary to maintain the listing of
Shares of any Fund will continue to be met.
9
The Exchange may, but is not required to, remove the Shares of a Fund from
listing if (1) following the initial twelve-month period beginning upon the
commencement of trading of a Fund, there are fewer than 50 beneficial holders of
the Shares for 30 or more consecutive trading days; (2) the value of the
underlying Index or portfolio of securities on which such Fund is based is no
longer calculated or available; or (3) such other event shall occur or condition
exists that, in the opinion of the Exchange, makes further dealings on the
Exchange inadvisable. In addition, the Exchange will remove the Shares from
listing and trading upon termination of the Trust or a Fund.
As in the case of other stocks traded on the Exchange, brokers' commissions on
transactions will be based on negotiated commission rates at customary levels.
MANAGEMENT OF THE TRUST
The following information supplements and should be read in conjunction with the
section in the Prospectus entitled "MANAGEMENT."
TRUSTEES AND OFFICERS OF THE TRUST
The Board has responsibility for the overall management and operations of the
Trust, including general supervision of the duties performed by the Adviser and
other service providers. The Board currently consists of five Trustees, two of
whom are "interested persons" (as defined in the 1940 Act) of the Trust.
TRUSTEES AND OFFICERS
NAME, ADDRESS POSITION(S) TERM OF OFFICE PRINCIPAL NUMBER OF OTHER
AND DATE OF BIRTH WITH FUNDS AND LENGTH OF OCCUPATION(S) PORTFOLIOS DIRECTORSHIPS
TIME SERVED DURING PAST 5 YEARS IN FUND HELD BY TRUSTEE
COMPLEX
OVERSEEN
BY TRUSTEE
AGUSTIN J. FLEITES* Trustee, Unlimited Principal, State 10 SSgA Cash
SSgA Funds Management, President Elected: Street Global Management Fund,
Inc. August 2001 Advisors Dublin, Ireland,
2 International Place (1987-present); Director
Boston, Massachusetts Member SSgA
02110 Investment Committee
Age: 35 (1994-present).
TIMOTHY B. HARBERT* Trustee Unlimited President of State 10 Chairman of SSgA
SSgA Funds Management, Elected: Street Global
Inc. September 2000 Advisors
2 International Place (1990-present);
Boston, Massachusetts Executive Vice
02110 President of State
Age: 50 Street Corporation
(1996-present);
Member, Executive
Operating Group of
State Street
Corporation
(1995-present).
10
DAVID M. KELLY Trustee Unlimited President and Chief 10 Chicago Stock
4 Jodi Lane Elected: Executive Officer, Exchange (Public
Chatham, NJ 07928 September 2000 NSCC (1983-February Governor/Director);
Age: 63 2000); Vice Penson Worldwide
Chairman, DTCC (1999 Inc. (Director);
- February 2000); Thomas Murray
Vice Chairman and Ltd. (Director)
CEO, Government
Securities Clearing
Corp. (1990 -
February 2000).
FRANK NESVET Trustee Unlimited Chief Executive 10 Libra Group, Inc.
63 Eliot Hill Road Elected: Officer, Libra
Natick, Massachusetts September 2000 Group, Inc.
01760 (1998-present);
Age: 58 Managing Director,
Senior Vice
President and Fund
Treasurer, New
England Funds
(1993-1998).
HELEN F. PETERS Trustee Unlimited Dean, Carroll School 10 N/A
133 South Street Elected: of Management,
Needham, Massachusetts September 2000 Boston College
02492 (August
Age: 53 2000-present);
(Partner), Samuelson
Peters, LLC
(1999-August 2000);
(Director of Global
Bond Group), Scudder
Kemper Investments
(1998-1999); (Chief
Investment Officer),
Colonial Management
(1991-1998).
JAMES E. ROSS Vice Unlimited Principal, State N/A N/A
Funds Management, Inc. President Elected: Street Global
2 International Place September 2000 Advisors (March 2000
Boston, Massachusetts to present); Vice
02110 President, State
Age: 36 Street Bank and
Trust Company
(1998-March 2000);
Assistant Vice
President, State Street
Bank and Trust Company
(1996-1998), Assistant
Secretary, State Street
Bank and Trust Company
(1995-1996).
KATHLEEN C. CUOCOLO Treasurer Unlimited Executive Vice N/A N/A
State Street Bank and Elected: President, State
Trust Company September 2000 Street Bank and
2 Avenue de Lafayette Trust Company (March
Boston, Massachusetts 2000-present);
02111 Senior Vice
Age: 49 President
(1995-March 2000);
Executive Operating
Group
(1999-present); CPA
in Massachusetts.
11
DONALD A. GIGNAC Assistant Unlimited Vice President, N/A N/A
State Street Bank and Treasurer Elected: State Street Bank
Trust Company September 2000 and Trust Company
2 Avenue de Lafayette (1993-present).
Boston, Massachusetts
02111
Age: 36
MARY MORAN ZEVEN Secretary Unlimited Vice President and N/A N/A
State Street Bank and Elected: Associate Counsel,
Trust Company August 2001 State Street Bank
One Federal Street and Trust Company
Boston, Massachusetts since 2000; Vice
02110 President and
Age: 40 Counsel, PFPC, Inc.
1999 to 2000; Counsel,
Curtis, Mallet-Prevost,
Colt & Mosle, LLP 1996
to 1999 (law firm).
MICHAEL E. GILLESPIE Assistant Unlimited Vice President and N/A N/A
State Street Bank and Secretary Elected: Associate Counsel,
Trust Company September 2000 State Street Bank
One Federal Street and Trust Company
Boston, Massachusetts (1998-present);
02110 Senior Counsel and
Age: 43 Director of
Compliance, The
Pioneer Group
(1985-1998).
*Mr. Fleites and Mr. Harbert are "interested persons" of the Trust, as defined
in the 1940 Act, by virtue of their positions as officers of the Adviser.
REMUNERATION OF TRUSTEES AND OFFICERS
No officer, director or employee of the Adviser, its parent or subsidiaries
receives any compensation from the Trust for serving as an officer or Trustee of
the Trust. The Trust pays each Independent Trustee an annual fee of $12,000 plus
$4,500 per in person meeting attended. An Independent Trustee will receive $500
for each meeting attended via telephone or video conference. The Trust also
reimburses each Independent Trustee for travel and other out-of-pocket expenses
incurred by him/her in connection with attending such meetings.
The table below shows the compensation that the Independent Trustees received
during the Trust's fiscal year ended June 30, 2001. Mr. Fleites and Mr. Harbert
receive no compensation from the Trust.
Pension or Total
Aggregate Retirement Compensation
Compensation Benefits Accrued Estimated Annual From the Trust
Name and from the as Part of Trust Benefits Upon and Fund Complex
Position Trust* Expenses Retirement Paid to Trustees*
-------- ------ -------- ---------- -----------------
David M. Kelly $15,000 $0 N/A $15,000
Frank Nesvet $15,000 $0 N/A $15,000
Helen F. Peters $15,000 $0 N/A $15,000
12
*During the first twelve months of operations, the Trustees received $2,000 per
in person meeting attended. As of June 30, 2001, the Trust had three in person
meetings. In the future, the Funds will typically hold four regularly scheduled
Board meetings per year and the Independent Trustees will receive $4,500 per in
person meeting attended.
The Board of Trustees has an Audit Committee consisting of all Trustees who are
not "interested persons" (as defined in the 1940 Act) of the Trust. The Audit
Committee meets with the Trust's independent auditors to review and approve the
scope and results of their professional services; to review the procedures for
evaluating the adequacy of the Trust's accounting controls; to consider the
range of audit fees; and to make recommendations to the Board regarding the
engagement of the Trust's independent auditors. The Audit Committee met once
during the fiscal year ended June 30, 2001.
As of September 30, 2001 the Trustees and officers of the Trust as a group owned
less than 1% of the outstanding shares of each Fund.
CODES OF ETHICS
The Trust, the Adviser and the Distributor each have adopted a code of ethics as
required by applicable law, which is designed to prevent affiliated persons of
the Trust, the Adviser and the Distributor from engaging in deceptive,
manipulative or fraudulent activities in connection with securities held or to
be acquired by the Funds (which may also be held by persons subject to the codes
of ethics). There can be no assurance that the codes of ethics will be effective
in preventing such activities. Each code of ethics, filed as exhibits to this
registration statement, may be examined at the office of the SEC in Washington,
D.C. or on the Internet at the SEC's website at http://www.sec.gov.
THE INVESTMENT ADVISER
SSgA Funds Management, Inc. (the "Adviser") acts as investment adviser to the
Trust and, subject to the supervision of the Board, is responsible for the
investment management of each Fund. The Adviser's principal address is 2
International Place, Boston, Massachusetts 02110. The Adviser, a Massachusetts
corporation, is a wholly owned subsidiary of State Street Boston Corporation, a
publicly held bank holding company. The Adviser, State Street Band and Trust
Company ("State Street") and other affiliates of State Street make up State
Street Global Advisors ("SSgA"), the investment management arm of State Street.
As of June 30, 2001, SSgA managed approximately $758 billion in assets,
including approximately $380 billion in equity index funds. SSgA provides
complete global investment management services from offices in the U.S., London,
Sydney, Hong Kong, Tokyo, Toronto, Luxembourg, Montreal, Paris, Dublin, Munich
and Brussels.
The Adviser serves as investment adviser to each Fund pursuant to an Investment
Advisory Agreement between the Trust and the Adviser. The Investment Advisory
Agreement, with respect to each Fund, continues in effect for two years from its
effective date, and thereafter is subject to annual approval by (1) the Board of
Trustees or (2) vote of a majority of the outstanding voting securities (as
defined in the 1940 Act) of the Fund, provided that in either event such
continuance also is approved by a majority of the Board of Trustees who are not
interested persons (as defined in the 1940 Act) of the Trust by a vote cast in
person at a meeting called for the purpose of voting on such approval. The
Investment Advisory Agreement with respect to each Fund is terminable without
penalty, on 60 days notice, by the Board of Trustees or by a vote of the holders
of a majority (as defined in the 1940 Act) of the applicable Fund's outstanding
voting securities. The Investment Advisory Agreement is also terminable upon 60
days notice by the Adviser and will terminate automatically in the event of its
assignment (as defined in the 1940 Act).
13
In considering whether to continue each Fund's Investment Advisory Agreement,
the Trustees will consider all information they deem relevant, including, among
other things, the nature and quality of the services rendered, the investment
performance of the Fund, the costs of the Adviser in providing services, the
extent to which economies of scale are shared with the Fund, the Adviser's
profitability in providing services, and information with respect to the
Adviser's fees as compared to those of comparable funds.
Under the Investment Advisory Agreement, the Adviser, subject to the supervision
of the Board and in conformity with the stated investment policies of each Fund,
manages the investment of each Fund's assets. The Adviser is responsible for
placing purchase and sale orders and providing continuous supervision of the
investment portfolio of each Fund.
Pursuant to the Investment Advisory Agreement, the Trust has agreed to indemnify
the Adviser for certain liabilities, including certain liabilities arising under
the federal securities laws, unless such loss or liability results from willful
misfeasance, bad faith or gross negligence in the performance of its duties or
the reckless disregard of its obligations and duties.
For the services provided to the Funds under the Investment Advisory Agreement,
each Fund pays the Adviser monthly fees based on a percentage of each Fund's
average daily net assets as shown in the following table.
FUND MANAGEMENT FEE
-----------------------------------------------------------------------------------------
streetTRACKS(SM) Dow Jones U.S. Large-Cap Value Fund 0.20%
streetTRACKS(SM) Dow Jones U.S. Large-Cap Growth Fund 0.20%
streetTRACKS(SM) Dow Jones U.S. Small-Cap Value Fund 0.25%
streetTRACKS(SM) Dow Jones U.S. Small-Cap Growth Fund 0.25%
streetTRACKS(SM) Dow Jones Global Titans Index Fund 0.50%
streetTRACKS(SM) Wilshire REIT Index Fund 0.25%
streetTRACKS(SM) Morgan Stanley Technology Index Fund 0.50%
streetTRACKS(SM) Morgan Stanley Internet Index Fund 0.50%
FORTUNE 500(R) Index Fund 0.20%
FORTUNE e-50(R) Index Fund 0.20%
From time to time, the Adviser may waive all or a portion of its fee. The
Adviser pays all expenses of each Fund other than the management fee, brokerage,
taxes, interest, fees and expenses of the Independent Trustees (including any
Trustee's counsel fees), litigation expenses and other extraordinary expenses.
For the fiscal year ended June 30, 2001, the Funds paid the following amounts to
the Adviser:
FUND NAME AMOUNT PAID
--------- -----------
streetTRACKS(SM) Dow Jones U.S. Large-Cap Value Fund $69,634.52
streetTRACKS(SM) Dow Jones U.S. Large-Cap Growth Fund $42,705.62
streetTRACKS(SM) Dow Jones U.S. Small-Cap Value Fund $43,685.47
streetTRACKS(SM) Dow Jones U.S. Small-Cap Growth Fund $24,846.75
streetTRACKS(SM) Dow Jones Global Titans Index Fund $103,563.45
streetTRACKS(SM) Wilshire REIT Index Fund $7,683.70
14
streetTRACKS(SM) Morgan Stanley Technology Index Fund $275,853.53
streetTRACKS(SM) Morgan Stanley Internet Index Fund $71,727.94
FORTUNE 500(R) Index Fund $91,269.47
FORTUNE e-50(R) Index Fund $49,582.66
INVESTMENT SUB-ADVISER -- streetTRACKS(SM) Wilshire REIT Index Fund
Pursuant to the Advisory Agreement between the streetTRACKS(SM) Wilshire REIT
Index Fund and the Adviser, the Adviser is authorized to engage one or more
sub-advisers for the performance of any of the services contemplated to be
rendered by the Adviser. The Adviser has retained The Tuckerman Group LLC
("Tuckerman") as sub-adviser, to be responsible for the day to day management of
the streetTRACKS(SM) Wilshire REIT Index Fund's investments, subject to
supervision of the Adviser and the Board of Trustees while the Adviser will
provide administrative, compliance and general management services to the Fund.
Since its organization on April 28, 1999, Tuckerman has provided investment
management services to institutional investors and other mutual funds. As of
August 31, 2001, Tuckerman managed approximately $800 million in assets.
Tuckerman's principal business address is 2 Manhattanville Road, Purchase, New
York 10577.
In accordance with the Sub-Advisory Agreement between the Adviser and Tuckerman,
the Adviser will pay Tuckerman an annual investment sub-advisory fee equal to 0%
of average daily net assets up to the first $50 million in net assets and 0.05%
thereafter with respect to the streetTRACKS(SM) Wilshire REIT Index Fund. For
the fiscal year ended June 30, 2001, the Adviser paid $0 to Tuckerman for its
services.
THE ADMINISTRATOR
State Street serves as Administrator for the Trust pursuant to an Administrative
Services Agreement. Under the Administrative Services Agreement, State Street is
obligated on a continuous basis to provide such administrative services as the
Board of Trustees of the Trust reasonably deems necessary for the proper
administration of the Trust and each Fund. State Street will generally assist in
all aspects of the Trust's and the Funds' operations; supply and maintain office
facilities (which may be in State Street's own offices), statistical and
research data, data processing services, clerical, accounting, bookkeeping and
record keeping services (including without limitation the maintenance of such
books and records as are required under the 1940 Act and the rules thereunder,
except as maintained by other agents), internal auditing, executive and
administrative services, and stationery and office supplies; prepare reports to
shareholders or investors; prepare and file tax returns; supply financial
information and supporting data for reports to and filings with the SEC and
various state Blue Sky authorities; supply supporting documentation for meetings
of the Board of Trustees; provide monitoring reports and assistance regarding
compliance with the Declaration of Trust, by-laws, investment objectives and
policies and with federal and state securities laws; arrange for appropriate
insurance coverage; and negotiate arrangements with, and supervise and
coordinate the activities of, agents and others to supply services.
Pursuant to the Administrative Services Agreement, the Trust has agreed to
indemnify the Administrator for certain liabilities, including certain
liabilities arising under the federal securities laws, unless such loss or
liability results from gross negligence or willful misconduct in the performance
of its duties.
15
CUSTODIAN AND TRANSFER AGENT
State Street, 225 Franklin Street, Boston, Massachusetts 02110, also serves as
Custodian for the Funds pursuant to a Custodian Agreement. As Custodian, State
Street holds the Funds' assets, calculates the net asset value of the Shares and
calculates net income and realized capital gains or losses. State Street also
serves as Transfer Agent of the Funds pursuant to a Transfer Agency Agreement.
State Street may be reimbursed by the Funds for its out-of-pocket expenses.
State Street and the Trust will comply with the self-custodian provisions of
Rule 17f-2 under the 1940 Act.
THE DISTRIBUTOR
State Street Capital Markets, LLC is the principal underwriter and Distributor
of Shares. It is currently anticipated that the Distributor's name will be
changed to State Street Global Markets, LLC effective January 1, 2002. Its
principal address is 225 Franklin Street, Boston, Massachusetts 02110. Investor
information can be obtained by calling 1-866-S-TRACKS. The Distributor has
entered into a Distribution Agreement with the Trust pursuant to which it
distributes Shares of each Fund. The Distribution Agreement will continue for
two years from its effective date and is renewable annually thereafter. Shares
will be continuously offered for sale by the Trust through the Distributor only
in Creation Units, as described in the Prospectus and below under "CREATION AND
REDEMPTION OF CREATION UNITS." Shares in less than Creation Units are not
distributed by the Distributor. The Distributor will deliver the Prospectus to
persons purchasing Creation Units and will maintain records of both orders
placed with it and confirmations of acceptance furnished by it. The Distributor
is a broker-dealer registered under the Securities Exchange Act of 1934 (the
"Exchange Act") and a member of the National Association of Securities Dealers,
Inc. ("NASD"). The Distributor has no role in determining the investment
policies of the Trust or which securities are to be purchased or sold by the
Trust.
Each Fund, except for the FORTUNE 500(R) Index Fund and the FORTUNE e-50(R)
Index Fund, has adopted a Distribution and Service Plan (a "Plan") pursuant to
which payments of up to 0.25% may be made. No payments pursuant to the Plan
during the next twelve (12) months of operation. Under its terms, each Fund's
Plan remains in effect from year to year, provided such continuance is approved
annually by vote of the Board, including a majority of the "Independent
Trustees" (Trustees who are not interested persons of the Fund (as defined in
the 1940 Act) and have no direct or indirect financial interest in the operation
of the Plan or any agreement related to the Plan). The Plan may not be amended
to increase materially the amount to be spent for the services provided by the
Distributor without approval by the shareholders of the relevant Fund to which
the Plan applies, and all material amendments of the Plan also require Board
approval (as described above). Each Plan may be terminated at any time, without
penalty, by vote of a majority of the Independent Trustees, or, by a vote of a
majority of the outstanding voting securities of such Fund (as such vote is
defined in the 1940 Act). Pursuant to the Distribution Agreement, the
Distributor will provide the Board with periodic reports of any amounts expended
under the Plan and the purpose for which such expenditures were made.
The Distribution Agreement provides that it may be terminated at any time,
without the payment of any penalty, as to each Fund: (i) by vote of a majority
of the Independent Trustees or (ii) by vote of a majority (as defined in the
1940 Act) of the outstanding voting securities of the Fund, on at least 60 days
written notice to the Distributor. The Distribution Agreement is also terminable
upon 60 days notice by the Distributor and will terminate automatically in the
event of its assignment (as defined in the 1940 Act).
16
Pursuant to agreements entered into with such persons, the Distributor will make
payments under each Plan to certain broker-dealers or other persons ("Investor
Services Organizations") that enter into agreements with the Distributor in the
form approved by the Board of Trustees to provide distribution assistance and
shareholder support, account maintenance and educational and promotional
services (which may include compensation and sales incentives to the registered
brokers or other sales personnel of the broker-dealer or other financial entity
that is a party to an investor services agreement) ("Investor Services
Agreements"). No such Investor Services Agreements will be entered into during
the first twelve months of operation. Each Investor Services Agreement will be a
"related agreement" under the Plan of the relevant Fund. No Investor Services
Agreement will provide for annual fees of more than 0.25% of a Fund's average
daily net assets per annum attributable to Shares subject to such agreement.
Subject to an aggregate limitation of 0.25% of a Fund's average net assets per
annum, the fees paid by a Fund under its Plan will be compensation for
distribution, investor services or marketing services for that Fund. To the
extent the Plan fees aggregate less than 0.25% per annum of the average daily
net assets of a Fund, each Fund may also reimburse the Distributor and other
persons for their respective costs incurred in printing prospectuses and
producing advertising or marketing material prepared at the request of the Fund.
The aggregate payments under each Plan will not exceed, on an annualized basis,
0.25% of average daily net assets of any Fund.
The continuation of the Distribution Agreement, any Investor Services Agreements
and any other related agreements is subject to annual approval of the Board,
including by a majority of the Independent Trustees, as described above.
Each of the Investor Services Agreements will provide that it may be terminated
at any time, without the payment of any penalty, (i) by vote of a majority of
the Independent Trustees or (ii) by vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of the relevant Fund, on at least 60
days' written notice to the other party. Each of the Distribution Agreement and
the Investor Services Agreements is also terminable upon 60 days' notice by the
Distributor and will terminate automatically in the event of its assignment (as
defined in the 1940 Act). Each Investor Services Agreement is also terminable by
the applicable Investor Service Organization upon 60 days' notice to the other
party thereto.
The allocation among the Funds of fees and expenses payable under the
Distribution Agreement and the Investor Services Agreements will be made pro
rata in accordance with the daily net assets of the respective Funds.
The Distributor may also enter into agreements with securities dealers
("Soliciting Dealers") who will solicit purchases of Creation Unit aggregations
of Fund Shares. Such Soliciting Dealers may also be Participating Parties (as
defined in the "Book Entry Only System" section below), DTC Participants (as
defined below) and/or Investor Services Organizations.
Pursuant to the Distribution Agreement, the Trust has agreed to indemnify the
Distributor, and may indemnify Soliciting Dealers entering into agreements with
the Distributor, for certain liabilities, including certain liabilities arising
under the federal securities laws, unless such loss or liability results from
willful misfeasance, bad faith or gross negligence in the performance of its
duties or the reckless disregard of its obligations and duties under the
Distribution Agreement or other agreement, as applicable.
17
BROKERAGE TRANSACTIONS
The policy of the Trust regarding purchases and sales of securities for the
Funds is that primary consideration will be given to obtaining the most
favorable prices and efficient executions of transactions. Consistent with this
policy, when securities transactions are effected on a stock exchange, the
Trust's policy is to pay commissions which are considered fair and reasonable
without necessarily determining that the lowest possible commissions are paid in
all circumstances. The Trust believes that a requirement always to seek the
lowest possible commission cost could impede effective portfolio management and
preclude the Funds and the Adviser from obtaining a high quality of brokerage
and research services. In seeking to determine the reasonableness of brokerage
commissions paid in any transaction, the Adviser relies upon its experience and
knowledge regarding commissions generally charged by various brokers and on its
judgment in evaluating the brokerage and research services received from the
broker effecting the transaction. Such determinations are necessarily subjective
and imprecise, as in most cases an exact dollar value for those services is not
ascertainable.
In seeking to implement the Trust's policies, the Adviser effects transactions
with those brokers and dealers who the Adviser believes provides the most
favorable prices and are capable of providing efficient executions. If the
Adviser believes such price and execution are obtainable from more than one
broker or dealer, it may give consideration to placing portfolio transactions
with those brokers and dealers who also furnish research and other services to
the Funds or the Adviser. Such services may include, but are not limited to,
information as to the availability of securities for purchase or sale and
statistical information pertaining to corporate actions affecting stocks,
including but not limited to, stocks within one or more of the Indexes.
The Funds will not deal with affiliates in principal transactions unless
permitted by exemptive order or applicable rule or regulation.
The Adviser assumes general supervision over placing orders on behalf of the
Trust for the purchase or sale of portfolio securities. If purchases or sales of
portfolio securities of the Trust and one or more other investment companies or
clients supervised by the Adviser are considered at or about the same time,
transactions in such securities are allocated among the several investment
companies and clients in a manner deemed equitable to all by the Adviser. In
some cases, this procedure could have a detrimental effect on the price or
volume of the security so far as the Trust is concerned. However, in other
cases, it is possible that the ability to participate in volume transactions and
to negotiate lower brokerage commissions will be beneficial to the Trust. The
primary consideration is prompt execution of orders at the most favorable net
price.
Portfolio turnover may vary from year to year, as well as within a year. High
turnover rates are likely to result in comparatively greater brokerage expenses.
The portfolio turnover rate for each Fund is expected to be under 50%. See
"INVESTMENT POLICIES AND STRATEGIES" in the Prospectus. The overall
reasonableness of brokerage commissions is evaluated by the Adviser based upon
its knowledge of available information as to the general level of commissions
paid by other institutional investors for comparable services.
18
BOOK ENTRY ONLY SYSTEM
The following information supplements and should be read in conjunction with the
section in the Prospectus entitled "BUYING AND SELLING."
DTC acts as securities depositary for the Shares. Shares of each Fund are
represented by securities registered in the name of DTC or its nominee, Cede &
Co., and deposited with, or on behalf of, DTC. Except in the limited
circumstance provided below, certificates will not be issued for Shares.
DTC, a limited-purpose trust company, was created to hold securities of its
participants (the "DTC Participants") and to facilitate the clearance and
settlement of securities transactions among the DTC Participants in such
securities through electronic book-entry changes in accounts of the DTC
Participants, thereby eliminating the need for physical movement of securities
certificates. DTC Participants include securities brokers and dealers, banks,
trust companies, clearing corporations and certain other organizations, some of
whom (and/or their representatives) own DTC. More specifically, DTC is owned by
a number of its DTC Participants and by the New York Stock Exchange ("NYSE"),
the AMEX and the NASD. Access to the DTC system is also available to others such
as banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a DTC Participant, either directly or indirectly
(the "Indirect Participants").
Beneficial ownership of Shares is limited to DTC Participants, Indirect
Participants and persons holding interests through DTC Participants and Indirect
Participants. Ownership of beneficial interests in Shares (owners of such
beneficial interests are referred to herein as "Beneficial Owners") is shown on,
and the transfer of ownership is effected only through, records maintained by
DTC (with respect to DTC Participants) and on the records of DTC Participants
(with respect to Indirect Participants and Beneficial Owners that are not DTC
Participants). Beneficial Owners will receive from or through the DTC
Participant a written confirmation relating to their purchase of Shares.
Conveyance of all notices, statements and other communications to Beneficial
Owners is effected as follows. Pursuant to the Depositary Agreement between the
Trust and DTC, DTC is required to make available to the Trust upon request and
for a fee to be charged to the Trust a listing of the Shares of each Fund held
by each DTC Participant. The Trust shall inquire of each such DTC Participant as
to the number of Beneficial Owners holding Shares, directly or indirectly,
through such DTC Participant. The Trust shall provide each such DTC Participant
with copies of such notice, statement or other communication, in such form,
number and at such place as such DTC Participant may reasonably request, in
order that such notice, statement or communication may be transmitted by such
DTC Participant, directly or indirectly, to such Beneficial Owners. In addition,
the Trust shall pay to each such DTC Participant a fair and reasonable amount as
reimbursement for the expenses attendant to such transmittal, all subject to
applicable statutory and regulatory requirements.
Share distributions shall be made to DTC or its nominee, Cede & Co., as the
registered holder of all Shares. DTC or its nominee, upon receipt of any such
distributions, shall credit immediately DTC Participants' accounts with payments
in amounts proportionate to their respective beneficial interests in Shares of
each Fund as shown on the records of DTC or its nominee. Payments by DTC
Participants to Indirect Participants and Beneficial Owners of Shares held
through such DTC Participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts of
19
customers in bearer form or registered in a "street name," and will be the
responsibility of such DTC Participants.
The Trust has no responsibility or liability for any aspects of the records
relating to or notices to Beneficial Owners, or payments made on account of
beneficial ownership interests in such Shares, or for maintaining, supervising
or reviewing any records relating to such beneficial ownership interests or for
any other aspect of the relationship between DTC and the DTC Participants or the
relationship between such DTC Participants and the Indirect Participants and
Beneficial Owners owning through such DTC Participants.
DTC may determine to discontinue providing its service with respect to Shares at
any time by giving reasonable notice to the Trust and discharging its
responsibilities with respect thereto under applicable law. Under such
circumstances, the Trust shall take action either to find a replacement for DTC
to perform its functions at a comparable cost or, if such a replacement is
unavailable, to issue and deliver printed certificates representing ownership of
Shares, unless the Trust makes other arrangements with respect thereto
satisfactory to the Exchange.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
Although the Funds do not have information concerning the beneficial ownership
of the Funds held in the names of DTC Participants, as of September 30, 2001,
the names, addresses and percentage ownership of each DTC Participant that owned
of record 5% or more of the outstanding shares of a Fund were as follows:
FUND NAME AND ADDRESS PERCENTAGE OF OWNERSHIP
---- ---------------- -----------------------
streetTRACKS(SM) Dow Jones U.S. Charles Schwab & Company, Inc. 10.716%
Large-Cap Value Fund Issuer Services
c/o ADP Proxy Services
51 Mercedes Way
Edgewood, NY 11717
Lehman Brothers, Inc. 58.533%
c/o BSSC, Attn: proxy Dept.
P. O. Box 29198
Brooklyn, NY 11202
Merrill Lynch 14.363%
4 Corporate Place
Corporate Park 287
Piscataway, NJ 08855
National Financial Services 6.249%
200 Liberty Street
New York, NY 10281
streetTRACKS(SM) Dow Jones U.S. Charles Schwab & Company, Inc. 10.561%
Large-Cap Growth Fund Issuer Services
c/o ADP Proxy Services
51 Mercedes Way
Edgewood, NY 11717
20
Lehman Brothers, Inc. 60.5%
c/o BSSC, Attn: proxy Dept.
P. O. Box 29198
Brooklyn, NY 11202
National Financial Services 11.981%
200 Liberty Street
New York, NY 10005
streetTRACKS(SM) Dow Jones U.S. Brown Brothers 7.939%
Small-Cap Value Fund 63 Wall Street
New York, NY 10005
Charles Schwab & Company, Inc. 11.709%
Issuer Services
c/o ADP Proxy Services
51 Mercedes Way
Edgewood, NY 11717
Lehman Brothers, Inc. 21.85%
c/o BSSC, Attn: proxy Dept.
P. O. Box 29198
Brooklyn, NY 11202
National Financial Services 5.604%
200 Liberty Street
New York, NY 10281
Spear Leeds Kellogg 19.255%
120 Broadway
New York, NY
streetTRACKS(SM) Dow Jones U.S. Charles Schwab & Company, Inc. 10.059%
Small-Cap Growth Fund Issuer Services
c/o ADP Proxy Services
51 Mercedes Way
Edgewood, NY 11717
Northern Trust 19.556%
801 S. Canal C-IN
P.O. Box 29198
Chicago, IL 60607
21
streetTRACKS(SM) Dow Jones Global First Clearing Corporation 10.604%
Titans Index Fund 10700 Wheat First Drive
Glen Allen, VA 23060
Lehman Brothers, Inc. 59.092%
c/o BSSC, Attn: proxy Dept.
P. O. Box 29198
Brooklyn, NY 11202
streetTRACKS(SM) Wilshire REIT Index Commerzbank Capital Markets Corp. 65.067%
Fund 1251 Avenue of the Americas
New York, NY 11202
Donaldson Lufkin & Jenrette 13.560%
Securities Corp.
1 Pershing Plaza
Jersey City, NJ 07399
streetTRACKS(SM) Morgan Stanley Lehman Brothers, Inc. 13.674%
Technology Index Fund c/o BSSC, Attn: proxy Dept.
P. O. Box 29198
Brooklyn, NY 11202
Merrill Lynch 5.824%
4 Corporate Place
Corporate park 287
Piscataway, NJ 08855
Morgan Stanley & Co., Inc. 42.703%
One Pierrepont Plaza, 7th Floor
Brooklyn, NY 11201
Morgan Stanley Dean Witter, Inc. 12.429%
280 West 10200 South
Sandy, UT 84070
streetTRACKS(SM) Morgan Stanley Edwards AG 13.046%
Internet Index Fund 125 Broad Street, 40th Floor
New York, NY 10004
Morgan Stanley & Co., Inc. 63.899%
One Pierrepont Plaza, 7th Floor
Brooklyn, NY 11201
Morgan Stanley Dean Witter, Inc 5.472%
280 West 10200 South
Sandy, UT 84070
22
Spear Leeds Kellogg 10.146%
120 Broadway
New York, NY
FORTUNE 500(R) Index Fund Commerzbank Capital Markets Corp. 75.00%
1251 Avenue of the Americas
New York, NY 10020
Charles Schwab & Company, Inc. 5.493%
Issuer Services
c/o ADP Proxy Services
51 Mercedes Way
Edgewood, NY 11717
FORTUNE e-50(R) Index Fund Commerzbank Capital Markets Corp. 21.286%
1251 Avenue of the Americas
New York, NY 10020
Charles Schwab & Company, Inc. 11.170%
Issuer Services
c/o ADP Proxy Services
51 Mercedes Way
Edgewood, NY 11717
Merill Lynch 20.198%
4 Corporate Place
Corporate park 287
Piscataway, NJ 08855
Morgan Stanley Dean Witter, Inc. 5.516%
280 West 10200 South
Sandy, UT 84070
National Financial Services 6.525%
200 Liberty Street
New York, NY 10281
CREATION AND REDEMPTION OF CREATION UNITS
CREATION
The Trust issues and sells Shares of each Fund only in Creation Units on a
continuous basis through the Distributor, without a sales load, at their net
asset value next determined after receipt, on any Business Day (as defined
below), of an order in proper form.
A "Business Day" with respect to each Fund is any day on which the NYSE is open
for business. As of the date of the Prospectus, the NYSE observes the following
holidays: New Year's Day, Martin Luther King,
23
Jr. Day, President's Day (Washington's Birthday), Good Friday, Memorial Day
(observed), Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
FUND DEPOSIT
The consideration for purchase of a Creation Unit of a Fund generally consists
of an in-kind deposit of a designated portfolio of equity securities -- the
"Deposit Securities" -- per each Creation Unit constituting a substantial
replication, or a representation, of the stocks included in the relevant Fund's
Index and an amount of cash -- the "Cash Component" -- computed as described
below. Together, the Deposit Securities and the Cash Component constitute the
"Fund Deposit," which represents the minimum initial and subsequent investment
amount for a Creation Unit of any Fund. The Cash Component is an amount equal to
the difference between the net asset value of the Shares (per Creation Unit) and
the market value of the Deposit Securities. If the Cash Component is a positive
number (i.e., the net asset value per Creation Unit exceeds the market value of
the Deposit Securities), the Cash Component shall be such positive amount. If
the Cash Component is a negative number (i.e., the net asset value per Creation
Unit is less than the market value of the Deposit Securities), the Cash
Component shall be such negative amount and the creator will be entitled to
receive cash in an amount equal to the Cash Component. The Cash Component serves
the function of compensating for any differences between the net asset value per
Creation Unit and the market value of the Deposit Securities.
The Custodian, through the National Securities Clearing Corporation ("NSCC")
(discussed below), makes available on each Business Day, immediately prior to
the opening of business on the New York Stock Exchange (currently 9:30 a.m., New
York time), the list of the names and the required number of shares of each
Deposit Security to be included in the current Fund Deposit (based on
information at the end of the previous Business Day) for each Fund. Such Fund
Deposit is applicable, subject to any adjustments as described below, in order
to effect creations of Creation Units of a given Fund until such time as the
next-announced composition of the Deposit Securities is made available.
The identity and number of shares of the Deposit Securities required for a Fund
Deposit for each Fund changes as rebalancing adjustments and corporate action
events are reflected from time to time by the Adviser with a view to the
investment objective of the Fund. The composition of the Deposit Securities may
also change in response to adjustments to the weighting or composition of the
Component Stocks of the relevant Index. In addition, the Trust reserves the
right to permit or require the substitution of an amount of cash -- i.e., a
"cash in lieu" amount -- to be added to the Cash Component to replace any
Deposit Security which may not be available in sufficient quantity for delivery
or which may not be eligible for transfer through the Clearing Process
(discussed below), or which may not be eligible for trading by an Authorized
Participant (as defined below) or the investor for which it is acting. Brokerage
commissions incurred in connection with acquisition of Deposit Securities not
eligible for transfer through the systems of DTC and hence not eligible for
transfer through the Clearing Process (discussed below) will be at the expense
of the Fund and will affect the value of all Shares; but the Adviser, subject to
the approval of the Board of Trustees, may adjust the transaction fee within the
parameters described above to protect ongoing shareholders. The adjustments
described above will reflect changes, known to the Adviser on the date of
announcement to be in effect by the time of delivery of the Fund Deposit, in the
composition of the subject Index being tracked by the relevant Fund or resulting
from certain corporate actions.
In addition to the list of names and numbers of securities constituting the
current Deposit Securities of a Fund Deposit, the Custodian, through the NSCC,
also makes available on each Business Day, the estimated
24
Cash Component, effective through and including the previous Business Day, per
outstanding Share of each Fund.
PROCEDURES FOR CREATION OF CREATION UNITS
To be eligible to place orders with the Distributor to create a Creation Unit of
a Fund, an entity must be (i) a "Participating Party", i.e., a broker-dealer or
other participant in the clearing process through the Continuous Net Settlement
System of the NSCC (the "Clearing Process"), a clearing agency that is
registered with the SEC; or (ii) a DTC Participant (see "BOOK ENTRY ONLY
SYSTEM"), and, in each case, must have executed an agreement with the Trust, the
Distributor and the Transfer Agent with respect to creations and redemptions of
Creation Units ("Participant Agreement") (discussed below). A Participating
Party and DTC Participant are collectively referred to as an "Authorized
Participant". Investors should contact the Distributor for the names of
Authorized Participants that have signed a Participant Agreement. All Shares of
Funds, however created, will be entered on the records of DTC in the name of
Cede & Co. for the account of a DTC Participant.
All orders to create Funds must be placed for one or more Creation Unit size
aggregations of Shares (50,000 in the case of each Fund). All orders to create
Creation Units, whether through the Clearing Process (through a Participating
Party) or outside the Clearing Process (through a DTC Participant), must be
received by the Distributor no later than the close of the regular trading
session on the NYSE (ordinarily 4:00 p.m. New York time)("Closing Time") in each
case on the date such order is placed in order for the creation of Creation
Units to be effected based on the net asset value of Shares of each Fund as next
determined on such date after receipt of the order in proper form. The date on
which an order to create Creation Units (or an order to redeem Creation Units as
discussed below) is placed is referred to as the "Transmittal Date". Orders must
be transmitted by an Authorized Participant by telephone or other transmission
method acceptable to the Distributor pursuant to procedures set forth in the
Participant Agreement, as described below (see "Placement of Creation Orders
Using Clearing Process" and "Placement of Creation Orders Outside Clearing
Process"). Severe economic or market disruptions or changes, or telephone or
other communication failure, may impede the ability to reach the Distributor or
an Authorized Participant.
Orders to create Creation Units of Funds shall be placed with an Authorized
Participant, as applicable, in the form required by such Authorized Participant.
In addition, the Authorized Participant may request the investor to make certain
representations or enter into agreements with respect to the order, e.g., to
provide for payments of cash, when required. Investors should be aware that
their particular broker may not have executed a Participant Agreement, and that,
therefore, orders to create Creation Units of Funds have to be placed by the
investor's broker through an Authorized Participant that has executed a
Participant Agreement. At any given time there may be only a limited number of
broker-dealers that have executed a Participant Agreement. Those placing orders
for Creation Units through the Clearing Process should afford sufficient time to
permit proper submission of the order to the Distributor prior to the Closing
Time on the Transmittal Date.
Orders for creation that are effected outside the Clearing Process are likely to
require transmittal by the DTC Participant earlier on the Transmittal Date than
orders effected using the Clearing Process. Those persons placing orders outside
the Clearing Process should ascertain the deadlines applicable to DTC and the
Federal Reserve Bank wire system by contacting the operations department of the
broker or depository institution effectuating such transfer of Deposit
Securities and Cash Component.
25
PLACEMENT OF CREATION ORDERS USING CLEARING PROCESS
The Clearing Process is the process of creating or redeeming Creation Units
through the Continuous Net Settlement System of the NSCC. Fund Deposits made
through the Clearing Process must be delivered through a Participating Party
that has executed a Participant Agreement. The Participant Agreement authorizes
the Distributor to transmit through the Transfer Agent to NSCC, on behalf of the
Participating Party, such trade instructions as are necessary to effect the
Participating Party's creation order. Pursuant to such trade instructions to
NSCC, the Participating Party agrees to deliver the requisite Deposit Securities
and the Cash Component to the Trust, together with such additional information
as may be required by the Distributor. An order to create Funds in Creation
Units through the Clearing Process is deemed received by the Distributor on the
Transmittal Date if (i) such order is received by the Distributor not later than
the Closing Time on such Transmittal Date and (ii) all other procedures set
forth in the Participant Agreement are properly followed.
PLACEMENT OF CREATION ORDERS OUTSIDE CLEARING PROCESS
Fund Deposits made outside the Clearing Process must be delivered through a DTC
Participant that has executed a Participant Agreement with the Trust, the
Distributor and the Transfer Agent. A DTC Participant who wishes to place an
order creating Creation Units to be effected outside the Clearing Process need
not be a Participating Party, but such orders must state that the DTC
Participant is not using the Clearing Process and that the creation of Creation
Units will instead be effected through a transfer of securities and cash
directly through DTC. The Fund Deposit transfer must be ordered by the DTC
Participant on the Transmittal Date in a timely fashion so as to ensure the
delivery of the requisite number of Deposit Securities through DTC to the
account of the Trust by no later than 11:00 a.m., New York time, of the next
Business Day immediately following the Transmittal Date. All questions as to the
number of Deposit Securities to be delivered, and the validity, form and
eligibility (including time of receipt) for the deposit of any tendered
securities, will be determined by the Trust, whose determination shall be final
and binding. The cash equal to the Cash Component must be transferred directly
to the Custodian through the Federal Reserve wire system in a timely manner so
as to be received by the Custodian no later than 2:00 p.m., New York time, on
the next Business Day immediately following such Transmittal Date. An order to
create Creation Units of Funds outside the Clearing Process is deemed received
by the Distributor on the Transmittal Date if (i) such order is received by the
Distributor not later than the Closing Time on such Transmittal Date; and (ii)
all other procedures set forth in the Participant Agreement are properly
followed. However, if the Custodian does not receive both the requisite Deposit
Securities and the Cash Component by 11:00 a.m. and 2:00 p.m., respectively, on
the next Business Day immediately following the Transmittal Date, such order
will be cancelled. Upon written notice to the Distributor, such cancelled order
may be resubmitted the following Business Day using a Fund Deposit as newly
constituted to reflect the then current net asset value of the Fund. The
delivery of Creation Units of Funds so created will occur no later than the
third (3rd) Business Day following the day on which the purchase order is deemed
received by the Distributor.
Creation Units of Funds may be created in advance of receipt by the Trust of all
or a portion of the applicable Deposit Securities as described below. In these
circumstances, the initial deposit will have a value greater than the net asset
value of the Shares on the date the order is placed in proper form since in
addition to available Deposit Securities, cash must be deposited in an amount
equal to the sum of (i) the Cash Component, plus (ii) 115% of the market value
of the undelivered Deposit Securities (the "Additional Cash Deposit"). The order
shall be deemed to be received on the Business Day on which the order is placed
provided that the order is placed in proper form prior to 4:00 p.m., New York
time, on such date and
26
federal funds in the appropriate amount are deposited with the Trust's Custodian
by 11:00 a.m., New York time, the following Business Day. If the order is not
placed in proper form by 4:00 p.m. or federal funds in the appropriate amount
are not received by 11:00 a.m. the next Business Day, then the order may be
deemed to be rejected and the investor shall be liable to the Trust for losses,
if any, resulting therefrom. An additional amount of cash shall be required to
be deposited with the Trust, pending delivery of the missing Deposit Securities
to the extent necessary to maintain the Additional Cash Deposit with the Trust
in an amount at least equal to 115% of the daily marked to market value of the
missing Deposit Securities. To the extent that missing Deposit Securities are
not received by 1:00 p.m., New York time, on the third Business Day following
the day on which the purchase order is deemed received by the Distributor or in
the event a mark to market payment is not made within one Business Day following
notification by the Distributor that such a payment is required, the Trust may
use the cash on deposit to purchase the missing Deposit Securities. Authorized
Participants will be liable to the Trust for the costs incurred by the Trust in
connection with any such purchases. These costs will be deemed to include the
amount by which the actual purchase price of the Deposit Securities exceeds the
market value of such Deposit Securities on the day the purchase order was deemed
received by the Distributor plus the brokerage and related transaction costs
associated with such purchases. The Trust will return any unused portion of the
Additional Cash Deposit once all of the missing Deposit Securities have been
properly received by the Custodian or purchased by the Trust and deposited into
the Trust. In addition, a transaction fee will be charged in all cases. The
delivery of Creation Units of Funds so created will occur no later than the
third Business Day following the day on which the purchase order is deemed
received by the Distributor.
ACCEPTANCE OF ORDERS FOR CREATION UNITS
The Trust reserves the absolute right to reject a creation order transmitted to
it by the Distributor in respect of any Fund if (a) the order is not in proper
form; (b) the investor(s), upon obtaining the Shares ordered, would own 80% or
more of the currently outstanding Shares of any Fund; (c) the Deposit Securities
delivered are not as disseminated through the facilities of the Exchange for
that date by the Custodian, as described above; (d) acceptance of the Deposit
Securities would have certain adverse tax consequences to the Fund; (e) the
acceptance of the Fund Deposit would, in the opinion of counsel, be unlawful;
(f) the acceptance of the Fund Deposit would otherwise, in the discretion of the
Trust or the Adviser, have an adverse effect on the Trust or the rights of
beneficial owners; or (g) in the event that circumstances outside the control of
the Trust, the Distributor and the Adviser make it for all practical purposes
impossible to process creation orders. Examples of such circumstances include
acts of God or public service or utility problems such as fires, floods, extreme
weather conditions and power outages resulting in telephone, telecopy and
computer failures; market conditions or activities causing trading halts;
systems failures involving computer or other information systems affecting the
Trust, the Adviser, the Distributor, DTC, NSCC or any other participant in the
creation process, and similar extraordinary events. The Distributor shall notify
a prospective creator of a Creation Unit and/or the Authorized Participant
acting on behalf of the creator of a Creation Unit of its rejection of the order
of such person. The Trust, the Transfer Agent, the Custodian and the Distributor
are under no duty, however, to give notification of any defects or
irregularities in the delivery of Fund Deposits nor shall either of them incur
any liability for the failure to give any such notification.
All questions as to the number of shares of each security in the Deposit
Securities and the validity, form, eligibility and acceptance for deposit of any
securities to be delivered shall be determined by the Trust, and the Trust's
determination shall be final and binding.
27
CREATION TRANSACTION FEE
To compensate the Trust for transfer and other transaction costs involved in
creation transactions through the Clearing Process, investors will be required
to pay a fixed creation transaction fee, described below, payable to the Trust
regardless of the number of creations made each day. An additional charge of up
to three (3) times the fixed transaction fee (expressed as a percentage of the
value of the Deposit Securities) may be imposed for (i) creations effected
outside the Clearing Process; and (ii) cash creations (to offset the Trust's
brokerage and other transaction costs associated with using cash to purchase the
requisite Deposit Securities). Investors are responsible for the costs of
transferring the securities constituting the Deposit Securities to the account
of the Trust.
FUND TRANSACTION OUTSIDE THE
FEE CLEARING
PROCESS
streetTRACKS(SM) Dow Jones U.S. Large Cap Value Index Fund $1,000 up to $4,000
streetTRACKS(SM) Dow Jones U.S. Large Cap Growth Index Fund $1,000 up to $4,000
streetTRACKS(SM) Dow Jones U.S. Small Cap Value Index Fund $1,500 up to $6,000
streetTRACKS(SM) Dow Jones U.S. Small Cap Growth Index Fund $1,500 up to $6,000
streetTRACKS(SM) Dow Jones Global Titans Index Fund $1,000 up to $4,000
streetTRACKS(SM) Wilshire REIT Index Fund $1,000 up to $4,000
streetTRACKS(SM) Morgan Stanley Technology Index Fund $ 500 up to $2,000
streetTRACKS(SM) Morgan Stanley Internet Index Fund $ 500 up to $2,000
FORTUNE 500(R) Index Fund $2,000 up to $8,000
FORTUNE e-50(R) Index Fund $ 500 up to $2,000
REDEMPTION
Shares may be redeemed only in Creation Units at their net asset value next
determined after receipt of a redemption request in proper form by the Fund
through the Transfer Agent and only on a Business Day. THE TRUST WILL NOT REDEEM
SHARES IN AMOUNTS LESS THAN CREATION UNITS. Beneficial Owners must accumulate
enough Shares in the secondary market to constitute a Creation Unit in order to
have such Shares redeemed by the Trust. There can be no assurance, however, that
there will be sufficient liquidity in the public trading market at any time to
permit assembly of a Creation Unit. Investors should expect to incur brokerage
and other costs in connection with assembling a sufficient number of Shares to
constitute a redeemable Creation Unit. As of September 30, 2001, the value of
the securities comprising a deposit of designated equity securities necessary
for an in-kind purchase of a Creation Unit for each Fund was as follows:
streetTRACKS(SM) Dow Jones Large Cap Value Index Fund, $5,994,910.00;
streetTRACKS(SM) Dow Jones Large Cap Growth Index Fund, $2,282,590.75;
streetTRACKS(SM) Dow Jones Small Cap Value Index Fund, $5,816,276.50;
streetTRACKS(SM) Dow Jones Small Cap Growth Index Fund, $2,756,711.60;
streetTRACKS(SM) Dow Jones Global Titans Index Fund, $5,778,306.50;
streetTRACKS(SM) Wilshire REIT Index Fund, $3,076,516.45; streetTRACKS(SM)
Morgan Stanley Technology Index Fund, $1,877,258.75; streetTRACKS(SM) Morgan
Stanley Internet Index Fund, $422,644.00; FORTUNE 500(R) Index Fund,
$3,749,800.70; FORTUNE e-50(R) Index Fund, $1,292,068.50.
With respect to each Fund, the Custodian, through the NSCC, makes available
immediately prior to the opening of business on the New York Stock Exchange
(currently 9:30 am, New York time) on each Business Day, the Fund Securities
that will be applicable (subject to possible amendment or correction) to
28
redemption requests received in proper form (as defined below) on that day. Fund
Securities received on redemption may not be identical to Deposit Securities
which are applicable to creations of Creation Units.
Unless cash redemptions are available or specified for a Fund, the redemption
proceeds for a Creation Unit generally consist of Fund Securities -- as
announced by the Custodian on the Business Day of the request for redemption
received in proper form -- plus cash in an amount equal to the difference
between the net asset value of the Shares being redeemed, as next determined
after a receipt of a request in proper form, and the value of the Fund
Securities (the "Cash Redemption Amount"), less a redemption transaction fee
described below in the section entitled "REDEMPTION TRANSACTION FEE". In the
event that the Fund Securities have a value greater than the net asset value of
the Shares, a compensating cash payment equal to the differential is required to
be made by or through an Authorized Participant by the redeeming shareholder.
REDEMPTION TRANSACTION FEE
A redemption transaction fee, described below, is paid to the Trust to offset
transfer and other transaction costs that may be incurred in connection with the
redemption of Creation Units. The redemption transaction fee is the same no
matter how many Creation Units are being redeemed pursuant to any one redemption
request. An additional charge of up to three (3) times the fixed transaction fee
may be charged with respect to transactions effected outside the Clearing
Process.
FUND TRANSACTION OUTSIDE THE
FEE CLEARING
PROCESS
streetTRACKS(SM) Dow Jones U.S. Large Cap Value Index Fund $1,000 up to $4,000
streetTRACKS(SM) Dow Jones U.S. Large Cap Growth Index Fund $1,000 up to $4,000
streetTRACKS(SM) Dow Jones U.S. Small Cap Value Index Fund $1,500 up to $6,000
streetTRACKS(SM) Dow Jones U.S. Small Cap Growth Index Fund $1,500 up to $6,000
streetTRACKS(SM) Dow Jones Global Titans Index Fund $1,000 up to $4,000
streetTRACKS(SM) Wilshire REIT Index Fund $1,000 up to $4,000
streetTRACKS(SM) Morgan Stanley Technology Index Fund $ 500 up to $2,000
streetTRACKS(SM) Morgan Stanley Internet Index Fund $ 500 up to $2,000
FORTUNE 500(R) Index Fund $2,000 up to $8,000
FORTUNE e-50(R) Index Fund $ 500 up to $2,000
The Funds, subject to approval by the Board of Trustees, may adjust the fee from
time to time based upon actual experience. An additional charge for cash
redemptions or partial cash redemptions (when cash redemptions are available)
for each Fund may be imposed. Investors who use the services of a broker or
other such intermediary in addition to an Authorized Participant to effect a
redemption of a Creation Unit may be charged a fee for such services.
PLACEMENT OF REDEMPTION ORDERS USING CLEARING PROCESS
Orders to redeem Creation Units of Funds through the Clearing Process must be
delivered through a Participating Party that has executed the Participant
Agreement. An order to redeem Creation Units of Funds using the Clearing Process
is deemed received on the Transmittal Date if (i) such order is received by the
Transfer Agent not later than 4:00 p.m., New York time, on such Transmittal
Date; and (ii) all other procedures set forth in the Participant Agreement are
properly followed; such order will be effected based on the net asset value of
the Fund as next determined. An order to redeem Creation Units of a Fund using
the Clearing Process made in proper form but received by the Fund after 4:00
p.m., New York time, will be
29
deemed received on the next Business Day immediately following the Transmittal
Date and will be effected at the net asset value next determined on such
Business Day. The requisite Fund Securities and the Cash Redemption Amount will
be transferred by the third (3rd) NSCC Business Day following the date on which
such request for redemption is deemed received.
PLACEMENT OF REDEMPTION ORDERS OUTSIDE CLEARING PROCESS
Orders to redeem Creation Units of Funds outside the Clearing Process must be
delivered through a DTC Participant that has executed the Participant Agreement.
A DTC Participant who wishes to place an order for redemption of Creation Units
of Funds to be effected outside the Clearing Process need not be a Participating
Party, but such orders must state that the DTC Participant is not using the
Clearing Process and that redemption of Creation Units will instead be effected
through transfer of Shares directly through DTC. An order to redeem Creation
Units of Funds outside the Clearing Process is deemed received by the Transfer
Agent on the Transmittal Date if (i) such order is received by the Transfer
Agent not later than 4:00 p.m., New York time, on such Transmittal Date; (ii)
such order is accompanied or proceeded by the requisite number of Shares of
Funds specified in such order, which delivery must be made through DTC to the
Custodian no later than 11:00 a.m., New York time, on the next Business Day
following such Transmittal Date (the "DTC Cut-Off-Time"); and (iii) all other
procedures set forth in the Participant Agreement are properly followed.
After the Transfer Agent has deemed an order for redemption outside the Clearing
Process received, the Transfer Agent will initiate procedures to transfer the
requisite Fund Securities which are expected to be delivered within three
Business Days and the Cash Redemption Amount to the Authorized Participant on
behalf of the redeeming Beneficial Owner by the third Business Day following the
Transmittal Date on which such redemption order is deemed received by the
Transfer Agent.
The calculation of the value of the Fund Securities and the Cash Redemption
Amount to be delivered upon redemption will be made by the Custodian according
to the procedures set forth under "DETERMINATION OF NET ASSET VALUE" computed on
the Business Day on which a redemption order is deemed received by the Transfer
Agent. Therefore, if a redemption order in proper form is submitted to the
Transfer Agent by a DTC Participant not later than the Closing Time on the
Transmittal Date, and the requisite number of Shares of the relevant Fund are
delivered to the Custodian prior to the DTC Cut-Off-Time, then the value of the
Fund Securities and the Cash Redemption Amount to be delivered will be
determined by the Custodian on such Transmittal Date. If, however, a redemption
order is submitted to the Transfer Agent by a DTC Participant not later than the
Closing Time on the Transmittal Date but either (1) the requisite number of
Shares of the relevant Fund are not delivered by the DTC Cut-Off-Time as
described above on the next Business Day following the Transmittal Date or (2)
the redemption order is not submitted in proper form, then the redemption order
will not be deemed received as of the Transmittal Date. In such case, the value
of the Fund Securities and the Cash Redemption Amount to be delivered will be
computed on the Business Day that such order is deemed received by the Transfer
Agent, i.e., the Business Day on which the Shares of the relevant Funds are
delivered through DTC to the Custodian by the DTC Cut-Off-Time on such Business
Day pursuant to a properly submitted redemption order.
If it is not possible to effect deliveries of the Fund Securities, the Trust may
in its discretion exercise its option to redeem such Shares in cash, and the
redeeming Beneficial Owner will be required to receive its redemption proceeds
in cash. In addition, an investor may request a redemption in cash which the
Fund may, in its sole discretion, permit. In either case, the investor will
receive a cash payment equal to the net
30
asset value of its Shares based on the net asset value of Shares of the relevant
Fund next determined after the redemption request is received in proper form
(minus a redemption transaction fee and additional charge for requested cash
redemptions specified above, to offset the Trust's brokerage and other
transaction costs associated with the disposition of Fund Securities). The Fund
may also, in its sole discretion, upon request of a shareholder, provide such
redeemer a portfolio of securities which differs from the exact composition of
the Fund Securities but does not differ in net asset value.
Redemptions of Shares for Fund Securities will be subject to compliance with
applicable federal and state securities laws and each Fund (whether or not it
otherwise permits cash redemptions) reserves the right to redeem Creation Units
for cash to the extent that the Fund could not lawfully deliver specific Fund
Securities upon redemptions or could not do so without first registering the
Fund Securities under such laws. An Authorized Participant or an investor for
which it is acting subject to a legal restriction with respect to a particular
stock included in the Fund Securities applicable to the redemption of a Creation
Unit may be paid an equivalent amount of cash. The Authorized Participant may
request the redeeming Beneficial Owner of the Shares to complete an order form
or to enter into agreements with respect to such matters as compensating cash
payment, beneficial ownership of Shares or delivery instructions.
The right of redemption may be suspended or the date of payment postponed with
respect to any Fund (1) for any period during which the NYSE is closed (other
than customary weekend and holiday closings); (2) for any period during which
trading on the NYSE is suspended or restricted; (3) for any period during which
an emergency exists as a result of which disposal of the Shares of the Fund or
determination of the Shares' net asset value is not reasonably practicable; or
(4) in such other circumstance as is permitted by the SEC.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction with the
section in the Prospectus entitled "DETERMINATION OF NET ASSET VALUE."
Net asset value per Share for each Fund of the Trust is computed by dividing the
value of the net assets of such Fund (i.e., the value of its total assets less
total liabilities) by the total number of Shares outstanding, rounded to the
nearest cent. Expenses and fees, including the management fees, are accrued
daily and taken into account for purposes of determining net asset value. The
net asset value of each Fund is calculated by the Custodian and determined at
the close of the regular trading session on the NYSE (ordinarily 4:00 p.m. New
York time) on each day that such exchange is open.
In computing a Fund's net asset value per Share, the Fund's securities holdings
are valued based on their last sale price. Price information on listed
securities is taken from the exchange where the security is primarily traded.
Securities regularly traded in an over-the-counter market are valued at the last
sale price in such market. Other portfolio securities and assets for which
market quotations are not readily available are valued based on fair value as
determined in good faith by the Adviser in accordance with procedures adopted by
the Board.
DIVIDENDS AND DISTRIBUTIONS
The following information supplements and should be read in conjunction with the
section in the Prospectus entitled "DISTRIBUTIONS."
31
GENERAL POLICIES
Dividends from net investment income, if any, are declared and paid quarterly by
each Fund. Distributions of net realized securities gains, if any, generally are
declared and paid once a year, but the Trust may make distributions on a more
frequent basis for certain Funds to improve index tracking or to comply with the
distribution requirements of the Internal Revenue Code, in all events in a
manner consistent with the provisions of the 1940 Act.
Dividends and other distributions on Shares are distributed, as described below,
on a pro rata basis to Beneficial Owners of such Shares. Dividend payments are
made through DTC Participants and Indirect Participants to Beneficial Owners
then of record with proceeds received from the Trust.
The Trust makes additional distributions to the extent necessary (i) to
distribute the entire annual taxable income of the Trust, plus any net capital
gains and (ii) to avoid imposition of the excise tax imposed by Section 4982 of
the Internal Revenue Code. Management of the Trust reserves the right to declare
special dividends if, in its reasonable discretion, such action is necessary or
advisable to preserve the status of each Fund as a regulated investment company
("RIC") or to avoid imposition of income or excise taxes on undistributed
income.
DIVIDEND REINVESTMENT SERVICE
Broker-dealers may make available the DTC book-entry Dividend Reinvestment
Service for use by Beneficial Owners of Funds through DTC Participants for
reinvestment of their dividend distributions. If this service is available and
used, dividend distributions of both income and realized gains will be
automatically reinvested in additional whole Shares issued by the same Fund
based on a payable date NAV.
TAXES
The following information also supplements and should be read in conjunction
with the section in the Prospectus entitled "TAX MATTERS."
Each Fund intends to qualify for and to elect treatment as a separate RIC under
Subchapter M of the Internal Revenue Code. To qualify for treatment as a RIC, a
company must annually distribute at least 90% of its net investment company
taxable income (which includes dividends, interest and net short-term capital
gains) and meet several other requirements.
Each Fund is treated as a separate corporation for federal income tax purposes.
Each Fund therefore is considered to be a separate entity in determining its
treatment under the rules for RICs described herein and in the Prospectus.
Losses in one Fund do not offset gains in another and the requirements (other
than certain organizational requirements) for qualifying RIC status are
determined at the Fund level rather than at the Trust level.
A Fund will be subject to a 4% excise tax on certain undistributed income if it
does not distribute to its shareholders in each calendar year at least 98% of
its ordinary income for the calendar year plus 98% of its capital gain net
income for the twelve months ended October 31 of such year. Each Fund intends to
declare and distribute dividends and distributions in the amounts and at the
times necessary to avoid the application of this 4% excise tax.
32
As a result of tax requirements, the Trust on behalf of each Fund has the right
to reject an order to purchase Shares if the purchaser (or group of purchasers)
would, upon obtaining the Shares so ordered, own 80% or more of the outstanding
Shares of a given Fund and if, pursuant to section 351 of the Internal Revenue
Code, the respective Fund would have a basis in the Deposit Securities different
from the market value of such securities on the date of deposit. The Trust also
has the right to require information necessary to determine beneficial share
ownership for purposes of the 80% determination. See "CREATION AND REDEMPTION OF
CREATION UNITS."
Dividends and interest received by a Fund may give rise to withholding and other
taxes imposed by foreign countries. Tax conventions between certain countries
and the United States may reduce or eliminate such taxes.
Each Fund will report to shareholders annually the amounts of dividends received
from ordinary income, the amount of distributions received from capital gains
and the portion of dividends which may qualify for the dividends received
deduction.
A loss realized on a sale or exchange of Shares of a Fund may be disallowed if
other Fund Shares are acquired (whether through the automatic reinvestment of
dividends or otherwise) within a sixty-one (61) day period beginning thirty (30)
days before and ending thirty (30) days after the date that the Shares are
disposed of. In such a case, the basis of the Shares acquired will be adjusted
to reflect the disallowed loss. Any loss upon the sale or exchange of Shares
held for six (6) months or less will be treated as long-term capital loss to the
extent of any capital gain dividends received by the shareholders.
Distribution of ordinary income and capital gains may also be subject to state
and local taxes.
Distributions reinvested in additional Shares of a Fund through the means of the
service (see "DIVIDEND REINVESTMENT SERVICE") will nevertheless be taxable
dividends to Beneficial Owners acquiring such additional Shares to the same
extent as if such dividends had been received in cash.
Distributions of ordinary income paid to shareholders who are nonresident aliens
or foreign entities will be subject to a 30% United States withholding tax
unless a reduced rate of withholding or a withholding exemption is provided
under applicable treaty law. Nonresident shareholders are urged to consult their
own tax advisors concerning the applicability of the United States withholding
tax.
Some shareholders may be subject to a withholding tax on distributions of
ordinary income, capital gains and any cash received on redemption of Creation
Units ("backup withholding"). The backup withholding rates are currently: 31%
from 1/1/01-8/6/01; 30.5% from 8/7/01-12/31/01; 30% during 2002-2003; 29% during
2004-2005; 28% during 2006-2010; and 31% -- 2011 and thereafter. Generally,
shareholders subject to backup withholding will be those for whom no certified
taxpayer identification number is on file with the Fund or who, to the Fund's
knowledge, have furnished an incorrect number. When establishing an account, an
investor must certify under penalty of perjury that such number is correct and
that such investor is not otherwise subject to backup withholding.
The foregoing discussion is a summary only and is not intended as a substitute
for careful tax planning. Purchasers of Shares of the Trust should consult their
own tax advisors as to the tax consequences of investing in such shares,
including under state, local and other tax laws. Finally, the foregoing
discussion is based on applicable provisions of the Internal Revenue Code,
regulations, judicial authority and
33
administrative interpretations in effect on the date hereof. Changes in
applicable authority could materially affect the conclusions discussed above,
and such changes often occur.
FEDERAL TAX TREATMENT OF FUTURES AND OPTIONS CONTRACTS
Each Fund is required for federal income tax purposes to mark to market and
recognize as income for each taxable year its net unrealized gains and losses on
certain futures contracts as of the end of the year as well as those actually
realized during the year. Gain or loss from futures and options contracts on
broad-based indexes required to be marked to market will be 60% long-term and
40% short-term capital gain or loss. Application of this rule may alter the
timing and character of distributions to shareholders. A Fund may be required to
defer the recognition of losses on futures contracts, option contracts and swaps
to the extent of any unrecognized gains on offsetting positions held by the
Fund.
In order for a Fund to continue to qualify for federal income tax treatment as a
regulated investment company, at least 90% of its gross income for a taxable
year must be derived from qualifying income, i.e., dividends, interest, income
derived from loans of securities, gains from the sale of securities or of
foreign currencies or other income derived with respect to the Fund's business
of investing in securities. It is anticipated that any net gain realized from
the closing out of futures or options contracts will be considered gain from the
sale of securities and therefore will be qualifying income for purposes of the
90% requirement.
Each Fund distributes to shareholders annually any net capital gains which have
been recognized for federal income tax purposes (including unrealized gains at
the end of the Fund's fiscal year) on futures or options transactions. Such
distributions are combined with distributions of capital gains realized on the
Fund's other investments and shareholders are advised on the nature of the
distributions.
CAPITAL STOCK AND SHAREHOLDER REPORTS
The Trust currently is comprised of ten Funds. Each Fund issues shares of
beneficial interest, par value $.01 per Share. The Board of Trustees may
designate additional Funds.
Each Share issued by the Trust has a pro rata interest in the assets of the
corresponding Fund. Shares have no preemptive, exchange, subscription or
conversion rights and are freely transferable. Each Share is entitled to
participate equally in dividends and distributions declared by the Board with
respect to the relevant Fund, and in the net distributable assets of such Fund
on liquidation.
Each Share has one vote with respect to matters upon which a shareholder vote is
required consistent with the requirements of the 1940 Act and the rules
promulgated thereunder. Shares of all Funds vote together as a single class
except that if the matter being voted on affects only a particular Fund it will
be voted on only by that Fund and if a matter affects a particular Fund
differently from other Funds, that Fund will vote separately on such matter.
Under Massachusetts law, the Trust is not required to hold an annual meeting of
shareholders unless required to do so under the 1940 Act. The policy of the
Trust is not to hold an annual meeting of shareholders unless required to do so
under the 1940 Act. All Shares of the Trust (regardless of the Fund) have
noncumulative voting rights for the election of Trustees. Under Massachusetts
law, Trustees of the Trust may be removed by vote of the shareholders.
Under Massachusetts law, shareholders of a business trust may, under certain
circumstances, be held personally liable as partners for obligations of the
Trust. However, the Declaration of Trust contains an
34
express disclaimer of shareholder liability for acts or obligations of the
Trust, requires that Trust obligations include such disclaimer, and provides for
indemnification and reimbursement of expenses out of the Trust's property for
any shareholder held personally liable for the obligations of the Trust. Thus,
the risk of a shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which the Trust itself would be unable
to meet its obligations. Given the above limitations on shareholder personal
liability, and the nature of each Fund's assets and operations, the risk to
shareholders of personal liability is believed to be remote.
Shareholder inquiries may be made by writing to the Trust, c/o the Distributor,
State Street Brokerage Services at 225 Franklin Street, 19th Floor, Boston,
Massachusetts 02110.
PERFORMANCE AND OTHER INFORMATION
The performance of a Fund may be quoted in advertisements, sales literature or
reports to shareholders in terms of average annual total return, cumulative
total return and yield.
Quotations of average annual total return are expressed in terms of the average
annual rate of return of a hypothetical investment in a Fund over periods of 1,
5 and 10 years (or the life of a Fund, if shorter). Such total return figures
will reflect the deduction of a proportional share of such Fund's expenses on an
annual basis, and will assume that all dividends and distributions are
reinvested when paid.
Total return is calculated according to the following formula: P(1 + T)n = ERV
(where P = a hypothetical initial payment of $1,000, T = the average annual
total return, n = the number of years and ERV = the ending redeemable value of a
hypothetical $1,000 payment made at the beginning of the 1, 5 or 10 year
period).
Quotations of a cumulative total return will be calculated for any specified
period by assuming a hypothetical investment in a Fund on the date of the
commencement of the period and will assume that all dividends and distributions
are reinvested on ex date. The net increase or decrease in the value of the
investment over the period will be divided by its beginning value to arrive at
cumulative total return. Total return calculated in this manner will differ from
the calculation of average annual total return in that it is not expressed in
terms of an average rate of return.
The yield of a Fund is the net annualized yield based on a specified 30-day (or
one month) period assuming a semiannual compounding of income. Included in net
investment income is the amortization of market premium or accretion of market
and original issue discount on bonds. Yield is calculated by dividing the net
investment income per share earned during the period by the maximum offering
price per share on the last day of the period, according to the following
formula: YIELD = 2[(((a-b)/cd + 1) to the power of 6)-1] (where a = dividends
and interest earned during the period, b = expenses accrued for the period (net
of reimbursements), c = the average daily number of shares outstanding during
the period that were entitled to receive dividends, and d = the maximum offering
price per share on the last day of the period).
Quotations of cumulative total return, average annual total return or yield
reflect only the performance of a hypothetical investment in a Fund during the
particular time period on which the calculations are based. Such quotations for
a Fund will vary based on changes in market conditions and the level of such
Fund's expenses, and no reported performance figure should be considered an
indication of performance which may be expected in the future.
35
The cumulative and average total returns and yields do not currently take into
account federal or state income taxes which may be payable by shareholders;
total returns and yields would, of course, be lower if such charges were taken
into account.
A comparison of the quoted non-standard performance offered for various
investments is valid only if performance is calculated in the same manner. Since
there are different methods for calculating performance, investors should
consider the effects of the methods used to calculate performance when comparing
performance of the Funds with performance quoted with respect to other
investment companies or types of investments.
From time to time, in advertising and marketing literature, the Funds'
performance may be compared to the performance of broad groups of open-end and
closed-end investment companies with similar investment goals, as tracked by
independent organizations such as Investment Company Data, Inc., Lipper
Analytical Services, Inc., CDA Investment Technologies, Inc., Morningstar, Inc.,
Value Line Mutual Fund Survey and other independent organizations. When these
organizations' tracking results are used, the Funds will be compared to the
appropriate fund category, that is, by fund objective and portfolio holdings, or
to the appropriate volatility grouping, where volatility is a measure of a
fund's risk.
Information may be provided to investors regarding capital gains distributions
by one or more Funds. Comparisons between the Funds and other investment
vehicles such as conventional mutual funds may be made regarding such capital
gains distributions, as well as relative tax efficiencies between the Funds and
such other investment vehicles (e.g., realization of capital gains or losses to
a Fund and to such other investment vehicles in connection with redemption of
their respective securities).
Investors may be informed that, while no unequivocal statement can be made as to
the net tax impact on a mutual fund resulting from the purchases and sales of
its portfolio stocks over a period of time, conventional mutual funds that have
accumulated substantial unrealized capital gains, if they experience net
redemptions and do not have sufficient available cash, may be required to sell
appreciated securities and make taxable capital gains distributions that are
generated by changes in such fund's portfolio. In contrast to conventional
mutual funds where redemption transactions that effect an adverse tax impact on
taxable shareholders because of the need to sell portfolio securities which, in
turn, may generate taxable gain, the in-kind redemption mechanism of the Funds
generally will not lead to a tax event for ongoing shareholders. Since
shareholders are generally required to pay tax on capital gains distributions,
the smaller the amount of such distributions, the less taxes that are payable
currently. To the extent that a Fund is not required to recognize capital gains,
a shareholder of such Fund is able, in effect, to defer tax on such gains until
he sells or otherwise disposes of his shares. If such holder retains his shares
until his death, under current law the tax basis of such shares would be
adjusted to their then fair market value.
In addition, in connection with the communication of the performance of the
Funds to current or prospective shareholders, the Trust also may compare those
figures to the performance of certain unmanaged indexes which may assume the
reinvestment of dividends or interest but generally do not reflect deductions
for administrative and management costs. Examples of such indexes include, but
are not limited to the following: Dow Jones Industrial Average; Consumer Price
Index; Standard & Poor's 500 Composite Stock Price Index (S&P 500); Russell 1000
& NASDAQ non-financial 100 and their subsidiary sector indexes.
Performance of an index is historical and does not represent performance of the
Trust, and is not a guarantee of future results.
36
In addition, information may be presented to current or prospective shareholders
regarding the purchase of Funds in the secondary market, such as margin
requirements, types of orders that may be entered and information concerning
short sales.
Evaluation of each Fund's performance or other relevant statistical information
made by independent sources may also be used in advertisements and sales
literature concerning the Trust, including reprints of, or selections from,
editorials or articles about the Trust. Sources for Trust performance
information and articles about the Trust include, but are not limited to, the
following: American Association of Individual Investors' Journal, a monthly
publication of the AAII that includes articles on investment analysis
techniques; Barron's, a Dow Jones and Company, Inc. business and financial
weekly that periodically reviews investment company performance data; Business
Week, a national business weekly that periodically reports the performance
rankings of investment companies; CDA Investment Technologies, an organization
that provides performance and ranking information through examining the dollar
results of hypothetical mutual fund investments and comparing these results
against appropriate indexes; Forbes, a national business publication that from
time to time reports the performance of specific investment companies; FORTUNE,
a national business publication that periodically rates the performance of a
variety of investment companies; The Frank Russell Company, a West-Coast
investment management firm that periodically evaluates international stock
markets and compares foreign equity market performance to U.S. stock market
performance; Ibbotson Associates, Inc., a company specializing in investment
research and data; Investment Company Data, Inc., an independent organization
that provides performance ranking information for broad classes of mutual funds;
Investor's Business Daily, a daily newspaper that features financial, economic,
and business news; Kiplinger's Personal Finance Magazine, a monthly investment
advisory publication that periodically features the performance of a variety of
securities; Lipper Analytical Services, Inc.'s Mutual Fund Performance Analysis,
a weekly publication of industry-wide mutual fund averages by type of fund;
Money, a monthly magazine that from time to time features both specific funds
and the mutual fund industry as a whole; The New York Times, a nationally
distributed newspaper that regularly covers financial news; Smart Money, a
national personal finance magazine published monthly by Dow Jones & Company,
Inc. and The Hearst Corporation that focuses on ideas for investing, spending
and saving; Value Line Mutual Fund Survey, an independent publication that
provides biweekly performance and other information on mutual funds; The Wall
Street Journal, a Dow Jones and Company, Inc. newspaper that regularly covers
financial news; Wiesenberger Investment Companies Services, an annual compendium
of information about mutual funds and other investment companies, including
comparative data on funds' backgrounds, management policies, salient features,
management results, income and dividend records and price ranges; Worth, a
national publication distributed ten times per year by Capital Publishing
Company that focuses on personal finance.
COUNSEL AND INDEPENDENT AUDITORS
Mayer, Brown & Platt serves as counsel to the Trust. Ernst & Young LLP serve as
the independent auditors of the Trust.
FINANCIAL STATEMENTS
The Report of Independent Auditors, financial highlights, and financial
statements of the Funds included in the Trust's Annual Report to Shareholders
for the fiscal year ended June 30, 2001 on Form N-30D under the Investment
Company Act, filed electronically on August 27, 2001 (File No.
0000950135-01-005285) are incorporated by reference into this Statement of
Additional Information.
37
PART C
OTHER INFORMATION
ITEM 23. Exhibits
(a)(i) Declaration of Trust was filed on June 28, 1998 and is incorporated
herein by reference
(a)(ii) Amended and Restated Declaration of Trust was filed on September 25,
2000, and is incorporated herein by reference
(b) Bylaws of the Trust were filed on September 25, 2000, and is
incorporated herein by reference
(c) Global certificates evidencing shares of the Beneficial Interest,
$.01 par value, of each Fund were filed on September 25, 2000, and
is incorporated herein by reference
(d) Investment Management Agreement between the Trust and SSgA Funds
Management, Inc. is filed herewith.
(d)(i) Addendum to Investment Management Agreement between the Trust and
SSgA Funds Management, Inc. is filed herewith
(d)(ii) Sub-Advisory Agreement between the Trust on behalf of the
streetTRACKS Wilshire REIT Index Fund and SSgA Funds Management,
Inc.
(e) Distribution Agreement between the Trust and State Street Capital
Markets was filed on September 25, 2000, and is incorporated herein
by reference
(f) Not applicable
(g) Custodian and Accounting Services Agreement was filed on September
25, 2000, and is incorporated herein by reference
(h)(i) Administration Agreement was filed on September 25, 2000, and is
incorporated herein by reference
(h)(ii) Transfer Agency Services Agreement was filed on September 25, 2000,
and is incorporated herein by reference
(h)(iii) Form of Participant Agreement is filed herewith
(h)(iv) Form of Sales and Investor Services Agreement was filed on September
25, 2000, and is incorporated herein by reference
(i) Opinion and Consent of Mayer Brown & Platt was filed on September
25, 2000, and is incorporated herein by reference
(j)(i) Consent of Ernst & Young, LLC is filed herewith
(k) Not applicable
(l) Subscription Agreement(s) between the Trust and State Street Capital
Markets, LLC was filed on September 25, 2000, and is incorporated
herein by reference
(m) Distribution and Service Plan was filed on September 25, 2000, and
is incorporated herein by reference
(n) Not applicable.
(p)(i) Code of Ethics of the Trust was filed on September 25, 2000, and is
incorporated herein by reference
(p)(ii) Code of Ethics of the Adviser was filed on September 25, 2000, and
is incorporated herein by reference
(p)(iii) Distributor has adopted the Code of Ethics used by the Adviser and
filed as Exhibit (p)(ii)
(q) Powers of Attorney were filed on September 25, 2000, and is
incorporated herein by reference
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Immediately prior to the contemplated public offering of the Trust Shares, State
Street Capital Markets, LLC will be the sole shareholder of each Fund of the
Trust.
ITEM 25. INDEMNIFICATION
Pursuant to Section 5.3 of the Registrant's Amended and Restated Declaration of
Trust and under Section 4.8 of the Registrant's By-Laws, the Trust will
indemnify any person who is, or has been, a Trustee, officer, employee or agent
of the Trust against all expenses reasonably incurred or paid by him/her in
connection with any claim, action, suit or proceeding in which he/she becomes
involved as a party or otherwise by virtue of his/her being or having been a
Trustee, officer, employee or agent and against amounts paid or incurred by
him/her in the settlement thereof, if he/she acted in good faith and in a manner
he/she reasonably believed to be in or not opposed to the best interests of the
Trust, and, with respect to any criminal action or proceeding, had no reasonable
cause to believe his/her conduct was unlawful. In addition, indemnification is
permitted only if it is determined that the actions in question did not render
him/her liable by reason of willful misfeasance, bad faith or gross negligence
in the performance of his/her duties or by reason of reckless disregard of
his/her obligations and duties to the Registrant. The Registrant may also
advance money for litigation expenses provided that Trustees, officers,
employees and/or agents give their undertakings to repay the Registrant unless
their conduct is later determined to permit indemnification.
Pursuant to Section 5.2 of the Registrant's Amended and Restated Declaration of
Trust, no Trustee, officer, employee or agent of the Registrant shall be liable
for any action or failure to act, except in the case of willful misfeasance, bad
faith or gross negligence or reckless disregard of duties to the Registrant.
Pursuant to paragraph 9 of the Registrant's Investment Advisory Agreement, the
Adviser shall not be liable for any action or failure to act, except in the case
of willful misfeasance, bad faith or gross negligence or reckless disregard of
duties to the Registrant.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions of Rule 484 under the Act, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The Registrant hereby undertakes that it will apply the indemnification
provision of its by-laws in a manner consistent with Release 11330 of the
Securities and Exchange Commission under the Investment Company Act of 1940, so
long as the interpretation of Sections 17(h) and 17(i) of such Act remains in
effect.
The Registrant maintains insurance on behalf of any person who is or was a
Trustee, officer, employee or agent of Registrant, or who is or was serving at
the request of Registrant as a trustee, director, officer, employee or agent of
another trust or corporation, against any liability asserted against him/her and
incurred by him/her or arising out of his/her position. However, in no event
will Registrant maintain insurance to indemnify any such person for any act for
which Registrant itself is not permitted to indemnify him/her.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
See "Management" in the STATEMENT OF ADDITIONAL INFORMATION as to the directors
and officers of the Adviser is included in its Form ADV filed with the SEC and
is incorporated herein by reference thereto.
ITEM 27. PRINCIPAL UNDERWRITERS
(a) State Street Capital Markets, LLC is the Trust's principal underwriter.
(b) The following is a list of the executive officers, directors and
partners of State Street Capital Markets, LLC:
Howard Fairweather, Director
David Spina. Director
Stefan Gavell, Director
Nicholas Bonn, Director
Charles Kaye, Director
F. Charles R. Hindmarsh, President and CEO
Nicholas Bonn, Executive Vice President and CFO
Robert Kilroy, Senior Vice President and Treasurer
Mark Hansen, Vice President and Chief Compliance Officer
Charles C. Cutrell, III, Secretary
M. Bradley Jacobs, Chief Legal Officer
(c) Not applicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books and other documents required to be maintained by Section
31(a) of the 1940 Act and the Rules thereunder will be maintained at the offices
of State Street Bank and Trust Company, One Federal Street, Boston,
Massachusetts 02110.
ITEM 29. MANAGEMENT SERVICES
Not applicable.
ITEM 30. UNDERTAKINGS
Not applicable.
Exhibit List
(d) Investment Management Agreement between the Trust and SSgA Funds
Management, Inc.
(d)(i) Addendum to Investment Management Agreement between the Trust and
SSgA Funds Management, Inc.
(d)(ii) Sub-Advisory Agreement between the Trust on behalf of the
streetTRACKS Wilshire REIT Index Fund and SSgA Funds Management,
Inc.
(h)(iii) Form of Participant Agreement
(j)(i) Consent of Ernst & Young, LLC
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, the Registrant has duly
caused this amendment to the registration statement to be signed on its behalf
by the undersigned, duly authorized, in the City of Boston and the Commonwealth
of Massachusetts, on the 26th day of October, 2001.
streetTRACKS(SM) SERIES TRUST
By: /s/ Agustin J. Fleites
-----------------------
Agustin J. Fleites
President
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
this amendment to the registration statement has been signed below by the
following person in the capacities and on the date indicated:
SIGNATURES TITLE DATE
---------- ----- ----
/s/ David M. Kelly* Trustee October 26, 2001
-----------------------
David M. Kelly
/s/ Frank Nesvet* Trustee October 26, 2001
-----------------------
Frank Nesvet
/s/ Helen F. Peters* Trustee October 26, 2001
-----------------------
Helen F. Peters
/s/ Timothy B. Harbert* Trustee October 26, 2001
-----------------------
Timothy B. Harbert
/s/ Agustin J. Fleites Trustee October 26, 2001
-----------------------
Agustin J. Fleites
* Pursuant to Power of Attorney
By: /s/ Michael E. Gillespie
--------------------------
Michael E. Gillespie
As Attorney-in-Fact
EX-99.(D)
3
b40821ssex99-d.txt
INVESTMENT MANAGEMENT AGREEMENT
INVESTMENT ADVISORY AGREEMENT
BETWEEN
SSGA FUNDS MANAGEMENT, INC.
AND
streetTRACKS(SM) SERIES TRUST
This Agreement is made as of this 1st day of May, 2001, between
streetTRACKS(SM) Series Trust, a Massachusetts business trust (the "Trust"), and
SSgA Funds Management, Inc., a Massachusetts corporation (the "Adviser").
WHEREAS, the Trust is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), currently consisting of the ten separate portfolio series set forth on
Exhibit A to this Agreement (each a "Fund" and collectively, the "Initial
Funds"), each having its own investment policies; and
WHEREAS, the Adviser is in the business of providing investment advisory
services; and
WHEREAS, the Trust desires to retain the Adviser to render investment
advisory services to the Trust with respect to the Initial Funds and such other
series subsequently established by the Trust and made subject to this Agreement
in accordance with paragraph 1(b) (the "Additional Funds") (the Initial Funds
together with the Additional Funds being referred to herein as the "Funds"), and
the Adviser is willing to render such services;
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, the Trust and Adviser agree as follows:
1. APPOINTMENT OF ADVISER.
(a) Initial Funds: The Trust hereby appoints the Adviser to act as
investment adviser to the Initial Funds for the period and on the terms set
forth in this Agreement. The Adviser accepts such appointment and agrees to
render the services herein set forth, for the compensation herein provided. The
Trust warrants that the Adviser has been duly appointed to act hereunder.
(b) Additional Funds: In the event that the Trust establishes one or
more series other than the Initial Funds with respect to which it desires to
retain the Adviser to render investment advisory services hereunder, it shall so
notify the Adviser in writing, indicating the advisory fee to be payable with
respect to each Additional Fund. If the Adviser is willing to render such
services, it shall so notify the Trust in writing, whereupon each such
Additional Fund shall become a Fund hereunder. In such event, a writing signed
by both the Trust and the Adviser shall be annexed hereto as a part hereof
indicating that each such Additional Fund has become a Fund hereunder and
reflecting the agreed-upon fee schedule for each such Additional Fund.
2. ADVISORY DUTIES. Subject to the supervision of the Board of Trustees of the
Trust (the "Board"), the Adviser shall manage the investment operations and
determine the composition of the portfolio of each Fund, including the purchase,
retention and disposition of the securities and other instruments held by the
Fund, in accordance with such Fund's investment objective and policies as stated
in the then current prospectus and Statement of Additional Information for such
Fund contained in the Trust's Registration Statement on Form N-1A (the
"Registration Statement"), as such prospectus and Statement of Additional
Information are amended or supplemented from time to time. The Adviser's duties
hereunder are subject to the following understandings:
(a) The Adviser shall provide supervision of investments, furnish a
continuous investment program for the Funds, determine from time to time what
investments or securities will be purchased, retained or sold by the Funds, and
what portion of the assets will be invested or held uninvested as cash;
(b) The Adviser, in the performance of its duties and obligations under
this Agreement, shall act in conformity with the Trust's Declaration of Trust,
By-Laws, Registration Statement and the terms and conditions of the order of
exemption under the 1940 Act of the Securities and Exchange Commission (IC
Release No. ) ( , 2000) granted pursuant to the First Amended and
Restated Application, and with the instructions and directions of the Board,
provided, however, the Adviser shall not be responsible for acting contrary to
any of the foregoing that are changed without notice of such change to the
Adviser; and the Adviser shall conform to and comply with the applicable
requirements of the 1940 Act and all other applicable federal or state laws and
regulations;
(c) The Adviser shall promptly communicate to the officers and Trustees
of the Trust such information relating to transactions of the Funds as they may
reasonably request. On occasions when the Adviser deems the purchase or sale of
a security to be in the best interest of a Fund as well as other clients, the
Adviser, to the extent permitted by applicable laws and regulations, may
aggregate the securities to be sold or purchased, provided that all accounts are
treated equitably and fairly. In such event, allocation of the securities so
purchased or sold, as well as the expenses incurred in the transactions, shall
be made by the Adviser in the manner it considers to be the most equitable and
consistent with its fiduciary obligations to the Trust and to such other
clients;
(d) The Adviser shall maintain books and records with respect to the
Trust's securities transactions and shall render to the Board such periodic and
special reports as the Board may reasonably request;
(e) The Adviser shall provide the Trust with a list of all securities
transactions as reasonably requested by the Trust;
(f) The investment advisory services of the Adviser to the Trust under
this Agreement are not to be deemed exclusive, and the Adviser shall be free to
render similar services to others; and
(g) The Adviser shall initially determine and make such modifications to
the identity and number of shares of the Deposit Securities and the Fund
Securities required for a Fund Deposit or Redemption for each Fund as may be
necessary as a result of rebalancing adjustments and corporate action events
(and may give directions to the Trust's Custodian with respect to such
designation).
3. EXECUTION AND ALLOCATION OF PORTFOLIO BROKERAGE COMMISSIONS. The Adviser,
subject to and in accordance with any directions which the Board may issue from
time to time, shall place, in the name of the Trust, orders for the execution of
the securities transactions in which any Fund is authorized to invest. When
placing such orders, the primary objective of the Adviser shall be to obtain the
best net price and execution ("best execution") for the Trust but this
requirement shall not be deemed to obligate the Adviser to place any order
solely on the basis of obtaining the lowest commission rate if the other
standards set forth in this section have been satisfied. The Trust recognizes
that there are likely to be many cases in which different brokers are equally
able to provide such best execution and that, in selection among such brokers
with respect to particular trades, it is desirable to choose those brokers who
furnish "brokerage and research services" (as defined in Section 28(e)(3) of the
Securities and Exchange Act of 1934) or statistical quotations and other
information to the Trust and/or the Adviser in accordance with the standards set
forth below. The Adviser may where it deems appropriate place
2
orders with a broker who charges a higher commission than another broker would
have charged for effecting that transaction, provided that the excess commission
is reasonable in relation to the value of brokerage and research services
provided by that broker. Accordingly, the Trust and the Adviser agree that the
Adviser may select brokers for the execution of any Fund's securities
transactions from among:
a. Those brokers and dealers who provide brokerage and research
services, or statistical quotations and other information to the Trust,
specifically including the quotations necessary to determine the Trust's net
assets, in such amount of total brokerage as may reasonably be required in light
of such services.
b. Those brokers and dealers who provide brokerage and research services
to the Adviser which relate directly to portfolio securities, actual or
potential, of the Trust, or which place the Adviser in a better position to make
decisions in connection with the management of the Trust's assets, whether or
not such data may also be useful to the Adviser in managing other portfolios or
advising other clients, in such amount of total brokerage as may reasonably be
required.
The Adviser agrees that no investment decision will be made or
influenced by a desire to provide brokerage for allocation in accordance with
the foregoing, and that the right to make such allocation of brokerage shall not
interfere with the Adviser's primary duty to obtain the best execution for the
Trust.
4. BOOKS AND RECORDS. The Adviser shall keep the Trust's books and records
required to be maintained by it pursuant to paragraph 2(d) hereof. The Adviser
agrees that all records which it maintains for the Trust are the property of the
Trust and it shall surrender promptly to the Trust any of such records upon the
Trust's request. The Adviser further agrees to preserve for the periods
prescribed by Rule 31a-2 of the Securities and Exchange Commission (the
"Commission") under the 1940 Act any such records as are required to be
maintained by Rule 31a-1(f) of the Commission under the 1940 Act. Nothing herein
shall prevent the Adviser from maintaining its own records as required by law,
which may be a duplication of the Trust's records.
5. REPORTS TO ADVISER. The Trust agrees to furnish the Adviser at its principal
office all prospectuses, proxy statements, reports to stockholders, sales
literature or other material prepared for distribution to shareholders of the
Trust or the public, which refer in any way to the Adviser, if reasonably
practicable ten (10) days prior to use thereof and not to use such material if
the Adviser should object thereto in writing within seven (7) days after receipt
of such material; provided, however, that the Adviser hereby approves all uses
of its name which merely refer in accurate terms to its appointment as
investment adviser hereunder, which merely identifies the Trust, or which are
required by the Commission or a state securities commission. In the event of
termination of this Agreement, the Trust shall, on written request of the
Adviser, forthwith delete any reference to the Adviser from any materials
described in the preceding sentence. The Trust shall furnish or otherwise make
available to the Adviser such other information relating to the business affairs
of the Trust as the Adviser at any time, or from time to time, reasonably
requests in order to discharge its obligations hereunder.
6. PROXIES. Unless the Trust gives written instructions to the contrary, the
Adviser shall vote or not vote all proxies solicited by or with respect to the
issuers of securities in which assets of any Fund may be invested. The Adviser
shall use its best good faith judgment to vote or not vote such proxies in a
manner which best serves the interests of the Trust's shareholders.
7. EXPENSES. During the term of this Agreement, the Adviser shall pay all of the
expenses of each Fund of the Trust except for the advisory fee, payments under
each Fund's 12b-1 plan, brokerage expenses, taxes, interest, fees and expenses
of the Independent Trustees (including any Trustee's counsel
3
fees), litigation expenses and other extraordinary expenses.
8. COMPENSATION OF THE ADVISER. For the services to be rendered by the Adviser
as provided in this Agreement, the Trust shall pay to the Adviser such
compensation as is designated in Exhibit A to this Agreement, so long as the
Adviser has not waived all or a portion of such compensation.
9. LIMITATION OF ADVISER'S LIABILITY. In the absence of (a) willful misfeasance,
bad faith or gross negligence on the part of the Adviser in performance of its
obligations and duties hereunder, (b) reckless disregard by the Adviser of its
obligations and duties hereunder, or (c) a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services (in
which case, any award of damages shall be limited to the period and the amount
set forth in Section 36(b)(3) of the 1940 Act), the Adviser shall not be subject
to any liability whatsoever to the Trust, or to any shareholder of the Trust,
for any error of judgment, mistake of law or any other act or omission in the
course of, or connected with, rendering services hereunder including, without
limitation, for any losses that may be sustained in connection with the
purchase, holding, redemption or sale of any security on behalf of the Trust.
10. DURATION AND TERMINATION.
(a) This Agreement shall become effective with respect to each Initial
Fund on the date hereof, or, with respect to any Additional Fund on the date of
the written notification specified in Section 1(b). This Agreement, unless
sooner terminated as provided herein, shall continue for each Fund for two years
following the effective date of this Agreement with respect to the Fund, and
thereafter shall continue for periods of one year so long as such continuance is
specifically approved at least annually (a) by the vote of a majority of those
members of the Board who are not parties to this Agreement or "interested
persons" (as defined in the 1940 Act) of any such party, cast in person at a
meeting called for the purpose of voting such approval, and (b) by the Board or
by vote of a majority of the outstanding voting securities of the Fund in
accordance with the provisions of the 1940 Act.
(b) This Agreement may be terminated by the Trust at any time, without
the payment of any penalty, by the Board or by the majority vote of either the
entire Board or by vote of a majority of the outstanding voting securities of
the Fund (in accordance with the provisions of the 1940 Act) on 60 days' written
notice to the Adviser. This Agreement may also be terminated by the Adviser on
90 days' written notice to the Trust. This Agreement will automatically and
immediately terminate in the event of its assignment (as defined in the 1940 Act
and the rules thereunder).
11. CHOICE OF LAW. This Agreement shall be construed in accordance with the laws
of The Commonwealth of Massachusetts and any applicable federal law.
12. LIMITATION OF LIABILITY. The Amended and Restated Declaration of Trust filed
on September __, 2000, which is hereby referred to and a copy of which is on
file with the Secretary of The Commonwealth of Massachusetts, provides that the
name streetTRACKS(SM) Series Trust means the Trustees from time to time serving
(as Trustees but not personally) under such Declaration of Trust. It is
expressly acknowledged and agreed that the obligations of the Trust hereunder
shall not be binding upon any of the shareholders, Trustees, officers, employees
or agents of the Trust, personally, but shall bind only the trust property of
the Trust, as provided in its Declaration of Trust. The execution and delivery
of this Agreement have been authorized by the Trustees of the Trust and signed
by an officer of the Trust, acting as such, and neither such authorization by
such Trustees nor such execution and delivery by such officer shall be deemed to
have been made by any of them individually or to impose any liability on any of
them personally, but shall bind only the trust property of the Trust as provided
in its Declaration of
4
Trust.
IN WITNESS WHEREOF, the due execution hereof as of the date first above
written.
Attest: streetTRACKS(SM) SERIES TRUST
By: /s/ Michael E. Gillespie By: /s/ Agustin J. Fleites
------------------------- ----------------------------
Name: Agustin J. Fleites
----------------------------
Title: President
----------------------------
Attest: SSGA FUNDS MANAGEMENT, INC.
By: /s/ By: /s/ Gustaff V. Fish
------------------------- ----------------------------
Name: Gustaff V. Fish
----------------------------
Title: President
----------------------------
5
EXHIBIT A
As consideration for the Adviser's services to each of the following
Funds, the Adviser shall receive from each Fund a unitary fee, accrued daily at
the rate of 1/365th of the applicable fee rate and payable monthly on the first
business day of each month, of the following annual percentages of the Fund's
average daily net assets during the month. The Adviser will pay all of the
expenses of each Fund of the Trust except for the advisory fee, payments under
each Fund's 12b-1 plan, brokerage expenses, taxes, interest, fees and expenses
of the Independent Trustees (including any Trustee's counsel fees), litigation
expenses and other extraordinary expenses.
FUND ANNUAL % OF AVERAGE
DAILY NET ASSETS
--------------------------------------------------------------------------------
streetTRACKS(SM) Dow Jones U.S. Large-Cap Value Fund 0.20%
streetTRACKS(SM) Dow Jones U.S. Large-Cap Growth Fund 0.20%
streetTRACKS(SM) Dow Jones U.S. Small-Cap Value Fund 0.25%
streetTRACKS(SM) Dow Jones U.S. Small-Cap Growth Fund 0.25%
streetTRACKS(SM) Dow Jones Global Titans Index Fund 0.50%
streetTRACKS(SM) Wilshire REIT Index Fund 0.25%
streetTRACKS(SM) Morgan Stanley High Tech 35 Index Fund 0.50%
streetTRACKS(SM) Morgan Stanley Internet Index Fund 0.50%
FORTUNE 500(R) Index Fund 0.20%
FORTUNE e-50(TM) Index Fund 0.20%
6
EX-99.(D)(I)
4
b40821ssex99-di.txt
ADDEMDUM TO INVESTMENT MANAGEMENT
EXHIBIT (d)(i)
ADDENDUM TO
INVESTMENT ADVISORY AGREEMENT
BETWEEN
SSgA FUNDS MANAGEMENT, INC.
AND
streetTRACKS(SM) SERIES TRUST
This Addendum is made as of the 1st of May, 2001 to the Agreement dated
the 1st of May, 2001, between streetTRACKS(SM) Series Trust, a Massachusetts
business trust (the "Trust"), and SSgA Funds Management, Inc., a Massachusetts
corporation (the "Adviser").
WHEREAS, the Trust has retained the Adviser to render investment advisory
services to the Trust with respect to the streetTRACKS(SM) Wilshire REIT Index
Fund; and
WHEREAS, the Adviser desires to engage one or more sub-advisers to perform some
of those investment advisory services for the streetTRACKS(SM) Wilshire REIT
Index Fund;
NOW, THEREFORE, in consideration of the mutual agreements contained herein, the
Trust and Adviser agree as follows:
ENGAGEMENT OF SUB-ADVISERS (streetTRACKS(SM) Wilshire REIT Index Fund)
The Adviser is authorized to engage one or more sub-advisers for the performance
of any of the services contemplated to be rendered by the Adviser to
streetTRACKS(SM) Wilshire REIT Index Fund under this Agreement, which
sub-advisers may be affiliates of the Adviser.
IN WITNESS WHEREOF, the due execution hereof as of the date first above written.
Attest: streetTRACKS(SM) SERIES TRUST
By: /s/ Michael E. Gillespie By: /s/ Augustin J. Fleites
------------------------- ----------------------------
Name: Agustin J. Fleites
----------------------------
Title: President
----------------------------
Attest: SSgA FUNDS MANAGEMENT, INC.
By: /s/ Michael E. Gillespie By: /s/ Timothy B. Harbert
------------------------- ----------------------------
Name: Timothy B. Harbert
----------------------------
Title: Executive Vice President
----------------------------
EX-99.(D)(II)
5
b40821ssex99-dii.txt
SUB-ADVISORY AGREEMENT
SUB-ADVISORY AGREEMENT
AGREEMENT made as of the 1st day of May, 2001, between SSgA FUNDS
MANAGEMENT, INC., a Massachusetts corporation (the "Adviser") and THE TUCKERMAN
GROUP LLC, a Delaware limited liability company (the "Sub-Adviser").
WHEREAS, the Adviser is in the business of providing investment advisory
services and is registered as an investment adviser under the Investment
Advisers Act of 1940, as amended (the "Advisers Act"); and
WHEREAS, the Sub-Adviser is engaged principally in the business of
rendering investment management services and is registered as an investment
adviser under the Advisers Act;
WHEREAS, streetTRACKS(SM) series Trust, a Massachusetts business trust
(the "Trust"), is an open-end management investment company and is so registered
under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust is authorized to issue shares of beneficial interest
in separate series, with each such series representing interests in a separate
portfolio of securities and other assets; and
WHEREAS, the Trust currently intends to offer shares of each of its
series noted in Exhibit A, such series together with all other series
subsequently established by the Trust with respect to which the Sub-Adviser
renders management and investment advisory services pursuant to the terms of
this Agreement being herein collectively referred to as the "Funds" and
individually as a "Fund"; and
WHEREAS, pursuant to the Advisory Agreement between the Trust and the
Adviser dated the 1st day of May, 2001 (the "Advisory Agreement"), the Adviser
is required to perform investment advisory services for the Funds.
NOW, THEREFORE, WITNESSETH: That it is hereby agreed between the parties
hereto as follows:
1. APPOINTMENT OF SUB-ADVISER.
(a) The initial Fund(s). The Adviser hereby employs the Sub-Adviser to
provide investment advisory services to each Fund noted in Exhibit A for the
period and on the terms set forth in this Agreement. The Sub-Adviser accepts
such appointment and agrees to render the services set forth in this Agreement,
for the compensation herein provided.
(b) Additional Funds. In the event that there are one or more series of
shares of the Trust with respect to which the Adviser desires to retain the
Sub-Adviser to render investment advisory services hereunder, the Adviser shall
so notify the Sub-Adviser in writing, indicating the advisory fee to be payable
with respect to the additional series of shares. If the Sub-Adviser is willing
to render such services on the terms provided for herein, it shall so notify the
Adviser in writing, whereupon such series shall become a Fund hereunder.
2. DUTIES OF ADVISER AND SUB-ADVISER.
(i) Delivery of Documents. The Adviser has furnished the Sub-Adviser
with true copies of each of the following:
(a) The Trust's Certificate of Trust as filed with the Secretary
of State of the Commonwealth of Massachusetts;
(b) The Trust's Amended and Restated Declaration of Trust filed
on September 21, 2000, and all amendments and supplements thereto (such
Declaration of Trust, as presently in effect and as it shall from time
to time be amended or supplemented, is herein called the "Declaration");
(c) The Trust's By-Laws and amendments and supplements thereto
(such By-Laws, as presently in effect and as it shall from time to time
be amended and supplemented, is herein called the "By-Laws");
(d) Resolutions of the Trust's Board of Trustees authorizing the
appointment of the Adviser and Sub-Adviser and approving the Advisory
Agreement and this Agreement and copies of the minutes of the initial
meeting of shareholders of each Fund;
(e) The Trust's Notification of Registration on Form N-8A under
the 1940 Act as filed with the Securities and Exchange Commission on
June 26, 1998 and all amendments thereto;
(f) The Trust's Registration Statement on Form N-1A under the
Securities Act of 1933 as amended (the "1933 Act") and the 1940 Act
(File Nos. 333-57793 and 811-08839) as filed with the Securities and
Exchange Commission on June 26, 1998, and all amendments thereto (the
"Registration Statement");
2
(g) The second amended application (the "Application") for
orders under Sections 6(c) and 17(b) of the 1940 Act for the purpose of
exempting the Trust and certain other applicants from various provisions
of the 1940 Act and rules thereunder (File No. 812-11882), the notice of
application relating to the Application (Investment Company Act Release
No. 24631 (September 1, 2000)) and the order granting the exemptive
relief sought in the Application (Investment Company Act Release No.
24666 (September 25, 2000))(collectively, the "Exemptive Relief");
(h) The most recent prospectus (such prospectus, as in effect
from time to time and all amendments and supplements thereto are herein
called the "Prospectus") of each Fund;
(i) All resolutions of the Board of Trustees of the Trust
pertaining to the objectives, investment policies and investment
restrictions of each Fund; and
(j) Copies of the executed Advisory Agreement between the Trust
and the Adviser relating to each Fund.
The Adviser will promptly furnish the Sub-Adviser from time to time with
copies of all amendments of or supplements to the foregoing items to the extent
such amendments or supplements relate to or affect the obligations of the
Sub-Adviser hereunder with respect to any Fund hereunder.
(ii) The Sub-Adviser, at its own expense, shall furnish the following
services to the Trust:
(a) Investment Program. The Sub-Adviser is hereby authorized and
directed and hereby agrees, subject to the stated investment objective
and policies of the Funds as set forth in the Trust's current
Registration Statement and subject to the supervision of the Adviser and
the Board of Trustees of the Trust, to (i) develop and furnish
continuously an investment program and strategy for each Fund in
compliance with that Fund's investment objective and policies as set
forth in the Trust's current Registration Statement, (ii) provide
research and analysis relative to the investment program and investments
of each Fund, (iii) determine (subject to the overall supervision of the
Board of Trustees of the Trust) what investments shall be purchased,
held, sold or exchanged by each Fund and what portion, if any, of the
assets of each Fund shall be held in cash or cash equivalents, (iv) make
changes on behalf of the Trust in the investments of each Fund and (v)
initially determine and make such modifications to the identity and
number of shares of the Deposit Securities and the Fund Securities
required for a Fund Deposit or Redemption for each Fund as may be
necessary as a result of rebalancing adjustments and corporate action
events (and may give direction to the Trust's Custodian with respect to
such designation). In accordance with paragraph 2(ii)(b), the
Sub-Adviser shall arrange for the placing of all orders for the purchase
and sale of securities and other investments for each Fund's account and
will exercise full discretion and act for the Trust in the same manner
and with the same force and effect
3
as the Trust might or could do with respect to such purchases, sales or
other transactions, as well as with respect to all other things
necessary or incidental to the furtherance or conduct of such purchases,
sales or transactions. The Sub-Adviser will make its officers and
employees available to meet with the Adviser's officers and directors on
due notice at reasonable times to review the investments and investment
program of each Fund in the light of current and prospective economic
and market conditions.
In the performance of its duties hereunder, the Sub-Adviser is and shall
be an independent contractor and except as expressly provided for herein or
otherwise expressly provided or authorized shall have no authority to act for or
represent any Fund or the Trust in any way or otherwise be deemed to be an agent
of any Fund, the Trust or of the Adviser. If any occasion should arise in which
the Sub-Adviser gives any advice to its clients concerning the shares of a Fund,
the Sub-Adviser will act solely as investment counsel for such clients and not
in any way on behalf of the Trust or any Fund.
(b) Portfolio Transactions. In connection with the management of
the investment and reinvestment of each Fund, the Sub-Adviser, acting by
its own officers, directors or employees or by a duly authorized
subcontractor, is authorized to select the broker or dealers that will
execute purchase and sale transactions for the Trust.
In executing portfolio transactions and selecting brokers or dealers, if
any, the Sub-Adviser will use its best efforts to seek on behalf of a Fund the
best overall terms available. In assessing the best overall terms available for
any transaction, the Sub-Adviser shall consider all factors it deems relevant,
including the breadth of the market in and the price of the security, the
financial condition and execution capability of the broker or dealer, and the
reasonableness of the commission, if any, with respect to the specific
transaction and on a continuing basis. In evaluating the best overall terms
available, and in selecting the broker or dealer, if any, to execute a
particular transaction, the Sub-Adviser may also consider the brokerage and
research services (as those terms are defined in Section 28(e) of the Securities
Exchange Act of 1934) provided to the Sub-Adviser with respect to a Fund and/or
other accounts over which the Sub-Adviser exercises investment discretion. The
Sub-Adviser may pay to a broker or dealer who provides such brokerage and
research services a commission for executing a portfolio transaction which is in
excess of the amount of commission another broker or dealer would have charged
for effecting that transaction if, but only if, the Sub-Adviser determines in
good faith that such commission was reasonable in relation to the value of the
brokerage and research services provided.
The Sub-Adviser may buy securities for a Fund at the same time it is
selling such securities for another client account and may sell securities for a
Fund at the time it is buying such securities for another client account. In
such cases, subject to applicable legal and regulatory requirements, and in
compliance with such procedures of the Trust as may be in effect from time to
time, the Sub-Adviser may effectuate cross transactions between a Fund and such
other account if it deems this to be advantageous. The Sub-Adviser also may
cause a Fund to enter into other types of investment transactions (e.g., a long
position on a particular
4
securities index) at the same time it is causing other client accounts to take
opposite economic positions (e.g., a short position on the same index).
On occasions when the Sub-Adviser deems the purchase or sale of a
security to be in the best interest of a Fund as well as other clients, the
Sub-Adviser, to the extent permitted by applicable laws and regulations, and in
compliance with such procedures of the Trust as may be in effect from time to
time, may aggregate the securities to be sold or purchased in order to obtain
the best execution and lower brokerage commissions, if any. In such event,
allocation of the securities so purchased or sold, as well as the expenses
incurred in the transaction, will be made by the Sub-Adviser in the manner it
considers to be the most equitable and consistent with its fiduciary obligations
to the subject Fund and to such clients.
The Sub-Adviser shall not have possession or custody of any Fund
investments. The Trust shall be responsible for all custodial agreements and the
payment of all custodial charges and fees and, upon the Sub-Adviser giving
proper instructions to the custodian, the Sub-Adviser shall have no
responsibility or liability for the acts, omissions or other conduct of the
custodian.
The Sub-Adviser shall, upon due notice from the Adviser, provide such
periodic and special reports describing any such research, advice or other
services received and the incremental commissions, net price or other
consideration to which they relate.
(c) Reports. The Sub-Adviser shall render to the Board of
Trustees of the Trust such periodic and special reports as the Board of
Trustees may request with respect to matters relating to the duties of
the Sub-Adviser set forth herein.
3. SUB-ADVISORY FEE.
For the services to be provided by the Sub-Adviser as provided in
Paragraph 2 hereof, the Adviser shall pay to the Sub-Adviser an annual fee as
set forth on Schedule A to this Agreement.
In the case of commencement or termination of this Agreement with
respect to any Fund during any calendar month, the fee with respect to such Fund
for that month shall be reduced proportionately based upon the number of
calendar days during which it is in effect, and the fee shall be computed during
the average daily net assets of such Fund for the days during which it is in
effect.
4. EXPENSES.
During the term of this Agreement, the Sub-Adviser will bear all
expenses incurred by it in the performance of its duties hereunder, other than
those expenses specifically assumed by the Adviser or by the Trust hereunder.
The Adviser shall assume and shall pay all expenses of the Trust, except for the
following expenses which shall be borne by the Trust: the advisory fee, payments
under each Fund's 12b-1 plan, brokerage expenses, taxes, interest, fees and
5
expenses of the Independent Trustees (including any Trustee's counsel fees),
litigation expenses and other extraordinary expenses.
5. COMPLIANCE WITH APPLICABLE REGULATIONS.
In performing its duties hereunder, the Sub-Adviser
(i) shall conform to and comply with the applicable provisions of the
1940 Act and all other applicable federal or state laws and regulations.
(ii) agrees that it will maintain for the Trust all and only such
records as required under Rules 31a-1 and 31a-2 under the 1940 Act in respect to
its services hereunder and that such records are the property of the Trust and
further agrees to surrender promptly to the Trust any such records upon the
Trust's request all in accordance with Rule 31a-3 under the 1940 Act.
6. LIABILITY OF SUB-ADVISER; INDEMNIFICATION.
Neither the Sub-Adviser nor the officers, directors, employees, agents,
or legal representatives (collectively, "Related Persons") of the Sub-Adviser
shall be liable for any error of judgment or mistake of law, or for any loss
suffered by any Fund or its shareholders in connection with the matters to which
this Agreement relates; provided that, except as set forth in the succeeding
paragraph, no provision of this Agreement shall be deemed to protect the
Sub-Adviser or its Related Persons against any liability to which it might
otherwise be subject by reason of any willful misfeasance, bad faith or gross
negligence or the reckless disregard of the Sub-Adviser's obligations and duties
(each of which is hereby referred to as a "Culpable Act") under this Agreement.
Neither the Sub-Adviser nor its Related Persons shall be liable for any
error of judgment or mistake of law, or for any loss suffered by the Adviser or
its Related Persons in connection with the matters to which this Agreement
relates; provided that this provision shall not be deemed to protect the
Sub-Adviser or its Related Persons against any liability to which it might
otherwise be subject by reason of any Culpable Act by the Sub-Adviser or its
Related Persons.
The Adviser shall indemnify the Sub-Adviser and its Related Persons and
hold them harmless from and against any and all actions, suits or claims whether
groundless or meritorious and from and against any and all losses, damages,
costs, charges, reasonable counsel fees, payments, expenses and liabilities
(collectively, "Damages") arising directly or indirectly out of or in connection
with the performance of services by the Sub-Adviser or its Related Persons
hereunder to the extent such Damages result from any Culpable Act of the Adviser
or any Related Person of the Adviser.
The Sub-Adviser shall indemnify the Adviser and its Related Persons from
and against any Damages arising directly or indirectly out of or in connection
with the performance of
6
services by the Adviser or its Related Persons under this Agreement or the
Advisory Agreement, in each case, to the extent such Damages result from any
Culpable Act of the Sub-Adviser or any of its Related Persons.
7. LIABILITY OF THE TRUST.
The Declaration provides that the name streetTRACKS(SM) Series Trust
means the Trustees from time to time serving (as Trustees but not personally)
under the Declaration. It is expressly acknowledged and agreed that the
obligations of the Trust hereunder shall not be binding upon any of the
shareholders, Trustees, officers, employees or agents of the Trust, personally,
but shall bind only the trust property of the Trust, as provided in the
Declaration. The execution and delivery of this Agreement have been authorized
by the Trustees of the Trust and signed by an officer of the Trust, acting as
such, and neither such authorization by such Trustees nor such execution and
delivery by such officer shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, but shall
bind only the trust property of the Trust as provided in the Declaration.
8. REPRESENTATIONS AND WARRANTIES.
(a) Adviser. The Adviser represents and warrants to the Sub-Adviser that
(i) the retention of the Sub-Adviser by the Adviser as contemplated by this
Agreement is authorized by the respective governing documents of the Trust and
the Adviser; (ii) the execution, delivery and performance of each of this
Agreement and the Advisory Agreement does not violate any obligation by which
the Trust or the Adviser or their respective property is bound, whether arising
by contract, operation of law or otherwise; and (iii) each of this Agreement and
the Advisory Agreement has been duly authorized by appropriate action of the
Trust and the Adviser and when executed and delivered by the Adviser will be the
legal, valid and binding obligation of the Trust and the Adviser, enforceable
against the Trust and Adviser in accordance with its terms hereof subject, as to
enforcement, to applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally and to general equitable principles (regardless of
whether enforcement is sought in a proceeding in equity or law).
(b) Sub-Adviser. The Sub-Adviser represents and warrants to the Adviser
that (i) the retention of the Sub-Adviser by the Adviser as contemplated by this
Agreement is authorized by the Sub-Adviser's governing documents; (ii) the
execution, delivery and performance of this Agreement does not violate any
obligation by which the Sub-Adviser or its property is bound, whether arising by
contract, operation of law or otherwise; and (iii) this Agreement has been duly
authorized by appropriate action of the Sub-Adviser and when executed and
delivered by the Sub-Adviser will be the legal, valid and binding obligation of
the Sub-Adviser, enforceable against the Sub-Adviser in accordance with its
terms hereof, subject, as to enforcement, to applicable bankruptcy, insolvency
and similar laws affecting creditors' rights generally and to general equitable
principles (regardless of whether enforcement is sought in a proceeding in
equity or law).
7
9. DURATION AND TERMINATION OF THIS AGREEMENT.
(a) Duration. This Agreement shall become effective with respect to each
Fund listed on Exhibit A on the date hereof and, with respect to any additional
Fund, on the date of receipt by the Adviser of notice from the Sub-Adviser in
accordance with Paragraph 1(b) hereof that the Sub-Adviser is willing to serve
as Sub-Adviser with respect to such Fund. Unless terminated as herein provided,
this Agreement shall remain in full force and effect for two years from the date
hereof with respect to each Fund listed on Exhibit A and, with respect to each
additional Fund, for two years from the date on which such Fund becomes a Fund
hereunder. Subsequent to such initial periods of effectiveness, this Agreement
shall continue in full force and effect for periods of one year thereafter with
respect to each Fund so long as such continuance with respect to any such Fund
is approved at least annually (a) by either the Trustees of the Trust or by vote
of a majority of the outstanding voting securities (as defined in the 1940 Act)
of such Fund, and (b) in either event, by the vote of a majority of the Trustees
of the Trust who are not parties to this Agreement or "interested persons" (as
defined in the 1940 Act) of any such party, cast in person at a meeting called
for the purpose of voting on such approval.
(b) Amendment. This Agreement may be amended by agreement of the
parties, provided that the amendment shall be approved both by the vote of a
majority of the Trustees of the Trust, including a majority of the Trustees who
are not parties to this Agreement or interested persons of any such party to
this Agreement cast in person at a meeting called for that purpose, and to the
extent required under the 1940 Act, by the holders of a majority of the
outstanding voting securities of the Trust.
(c) Termination. This Agreement may be terminated with respect to any
Fund at any time, without payment of any penalty, (i) by vote of the Trustees of
the Trust or by vote of a majority of the outstanding voting securities (as
defined in the 1940 Act) of that Fund, (ii) by the Adviser, or (iii) by the
Sub-Adviser, in each case on sixty (60) days' prior written notice to the other
party. Upon the effective date of termination of this Agreement, the Sub-Adviser
shall deliver all books and records of the Trust or any Fund held by it (i) to
such entity as the Trust may designate as a successor sub-adviser, or (ii) to
the Adviser.
(d) Automatic Termination. This Agreement shall automatically and
immediately terminate in the event of its assignment (as defined in the 1940
Act).
(e) Approval, Amendment or Termination by Individual Fund. Any approval,
amendment or termination of this Agreement by the holders of a majority of the
outstanding voting securities (as defined in the 1940 Act) of any Fund shall be
effective to continue, amend or terminate this Agreement with respect to any
such Fund notwithstanding (i) that such action has not been approved by the
holders of a majority of the outstanding voting securities of any other Fund
affected thereby, and (ii) that such action has not been approved by the vote of
a majority of the outstanding voting securities of the Trust, unless such action
shall be required by any applicable law or otherwise.
8
10. SERVICES NOT EXCLUSIVE.
The services of the Sub-Adviser to the Adviser in connection with the
Funds hereunder are not to be deemed exclusive, and the Sub-Adviser shall be
free to render similar services to others so long as its services hereunder are
not impaired thereby. It is understood that the persons employed by the
Sub-Adviser to assist in the performance of its duties hereunder will not devote
their full time to such services and nothing hereunder contained shall be deemed
to limit or restrict the right of the Sub-Adviser to engage in or devote time
and attention to other businesses or to render services of whatever kind or
nature.
11. MISCELLANEOUS.
(a) Notices. All notices or other communications given under this
Agreement shall be made by guaranteed overnight delivery, telecopy or certified
mail; notice is effective when received. Notice shall be given to the parties at
the following addresses:
Adviser: SSgA Funds Management, Inc.
Two International Place
-------------------------------
Boston, MA 02110
-------------------------------
Attn: Gustaff V. Fish
-------------------------------
Sub-Adviser: The Tuckerman Group LLC
2 Manhattanville Road
Purchase, NY 10577
Attention: Steven DeBara
---------------------
(b) Severability. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder
shall not be thereby affected.
(c) Applicable Law. This Agreement shall be construed in accordance with
and governed by the laws of the Commonwealth of Massachusetts and any applicable
federal law.
(d) Counterparties. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
(e) Entire Agreement. This Agreement states the entire agreement of the
parties hereto, and is intended to be the complete and exclusive statement of
the terms hereof. It may not be added to or changed orally, and may not be
modified or rescinded except by a writing signed by the parties hereto and in
accordance with the 1940 Act, when applicable.
IN WITNESS WHEREOF, the Adviser and the Sub-Adviser have caused this
Agreement to be executed as of the date first set forth above.
9
SSgA FUNDS MANAGEMENT, INC.
By: /s/ Gustaff V. Fish
------------------------------
Name: Gustaff V. Fish
Title: President
THE TUCKERMAN GROUP LLC
By: /s/ Donald E. Conover
------------------------------
Name: Donald E. Conover
Title: President
Acknowledged and agreed to as of the date first set forth above with
respect to the Trust's obligations under this Agreement.
streetTRACKS(SM) SERIES TRUST
By: /s/ Agustin J. Fleites
------------------------------
Name: Agustin J. Fleites
Title: President
10
SCHEDULE A
streetTRACKS(SM) Wilshire REIT Index Fund
The Adviser shall pay to the Sub-Adviser an annual investment
sub-advisory fee equal to 0% of average daily net assets up to the first $50
million in net assets and 0.05% thereafter with respect to streetTRACKS(SM)
Wilshire REIT Index Fund. Such fee shall be accrued daily and paid as soon as
practical after the last day of each calendar month.
11
EX-99.(H)(III)
6
b40821ssex99-hiii.txt
FORM OF PATICIPANT AGREEMENT
EXHIBIT (h)(iii)
PARTICIPANT AGREEMENT
This Participant Agreement (the "Agreement") is entered into by and
between State Street Capital Markets, LLC, (the "Distributor"), State Street
Bank and Trust Company, as transfer agent (the "Transfer Agent") and __________
(the "Participant") and is subject to acceptance by streetTRACKS(SM) Series
Trust (the "Trust"). The Trust is an open-end management investment company. The
Trust currently consists of ten investment portfolios (each a "Fund" and
collectively the "Funds"). The Trust was organized as a Massachusetts business
trust under a Declaration of Trust dated June 12, 1998, as amended and restated
on September 6, 2000. The Distributor has been retained to provide certain
services with respect to acting as principal underwriter of the Trust in
connection with the creation and distribution of shares the Funds (the
"Shares"). The Transfer Agent has been retained to provide certain services with
respect to the creation and redemption of Shares. As specified in the Trust's
prospectus and Statement of Additional Information (together, the "Prospectus"),
Shares may be created or redeemed only in aggregations of 50,000 Shares,
referred to therein and herein as a "Creation Unit". The Prospectus provides
that Creation Units be shall issued in exchange for Deposit Securities and a
Cash Component delivered by the Participant on behalf of the investor (which may
be the Participant) to the Trust. The Prospectus also provides that Creation
Units shall be redeemed in exchange for Fund Securities and a Cash Redemption
Amount. Capitalized terms not otherwise defined herein are used herein as
defined in the Prospectus.
This Agreement is intended to set forth certain premises and the
procedures by which the Participant may create and/or redeem Creation Units. To
place orders with the Distributor, an entity must be: (i) a broker-dealer or
other participant in the Continuous Net Settlement ("CNS") clearing process of
the National Securities Clearing Corporation ("NSCC") as such processes have
been enhanced to effect creations and redemptions of Creation Units, such
processes being referred to herein as the "Clearing Process", or (ii) outside
the Clearing Process (i.e., through the facilities of The Depository Trust
Company ("DTC"). The parties hereto in consideration of the premises and of the
mutual agreements contained herein agree as follows:
1. Status of Participant. The Participant hereby represents, covenants
and warrants that (i) with respect to orders for the creation or
redemption of Creation Units by means of the Clearing Process, it is a
member of NSCC and a participant in the CNS System of NSCC (as defined
in the Prospectus, a "Participating Party"); and (ii) with respect to
orders for the creation or redemption of Creation Units outside the
Clearing Process, it is a DTC Participant (as defined in the
Prospectus, a "DTC Participant"). The Participant may place orders for
the creation or redemption of Creation Units either through the
Clearing Process or outside the Clearing Process, subject to the
procedures for creation and redemption referred to in paragraph 2 of
this Agreement ("Execution of Orders"). Any change in the foregoing
status of Participant shall terminate this Agreement and Participant
shall give notice to the Distributor, Transfer Agent and the Trust of
such change.
2. Execution of Orders. All orders for the creation or redemption of
Creation Units shall be handled by each party hereto in accordance with
the terms of the Prospectus and the procedures described in Attachment
A to this Agreement. Each party hereto agrees to comply with the
provisions of such documents to the extent applicable to it. In the
event the procedures include the use of recorded telephone lines, the
Participant hereby consents to such use. The Trust reserves the right
to issue additional or other procedures relating to the manner of
creating or redeeming Creation Units and the Participant, the Transfer
Agent and the Distributor each agrees to comply with such procedures as
may be issued from time to time.
3. NSCC. Solely with respect to orders for the creation or redemption of
Creation Units through the Clearing Process, the Participant as a
Participating Party hereby authorizes the Transfer Agent to transmit to
NSCC on behalf of the Participant such instructions, including share
and cash amounts as are necessary with respect to the creation and
redemption of Creation Units consistent with the instructions issued by
the Participant to the telephone representative of the Distributor for
purchases and the telephone representative of the Transfer Agent for
redemption. The Participant agrees to be bound by the terms of such
instructions issued by the Transfer Agent (or the Distributor on behalf
of the Trust) and reported to NSCC as though such instructions were
issued by the Participant directly to NSCC.
4. Role of Participant. The Participant shall have no authority in any
transaction to act as agent of the Distributor, Transfer Agent or the
Trust.
5. Fees. In connection with the creation or redemption of Creation Units,
the Trust shall charge and the Participant agrees to pay on behalf of
the investor to the Trust the Transaction Fee prescribed in the
Prospectus applicable to creation or redemption through the Clearing
Process, or the Transaction Fee and such additional fee as may be
prescribed pursuant to the Prospectus applicable to creation or
redemption outside the Clearing Process. The Trust reserves the right
to adjust the Transaction Fee subject to any limitation as prescribed
in the Prospectus.
6. Authorized Persons. Concurrently with the execution of this Agreement
and from time to time thereafter, the Participant shall deliver to the
Distributor, the Transfer Agent and the Trust, duly certified as
appropriate by its secretary or other duly authorized official, a
certificate, in the form set forth in Attachment B, setting forth the
names and signatures of all persons authorized to give instructions
relating to activity contemplated hereby or any other notice, request
or instruction on behalf of the Participant (each an "Authorized
Person"). Such certificate may be accepted and relied upon by the
Distributor and the Trust as conclusive evidence of the facts set forth
therein and shall be considered to be in full force and effect until
delivery to the Distributor and the Trust of a superseding certificate
bearing a subsequent date. The Distributor shall issue to each
Authorized Person a unique personal identification number ("PIN
Number") by which such Authorized Person and the Participant shall be
identified and instructions issued by the Participant hereunder shall
be authenticated. Upon the termination or revocation of authority of
such Authorized Person by the Participant, the Participant shall give
immediate written notice of such fact to the Distributor and the Trust
and such notice shall be effective upon receipt by the Distributor and
the Trust.
7. Redemption. The Participant represents and warrants that it will not
obtain an Order Number (as described in Attachment A) for the purpose of
redeeming a Creation Unit unless it or the party for which it is acting,
as the case may be, first owns the requisite number of shares to be
redeemed as a Creation Unit.
8. Beneficial Ownership. The Participant represents and warrants to the
Distributor, Transfer Agent and the Trust that it does not hold for the
account of any single Beneficial Owner of shares of a given Fund of the
Trust 80 percent (80%) or more of outstanding shares of a given Fund of
the Trust such as to cause the respective Fund of the Trust to have a
basis in the Deposit Securities deposited with the Trust different from
the market value of such Deposit Securities on the date of such
deposit, pursuant to Section 351 of the Internal Revenue Code. The
Transfer Agent shall have the right to require information from the
Participant regarding share ownership, and to rely thereon to the
extent necessary to make a determination regarding ownership of 80
percent (80%) or more of outstanding shares of a given Fund of the
Trust by a Beneficial Owner as a condition to the acceptance of a Fund
Deposit.
2
9. Indemnification. The Participant hereby agrees to indemnify and hold
harmless the Distributor, Transfer Agent and the Trust and their
respective subsidiaries, affiliates, directors, officers, employees and
agents (each an "Indemnified Party") from and against any loss,
liability, cost or expense suffered or incurred by such Indemnified
Party resulting from, in connection with or arising out of (i) any
breach by the Participant of any provision of this Agreement; or (ii)
any failure by Participant, for any reason, fraudulent, negligent or
otherwise to comply with its obligations under this Agreement, (iii)
any action undertaken in accordance with the terms at the direction of
or for the benefit of the Participant, or (iv) any actions of such
Indemnified Party in reliance upon any instructions issued in
accordance with Attachment A (as may be amended from time to time)
believed by the Distributor and/or Trust to be genuine and to have been
given by the Participant. This paragraph shall survive the termination
of this Agreement.
10. Additional Payment on Redemption. In the event that the Participant
receives Fund Securities the value of which exceeds net asset value at the
time of redemption, the Participant agrees to pay, on the same business
day it is notified, or cause the beneficial owner(s) of the shares
redeemed to pay, on such day, to the Trust an amount in cash equal to the
difference.
11. Acknowledgment. The Participant acknowledges receipt of the Prospectus
and represents it has reviewed such document and understands the terms
thereof. The Distributor agrees to process orders for creation in
accordance with the provisions of the Prospectus. The Transfer Agent
agrees to process orders for redemptions in accordance with the
provisions of the Prospectus.
12. Notices. Except as otherwise specifically provided in this Agreement,
all notices required or permitted to be given pursuant to this
Agreement shall be given in writing and delivered by personal delivery
or by postage prepaid registered or certified United States first class
mail, return receipt requested, or by telex, telegram or facsimile or
similar means of same day delivery (with a confirming copy by mail as
provided herein). Unless otherwise notified in writing, all notices to
the Trust shall be given or sent as follows: State Street Bank and
Trust Company, Global Client Support, P.O. Box 1978, Boston, MA 02105,
Attn.: streetTRACKS(SM) Trust.
All notices to the Participant and the Distributor or the Transfer Agent,
as the case may be, shall be directed to the address or telephone,
facsimile or telex numbers indicated below the signature line of such
party.
13. Termination and Amendment. This Agreement shall become effective in
this form as of the date accepted by the Trust and may be terminated at
any time by any party upon thirty days prior notice to the other
parties (i) unless earlier terminated by the Trust in the event of a
breach of this Agreement or the procedures described herein by the
Participant or (ii) in the event that the Trust is terminated pursuant
to the Trust's Declaration of Trust, filed June 12, 1998, as amended
and restated on September 6, 2000. This Agreement supersedes any prior
such agreement between the parties. This Agreement may be amended by
the Trust from time to time by the following procedure. The Trust will
mail a copy of the amendment to the Distributor, the Transfer Agent and
the Participant. If neither the Distributor, the Transfer Agent nor
the Participant objects in writing to the amendment within ten days
after its receipt, the amendment will become part of this Agreement in
accordance with its terms.
14. Limitation of Liability. The Amended and Restated Declaration of Trust
dated September 6, 2000, which is hereby referred to and a copy of
which is on file with the Secretary of The Commonwealth of
Massachusetts, provides that the name streetTRACKS(SM) Series Trust means
the Trustees from time to time serving (as Trustees but not personally)
under such Declaration of
3
Trust. It is expressly acknowledged and agreed that the obligations of the
Trust hereunder shall not be binding upon any of the shareholders,
Trustees, officers, employees or agents of the Trust, personally, but
shall bind only the trust property of the Trust, as provided in its
Declaration of Trust. The execution and delivery of this Agreement have
been authorized by the Trustees of the Trust and signed by an officer of
the Trust, acting as such, and neither such authorization by such Trustees
nor such execution and delivery by such officer shall be deemed to have
been made by any of them individually or to impose any liability on any of
them personally, but shall bind only the trust property of the Trust as
provided in its Declaration of Trust.
15. Counterparts. This Agreement may be simultaneously executed in several
counterparts, each of which shall be an original and all shall
constitute but one and the same instrument.
16. Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of The Commonwealth of Massachusetts.
4
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the _________ day of _______________ , 200__ .
STATE STREET CAPITAL MARKETS, LLC
BY: _______________________________
TITLE: _______________________________
ADDRESS: _______________________________
TELEPHONE: _______________________________
FACSIMILE: _______________________________
TELEX: _______________________________
STATE STREET BANK AND TRUST COMPANY
BY: _______________________________
TITLE: _______________________________
ADDRESS: _______________________________
TELEPHONE: _______________________________
FACSIMILE: _______________________________
TELEX: _______________________________
BY: _______________________________
TITLE: _______________________________
ADDRESS: _______________________________
TELEPHONE: _______________________________
FACSIMILE: _______________________________
TELEX: _______________________________
ACCEPTED BY:
streetTRACKS(SM) SERIES TRUST
BY: _______________________________
TITLE: _______________________________
ATTACHMENT A
This document supplements the Prospectus with respect to the procedures to
be used by (i) the Distributor in processing an order for the creation of
Creation Units of each series of streetTRACKS(SM) Series Trust (each a "Fund")
and (ii) the Transfer Agent in processing an order for redemption of Creation
Units. To accommodate Participants with restricted securities in the standard
basket, State Street has developed custom creation and redemption baskets. For a
Participant to transact in a custom basket, the Participant must acknowledge the
additional procedures described in Appendix 1 relating to custom baskets.
A Participant is required to have signed the Participant Agreement. Upon
acceptance of the Participant Agreement by the Trust, the Distributor will
assign a personal identification number to each Authorized Person authorized to
act for the Participant. This will allow a Participant through its Authorized
Person(s) to place an order with respect to Creation Units.
TO PLACE AN ORDER FOR CREATION OR REDEMPTION OF CREATION UNITS
1. Call to Receive an Order Number. For Creations, an Authorized Person
for the Participant will call the telephone representative at
1-877-879-2924 not later than the closing time of the regular trading
session on the New York Stock Exchange (the "NYSE Closing Time")
(ordinarily 4:00 p.m. New York time) to receive an Order Number. For
Redemptions, an Authorized Person for the Participant will call the
telephone representative at 1-877-879-2924 not later than the NYSE
Closing Time to receive an Order Number.
Upon verifying the authenticity of the caller (as determined by the use of
the appropriate PIN Number) and the terms of the order, the telephone
representative will issue a unique Order Number. All orders with respect
to the creation or redemption of Creation Units are required to be in
writing and accompanied by the designated Order Number. Incoming telephone
calls are queued and will be handled in the sequence received. Calls
placed before the NYSE Closing Time will be processed even if the call is
taken after this cut-off time. ACCORDINGLY, DO NOT HANG UP AND REDIAL.
INCOMING CALLS THAT ARE ATTEMPTED LATER THAN THE NYSE CLOSING TIME WILL
NOT BE ACCEPTED.
NOTE THAT THE TELEPHONE CALL IN WHICH THE ORDER NUMBER IS ISSUED INITIATES
THE ORDER PROCESS BUT DOES NOT ALONE CONSTITUTE THE ORDER. AN ORDER IS
ONLY COMPLETED AND PROCESSED UPON RECEIPT OF WRITTEN INSTRUCTIONS
CONTAINING THE DESIGNATED ORDER NUMBER AND PIN NUMBER AND TRANSMITTED BY
FACSIMILE OR TELEX (the "Order").
2. Place the Order. An Order Number is only valid for a limited time.
The Order for creation or redemption of Creation Units must be sent by
facsimile or telex to the telephone representative within 20 minutes of
the issuance of the Order Number. In the event that the Order is not
received within such time period, the telephone representative will
attempt to contact the Participant to request immediate transmission of
the Order. Unless the Order is received by the telephone
representative upon the earlier of (i) within 15 minutes of contact
with the Participant or (ii) 45 minutes after the NYSE Closing Time,
the order will be deemed invalid.
3. Await Receipt of Confirmation.
A. Clearing Process. The Distributor (in the case of creations) or the
Transfer Agent (in the case of redemptions) shall issue a
confirmation of Order acceptance within 15 minutes of
its receipt of an Order received in good form. In the event the
Participant does not receive a timely confirmation from the
Distributor or the Transfer Agent, it should contact the telephone
representative at the business number indicated.
B. Outside the Clearing Process. In lieu of receiving a
confirmation of Order acceptance, the DTC Participant will
receive an acknowledgment of Order acceptance. The DTC
Participant shall deliver on trade date plus one the Deposit
Securities and Cash Component (in the case of creations) or the
Creation Unit size aggregation of shares (in the case of
redemptions) to the Trust through DTC. The Trust shall settle
the transaction within three (3) Business Days.
4. Ambiguous Instructions. In the event that an Order contains terms that
differ from the information provided in the telephone call at the time
of issuance of the Order Number, the telephone representative will
attempt to contact the Participant to request confirmation of the terms
of the order. If an Authorized Person confirms the terms as they
appear in the Order then the order will be accepted and processed. If
an Authorized Person contradicts its terms, the Order will be deemed
invalid and a corrected Order must be received by the telephone
representative not later than the earlier of (i) within 15 minutes of
such contact with the Participant or (ii) 45 minutes after the NYSE
Closing Time. If the telephone representative is not able to contact
an Authorized Person, then the Order shall be accepted and processed in
accordance with its terms notwithstanding any inconsistency from the
terms of the telephone information. In the event that an Order
contains terms that are illegible, as determined in the sole discretion
of the Distributor (in the case of creations) or the Transfer Agent (in
the case of redemptions), the Order will be deemed invalid and the
telephone representative will attempt to contact the Participant to
request retransmission of the Order. A corrected Order must be
received by the telephone representative not later than the earlier of
(i) within 15 minutes of such contact with the Participant or (ii) 45
minutes after the NYSE Closing Time.
5. Processing an Order. The Distributor reserves the right to suspend an
Order in the event that its acceptance would appear to result in the
Participant or a Beneficial Owner owning 80 percent (80%) or more of
all outstanding shares of a given Fund. In such event, the telephone
representative will attempt to contact an Authorized Person for
purposes of confirmation of the fact that with respect to such
Participant no Beneficial Owner would own 80 percent (80%) or more of
all outstanding shares of a given Fund upon execution of the Order. In
the event that (i) the telephone representative is unable to contact an
Authorized Person or (ii) the Participant fails to transmit an
identical Order containing a representation and warranty as to such
fact, then the Order shall be deemed invalid.
6. Creation of Creation Units Prior to Receipt of Deposit Securities.
Creation Units of streetTRACKS(SM) Funds may be created in advance of
receipt by the Trust of all or a portion of the applicable Deposit
Securities, provided that the Participant deposits an initial deposit
of cash with the Trust having a value greater than the net asset value
of the shares on the date the order is placed in proper form. In
addition to available Deposit Securities, cash must be deposited in an
amount equal to the sum of (i) the Cash Component, plus (ii) 115% of
the market value of the undelivered Deposit Securities (the "Additional
Cash Deposit"). The order shall be deemed to be received on the
Business Day on which the order is placed provided that the order is
placed in proper form prior to 4:00 p.m. eastern time such date and
federal funds in the appropriate amount are deposited with the Trust's
Custodian by 11:00 a.m. eastern time the following Business Day. If
the order is not placed in proper form by 4:00 p.m. eastern time or
federal funds in the appropriate amount are not received by 11:00 a.m.
eastern time the next Business Day, then the order may be deemed to be
rejected and the investor shall be liable to the Trust for losses, if
any,
resulting therefrom. An additional amount of cash shall be required to be
deposited with the Trust, pending delivery of the missing Deposit
Securities to the extent necessary to maintain an amount of cash on
deposit with the Trust at least equal to 115% of the daily marked to
market value of the missing Deposit Securities. To the extent that missing
Deposit Securities are not received by 1:00 p.m. eastern time on the third
Business Day following the day on which the purchase order is deemed
received by the Distributor or in the event a mark to market payment is
not made within one Business Day following notification by the Distributor
that such a payment is required, the Trust may use the cash on deposit to
purchase the missing Deposit Securities. The Participant will be liable to
the Trust for the costs incurred by the Trust in connection with any such
purchases. These costs will be deemed to include the amount by which the
actual purchase price of the Deposit Securities exceeds the market value
of such Deposit Securities on the day the purchase order was deemed
received by the Distributor plus the brokerage and related transaction
costs associated with such purchases. The Trust will return any unused
portion of the Additional Cash Deposit once all of the missing Deposit
Securities have been properly received by the Custodian or purchased by
the Trust and deposited into the Trust. The Trust shall charge and the
Participant agrees to pay to the Trust the Transaction Fee prescribed in
the Prospectus applicable to creation or redemption through the Clearing
Process, or the Transaction Fee and such additional fee as may be
prescribed pursuant to the Prospectus applicable to creation or redemption
outside the Clearing Process. The delivery of Creation Units of the
streetTRACKS(SM) Funds so created will occur no later than the third
Business Day following the day on which the purchase order is deemed
received by the Distributor.
APPENDIX 1 -- PROCEDURES SPECIFIC TO CUSTOM BASKETS
To accommodate Participants with restricted securities in the standard
basket of a Fund, State Street has developed custom creation and redemption
baskets (the "Custom Baskets"). Custom Baskets are intended to allow
Participants with restricted issues in a particular Fund, to transact in that
Fund using the Custom Basket process. The Custom Basket process substitutes
cash-in-lieu for the restricted securities and continues to settle through the
standard CNS process at NSCC. It is the responsibility of the Participant to
apply to the NSCC by contacting DTCC Participant Services at 212-855-4155 to
allow them to receive Custom Baskets as well as the regular daily standard
baskets (the "Standard Baskets"). To ensure proper tracking of the Fund to its
benchmark index the following guidelines must be followed when transacting
Custom Baskets:
1. On or before T-1, the Participant must request a Custom Basket from the
Transfer Agent by calling 1-877-879-2924. The Transfer Agent will fax
a standard form (see attached) on which the Participant must identify
the restricted securities to be omitted from the creation or redemption
basket. At this time, the Participant is limited to substituting
cash-in-lieu only for restricted issues. Participants may request that
the Custom Basket be available for creations and redemptions for a
one-time transaction, a specific period or indefinitely. The Trust
will review the Custom Basket request and, if approved, will deliver a
confirmation back to the Participant. In the event subsequent
additions and/or deletions to restricted issues are required to change
the custom basket already approved, the Participant is responsible for
completing a new standard form with the Transfer Agent.
2. On trade date, prior to the opening of the NYSE, State Street will notify
NSCC as to the components of the approved Custom Baskets available that
day along with the components of the Standard Basket. Each Custom Basket
will be identified by a separate NSCC assigned instruction CUSIP.
3. On trade date, the Participant will follow the directions regarding
placing orders outlined in Attachment A. A Participant wishing to
create or redeem a Custom Basket must identify the custom CUSIP on the
order form in the blank provided. Orders received without a custom
CUSIP indicated will be processed as orders for Standard Baskets.
Participants placing orders for Custom Baskets must note that the
cut-off-time to create and redeem a Custom Basket will be 3:00 p.m. New
York time. ORDERS FOR CUSTOM BASKETS WILL NOT BE PROCESSED IF RECEIVED
BY STATE STREET AFTER 3:00 P.M. NEW YORK TIME. The Participant must
transact on the Standard Basket after 3:00 p.m. New York time.
IN WITNESS WHEREOF, the Participant acknowledges that he or she has read
the procedures relating to Custom Baskets and agrees to comply with all such
procedures. Failure to comply with the Custom Basket procedures will require the
transaction to be effected in Standard Basket.
PARTICIPANT: __________________________________
BY: __________________________________
TITLE: __________________________________
ADDRESS: __________________________________
TELEPHONE: __________________________________
FACSIMILE: __________________________________
TELEX: __________________________________
Date: _____________________________
ATTACHMENT B
The following individuals are Authorized Persons pursuant to Section 6
of the Participant Agreement between State Street Capital Markets, LLC, State
Street Bank and Trust Company and [ ]
[ ]
By: __________________________
EX-99.(J)(I)
7
b40821ssex99-ji.txt
CONSENT OF ERNST & YOUNG
EXHIBIT (j)(i)
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the references made to our firm under the captions
"Financial Highlights" "General Information" in the Prospectus and "Independent
Auditors" and "Financial Statements" in the Statement of Additional Information
included in Post-Effective Amendment No. 2 to Registration Statement (Form N-1A,
No. 811-08839) of the streetTRACKS Series Trust.
We also consent to the incorporation by reference into the Statement of
Additional Information of our report dated August 10, 2001 with respect to the
financial statements and financial highlights of the streetTRACKS Dow Jones U.S.
Large Cap Value Index Fund, streetTRACKS Dow Jones U.S. Large Cap Growth Index
Fund, streetTRACKS Dow Jones U.S. Small Cap Value Index Fund, streetTRACKS Dow
Jones U.S. Small Cap Growth Index Fund, streetTRACKS Dow Jones Global Titans
Index Fund, streetTRACKS Wilshire REIT Index Fund, streetTRACKS Morgan Stanley
Technology Index Fund, streetTRACKS Morgan Stanley Internet Index Fund, Fortune
500 Index Fund, and Fortune e-50 Index Fund, included in the annual report of
the streetTRACKS Series Trust.
/s/ Ernst & Young LLP
------------------------------
Ernst & Young LLP
Boston, Massachusetts
October 26, 2001