UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-21145
----------------------------------------------
STREETTRACKS INDEX SHARES FUNDS
(FORMERLY FRESCO INDEX SHARES FUNDS)
------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
225 Franklin Street, Boston, MA 02109
------------------------------------------------------------------------------
(Address of principal executive offices) (zip code)
Scott M. Zoltowski, Esq.
State Street Bank and Trust Company
One Federal Street
Boston, MA 02110
(Name and address of agent for service)
Copy to:
Stuart Strauss, Esq.
Clifford Chance US LLP
31 West 52nd Street
New York, New York 10019
Registrant's telephone number, including area code: (866) S-TRACKS
Date of fiscal year end: September 30
Date of reporting period: September 30, 2004
ITEM 1: REPORTS TO SHAREHOLDERS
streetTRACKS (R)
Index Shares Funds
ANNUAL REPORT
SEPTEMBER 30, 2004
(COVER GRAPHIC)
[streetTRACKS annual report]
PRESIDENT'S LETTER TO SHAREHOLDERS
Dear streetTRACKS shareholders,
On July 1, 2004, SSgA Funds Management, Inc. began managing two new additions to
the streetTRACKS family. The Fresco Dow Jones STOXX 50 Fund (NYSE: FEU) and the
Fresco Dow Jones Euro STOXX 50 Fund (NYSE: FEZ) were transferred from UBS Global
Asset Management (US) Inc. and were accordingly renamed the streetTRACKS STOXX
50 Fund (NYSE: FEU) and streetTRACKS EuroSTOXX 50 Fund (NYSE: FEZ). The Funds
are managed to the Dow Jones STOXX 50 Index and the Dow Jones EURO STOXX 50
Index, respectively.
Enabling investors to gain easy exposure to the European and Eurozone markets,
the streetTRACKS STOXX 50 Fund and the streetTRACKS EuroSTOXX 50 Fund have
posted returns of 22.13% and 24.21%, respectively, for the fiscal year ending
September 30, 2004. First quarter returns were very strong, but markets grew
more cautious towards fiscal year end, due to instability in the Middle East and
higher oil prices.
Though markets remained flat through fiscal year end, investors' interest in
exchange traded funds continued to grow. ETFs listed and traded on U.S.
exchanges number 148 as of September 30, 2004 -- up from 114 at the end of the
last fiscal year. Total assets under management topped $181 billion as of
September 30, 2004, representing an increase of approximately $57 billion over
last year. The streetTRACKS family continued to share in the success of ETFs as
well. Total assets invested in the streetTRACKS funds exceeded $1 billion in
eleven funds as of September 30, 2004.
We anticipate further growth in the ETF industry -- both in assets and in the
number of ETF products available. We are fully committed to playing a leading
role in working with investors and advisors to develop applications for ETFs
that help you best pursue your investment goals. We look forward to a continued
relationship built on trust and dedicated to delivering innovative products, and
applications for those products, that best serve the needs of the investment
community.
Agustin J. Fleites
President
streetTRACKS Series Trust
1
[streetTRACKS annual report]
MANAGEMENT'S DISCUSSION AND ANALYSIS
STREETTRACKS DOW JONES STOXX 50 INDEX FUND
The Dow Jones STOXX 50 Index Fund (the "Fund") seeks to replicate the total
return of the Dow Jones STOXX 50 Index (the "Index"). To accomplish this, the
Fund utilizes a "passive" or indexing approach and attempts to approximate the
investment performance of its benchmark index, before expenses, by investing in
a portfolio of stocks to replicate the Index.
The Fund performance for the year ending September 30, 2004 was 22.13% versus
the Index return of 22.40%. The vast majority of the return was posted in the
first quarter of the fiscal year. Stock markets in many parts of the world
posted strong gains during that time period. Markets reacted positively to
encouraging economic news and appeared to build expected earnings into stock
prices during the period. Since December, the markets have been relatively flat.
Investors appeared to cautiously wait for expected earnings to materialize.
Other factors influencing the markets were instability in the Middle East and
increasing oil prices. The price of a barrel of oil was just under $50 on
September 30, 2004, a 70% increase over the price a year earlier.
Ericsson Lm Tel of Sweden was the top performing stock in the index during the
period, rising 100%. Nokia OYJ was the worst performing stock in the index,
falling nearly 14%. While both firms are well known makers of mobile phones,
Ericsson Lm Tel posted a very good year with much improved earnings, while
earnings at Nokia OYJ were not nearly as good.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
DOW JONES STOXX 50 FUND
[LINE GRAPH]
<Table>
<Caption>
STREETTRACKS DOW JONES DOW JONES STOXX 50 INDEX - US
STOXX 50 FUND DOLLAR DENOMINATED
---------------------- -----------------------------
10/15/02 10000.00 10000.00
12/31/02 10059.00 9978.00
3/31/03 9128.50 9131.80
6/30/03 11097.60 11096.40
9/30/03 11279.10 11287.10
12/31/03 13631.00 13660.00
3/31/04 13384.40 13423.40
6/30/04 13524.50 13552.20
9/30/04 13775.70 13815.10
</Table>
2
STREETTRACKS INDEX SHARES FUNDS ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following Performance chart is provided to compare the Fund's total
return at NAV to the total return based on market price and its benchmark
Index. The following chart is for comparative purposes only and represents
the period noted. The Fund's past performance is no guarantee of future
results. The investment return and principal value of Fund shares will vary
with changes in market conditions, and may be worth more or less than their
original cost when they are redeemed or sold in the market.
PERFORMANCE AS OF SEPTEMBER 30, 2004
<Table>
<Caption>
---------------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN
---------------------------------------------------------------------------------
NET ASSET MARKET
VALUE VALUE DOW JONES STOXX 50 INDEX
------------------------------------------------------------------------------------------------------------------
ONE YEAR ENDED 9/30/04 22.13% 22.20% 22.40%
------------------------------------------------------------------------------------------------------------------
SINCE INCEPTION OF TRADING (1) 37.76% 34.89% 32.84%
------------------------------------------------------------------------------------------------------------------
</Table>
(1) For the period October 21, 2002 (commencement of trading) to September
30, 2004.
<Table>
<Caption>
---------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
---------------------------------------------------------------------------------
NET ASSET MARKET
VALUE VALUE DOW JONES STOXX 50 INDEX
------------------------------------------------------------------------------------------------------------------
ONE YEAR ENDED 9/30/04 22.13% 22.20% 22.40%
------------------------------------------------------------------------------------------------------------------
SINCE INCEPTION OF TRADING (1) 17.93% 16.66% 15.71%
------------------------------------------------------------------------------------------------------------------
</Table>
(1) For the period October 21, 2002 (commencement of trading) to September
30, 2004.
TOP FIVE HOLDINGS AS OF SEPTEMBER 30, 2004
<Table>
-----------------------------------------------------------------------------------------------------
DESCRIPTION HSBC
HOLDINGS VODAFONE GLAXOSMITHKLINE TOTAL FINA
BP PLC PLC GROUP PLC PLC ELF SA
-----------------------------------------------------------------------------------------------------
MARKET VALUE 1,471,807 1,338,572 1,068,642 1,054,289
$1,739,959
-----------------------------------------------------------------------------------------------------
% OF 6.99% 5.91 5.38 4.29 4.23
NET ASSETS
-----------------------------------------------------------------------------------------------------
</Table>
INDUSTRY BREAKDOWN AS OF SEPTEMBER 30, 2004*
[PIE CHART]
<Table>
<Caption>
CYCLICAL
GOODS FOOD
& FINANCIAL &
AUTOMOBILES BANKS CHEMICALS SERVICES ENERGY SERVICES BEVERAGES HEALTHCARE INDUSTRIALS INSURANCE
- ----------- ----- --------- -------- ------ --------- --------- ---------- ----------- ---------
1.2 26.80 1.10 1.00 19.20 1.00 5.50 12.90 2.10 6.30
<Caption>
NON-
CYCLICAL
GOODS
&
MINING SERVICES OTHER RETAIL SOFTWARE TECHNOLOGY TELECOMMUNICATIONS UTILITIES
------ -------- ----- ------ -------- ---------- ------------------ ---------
1.20 2.10 0.30 1.00 1.10 2.20 12.60 2.40
</Table>
* The Fund's industry breakdown is expressed as a percentage of net assets
and may change over time.
3
STREETTRACKS INDEX SHARES FUNDS ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
STREETTRACKS DOW JONES EUROSTOXX 50 INDEX FUND
The Dow Jones EUROSTOXX 50 Index Fund (the "Fund") seeks to replicate the total
return of the Dow Jones EUROSTOXX 50 Index (the "Index"). To accomplish this,
the Fund utilizes a "passive" or indexing approach and attempts to approximate
the investment performance of its benchmark index, before expenses, by investing
in a portfolio of stocks to replicate the Index.
The Fund performance for the year ending September 30, 2004 was 24.21% versus
the Index return of 24.13%. The vast majority of the return was posted in the
first quarter of the fiscal year. Stock markets in many parts of the world
posted strong gains during that time period. Markets reacted positively to
encouraging economic news and appeared to build expected earnings into stock
prices during the period. Since December, the markets have been relatively flat.
Investors appeared to cautiously wait for expected earnings to materialize.
Other factors influencing the markets were instability in the Middle East and
increasing oil prices. The price of a barrel of oil was just under $50 on
September 30, 2004, a 70% increase over the price a year earlier.
RWE AG, a German Utility company gained nearly 74% during the year. Utilities
were a strong performer in general, and the company was rewarded for its efforts
to cut debt, and narrow its focus on water, gas, and electricity distribution.
Koninklijke Ahold NV, the Dutch Food Retailer fell over 25%. The company
continued to suffer the after affects of an accounting issue that caused a
significant restatement of earnings. Wal-Mart's efforts to enter U.S. Food
retail sales, further weighed on the stock price of Koninklijke Ahold NV, which
is the parent of U.S. Food retailers, Stop & Shop and Giant.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
DOW JONES EURO STOXX 50 FUND
[LINE GRAPH]
<Table>
<Caption>
STREETTRACKS DOW JONES EURO DOW JONES EURO STOXX 50
STOXX 50 FUND INDEX - US DOLLAR DENOMINATED
--------------------------- -----------------------------
10/15/02 10000.00 10000.00
12/31/02 10343.00 10282.50
3/31/03 9148.40 9155.50
6/30/03 11656.90 11640.80
9/30/03 11745.90 11731.50
12/31/03 14658.00 14657.00
3/31/04 14443.10 14452.00
6/30/04 14684.80 14664.00
9/30/04 14590.10 14561.80
</Table>
4
STREETTRACKS INDEX SHARES FUNDS ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following Performance chart is provided to compare the Fund's total
return at NAV to the total return based on market price and its benchmark
Index. The following chart is for comparative purposes only and represents
the period noted. The Fund's past performance is no guarantee of future
results. The investment return and principal value of Fund shares will vary
with changes in market conditions, and may be worth more or less than their
original cost when they are redeemed or sold in the market.
PERFORMANCE AS OF SEPTEMBER 30, 2004
<Table>
<Caption>
-----------------------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN
---------------------------------------------------------------------------------
NET ASSET MARKET
VALUE VALUE DOW JONES EURO STOXX 50 INDEX
------------------------------------------------------------------------------------------------------------------
ONE YEAR ENDED 9/30/04 24.21% 24.11% 24.13%
------------------------------------------------------------------------------------------------------------------
SINCE INCEPTION OF TRADING (1) 43.22% 39.97% 38.04%
------------------------------------------------------------------------------------------------------------------
</Table>
(1) For the period October 21, 2002 (commencement of trading) to September
30, 2004.
<Table>
<Caption>
-----------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
---------------------------------------------------------------------------------
NET ASSET MARKET
VALUE VALUE DOW JONES EURO STOXX 50 INDEX
-----------------------------------------------------------------------------------------------------------------------------
ONE YEAR ENDED 9/30/04 24.21% 24.11% 24.13%
-----------------------------------------------------------------------------------------------------------------------------
SINCE INCEPTION OF TRADING (1) 20.31% 18.90% 18.05%
------------------------------------------------------------------------------------------------------------------
</Table>
(1) For the period October 21, 2002 (commencement of trading) to September
30, 2004.
TOP FIVE HOLDINGS AS OF SEPTEMBER 30, 2004
<Table>
------------------------------------------------------------------------------------------------------------------
DESCRIPTION TOTAL FINA ROYAL DUTCH SANOFI-
ELF SA PETROLEUM CO. SYNTHELABO SA TELEFONICA SA NOKIA OYJ
------------------------------------------------------------------------------------------------------------------
MARKET VALUE $6,727,611 5,759,835 3,869,552 3,524,352 3,444,922
------------------------------------------------------------------------------------------------------------------
% OF 7.21% 6.17 4.15 3.78 3.69
NET ASSETS
------------------------------------------------------------------------------------------------------------------
</Table>
INDUSTRY BREAKDOWN AS OF SEPTEMBER 30, 2004*
[PIE CHART]
<Table>
Financial Services 1.7
Technology 4.4
Banks 18.3
Software 1.9
Chemicals 3.9
Construction 1.9
Cyclical Goods & Services 2.7
Energy 17.9
Food & Beverages 3.0
Healthcare 4.2
Insurance 10.2
Media 1.6
Non-cyclical Goods & Services 1.7
Retail 1.6
Telecommunications 11.0
Utilities 8.3
Automobiles 2.0
Other 0.2
Industrials 3.5
</Table>
* The Fund's industry breakdown is expressed as a percentage of net assets
and may change over time.
5
STREETTRACKS INDEX SHARES STOXX 50 FUND
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
SECURITY DESCRIPTION SHARES VALUE
- -------------------- ------ -----
COMMON STOCKS -- 99.50%
BELGIUM -- 0.98%
FINANCIAL SERVICES -- 0.98%
Fortis*............................... 10,305 $ 244,969
-----------
FINLAND -- 2.17%
TECHNOLOGY -- 2.17%
Nokia Oyj............................. 39,197 539,404
-----------
FRANCE -- 10.73%
BANKS -- 3.15%
BNP Paribas SA........................ 7,043 454,865
Societe Generale...................... 3,730 330,077
-----------
784,942
-----------
ENERGY -- 4.23%
Total Fina Elf SA..................... 5,176 1,054,289
-----------
INSURANCE -- 1.03%
AXA*.................................. 12,655 256,038
-----------
NON-CYCLICAL GOODS & SERVICES -- 0.69%
L'Oreal SA*........................... 2,613 171,192
-----------
RETAIL -- 0.96%
Carrefour SA*......................... 5,055 237,760
-----------
UTILITIES -- 0.67%
Suez SA............................... 7,809 167,401
-----------
TOTAL FRANCE COMMON STOCKS............ 2,671,622
-----------
GERMANY -- 11.18%
AUTOMOBILES -- 1.16%
DaimlerChrysler AG*................... 7,036 290,125
-----------
BANKS -- 1.32%
Deutsche Bank AG...................... 4,564 328,036
-----------
CHEMICALS -- 1.10%
BASF AG............................... 4,666 274,981
-----------
INDUSTRIALS -- 2.08%
Siemens AG............................ 7,039 517,640
-----------
INSURANCE -- 1.19%
Allianz AG............................ 2,934 295,494
-----------
SOFTWARE -- 1.11%
SAP AG................................ 1,775 275,789
-----------
TELECOMMUNICATIONS -- 1.50%
Deutsche Telekom AG*.................. 20,084 372,668
-----------
UTILITIES -- 1.72%
E.ON AG*.............................. 5,811 428,705
-----------
TOTAL GERMANY COMMON STOCKS........... 2,783,438
-----------
ITALY -- 3.86%
ENERGY -- 1.94%
Eni SpA*.............................. 21,499 481,700
-----------
INSURANCE -- 1.02%
Assicurazioni Generali SpA*........... 9,235 253,828
-----------
TELECOMMUNICATIONS -- 0.90%
Telecom Italia SpA.................... 72,766 224,583
-----------
TOTAL ITALY COMMON STOCKS............. 960,111
-----------
</Table>
<Table>
<Caption>
SECURITY DESCRIPTION SHARES VALUE
- -------------------- ------ -----
NETHERLANDS -- 8.68%
BANKS -- 1.27%
ABN AMRO Holding NV................... 13,905 $ 315,869
-----------
CYCLICAL GOODS & SERVICES -- 0.99%
Philips Electronics NV................ 10,730 245,744
-----------
ENERGY -- 3.62%
Royal Dutch Petroleum Co.............. 17,523 902,535
-----------
FOOD & BEVERAGES -- 1.11%
Unilever NV........................... 4,794 275,796
-----------
INSURANCE -- 1.69%
Aegon NV.............................. 275 2,965
ING Groep NV.......................... 16,617 419,370
-----------
422,335
-----------
TOTAL NETHERLANDS COMMON STOCKS....... 2,162,279
-----------
SPAIN -- 5.36%
BANKS -- 3.14%
Banco Bilbao Vizcaya Argentaria SA.... 28,471 391,799
Banco Santander Central Hispano SA*... 40,038 390,856
-----------
782,655
-----------
TELECOMMUNICATIONS -- 2.22%
Telefonica SA......................... 36,876 551,890
-----------
TOTAL SPAIN COMMON STOCKS............. 1,334,545
-----------
SWEDEN -- 1.62%
TELECOMMUNICATIONS -- 1.62%
Ericsson Lm Tel....................... 130,000 403,560
-----------
SWITZERLAND -- 13.96%
BANKS -- 3.79%
Credit Suisse Group*.................. 10,043 320,504
UBS AG................................ 8,831 621,642
-----------
942,146
-----------
FOOD & BEVERAGES -- 3.12%
Nestle SA............................. 3,393 777,127
-----------
HEALTHCARE -- 6.41%
Novartis AG........................... 21,134 985,023
Roche Holding AG*..................... 5,906 610,134
-----------
1,595,157
-----------
INSURANCE -- 0.64%
Swiss Reinsurance*.................... 2,786 160,306
-----------
TOTAL SWITZERLAND COMMON STOCKS....... 3,474,736
-----------
UNITED KINGDOM -- 40.96%
BANKS -- 14.15%
Barclays PLC.......................... 54,071 518,574
HBOS PLC.............................. 32,688 441,263
HSBC Holdings PLC..................... 92,743 1,471,807
Lloyds TSB Group PLC.................. 46,973 366,775
Royal Bank of Scotland Group PLC...... 25,095 724,753
-----------
3,523,172
-----------
</Table>
See accompanying notes to financial statements.
6
STREETTRACKS INDEX SHARES STOXX 50 FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
SECURITY DESCRIPTION SHARES VALUE
- -------------------- ------ -----
ENERGY -- 9.38%
BP PLC................................ 182,283 $ 1,739,959
Shell Transport & Trading Co. PLC..... 80,937 593,893
-----------
2,333,852
-----------
FOOD & BEVERAGES -- 1.29%
Diageo PLC............................ 25,653 320,300
-----------
HEALTHCARE -- 6.47%
AstraZeneca PLC....................... 13,247 542,945
GlaxoSmithKline PLC................... 49,585 1,068,642
-----------
1,611,587
-----------
INSURANCE -- 0.77%
Aviva PLC............................. 19,385 192,053
-----------
MINING -- 1.23%
Anglo American PLC.................... 12,728 305,173
-----------
NON-CYCLICAL GOODS & SERVICES -- 1.36%
Tesco PLC............................. 65,740 339,333
-----------
TELECOMMUNICATIONS -- 6.31%
BT Group PLC.......................... 71,706 233,236
Vodafone Group PLC.................... 559,340 1,338,572
-----------
1,571,808
-----------
TOTAL UNITED KINGDOM COMMON STOCKS.... 10,197,278
-----------
TOTAL COMMON STOCKS -- (Cost
$22,936,463)........................ 24,771,942
-----------
</Table>
<Table>
<Caption>
SHARES VALUE
------ -----
SHORT TERM INVESTMENTS -- 0.02%
UNITED STATES -- 0.02%
MONEY MARKET FUND -- 0.02%
AIM Short Term Investment Class Prime
Fund -- (Cost $4,380)................ 4,380 $ 4,380
-----------
TOTAL INVESTMENTS -- 99.52% (Cost
$22,940,843)......................... 24,776,322
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 0.48%............... 120,059
-----------
NET ASSETS -- 100.00%.................. $24,896,381
===========
* Non-income producing security
</Table>
See accompanying notes to financial statements.
7
STREETTRACKS INDEX SHARES EURO STOXX 50 FUND
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
SECURITY DESCRIPTION SHARES VALUE
- -------------------- ------- -----
COMMON STOCKS -- 99.88%
BELGIUM -- 1.67%
FINANCIAL SERVICES -- 1.67%
Fortis (1)*........................... 65,449 $ 1,555,846
-----------
FINLAND -- 3.69%
TECHNOLOGY -- 3.69%
Nokia Oyj............................. 250,333 3,444,922
-----------
FRANCE -- 32.89%
BANKS -- 6.44%
BNP Paribas SA........................ 44,731 2,888,907
Credit Agricole S.A.*................. 37,053 1,010,595
Societe Generale...................... 23,858 2,111,254
-----------
6,010,756
-----------
CHEMICALS -- 0.98%
L'Air Liquide SA*..................... 5,858 918,913
-----------
CONSTRUCTION -- 1.88%
Compagnie de Saint-Gobain............. 18,531 951,231
Lafarge SA*........................... 9,164 801,840
-----------
1,753,071
-----------
CYCLICAL GOODS & SERVICES -- 0.99%
LVMH Moet Hennessy Louis Vuitton SA
(1)................................. 13,800 921,253
-----------
ENERGY -- 7.21%
Total Fina Elf SA..................... 33,029 6,727,611
-----------
FOOD & BEVERAGES -- 1.14%
Groupe Danone*........................ 13,491 1,060,644
-----------
HEALTHCARE -- 4.15%
Sanofi-Synthelabo SA (1).............. 53,349 3,869,552
-----------
INSURANCE -- 1.76%
AXA*.................................. 81,020 1,639,211
-----------
MEDIA -- 1.58%
Vivendi Universal SA*................. 57,556 1,474,726
-----------
NON-CYCLICAL GOODS & SERVICES -- 1.17%
L'Oreal SA*........................... 16,746 1,097,123
-----------
RETAIL -- 1.63%
Carrefour SA*......................... 32,365 1,522,273
-----------
TECHNOLOGY -- 0.77%
Alcatel SA*........................... 61,416 717,782
-----------
TELECOMMUNICATIONS -- 2.04%
France Telecom SA..................... 76,472 1,905,263
-----------
UTILITIES -- 1.15%
Suez SA............................... 50,048 1,072,875
-----------
TOTAL FRANCE COMMON STOCKS............ 30,691,053
-----------
GERMANY -- 22.25%
AUTOMOBILES -- 1.98%
DaimlerChrysler AG*................... 44,793 1,847,012
-----------
BANKS -- 2.25%
Deutsche Bank AG...................... 29,191 2,098,090
-----------
CHEMICALS -- 2.95%
BASF AG............................... 29,492 1,738,049
Bayer AG.............................. 36,966 1,010,977
-----------
2,749,026
-----------
</Table>
<Table>
<Caption>
SECURITY DESCRIPTION SHARES VALUE
- -------------------- ------- -----
INDUSTRIALS -- 3.54%
Siemens AG............................ 44,955 $ 3,305,938
-----------
INSURANCE -- 3.03%
Allianz AG............................ 18,605 1,873,780
Muenchener Rueckversicherungs-
Gesellschaft AG*.................... 9,939 957,419
-----------
2,831,199
-----------
SOFTWARE -- 1.86%
SAP AG................................ 11,169 1,735,374
-----------
TELECOMMUNICATIONS -- 2.55%
Deutsche Telekom AG*.................. 128,425 2,382,987
-----------
UTILITIES -- 4.09%
E.ON AG*.............................. 37,142 2,740,144
RWE AG*............................... 22,474 1,074,081
-----------
3,814,225
-----------
TOTAL GERMANY COMMON STOCKS........... 20,763,851
-----------
ITALY -- 10.90%
BANKS -- 2.07%
Sanpaolo IMI SpA*..................... 55,943 631,584
UniCredito Italiano SpA*.............. 258,898 1,305,499
-----------
1,937,083
-----------
ENERGY -- 3.30%
Eni SpA (1)*.......................... 137,316 3,076,658
-----------
INSURANCE -- 1.74%
Assicurazioni Generali SpA*........... 59,139 1,625,463
-----------
TELECOMMUNICATIONS -- 2.67%
Telecom Italia Mobile SpA (TIM)*...... 198,592 1,070,466
Telecom Italia SpA.................... 459,218 1,417,317
-----------
2,487,783
-----------
UTILITIES -- 1.12%
Enel SpA (1)*......................... 127,694 1,043,561
-----------
TOTAL ITALY COMMON STOCKS............. 10,170,548
-----------
NETHERLANDS -- 16.16%
BANKS -- 2.16%
ABN AMRO Holding NV (1)............... 88,960 2,020,831
-----------
CYCLICAL GOODS & SERVICES -- 1.69%
Philips Electronics NV................ 68,700 1,573,401
-----------
ENERGY -- 6.17%
Royal Dutch Petroleum Co.............. 111,829 5,759,835
-----------
FOOD & BEVERAGES -- 1.89%
Unilever NV (1)....................... 30,678 1,764,888
-----------
INSURANCE -- 3.68%
Aegon NV (1).......................... 72,898 785,881
ING Groep NV.......................... 104,970 2,649,174
-----------
3,435,055
-----------
NON-CYCLICAL GOODS & SERVICES -- 0.57%
Koninklijke Ahold NV*................. 83,287 531,694
-----------
TOTAL NETHERLANDS COMMON STOCKS....... 15,085,704
-----------
</Table>
See accompanying notes to financial statements.
8
STREETTRACKS INDEX SHARES EURO STOXX 50 FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
SECURITY DESCRIPTION SHARES VALUE
- -------------------- ------- -----
SPAIN -- 12.32%
BANKS -- 5.36%
Banco Bilbao Vizcaya Argentaria SA
(1)................................. 181,999 $ 2,504,553
Banco Santander Central Hispano SA
(1)*................................ 255,936 2,498,478
-----------
5,003,031
-----------
ENERGY -- 1.20%
Repsol YPF SA*........................ 51,046 1,120,897
-----------
TELECOMMUNICATIONS -- 3.78%
Telefonica SA......................... 235,489 3,524,352
-----------
UTILITIES -- 1.98%
Endesa SA (1)......................... 51,138 973,660
Iberdrola SA*......................... 42,191 875,101
-----------
1,848,761
-----------
TOTAL SPAIN COMMON STOCKS............. 11,497,041
-----------
TOTAL COMMON STOCKS --
(Cost $78,257,541).................. 93,208,965
-----------
</Table>
<Table>
<Caption>
SHARES VALUE
------ -----
SHORT TERM INVESTMENTS -- 12.19%
UNITED STATES -- 12.19%
MONEY MARKET FUNDS -- 12.19%
AIM Short Term Investment Class
Prime Fund (Cost -- $40,506).... 40,506 $ 40,506
UBS Private Money Market Fund, LLC
(Cost -- $11,336,507)(2)........ 11,336,507 11,336,507
------------
TOTAL SHORT TERM INVESTMENTS --
(Cost $11,377,013).............. 11,377,013
------------
TOTAL INVESTMENTS -- 112.07%
(Cost -- $89,634,554)........... 104,585,978
OTHER ASSETS IN EXCESS OF
LIABILITIES -- (12.07%)....... (11,260,890)
------------
NET ASSETS -- 100.00%............. $ 93,325,088
============
* Non-income producing security
(1) Security, or portion thereof, was on loan
at September 30, 2004
(2) Investments of cash collateral for
securities loaned
</Table>
See accompanying notes to financial statements.
9
STREETTRACKS INDEX SHARES FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
STREETTRACKS STREETTRACKS
DOW JONES DOW JONES
STOXX 50 EURO STOXX 50
FUND FUND
------------ -------------
ASSETS
Investments in securities at value (cost -- $22,940,843
and $78,298,047 respectively)*.......................... $24,776,322 $ 93,249,471
Investments of cash collateral received for securities
loaned, at value (cost -- $0 and $11,336,507,
respectively)........................................... -- 11,336,507
Cash...................................................... -- --
Foreign currency, at value (cost -- $35,079 and $517,992,
respectively)........................................... 35,396 524,375
Receivable for investments sold........................... 153,044 2,484,721
Receivable for foreign currency contracts................. 151,892 477,341
Dividends receivable...................................... 86,907 29,177
----------- ------------
TOTAL ASSETS....................................... 25,203,061 108,101,592
----------- ------------
LIABILITIES
Payable for cash collateral for securities loaned......... -- 11,336,507
Payable for investments purchased......................... -- 2,445,345
Distributions payable..................................... 145,763 481,223
Payable for foreign currency contracts.................... 152,267 481,223
Accrued trustees fees..................................... 2,781 10,269
Accrued advisory fee...................................... 5,869 21,937
----------- ------------
TOTAL LIABILITIES.................................. 306,680 14,776,504
----------- ------------
NET ASSETS......................................... $24,896,381 $ 93,325,088
=========== ============
NET ASSETS REPRESENTED BY:
Paid in capital........................................... $23,230,373 $ 78,898,435
Undistributed net investment income....................... (58,614) (477,341)
Accumulated net realized gain (loss) on investments and
foreign currency transactions........................... (113,348) (51,495)
Net unrealized appreciation on investments and foreign
currency................................................ 1,837,970 14,955,489
----------- ------------
NET ASSETS......................................... $24,896,381 $ 93,325,088
=========== ============
NET ASSETS VALUE PER SHARE
Net asset value per share................................. $ 33.20 $ 33.94
=========== ============
Shares outstanding (unlimited amount authorized, $0.01 par
value).................................................. 750,000 2,750,000
=========== ============
</Table>
* Includes $0 and $10,752,418, respectively, of investments in securities on
loan, at value.
See accompanying notes to financial statements.
10
STREETTRACKS INDEX SHARES FUNDS
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
STREETTRACKS STREETTRACKS
DOW JONES DOW JONES
STOXX 50 EURO STOXX 50
FUND FUND
------------ -------------
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes, $84,513 and
$274,373, respectively)................................. $ 641,990 $ 1,856,078
Securities lending -- Net................................. 4,519 79,440
---------- -----------
TOTAL INVESTMENT INCOME................................... 646,509 1,935,518
---------- -----------
EXPENSES:
Advisory fee.............................................. 56,739 250,165
Trustees fees and expenses................................ 6,427 32,318
Other expenses............................................ 654 841
---------- -----------
TOTAL EXPENSES............................................ 63,820 283,324
---------- -----------
NET INVESTMENT INCOME..................................... 582,689 1,652,194
---------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on investments and foreign
currency transactions................................... (121,105) 12,867,239
Net change in unrealized appreciation on investments and
foreign currency........................................ 1,164,330 6,731,659
---------- -----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND
FOREIGN CURRENCY..................................... 1,043,225 19,598,898
---------- -----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $1,625,914 $21,251,092
========== ===========
</Table>
See accompanying notes to financial statements.
11
streetTRACKS INDEX SHARES FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<Table>
<Caption>
FOR THE YEAR ENDED FOR THE PERIOD ENDED
SEPTEMBER 30, 2004 SEPTEMBER 30, 2003*
---------------------------- ----------------------------
STREETTRACKS STREETTRACKS STREETTRACKS STREETTRACKS
DOW JONES DOW JONES DOW JONES DOW JONES
STOXX 50 EURO STOXX 50 STOXX 50 EURO STOXX 50
FUND FUND FUND FUND
------------ ------------- ------------ -------------
FROM OPERATIONS:
Net investment income....................... $ 582,689 $ 1,652,194 $ 621,227 $ 3,848,672
Net realized gain (loss) on investments and
foreign currency transactions............. (121,105) 12,867,239 1,987,826 14,957,077
Net change in unrealized appreciation on
investments and foreign currency.......... 1,164,330 6,731,659 673,640 8,223,830
----------- ------------ ------------ -------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................ 1,625,914 21,251,092 3,282,693 27,029,579
----------- ------------ ------------ -------------
UNDISTRIBUTED NET INVESTMENT INCOME INCLUDED
IN PRICE OF SHARES ISSUED AND REDEEMED,
NET......................................... 4,367 16,527 (146,907) (905,561)
----------- ------------ ------------ -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income....................... (601,360) (1,760,293) (473,377) (2,937,683)
----------- ------------ ------------ -------------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares........ 15,509,127 27,470,917 30,444,056 200,632,489
Cost of shares redeemed..................... (62,983) (39,019,051) (24,735,149) (138,502,928)
----------- ------------ ------------ -------------
NET INCREASE (DECREASE) IN NET ASSETS FROM
BENEFICIAL INTEREST TRANSACTIONS............ 15,446,144 (11,548,134) 5,708,907 62,129,561
----------- ------------ ------------ -------------
Net increase in net assets during period.... 16,475,065 7,959,192 8,371,316 85,315,896
Net assets at beginning of period........... 8,421,316 85,365,896 50,000 50,000
----------- ------------ ------------ -------------
NET ASSETS END OF PERIOD (1).................. $24,896,381 $ 93,325,088 $ 8,421,316 $ 85,365,896
=========== ============ ============ =============
SHARES OF BENEFICIAL INTEREST:
Shares sold................................. 450,000 800,000 1,200,000 8,150,000
Shares redeemed............................. (1,971) (1,102,046) (900,000) (5,100,000)
----------- ------------ ------------ -------------
NET INCREASE (DECREASE)....................... 448,029 (302,046) 300,000 3,050,000
=========== ============ ============ =============
Including undistributed net investment
income:..................................... $ 129,109 $ 863,352 $ 147,780 $ 971,451
=========== ============ ============ =============
</Table>
* For the period October 15, 2002 (commencement of operations) through September
30, 2003.
See accompanying notes to financial statements.
12
STREETTRACKS INDEX SHARES FUNDS
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A STREETTRACKS SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- --------------------------------------------------------------------------------
<Table>
<Caption>
FOR THE YEAR ENDED FOR THE PERIOD ENDED
SEPTEMBER 30, 2004 SEPTEMBER 30, 2003*
---------------------------- ----------------------------
STREETTRACKS STREETTRACKS STREETTRACKS STREETTRACKS
DOW JONES DOW JONES DOW JONES DOW JONES
STOXX 50 EURO STOXX 50 STOXX 50 EURO STOXX 50
FUND+ FUND+ FUND FUND
------------ ------------- ------------ -------------
Net asset value, beginning of period....... $ 27.89 $ 27.97 $ 25.34(4) $ 24.35(4)
------- ------- ------- -------
Income from investment operations:
Net investment income...................... 0.99 0.64 1.20 0.97
Net realized and unrealized gain........... 5.16 6.14 2.50 3.59
------- ------- ------- -------
Total from investment operations........... 6.15 6.78 3.70 4.56
------- ------- ------- -------
Undistributed net investment income
included in price of units issued and
redeemed, net............................ 0.01 0.01 (0.49) (0.30)
------- ------- ------- -------
Distributions to shareholders from:
Net investment income...................... (0.85) (0.82) (0.66) (0.64)
------- ------- ------- -------
Net asset value, end of period............. $ 33.20 $ 33.94 $ 27.89 $ 27.97
======= ======= ======= =======
Total return (1)........................... 22.13% 24.21% 12.79% 17.46%
Net assets, end of period (in 000's)....... $24,896 $93,325 $ 8,421 $85,366
Ratio of expenses to average net assets.... 0.33% 0.33% 0.35%(2) 0.35%(2)
Ratio of net investment income to average
net assets............................... 2.98% 1.92% 2.96%(2) 2.78%(2)
Portfolio turnover rate (3)................ 7% 11% 6% 6%
</Table>
- ---------------
* For the period October 15, 2002 (commencement of operations) through
September 30, 2003.
(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
are 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.
(4) The beginning net asset values above have been adjusted to reflect reverse
stock splits which were effective October 15, 2002, in order to adjust the
net asset value per share of each Fund to be approximately 1/100th of the
value of its respective index. The ratio of the reverse stock split for the
streetTRACKS Dow Jones STOXX 50 Fund and the streetTRACKS Dow Jones EURO
STOXX 50 Fund was 1:2.536 and 1:2.444 respectively.
+ Effective July 1, 2004, SSgA Funds Management, Inc. succeeded UBS Global
Asset Management (US) Inc. as the Fund's Adviser.
See accompanying notes to financial statements.
13
STREETTRACKS INDEX SHARES FUNDS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2004
- --------------------------------------------------------------------------------
1. ORGANIZATION
The streetTRACKS Index Shares Funds (the "Trust") (prior to July 1, 2004, the
Trust was known as Fresco Index Shares Funds), is registered under the
Investment Company Act of 1940, as amended, and is an open-end investment
management company that was organized as a Massachusetts business trust on
February 14, 2002. The Trust currently consists of two separate exchange-traded
"index funds", (each referred to as a "Fund" and, collectively, as "the Funds")
streetTRACKS Dow Jones STOXX 50 Fund and streetTRACKS Dow Jones EURO STOXX 50,
each of which represents a separate series of beneficial interest in the Trust.
Each Fund operates as a non-diversified investment company. The investment
objective of each fund is to replicate as closely as possible, before expenses,
the price and yield of a specified market index.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Trust in the preparation of its financial statements:
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
SECURITY VALUATION
Portfolio securities are valued based on the last sale price on the exchange
which is deemed to be the principal market for the security. Securities
regularly traded in an over-the-counter market are valued at the latest quoted
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 Trust's Pricing Committee in accordance with
procedures adopted by the Board of Trustees.
INVESTMENT INCOME
Dividend income is recorded on the ex-dividend date. Interest income is recorded
on the accrual basis.
INVESTMENT TRANSACTIONS
Investment transactions are recorded on the trade date. Realized gains and
losses from the sale or disposition of securities and foreign exchange
transactions are recorded on the identified cost basis. Corporate actions
(including cash dividends) are recorded net of non-reclaimable foreign tax
withholdings.
FOREIGN CURRENCY TRANSLATION AND FOREIGN INVESTMENTS
The accounting records of the Funds are maintained in U.S. dollars. Portfolio
securities and other assets and liabilities denominated in a foreign currency
are translated to U.S. dollars at the prevailing rates of exchange at period
end. Purchases and sales of securities, income receipts and expense payments are
translated into U.S. dollars at the prevailing exchange rate on the respective
dates of transactions. The effects of changes in foreign currency exchange rates
on portfolio investments are included in the net realized and unrealized gains
and losses on investments. Net gains and losses on foreign currency transactions
include disposition of foreign currencies, and currency gains and losses between
the accrual and receipt dates of portfolio investment income and between the
trade and settlement dates of portfolio investment transactions.
Investing in securities of foreign companies and foreign governments involves
special risks and considerations not typically associated with investing in U.S.
companies and securities of the U.S. government. These risks include revaluation
of currencies and the risk of appropriation. Moreover, the markets for
securities of many foreign companies and foreign governments may be less liquid
and the prices of such securities may be more volatile than those of comparable
U.S. companies and the U.S. government.
14
STREETTRACKS INDEX SHARES FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2004
- --------------------------------------------------------------------------------
EXPENSES
Advisory fees, which are directly identifiable to a specific Fund, are applied
to that Fund. Certain fees are allocated in such a manner as deemed equitable,
taking into consideration the relative net assets of the Funds.
FEDERAL INCOME TAX
The Funds intend to qualify for and elect treatment as a "regulated investment
company" under Subchapter M of the Internal Revenue Code of 1986, as amended. By
so qualifying and electing, each Fund will not be subject to federal income
taxes to the extent it distributes it's taxable income, including any net
realized capital gains, for each fiscal year. In addition, by distributing
during each calendar year substantially all their net investment income and
capital gains, if any, the Funds will not be subject to federal excise tax.
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
These book-tax differences are primarily due to differing treatments for income
equalization, in-kind transactions and losses deferred due to wash sales.
At September 30, 2004, the Funds had no capital loss carryforwards.
For the period ended September 30, 2004, the Funds reclassified non-taxable
security gains and losses realized on the in-kind redemption of Creation Units
(Note 4) as an increase or decrease to paid in capital in the Statements of
Assets and Liabilities as follows:
<Table>
<Caption>
NET GAIN
RECLASS AMOUNT
- ----------------------------------------------------------------------------
streetTRACKS DJ STOXX 50 Fund $ --
streetTRACKS DJ EURO STOXX 50 Fund 12,335,748
</Table>
The Funds use the accounting practice of equalization. This accounting method is
used to keep the continuing shareholders' per share equity in undistributed net
investment income from being affected by the continuous sales and redemptions of
capital stock. Equalization is calculated on a per share basis whereby a portion
of the proceeds from sales and costs of repurchases of capital stock is applied
to undistributed net investment income. The amounts of equalization are
disclosed in the Statements of Changes in Net Assets as undistributed net
investment income included in the price of capital shares issued or redeemed.
The Funds incurred the following losses during the period November 1, 2003
through September 30, 2004 that are deferred for tax purposes until fiscal 2005:
<Table>
<Caption>
DEFERRED LOSSES
- -----------------------------------------------------------------------------
streetTRACKS DJ STOXX 50 Fund $89,840
streetTRACKS DJ EURO STOXX 50 Fund --
</Table>
For the year ended September 30, 2004, there were no significant differences
between the book basis and the tax basis character of distributions to
shareholders. Additionally, there were no significant differences between the
book basis and tax basis of components of net assets other than differences in
the net unrealized appreciation (depreciation) in value of investments
attributable to the tax deferral of losses on wash sales.
The tax character of distributions paid during the year ended September 30,
2004, was as follows:
<Table>
<Caption>
ORDINARY INCOME LONG-TERM CAPITAL GAIN
- ------------------------------------------------------------------------------------------------------
streetTRACKS DJ STOXX 50 Fund $ 600,656 $ 704
streetTRACKS DJ EURO STOXX 50 Fund 1,760,293 --
</Table>
The tax character of distributions paid during the year ended September 30,
2003, was as follows:
<Table>
<Caption>
ORDINARY INCOME LONG-TERM CAPITAL GAIN
- ------------------------------------------------------------------------------------------------------
Fresco Dow Jones STOXX 50 Fund $ 473,377 $ --
Fresco Dow Jones EURO STOXX 50 Fund 2,937,683 --
</Table>
15
STREETTRACKS INDEX SHARES FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2004
- --------------------------------------------------------------------------------
As of September 30, 2004 the components of distributable earnings (excluding
unrealized appreciation (depreciation)) on a tax basis were as follows:
<Table>
<Caption>
UNDISTRIBUTED
UNDISTRIBUTED LONG-TERM
ORDINARY INCOME CAPITAL GAIN
- -------------------------------------------------------------------------------------------------
streetTRACKS DJ STOXX 50 Fund $86,273 $--
streetTRACKS DJ EURO STOXX 50 Fund -- --
</Table>
DISTRIBUTIONS
The Trust declares and distributes dividends from net investment income, if any
to its shareholders quarterly. The Trust will distribute net realized capital
gains, if any, at least annually. Distributions are recorded on the ex-dividend
date. Income and capital gain distributions are determined in accordance with
income tax regulations, which may differ from accounting principles generally
accepted in the United States.
3. FEES AND COMPENSATION PAID TO AFFILIATES AND OTHER RELATED PARTY PARTIES
TRANSACTIONS
ADVISORY FEE
Effective July 1, 2004, each Fund has entered into an Investment Advisory
Agreement with SSgA Funds Management, Inc. ("the Adviser") As compensation for
the services rendered, facilities furnished, and expenses borne by the Adviser,
each Fund pays the Adviser a fee accrued daily and paid monthly, based on a
percentage of each Funds' average daily net assets as shown in the following
table:
<Table>
<Caption>
ANNUAL RATE
- -------------------------------------------------------------------------
streetTRACKS DJ STOXX 50 Fund 0.29%
streetTRACKS DJ EURO STOXX 50 Fund 0.29%
</Table>
The Adviser pays the operating expenses of each Fund other than the advisory
fee, brokerage, taxes, interest, fees and expenses of the Independent Trustees
(including any Trustee's counsel fees), litigation expenses and other
extraordinary expenses.
Prior to July 1, 2004, each Fund operated under an Investment Advisory Agreement
with UBS Global Asset Management (US) Inc. with the same fees and conditions as
those presented above for SSgA Funds Management Inc.
DISTRIBUTOR
State Street Global Markets, LLC ("the Distributor") acts as the principal
underwriter of each Fund pursuant to a principal underwriting contract with the
Trust (the "Principal Underwriting Agreement") which requires the Distributor to
use its best efforts, consistent with its other businesses, to sell streetTRACKS
Index Shares of the Funds. streetTRACKS Index Shares of the Fund, are offered
continuously. The Distributor may enter into dealer agreements with other
broker-dealers (affiliated and non-affiliated) and with other financial
institutions to authorize them to sell streetTRACKS Index Shares. Management has
not implemented a 12b-1 fee on any of the Funds.
TRUSTEES' FEES
The Trust pays fees and expenses of the Independent Trustees, including
Trustee's legal counsel fees. The Trust pays each Independent Trustee an annual
fee of $15,000, and a meeting fee of $300 per board meeting attended. The Funds
will reimburse the Trustees for any out of pocket expenses related to attending
meetings of the Board of Trustees. 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 Trustees who are members of the Audit Committee do
not receive additional compensation from the Trust as a result of their position
on the Audit Committee.
16
STREETTRACKS INDEX SHARES FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2004
- --------------------------------------------------------------------------------
4. SHAREHOLDER TRANSACTIONS
Except for under the Trust's dividend reinvestment plan, streetTRACKS Index
Shares are issued and redeemed by a Fund only in Creation Unit size aggregations
of 50,000 streetTRACKS Index shares. Such transactions are only permitted on an
in-kind basis, with a separate cash payment, which is a balancing cash component
to equate the transaction to the net asset value per unit of the Fund on the
transaction date. Transaction fees at scheduled amounts ranging from $3,000 to
$12,000 per Creation Unit are charged to those persons creating or redeeming
Creation Units. Transaction fees are received by the custodian and used to
offset the expense of processing orders.
5. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION
At September 30, 2004, the cost of investments for federal income tax purposes
was substantially the same as the cost for financial reporting purposes.
<Table>
<Caption>
GROSS GROSS NET UNREALIZED
IDENTIFIED UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION DEPRECIATION (DEPRECIATION)
- ---------------------------------------------------------------------------------------------------------------------
streetTRACKS DJ STOXX 50 Fund $22,964,350 $ 2,361,225 $ 549,253 $ 1,811,972
streetTRACKS DJ EURO STOXX 50 Fund 89,686,050 16,433,952 1,534,024 14,899,928
</Table>
6. INVESTMENT TRANSACTIONS
For the year ended September 30, 2004, the Trust had in-kind contributions and
in-kind redemptions as follows:
<Table>
<Caption>
SUBSCRIPTIONS REDEMPTIONS
- ------------------------------------------------------------------------------------------
streetTRACKS DJ STOXX 50 Fund $15,504,627 $ 62,963
streetTRACKS DJ EURO STOXX 50 Fund 27,463,987 39,008,029
</Table>
For the year ended September 30, 2004, the Trust had purchases and sales of
investment securities as follows:
<Table>
<Caption>
PURCHASES SALES
- ---------------------------------------------------------------------------------------
streetTRACKS DJ STOXX 50 Fund $1,306,056 $ 1,535,129
streetTRACKS DJ EURO STOXX 50 Fund 9,602,830 10,379,230
</Table>
For the year ended September 30, 2004, the Trust did not pay any commissions to
State Street Brokerage Services for Investment Transactions.
7. INITIAL CAPITALIZATION AND OFFERING OF SHARES
On the commencement of operations for each Fund, October 15, 2002, the Board of
Trustees declared reverse stock splits, which were effective on the date of
commencement of operations for each Fund. The reverse stock splits were executed
in order to align the net asset value per share of each Fund to an established
proportion of its benchmark index.
The ratio of the reverse stock splits were as follows:
<Table>
<Caption>
RATIO
- ---------------------------------------------------------------------
streetTRACKS DJ STOXX 50 Fund 1:2.536
streetTRACKS DJ EURO STOXX 50 Fund 1:2.444
</Table>
8. SECURITIES LENDING
Each Fund may lend securities up to 33 1/3% of its total assets to qualified
broker-dealers or institutional investors. The loans are secured at all times by
cash, cash equivalents or U.S. government securities in an amount at least equal
to the market value of the securities loaned, plus accrued interest and
dividends, determined on a daily basis and adjusted accordingly. The Funds will
regain record ownership of loaned securities to exercise certain beneficial
rights; however, the Funds may bear the risk of delay in recovery of, or even
loss of rights in, the securities loaned should the borrower fail financially.
The Portfolios receive compensation for lending its securities from interest or
dividends earned on the cash, cash equivalents or U.S. government securities
held as collateral, net of fee rebates paid to the borrower plus reasonable
administrative and custody fees.
17
STREETTRACKS INDEX SHARES FUNDS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF
STREETTRACKS INDEX SHARES FUNDS
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of streetTRACKS Index Shares Funds
(the "Funds") at September 30, 2004, and the results of its operations, the
changes in its net assets and the financial highlights for the periods
indicated, in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Board of Trustees, our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by the Board of Trustees, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation of
securities at September 30, 2004 by correspondence with the custodian and
brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 19, 2004
18
STREETTRACKS INDEX SHARES FUNDS
OTHER INFORMATION
SEPTEMBER 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
CLOSING BID/ASK MIDPOINT PRICE VS. NAV AS OF SEPTEMBER 30, 2004
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the closing bid/ask midpoint price for
each of the Funds was at a discount or premium to the daily net asset value
(NAV). The following charts are for comparative purposes only and represent the
periods noted.
streetTRACKS DJ STOXX 50 FUND
<Table>
<Caption>
-----------------------------------------------------------------------------
Bid/Ask Midpoint Price
Above NAV
-----------------------------------------------------------------------------
50 - 99 100 - 199 >200
BASIS POINTS BASIS POINTS BASIS POINTS
-----------------------------------------------------------------------------
2004
QUARTER ENDING:
9/30/04 19 7 0
-----------------------------------------------------------------------------
QUARTER ENDING:
6/30/04 19 3 0
-----------------------------------------------------------------------------
QUARTER ENDING:
3/31/04 13 3 0
-----------------------------------------------------------------------------
2003
QUARTER ENDING:
12/30/03 14 1 0
-----------------------------------------------------------------------------
QUARTER ENDING:
9/30/03 8 2 0
-----------------------------------------------------------------------------
QUARTER ENDING:
6/30/03 13 2 0
-----------------------------------------------------------------------------
QUARTER ENDING:
3/31/03 10 10 1
-----------------------------------------------------------------------------
2002
PERIOD ENDING:
12/31/02* 9 7 0
-----------------------------------------------------------------------------
<Caption>
----------------------- -----------------------------------------------------
Bid/Ask Midpoint Price
Below NAV
----------------------- -----------------------------------------------------
50 - 99 100 - 199 >200
BASIS POINTS BASIS POINTS BASIS POINTS
----------------------- -----------------------------------------------------
2004
QUARTER ENDING:
9/30/04 1 1 0
-----------------------------------------------------------------------------
QUARTER ENDING:
6/30/04 1 2 0
-----------------------------------------------------------------------------
QUARTER ENDING:
3/31/04 6 2 0
-----------------------------------------------------------------------------
2003
QUARTER ENDING:
12/30/03 2 0 0
-----------------------------------------------------------------------------
QUARTER ENDING:
9/30/03 6 0 0
-----------------------------------------------------------------------------
QUARTER ENDING:
6/30/03 8 3 0
-----------------------------------------------------------------------------
QUARTER ENDING:
3/31/03 6 2 0
-----------------------------------------------------------------------------
2002
PERIOD ENDING:
12/31/02* 7 3 0
-----------------------------------------------------------------------------
</Table>
* Commencement of trading October 21, 2002
19
STREETTRACKS INDEX SHARES FUNDS
OTHER INFORMATION (CONTINUED)
SEPTEMBER 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
streetTRACKS DJ EURO STOXX 50 FUND
<Table>
<Caption>
-----------------------------------------------------------------------------
Bid/Ask Midpoint Price
Above NAV
-----------------------------------------------------------------------------
50 - 99 100 - 199 >200
BASIS POINTS BASIS POINTS BASIS POINTS
-----------------------------------------------------------------------------
2004 QUARTER ENDING:
9/30/04 8 4 0
-----------------------------------------------------------------------------
QUARTER ENDING:
6/30/03 10 3 0
-----------------------------------------------------------------------------
QUARTER ENDING:
3/31/04 9 1 0
-----------------------------------------------------------------------------
2003
QUARTER ENDING:
12/30/03 11 1 0
-----------------------------------------------------------------------------
QUARTER ENDING:
9/30/03 8 1 0
-----------------------------------------------------------------------------
QUARTER ENDING:
6/30/03 6 3 0
-----------------------------------------------------------------------------
QUARTER ENDING:
3/31/03 12 6 1
-----------------------------------------------------------------------------
2002
PERIOD ENDING:
12/31/02* 5 7 1
-----------------------------------------------------------------------------
<Caption>
----------------------- -----------------------------------------------------
Bid/Ask Midpoint Price
Below NAV
----------------------- -----------------------------------------------------
50 - 99 100 - 199 >200
BASIS POINTS BASIS POINTS BASIS POINTS
----------------------- -----------------------------------------------------
2004 QUARTER ENDING:
9/30/04 7 1 1
-----------------------------------------------------------------------------
QUARTER ENDING:
6/30/03 5 2 1
-----------------------------------------------------------------------------
QUARTER ENDING:
3/31/04 3 8 0
-----------------------------------------------------------------------------
2003
QUARTER ENDING:
12/30/03 4 0 0
-----------------------------------------------------------------------------
QUARTER ENDING:
9/30/03 6 3 0
-----------------------------------------------------------------------------
QUARTER ENDING:
6/30/03 11 4 0
-----------------------------------------------------------------------------
QUARTER ENDING:
3/31/03 11 4 0
-----------------------------------------------------------------------------
2002
PERIOD ENDING:
12/31/02* 9 5 0
-----------------------------------------------------------------------------
</Table>
* Commencement of trading October 21, 2002
20
STREETTRACKS INDEX SHARES TRUST
OTHER INFORMATION (CONTINUED)
SEPTEMBER 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
SHAREHOLDER EXPENSE EXAMPLE (UNAUDITED)
As a shareholder of a Fund, you incur two types of costs: (1) transaction costs,
which may include creation and redemption fees or brokerage charges and (2)
ongoing costs, including management fees, trustee fees and other Fund expenses.
This example is intended to help you understand your ongoing costs (in dollars)
of investing in a Fund and to compare these costs with the ongoing costs of
investing in other mutual funds. It is based on an investment of $1,000 invested
at April 1, 2004 and held for the six months ended September 30, 2004.
ACTUAL EXPENSES
The first table below provides information about actual account values and
actual expenses. You may use the information in this table, together with the
amount you invested, to estimate the expenses that you incurred over the period.
Simply divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the first
table under the heading entitled "Expenses Paid During Period" to estimate the
expenses attributable to your investment during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second table below provides information about hypothetical account values
and hypothetical expenses based on a Fund's actual expense ratio and an assumed
rate of return of 5% per year before expenses, which is not a Fund's actual
return. Thus, you should not use the hypothetical account values and expenses to
estimate the actual ending account balance or your expenses for the period.
Rather, these figures are provided to enable you to compare the ongoing costs of
investing in a Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of other funds. Shareholders are charged transaction fees of $3,000 to $12,000
per Creation Unit to those persons creating or redeeming Creation Units. If you
buy or sell streetTRACKS Index Fund Shares in the secondary market, you will
incur customary brokerage commissions and charges.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transaction costs, such as creation
and redemption fees or brokerage charges. Therefore, the second table is useful
in comparing ongoing costs only, and will not help you determine the relative
total costs of owning different funds. In addition, if these transaction costs
were included, your costs would have been higher.
<Table>
<Caption>
BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES PAID
VALUE VALUE DURING PERIOD*
4/01/04 9/30/04 4/01/04 TO 9/30/04
----------------- -------------- -------------------
ACTUAL
The streetTRACKS Dow Jones STOXX 50 Fund $1,000 $1,029.24 $1.83
The streetTRACKS Dow Jones Euro STOXX 50 Fund $1,000 $1,610.18 $1.81
HYPOTHETICAL
(ASSUMING A 5% RETURN BEFORE EXPENSES)
The streetTRACKS Dow Jones STOXX 50 Fund $1,000 $1,023.20 $1.82
The streetTRACKS Dow Jones Euro STOXX 50 Fund $1,000 $1,023.20 $1.82
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.36% and 0.36%,
respectively, multiplied by the average account value of the period,
multiplied by 183/356.
PROXY VOTING POLICIES
A. You may obtain a description of the Funds' proxy voting policies and
procedures, without charge, upon request by contacting the Funds
directly at 1-866-STRACKS (1-866-787-2257) (toll-free), on the website
of the Securities and Exchange Commission, at www.sec.gov, or on the
Funds' website at www.streetTRACKS.com. Information regarding how the
Funds voted proxies relating to portfolio securities during the most
recent 12-month period ended June 30 is also available without charge,
upon request by calling 1-866-787-2257 (toll-free), on the website of
the Securities and Exchange Commission, at www.sec.gov, and on the
Funds' website at www.streetTRACKS.com.
21
STREETTRACKS INDEX SHARES TRUST
OTHER INFORMATION (CONTINUED)
SEPTEMBER 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
B. QUARTERLY PORTFOLIO SCHEDULE
The Funds will file a complete schedule of portfolio holdings with the
Securities and Exchange Commission for the first and third quarters of
each fiscal year on Form N-Q commencing with the quarter ending
December 31, 2004. The Funds' Forms N-Q will be available on the
Securities and Exchange Commission's website at www.sec.gov and may be
reviewed and copied at the Securities and Exchange Commission's Public
Reference Room in Washington, DC. Information on the operation of the
Public Reference Room may be obtained by calling 1-800-SEC-0330. The
information on Form N-Q will be available upon request, without charge,
by calling 1-866-2257 (toll-free), and on the Funds' website at
www.streetTRACKS.com.
REPORT OF VOTE OF SHAREHOLDERS (UNAUDITED)
A special meeting of shareholders of the Trust (prior to July 1, 2004, the Trust
was known as Fresco Index Shares Funds) was held on June 16, 2004 to vote on a
new investment advisory Agreement between SSgA Funds Management, Inc. ("SSgA
FM") and the Trust on behalf of each of its series portfolios and to approve
five new Trustees. The Trust's then current investment adviser and distributor,
UBS Global AM, had made a business decision to exit the business in the United
States. For this reason, shareholders were asked to approve a new investment
advisory agreement with SSgA FM. The results of the shareholder votes were as
follows:
Proposal 1--To Approve a New Investment Advisory Agreement with SSgA FM, with
respect to each Fund
<Table>
<Caption>
SHARES FOR AS A
PERCENT OF TOTAL
FRESCO INDEX SHARES FUNDS VOTES FOR SHARES VOTED ABSTENTIONS*
- ---------------------------------------------------------------------------------
Dow Jones STOXX 50 Fund 608,668 99.895 476
Dow Jones EURO STOXX 50 Fund 1,166,740 99.567 838
</Table>
Proposal 2--To Approve Five New Trustees
<Table>
<Caption>
SHARES FOR AS A
PERCENT OF TOTAL
FRESCO INDEX SHARES FUNDS VOTES FOR SHARES VOTED ABSTENTIONS*
- ---------------------------------------------------------------------------------
Dow Jones STOXX 50 Fund
Timothy B. Harbert 583,242 95.722 26,065
Agustin J. Fleites 583,242 95.722 26,065
David M. Kelly 608,719 99.903 588
Frank Nesvet 608,719 99.903 588
Helen F. Peters 608,719 99.903 588
Dow Jones EURO STOXX 50 Fund
Timothy B. Harbert 1,140,644 97.342 31,148
Agustin J. Fleites 1,140,664 97.342 31,148
David M. Kelly 1,170,695 99.905 1,117
Frank Nesvet 1,170,695 99.905 1,117
Helen F. Peters 1,170,695 99.905 1,117
</Table>
* Abstentions were counted as shares that were present and entitled to vote for
purposes of determining a quorum and had a negative effect on the proposals.
22
STREETTRACKS INDEX SHARES TRUST
OTHER INFORMATION
SEPTEMBER 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
TRUSTEES AND OFFICERS
<Table>
<Caption>
NUMBER OF
TERM OF OFFICE PORTFOLIOS IN
NAME, ADDRESS AND DATE OF POSITION(S) AND LENGTH OF PRINCIPAL OCCUPATION(S) FUND COMPLEX OTHER DIRECTORSHIPS
BIRTH WITH FUNDS TIME SERVED DURING PAST 5 YEARS OVERSEEN BY TRUSTEE HELD BY TRUSTEE
- ------------------------- ----------- -------------- ----------------------- ------------------- -------------------
Agustin J. Fleites* Trustee, Unlimited, Principal, State Street 20 Chairman of the Board,
SSgA Funds Chairman, Elected: Global Advisors (1987- Trustee President,
Management, Inc. and July 2004 present); Member SSgA Principal Executive
State Street Financial President Investment Committee Officer, streetTRACKS
Center (1994-present). Series Trust
One Lincoln Street Trustee, Select Sector
Boston, MA SPDR Trust
02111-2900 Director, SSgA Cash
12/17/65 Management Fund,
Dublin, Ireland,
Director
David M. Kelly Trustee Unlimited, President and CEO, NSCC 11 Trustee, streetTRACKS
4 Jodi Lane Elected: (1983-February 2000) (a Series Trust
Chatham, NJ 07928 July 2004 clearing org.); Vice Chicago Stock Exchange
10/10/38 Chairman, DTCC (Public Governor/
(1999-February 2000)(a Director); Penson
depository in US); Vice Worldwide Inc.
Chairman and CEO, (Director); Thomas
Government Securities Murray Ltd.
Clearing Corp. (1990- (Director); Custodial
February 2000) (a Trust Co. (Director).
government securities
clearing company).
Frank Nesvet Trustee Unlimited, Chief Executive 11 Trustee, streetTRACKS
c/o streetTRACKS Elected: Officer, Libra Group, Series Trust
Series Trust July 2004 Inc. (1998- present)(a
225 Franklin Street financial services
Boston, Massachusetts consulting company);
02110 Managing Director,
9/24/43 Senior Vice President
and Fund Treasurer, New
England Funds
(1993-1998).
Helen F. Peters Trustee Unlimited, Dean, Carroll School of 11 Trustee, streetTRACKS
133 South Street Elected: Management, Boston Series Trust
Needham, Massachusetts July 2004 College (August 2000-
02492 present); Partner,
3/22/48 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 Street N/A N/A
SSgA Funds President Elected: Global Advisors (March
Management, Inc. July 2004 2000 to present); Vice
State Street Financial President, State Street
Center Bank and Trust Company
One Lincoln Street (1998-March 2000).
Boston, MA 02111-2900
6/24/65
</Table>
23
STREETTRACKS INDEX SHARES TRUST
OTHER INFORMATION (CONTINUED)
SEPTEMBER 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
NUMBER OF
TERM OF OFFICE PORTFOLIOS IN
NAME, ADDRESS AND DATE OF POSITION(S) AND LENGTH OF PRINCIPAL OCCUPATION(S) FUND COMPLEX OTHER DIRECTORSHIPS
BIRTH WITH FUNDS TIME SERVED DURING PAST 5 YEARS OVERSEEN BY TRUSTEE HELD BY TRUSTEE
- ------------------------- ----------- -------------- ----------------------- ------------------- -------------------
Donald A. Gignac Treasurer Unlimited, Senior Vice President, N/A N/A
State Street Bank and Elected: State Street Bank and
Trust Company July 2004 Trust Company (2002-
2 Avenue de Lafayette present); Vice
Boston, Massachusetts President, State Street
02111 Bank and Trust Company
6/14/65 (1993- 2002).
Michael P. Riley Assistant Unlimited, Assistant Vice N/A N/A
State Street Bank and Treasurer Elected: President, State Street
Trust Company July 2004 Bank and Trust Company
One Federal Street (2000- present);
Boston, Massachusetts Assistant Secretary,
02110 Assistant Director,
3/22/66 State Street Bank and
Trust Company
(1999-2000); Manager,
State Street Bank and
Trust Company
(1998-1999).
Karen Gillogly Assistant Unlimited, Vice President, State N/A N/A
State Street Bank and Treasurer Elected: Street Bank and Trust
Trust Company July 2004 Company (1999-
One Federal Street present); Audit Senior
Boston, Massachusetts Manager, Ernst & Young
02110 LLP (1998).
9/3/66
Mary Moran Zeven Secretary Unlimited, Senior Vice President N/A N/A
State Street Bank and Elected: and Senior Managing
Trust Company July 2004 Counsel, State Street
One Federal Street Bank and Trust Company
Boston, Massachusetts (2002- present); Vice
02110 President and Counsel,
2/27/61 State Street Bank and
Trust Company
(2000-2002); Vice
President and Counsel,
PFPC, Inc. 1999 to
2000.
Peter A. Ambrosini, Esq. Chief Unlimited, Chief Compliance and N/A N/A
SSgA Funds Compliance Elected; Risk Management
Management, Inc. Officer July 2004 Officer, SSgA Funds
State Street Financial Management, Inc. and
Center State Street Global
One Lincoln Street Advisors
Boston, MA 02111-2900 (2001-present);
12/17/43 Managing Director,
PricewaterhouseCoopers
(1986-2001).
</Table>
* Mr. Fleites is an "interested person" of the Trust, as defined in the 1940
Act, by virtue of his position as an officer of the Adviser.
24
streetTRACKS (R) INDEX SHARES FUNDS
TRUSTEES
David M. Kelly
Frank Nesvet
Helen F. Peters
Agustin J. Fleites
OFFICERS
Agustin J. Fleites, President
James E. Ross, Vice President
Donald A. Gignac, Treasurer
Mary Moran Zeven, Secretary
Karen Gillogly, Assistant Treasurer
Michael Riley, Assistant Treasurer
Peter Ambrosini, Chief Compliance Officer
INVESTMENT MANAGER
SSgA Funds Management, Inc.
State Street Financial Center
One Lincoln Center
Boston, MA 02111
DISTRIBUTOR
State Street Global Markets, LLC
225 Franklin Street
Boston, MA 02110
CUSTODIAN, ADMINISTRATOR AND TRANSFER AGENT
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
LEGAL COUNSEL
Clifford Chance US LLP
31 West 52nd Street
New York, New York 10019
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers LLP
125 High Street
Boston, MA 02110
streetTRACKS are distributed by State Street Global Markets, LLC, a wholly-owned
subsidiary of State Street Corporation. State Street Global Markets, LLC is a
member of NASD, SIPC, and the Boston Stock Exchange.
The information contained in this report is intended for the general information
of shareholders of the Trust. This report is not authorized for distribution to
prospective investors unless preceded or accompanied by a current Trust
prospectus which contains important information concerning the Trust. You may
obtain a current prospectus from the Distributor by calling 1-866-S-TRACKS or
visiting WWW.STREETTRACKS.COM Please read the prospectus carefully before you
invest.
The investment return and principal value of an investment in the streetTRACKS
funds will fluctuate in value, so that when shares are sold or redeemed they
may be worth more or less than when they were purchased.
International investments may involve risk of capital loss from unfavorable
fluctuations in currency values, from differences in generally accepted
accounting principles or from economic or political instability in other
nations.
In general, streetTRACKS shares can be expected to move up or down in value with
the value of the applicable index. Although streetTRACKS shares may be bought
and sold on the exchange through any brokerage account, streetTRACKS shares are
not individually redeemable from the Fund. Investors may acquire streetTRACKS
and tender them for redemption through the Fund in Creation Unit Aggregations
only. Please see the prospectus for more details.
streetTRACKS are not sponsored, endorsed, sold, or promoted by Dow Jones &
Company, Time Inc., ("Dow Jones") Dow Jones does not make any representation
regarding the advisability of investing in streetTRACKS. streetTRACKS are
distributed by State Street Global Markets, LLC, a wholly-owned subsidiary of
State Street Corporation. State Street Global Markets, LLC is a member of NASD,
SIPC, and the Boston Stock Exchange. References to State Street may include
State Street Corporation and its affiliates. Shares of the streetTRACKS funds
are not insured by the FDIC or by another governmental agency; they are not
obligations of the FDIC nor are they deposits or obligations of or guaranteed by
State Street Bank and Trust Company. streetTRACKS shares are subject to
investment risks, including possible loss of the principal invested. The
streetTRACKS funds pay State Street for its services as investment advisor,
custodian, transfer agent and shareholder servicing agent.
For more information on streetTRACKS, or to obtain a prospectus, call:
1-866-S-TRACKS
or visit
WWW.STREETTRACKS.COM
Please read the prospectus carefully before you invest or send money.
(STATE STREET GLOBAL ADVISORS SSGA (R) LOGO) (STATE STREET LOGO)
(COVER GRAPHIC)
(C)2002 STATE STREET CORPORATION ET0912-02
ITEM 2. CODE OF ETHICS
(a) The streetTracks Index Shares Funds (the "Trust" or "Registrant") has
adopted a Code of Conduct for Principal Executive and Senior Financial Officers
(the "Code of Conduct").
(c) On July 1, 2004, the Board of Trustees adopted a new Code of Conduct which
is being filed as Exhibit 11(a)(1) to this Form N-CSR. There were no material
amendments to this Code of Conduct during the period July 1, 2004 to September
30, 2004. There were no material amendments to the Code of Conduct in effect for
the period April 1, 2004 to June 30, 2004.
(d) There have been no waivers granted by the Trust to individuals covered by
the Code of Conduct during the period of April 1, 2004 through September 30,
2004.
(f) A copy of the Code of Conduct is being filed as Exhibit 11(a)(1) to this
Form N-CSR.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT
(a)(1) The Board of Trustees of the Trust has determined that the Trust has one
Board member serving on the Trust's Audit Committee that possess the attributes
identified in Instructions 2(b) of Item 3 to Form N-CSR to qualify as an "audit
committee financial expert."
(2) Frank Nesvet is the Trust's audit committee financial expert. The Board also
determined that Mr. Nesvet is not an "interested person" of the Trust, as that
term is defined in Section 2(a)(19) of the Investment Company Act.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
(a) Audit Fees
For the fiscal years ending September 30, 2004 and September 30, 2003, the
aggregate audit fees billed for professional services rendered by
PricewaterhouseCoopers LLP ("PwC"), the Trust's registered public
accounting firm, for the audit of the Trust's annual financial statements
and services provided by PwC in connection with the Trust's statutory and
regulatory filings were $31,400 and $26,000, respectively.
(b) Audit-Related Fees
For the fiscal years ending September 30, 2004 and September 30, 2003, the
aggregate billed fees for assurance and related services by PwC reasonably
related to the performance of the audit of the Trust's financial
statements that are not reported under (a) of this Item were $0 and $0,
respectively. The nature of such services were the: (1) auditing of the
statements of assets and liabilities, related statements of operations and
changes in net assets, and the financial highlights of the Trust's
operational series; (2) auditing and reporting on the financial statements
to be included in the amendment to the Trust's registration statement on
Form N-1A to be filed with the Securities and Exchange
Commission; (3) review of the amendment to the registration statement; and
(4) issuance of a report on internal control for inclusion in the Trust's
Form N-SAR.
(c) Tax Fees
For the fiscal years ending September 30, 2004 and September 30, 2003, the
aggregate tax fees billed for professional services rendered by PwC for
tax compliance, tax advice, and tax planning were $12,400 and $11,000,
respectively. Services included the review of income and excise tax
returns for the Trust.
(d) All Other Fees
For the fiscal years ending September 30, 2004 and September 30, 2003, the
aggregate fees billed for professional services rendered by PwC for
products and services provided by PwC, other than the services reported in
(a) through (c) of this Item were $0 and $0, respectively.
(e)(1) Audit Committee Pre-Approval Policies and Procedures
The Trust's Audit Committee Charter states the following with respect to
pre-approval procedures:
(a) to pre-approve all non-audit services to be provided to the
Trust by the independent auditor when, without such
pre-approval, the auditor would not be independent of the
Trust under applicable federal securities laws, rules or
auditing standards;
(b) to establish, if deemed necessary or appropriate as an
alternative to Audit Committee pre-approval of services to be
provided by the independent auditor as required by paragraph
(b) herein, policies and procedures to permit such services to
be pre-approved by other means, such as by action of a
designated member or members of the Audit Committee, subject
to subsequent Audit Committee review or oversight;
(c) to receive and consider reports from the Trust's independent
auditor regarding: (i) all critical accounting policies and
practices of the Trust to be used; (ii) all alternative
accounting treatments for policies and practices related to
material items that have been discussed with management,
including the potential ramifications of use of those
treatments and the treatment preferred by the auditor; (iii)
any material written communications between the auditor and
management; and (iv) all non-audit services provided to any
entity in the Trust's investment company complex that were not
pre-approved by the Committee or pursuant to pre-approval
policies and procedures established by the Committee and
associated fees;
(d) to review and pre-approve all audit and non-audit services
proposed to be provided to the Trust by its independent
auditors; and
(e) to review and pre-approve all non-audit services proposed to
be provided by the Trust's independent auditors to the
investment adviser or any of its subsidiaries or affiliates
that provide on-going services to the Trust, when, without
such pre-approval by the Audit Committee, the auditor would
not be independent of the Trust under applicable federal
securities laws, rules or auditing standards.
(e)(2) Percentages of Services
One hundred percent of the services described in each of paragraphs (b)
through (d) of this Item were approved by the Trust's Audit Committee
pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not applicable.
(g) Total Fees Paid By Adviser and Certain Affiliates
For the fiscal years ending September 30, 2004 and September 30, 2003, the
aggregate non-audit fees billed by PwC for services rendered to the Trust
and SSgA Funds Management, Inc. (the "Adviser") and any entity
controlling, controlled by, or under common control with the Adviser that
provided ongoing services to the Trust were $2,904,000 and $2,098,500
respectively.
(h) Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
The Trust has a separately designated Audit Committee established in accordance
with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended. The
Trust's Audit Committee is comprised of the following members: Frank Nesvet
(Chairman), David M. Kelly, and Helen F. Peters.
ITEM 6. SCHEDULE OF INVESTMENTS
Not required for this filing.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the Registrant.
ITEM 8. PURCHASE OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS
Not applicable to the Registrant.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There have been no material changes to the procedures by which shareholders may
recommend nominees to the Registrant's Board of Trustees during the period
covered by this Form N-CSR filing.
ITEM 10. CONTROLS AND PROCEDURES
(a) Within 90 days of the filing date of this Form N-CSR, Agustin Fleites, the
Registrant's President, and Donald Gignac, the Registrant's Chief Financial
Officer, reviewed the Registrant's disclosure controls and procedures (the
"Procedures") and evaluated their effectiveness. Based on the review, Messrs.
Fleites and Gignac determined that the Procedures adequately ensure that
information required to be disclosed by the Registrant in its periodic reports
is recorded, processed, summarized and reported within the time periods required
by the Securities and Exchange Commission's rules and regulations.
(b) In the Registrant's second fiscal half-year, there were no significant
changes in the Registrant's internal controls or in other factors that have
materially affected, or are reasonably likely to materially affect, its controls
over financial reporting subsequent to the date of their evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
ITEM 11. EXHIBITS
(a)(1) The Trust's Code of Conduct for Principal Executive and Senior Financial
Officers.
(a)(2) The certifications required by Rule 30a-2 of the Investment Company Act
of 1940, as amended (the "1940 Act"), is attached hereto.
(b) The certification required by Rule 30a-2(b) of the 1940 Act and Sections 906
of the Sarbanes-Oxley Act of 2002 is attached hereto.
]
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
STREETTRACKS INDEX SHARES FUNDS
By: /s/ Agustin Fleites
------------------------
Agustin Fleites
President
Date: December 1, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Agustin Fleites
------------------------
Agustin Fleites
President
Date: December 1, 2004
By: /s/ Donald Gignac
------------------------
Donald Gignac
Chief Financial Officer
Date: December 1, 2004