N-30D 1 a06-24326_1n30d.htm INITIAL ANNUAL AND SEMI-ANNUAL REPORTS MAILED TO SHAREHOLDERS

STANDARD AND POOR’S MIDCAP 400 DEPOSITARY RECEIPTS(TM)

 

(“MIDCAP SPDRS”)(TM)

 

MIDCAP SPDR TRUST, SERIES 1

 

A UNIT INVESTMENT TRUST

 

ANNUAL REPORT

 

SEPTEMBER 30, 2006

 

“S&P”, “S&P MidCap 400 Index”, “Standard & Poor’s”, “Standard & Poor’s MidCap 400 Depositary Receipts”, and “MidCap SPDRs” are trademarks of The McGraw-Hill Companies, 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 The McGraw-Hill Companies, Inc.



MIDCAP SPDR TRUST, SERIES 1

TRUST OVERVIEW

 

OBJECTIVE:

 

To replicate the total return of the S&P MidCap 400 Index.

 

STRATEGY:

 

The Trust’s holdings are comprised of the 400 stocks in the S&P MidCap 400 Index, which is designed to capture the price performance of the middle capitalization segment of the U.S. publicly traded stock market.

 

PERFORMANCE OVERVIEW:

 

The MidCap SPDR Trust, Series 1 (the “Trust”) seeks to match the total return of the S&P MidCap 400 Index. To accomplish this, the Trust utilizes a full replication approach. With this strategy, all 400 securities of the S&P MidCap 400 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.



MIDCAP SPDR Trust, Series 1

Schedule of Investments

September 30, 2006

Common Stock

 

Shares

 

Value

 

3Com Corp. *

 

3,060,503

 

$

13,496,818

 

99 Cents Only Stores *

 

361,977

 

$

4,282,188

 

Abercrombie & Fitch Co.

 

683,954

 

$

47,521,124

 

Activision, Inc. *

 

1,937,702

 

$

29,259,300

 

Acxiom Corp.

 

525,881

 

$

12,968,225

 

Adesa Inc.

 

698,079

 

$

16,132,606

 

Adtran Inc.

 

502,857

 

$

11,988,111

 

Advance Auto Parts, Inc.

 

816,269

 

$

26,887,901

 

Advanced Medical Optics, Inc *

 

460,683

 

$

18,220,013

 

Advent Software, Inc. *

 

157,335

 

$

5,697,100

 

Aeropostale, Inc. *

 

410,192

 

$

11,989,912

 

Affymetrix Inc. *

 

525,547

 

$

11,330,793

 

AGCO Corp. *

 

706,753

 

$

17,916,189

 

AGL Resources

 

604,762

 

$

22,073,813

 

Airgas Inc.

 

604,156

 

$

21,852,323

 

AirTran Holdings Inc. *

 

705,666

 

$

7,000,207

 

Alaska Air Group *

 

309,684

 

$

11,780,379

 

Albemarle Corp.

 

305,577

 

$

16,601,998

 

Alexander & Baldwin

 

334,433

 

$

14,838,792

 

Alliance Data Systems *

 

516,306

 

$

28,494,928

 

Alliant Energy Corp.

 

914,439

 

$

32,672,905

 

Alliant Techsystems Inc *

 

269,390

 

$

21,836,753

 

AMB Property Corp.

 

686,330

 

$

37,823,646

 

American Eagle Outfitters, Inc.

 

1,036,387

 

$

45,424,842

 

American Financial Group, Inc.

 

360,175

 

$

16,903,013

 

American Greetings Corp (Class A)

 

444,104

 

$

10,267,684

 

AmeriCredit Corp. *

 

971,157

 

$

24,269,213

 

AmerUs Group Co.

 

334,347

 

$

22,738,939

 

Ametek, Inc.

 

548,005

 

$

23,865,618

 

Amphenol Corp.

 

693,971

 

$

42,977,624

 

Andrew Corp. *

 

1,239,833

 

$

11,443,659

 

AnnTaylor Stores Corp. *

 

564,933

 

$

23,648,095

 

Applebee’s Intl

 

577,964

 

$

12,432,006

 

Apria Healthcare Group *

 

329,541

 

$

6,505,139

 

Aqua America Inc

 

1,020,351

 

$

22,386,501

 

Aquila, Inc. *

 

2,904,876

 

$

12,578,113

 

Arch Coal

 

1,114,654

 

$

32,224,647

 

Arrow Electronics Inc *

 

948,459

 

$

26,016,230

 

Arvinmeritor Inc

 

548,020

 

$

7,803,805

 

Associated Banc-Corp.

 

1,026,649

 

$

33,366,093

 

Astoria Financial

 

671,351

 

$

20,691,038

 

Atmel Corp. *

 

3,326,553

 

$

20,092,380

 

Avis Budget Group, Inc. *

 

778,451

 

$

14,237,869

 

Avnet, Inc. *

 

990,835

 

$

19,440,183

 

Avocent Corp. *

 

397,154

 

$

11,962,278

 

 



 

Bandag, Inc.

 

89,069

 

$

3,655,392

 

Bank of Hawaii Corp.

 

392,215

 

$

18,889,074

 

Banta Corp.

 

187,224

 

$

8,911,862

 

Barnes & Noble

 

397,379

 

$

15,076,559

 

Beazer Homes Inc.

 

304,412

 

$

11,884,244

 

Beckman Coulter Inc.

 

481,626

 

$

27,722,393

 

Belo Corp.

 

682,020

 

$

10,782,736

 

BISYS Group *

 

935,048

 

$

10,154,621

 

BJ’s Wholesale Club *

 

503,975

 

$

14,705,991

 

Black Hills

 

258,270

 

$

8,680,455

 

Blyth Inc.

 

194,718

 

$

4,737,489

 

Bob Evans Farms

 

282,940

 

$

8,567,423

 

Borders Group

 

481,766

 

$

9,828,026

 

Borg Warner Inc.

 

445,571

 

$

25,473,294

 

Bowater Inc.

 

434,288

 

$

8,933,304

 

Boyd Gaming Corp.

 

328,578

 

$

12,630,538

 

Brinker International

 

642,331

 

$

25,751,050

 

Brown & Brown Inc.

 

888,161

 

$

27,142,200

 

Cabot Corp.

 

491,807

 

$

18,295,220

 

Cadence Design Systems *

 

2,178,702

 

$

36,950,786

 

Callaway Golf Co.

 

487,924

 

$

6,396,684

 

Cameron International Corp. *

 

866,557

 

$

41,863,369

 

Career Education *

 

735,353

 

$

16,545,443

 

Carlisle Companies

 

239,252

 

$

20,121,093

 

CarMax Inc. *

 

826,659

 

$

34,479,947

 

Catalina Marketing

 

284,051

 

$

7,811,403

 

Cathay Bancorp Inc.

 

400,198

 

$

14,447,148

 

CBRL Group

 

240,083

 

$

9,706,556

 

CDW Corp.

 

465,963

 

$

28,740,598

 

Cephalon, Inc. *

 

471,717

 

$

29,128,525

 

Ceridian Corp. *

 

1,079,337

 

$

24,133,975

 

Ch Robinson Worldwide Inc.

 

1,346,506

 

$

60,027,237

 

Charles River Laboratories Intl. Inc. *

 

530,447

 

$

23,026,704

 

Charming Shoppes Inc. *

 

952,202

 

$

13,597,445

 

Checkfree Corp *

 

690,749

 

$

28,541,749

 

Cheesecake Factory *

 

614,151

 

$

16,698,766

 

Chemtura, Corp

 

1,868,179

 

$

16,197,112

 

Chico’s FAS Inc. *

 

1,363,443

 

$

29,354,928

 

ChoicePoint Inc. *

 

659,780

 

$

23,620,124

 

Church & Dwight Co.

 

503,990

 

$

19,711,049

 

Cincinnati Bell Inc. *

 

1,917,543

 

$

9,242,557

 

City National Corp.

 

313,691

 

$

21,036,118

 

Claire’s Stores

 

739,275

 

$

21,557,259

 

Cognizant Technology Solutions Corp. (Class A) *

 

1,094,154

 

$

81,033,045

 

Coldwater Creek, Inc. *

 

466,639

 

$

13,420,538

 

Colonial BancGroup

 

1,202,101

 

$

29,451,475

 

Commercial Metals

 

930,560

 

$

18,918,285

 

CommScope, Inc. *

 

458,136

 

$

15,054,349

 

Community Health Systems *

 

734,142

 

$

27,420,204

 

Con-Way Inc.

 

372,406

 

$

16,691,237

 

 



 

Copart Inc. *

 

547,430

 

$

15,432,052

 

Corinthian Colleges *

 

668,928

 

$

7,231,112

 

Corporate Executive Board Co

 

312,666

 

$

28,111,800

 

Covance Inc. *

 

495,115

 

$

32,865,734

 

Crane Company

 

398,963

 

$

16,676,653

 

Cree Inc. *

 

599,746

 

$

12,060,892

 

CSG Systems International *

 

372,724

 

$

9,851,095

 

Cullen Frost Bankers

 

431,516

 

$

24,950,255

 

Cypress Semiconductor *

 

1,095,986

 

$

19,475,671

 

Cytec Industries

 

322,466

 

$

17,925,885

 

Cytyc Corp. *

 

873,748

 

$

21,389,351

 

Deluxe, Corp

 

399,251

 

$

6,827,192

 

Denbury Resources, Inc *

 

926,172

 

$

26,766,371

 

Dentsply International

 

1,194,529

 

$

35,967,268

 

Developers Diversified Realty Corporation

 

852,098

 

$

47,512,984

 

DeVRY Inc. *

 

461,436

 

$

9,814,744

 

Diebold, Inc.

 

509,698

 

$

22,187,154

 

Dollar Tree Stores *

 

791,909

 

$

24,517,503

 

Donaldson Co.

 

552,586

 

$

20,390,423

 

DPL Inc.

 

886,476

 

$

24,041,229

 

DRS Technolgies

 

311,905

 

$

13,620,891

 

DST Systems Inc. *

 

453,422

 

$

27,962,535

 

Dun & Bradstreet *

 

487,792

 

$

36,579,522

 

Duquesne Light Holdings Inc.

 

610,439

 

$

12,001,231

 

Dycom Industries *

 

315,384

 

$

6,780,756

 

Eaton Vance

 

986,556

 

$

28,472,006

 

Edwards (A.G.), Inc.

 

592,881

 

$

31,588,700

 

Edwards Lifesciences Corp. *

 

453,508

 

$

21,128,938

 

Emmis Communications *

 

251,599

 

$

3,082,088

 

Energizer Holdings Inc. *

 

445,595

 

$

32,078,384

 

Energy East

 

1,146,966

 

$

27,206,034

 

ENSCO Int’l

 

1,191,625

 

$

52,228,924

 

Entercom Communications

 

216,127

 

$

5,446,400

 

Equitable Resources

 

937,091

 

$

32,779,443

 

Everest Reinsurance Group Ltd

 

504,084

 

$

49,163,313

 

Expeditors Int’l

 

1,656,253

 

$

73,835,759

 

F5 Networks Inc. *

 

314,872

 

$

16,914,924

 

Fair, Isaac Corporation

 

488,266

 

$

17,855,888

 

Fairchild Semiconductor *

 

951,363

 

$

17,790,488

 

Fastenal

 

972,711

 

$

37,517,463

 

Federal Signal

 

373,299

 

$

5,692,810

 

Ferro Corp.

 

330,092

 

$

5,869,036

 

Fidelity National Financial

 

1,368,707

 

$

57,006,647

 

Fidelity National Information Se

 

505,365

 

$

18,698,505

 

First American Corp

 

750,488

 

$

31,775,662

 

First Niagara Finl Grp Inc

 

858,303

 

$

12,514,058

 

FirstMerit Corp.

 

621,699

 

$

14,404,766

 

Florida Rock

 

383,277

 

$

14,836,653

 

Flowserve Corp. *

 

438,862

 

$

22,202,029

 

FMC Corp.

 

303,255

 

$

19,429,548

 

 



 

FMC Technologies *

 

532,140

 

$

28,575,918

 

Foot Locker, Inc.

 

1,208,165

 

$

30,506,166

 

Forest Oil *

 

424,721

 

$

13,416,936

 

Furniture Brands International

 

375,225

 

$

7,144,284

 

Gallagher (Arthur J.) & Co

 

754,798

 

$

20,130,463

 

Gamestop Corp. *

 

583,765

 

$

27,016,644

 

Gartner, Inc. *

 

442,846

 

$

7,789,661

 

GATX Corp.

 

397,752

 

$

16,455,000

 

Gen-Probe, Inc *

 

402,302

 

$

18,863,941

 

Gentex Corp

 

1,140,187

 

$

16,202,057

 

Glatfelter

 

347,393

 

$

4,707,175

 

Graco Inc.

 

526,852

 

$

20,578,839

 

Granite Construction

 

263,154

 

$

14,039,266

 

Grant Prideco *

 

1,013,650

 

$

38,549,110

 

Great Plains Energy Inc.

 

623,081

 

$

19,327,973

 

Greater Bay Bancorp

 

395,655

 

$

11,161,428

 

Hanesbrands Inc *

 

737,846

 

$

16,608,913

 

Hanover Compressor *

 

801,157

 

$

14,597,081

 

Hanover Insurance Group. *

 

395,663

 

$

17,658,440

 

Harris Corp.

 

1,039,470

 

$

46,246,020

 

Harsco Corp.

 

326,233

 

$

25,331,992

 

Harte-Hanks, Inc.

 

386,422

 

$

10,182,220

 

Hawaiian Electric Industries

 

631,203

 

$

17,080,353

 

HCC Insurance Holdings

 

863,513

 

$

28,392,307

 

Health Net, Inc. *

 

900,508

 

$

39,190,108

 

Helmerich & Payne

 

816,874

 

$

18,812,608

 

Highwoods Properties, Inc.

 

425,606

 

$

15,836,799

 

Hillenbrand Industries

 

476,516

 

$

27,151,882

 

HNI Corp.

 

388,977

 

$

16,173,664

 

Horace Mann Educators

 

333,913

 

$

6,421,147

 

Hormel Foods Corp.

 

567,939

 

$

20,434,445

 

Hospitality Properties Trust

 

576,644

 

$

27,217,597

 

Hovnanian Enterprises Inc. *

 

283,049

 

$

8,304,658

 

Hubbell Inc. (Class B)

 

471,989

 

$

22,608,273

 

IDACORP Inc. Hldg. Co.

 

332,398

 

$

12,567,968

 

Imation Corp.

 

270,096

 

$

10,844,354

 

IndyMac Bancorp

 

533,119

 

$

21,943,178

 

Ingram Micro Inc. *

 

1,075,532

 

$

20,607,193

 

Integrated Device Technology *

 

1,550,084

 

$

24,894,349

 

International Rectifier Corp. *

 

555,522

 

$

19,354,386

 

International Speedway Corp. (Class A)

 

277,707

 

$

13,840,917

 

Intersil Corp. (Class A)

 

1,090,333

 

$

26,767,675

 

Intuitive Surgical, Inc *

 

285,713

 

$

30,128,436

 

Investors Financial Services

 

513,045

 

$

22,101,979

 

Invitrogen Corp. *

 

415,302

 

$

26,334,300

 

ITT Educational Services, Inc. *

 

256,398

 

$

16,999,187

 

J.B. Hunt Transport Services Inc.

 

823,886

 

$

17,112,112

 

Jack Henry & Associates Inc

 

609,188

 

$

13,262,023

 

Jacobs Engineering Group *

 

456,963

 

$

34,148,845

 

Jefferies Group, Inc.

 

784,081

 

$

22,346,309

 

 



 

JetBlue Airways Corp. *

 

1,362,627

 

$

12,631,552

 

Joy Global Inc

 

921,552

 

$

34,659,571

 

Kelly Services

 

164,712

 

$

4,514,756

 

KEMET Corp. *

 

675,590

 

$

5,452,011

 

Kennametal Inc.

 

300,459

 

$

17,021,002

 

Korn/Ferry International *

 

339,511

 

$

7,109,360

 

Lam Research *

 

1,101,609

 

$

49,935,936

 

Lancaster Colony

 

182,860

 

$

8,184,814

 

Lattice Semconductor *

 

887,796

 

$

6,054,769

 

Laureate Education, Inc. *

 

399,064

 

$

19,099,203

 

Lear Corporation

 

522,985

 

$

10,825,790

 

Lee Enterprises

 

356,300

 

$

8,993,012

 

Leucadia National Corp.

 

1,259,666

 

$

32,965,459

 

Liberty Property Trust

 

699,034

 

$

33,406,835

 

LifePoint Hospitals *

 

444,958

 

$

15,715,917

 

Lincare Holdings *

 

727,378

 

$

25,196,374

 

Lincoln Electric Holdings

 

330,659

 

$

18,004,383

 

Longview Fibre

 

510,576

 

$

10,374,904

 

Lubrizol Corp.

 

531,581

 

$

24,309,199

 

Lyondell Chemical Co.

 

1,636,001

 

$

41,505,345

 

M.D.C Hldgs

 

268,877

 

$

12,489,337

 

Macerich Co

 

557,618

 

$

42,579,710

 

Mack-Cali Realty

 

484,523

 

$

25,098,291

 

Macrovision Corporation *

 

410,720

 

$

9,729,957

 

Manpower Inc.

 

672,849

 

$

41,225,458

 

Martek Biosciences Corp. *

 

249,681

 

$

5,370,638

 

Martin Marietta

 

352,037

 

$

29,789,371

 

McAfee, Inc. *

 

1,238,769

 

$

30,300,290

 

McData Corp. *

 

1,236,680

 

$

6,220,500

 

MDU Resources

 

1,398,837

 

$

31,250,019

 

Media General

 

186,867

 

$

7,048,623

 

Medicis Pharmaceutical Cl A

 

424,946

 

$

13,747,003

 

MEMC Electronic Materials, Inc *

 

1,293,080

 

$

47,365,520

 

Mentor Graphics *

 

631,359

 

$

8,889,535

 

Mercantile Bankshares

 

973,495

 

$

35,308,664

 

Mercury General Corp

 

275,990

 

$

13,691,864

 

Michaels Stores

 

1,035,331

 

$

45,078,312

 

Micrel Inc. *

 

459,852

 

$

4,409,981

 

Microchip Technology

 

1,669,035

 

$

54,110,115

 

Millennium Pharmaceuticals *

 

2,448,619

 

$

24,363,759

 

Miller (Herman)

 

512,517

 

$

17,533,207

 

Mine Safety Appliances Co.

 

234,469

 

$

8,356,475

 

Minerals Technologies

 

152,373

 

$

8,136,718

 

Modine Mfg.

 

255,932

 

$

6,226,826

 

Mohawk Industries *

 

415,449

 

$

30,930,178

 

MoneyGram International, Inc.

 

656,457

 

$

19,076,640

 

MPS Group, Inc. *

 

804,271

 

$

12,152,535

 

Msc Industrial Dircl

 

424,954

 

$

17,312,626

 

National Fuel Gas

 

647,643

 

$

23,541,823

 

National Instruments

 

439,833

 

$

12,025,034

 

 



 

Navigant Consulting *

 

411,567

 

$

8,256,034

 

New Plan Excel Realty Trust

 

813,830

 

$

22,014,101

 

New York Community Bancorp

 

2,016,358

 

$

33,027,944

 

Newfield Exploration Company *

 

1,015,397

 

$

39,133,400

 

Newport Corporation *

 

316,751

 

$

5,163,041

 

Noble Energy, Inc.

 

1,371,317

 

$

62,518,342

 

Nordson Corporation

 

261,422

 

$

10,420,281

 

Northeast Utilities

 

1,194,312

 

$

27,791,640

 

NSTAR

 

829,408

 

$

27,669,051

 

OGE Energy Corp.

 

706,435

 

$

25,509,368

 

Ohio Casualty

 

477,052

 

$

12,341,335

 

Old Republic International

 

1,786,246

 

$

39,565,349

 

Olin Corp.

 

564,017

 

$

8,663,301

 

Omnicare, Inc.

 

942,239

 

$

40,601,079

 

ONEOK Inc.

 

853,379

 

$

32,249,192

 

O’Reilly Automotive Inc. *

 

880,551

 

$

29,243,099

 

Osi Restaurant Partners Inc.

 

578,018

 

$

18,328,951

 

Oskosh Truck Corp.

 

571,806

 

$

28,859,049

 

Overseas Shipholding Group

 

230,275

 

$

14,224,087

 

Pacific Sunwear of California, Inc. *

 

538,376

 

$

8,118,710

 

Packaging Corporation of America

 

630,691

 

$

14,632,031

 

Palm Inc. *

 

803,665

 

$

11,701,362

 

Par Pharmaceutical Companies, Inc. *

 

272,170

 

$

4,964,381

 

Patterson UTI-Energy

 

1,289,493

 

$

30,638,354

 

Payless ShoeSource *

 

510,312

 

$

12,706,769

 

PDL Biopharma Inc *

 

891,888

 

$

17,124,250

 

Peabody Energy

 

2,052,692

 

$

75,498,012

 

Pentair Inc.

 

785,261

 

$

20,565,986

 

Pepco Holdings, Inc.

 

1,480,817

 

$

35,791,347

 

PepsiAmericas, Inc.

 

470,079

 

$

10,031,486

 

Perrigo Co.

 

590,256

 

$

10,016,644

 

PETsMART Inc.

 

1,085,573

 

$

30,124,651

 

Pharmaceutical Prod Dev

 

799,425

 

$

28,531,478

 

Pier 1 Imports

 

679,528

 

$

5,042,098

 

Pioneer Natural Resources

 

968,502

 

$

37,887,798

 

Plains Exploration & Production Company *

 

595,607

 

$

25,557,496

 

Plantronics Inc.

 

368,236

 

$

6,455,177

 

Plexus Corp *

 

358,801

 

$

6,888,979

 

PMI Group

 

671,677

 

$

29,426,169

 

PNM Resources, Inc.

 

540,410

 

$

14,899,104

 

Pogo Producing

 

450,650

 

$

18,454,117

 

Polycom Inc. *

 

684,886

 

$

16,800,254

 

Potlatch Corp

 

300,630

 

$

11,153,373

 

Powerwave Technologies *

 

873,927

 

$

6,641,845

 

Precision Castparts

 

1,052,034

 

$

66,446,467

 

Pride International *

 

1,266,484

 

$

34,726,991

 

Protective Life Corp.

 

542,934

 

$

24,839,230

 

Psychiatric Solutions, Inc. *

 

412,553

 

$

14,063,932

 

Puget Energy, Inc. (Hldg. Co.)

 

902,659

 

$

20,517,439

 

Quanta Services *

 

920,341

 

$

15,516,949

 

 



 

Questar Corp.

 

665,519

 

$

54,419,489

 

Quicksilver Resrcscom *

 

427,509

 

$

13,637,537

 

Radian Group

 

634,418

 

$

38,065,080

 

Ralph Lauren Polo Corp.

 

479,397

 

$

31,012,192

 

Raymond James Financial, Inc.

 

703,158

 

$

20,560,340

 

Rayonier Inc.

 

594,597

 

$

22,475,767

 

Reader’s Digest Association

 

748,352

 

$

9,698,642

 

Regency Centers Corp

 

533,848

 

$

36,707,388

 

Regis Corp.

 

352,169

 

$

12,625,259

 

Reliance Steel & Aluminum

 

498,019

 

$

16,006,331

 

Rent-A-Center, Inc. *

 

541,707

 

$

15,866,598

 

Republic Services Inc.

 

890,770

 

$

35,817,862

 

ResMed Inc. *

 

589,643

 

$

23,733,131

 

Reynolds & Reynolds Co

 

419,480

 

$

16,573,655

 

RF Micro Devices, Inc. *

 

1,487,806

 

$

11,277,569

 

Rollins, Inc.

 

231,937

 

$

4,896,190

 

Roper Industries

 

675,606

 

$

30,226,612

 

Ross Stores

 

1,095,746

 

$

27,842,906

 

RPM International Inc.

 

922,787

 

$

17,523,725

 

Ruby Tuesday, Inc.

 

458,353

 

$

12,920,971

 

Ruddick Corp.

 

276,565

 

$

7,198,987

 

Ryland Group Inc.

 

339,092

 

$

14,652,165

 

SAKS Inc.

 

1,063,768

 

$

18,381,911

 

SCANA Corp .

 

900,834

 

$

36,276,585

 

Schein (Henry) Inc. *

 

684,692

 

$

34,330,457

 

Scholastic Corp. *

 

198,344

 

$

6,178,416

 

Scientific Games Corporation *

 

517,595

 

$

16,459,521

 

Scotts Co.

 

358,063

 

$

15,930,223

 

SEI Investments

 

489,516

 

$

27,505,904

 

Semtech Corp *

 

565,663

 

$

7,217,860

 

Sensient Technologies

 

360,051

 

$

7,046,198

 

Sepracor Inc. *

 

848,433

 

$

41,098,095

 

Sequa Corp. *

 

53,325

 

$

5,005,084

 

Sierra Pacific Resources *

 

1,715,223

 

$

24,596,298

 

Silicon Laboratories Inc. *

 

434,801

 

$

13,487,527

 

Smithfield Foods *

 

769,257

 

$

20,785,324

 

Smucker (J.M.) Co

 

445,509

 

$

21,362,157

 

Sonoco Products Co

 

769,808

 

$

25,896,341

 

Sotheby’s Holdings

 

430,064

 

$

13,865,263

 

Southwestern Energy *

 

1,305,870

 

$

39,006,337

 

SPX Corp.

 

449,229

 

$

24,006,798

 

SRA International, Inc. *

 

317,450

 

$

9,542,547

 

StanCorp Financial Group

 

422,197

 

$

18,842,652

 

Steel Dynamics, Inc.

 

353,567

 

$

17,837,455

 

Stericycle Inc. *

 

342,400

 

$

23,896,096

 

STERIS Corp.

 

503,439

 

$

12,112,742

 

SVB Financial Group *

 

268,147

 

$

11,970,082

 

Swift Transportation *

 

418,555

 

$

9,928,125

 

Sybase Inc. *

 

694,864

 

$

16,843,503

 

Synopsys Inc. *

 

1,095,606

 

$

21,605,350

 

 



 

TCF Financial

 

875,084

 

$

23,005,958

 

Tech Data Corp. *

 

426,864

 

$

15,593,342

 

Techne Corp *

 

305,810

 

$

15,553,497

 

Teleflex Inc

 

310,577

 

$

17,280,504

 

Telephone & Data Systems Inc

 

808,332

 

$

34,030,777

 

Texas Regional Bancshares, Inc.

 

357,512

 

$

13,746,336

 

The Brink’s Company

 

367,444

 

$

19,496,579

 

Thomas & Betts Corp. *

 

403,972

 

$

19,273,504

 

Thor Industries, Inc.

 

277,310

 

$

11,416,853

 

Tidewater Inc.

 

453,096

 

$

20,022,312

 

Timberland Co (Class A) *

 

397,799

 

$

11,444,677

 

Timken Co.

 

729,956

 

$

21,738,090

 

Toll Brothers Inc *

 

977,308

 

$

27,442,809

 

Tootsie Roll Industries Inc

 

206,552

 

$

6,054,039

 

Transaction Systems Architects, Inc. *

 

291,366

 

$

9,999,681

 

Triad Hospitals *

 

682,362

 

$

30,044,399

 

Trinity Industries

 

618,616

 

$

19,900,877

 

TriQuint Semiconductor *

 

1,080,106

 

$

5,616,551

 

Tupperware Corp.

 

471,298

 

$

9,171,459

 

United Dominion Realty Trust, Inc. (Md.)

 

1,045,457

 

$

31,572,801

 

United Rentals *

 

513,262

 

$

11,933,342

 

Unitrin, Inc.

 

317,396

 

$

14,019,381

 

Universal Corp.

 

199,944

 

$

7,303,954

 

Universal Health Services (Class B)

 

442,232

 

$

26,502,964

 

Urban Outfitters Inc. *

 

873,018

 

$

15,443,688

 

Utstarcom Inc. *

 

825,766

 

$

7,324,544

 

Valassis Communications Inc *

 

371,194

 

$

6,551,574

 

Valeant Pharmaceuticals International

 

722,035

 

$

14,281,852

 

Valspar Corp

 

789,571

 

$

21,002,589

 

Varian Inc *

 

240,363

 

$

11,025,451

 

Varian Medical Systems *

 

1,008,967

 

$

53,868,748

 

VCA Antech, Inc. *

 

646,548

 

$

23,314,521

 

Vectren Corp

 

591,740

 

$

15,888,219

 

Vertex Pharmaceuticals Inc *

 

938,846

 

$

31,592,168

 

Vishay Intertechnology Inc *

 

1,432,337

 

$

20,110,011

 

W. R. Berkley Corp.

 

1,307,609

 

$

46,276,283

 

Waddell & Reed Financial Inc.

 

658,017

 

$

16,285,921

 

Washington Federal Inc.

 

677,594

 

$

15,205,209

 

Washington Post Co

 

44,030

 

$

32,450,110

 

Webster Financial Corp.

 

408,049

 

$

19,223,188

 

Weingarten Realty Investors

 

613,009

 

$

26,371,647

 

Werner Enterprises

 

396,020

 

$

7,409,534

 

Westamerica Bancorporation

 

242,180

 

$

12,232,512

 

Westar Energy Inc

 

677,384

 

$

15,925,298

 

Western Digital Corp. *

 

1,713,826

 

$

31,020,251

 

Westwood One, Inc.

 

544,464

 

$

3,854,805

 

WGL Holdings, Inc.

 

378,750

 

$

11,870,025

 

Williams-Sonoma Inc.

 

881,133

 

$

28,539,898

 

Wilmington Trust Corp.

 

533,181

 

$

23,753,213

 

Wind River Systems *

 

586,521

 

$

6,281,640

 

 



 

Wisconsin Energy Corp

 

908,390

 

$

39,187,945

 

Worthington Industries, Inc

 

565,493

 

$

9,647,311

 

WPS Resources

 

334,907

 

$

16,621,434

 

YRC Worldwide, Inc. *

 

446,627

 

$

16,543,064

 

Zebra Technologies Corp *

 

549,969

 

$

19,655,892

 

 

 

 

 

 

 

Totals

 

 

 

$

8,343,451,122

 

 

The securities of the MIDCAP SPDR Trust’s investment portfolio categorized by industry sector, as a percentage of total investment at value, were as follows:

Industry Name

 

Value

 

Weight

 

Capital Goods

 

$

711,173,262

 

8.52

%

Utilities

 

$

697,400,294

 

8.36

%

Energy

 

$

678,339,747

 

8.13

%

Retailing

 

$

615,497,717

 

7.38

%

Health Care Equipment & Services

 

$

573,171,937

 

6.87

%

Software & Services

 

$

513,648,769

 

6.16

%

Banks

 

$

477,818,986

 

5.73

%

Technology Hardware & Equipment

 

$

464,308,835

 

5.56

%

Insurance

 

$

446,908,225

 

5.36

%

Materials

 

$

421,492,677

 

5.05

%

Real Estate

 

$

390,145,843

 

4.68

%

Pharmaceuticals & Biotechnology

 

$

340,355,272

 

4.08

%

Semiconductors & Semiconductor Equipment

 

$

339,911,669

 

4.07

%

Commerical Services & Support

 

$

337,128,708

 

4.04

%

Transportation

 

$

247,797,998

 

2.97

%

Consumer Services

 

$

243,516,910

 

2.92

%

Diversified Financials

 

$

226,095,831

 

2.71

%

Consumer Durables & Apparels

 

$

202,486,773

 

2.43

%

Food & Staples Retailing

 

$

167,850,630

 

2.01

%

Media

 

$

112,080,029

 

1.34

%

Automobiles & Components

 

$

81,604,017

 

0.98

%

Telecommunication Services

 

$

54,716,993

 

0.65

%

 

 

 

 

 

 

Grand Total

 

$

8,343,451,122

 

100.00

%

 

(*) Denotes non-income producing security.

 

The accompanying notes are an integral part of these financial statements.

 



MIDCAP SPDR TRUST, SERIES 1
STATEMENT OF ASSETS AND LIABILITIES
September 30, 2006

 

Assets:

 

 

 

Investments in securities, at value (cost $9,265,687,098)

 

$

8,343,451,122

 

Cash

 

25,422,245

 

Receivable from units created

 

14,538

 

Dividends receivable

 

5,846,490

 

Receivable for securities sold

 

65,535,830

 

Total Assets

 

8,440,270,225

 

 

 

 

 

Liabilities:

 

 

 

Payable for securities purchased

 

64,477,391

 

Distribution payable

 

20,576,053

 

Payable to sponsor

 

7,546,081

 

Accrued trustee fees

 

607,040

 

Other accrued expenses

 

394,570

 

Redemption payable

 

7,892

 

Total Liabilities

 

93,609,027

 

Net Assets

 

$

8,346,661,198

 

 

 

 

 

Net Assets Represented By:

 

 

 

Interest of Unitholders (60,676,786 units of fractional undivided interest (MidCap SPDRs) outstanding; unlimited units authorized)

 

 

 

Cost to investors of outstanding units

 

$

9,695,010,844

 

Undistributed net investment income

 

6,206,989

 

Accumulated net realized losses on investments

 

(432,320,659

)

Unrealized depreciation on investments

 

(922,235,976

)

Net assets

 

$

8,346,661,198

 

Net asset value per MidCap SPDR ($8,346,661,198/60,676,786 MidCap SPDRs)

 

$

137.56

 

 

The accompanying notes are an integral part of these financial statements.



MIDCAP SPDR TRUST, SERIES 1

STATEMENTS OF OPERATIONS

 

 

 

For the Year

 

For the Year

 

For the Year

 

 

 

Ended

 

Ended

 

Ended

 

 

 

September 30, 2006

 

September 30, 2005

 

September 30, 2004

 

Investment income

 

 

 

 

 

 

 

Dividend income

 

$

123,897,645

 

$

102,141,590

 

$

77,048,858

 

Expenses

 

 

 

 

 

 

 

Trustee fees and expenses

 

9,431,705

 

7,947,030

 

6,746,430

 

Printing and distribution expenses

 

10,936,424

 

8,859,504

 

7,349,918

 

Audit fees

 

79,112

 

78,800

 

67,050

 

Legal fees

 

101,653

 

81,930

 

70,503

 

License fees

 

2,749,982

 

2,318,005

 

1,884,016

 

Total expenses

 

23,298,876

 

19,285,269

 

16,117,917

 

Less: voluntary fee reduction by the Trustee (see Note 3)

 

(875,397

)

(462,174

)

(123,652

)

Net expenses

 

22,423,479

 

18,823,095

 

15,994,265

 

Net investment income

 

101,474,166

 

83,318,495

 

61,054,593

 

Realized and unrealized gains (losses) on investments

 

 

 

 

 

 

 

Net realized gains/(losses)

 

18,784,496

 

103,437,325

 

62,515,659

 

Net realized gains from in-kind redemptions

 

1,243,027,600

 

1,109,056,346

 

366,612,906

 

Net increase (decrease) in unrealized appreciation (depreciation) of investments

 

(857,567,644

)

132,523,435

 

428,181,459

 

Net realized and unrealized gains on investments

 

404,244,452

 

1,345,017,106

 

857,310,024

 

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

 

$ 

505,718,618

 

$ 

1,428,335,601

 

$ 

918,364,617

 

 

The accompanying notes are an integral part of these financial statements.



MIDCAP SPDR TRUST, SERIES 1

STATEMENTS OF CHANGES IN NET ASSETS

 

 

 

For the Year

 

For the Year

 

For the Year

 

 

 

Ended

 

Ended

 

Ended

 

 

 

September 30, 2006

 

September 30, 2005

 

September 30, 2004

 

Increase (Decrease) in Net Assets From:

 

 

 

 

 

 

 

Operations:

 

 

 

 

 

 

 

Net investment income

 

$

101,474,166

 

$ 

83,318,495

 

$ 

61,054,593

 

Net realized gains (losses) on investments and in-kind redemptions

 

1,261,812,096

 

1,212,493,671

 

429,128,565

 

Net increase (decrease) in unrealized appreciation (depreciation) on investments

 

(857,567,644

)

132,523,435

 

428,181,459

 

Net increase in net assets resulting from operations

 

505,718,618

 

1,428,335,601

 

918,364,617

 

 

 

 

 

 

 

 

 

Dividends and Distributions to Unitholders from:

 

 

 

 

 

 

 

Net investment income

 

(95,899,706

)

(81,890,862

)

(59,300,208

)

Total dividends and distributions

 

(95,899,706

)

(81,890,862

)

(59,300,208

)

Unitholder Transactions:

 

 

 

 

 

 

 

Proceeds from subscriptions of MidCap SPDR units

 

7,167,944,824

 

4,666,255,578

 

2,007,615,417

 

Reinvestment of dividends and distributions

 

762,797

 

614,841

 

448,959

 

Less: Redemptions of MidCap SPDR units

 

(7,558,100,034

)

(4,223,112,006

)

(1,610,059,193

)

Increase (decrease) in net assets due to unitholder transactions

 

(389,392,413

)

443,758,413

 

398,005,183

 

Total increase (decrease)

 

20,426,499

 

1,790,203,152

 

1,257,069,592

 

Net Assets:

 

 

 

 

 

 

 

Beginning of year

 

8,326,234,699

 

6,536,031,547

 

5,278,961,955

 

End of year (including undistributed net investment income of $6,206,989, $1,843,416 and $415,782, respectively)

 

$

8,346,661,198

 

$

8,326,234,699

 

$

6,536,031,547

 

 

The accompanying notes are an integral part of these financial statements.



MIDCAP SPDR TRUST, SERIES 1

FINANCIAL HIGHLIGHTS

SELECTED DATA FOR A MIDCAP SPDR

 

 

 

For the Year

 

For the Year

 

For the Year

 

For the Year

 

For the Year

 

 

 

Ended

 

Ended

 

Ended

 

Ended

 

Ended

 

 

 

September 30,

 

September 30,

 

September 30,

 

September 30,

 

September 30,

 

 

 

2006

 

2005

 

2004

 

2003

 

2002

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Asset Value, Beginning of Year

 

$

130.82

 

$

108.59

 

$

93.50

 

$

74.67

 

$

79.21

 

Investment Operations:

 

 

 

 

 

 

 

 

 

 

 

Net investment income

 

1.58

 

1.36

 

1.02

 

0.82

 

0.70

 

Net realized and unrealized gains (losses) on investments

 

6.65

 

22.21

 

15.06

 

18.82

 

(4.52

)

Total from Investment Operations

 

8.23

 

23.57

 

16.08

 

19.64

 

(3.82

)

Less Distributions from:

 

 

 

 

 

 

 

 

 

 

 

Net investment income

 

(1.49

)

(1.34

)

(0.99

)

(0.81

)

(0.72

)

Total Distributions

 

(1.49

)

(1.34

)

(0.99

)

(0.81

)

(0.72

)

Net Asset Value, End of Year

 

$

137.56

 

$

130.82

 

$

108.59

 

$

93.50

 

$

74.67

 

Total Investment Return

 

6.26

%

21.77

%

17.21

%

26.41

%

(4.94

)%

 

 

 

 

 

 

 

 

 

 

 

 

Ratios and Supplemental Data

 

 

 

 

 

 

 

 

 

 

 

Net assets, end of year (000's)

 

$

8,346,661

 

$

8,326,235

 

$

6,536,032

 

$

5,278,962

 

$

5,408,491

 

Ratio of expenses to average net assets

 

0.25

%(1)

0.25

%(1)

0.25

%(1)

0.25

%(1)

0.25

%(1)

Ratio of net investment income to average net assets

 

1.13

%(1)

1.11

%(1)

0.96

%(1)

0.96

%(1)

0.81

%(1)

Portfolio turnover rate (2)

 

16.87

%

19.17

%

16.29

%

13.02

%

21.43

%

 

(1)                                  Net of voluntary fee reduction by the Trustee. Before voluntary fee reduction by the Trustee, the net investment income and expenses to average net assets ratios would have been 1.12% and 0.26% for the year September 30, 2006, 1.10% and 0.26% for the year ended September 30, 2005 (see Note 3), 0.96% and 0.25% for the year ended September 30, 2004, 0.96% and 0.25% for the year ended September 30, 2003, 0.82% and 0.25% for the year ended September 30, 2002.

 

(2)                                  Portfolio turnover rate excludes securities received or delivered from processing creations or redemptions of MidCap SPDRs.

 

The accompanying notes are an integral part of these financial statements.



MIDCAP SPDR TRUST, SERIES 1

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2006

Note 1 - ORGANIZATION

MidCap 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 Midcap 400 Composite Price Index (the “S&P MidCap Index”).  Each unit of fractional undivided interest in the Trust is referred to as a Standard & Poor’s Depository Receipt (“MidCap SPDR”).  The Trust commenced operations on April 27, 1995 upon the initial issuance of 375,000 MidCap SPDRs (equivalent to 15 “Creation Units”- see Note 4) in exchange for a portfolio of securities assembled to reflect the intended portfolio composition of the Trust.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The financial statements of the Trust are prepared in accordance with accounting principles generally accepted in the United States of America.

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America 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 mean between the closing bid and offer prices on the exchange, which is deemed to be the principal market for the security.  Portfolio securities traded on NASDAQ are valued at the NASDAQ official closing price on the day of valuation.  If there are no closing bid and offer prices 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 a specific identification basis.  Dividend income is recorded on the ex-dividend date.

Distributions to Unitholders - The Trust intends to declare and distribute dividends from net investment income quarterly.  The Trust will distribute net realized capital gains, if any, at least annually.

Federal Income Tax - The Trust has qualified and intends to continue to qualify for and elect treatment as a “regulated investment company” under Subchapter M of the Internal Revenue Code of 1986, as amended.  By so qualifying and electing, the Trust is not 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 is not subject to federal excise tax.

NOTE 3 - TRANSACTIONS WITH THE TRUSTEE AND SPONSOR

In accordance with the Trust Agreement, The Bank of New York (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 MidCap Index.  For these services, the Trustee receives a fee at the following annual rates:



 

NET ASSET VALUE OF THE TRUST

 

FEE AS A PERCENTAGE OF NET ASSET VALUE OF THE TRUST

$0-$500,000,000*

 

14/100 of 1% per annum

$500,000,001-$1,000,000,000*

 

12/100 of 1% per annum

$1,000,000,001 and above*

 

10/100 of 1% per annum

 

*  The fee indicated applies to that portion of the net asset value of the Trust, which falls in the size category indicated.

The Trustee voluntarily agreed to reduce its fee for the years ended September 30, 2006, 2005 and 2004 as disclosed in the Statements of Operations. The amount of the reduction equals the Federal Funds Rate, as published in the Wall Street Journal multiplied by each day’s daily cash balance in the Trust’s cash account, reduced by the amount of reserves for that account required by the Federal Reserve Board of Governors.  The Trustee reserves the right to discontinue this voluntary fee reduction in the future.

 

In the current year financial statements the gross trustee fees and the voluntary fee reduction for year ended September 30, 2005 is $ 7,947,030 and $462,174, respectively.  In the prior year financial statements the amount of net trustee fees and the voluntary fee reduction in the Statement of Operations for year ended September 30, 2005 was incorrectly reported as $7,484,856 and $0, respectively. This change had no effect on the results of operations and the net assets of the Trust.

 

PDR Services LLC (the “Sponsor”, a wholly-owned subsidiary of the American Stock Exchange LLC) agreed to reimburse the Trust for, or assume, the ordinary operating expenses of the Trust, which exceeded 30/100 of 1% per annum of the daily net asset value of the Trust as calculated by the Trustee.  There were no expenses assumed by the Sponsor for the years ended September 30, 2006, 2005 and 2004.

 

The Sponsor retains the ability to be repaid by the Trust for expenses so reimbursed or assumed to the extent that expenses fall below the expense limitation described above on any given day during the year.  There is no recoupment by the Sponsor of expenses so reimbursed in subsequent periods.

NOTE 4 - TRUST TRANSACTIONS IN MIDCAP SPDRs

Transactions in MidCap SPDRs were as follows:

 

 

 

Year Ended September 30, 2006

 

Year Ended September 30, 2005

 

 

 

MidCap SPDRs

 

AMOUNT

 

MidCap SPDRs

 

AMOUNT

 

MidCap SPDRs sold

 

51,850,000

 

$

7,167,944,824

 

37,275,000

 

$

4,666,255,578

 

Dividend reinvestment MIDCAP SPDRs issued

 

5,517

 

762,797

 

5,077

 

614,841

 

MidCap SPDRs redeemed

 

(54,825,000

)

(7,558,100,034

)

(33,825,000

)

(4,223,112,006

)

Net increase/decrease

 

(2,969,483

)

$

(389,392,413

)

3,455,077

 

$

443,758,413

 

 

 

Year Ended September 30, 2004

 

 

 

MidCap SPDRs

 

AMOUNT

 

MidCap SPDRs sold

 

19,525,000

 

$

2,007,615,417

 

Dividend reinvestment MIDCAP SPDRs issued

 

4,256

 

448,959

 

MidCap SPDRs redeemed

 

(15,800,000

)

(1,610,059,193

)

Net increase/decrease

 

3,729,256

 

$

398,005,183

 

 

Except under the Trust’s dividend reinvestment plan, MidCap SPDRs are issued and redeemed by the Trust only in Creation Unit size aggregations of 25,000 MidCap 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 MidCap SPDR and a balancing cash component to equate the transaction to the net asset value per unit of the Trust on the transaction date. Transaction fees, in the amount of the lesser of 20/100 of 1% of current market value of 1 Creation Unit or $3,000, are charged to those persons creating or redeeming Creation Units.  Transaction fees are received by the Trustee directly from the authorized participants and used to offset the expense of processing orders.  During the year ended September 30, 2006, the Trustee earned $387,000 in transaction fees. The Trustee, in its sole discretion, may voluntarily reduce or waive its fee, or modify its transaction fee schedule, subject to certain limitations. There were no reductions or waivers for the year ended September 30, 2006.

At September 30, 2006, the Trustee and its affiliates held 5,366,935 MidCap SPDRs, or 8.86% of fractional undivided interest in the Trust.



NOTE 5 - INVESTMENT TRANSACTIONS

For the year ended September 30, 2006 the Trust had net in-kind contributions, net in-kind redemptions, purchases and sales of investment securities of $7,167,944,824, $7,558,100,034, $1,525,188,033 and $1,520,043,582, respectively.

NOTE 6 – FEDERAL INCOME TAX STATUS

The following details the tax basis distributions and components of distributable earnings as of September 30, 2006.  The tax basis components of distributable earnings differ from the amounts reflected in the Statement of Assets and Liabilities by temporary book/tax differences primarily arising from wash sales and amortization of license fees.

 

Cost of investments for federal income tax purposes

 

$

9,360,310,696

 

 

 

 

 

Gross unrealized appreciation

 

$

316,089,868

 

Gross unrealized depreciation

 

(1,332,949,442

)

Net unrealized depreciation

 

$

(1,016,859,574

)

 

 

 

 

Distributable earnings, ordinary income

 

$

15,842,735

 

 

 

 

 

Capital loss carryforwards expiring:

 

 

 

9/30/10

 

(147,615,096

)

9/30/11

 

(109,442,118

)

9/30/12

 

(80,295,247

)

 

 

$

(337,352,461

)

 

For the year ended September 30, 2006, the Trust utilized $46,671,686 of capital loss carryforwards.

To the extent that capital losses are used to offset future capital gains, it is probable that gains so offset will not be distributed to shareholders. 

The tax composition of dividends paid during the years ending September 30, 2006, September 30, 2005 and September 30, 2004 were from ordinary income.

As of September 30, 2006, the Trust had permanent book/tax differences primarily attributable to in-kind redemptions and distributions received from real estate investment trusts.  To reflect reclassifications arising from these differences, accumulated net realized loss on investments was increased by $1,236,337,161, additional paid in capital was increased by $1,237,548,047, and undistributed net investment income was decreased by $1,210,886.

NOTE 7- REPRESENTATIONS AND INDEMNIFICATIONS

In the normal course of business the Trust enters into contracts that contain a variety of representations and warranties which provide general indemnifications.  The Trust’s maximum exposure under these arrangements in unknown as this would involve future claims that maybe made against the Trust that have not yet occurred.  However, based on experience, the Trust expects the risk of loss to be remote.

NOTE 8 – RECENT ACCOUNTING PRONOUNCEMENTS

On July 13, 2006, the Financial Accounting Standards Board (FASB) released FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” (FIN 48).  FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements.  FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Trust’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority.  Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year.  Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date.  At this time, management is evaluating the implications of FIN 48 and its impact in the financial statements has not yet been determined.



On September 15, 2006, the FASB released Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“FAS 157”) which provides enhanced guidance for measuring fair value. The standard requires companies to provide expanded information about the assets and liabilities measured at fair value and the potential effect of these fair valuations on an entity’s financial performance. The standard does not expand the use of fair value in any new circumstances, but provides clarification on acceptable fair valuation methods and applications. Adoption of FAS 157 is required for fiscal years beginning after November 15, 2007. At this time, management is evaluating the implications of FAS 157 and its impact in the financial statements has not yet been determined.

NOTE 9 - RELATED PARTY TRANSACTIONS

During the fiscal year ended September 30, 2006, 2005 and 2004 the Trust paid $2,582,136, $2,588,069 and $1,981,356 respectively, in commissions on trades to a related party, BNY Brokerage. BNY Brokerage is a subsidiary of The Bank of New York, the parent company of the Trustee.  The standing instructions with the BNY Brokerage require all trades to be executed at the close of business on any exchange that the securities are traded.



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Trustee and Unitholders of MidCap 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 MidCap SPDR Trust, Series 1 (the “Trust”) at September 30, 2006, the results of its operations and the changes in its net assets for each of the three years in the period then ended, and the financial highlights for each of the five years in the period then ended, 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation.  We believe that our audits, which included confirmation of securities at September 30, 2006 by correspondence with the custodian, provide a reasonable basis for our opinion.

 

PricewaterhouseCoopers LLP

New York, New York

January 16, 2007



ESSENTIAL INFORMATION AS OF SEPTEMBER 30, 2006*

 

 

 

Total Trust Assets:

 

$8,440,270,225

 

 

 

Net Trust Assets:

 

$8,346,661,198

 

 

 

Number of MidCap SPDRs:

 

60,676,786

 

 

 

Fractional Undivided Interest in Trust

 

 

Represented by each MidCap SPDR:

 

1/60,676,786th

 

 

 

Record Date:

 

Quarterly, on the second (2nd) Business Day after the third

 

 

Friday in each of March, June, September and December.

 

 

 

Dividend Payment Dates:

 

Quarterly, on the last Business Day of April, July, October

 

 

and January.

 

 

 

Trustee’s Annual Fee:

 

From 14/100 of one percent to 10/100 of one percent, based

 

 

on net asset value of the Trust, as the same may be reduced

 

 

by certain amounts, plus the Transaction Fee.

 

 

 

Estimated Ordinary Operating

 

 

Expenses of the Trust:

 

25/100 of one percent (inclusive of Trustee’s annual fee)

 

 

 

Net Asset Value per MidCap SPDR

 

 

(based on the value of the securities, other

 

 

net assets of the Trust and number of

 

 

MidCap SPDR’s outstanding):

 

$137.56

 

 

 

Evaluation Time:

 

Closing time of the regular trading session on the New York

 

 

Stock Exchange, Inc. (ordinarily 4:00 p.m. New York time).

 

 

 

Licensor:

 

Standard & Poor’s, a division of The McGraw-Hill Companies, Inc.

 

 

 

Mandatory Termination Date:

 

The first to occur of (i) April 27, 2120 or (ii) the date 20 years after

 

 

the death of the last survivor of eleven persons named in the Agreement,

 

 

the oldest of whom was born in 1990 and the youngest of whom was

 

 

born in 1993.

 

 

 

Discretionary Termination:

 

Trust may be terminated if the value of the securities held by the Trust

 

 

is less than $100,000,000, as such amount shall be adjusted for

 

 

inflation.

 

*      The Trust Agreement became effective and the initial deposit was made on April 27, 1995 (the “Initial Date of Deposit”).



MIDCAP SPDR TRUST

Frequency Distribution of Discounts and Premiums

Bid/Ask Price vs. Net Asset Value (NAV)

Five Year Period Ending 9/30/2006

 

Premium/ Discount Range

 

Number of
Trading Days

 

Percentage of Total
Trading Days

 

 

 

 

 

 

 

Greater than 0.25%

 

79

 

6.2

%

 

 

 

 

 

 

Between zero and 0.25%

 

522

 

41.4

%

 

 

 

 

 

 

Bid/Ask Price Equal to NAV

 

35

 

2.8

%

 

 

 

 

 

 

Between zero and -0.25%

 

523

 

41.5

%

 

 

 

 

 

 

Less than -0.25%

 

102

 

8.1

%

 

 

 

 

 

 

Total:

 

1,261

 

100

%

 



Comparision of Total Returns Based on NAV and Bid/Ask Price(1)(2)

From Inception to 9/30/06

Cummulative Total Return

 

 

1 Year

 

5 Year

 

10 Year

 

Since Inception

 

MidCap SPDR Trust

 

 

 

 

 

 

 

 

 

Return Based on NAV

 

6.26

%

82.61

%

239.42

%

348.85

%

Return Based on Bid/Ask Price

 

6.35

%

82.86

%

240.27

%

349.54

%

S&P MidCap 400 Index

 

6.56

%

84.93

%

250.88

%

369.28

%

 

Average Annual Total Return

 

 

 

1 Year

 

5 Year

 

10 Year

 

Since Inception

 

MidCap SPDR Trust

 

 

 

 

 

 

 

 

 

Return Based on NAV

 

6.26

%

12.78

%

13.00

%

14.04

%

Return Based on Bid/Ask Price

 

6.35

%

12.82

%

13.03

%

14.06

%

S&P MidCap 400 Index

 

6.56

%

13.08

%

13.37

%

14.48

%

 

(1) The Bid/Ask Price is calculated based on the best bid and best offer on the Amex at 4:00 p.m.  However, prior to April 3, 2001, the Bid/Ask Price is based on the midpoint of the best bid and best offer on the Amex at the close of trading, ordinarily 4:15 pm.

(2) Average Annual Return and Cummulative Total Return for the period since inception is calculated from the inception date of April 27, 1995.



MIDCAP SPDR TRUST, SERIES 1

SPONSOR

PDR Services LLC

c/o American Stock Exchange LLC

86 Trinity Place

New York, NY 10006

TRUSTEE

The Bank of New York

2 Hanson Place

Brooklyn, NY 11217

DISTRIBUTOR

ALPS Distributors, Inc.

1625 Broadway, Suite 2200

Denver, CO 80202

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

PriceWaterhouseCoopers LLP

PriceWaterhouseCoopers Center

300 Madison Avenue

New York, NY 10017

LEGAL COUNSEL

Carter, Ledyard & Milburn LLP

2 Wall Street

New York, NY 10005