<PAGE> 1
THE SELECT SECTOR SPDR TRUST
[SELECT SECTOR SPDRs LOGO]
SEMI-ANNUAL REPORT
MARCH 31, 2000
[SELECT SECTOR SPDRs LOGO]
Benchmark Sector-Based Equity Portfolios of Companies in the S&P 500
<PAGE> 2
THE SELECT SECTOR SPDR TRUST [LOGO] SEMI-ANNUAL REPORT
SELECT SECTOR SPDR FUNDS
Select Sector SPDR Funds are unique investments that unbundle the benchmark S&P
500 and give you ownership in particular sectors or groups of industries that
are represented by a specified Select Sector Index. Through a single share,
investors can buy or sell any of nine major industry sectors that make up the
S&P 500 much as they buy or sell a share of stock. Select Sector SPDR Fund
shares are different from the shares of conventional mutual funds. Select Sector
SPDRs trade on the American Stock Exchange.
NINE SELECT SECTOR SPDR FUNDS
Shares are available for exchange trading in the following Funds of the Select
Sector SPDR Trust:
<TABLE>
<S> <C>
THE BASIC INDUSTRIES SELECT SECTOR SPDR FUND XLB
THE CONSUMER SERVICES SELECT SECTOR SPDR FUND XLV
THE CONSUMER STAPLES SELECT SECTOR SPDR FUND XLP
THE CYCLICAL/TRANSPORTATION SELECT SECTOR SPDR FUND XLY
THE ENERGY SELECT SECTOR SPDR FUND XLE
THE FINANCIAL SELECT SECTOR SPDR FUND XLF
THE INDUSTRIAL SELECT SECTOR SPDR FUND XLI
THE TECHNOLOGY SELECT SECTOR SPDR FUND XLK
THE UTILITIES SELECT SECTOR SPDR FUND XLU
</TABLE>
Each of these Funds is designed to, before expenses, closely track the price
performance and dividend yield of a Select Sector Index. Each Fund's portfolio
is comprised principally of shares of constituent companies in the S&P 500. Each
stock in the S&P 500 is allocated to only one Select Sector Index. The combined
companies of the nine Select Sector Indexes represent all of the companies in
the S&P 500. Of course, each Select Sector SPDR Fund can be expected to move up
or down in value with its underlying Select Sector Index.
OBJECTIVE
Select Sector SPDR Funds are designed to provide investors with an affordable
way to invest in a portfolio of equity securities in a sector or group of
industries in a single trade. Select Sector SPDR Funds allow you to custom
tailor asset allocations to fit your particular investment needs or goals. One
Fund may complement another; individual Select Sector SPDR Funds can be used to
increase exposure to certain industries that may be outperforming the market or
to hedge other holdings in your portfolio. Although an individual Select Sector
SPDR Fund may bear a higher level of risk than a broad-market fund, because of
less diversity, sector investments may also offer opportunities for returns
greater than an investment in the entire S&P 500 Index.
<PAGE> 3
THE SELECT SECTOR SPDR TRUST [LOGO] SEMI-ANNUAL REPORT
CHAIRMAN'S LETTER TO SHAREHOLDERS
DEAR SHAREHOLDERS:
We are pleased to present the semi-annual report for The Select Sector SPDR
Trust. For the first six months of this fiscal year net assets have increased by
$1.5 billion, bringing the Trust's total net assets to $2.9 billion as of March
31, 2000. Our largest fund, The Technology Select Sector SPDR Fund, reached net
assets of $1.5 billion as of March 31, 2000. As a result of the Trust's
continued success, management has decided to lower the expenses of the Trust for
at least the next twelve months. Effective May 17, 2000, each Fund's expenses
will be reduced by approximately 22 basis points. When these expense reductions
are applied to the Fund's net assets as of March 31, 2000, the expenses for each
Fund range from 27 to 28 basis points. We believe this expense reduction will
contribute to the success the Trust has experienced.
The US equity markets produced extraordinary returns in 1999, with equity
returns driven primarily by a group of companies in the technology and
telecommunication sectors. In December, interest rates rose throughout the
developed world, with the exception of Japan. Many investors perceived these
higher interest rates as a potential threat to the continued growth of both
technology and telecommunication companies as well as those industries that have
had limited growth in the recent bull market, such as manufacturing, basic
industries and electric utilities. These interest rate fears, along with growing
concerns over the high-prices of technology shares helped to create increased
volatility in the overall US equity markets during the first quarter of 2000,
despite strong US and global economic fundamentals.
Over the past six months the Technology Sector has dominated the headlines as
well as the S&P 500 Index. The large index weight of the Technology Sector
helped to drive the S&P 500's success. For the six-month period ending March 31,
2000, the S&P posted a return of 17.51%, with the Technology Sector posting a
return of 46.43%. The weakest performing sector for the period was the Utilities
Sector with a return of -8.39%.
In the Management's Discussion and Analysis pages that follow, we have provided
a brief overview of the performance of each of The Select Sector SPDR Funds. We
continue to appreciate your support of The Select Sector SPDR Trust and look
forward to serving your investment allocation needs in the future.
Sincerely,
/s/ John W. English
John W. English
Chairman of the Board
1
<PAGE> 4
THE SELECT SECTOR SPDR TRUST [LOGO] SEMI-ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
THE BASIC INDUSTRIES SELECT SECTOR SPDR FUND
The Basic Industries Select Sector SPDR Fund seeks to replicate the total return
of the Basic Industries Select Sector of the S&P 500 Index. To accomplish this,
the Basic Industries Select Sector SPDR Fund utilizes a "passive" investment
approach and attempts to approximate the investment performance of its benchmark
Select Sector Index, before expenses, by investing in a portfolio of stocks that
seek to replicate its relevant Select Sector Index. For the six-month period
ending March 31, 2000, the Fund had a return of -1.89% as compared to the Basic
Industries Select Sector Index return of -1.46% and the S&P 500 Index return of
17.51%. The best performing industry in the index was Chemicals, which returned
over 26.00% for the period. However, even within this industry, several
Specialty Chemical firms -- such as Hercules Inc. and WR Grace experienced
difficulties and posted negative returns. The worst performing industry for the
six-month period was Gold and Precious Metals whose four constituents posted
returns ranging from -13.05% for Newmont Mining Corp. to -45.04% for Placer Done
Inc. The Basic Industries Select Sector SPDR Fund consisted of 51 companies as
of March 31, 2000.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT BASIC INDUSTRIES SELECT
SECTOR SPDR FUND
[PERFORMANCE CHART]
<TABLE>
<CAPTION>
BASIC INDUSTRIES SELECT SECTOR
SPDR FUND S&P 500 INDEX
------------------------------ -------------
<S> <C> <C>
12/16/98 10000.00 10000.00
12/31/98 10429.00 10584.00
03/31/99 10567.00 11111.00
06/30/99 12639.00 11895.00
09/30/99 11559.00 11152.00
12/31/99 12948.90 12810.00
3/31/00 11341.90 13104.00
</TABLE>
TOP FIVE HOLDINGS
<TABLE>
<CAPTION>
DUPONT (E.I.) DE MONSANTO ALCOA DOW INTERNATIONAL
DESCRIPTION NEMOURS & CO. COMPANY INCORPORATED CHEMICAL CO. PAPER CO.
----------- ---------------- ----------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Value $19,200,023 $11,358,222 $8,989,541 $8,690,448 $6,152,452
% of Net Assets 16.64% 9.84% 7.79% 7.53% 5.33%
</TABLE>
2
<PAGE> 5
THE SELECT SECTOR SPDR TRUST [LOGO] SEMI-ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
THE CONSUMER SERVICES SELECT SECTOR SPDR FUND
The Consumer Services Select Sector SPDR Fund seeks to replicate the total
return of the Consumer Services Select Sector of the S&P 500 Index. To
accomplish this, the Consumer Services Select Sector SPDR Fund utilizes a
"passive" or indexing investment approach and attempts to approximate the
investment performance of its benchmark Select Sector Index, before expenses, by
investing in a portfolio of stocks that seek to replicate the relevant Select
Sector Index. For the six-month period ending March 31, 2000, the Fund had a
return of 15.48% as compared to the Consumer Services Select Sector Index return
of 15.77% and the S&P 500 Index return of 17.51%. Two of the three largest
stocks in this sector, Disney and Time Warner, were also the best performing
stocks within this sector. Time Warner had the highest return at nearly 65% with
Disney close behind at 60%. Time Warner's return was buoyed by their impending
merger with AOL. The worst performing stock in this sector was Service Corp.,
which had declined over 70%. This stock was removed from the S&P 500 index in
mid March due to lack of representation. Markets as a whole have been very
volatile and the Consumer Services sector is not an exception to these broad
market swings. In fact, declining and gaining issues were equally split in this
Fund. The majority of these movements were in the double digits. In nearly every
case, this volatility was also found within the sub-sectors of this Fund; as
evidenced by multiple cases of same-industry firms having dramatically different
returns. As of March 31, 2000, the Consumer Services Select Sector SPDR Fund
consisted of 46 companies.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT CONSUMER SERVICES SELECT
SECTOR SPDR FUND
[PERFORMANCE CHART]
<TABLE>
<CAPTION>
CONSUMER SERVICES SELECT SECTOR
SPDR FUND S&P 500 INDEX
------------------------------- -------------
<S> <C> <C>
12/16/98 10000.00 10000.00
12/31/98 10817.00 10584.00
03/31/99 11659.00 11111.00
06/30/99 12297.00 11895.00
09/30/99 11203.00 11152.00
12/31/99 12987.90 12810.00
3/31/00 12937.20 13104.00
</TABLE>
TOP FIVE HOLDINGS
<TABLE>
<CAPTION>
TIME WARNER WALT DISNEY MCDONALDS MEDIAONE GROUP COMCAST
DESCRIPTION INCORPORATED COMPANY CORPORATION INCORPORATED CORPORATION
----------- ------------ ----------- ----------- -------------- -----------
<S> <C> <C> <C> <C> <C>
VALUE $15,699,500 $10,457,200 $6,204,649 $6,050,133 $4,512,432
% OF NET ASSETS 18.19% 12.11% 7.19% 7.01% 5.23%
</TABLE>
3
<PAGE> 6
THE SELECT SECTOR SPDR TRUST [LOGO] SEMI-ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
THE CONSUMER STAPLES SELECT SECTOR SPDR FUND
The Consumer Staples Select Sector SPDR Fund seeks to replicate the total return
of the Consumer Staples Select Sector of the S&P 500 Index. To accomplish this,
the Consumer Staples Select Sector SPDR Fund utilizes a "passive" or indexing
investment approach and attempts to approximate the investment performance of
its benchmark Select Sector Index, before expenses, by investing in a portfolio
of stocks that seek to replicate the relevant Select Sector Index. As a result,
the Consumer Staples Select Sector Fund underperformed the S&P 500 Index during
the period. For the six-month period ending March 31, 2000, the Fund had a
return of -6.01% as compared to the Consumer Staples Select Sector Index return
of -5.77% and the S&P 500 Index return of 17.51%. This was a reflection of
investors seeking so-called "New Economy" issues over "Old Economy" companies,
many of which may be found in the Consumer Staples sector. Rite-Aid continued to
lead the underperformers in the sector. The company ended the period at
approximately $5 per share, down from a high of $51 per share earlier in the
year as more negative financial surprises were unearthed. Procter & Gamble also
tumbled during the period after it caught analysts and investors off guard with
a profit warning. The company lost nearly 40% during the time period but much of
the loss (over 30%) occurred the day after its earnings warning. Tobacco stocks
Philip Morris and UST also had poor performance during the period as the
industry remained open to significant punitive damages after last July's
sweeping liability verdict. On the positive side, drug makers and
biotechnology-related companies enjoyed positive returns during the period.
Warner Lambert shares rose as it came to terms to be acquired by Pfizer to form
the second largest drug maker in the world. The other top performers during the
period were Medtronic, Pharmacia, Biomet and American Home Products, who each
had returns of over 30% during the period. As of March 31, 2000, the Consumer
Staples Select Sector SPDR Fund consisted of 68 companies.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT CONSUMER STAPLES SELECT
SECTOR SPDR FUND
[PERFORMANCE CHART]
<TABLE>
<CAPTION>
CONSUMER STAPLES SELECT SECTOR
SPDR FUND S&P 500 INDEX
------------------------------ -------------
<S> <C> <C>
12/16/98 10000.00 10000.00
12/31/98 10451.00 10584.00
03/31/99 10193.00 11111.00
06/30/99 9890.00 11895.00
09/30/99 8755.00 11152.00
12/31/99 8916.25 12810.00
3/31/00 8227.62 13104.00
</TABLE>
TOP FIVE HOLDINGS
<TABLE>
<CAPTION>
MERCK AND PFIZER COCA-COLA BRISTOL-MYERS JOHNSON &
DESCRIPTION COMPANY, INC. INCORPORATED COMPANY SQUIBB CO. JOHNSON CO.
----------- ------------- ------------ ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Value $20,996,510 $20,469,406 $16,765,793 $16,563,278 $14,100,428
% of Net Assets 8.11% 7.91% 6.48% 6.40% 5.45%
</TABLE>
4
<PAGE> 7
THE SELECT SECTOR SPDR TRUST [LOGO] SEMI-ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
THE CYCLICAL/TRANSPORTATION SELECT SECTOR SPDR FUND
The Cyclical/Transportation Select Sector SPDR Fund seeks to replicate the total
return of the Cyclical/Transportation Select Sector of the S&P 500 Index. To
accomplish this, the Cyclical/ Transportation Select Sector SPDR Fund utilizes a
"passive" or indexing investment approach and attempts to approximate the
investment performance of its benchmark Select Sector Index, before expenses, by
investing in a portfolio of stocks that seek to replicate the relevant Select
Sector Index. The Fund's performance has been favorable over the last six months
as the Cyclical/ Transportation Select Sector Index was able to enjoy high
earnings growth in the period. For the six-month period ending March 31, 2000,
the Fund had a return of 11.72% as compared to the Cyclical/Transportation
Select Sector Index return of 11.98% and the S&P 500 Index return of 17.51%. The
bulk of the performance came mainly as a result of an exceptionally strong
fourth quarter for department stores and specialty retail stores. These
industries benefited greatly from the strong economy in 1999, which translated
into increased consumer spending over the holiday period. Wal-Mart, Home Depot
and Gap, Inc. each had returns in excess of 40% for the fourth quarter 1999 and
together their returns contributed over 17% to the return of the Cyclical/
Transportation sector in the quarter. The impressive gains posted before the
holidays were offset somewhat during the first quarter 2000 as uncertainties in
the economy affected consumer spending. Many department stores and specialty
retail stores gave up a portion of their large gains and railroad stocks
continued their weak growth. As of March 31, 2000, the Cyclical/Transportation
Select Sector SPDR Fund consisted of 70 companies.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT CYCLICAL/TRANSPORTATION
SELECT SECTOR SPDR FUND
[PERFORMANCE CHART]
<TABLE>
<CAPTION>
CYCLICALS/TRANSPORTATION SELECT
SECTOR SPDR FUND S&P 500 INDEX
------------------------------- -------------
<S> <C> <C>
12/16/98 10000.00 10000.00
12/31/98 10705.00 10584.00
03/31/99 11652.00 11111.00
06/30/99 12145.00 11895.00
09/30/99 10717.00 11152.00
12/31/99 12675.20 12810.00
3/31/00 11972.80 13104.00
</TABLE>
TOP FIVE HOLDINGS
<TABLE>
<CAPTION>
WAL-MART STORES HOME DEPOT FORD MOTOR GENERAL MOTORS GAP
DESCRIPTION INCORPORATED INCORPORATED COMPANY CORPORATION INCORPORATED
----------- --------------- ------------ ---------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Value $24,620,577 $19,736,677 $7,450,006 $7,164,275 $5,743,979
% of Net Assets 19.20% 15.39% 5.81% 5.59% 4.48%
</TABLE>
5
<PAGE> 8
THE SELECT SECTOR SPDR TRUST [LOGO] SEMI-ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
THE ENERGY SELECT SECTOR SPDR FUND
The Energy Select Sector SPDR Fund seeks to replicate the total return of the
Energy Select Sector of the S&P 500 Index. To accomplish this, the Energy Select
Sector SPDR Fund utilizes a "passive" or indexing investment approach and
attempts to approximate the investment performance of its benchmark Select
Sector Index, before expenses, by investing in a portfolio of stocks that seek
to replicate the relevant Select Sector Index. For the six-month period ending
March 31, 2000, the Fund had a return of 7.46% as compared to the Energy Select
Sector Index return of 7.77% and the S&P 500 Index return of 17.51%. The Fund
was led by a strong performance by Enron Corporation, which had a sizzling
return of just under 83% over this period. This stock alone was responsible for
over half of the total sector return. Other top gainers included Rowan Companies
with an equally impressive 81.2% return, Schlumberger Ltd. 33.6%, and Anadarko
Petroleum 26.9%. Laggards for the six-month period included McDermott
International -54.1%, Unocal Corp -18.7%, and Texaco -13.4%. The Energy sector
was spurred by the highest oil prices in several years. As OPEC was limiting the
supply of oil available for consumption, the United States was suffering through
an extended period of bitterly cold weather. The Northeast was hit especially
hard as consumers in that region saw their oil bills rise to nearly $2.00 per
gallon. Gasoline prices also increased steadily across the country reaching
levels between $1.50 to $2.00 per gallon. This increase in both demand and
prices helped to bolster the performance of the sector as a whole during the
period. It also sparked talk among government officials about possibly tapping
into the nation's reserves and/or eliminating the gasoline tax as alternatives
to combat this sharp rise in prices. As the quarter drew to a close, the member
nations of OPEC agreed to marginally increase the supply of oil in order to help
lower prices as well. As of March 31, 2000, the Energy Select Sector SPDR Fund
consisted of 31 companies.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT ENERGY SELECT SECTOR SPDR
FUND
[PERFORMANCE CHART]
<TABLE>
<CAPTION>
ENERGY SELECT SECTOR SPDR FUND S&P 500 INDEX
------------------------------ -------------
<S> <C> <C>
12/16/98 10000.00 10000.00
12/31/98 9835.00 10584.00
03/31/99 10483.00 11111.00
06/30/99 11993.00 11895.00
09/30/99 11791.00 11152.00
12/31/99 11706.60 12810.00
3/31/00 12671.80 13104.00
</TABLE>
TOP FIVE HOLDINGS
<TABLE>
<CAPTION>
ROYAL DUTCH
EXXON MOBIL PETROLEUM CHEVRON ENRON SCHLUMBERGER
DESCRIPTION CORPORATION CORPORATION CORPORATION CORPORATION LIMITED
----------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Value $48,081,588 $34,624,362 $17,516,074 $9,726,861 $9,410,724
% of Net Assets 22.31% 16.07% 8.13% 4.51% 4.37%
</TABLE>
6
<PAGE> 9
THE SELECT SECTOR SPDR TRUST [LOGO] SEMI-ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
THE FINANCIAL SELECT SECTOR SPDR FUND
The Financial Select Sector SPDR Fund seeks to replicate the total return of the
Financial Select Sector of the S&P 500 Index. To accomplish this, the Financial
Select Sector SPDR Fund utilizes a "passive" investment approach and attempts to
approximate the investment performance of its benchmark Select Sector Index,
before expenses, by investing in a portfolio of stocks that seek to replicate
the relevant Select Sector Index. While the S&P 500 Index posted a strong 17.51%
return for the six-month period ending March 31, 2000, most of the return was
provided by the Technology Sector. Only a handful of Sector Indexes provided
positive returns for the period. Fortunately, the Financial Select Sector SPDR
Index was one of the handful of Select Sector Indexes that did post positive
returns. The Fund returned 10.93% for the six months as compared with the
Financial Select Sector Index return of 11.15%. Very impressive returns by
Morgan Stanley Dean Witter & Co (over 86%) and Citigroup Inc. (almost 37%)
resulted in the Diversified Financial industry providing the strongest industry
return for the Financial Select Sector (+20.87%) despite the extremely poor
returns of other Diversified Financial industry firms such as Associates First
Capital, which experienced a total return for the period of -40.26%. The only
Financial Select Sector industry to post a negative six-month return was the
Savings & Loan Industry. Golden West Financial Corporation returned -4.5% and
Washington Mutual Inc. provided a total return of -7.59%. As of March 31, 2000,
the Financial Select SPDR Fund consisted of 70 companies.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT FINANCIAL SELECT SECTOR
SPDR FUND
[PERFORMANCE CHART]
<TABLE>
<CAPTION>
FINANCIAL SELECT SECTOR SPDR
FUND S&P 500 INDEX
---------------------------- -------------
<S> <C> <C>
12/16/98 10000.00 10000.00
12/31/98 10597.00 10584.00
03/31/99 11371.00 11111.00
06/30/99 11925.00 11895.00
09/30/99 10097.00 11152.00
12/31/99 10956.10 12810.00
3/31/00 11194.80 13104.00
</TABLE>
TOP FIVE HOLDINGS
<TABLE>
<CAPTION>
AMERICAN MORGAN STANLEY, CHASE
CITIGROUP INTERNATIONAL DEAN WITTER, DISCOVER BANK AMERICA MANHATTAN
DESCRIPTION INCORPORATED GROUP INCORPORATED AND COMPANY CORPORATION CORPORATION
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VALUE
$56,691,421 $48,056,265 $26,346,808 $25,377,705 $20,384,960
-------------------------------------------------------------------------------------------------------------
% OF NET ASSETS 12.20% 10.34% 5.67% 5.46% 4.39%
</TABLE>
7
<PAGE> 10
THE SELECT SECTOR SPDR TRUST [LOGO] SEMI-ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
THE INDUSTRIAL SELECT SECTOR SPDR FUND
The Industrial Select Sector SPDR Fund seeks to replicate the total return of
the Industrial Select Sector of the S&P 500 Index. To accomplish this, the
Industrial Select Sector SPDR Fund utilizes a "passive" or indexing investment
approach and attempts to approximate the investment performance of its benchmark
Select Sector Index, before expenses, by investing in a portfolio of stocks that
seek to replicate the relevant Select Sector Index. For the six-month period
ending March 31, 2000, the Fund had a return of 2.04% as compared to the
Industrial Select Sector Index return of 2.36%. This represents a significant
underperformance relative to the S&P 500 Index's return of 17.51%. On a whole,
stocks in this sector had a very rough time during this six-month period. Over
82% of the names declined during this time frame. Fueling this decline were
fears regarding possible currency devaluations in countries where Industrial
Select Sector companies also have business; as well as possible project delays.
The two worst performing stocks were Allied Waste and Foster Wheeler. Both of
these issues were down approximately 43%.
Despite all of the declining issues, the Fund still had a positive return due to
two stocks. One of these was General Electric, far and away the largest stock in
this index, which had a positive return of 32% during this time period. The
other positive contributor was Corning which had a return of 184%. Continued
demand for fiber optics was the driving force behind this return. As of March
31, 2000, the Industrial Select Sector SPDR Fund consisted of 30 companies.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT INDUSTRIAL SELECT SECTOR
SPDR FUND
[PERFORMANCE CHART]
<TABLE>
<CAPTION>
INDUSTRIAL SELECT SECTOR SPDR
FUND S&P 500 INDEX
----------------------------- -------------
<S> <C> <C>
12/16/98 10000.00 10000.00
12/31/98 10759.00 10584.00
03/31/99 11010.00 11111.00
06/30/99 13153.00 11895.00
09/30/99 12740.00 11152.00
12/31/99 13223.30 12810.00
3/31/00 13001.30 13104.00
</TABLE>
TOP FIVE HOLDINGS
<TABLE>
<CAPTION>
GENERAL TYCO HONEYWELL MINNESOTA MINING
ELECTRIC LABORATORIES CORNING INTERNATIONAL AND MANUFACTURING
DESCRIPTION COMPANY INCORPORATED INCORPORATED INCORPORATED COMPANY
----------- ----------- ------------ ------------ ------------- -----------------
<S> <C> <C> <C> <C> <C>
Value $14,004,431 $6,712,577 $4,507,202 $3,804,933 $2,805,837
% of Net Assets 22.45% 10.76% 7.23% 6.10% 4.50%
</TABLE>
8
<PAGE> 11
THE SELECT SECTOR SPDR TRUST [LOGO] SEMI-ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
THE TECHNOLOGY SELECT SECTOR SPDR FUND
The Technology Select Sector SPDR Fund seeks to replicate the total return of
the Technology Select Sector of the S&P 500 Index. To accomplish this, the
Technology Select Sector SPDR Fund utilizes a "passive" or indexing investment
approach and attempts to approximate the investment performance of its benchmark
Select Sector Index, before expenses, by investing in a portfolio of stocks that
seek to replicate the relevant Select Sector Index. It comes as no surprise that
the Technology Select Sector remained the best performing Select Sector SPDR
Fund. For the six-month period ending March 31, 2000, the Fund had a return of
46.14% as compared to the Technology Select Sector Index return of 46.43% and
the S&P 500 Index return of 17.51%. Many of the new economy stocks that have
been driving the wonderful returns in the US equity market are constituents of
the Technology Select Sector.
The dominating stock in the Technology Select Sector for the six-month period
ending March 31, 2000 was Cisco Systems. Cisco posted a return of 125.52% during
that period. Although it did not post the highest return in the Sector, its
large weighting in the Sector, approximately 10%, enabled it to be the driving
force behind the sector return. At one point in March, Cisco eclipsed Microsoft
in market capitalization and for part of one trading day was the largest
company, as defined by capitalization, in the S&P 500 Index.
Other companies that helped Cisco push the Technology Select Sector to the top
were also S&P 500 Index top ten capitalized companies. Oracle posted a return of
243.13% and made up approximately 4.37% of the Sector. Intel recorded a return
of 77.62% for the time period while comprising 8.66% of the Sector. Overall the
best performing stock in the Technology Select Sector for the six-month period
ending March 31, 2000 was Network Appliance which posted an impressive return of
362.13%.
Although the Technology Select Sector has basked in the glory of some of the
market's highest flying stocks, not every company has had stellar performance.
Lucent Technologies, for example, found out how unforgiving investors can be
when the company announced it would miss first quarter earnings. In January 2000
after the announcement was made, Lucent lost over 28% of its market
capitalization in one trading day. The company's stock did recover somewhat and
recorded a return of -5.53% for the six-month period ending March 31, 2000. That
return coupled with the size of the security in the Sector, 3.80%, dragged the
performance of the Technology Select Sector down. As of March 31, 2000, the
Technology Select Sector Fund consisted of 93 companies.
9
<PAGE> 12
THE SELECT SECTOR SPDR TRUST [LOGO] SEMI-ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT TECHNOLOGY SELECT SECTOR
SPDR FUND
[PERFORMANCE CHART]
<TABLE>
<CAPTION>
TECHNOLOGY SELECT SECTOR SPDR
FUND S&P 500 INDEX
----------------------------- -------------
<S> <C> <C>
12/16/98 10000.00 10000.00
12/31/98 10851.00 10584.00
03/31/99 12189.00 11111.00
06/30/99 13445.00 11895.00
09/30/99 13700.00 11152.00
12/31/99 18010.50 12810.00
03/31/00 20021.00 13104.00
</TABLE>
TOP FIVE HOLDINGS
<TABLE>
<CAPTION>
INTERNATIONAL
BUSINESS
MICROSOFT CISCO SYSTEMS INTEL ORACLE MACHINES
DESCRIPTION CORPORATION INCORPORATED CORPORATION CORPORATION CORPORATION
----------- ------------ ------------- ------------ ----------- ---------------------
<S> <C> <C> <C> <C> <C>
Value $157,611,462 $150,766,488 $125,634,318 $63,384,252 $60,612,706
% of Net Assets 10.86% 10.38% 8.65% 4.37% 4.17%
</TABLE>
10
<PAGE> 13
THE SELECT SECTOR SPDR TRUST [LOGO] SEMI-ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
THE UTILITIES SELECT SECTOR SPDR FUND
The Utilities Select Sector SPDR Fund seeks to replicate the total return of the
Utilities Select Sector of the S&P 500 Index. To accomplish this, the Utilities
Select Sector SPDR Fund utilizes a "passive" or indexing investment approach and
attempts to approximate the investment performance of its benchmark Select
Sector Index, before expenses, by investing in a portfolio of stocks that seek
to replicate the relevant Select Sector Index. Performance has been less than
favorable throughout the past two quarters as the Utilities Select Sector
continued to be strongly affected by problems with Telephone and Electric
Utilities Companies. For the six-month period ending March 31, 2000, the Fund
had a return of -8.42% as compared to the Utilities Select Sector Index return
of -8.39% and the S&P 500 Index return of 17.51%. Over 4% of this negative
performance was attributed to the Telecom industry. The two largest companies in
the Utilities Sector Index, SBC Communications Inc. and Bell Atlantic Corp.
experienced six-month returns of -17.03% and -8.05%, respectively. At the same
time, the Electric Utilities industry added an additional 4.80% of negative
performance, as many of the largest names in that industry had negative returns
of over 25 percent. Unfortunately, these negative returns were unable to find a
positive offset as only 7 companies in the fund experienced positive performance
for this time period. As of March 31, 2000, the Utilities Sector SPDR Fund
consisted of 41 companies.
[Performance Chart]
COMPARISON OF CHANGE IN VALUE OF A 10,000 INVESTMENT CONSUMER SERVICES SELECT
SECTOR SPDR FUND
<TABLE>
<CAPTION>
UTILITIES SELECT SECTOR SPDR
FUND S&P 500 INDEX
---------------------------- -------------
<S> <C> <C>
12/16/98 10000.00 10000.00
12/31/98 10369.00 10584.00
03/31/99 9239.00 11111.00
06/30/99 10818.00 11895.00
09/30/99 10366.00 11152.00
12/31/99 10021.70 12810.00
3/31/00 9490.40 13104.00
</TABLE>
TOP FIVE HOLDINGS
<TABLE>
<CAPTION>
SBC
COMMUNICATIONS BELL ATLANTIC BELL SOUTH GTE U.S. WEST
DESCRIPTION INCORPORATED CORPORATION CORPORATION CORPORATION INCORPORATED
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VALUE $16,142,154 $10,961,435 $3,463,289 $3,355,957 3,276,114
----------------------------------------------------------------------------------------------------------------
% OF NET ASSETS 22.16% 15.05% 4.76% 4.61% 4.50%
</TABLE>
11
<PAGE> 14
THE BASIC INDUSTRIES SELECT SECTOR SPDR FUND
SCHEDULE OF INVESTMENTS
MARCH 31, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
COMMON STOCKS -- 99.8%
ALUMINUM -- 11.3%
<S> <C> <C>
Alcan Aluminum Ltd. .......... 76,157 $ 2,579,818
Alcoa, Inc. .................. 127,965 8,989,541
Reynolds Metals Co. .......... 22,002 1,471,384
-----------
13,040,743
-----------
CHEMICALS -- 51.8%
Air Products & Chemicals, Inc. 79,697 2,266,383
Dow Chemical Co. ............. 76,232 8,690,448
Du Pont (E.I.) de Nemours .... 363,121 19,200,023
Eastman Chemical Co. ......... 27,187 1,237,008
Ecolab, Inc. ................. 45,076 1,653,726
Engelhard Corp. .............. 43,698 660,932
FMC Corp. (a) ................ 10,685 603,703
Great Lakes Chemical Corp. ... 19,965 678,810
Hercules, Inc. ............... 36,941 595,674
Monsanto Co. ................. 220,548 11,358,222
PPG Industries, Inc. ......... 60,364 3,157,792
Praxair, Inc. ................ 55,225 2,298,741
Rohm & Haas Co. .............. 76,085 3,395,293
Sigma-Aldrich Corp. .......... 35,044 941,807
Union Carbide Corp. .......... 46,579 2,716,138
W.R. Grace & Co. (a) ......... 24,919 316,160
-----------
59,770,860
-----------
CONSTRUCTION -- 1.4%
Vulcan Materials Co. ......... 34,822 1,595,283
-----------
CONTAINERS -- 3.6%
Ball Corp. ................... 10,527 363,839
Bemis Co., Inc. .............. 18,172 670,093
Crown Cork & Seal Co., Inc. .. 45,003 720,048
Owens-Illinois, Inc. (a) ..... 52,216 881,145
Pactiv Corp. (a) ............. 59,506 520,678
Temple-Inland, Inc. .......... 19,370 964,868
-----------
4,120,671
-----------
GOLD -- 4.3%
Barrick Gold Corp. ........... 137,081 2,150,458
Homestake Mining Co. ......... 90,447 542,682
Newmont Mining Corp. ......... 58,271 1,307,456
Placer Dome, Inc. ............ 113,209 919,823
-----------
4,920,419
-----------
MANUFACTURING -- 3.4%
Avery Dennison Corp. ......... 39,169 2,391,757
Sealed Air Corp. (a) ......... 29,062 1,578,430
-----------
3,970,187
-----------
</TABLE>
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
<S> <C> <C>
MACHINERY -- 0.3%
Timken Co. ........................... 21,554 $ 350,252
-------------
METALS/MINING -- 2.8%
Freeport-McMoran Copper
& Gold, Inc. .................... 56,782 684,933
Inco Ltd. ............................ 66,726 1,221,920
Phelps Dodge Corp. ................... 28,169 1,338,027
-------------
3,244,880
-------------
PAPER & FOREST PRODUCTS -- 17.8%
Boise Cascade Corp. .................. 19,833 689,197
Champion International Corp. ......... 33,479 1,782,757
Georgia-Pacific Corp. ................ 59,439 2,351,555
International Paper Co. .............. 143,917 6,152,452
Louisiana-Pacific Corp. .............. 36,999 513,361
Mead Corp. ........................... 35,719 1,247,933
Potlatch Corp. ....................... 10,047 432,021
Westvaco Corp. ....................... 34,894 1,164,587
Weyerhaeuser Co. ..................... 81,641 4,653,537
Willamette Industries, Inc. .......... 38,753 1,554,964
-------------
20,542,364
-------------
STEEL -- 3.1%
Allegheny Technologies, Inc. ......... 32,482 651,670
Bethlehem Steel Corp. (a) ............ 45,579 273,474
Nucor Corp. .......................... 30,283 1,514,150
USX-U.S. Steel Group ................. 30,730 768,250
Worthington Industries, Inc. ......... 31,019 383,860
-------------
3,591,404
-------------
TOTAL COMMON STOCKS --
(Cost $133,495,567) ............. 115,147,063
-------------
SHORT TERM INVESTMENTS -- 0.3%
MONEY MARKET FUND -- 0.3%
AIM Short Term Investment Class
Prime Fund (Cost $305,430) ...... 305 305,430
-------------
TOTAL INVESTMENTS -- 100.1%
(Cost $133,800,997) ............... 115,452,493
OTHER ASSETS AND LIABILITIES -- (0.1)% (81,586)
-------------
NET ASSETS -- 100.0% ................. $ 115,370,907
=============
</TABLE>
(a) Non-income producing security.
See accompanying notes to financial statements
12
<PAGE> 15
THE CONSUMER SERVICES SELECT SECTOR SPDR FUND
SCHEDULE OF INVESTMENTS
MARCH 31, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
<S> <C> <C>
COMMON STOCKS -- 100.1%
ENTERTAINMENT -- 38.4%
Seagram Co. Ltd. (The) ......... 53,967 $ 3,211,037
Time Warner, Inc. .............. 156,995 15,699,500
Viacom, Inc. ................... 71,151 3,753,215
Walt Disney Co. ................ 252,742 10,457,200
----------
33,120,952
----------
FINANCIAL SERVICES -- 2.6%
Cendant Corp. (a) .............. 89,821 1,661,689
H&R Block, Inc. ................ 13,567 607,123
----------
2,268,812
----------
HOTELS -- 5.0%
Carnival Corp. ................. 78,131 1,938,625
Harrah's Entertainment, Inc. (a) 19,567 363,212
Hilton Hotels Corp. ............ 54,190 419,973
Marriott International, Inc. ... 32,634 1,027,971
Mirage Resorts, Inc. (a) ....... 27,199 526,981
----------
4,276,762
----------
INFORMATION SERVICES -- 6.7%
Dun & Bradstreet Corp. ......... 22,027 630,523
IMS Health, Inc. ............... 40,838 691,694
Interpublic Group of Cos., Inc. 35,738 1,688,620
Omnicom Group, Inc. ............ 22,310 2,084,590
Shared Medical Systems ......... 4,505 233,697
Young & Rubicam, Inc. .......... 9,928 466,616
----------
5,795,740
----------
MEDIA -- 20.0%
CBS Corp. (a) .................. 66,199 3,748,518
Clear Channel Communications,
Inc. (a) ................. 42,304 2,921,620
Comcast Corp. .................. 104,033 4,512,432
MediaOne Group, Inc. (a) ....... 74,693 6,050,133
----------
17,232,703
----------
MEDICAL PROVIDERS -- 7.9%
Aetna, Inc. .................... 18,675 1,039,964
Columbia/HCA Healthcare Corp. .. 71,802 1,817,488
Healthsouth Corp. (a) .......... 58,821 327,192
Humana, Inc. (a) ............... 30,054 219,770
</TABLE>
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
<S> <C> <C>
MEDICAL PROVIDERS -- (CONTINUED)
Manor Care, Inc. (a) ................. 17,729 $ 239,341
Quintiles Transnational Corp. (a) .... 18,227 310,998
Tenet Healthcare Corp. ............... 41,312 950,176
United Healthcare Corp. .............. 21,974 1,310,200
Wellpoint Health Networks, Inc. (a) .. 8,909 622,516
---------
6,837,645
---------
PUBLISHING -- 10.7%
American Greetings Corp. ............. 12,144 221,628
Deluxe Corp. ......................... 11,687 309,705
Dow Jones & Co., Inc. ................ 11,998 861,606
Gannett Co., Inc. .................... 35,018 2,464,392
Jostens, Inc. ........................ 6,989 170,357
Knight Ridder, Inc. .................. 11,712 596,580
McGraw-Hill, Inc. .................... 25,456 1,158,248
Meredith Corp. ....................... 8,849 245,007
New York Times Co. ................... 22,465 964,591
R.R. Donnelley & Sons Co. ............ 18,818 394,002
Times Mirror Co. ..................... 8,063 749,355
Tribune Co. .......................... 30,880 1,129,050
---------
9,264,521
---------
RESTAURANTS -- 8.8%
Darden Restaurants, Inc. ............. 19,911 354,665
McDonald's Corp. ..................... 165,182 6,204,649
Tricon Global Restaurants, Inc. (a) .. 20,792 645,851
Wendy's International, Inc. .......... 18,292 369,270
---------
7,574,435
---------
TOTAL COMMON STOCKS --
(Cost $84,115,197) .............. 86,371,570
----------
SHORT TERM INVESTMENTS -- 0.1%
MONEY MARKET FUND -- 0.1%
AIM Short Term Investment Class
Prime Fund (Cost $92,226) ...... 92 92,226
---------
TOTAL INVESTMENTS -- 100.2%
(Cost $84,207,423) .............. 86,463,796
OTHER ASSETS AND LIABILITIES -- (0.2)% (136,945)
----------
NET ASSETS -- 100.0% ................. $ 86,326,851
============
</TABLE>
(a) Non-income producing security.
See accompanying notes to financial statements
13
<PAGE> 16
THE CONSUMER STAPLES SELECT SECTOR SPDR FUND
SCHEDULE OF INVESTMENTS
MARCH 31, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
COMMON STOCKS -- 100.1%
AGRICULTURE -- 0.4%
<S> <C> <C>
Archer Daniels Midland Co. ..... 87,846 $ 911,402
------------
ALCOHOL -- 1.9%
Adolph Coors Co. (Class B) ..... 5,290 252,928
Anheuser-Busch Cos., Inc. ...... 67,255 4,186,624
Brown-Forman Corp. (Class B) ... 9,906 539,258
------------
4,978,810
------------
DRUGS -- 43.5%
Allergan Pharmaceuticals, Inc. . 19,058 952,900
ALZA Corp. (Class A) (a) ....... 14,793 555,662
American Home Products Corp. ... 188,852 10,127,189
Bristol-Myers Squibb Co. ....... 286,810 16,563,278
Cardinal Health, Inc. .......... 40,685 1,866,424
Eli Lilly & Co. ................ 157,720 9,936,360
Mckesson HBOC, Inc. ............ 40,777 856,317
Merck & Co., Inc. .............. 337,972 20,996,510
Pfizer, Inc. ................... 559,847 20,469,406
Pharmacia & Upjohn, Inc. ....... 166,711 9,877,627
Schering-Plough Corp. .......... 212,447 7,807,427
Warner-Lambert Co. ............. 124,194 12,108,915
Watson Pharmaceuticals, Inc. (a) 13,876 550,704
------------
112,668,719
------------
FOOD AND BEVERAGES -- 18.9%
Bestfoods ...................... 40,337 1,888,276
Campbell Soup Co. .............. 61,648 1,895,676
Coca-Cola Co. .................. 357,194 16,765,793
Coca-Cola Enterprises, Inc. .... 61,541 1,326,978
ConAgra, Inc. .................. 71,221 1,290,881
General Mills, Inc. ............ 43,588 1,577,341
H.J. Heinz Co. ................. 51,285 1,788,564
Hershey Foods Corp. ............ 19,995 974,756
Kellogg Co. .................... 58,643 1,502,727
PepsiCo, Inc. .................. 210,533 7,276,547
Quaker Oats Co. ................ 19,300 1,170,063
Ralston-Ralston Purina Co. ..... 43,642 1,194,700
RJR Nabisco Holdings Corp. ..... 47,211 566,532
Sara Lee Corp. ................. 131,378 2,364,804
SUPERVALU, Inc. ................ 20,159 381,761
SYSCO Corp. .................... 47,762 1,704,506
Unilever N.V. (N.Y. Shares) .... 82,649 3,977,483
W.M. Wrigley Jr. Co. ........... 16,709 1,283,460
------------
48,930,848
------------
GROCERY -- 3.0%
Albertson's, Inc. .............. 61,269 1,899,339
Great Atlantic & Pacific Tea Co. 5,535 107,932
Kroger Co. (a) ................. 120,689 2,119,601
Safeway, Inc. (a) .............. 73,594 3,330,128
Winn-Dixie Stores, Inc. ........ 21,147 411,045
------------
7,868,045
------------
HOME PRODUCTS -- 9.6%
Alberto-Culver Co. (Class B) ... 8,101 $ 192,905
Avon Products, Inc. ............ 35,052 1,018,699
</TABLE>
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
<S> <C> <C>
Clorox Co. ...................... 34,163 1,110,298
Colgate-Palmolive Co. ........... 84,275 4,751,003
Fortune Brands, Inc. ............ 23,708 592,700
Gillette Co. .................... 155,073 5,844,314
International Flavors &
Fragrances, Inc. ........... 15,201 532,985
Procter & Gamble Co. ............ 190,258 10,702,012
------------
24,744,916
------------
HOUSEHOLD PRODUCTS -- 2.0%
Fort James Corp. ................ 31,300 688,600
Kimberly-Clark Corp. ............ 80,351 4,499,656
------------
5,188,256
------------
MEDICAL PRODUCTS -- 15.5%
Abbott Laboratories ............. 222,315 7,822,709
Bausch & Lomb, Inc. ............. 8,371 436,862
Baxter International, Inc. ...... 42,099 2,639,081
Becton, Dickinson & Co. ......... 36,396 957,670
Biomet, Inc. .................... 16,328 593,931
Boston Scientific Corp. (a) ..... 59,942 1,277,514
C.R. Bard, Inc. ................. 7,355 284,547
Guidant Corp. ................... 44,488 2,616,450
Johnson & Johnson Co. ........... 201,255 14,100,428
Mallinckrodt, Inc. .............. 9,870 283,762
Medtronic, Inc. ................. 172,735 8,885,057
St. Jude Medical Center, Inc. (a) 12,163 313,957
------------
40,211,968
------------
SPECIALITY RETAIL -- 2.4%
CVS Corp. ....................... 56,662 2,128,366
Longs Drug Stores Corp. ......... 5,645 128,424
Rite Aid Corp. .................. 37,407 205,739
Walgreen Co. .................... 145,503 3,746,702
------------
6,209,231
------------
TOBACCO -- 2.9%
Philip Morris Cos., Inc. ........ 342,141 7,227,728
UST, Inc. ....................... 24,761 386,891
------------
7,614,619
------------
TOTAL COMMON STOCKS --
(Cost $289,809,269) ........ 259,326,814
------------
SHORT TERM INVESTMENTS -- 0.1%
MONEY MARKET FUND -- 0.1%
AIM Short Term Investment Class
Prime Fund (Cost $228,275) 228 $ 228,275
-----------
TOTAL INVESTMENTS -- 100.2%
(Cost $290,037,544)............ 259,555,089
</TABLE>
See accompanying notes to financial statements
14
<PAGE> 17
THE CONSUMER STAPLES SELECT SECTOR SPDR FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
MARCH 31, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
<S> <C> <C>
OTHER ASSETS AND LIABILITIES -- (0.2)% (640,690)
-------------
NET ASSETS -- 100.0% $ 258,914,399
=============
</TABLE>
(a) Non-income producing security.
See accompanying notes to financial statements
15
<PAGE> 18
THE CYCLICAL/TRANSPORTATION SELECT SECTOR SPDR FUND
SCHEDULE OF INVESTMENTS
MARCH 31, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
COMMON STOCKS -- 100.0%
AIRLINES -- 2.9%
<S> <C> <C>
AMR Corp. ...................... 21,702 $ 691,751
Delta Air Lines, Inc. .......... 19,857 1,057,385
Southwest Airlines Co. ......... 75,579 1,572,988
US Airways Group, Inc. (a) ..... 13,929 387,401
----------
3,709,525
----------
APPAREL -- 8.9%
Gap, Inc. ...................... 115,312 5,743,979
Limited, Inc. .................. 31,696 1,335,194
Liz Claiborne, Inc. ............ 11,460 525,011
Nike, Inc. (Class B) ........... 39,283 1,556,589
Reebok International Ltd. (a) .. 25,057 231,777
Russell Corp. .................. 13,442 192,389
Springs Industries, Inc. ....... 5,993 227,734
TJX Cos., Inc. ................. 48,236 1,070,236
V.F. Corp. ..................... 20,233 486,857
----------
11,369,766
----------
CONSTRUCTION -- 2.1%
Armstrong World Industries, Inc. 9,824 175,604
Centex Corp. ................... 14,031 334,113
Kaufman & Broad Home Corp. ..... 12,599 270,091
Masco Corp. .................... 64,902 1,330,491
Owens Corning .................. 15,081 292,194
Pulte Corp. .................... 12,632 263,693
----------
2,666,186
----------
CONSUMER DURABLES -- 1.9%
Black & Decker Corp. ........... 14,345 538,834
Maytag Corp. ................... 14,207 470,607
Snap-on, Inc. .................. 12,991 340,202
Stanley Works .................. 16,604 437,930
Whirlpool Corp. ................ 12,099 709,304
----------
2,496,877
----------
DEPARTMENT STORES -- 29.3%
Costco Wholesale Corp. (a) ..... 61,874 3,252,252
Dillard's, Inc. ................ 20,922 343,905
Federated Department Stores,
Inc. (a) .................. 30,626 1,278,636
Harcourt General, Inc. ......... 13,010 484,623
J.C. Penney Co., Inc. .......... 42,166 627,219
KMart Corp. (a) ................ 78,039 756,003
Kohl's Corp. (a) ............... 23,582 2,417,155
May Department Stores Co. ...... 48,543 1,383,475
Nordstrom, Inc. ................ 23,066 680,447
Sears, Roebuck & Co. ........... 54,795 1,691,796
Wal-Mart Stores, Inc. .......... 443,614 24,620,577
----------
37,536,088
----------
HOUSEWARES -- 1.6%
Leggett & Platt, Inc. .......... 32,795 $ 705,092
</TABLE>
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
COMMON STOCKS -- 100.0%
AIRLINES -- 2.9%
<S> <C> <C>
Newell Rubbermaid, Inc. ............. 42,044 1,043,217
Tupperware Corp. .................... 16,312 257,934
---------
2,006,243
---------
INDUSTRIAL SERVICES -- 0.2%
Ryder System, Inc. .................. 14,597 331,169
---------
LEISURE TIME -- 1.2%
Brunswick Corp. ..................... 18,539 351,082
Hasbro, Inc. ........................ 30,395 501,518
Mattel, Inc. ........................ 66,926 698,540
---------
1,551,140
---------
MOTOR VEHICLES -- 15.3%
Cooper Tire & Rubber Co. ............ 19,358 243,185
Delphi Automotive Systems Corp. ..... 84,009 1,344,144
Ford Motor Co. ...................... 162,177 7,450,006
General Motors Corp. ................ 86,512 7,164,275
Genuine Parts Co. ................... 29,170 696,434
Goodyear Tire & Rubber Co. .......... 26,125 609,039
Harley-Davidson, Inc. ............... 19,939 1,582,658
ITT Industries, Inc. ................ 15,801 490,818
----------
19,580,559
----------
RAILROADS -- 4.6%
Burlington Northern Santa Fe Corp. .. 66,329 1,467,529
CSX Corp. ........................... 33,352 783,772
Kansas City Southern Industries, Inc. 16,734 1,438,078
Norfolk Southern Corp. .............. 57,389 824,967
Union Pacific Corp. ................. 36,125 1,413,391
---------
5,927,737
---------
SPECIALITY RETAIL -- 30.7%
AutoZone, Inc. (a) .................. 22,602 627,206
Bed Bath & Beyond, Inc. (a) ......... 22,967 904,326
Best Buy Co., Inc. (a) .............. 30,188 2,596,168
Circuit City Stores, Inc. ........... 30,154 1,835,625
Consolidated Stores Corp. (a) ....... 23,823 270,987
Dollar General Corp. ................ 41,320 1,110,475
Home Depot, Inc. (The) .............. 305,995 19,736,677
Lowes Cos., Inc. .................... 52,901 3,088,096
Office Depot, Inc. (a) .............. 57,144 660,727
Pep Boys - Manny, Moe & Jack ........ 1,000 5,938
Sherwin-Williams Co. ................ 28,991 635,990
Staples, Inc. (a) ................... 68,908 1,378,160
Tandy Corp. ......................... 28,536 1,448,202
Target Corp. ........................ 59,722 4,464,219
Toys R Us, Inc. (a) ................. 41,673 617,281
----------
39,380,077
----------
COMMON STOCKS -- (CONTINUED)
TRUCKING AND FREIGHT -- 1.3%
FedEx Corp. (a) ..................... 41,574 $ 1,621,396
-----------
TOTAL COMMON STOCKS --
</TABLE>
See accompanying notes to financial statements
16
<PAGE> 19
THE CYCLICAL/TRANSPORTATION SELECT SECTOR SPDR FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
MARCH 31, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
<S> <C> <C>
(Cost $135,487,343) ............ 128,176,763
-----------
SHORT TERM INVESTMENTS -- 0.2%
MONEY MARKET FUND -- 0.2%
AIM Short Term Investment Class
Prime Fund (Cost $231,328) ... 231 231,328
------------
TOTAL INVESTMENTS -- 100.2%
(Cost $135,718,671) ............. 128,408,091
OTHER ASSETS AND LIABILITIES -- (0.2)% (197,678)
-----------
NET ASSETS -- 100.0% ................. $ 128,210,413
=============
</TABLE>
(a) Non-income producing security.
See accompanying notes to financial statements
17
<PAGE> 20
THE ENERGY SELECT SPECTOR SPDR FUND
SCHEDULE OF INVESTMENTS
March 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
<S> <C> <C>
COMMON STOCKS -- 100.4%
ENERGY RESOURCES -- 72.5%
Amerada Hess Corp. ................ 45,223 $ 2,922,536
Anadarko Petroleum Corp. .......... 70,594 2,731,105
Apache Corp. ...................... 58,317 2,901,271
Arch Coal, Inc. ................... 11,879 83,155
Atlantic Richfield Co. ............ 103,804 8,823,340
Burlington Resources, Inc. ........ 93,922 3,475,114
Chevron Corp. ..................... 189,491 17,516,074
Conoco, Inc. (Class B) ............ 225,206 5,770,904
Exxon Mobil Corp. ................. 617,916 48,081,588
Kerr-McGee Corp. .................. 48,076 2,776,389
Occidental Petroleum Corp. ........ 163,333 3,389,160
Phillips Petroleum Co. ............ 97,085 4,490,181
Royal Dutch Petroleum Co. ......... 601,509 34,624,362
Texaco, Inc. ...................... 174,700 9,368,288
Union Pacific Resources Group, Inc. 161,385 2,340,083
Unocal Corp. ...................... 110,027 3,273,303
USX-Marathon Group ................ 138,204 3,601,942
------------
156,168,795
------------
INDUSTRIAL PRODUCTS -- 0.6%
McDermott International, Inc. ..... 147,234 1,352,713
------------
NATURAL GAS -- 12.3%
Coastal Corp. ..................... 85,996 3,955,816
Columbia Energy Group ............. 42,644 2,526,657
El Paso Energy Corp. .............. 93,952 3,793,312
Enron Corp. ....................... 129,908 9,726,861
Williams Cos., Inc. (The) ......... 147,816 6,494,666
------------
26,497,312
------------
</TABLE>
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
<S> <C> <C>
OIL AND GAS REFINING -- 2.9%
Ashland, Inc. ........................ 56,517 $ 1,889,787
Sunoco, Inc. ......................... 69,510 1,902,836
Tosco Corp. .......................... 81,366 2,476,578
-------------
6,269,201
-------------
OIL AND GAS SERVICES -- 12.1%
Baker Hughes, Inc. ................... 131,773 3,986,133
Halliburton Co. ...................... 152,657 6,258,937
Rowan Cos., Inc. (a) ................. 67,356 1,982,792
Schlumberger Ltd. .................... 123,016 9,410,724
Transocean Sedco Forex, Inc. ......... 83,886 4,304,401
-------------
25,942,987
-------------
TOTAL COMMON STOCKS --
(Cost $207,094,509) ............. 216,23,008
-------------
SHORT TERM INVESTMENTS -- 0.3%
MONEY MARKET FUND -- 0.3%
AIM Short Term Investment Class
Prime Fund (Cost $702,799) 703 702,799
-------------
TOTAL INVESTMENTS -- 100.7%
(Cost $207,797,308) ............. 216,933,807
OTHER ASSETS AND LIABILITIES -- (0.7)% (1,428,241)
-------------
NET ASSETS -- 100.0% ................. $ 215,505,566
=============
</TABLE>
(a) Non-income producing security.
See accompanying notes to financial statements
18
<PAGE> 21
THE FINANCIAL SELECT SECTOR SPDR FUND
SCHEDULE OF INVESTMENTS
MARCH 31, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
COMMON STOCKS -- 100.2%
BANKS -- 37.7%
<S> <C> <C>
AmSouth Bancorp ................... 110,759 $ 1,654,462
Banc One Corp. .................... 325,288 11,181,775
Bank America Corp. ................ 483,961 25,377,705
Bank of New York, Inc. ............ 208,864 8,680,910
BB&T Corp. ........................ 98,462 2,763,090
Chase Manhattan Corp. ............. 233,806 20,384,960
Comerica, Inc. .................... 44,387 1,858,706
Fifth Third Bancorp ............... 87,558 5,516,154
First Union Corp. ................. 280,239 10,438,903
Firstar Corp. ..................... 278,022 6,377,129
FleetBoston Financial Corp. ....... 259,662 9,477,663
Huntington Bancshares, Inc. ....... 65,106 1,456,747
J.P. Morgan & Co., Inc. ........... 49,084 6,466,817
KeyCorp ........................... 126,757 2,408,383
Mellon Financial Corp. ............ 144,286 4,256,437
National City Corp. ............... 174,830 3,605,869
Northern Trust Corp. .............. 63,187 4,269,072
Old Kent Financial Corp. .......... 34,683 1,120,694
PNC Bank Corp. .................... 83,434 3,759,745
Regions Financial Corp. ........... 61,984 1,414,010
SouthTrust Corp. .................. 47,590 1,210,571
State Street Corp. ................ 45,400 4,398,125
Summit Bancorp .................... 49,533 1,300,241
SunTrust Banks, Inc. .............. 90,800 5,243,700
Synovus Financial Corp. ........... 79,222 1,495,315
U.S. Bancorp ...................... 213,943 4,680,003
Union Planters Corp. .............. 39,948 1,230,898
Wachovia Corp. .................... 57,503 3,885,046
Wells Fargo & Co. ................. 468,402 19,175,207
-----------
175,088,337
-----------
CONSUMER FINANCE -- 3.8%
Capital One Financial Corp. ....... 55,938 2,681,528
Countrywide Credit Industries, Inc. 32,051 873,390
Household International, Inc. ..... 133,325 4,974,689
MBNA Corp. ........................ 227,360 5,797,680
Providian Financial Corp. ......... 40,289 3,490,034
-----------
17,817,321
-----------
FINANCIAL SERVICES -- 31.2%
American Express Co. .............. 126,947 18,907,169
Aon Corp. ......................... 72,746 2,346,059
Associates First
Capital Corp. (Class A) ...... 206,570 4,428,344
Citigroup, Inc. ................... 955,809 56,691,421
Fannie Mae ........................ 290,781 16,410,953
Freddie Mac ....................... 197,224 8,714,835
Marsh & McLennan Cos., Inc. ....... 75,661 8,346,354
Morgan Stanley, Dean Witter,
Discover and Co. ............. 323,026 26,346,808
SLM Holding Corp. ................. 45,097 1,502,294
T. Rowe Price Associates, Inc. .... 33,915 1,339,643
-----------
145,033,880
-----------
LIFE INSURANCE -- 3.1%
Aflac, Inc. ....................... 75,517 $ 3,440,743
</TABLE>
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
<S> <C> <C>
American General Corp. ............... 70,101 3,934,419
Conseco, Inc. ........................ 92,642 1,059,593
Jefferson-Pilot Corp. ................ 29,697 1,976,707
Lincoln National Corp. ............... 55,408 1,856,168
Torchmark Corp. ...................... 37,257 861,568
UnumProvident Corp. .................. 67,988 1,155,796
----------
14,284,994
----------
PROPERTY INSURANCE -- 16.1%
Allstate Corp. ....................... 228,350 5,437,584
American International Group, Inc. ... 438,870 48,056,265
Chubb Corp. .......................... 49,907 3,371,842
CIGNA Corp. .......................... 47,732 3,615,699
Cincinnati Financial Corp. ........... 46,500 1,749,562
Hartford Financial Services
Group, Inc. ..................... 62,889 3,317,395
Loews Corp. .......................... 30,107 1,505,350
MBIA, Inc. ........................... 28,240 1,470,245
MGIC Investment Corp. ................ 29,949 1,306,525
Progressive Corp. .................... 20,781 1,580,655
SAFECO Corp. ......................... 36,833 978,377
St. Paul Cos., Inc. .................. 64,394 2,197,445
----------
74,586,944
----------
SAVINGS AND LOANS -- 1.2%
Golden West Financial Corp. .......... 45,825 1,429,167
Washington Mutual, Inc. .............. 163,736 4,339,004
----------
5,768,171
----------
SECURITY DEALERS/
ASSET MANAGEMENT -- 7.1%
Bear Stearns Cos., Inc. .............. 32,200 1,469,125
Franklin Resources, Inc. ............. 70,507 2,357,578
Lehman Brothers Holdings, Inc. ....... 34,072 3,304,984
Merrill Lynch & Co., Inc. ............ 104,836 11,007,780
Paine Webber Group, Inc. ............. 40,459 1,780,196
Schwab (Charles) Corp. ............... 232,579 13,213,394
----------
33,133,057
----------
TOTAL COMMON STOCKS --
(Cost $455,905,439) ............. 465,712,704
-------------
SHORT TERM INVESTMENTS -- 0.1%
MONEY MARKET FUND -- 0.1%
AIM Short Term Investment Class
Prime Fund (Cost $350,000) ..... 350 350,000
----------
TOTAL INVESTMENTS -- 100.3%
(Cost $456,255,439) ............. 466,062,704
OTHER ASSETS AND LIABILITIES -- (0.3)% (1,252,445)
------------
NET ASSETS -- 100.0% ................. $ 464,810,259
=============
</TABLE>
See accompanying notes to financial statements
19
<PAGE> 22
THE INDUSTRIAL SELECT SECTOR SPDR FUND
SCHEDULE OF INVESTMENTS
MARCH 31, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
COMMON STOCKS -- 99.8%
ELECTRICAL EQUIPMENT -- 28.1%
<S> <C> <C>
Cooper Industries, Inc. .......... 30,309 $ 1,060,815
Emerson Electric Co. ............ 46,968 2,483,433
General Electric Co. ............. 90,242 14,004,431
-----------
17,548,679
-----------
ENGINEERING & CONSTRUCTION -- 1.5%
Fluor Corp. ...................... 30,099 933,069
-----------
MANUFACTURING -- 47.5%
Briggs & Stratton Corp. .......... 21,347 877,895
Corning, Inc. .................... 23,233 4,507,202
Crane Co. ........................ 38,363 903,928
Danaher Corp. .................... 27,634 1,409,334
Eaton Corp. ...................... 15,617 1,218,126
Honeywell International, Inc. .... 72,217 3,804,933
Illinois Tool Works, Inc. ........ 34,935 1,930,159
Johnson Controls, Inc. ........... 20,063 1,084,656
Minnesota Mining &
Manufacturing Co. ........... 31,682 2,805,837
National Service Industries, Inc.. 39,927 840,963
Pall Corp. ....................... 42,700 958,081
Parker-Hannifin Corp. ............ 27,194 1,123,452
Textron, Inc. .................... 23,853 1,452,051
Tyco Laboratories, Inc. .......... 134,588 6,712,577
-----------
29,629,194
-----------
MACHINERY-DIVERSIFIED -- 12.4%
Caterpillar, Inc. ................ 45,443 1,792,158
Deere & Co. ...................... 37,664 1,431,232
Dover Corp. ...................... 31,229 1,495,088
Ingersoll-Rand Co. ............... 30,334 1,342,280
Milacron, Inc. ................... 56,340 813,409
Nacco Industries, Inc. (Class A).. 17,423 835,215
-----------
7,709,382
-----------
</TABLE>
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
MOTOR VEHICLES -- 6.6%
<S> <C> <C>
Cummins Engine Co., Inc. ............. 23,839 $ 895,452
Dana Corp. ........................... 40,452 1,140,241
Navistar International Corp.(a) ...... 24,313 975,559
PACCAR, Inc. ......................... 22,321 1,116,050
------------
4,127,302
------------
WASTE MANAGEMENT -- 3.7%
Allied Waste Industries, Inc.(a) ..... 138,090 906,216
Waste Management, Inc. ............... 100,470 1,375,183
------------
2,281,399
------------
TOTAL COMMON STOCKS --
(Cost $69,139,338) .............. 62,229,025
------------
SHORT TERM INVESTMENTS -- 0.3%
MONEY MARKET FUND -- 0.3%
AIM Short Term Investment Class
Prime Fund (Cost $183,974) ..... 184 183,974
------------
TOTAL INVESTMENTS -- 100.1%
(Cost $69,323,312) .............. 62,412,999
OTHER ASSETS AND LIABILITIES -- (0.1)% (44,115)
------------
NET ASSETS -- 100.0% ................. $ 62,368,884
============
</TABLE>
(a) Non-income producing security.
See accompanying notes to financial statements.
20
<PAGE> 23
THE TECHNOLOGY SELECT SECTOR SPDR FUND
SCHEDULE OF INVESTMENTS
MARCH 31, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
COMMON STOCKS -- 99.8%
BIOTECHNOLOGY -- 1.5%
<S> <C> <C>
Amgen, Inc. (a) ................. 296,179 $ 18,177,986
Biogen, Inc. (a) ................ 42,680 2,982,265
------------
21,160,251
------------
COMMUNICATIONS EQUIPMENT -- 13.7%
Adaptec, Inc. (a) ............... 29,457 1,137,777
ADC Telecommunications, Inc. (a) 85,448 4,603,511
Andrew Corp. (a) ................ 30,416 695,766
Comverse Technology, Inc. (a) ... 21,723 4,105,647
Global Crossing Ltd. (a) ........ 222,100 9,092,219
Lucent Technologies, Inc. ....... 908,379 55,184,024
Motorola, Inc. .................. 203,913 29,032,113
Nortel Networks Corp. ........... 415,160 52,310,160
QUALCOMM, Inc. (a) .............. 210,268 31,395,641
Scientific-Atlanta, Inc. ........ 53,739 3,409,068
Tellabs, Inc. (a) ............... 116,784 7,355,567
------------
198,321,493
------------
COMPUTER HARDWARE -- 28.8%
3Com Corp. (a) .................. 102,424 5,697,335
Apple Computer, Inc. (a) ........ 49,466 6,718,101
Cabletron Systems, Inc. (a) ..... 63,602 1,864,334
Cisco Systems, Inc. (a) ......... 1,950,092 150,766,488
Compaq Computer Corp. ........... 488,979 13,019,066
Dell Computer Corp. (a) ......... 734,884 39,637,806
EMC Corp. (a) ................... 292,588 36,573,500
Gateway 2000, Inc. (a) .......... 94,810 5,024,930
Hewlett-Packard Co. ............. 287,878 38,161,827
International Business
Machines Corp. ............. 513,667 60,612,706
Lexmark International Group, Inc.
(Class A) (a) .............. 36,302 3,838,937
NCR Corp. (a) ................... 27,311 1,095,854
Network Appliance, Inc. (a) ..... 98,368 8,139,952
Seagate Technology, Inc. (a) .... 66,085 3,981,621
Silicon Graphics, Inc. (a) ...... 61,435 648,907
Sun Microsystems, Inc. (a) ...... 454,345 42,573,546
------------
418,354,910
------------
COMPUTERS SOFTWARE -- 23.3%
Adobe Systems, Inc. ............. 37,078 4,127,245
America Online, Inc. (a) ........ 653,110 43,921,647
Autodesk, Inc. .................. 22,746 1,034,943
BMC Software, Inc. (a) .......... 72,464 3,577,910
Citrix Systems, Inc. (a) ........ 51,027 3,380,539
Computer Associates
International, Inc. ........ 170,376 10,084,130
Compuware Corp. (a) ............. 107,070 2,255,162
Microsoft Corp. (a) ............. 1,483,402 157,611,462
Novell, Inc. (a) ................ 98,330 2,814,696
Oracle Corp. (a) ................ 811,968 63,384,252
Parametric Technology Corp. (a) . 88,056 1,854,680
PeopleSoft, Inc. ................ 85,996 1,719,920
Unisys Corp. (a) ................ 92,640 2,362,320
COMPUTERS SOFTWARE -- (CONTINUED)
VERITAS Software Corp. (a) ...... 108,400 $ 14,192,953
</TABLE>
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
<S> <C> <C>
Yahoo!, Inc. (a) ................ 150,035 25,712,248
-----------
338,034,107
-----------
DEFENSE/AEROSPACE -- 1.3%
B.F. Goodrich Co. ................. 36,313 1,041,729
Boeing Co. ........................ 250,311 9,496,174
General Dynamics Corp. ............ 60,398 3,004,800
Lockheed Martin Corp. ............. 116,563 2,382,256
Northrop Grumman Corp. ............ 21,904 1,159,543
Raytheon Co. (Class B) ............ 98,146 1,742,092
-----------
18,826,594
-----------
ELECTRICAL EQUIPMENT -- 1.2%
Conexant Systems, Inc. (a) ........ 61,079 4,336,609
Molex, Inc. ....................... 55,773 3,276,664
Rockwell International Corp. ...... 56,292 2,353,709
Solectron Corp. (a) ............... 174,126 6,975,923
Thomas & Betts Corp. .............. 19,486 550,479
-----------
17,493,384
-----------
ELECTRONICS -- 1.6%
Analog Devices, Inc. (a) .......... 99,614 8,025,153
Linear Technology Corp. ........... 86,700 4,762,651
PE Corp. - PE Biosystems Group .... 63,727 6,149,655
PerkinElmer, Inc. ................. 18,209 1,210,899
Tektronix, Inc. ................... 18,200 1,019,200
W.W. Grainger, Inc. ............... 29,182 1,583,124
-----------
22,750,682
-----------
INFORMATION SERVICES -- 2.4%
Automatic Data Processing, Inc. ... 183,042 8,831,777
Ceridian Corp. (a) ................ 45,314 869,462
Computer Sciences Corp. (a) ....... 49,984 3,954,984
Electronic Data Systems Corp. ..... 136,552 8,764,932
Equifax, Inc. ..................... 44,039 1,111,985
First Data Corp. .................. 122,353 5,414,120
Paychex, Inc. ..................... 74,905 3,923,149
Sabre Holdings Corp. .............. 36,700 1,355,606
-----------
34,226,015
-----------
MANUFACTURING -- 0.7%
Millipore Corp. ................... 16,583 935,903
Thermo Electron Corp. (a) ......... 52,256 1,064,716
United Technologies Corp. ......... 137,460 8,685,754
-----------
10,686,373
-----------
MOTOR VEHICLES -- 0.1%
TRW, Inc. ......................... 37,270 2,180,295
-----------
OFFICE EQUIPMENT & SUPPLIES -- 0.2%
Pitney Bowes, Inc. ................ 77,694 3,471,951
-----------
COMMON STOCKS -- (CONTINUED)
PHOTOGRAPHY/IMAGING -- 0.7%
Eastman Kodak Co. ................. 91,831 $ 4,987,571
IKON Office Solutions, Inc. ....... 51,484 318,557
Polaroid Corp. .................... 17,736 421,230
Xerox Corp. ....................... 191,594 4,981,444
-----------
</TABLE>
See accompanying notes to financial statements
21
<PAGE> 24
THE TECHNOLOGY SELECT SECTOR SPDR FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
MARCH 31, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
<S> <C> <C>
10,708,802
----------
SEMI-CONDUCTORS -- 15.4%
Advanced Micro Devices, Inc. (a) 50,142 2,861,228
Applied Materials, Inc. (a) .... 222,556 20,975,903
Intel Corp. .................... 952,226 125,634,318
KLA-Tencor Corp. (a) ........... 57,406 4,836,455
LSI Logic Corp. (a) ............ 91,267 6,628,266
Micron Technology, Inc. (a) .... 80,895 10,192,770
National Semiconductor Corp. (a) 54,663 3,313,944
Teradyne, Inc. (a) ............. 48,666 4,002,779
Texas Instruments, Inc. ........ 233,846 37,415,360
Xilinx, Inc. (a) ............... 91,472 7,575,025
-----------
223,436,048
-----------
TELEPHONE -- 6.7%
AT&T Corp. ..................... 910,602 51,221,362
CenturyTel, Inc. ............... 43,285 1,606,956
MCI WorldCom, Inc. (a) ......... 635,986 28,818,116
Sprint Corp. ................... 250,888 15,805,944
-----------
97,452,378
-----------
WIRELESS COMMUNICATIONS -- 2.2%
Nextel Communications, Inc.
</TABLE>
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
<S> <C> <C>
(Class A) (a) ................. 107,603 $ 15,952,145
Sprint Corp. (PCS Group) (a) ....... 250,402 16,354,380
--------------
32,306,525
--------------
TOTAL COMMON STOCKS --
(Cost $1,107,667,866) ......... 1,449,409,808
--------------
SHORT TERM INVESTMENTS -- 0.0% (b)
MONEY MARKET FUNDS -- 0.0% (b)
AIM Short Term Investment Class
Prime Fund .................... 138,563 138,563
Federated Prime Obligations Fund ... 93,016 93,016
--------------
TOTAL SHORT TERM INVESTMENTS --
(Cost $231,579) ............... 231,579
--------------
TOTAL INVESTMENTS -- 99.8%
(Cost $1,107,899,445) ......... 1,449,641,387
OTHER ASSETS AND LIABILITIES -- 0.2% 2,181,975
--------------
NET ASSETS -- 100.0% ............... $1,451,823,362
==============
</TABLE>
(a) Non-income producing security.
(b) Amount shown represents less than 0.01%
See accompanying notes to financial statements
22
<PAGE> 25
THE UTILITIES SELECT SECTOR SPDR FUND
SCHEDULE OF INVESTMENTS
MARCH 31, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
COMMON STOCKS -- 100.6%
ELECTRIC UTILITIES -- 42.9%
<S> <C> <C>
AES Corp. (a) ................... 27,631 $ 2,175,941
Ameren Corp. .................... 26,022 805,056
American Electric Power Co., Inc. 32,733 975,853
Carolina Power & Light Co. ...... 27,919 905,623
Central & South West Corp. ...... 42,588 726,658
Cinergy Corp. ................... 33,367 717,390
CMS Energy Corp. ................ 29,998 543,714
Consolidated Edison, Inc. ....... 36,088 1,046,552
Constellation Energy Group, Inc. 27,462 875,351
Dominion Resources, Inc. ........ 35,536 1,365,915
DTE Energy Co. .................. 26,989 782,681
Duke Energy Corp. ............... 47,565 2,497,162
Edison International ............ 58,916 975,796
Entergy Corp. ................... 43,913 886,494
FirstEnergy Corp. ............... 42,474 876,026
Florida Progress Corp. .......... 18,088 829,787
FPL Group, Inc. ................. 27,174 1,251,702
GPU, Inc. ....................... 26,135 715,446
New Century Energies, Inc. ...... 24,129 725,378
Niagara Mohawk Holdings, Inc. (a) 45,682 616,707
Northern States Power Co. ....... 34,372 683,144
Peco Energy Co. ................. 29,630 1,092,606
PG&E Corp. ...................... 58,514 1,228,794
Pinnacle West Capital Corp. ..... 21,438 604,284
PPL Corp. ....................... 32,105 672,198
Public Service Enterprise, Inc. . 36,007 1,066,707
Reliant Energy, Inc. ............ 47,968 1,124,250
Southern Co. .................... 90,551 1,969,484
Texas Utilities Co. ............. 42,058 1,248,597
Unicom Corp. .................... 33,156 1,210,194
----------
31,195,490
----------
</TABLE>
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
NATURAL GAS -- 3.5%
<S> <C> <C>
Eastern Enterprises .................. 8,431 $ 504,806
NICOR, Inc. .......................... 15,295 503,779
ONEOK, Inc. .......................... 16,970 424,250
Peoples Energy Corp. ................. 15,769 432,662
Sempra Energy ........................ 41,663 697,855
------------
2,563,352
------------
TELEPHONE -- 54.2%
ALLTEL Corp. ......................... 40,558 2,557,689
Bell Atlantic Corp. .................. 174,911 10,691,435
BellSouth Corp. ...................... 73,687 3,463,289
GTE Corp. ............................ 47,267 3,355,957
SBC Communications, Inc. ............. 384,337 16,142,154
U.S. West, Inc. ...................... 45,110 3,276,114
------------
39,486,638
------------
TOTAL COMMON STOCKS --
(Cost $79,872,554) .............. 73,245,480
------------
SHORT TERM INVESTMENTS -- 0.3%
MONEY MARKET FUND -- 0.3%
AIM Short Term Investment Class
Prime Fund (Cost $265,868) ..... 266 265,868
------------
TOTAL INVESTMENTS -- 100.9%
(Cost $80,138,422) .............. 73,511,348
OTHER ASSETS AND LIABILITIES -- (0.9)% (681,012)
------------
NET ASSETS -- 100.00% ................ $ 72,830,336
============
</TABLE>
(a) Non-income producing security.
See accompanying notes to financial statements
23
<PAGE> 26
THE SELECT SECTOR SPDR TRUST
STATEMENTS OF ASSETS AND LIABILITIES
MARCH 31, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
THE BASIC THE CONSUMER THE CONSUMER THE CYCLICAL/
INDUSTRIES SERVICES STAPLES TRANSPORTATION
SELECT SECTOR SELECT SECTOR SELECT SECTOR SELECT SECTOR
SPDR FUND SPDR FUND SPDR FUND SPDR FUND
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
ASSETS
Investments in securities, at value (Note 2) $ 115,452,493 $ 86,463,796 $ 259,555,089 $ 128,408,091
Cash 12,566 10,000 10,000 12,812
Receivable for investments sold -- 2,301,915 5,366,622 134,390
Receivable for income delivered for Select Sector
SPDRs purchased in-kind -- -- -- --
Dividends receivable (Note 2) 133,207 22,135 490,208 118,868
Prepaid expenses 1,410 1,472 3,514 2,093
------------- ------------- ------------- -------------
TOTAL ASSETS 115,599,676 88,799,318 265,425,433 128,676,254
------------- ------------- ------------- -------------
LIABILITIES
Payable for investments purchased -- 2,377,191 5,340,227 150,106
Payable for income delivered for Select Sector
SPDRs redeemed in-kind -- -- -- --
Distributions payable (Note 2) 112,065 -- 888,301 212,799
Accrued advisory fees (Note 3) 4,668 3,907 11,446 6,386
Accrued trustees fees (Note 3) 1,396 -- 2,084 842
Accrued distribution fees (Note 3) 94,189 72,353 172,534 77,191
Accrued expenses and other liabilities 16,451 19,016 96,442 18,517
------------- ------------- ------------- -------------
TOTAL LIABILITIES 228,769 2,472,467 6,511,034 465,841
------------- ------------- ------------- -------------
NET ASSETS $ 115,370,907 $ 86,326,851 $ 258,914,399 $ 128,210,413
============= ============= ============= =============
NET ASSETS REPRESENTED BY:
Paid in surplus (Note 4) $ 134,368,072 $ 77,927,981 $ 303,133,490 $ 136,811,060
Undistributed (distribution in excess of)
net investment income 80,278 (2,881) (13,603) (16,309)
Accumulated net realized gain (loss) on
investments (728,939) 6,145,378 (13,723,033) (1,273,758)
Net unrealized appreciation (depreciation)
on investments (18,348,504) 2,256,373 (30,482,455) (7,310,580)
------------- ------------- ------------- -------------
NET ASSETS $ 115,370,907 $ 86,326,851 $ 258,914,399 $ 128,210,413
============= ============= ============= =============
NET ASSET VALUE PER SELECT SECTOR SPDR
Net asset value per Select Sector SPDR $ 23.07 $ 30.83 $ 21.14 $ 29.14
============= ============= ============= =============
Shares outstanding (unlimited amount authorized,
$0.001 par value) 5,000,000 2,800,000 12,250,027 4,400,000
============= ============= ============= =============
Cost of investments $ 133,800,997 $ 84,207,423 $ 290,037,544 $ 135,718,671
============= ============= ============= =============
</TABLE>
See accompanying notes to financial statements.
24
<PAGE> 27
<TABLE>
<CAPTION>
THE ENERGY THE FINANCIAL THE INDUSTRIAL THE TECHNOLOGY THE UTILITIES
SELECT SECTOR SELECT SECTOR SELECT SECTOR SELECT SECTOR SELECT SECTOR
SPDR FUND SPDR FUND SPDR FUND SPDR FUND SPDR FUND
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments in securities,
at value (Note 2) $ 216,933,807 $ 466,062,704 $ 62,412,999 $ 1,449,641,387 $ 73,511,348
Cash 15,728 9,405 32,227 77,960 10,000
Receivable for investments
sold 9,778,160 -- 2,175,254 22,428,440 7,125,223
Receivable for income delivered
for Select Sector SPDRs
purchased in-kind 134 -- -- 9,206 --
Dividends receivable (Note 2) 168,022 613,641 141,170 397,799 180,621
Prepaid expenses 2,504 4,681 1,543 14,273 7,234
--------------- --------------- --------------- --------------- ---------------
TOTAL ASSETS 226,898,355 466,690,431 64,763,193 1,472,569,065 80,834,426
--------------- --------------- --------------- --------------- ---------------
LIABILITIES
Payable for investments purchased 10,436,404 -- 2,246,916 19,583,098 7,214,869
Payable for income delivered for
Select Sector SPDRs redeemed in-kind 177 -- -- 139,441 --
Distributions payable (Note 2) 755,837 1,582,309 80,963 -- 705,799
Accrued advisory fees (Note 3) 9,692 17,996 4,249 54,977 4,077
Accrued trustees fees (Note 3) 3,671 -- -- 18,136 --
Accrued distribution fees (Note 3) 155,868 227,900 49,091 784,265 68,542
Accrued expenses and other liabilities 31,140 51,967 13,090 165,786 10,803
--------------- --------------- --------------- --------------- ---------------
TOTAL LIABILITIES 11,392,789 1,880,172 2,394,309 20,745,703 8,004,090
--------------- -------------- --------------- --------------- ---------------
NET ASSETS $ 215,505,566 $ 464,810,259 $ 62,368,884 $ 1,451,823,362 $ 72,830,336
=============== =============== =============== =============== ===============
NET ASSETS REPRESENTED BY:
Paid in surplus (Note 4) 189,855,284 $ 456,203,358 $ 64,253,529 $ 1,011,471,033 $ 85,923,738
Undistributed (distribution in excess of)
net investment income (25,646) 49,303 8,798 (1,679,665) 9,967
Accumulated net realized gain (loss) on
investments 16,539,429 (1,249,667) 5,016,870 100,290,052 (6,476,295)
Net unrealized appreciation (depreciation)
on investments 9,136,499 9,807,265 (6,910,313) 341,741,942 (6,627,074)
--------------- --------------- --------------- --------------- ---------------
NET ASSETS $ 215,505,566 $ 464,810,259 $ 62,368,884 $ 1,451,823,362 $ 72,830,336
=============== =============== =============== =============== ==============
NET ASSET VALUE PER SELECT SECTOR SPDR
Net asset value per Select Sector SPDR $ 29.32 $ 24.27 $ 29.01 $ 60.24 $ 26.48
=============== =============== =============== =============== ==============
Shares outstanding (unlimited amount
authorized $0.001 par value) 7,350,000 19,150,286 2,150,000 24,100,003 2,750,002
=============== =============== =============== =============== ==============
Cost of investments $ 207,797,308 $ 456,255,439 $ 69,323,312 $ 1,107,899,445 $ 80,138,422
=============== =============== =============== =============== ===============
</TABLE>
25
<PAGE> 28
THE SELECT SECTOR SPDR TRUST
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
THE BASIC THE CONSUMER THE CONSUMER THE CYCLICAL/
INDUSTRIES SERVICES STAPLES TRANSPORTATION
SELECT SECTOR SELECT SECTOR SELECT SECTOR SELECT SECTOR
SPDR FUND SPDR FUND SPDR FUND SPDR FUND
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend income (Note 2) $ 1,006,967 $ 238,302 $ 1,717,990 $ 632,950
Foreign taxes withheld (5,464) (2,966) (2,748) --
------------ ------------ ------------ ------------
TOTAL INVESTMENT INCOME 1,001,503 235,336 1,715,242 632,950
------------ ------------ ------------ ------------
EXPENSES
Distribution fee (Note 3) 128,068 112,679 261,978 131,459
Administration, custody
and transfer agency fee (Note 3) 51,227 45,071 104,791 52,584
License fee (Note 3) 30,734 27,059 62,962 31,630
Advisory Fee (Note 3) 25,614 22,536 52,396 26,292
Professional fees 6,139 4,774 9,875 3,798
Trustee fees (Note 3) 5,156 5,138 8,940 3,599
SEC registration expense 3,931 3,110 6,602 2,718
Printing and postage expense 3,730 2,803 5,846 2,283
Insurance expense 705 585 1,254 522
Miscellaneous expenses 239 226 225 187
------------ ------------ ------------ ------------
TOTAL EXPENSES 255,543 223,981 514,869 255,072
------------ ------------ ------------ ------------
NET INVESTMENT INCOME (LOSS) 745,960 11,355 1,200,373 377,878
------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain (loss) on investment transactions (656,336) 6,244,708 (13,512,862) (979,429)
Net change in unrealized appreciation (depreciation) (8,142,510) 898,978 (11,895,004) (5,234,154)
------------ ------------ ------------ ------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (8,798,846) 7,143,686 (25,407,866) (6,213,583)
------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ (8,052,886) $ 7,155,041 $(24,207,493) $ (5,835,705)
============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
26
<PAGE> 29
<TABLE>
<CAPTION>
THE ENERGY THE FINANCIAL THE INDUSTRIAL THE TECHNOLOGY THE UTILITIES
SELECT SECTOR SELECT SECTOR SELECT SECTOR SELECT SECTOR SELECT SECTOR
SPDR FUND SPDR FUND SPDR FUND SPDR FUND SPDR FUND
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend income (Note 2) $ 1,714,189 $ 3,009,951 $ 726,351 $ 1,433,162 $ 1,554,694
Foreign taxes withheld (400) -- -- (3,894) --
------------- ------------- ------------- ------------- -------------
TOTAL INVESTMENT INCOME 1,713,789 3,009,951 726,351 1,429,268 1,554,694
------------- ------------- ------------- ------------- -------------
EXPENSES
Distribution fee (Note 3) 233,179 370,019 112,047 1,289,303 116,442
Administration, custody
and transfer agency fee (Note 3) 93,272 148,008 44,819 515,721 41,490
License fee (Note 3) 56,025 89,013 26,903 309,815 27,938
Advisory Fee (Note 3) 46,636 74,004 22,409 257,860 23,288
Professional fees 11,154 11,030 5,319 54,711 6,166
Trustee fees (Note 3) 9,195 10,769 5,078 45,626 5,861
SEC registration expense 7,184 7,544 3,489 35,823 3,977
Printing and postage expense 6,634 6,865 3,124 33,085 3,543
Insurance expense 1,272 1,451 620 6,446 --
Miscellaneous expenses 5,293 299 372 481 452
------------- ------------- ------------- ------------- -------------
TOTAL EXPENSES 469,844 719,002 224,180 2,548,871 229,157
------------- ------------- ------------- ------------- -------------
NET INVESTMENT INCOME (LOSS) 1,243,945 2,290,949 502,171 (1,119,603) 1,325,537
------------- ------------- ------------- ------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain (loss) on
investment transactions 17,274,269 (974,638) 5,059,590 102,225,636 (6,506,912)
Net change in unrealized
appreciation (depreciation) (334,772) 26,605,154 (8,291,147) 273,089,510 (4,484,945)
------------- ------------- ------------- ------------- -------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS 16,939,497 25,630,516 (3,231,557) 375,315,146 (10,991,857)
------------- ------------- ------------- ------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 18,183,442 $ 27,921,465 $ (2,729,386) $ 374,195,543 $ (9,666,320)
============= ============= ============= ============= =============
</TABLE>
27
<PAGE> 30
THE SELECT SECTOR SPDR TRUST
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
THE BASIC INDUSTRIES THE CONSUMER SERVICES
SELECT SECTOR SPDR FUND SELECT SECTOR SPDR FUND
---------------------------------- ----------------------------------
(UNAUDITED) (UNAUDITED)
SIX MONTHS PERIOD(*) SIX MONTHS PERIOD(*)
ENDED ENDED ENDED ENDED
3/31/2000 9/30/1999 3/31/2000 9/30/1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS:
Net investment income (loss) $ 745,960 $ 703,808 $ 11,355 $ (50,400)
Net realized gain (loss) on investment
transactions (656,336) 5,078,135 6,244,708 1,454,676
Net change in unrealized appreciation
(depreciation) (8,142,510) (10,205,994) 898,978 1,357,395
------------- ------------- ------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS (8,052,886) (4,424,051) 7,155,041 2,761,671
------------- ------------- ------------- -------------
UNDISTRIBUTED NET INVESTMENT INCOME INCLUDED IN
PRICE OF UNITS ISSUED AND REDEEMED, NET (103,472) 12,794 1,828 (16,064)
------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income (597,551) (681,486) -- --
In excess of net investment income -- -- -- --
Net realized gain (177,307) -- (414,000) --
------------- ------------- ------------- -------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (774,858) (681,486) (414,000) --
------------- ------------- ------------- -------------
NET INCREASE IN NET ASSETS FROM
SPDRS TRANSACTIONS (NOTE 4) 42,415,075 86,968,680 19,164,424 57,662,840
------------- ------------- ------------- -------------
Net increase in net assets during period 33,483,859 81,875,937 25,907,293 60,408,447
Net assets at beginning of period 81,887,048 11,111 60,419,558 11,111
------------- ------------- ------------- -------------
NET ASSETS END OF PERIOD(1) $ 115,370,907 $ 81,887,048 $ 86,326,851 $ 60,419,558
============= ============= ============= =============
(1) Including undistributed (distribution
in excess of) net investment income $ 80,278 $ 35,341 $ (2,881) $ (16,064)
============= ============= ============= =============
</TABLE>
(*) Commencement of operations was on December 16, 1998.
See accompanying notes to financial statements.
28
<PAGE> 31
<TABLE>
<CAPTION>
THE CONSUMER STAPLES THE CYCLICAL/TRANSPORTATION
SELECT SECTOR SPDR FUND SELECT SECTOR SPDR FUND
--------------------------------- ---------------------------------
(UNAUDITED) (UNAUDITED)
SIX MONTHS PERIOD(*) SIX MONTHS PERIOD(*)
ENDED ENDED ENDED ENDED
3/31/2000 9/30/1999 3/31/2000 9/30/1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS:
Net investment income (loss) $ 1,200,373 $ 968,872 $ 377,878 $ 117,072
Net realized gain (loss) on investment
transactions (13,512,862) 1,143,552 (979,429) 322,104
Net change in unrealized appreciation
(depreciation) (11,895,004) (18,587,451) (5,234,154) (2,076,426)
------------- ------------- ------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS (24,207,493) (16,475,027) (5,835,705) (1,637,250)
------------- ------------- ------------- -------------
UNDISTRIBUTED NET INVESTMENT INCOME INCLUDED IN
PRICE OF UNITS ISSUED AND REDEEMED, NET (7,360) 59,660 (34,180) 10,947
------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income (1,245,365) (968,872) (352,154) (117,072)
In excess of net investment income -- (20,911) -- (18,800)
Net realized gain -- -- -- --
------------- ------------- ------------- -------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (1,245,365) (989,783) (352,154) (135,872)
------------- ------------- ------------- -------------
NET INCREASE IN NET ASSETS FROM
SPDRS TRANSACTIONS (NOTE 4) 166,724,065 135,044,591 99,108,158 37,075,358
------------- ------------- ------------- -------------
Net increase in net assets during period 141,263,847 117,639,441 92,886,119 35,313,183
Net assets at beginning of period 117,650,552 11,111 35,324,294 11,111
------------- ------------- ------------- -------------
NET ASSETS END OF PERIOD(1) $ 258,914,399 $ 117,650,552 $ 128,210,413 $ 35,324,294
============= ============= ============= =============
(1) Including undistributed (distribution
in excess of) net investment income $ (13,603) $ 38,749 $ (16,309) $ (7,853)
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
THE ENERGY
SELECT SECTOR SPDR FUND
---------------------------------
(UNAUDITED)
SIX MONTHS PERIOD(*)
ENDED ENDED
3/31/2000 9/30/1999
--------- ---------
<S> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS:
Net investment income (loss) $ 1,243,945 $ 1,608,123
Net realized gain (loss) on investment
transactions 17,274,269 8,728,547
Net change in unrealized appreciation
(depreciation) (334,772) 9,471,271
------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 18,183,442 19,807,941
------------- -------------
UNDISTRIBUTED NET INVESTMENT INCOME INCLUDED IN
PRICE OF UNITS ISSUED AND REDEEMED, NET 32,812 378,336
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income (1,261,850) (1,608,123)
In excess of net investment income -- (418,950)
Net realized gain -- --
------------- -------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (1,261,850) (2,027,073)
------------- -------------
NET INCREASE IN NET ASSETS FROM
SPDRS TRANSACTIONS (NOTE 4) 48,915,270 131,465,577
------------- -------------
Net increase in net assets during period 65,869,674 149,624,781
Net assets at beginning of period 149,635,892 11,111
------------- -------------
NET ASSETS END OF PERIOD(1) $ 215,505,566 $ 149,635,892
============= =============
(1) Including undistributed (distribution
in excess of) net investment income $ (25,646) $ (40,553)
============= =============
</TABLE>
29
<PAGE> 32
THE SELECT SECTOR SPDR TRUST
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
THE FINANCIAL THE INDUSTRIAL
SELECT SECTOR SPDR FUND SELECT SECTOR SPDR FUND
--------------------------------- ---------------------------------
(UNAUDITED) (UNAUDITED)
SIX MONTHS PERIOD(*) SIX MONTHS PERIOD(*)
ENDED ENDED ENDED ENDED
3/31/2000 9/30/1999 3/31/2000 9/30/1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS:
Net investment income (loss) $ 2,290,949 $ 958,015 $ 502,171 $ 329,645
Net realized gain (loss) on investment
transactions (974,638) 4,854,084 5,059,590 2,128,356
Net change in unrealized appreciation
(depreciation) 26,605,154 (16,797,889) (8,291,147) 1,380,834
------------- ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 27,921,465 (10,985,790) (2,729,386) 3,838,835
------------- ------------ ------------ ------------
UNDISTRIBUTED NET INVESTMENT INCOME INCLUDED IN
PRICE OF UNITS ISSUED AND REDEEMED, NET 99,492 32,335 (115,355) (8,091)
------------- ------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income (2,348,759) (958,015) (422,848) (277,354)
In excess of net investment income -- (24,867) -- --
Net realized gain -- -- (147,641) --
------------- ------------ ------------ ------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (2,348,759) (982,882) (570,489) (277,354)
------------- ------------ ------------ ------------
NET INCREASE IN NET ASSETS FROM
SPDRS TRANSACTIONS (NOTE 4) 315,729,097 135,334,190 (178,868) 62,398,481
------------- ------------ ------------ ------------
Net increase in net assets during period 341,401,295 123,397,853 (3,594,098) 65,951,871
Net assets at beginning of period 123,408,964 11,111 65,962,982 11,111
------------- ------------ ------------ ------------
NET ASSETS END OF PERIOD(1) $ 464,810,259 $ 123,408,964 $ 62,368,884 $ 65,962,982
============= ============= ============= =============
(1) Including undistributed (distribution
in excess of) net investment income $ 49,303 $ 7,621 $ 8,798 $ 44,830
============= ============= ============= =============
</TABLE>
(*) Commencement of operations was on December 16, 1998.
See accompanying notes to financial statements.
30
<PAGE> 33
<TABLE>
<CAPTION>
THE TECHNOLOGY THE UTILITIES
SELECT SECTOR SPDR FUND SELECT SECTOR SPDR FUND
------------------------------------ -----------------------------------
(UNAUDITED) (UNAUDITED)
SIX MONTHS PERIOD(*) SIX MONTHS PERIOD(*)
ENDED ENDED ENDED ENDED
3/31/2000 9/30/1999 3/31/200 9/30/1999
--------- --------- -------- ---------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS:
Net investment income (loss) $ (1,119,603) $ (652,931) $ 1,325,537 $ 1,277,873
Net realized gain (loss) on investment
transactions 102,225,636 41,270,030 (6,506,912) 457,587
Net change in unrealized appreciation
(depreciation) 273,089,510 68,652,432 (4,484,945) (2,142,129)
--------------- --------------- --------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 374,195,543 109,269,531 (9,666,320) (406,669)
--------------- --------------- --------------- ---------------
UNDISTRIBUTED NET INVESTMENT INCOME INCLUDED IN
PRICE OF UNITS ISSUED AND REDEEMED, NET (440,014) (95,374) (131,236) 124,047
--------------- --------------- --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income (24,674) -- (1,205,199) (1,277,873)
In excess of net investment income -- -- -- (104,158)
Net realized gain -- -- (446,091) --
--------------- --------------- --------------- ---------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (24,674) -- (1,651,290) (1,382,031)
--------------- --------------- --------------- ---------------
NET INCREASE IN NET ASSETS FROM
SPDRS TRANSACTIONS (NOTE 4) 346,373,690 622,533,549 3,111,187 82,821,537
--------------- --------------- --------------- ---------------
Net increase in net assets during period 720,104,545 731,707,706 (8,337,659) 81,156,884
Net assets at beginning of period 731,718,817 11,111 81,167,995 11,111
--------------- --------------- --------------- ---------------
NET ASSETS END OF PERIOD(1) $ 1,451,823,362 $ 731,718,817 $ 72,830,336 $ 81,167,995
=============== =============== =============== ===============
(1) Including undistributed (distribution
in excess of) net investment income $ (1,679,665) $ (95,374) $ 9,967 $ 20,865
=============== =============== =============== ===============
</TABLE>
31
<PAGE> 34
THE SELECT SECTOR SPDR TRUST
FINANCIAL HIGHLIGHTS
For a Select Sector SPDR outstanding for the period ended
<TABLE>
<CAPTION>
THE BASIC INDUSTRIES THE CONSUMER SERVICES
SELECT SECTOR SPDR FUND SELECT SECTOR SPDR FUND
SIX MONTHS ENDED PERIOD ENDED SIX MONTHS ENDED PERIOD ENDED
MARCH 31, 2000 SEPTEMBER 30, MARCH 31, 2000 SEPTEMBER 30,
(UNAUDITED) 1999 (1) (UNAUDITED) 1999 (1)
----------- -------- ----------- --------
<S> <C> <C> <C> <C>
Net asset value, beginning of period .............. $ 23.74 $ 20.72 $ 26.85 $ 23.97
----------- ----------- ----------- -----------
Net investment income (loss) ...................... 0.19 0.24 -- (0.02)
Net realized and unrealized gain (loss) (2) ....... (0.62) 3.01 4.16 2.90
----------- ----------- ----------- -----------
Total from investment operations .................. (0.43) 3.25 4.16 2.88
----------- ----------- ----------- -----------
Undistributed net investment income included
in price of units issued and redeemed ........... (0.02) -- -- --
----------- ----------- ----------- -----------
Distributions to shareholders from:
Net investment income ............................. (0.16) (0.23) -- --
In excess of net investment income ................ -- -- -- --
Net realized gains ................................ (0.06) -- (0.18) --
----------- ----------- ----------- -----------
Total distributions ............................... (0.22) (0.23) (0.18) --
----------- ----------- ----------- -----------
Net asset value, end of period .................... $ 23.07 $ 23.74 $ 30.83 $ 26.85
=========== =========== =========== ===========
Total return (3) .................................. (1.89)% 15.59% 15.48% 12.03%
Net assets, end of period (in 000's) .............. $ 115,371 $ 81,887 $ 86,327 $ 60,420
Ratio of expenses to average net assets (4) ....... 0.50% 0.56% 0.50% 0.57%
Ratio of net investment income (loss)
to average net assets (4) ...................... 1.46% 1.44% 0.03% (0.11)%
Portfolio turnover rate (5) ....................... 3.08% 9.70% 8.05% 14.56%
</TABLE>
(1) Commencement of investment operations was on December 16, 1998.
(2) The amounts shown at this caption for a share outstanding may not accord
with the change in aggregate gains and losses in securities for the fiscal
period because of the timing of sales and repurchases of Fund shares in
relation to fluctuating market values for the Fund.
(3) Total return is calculated assuming a purchase of shares at net asset
value per share on the first day and a sale at net asset value per share
on the last day of each period reported. Distributions are assumed, for
the purposes of this calculation, to be reinvested at the net asset value
per share on the respective payment dates of each Fund. Total return for a
period of less than one year is not annualized. Broker commission charges
are not included in the calculation.
(4) Annualized.
(5) Portfolio turnover rate excludes securities received or delivered from
processing creations or redemptions on Select Sector SPDRs.
The beginning net asset values shown above have been adjusted to reflect reverse
stock splits which were effective on December 16, 1998, in order to adjust the
net asset value per share of each Fund to be approximately 1/10th of the value
of its respective Select Sector Index. The ratio of the reverse stock split for
The Basic Industries Select Sector SPDR Fund, The Consumer Services Select
Sector SPDR Fund, The Consumer Staples Select Sector SPDR Fund, The
Cyclical/Transportation Select Sector SPDR Fund, The Energy Select Sector SPDR
Fund, The Financial Select Sector SPDR Fund, The Industrial Select Sector SPDR
Fund, The Technology Select Sector SPDR Fund, and The Utilities Select Sector
SPDR Fund was 1 for 2.072, 1 for 2.397, 1 for 2.606, 1 for 2.451, 1 for 2.359, 1
for 2.202, 1 for 2.266, 1 for 3.009, and 1 for 2.906, respectively.
32
<PAGE> 35
THE SELECT SECTOR SPDR TRUST
FINANCIAL HIGHLIGHTS
For a Select Sector SPDR outstanding for the period ended
<TABLE>
<CAPTION>
THE CONSUMER STAPLES THE CYCLICAL/TRANSPORTATION
SELECT SECTOR SPDR FUND SELECT SECTOR SPDR FUND
SIX MONTHS ENDED PERIOD ENDED SIX MONTHS ENDED PERIOD ENDED
MARCH 31, 2000 SEPTEMBER 30, MARCH 31, 2000 SEPTEMBER 30,
(UNAUDITED) 1999 (1) (UNAUDITED) 1999 (1)
----------- -------- ----------- --------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ................ $ 22.63 $ 26.06 $ 26.17 $ 24.51
----------- ---------- ------------ ----------
Net investment income (loss) ........................ 0.14 0.20 0.11 0.09
Net realized and unrealized gain (loss) (2) ......... (1.49) (3.44) 2.96 1.66
----------- ---------- ------------ ----------
Total from investment operations .................... (1.35) (3.24) 3.07 1.75
----------- ---------- ------------ ----------
Undistributed net investment income included
in price of units issued and redeemed ............. - 0.01 (0.01) 0.01
----------- ----------- ----------- -----------
Distributions to shareholders from:
Net investment income ............................... (0.14) (0.20) (0.09) (0.09)
In excess of net investment income .................. - - - (0.01)
Net realized gains .................................. - - - -
----------- ----------- ----------- -----------
Total distributions ................................. (0.14) (0.20) (0.09) (0.10)
----------- ----------- ----------- -----------
Net asset value, end of period ...................... $ 21.14 $ 22.63 $ 29.14 $ 26.17
=========== =========== =========== ===========
Total return (3) .................................... (6.01)% (12.45)% 11.72% 7.17%
Net assets, end of period (in 000's) ................ $ 258,914 $ 117,651 $ 128,210 $ 35,324
Ratio of expenses to average net assets (4) ......... 0.49% 0.57% 0.49% 0.58%
Ratio of net investment income (loss)
to average net assets (4) ........................ 1.15% 1.10% 0.72% 0.49%
Portfolio turnover rate (5) ......................... 3.02% 2.91% 11.80% 9.56%
</TABLE>
(1) Commencement of investment operations was on December 16, 1998.
(2) The amounts shown at this caption for a share outstanding may not accord
with the change in aggregate gains and losses in securities for the fiscal
period because of the timing of sales and repurchases of Fund shares in
relation to fluctuating market values for the Fund.
(3) Total return is calculated assuming a purchase of shares at net asset
value per share on the first day and a sale at net asset value per share
on the last day of each period reported. Distributions are assumed, for
the purposes of this calculation, to be reinvested at the net asset value
per share on the respective payment dates of each Fund. Total return for a
period of less than one year is not annualized. Broker commission charges
are not included in the calculation.
(4) Annualized.
(5) Portfolio turnover rate excludes securities received or delivered from
processing creations or redemptions on Select Sector SPDRs.
The beginning net asset values shown above have been adjusted to reflect reverse
stock splits which were effective on December 16, 1998, in order to adjust the
net asset value per share of each Fund to be approximately 1/10th of the value
of its respective Select Sector Index. The ratio of the reverse stock split for
The Basic Industries Select Sector SPDR Fund, The Consumer Services Select
Sector SPDR Fund, The Consumer Staples Select Sector SPDR Fund, The
Cyclical/Transportation Select Sector SPDR Fund, The Energy Select Sector SPDR
Fund, The Financial Select Sector SPDR Fund, The Industrial Select Sector SPDR
Fund, The Technology Select Sector SPDR Fund, and The Utilities Select Sector
SPDR Fund was 1 for 2.072, 1 for 2.397, 1 for 2.606, 1 for 2.451, 1 for 2.359, 1
for 2.202, 1 for 2.266, 1 for 3.009, and 1 for 2.906, respectively.
33
<PAGE> 36
THE SELECT SECTOR SPDR TRUST
FINANCIAL HIGHLIGHTS
For a Select Sector SPDR outstanding for the period ended
<TABLE>
<CAPTION>
THE ENERGY THE FINANCIAL
SELECT SECTOR SPDR FUND SELECT SECTOR SPDR FUND
SIX MONTHS ENDED PERIOD ENDED SIX MONTHS ENDED PERIOD ENDED
MARCH 31, 2000 SEPTEMBER 30, MARCH 31, 2000 SEPTEMBER 30,
(UNAUDITED) 1999 (1) (UNAUDITED) 1999 (1)
----------- -------- ----------- --------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ............... $ 27.46 $ 23.59 $ 22.04 $ 22.02
----------- ----------- ----------- -----------
Net investment income (loss) ....................... 0.25 0.29 0.17 0.21
Net realized and unrealized gain (loss) (2) ........ 1.79 3.88 2.22 0.02
----------- ----------- ----------- -----------
Total from investment operations ................... 2.04 4.17 2.39 0.23
----------- ----------- ----------- -----------
Undistributed net investment income included
in price of units issued and redeemed ............ - 0.07 0.01 0.01
----------- ----------- ----------- -----------
Distributions to shareholders from:
Net investment income .............................. (0.18) (0.29) (0.17) (0.21)
In excess of net investment income ................. - (0.08) - (0.01)
Net realized gains ................................. - - - -
----------- ----------- ----------- -----------
Total distributions ................................ (0.18) (0.37) (0.17) (0.22)
----------- ----------- ----------- -----------
Net asset value, end of period ..................... $ 29.32 $ 27.46 $ 24.27 $ 22.04
=========== =========== =========== ===========
Total return (3) ................................... 7.46% 17.91% 10.93% 0.97%
Net assets, end of period (in 000's) ............... $ 215,506 $ 149,636 $ 464,810 $ 123,409
Ratio of expenses to average net assets (4) ........ 0.50% 0.56% 0.49% 0.57%
Ratio of net investment income (loss)
to average net assets (4) ....................... 1.33% 1.73% 1.55% 1.14%
Portfolio turnover rate (5) ........................ 21.50% 20.15% 2.85% 5.71%
</TABLE>
(1) Commencement of investment operations was on December 16, 1998.
(2) The amounts shown at this caption for a share outstanding may not accord
with the change in aggregate gains and losses in securities for the fiscal
period because of the timing of sales and repurchases of Fund shares in
relation to fluctuating market values for the Fund.
(3) Total return is calculated assuming a purchase of shares at net asset
value per share on the first day and a sale at net asset value per share
on the last day of each period reported. Distributions are assumed, for
the purposes of this calculation, to be reinvested at the net asset value
per share on the respective payment dates of each Fund. Total return for a
period of less than one year is not annualized. Broker commission charges
are not included in the calculation.
(4) Annualized.
(5) Portfolio turnover rate excludes securities received or delivered from
processing creations or redemptions on Select Sector SPDRs.
The beginning net asset values shown above have been adjusted to reflect reverse
stock splits which were effective on December 16, 1998, in order to adjust the
net asset value per share of each Fund to be approximately 1/10th of the value
of its respective Select Sector Index. The ratio of the reverse stock split for
The Basic Industries Select Sector SPDR Fund, The Consumer Services Select
Sector SPDR Fund, The Consumer Staples Select Sector SPDR Fund, The
Cyclical/Transportation Select Sector SPDR Fund, The Energy Select Sector SPDR
Fund, The Financial Select Sector SPDR Fund, The Industrial Select Sector SPDR
Fund, The Technology Select Sector SPDR Fund, and The Utilities Select Sector
SPDR Fund was 1 for 2.072, 1 for 2.397, 1 for 2.606, 1 for 2.451, 1 for 2.359, 1
for 2.202, 1 for 2.266, 1 for 3.009, and 1 for 2.906, respectively.
34
<PAGE> 37
THE SELECT SECTOR SPDR TRUST
FINANCIAL HIGHLIGHTS
For a Select Sector SPDR outstanding for the period ended
<TABLE>
<CAPTION>
THE INDUSTRIAL THE TECHNOLOGY
SELECT SECTOR SPDR FUND SELECT SECTOR SPDR FUND
SIX MONTHS ENDED PERIOD ENDED SIX MONTHS ENDED PERIOD ENDED
MARCH 31, 2000 SEPTEMBER 30, MARCH 31, 2000 SEPTEMBER 30,
(UNAUDITED) 1999 (1) (UNAUDITED) 1999 (1)
----------- -------- ----------- --------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ............... $ 28.68 $ 22.66 $ 41.22 $ 30.09
------------- ------------- ------------- -------------
Net investment income (loss) ....................... 0.20 0.21 (0.08) (0.04)
Net realized and unrealized gain (loss) (2) ........ 0.43 6.00 19.12 11.18
------------- ------------- ------------- -------------
Total from investment operations ................... 0.63 6.21 19.04 11.14
------------- ------------- ------------- -------------
Undistributed net investment income included
in price of units issued and redeemed ............ (0.05) - (0.02) (0.01)
------------- ------------- ------------- -------------
Distributions to shareholders from:
Net investment income .............................. (0.17) (0.19) - -
In excess of net investment income ................. - - - -
Net realized gains ................................. (0.08) - - -
------------- ------------- ------------- -------------
Total distributions ................................ (0.25) (0.19) - -
------------- ------------- ------------- -------------
Net asset value, end of period ..................... $ 29.01 $ 28.68 $ 60.24 $ 41.22
============= ============= ============= =============
Total return (3) ................................... 2.04% 27.40% 46.14% 37.00%
Net assets, end of period (in 000's) ............... $ 62,369 $ 65,963 $ 1,451,823 $ 731,719
Ratio of expenses to average net assets (4) ........ 0.50% 0.57% 0.49% 0.56%
Ratio of net investment income (loss)
to average net assets (4) ....................... 1.12% 0.94% (0.22)% (0.15)%
Portfolio turnover rate (5) ........................ 20.07% 12.42% 8.18% 21.23%
</TABLE>
(1) Commencement of investment operations was on December 16, 1998.
(2) The amounts shown at this caption for a share outstanding may not accord
with the change in aggregate gains and losses in securities for the fiscal
period because of the timing of sales and repurchases of Fund shares in
relation to fluctuating market values for the Fund.
(3) Total return is calculated assuming a purchase of shares at net asset
value per share on the first day and a sale at net asset value per share
on the last day of each period reported. Distributions are assumed, for
the purposes of this calculation, to be reinvested at the net asset value
per share on the respective payment dates of each Fund. Total return for a
period of less than one year is not annualized. Broker commission charges
are not included in the calculation.
(4) Annualized.
(5) Portfolio turnover rate excludes securities received or delivered from
processing creations or redemptions on Select Sector SPDRs.
The beginning net asset values shown above have been adjusted to reflect reverse
stock splits which were effective on December 16, 1998, in order to adjust the
net asset value per share of each Fund to be approximately 1/10th of the value
of its respective Select Sector Index. The ratio of the reverse stock split for
The Basic Industries Select Sector SPDR Fund, The Consumer Services Select
Sector SPDR Fund, The Consumer Staples Select Sector SPDR Fund, The
Cyclical/Transportation Select Sector SPDR Fund, The Energy Select Sector SPDR
Fund, The Financial Select Sector SPDR Fund, The Industrial Select Sector SPDR
Fund, The Technology Select Sector SPDR Fund, and The Utilities Select Sector
SPDR Fund was 1 for 2.072, 1 for 2.397, 1 for 2.606, 1 for 2.451, 1 for 2.359, 1
for 2.202, 1 for 2.266, 1 for 3.009, and 1 for 2.906, respectively.
35
<PAGE> 38
THE SELECT SECTOR SPDR TRUST
FINANCIAL HIGHLIGHTS
For a Select Sector SPDR outstanding for the period ended
<TABLE>
<CAPTION>
THE UTILITIES
SELECT SECTOR SPDR FUND
SIX MONTHS ENDED PERIOD ENDED
MARCH 31, 2000 SEPTEMBER 30,
(UNAUDITED) 1999 (1)
<S> <C> <C>
Net asset value, beginning of period .............. $ 29.52 $ 29.06
---------- ----------
Net investment income (loss) ...................... 0.47 0.56
Net realized and unrealized gain (loss) (2) ....... (2.90) 0.45
---------- ----------
Total from investment operations .................. (2.43) 1.01
---------- ----------
Undistributed net investment income included
in price of units issued and redeemed ........... (0.05) 0.05
---------- ----------
Distributions to shareholders from:
Net investment income ............................. (0.38) (0.56)
In excess of net investment income ................ - (0.04)
Net realized gains ................................ (0.18)
---------- ----------
Total distributions ............................... (0.56) (0.60)
---------- ----------
Net asset value, end of period .................... $ 26.48 $ 29.52
========== ==========
Total return (3) .................................. (8.42)% 3.66%
Net assets, end of period (in 000's) .............. $ 72,830 $ 81,168
Ratio of expenses to average net assets (4) ....... 0.49% 0.57%
Ratio of net investment income (loss)
to average net assets (4) ...................... 2.85% 2.62%
Portfolio turnover rate (5) ....................... 32.44% 38.86%
</TABLE>
(1) Commencement of investment operations was on December 16, 1998.
(2) The amounts shown at this caption for a share outstanding may not accord
with the change in aggregate gains and losses in securities for the fiscal
period because of the timing of sales and repurchases of Fund shares in
relation to fluctuating market values for the Fund.
(3) Total return is calculated assuming a purchase of shares at net asset
value per share on the first day and a sale at net asset value per share
on the last day of each period reported. Distributions are assumed, for
the purposes of this calculation, to be reinvested at the net asset value
per share on the respective payment dates of each Fund. Total return for a
period of less than one year is not annualized. Broker commission charges
are not included in the calculation.
(4) Annualized.
(5) Portfolio turnover rate excludes securities received or delivered from
processing creations or redemptions on Select Sector SPDRs.
The beginning net asset values shown above have been adjusted to reflect reverse
stock splits which were effective on December 16, 1998, in order to adjust the
net asset value per share of each Fund to be approximately 1/10th of the value
of its respective Select Sector Index. The ratio of the reverse stock split for
The Basic Industries Select Sector SPDR Fund, The Consumer Services Select
Sector SPDR Fund, The Consumer Staples Select Sector SPDR Fund, The
Cyclical/Transportation Select Sector SPDR Fund, The Energy Select Sector SPDR
Fund, The Financial Select Sector SPDR Fund, The Industrial Select Sector SPDR
Fund, The Technology Select Sector SPDR Fund, and The Utilities Select Sector
SPDR Fund was 1 for 2.072, 1 for 2.397, 1 for 2.606, 1 for 2.451, 1 for 2.359, 1
for 2.202, 1 for 2.266, 1 for 3.009,and 1 for 2.906, respectively.
36
<PAGE> 39
THE SELECT SECTOR SPDR TRUST
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000 (UNAUDITED)
1. ORGANIZATION
The Select Sector SPDR Trust (the "Trust") was organized in the Commonwealth of
Massachusetts on June 10, 1998 and is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end management investment
company. 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, in a particular sector or group of industries
as specified by a specified market sector index (each a "Select Sector Index").
Each of the nine Select Sector Indexes represents a basket of equity securities
of public companies that are components of the S & P 500 Index and are included
in a specific sector. The Trust is comprised of nine funds (collectively the
"Funds" and each individually a "Fund") as follows: The Basic Industries Select
Sector SPDR Fund, The Consumer Services Select Sector SPDR Fund, The Consumer
Staples Select Sector SPDR Fund, The Cyclical/Transportation Select Sector SPDR
Fund, The Energy Select Sector SPDR Fund, The Financial Select Sector SPDR Fund,
The Industrial Select Sector SPDR Fund, The Technology Select Sector SPDR Fund,
and The Utilities Select Sector SPDR Fund. Each Fund operates as a
non-diversified investment company.
2. SUMMARY OF 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 closing sale price on the exchange
which is deemed to be the principal market for the security. If there is no
closing sale price then the security is valued at the closing bid price on the
exchange which is deemed the principal market for the security. Securities
regularly traded in an over-the-counter market are valued at the latest quoted
bid 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 Advisor in accordance with procedures approved
by the Board of Trustees.
FEDERAL INCOME TAX
The Funds have qualified and intend to continue 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 they distribute their
taxable income, including any net realized capital gains, for each fiscal year.
In addition, by distributing during each calendar year substantially all of
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 March 31, 2000, none of
the Funds had capital loss carryforwards.
37
<PAGE> 40
THE SELECT SECTOR SPDR TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2000 (UNAUDITED)
INVESTMENT INCOME
Dividend income is recorded on the ex-dividend date. Interest income is recorded
on the accrual basis. The value of additional securities received as dividend
payments is recorded as income and as the cost basis of such securities.
EXPENSES
Expenses of the Trust, which are directly identifiable to a specific Fund, are
allocated to that Fund. Expenses, which are not readily identifiable to a
specific Fund, are allocated in such a manner as deemed equitable, taking into
consideration the nature and type of expense and the relative net assets of the
Funds.
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. Corporate actions (including cash dividends) are recorded net of
nonreclaimable tax withholdings on the ex-dividend date.
DISTRIBUTIONS
The Trust declares and distributes dividends from net investment income to its
shareholders quarterly. The Trust will distribute net realized capital gains, if
any, at least annually.
REPURCHASE AGREEMENTS
Each Fund may enter into repurchase agreements with commercial banks. In a
repurchase agreement, a Fund buys a security and the seller simultaneously
agrees to repurchase the security on a specified future date at an agreed-upon
price. The repurchase price reflects an agreed-upon interest rate during the
time the Fund's money is invested in the security. Because the security
constitutes collateral for the repurchase obligation, a repurchase agreement can
be considered a collateralized loan. The Fund's risk is the ability of the
seller to pay the agreed-upon price on the maturity date. If the seller is
unable to make a timely repurchase, the Fund could experience delays in the
receipt of expected proceeds, suffer a loss in principal or current interest, or
incur costs in liquidating the collateral. At March 31, 2000, the Trust had no
open repurchase agreements.
38
<PAGE> 41
THE SELECT SECTOR SPDR TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2000 (UNAUDITED)
OTHER
Each of the Select Sector SPDR Funds concentrates its investments in certain
industries, subjecting them to greater risk than funds that invest in a wider
range of industries.
3. FEES AND COMPENSATION PAID TO AFFILIATES AND OTHER PARTIES
ADVISORY FEE
Each Fund has entered into an Investment Advisory Agreement with State Street
Global Advisors ("The Advisor"). As compensation for the services rendered,
facilities furnished, and expenses borne by the Advisor, each Fund pays the
Advisor a fee accrued daily and paid monthly, at the annualized rate of 0.05% of
average daily net assets of each of the Funds.
UNITARY FEE
A "Unitary" Fee is paid by each of the Funds to State Street Bank for the
Administration, Custody and Transfer Agency services it provides to the Funds.
The unitary fee is calculated based upon the aggregate net assets of the Trust
and allocated pro rata to each Select Sector SPDR Fund based upon the relative
net assets of each Fund. The unitary fee is equal to the greater of: (a) a
sliding scale fee calculated as follows: (i) 0.10% of average daily net assets
of the Trust up to the first $4.5 billion of net assets (such $4.5 billion to be
increased by $500 million each time a new Select Sector SPDR Fund is added):
(ii) 0.08% of average daily net assets up to the next $4.5 billion of net assets
of the Trust (such $4.5 billion to be increased by $500 million each time a new
Select Sector SPDR Fund is added): and (iii) 0.06% of average daily net assets
on the remainder of net assets; or (b) a minimum annual fee of $3.15 million
increased by $350,000 each time a new Select Sector SPDR Fund is added. The
minimum fee will not be in effect for the first two years of the Trust's
operation.
DISTRIBUTOR
ALPS Mutual Fund Services, Inc. (the "Distributor") serves as the distributor of
the shares of each Fund pursuant to a Distribution Plan and Agreement, pursuant
to Rule 12b-1 under the 1940 Act, between the Distributor and the Trust. The
Rule 12b-1 Plan and Agreement provides for payment of a fee to the Distributor
at an annualized rate of 0.25% of the average daily net assets of each of the
Funds.
ADDITIONAL EXPENSES
Standard and Poor's ("S&P"), the American Stock Exchange LLC (the "AMEX"), and
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") have
entered into a license agreement with respect to each Select Sector SPDR Fund's
Select Sector Index. Pursuant to such license agreement, the Trust has entered
into a sub-license agreement which requires the Trust to pay a sub-license fee
per annum (i) to S&P equal to the greater of 0.03% of the aggregate net assets
of the Trust or $450,000 (the "Minimum Annual Fee"), and (ii) to Merrill Lynch
equal to 0.03% of the aggregate net assets of the Trust. The Minimum Annual Fee
is payable in full on each anniversary of the First Trading Day. The fee to
Merrill Lynch is payable on a quarterly basis. Each Select Sector SPDR Fund will
pay its proportionate share of the annual sub-license fees based on the relative
net assets of such Fund.
39
<PAGE> 42
THE SELECT SECTOR SPDR TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2000 (UNAUDITED)
TRUSTEES FEES
Trustees receive an annual fee of $12,000, and a meeting fee of $2,000 per
meeting attended. The Funds will reimburse the Trustees for any out of pocket
expenses related to attending meetings of the Board of Trustees.
4. SHAREHOLDER TRANSACTIONS IN SELECT SECTOR SPDR FUNDS WERE AS FOLLOWS FOR THE
SIX MONTHS ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
THE BASIC INDUSTRIES SELECT SECTOR SPDR FUND THE CONSUMER SERVICES SELECT SECTOR SPDR FUND
Select Sector Select Sector
SPDRs Amount SPDRs Amount
------------- ------ ------------- ------
<S> <C> <C> <S> <C> <C>
SPDRs sold 3,450,000 $ 87,646,375 SPDRs sold 2,500,000 $ 75,097,380
Dividend reinvestment Dividend reinvestment
SPDRs issued - - SPDRs issued - -
SPDRs redeemed (1,900,000) (45,334,772) SPDRs redeemed
(1,950,000) (55,931,128)
Net income equalization - 103,472 Net income equalization - (1,828)
--------- ------------ --------- ------------
Net increase 1,550,000 $ 42,415,075 Net increase 550,000 $ 19,164,424
========= ============ ========= ============
</TABLE>
<TABLE>
<CAPTION>
THE CONSUMER STAPLES SELECT SECTOR SPDR FUND THE CYCLICAL/TRANSPORTATION SELECT SECTOR SPDR FUND
Select Sector Select Sector
SPDRs Amount SPDRs Amount
------------- ------ ------------- ------
<S> <C> <C> <C> <C> <C>
SPDRs sold 10,250,000 $ 234,434,926 SPDRs sold 6,200,000 $ 182,766,935
Dividend reinvestment Dividend reinvestment
SPDRs issued 12 287 SPDRs issued - -
SPDRs redeemed (3,200,000) (67,718,508) SPDRs redeemed (3,150,000) (83,692,957)
Net income equalization - 7,360 Net income equalization - 34,180
---------- ------------- --------- -------------
Net increase 7,050,012 $ 166,724,065 Net increase 3,050,000 $ 99,108,158
========== ============= ========= =============
</TABLE>
<TABLE>
<CAPTION>
THE ENERGY SELECT SECTOR SPDR FUND THE FINANCIAL SELECT SECTOR SPDR FUND
Select Sector Select Sector
SPDRs Amount SPDRs Amount
------------- ------ ------------- ------
<S> <C> <C> <S> <C> <C>
SPDRs sold 8,000,000 $ 216,291,650 SPDRs sold 18,250,000 $ 422,096,379
Dividend reinvestment Dividend reinvestment
SPDRs issued - - SPDRs issued 199 4,778
SPDRs redeemed (6,100,000) (167,343,568) SPDRs redeemed (4,700,000) (106,272,568)
Net income equalization - (32,812) Net income equalization - (99,492)
---------- ------------- --------- -------------
Net increase 1,900,000 $ 48,915,270 Net increase 13,550,199 $ 315,729,097
========== ============= ========= =============
</TABLE>
40
<PAGE> 43
THE SELECT SECTOR SPDR TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
THE INDUSTRIAL SELECT SECTOR SPDR FUND THE TECHNOLOGY SELECT SECTOR SPDR FUND
Select Sector Select Sector
SPDRs Amount SPDRs Amount
------------- ------ ------------- ------
<S> <C> <C> <C> <C> <C>
SPDRs sold 3,550,000 $ 101,591,729 SPDRs sold 12,900,000 $ 661,470,522
Dividend reinvestment Dividend reinvestment
SPDRs issued - - SPDRs issued 3 152
SPDRs redeemed (3,700,000) (101,885,952) SPDRs redeemed (6,550,000) (315,536,998)
Net income equalization - 115,355 Net income equalization - 440,014
---------- ------------- ---------- -------------
Net decrease (150,000) $ (178,868) Net increase 6,350,003 $ 346,373,690
========== ============= ========== =============
</TABLE>
<TABLE>
<CAPTION>
THE UTILITIES SELECT SECTOR SPDR FUND
Select Sector
SPDRs Amount
------------- ------
<S> <C> <C>
SPDRs sold 2,200,000 $61,509,346
Dividend reinvestment
SPDRs issued 2 55
SPDRs redeemed (2,200,000) (58,529,450)
Net income equalization - 131,236
---------- -----------
Net increase 2 $3,111,187
========== ===========
</TABLE>
Except for under the Trust's dividend reinvestment plan, Select Sector SPDRs are
issued and redeemed by a Fund only in Creation Unit size aggregations of 50,000
Select Sector 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 Select Sector SPDR (income equalization) and 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
$1,000 to $4,000 per Creation Unit are charged to those persons creating or
redeeming Creation Units. Transaction fees are received by the Transfer Agent
and used to offset the expense of processing orders.
5. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION
The identified cost of investments in securities owned by each Fund for both
financial statement and federal income tax purposes, and their respective gross
unrealized appreciation and depreciation at March 31, 2000 were as follows:
<TABLE>
<CAPTION>
GROSS GROSS NET UNREALIZED
IDENTIFIED UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION DEPRECIATION (DEPRECIATION)
---- ------------ ------------ --------------
<S> <C> <C> <C> <C>
The Basic Industries Select Sector SPDR Fund $ 133,800,997 $ 2,741,482 $ 21,089,986 $ (18,348,504)
The Consumer Services Select Sector SPDR Fund 84,207,423 9,374,909 7,118,536 2,256,373
The Consumer Staples Select Sector SPDR Fund 290,037,544 7,959,657 38,442,112 (30,482,455)
The Cyclical/Transportation Select Sector SPDR Fund 135,718,671 5,172,219 12,482,799 (7,310,580)
The Energy Select Sector SPDR Fund 207,797,308 13,060,811 3,924,312 9,136,499
The Financial Select Sector SPDR Fund 456,255,439 30,920,862 21,113,597 9,807,265
The Industrial Select Sector SPDR Fund 69,323,312 2,616,787 9,527,100 (6,910,313)
The Technology Select Sector SPDR Fund 1,107,899,445 370,362,743 28,620,801 341,741,942
The Utilities Select Sector SPDR Fund 80,138,422 814,192 7,441,266 (6,627,074)
</TABLE>
41
<PAGE> 44
THE SELECT SECTOR SPDR TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2000 (UNAUDITED)
6. INVESTMENT TRANSACTIONS
For the six months ended March 31, 2000, the Trust had in-kind contributions and
in-kind redemptions as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
--------- -----
<S> <C> <C>
The Basic Industries Select Sector SPDR Fund $ 87,757,102 $ 45,343,504
The Consumer Services Select Sector SPDR Fund 75,164,031 55,957,260
The Consumer Staples Select Sector SPDR Fund 234,449,742 67,719,916
The Cyclical/Transportation Select Sector SPDR Fund 182,803,336 83,666,564
The Energy Select Sector SPDR Fund 216,273,894 167,176,075
The Financial Select Sector SPDR Fund 412,352,707 103,938,760
The Industrial Select Sector SPDR Fund 101,712,383 101,885,748
The Technology Select Sector SPDR Fund 662,422,946 315,994,000
The Utilities Select Sector SPDR Fund 61,645,711 58,525,343
</TABLE>
For the six months ended March 31, 2000, the Trust had purchases and sales of
investment securities as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
--------- -----
<S> <C> <C>
The Basic Industries Select Sector SPDR Fund $ 2,759,136 $ 3,217,718
The Consumer Services Select Sector SPDR Fund 7,170,235 7,628,306
The Consumer Staples Select Sector SPDR Fund 7,362,067 6,428,205
The Cyclical/Transportation Select Sector SPDR Fund 12,467,781 12,568,442
The Energy Select Sector SPDR Fund 40,277,744 40,029,474
The Financial Select Sector SPDR Fund 16,937,673 8,758,105
The Industrial Select Sector SPDR Fund 18,273,207 18,579,001
The Technology Select Sector SPDR Fund 85,010,556 89,700,686
The Utilities Select Sector SPDR Fund 16,394,422 16,594,584
</TABLE>
7. INITIAL CAPITALIZATION AND OFFERING OF SHARES
During the period from December 14, 1998 to the commencement of investment
operations for each of the Funds, each Fund had no operations other than those
related to organizational matters, including the initial capital contribution of
$11,111 for each Fund and the issuance of 1,111 shares for each of the Funds. On
December 16, 1998 (commencement of investment operations) the Board of Trustees
declared reverse stock splits with an effective date of December 16, 1998 in
order to adjust the net asset value per share of each portfolio to be
approximately 1/10th of the value of its respective Select Sector Index. All
capital share activity and per share data have been restated to reflect the
reverse stock split. The ratio of the reverse stock split for The Basic
Industries Select Sector SPDR Fund, The Consumer Services Select Sector SPDR
Fund, The Consumer Staples Select Sector SPDR Fund, The Cyclical/Transportation
Select Sector SPDR Fund, The Energy Select Sector SPDR Fund, The Financial
Select Sector SPDR Fund, The Industrial Select Sector SPDR Fund, The Technology
Select Sector SPDR Fund, and The Utilities Select Sector SPDR Fund was 1 for
2.072, 1 for 2.397, 1 for 2.606, 1 for 2.451, 1 for 2.359, 1 for 2.202, 1 for
2.266, 1 for 3.009,and 1 for 2.906, respectively.
8. SUBSEQUENT EVENT
42
<PAGE> 45
THE SELECT SECTOR SPDR TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2000 (UNAUDITED)
Effective May 17, 2000, through a voluntary waiver, State Street reduced the
Advisory Fee from 0.05% of average daily net assets to 0.03% of average daily
net assets and reduced the Unitary Fee from 0.10% for the first $500 million
per Fund, 0.08% for the next $500 million per Fund and 0.06% thereafter of
average daily net assets to 0.07% for the first $500 million per Fund, 0.05%
for the next $500 million per Fund and 0.03% thereafter of average daily net
assets. State Street will also continue to waive its Fund service fee
minimums. In addition, the Board has limited each Fund's 12b-1 fee to 0.08%
of its average daily net assets. The foregoing reductions will remain in
effect for at least a 12-month period. There is no assurance that the
reductions will remain in effect for more than one year. Had these voluntary
waivers and the 12b-1 fee limit been applied to the net assets as of March
31, 2000, the expense ratio for each Fund would be as follows:
The Basic Industries Select Sector SPDR Fund 0.28%
The Consumer Services Select Sector SPDR Fund 0.28%
The Consumer Staples Select Sector SPDR Fund 0.27%
The Cyclical/Transportation Select Sector SPDR Fund 0.27%
The Energy Select Sector SPDR Fund 0.28%
The Financial Select Sector SPDR Fund 0.27%
The Industrial Select Sector SPDR Fund 0.28%
The Technology Select Sector SPDR Fund 0.27%
The Utilities Select Sector SPDR Fund 0.27%
43
<PAGE> 46
THE SELECT SECTOR SPDR TRUST [LOGO] SEMI-ANNUAL REPORT
TRUSTEES
JOHN W. ENGLISH, CHAIRMAN
CHERYL BURGERMEISTER
GEORGE R. GASPARI
BURTON G. MALKIEL
ERNEST J. SCALBERG
R. CHARLES TSCHAMPION
OFFICERS
HOWARD H. FAIRWEATHER, PRESIDENT AND SECRETARY
E. DAVIS HAWKES, JR., TREASURER AND ASSISTANT SECRETARY
INVESTMENT MANAGER
STATE STREET BANK AND TRUST COMPANY
225 FRANKLIN STREET
BOSTON, MASSACHUSETTS 02110
DISTRIBUTOR
ALPS MUTUAL FUNDS SERVICES
370 17TH STREET, SUITE 3100
DENVER, COLORADO 80202
CUSTODIAN, ADMINISTRATOR AND TRANSFER AGENT
STATE STREET BANK AND TRUST COMPANY
225 FRANKLIN STREET
BOSTON, MASSACHUSETTS 02110
LEGAL COUNSEL
MAYER, BROWN & PLATT
1675 BROADWAY
NEW YORK, NEW YORK 10019
INDEPENDENT PUBLIC ACCOUNTANTS
PRICEWATERHOUSECOOPERS LLP
160 FEDERAL STREET
BOSTON, MASSACHUSETTS 02110
The Select Sector SPDR Trust is distributed by ALPS Mutual Funds Services,
Inc., a member of the NASD.
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. Please read the prospectus carefully before you invest.
<PAGE> 47
CATEGORICALLY UNIQUE INDEX FUNDS(SM)
[SELECT SECTOR SPDRs LOGO]
"Standard & Poor's(R)," "S&P(R)," "S&P 500(R)," "Standard and Poor's 500(R),"
"500(R)," "Standard and Poor's Depositary Receipts(R)," "SPDRs(R)," "Select
Sector SPDR," "Select Sector SPDRs and "Select Sector Standard and
Poor's Depositary Receipts" are trademarks of The McGraw-Hill Companies,
Inc. and have been licensed for use in connection with the listing and trading
of Select Sector SPDRs on the AMEX. The stocks included in each Select Sector
Index (upon which the Products are based) were selected by the index compilation
agent in consultation with S&P from the universe of companies represented by the
S&P 500 Index. The composition and weighting of stocks included in each Select
Sector Index can be expected to differ from the composition and weighting of
stocks included in any similar S&P 500 sector index that is published and
disseminated by S&P.
