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(R) INDEX SHARES FUNDS
(Exact name of registrant as specified in charter)
One Lincoln Street, Boston, Massachusetts 02111
(Address of principal executive offices) (zip code)
Scott M. Zoltowski
State Street Bank and Trust Company
One Lincoln Street
Boston, Massachusetts 02111
(Name and address of agent for service)
Copy to:
Stuart M. Strauss, Esq.
Clifford Chance US LLP
31 West 52nd Street
New York NY 10019
Registrant's telephone number, including area code: (866) 787-2257
Date of fiscal year end: September 30
Date of reporting period: September 30, 2005
ITEM 1. REPORTS TO SHAREHOLDERS.
streetTRACKS (R)
Index Shares Funds
ANNUAL REPORT
SEPTEMBER 30, 2005
(COVER GRAPHIC)
(streetTRACKS annual report)
PRESIDENT'S LETTER TO SHAREHOLDERS
Dear Shareholders,
As president of the streetTRACKS Index Shares Funds, I am pleased to provide you
with the streetTRACKS Index Shares Funds annual report for the fiscal year ended
September 30, 2005. This report includes discussion about the management of the
streetTRACKS Dow Jones STOXX 50 Fund and the streetTRACKS Dow Jones EURO STOXX
50 Fund, as well as performance and financial statements for each portfolio.
Overall, investor interest in exchange traded funds continued this year. Assets
of ETFs listed and traded on U.S. exchanges topped $263.6 billion as of fiscal
year ending September 30, 2005, representing an increase of approximately 45.6%
over last year. The streetTRACKS Index Shares Funds continue to share in the
success of ETFs as well. Total assets invested in the streetTRACKS Index Shares
Funds reached over $211.3 million as of September 30, 2005, growing 78.6% over
the course of the fiscal year.*
As the ETF industry continues to grow, we are firmly committed to developing new
and more innovative ETF products -- and applications for those products--to help
you meet your investment objectives. We deeply appreciate your support and
confidence and wish to thank you for choosing streetTRACKS Index Shares Funds.
We look forward to an enduring relationship with our shareholders, built on
trust and dedicated to best serving the needs of a growing and increasingly
sophisticated investment community.
Sincerely,
(Signature of James Ross)
James Ross
President, streetTRACKS Index Shares Funds
*Source: Bloomberg; SSgA Advisor Consulting Services as of 9/30/2005
1
(streetTRACKS annual report)
MANAGEMENT'S DISCUSSION AND ANALYSIS
STREETTRACKS DOW JONES STOXX 50 FUND
The streetTRACKS Dow Jones STOXX 50 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 one year period ending September 30, 2005 was
21.60% versus the Index return of 22.01%. The performance was strong during the
fourth quarter 2004, up 14.05%. The first two quarters of 2005 were down only
slightly, 0.54% and 0.08% respectively, then rebounded during the third quarter
2005, returning 7.30%. All of the constituents in the index added value during
the period. Strong corporate earnings (59% of reporting companies beat earnings
estimates), positive economic news out of the U.S., increasing merger and
acquisition activity thanks to low corporate bond yields, and the revaluation of
China's currency, all helped European markets overcome the London terror
attacks.
Energy companies benefited from oil price increases during the period. The three
European oil giants, United Kingdom's BP PLC and Royal Dutch Shell PLC and
France's Total SA all provided significant returns for the sector. These three
companies together represent over 14% of the index.
Financial companies, which represent almost 34% of the index was the second best
contributor. The top three contributors in the period were Banco Santander
Central Hispano SA, UBS AG, and Credit Suisse Group. These companies are
domiciled in Spain and Switzerland, respectively. The strength across borders of
these stocks exemplifies the strength of financial stocks during the period.
Health Care also had a very good period, led by Roche Holding AG in Switzerland
and GlaxoSmithKline PLC in the United Kingdom. These two stocks make up almost
7.0% of the index. The sector constitutes 12.4% of the entire index as of
September 2005.
Structural changes to the benchmark over the period included: In June 2005,
STOXX announced a number of share and free float factor changes. AstraZeneca PLC
and ABN AMRO Holding NV were the biggest weight increases, while Nokia Oyj and
Vodafone Group PLC were the largest decliners. In July, the Royal Dutch
Petroleum take over of Shell Transport & Trading, and the addition of France
Telecom SA were the major changes during the month. In September, the
replacement of Swiss Reinsurance by Rio Tinto PLC was a sizable change that was
included in the annual blue-chip review.
The Fund consisted of 50 companies as of September 30, 2005.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
streetTRACKS 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 10000
12/31/02 10059 9978
3/31/03 9129 9132
6/30/03 11098 11096
9/30/03 11279 11287
12/31/03 13631 13660
3/31/04 13384 13423
6/30/04 13524 13552
9/30/04 13776 13815
12/31/04 15710 15814
3/31/05 15626 15695
6/30/05 15612 15682
9/30/05 16751 16856
</Table>
(Fund's performance does not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or on the redemption of Fund Shares. The Fund's
past performance is no guarantee of future results.)
2
STREETTRACKS INDEX SHARES FUNDS ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
STREETTRACKS DOW JONES STOXX 50 FUND
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. Performance quoted represents past performance and past
performance does not guarantee future results. Current performance may be
higher or lower than the performance quoted. For the most recent month end
performance information visit www.streettracks.com. Investment in the Fund
poses investment risk including the possible loss of principal. The
investment return and principal value of an investment will fluctuate, in
that shares, when redeemed, may be worth more or less than their original
cost. The returns do not reflect the deductions of taxes that a shareholder
would pay on Fund distributions or on redemption of Fund shares.
PERFORMANCE AS OF SEPTEMBER 30, 2005
<Table>
<Caption>
---------------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN
---------------------------------------------------------------------------------
NET ASSET MARKET DOW JONES STOXX 50 INDEX
VALUE VALUE (Broad-Based Comparative Index)
------------------------------------------------------------------------------------------------------------------
ONE YEAR ENDED 9/30/05 21.60% 21.14% 22.01%
------------------------------------------------------------------------------------------------------------------
SINCE INCEPTION OF TRADING (1) 67.65% 63.41% 68.49%
------------------------------------------------------------------------------------------------------------------
</Table>
(1) For the period October 21, 2002 (commencement of trading) to September
30, 2005.
<Table>
<Caption>
---------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
---------------------------------------------------------------------------------
NET ASSET MARKET DOW JONES STOXX 50 INDEX
VALUE VALUE (Broad-Based Comparative Index)
------------------------------------------------------------------------------------------------------------------
ONE YEAR ENDED 9/30/05 21.60% 21.14% 22.01%
------------------------------------------------------------------------------------------------------------------
SINCE INCEPTION OF TRADING (1) 19.20% 18.16% 19.40%
------------------------------------------------------------------------------------------------------------------
</Table>
(1) For the period October 21, 2002 (commencement of trading) to September
30, 2005.
TOP FIVE HOLDINGS AS OF SEPTEMBER 30, 2005
<Table>
-----------------------------------------------------------------------------------------------------
DESCRIPTION HSBC
HOLDINGS VODAFONE GLAXOSMITHKLINE
BP PLC PLC GROUP PLC TOTAL SA PLC
-----------------------------------------------------------------------------------------------------
MARKET VALUE 1,627,002 1,474,037 1,426,241 1,358,481
$2,352,739
-----------------------------------------------------------------------------------------------------
% OF 7.48% 5.17 4.69 4.54 4.32
NET ASSETS
-----------------------------------------------------------------------------------------------------
</Table>
INDUSTRY BREAKDOWN AS OF SEPTEMBER 30, 2005*
(PIE CHART IN %)
<Table>
<Caption>
CYCLICAL
GOODS FOOD
& & FINANCIAL
AUTOMOBILES BANKS CHEMICALS SERVICES ENERGY BEVERAGES SERVICES HEALTHCARE INDUSTRIALS INSURANCE
- ----------- ----- --------- -------- ------ --------- --------- ---------- ----------- ---------
1.3 26.4 1.1 1.0 18.0 5.7 1.1 12.8 1.8 6.1
<Caption>
NON-
CYCLICAL
GOODS
&
AUTOMOBILES OTHER MINING SERVICES RETAIL SOFTWARE TECHNOLOGY TELECOMMUNICATIONS UTILITIES
- ----------- ----- ------ -------- ------ -------- ---------- ------------------ ---------
1.3 0.7 2.5 1.9 0.8 1.1 2.1 13.0 2.6
</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 EURO STOXX 50 FUND
The streetTRACKS Dow Jones EURO STOXX 50 Fund (the "Fund") seeks to replicate
the total return of the Dow Jones EURO 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 one year period ending September 30, 2005 was
24.82% versus the Index return of 25.06%. The performance was strong during the
fourth quarter 2004, up 18.64%. Returns declined over the first half of 2005,
down 0.76% in Q1 and 1.28% in Q2, and then rebounded during the third quarter
returning 7.39%. All of the constituents in the index added value during the
period. Strong corporate earnings (59% of reporting companies beat earnings
estimates,) positive economic news out of the U.S., increasing merger and
acquisition activity thanks to low corporate bond yields, and the revaluation of
China's currency all helped European markets overcome the London Terror attacks.
Energy companies benefited from oil price increases during the period. The
sector, which represents over 16.0% of the index, returned 38.5% for the year
ending September 2005. The three giant Euroland oil companies, France's Total
SA, Eni SpA of Italy and Royal Dutch Petroleum in the Netherlands, led the way
within the sector and provided solid returns. These stocks are over 15% of the
index.
Financial companies, which represent 29.9% of the index also posted strong
returns during the period. The sector was up 28.0%. The top three contributors
in the period were posted by two Spanish banks, Banco Santander Central Hispano
SA and Banco Bilbao Vizcaya Argentaria SA and by Societe Genarale in France.
Structural changes to the benchmark over the period included: In June 2005,
STOXX announced a number of share and free float factor changes. France Telecom
SA and ABN AMRO Holding NV were the biggest weight increases, while Nokia Oyj
and Deutsche Bank AG were the largest decliners. Also Telecom Italia's take over
of Telecom Italia Mobile resulted in the addition of Allied Irish Bank PLC. In
July 2005, the Royal Dutch Petroleum's take over of Shell Transport & Trading,
and the addition of Renault SA were the major changes during the month.
The Fund consisted of 50 companies as of September 30, 2005.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
streetTRACKS 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 10283.00
3/31/03 9148.00 9156.00
6/30/30 11657.00 11641.00
9/30/03 11746.00 11732.00
12/31/03 14658.00 14657.00
3/31/04 14443.00 14452.00
6/30/04 14685.00 14664.00
9/30/04 14590.00 14562.00
12/31/04 17299.00 17325.00
3/31/05 17161.00 17147.00
6/30/05 16958.00 16927.00
9/30/05 18212.00 18211.00
</Table>
(Fund's performance does not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or on the redemption of Fund Shares. The Fund's
past performance is no guarantee of future results.)
4
STREETTRACKS INDEX SHARES FUNDS ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
STREETTRACKS DOW JONES EURO STOXX 50 FUND
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. Performance quoted represents past performance and past
performance does not guarantee future results. Current performance may be
higher or lower than the performance quoted. For the most recent month end
performance information visit www.streettracks.com. Investment in the Fund
poses investment risk including the possible loss of principal. The
investment return and principal value of an investment will fluctuate, in
that shares, when redeemed, may be worth more or less than their original
cost. The returns do not reflect the deductions of taxes that a shareholder
would pay on Fund distributions or on redemption of Fund shares.
PERFORMANCE AS OF SEPTEMBER 30, 2005
<Table>
<Caption>
-----------------------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN
---------------------------------------------------------------------------------
NET ASSET MARKET
VALUE VALUE DOW JONES EURO STOXX 50 INDEX
------------------------------------------------------------------------------------------------------------------
ONE YEAR ENDED 9/30/05 24.82% 24.57% 25.06%
------------------------------------------------------------------------------------------------------------------
SINCE INCEPTION OF TRADING (1) 78.77% 74.57% 78.64%
------------------------------------------------------------------------------------------------------------------
</Table>
(1) For the period October 21, 2002 (commencement of trading) to September
30, 2005.
<Table>
<Caption>
-----------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
---------------------------------------------------------------------------------
NET ASSET MARKET
VALUE VALUE DOW JONES EURO STOXX 50 INDEX
-----------------------------------------------------------------------------------------------------------------------------
ONE YEAR ENDED 9/30/05 24.82% 24.57% 25.06%
-----------------------------------------------------------------------------------------------------------------------------
SINCE INCEPTION OF TRADING (1) 21.83% 20.85% 21.80%
------------------------------------------------------------------------------------------------------------------
</Table>
(1) For the period October 21, 2002 (commencement of trading) to September
30, 2005.
TOP FIVE HOLDINGS AS OF SEPTEMBER 30, 2005
<Table>
-----------------------------------------------------------------------------------------------------------------------
DESCRIPTION SANOFI- BANCO SANTANDER
TOTAL SA AVENTIS CENTRAL HISPANO SA ENI SPA NOKIA OYJ
-----------------------------------------------------------------------------------------------------------------------
MARKET VALUE $13,853,618 7,186,926 7,151,726 6,581,117 6,466,268
-----------------------------------------------------------------------------------------------------------------------
% OF 7.71% 4.00 3.98 3.66 3.60
NET ASSETS
-----------------------------------------------------------------------------------------------------------------------
</Table>
INDUSTRY BREAKDOWN AS OF SEPTEMBER 30, 2005*
(PIE CHART IN %)
<Table>
Automobiles 3.1
Banks 20.8
Chemicals 4.2
Construction 1.7
Cyclical Goods & Services 2.7
Energy 12.9
Food & Beverages 3.2
Financial Services 1.8
Healthcare 4.0
Industrials 3.1
Insurance 11.2
Media 1.7
Other 0.3
Non-cyclical Goods & Services 1.7
Retail 1.3
Software 1.8
Technology 4.4
Telecommunications 10.0
Utilities 10.1
</Table>
* The Fund's industry breakdown is expressed as a percentage of net assets
and may change over time.
5
STREETTRACKS DOW JONES STOXX 50 FUND
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2005
- --------------------------------------------------------------------------------
<Table>
<Caption>
SECURITY DESCRIPTION SHARES VALUE
- -------------------- ------ -----
COMMON STOCKS -- 99.37%
BELGIUM -- 1.07%
FINANCIAL SERVICES -- 1.07%
Fortis................................ 11,575 $ 335,627
-----------
FINLAND -- 2.13%
TECHNOLOGY -- 2.13%
Nokia Oyj............................. 39,830 669,413
-----------
FRANCE -- 12.60%
BANKS -- 3.23%
BNP Paribas SA........................ 7,375 562,398
Societe Generale...................... 3,954 452,640
-----------
1,015,038
-----------
ENERGY -- 4.53%
Total SA.............................. 5,209 1,426,241
-----------
INSURANCE -- 1.19%
AXA................................... 13,538 372,797
-----------
NON-CYCLICAL GOODS & SERVICES -- 0.65%
L'Oreal SA............................ 2,647 205,683
-----------
RETAIL -- 0.77%
Carrefour SA.......................... 5,273 243,361
-----------
TELECOMMUNICATIONS -- 1.41%
France Telecom SA..................... 15,375 442,660
-----------
UTILITIES -- 0.82%
Suez SA............................... 8,866 257,077
-----------
TOTAL FRANCE COMMON STOCKS............ 3,962,857
-----------
GERMANY -- 11.44%
AUTOMOBILES -- 1.32%
DaimlerChrysler AG.................... 7,816 415,947
-----------
BANKS -- 1.38%
Deutsche Bank AG...................... 4,607 432,246
-----------
CHEMICALS -- 1.13%
BASF AG............................... 4,708 354,763
-----------
INDUSTRIALS -- 1.83%
Siemens AG............................ 7,459 576,448
-----------
INSURANCE -- 1.53%
Allianz AG............................ 3,556 481,634
-----------
SOFTWARE -- 1.05%
SAP AG................................ 1,901 329,581
-----------
TELECOMMUNICATIONS -- 1.38%
Deutsche Telekom AG................... 23,760 433,704
-----------
UTILITIES -- 1.82%
E.ON AG............................... 6,216 572,791
-----------
TOTAL GERMANY COMMON STOCKS........... 3,597,114
-----------
ITALY -- 4.17%
ENERGY -- 2.17%
Eni SpA............................... 22,868 681,275
-----------
INSURANCE -- 0.98%
Assicurazioni Generali SpA............ 9,744 308,264
-----------
TELECOMMUNICATIONS -- 1.02%
Telecom Italia SpA.................... 98,449 321,070
-----------
TOTAL ITALY COMMON STOCKS............. 1,310,609
-----------
</Table>
<Table>
<Caption>
SECURITY DESCRIPTION SHARES VALUE
- -------------------- ------ -----
NETHERLANDS -- 5.09%
BANKS -- 1.26%
ABN AMRO Holding NV................... 16,433 $ 394,862
-----------
CYCLICAL GOODS & SERVICES -- 1.00%
Koninklijke (Royal) Philips
Electronics NV...................... 11,819 315,058
-----------
FOOD & BEVERAGES -- 1.15%
Unilever NV........................... 5,083 362,490
-----------
INSURANCE -- 1.68%
ING Groep NV.......................... 17,680 528,208
-----------
TOTAL NETHERLANDS COMMON STOCKS....... 1,600,618
-----------
SPAIN -- 6.08%
BANKS -- 4.03%
Banco Bilbao Vizcaya Argentaria SA.... 30,212 531,442
Banco Santander Central Hispano SA.... 55,772 734,950
-----------
1,266,392
-----------
TELECOMMUNICATIONS -- 2.05%
Telefonica SA......................... 39,345 646,083
-----------
TOTAL SPAIN COMMON STOCKS............. 1,912,475
-----------
SWEDEN -- 1.54%
TELECOMMUNICATIONS -- 1.54%
Telefonaktiebolaget LM Ericsson (Class
B).................................. 132,020 483,361
-----------
SWITZERLAND -- 13.62%
BANKS -- 3.89%
Credit Suisse Group................... 10,814 480,622
UBS AG................................ 8,706 742,804
-----------
1,223,426
-----------
FOOD & BEVERAGES -- 3.37%
Nestle SA............................. 3,603 1,059,172
-----------
HEALTHCARE -- 6.36%
Novartis AG........................... 22,153 1,128,055
Roche Holding AG...................... 6,268 874,141
-----------
2,002,196
-----------
TOTAL SWITZERLAND COMMON STOCKS....... 4,284,794
-----------
UNITED KINGDOM -- 41.63%
BANKS -- 12.58%
Barclays PLC.......................... 57,602 583,908
HBOS PLC.............................. 34,763 524,896
HSBC Holdings PLC..................... 100,292 1,627,002
Lloyds TSB Group PLC.................. 49,853 411,871
Royal Bank of Scotland Group PLC...... 28,391 808,145
-----------
3,955,822
-----------
ENERGY -- 11.30%
BP PLC................................ 197,462 2,352,739
Royal Dutch Shell PLC (Class A)....... 36,199 1,200,744
-----------
3,553,483
-----------
FOOD & BEVERAGES -- 1.22%
Diageo PLC............................ 26,535 382,586
-----------
</Table>
See accompanying notes to financial statements.
6
STREETTRACKS DOW JONES STOXX 50 FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2005
- --------------------------------------------------------------------------------
<Table>
<Caption>
SECURITY DESCRIPTION SHARES VALUE
- -------------------- ------ -----
HEALTHCARE -- 6.46%
AstraZeneca PLC....................... 14,459 $ 674,018
GlaxoSmithKline PLC................... 53,252 1,358,481
-----------
2,032,499
-----------
INSURANCE -- 0.70%
Aviva PLC............................. 19,921 219,383
-----------
MINING -- 2.51%
Anglo American Capital PLC............ 13,281 397,073
Rio Tinto PLC......................... 9,605 393,879
-----------
790,952
-----------
NON-CYCLICAL GOODS & SERVICES -- 1.22%
Tesco PLC............................. 69,818 382,279
-----------
TELECOMMUNICATIONS -- 5.64%
BT Group PLC.......................... 76,560 301,021
Vodafone Group PLC.................... 564,890 1,474,037
-----------
1,775,058
-----------
TOTAL UNITED KINGDOM COMMON STOCKS.... 13,092,062
-----------
TOTAL COMMON STOCKS --
(Cost $24,847,050).................. 31,248,930
-----------
</Table>
<Table>
<Caption>
SECURITY DESCRIPTION SHARES VALUE
- -------------------- ------ -----
SHORT TERM INVESTMENT -- 0.67%
UNITED STATES -- 0.67%
MONEY MARKET FUND -- 0.67%
AIM Short Term Investment Class Prime
Fund (Cost -- $209,540)............. 209,540 $ 209,540
-----------
TOTAL INVESTMENTS -- 100.04%
(Cost -- $25,056,590)............... 31,458,470
LIABILITIES IN EXCESS OF OTHER
ASSETS -- (0.04)%................... (11,048)
-----------
NET ASSETS -- 100.00%................. $31,447,422
===========
</Table>
See accompanying notes to financial statements.
7
STREETTRACKS DOW JONES EURO STOXX 50 FUND
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2005
- --------------------------------------------------------------------------------
<Table>
<Caption>
SECURITY DESCRIPTION SHARES VALUE
- -------------------- --------- ------------
COMMON STOCKS -- 99.75%
BELGIUM -- 1.82%
FINANCIAL SERVICES -- 1.82%
Fortis.............................. 112,774 $ 3,269,982
------------
FINLAND -- 3.60%
TECHNOLOGY -- 3.60%
Nokia Oyj........................... 384,742 6,466,268
------------
FRANCE -- 34.84%
AUTOMOBILES -- 0.91%
Renault SA.......................... 17,151 1,629,435
------------
BANKS -- 6.45%
BNP Paribas SA...................... 71,790 5,474,517
Credit Agricole SA.................. 59,687 1,755,864
Societe Generale.................... 38,133 4,365,331
------------
11,595,712
------------
CHEMICALS -- 0.97%
L'Air Liquide SA.................... 9,459 1,744,849
------------
CONSTRUCTION -- 1.71%
Compagnie de Saint-Gobain........... 29,990 1,730,495
Lafarge SA.......................... 15,287 1,349,133
------------
3,079,628
------------
CYCLICAL GOODS & SERVICES -- 1.03%
LVMH Moet Hennessy Louis Vuitton
SA................................ 22,316 1,845,703
------------
ENERGY -- 7.71%
Total SA............................ 50,597 13,853,618
------------
FOOD & BEVERAGES -- 1.27%
Groupe Danone....................... 21,122 2,283,004
------------
HEALTHCARE -- 4.00%
Sanofi-Aventis...................... 86,706 7,186,926
------------
INSURANCE -- 2.02%
AXA................................. 132,082 3,637,148
------------
MEDIA -- 1.70%
Vivendi Universal SA................ 93,105 3,048,766
------------
NON-CYCLICAL GOODS & SERVICES -- 1.11%
L'Oreal SA.......................... 25,581 1,987,750
------------
RETAIL -- 1.31%
Carrefour SA........................ 50,961 2,351,967
------------
TECHNOLOGY -- 0.84%
Alcatel SA*......................... 113,331 1,513,944
------------
TELECOMMUNICATIONS -- 2.42%
France Telecom SA................... 150,800 4,341,672
------------
UTILITIES -- 1.39%
Suez SA............................. 86,511 2,508,463
------------
TOTAL FRANCE COMMON STOCKS.......... 62,608,585
------------
GERMANY -- 23.24%
AUTOMOBILES -- 2.24%
DaimlerChrysler AG.................. 75,751 4,031,271
------------
BANKS -- 2.34%
Deutsche Bank AG.................... 44,853 4,208,274
------------
</Table>
<Table>
<Caption>
SECURITY DESCRIPTION SHARES VALUE
- -------------------- --------- ------------
CHEMICALS -- 3.21%
BASF AG............................. 45,627 $ 3,438,137
Bayer AG............................ 63,389 2,330,197
------------
5,768,334
------------
INDUSTRIALS -- 3.12%
Siemens AG.......................... 72,582 5,609,295
------------
INSURANCE -- 3.62%
Allianz AG.......................... 34,428 4,663,023
Muenchener Rueckversicherungs-
Gesellschaft AG................... 15,987 1,831,099
------------
6,494,122
------------
SOFTWARE -- 1.78%
SAP AG.............................. 18,427 3,194,735
------------
TELECOMMUNICATIONS -- 2.34%
Deutsche Telekom AG................. 230,227 4,202,459
------------
UTILITIES -- 4.59%
E.ON AG............................. 60,061 5,534,492
RWE AG.............................. 40,885 2,713,580
------------
8,248,072
------------
TOTAL GERMANY COMMON STOCKS......... 41,756,562
------------
IRELAND -- 0.95%
BANKS -- 0.95%
Allied Irish Banks PLC.............. 79,927 1,705,643
------------
ITALY -- 10.88%
BANKS -- 2.07%
SanPaolo IMI SpA.................... 85,759 1,335,868
UniCredito Italiano SpA............. 421,170 2,381,505
------------
3,717,373
------------
ENERGY -- 3.66%
Eni SpA............................. 220,905 6,581,117
------------
INSURANCE -- 1.68%
Assicurazioni Generali SpA.......... 95,362 3,016,897
------------
TELECOMMUNICATIONS -- 1.73%
Telecom Italia SpA.................. 951,378 3,102,714
------------
UTILITIES -- 1.74%
Enel SpA............................ 362,801 3,136,237
------------
TOTAL ITALY COMMON STOCKS........... 19,554,338
------------
NETHERLANDS -- 10.22%
BANKS -- 2.14%
ABN AMRO Holding NV................. 160,265 3,850,945
------------
CYCLICAL GOODS & SERVICES -- 1.69%
Koninklijke (Royal) Philips
Electronics NV.................... 114,226 3,044,914
------------
FOOD & BEVERAGES -- 1.97%
Unilever NV (1)..................... 49,609 3,537,826
------------
INSURANCE -- 3.84%
Aegon NV............................ 121,419 1,807,902
ING Groep NV (1).................... 170,354 5,089,498
------------
6,897,400
------------
</Table>
See accompanying notes to financial statements.
8
STREETTRACKS DOW JONES EURO STOXX 50 FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2005
- --------------------------------------------------------------------------------
<Table>
<Caption>
SECURITY DESCRIPTION SHARES VALUE
- -------------------- --------- ------------
NON-CYCLICAL GOODS & SERVICES -- 0.58%
Koninklijke Ahold NV*............... 136,733 $ 1,036,920
------------
TOTAL NETHERLANDS COMMON STOCKS..... 18,368,005
------------
SPAIN -- 14.20%
BANKS -- 6.86%
Banco Bilbao Vizcaya Argentaria
SA................................ 293,874 5,169,372
Banco Santander Central Hispano
SA................................ 542,712 7,151,726
------------
12,321,098
------------
ENERGY -- 1.55%
Repsol YPF SA....................... 85,858 2,790,757
------------
TELECOMMUNICATIONS -- 3.47%
Telefonica SA....................... 380,059 6,240,932
------------
UTILITIES -- 2.32%
Endesa SA........................... 83,848 2,251,304
Iberdrola SA........................ 68,068 1,908,039
------------
4,159,343
------------
TOTAL SPAIN COMMON STOCKS........... 25,512,130
------------
TOTAL COMMON STOCKS --
(Cost $174,386,464)............... 179,241,513
------------
RIGHTS -- 0.02%
FRANCE -- 0.02%
UTILITIES -- 0.02%
Suez SA, expires 9/27/05 (1)*
(Cost -- $0)...................... 78,000 29,958
------------
</Table>
<Table>
<Caption>
SECURITY DESCRIPTION SHARES VALUE
- -------------------- --------- ------------
SHORT TERM INVESTMENTS -- 1.86%
UNITED STATES -- 1.86%
MONEY MARKET FUNDS -- 1.86%
AIM Short Term Investment
Class Prime Fund
(Cost -- $942,297)................ 942,297 $ 942,297
UBS Private Money Market Fund,
LLC (Cost -- $2,405,900) (2)...... 2,405,900 2,405,900
------------
3,348,197
------------
TOTAL SHORT TERM
INVESTMENTS --
(Cost -- $3,348,197).............. 3,348,197
------------
TOTAL INVESTMENTS -- 101.63%
(Cost $177,734,661)............... 182,619,668
LIABILITIES IN EXCESS OF OTHER
ASSETS -- (1.63)%................. (2,932,053)
------------
NET ASSETS -- 100.00%............... $179,687,615
============
* Non-income producing security
(1) Security, or portion thereof, was on loan at
September 30, 2005
(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, 2005
- --------------------------------------------------------------------------------
<Table>
<Caption>
STREETTRACKS STREETTRACKS
DOW JONES DOW JONES
STOXX 50 EURO STOXX 50
FUND FUND
------------ -------------
ASSETS
Investments in securities at value (cost -- $25,056,590
and $175,328,761, respectively)*........................ $31,458,470 $180,213,768
Investments of cash collateral received for securities
loaned, at value (cost -- $0 and $2,405,900,
respectively)........................................... -- 2,405,900
Cash...................................................... -- 44,096
Foreign currency, at value (cost -- $58,505 and $159,612,
respectively)........................................... 58,401 160,188
Dividends receivable...................................... 100,029 124,651
----------- ------------
TOTAL ASSETS....................................... 31,616,900 182,948,603
----------- ------------
LIABILITIES
Cash collateral for securities loaned..................... -- 2,405,900
Distributions payable..................................... 156,324 804,408
Accrued trustees fees..................................... 2,546 12,004
Accrued advisory fee...................................... 7,494 38,676
Payable to Sub-Custodian.................................. 3,114 --
----------- ------------
TOTAL LIABILITIES.................................. 169,478 3,260,988
----------- ------------
NET ASSETS......................................... $31,447,422 $179,687,615
=========== ============
NET ASSETS REPRESENTED BY:
Paid in capital........................................... $25,037,075 $175,739,756
Distributions in excess of net investment income.......... (61,610) (700,644)
Accumulated net realized gain (loss) on investments and
foreign currency transactions........................... 71,912 (234,604)
Net unrealized appreciation on investments and foreign
currency................................................ 6,400,045 4,883,107
----------- ------------
NET ASSETS......................................... $31,447,422 $179,687,615
=========== ============
NET ASSET VALUE PER SHARE
Net asset value per share................................. $ 39.31 $ 41.31
=========== ============
Shares outstanding (unlimited amount authorized, $0.01 par
value).................................................. 800,019 4,350,032
=========== ============
</Table>
* Includes $0 and $2,289,217, 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, 2005
- --------------------------------------------------------------------------------
<Table>
<Caption>
STREETTRACKS STREETTRACKS
DOW JONES DOW JONES
STOXX 50 EURO STOXX 50
FUND FUND
------------ -------------
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes, $80,535 and
$708,716, respectively)................................. $ 887,038 $ 4,062,892
Securities lending -- Net................................. 11,754 197,834
---------- ------------
TOTAL INVESTMENT INCOME................................... 898,792 4,260,726
---------- ------------
EXPENSES:
Advisory fee.............................................. 84,662 397,634
Trustees fees and expenses................................ 10,089 43,668
---------- ------------
TOTAL EXPENSES............................................ 94,751 441,302
---------- ------------
NET INVESTMENT INCOME..................................... 804,041 3,819,424
---------- ------------
REALIZED AND UNREALIZED GAIN (LOSS) IN INVESTMENTS:
Net realized gain on investments and foreign currency
transactions............................................ 174,316 34,046,899
Net change in unrealized appreciation (depreciation) on
investments and foreign
currency................................................ 4,562,075 (10,072,382)
---------- ------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND
FOREIGN CURRENCY..................................... 4,736,391 23,974,517
---------- ------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $5,540,432 $ 27,793,941
========== ============
</Table>
See accompanying notes to financial statements.
11
STREETTRACKS INDEX SHARES FUNDS
STATEMENTS OF CHANGE IN NET ASSETS
- --------------------------------------------------------------------------------
<Table>
<Caption>
STREETTRACKS DOW JONES STREETTRACKS DOW JONES
STOXX 50 FUND EURO STOXX 50 FUND
----------------------------- -----------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2005 2004 2005 2004
------------- ------------- ------------- -------------
FROM OPERATIONS:
Net investment income................................. $ 804,041 $ 582,689 $ 3,819,424 $ 1,652,194
Net realized gain (loss) on investments and foreign
currency transactions............................... 174,316 (121,105) 34,046,899 12,867,239
Net change in unrealized appreciation (depreciation)
on investments and foreign currency................. 4,562,075 1,164,330 (10,072,382) 6,731,659
----------- ----------- ------------- ------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS.......................................... 5,540,432 1,625,914 27,793,941 21,251,092
----------- ----------- ------------- ------------
Undistributed net investment income included in price
of shares issued and redeemed....................... 138 4,367 67,904 16,527
----------- ----------- ------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income................................. (796,093) (601,360) (3,960,144) (1,760,293)
----------- ----------- ------------- ------------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares.................. 1,805,862 15,509,127 181,521,597 27,470,917
Net proceeds from dividend reinvestment shares
issued.............................................. 702 -- 1,227 --
Cost of shares redeemed............................... -- (62,983) (119,061,998) (39,019,051)
----------- ----------- ------------- ------------
NET INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL
INTEREST TRANSACTIONS................................. 1,806,564 15,446,144 62,460,826 (11,548,134)
----------- ----------- ------------- ------------
Net increase in net assets during period.............. 6,551,041 16,475,065 86,362,527 7,959,192
Net assets at beginning of period..................... 24,896,381 8,421,316 93,325,088 85,365,896
----------- ----------- ------------- ------------
NET ASSETS AT END OF PERIOD (1)......................... $31,447,422 $24,896,381 $179,687,615 $ 93,325,088
=========== =========== ============= ============
SHARES OF BENEFICIAL INTEREST:
Shares sold........................................... 50,000 450,000 4,550,000 800,000
Shares issued to shareholders from reinvestment of
distributions....................................... 19 -- 32 --
Shares redeemed....................................... -- (1,971) (2,950,000) (1,102,046)
----------- ----------- ------------- ------------
NET INCREASE (DECREASE)................................. 50,019 448,029 1,600,032 (302,046)
=========== =========== ============= ============
(1) Including undistributed (distributions in excess of)
net investment income:................................ $ (61,610) $ 129,109 $ (700,644) $ 863,352
=========== =========== ============= ============
</Table>
See accompanying notes to financial statements.
12
STREETTRACKS INDEX SHARES FUNDS
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A STREETTRACKS SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS
PRESENTED BELOW:
- --------------------------------------------------------------------------------
<Table>
<Caption>
STREETTRACKS DOW JONES STREETTRACKS DOW JONES
STOXX 50 FUND EURO STOXX 50 FUND
--------------------------------------------- ---------------------------------------------
FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2005 2004+ 2003* 2005 2004+ 2003*
------------- ------------- ------------- ------------- ------------- -------------
NET ASSET VALUE, BEGINNING OF
PERIOD........................ $ 33.20 $ 27.89 $25.34(4) $ 33.94 $ 27.97 $ 24.35(4)
------- ------- ------ -------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income........... 1.01 0.99 1.20 0.94 0.64 0.97
Net realized and unrealized
gain.......................... 6.10 5.16 2.50 7.39 6.14 3.59
------- ------- ------ -------- ------- -------
Total from investment
operations.................... 7.11 6.15 3.70 8.33 6.78 4.56
------- ------- ------ -------- ------- -------
Undistributed net investment
income included in price of
units issued and redeemed..... 0.00(5) 0.01 (0.49) 0.02 0.01 (0.30)
------- ------- ------ -------- ------- -------
DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income........... (1.00) (0.85) (0.66) (0.98) (0.82) (0.64)
------- ------- ------ -------- ------- -------
NET ASSET VALUE, END OF
PERIOD........................ $ 39.31 $ 33.20 $27.89 $ 41.31 $ 33.94 $ 27.97
======= ======= ====== ======== ======= =======
TOTAL RETURN (1)................ 21.60% 22.13% 12.79% 24.82% 24.21% 17.46%
Net assets, end of period (in
000's)........................ $31,447 $24,896 $8,421 $179,688 $93,325 $85,366
Ratio of expenses to average net
assets........................ 0.32% 0.33% 0.35%(2) 0.32% 0.33% 0.35%(2)
Ratio of net investment income
to
average net assets............ 2.75% 2.98% 2.96%(2) 2.79% 1.92% 2.78%(2)
Portfolio turnover rate (3)..... 9% 7% 6% 15% 11% 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
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.
(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.
(5) Amount is less than $0.005 per share
+ Effective on 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, 2005
- --------------------------------------------------------------------------------
1. ORGANIZATION
The streetTRACKS Index Shares Funds (the "Trust"), 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
Fund, each of which represents a separate series of beneficial interests 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.
INDEMNIFICATIONS
Under the Trust's organizational documents, its officers and trustees are
indemnified against certain liability arising out of the performance of their
duties to the Trust. Additionally, in the normal course of business, the Trust
enters into contracts with service providers that contain general
indemnification clauses. The Trust's maximum exposure under these arrangements
is unknown as this would involve future claims that may be made against the
Trust that have not yet occurred. However, based on experience the Trust expects
the risk of loss to be remote.
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
14
STREETTRACKS INDEX SHARES FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2005
- --------------------------------------------------------------------------------
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.
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
Each Fund intends 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 its 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 2005, the Funds had no capital loss carryforwards.
For the year ended September 30, 2005, 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 Dow Jones STOXX 50 Fund $ --
streetTRACKS Dow Jones EURO STOXX 50 Fund 32,748,428
</Table>
The Funds use the accounting practice of equalization. This accounting method
was 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, 2004
through September 30, 2005 that are deferred for tax purposes until fiscal 2006:
<Table>
<Caption>
DEFERRED LOSSES
- -----------------------------------------------------------------------------
streetTRACKS Dow Jones STOXX 50 Fund $ --
streetTRACKS Dow Jones EURO STOXX 50 Fund --
</Table>
For the year ended September 30, 2005, 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,
2005, was as follows:
<Table>
<Caption>
ORDINARY INCOME LONG-TERM CAPITAL GAIN
- ------------------------------------------------------------------------------------------------------
streetTRACKS Dow Jones STOXX 50 Fund $ 796,093 $ --
streetTRACKS Dow Jones EURO STOXX 50 Fund 3,960,144 --
</Table>
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 Dow Jones STOXX 50 Fund $ 600,656 $ 704
streetTRACKS Dow Jones EURO STOXX 50 Fund 1,760,293 --
</Table>
15
STREETTRACKS INDEX SHARES FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2005
- --------------------------------------------------------------------------------
As of September 30, 2005 the components of distributable earnings (excluding
unrealized appreciation (depreciation)) on a tax basis were as follows:
<Table>
<Caption>
UNDISTRIBUTED UNDISTRIBUTED
ORDINARY INCOME LONG-TERM CAPITAL GAIN
- ------------------------------------------------------------------------------------------------------
streetTRACKS Dow Jones STOXX 50 Fund $ 94,714 $117,420
streetTRACKS Dow Jones EURO STOXX 50 Fund 103,764 --
</Table>
DISTRIBUTIONS
The Trust declares and distributes dividends from net investment income, if any
to its shareholders quarterly. The Trust distributes 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.
EQUALIZATION
The Funds follow the accounting practice known as "Equalization" by which a
portion of the proceeds from sales and costs of reacquiring streetTRACKS Index
Shares, equivalent on a per share basis to the amount of distributable net
investment income on the date of the transaction, is credited or charged to
undistributed net investment income. As a result, undistributed net investment
income per share is unaffected by sales or reacquisitions of streetTRACKS Index
Shares.
3. FEES AND COMPENSATION PAID TO AFFILIATES AND OTHER RELATED PARTY
TRANSACTIONS
ADVISORY FEE
Effective July 1, 2004, each Fund entered into an Investment Advisory Agreement
with SSgA Funds Management, Inc. (the Trust on behalf of "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 Fund's average daily net assets as shown in the
following table:
<Table>
<Caption>
ANNUAL RATE
- -------------------------------------------------------------------------
streetTRACKS Dow Jones STOXX 50 Fund 0.29%
streetTRACKS Dow Jones 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.
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 Shares of
the Funds. Shares of the Funds 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
the Shares. Management has not implemented a 12b-1 fee on either 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 fund per board meeting attended.
An Independent Trustee will receive $500 for each meeting attended via telephone
or video conference. 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
16
STREETTRACKS INDEX SHARES FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2005
- --------------------------------------------------------------------------------
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.
4. SHAREHOLDER TRANSACTIONS
Except under the Trust's dividend reinvestment plan, Shares are issued and
redeemed by a Fund only in Creation Unit size aggregations of 50,000. Such
transactions are only permitted on an in-kind basis, with a separate cash
payment, which is (cash component) used to equate the transaction to the net
asset value per Share of a Fund on the transaction date. Transaction fees at
scheduled amounts ranging from $1,500 to $6,000 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, 2005, 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 Dow Jones STOXX 50 Fund $ 25,102,098 $6,452,428 $ 96,056 $6,356,372
streetTRACKS Dow Jones EURO STOXX 50 Fund 177,969,266 5,875,191 1,224,790 4,650,401
</Table>
6. INVESTMENT TRANSACTIONS
For the year ended September 30, 2005, the Trust had in-kind contributions and
in-kind redemptions as follows:
<Table>
<Caption>
SUBSCRIPTIONS REDEMPTIONS
- ------------------------------------------------------------------------------------------
streetTRACKS Dow Jones STOXX 50 Fund $ 1,805,862 $ --
streetTRACKS Dow Jones EURO STOXX 50 Fund 181,452,653 119,061,998
</Table>
For the year ended September 30, 2005, the Trust had purchases and sales of
investment securities as follows:
<Table>
<Caption>
PURCHASES SALES
- ----------------------------------------------------------------------------------------
streetTRACKS Dow Jones STOXX 50 Fund $ 2,536,827 $ 2,610,179
streetTRACKS Dow Jones EURO STOXX 50 Fund 20,371,421 20,788,763
</Table>
For the year ended September 30, 2005, the Trust did not pay any commissions to
an affiliate of the Adviser 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 Dow Jones STOXX 50 Fund 1: 2.536
streetTRACKS Dow Jones EURO STOXX 50 Fund 1: 2.444
</Table>
17
STREETTRACKS INDEX SHARES FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2005
- --------------------------------------------------------------------------------
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.
Each Fund receives 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.
18
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 statements of assets and liabilities, including
the schedules 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, 2005, and the results of their operations, the
changes in their 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
Trust's management; 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 audits 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 management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at September 30, 2005 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 14, 2005
19
STREETTRACKS INDEX SHARES FUNDS
OTHER INFORMATION
SEPTEMBER 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
CLOSING BID/ASK MIDPOINT PRICE VS. NAV AS OF SEPTEMBER 30, 2005
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 Dow Jones STOXX 50 Fund
<Table>
<Caption>
-----------------------------------------------------------------------------
Bid/Ask Midpoint Price
Above NAV
-----------------------------------------------------------------------------
50 - 99 100 - 199 >200
BASIS POINTS BASIS POINTS BASIS POINTS
-----------------------------------------------------------------------------
2005
QUARTER ENDING:
9/30/05 11 2 0
6/30/05 14 9 1
3/31/05 4 0 0
-----------------------------------------------------------------------------
2004
QUARTER ENDING:
12/31/04 30 7 0
9/30/04 19 7 0
6/30/04 19 3 0
3/31/04 13 3 0
-----------------------------------------------------------------------------
2003
QUARTER ENDING:
12/31/03 14 1 0
9/30/03 8 2 0
6/30/03 13 2 0
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
----------------------- -----------------------------------------------------
2005
QUARTER ENDING:
9/30/05 0 2 3
6/30/05 4 2 0
3/31/05 5 3 6
-----------------------------------------------------------------------------
2004
QUARTER ENDING:
12/31/04 1 0 1
9/30/04 1 1 0
6/30/04 1 2 0
3/31/04 6 2 0
-----------------------------------------------------------------------------
2003
QUARTER ENDING:
12/31/03 2 0 0
9/30/03 6 0 0
6/30/03 8 3 0
3/31/03 6 2 0
-----------------------------------------------------------------------------
2002
PERIOD ENDING:
12/31/02* 7 3 0
-----------------------------------------------------------------------------
</Table>
* Commencement of trading October 21, 2002
20
STREETTRACKS INDEX SHARES FUNDS
OTHER INFORMATION (CONTINUED)
SEPTEMBER 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
streetTRACKS Dow Jones EURO STOXX 50 Fund
<Table>
<Caption>
-----------------------------------------------------------------------------
Bid/Offer Midpoint Price
Above NAV
-----------------------------------------------------------------------------
50 - 99 100 - 199 >200
BASIS POINTS BASIS POINTS BASIS POINTS
-----------------------------------------------------------------------------
2005
QUARTER ENDING:
9/30/05 7 2 0
6/30/05 6 1 0
3/31/05 13 4 0
-----------------------------------------------------------------------------
2004
QUARTER ENDING:
12/31/04 12 1 0
9/30/04 8 4 0
6/30/04 10 3 0
3/31/04............. 9 1 0
-----------------------------------------------------------------------------
2003
QUARTER ENDING:
12/31/03 11 1 0
9/30/03 8 1 0
6/30/03 6 3 0
3/31/03 12 6 1
-----------------------------------------------------------------------------
2002
PERIOD ENDING:
12/31/02* 5 7 1
-----------------------------------------------------------------------------
<Caption>
----------------------- -----------------------------------------------------
Bid/Offer Midpoint Price
Below NAV
----------------------- -----------------------------------------------------
50 - 99 100 - 199 >200
BASIS POINTS BASIS POINTS BASIS POINTS
----------------------- -----------------------------------------------------
2005
QUARTER ENDING:
9/30/05 6 1 4
6/30/05 10 4 0
3/31/05 4 8 1
-----------------------------------------------------------------------------
2004
QUARTER ENDING:
12/31/04 4 0 1
9/30/04 7 1 1
6/30/04 5 2 1
3/31/04............. 3 8 0
-----------------------------------------------------------------------------
2003
QUARTER ENDING:
12/31/03 4 0 0
9/30/03 6 3 0
6/30/03 11 4 0
3/31/03 11 4 0
-----------------------------------------------------------------------------
2002
PERIOD ENDING:
12/31/02* 9 5 0
-----------------------------------------------------------------------------
</Table>
* Commencement of trading October 21, 2002
21
STREETTRACKS INDEX SHARES FUNDS
OTHER INFORMATION (CONTINUED)
SEPTEMBER 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
SHAREHOLDER EXPENSE EXAMPLE
As a shareholder of a Fund, you incur two types of costs: (1) transaction costs
which may include creation and redemption fees on brokerage charges and (2)
ongoing costs, including management fees, distribution (12b-1) fees,
administration, custodian and transfer agent 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, 2005 and held for the six months ended September 30, 2005.
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 the other funds. The Funds charge transaction fees of $3,000 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 on 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*
4/01/05 9/30/05 4/01/05 TO 9/30/05
----------------- -------------- ------------------
ACTUAL
streetTRACKS Dow Jones STOXX 50 Fund................... $1,000 $1,072.03 $1.82
streetTRACKS Dow Jones EURO STOXX 50 Fund.............. $1,000 $1,061.19 $1.76
HYPOTHETICAL
(ASSUMING A 5% RETURN BEFORE EXPENSES)
streetTRACKS Dow Jones STOXX 50 Fund................... $1,000 $1,023.31 $1.78
streetTRACKS Dow Jones EURO STOXX 50 Fund.............. $1,000 $1,023.36 $1.72
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.35% and 0.34%,
respectively, multiplied by the average account value of the period,
multiplied by 183/365.
TAX INFORMATION (UNAUDITED)
QUALIFIED DIVIDEND INCOME
For the fiscal year ended September 30, 2005, the funds will designate up to the
maximum amount allowable pursuant to the Internal Revenue Code, as qualified
dividend income eligible for reduced tax rates. These lower rates range from 5%
to 15% depending on the individual's tax bracket. Complete information will be
reported in conjunction with form 1099-DIV.
22
STREETTRACKS INDEX SHARES FUNDS
OTHER INFORMATION (CONTINUED)
SEPTEMBER 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
CAPITAL GAINS DISTRIBUTIONS
Pursuant to Internal Revenue Section 852(b), the following Funds paid
distributions, which have been designated as capital gains distributions for the
fiscal year ended September 30, 2005.
<Table>
<Caption>
AMOUNT
----------
streetTRACKS Dow Jones STOXX 50 Fund........................ $ --
streetTRACKS Dow Jones EURO STOXX 50 Fund................... 1,406,551
</Table>
FOREIGN TAX CREDIT
The Trust has made an election under Internal Revenue Code Section 853 to pass
through foreign taxes paid by the Fund to its shareholders. For the year ended
September 30, 2005, the total amount of foreign taxes will be passed through
are:
<Table>
<Caption>
AMOUNT
----------
streetTRACKS Dow Jones STOXX 50 Fund........................ $ 80,535
streetTRACKS Dow Jones EURO STOXX 50 Fund................... 708,716
</Table>
PROXY VOTING POLICIES
You may obtain a description of the Fund's 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.
QUARTERLY PORTFOLIO SCHEDULE
The Funds file a complete schedule of portfolio holdings with the
Securities and Exchange Commission for the first and third quarters of each
fiscal year on the Form N-Q. The Funds' Forms N-Q are 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 form N-Q will be
available upon request, without charge, by calling 1-866-787-2257
(toll-free), and on the Funds' website www.streetTRACKS.com.
INVESTMENT ADVISORY CONTRACT RENEWAL
At an in-person meeting held on August 22, 2005, the Board of Trustees of
the Trust (the "Board") considered renewal of the Investment Advisory
Agreement (the "Agreement") between the Trust and SSgA Funds Management,
Inc. (the "Adviser") with respect to the series portfolios of the Trust
(each a "Fund", collectively, the "Funds"). The Trustees who are not
"interested persons" of the Trust within the meaning of the Investment
Company Act of 1940, as amended (the "Independent Trustees") also met
separately with their counsel to consider the Agreement.
In evaluating the Agreement, the Board drew on materials provided to them
by the Adviser and on other materials provided by State Street Bank and
Trust Company, the Trust's Administrator, Transfer Agent and Custodian
("State Street"). In deciding whether to renew the Agreement, the Board
considered various factors, including (i) the nature, extent and quality of
the services provided by the Adviser under the Agreement, (ii) the
investment performance of the Funds, (iii) the costs to the Adviser of its
services and the profits realized by the Adviser from its relationship with
the Trust, and (iv) the extent to which economies of scale would be
realized if and as the Funds grow and whether the fee levels in the
Agreement reflect these economies of scale.
First, the Board considered the nature, extent and quality of the services
provided by the Adviser. In doing so, they relied on their prior experience
with the Trust, the Adviser and State Street, as well as materials provided
prior to and at the meeting. The Board reviewed the Advisory Agreements and
the Adviser's responsibilities for managing the investment operations of
each Fund in accordance with each Fund's investment objective and policies,
23
STREETTRACKS INDEX SHARES FUNDS
OTHER INFORMATION (CONTINUED)
SEPTEMBER 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
and the applicable legal and regulatory requirements. They appreciated the
relatively unique nature of the Funds, as ETFs, and the experience and
expertise of the Adviser with ETFs. The Board considered the background and
experience of the Adviser's senior management, including those individuals
responsible for the portfolio management and compliance. They also
considered the resources, structures and practices of the Adviser in
managing the Funds' portfolios and in monitoring and securing each Fund's
compliance with its investment objectives and policies and with applicable
laws and regulations. The Board also considered information about the
Adviser's best execution procedures and overall investment management
business, noting that the Adviser serves a wide range of clients across a
broad spectrum of asset classes. The Board looked at the Adviser's general
knowledge of the investment business and that of its parent, State Street
Global Advisers, with which the Adviser shares all of its senior personnel.
The Board considered that the Adviser and its affiliates constitute one of
the world's largest investment management enterprises for indexed products
generally and ETFs in particular. The Independent Trustees then determined
that the nature, extent and quality of the services provided by the Adviser
to the Trust were necessary and appropriate.
The Independent Trustees' reviewed the Funds' performance. They noted that
the distinctive indexed investment objective of each of the Funds made the
analysis of investment performance, in absolute terms, less of a priority
than that which normally attaches to the performance of actively-managed
funds. The Board was more concerned with the extent to which each Fund
achieved its objective of replicating the total return of the applicable
index (index tracking and tracking error). The Board considered that the
Funds did not generate any taxable gain during the most recent fiscal year,
and that the Funds were unlikely to distribute any material taxable gains
in the current fiscal year. The Independent Trustees then determined that
the performance of each Fund was satisfactory.
The Board considered the profitability of the advisory arrangement with the
Funds to the Adviser including data on the Funds' historical profitability
to the Adviser. The Independent Trustees, through their counsel, had the
opportunity to discuss with representatives of the Adviser and State Street
the methodologies used in computing the costs that formed the bases of the
profitability calculations and determined that these methodologies were
reasonable. The Independent Trustees concluded that, to the extent that the
Adviser's relationship with the Trust had been profitable, the
profitability was not excessive.
The Board considered whether the Adviser benefited in other ways from its
relationship with the Trust, noting that Adviser maintains no soft-dollar
arrangements in connection with the Trust's brokerage transactions. The
Independent Trustees concluded that, to the extent that the Adviser derives
other benefits from its relationship with the Trust, those benefits are not
so significant as to cause the Adviser's fee to be excessive.
The Independent Trustees determined that the Adviser is likely to realize
economies of scale in managing the Funds as assets grow in size. The
Independent Trustees further determined that such economies of scale are
currently shared with the Funds by way of the low advisory fee and unitary
fee structure of the Trust.
The Board evaluated the Funds' unitary fee through the review of
comparative information with respect to fees paid by similar funds -- i.e.,
ETFs tracking sector indexes. The Board also reviewed the expense ratios of
the Funds and the unitary fee structure. The Independent Trustees
concluded, based on the information presented, that each Fund's fees were
fair and reasonable in light those of their direct competitors. The Board
reviewed the universe of similar ETFs for each Fund based upon Lipper
Analytical Services and related comparative information. The Board used a
Fund by Fund analysis of the data to determine that each Fund's expense
ratio was reasonable in light of its peers.
The Independent Trustees' conclusions regarding the Agreement were as
follows: (a) the nature and extent of the services provided by the Adviser
were appropriate; (b) the performance, and more importantly, the index
tracking, of each Fund had been satisfactory; (c) the Adviser's fees for
each Fund and the unitary fee, considered in relation to the services
provided, were fair and reasonable; (d) the profitability of the Trust's
relationship with the Adviser was not excessive; (e) any additional
benefits to the Adviser were not of a magnitude materially to affect the
Independent Trustees' conclusions; and (f) the fees paid to the Adviser
adequately shared the economies of scale with the Funds.
24
STREETTRACKS INDEX SHARES FUNDS
OTHER INFORMATION
SEPTEMBER 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
TRUSTEES AND OFFICERS
<Table>
<Caption>
NUMBER OF
TERM OF OFFICE PORTFOLIOS IN
NAME, ADDRESS AND POSITION(S) AND LENGTH OF PRINCIPAL OCCUPATION(S) FUND COMPLEX OTHER DIRECTORSHIPS
DATE OF BIRTH WITH FUNDS TIME SERVED DURING PAST 5 YEARS OVERSEEN BY TRUSTEE HELD BY TRUSTEE
- ----------------- ----------- -------------- ----------------------- ------------------- -------------------
David M. Kelly Independent Unlimited President and CEO, NSCC 19 Trustee, streetTRACKS
420 Sabal Palm Lane Trustee Elected: (1983-February 2000) (a Series Trust
Vero Beach, FL 32963 September 2000 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 Independent Unlimited Chief Executive 19 Trustee, streetTRACKS
c/o streetTRACKS Trustee Elected: Officer, Libra Group, Series Trust
Series Trust September 2000 Inc. (1998- present) (a Jefferson Pilot
State Street Financial financial services Variable Fund, Inc.,
Center consulting company); (Director); The
One Lincoln Street Managing Director, Massachusetts Health &
Boston, MA 02111-2900 Senior Vice President Education Tax Exempt
9/24/43 and Fund Treasurer, New Trust (Trustee).
England Funds
(1993-1998).
Helen F. Peters Independent Unlimited Professor of Finance, 19 Trustee, streetTRACKS
133 South Street Trustee Elected: Carroll School of Series Trust
Needham, Massachusetts September 2000 Management, Boston Tradeware Global
02492 College (2003-present); (Director); BJ's
3/22/48 Dean, Boston College Wholesale Clubs
(August 2000-2003); (Director).
Partner Samuelson
Peters, LLC (1999-
September 3000).
James E. Ross President Unlimited President, SSgA Funds N/A N/A
SSgA Funds Elected: Management, Inc.
Management, Inc. August 2005 (2005-present);
State Street Financial Principal, SSgA Funds
Center Management, Inc.
One Lincoln Street (2001-present);
Boston, MA 02111-2900 Principal, State Street
6/24/65 Global Advisors (March
2000 to present); Vice
President, State Street
Bank and Trust Company
(1998-March 2000).
Michael P. Riley Vice Unlimited Principal, State Street N/A N/A
SSgA Funds Management, President Elected: Global Advisors (2005
Inc. February 2005 to present); Assistant
State Street Financial Vice President, State
Center Street Bank and Trust
One Lincoln Street Company (2000-2004).
Boston, MA 02111-2900
3/22/69
</Table>
25
STREETTRACKS INDEX SHARES FUNDS
OTHER INFORMATION (CONTINUED)
SEPTEMBER 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
NUMBER OF
TERM OF OFFICE PORTFOLIOS IN
NAME, ADDRESS AND POSITION(S) AND LENGTH OF PRINCIPAL OCCUPATION(S) FUND COMPLEX OTHER DIRECTORSHIPS
DATE OF BIRTH WITH FUNDS TIME SERVED DURING PAST 5 YEARS OVERSEEN BY TRUSTEE HELD BY TRUSTEE
- ----------------- ----------- -------------- ----------------------- ------------------- -------------------
Gary L. French Treasurer Unlimited Senior Vice President, N/A N/A
State Street Bank and Elected: State Street Bank and
Trust Company May 2005 Trust Company
2 Avenue de Lafayette (2002-present);
Boston, MA 02111 Managing Director,
07/04/51 Deutsche Bank
(2001-2002); President,
UAM Fund Services
(1995-2001);
Mary Moran Zeven Secretary Unlimited Senior Vice President N/A N/A
State Street Bank and Elected: and Senior Managing
Trust Company August 2001 Counsel, State Street
One Lincoln Street Bank and Trust Company
Boston, Massachusetts (2002- present); Vice
02111 President and Counsel,
2/27/61 State Street Bank and
Trust Company
(2000-2002).
Scott M. Zoltowski Assistant Unlimited Vice President and N/A N/A
State Street Bank and Secretary Elected: Counsel, State Street
Trust Company November 2004 Bank and Trust Company
One Lincoln Street (2004- present); Senior
Boston, MA 02111 Counsel, BISYS, Inc.
1/30/69 (2001-2004); Associate,
Dechert LLP (1999-
2001).
John W. Clark Assistant Unlimited Vice President, State N/A N/A
State Street Bank and Treasurer Elected: Street Bank & Trust
Trust Company August 2005 Company (2001-
One Lincoln Street present); Director,
Boston, MA 02111 Investors Bank & Trust
03/24/67 Company (1998-2000);
Assistant Vice
President, Investors
Bank & Trust Company
(1996-1998).
Matthew Flaherty Assistant Unlimited Assistant Director, N/A N/A
State Street Bank and Treasurer Elected: State Street Bank and
Trust Company May 2005 Trust (1994-present).
One Lincoln Street
Boston, MA 02111
2/19/71
Peter A. Ambrosini Chief Unlimited Senior Principal and N/A N/A
SSgA Funds Compliance Elected: Chief Compliance and
Management, Inc. Officer May 2004 Risk Management
State Street Financial Officer, SSgA Funds
Center Management, Inc.
One Lincoln Street (2001-present);
Boston, MA 02111 Managing Director,
12/17/43 PricewaterhouseCoopers
(1986-2001).
</Table>
26
streetTRACKS (R) INDEX SHARES FUNDS
TRUSTEES
David M. Kelly
Frank Nesvet
Helen F. Peters
OFFICERS
James E. Ross, President
Michael P. Riley, Vice President
Gary French, Treasurer
Mary Moran Zeven, Secretary
Scott M. Zoltowski, Assistant Secretary
John W. Clark, Assistant Treasurer
Matthew Flaherty, Assistant Treasurer
Peter A. 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
State Street Financial Center
One Lincoln Street
Boston, MA 02110
CUSTODIAN, ADMINISTRATOR AND TRANSFER AGENT
State Street Bank and Trust Company
State Street Financial Center
One Lincoln 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)
ITEM 2. CODE OF ETHICS.
As of the end of the period covered by this report, the registrant has adopted a
code of ethics that applies to the registrant's principal executive officer,
principal financial officer, principal accounting officer or controller, or
persons performing similar functions, regardless of whether these individuals
are employed by the registrant or a third party (the "Code of Ethics"). During
the period covered by this report, no substantive amendments were made to the
Code of Ethics. During the period covered by this report, the registrant did not
grant any waivers, including any implicit waivers, from any provision of the
Code of Ethics.
The Code of Ethics is attached hereto as Exhibit 12(a)(1).
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a)(1) The Board of Trustees of the registrant has determined that the
registrant has one Board member serving on the 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 registrant's audit committee financial expert. The Board
also determined that Mr. Nesvet is not an "interested person(s)" of the
registrant 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, 2005 and September 30, 2004, the
aggregate audit fees billed for professional services rendered by the principal
accountant were $34,800 and $31,400, respectively. The nature of the services
are (1) auditing of the statements of assets and liabilities, related statements
of operations and changes in net assets, and the financial highlights of each
series of the registrant; (2) auditing and reporting on the financial statements
to be included in the amendment to the registrant'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 registrant's Form N-SAR.
(b) Audit-Related Fees.
For the fiscal years ending September 30, 2005 and September 30, 2004, the
principal accountant did not bill the registrant any fees for assurances and
related services that are reasonably related to the performance of the audit of
the registrant's financial statements and are not reported under paragraph (a)
of this Item.
(c) Tax Fees.
For the fiscal years ending September 30, 2005 and September 30, 2004, the
aggregate tax fees billed for professional services rendered by the principal
accountant were $13,000 and $12,400, respectively. Services included the review
of the registrant's federal, state and local income, franchise and other tax
returns.
(d) All Other Fees.
There were no other fees billed by the principal accountant for the fiscal years
ending September 30, 2005 and September 30, 2004.
(e)(1) Audit Committee Pre-Approval Policies and Procedures.
The registrant's Audit Committee Charter states the following with respect to
pre-approval procedures:
Before the independent auditors are engaged by the Trust to render audit or
non-audit services, either:
a. The Audit Committee shall pre-approve all auditing services and
permissible non-audit services (e.g., tax services) provided to the
Trust. The Audit Committee may delegate to one or more of its members
the authority to grant pre-approvals. Any decision of any member to
whom authority is delegated under this section shall be presented to
the full Audit Committee at its next regularly scheduled meeting;
or
b. The engagement to render the auditing service or permissible non-audit
service is entered into pursuant to pre-approval policies and
procedures established by the Audit Committee. Any such policies and
procedures must (1) be detailed as to the particular service and (2)
not involve any delegation of the Audit Committee's responsibilities
to the investment adviser. The Audit Committee must be informed of
each service entered into pursuant to the policies and procedures. A
copy of any such policies and procedures shall be attached as an
exhibit to the Audit Committee Charter.
c. De Minimis Exceptions to Pre-Approval Requirements. Pre-Approval for a
service provided to the Trust other than audit, review or attest
services is not required if: (1) the aggregate amount of all such
non-audit services provided to the Trust constitutes not more than 5
percent of the total amount of revenues paid by the Trust to the
independent auditors during the fiscal year in which the non-audit
services are provided; (2) such services were not recognized by the
Trust at the time of the engagement to be non-audit services; and (3)
such services are promptly brought to the attention of the Audit
Committee and are approved by the Audit Committee or by one or more
members of the Audit Committee to whom authority to grant such
approvals has been delegated by the Audit Committee prior to the
completion of the audit.
d. Pre-Approval of Non-Audit Services Provided to the investment adviser
and Certain Control Persons. The Audit Committee shall pre-approve any
non-audit services proposed to be provided by the independent auditors
to (a) the investment adviser and (b) any entity controlling,
controlled by, or under common control with the investment adviser
that provides ongoing services to the Trust, if the independent
auditors' engagement with the investment adviser or any such control
persons relates directly to the operations and financial reporting of
the Trust. It shall be the responsibility of the independent auditors
to notify the Audit Committee of any non-audit services that need to
be pre-approved.
e. Application of De Minimis Exception: The De Minimis exception set
forth above applies to pre-approvals under this Section as well,
except that the "total amount of revenues" calculation is based on the
total amount of revenues paid to the independent auditors by the Trust
and any other entity that has its services approved under this Section
(i.e., the investment adviser or any control person).
(e)(2) Percentage of Services.
One hundred percent of the services described in each of paragraphs (b) through
(d) of this Item were approved by the registrant's Audit Committee pursuant to
paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not applicable.
(g) For the fiscal years ending September 30, 2005 and September 30, 2004, 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 $4,578,000 and $2,904,000, respectively.
(h) Not applicable.
ITEM 5. DISCLOSURE OF AUDIT COMMITTEES FOR LISTED COMPANIES.
The registrant has an audit committee which was established by the Board of
Trustees of the Trust in accordance with Section 3(a)(58)(A) of the Securities
Exchange Act of 1934, as amended. The members of the registrant's audit
committee are Frank Nesvet, David Kelly and Helen Peters.
ITEM 6. SCHEDULE OF INVESTMENTS.
The schedule of investments is included as part of the report to shareholders
filed under Item 1 of this Form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the registrant.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the registrant.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable to the registrant.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Registrant has not adopted any material changes to the procedures by which
shareholders may recommend nominees to the registrant's Board.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Within 90 days of the filing date of this Form N-CSR, James Ross, the
registrant's President and Principal Executive Officer, and Gary L. French, the
registrant's Treasurer and Principal Financial Officer, reviewed the
registrant's disclosure controls and procedures and evaluated their
effectiveness. Based on their review, Messrs. Ross and French determined that
the disclosure controls and 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.
(b) There were no significant changes in the registrant's internal controls or
in other factors that could significantly affect these controls subsequent to
the date of their evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
ITEM 12. EXHIBITS.
(a)(1) Code of Ethics referred to in Item 2.
(a)(2) Separate certifications required by Rule 30a-2 under the Investment
Company Act of 1940 for each principal executive officer and principal financial
officer of the registrant are attached.
(b) A single certification required by Rule 30a-2(b) under the Investment
Company Act of 1940, Rule 13a-14(b) or Rule 15d-14(b) under the Securities
Exchange Act of 1934 and Section 1350 of Chapter 63 of Title 18 of the United
States Code for the principal executive officer and principal financial officer
of the registrant is attached.
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(R) Index Shares
By: /s/ James Ross
-----------------------------------------
James Ross
President and Principal Executive Officer
Date: November 28, 2005
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/ James Ross
-----------------------------------------
James Ross
President and Principal Executive Officer
Date: November 28, 2005
By: /s/ Gary L. French
-----------------------------------------
Gary L. French
Treasurer and Principal Financial Officer
Date: November 22, 2005