N-30D 1 b37488ssn-30d.txt STATE STREET BANK 1 STANDARD AND POOR'S DEPOSITARY RECEIPTS(TM) ("SPDRS")(TM) SPDR TRUST SERIES 1 A UNIT INVESTMENT TRUST ANNUAL REPORT SEPTEMBER 30, 2000 "S&P", "S&P 500", "Standard & Poor's", "Standard & Poor's Depositary Receipts", and "SPDRs" are trademarks of McGraw-Hill, Inc. and have been licensed for use by PDR Services LLC and the American Stock Exchange LLC. The Trust, however, is not sponsored by or affiliated with Standard & Poor's Corporation or McGraw-Hill, Inc. 2 SPDR TRUST SERIES 1 TRUST OVERVIEW -------------------------------------------------------------------------------- OBJECTIVE: To replicate the total return of the S&P 500 Index. STRATEGY: The Trust's holdings are comprised of the 500 stocks in the S&P 500 Index, which is designed to capture the price performance of a large cross-section of the U.S. publicly traded stock market. PERFORMANCE OVERVIEW: The SPDR Trust, Series 1 (the "Trust") seeks to match the total return of the S&P 500 Index. To accomplish this, the Trust utilizes a full replication approach. With this strategy, all 500 securities of the S&P 500 Index are owned by the Trust in their approximate market capitalization weight. A replication management approach results in low expected tracking error of the Trust relative to its benchmark. In the US equity market, factors such as productivity gains, technological advances and scale efficiencies appear to have offset heightened concerns over inflation and interest rates. The Trust ended its fiscal year on September 30, 2000 with a total year-to-date return of 13.16%. The twelve basis point deviation from the year-to-date S&P 500 total return of 13.28% is attributable primarily to Trust expenses. Despite ongoing inflation and interest rate concerns, the US equity market rally that began back in 1994 limped forward for much of the past fiscal year. Over the twelve month period, however, the winning and losing sectors within the Index shifted significantly. During the third quarter - for the first time in over a year - large-cap value stocks outperformed large-cap growth stocks. Investors initiated a shift toward the "old economy" stocks. Technology stocks which were strong performers during the end of 1999 and the beginning of 2000 experienced difficulties. Technology was the worst performing sector during the third quarter. Companies such as Intel, Microsoft, Lucent, Cisco, and Dell all suffered during the last three month period. As the technology sector stumbled, however, the financial sector emerged as the leading index sector. Firms such as Associates First Capital, Capital One and Lehman Brothers posted strong third quarter returns helping to lead the financials. In addition, some health care companies such as Manor Care and Humana Inc. supplied individual third quarter returns in excess of 100%. 1 3 SPDR TRUST SERIES 1 SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2000
-------------------------------------------------------------------------------- COMMON STOCKS SHARES VALUE -------------------------------------------------------------------------------- Abbott Lab ................................. 2,984,727 $141,961,078 Adaptec, Inc.* ............................. 200,084 4,001,680 ADC Telecommunications, Inc.* ............. 1,308,920 35,197,677 Adobe Systems, Inc. ........................ 231,109 35,879,672 Advanced Micro Devices, Inc.* ............. 593,027 14,010,263 AES Corp.* ................................. 879,933 60,275,410 Aetna, Inc. ................................ 271,980 15,791,839 Aflac, Inc. ................................ 506,557 32,451,308 Agilent Technologies, Inc.* ................ 872,962 42,720,578 Air Products & Chemicals, Inc. ............. 442,876 15,943,536 Alberto-Culver Co., Class B ................ 104,440 3,009,178 Albertson's, Inc. .......................... 811,942 17,050,782 Alcan Aluminum Ltd. ........................ 422,650 12,230,434 Alcoa, Inc. ................................ 1,668,582 42,235,982 Allegheny Technologies, Inc. ............... 163,700 2,967,063 Allergan Pharmaceuticals, Inc. ............. 249,129 21,035,830 Allied Waste Industries, Inc.* ............. 374,540 3,441,086 Allstate Corp. ............................. 1,411,879 49,062,795 Alltel Corp. ............................... 608,049 31,732,557 Altera Corp.* .............................. 768,862 36,713,160 Alza Corp., Class A* ....................... 201,801 17,455,787 Amerada Hess Corp. ......................... 174,763 11,698,198 Ameren Corp. ............................... 259,328 10,859,360 America Online, Inc.* ...................... 4,428,558 238,034,992 American Electric Power Co., Inc. .......... 621,049 24,298,542 American Express Co. ....................... 2,560,821 155,569,876 American General Corp. ..................... 480,655 37,491,090 American Greetings Corp., Class A .......... 120,977 2,117,098 American Home Products Corp. .............. 2,512,219 142,097,387 American International Group, Inc. ......... 4,454,277 426,218,630 American Power Conversion Corp.* ........... 374,001 7,176,144 Amgen, Inc.* ............................... 1,978,128 138,128,969 AMR Corp. .................................. 289,056 9,448,518 AmSouth Bancorp ............................ 754,888 9,436,100 Anadarko Petroleum Corp. ................... 468,605 31,143,488 Analog Devices, Inc.*. ..................... 681,858 56,295,901 Andrew Corp.* .............................. 158,855 4,160,015 Anheuser-Busch Cos., Inc. .................. 1,741,266 73,677,318 Aon Corp. .................................. 494,099 19,393,386 Apache Corp. ............................... 235,476 13,922,519 Apple Computer, Inc.* ...................... 628,274 16,178,056 Applied Materials, Inc.* ................... 1,556,628 92,327,498 Archer-Daniels-Midland Co. ................. 1,219,377 10,517,127 Armstrong Holdings, Inc. ................... 72,058 860,192 Ashland, Inc. .............................. 137,383 4,628,090 Associates First Capital Corp., Class A .... 1,406,325 53,440,350 AT&T Corp. ................................. 7,229,530 212,367,444 Autodesk, Inc. ............................. 112,613 2,857,555 Automatic Data Processing, Inc. ............ 1,208,185 80,797,372 Autozone, Inc.*. ........................... 246,133 5,584,142 Avery Dennison Corp. ....................... 216,749 10,051,735 Avon Products, Inc. ........................ 458,333 18,734,361 Baker Hughes, Inc. ......................... 637,521 23,667,967 Ball Corp. ................................. 55,463 1,757,484 Banc One Corp. ............................. 2,211,462 85,417,720 Bank of America Corp. ...................... 3,158,602 165,431,780 Bank of New York, Inc. ..................... 1,420,827 79,655,114 Barrick Gold Corp. ......................... 764,054 11,651,824 Bausch & Lomb, Inc. ........................ 98,418 3,832,151 Baxter International, Inc. ................. 560,788 44,757,892 BB&T Corp. ................................. 758,914 22,862,284 Bear Stearns Cos., Inc. .................... 212,897 13,412,511 Becton, Dickinson & Co. .................... 487,688 12,893,252 Bed Bath & Beyond, Inc.*. .................. 546,329 13,325,306 BellSouth Corp. ............................ 3,603,580 145,044,095 Bemis Co., Inc. ............................ 103,459 3,323,620 Best Buy Co., Inc.*. ....................... 395,644 25,172,850 Bestfoods .................................. 530,782 38,614,390 Bethlehem Steel Corp.*. .................... 255,129 765,387 Biogen, Inc.*. ............................. 284,772 17,371,092 Biomet, Inc. ............................... 342,248 11,978,680 Black & Decker Corp. ....................... 158,439 5,416,633 Block (H&R), Inc. .......................... 183,681 6,807,677 BMC Software, Inc.*. ....................... 472,512 9,036,792 Boeing Co. ................................. 1,725,487 108,705,681 Boise Cascade Corp. ........................ 112,733 2,994,470 Boston Scientific Corp.*. .................. 787,057 12,937,249 Briggs & Stratton Corp. .................... 41,174 1,556,892 Bristol-Myers Squibb Co. ................... 3,779,017 215,876,346 Broadcom Corp., Class A* ................... 426,625 103,989,844 Brown-Forman Corp., Class B ................ 133,168 7,290,948 Brunswick Corp. ............................ 169,753 3,097,992 Burlington Northern Santa Fe Corp. ......... 777,571 16,766,375 Burlington Resources, Inc. ................. 407,223 14,990,897 C.R. Bard, Inc. ............................ 97,615 4,124,234 Cabletron Systems, Inc.*. .................. 352,530 10,355,569 Campbell Soup Co. .......................... 815,518 21,101,528 Capital One Financial Corp. ................ 378,325 26,506,395 Cardinal Health, Inc. ...................... 532,098 46,924,392 Carnival Corp. ............................. 1,163,605 28,653,773 Caterpillar, Inc. .......................... 672,263 22,688,876 Cendant Corp.*. ............................ 1,399,603 15,220,683 Centex Corp. ............................... 110,298 3,543,323 CenturyTel, Inc. ........................... 263,188 7,171,873 Ceridian Corp.*. ........................... 271,289 7,613,048 Charter One Financial, Inc. ................ 424,494 10,347,030 Chase Manhattan Corp. ...................... 2,513,646 116,099,025 Chevron Corp. .............................. 1,256,324 107,101,621 Chubb Corp. ................................ 337,390 26,695,984 CIGNA Corp. ................................ 303,180 31,651,992 Cincinnati Financial Corp. ................. 310,828 11,034,394 CINergy Corp. .............................. 309,521 10,233,538
See accompanying notes to financial statements 2 4 SPDR TRUST SERIES 1 SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2000
-------------------------------------------------------------------------------- COMMON STOCKS SHARES VALUE -------------------------------------------------------------------------------- Circuit City Stores, Inc. ............. 393,327 $ 9,046,521 Cisco Systems, Inc.* .................. 13,642,653 753,756,578 CIT Group, Inc. (The), Class A ........ 511,976 8,959,580 Citigroup, Inc. ....................... 8,649,909 467,635,705 Citrix Systems, Inc.* ................. 355,555 7,133,322 Clear Channel Communications, Inc.* ... 1,124,024 63,507,356 Clorox Co. ............................ 452,028 17,883,358 CMS Energy Corp. ...................... 212,269 5,717,996 Coastal Corp. ......................... 413,079 30,619,481 Coca-Cola Co. ......................... 4,768,403 262,858,215 Coca-Cola Enterprises, Inc. ........... 801,548 12,774,671 Colgate-Palmolive Co. ................. 1,112,737 52,521,186 Columbia Energy Group ................. 155,494 11,040,074 Comcast Corp., Class A* ............... 1,734,753 71,016,451 Comerica, Inc. ........................ 301,983 17,647,132 Compaq Computer Corp. ................. 3,271,579 90,230,149 Computer Associates International, Inc. 1,137,245 28,644,358 Computer Sciences Corp.* .............. 319,498 23,722,727 Compuware Corp.* ...................... 696,650 5,834,444 Comverse Technology, Inc.* ............ 293,169 31,662,252 ConAgra, Inc. ......................... 961,032 19,280,705 Conexant Systems, Inc.* ............... 422,448 17,690,010 Conoco, Inc., Class B ................. 1,196,907 32,241,682 Conseco, Inc. ......................... 597,775 4,558,034 Consolidated Edison, Inc. ............. 409,516 13,974,734 Consolidated Stores Corp.* ............ 208,716 2,817,666 Constellation EnergyGroup, Inc. ....... 289,016 14,378,546 Convergys Corp.* ...................... 297,198 11,553,572 Cooper Industries, Inc. ............... 179,761 6,336,575 Cooper Tire & Rubber Co. .............. 136,790 1,376,449 Coors (Adolph) Co., ClassB ............ 70,947 4,482,964 Corning, Inc. ......................... 566,184 168,156,648 Costco Wholesale Corp.* ............... 862,419 30,130,764 Countrywide CreditIndustries, Inc. .... 219,071 8,269,930 CP&L, Energy, Inc. .................... 302,263 12,600,589 Crane Co. ............................. 117,055 2,677,633 Crown Cork & Seal Co., Inc. ........... 254,424 2,719,157 CSX Corp. ............................. 422,225 9,209,783 Cummins Engine Co., Inc. .............. 82,508 2,470,083 CVS Corp. ............................. 752,740 34,861,271 Dana Corp. ............................ 284,995 6,127,392 Danaher Corp. ......................... 273,731 13,618,117 Darden Restaurants, Inc. .............. 238,903 4,972,169 Deere & Co. ........................... 452,530 15,046,623 Dell Computer Corp.* .................. 4,963,411 152,935,101 Delphi Automotive Systems Corp. ....... 1,087,162 16,443,325 Delta Air Lines, Inc. ................. 236,693 10,503,252 Deluxe Corp. .......................... 138,747 2,818,298 Devon Energy Corp. .................... 245,362 14,758,524 Dillard's, Inc., Class A .............. 180,733 1,920,288 Disney (Walt) Co. (The) ............... 4,004,442 153,169,906 Dollar General Corp. .................. 635,718 10,648,277 Dominion Resources, Inc. .............. 459,682 26,690,286 Dover Corp. ........................... 392,395 18,418,040 Dow Chemical Co. ...................... 1,303,361 32,502,565 Dow Jones & Co., Inc. ................. 171,129 10,353,305 DTE Energy Co. ........................ 275,538 10,539,329 Du Pont (E.I.) de Nemours& Co., Inc. .. 2,016,570 83,561,619 Duke Energy Corp. ..................... 709,768 60,862,606 Dun & Bradstreet Corp. ................ 314,019 10,814,029 Eastern Enterprises ................... 53,770 3,431,198 Eastman Chemical Co. .................. 148,315 5,478,385 Eastman Kodak Co. ..................... 597,485 24,422,199 Eaton Corp. ........................... 140,729 8,672,425 Ecolab, Inc. .......................... 244,423 8,814,504 Edison International .................. 640,140 12,362,704 El Paso Energy Corp. .................. 446,309 27,503,792 Electronic Data Systems Corp. ......... 899,691 37,337,176 EMC Corp.* ............................ 4,182,508 414,591,105 Emerson Electric Co. .................. 823,850 55,197,950 Engelhard Corp. ....................... 241,681 3,927,316 Enron Corp. ........................... 1,413,043 123,817,893 Entergy Corp. ......................... 442,533 16,484,354 Equifax, Inc. ......................... 273,584 7,369,669 Exxon Mobil Corp. ..................... 6,698,461 597,000,335 Fannie Mae ............................ 1,940,798 138,767,057 Federated Department Stores, Inc.* .... 414,098 10,818,310 FedEx Corp.* .......................... 558,968 24,784,641 Fifth Third Bancorp ................... 896,070 48,275,771 First Data Corp. ...................... 794,356 31,029,531 First Union Corp. ..................... 1,894,282 60,972,202 Firstar Corp. ......................... 1,842,806 41,232,784 First Energy Corp. .................... 445,193 11,992,386 Fleet Boston Financial Corp. .......... 1,736,438 67,721,082 Florida Progress Corp. ................ 190,371 10,077,765 Fluor Corp. ........................... 147,167 4,415,010 FMC Corp.* ............................ 58,482 3,921,949 Ford Motor Co. ........................ 3,618,931 91,604,191 Fort James Corp. ...................... 397,434 12,146,577 Fortune Brands, Inc. .................. 305,399 8,093,074 FPL Group, Inc. ....................... 344,107 22,625,035 Franklin Resources, Inc. .............. 470,378 20,898,895 Freddie Mac ........................... 1,342,293 72,567,715 Freeport-McMoran Copper & Gold ........ 282,493 2,489,470 Gannett Co., Inc. ..................... 513,731 27,227,743 Gap, Inc. (The) ....................... 1,642,634 33,058,009 Gateway 2000, Inc.* ................... 621,228 29,042,409 General Dynamics Corp. ................ 386,837 24,298,199 General Electric Co. .................. 19,044,368 1,098,621,979 General Mills, Inc. ................... 561,072 19,918,056 General Motors Corp. .................. 1,030,838 67,004,470 Genuine Parts Co. ..................... 341,448 6,508,853
See accompanying notes to financial statements 3 5 SPDR TRUST SERIES 1 SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2000
-------------------------------------------------------------------------------- COMMON STOCKS SHARES VALUE -------------------------------------------------------------------------------- Georgia-Pacific Corp. .................. 329,429 $ 7,741,582 Gillette Co. ........................... 2,017,290 62,283,829 Global Crossing Ltd.* .................. 1,702,108 52,765,348 Golden West Financial Corp. ............ 299,944 16,084,497 Goodrich (B.F.) Co. (The) .............. 195,540 7,662,724 Goodyear Tire & Rubber Co. (The) ....... 302,057 5,437,026 GPU, Inc. .............................. 236,889 7,684,087 Grace (W.R.) & Co.* .................... 140,120 963,325 Great Lakes Chemical Corp. ............. 107,579 3,153,409 Guidant Corp.* ......................... 588,457 41,596,554 Halliburton Co. ........................ 857,579 41,967,772 Harcourt General, Inc. ................. 138,486 8,170,674 Harley-Davidson, Inc. .................. 585,721 28,041,393 Harrah's Entertainment, Inc.* .......... 234,666 6,453,315 Hartford Financial Services Group ...... 417,248 30,433,026 Hasbro, Inc. ........................... 332,529 3,803,300 HCA-The Healthcare Co. ................. 1,076,838 39,977,611 Healthsouth Corp.* ..................... 708,000 5,752,500 Heinz (H.J.) Co. ....................... 681,015 25,240,118 Hercules, Inc. ......................... 208,487 2,944,879 Hershey Foods Corp. .................... 264,670 14,325,264 Hewlett-Packard Co. .................... 1,917,600 186,007,200 Hilton Hotels Corp. .................... 686,483 7,937,460 Home Depot, Inc. (The) ................. 4,457,409 236,521,265 Homestake Mining Co. ................... 502,502 2,606,729 Honeywell International, Inc. .......... 1,541,632 54,920,640 Household International, Inc. .......... 913,365 51,719,293 Humana, Inc.* .......................... 309,909 3,331,522 Huntington Bancshares, Inc. ............ 473,431 6,953,522 Illinois Tool Works, Inc. .............. 579,974 32,406,047 IMS Health, Inc. ....................... 574,094 11,912,451 Inco Ltd.* ............................. 350,918 5,658,553 Ingersoll-Rand Co. ..................... 312,643 10,590,782 Intel Corp. ............................ 12,906,932 536,444,361 International Business Machines Corp. .. 3,385,453 380,863,462 International Flavors & Fragrances, Inc. 189,542 3,459,142 International Paper Co. ................ 925,829 26,559,719 Interpublic Group of Cos., Inc. ........ 584,322 19,903,468 ITT Industries, Inc. ................... 169,843 5,509,282 J.C. Penney Co., Inc. .................. 510,411 6,029,230 J.P. Morgan & Co., Inc. ................ 306,005 49,993,567 JDS Uniphase Corp.* .................... 1,795,805 170,040,286 Jefferson-Pilot Corp. .................. 199,379 13,532,850 Johnson & Johnson ...................... 2,679,498 251,705,343 Johnson Controls, Inc. ................. 167,058 8,885,397 Kaufman & Broad Home Corp. ............. 87,830 2,365,921 Kellogg Co. ............................ 783,083 18,940,820 Kerr-McGee Corp. ....................... 182,116 12,065,185 Keycorp ................................ 838,288 21,219,165 Key Span Corp. ......................... 255,732 10,261,247 Kimberly-Clark Corp. ................... 1,034,815 57,755,612 Kla-Tencor Corp.* ...................... 359,289 $ 14,798,216 K-Mart Corp.* .......................... 928,768 5,572,608 Knight Ridder, Inc. .................... 149,431 7,592,963 Kohl's Corp.* .......................... 628,713 36,268,881 Kroger Co.* ............................ 1,604,269 36,196,319 Leggett & Platt, Inc. .................. 381,631 6,034,540 Lehman Brothers Holdings, Inc. ......... 233,345 34,476,724 Lexmark International, Inc.* ........... 249,445 9,354,188 Lilly (Eli) & Co. ...................... 2,175,606 176,496,037 Limited, Inc. (The) .................... 830,693 18,327,164 Lincoln National Corp. ................. 365,225 17,576,453 Linear Technology Corp. ................ 600,599 38,888,785 Liz Claiborne, Inc. .................... 106,865 4,114,303 Lockheed Martin Corp. .................. 824,764 27,184,221 Loews Corp. ............................ 190,409 15,875,350 Longs Drug Stores Corp. ................ 69,977 1,338,310 Louisiana-Pacific Corp. ................ 208,985 1,920,050 Lowes Cos., Inc. ....................... 734,334 32,953,238 LSI Logic Corp.* ....................... 590,013 17,257,880 Lucent Technologies, Inc. .............. 6,419,762 196,203,976 Mallinckrodt, Inc. ..................... 131,336 5,992,205 Manor Care, Inc.* ...................... 191,701 3,007,309 Marriott International, Inc. ........... 462,854 16,865,243 Marsh & McLennan Cos., Inc. ............ 520,650 69,116,287 Masco Corp. ............................ 856,991 15,961,457 Mattel, Inc. ........................... 831,254 9,299,654 Maxim Integrated Products, Inc.* ....... 546,068 43,924,345 May Department Stores Co. .............. 638,465 13,088,533 Maytag Corp. ........................... 145,198 4,510,213 MBIA, Inc. ............................. 190,114 13,521,858 MBNA Corp. ............................. 1,642,841 63,249,378 McDermott International, Inc. .......... 121,457 1,336,027 McDonald's Corp. ....................... 2,539,657 76,665,896 McGraw-Hill, Inc. ...................... 374,589 23,809,813 Mckesson HBOC, Inc. .................... 544,672 16,646,538 Mead Corp. ............................. 199,600 4,665,650 MedImmune, Inc.* ....................... 403,230 31,149,517 Medtronic, Inc. ........................ 2,306,018 119,480,558 Mellon Financial Corp. ................. 947,663 43,947,872 Merck & Co., Inc. ...................... 4,429,998 329,757,976 Mercury Interactive Corp.* ............. 153,330 24,034,478 Meredith Corp. ......................... 97,405 2,873,448 Merrill Lynch & Co., Inc. .............. 1,544,082 101,909,412 MGIC Investment Corp. .................. 204,599 12,506,114 Micron Technology, Inc.* ............... 1,072,176 49,320,096 Microsoft Corp.* ....................... 10,118,375 610,264,492 Millipore Corp. ........................ 89,459 4,333,170 Minnesota Mining &Manufacturing Co. .... 762,305 69,465,043 Molex, Inc. ............................ 378,840 20,623,103 Morgan Stanley, Dean Witter, Discover and Co. ................... 2,163,571 197,831,523
See accompanying notes to financial statements 4 6 SPDR TRUST SERIES 1 SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2000
-------------------------------------------------------------------------------- COMMON STOCKS SHARES VALUE -------------------------------------------------------------------------------- Motorola, Inc. ...................... 4,152,952 $117,320,894 Nabisco Group Holdings Corp. ........ 630,289 17,963,237 National City Corp. ................. 1,170,748 25,902,800 National Semiconductor Corp.* ....... 340,408 13,701,422 National Service Industries, Inc. ... 74,114 1,449,855 Navistar International Corp.* ....... 120,917 3,619,953 NCR Corp.* .......................... 178,582 6,752,632 Network Appliance, Inc.* ............ 588,655 74,979,931 New York Times Co. (The), Class A ... 327,661 12,881,173 Newell Rubbermaid, Inc. ............. 514,666 11,740,818 Newmont Mining Corp. ................ 312,064 5,305,088 Nextel Communications, Inc., Class A* 1,461,441 68,322,367 Niagara Mohawk Holdings, Inc.* ...... 329,965 5,196,949 NICOR, Inc. ......................... 83,709 3,029,219 Nike, Inc., Class B ................. 527,601 21,137,015 Nordstrom, Inc. ..................... 247,421 3,850,489 Norfolk Southern Corp. .............. 739,918 10,821,301 Nortel Networks Corp. ............... 5,743,196 342,079,112 Northern Trust Corp. ................ 425,753 37,838,798 Northrop Grumman Corp. .............. 135,988 12,357,910 Novell, Inc.* ....................... 643,692 6,396,689 Novellus Systems, Inc.* ............. 252,715 11,767,042 Nucor Corp. ......................... 163,302 4,919,473 Occidental Petroleum Corp. .......... 711,767 15,525,418 Office Depot, Inc.* ................. 608,379 4,752,961 Old Kent Financial Corp. ............ 265,193 7,674,022 Omnicom Group, Inc. ................. 341,071 24,876,866 ONEOK, Inc. ......................... 56,546 2,247,704 Oracle Corp.* ....................... 5,412,984 426,272,490 Owens-Illinois, Inc.* ............... 289,038 2,673,602 PACCAR, Inc. ........................ 142,707 5,289,078 Pactiv Corp.* ....................... 304,523 3,406,851 Paine Webber Group, Inc. ............ 281,381 19,169,081 Pall Corp. .......................... 237,929 4,743,709 Palm, Inc.* ......................... 1,084,513 57,411,407 Parametric Technology Corp.* ........ 513,367 5,614,952 Parker-Hannifin Corp. ............... 216,217 7,297,324 Paychex, Inc. ....................... 711,926 37,376,115 PE Corp. - PE Biosystems Group ...... 402,336 46,872,144 Peco Energy Co. ..................... 327,594 19,839,912 Peoples Energy Corp. ................ 65,168 2,174,982 People Soft, Inc.* .................. 532,152 14,866,997 PepsiCo, Inc. ....................... 2,776,682 127,727,372 Perkin Elmer, Inc. .................. 95,114 9,927,524 Pfizer, Inc. ........................ 12,130,659 545,121,489 PG&E Corp. .......................... 744,142 17,998,935 Pharmacia Corp. ..................... 2,494,854 150,159,025 Phelps Dodge Corp. .................. 152,113 6,350,718 Philip Morris Cos., Inc. ............ 4,330,644 127,483,333 Phillips Petroleum Co. .............. 485,730 30,479,557 Pinnacle West Capital Corp. ......... 158,337 8,055,395 Pitney Bowes, Inc. .................. 496,835 $ 19,593,930 Placer Dome, Inc. ................... 630,440 5,949,778 PNC Financial Services Group ........ 560,537 36,434,905 Polaroid Corp. ...................... 81,695 1,097,777 Potlatch Corp. ...................... 53,156 1,681,059 PPG Industries, Inc. ................ 336,083 13,338,294 PPL Corp. ........................... 278,595 11,631,341 Praxair, Inc. ....................... 304,685 11,387,602 Procter & Gamble Co. ................ 2,519,668 168,817,756 Progressive Corp. ................... 141,332 11,571,558 Providian Financial Corp. ........... 275,042 34,930,334 Public Service Enterprise, Inc. ..... 417,498 18,656,942 Pulte Corp. ......................... 71,768 2,368,344 Quaker Oats Co. ..................... 252,950 20,014,669 QUALCOMM, Inc.* ..................... 1,428,401 101,773,571 Quintiles Transnational Corp.* ...... 207,757 3,311,127 Qwest Communications Intl., Inc. .... 3,193,150 153,470,772 R.R. Donnelley & Sons Co. ........... 235,343 5,780,612 Radio Shack Corp. ................... 360,267 23,282,255 Ralston Purina Group ................ 582,694 13,802,564 Raytheon Co., Class B ............... 656,301 18,663,560 Reebok International Ltd.* .......... 98,253 1,848,385 Regions Financial Corp. ............. 428,952 9,731,849 Reliant Energy, Inc. ................ 570,297 26,518,810 Rockwell International Corp. ........ 362,454 10,964,234 Rohm & Haas Co. ..................... 419,121 12,180,704 Rowan Cos., Inc.* ................... 184,031 5,336,899 Royal Dutch Petroleum Co. ........... 4,130,912 247,596,538 Russell Corp. ....................... 65,051 1,032,685 Ryder System, Inc. .................. 117,375 2,164,102 Sabre Holdings Corp. ................ 249,146 7,209,662 SAFECO Corp. ........................ 237,787 6,479,696 Safeway, Inc.* ...................... 958,534 44,751,556 Sanmina Corp.* ...................... 287,161 26,885,449 Sapient Corp.* ...................... 227,660 9,262,916 Sara Lee Corp. ...................... 1,678,795 34,100,523 SBC Communications, Inc. ............ 6,517,645 325,882,250 Schering-Plough Corp. ............... 2,820,663 131,160,829 Schlumberger Ltd. ................... 1,096,695 90,271,707 Schwab (Charles) Corp. .............. 2,627,679 93,282,604 Scientific-Atlanta, Inc. ............ 305,987 19,468,423 Seagate Technology, Inc.* ........... 433,873 29,937,237 Seagram Co. Ltd. (The) .............. 842,443 48,387,820 Sealed Air Corp.* ................... 163,494 7,398,104 Sears, Roebuck & Co. ................ 659,270 21,373,533 Sempra Energy ....................... 394,480 8,210,115 Sherwin-Williams Co. ................ 319,972 6,839,402 Siebel Systems, Inc.* ............... 800,710 89,129,032 Sigma-Aldrich Corp. ................. 166,717 5,501,661 Snap-on, Inc. ....................... 105,912 2,495,552 Solectron Corp.* .................... 1,152,128 53,141,904
See accompanying notes to financial statements 5 7 SPDR TRUST SERIES 1 SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2000
-------------------------------------------------------------------------------- COMMON STOCKS SHARES VALUE -------------------------------------------------------------------------------- Southern Co. ............................. 1,252,135 $ 40,616,129 SouthTrust Corp. ......................... 324,651 10,206,216 Southwest Airlines Co. ................... 958,653 23,247,335 Springs Industries, Inc. ................. 34,905 983,885 Sprint Corp. ............................. 1,694,472 49,669,210 Sprint Corp. (PCS Group)* ................ 1,766,034 61,921,567 St. Jude Medical Center, Inc.* ........... 156,256 7,969,056 St. Paul Cos., Inc. ...................... 412,102 20,321,780 Stanley Works (The) ...................... 170,213 3,925,537 Staples, Inc.* ........................... 873,705 12,395,690 Starbucks Corp.* ......................... 349,794 14,013,622 State Street Corp. ....................... 310,844 40,409,720 Stilwell Financial, Inc.* ................ 430,678 18,734,493 Summit Bancorp ........................... 331,108 11,423,226 Sun Microsystems, Inc.* .................. 3,050,234 356,114,819 Sunoco, Inc. ............................. 163,129 4,394,287 SunTrust Banks, Inc. ..................... 582,974 29,039,392 Supervalu, Inc. .......................... 253,542 3,818,976 Synovus Financial Corp. .................. 546,039 11,569,201 SYSCO Corp. .............................. 643,365 29,795,842 T. Rowe Price Associates, Inc. ........... 234,619 11,012,429 Target Corp. ............................. 1,760,286 45,107,329 Tektronix, Inc. .......................... 93,336 7,169,372 Tellabs, Inc.* ........................... 788,055 37,629,626 Temple-Inland, Inc. ...................... 100,886 3,821,057 Tenet Healthcare Corp. ................... 604,246 21,979,448 Teradyne, Inc.* .......................... 334,665 11,713,275 Texaco, Inc. ............................. 1,065,705 55,949,512 Texas Instruments, Inc. .................. 3,322,860 156,797,456 Textron, Inc. ............................ 278,305 12,836,818 Thermo Electron Corp.* ................... 334,142 8,687,692 Thomas & Betts Corp. ..................... 115,985 2,022,488 Tiffany & Co. ............................ 280,279 10,808,259 Time Warner, Inc. ........................ 2,536,341 198,468,683 Timken Co. ............................... 121,524 1,663,360 TJX Cos., Inc. (The) ..................... 566,960 12,756,600 Torchmark Corp. .......................... 247,669 6,888,294 Tosco Corp. .............................. 279,121 8,705,086 Toys "R" Us, Inc.* ....................... 406,027 6,597,939 Transocean Sedco Forex, Inc. ............. 406,630 23,838,684 Tribune Co. .............................. 594,997 25,956,744 Tricon Global Restaurants, Inc.* ......... 284,467 8,711,802 TRW, Inc. ................................ 234,128 9,511,450 Tupperware Corp. ......................... 100,720 1,812,960 TXU Corp. ................................ 509,114 20,173,642 Tyco Laboratories, Inc. .................. 3,239,718 168,060,371 U.S. Bancorp ............................. 1,445,411 32,883,100 Unicom Corp. ............................. 342,747 19,258,097 Unilever N.V., (N.Y. Shares) ............. 1,103,407 53,239,388 Union Carbide Corp. ...................... 260,311 9,826,740 Union Pacific Corp. ...................... 478,861 18,615,721 Union Planters Corp. ..................... 251,691 8,321,534 Unisys Corp.* ............................ 582,479 6,552,889 United Technologies Corp. ................ 908,071 62,883,917 United Health Group, Inc. ................ 312,994 30,908,157 Unocal Corp. ............................. 468,800 16,613,100 Unum Provident Corp. ..................... 464,616 12,660,786 US Airways Group, Inc.* .................. 128,670 3,916,393 USA Education, Inc. ...................... 302,036 14,554,360 UST, Inc. ................................ 302,327 6,915,730 USX-Marathon Group ....................... 602,172 17,086,631 USX-U.S. Steel Group ..................... 169,291 2,571,107 V.F. Corp. ............................... 220,540 5,444,581 VERITAS Software Corp.* .................. 772,845 109,743,990 Verizon Communications ................... 5,239,498 253,788,184 Viacom, Inc.* ............................ 2,916,014 170,586,819 Visteon Corp. ............................ 253,312 3,831,344 Vulcan Materials Co. ..................... 194,511 7,816,911 W.W. Grainger, Inc. ...................... 174,018 4,578,849 Wachovia Corp. ........................... 385,910 21,876,273 Wal-Mart Stores, Inc. .................... 8,588,354 413,314,536 Walgreen Co. ............................. 1,942,045 73,676,332 Washington Mutual, Inc. .................. 1,036,311 41,258,132 Waste Management, Inc. ................... 1,199,162 20,910,387 Watson Pharmaceuticals, Inc.* ............ 183,901 11,930,577 Wellpoint Health Networks, Inc.* ......... 120,226 11,541,696 Wells Fargo & Co. ........................ 3,164,868 145,386,124 Wendy's International, Inc. .............. 208,241 4,177,835 Westvaco Corp. ........................... 193,609 5,166,940 Weyerhaeuser Co. ......................... 423,437 17,096,269 Whirlpool Corp. .......................... 140,853 5,475,660 Willamette Industries, Inc. .............. 206,204 5,773,712 Williams Cos., Inc. (The) ................ 853,147 36,045,461 Winn-Dixie Stores, Inc. .................. 263,077 3,781,732 WorldCom, Inc.* .......................... 5,517,968 167,608,278 Worthington Industries, Inc. ............. 164,276 1,540,088 Wrigley (Wm.) Jr. Co. .................... 220,290 16,494,214 Xcel Energy, Inc.* ....................... 644,017 17,710,472 Xerox Corp. .............................. 1,286,661 19,380,331 Xilinx, Inc.* ............................ 621,996 53,258,407 Yahoo, Inc.* ............................. 1,048,096 95,376,736 Young & Rubicam, Inc. .................... 136,960 6,779,520 --------------- Total Investments - (Cost $25,340,490,062) $24,277,778,819 ===============
(*) Denotes non-income producing security. See accompanying notes to financial statements 6 8 SPDR TRUST SERIES 1 STATEMENT OF ASSETS AND LIABILITIES SEPTEMBER 30, 2000 ----------------------------------------------------------------------------------------------------------------------- ASSETS Investments in securities, at value (cost $25,340,490,062)............................. $ 24,277,778,819 Cash................................................................................... 67,319,556 Receivable for investments sold........................................................ 298,748 Receivable for SPDR's issued in-kind................................................... 84,529 Dividends receivable................................................................... 18,070,746 ----------------- Total Assets............................................................................... 24,363,552,398 LIABILITIES Income distributions payable........................................................... 54,993,036 Due to Sponsor......................................................................... 11,044,299 Accrued Trustee fees................................................................... 948,237 Accrued expenses and other liabilities................................................. 7,937,500 ----------------- Total Liabilitities........................................................................ 74,923,072 ----------------- NET ASSETS................................................................................. $ 24,288,629,326 ================= NET ASSETS REPRESENTED BY: Paid in surplus relating to 168,873,406 units of fractional undivided interest ("SPDRs") outstanding; unlimited units authorized.................................... $ 25,877,826,504 Distribution in excess of net investment income........................................ (8,038,996) Accumulated net realized loss on investments........................................... (518,446,939) Net unrealized depreciation on investments............................................. (1,062,711,243) ----------------- NET ASSETS................................................................................. $ 24,288,629,326 ================= NET ASSET VALUE PER SPDR ($24,288,629,326 / 168,873,406 SPDRs)............................. $ 143.83 ========
See accompanying notes to financial statements 7 9 SPDR TRUST SERIES 1 STATEMENTS OF OPERATIONS
------------------------------------------------------------------------------------------------------- FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED SEPTEMBER 30, 2000 SEPTEMBER 30, 1999 SEPTEMBER 30, 1998 ------------------ ------------------ ------------------ INVESTMENT INCOME Dividend income (a) ...................... $ 208,907,333 $ 162,164,007 $ 93,269,315 --------------- --------------- --------------- EXPENSES Trustee expense .......................... 15,167,823 13,488,118 6,990,046 Marketing expense ........................ 7,324,559 4,795,915 2,213,340 S&P license fee .......................... 6,142,144 4,264,396 2,504,990 SEC registration expense ................. 2,526,019 670,400 1,125,070 Legal and audit services ................. 155,000 120,000 229,520 Amortization of organization costs ....... -- -- 35,416 Other expenses ........................... 280,001 244,966 130,705 --------------- --------------- --------------- Total expenses ............................... 31,595,546 23,583,795 13,229,087 Rebate from Sponsor ...................... -- -- (410,301) Rebate from Trustee ...................... (5,472,178) (2,002,824) (1,149,645) --------------- --------------- --------------- Net expenses ................................. 26,123,368 21,580,971 11,669,141 Trustee earnings credit .................. (2,634,976) (700,001) (488,977) --------------- --------------- --------------- Net expenses after Trustee earnings credits... 23,488,392 20,880,970 11,180,164 --------------- --------------- --------------- NET INVESTMENT INCOME ........................ 185,418,941 141,283,037 82,089,151 --------------- --------------- --------------- REALIZED AND UNREALIZED GAIN ON INVESTMENTS Net realized gain on investment transactions .............. 2,168,957,337 2,248,743,945 1,878,084,944 Net increase in unrealized appreciation (depreciation) .......... (629,335,586) 219,582,548 (1,707,909,730) --------------- --------------- --------------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS ........................... 1,539,621,751 2,468,326,493 170,175,214 --------------- --------------- --------------- NET INCREASE IN NET ASSETS FROM OPERATIONS... $ 1,725,040,692 $ 2,609,609,530 $ 252,264,365 =============== =============== ===============
(a) Net of withholding tax expense of $994,496, $1,559,617, and $586,136 for 2000, 1999, and 1998, respectively. See accompanying notes to financial statements 8 10 SPDR TRUST SERIES 1 STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------------------------------------------------- FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED SEPTEMBER 30, 2000 SEPTEMBER 30, 1999 SEPTEMBER 30, 1998 ------------------ ------------------ ------------------ INCREASE IN NET ASSETS FROM OPERATIONS: Net investment income ................ $ 185,418,941 $ 141,283,037 $ 82,089,151 Net realized gain on investment transactions .......... 2,168,957,337 2,248,743,945 1,878,084,944 Net increase in unrealized Appreciation (depreciation) ...... (629,335,586) 219,582,548 (1,707,909,730) ---------------- ---------------- ---------------- NET INCREASE IN NET ASSETS FROM OPERATIONS 1,725,040,692 2,609,609,530 252,264,365 ---------------- ---------------- ---------------- UNDISTRIBUTED NET INVESTMENT INCOME INCLUDED IN PRICE OF UNITS ISSUED AND REDEEMED, NET .......... 5,040,960 3,650,519 6,830,907 ---------------- ---------------- ---------------- DISTRIBUTIONS TO UNITHOLDERS FROM: Net investment income ................ (185,418,941) (141,283,037) (82,089,151) In excess of net investment income ... (1,236,660) (2,999,602) (4,796,055) ---------------- ---------------- ---------------- TOTAL DISTRIBUTIONS TO UNITHOLDERS ....... (186,655,601) (144,282,639) (86,885,206) ---------------- ---------------- ---------------- NET INCREASE IN NET ASSETS FROM ISSUANCE AND REDEMPTION OF SPDRS ..... 9,563,211,356 2,643,670,384 3,844,189,382 ---------------- ---------------- ---------------- NET INCREASE IN NET ASSETS DURING PERIOD . 11,106,637,407 5,112,647,794 4,016,399,448 NET ASSETS AT BEGINNING OF PERIOD ........ 13,181,991,919 8,069,344,125 4,052,944,677 ---------------- ---------------- ---------------- NET ASSETS END OF PERIOD* ................ $ 24,288,629,326 $ 13,181,991,919 $ 8,069,344,125 ================ ================ ================ *INCLUDES DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME ...... $ (8,038,996) $ (3,151,817) $ (3,802,740) ---------------- ---------------- ----------------
See accompanying notes to financial statements 9 11 SPDR TRUST SERIES 1 FINANCIAL HIGHLIGHTS SELECTED DATA FOR A SPDR OUTSTANDING DURING THE PERIOD
----------------------------------------------------------------------------------------------------------------------------------- FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE PERIOD FOR THE YEAR FOR THE YEAR ENDED ENDED ENDED ENDED ENDED ENDED 9/30/00 9/30/99 9/30/98 9/30/97 12/31/96 12/31/95 ------- ------- ------- ------- -------- -------- NET ASSET VALUE, BEGINNING OF PERIOD ..... $ 128.39 $ 101.80 $ 94.78 $ 74.08 $ 61.61 $ 45.93 ----------- ----------- ---------- ---------- ---------- ---------- Investment Operations: Net investment income ............... 1.45 1.49 1.41 1.03 1.35 1.26 Net realized and unrealized gain on investments .............. 15.43 26.59 7.01 20.67 12.52 15.70 ----------- ----------- ---------- ---------- ---------- ---------- Total from investment operations ......... 16.88 28.08 8.42 21.70 13.87 16.96 ----------- ----------- ---------- ---------- ---------- ---------- Less distributions from: Net investment income ............... (1.43) (1.46) (1.32) (1.00) (1.28) (1.24) In excess of net investment income .. (0.01) (0.03) (0.08) -- -- (0.03) Net realized gains .................. -- -- -- -- (0.12) (0.01) ----------- ----------- ---------- ---------- ---------- ---------- Total distributions ...................... (1.44) (1.49) (1.40) (1.00) (1.40) (1.28) ----------- ----------- ---------- ---------- ---------- ---------- NET ASSET VALUE, END OF PERIOD ........... $ 143.83 $ 128.39 $ 101.80 $ 94.78 $ 74.08 $ 61.61 =========== =========== ========== ========== ========== ========== TOTAL INVESTMENT RETURN .................. 13.16% 27.54% 8.82% 29.38% 22.67% 37.23% RATIOS AND SUPPLEMENTAL DATA Ratio to average net assets: Net investment income ............... 1.01% 1.18% 1.35% 1.63%(1) 2.03% 2.35% Total expenses ...................... 0.13% 0.17% 0.18% 0.18%(1) 0.18% 0.19% Portfolio turnover rate (2) ......... 8.20% 6.23% 4.71% 3.22% 4.37% 4.02% Total expenses excluding Trustee earnings credit ................... 0.14% 0.18% 0.19% 0.19%(1) 0.20% 0.20% Total expenses excluding Trustee earnings credit and fee waivers (3) 0.17% 0.20% 0.22% 0.21%(1) 0.23% 0.23% Net assets, end of period (000's).... $24,288,629 $13,181,992 $8,069,344 $4,052,945 $2,008,327 $1,001,231 -----------------------------------------------------------------------------------------------------------------------------------
(1) Annualized. (2) Portfolio turnover ratio excludes securities received or delivered from processing creations or redemptions of SPDRs. (3) Net of expenses reimbursed by the Trustee in 1999 and 2000, the Sponsor and Trustee in 1998, and the Sponsor from 1995 through the period ended 9/30/97. 10 12 SPDR TRUST SERIES 1 NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2000 -------------------------------------------------------------------------------- NOTE 1 -- ORGANIZATION SPDR Trust Series 1 (the "Trust") is a unit investment trust created under the laws of the State of New York and registered under the Investment Company Act of 1940. The Trust was created to provide investors with the opportunity to purchase a security representing a proportionate undivided interest in a portfolio of securities consisting of substantially all of the common stocks, in substantially the same weighting, which comprise the Standard & Poor's 500 Composite Price Index (the "S&P Index"). Each unit of fractional undivided interest in the Trust is referred to as a Standard & Poor's Depositary Receipt ("SPDR"). The Trust commenced operations on January 22, 1993 upon the initial issuance of 150,000 SPDRs (equivalent to three "Creation Units" - see Note 4) in exchange for a portfolio of securities assembled to reflect the intended portfolio composition of the Trust. Effective September 30, 1997, the fiscal year end of the Trust changed from December 31 to September 30. NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES 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 these estimates. The following is a summary of significant accounting policies followed by the Trust. SECURITY VALUATION Portfolio securities are valued based on the closing sale price on the exchange which is deemed to be the principal market for the security. If no closing sale price is available, then the security is valued at the previous closing sale price on the exchange which is deemed to be the principal market for the security. If there is no closing sale price available, valuation will be determined by the Trustee in good faith based on available information. INVESTMENT TRANSACTIONS Investment transactions are recorded on the trade date. Realized gains and losses from the sale or disposition of securities are recorded on the identified cost basis. Dividend income is recorded on the ex-dividend date. DISTRIBUTIONS TO UNITHOLDERS The Trust declares and distributes dividends from net investment income to its unitholders quarterly. The Trust will distribute net realized capital gains, if any, at least annually. 11 13 SPDR TRUST SERIES 1 NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2000 (CONTINUED) -------------------------------------------------------------------------------- FEDERAL INCOME TAX The Trust has qualified and intends to qualify as a "regulated investment company" under Subchapter M of the Internal Revenue Code of 1986, as amended. By so qualifying and electing, the Trust 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 of its net investment income and capital gains, if any, the Trust 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 differences are primarily due to differing treatments for income equalization, in-kind transactions and losses deferred due to wash sales. Net investment income per share calculations in the financial highlights for all years presented exclude these differences. During 2000, the Trust reclassified $2,601,875,048 of non-taxable security gains realized in the in-kind redemption of Creation Units (Note 4) as an increase to paid in surplus in the Statement of Assets and Liabilities. At September 30, 2000, the Trust had capital loss carryforwards of $33,523, $27,700,040, and $56,816,996, which will expire on September 30, 2005, September 30, 2007, and September 30, 2008, respectively. The Trust incurred losses of $392,525,767 during the period November 1, 1999 through September 30, 2000 that were deferred for tax purposes until fiscal 2001. NOTE 3 -- TRANSACTIONS WITH THE TRUSTEE AND SPONSOR In accordance with the Trust Agreement, State Street Bank and Trust Company (the "Trustee") maintains the Trust's accounting records, acts as custodian and transfer agent to the Trust, and provides administrative services, including filing of all required regulatory reports. The Trustee is also responsible for determining the composition of the portfolio of securities which must be delivered in exchange for the issuance of Creation Units of the Trust, and for adjusting the composition of the Trust's portfolio from time to time to conform to changes in the composition and/or weighting structure of the S&P 500 Index. For these services, the Trustee received a fee at the following annual rates for the period October 1, 1999 through February 29, 2000:
Net asset value of the Trust Fee as a percentage of net asset value of the Trust ---------------------------- --------------------------------------------------- $0 - $499,999,999 15/100 of 1% per annum plus or minus the Adjustment Amount $500,000,000 - $999,999,999 13/100 of 1% per annum plus or minus the Adjustment Amount $1,000,000,000 - and above 11/100 of 1% per annum plus or minus the Adjustment Amount
Effective March 1, 2000, the Trustee contractually reduced, on a permanent basis, the Trustee Fee to the following annual rates:
Net asset value of the Trust Fee as a percentage of net asset value of the Trust ---------------------------- --------------------------------------------------- $0 - $499,999,999 10/100 of 1% per annum plus or minus the Adjustment Amount $500,000,000 - $2,499,999,999 8/100 of 1% per annum plus or minus the Adjustment Amount $2,500,000,000 - and above 6/100 of 1% per annum plus or minus the Adjustment Amount
12 14 SPDR TRUST SERIES 1 NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2000 (CONTINUED) -------------------------------------------------------------------------------- NOTE 3 -- TRANSACTIONS WITH THE TRUSTEE AND SPONSOR - (CONTINUED) The Adjustment Amount is the sum of (a) the excess or deficiency of transaction fees received by the Trustee, less the expenses incurred in processing orders for creation and redemption of SPDRs and (b) the amounts earned by the Trustee with respect to the cash held by the Trustee for the benefit of the Trust. During the year ended September 30, 2000, the Adjustment Amount reduced the Trustee's fee by $2,387,476. The Adjustment Amount included a deficiency of net transaction fees from processing orders of ($247,500) and a Trustee earnings credit of $2,634,976. For the period from October 1, 1999 through February 29, 2000, State Street Bank and Trust Company (the "Trustee") agreed to reimburse the Trust for, or assume, the ordinary operating expenses of the Trust, before the Trustee earnings credit, which exceeded 18.00/100 of 1% per annum of the daily net asset value of the Trust. Effective March 1, 2000, the Trustee contractually agreed that, for the next two years, it will waive an additional portion of its fee, before the Trustee earnings credit, as needed, so that the total operating expenses will not exceed 12.00/100 of 1% per annum of the daily net asset value of the Trust. The amount of such reimbursement by the Trustee for the year ended September 30, 2000 was $5,472,178. The Trust has entered into a Memorandum of Agreement with Standard and Poor's ("S&P"), the American Stock Exchange LLC (the "AMEX"), and PDR Services (the "Sponsor") pursuant to which the Trust has obtained a sub-license to use certain S&P marks. The Memorandum of Agreement requires the Trust to pay annually a sub-license fee to the S&P equal to the greater of: (i) 0.03% of the Trust's daily average net assets of the Trust plus a volume based fee ranging from $0.03 to $0.04 per round lot trade of the average daily trading volume, or (ii) $125,000, the minimum annual fee. NOTE 4 -- TRUST TRANSACTIONS IN SPDRS Transactions in SPDRs were as follows:
YEAR ENDED YEAR ENDED YEAR ENDED SEPTEMBER 30, 2000 SEPTEMBER 30, 1999 SEPTEMBER 30, 1998 SPDRs Amount SPDRs Amount SPDRs Amount ----------- ---------------- ------------ --------------- ----------- --------------- SPDRs sold 168,550,000 $ 24,126,960,016 136,600,000 $ 15,863,560,260 123,400,000 $ 12,952,751,200 Dividend reinvestment SPDRs issued 3,838 542,719 3,564 446,517 3,020 309,869 SPDRs redeemed (102,350,000) (14,559,250,419) (113,200,000) (13,216,685,874) (86,900,000) (9,102,040,780) Net income equalization -- (5,040,960) -- (3,650,519) -- (6,830,907) ----------------------- ------------ ---------------- ------------ ---------------- ----------- ---------------- Net increase 66,203,838 $ 9,563,211,356 23,403,564 $ 2,643,670,384 36,503,020 $ 3,844,189,382 ============ ================ ============ ================ =========== ================
13 15 SPDR TRUST SERIES 1 NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2000 (CONTINUED) -------------------------------------------------------------------------------- NOTE 4 -- TRUST TRANSACTIONS IN SPDRS - (CONTINUED) Except for under the Trust's dividend reinvestment plan, SPDRs are issued and redeemed by the Trust only in Creation Unit size aggregations of 50,000 SPDRs. Such transactions are only permitted on an in-kind basis, with a separate cash payment which is equivalent to the undistributed net investment income per SPDR (income equalization) and a balancing cash component to equate the transaction to the net asset value per unit of the Trust on the transaction date. A transaction fee of $3,000 is charged in connection with each creation or redemption of Creation Units through the SPDR Clearing Process per Participating party per day, regardless of the number of Creation Units created or redeemed. Transaction fees are received by the Trustee and used to offset the expense of processing orders. NOTE 5 -- INVESTMENT TRANSACTIONS For the year ended September 30, 2000, the Trust had in-kind contributions, in-kind redemptions, purchases and sales of investment securities of $21,651,806,544, $12,107,493,424, $1,648,111,098, and $1,511,874,679, respectively. At September 30, 2000, the cost of investments for federal income tax purposes was $25,381,860,676, accordingly, gross unrealized appreciation was $2,050,196,977 and gross unrealized depreciation was $3,154,278,834, resulting in net unrealized depreciation of $1,104,081,857. 14 16 SPDR TRUST SERIES 1 REPORT OF INDEPENDENT ACCOUNTANTS -------------------------------------------------------------------------------- To the Trustee and Unitholders of SPDR Trust Series 1 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 SPDR Trust Series 1 (the "Trust") at September 30, 2000, 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 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 auditing standards generally accepted in the United States of America, which 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 management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at September 30, 2000 by correspondence with the custodian, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Boston, Massachusetts November 20, 2000 15 17 (This page has been left blank intentionally.) 18 SPDR TRUST SERIES 1 -------------------------------------------------------------------------------- SPONSOR ------- PDR Services LLC c/o American Stock Exchange LLC 86 Trinity Place New York, NY 10006 TRUSTEE ------- State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110 DISTRIBUTOR ----------- ALPS Mutual Funds Services, Inc. 370 17th Street, Suite 3100 Denver, CO 80202 INDEPENDENT ACCOUNTANTS ----------------------- PricewaterhouseCoopers LLP 160 Federal Street Boston, MA 02110 LEGAL COUNSEL ------------- Carter, Ledyard & Milburn 2 Wall Street New York, NY 10005