<PAGE> 1
STANDARD AND POOR'S DEPOSITARY RECEIPTSTM ("SPDRs")TM
SPDR TRUST SERIES 1
A UNIT INVESTMENT TRUST
ANNUAL REPORT
SEPTEMBER 30, 1999
"S&P", "S&P 500", "Standard & Poor's", "Standard & Poor's Depositary Receipts",
and "SPDRs" are trademarks of McGraw-Hill, Inc. and have been licensed for use
by PDR Services LLC and the American Stock Exchange LLC. The Trust, however, is
not sponsored by or affiliated with Standard & Poor's Corporation or
McGraw-Hill, Inc.
<PAGE> 2
SPDR TRUST SERIES 1
TRUST OVERVIEW
TRUST OBJECTIVE:
To replicate the total return of the S&P 500 Index.
STRATEGY:
The Trust's holdings are comprised of the 500 stocks in the S&P 500 Index, which
is designed to capture the price performance of a large cross-section of the
U.S. publicly traded stock market.
PERFORMANCE OVERVIEW:
The SPDR Trust Series 1 (the "Trust") seeks to replicate the performance of the
S&P 500 Index ("Index"). To accomplish this, the Trust utilizes a full
replication approach. Under this strategy, the Trust seeks to hold each security
in the S&P 500 Index in the same capitalization weight as it appears in the
Index. The 500 stocks of the S&P 500 Index represent approximately 79% of the
market value of all U.S. common stocks. Standard and Poor's Corporation selects
the 500 stocks to capture the price performance of a large cross-section of the
U.S. publicly traded stock market. The Index is also structured to approximate
the general distribution of industries in the U.S. economy and does not
necessarily represent the 500 largest companies.
At September 30, 1999, the Trust closed it's fiscal year with a 27.54%
year-to-date return, which closely mirrored the S&P 500 Index return of 27.86%,
for that same period. The full replication approach allowed the Trust's
performance to be very similar to the performance of the Index. The Trust's
slight deviation in performance from the Index return was attributable
principally to the Trust's operating expenses.
Over the past fiscal year, low inflation and low unemployment continued to drive
the U.S. equity markets forward. Large capitalization stocks continued to be the
primary beneficiaries of the U.S. equity rally that began back in 1994. The
returns of large cap growth stocks continued to dominate large cap value as the
S&P BARRA Growth Index returned 33.37% and the S&P BARRA Value Index returned
21.48% for the fiscal year to date. Small cap stocks, as measured by the Russell
2000 Index, also performed well, posting a current return of 19.07%.
The crisis in Asia and Russia that dominated last year's headlines did not
materialize into the crushing blow to the U.S. stock market that many predicted.
Although the preemptive 0.25% interest rate hikes orchestrated by the Fed on
June 30, 1999 and August 24, 1999 were viewed positively by many as an attempt
to keep the economy expanding in a controlled manner, the market did pull back
in response to inflation fears. The rally stalled during July and August of 1999
when the S&P 500 Index posted negative returns for two consecutive months of
- -3.12% and -0.49%, respectively. Small cap stocks also suffered slightly, as the
Russell 2000 returned -2.74% and -3.70% for the same periods.
1
<PAGE> 3
SPDR TRUST SERIES 1
TRUST OVERVIEW (CONTINUED)
The total market value of the S&P 500 continued to grow over the past year with
total capitalization increasing by over $2 trillion to more than $10.8 trillion.
Microsoft Corp., the largest company in the S&P 500, reflected the strong
performance of the Technology Sector, as it's capitalization doubled from the
end of fiscal 1998 to $472.4 billion. Similarly, General Electric's market
capitalization grew to $367.4 billion, an increase of over $100 billion from
last year.
The best performing stock in the S&P 500 over the past fiscal year was LSI Logic
Corp., which posted a return of 363.27%. Other strong performers have been Sun
Microsystems, Inc., Charles Schwab Corp., and Adobe Systems, Inc., posting gains
of 301.26%, 297.22%, and 280.29%, respectively. The worst performing stocks
included, Service Corporation International and McKesson HBOC, Inc., posting
losses of, 58.16%, and 57.93%, respectively.
2
<PAGE> 4
SPDR TRUST SERIES 1
SCEDULE OF INVESTMENTS
SEPTEMBER 30, 1999
- -----------------------------------------------------------
COMMON STOCKS SHARES VALUE
- -----------------------------------------------------------
3Com Corp. * ..................... 450,377 $ 12,948,339
Abbott Lab. ...................... 1,890,002 69,457,573
Adaptec, Inc. * .................. 129,000 5,103,563
ADC Telecommunications, Inc. * ... 154,446 6,477,079
Adobe Systems, Inc. .............. 76,531 8,686,269
Advanced Micro Devices, Inc. * ... 183,949 3,161,623
AES Corp. * ...................... 238,341 14,062,119
Aetna, Inc. ...................... 173,797 8,559,502
Aflac, Inc. ...................... 332,506 13,923,689
Air Products & Chemicals, Inc. ... 287,926 8,367,849
Alberto-Culver Co., Class B ...... 73,744 1,705,330
Albertson's, Inc. ................ 527,697 20,877,013
Alcan Aluminum Ltd. .............. 273,374 8,542,938
Alcoa, Inc. ...................... 457,962 28,422,267
Allegheny Teledyne, Inc. ......... 241,051 4,067,736
Allergan Pharmaceuticals, Inc. ... 82,448 9,069,280
Allied Signal, Inc. .............. 688,438 41,263,253
Allied Waste Industries, Inc. * .. 245,212 2,865,915
Allstate Corp. ................... 997,120 24,865,680
Alltel Corp. ..................... 382,841 26,942,435
Alza Corp. * ..................... 126,436 5,413,041
Amerada Hess Corp. ............... 111,079 6,803,589
Ameren Corp. ..................... 172,312 6,515,548
America Online, Inc. ............. 1,378,606 143,375,024
American Electric Power Co., Inc.. 242,836 8,286,779
American Express Co. ............. 561,252 75,558,550
American General Corp. ........... 313,757 19,825,520
American Greetings Corp., Class A. 87,031 2,241,048
American Home Products Corp. ..... 1,632,224 67,737,296
American International Group, Inc. 1,926,637 167,497,004
Ameritech Corp. .................. 1,366,800 91,831,875
Amgen, Inc. * .................... 637,028 51,917,782
AMR Corp. * ...................... 180,631 9,844,389
AmSouth Bancorp .................. 215,769 5,057,086
Anadarko Petroleum Corp. ......... 153,524 4,692,077
Andrew Corp. * ................... 103,223 1,793,500
Anheuser-Busch Cos., Inc. ........ 583,887 40,908,583
Aon Corp. ........................ 324,616 9,596,460
Apache Corp. ..................... 138,826 5,995,548
Apple Computer, Inc. * ........... 199,118 12,606,658
Applied Materials, Inc. * ........ 468,089 36,364,664
Archer -Daniels -Midland Co. ..... 773,211 9,423,509
Armstrong World Industries, Inc... 53,075 2,385,058
ASARCO, Inc. ..................... 54,231 1,454,069
Ashland, Inc. .................... 91,922 3,090,877
Associates First Capital Corp. ... 910,976 32,795,136
AT&T Corp. ....................... 3,981,186 173,181,591
Atlantic Richfield Co. ........... 404,028 35,806,981
Autodesk, Inc. ................... 73,844 1,615,338
Automatic Data Processing, Inc. .. 775,017 34,585,134
Autozone, Inc. * ................. 187,187 5,252,935
Avery Dennison Corp. ............. 142,917 $ 7,538,872
Avon Products, Inc. .............. 324,405 8,049,299
Baker Hughes, Inc. ............... 413,180 11,982,220
Ball Corp. ....................... 39,937 1,759,724
Banc One Corp. ................... 1,464,931 50,997,910
Bank of New York, Inc. ........... 918,069 30,697,932
BankAmerica Corp. ................ 2,157,614 120,152,130
BankBoston Corp. ................. 374,587 16,247,711
Bard (C.R.), Inc. ................ 67,912 3,196,109
Barrick Gold Corp. ............... 488,473 10,624,288
Bausch & Lomb, Inc. .............. 73,206 4,827,021
Baxter International, Inc. ....... 366,096 22,057,284
BB&T Corp. ....................... 391,339 12,669,600
Bear Stearns Cos., Inc. .......... 146,547 5,632,900
Becton, Dickinson & Co. .......... 313,400 8,794,787
Bed Bath & Beyond, Inc. * ........ 174,300 6,075,087
Bell Atlantic Corp. .............. 1,930,910 129,974,379
BellSouth Corp. .................. 2,355,076 105,978,420
Bemis Co., Inc. .................. 69,252 2,345,912
Best Buy Co., Inc. * ............. 256,355 15,910,032
Bestfoods ........................ 349,599 16,955,551
Bethlehem Steel Corp. * .......... 154,688 1,140,824
Biomet, Inc. ..................... 141,043 3,711,194
Black & Decker Corp. ............. 111,615 5,099,410
Block (H&R), Inc. ................ 119,432 5,187,828
BMC Software, Inc. * ............. 295,909 21,175,988
Boeing Co. ....................... 1,199,553 51,130,947
Boise Cascade Corp. .............. 68,915 2,511,090
Boston Scientific Corp. * ........ 494,008 12,195,822
Briggs & Stratton Corp. .......... 30,541 1,782,831
Bristol-Myers Squibb Co. ......... 2,480,375 167,425,312
Brown-Forman Corp., Class B ...... 87,442 5,454,195
Brunswick Corp. .................. 115,390 2,870,326
Burlington Northern Santa Fe ..... 565,638 15,555,045
Burlington Resources, Inc. ....... 225,159 8,274,593
Cabletron Systems, Inc. * ........ 208,658 3,273,322
Campbell Soup Co. ................ 542,322 21,218,348
Capital One Financial Corp. ...... 251,052 9,791,028
Cardinal Health, Inc. ............ 341,252 18,598,234
Carnival Corp. ................... 756,699 32,916,406
Carolina Power & Light Co. ....... 199,721 7,065,130
Case Corp. ....................... 96,658 4,814,777
Caterpillar, Inc. ................ 445,532 24,420,723
CBS Corp. * ...................... 880,158 40,707,307
Cendant Corp. * .................. 881,390 15,644,672
Centex Corp. ..................... 77,192 2,281,989
Central & South West Corp. ....... 270,053 5,704,870
CenturyTel, Inc. ................. 175,636 7,135,213
Ceridian Corp. * ................. 181,308 4,510,037
Champion International Corp. ..... 120,357 6,183,341
Chase Manhattan Corp. ............ 1,039,585 78,358,719
See accompanying notes to financial statements
3
<PAGE> 5
SPDR TRUST SERIES 1
SCEDULE OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 1999
- -----------------------------------------------------------
COMMON STOCKS SHARES VALUE
- -----------------------------------------------------------
Chevron Corp. .................... 816,643 $ 72,477,066
Chubb Corp. ...................... 220,432 10,980,269
CIGNA Corp. ...................... 248,664 19,333,626
Cincinnati Financial Corp. ....... 208,247 7,815,770
CINergy Corp. .................... 199,501 5,648,372
Circuit City Stores, Inc. ........ 251,428 10,607,119
Cisco Systems, Inc. * ............ 4,056,903 278,151,412
Citigroup, Inc. .................. 4,203,635 184,959,940
Clear Channel Communications * ... 416,618 33,277,363
Clorox Co. ....................... 295,266 11,293,924
CMS Energy Corp. ................. 146,702 4,978,699
Coastal Corp. .................... 270,148 11,059,184
Coca Cola Enterprises, Inc. ...... 531,672 11,995,849
Coca-Cola Co. .................... 3,071,984 147,647,231
Colgate-Palmolive Co. ............ 728,208 33,315,516
Columbia Energy Group ............ 103,708 5,742,831
Columbia/HCA Healthcare Corp. .... 711,030 15,064,948
Comcast Corp., Class A ........... 920,887 36,720,369
Comerica, Inc. ................... 193,303 9,785,964
Compaq Computer Corp. ............ 2,105,164 48,287,199
Computer Associates International,
Inc. ........................... 673,225 41,235,031
Computer Sciences Corp. .......... 199,382 14,019,047
Compuware Corp. * ................ 445,920 11,621,790
ConAgra, Inc. .................... 615,420 13,885,414
Conoco, Inc. ..................... 772,402 21,144,505
Conseco, Inc. .................... 399,314 7,711,752
Consolidated Edison, Inc. ........ 276,026 11,455,079
Consolidated Natural Gas Co. ..... 119,971 7,483,191
Consolidated Stores Corp. * ...... 140,113 3,091,243
Constellation Energy Group, Inc... 193,738 5,448,881
Cooper Industries, Inc. .......... 118,212 5,526,411
Cooper Tire & Rubber Co. ......... 98,144 1,729,788
Coors (Adolph) Co., Class B ...... 49,325 2,669,716
Corning, Inc. .................... 305,735 20,961,956
Costco Wholesale Corp. * ......... 275,991 19,871,352
Countrywide Credit Industries, Inc. 139,040 4,484,040
Crane Co. ........................ 90,593 2,032,680
Crown Cork & Seal Co., Inc. ...... 158,194 3,836,205
CSX Corp. ........................ 264,665 11,215,179
Cummins Engine Co., Inc. ......... 51,036 2,542,231
CVS Corp. ........................ 483,812 19,745,577
Cyprus Amax Minerals Co. ......... 122,503 2,404,121
Dana Corp. ....................... 210,611 7,818,933
Danaher Corp. .................... 170,794 8,998,709
Darden Restaurants, Inc. ......... 174,912 3,421,716
Data General Corp. * ............. 59,115 1,245,110
Dayton-Hudson Corp. .............. 553,634 33,252,642
Deere & Co. ...................... 290,774 11,249,319
Dell Computer Corp. * ............ 3,172,409 132,646,351
Delphi Automotive Systems Corp. .. 703,839 11,305,414
Delta Air Lines, Inc. ............ 176,142 8,542,887
Deluxe Corp. ..................... 98,216 $ 3,339,344
Dillard's, Inc., Class A ......... 135,624 2,754,863
Disney (Walt) Co. (The) .......... 2,557,574 66,177,227
Dollar General Corp. ............. 268,361 8,285,646
Dominion Resources, Inc. ......... 234,705 10,591,063
Donnelley (R.R.) & Sons Co. ...... 164,306 4,744,336
Dover Corp. ...................... 250,053 10,220,916
Dow Chemical Co. ................. 275,601 31,315,164
Dow Jones & Co., Inc. ............ 112,615 6,010,826
DTE Energy Co. ................... 178,021 6,431,009
Du Pont (E.I.) de Nemours & Co.,
Inc. ........................... 1,216,580 74,059,307
Duke Power Co. ................... 450,113 24,812,479
Dun & Bradstreet Corp. ........... 204,937 6,122,493
Eastern Enterprises .............. 21,834 1,013,916
Eastman Chemical Co. ............. 98,128 3,925,120
Eastman Kodak Co. ................ 395,275 29,818,558
Eaton Corp. ...................... 90,341 7,797,558
Ecolab, Inc. ..................... 162,022 5,529,001
Edison International ............. 434,154 10,555,369
EG & G, Inc. ..................... 61,285 2,439,909
Electronic Data Systems Corp. .... 612,541 32,426,389
EMC Corp. * ...................... 1,261,312 90,104,976
Emerson Electric Co. ............. 541,077 34,189,303
Engelhard Corp. .................. 144,770 2,633,004
Enron Corp. ...................... 887,640 36,615,150
Entergy Corp. .................... 314,300 9,095,056
Equifax, Inc. .................... 181,235 5,097,234
Exxon Corp. ...................... 3,023,120 229,568,175
Fannie Mae ....................... 1,272,165 79,748,843
FDX Corp. * ...................... 375,644 14,556,205
Federated Department Stores,
Inc. * ......................... 260,964 11,400,865
Fifth Third Bancorp .............. 337,287 20,521,806
First Data Corp. ................. 526,823 23,114,359
First Energy Corp. ............... 293,855 7,493,303
First Union Corp. ................ 1,194,868 42,492,493
Firstar Corp. .................... 1,234,424 31,632,115
Fleet Financial Group, Inc. ...... 707,079 25,896,768
Fleetwood Enterprises, Inc. ...... 46,543 939,587
Florida Progress Corp. ........... 118,420 5,476,925
Fluor Corp. ...................... 92,185 3,710,446
FMC Corp. * ...................... 41,845 2,019,021
Ford Motor Co. ................... 1,508,299 75,697,756
Fort James Corp. ................. 278,000 7,419,125
Fortune Brands, Inc. ............. 209,591 6,759,310
Foster Wheeler Corp. ............. 52,967 638,914
FPL Group, Inc. .................. 227,549 11,462,781
Franklin Resources, Inc. ......... 316,311 9,726,563
Freddie Mac ...................... 860,164 44,728,528
Freeport-McMoran Copper & Gold ... 200,004 3,112,562
Gannett Co., Inc. ................ 349,770 24,199,712
Gap, Inc. (The) .................. 1,075,852 34,427,268
See accompanying notes to financial statements
4
<PAGE> 6
SPDR TRUST SERIES 1
SCEDULE OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 1999
- -----------------------------------------------------------
COMMON STOCKS SHARES VALUE
- -----------------------------------------------------------
Gateway 2000, Inc. * ............. 393,592 $ 17,490,244
General Dynamics Corp. ........... 249,359 15,569,353
General Electric Co. ............. 4,088,347 484,724,641
General Instrument Corp. * ....... 213,115 10,256,159
General Mills, Inc. .............. 186,016 15,090,548
General Motors Corp. ............. 804,659 50,643,226
Genuine Parts Co. ................ 217,735 5,783,586
Georgia-Pacific Corp. ............ 215,555 8,729,978
Gillette Co. ..................... 1,354,948 45,983,548
Global Crossing Ltd. * ........... 958,969 25,412,684
Golden West Financial Corp. ...... 70,190 6,896,168
Goodrich (B.F.) Co. .............. 137,538 3,988,602
Goodyear Tire & Rubber Co. (The).. 191,295 9,206,072
GPU, Inc. ........................ 162,206 5,291,971
Grace (W. R.) & Co. * ............ 94,656 1,520,412
Grainger (W.W.), Inc. ............ 108,470 5,213,339
Great Atlantic & Pacific Tea Co.,
Inc. ........................... 49,532 1,501,439
Great Lakes Chemical Corp. ....... 75,877 2,888,068
GTE Corp. ........................ 1,208,955 92,938,416
Guidant Corp. .................... 374,005 20,056,018
Halliburton Co. .................. 545,440 22,363,040
Harcourt General, Inc. ........... 89,210 3,713,366
Harrahs Entertainment, Inc. * .... 160,269 4,447,465
Harris Corp. ..................... 103,876 2,869,575
Hartford Financial Services Group 284,786 11,640,628
Hasbro, Inc. ..................... 246,764 5,290,003
HCR Manor Care, Inc. ............. 136,322 2,343,034
Healthsouth Corp. * .............. 514,652 3,120,078
Heinz (H.J.) Co. ................. 448,376 19,280,168
Helmerich & Payne, Inc. .......... 65,834 1,666,423
Hercules, Inc. ................... 126,987 3,635,003
Hershey Foods Corp. .............. 174,664 8,503,954
Hewlett-Packard Co. .............. 1,265,406 116,417,352
Hilton Hotels Corp. .............. 327,135 3,230,458
Home Depot, Inc. (The) ........... 1,852,184 127,106,127
Homestake Mining Co. ............. 302,616 2,780,285
Honeywell, Inc. .................. 158,012 17,588,711
Household International, Inc. .... 599,769 24,065,731
Humana, Inc. * ................... 215,797 1,483,604
Huntington Bancshares, Inc. ...... 294,886 7,832,909
Ikon Office Solutions, Inc. ...... 175,930 1,880,252
Illinois Tool Works, Inc. ........ 314,045 23,415,980
IMS Health, Inc. ................. 397,692 9,072,349
Inco, Ltd. ....................... 240,384 5,138,208
Ingersoll-Rand Co. ............... 206,393 11,338,715
Intel Corp. ...................... 4,127,917 306,755,832
International Business Machines
Corp. .......................... 2,256,788 273,917,643
International Flavors &
Fragrances, Inc. ............... 133,217 4,595,987
International Paper Co. .......... 509,702 24,497,552
Interpublic Group of Cos., Inc. .. 352,921 14,513,876
ITT Industries, Inc. ............. 114,043 3,627,993
J.C. Penney Co., Inc. ............ 326,595 $ 11,226,703
J.P. Morgan & Co., Inc. .......... 219,284 25,053,197
Jefferson-Pilot Corp. ............ 130,631 8,254,246
Johnson & Johnson ................ 1,672,743 153,683,263
Johnson Controls, Inc. ........... 106,650 7,072,228
Jostens, Inc. .................... 49,757 951,603
K mart Corp. * ................... 621,523 7,264,050
Kansas City Southern Industries,
Inc. ........................... 137,279 6,374,894
Kaufman & Broad Home Corp. ....... 51,182 1,055,629
Kellogg Co. ...................... 495,217 18,539,686
Kerr-McGee Corp. ................. 108,449 5,971,473
Keycorp .......................... 564,449 14,569,840
Kimberly-Clark Corp. ............. 657,219 34,503,997
King World Productions, Inc. * ... 88,838 3,331,425
Kla-Tencor Corp. * ............... 111,134 7,223,710
Knight Ridder, Inc. .............. 98,596 5,410,456
Kohls Corp. * .................... 203,074 13,428,268
Kroger Co. * ..................... 1,036,102 22,859,000
Laidlaw, Inc. .................... 423,150 2,856,263
Lehman Brothers Holdings, Inc. ... 147,432 8,597,129
Lexmark International Group,
Inc. * ......................... 163,128 13,131,804
Lilly (Eli) & Co. ................ 1,364,953 87,356,992
Limited, Inc. (The) .............. 264,813 10,129,097
Lincoln National Corp. ........... 249,978 9,389,799
Liz Claiborne, Inc. .............. 79,014 2,449,434
Lockheed Martin Corp. ............ 486,388 15,898,808
Loews Corp. ...................... 134,306 9,426,602
Longs Drug Stores Corp. .......... 51,291 1,532,319
Louisiana Pacific Corp. .......... 108,820 1,700,313
Lowes Cos., Inc. ................. 466,124 22,723,545
LSI Logic Corp. * ................ 181,306 9,337,259
Lucent Technologies, Inc. ........ 3,822,223 247,966,717
Mallinckrodt, Inc. ............... 89,821 2,711,471
Marriott International, Inc. ..... 306,035 10,003,519
Marsh & McLennan Cos., Inc. ...... 330,214 22,619,659
Masco Corp. ...................... 533,335 16,533,385
Mattel, Inc. ..................... 522,987 9,936,753
May Department Stores Co. ........ 418,320 15,242,535
Maytag Corp. ..................... 109,846 3,659,245
MBIA, Inc. ....................... 121,434 5,661,860
MBNA Corp. ....................... 991,514 22,618,913
McDermott International, Inc. .... 75,569 1,530,272
McDonald's Corp. ................. 1,682,606 72,352,058
McGraw-Hill, Inc. ................ 249,598 12,074,303
MCI Worldcom, Inc. * ............. 2,327,705 167,303,797
Mckesson HBOC, Inc. .............. 346,622 10,052,038
Mead Corp. ....................... 129,548 4,453,213
Mediaone Group, Inc. * ........... 757,416 51,740,980
Medtronic, Inc. .................. 1,463,256 51,945,588
Mellon Bank Corp. ................ 629,416 21,242,790
Merck & Co., Inc. ................ 2,919,739 189,235,584
See accompanying notes to financial statements
5
<PAGE> 7
SPDR TRUST SERIES 1
SCEDULE OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 1999
- -----------------------------------------------------------
COMMON STOCKS SHARES VALUE
- -----------------------------------------------------------
Meredith Corp. ................... 65,169 $ 2,366,449
Merrill Lynch & Co., Inc. ........ 461,727 31,022,283
MGIC Investment Corp. ............ 139,061 6,640,163
Micron Technology, Inc. * ........ 312,653 20,810,965
Microsoft Corp. * ................ 6,362,125 576,169,945
Milacron, Inc. ................... 50,739 900,617
Millipore Corp. .................. 57,027 2,142,077
Minnesota Mining & Manufacturing
Co. ............................ 498,721 47,908,386
Mirage Resorts, Inc. * ........... 232,526 3,269,897
Mobil Corp. ...................... 978,880 98,622,160
Monsanto Co. ..................... 789,415 28,172,248
Morgan Stanley, Dean Witter,
Discover and Co. ............... 714,047 63,684,067
Motorola, Inc. ................... 750,842 66,074,096
Nabisco Group Holdings Corp. ..... 409,164 6,137,460
Nacco Industries, Inc., Class A .. 10,775 752,903
National City Corp. .............. 771,990 20,602,483
National Semiconductor Corp. * ... 212,552 6,482,836
National Service Industries, Inc. 55,808 1,757,952
Navistar International Corp. * ... 83,010 3,859,965
Network Appliance, Inc. * ........ 91,198 6,532,057
New Century Energies, Inc. ....... 142,580 4,767,519
New York Times Co. (The), Class A 221,619 8,310,713
Newell Rubbermaid, Inc. .......... 352,953 10,081,220
Newmont Mining Corp. ............. 207,893 5,379,231
Nextel Communications, Inc. * .... 414,802 28,128,761
Niagara Mohawk Power Corp. * ..... 234,608 3,621,761
NICOR, Inc. ...................... 64,059 2,382,194
Nike, Inc., Class B .............. 352,819 20,066,581
Nordstrom, Inc. .................. 169,801 4,584,627
Norfolk Southern Corp. ........... 467,195 11,446,277
Nortel Networks Corp. ............ 1,656,578 84,485,478
Northern States Power Co. ........ 191,608 4,131,548
Northern Trust Corp. ............. 134,291 11,213,298
Northrop Corp. ................... 87,236 5,544,938
Novell, Inc. * ................... 410,673 8,495,798
Nucor Corp. ...................... 110,396 5,257,610
Occidental Petroleum Corp. ....... 435,847 10,078,962
Office Depot, Inc. * ............. 469,601 4,784,060
Omnicom Group, Inc. .............. 216,472 17,141,876
ONEOK Systems, Inc. .............. 39,324 1,192,009
Oracle Systems Corp. * ........... 1,796,616 81,746,028
Owens Corning .................... 69,972 1,517,518
Owens-Illinois, Inc. * ........... 199,384 3,950,296
PACCAR, Inc. ..................... 98,096 4,990,634
PacifiCorp ....................... 373,156 7,509,765
Paine Webber Group, Inc. ......... 181,186 6,567,993
Pall Corp. ....................... 161,084 3,735,135
Parametric Technology Corp. * .... 342,260 4,620,510
Parker-Hannifin Corp. ............ 138,146 6,190,668
Paychex, Inc. .................... 312,501 10,664,097
PE Corp. - PE Biosystems Group ... 127,754 $ 9,230,226
Peco Energy Co. .................. 233,075 8,740,313
Peoples Energy Corp. ............. 46,673 1,642,306
PeopleSoft, Inc. ................. 295,110 4,998,426
Pep Boys - Manny Moe & Jack ...... 66,049 982,479
PepsiCo, Inc. .................... 1,826,523 55,252,321
Pfizer, Inc. ..................... 4,822,137 173,295,548
PG&E Corp. ....................... 477,657 12,359,375
Pharmacia & Upjohn, Inc. ......... 629,050 31,216,606
Phelps Dodge Corp. ............... 66,855 3,681,203
Philip Morris Cos., Inc. ......... 2,985,403 102,063,465
Phillips Petroleum Co. ........... 314,447 15,329,291
Pitney Bowes, Inc. ............... 336,284 20,492,306
Placer Dome, Inc. ................ 407,510 6,061,711
PNC Financial Corp. .............. 380,214 20,032,525
Polaroid Corp. ................... 58,782 1,528,332
Potlatch Corp. ................... 38,383 1,580,900
PP&L Resources, Inc. ............. 197,979 5,357,807
PPG Industries, Inc. ............. 210,123 12,607,380
Praxair, Inc. .................... 198,923 9,150,458
Procter & Gamble Co. ............. 1,653,066 154,974,937
Progressive Corp. ................ 91,391 7,465,502
Providian Financial Corp. ........ 178,274 14,117,072
Public Service Enterprise, Inc. .. 273,844 10,577,224
Pulte Corp. ...................... 57,392 1,248,276
Quaker Oats Co. .................. 168,865 10,448,522
QUALCOMM, Inc. ................... 200,704 37,970,688
Ralston Purina Co. ............... 407,724 11,339,824
Raytheon Co. ..................... 418,851 20,785,481
Reebok International Ltd. * ...... 73,713 787,808
Regions Financial Corp. .......... 272,881 8,186,430
Reliant Energy, Inc. ............. 362,036 9,797,599
Republic New York Corp. .......... 132,067 8,113,866
Reynolds Metals Co. .............. 81,834 4,940,728
Rite Aid Corp. ................... 330,122 4,559,810
Rockwell International Corp. ..... 235,890 12,384,225
Rohm & Haas Co. .................. 268,424 9,696,817
Rowan Cos., Inc. * ............... 112,880 1,834,300
Royal Dutch Petroleum Co. ........ 2,668,070 157,582,884
Russell Corp. .................... 49,265 698,947
Ryder System, Inc. ............... 90,357 1,841,024
SAFECO Corp. ..................... 164,232 4,598,496
Safeway, Inc. * .................. 623,297 23,724,242
Sara Lee Corp. ................... 1,127,819 26,433,258
SBC Communications, Inc. ......... 2,455,565 125,387,288
Schering-Plough Corp. ............ 1,834,095 80,012,394
Schlumberger Ltd. ................ 686,572 42,782,018
Schwab (Charles) Corp. ........... 1,024,766 34,521,805
Scientific-Atlanta, Inc. ......... 93,646 4,641,330
Seagate Technology, Inc. * ....... 278,747 8,588,892
Seagram Co. Ltd. (The) ........... 537,286 24,446,513
See accompanying notes to financial statements
6
<PAGE> 8
SPDR TRUST SERIES 1
SCEDULE OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 1999
- -----------------------------------------------------------
COMMON STOCKS SHARES VALUE
- -----------------------------------------------------------
Sealed Air Corp. * ............... 105,698 $ 5,423,629
Sears, Roebuck & Co. ............. 475,296 14,912,412
Sempra Energy .................... 295,267 6,145,244
Service Corp. International ...... 328,082 3,465,366
Shared Medical Systems ........... 32,866 1,536,486
Sherwin-Williams Co. ............. 213,577 4,471,768
Sigma-Aldrich Corp. .............. 126,167 4,005,802
Silicon Graphics, Inc. * ......... 234,919 2,569,427
SLM Holding Corp. ................ 204,463 8,791,909
Snap On, Inc. .................... 79,948 2,598,310
Solectron Corp. * ................ 335,958 24,125,984
Sonat, Inc. ...................... 142,630 5,660,628
Southern Co. ..................... 853,134 21,968,200
SouthTrust Corp. ................. 206,000 7,390,250
Southwest Airlines Co. ........... 635,990 9,659,098
Springs Industries, Inc. ......... 25,322 859,365
Sprint Corp. ..................... 1,082,690 58,735,932
Sprint Corp. (PCS Group) * ....... 544,054 40,566,026
St. Jude Medical Center, Inc. * .. 105,496 3,323,124
St. Paul Cos., Inc. .............. 283,176 7,787,340
Stanley Works (The) .............. 115,887 2,918,904
Staples, Inc. * .................. 583,345 12,724,213
State Street Corp. ............... 202,226 13,068,855
Summit Bancorp ................... 213,520 6,926,055
Sun Microsystems, Inc. * ......... 962,136 89,478,648
Sunoco, Inc. ..................... 106,680 2,920,365
SunTrust Banks, Inc. ............. 399,904 26,293,688
Supervalu, Inc. .................. 150,391 3,280,404
Synovus Financial Corp. .......... 342,274 6,396,245
SYSCO Corp. ...................... 414,522 14,534,178
Tandy Corp. ...................... 243,918 12,607,512
Tektronix, Inc. .................. 59,786 2,002,831
Tellabs, Inc. * .................. 491,612 27,991,158
Temple-Inland, Inc. .............. 65,004 3,932,742
Tenet Healthcare Corp. * ......... 397,831 6,986,907
Tenneco, Inc. .................... 207,463 3,526,871
Texaco, Inc. ..................... 672,090 42,425,681
Texas Instruments, Inc. .......... 976,620 80,326,995
Texas Utilities Co. .............. 334,100 12,466,106
Textron, Inc. .................... 188,828 14,610,566
Thermo Electron Corp. * .......... 202,143 2,716,297
Thomas & Betts Corp. ............. 71,806 3,662,106
Time Warner, Inc. ................ 1,607,052 97,628,409
Times Mirror Co., Class A ........ 90,514 5,956,953
Timken Co. ....................... 83,086 1,339,762
TJX Cos., Inc. (The) ............. 382,638 10,737,779
Torchmark Corp. .................. 160,228 4,145,900
Tosco Corp. ...................... 189,810 4,792,703
Toys R Us Co. * .................. 314,060 4,710,900
Tribune Co. ...................... 296,786 14,765,103
Tricon Global Restaurants, Inc. * 193,825 7,934,711
TRW, Inc. ........................ 150,948 $ 7,509,663
Tupperware Corp. ................. 72,100 1,460,025
Tyco Laboratories, Inc. .......... 1,045,385 107,936,001
U. S. West, Inc. ................. 626,494 35,749,314
U.S. Bancorp ..................... 898,717 27,130,019
Unicom Corp. ..................... 268,819 9,929,502
Unilever N.V. (N.Y. Shares)....... 712,110 48,512,494
Union Carbide Corp. .............. 165,606 9,408,491
Union Pacific Corp. .............. 309,892 14,894,184
Union Pacific Resources Group, Inc. 315,834 5,073,084
Union Planters Corp. ............. 179,010 7,294,658
Unisys Corp. * ................... 382,616 17,265,547
United Healthcare Corp. .......... 216,634 10,547,368
United Technologies Corp. ........ 603,709 35,807,490
Unocal Corp. ..................... 304,097 11,270,595
Unum Corp. ....................... 297,562 8,759,481
US Air Group, Inc. * ............. 92,432 2,426,340
UST, Inc. ........................ 220,368 6,652,359
USX-Marathon Group ............... 391,876 11,462,373
USX-U.S. Steel Group ............. 113,140 2,913,355
V.F. Corp. ....................... 152,281 4,720,711
Viacom, Inc. * ................... 863,019 36,462,553
Vulcan Materials Co. ............. 121,428 4,447,301
Wachovia Corp. ................... 254,588 20,016,981
Wal-Mart Stores, Inc. ............ 5,542,495 263,614,918
Walgreen Co. ..................... 1,256,630 31,886,986
Warner-Lambert Co. ............... 1,064,529 70,658,112
Washington Mutual, Inc. .......... 723,151 21,152,167
Waste Management, Inc. ........... 764,250 14,711,812
Watson Pharmaceuticals, Inc. * ... 115,554 3,531,619
Wellpoint Health Networks, Inc. * 76,112 4,338,384
Wells Fargo & Co. ................ 2,059,929 81,624,687
Wendy's International, Inc. ...... 154,358 4,071,192
Westvaco Corp. ................... 125,612 3,218,808
Weyerhaeuser Co. ................. 247,443 14,258,903
Whirlpool Corp. .................. 94,540 6,174,644
Willamette Industries, Inc. ...... 139,809 6,029,263
Williams Cos., Inc. (The) ........ 541,938 20,288,804
Winn-Dixie Stores, Inc. .......... 186,173 5,527,011
Worthington Industries, Inc. ..... 124,145 2,110,465
Wrigley (Wm) Jr. Co. ............. 147,677 10,162,024
Xerox Corp. ...................... 830,183 34,815,800
---------------
Total Investments - (Cost $13,597,115,126) $13,163,739,469
===============
(*) Denotes non-income producing security.
See accompanying notes to financial statements
7
<PAGE> 9
SPDR TRUST SERIES 1
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
ASSETS
Investments in securities, at value (cost
$13,597,115,126)......................................... $13,163,739,469
Cash....................................................... 43,489,739
Receivable for investments sold............................ 38,522,940
Dividends receivable....................................... 14,559,165
---------------
Total Assets................................................... 13,260,311,313
LIABILITIES
Payable for investments purchased.......................... 24,662,762
Income distributions payable............................... 39,276,300
Due to Sponsor............................................. 4,149,108
Accrued Trustee fees....................................... 1,756,104
Accrued expenses and other liabilities..................... 8,475,120
---------------
Total Liabilities.............................................. 78,319,394
---------------
NET ASSETS..................................................... $13,181,991,919
===============
NET ASSETS REPRESENTED BY:
Paid in surplus relating to 102,669,568 units of fractional
undivided interest
("SPDRs") outstanding; unlimited units authorized.......... $13,704,048,621
Distribution in excess of net investment income............ (3,151,817)
Accumulated net realized loss on investments............... (85,529,228)
Net unrealized depreciation on investments................. (433,375,657)
---------------
NET ASSETS..................................................... $13,181,991,919
===============
NET ASSET VALUE PER SPDR ($13,181,991,919 / 102,669,568 SPDRs).. $128.39
=======
See accompanying notes to financial statements
8
<PAGE> 10
SPDR TRUST SERIES 1
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR FOR THE NINE MONTH FOR THE YEAR
ENDED ENDED PERIOD ENDED ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998 SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------ ------------------ ------------------ -----------------
INVESTMENT INCOME
<S> <C> <C> <C> <C>
Dividend income (a) .......................... $ 162,164,007 $ 93,269,315 $ 38,356,337 $ 29,620,992
-------------- --------------- ------------ ------------
EXPENSES
Trustee expense ............................ 13,488,118 6,990,046 2,578,842
1,806,689
Marketing expense .......................... 4,795,915 2,213,340 431,452
436,049
S&P license fee ............................ 4,264,396 2,504,990 563,541
347,506
SEC registration expense ................... 670,400 1,125,070 450,401
203,447
Legal and audit services ................... 120,000 229,520 143,826
135,000
Amortization of organization costs ......... -- 35,416 81,912
110,000
Other expenses ............................. 244,966 130,705 90,978
-------------- --------------- ------------ ------------
41,002
Total expenses ................................. 23,583,795 13,229,087 4,340,952
3,079,693
Rebate from Sponsor ........................ -- (410,301) (249,830)
(434,407)
Rebate from Trustee ........................ (2,002,824) (1,149,645) -- --
-------------- --------------- ------------ ------------
Net expenses ................................... 21,580,971 11,669,141 4,091,122
2,645,286
Trustee earnings credit ...................... (700,001) (488,977) (194,498) (176,370)
-------------- --------------- ------------ ------------
Net expenses after Trustee earnings credit ..... 20,880,970 11,180,164 3,896,624 2,468,916
-------------- --------------- ------------ ------------
NET INVESTMENT INCOME .......................... 141,283,037 82,089,151 34,459,713 27,152,076
-------------- --------------- ------------ ------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Net realized gain on
investment transactions .................. 2,248,743,945 1,878,084,944 4,973,050 12,398,283
Net increase in unrealized
appreciation (depreciation) .............. 219,582,548 (1,707,909,730) 644,808,026 236,120,771
-------------- --------------- ------------ ------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS ............................. 2,468,326,493 170,175,214 649,781,076 248,519,054
-------------- --------------- ------------ ------------
NET INCREASE IN NET ASSETS FROM OPERATIONS ..... $2,609,609,530 $ 252,264,365 $684,240,789 $275,671,130
============== =============== ============ ============
</TABLE>
(a) Net of withholding tax expense of $1,559,617, $586,136, $289,809, and
$182,561 for 1999, 1998, 1997, and 1996, respectively.
See accompanying notes to financial statements
9
<PAGE> 11
SPDR TRUST SERIES 1
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR FOR THE NINE MONTH FOR THE YEAR
ENDED ENDED PERIOD ENDED ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998 SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------ ------------------ ------------------ -----------------
INCREASE IN NET ASSETS FROM OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income ................. $ 141,283,037 $ 82,089,151 $ 34,459,713 $ 27,152,076
Net realized gain on
investment transactions ........... 2,248,743,945 1,878,084,944 4,973,050 12,398,283
Net increase (decrease)
in unrealized appreciation ........ 219,582,548 (1,707,909,730) 644,808,026 236,120,771
--------------- --------------- -------------- --------------
NET INCREASE IN NET ASSETS FROM OPERATIONS 2,609,609,530 252,264,365 684,240,789 275,671,130
--------------- --------------- -------------- --------------
UNDISTRIBUTED NET INVESTMENT INCOME
INCLUDED IN PRICE OF UNITS
ISSUED AND REDEEMED, NET .............. 3,650,519 6,830,907 420,891 1,962,474
--------------- --------------- -------------- --------------
DISTRIBUTIONS TO UNITHOLDERS FROM:
Net investment income ................. (141,283,037) (82,089,151) (33,466,398) (27,037,456)
In excess of net investment income .... (2,999,602) (4,796,055) -- --
Net realized gains .................... -- -- -- (3,078,255)
--------------- --------------- -------------- --------------
TOTAL DISTRIBUTIONS TO UNITHOLDERS ........ (144,282,639) (86,885,206) (33,466,398) (30,115,711)
--------------- --------------- -------------- --------------
NET INCREASE IN NET ASSETS FROM
ISSUANCE AND REDEMPTION OF SPDRS ...... 2,643,670,384 3,844,189,382 1,393,422,226 759,578,491
--------------- --------------- -------------- --------------
NET INCREASE IN NET ASSETS DURING PERIOD .. 5,112,647,794 4,016,399,448 2,044,617,508 1,007,096,384
NET ASSETS AT BEGINNING OF PERIOD ......... 8,069,344,125 4,052,944,677 2,008,327,169 1,001,230,785
--------------- --------------- -------------- --------------
NET ASSETS END OF PERIOD* ................. $13,181,991,919 $ 8,069,344,125 $4,052,944,677 $2,008,327,169
=============== =============== ============== ==============
*INCLUDES UNDISTRIBUTED (DISTRIBUTIONS
IN EXCESS OF) NET INVESTMENT INCOME ... $ (3,151,817) $ (3,802,740) $ 993,315 $ --
--------------- --------------- -------------- --------------
</TABLE>
See accompanying notes to financial statements
10
<PAGE> 12
SPDR TRUST SERIES 1
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SPDR OUTSTANDING DURING THE PERIOD
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
FOR THE YEAR FOR THE YEAR FOR THE PERIOD FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
9/30/99 9/30/98 9/30/97 12/31/96 12/31/95 12/31/94
--------- --------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.. $ 101.80 $ 94.78 $ 74.08 $ 61.61 $ 45.93 $ 46.62
----------- ---------- ---------- --------- --------- --------
Investment Operations:
Net investment income............ 1.49 1.41 1.03 1.35 1.26 1.22
Net realized and unrealized gain
(loss) on investments......... 26.59 7.01 20.67 12.52 15.70 (0.68)
----------- ---------- ---------- --------- --------- --------
Total from investment operations...... 28.08 8.42 21.70 13.87 16.96 0.54
----------- ---------- ---------- --------- --------- --------
Less distributions from:
Net investment income............ (1.46) (1.32) (1.00) (1.28) (1.24) (1.23)
In excess of net investment income (0.03) (0.08) -- -- (0.03) --
Net realized gains............... -- -- -- (0.12) (0.01) --
----------- ---------- ---------- --------- --------- --------
Total distributions................... (1.49) (1.40) (1.00) (1.40) (1.28) (1.23)
----------- ---------- ---------- --------- --------- --------
NET ASSET VALUE, END OF PERIOD........ $ 128.39 $ 101.80 $ 94.78 $ 74.08 $ 61.61 $ 45.93
=========== ========== ========== ========= ========= ========
TOTAL INVESTMENT RETURN............... 27.54% 8.82% 29.38% 22.67% 37.23% 1.15%
RATIOS AND SUPPLEMENTAL DATA
Ratio to average net assets:
Total expenses (1)............... 0.18% 0.19% 0.19%(2) 0.20% 0.20% 0.20%
Net expenses after rebates and
Trustee earnings credit (1)... 0.17% 0.18% 0.18%(2) 0.18% 0.19% --
Net investment income............ 1.18% 1.35% 1.63%(2) 2.03% 2.35% 2.63%
Portfolio turnover rate (3)........... 6.23% 4.71% 3.22% 4.37% 4.02% 4.07%
NET ASSETS, END OF PERIOD (000'S)..... $13,181,992 $8,069,344 $4,052,945 $2,008,327 $1,001,231 $422,577
</TABLE>
- --------------------------------------------------------------------------------
(1) Net of expenses reimbursed by the Trustee in 1999, the Sponsor and
Trustee in 1998, and the Sponsor in 1994 through the period ended
9/30/97. If the Trust had borne all expenses reimbursed by the Sponsor
and Trustee as noted, the ratio of expenses to average net assets would
have increased by 0.02%, 0.03%, 0.02%, 0.03%, 0.03%, and 0.01% in 1999,
1998, 1997, 1996, 1995, and 1994, respectively.
(2) Annualized.
(3) Portfolio turnover ratio excludes securities received or delivered from
processing creations or redemptions of SPDRs.
11
<PAGE> 13
SPDR TRUST SERIES 1
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
NOTE 1 -- ORGANIZATION
SPDR Trust Series 1 (the "Trust") is a unit investment trust created under the
laws of the State of New York and registered under the Investment Company Act of
1940. The Trust was created to provide investors with the opportunity to
purchase a security representing a proportionate undivided interest in a
portfolio of securities consisting of substantially all of the common stocks, in
substantially the same weighting, which comprise the Standard & Poor's 500
Composite Price Index (the "S&P Index"). Each unit of fractional undivided
interest in the Trust is referred to as a Standard & Poor's Depositary Receipt
("SPDR"). The Trust commenced operations on January 22, 1993 upon the initial
issuance of 150,000 SPDRs (equivalent to three "Creation Units" - see Note 4) in
exchange for a portfolio of securities assembled to reflect the intended
portfolio composition of the Trust. Effective September 30, 1997, the fiscal
year end of the Trust changed from December 31 to September 30.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
effect the reported amounts and disclosures in the financial statements. Actual
results could differ from these estimates. The following is a summary of
significant accounting policies followed by the Trust.
SECURITY VALUATION
Portfolio securities are valued based on the closing sale price on the exchange
which is deemed to be the principal market for the security. If no closing sale
price is available, then the security is valued at the closing bid price on the
exchange which is deemed to be the principal market for the security. If there
is no closing bid price available, valuation will be determined by the Trustee
in good faith based on available information.
INVESTMENT TRANSACTIONS
Investment transactions are recorded on the trade date. Realized gains and
losses from the sale or disposition of securities are recorded on the identified
cost basis. Dividend income is recorded on the ex-dividend date.
DISTRIBUTIONS TO UNITHOLDERS
The Trust declares and distributes dividends from net investment income to its
unitholders quarterly. The Trust will distribute net realized capital gains, if
any, at least annually.
12
<PAGE> 14
SPDR TRUST SERIES 1
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 (CONTINUED)
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Trust has qualified and intends to qualify for and elect treatment as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended. By so qualifying and electing, the Trust will not be
subject to federal income taxes to the extent it distributes its taxable income,
including any net realized capital gains, for each fiscal year. In addition, by
distributing during each calendar year substantially all of its net investment
income and capital gains, if any, the Trust will not be subject to federal
excise tax. Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
income equalization, in-kind transactions and losses deferred due to wash sales.
Net investment income per share calculations in the financial highlights for all
years presented exclude these differences. During 1999, the Trust reclassified
$2,312,821,331 of non-taxable security gains realized in the in-kind redemption
of Creation Units (Note 4) as an increase to paid in surplus in the Statement of
Assets and Liabilities. At September 30, 1999, the Trust had capital loss
carryforwards of $33,523 and $27,798,414 which will expire on September 30, 2005
and September 30, 2006, respectively.
NOTE 3 -- TRANSACTIONS WITH THE TRUSTEE AND SPONSOR
In accordance with the Trust Agreement, State Street Bank and Trust Company (the
"Trustee") maintains the Trust's accounting records, acts as custodian and
transfer agent to the Trust, and provides administrative services, including
filing of all required regulatory reports. The Trustee is also responsible for
determining the composition of the portfolio of securities which must be
delivered in exchange for the issuance of Creation Units of the Trust, and for
adjusting the composition of the Trust's portfolio from time to time to conform
to changes in the composition and/or weighting structure of the S&P Index. For
these services, the Trustee receives a fee at the following annual rates:
<TABLE>
<CAPTION>
NET ASSET VALUE OF THE TRUST FEE AS A PERCENTAGE OF NET ASSET VALUE OF THE TRUST
- ---------------------------- ---------------------------------------------------
<S> <C>
$0 - $499,999,999 15/100 of 1% per annum plus or minus the Adjustment Amount
$500,000,000 - $999,999,999 13/100 of 1% per annum plus or minus the Adjustment Amount
$1,000,000,000 - and above 11/100 of 1% per annum plus or minus the Adjustment Amount
</TABLE>
The Adjustment Amount is the sum of (a) the excess or deficiency of transaction
fees received by the Trustee, less the expenses incurred in processing orders
for creation and redemption of SPDRs and (b) the amounts earned by the Trustee
with respect to the cash held by the Trustee for the benefit of the Trust.
During the year ended September 30, 1999, the Adjustment Amount reduced the
Trustee's fee by $661,597. The Adjustment Amount included a deficiency of net
transaction fees from processing orders of ($38,404) and a Trustee earnings
credit of $700,001.
For the year ended September 30, 1999, State Street Bank and Trust Company (the
"Trustee") agreed to reimburse the Trust for, or assume, the ordinary operating
expenses of the Trust, before the Trustee earnings credit, which exceeded
18.00/100 of 1% per annum of the daily net asset value of the Trust. The amount
of such reimbursement by the Trustee for the year ended September 30, 1999 was
$2,002,824.
13
<PAGE> 15
SPDR TRUST SERIES 1
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 (CONTINUED)
- --------------------------------------------------------------------------------
NOTE 4 -- TRUST TRANSACTIONS IN SPDRS
Transactions in SPDRs were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
September 30, 1999 September 30, 1998
SPDRs Amount SPDRs Amount
----------- --------------- ----------- ---------------
<S> <C> <C> <C> <C>
SPDRs sold ............ 136,600,000 $15,863,560,260 123,400,000 $12,952,751,200
Dividend reinvestment
SPDRs issued ....... 3,564 446,517 3,020 309,869
SPDRs redeemed ........ (113,200,000) (13,216,685,874) (86,900,000) (9,102,040,780)
Net income equalization -- (3,650,519) -- (6,830,907)
----------- --------------- ----------- ---------------
Net increase .......... 23,403,564 $ 2,643,670,384 36,503,020 $ 3,844,189,382
=========== =============== =========== ===============
Nine Month Period Ended Year Ended
September 30, 1997 (Note 1) September 30, 1996
SPDRs Amount SPDRs Amount
----------- -------------- ---------- --------------
SPDRs sold ............ 23,800,000 $2,120,759,371 15,750,000 $1,100,700,575
Dividend reinvestment
SPDRs issued ....... 4,003 328,997 7,625 506,869
SPDRs redeemed ........ (8,150,000) (727,245,251) (4,900,000) (339,666,479)
Net income equalization -- (420,891) -- (1,962,474)
----------- -------------- ---------- --------------
Net increase .......... 15,654,003 $1,393,422,226 10,857,625 $ 759,578,491
=========== ============== ========== ==============
</TABLE>
Except for under the Trust's dividend reinvestment plan, SPDRs are issued and
redeemed by the Trust only in Creation Unit size aggregations of 50,000 SPDRs.
Such transactions are only permitted on an in-kind basis, with a separate cash
payment which is equivalent to the undistributed net investment income per SPDR
(income equalization) and a balancing cash component to equate the transaction
to the net asset value per unit of the Trust on the transaction date. A
transaction fee of $3,000 is charged in connection with each creation or
redemption of Creation Units through the SPDR Clearing Process per Participating
party per day, regardless of the number of Creation Units created or redeemed.
Transaction fees are received by the Trustee and used to offset the expense of
processing orders.
NOTE 5 -- INVESTMENT TRANSACTIONS
For the year ended September 30, 1999, the Trust had in-kind contributions,
in-kind redemptions, purchases and sales of investment securities of
$15,127,322,773, $12,516,390,306, $816,374,449, and $748,897,781, respectively.
At September 30, 1999, the cost of investments for federal income tax purposes
was $13,605,472,051, accordingly, gross unrealized appreciation was $879,768,618
and gross unrealized depreciation was $1,321,501,200, resulting in net
unrealized depreciation of $441,732,582.
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SPDR TRUST SERIES 1
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Trustee and Unitholders of
SPDR Trust Series 1
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of SPDR Trust Series 1 (the "Trust")
at September 30, 1999, and the results of its operations, the changes in its net
assets and the financial highlights for the periods indicated, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Trust's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of investments owned at September 30, 1999
by correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 22, 1999
15
<PAGE> 17
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16
<PAGE> 18
SPDR TRUST SERIES 1
- --------------------------------------------------------------------------------
SPONSOR
PDR Services LLC
c/o American Stock Exchange LLC
86 Trinity Place
New York, NY 10006
TRUSTEE
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
DISTRIBUTOR
ALPS Mutual Funds Services, Inc.
370 17th Street, Suite 3100
Denver, CO 80202
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
160 Federal Street
Boston, MA 02110
LEGAL COUNSEL
Carter, Ledyard & Milburn
2 Wall Street
New York, NY 10005
