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