XLF Financial Select Sector

The Select Sector SPDRs, a family of Exchange Traded Funds (ETFs) that divide the S&P 500 into nine individual sector funds, saw its collective assets under management grow 17.3% in May, rising to more than $11.8 billion. The $1.75 billion monthly expansion is the largest on record for the funds group, surpassing the previous record of $1.3 billion achieved in February of this year. With S&P 500 performance posting a 3.0% gain for the month, the vast majority of the Sector SPDR asset expansion is due to inflows of new money. This data provides fresh evidence of the continuing surge in popularity of ETFs in general and the Sector SPDRs in particular. "Not only have retail investors come to understand that ETFs are a lower cost alternative to actively managed mutual funds, but they are increasingly seeing them as a substitute to single stock investing," said Dan Dolan, Director - Wealth Management Strategies, Select Sector SPDR Trust, and the architect of Select Sector SPDRs. "Every time a blue chip stock gets stung by bad headlines, more and more single-stock investors come to favor the diversification a Sector SPDR can offer. If you are looking to capitalize on a specific investment theme you no longer need to expose your portfolio to single stock risk." Although entire ETF assets have grown more than 8% thus far in 2005 (expanding to $242 billion), assets in the Sector SPDR Funds have grown 26% over the same time frame. (This growth continues a trend that saw the Funds' assets expand by 52% in 2004.) This popularity is due perhaps to the continuing improvement in the cost structure of the funds which are now offered with total expenses of 25 basis points per year. "ETF's are popular for the right reasons with retail investors and fee-based advisors," said financial advisor Paul Dickey of INS Capital, LLC in Denver, CO. "With ETFs, investors always know exactly where this money is allocated, which removes one of the risks associated with traditional mutual funds. ETF's can serve as the perfect core component of a diversified portfolio that offers a high degree of customization and transparency, all for extremely low cost." On a sector basis, percentage monthly expansion was lead by the 33.3% growth of the Energy SPDR (XLE), 32.5% for the Financial SPDR (XLF), 28.8% for the Materials SPDR (XLB), and 25.4% for the Consumer Discretionary SPDR (XLY). The Industrial SPDR (XLI) was the only sector that saw a pullback in assets for the month (-2.9%). On an aggregate dollar basis, monthly expansion was lead by the $719 million increase in Energy, $366 million in Financials, $187 million in Materials, and $148 million in Technology. About Select Sector SPDRs Select Sector SPDRs are unique ETFs that divide the S&P 500 into nine sector index funds: Consumer Discretionary, Consumer Staples, Energy, Financials, Healthcare, Industrials, Materials, Technology and Utilities. Select Sector SPDRs allow investors to customize their portfolios by picking and weighting the sectors to meet specific investment goals. Select Sector SPDR shares are actively traded on the American Stock Exchange throughout the trading day providing the attributes of a mutual fund, the focus of a sector fund, and the tradability of a stock. SSgA Funds Management, Inc. serves as the Adviser to the Trust and, subject to the supervision of the Board of Trustees, is responsible for the investment management of the Select Sector SPDR Funds. An investor should consider investment objectives, risks, charges, and expenses carefully before investing. To obtain a prospectus which contains this and other information, visit www.sectorspdrs.com. Please read the prospectus carefully before investing. The Select Sector SPDR is a trademark of the McGraw-Hill Companies, Inc. and has been licensed for use. The stocks included in each Select Sector Index were selected by the compilation agent. The composition and weighting of each Index can be expected to differ from that of any similar index that is published by Standard & Poor's. Select Sector SPDRs bear a higher level of risk than more broadly diversified funds. * Ordinary brokerage commissions apply when buying or selling Sector SPDR shares. ALPS Distributors Inc., a registered broker-dealer, is the distributor for the Select Sector SPDR Trust.