N-CSR 1 b52579isnvcsr.txt STREETTRACKS INDEX SHARES FUNDS UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number: 811-21145 ---------------------------------------------- STREETTRACKS INDEX SHARES FUNDS (FORMERLY FRESCO INDEX SHARES FUNDS) ------------------------------------------------------------------------------ (Exact name of registrant as specified in charter) 225 Franklin Street, Boston, MA 02109 ------------------------------------------------------------------------------ (Address of principal executive offices) (zip code) Scott M. Zoltowski, Esq. State Street Bank and Trust Company One Federal Street Boston, MA 02110 (Name and address of agent for service) Copy to: Stuart Strauss, Esq. Clifford Chance US LLP 31 West 52nd Street New York, New York 10019 Registrant's telephone number, including area code: (866) S-TRACKS Date of fiscal year end: September 30 Date of reporting period: September 30, 2004 ITEM 1: REPORTS TO SHAREHOLDERS streetTRACKS (R) Index Shares Funds ANNUAL REPORT SEPTEMBER 30, 2004 (COVER GRAPHIC) [streetTRACKS annual report] PRESIDENT'S LETTER TO SHAREHOLDERS Dear streetTRACKS shareholders, On July 1, 2004, SSgA Funds Management, Inc. began managing two new additions to the streetTRACKS family. The Fresco Dow Jones STOXX 50 Fund (NYSE: FEU) and the Fresco Dow Jones Euro STOXX 50 Fund (NYSE: FEZ) were transferred from UBS Global Asset Management (US) Inc. and were accordingly renamed the streetTRACKS STOXX 50 Fund (NYSE: FEU) and streetTRACKS EuroSTOXX 50 Fund (NYSE: FEZ). The Funds are managed to the Dow Jones STOXX 50 Index and the Dow Jones EURO STOXX 50 Index, respectively. Enabling investors to gain easy exposure to the European and Eurozone markets, the streetTRACKS STOXX 50 Fund and the streetTRACKS EuroSTOXX 50 Fund have posted returns of 22.13% and 24.21%, respectively, for the fiscal year ending September 30, 2004. First quarter returns were very strong, but markets grew more cautious towards fiscal year end, due to instability in the Middle East and higher oil prices. Though markets remained flat through fiscal year end, investors' interest in exchange traded funds continued to grow. ETFs listed and traded on U.S. exchanges number 148 as of September 30, 2004 -- up from 114 at the end of the last fiscal year. Total assets under management topped $181 billion as of September 30, 2004, representing an increase of approximately $57 billion over last year. The streetTRACKS family continued to share in the success of ETFs as well. Total assets invested in the streetTRACKS funds exceeded $1 billion in eleven funds as of September 30, 2004. We anticipate further growth in the ETF industry -- both in assets and in the number of ETF products available. We are fully committed to playing a leading role in working with investors and advisors to develop applications for ETFs that help you best pursue your investment goals. We look forward to a continued relationship built on trust and dedicated to delivering innovative products, and applications for those products, that best serve the needs of the investment community. Agustin J. Fleites President streetTRACKS Series Trust 1 [streetTRACKS annual report] MANAGEMENT'S DISCUSSION AND ANALYSIS STREETTRACKS DOW JONES STOXX 50 INDEX FUND The Dow Jones STOXX 50 Index Fund (the "Fund") seeks to replicate the total return of the Dow Jones STOXX 50 Index (the "Index"). To accomplish this, the Fund utilizes a "passive" or indexing approach and attempts to approximate the investment performance of its benchmark index, before expenses, by investing in a portfolio of stocks to replicate the Index. The Fund performance for the year ending September 30, 2004 was 22.13% versus the Index return of 22.40%. The vast majority of the return was posted in the first quarter of the fiscal year. Stock markets in many parts of the world posted strong gains during that time period. Markets reacted positively to encouraging economic news and appeared to build expected earnings into stock prices during the period. Since December, the markets have been relatively flat. Investors appeared to cautiously wait for expected earnings to materialize. Other factors influencing the markets were instability in the Middle East and increasing oil prices. The price of a barrel of oil was just under $50 on September 30, 2004, a 70% increase over the price a year earlier. Ericsson Lm Tel of Sweden was the top performing stock in the index during the period, rising 100%. Nokia OYJ was the worst performing stock in the index, falling nearly 14%. While both firms are well known makers of mobile phones, Ericsson Lm Tel posted a very good year with much improved earnings, while earnings at Nokia OYJ were not nearly as good. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT DOW JONES STOXX 50 FUND [LINE GRAPH]
STREETTRACKS DOW JONES DOW JONES STOXX 50 INDEX - US STOXX 50 FUND DOLLAR DENOMINATED ---------------------- ----------------------------- 10/15/02 10000.00 10000.00 12/31/02 10059.00 9978.00 3/31/03 9128.50 9131.80 6/30/03 11097.60 11096.40 9/30/03 11279.10 11287.10 12/31/03 13631.00 13660.00 3/31/04 13384.40 13423.40 6/30/04 13524.50 13552.20 9/30/04 13775.70 13815.10
2 STREETTRACKS INDEX SHARES FUNDS ANNUAL REPORT MANAGEMENT'S DISCUSSION AND ANALYSIS The following Performance chart is provided to compare the Fund's total return at NAV to the total return based on market price and its benchmark Index. The following chart is for comparative purposes only and represents the period noted. The Fund's past performance is no guarantee of future results. The investment return and principal value of Fund shares will vary with changes in market conditions, and may be worth more or less than their original cost when they are redeemed or sold in the market. PERFORMANCE AS OF SEPTEMBER 30, 2004
--------------------------------------------------------------------------------------------------------------------- CUMULATIVE TOTAL RETURN --------------------------------------------------------------------------------- NET ASSET MARKET VALUE VALUE DOW JONES STOXX 50 INDEX ------------------------------------------------------------------------------------------------------------------ ONE YEAR ENDED 9/30/04 22.13% 22.20% 22.40% ------------------------------------------------------------------------------------------------------------------ SINCE INCEPTION OF TRADING (1) 37.76% 34.89% 32.84% ------------------------------------------------------------------------------------------------------------------
(1) For the period October 21, 2002 (commencement of trading) to September 30, 2004.
--------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN --------------------------------------------------------------------------------- NET ASSET MARKET VALUE VALUE DOW JONES STOXX 50 INDEX ------------------------------------------------------------------------------------------------------------------ ONE YEAR ENDED 9/30/04 22.13% 22.20% 22.40% ------------------------------------------------------------------------------------------------------------------ SINCE INCEPTION OF TRADING (1) 17.93% 16.66% 15.71% ------------------------------------------------------------------------------------------------------------------
(1) For the period October 21, 2002 (commencement of trading) to September 30, 2004. TOP FIVE HOLDINGS AS OF SEPTEMBER 30, 2004 ----------------------------------------------------------------------------------------------------- DESCRIPTION HSBC HOLDINGS VODAFONE GLAXOSMITHKLINE TOTAL FINA BP PLC PLC GROUP PLC PLC ELF SA ----------------------------------------------------------------------------------------------------- MARKET VALUE 1,471,807 1,338,572 1,068,642 1,054,289 $1,739,959 ----------------------------------------------------------------------------------------------------- % OF 6.99% 5.91 5.38 4.29 4.23 NET ASSETS -----------------------------------------------------------------------------------------------------
INDUSTRY BREAKDOWN AS OF SEPTEMBER 30, 2004* [PIE CHART]
CYCLICAL GOODS FOOD & FINANCIAL & AUTOMOBILES BANKS CHEMICALS SERVICES ENERGY SERVICES BEVERAGES HEALTHCARE INDUSTRIALS INSURANCE ----------- ----- --------- -------- ------ --------- --------- ---------- ----------- --------- 1.2 26.80 1.10 1.00 19.20 1.00 5.50 12.90 2.10 6.30 NON- CYCLICAL GOODS & MINING SERVICES OTHER RETAIL SOFTWARE TECHNOLOGY TELECOMMUNICATIONS UTILITIES ------ -------- ----- ------ -------- ---------- ------------------ --------- 1.20 2.10 0.30 1.00 1.10 2.20 12.60 2.40
* The Fund's industry breakdown is expressed as a percentage of net assets and may change over time. 3 STREETTRACKS INDEX SHARES FUNDS ANNUAL REPORT MANAGEMENT'S DISCUSSION AND ANALYSIS STREETTRACKS DOW JONES EUROSTOXX 50 INDEX FUND The Dow Jones EUROSTOXX 50 Index Fund (the "Fund") seeks to replicate the total return of the Dow Jones EUROSTOXX 50 Index (the "Index"). To accomplish this, the Fund utilizes a "passive" or indexing approach and attempts to approximate the investment performance of its benchmark index, before expenses, by investing in a portfolio of stocks to replicate the Index. The Fund performance for the year ending September 30, 2004 was 24.21% versus the Index return of 24.13%. The vast majority of the return was posted in the first quarter of the fiscal year. Stock markets in many parts of the world posted strong gains during that time period. Markets reacted positively to encouraging economic news and appeared to build expected earnings into stock prices during the period. Since December, the markets have been relatively flat. Investors appeared to cautiously wait for expected earnings to materialize. Other factors influencing the markets were instability in the Middle East and increasing oil prices. The price of a barrel of oil was just under $50 on September 30, 2004, a 70% increase over the price a year earlier. RWE AG, a German Utility company gained nearly 74% during the year. Utilities were a strong performer in general, and the company was rewarded for its efforts to cut debt, and narrow its focus on water, gas, and electricity distribution. Koninklijke Ahold NV, the Dutch Food Retailer fell over 25%. The company continued to suffer the after affects of an accounting issue that caused a significant restatement of earnings. Wal-Mart's efforts to enter U.S. Food retail sales, further weighed on the stock price of Koninklijke Ahold NV, which is the parent of U.S. Food retailers, Stop & Shop and Giant. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT DOW JONES EURO STOXX 50 FUND [LINE GRAPH]
STREETTRACKS DOW JONES EURO DOW JONES EURO STOXX 50 STOXX 50 FUND INDEX - US DOLLAR DENOMINATED --------------------------- ----------------------------- 10/15/02 10000.00 10000.00 12/31/02 10343.00 10282.50 3/31/03 9148.40 9155.50 6/30/03 11656.90 11640.80 9/30/03 11745.90 11731.50 12/31/03 14658.00 14657.00 3/31/04 14443.10 14452.00 6/30/04 14684.80 14664.00 9/30/04 14590.10 14561.80
4 STREETTRACKS INDEX SHARES FUNDS ANNUAL REPORT MANAGEMENT'S DISCUSSION AND ANALYSIS The following Performance chart is provided to compare the Fund's total return at NAV to the total return based on market price and its benchmark Index. The following chart is for comparative purposes only and represents the period noted. The Fund's past performance is no guarantee of future results. The investment return and principal value of Fund shares will vary with changes in market conditions, and may be worth more or less than their original cost when they are redeemed or sold in the market. PERFORMANCE AS OF SEPTEMBER 30, 2004
----------------------------------------------------------------------------------------------------------------------------- CUMULATIVE TOTAL RETURN --------------------------------------------------------------------------------- NET ASSET MARKET VALUE VALUE DOW JONES EURO STOXX 50 INDEX ------------------------------------------------------------------------------------------------------------------ ONE YEAR ENDED 9/30/04 24.21% 24.11% 24.13% ------------------------------------------------------------------------------------------------------------------ SINCE INCEPTION OF TRADING (1) 43.22% 39.97% 38.04% ------------------------------------------------------------------------------------------------------------------
(1) For the period October 21, 2002 (commencement of trading) to September 30, 2004.
----------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN --------------------------------------------------------------------------------- NET ASSET MARKET VALUE VALUE DOW JONES EURO STOXX 50 INDEX ----------------------------------------------------------------------------------------------------------------------------- ONE YEAR ENDED 9/30/04 24.21% 24.11% 24.13% ----------------------------------------------------------------------------------------------------------------------------- SINCE INCEPTION OF TRADING (1) 20.31% 18.90% 18.05% ------------------------------------------------------------------------------------------------------------------
(1) For the period October 21, 2002 (commencement of trading) to September 30, 2004. TOP FIVE HOLDINGS AS OF SEPTEMBER 30, 2004 ------------------------------------------------------------------------------------------------------------------ DESCRIPTION TOTAL FINA ROYAL DUTCH SANOFI- ELF SA PETROLEUM CO. SYNTHELABO SA TELEFONICA SA NOKIA OYJ ------------------------------------------------------------------------------------------------------------------ MARKET VALUE $6,727,611 5,759,835 3,869,552 3,524,352 3,444,922 ------------------------------------------------------------------------------------------------------------------ % OF 7.21% 6.17 4.15 3.78 3.69 NET ASSETS ------------------------------------------------------------------------------------------------------------------
INDUSTRY BREAKDOWN AS OF SEPTEMBER 30, 2004* [PIE CHART] Financial Services 1.7 Technology 4.4 Banks 18.3 Software 1.9 Chemicals 3.9 Construction 1.9 Cyclical Goods & Services 2.7 Energy 17.9 Food & Beverages 3.0 Healthcare 4.2 Insurance 10.2 Media 1.6 Non-cyclical Goods & Services 1.7 Retail 1.6 Telecommunications 11.0 Utilities 8.3 Automobiles 2.0 Other 0.2 Industrials 3.5
* The Fund's industry breakdown is expressed as a percentage of net assets and may change over time. 5 STREETTRACKS INDEX SHARES STOXX 50 FUND PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 2004 --------------------------------------------------------------------------------
SECURITY DESCRIPTION SHARES VALUE -------------------- ------ ----- COMMON STOCKS -- 99.50% BELGIUM -- 0.98% FINANCIAL SERVICES -- 0.98% Fortis*............................... 10,305 $ 244,969 ----------- FINLAND -- 2.17% TECHNOLOGY -- 2.17% Nokia Oyj............................. 39,197 539,404 ----------- FRANCE -- 10.73% BANKS -- 3.15% BNP Paribas SA........................ 7,043 454,865 Societe Generale...................... 3,730 330,077 ----------- 784,942 ----------- ENERGY -- 4.23% Total Fina Elf SA..................... 5,176 1,054,289 ----------- INSURANCE -- 1.03% AXA*.................................. 12,655 256,038 ----------- NON-CYCLICAL GOODS & SERVICES -- 0.69% L'Oreal SA*........................... 2,613 171,192 ----------- RETAIL -- 0.96% Carrefour SA*......................... 5,055 237,760 ----------- UTILITIES -- 0.67% Suez SA............................... 7,809 167,401 ----------- TOTAL FRANCE COMMON STOCKS............ 2,671,622 ----------- GERMANY -- 11.18% AUTOMOBILES -- 1.16% DaimlerChrysler AG*................... 7,036 290,125 ----------- BANKS -- 1.32% Deutsche Bank AG...................... 4,564 328,036 ----------- CHEMICALS -- 1.10% BASF AG............................... 4,666 274,981 ----------- INDUSTRIALS -- 2.08% Siemens AG............................ 7,039 517,640 ----------- INSURANCE -- 1.19% Allianz AG............................ 2,934 295,494 ----------- SOFTWARE -- 1.11% SAP AG................................ 1,775 275,789 ----------- TELECOMMUNICATIONS -- 1.50% Deutsche Telekom AG*.................. 20,084 372,668 ----------- UTILITIES -- 1.72% E.ON AG*.............................. 5,811 428,705 ----------- TOTAL GERMANY COMMON STOCKS........... 2,783,438 ----------- ITALY -- 3.86% ENERGY -- 1.94% Eni SpA*.............................. 21,499 481,700 ----------- INSURANCE -- 1.02% Assicurazioni Generali SpA*........... 9,235 253,828 ----------- TELECOMMUNICATIONS -- 0.90% Telecom Italia SpA.................... 72,766 224,583 ----------- TOTAL ITALY COMMON STOCKS............. 960,111 -----------
SECURITY DESCRIPTION SHARES VALUE -------------------- ------ ----- NETHERLANDS -- 8.68% BANKS -- 1.27% ABN AMRO Holding NV................... 13,905 $ 315,869 ----------- CYCLICAL GOODS & SERVICES -- 0.99% Philips Electronics NV................ 10,730 245,744 ----------- ENERGY -- 3.62% Royal Dutch Petroleum Co.............. 17,523 902,535 ----------- FOOD & BEVERAGES -- 1.11% Unilever NV........................... 4,794 275,796 ----------- INSURANCE -- 1.69% Aegon NV.............................. 275 2,965 ING Groep NV.......................... 16,617 419,370 ----------- 422,335 ----------- TOTAL NETHERLANDS COMMON STOCKS....... 2,162,279 ----------- SPAIN -- 5.36% BANKS -- 3.14% Banco Bilbao Vizcaya Argentaria SA.... 28,471 391,799 Banco Santander Central Hispano SA*... 40,038 390,856 ----------- 782,655 ----------- TELECOMMUNICATIONS -- 2.22% Telefonica SA......................... 36,876 551,890 ----------- TOTAL SPAIN COMMON STOCKS............. 1,334,545 ----------- SWEDEN -- 1.62% TELECOMMUNICATIONS -- 1.62% Ericsson Lm Tel....................... 130,000 403,560 ----------- SWITZERLAND -- 13.96% BANKS -- 3.79% Credit Suisse Group*.................. 10,043 320,504 UBS AG................................ 8,831 621,642 ----------- 942,146 ----------- FOOD & BEVERAGES -- 3.12% Nestle SA............................. 3,393 777,127 ----------- HEALTHCARE -- 6.41% Novartis AG........................... 21,134 985,023 Roche Holding AG*..................... 5,906 610,134 ----------- 1,595,157 ----------- INSURANCE -- 0.64% Swiss Reinsurance*.................... 2,786 160,306 ----------- TOTAL SWITZERLAND COMMON STOCKS....... 3,474,736 ----------- UNITED KINGDOM -- 40.96% BANKS -- 14.15% Barclays PLC.......................... 54,071 518,574 HBOS PLC.............................. 32,688 441,263 HSBC Holdings PLC..................... 92,743 1,471,807 Lloyds TSB Group PLC.................. 46,973 366,775 Royal Bank of Scotland Group PLC...... 25,095 724,753 ----------- 3,523,172 -----------
See accompanying notes to financial statements. 6 STREETTRACKS INDEX SHARES STOXX 50 FUND PORTFOLIO OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2004 --------------------------------------------------------------------------------
SECURITY DESCRIPTION SHARES VALUE -------------------- ------ ----- ENERGY -- 9.38% BP PLC................................ 182,283 $ 1,739,959 Shell Transport & Trading Co. PLC..... 80,937 593,893 ----------- 2,333,852 ----------- FOOD & BEVERAGES -- 1.29% Diageo PLC............................ 25,653 320,300 ----------- HEALTHCARE -- 6.47% AstraZeneca PLC....................... 13,247 542,945 GlaxoSmithKline PLC................... 49,585 1,068,642 ----------- 1,611,587 ----------- INSURANCE -- 0.77% Aviva PLC............................. 19,385 192,053 ----------- MINING -- 1.23% Anglo American PLC.................... 12,728 305,173 ----------- NON-CYCLICAL GOODS & SERVICES -- 1.36% Tesco PLC............................. 65,740 339,333 ----------- TELECOMMUNICATIONS -- 6.31% BT Group PLC.......................... 71,706 233,236 Vodafone Group PLC.................... 559,340 1,338,572 ----------- 1,571,808 ----------- TOTAL UNITED KINGDOM COMMON STOCKS.... 10,197,278 ----------- TOTAL COMMON STOCKS -- (Cost $22,936,463)........................ 24,771,942 -----------
SHARES VALUE ------ ----- SHORT TERM INVESTMENTS -- 0.02% UNITED STATES -- 0.02% MONEY MARKET FUND -- 0.02% AIM Short Term Investment Class Prime Fund -- (Cost $4,380)................ 4,380 $ 4,380 ----------- TOTAL INVESTMENTS -- 99.52% (Cost $22,940,843)......................... 24,776,322 OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.48%............... 120,059 ----------- NET ASSETS -- 100.00%.................. $24,896,381 =========== * Non-income producing security
See accompanying notes to financial statements. 7 STREETTRACKS INDEX SHARES EURO STOXX 50 FUND PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 2004 --------------------------------------------------------------------------------
SECURITY DESCRIPTION SHARES VALUE -------------------- ------- ----- COMMON STOCKS -- 99.88% BELGIUM -- 1.67% FINANCIAL SERVICES -- 1.67% Fortis (1)*........................... 65,449 $ 1,555,846 ----------- FINLAND -- 3.69% TECHNOLOGY -- 3.69% Nokia Oyj............................. 250,333 3,444,922 ----------- FRANCE -- 32.89% BANKS -- 6.44% BNP Paribas SA........................ 44,731 2,888,907 Credit Agricole S.A.*................. 37,053 1,010,595 Societe Generale...................... 23,858 2,111,254 ----------- 6,010,756 ----------- CHEMICALS -- 0.98% L'Air Liquide SA*..................... 5,858 918,913 ----------- CONSTRUCTION -- 1.88% Compagnie de Saint-Gobain............. 18,531 951,231 Lafarge SA*........................... 9,164 801,840 ----------- 1,753,071 ----------- CYCLICAL GOODS & SERVICES -- 0.99% LVMH Moet Hennessy Louis Vuitton SA (1)................................. 13,800 921,253 ----------- ENERGY -- 7.21% Total Fina Elf SA..................... 33,029 6,727,611 ----------- FOOD & BEVERAGES -- 1.14% Groupe Danone*........................ 13,491 1,060,644 ----------- HEALTHCARE -- 4.15% Sanofi-Synthelabo SA (1).............. 53,349 3,869,552 ----------- INSURANCE -- 1.76% AXA*.................................. 81,020 1,639,211 ----------- MEDIA -- 1.58% Vivendi Universal SA*................. 57,556 1,474,726 ----------- NON-CYCLICAL GOODS & SERVICES -- 1.17% L'Oreal SA*........................... 16,746 1,097,123 ----------- RETAIL -- 1.63% Carrefour SA*......................... 32,365 1,522,273 ----------- TECHNOLOGY -- 0.77% Alcatel SA*........................... 61,416 717,782 ----------- TELECOMMUNICATIONS -- 2.04% France Telecom SA..................... 76,472 1,905,263 ----------- UTILITIES -- 1.15% Suez SA............................... 50,048 1,072,875 ----------- TOTAL FRANCE COMMON STOCKS............ 30,691,053 ----------- GERMANY -- 22.25% AUTOMOBILES -- 1.98% DaimlerChrysler AG*................... 44,793 1,847,012 ----------- BANKS -- 2.25% Deutsche Bank AG...................... 29,191 2,098,090 ----------- CHEMICALS -- 2.95% BASF AG............................... 29,492 1,738,049 Bayer AG.............................. 36,966 1,010,977 ----------- 2,749,026 -----------
SECURITY DESCRIPTION SHARES VALUE -------------------- ------- ----- INDUSTRIALS -- 3.54% Siemens AG............................ 44,955 $ 3,305,938 ----------- INSURANCE -- 3.03% Allianz AG............................ 18,605 1,873,780 Muenchener Rueckversicherungs- Gesellschaft AG*.................... 9,939 957,419 ----------- 2,831,199 ----------- SOFTWARE -- 1.86% SAP AG................................ 11,169 1,735,374 ----------- TELECOMMUNICATIONS -- 2.55% Deutsche Telekom AG*.................. 128,425 2,382,987 ----------- UTILITIES -- 4.09% E.ON AG*.............................. 37,142 2,740,144 RWE AG*............................... 22,474 1,074,081 ----------- 3,814,225 ----------- TOTAL GERMANY COMMON STOCKS........... 20,763,851 ----------- ITALY -- 10.90% BANKS -- 2.07% Sanpaolo IMI SpA*..................... 55,943 631,584 UniCredito Italiano SpA*.............. 258,898 1,305,499 ----------- 1,937,083 ----------- ENERGY -- 3.30% Eni SpA (1)*.......................... 137,316 3,076,658 ----------- INSURANCE -- 1.74% Assicurazioni Generali SpA*........... 59,139 1,625,463 ----------- TELECOMMUNICATIONS -- 2.67% Telecom Italia Mobile SpA (TIM)*...... 198,592 1,070,466 Telecom Italia SpA.................... 459,218 1,417,317 ----------- 2,487,783 ----------- UTILITIES -- 1.12% Enel SpA (1)*......................... 127,694 1,043,561 ----------- TOTAL ITALY COMMON STOCKS............. 10,170,548 ----------- NETHERLANDS -- 16.16% BANKS -- 2.16% ABN AMRO Holding NV (1)............... 88,960 2,020,831 ----------- CYCLICAL GOODS & SERVICES -- 1.69% Philips Electronics NV................ 68,700 1,573,401 ----------- ENERGY -- 6.17% Royal Dutch Petroleum Co.............. 111,829 5,759,835 ----------- FOOD & BEVERAGES -- 1.89% Unilever NV (1)....................... 30,678 1,764,888 ----------- INSURANCE -- 3.68% Aegon NV (1).......................... 72,898 785,881 ING Groep NV.......................... 104,970 2,649,174 ----------- 3,435,055 ----------- NON-CYCLICAL GOODS & SERVICES -- 0.57% Koninklijke Ahold NV*................. 83,287 531,694 ----------- TOTAL NETHERLANDS COMMON STOCKS....... 15,085,704 -----------
See accompanying notes to financial statements. 8 STREETTRACKS INDEX SHARES EURO STOXX 50 FUND PORTFOLIO OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2004 --------------------------------------------------------------------------------
SECURITY DESCRIPTION SHARES VALUE -------------------- ------- ----- SPAIN -- 12.32% BANKS -- 5.36% Banco Bilbao Vizcaya Argentaria SA (1)................................. 181,999 $ 2,504,553 Banco Santander Central Hispano SA (1)*................................ 255,936 2,498,478 ----------- 5,003,031 ----------- ENERGY -- 1.20% Repsol YPF SA*........................ 51,046 1,120,897 ----------- TELECOMMUNICATIONS -- 3.78% Telefonica SA......................... 235,489 3,524,352 ----------- UTILITIES -- 1.98% Endesa SA (1)......................... 51,138 973,660 Iberdrola SA*......................... 42,191 875,101 ----------- 1,848,761 ----------- TOTAL SPAIN COMMON STOCKS............. 11,497,041 ----------- TOTAL COMMON STOCKS -- (Cost $78,257,541).................. 93,208,965 -----------
SHARES VALUE ------ ----- SHORT TERM INVESTMENTS -- 12.19% UNITED STATES -- 12.19% MONEY MARKET FUNDS -- 12.19% AIM Short Term Investment Class Prime Fund (Cost -- $40,506).... 40,506 $ 40,506 UBS Private Money Market Fund, LLC (Cost -- $11,336,507)(2)........ 11,336,507 11,336,507 ------------ TOTAL SHORT TERM INVESTMENTS -- (Cost $11,377,013).............. 11,377,013 ------------ TOTAL INVESTMENTS -- 112.07% (Cost -- $89,634,554)........... 104,585,978 OTHER ASSETS IN EXCESS OF LIABILITIES -- (12.07%)....... (11,260,890) ------------ NET ASSETS -- 100.00%............. $ 93,325,088 ============ * Non-income producing security (1) Security, or portion thereof, was on loan at September 30, 2004 (2) Investments of cash collateral for securities loaned
See accompanying notes to financial statements. 9 STREETTRACKS INDEX SHARES FUNDS STATEMENTS OF ASSETS AND LIABILITIES SEPTEMBER 30, 2004 --------------------------------------------------------------------------------
STREETTRACKS STREETTRACKS DOW JONES DOW JONES STOXX 50 EURO STOXX 50 FUND FUND ------------ ------------- ASSETS Investments in securities at value (cost -- $22,940,843 and $78,298,047 respectively)*.......................... $24,776,322 $ 93,249,471 Investments of cash collateral received for securities loaned, at value (cost -- $0 and $11,336,507, respectively)........................................... -- 11,336,507 Cash...................................................... -- -- Foreign currency, at value (cost -- $35,079 and $517,992, respectively)........................................... 35,396 524,375 Receivable for investments sold........................... 153,044 2,484,721 Receivable for foreign currency contracts................. 151,892 477,341 Dividends receivable...................................... 86,907 29,177 ----------- ------------ TOTAL ASSETS....................................... 25,203,061 108,101,592 ----------- ------------ LIABILITIES Payable for cash collateral for securities loaned......... -- 11,336,507 Payable for investments purchased......................... -- 2,445,345 Distributions payable..................................... 145,763 481,223 Payable for foreign currency contracts.................... 152,267 481,223 Accrued trustees fees..................................... 2,781 10,269 Accrued advisory fee...................................... 5,869 21,937 ----------- ------------ TOTAL LIABILITIES.................................. 306,680 14,776,504 ----------- ------------ NET ASSETS......................................... $24,896,381 $ 93,325,088 =========== ============ NET ASSETS REPRESENTED BY: Paid in capital........................................... $23,230,373 $ 78,898,435 Undistributed net investment income....................... (58,614) (477,341) Accumulated net realized gain (loss) on investments and foreign currency transactions........................... (113,348) (51,495) Net unrealized appreciation on investments and foreign currency................................................ 1,837,970 14,955,489 ----------- ------------ NET ASSETS......................................... $24,896,381 $ 93,325,088 =========== ============ NET ASSETS VALUE PER SHARE Net asset value per share................................. $ 33.20 $ 33.94 =========== ============ Shares outstanding (unlimited amount authorized, $0.01 par value).................................................. 750,000 2,750,000 =========== ============
* Includes $0 and $10,752,418, respectively, of investments in securities on loan, at value. See accompanying notes to financial statements. 10 STREETTRACKS INDEX SHARES FUNDS STATEMENTS OF OPERATIONS FOR THE YEAR ENDED SEPTEMBER 30, 2004 --------------------------------------------------------------------------------
STREETTRACKS STREETTRACKS DOW JONES DOW JONES STOXX 50 EURO STOXX 50 FUND FUND ------------ ------------- INVESTMENT INCOME: Dividends (net of foreign withholding taxes, $84,513 and $274,373, respectively)................................. $ 641,990 $ 1,856,078 Securities lending -- Net................................. 4,519 79,440 ---------- ----------- TOTAL INVESTMENT INCOME................................... 646,509 1,935,518 ---------- ----------- EXPENSES: Advisory fee.............................................. 56,739 250,165 Trustees fees and expenses................................ 6,427 32,318 Other expenses............................................ 654 841 ---------- ----------- TOTAL EXPENSES............................................ 63,820 283,324 ---------- ----------- NET INVESTMENT INCOME..................................... 582,689 1,652,194 ---------- ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments and foreign currency transactions................................... (121,105) 12,867,239 Net change in unrealized appreciation on investments and foreign currency........................................ 1,164,330 6,731,659 ---------- ----------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FOREIGN CURRENCY..................................... 1,043,225 19,598,898 ---------- ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $1,625,914 $21,251,092 ========== ===========
See accompanying notes to financial statements. 11 streetTRACKS INDEX SHARES FUNDS STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------------------------------------------
FOR THE YEAR ENDED FOR THE PERIOD ENDED SEPTEMBER 30, 2004 SEPTEMBER 30, 2003* ---------------------------- ---------------------------- STREETTRACKS STREETTRACKS STREETTRACKS STREETTRACKS DOW JONES DOW JONES DOW JONES DOW JONES STOXX 50 EURO STOXX 50 STOXX 50 EURO STOXX 50 FUND FUND FUND FUND ------------ ------------- ------------ ------------- FROM OPERATIONS: Net investment income....................... $ 582,689 $ 1,652,194 $ 621,227 $ 3,848,672 Net realized gain (loss) on investments and foreign currency transactions............. (121,105) 12,867,239 1,987,826 14,957,077 Net change in unrealized appreciation on investments and foreign currency.......... 1,164,330 6,731,659 673,640 8,223,830 ----------- ------------ ------------ ------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................ 1,625,914 21,251,092 3,282,693 27,029,579 ----------- ------------ ------------ ------------- UNDISTRIBUTED NET INVESTMENT INCOME INCLUDED IN PRICE OF SHARES ISSUED AND REDEEMED, NET......................................... 4,367 16,527 (146,907) (905,561) ----------- ------------ ------------ ------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income....................... (601,360) (1,760,293) (473,377) (2,937,683) ----------- ------------ ------------ ------------- FROM BENEFICIAL INTEREST TRANSACTIONS: Net proceeds from the sale of shares........ 15,509,127 27,470,917 30,444,056 200,632,489 Cost of shares redeemed..................... (62,983) (39,019,051) (24,735,149) (138,502,928) ----------- ------------ ------------ ------------- NET INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS............ 15,446,144 (11,548,134) 5,708,907 62,129,561 ----------- ------------ ------------ ------------- Net increase in net assets during period.... 16,475,065 7,959,192 8,371,316 85,315,896 Net assets at beginning of period........... 8,421,316 85,365,896 50,000 50,000 ----------- ------------ ------------ ------------- NET ASSETS END OF PERIOD (1).................. $24,896,381 $ 93,325,088 $ 8,421,316 $ 85,365,896 =========== ============ ============ ============= SHARES OF BENEFICIAL INTEREST: Shares sold................................. 450,000 800,000 1,200,000 8,150,000 Shares redeemed............................. (1,971) (1,102,046) (900,000) (5,100,000) ----------- ------------ ------------ ------------- NET INCREASE (DECREASE)....................... 448,029 (302,046) 300,000 3,050,000 =========== ============ ============ ============= Including undistributed net investment income:..................................... $ 129,109 $ 863,352 $ 147,780 $ 971,451 =========== ============ ============ =============
* For the period October 15, 2002 (commencement of operations) through September 30, 2003. See accompanying notes to financial statements. 12 STREETTRACKS INDEX SHARES FUNDS FINANCIAL HIGHLIGHTS SELECTED DATA FOR A STREETTRACKS SHARE OUTSTANDING THROUGHOUT EACH PERIOD --------------------------------------------------------------------------------
FOR THE YEAR ENDED FOR THE PERIOD ENDED SEPTEMBER 30, 2004 SEPTEMBER 30, 2003* ---------------------------- ---------------------------- STREETTRACKS STREETTRACKS STREETTRACKS STREETTRACKS DOW JONES DOW JONES DOW JONES DOW JONES STOXX 50 EURO STOXX 50 STOXX 50 EURO STOXX 50 FUND+ FUND+ FUND FUND ------------ ------------- ------------ ------------- Net asset value, beginning of period....... $ 27.89 $ 27.97 $ 25.34(4) $ 24.35(4) ------- ------- ------- ------- Income from investment operations: Net investment income...................... 0.99 0.64 1.20 0.97 Net realized and unrealized gain........... 5.16 6.14 2.50 3.59 ------- ------- ------- ------- Total from investment operations........... 6.15 6.78 3.70 4.56 ------- ------- ------- ------- Undistributed net investment income included in price of units issued and redeemed, net............................ 0.01 0.01 (0.49) (0.30) ------- ------- ------- ------- Distributions to shareholders from: Net investment income...................... (0.85) (0.82) (0.66) (0.64) ------- ------- ------- ------- Net asset value, end of period............. $ 33.20 $ 33.94 $ 27.89 $ 27.97 ======= ======= ======= ======= Total return (1)........................... 22.13% 24.21% 12.79% 17.46% Net assets, end of period (in 000's)....... $24,896 $93,325 $ 8,421 $85,366 Ratio of expenses to average net assets.... 0.33% 0.33% 0.35%(2) 0.35%(2) Ratio of net investment income to average net assets............................... 2.98% 1.92% 2.96%(2) 2.78%(2) Portfolio turnover rate (3)................ 7% 11% 6% 6%
--------------- * For the period October 15, 2002 (commencement of operations) through September 30, 2003. (1) Total return is calculated assuming a purchase of shares at net asset value on the first day and a sale at net asset value on the last day of each period reported. Distributions are assumed, for the purpose of this calculation, to be reinvested at net asset value per share on the respective payment dates of each Fund. Total return for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. (2) Annualized (3) Portfolio Turnover rate excludes securities received or delivered from processing of creations or redemptions. (4) The beginning net asset values above have been adjusted to reflect reverse stock splits which were effective October 15, 2002, in order to adjust the net asset value per share of each Fund to be approximately 1/100th of the value of its respective index. The ratio of the reverse stock split for the streetTRACKS Dow Jones STOXX 50 Fund and the streetTRACKS Dow Jones EURO STOXX 50 Fund was 1:2.536 and 1:2.444 respectively. + Effective July 1, 2004, SSgA Funds Management, Inc. succeeded UBS Global Asset Management (US) Inc. as the Fund's Adviser. See accompanying notes to financial statements. 13 STREETTRACKS INDEX SHARES FUNDS NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2004 -------------------------------------------------------------------------------- 1. ORGANIZATION The streetTRACKS Index Shares Funds (the "Trust") (prior to July 1, 2004, the Trust was known as Fresco Index Shares Funds), is registered under the Investment Company Act of 1940, as amended, and is an open-end investment management company that was organized as a Massachusetts business trust on February 14, 2002. The Trust currently consists of two separate exchange-traded "index funds", (each referred to as a "Fund" and, collectively, as "the Funds") streetTRACKS Dow Jones STOXX 50 Fund and streetTRACKS Dow Jones EURO STOXX 50, each of which represents a separate series of beneficial interest in the Trust. Each Fund operates as a non-diversified investment company. The investment objective of each fund is to replicate as closely as possible, before expenses, the price and yield of a specified market index. 2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies followed by the Trust in the preparation of its financial statements: The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. SECURITY VALUATION Portfolio securities are valued based on the last sale price on the exchange which is deemed to be the principal market for the security. Securities regularly traded in an over-the-counter market are valued at the latest quoted sale price in such market. Other portfolio securities and assets for which market quotations are not readily available are valued based on fair value as determined in good faith by the Trust's Pricing Committee in accordance with procedures adopted by the Board of Trustees. INVESTMENT INCOME Dividend income is recorded on the ex-dividend date. Interest income is recorded on the accrual basis. INVESTMENT TRANSACTIONS Investment transactions are recorded on the trade date. Realized gains and losses from the sale or disposition of securities and foreign exchange transactions are recorded on the identified cost basis. Corporate actions (including cash dividends) are recorded net of non-reclaimable foreign tax withholdings. FOREIGN CURRENCY TRANSLATION AND FOREIGN INVESTMENTS The accounting records of the Funds are maintained in U.S. dollars. Portfolio securities and other assets and liabilities denominated in a foreign currency are translated to U.S. dollars at the prevailing rates of exchange at period end. Purchases and sales of securities, income receipts and expense payments are translated into U.S. dollars at the prevailing exchange rate on the respective dates of transactions. The effects of changes in foreign currency exchange rates on portfolio investments are included in the net realized and unrealized gains and losses on investments. Net gains and losses on foreign currency transactions include disposition of foreign currencies, and currency gains and losses between the accrual and receipt dates of portfolio investment income and between the trade and settlement dates of portfolio investment transactions. Investing in securities of foreign companies and foreign governments involves special risks and considerations not typically associated with investing in U.S. companies and securities of the U.S. government. These risks include revaluation of currencies and the risk of appropriation. Moreover, the markets for securities of many foreign companies and foreign governments may be less liquid and the prices of such securities may be more volatile than those of comparable U.S. companies and the U.S. government. 14 STREETTRACKS INDEX SHARES FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2004 -------------------------------------------------------------------------------- EXPENSES Advisory fees, which are directly identifiable to a specific Fund, are applied to that Fund. Certain fees are allocated in such a manner as deemed equitable, taking into consideration the relative net assets of the Funds. FEDERAL INCOME TAX The Funds intend to qualify for and elect treatment as a "regulated investment company" under Subchapter M of the Internal Revenue Code of 1986, as amended. By so qualifying and electing, each Fund will not be subject to federal income taxes to the extent it distributes it's taxable income, including any net realized capital gains, for each fiscal year. In addition, by distributing during each calendar year substantially all their net investment income and capital gains, if any, the Funds will not be subject to federal excise tax. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These book-tax differences are primarily due to differing treatments for income equalization, in-kind transactions and losses deferred due to wash sales. At September 30, 2004, the Funds had no capital loss carryforwards. For the period ended September 30, 2004, the Funds reclassified non-taxable security gains and losses realized on the in-kind redemption of Creation Units (Note 4) as an increase or decrease to paid in capital in the Statements of Assets and Liabilities as follows:
NET GAIN RECLASS AMOUNT ---------------------------------------------------------------------------- streetTRACKS DJ STOXX 50 Fund $ -- streetTRACKS DJ EURO STOXX 50 Fund 12,335,748
The Funds use the accounting practice of equalization. This accounting method is used to keep the continuing shareholders' per share equity in undistributed net investment income from being affected by the continuous sales and redemptions of capital stock. Equalization is calculated on a per share basis whereby a portion of the proceeds from sales and costs of repurchases of capital stock is applied to undistributed net investment income. The amounts of equalization are disclosed in the Statements of Changes in Net Assets as undistributed net investment income included in the price of capital shares issued or redeemed. The Funds incurred the following losses during the period November 1, 2003 through September 30, 2004 that are deferred for tax purposes until fiscal 2005:
DEFERRED LOSSES ----------------------------------------------------------------------------- streetTRACKS DJ STOXX 50 Fund $89,840 streetTRACKS DJ EURO STOXX 50 Fund --
For the year ended September 30, 2004, there were no significant differences between the book basis and the tax basis character of distributions to shareholders. Additionally, there were no significant differences between the book basis and tax basis of components of net assets other than differences in the net unrealized appreciation (depreciation) in value of investments attributable to the tax deferral of losses on wash sales. The tax character of distributions paid during the year ended September 30, 2004, was as follows:
ORDINARY INCOME LONG-TERM CAPITAL GAIN ------------------------------------------------------------------------------------------------------ streetTRACKS DJ STOXX 50 Fund $ 600,656 $ 704 streetTRACKS DJ EURO STOXX 50 Fund 1,760,293 --
The tax character of distributions paid during the year ended September 30, 2003, was as follows:
ORDINARY INCOME LONG-TERM CAPITAL GAIN ------------------------------------------------------------------------------------------------------ Fresco Dow Jones STOXX 50 Fund $ 473,377 $ -- Fresco Dow Jones EURO STOXX 50 Fund 2,937,683 --
15 STREETTRACKS INDEX SHARES FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2004 -------------------------------------------------------------------------------- As of September 30, 2004 the components of distributable earnings (excluding unrealized appreciation (depreciation)) on a tax basis were as follows:
UNDISTRIBUTED UNDISTRIBUTED LONG-TERM ORDINARY INCOME CAPITAL GAIN ------------------------------------------------------------------------------------------------- streetTRACKS DJ STOXX 50 Fund $86,273 $-- streetTRACKS DJ EURO STOXX 50 Fund -- --
DISTRIBUTIONS The Trust declares and distributes dividends from net investment income, if any to its shareholders quarterly. The Trust will distribute net realized capital gains, if any, at least annually. Distributions are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from accounting principles generally accepted in the United States. 3. FEES AND COMPENSATION PAID TO AFFILIATES AND OTHER RELATED PARTY PARTIES TRANSACTIONS ADVISORY FEE Effective July 1, 2004, each Fund has entered into an Investment Advisory Agreement with SSgA Funds Management, Inc. ("the Adviser") As compensation for the services rendered, facilities furnished, and expenses borne by the Adviser, each Fund pays the Adviser a fee accrued daily and paid monthly, based on a percentage of each Funds' average daily net assets as shown in the following table:
ANNUAL RATE ------------------------------------------------------------------------- streetTRACKS DJ STOXX 50 Fund 0.29% streetTRACKS DJ EURO STOXX 50 Fund 0.29%
The Adviser pays the operating expenses of each Fund other than the advisory fee, brokerage, taxes, interest, fees and expenses of the Independent Trustees (including any Trustee's counsel fees), litigation expenses and other extraordinary expenses. Prior to July 1, 2004, each Fund operated under an Investment Advisory Agreement with UBS Global Asset Management (US) Inc. with the same fees and conditions as those presented above for SSgA Funds Management Inc. DISTRIBUTOR State Street Global Markets, LLC ("the Distributor") acts as the principal underwriter of each Fund pursuant to a principal underwriting contract with the Trust (the "Principal Underwriting Agreement") which requires the Distributor to use its best efforts, consistent with its other businesses, to sell streetTRACKS Index Shares of the Funds. streetTRACKS Index Shares of the Fund, are offered continuously. The Distributor may enter into dealer agreements with other broker-dealers (affiliated and non-affiliated) and with other financial institutions to authorize them to sell streetTRACKS Index Shares. Management has not implemented a 12b-1 fee on any of the Funds. TRUSTEES' FEES The Trust pays fees and expenses of the Independent Trustees, including Trustee's legal counsel fees. The Trust pays each Independent Trustee an annual fee of $15,000, and a meeting fee of $300 per board meeting attended. The Funds will reimburse the Trustees for any out of pocket expenses related to attending meetings of the Board of Trustees. The Board of Trustees has an Audit Committee consisting of all Trustees who are not "interested persons" (as defined in the 1940 Act) of the Trust. The Trustees who are members of the Audit Committee do not receive additional compensation from the Trust as a result of their position on the Audit Committee. 16 STREETTRACKS INDEX SHARES FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2004 -------------------------------------------------------------------------------- 4. SHAREHOLDER TRANSACTIONS Except for under the Trust's dividend reinvestment plan, streetTRACKS Index Shares are issued and redeemed by a Fund only in Creation Unit size aggregations of 50,000 streetTRACKS Index shares. Such transactions are only permitted on an in-kind basis, with a separate cash payment, which is a balancing cash component to equate the transaction to the net asset value per unit of the Fund on the transaction date. Transaction fees at scheduled amounts ranging from $3,000 to $12,000 per Creation Unit are charged to those persons creating or redeeming Creation Units. Transaction fees are received by the custodian and used to offset the expense of processing orders. 5. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION At September 30, 2004, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes.
GROSS GROSS NET UNREALIZED IDENTIFIED UNREALIZED UNREALIZED APPRECIATION COST APPRECIATION DEPRECIATION (DEPRECIATION) --------------------------------------------------------------------------------------------------------------------- streetTRACKS DJ STOXX 50 Fund $22,964,350 $ 2,361,225 $ 549,253 $ 1,811,972 streetTRACKS DJ EURO STOXX 50 Fund 89,686,050 16,433,952 1,534,024 14,899,928
6. INVESTMENT TRANSACTIONS For the year ended September 30, 2004, the Trust had in-kind contributions and in-kind redemptions as follows:
SUBSCRIPTIONS REDEMPTIONS ------------------------------------------------------------------------------------------ streetTRACKS DJ STOXX 50 Fund $15,504,627 $ 62,963 streetTRACKS DJ EURO STOXX 50 Fund 27,463,987 39,008,029
For the year ended September 30, 2004, the Trust had purchases and sales of investment securities as follows:
PURCHASES SALES --------------------------------------------------------------------------------------- streetTRACKS DJ STOXX 50 Fund $1,306,056 $ 1,535,129 streetTRACKS DJ EURO STOXX 50 Fund 9,602,830 10,379,230
For the year ended September 30, 2004, the Trust did not pay any commissions to State Street Brokerage Services for Investment Transactions. 7. INITIAL CAPITALIZATION AND OFFERING OF SHARES On the commencement of operations for each Fund, October 15, 2002, the Board of Trustees declared reverse stock splits, which were effective on the date of commencement of operations for each Fund. The reverse stock splits were executed in order to align the net asset value per share of each Fund to an established proportion of its benchmark index. The ratio of the reverse stock splits were as follows:
RATIO --------------------------------------------------------------------- streetTRACKS DJ STOXX 50 Fund 1:2.536 streetTRACKS DJ EURO STOXX 50 Fund 1:2.444
8. SECURITIES LENDING Each Fund may lend securities up to 33 1/3% of its total assets to qualified broker-dealers or institutional investors. The loans are secured at all times by cash, cash equivalents or U.S. government securities in an amount at least equal to the market value of the securities loaned, plus accrued interest and dividends, determined on a daily basis and adjusted accordingly. The Funds will regain record ownership of loaned securities to exercise certain beneficial rights; however, the Funds may bear the risk of delay in recovery of, or even loss of rights in, the securities loaned should the borrower fail financially. The Portfolios receive compensation for lending its securities from interest or dividends earned on the cash, cash equivalents or U.S. government securities held as collateral, net of fee rebates paid to the borrower plus reasonable administrative and custody fees. 17 STREETTRACKS INDEX SHARES FUNDS REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM -------------------------------------------------------------------------------- TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF STREETTRACKS INDEX SHARES FUNDS In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of streetTRACKS Index Shares Funds (the "Funds") at September 30, 2004, and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Board of Trustees, our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by the Board of Trustees, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at September 30, 2004 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Boston, Massachusetts November 19, 2004 18 STREETTRACKS INDEX SHARES FUNDS OTHER INFORMATION SEPTEMBER 30, 2004 (UNAUDITED) -------------------------------------------------------------------------------- FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS CLOSING BID/ASK MIDPOINT PRICE VS. NAV AS OF SEPTEMBER 30, 2004 The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the closing bid/ask midpoint price for each of the Funds was at a discount or premium to the daily net asset value (NAV). The following charts are for comparative purposes only and represent the periods noted. streetTRACKS DJ STOXX 50 FUND
----------------------------------------------------------------------------- Bid/Ask Midpoint Price Above NAV ----------------------------------------------------------------------------- 50 - 99 100 - 199 >200 BASIS POINTS BASIS POINTS BASIS POINTS ----------------------------------------------------------------------------- 2004 QUARTER ENDING: 9/30/04 19 7 0 ----------------------------------------------------------------------------- QUARTER ENDING: 6/30/04 19 3 0 ----------------------------------------------------------------------------- QUARTER ENDING: 3/31/04 13 3 0 ----------------------------------------------------------------------------- 2003 QUARTER ENDING: 12/30/03 14 1 0 ----------------------------------------------------------------------------- QUARTER ENDING: 9/30/03 8 2 0 ----------------------------------------------------------------------------- QUARTER ENDING: 6/30/03 13 2 0 ----------------------------------------------------------------------------- QUARTER ENDING: 3/31/03 10 10 1 ----------------------------------------------------------------------------- 2002 PERIOD ENDING: 12/31/02* 9 7 0 ----------------------------------------------------------------------------- ----------------------- ----------------------------------------------------- Bid/Ask Midpoint Price Below NAV ----------------------- ----------------------------------------------------- 50 - 99 100 - 199 >200 BASIS POINTS BASIS POINTS BASIS POINTS ----------------------- ----------------------------------------------------- 2004 QUARTER ENDING: 9/30/04 1 1 0 ----------------------------------------------------------------------------- QUARTER ENDING: 6/30/04 1 2 0 ----------------------------------------------------------------------------- QUARTER ENDING: 3/31/04 6 2 0 ----------------------------------------------------------------------------- 2003 QUARTER ENDING: 12/30/03 2 0 0 ----------------------------------------------------------------------------- QUARTER ENDING: 9/30/03 6 0 0 ----------------------------------------------------------------------------- QUARTER ENDING: 6/30/03 8 3 0 ----------------------------------------------------------------------------- QUARTER ENDING: 3/31/03 6 2 0 ----------------------------------------------------------------------------- 2002 PERIOD ENDING: 12/31/02* 7 3 0 -----------------------------------------------------------------------------
* Commencement of trading October 21, 2002 19 STREETTRACKS INDEX SHARES FUNDS OTHER INFORMATION (CONTINUED) SEPTEMBER 30, 2004 (UNAUDITED) -------------------------------------------------------------------------------- streetTRACKS DJ EURO STOXX 50 FUND
----------------------------------------------------------------------------- Bid/Ask Midpoint Price Above NAV ----------------------------------------------------------------------------- 50 - 99 100 - 199 >200 BASIS POINTS BASIS POINTS BASIS POINTS ----------------------------------------------------------------------------- 2004 QUARTER ENDING: 9/30/04 8 4 0 ----------------------------------------------------------------------------- QUARTER ENDING: 6/30/03 10 3 0 ----------------------------------------------------------------------------- QUARTER ENDING: 3/31/04 9 1 0 ----------------------------------------------------------------------------- 2003 QUARTER ENDING: 12/30/03 11 1 0 ----------------------------------------------------------------------------- QUARTER ENDING: 9/30/03 8 1 0 ----------------------------------------------------------------------------- QUARTER ENDING: 6/30/03 6 3 0 ----------------------------------------------------------------------------- QUARTER ENDING: 3/31/03 12 6 1 ----------------------------------------------------------------------------- 2002 PERIOD ENDING: 12/31/02* 5 7 1 ----------------------------------------------------------------------------- ----------------------- ----------------------------------------------------- Bid/Ask Midpoint Price Below NAV ----------------------- ----------------------------------------------------- 50 - 99 100 - 199 >200 BASIS POINTS BASIS POINTS BASIS POINTS ----------------------- ----------------------------------------------------- 2004 QUARTER ENDING: 9/30/04 7 1 1 ----------------------------------------------------------------------------- QUARTER ENDING: 6/30/03 5 2 1 ----------------------------------------------------------------------------- QUARTER ENDING: 3/31/04 3 8 0 ----------------------------------------------------------------------------- 2003 QUARTER ENDING: 12/30/03 4 0 0 ----------------------------------------------------------------------------- QUARTER ENDING: 9/30/03 6 3 0 ----------------------------------------------------------------------------- QUARTER ENDING: 6/30/03 11 4 0 ----------------------------------------------------------------------------- QUARTER ENDING: 3/31/03 11 4 0 ----------------------------------------------------------------------------- 2002 PERIOD ENDING: 12/31/02* 9 5 0 -----------------------------------------------------------------------------
* Commencement of trading October 21, 2002 20 STREETTRACKS INDEX SHARES TRUST OTHER INFORMATION (CONTINUED) SEPTEMBER 30, 2004 (UNAUDITED) -------------------------------------------------------------------------------- SHAREHOLDER EXPENSE EXAMPLE (UNAUDITED) As a shareholder of a Fund, you incur two types of costs: (1) transaction costs, which may include creation and redemption fees or brokerage charges and (2) ongoing costs, including management fees, trustee fees and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in a Fund and to compare these costs with the ongoing costs of investing in other mutual funds. It is based on an investment of $1,000 invested at April 1, 2004 and held for the six months ended September 30, 2004. ACTUAL EXPENSES The first table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you incurred over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first table under the heading entitled "Expenses Paid During Period" to estimate the expenses attributable to your investment during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second table below provides information about hypothetical account values and hypothetical expenses based on a Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not a Fund's actual return. Thus, you should not use the hypothetical account values and expenses to estimate the actual ending account balance or your expenses for the period. Rather, these figures are provided to enable you to compare the ongoing costs of investing in a Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Shareholders are charged transaction fees of $3,000 to $12,000 per Creation Unit to those persons creating or redeeming Creation Units. If you buy or sell streetTRACKS Index Fund Shares in the secondary market, you will incur customary brokerage commissions and charges. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as creation and redemption fees or brokerage charges. Therefore, the second table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES PAID VALUE VALUE DURING PERIOD* 4/01/04 9/30/04 4/01/04 TO 9/30/04 ----------------- -------------- ------------------- ACTUAL The streetTRACKS Dow Jones STOXX 50 Fund $1,000 $1,029.24 $1.83 The streetTRACKS Dow Jones Euro STOXX 50 Fund $1,000 $1,610.18 $1.81 HYPOTHETICAL (ASSUMING A 5% RETURN BEFORE EXPENSES) The streetTRACKS Dow Jones STOXX 50 Fund $1,000 $1,023.20 $1.82 The streetTRACKS Dow Jones Euro STOXX 50 Fund $1,000 $1,023.20 $1.82
* Expenses are equal to the Fund's annualized expense ratio of 0.36% and 0.36%, respectively, multiplied by the average account value of the period, multiplied by 183/356. PROXY VOTING POLICIES A. You may obtain a description of the Funds' proxy voting policies and procedures, without charge, upon request by contacting the Funds directly at 1-866-STRACKS (1-866-787-2257) (toll-free), on the website of the Securities and Exchange Commission, at www.sec.gov, or on the Funds' website at www.streetTRACKS.com. Information regarding how the Funds voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is also available without charge, upon request by calling 1-866-787-2257 (toll-free), on the website of the Securities and Exchange Commission, at www.sec.gov, and on the Funds' website at www.streetTRACKS.com. 21 STREETTRACKS INDEX SHARES TRUST OTHER INFORMATION (CONTINUED) SEPTEMBER 30, 2004 (UNAUDITED) -------------------------------------------------------------------------------- B. QUARTERLY PORTFOLIO SCHEDULE The Funds will file a complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q commencing with the quarter ending December 31, 2004. The Funds' Forms N-Q will be available on the Securities and Exchange Commission's website at www.sec.gov and may be reviewed and copied at the Securities and Exchange Commission's Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The information on Form N-Q will be available upon request, without charge, by calling 1-866-2257 (toll-free), and on the Funds' website at www.streetTRACKS.com. REPORT OF VOTE OF SHAREHOLDERS (UNAUDITED) A special meeting of shareholders of the Trust (prior to July 1, 2004, the Trust was known as Fresco Index Shares Funds) was held on June 16, 2004 to vote on a new investment advisory Agreement between SSgA Funds Management, Inc. ("SSgA FM") and the Trust on behalf of each of its series portfolios and to approve five new Trustees. The Trust's then current investment adviser and distributor, UBS Global AM, had made a business decision to exit the business in the United States. For this reason, shareholders were asked to approve a new investment advisory agreement with SSgA FM. The results of the shareholder votes were as follows: Proposal 1--To Approve a New Investment Advisory Agreement with SSgA FM, with respect to each Fund
SHARES FOR AS A PERCENT OF TOTAL FRESCO INDEX SHARES FUNDS VOTES FOR SHARES VOTED ABSTENTIONS* --------------------------------------------------------------------------------- Dow Jones STOXX 50 Fund 608,668 99.895 476 Dow Jones EURO STOXX 50 Fund 1,166,740 99.567 838
Proposal 2--To Approve Five New Trustees
SHARES FOR AS A PERCENT OF TOTAL FRESCO INDEX SHARES FUNDS VOTES FOR SHARES VOTED ABSTENTIONS* --------------------------------------------------------------------------------- Dow Jones STOXX 50 Fund Timothy B. Harbert 583,242 95.722 26,065 Agustin J. Fleites 583,242 95.722 26,065 David M. Kelly 608,719 99.903 588 Frank Nesvet 608,719 99.903 588 Helen F. Peters 608,719 99.903 588 Dow Jones EURO STOXX 50 Fund Timothy B. Harbert 1,140,644 97.342 31,148 Agustin J. Fleites 1,140,664 97.342 31,148 David M. Kelly 1,170,695 99.905 1,117 Frank Nesvet 1,170,695 99.905 1,117 Helen F. Peters 1,170,695 99.905 1,117
* Abstentions were counted as shares that were present and entitled to vote for purposes of determining a quorum and had a negative effect on the proposals. 22 STREETTRACKS INDEX SHARES TRUST OTHER INFORMATION SEPTEMBER 30, 2004 (UNAUDITED) -------------------------------------------------------------------------------- TRUSTEES AND OFFICERS
NUMBER OF TERM OF OFFICE PORTFOLIOS IN NAME, ADDRESS AND DATE OF POSITION(S) AND LENGTH OF PRINCIPAL OCCUPATION(S) FUND COMPLEX OTHER DIRECTORSHIPS BIRTH WITH FUNDS TIME SERVED DURING PAST 5 YEARS OVERSEEN BY TRUSTEE HELD BY TRUSTEE ------------------------- ----------- -------------- ----------------------- ------------------- ------------------- Agustin J. Fleites* Trustee, Unlimited, Principal, State Street 20 Chairman of the Board, SSgA Funds Chairman, Elected: Global Advisors (1987- Trustee President, Management, Inc. and July 2004 present); Member SSgA Principal Executive State Street Financial President Investment Committee Officer, streetTRACKS Center (1994-present). Series Trust One Lincoln Street Trustee, Select Sector Boston, MA SPDR Trust 02111-2900 Director, SSgA Cash 12/17/65 Management Fund, Dublin, Ireland, Director David M. Kelly Trustee Unlimited, President and CEO, NSCC 11 Trustee, streetTRACKS 4 Jodi Lane Elected: (1983-February 2000) (a Series Trust Chatham, NJ 07928 July 2004 clearing org.); Vice Chicago Stock Exchange 10/10/38 Chairman, DTCC (Public Governor/ (1999-February 2000)(a Director); Penson depository in US); Vice Worldwide Inc. Chairman and CEO, (Director); Thomas Government Securities Murray Ltd. Clearing Corp. (1990- (Director); Custodial February 2000) (a Trust Co. (Director). government securities clearing company). Frank Nesvet Trustee Unlimited, Chief Executive 11 Trustee, streetTRACKS c/o streetTRACKS Elected: Officer, Libra Group, Series Trust Series Trust July 2004 Inc. (1998- present)(a 225 Franklin Street financial services Boston, Massachusetts consulting company); 02110 Managing Director, 9/24/43 Senior Vice President and Fund Treasurer, New England Funds (1993-1998). Helen F. Peters Trustee Unlimited, Dean, Carroll School of 11 Trustee, streetTRACKS 133 South Street Elected: Management, Boston Series Trust Needham, Massachusetts July 2004 College (August 2000- 02492 present); Partner, 3/22/48 Samuelson Peters, LLC (1999-August 2000); Director of Global Bond Group, Scudder Kemper Investments (1998- 1999); Chief Investment Officer, Colonial Management (1991- 1998). James E. Ross Vice Unlimited, Principal, State Street N/A N/A SSgA Funds President Elected: Global Advisors (March Management, Inc. July 2004 2000 to present); Vice State Street Financial President, State Street Center Bank and Trust Company One Lincoln Street (1998-March 2000). Boston, MA 02111-2900 6/24/65
23 STREETTRACKS INDEX SHARES TRUST OTHER INFORMATION (CONTINUED) SEPTEMBER 30, 2004 (UNAUDITED) --------------------------------------------------------------------------------
NUMBER OF TERM OF OFFICE PORTFOLIOS IN NAME, ADDRESS AND DATE OF POSITION(S) AND LENGTH OF PRINCIPAL OCCUPATION(S) FUND COMPLEX OTHER DIRECTORSHIPS BIRTH WITH FUNDS TIME SERVED DURING PAST 5 YEARS OVERSEEN BY TRUSTEE HELD BY TRUSTEE ------------------------- ----------- -------------- ----------------------- ------------------- ------------------- Donald A. Gignac Treasurer Unlimited, Senior Vice President, N/A N/A State Street Bank and Elected: State Street Bank and Trust Company July 2004 Trust Company (2002- 2 Avenue de Lafayette present); Vice Boston, Massachusetts President, State Street 02111 Bank and Trust Company 6/14/65 (1993- 2002). Michael P. Riley Assistant Unlimited, Assistant Vice N/A N/A State Street Bank and Treasurer Elected: President, State Street Trust Company July 2004 Bank and Trust Company One Federal Street (2000- present); Boston, Massachusetts Assistant Secretary, 02110 Assistant Director, 3/22/66 State Street Bank and Trust Company (1999-2000); Manager, State Street Bank and Trust Company (1998-1999). Karen Gillogly Assistant Unlimited, Vice President, State N/A N/A State Street Bank and Treasurer Elected: Street Bank and Trust Trust Company July 2004 Company (1999- One Federal Street present); Audit Senior Boston, Massachusetts Manager, Ernst & Young 02110 LLP (1998). 9/3/66 Mary Moran Zeven Secretary Unlimited, Senior Vice President N/A N/A State Street Bank and Elected: and Senior Managing Trust Company July 2004 Counsel, State Street One Federal Street Bank and Trust Company Boston, Massachusetts (2002- present); Vice 02110 President and Counsel, 2/27/61 State Street Bank and Trust Company (2000-2002); Vice President and Counsel, PFPC, Inc. 1999 to 2000. Peter A. Ambrosini, Esq. Chief Unlimited, Chief Compliance and N/A N/A SSgA Funds Compliance Elected; Risk Management Management, Inc. Officer July 2004 Officer, SSgA Funds State Street Financial Management, Inc. and Center State Street Global One Lincoln Street Advisors Boston, MA 02111-2900 (2001-present); 12/17/43 Managing Director, PricewaterhouseCoopers (1986-2001).
* Mr. Fleites is an "interested person" of the Trust, as defined in the 1940 Act, by virtue of his position as an officer of the Adviser. 24 streetTRACKS (R) INDEX SHARES FUNDS TRUSTEES David M. Kelly Frank Nesvet Helen F. Peters Agustin J. Fleites OFFICERS Agustin J. Fleites, President James E. Ross, Vice President Donald A. Gignac, Treasurer Mary Moran Zeven, Secretary Karen Gillogly, Assistant Treasurer Michael Riley, Assistant Treasurer Peter Ambrosini, Chief Compliance Officer INVESTMENT MANAGER SSgA Funds Management, Inc. State Street Financial Center One Lincoln Center Boston, MA 02111 DISTRIBUTOR State Street Global Markets, LLC 225 Franklin Street Boston, MA 02110 CUSTODIAN, ADMINISTRATOR AND TRANSFER AGENT State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110 LEGAL COUNSEL Clifford Chance US LLP 31 West 52nd Street New York, New York 10019 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM PricewaterhouseCoopers LLP 125 High Street Boston, MA 02110 streetTRACKS are distributed by State Street Global Markets, LLC, a wholly-owned subsidiary of State Street Corporation. State Street Global Markets, LLC is a member of NASD, SIPC, and the Boston Stock Exchange. The information contained in this report is intended for the general information of shareholders of the Trust. This report is not authorized for distribution to prospective investors unless preceded or accompanied by a current Trust prospectus which contains important information concerning the Trust. You may obtain a current prospectus from the Distributor by calling 1-866-S-TRACKS or visiting WWW.STREETTRACKS.COM Please read the prospectus carefully before you invest. The investment return and principal value of an investment in the streetTRACKS funds will fluctuate in value, so that when shares are sold or redeemed they may be worth more or less than when they were purchased. International investments may involve risk of capital loss from unfavorable fluctuations in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations. In general, streetTRACKS shares can be expected to move up or down in value with the value of the applicable index. Although streetTRACKS shares may be bought and sold on the exchange through any brokerage account, streetTRACKS shares are not individually redeemable from the Fund. Investors may acquire streetTRACKS and tender them for redemption through the Fund in Creation Unit Aggregations only. Please see the prospectus for more details. streetTRACKS are not sponsored, endorsed, sold, or promoted by Dow Jones & Company, Time Inc., ("Dow Jones") Dow Jones does not make any representation regarding the advisability of investing in streetTRACKS. streetTRACKS are distributed by State Street Global Markets, LLC, a wholly-owned subsidiary of State Street Corporation. State Street Global Markets, LLC is a member of NASD, SIPC, and the Boston Stock Exchange. References to State Street may include State Street Corporation and its affiliates. Shares of the streetTRACKS funds are not insured by the FDIC or by another governmental agency; they are not obligations of the FDIC nor are they deposits or obligations of or guaranteed by State Street Bank and Trust Company. streetTRACKS shares are subject to investment risks, including possible loss of the principal invested. The streetTRACKS funds pay State Street for its services as investment advisor, custodian, transfer agent and shareholder servicing agent. For more information on streetTRACKS, or to obtain a prospectus, call: 1-866-S-TRACKS or visit WWW.STREETTRACKS.COM Please read the prospectus carefully before you invest or send money. (STATE STREET GLOBAL ADVISORS SSGA (R) LOGO) (STATE STREET LOGO) (COVER GRAPHIC) (C)2002 STATE STREET CORPORATION ET0912-02 ITEM 2. CODE OF ETHICS (a) The streetTracks Index Shares Funds (the "Trust" or "Registrant") has adopted a Code of Conduct for Principal Executive and Senior Financial Officers (the "Code of Conduct"). (c) On July 1, 2004, the Board of Trustees adopted a new Code of Conduct which is being filed as Exhibit 11(a)(1) to this Form N-CSR. There were no material amendments to this Code of Conduct during the period July 1, 2004 to September 30, 2004. There were no material amendments to the Code of Conduct in effect for the period April 1, 2004 to June 30, 2004. (d) There have been no waivers granted by the Trust to individuals covered by the Code of Conduct during the period of April 1, 2004 through September 30, 2004. (f) A copy of the Code of Conduct is being filed as Exhibit 11(a)(1) to this Form N-CSR. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT (a)(1) The Board of Trustees of the Trust has determined that the Trust has one Board member serving on the Trust's Audit Committee that possess the attributes identified in Instructions 2(b) of Item 3 to Form N-CSR to qualify as an "audit committee financial expert." (2) Frank Nesvet is the Trust's audit committee financial expert. The Board also determined that Mr. Nesvet is not an "interested person" of the Trust, as that term is defined in Section 2(a)(19) of the Investment Company Act. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES (a) Audit Fees For the fiscal years ending September 30, 2004 and September 30, 2003, the aggregate audit fees billed for professional services rendered by PricewaterhouseCoopers LLP ("PwC"), the Trust's registered public accounting firm, for the audit of the Trust's annual financial statements and services provided by PwC in connection with the Trust's statutory and regulatory filings were $31,400 and $26,000, respectively. (b) Audit-Related Fees For the fiscal years ending September 30, 2004 and September 30, 2003, the aggregate billed fees for assurance and related services by PwC reasonably related to the performance of the audit of the Trust's financial statements that are not reported under (a) of this Item were $0 and $0, respectively. The nature of such services were the: (1) auditing of the statements of assets and liabilities, related statements of operations and changes in net assets, and the financial highlights of the Trust's operational series; (2) auditing and reporting on the financial statements to be included in the amendment to the Trust's registration statement on Form N-1A to be filed with the Securities and Exchange Commission; (3) review of the amendment to the registration statement; and (4) issuance of a report on internal control for inclusion in the Trust's Form N-SAR. (c) Tax Fees For the fiscal years ending September 30, 2004 and September 30, 2003, the aggregate tax fees billed for professional services rendered by PwC for tax compliance, tax advice, and tax planning were $12,400 and $11,000, respectively. Services included the review of income and excise tax returns for the Trust. (d) All Other Fees For the fiscal years ending September 30, 2004 and September 30, 2003, the aggregate fees billed for professional services rendered by PwC for products and services provided by PwC, other than the services reported in (a) through (c) of this Item were $0 and $0, respectively. (e)(1) Audit Committee Pre-Approval Policies and Procedures The Trust's Audit Committee Charter states the following with respect to pre-approval procedures: (a) to pre-approve all non-audit services to be provided to the Trust by the independent auditor when, without such pre-approval, the auditor would not be independent of the Trust under applicable federal securities laws, rules or auditing standards; (b) to establish, if deemed necessary or appropriate as an alternative to Audit Committee pre-approval of services to be provided by the independent auditor as required by paragraph (b) herein, policies and procedures to permit such services to be pre-approved by other means, such as by action of a designated member or members of the Audit Committee, subject to subsequent Audit Committee review or oversight; (c) to receive and consider reports from the Trust's independent auditor regarding: (i) all critical accounting policies and practices of the Trust to be used; (ii) all alternative accounting treatments for policies and practices related to material items that have been discussed with management, including the potential ramifications of use of those treatments and the treatment preferred by the auditor; (iii) any material written communications between the auditor and management; and (iv) all non-audit services provided to any entity in the Trust's investment company complex that were not pre-approved by the Committee or pursuant to pre-approval policies and procedures established by the Committee and associated fees; (d) to review and pre-approve all audit and non-audit services proposed to be provided to the Trust by its independent auditors; and (e) to review and pre-approve all non-audit services proposed to be provided by the Trust's independent auditors to the investment adviser or any of its subsidiaries or affiliates that provide on-going services to the Trust, when, without such pre-approval by the Audit Committee, the auditor would not be independent of the Trust under applicable federal securities laws, rules or auditing standards. (e)(2) Percentages of Services One hundred percent of the services described in each of paragraphs (b) through (d) of this Item were approved by the Trust's Audit Committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. (f) Not applicable. (g) Total Fees Paid By Adviser and Certain Affiliates For the fiscal years ending September 30, 2004 and September 30, 2003, the aggregate non-audit fees billed by PwC for services rendered to the Trust and SSgA Funds Management, Inc. (the "Adviser") and any entity controlling, controlled by, or under common control with the Adviser that provided ongoing services to the Trust were $2,904,000 and $2,098,500 respectively. (h) Not applicable. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS The Trust has a separately designated Audit Committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended. The Trust's Audit Committee is comprised of the following members: Frank Nesvet (Chairman), David M. Kelly, and Helen F. Peters. ITEM 6. SCHEDULE OF INVESTMENTS Not required for this filing. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable to the Registrant. ITEM 8. PURCHASE OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS Not applicable to the Registrant. ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There have been no material changes to the procedures by which shareholders may recommend nominees to the Registrant's Board of Trustees during the period covered by this Form N-CSR filing. ITEM 10. CONTROLS AND PROCEDURES (a) Within 90 days of the filing date of this Form N-CSR, Agustin Fleites, the Registrant's President, and Donald Gignac, the Registrant's Chief Financial Officer, reviewed the Registrant's disclosure controls and procedures (the "Procedures") and evaluated their effectiveness. Based on the review, Messrs. Fleites and Gignac determined that the Procedures adequately ensure that information required to be disclosed by the Registrant in its periodic reports is recorded, processed, summarized and reported within the time periods required by the Securities and Exchange Commission's rules and regulations. (b) In the Registrant's second fiscal half-year, there were no significant changes in the Registrant's internal controls or in other factors that have materially affected, or are reasonably likely to materially affect, its controls over financial reporting subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. ITEM 11. EXHIBITS (a)(1) The Trust's Code of Conduct for Principal Executive and Senior Financial Officers. (a)(2) The certifications required by Rule 30a-2 of the Investment Company Act of 1940, as amended (the "1940 Act"), is attached hereto. (b) The certification required by Rule 30a-2(b) of the 1940 Act and Sections 906 of the Sarbanes-Oxley Act of 2002 is attached hereto. ] SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. STREETTRACKS INDEX SHARES FUNDS By: /s/ Agustin Fleites ------------------------ Agustin Fleites President Date: December 1, 2004 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ Agustin Fleites ------------------------ Agustin Fleites President Date: December 1, 2004 By: /s/ Donald Gignac ------------------------ Donald Gignac Chief Financial Officer Date: December 1, 2004