SPDR TRUST SERIES 1, 485BPOS, 1996-04-25

SPDR TRUST SERIES 1
485BPOS, 1996-04-25

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<PAGE>

As filed with the Securities and Exchange Commission on April 25, 1996
File No. 33-46080
811-7330
================================================================================

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

POST EFFECTIVE AMENDMENT NO. 4

FORM S-6

FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF
SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED
ON FORM N-8B-2

A. Exact name of Trust:

SPDR TRUST SERIES 1

B. Name of Depositor:

PDR SERVICES CORPORATION

C. Complete address of Depositor's principal executive office:

PDR SERVICES CORPORATION
c/o AMERICAN STOCK EXCHANGE, INC.
86 Trinity Place
New York, New York 10006

D. Name and complete address of agent for service:

James F. Duffy
PDR SERVICES CORPORATION
c/o AMERICAN STOCK EXCHANGE, INC.
86 Trinity Place
New York, New York 10006

Copy to:
Sam Scott Miller
ORRICK, HERRINGTON & SUTCLIFFE
666 Fifth Avenue

New York, New York 10103
<PAGE>

E. Title and amount of securities being registered:

An indefinite number of units of Beneficial Interest pursuant to Rule
24f-2 under the Investment Company Act of 1940.

F. Proposed maximum aggregate offering price to the public of the
securities being registered:

Indefinite pursuant to Rule 24f-2

G. Amount of filing fee:

In accordance with Rule 24f-2, a registration fee in the amount of
$500.00 was paid in connection with the preliminary registration of
the Trust and $138,493.01 was paid on February 29, 1996 in connection
with the filing of the Rule 24f-2 Notice for the Trust's most recent
fiscal year.

H. Approximate date of proposed sale to public:

/x/ Check box if it is proposed that this filing should become
effective on April 25, 1996 at 4:00 p.m. pursuant to paragraph
(b) of Rule 485.

================================================================================
<PAGE>

SPDR TRUST SERIES 1

Cross Reference Sheet

Pursuant to Regulation C
Under the Securities Act of 1933, as amended

(Form N-8B-2 Items required by Instruction 1
as to Prospectus in Form S-6)

Form N-8B-2 Form S-6
Item Number Heading in Prospectus
- ----------- ---------------------

I. Organization and General Information
------------------------------------

1. (a) Name of Trust............... Prospectus Front Cover
(b) Title of securities issued.. Prospectus Front Cover

2. Name, address and Internal
Revenue Service Employer
Identification Number of
depositor....................... Sponsor

3. Name, address and Internal
Revenue Service Employer
Identification Number of
trustee......................... Trustee

4. Name, address and Internal
Revenue Service Employer
Identification Number
of principal underwriter........ *

5. State of organization of Trust.. Prospectus Summary - The
Trust

6. (a) Dates of execution and
termination of Trust
Agreement................... Prospectus Summary - The
Trust; Prospectus Summary
- Termination
(b) Dates of execution and
termination of Trust
Agreement................... Same as set forth in 6(a)

7. Changes of name................. *

8. Fiscal Year..................... *

9. Material Litigation............. *

- ----------
*Not applicable, answer negative or not required.

i
<PAGE>

II. General Description of the Trust
and Securities of the Trust
--------------------------------

10. (a) Registered or bearer
securities.................. Prospectus Summary - The
Trust

(b) Cumulative or distributive.. Prospectus Summary -
Distributions

(c) Rights of holders as to
withdrawal or redemption.... Prospectus Summary -
Redemption; Redemption of
SPDRs; Administration of
the Trust - Rights of
Beneficial Owners

(d) Rights of holders as to
conversion, transfer, etc... Prospectus Summary -
Redemption;
Administration of the
Trust - Register of
Ownership and Transfer;
- Rights of Beneficial
Owners; Redemption

(e) Lapses or defaults in
principal payments with
respect to periodic payment
plan certificates........... *

(f) Voting rights............... Administration of the
Trust - Voting

(g) Notice to holders as to
change in:

(1) Composition of Trust
assets.................. *

(2) Terms and conditions
of Trust's securities... Administration of the
Trust - Amendment

(3) Provisions of Trust
Agreement............... Same as set forth in
10(g)(2)

(4) Identity of depositor
and trustee............. Resignation, Removal and
Liability - The Trustee;
- The Sponsor

- ----------
*Not applicable, answer negative or not required.

ii
<PAGE>

(h) Consent of holders
required to change:

(1) Composition of Trust
assets................... *

(2) Terms and conditions
of Trust's securities.... Administration of the Trust
- Amendment
(3) Provisions of Trust
Agreement................ Same as set forth in
10(h)(2)

(4) Identity of depositor
and trustee.............. Resignation, Removal and
Liability - The Sponsor;
- The Trustee

(i) Other principal
features of the securities... Prospectus Summary - The
Trust

11. Type of securities
comprising units................. The Prospectus - Front
Cover; Prospectus Summary-
The Trust; The Portfolio;
The S&P Index

12. Certain information regarding
securities comprising periodic
payment certificates............. *

13. (a) Certain information regarding
loads, fees, expenses
and charges.................. Prospectus Summary -
Redemption; Expenses of the
Trust; Redemption of SPDRs

(b) Certain information regarding
periodic payment plan
certificates................. *

(d) Reasons for certain
differences in prices........ *

(e) Certain other loads, fees, or
charges payable by holders... *

- ----------
*Not applicable, answer negative or not required.

iii
<PAGE>

(f) Certain profits receivable
by depositor, principal
underwriters, custodian,
trustee or affiliated
persons...................... The Portfolio - Adjustments
to the Portfolio

(g) Ratio of annual charges and
deductions to income......... *

14. Issuance of Trust's securities... The Trust - Creation of
Creation Units

15. Receipt and handling of
payments from purchasers......... The Trust

16. Acquisition and disposition of
underlying securities............ The Trust - Creation of
Creation Units; The
Portfolio; Administration
of the Trust

17. (a) Withdrawal or redemption by
holders...................... Administration of the Trust
- Rights of Beneficial
Owners; Redemption of SPDRs
(b) Persons entitled or required
to redeem or repurchase
securities................... Same as set forth in 17(a)

18. (a) Receipt, custody and
disposition of income........ Administration of the Trust
- Distributions to
Beneficial Owners

(b) Reinvestment of distribu-
tions........................ *

(d) Schedule of distributions.... *

- ----------
*Not applicable, answer negative or not required.

iv
<PAGE>

19. Records, accounts and reports.. The S&P Index; Distribution
of SPDRs; Expenses;
Administration of the Trust
- Records; - Distributions
to Beneficial Owners; -
Statements to Beneficial
Owners; - Register of
Ownership and Transfer

20. Certain miscellaneous provi-
sions of Trust Agreement

(a) Amendments................. Administration of the Trust
- Amendment

(b) Extension or termination... Administration of the Trust
- Amendment; - Termination

(d) Successor trustee.......... Same as set forth in 20(c)

(e) Removal or resignation of
depositor.................. Resignation, Removal and
Liability - The Sponsor

(f) Successor depositor........ Same as set forth in 20(e)

21. Loans to security holders...... *

22. Limitations on liabilities..... Resignation, Removal and
Liability - The Trustee; -
The Sponsor

23. Bonding arrangements........... *

24. Other material provisions of
Trust Agreement................ *

III. Organization, Personnel and
Affiliated Persons of Depositor
-------------------------------

25. Organization of depositor...... Sponsor

26. Fees received by depositor..... *

- ----------
*Not applicable, answer negative or not required.

v
<PAGE>

27. Business of depositor.......... Sponsor

28. Certain information as to
officials and affiliated
persons of depositor........... Sponsor

29. Ownership of voting securities
of depositor................... Sponsor

30. Persons controlling depositor.. *

31. Payments by depositor for
certain services rendered
to Trust....................... *

32. Payments by depositor for
certain other services
rendered to Trust.............. *

33. Remuneration of employees of
depositor for certain
services rendered to Trust..... *

34. Compensation of other persons
for certain services rendered
to Trust....................... *

IV. Distribution and Redemption of Securities
-----------------------------------------

35. Distribution of Trust's
securities in states........... Distribution of SPDRs

36. Suspension of sales of Trust's
securities..................... *

37. Denial or revocation of
authority to distribute........ *

38. (a) Method of distribution..... Prospectus Summary -
Underwriting; The Trust -
Creation of Creation
Units; Distribution of
SPDRs

(b) Underwriting agreements.... Prospectus Summary -
Underwriting;
Distribution of SPDRs

- ----------
*Not applicable, answer negative or not required.

vi
<PAGE>

39. (a) Organization of principal
underwriter................ Underwriter

(b) NASD membership of
principal underwriter...... Prospectus Summary -
Underwriting; Underwriter

40. Certain fees received by
principal underwriters......... *

41. (a) Business of principal
underwriters............... Prospectus Summary -
Underwriting; Underwriter

(b) Branch offices of
principal underwriters..... *

42. Ownership of Trust's securities
by certain persons............. *

43. Certain brokerage commissions
received by principal
underwriters................... *

44. (a) Method of valuation for
determining offering price. The Portfolio; Valuation

(b) Schedule as to components of
offering price............. *

45. Suspension of redemption
rights......................... *

46. (a) Certain information
regarding redemption or
withdrawal valuation....... Valuation; Redemption of
SPDRs

(b) Schedule as to components
of redemption price........ *

- ----------
*Not applicable, answer negative or not required.

vii
<PAGE>

47. Maintenance of position in
underlying securities.......... The Trust; The Portfolio;
Distribution of SPDRs;
Valuation; Administration
of the Trust -
Distribution to
Beneficial Owners

V. Information Concerning the Trustee or Custodian
-----------------------------------------------

48. Organization and regulation of
trustee........................ Trustee

49. Fees and expenses of trustee... Expenses of the Trust;
Redemptions of SPDRs

50. Trustee's lien................. Expenses of the Trust;
Redemption of SPDRs

VI. Information Concerning Insurance of Holders of Securities
---------------------------------------------------------

51. (a) Name and address of
insurance company........... *

(b) Types of policies........... *

(d Coverage.................... *

(e) Beneficiaries............... *

(f) Terms and manner of
cancellation................ *

(g) Method of determining
premiums.................... *

(h) Aggregate premiums paid..... *

(i) Recipients of premiums...... *

(j) Other material provisions
of Trust Agreement relating
to insurance................ *

- ----------
*Not applicable, answer negative or not required.

viii
<PAGE>

VII. Policy of Registrant
--------------------

52. (a) Method of selecting and
eliminating securities from
the Trust................... The Trust - Creation of
Creation Units; The
Portfolio; Administration
of the Trust

(b) Elimination of securities
from the Trust.............. *

(d) Description of any other
fundamental policy of the
Trust....................... *

53. (a) Taxable status of the Trust. Tax Status of the Trust

(b) Qualification of the Trust
as a regulated investment
company..................... Same as set forth in
53(b)

VIII. Financial and Statistical Information
-------------------------------------

54. Information regarding the
Trust's last ten fiscal years... *

55. Certain information regarding
periodic payment plan certifi-
cates........................... *

56. Certain information regarding
periodic payment plan certifi-
cates........................... *

57. Certain information regarding
periodic payment plan certifi-
cates........................... *

- ----------
*Not applicable, answer negative or not required.

ix
<PAGE>

58. Certain information regarding
periodic payment plan certifi-
cates........................... *

59. Financial statements
(Instruction 1(c) to Form S-6).. *

x
<PAGE>

Undertaking to File Reports
---------------------------

Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to
file with the Securities and Exchange Commission such supplementary
and periodic information, documents, and reports as may be prescribed
by any rule or regulations of the Commission heretofore or hereafter
duly adopted pursuant to authority conferred in that section.
<PAGE>

PROSPECTUS

STANDARD & POOR'S DEPOSITARY RECEIPTS(R)
("SPDRS")(R)

SPDR TRUST, SERIES 1

A UNIT INVESTMENT TRUST

----------------

This Trust (the "Trust") was formed by PDR Services Corporation, a Delaware
corporation (the "Sponsor") and a wholly-owned subsidiary of the American
Stock Exchange, Inc. (the "Exchange"), to provide investors with the
opportunity to purchase units of beneficial interest in the Trust representing
proportionate undivided interests in the portfolio of securities held by the
Trust (the "Securities") consisting of substantially all of the common stocks,
in substantially the same weighting, as the component common stocks of the
Standard & Poor's 500 Index (the "S&P Index").* While the investment objective
of the Trust is to provide investment results that generally correspond to the
price and yield performance of the S&P Index, there is no assurance that this
investment objective can be achieved. Each unit of fractional undivided
interest in the Trust is referred to as a Standard & Poor's Depositary Receipt
("SPDR"). The value of the Securities and, consequently, the value of SPDRs,
will fluctuate. The minimum number of SPDRs that may be created or redeemed at
any one time as described below is 50,000, which aggregation is referred to
herein as a "Creation Unit".

SPDRs are listed on the Exchange. SPDRs are traded in the secondary market
on a per-SPDR basis, and need not be traded in Creation Unit size
aggregations.

----------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.

----------------

Prospectus dated April 25, 1996

[LOGO] SPDR (TM)

Investors are advised to read and retain this Prospectus for future reference.

----------------

* "S&P"(R), "S&P 500"(R), "Standard & Poor's 500", "Standard and Poor's
Depositary Receipts"(R) and "SPDRs"(R) are trademarks of The McGraw-Hill
Companies, Inc., PDR Services Corporation and the American Stock Exchange,
Inc. are permitted to use these trademarks pursuant to a License Agreement
with Standard & Poor's, a division of The McGraw-Hill Companies, Inc. The
Trust, however, is not sponsored by or affiliated with Standard & Poor's or
The McGraw-Hill Companies, Inc.

ESSENTIAL INFORMATION AS OF DECEMBER 31, 1995+

Number of SPDRs

16,251,356

Fractional Undivided
Interest in Trust
Represented by each SPDR
1/16,251,356th

Record Date:
Quarterly, on the second 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 11/100 of one percent to 15/100 of one
percent, based on net asset value of the Trust,
as the same may be reduced by certain amounts,
plus the Adjustment Amount.+++

Estimated Ordinary Operating
Expenses of the Trust:

18.45/100 of one percent (0.1845%) (inclusive
of Trustee's annual fee).+++

Net Asset Value per SPDR
(based on the value of the
Securities, other net assets
of the Trust and number of
SPDRs outstanding)

$61.61

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) January 22, 2118 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 at any time after
six months following and prior to three years
following the Initial Date of Deposit the value
of the securities held by the Trust is less
than $150,000,000 or if at any time after three
years following the Initial Date of Deposit
such value is less than $350,000,000, as such
amount shall be adjusted for inflation.++++
- --------
+ The Trust Agreement became effective and the initial deposit was made on
January 22, 1993 (the "Initial Date of Deposit").
++ See "Administration of the Trust--Distributions to Beneficial Owners".

+++ Until further notice, the Sponsor has undertaken that on each day during
the fiscal year ending December 31, 1996, the ordinary operating expenses
of the Trust as calculated by the Trustee will not be permitted to exceed
an amount which is 0.1845% of the daily net asset value of the Trust.
Thereafter, such amount may be changed and may exceed 0.1845%. See
"Expenses of the Trust".
++++ The Trust may also be terminated under other circumstances. See
"Administration of the Trust--Termination".

2
<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus.

OBJECTIVES

The Sponsor formed the Trust to provide investors with the opportunity to
purchase units of beneficial interest in the Trust representing proportionate
undivided interests in the Securities which consist of substantially all of the
common stocks, in substantially the same weighting, as the component common
stocks of the Standard & Poor's 500 Index (the "S&P Index") in the form of a
security that closely tracks the S&P Index and that may be traded as a share of
common stock. The investment objective of the Trust is to provide investment
results that generally correspond to the price and yield performance of the
component common stocks of the S&P Index (the "Index Securities"). There can be
no assurance that this investment objective will be met fully. For example, it
will not be possible for the Trust to replicate and maintain exactly the
composition and relative weightings of the Index Securities. It is also
possible that, from time to time, the Trust will be unable to purchase all of
the Index Securities. In certain circumstances, the Trust may be required to
make distributions in excess of the yield performance of the Index Securities
(see "Tax Status of the Trust"). The value of the Securities and, consequently,
the value of SPDRs, is subject to changes in the value of common stocks
generally and to other factors. Further, the payment of dividends and
maintenance of capital are subject to a number of conditions, including the
financial condition of the issuers of the Securities (see "Special
Considerations").

THE TRUST

The Trust is a unit investment trust organized under the laws of the State of
New York. The Trust is governed by a trust agreement (the "Trust Agreement")
between State Street Bank and Trust Company, a bank and trust company organized
under the laws of the Commonwealth of Massachusetts (the "Trustee"), and the
Sponsor dated and executed as of January 22, 1993.

DISTRIBUTOR

The Distributor for SPDRs is PDR Distributors, Inc., a registered broker-
dealer, a member of the National Association of Securities Dealers, Inc., and a
wholly-owned subsidiary of Signature Financial Group, Inc. (see
"Underwriting").

PORTFOLIO DEPOSITS

All orders to create SPDRs in Creation Unit size aggregations must be placed
with the Distributor (see "Underwriting" and "Procedure for Creation of
Creation Units"). To be eligible to place orders with the Distributor to create
Creation Unit size aggregations of SPDRs, an entity or person either must be
(1) a "Participating Party", as hereinafter defined or (2) a Depository Trust
Company ("DTC") Participant (see "Book-Entry Ownership of SPDRs"), and in each
case must have executed a Participant Agreement, as hereinafter defined (see
"The Trust--Procedures for Creation of Creation Units" and "The Trust--
Placement of Creation Orders Using SPDR Clearing Process"). As used herein, the
term "Participating Party" means a broker-dealer or other participant in the
SPDR Clearing Process, as hereinafter defined, through the Continuous Net
Settlement ("CNS") System of the National Securities Clearing Corporation
("NSCC"), a clearing agency that is registered with the Securities and Exchange
Commission (the "Commission"). Upon acceptance of an order to create SPDRs, the
Distributor will transmit such order to the Trustee and instruct the Trustee to
initiate the book entry movement of the appropriate number of SPDRs to the
account of the entity placing the order. Payment for orders to create SPDRs
will be made by deposits with the Trustee of a portfolio of securities that is
substantially similar in composition and weighting to the Index Securities (see
"The Trust--Creation of SPDRs"), together with a cash payment in an amount
which shall be equal to the Dividend Equivalent Payment (as hereinafter
defined), plus or minus, as the case may be, the Balancing Amount (as
hereinafter defined--see

3
<PAGE>

"The Portfolio--Adjustments to the Portfolio Deposit"). The "Dividend
Equivalent Payment" enables the Trustee to make a distribution of dividends on
the next Dividend Payment Date (as hereinafter defined), and is an amount
equal, on a per Creation Unit basis, to the dividends on all the Securities
with ex-dividend dates within the accumulation period, net of expenses and
liabilities for such period (including, without limitation, (x) taxes or other
governmental charges against the Trust not previously deducted, if any, and (y)
accrued fees of the Trustee and other expenses of the Trust (including legal
and auditing expenses) and other expenses not previously deducted (see
"Expenses of the Trust")), as if all of the Securities had been held for the
entire accumulation period for such distribution. For federal income tax
purposes, a portion of dividend distributions may result in a return of capital
to Beneficial Owners (as hereinafter defined) of SPDRs (see "Tax Status of the
Trust").

The Dividend Equivalent Payment and the Balancing Amount are collectively
referred to herein as the "Cash Component" and the deposit of such a portfolio
of securities and the Cash Component are collectively referred to herein as a
"Portfolio Deposit". In connection with the creation of SPDRs, in the event
that the Trustee determines, in its discretion, that one or more Index
Securities are likely to be unavailable for delivery or available in
insufficient quantity for delivery to the Trust upon the creation of SPDRs in
Creation Unit size aggregations, then the Trustee shall have the right in its
discretion to permit the cash equivalent value of such Index Security or Index
Securities to be included in the Portfolio Deposit as a part of the Cash
Component in lieu of the inclusion of such Index Security or Index Securities
in the securities portion of the Portfolio Deposit (see "The Portfolio--
Adjustments to the Portfolio Deposit").

In connection with the creation of SPDRs, if a creator is restricted by
regulation or otherwise from investing or engaging in a transaction in one or
more Index Securities, the Trustee shall have the right, in its discretion, to
permit the cash equivalent value of such Index Security or Index Securities to
be included in the Portfolio Deposit based on the market value of such Index
Security or Index Securities as of the Evaluation Time on the date such
creation order is deemed received by the Distributor (see "Placement of
Creation Orders Outside SPDR Clearing Process") as part of the Cash Component
in lieu of the inclusion of such Index Security or Index Securities in the
securities portion of the Portfolio Deposit. In such case such creator will pay
the Trustee the standard Transaction Fee, plus an additional amount per
Creation Unit not to exceed three (3) times the Transaction Fee applicable for
one Creation Unit as described below.

An entity or person placing creation orders with the Distributor must deposit
Portfolio Deposits either (i) through the CNS clearing processes of NSCC, as
such processes have been enhanced to effect creations and redemptions of
Creation Unit size aggregations of SPDRs, such processes being referred to
herein as the "SPDR Clearing Process", or (ii) with the Trustee outside the
SPDR Clearing Process (i.e., through the facilities of DTC).

TRANSACTION FEE

A transaction fee is payable to the Trustee in connection with each creation
and each redemption made through the SPDR Clearing Process of Creation Unit
size aggregations of SPDRs (the "Transaction Fee"), subject to the changes,
modifications or waivers, if any, described below. Such Transaction Fee is non-
refundable, regardless of the net asset value of the Trust.

Until further notice is given as described below, the Transaction Fee charged
in connection with each creation of Creation Units through the SPDR Clearing
Process (see "Procedures for Creation of Creation Units") is $3,000 per
Participating Party per day, regardless of the number of Creation Units created
on such day. This $3,000 charge is subject to a limit not to exceed 10/100 of
one percent (10 basis points) of the value of one Creation Unit at the time of
creation (the "10 Basis Point Limit")*. No modifications to, or reductions,
discounts or waivers of, the Transaction Fee charged in connection with the
creation of Creation Units are scheduled or currently contemplated by the
Sponsor.
- --------

* The amount of the Transaction Fee currently in effect will be available from
the Trustee.

4
<PAGE>

Until further notice is given as described below, the Transaction Fee charged
in connection with the redemption of Creation Units through the SPDR Clearing
Process shall be as set forth in the table below:

REDEMPTIONS PER PARTICIPATING PARTY PER DAY

<TABLE>
<S> <C>
1 Creation Unit $3,000
2-9 Creation Units $1,500 for each additional Creation Unit redeemed
10 and more $3,000 total, regardless of the number of Creation Units redeemed
</TABLE>

No modifications to, or reductions, discounts or waivers of, the Transaction
Fee charged in connection with redemptions of Creation Units are scheduled or
currently contemplated by the Sponsor.

If Creation Units are created or redeemed outside the SPDR Clearing Process,
an additional amount not to exceed three (3) times the Transaction Fee
applicable for one Creation Unit will be charged to the creator or redeemer per
Creation Unit per day. Under the current schedule, therefore, the total fee
charged in connection with the creation or redemption of one Creation Unit
outside the SPDR Clearing Process would be $3,000 (the Transaction Fee for the
creation or redemption of one Creation Unit) plus an additional amount of
$9,000 (3) times $3,000) for a total of $12,000.

From time to time, and for such periods as the Sponsor, in its sole
discretion, may determine, the Transaction Fee (as well as any additional
amounts charged in connection with creations and/or redemptions outside the
SPDR Clearing Process) may be increased, decreased or otherwise modified or
waived in its entirety for certain lot-size creations and/or redemptions of
SPDRs, or for creations and/or redemptions made under certain specified
circumstances without the consent of Beneficial Owners, subject to certain
conditions (See "The Trust--Creation of Creation Units" and "Procedures for
Redemption of SPDRs"). The Sponsor also reserves the right, from time to time,
to vary the lot-size of the creations and/or redemptions of SPDRs subject to an
increase or decrease and/or entitled to such waiver of the Transaction Fee. Any
change so made will not cause the amount of the Transaction Fee to exceed the
Ten Basis Point Limit at the time of a creation, or redemption, as the case may
be. Such changes or variations will be effected by an amendment to the current
Trust prospectus. The amount of the new Transaction Fee in effect at any given
time will be available from the Trustee.

SIZE OF CREATION UNIT AGGREGATIONS OF SPDRS

SPDRs may be created or redeemed only in Creation Unit size aggregations of
50,000 SPDRs, or in multiples thereof (e.g., 100,000, 150,000, 200,000 SPDRs),
and in no event will fractional Creation Units be created or redeemed.* The
Sponsor reserves the right to direct the Trustee to declare a split or reverse
split in the number of SPDRs outstanding and a corresponding change in the
number of SPDRs constituting a Creation Unit in the event that the per SPDR
price in the secondary market changes to an amount that the Sponsor believes
falls outside a desirable retail range. For example, if a 2-for-1 split were
declared, the number of SPDRs in a Creation Unit size aggregation of SPDRs
would double (e.g., from 50,000 to 100,000 SPDRs per Creation Unit).
- --------

* See "Dividend Reinvestment Service," however, for a description of the sole
case in which SPDRs may be created by the Trustee in less than a Creation
Unit size aggregation of 50,000 SPDRs.

5
<PAGE>

PORTFOLIO ADJUSTMENTS

To maintain the correlation between the composition and weighting of
Securities and that of the Index Securities, the composition and weightings of
the Securities are adjusted from time to time to conform to periodic changes in
the identity and/or relative weightings of the Index Securities made by
Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("Standard &
Poor's" or "S&P"). The Trustee aggregates certain of these adjustments and
makes conforming changes to the Trust's portfolio at least monthly; adjustments
are made more frequently, however, in the case of changes to the S&P Index that
are significant (see "The Portfolio--Adjustments to the Portfolio"). The
composition and weightings of the securities portion of a Portfolio Deposit are
also adjusted to conform to changes in the S&P Index. Any change in the
identity or weighting of an Index Security will result in a corresponding
adjustment to the prescribed Portfolio Deposit effective on the Business Day (a
"Business Day" being any day that the New York Stock Exchange is open for
business) following the day on which the change to the S&P Index takes effect
after the close of the market (see "The Portfolio--Adjustments to the Portfolio
Deposit").

BOOK ENTRY OWNERSHIP OF SPDRS

The Depository Trust Company, New York, New York, a limited purpose trust
company organized under the laws of the State of New York (the "Depository") or
its nominee will be the record or registered owner of all outstanding SPDRs.
Beneficial ownership of SPDRs will be shown on the records of the Depository or
its participants. Certificates will not be issued for SPDRs, whether in
Creation Unit size aggregations or otherwise (see "The Trust--Book-Entry-Only
System").

EXPENSES

The expenses incident to the organization of the Trust and its registration
as an investment company were capitalized and are being amortized on a straight
line basis over five years following the Initial Date of Deposit (see "Expenses
of the Trust"). The Trustee's fees are set forth generally in the Summary of
Essential Information and more specifically in "Expenses of the Trust" below.
Other expenses of the Trust are also described more fully in "Expenses of the
Trust".

FEDERAL INCOME TAX CONSIDERATIONS

For the fiscal year ended December 31, 1995, the Trust believes that it
qualified for tax treatment as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). The
Trust intends to continue to so qualify and to distribute annually its entire
investment company taxable income and net capital gain. Distributions that are
taxable as ordinary income to Beneficial Owners generally are expected to
constitute dividend income for federal income tax purposes and to be eligible
for the dividends-received deduction available to many corporations to the
extent of qualifying dividend income received by the Trust (see "Tax Status of
the Trust"). The Trust's regular quarterly distributions are based on the
dividend performance of the Securities held during such quarterly distribution
period rather than the actual taxable income of the Trust. As a result, a
portion of the distributions of the Trust may be treated as a return of capital
or a capital gain dividend for federal income tax purposes or the Trust may be
required to make additional distributions to maintain its status as a regulated
investment company or to avoid imposition of income or excise taxes on
undistributed income (see "Tax Status of the Trust" and "Administration of the
Trust--Distributions to Beneficial Owners").

ERISA CONSIDERATIONS

In considering the advisability of an investment in SPDRs, fiduciaries of
pension, profit sharing or other tax-qualified retirement plans (including
Keogh Plans) and welfare plans (collectively, "Plans") subject to the fiduciary
responsibility requirements of the Employee Retirement Income Security Act of
1974, as amended

6
<PAGE>

("ERISA"), should consider whether an investment in SPDRs is permitted by the
documents and instruments governing the Plan and whether the investment
satisfies the diversification requirements of ERISA. Individual retirement
account ("IRA") investors should consider that an IRA may make only such
investments as are authorized by its governing instruments.

The fiduciary standards and prohibited transaction rules of ERISA and Section
4975 of the Code will not apply to transactions involving the Trust's assets
while SPDRs are held by a Plan or IRA. Unlike many other investment vehicles
offered to Plans and IRAs, the Trust's assets will not be treated as "plan
assets" of the Plans or IRAs which acquire or purchase SPDRs. Although ERISA
imposes certain duties on Plan fiduciaries and ERISA and/or Section 4975 of the
Code prohibit certain transactions involving "plan assets" between Plans or
IRAs and their fiduciaries or certain related persons, those rules will not
apply to transactions involving the Trust's assets because SPDRs represent an
interest in the Trust, and the Trust is registered as an investment company
under the Investment Company Act of 1940, as amended (the "1940 Act"). ERISA,
the Code and U.S. Department of Labor regulations contain unconditional
language exempting the assets of registered investment companies from treatment
as "plan assets" in applying the fiduciary and prohibited transaction
provisions of ERISA and the Code.

RESTRICTIONS ON PURCHASES BY INVESTMENT COMPANIES

The acquisition of SPDRs by registered investment companies is subject to the
restrictions set forth in section 12(d)(1) of the 1940 Act.

INVESTMENT MANAGEMENT

The Trust holds the Securities and cash and is not actively "managed" by
traditional methods, which typically involve effecting changes in the
Securities on the basis of judgments made relating to economic, financial and
market considerations. The composition and relative weightings of the
Securities are, however, adjusted to conform to changes in the composition and
weighting of the Index Securities in the manner set forth in the Trust
Agreement (see "The Portfolio--Adjustments to the Portfolio").

DISTRIBUTIONS

Quarterly distributions based on the amount of dividends payable with respect
to Securities held by the Trust and other income, if any, received by the
Trust, net of fees and expenses, are made via the Depository and its
participants to Beneficial Owners (see "The Trust--Book-Entry-Only System") on
each Dividend Payment Date (see "Administration of the Trust--Distributions to
Beneficial Owners"). Any capital gain income recognized by the Trust in any
taxable year that is not previously treated as distributed during the year
ordinarily is to be distributed at least annually in January of the following
taxable year. The Trust may make additional distributions shortly after the end
of the year in order to satisfy certain distribution requirements imposed by
the Code (see "Tax Status of the Trust" and "Administration of the Trust--
Distributions to Beneficial Owners"). Although all distributions are currently
made quarterly, the Trustee reserves the right to vary the periodicity with
which distributions are made (see "Administration of the Trust--Distributions
to Beneficial Owners"). Those Beneficial Owners interested in reinvesting their
quarterly distributions may participate through DTC Participants in the DTC
Dividend Reinvestment Service available through certain brokers. (See "Dividend
Reinvestment Service" for a brief description thereof.)

REDEMPTION

SPDRs in Creation Unit size aggregations are redeemable in kind only and are
not redeemable for cash (see "Redemption of SPDRs"). SPDRs can be redeemed only
in Creation Unit size aggregations effected by a Participating Party (with
respect to redemptions through the SPDR Clearing Process) or a DTC Participant
(with respect to redemptions outside the SPDR Clearing Process), in either case
which has executed a Participant

7
<PAGE>

Agreement (see "Redemption of SPDRs--Procedure for Redemption of SPDRs").
Individual SPDRs are not redeemable, but entitle the owners thereof to certain
payments upon termination of the Trust (see "Administration of the Trust--
Termination"). Prior to termination, SPDR owners may aggregate individual SPDRs
to Creation Unit size or multiples thereof (e.g., 50,000, 100,000 SPDRs, etc.)
and request that the Trustee redeem the SPDRs so aggregated. There can be no
assurance, however, that there always will be sufficient depth and liquidity in
the public trading market to complete all such transactions (see "Special
Considerations"). Owners of SPDRs in less than Creation Unit size aggregations
may have to pay brokerage fees and commissions to acquire sufficient SPDRs
(i.e., 50,000 SPDRs) to constitute a Creation Unit. Each redemption will also
be accompanied by a Cash Redemption Payment (as hereinafter defined, see
"Redemption of SPDRs--Procedure for Redemption of SPDRs") which on any given
Business Day is an amount identical to the Cash Component of a Portfolio
Deposit.

In the event that the Trustee determines in its discretion that an Index
Security is likely to be unavailable for delivery or available in insufficient
quantity for delivery by the Trust upon the redemption of SPDRs in Creation
Unit size aggregations, then the Trustee shall have the right in its discretion
to deliver the cash equivalent value of such Index Security or Index
Securities, based on the market value of such Index Security or Index
Securities as of the Evaluation Time on the date such redemption order is
deemed received by the Trustee (see "Procedure for Redemption of SPDRs"), as
part of the Cash Redemption Payment in lieu of delivering the Index Security or
Index Securities to the redeemer.

In connection with the redemption of SPDRs, if a redeemer is restricted by
regulation or otherwise from investing or engaging in a transaction in one or
more Index Securities, the Trustee shall have the right in its discretion to
deliver the cash equivalent value of such Index Security or Index Securities
based on the market value of such Index Security or Index Securities as of the
Evaluation Time on the date such redemption order is deemed received by the
Trustee (see "Placement of Redemption Orders Outside SPDR Clearing Process") as
a part of the Cash Redemption Payment in lieu of delivering such Index Security
or Index Securities to the redeemer. In such case, such investor will pay the
Trustee the Standard Transaction Fee, plus an additional amount per Creation
Unit not to exceed three (3) times the Transaction Fee applicable for one
Creation Unit.

SPDR owners may also be required to pay Excess Cash Amounts, (as hereinafter
defined) when applicable, in connection with a redemption of SPDRs (see
"Redemption of SPDRs--Procedure for Redemption of SPDRs"). The Transaction Fee
will be charged in connection with the redemption of each Creation Unit size
aggregation of SPDRs. If a request for redemption is made directly to the
Trustee outside the SPDR Clearing Process, an additional amount not to exceed
three (3) times the Transaction Fee applicable for one Creation Unit will be
charged to the redeemer due to the increased expense associated with delivery
outside the SPDR Clearing Process (see "Prospectus Summary--Transaction Fee").

TERMINATION

The Trust will terminate by its terms on the first to occur of: (i) the date
one hundred twenty-five (125) years from the Initial Date of Deposit (i.e.,
January 22, 2118) or (ii) the date twenty (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 (the "Termination
Date"). The Trust may also be terminated earlier upon the agreement of the
Beneficial Owners of 66 2/3% of the then outstanding SPDRs or in the event that
SPDRs are de-listed from the Exchange (see "Exchange Listing"). The Sponsor
will also have the discretionary right to terminate the Trust if at any time
after six months following and prior to three years following the Initial Date
of Deposit the net asset value of the Trust is less than $150,000,000 or if at
any time after three years following the Initial Date of Deposit such value is
less than $350,000,000, as such dollar amount shall be adjusted for inflatio
n in accordance with the National Consumer Price Index for All Urban
Consumers (the "CPI-U")* as published
- --------

* The CPI-U, as published by the United States Department of Labor, measures
the inflation rate of specified commodities deemed representative of the
purchases of all urban consumers.

8
<PAGE>

by the United States Department of Labor, such adjustment to take effect at the
end of the fourth year following the Initial Date of Deposit and at the end of
each year thereafter and to be made so as to reflect the percentage increase in
consumer prices as set forth in the CPI-U for the twelve month period ending in
the month preceding the month in which such adjustment is made. The Trustee
shall also have the right to terminate the Trust in the event that (a) the
Sponsor resigns or becomes incapable of discharging its duties and a successor
is not appointed; (b) the Depository is unable or unwilling to continue to
perform its functions as set forth under the Trust Agreement and a comparable
replacement is unavailable; (c) NSCC no longer provides clearance services with
respect to SPDRs, or if the Trustee is no longer a member of NSCC; (d) Standard
& Poor's ceases publishing the S&P Index; or (e) the License Agreement (as
hereinafter defined) is terminated (see "Administration of the Trust--
Termination"). The Trust shall also terminate if the Trustee resigns or becomes
incapable of discharging its duties and a successor is not appointed.

UNDERWRITING

PDR Distributors, Inc. (the "Distributor") acts as underwriter of SPDRs on an
agency basis. All orders to create SPDRs in Creation Unit size aggregations
must be placed with the Distributor, and it is the responsibility of the
Distributor to transmit such orders to the Trustee. The Distributor will
furnish to those placing such orders confirmation that the orders have been
accepted, but the Distributor shall reject any order which is not submitted in
proper form. Upon acceptance of an order to create SPDRs, the Distributor
instructs the Trustee to initiate the book-entry movement of the appropriate
number of SPDRs to the account of the entity placing the order. The Distributor
is also responsible for delivering a prospectus to those persons creating
SPDRs. The Distributor also maintains records of both the orders placed with it
for the creation of SPDRs and the confirmations of acceptance issued by it. In
addition, the Distributor maintains a record of the instructions given to
implement delivery of SPDRs in response to orders placed with it. The
Distributor may also provide certain other administrative services, such as
those related to state securities law compliance. The Distributor is a
corporation organized in 1991 under the laws of the State of Delaware and is
located at 6 St. James Avenue, Boston, MA 02116. The Distributor is a
registered broker-dealer, a member of the National Association of Securities
Dealers, Inc. and a wholly-owned subsidiary of Signature Financial Group, Inc.
The Sponsor pays the Distributor for its services a flat annual fee. The
Sponsor will not seek reimbursement for such payment from the Trust without
obtaining prior exemptive relief from the Commission.

9
<PAGE>

SPECIAL CONSIDERATIONS AND RISK FACTORS

GENERAL

Investment in the Trust should be made with an understanding that the value
of the Securities may fluctuate in accordance with changes in the financial
condition of the issuers of the Securities (particularly those that are
heavily weighted in the S&P Index), the value of common stocks generally and
other factors. The identity and weighting of the Index Securities and the
Securities also changes from time to time (see "The Portfolio--Adjustments to
the Portfolio" and "The Portfolio--Selection and Acquisition of Securities").
There can be no assurance that the issuers of the Securities will pay
dividends on outstanding shares of common stock. Distributions on the
Securities will generally depend upon the declaration of dividends by the
issuers of the Securities; the declaration of such dividends generally depends
upon various factors, including the financial condition of the issuers and
general economic conditions. As discussed above, the Trust, unlike a managed
investment company, is not actively "managed" by traditional methods, and
therefore the adverse financial condition of an issuer will not result in the
elimination of its securities from the Securities held by the Trust unless the
Securities of such issuer are removed from the S&P Index (see "The Portfolio--
Adjustments to the Portfolio").

An investment in the Trust should also be made with an understanding of the
risks inherent in an investment in equity securities, including the risk that
the financial condition of the issuers of the Securities may become impaired
or that the general condition of the stock market may deteriorate (either of
which may cause a decrease in the value of the Securities and thus in the
value of SPDRs). Common stocks are susceptible to general stock market
fluctuations and to volatile increases and decreases in value as market
confidence in and perceptions of their issuers change. These investor
perceptions are based on various and unpredictable factors including
expectations regarding government, economic, monetary and fiscal policies,
inflation and interest rates, economic expansion or contraction, and global or
regional political, economic and banking crises. As discussed above, the Trust
is not actively "managed" and therefore common stocks held by the Trust will
not be disposed of as a result of normal fluctuations in the market.

Holders of common stocks of any given issuer incur more risk than holders of
preferred stocks and debt obligations of such issuer because common
stockholders, as owners of such issuer, have generally inferior rights to
receive payments from such issuer in comparison with the rights of creditors
of, or holders of debt obligations or preferred stocks issued by, such issuer.
Further, unlike debt securities which typically have a stated principal amount
payable at maturity (whose value, however, will be subject to market
fluctuations prior thereto), or preferred stocks which typically have a
liquidation preference and which may have stated optional or mandatory
redemption provisions, common stocks have neither a fixed principal amount nor
a maturity. Common stock values are subject to market fluctuations as long as
the common stock remains outstanding. The value of the Securities thus may be
expected to fluctuate over the entire life of the Trust to values higher or
lower than those prevailing on the Initial Date of Deposit (see "Market
Risks").

Although most of the Securities are listed on a national securities
exchange, the principal trading market for some Securities may be in the over-
the-counter market. The existence of a liquid trading market for certain
Securities may depend on whether dealers will make a market in such
Securities. There can be no assurance that a market will be made for any of
the Securities, that any market for the Securities will be maintained or that
any such market will be or remain liquid. The price at which the Securities
may be sold and the value of the Trust will be adversely affected if trading
markets for the Securities are limited or absent.

An investment in the Trust should also be made with an understanding that
the Trust will not be able to replicate exactly the performance of the S&P
Index because the total return generated by the Securities will be reduced by
transaction costs incurred in adjusting the actual balance of the Portfolio
Securities and other Trust expenses, whereas such transaction costs and
expenses are not included in the calculation of the S&P Index. It is also
possible that for a short period of time, the Trust may not fully replicate
the performance of the S&P Index due to the temporary unavailability of
certain Index Securities in the secondary market or due to other

10
<PAGE>

extraordinary circumstances. Such events are unlikely to continue for an
extended period of time, because the Trustee is required to correct such
imbalances by means of adjusting the composition or weighting of Portfolio
Securities (see "The Portfolio--Adjustments to the Portfolio").

Neither the Depository nor Beneficial Owners of SPDRs are entitled either to
dispose of any of the Securities in the Trust, as such, or to vote the
Securities. As the beneficial owner of the Securities, the Trustee has the
right to vote all of the voting Securities (see "Administration of the Trust--
Voting").

Except as otherwise specifically noted, the time frames for delivery of
securities, cash, or SPDRs in connection with creation and redemption activity
within the SPDR Clearing Process as set forth herein are based on NSCC's
current "regular way" settlement period of three (3) days during which NSCC is
open for business (each such day an "NSCC Business Day"). NSCC may, in the
future, reduce such "regular way" settlement period, in which case it is
anticipated that there would be a corresponding reduction in settlement
periods applicable to SPDR creations and redemptions. Investors should note
that NSCC Business Days do not always coincide with the days during which the
Trustee is open for business.

NET ASSET VALUE AND MARKET PRICES

The Trust's assets consist primarily of the Securities. Therefore, the net
asset value of SPDRs in Creation Unit size aggregations and, proportionately,
the net asset value per SPDR, changes as fluctuations occur in the market
value of Securities. Investors should also be aware that the aggregate public
trading market price of 50,000 SPDRs may be different from the net asset value
of a Creation Unit aggregation of SPDRs (i.e., 50,000 SPDRs may trade at a
premium over or at a discount to the net asset value of a Creation Unit) and
similarly the public trading market price per SPDR may be different from the
net asset value of a Creation Unit on a per SPDR basis (see "Special
Considerations and Risk Factors--Market Risks"). This price difference may be
due, in large part, to the fact that supply and demand forces at work in the
secondary trading market for SPDRs will be closely related to, but not
identical to, the same forces influencing the prices of the S&P 500 stocks
trading individually or in the aggregate at any point in time. The expenses of
the Trust are reflected in the net asset value of SPDRs in Creation Unit size
aggregations and the expenses of the Trust are accrued daily (see "Expenses of
the Trust").

TRADING CONSIDERATIONS

The Sponsor does not maintain a secondary market in SPDRs. SPDRs are listed
for trading on the Exchange. The market symbol for SPDRs is SPY. Trading in
SPDRs on the Exchange may be halted due to market conditions or, in light of
Exchange rules and procedures, for reasons that, in the view of the Exchange,
make trading in SPDRs inadvisable. In addition, trading in SPDRs on the
Exchange is subject to trading halts caused by extraordinary market volatility
pursuant to Exchange "circuit breaker" rules that require trading in
securities on the Exchange to be halted for a specified time period based on a
specified market decline. There can be no assurance that the requirements of
the Exchange necessary to maintain the listing of SPDRs will continue to be
met or will remain unchanged. The Trust will be terminated in the event SPDRs
are delisted from the Exchange. (For a description of the conditions to
listing of SPDRs and the circumstances under which the Exchange would consider
the suspension of trading in or the delisting of SPDRs, see "Exchange
Listing.") Further, the Trust may be terminated, among other reasons, in the
event that the License Agreement is terminated or the net asset value of the
Trust falls below a specified level (see "Administration of the Trust--
Termination").

MARKET RISKS

SPDRs are subject to the risks of an investment in a broadly based portfolio
of common stocks, including the risk that the general level of stock prices
may decline, thereby adversely affecting the value of such investment. SPDRs
are also subject to risks other than those associated with an investment in a
broadly based portfolio of common stocks in that the selection of the stocks
included in the Trust's portfolio, the expenses associated with the Trust or
other factors distinguishing an ownership interest in a trust from the direct
ownership

11
<PAGE>

of a portfolio of securities may affect trading in SPDRs as compared with
trading in a broadly based portfolio of common stocks. SPDRs are further
subject to the risk that extraordinary events may cause any of the parties
providing services to the Trust, such as the Trustee, the Sponsor, the
Distributor, the Depository or NSCC, to be closed or otherwise unable to
perform such party's obligations as set forth herein and in the agreements
between and among such parties. According to the terms of the Trust Agreement,
if any of the above named entities fails or is otherwise unable to perform
adequately its duties, a successor entity may be named or appointed to assume
all duties and obligations of its predecessor. If, however, no suitable
successor is available or willing to undertake all such duties and
obligations, under the Trust Agreement the Trust will then be terminated (see
"Administration of the Trust--Termination").

The Trustee will deliver a portfolio of Securities for each Creation Unit
size aggregation of SPDRs delivered for redemption, identical in weighting and
composition to the securities portion of a Portfolio Deposit as in effect on
the date request for redemption is deemed received by the Trustee (see
"Redemption of SPDRs"). If a redemption is processed through the SPDR Clearing
Process, to the extent that the Securities to be delivered on settlement date
are not delivered, they will be covered by NSCC's guarantee of the completion
of such delivery. Any Securities not received on settlement date will be
marked to the market until delivery is completed. The Trust, to the extent it
has not already done so, remains obligated to deliver such Securities to NSCC,
and the market risk of any increase in the value of such Securities until
delivery is made by the Trust to NSCC could adversely affect the net asset
value of the Trust. Investors should note that the Securities to be delivered
to a redeemer submitting a redemption request outside of the SPDR Clearing
Process that are not delivered to such redeemer are not covered by NSCC's
guarantee of completion of such delivery.

Investors should also note that the size of the Trust in terms of total
assets held may change substantially over time and from time to time as SPDRs
in Creation Unit size aggregations are created and redeemed. Such fluctuations
in Trust size should not adversely impact the net asset value at any time,
because the amount of the Cash Component or the Cash Redemption Payment upon
creations or redemptions, respectively, of SPDRs in Creation Unit size
aggregations is determined each day to equate the value of the Portfolio
Deposit to the net asset value of the Trust, on a per Creation Unit basis, at
the close of business on the day such request is deemed received by the
Trustee (see "The Portfolio--Adjustments to the Portfolio Deposit").

Investors in the Trust should also be aware that there are tax consequences
associated with the ownership of SPDRs resulting from the distribution of
Trust dividends and sales of SPDRs as well as the sales of underlying
Securities held by the Trust in connection with redemptions under certain
circumstances (see "Tax Status of the Trust--Tax Consequences to Beneficial
Owners").

12
<PAGE>

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 December 31, 1995, and the results of its operations, the
changes in its net assets and the financial highlights for the periods
indicated, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards, which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included
confirmation of investments owned at December 31, 1995 by correspondence with
the custodian and brokers, provide a reasonable basis for the opinion
expressed above.

Price Waterhouse LLP

Boston, Massachusetts

February 16, 1996

13
<PAGE>

SPDR TRUST SERIES 1

STATEMENT OF ASSETS AND LIABILITIES

DECEMBER 31, 1995

- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost $827,188,930) (Note
2)............................................................ $1,001,211,658
Cash........................................................... 4,575,805
Receivable for investments sold................................ 672,844
Dividends receivable (Note 2).................................. 1,803,634
Deferred organization costs (Note 2)........................... 227,328
--------------
TOTAL ASSETS..................................................... 1,008,491,269
--------------
LIABILITIES
Payable for investments purchased.............................. 742,868
Income distribution payable (Note 2)........................... 5,558,618
Due to Sponsor (Note 3)........................................ 373,462
Accrued trustee fees (Note 3).................................. 287,793
Accrued expenses and other liabilities......................... 297,743
--------------
TOTAL LIABILITIES................................................ 7,260,484
--------------
NET ASSETS....................................................... $1,001,230,785
--------------
NET ASSETS REPRESENTED BY:
Paid in surplus relating to 16,251,356 units of fractional
undivided interest ("SPDRs") outstanding; unlimited units
authorized (Note 4)........................................... $ 828,483,453
Distribution in excess of net investment income................ (1,122,255)
Accumulated net realized loss on investments................... (153,141)
Net unrealized appreciation on investments..................... 174,022,728
--------------
NET ASSETS....................................................... $1,001,230,785
==============
NET ASSET VALUE PER SPDR ($1,001,230,785/16,251,356 SPDRs)....... $ 61.61
==============
</TABLE>

See accompanying notes to financial statements

14
<PAGE>

SPDR TRUST SERIES 1

STATEMENT OF OPERATIONS

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED ENDED ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994 DECEMBER 31, 1993(*)
----------------- ----------------- --------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividend income (Note
2)................... $ 16,060,887(a) $ 13,330,201 $ 6,772,508
------------ ------------ -----------
EXPENSES
Trustee expense (Note
3)................... 909,805 668,953 299,165
S & P license fee..... 218,098 -- --
SEC registration fees. 136,000 -- 156,250
Amortization of organ-
ization costs (Note
2)................... 110,000 110,000 102,172
Legal and audit serv-
ices................. 80,000 174,823 65,498
Printing and postage
expense.............. 20,000 15,250 75,000
Miscellaneous ex-
penses............... 1,000 3,992 10,000
------------ ------------ -----------
TOTAL EXPENSES.......... 1,474,903 973,018 708,085
Rebate from Sponsor
(Note 3)............. (180,244) (27,593) (230,591)
------------ ------------ -----------
Net expenses............ 1,294,659 945,425 477,494
Trustee fees offset by
earnings credit (Note
3)..................... (107,356) -- --
------------ ------------ -----------
Net expenses after
Trustee fees offset by
earnings
credit................. 1,187,303 945,425 477,494
------------ ------------ -----------
NET INVESTMENT INCOME... 14,873,584 12,384,776 6,295,014
------------ ------------ -----------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVEST-
MENTS
Net realized gain
(loss) on investment
transactions......... 6,289,657 (9,680,642) 202,429
Net increase (de-
crease) in unrealized
appreciation......... 170,848,065 (10,145,765) 13,320,428
------------ ------------ -----------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON
INVESTMENTS............ 177,137,722 (19,826,407) 13,522,857
------------ ------------ -----------
NET INCREASE (DECREASE)
IN NET ASSETS FROM
OPERATIONS............. $192,011,306 $ (7,441,631) $19,817,871
============ ============ ===========
</TABLE>
- --------

* The Trust commenced operations on January 22, 1993.

(a) Net of witholding tax expense of $109,162.

See accompanying notes to financial statements

15
<PAGE>

SPDR TRUST SERIES 1

STATEMENT OF CHANGES IN NET ASSETS

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED ENDED ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994 DECEMBER 31, 1993(*)
----------------- ----------------- --------------------
<S> <C> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS:
Net investment income. $ 14,873,584 $ 12,384,776 $ 6,295,014
Net realized gain
(loss) on investment
transactions......... 6,289,657 (9,680,642) 202,429
Net increase
(decrease) in
unrealized
appreciation......... 170,848,065 (10,145,765) 13,320,428
-------------- ------------ ------------
NET INCREASE (DECREASE)
IN NET ASSETS FROM
OPERATIONS............. 192,011,306 (7,441,631) 19,817,871
-------------- ------------ ------------
UNDISTRIBUTED NET
INVESTMENT INCOME
INCLUDED IN PRICE OF
UNITS ISSUED AND
REDEEMED, NET.......... 325,692 374,852 672,224
-------------- ------------ ------------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income. (14,873,584) (12,844,467) (6,646,991)
In excess of net
investment income.... (310,588) 0 0
Net realized gains.... (128,321) 0 (202,429)
-------------- ------------ ------------
TOTAL DISTRIBUTIONS TO
UNITHOLDERS............ (15,312,493) (12,844,467) (6,849,420)
-------------- ------------ ------------
NET INCREASE (DECREASE)
IN NET ASSETS FROM
ISSUANCE AND REDEMPTION
OF SPDRS (NOTE 4)...... 401,629,719 (19,069,514) 441,385,991
-------------- ------------ ------------
NET INCREASE (DECREASE)
IN NET ASSETS DURING
PERIOD................. 578,654,224 (38,980,760) 455,026,666
NET ASSETS AT BEGINNING
OF PERIOD.............. 422,576,561 461,557,321 6,530,655
-------------- ------------ ------------
NET ASSETS AT END OF
PERIOD (including
undistributed net
investment income
(loss) of ($1,122,255),
$235,408 and $320,247,
respectively).......... $1,001,230,785 $422,576,561 $461,557,321
============== ============ ============
</TABLE>
- --------

* The Trust commenced operations on January 22, 1993.

See accompanying notes to financial statements

16
<PAGE>

SPDR TRUST SERIES 1

FINANCIAL HIGHLIGHTS

SELECTED DATA FOR A SPDR OUTSTANDING DURING THE PERIOD

- -------------------------------------------------------------------------------

<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED ENDED ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994 DECEMBER 31, 1993(1)
----------------- ----------------- --------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD......... $45.93 $46.62 $43.54
---------- -------- --------
INVESTMENT OPERATIONS:
Net investment income
(2).................. 1.26 1.22 1.15
Net realized and
unrealized gain
(loss) on
investments.......... 15.70 (0.68) 3.06
---------- -------- --------
TOTAL FROM INVESTMENT
OPERATIONS............. 16.96 0.54 4.21
---------- -------- --------
LESS DISTRIBUTIONS FROM:
Net investment income. (1.24) (1.23) (1.10)
In excess of net in-
vestment income...... (0.03) -- --
Net realized gains.... (0.01) 0.00 (0.03)
---------- -------- --------
TOTAL DISTRIBUTIONS..... (1.28) (1.23) (1.13)
---------- -------- --------
NET ASSET VALUE, END OF
PERIOD................. $61.61 $45.93 $46.62
========== ======== ========
TOTAL INVESTMENT RETURN. 37.23% 1.15% 9.78%
RATIOS AND SUPPLEMENTAL
DATA
Ratio to average net as-
sets:..................
Total expenses (2).... 0.20% 0.20% 0.20%(3)
Net expenses after
Trustee earnings
credit (2)........... 0.19% -- --
Net investment income
(2).................. 2.35% 2.63% 2.62%(3)
Portfolio turnover rate
(4).................... 4.02% 4.07% 2.40%
NET ASSETS, END OF PE-
RIOD (THOUSANDS)....... $1,001,231 $422,577 $461,557
</TABLE>
- --------

(1) The Trust commenced operations on January 22, 1993.

(2) Net of expenses reimbursed by the Sponsor. If the Trust had borne all
expenses, net investment income per unit would have decreased by $0.01,
$0.01 and $0.04 in 1995, 1994 and 1993, respectively, and the ratio of
expenses to average net assets would have increased by 0.03%, 0.01% and
0.10% (on an annualized basis) in 1995, 1994 and 1993, respectively. For
the years ended 1993 and 1994, the ratio of expenses to average net assets
were not required to be calculated before and after Trustee earnings
credits.

(3) Annualized.

(4) Portfolio turnover ratio excludes securities received or delivered from
processing creations or redemptions of SPDRs.

See accompanying notes to financial statements

17
<PAGE>

SPDR TRUST SERIES 1

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 1995

- -------------------------------------------------------------------------------

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.

NOTE 2--SIGNIFICANT ACCOUNTING POLICIES

The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts and disclosures in the financial
statements. Actual results could differ from these estimates. The following is
a summary of significant accounting policies followed by the Trust.

SECURITY VALUATION

Portfolio securities are valued based on the closing sale price on the
exchange which is deemed to be the principal market for the security. If no
closing sale price is available, then the security is valued at the closing
bid price on the exchange which is deemed to be the principal market for the
security. If there is no closing bid price available, valuation will be
determined by the Trustee in good faith based on available information.

INVESTMENT TRANSACTIONS

Investment transactions are recorded on the trade date. Realized gains and
losses from the sale or disposition of securities are recorded on the
identified cost basis. Dividend income is recorded on the ex-dividend date.

DISTRIBUTIONS TO UNITHOLDERS

The Trust declares and distributes dividends from net investment income to
its unitholders quarterly. The Trust will distribute net realized capital
gains, if any, at least annually.

FEDERAL INCOME TAX

The Trust has qualified and intends to qualify for and elect treatment as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended. By so qualifying, 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. The Trust has reclassified $5,687,578 of non-deductible
security gains realized in 1995 in the in-kind redemption of Creation Units
(Note 4) as an increase to paid in surplus in the Statement of Assets and
Liabilities. During the year ended December 31, 1995, 100% of the Trust's
dividends paid qualified for the dividends received deduction for corporate
shareholders. The Trust incurred net capital losses of $147,423 during the
period from November 1

18
<PAGE>

SPDR TRUST SERIES 1

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995

- -------------------------------------------------------------------------------

through December 31, 1995. These losses will be used to offset any net
realized capital gains realized during 1996, any losses not utilized in 1996
will be carried forward with an expiration date of December 31, 2004.

ORGANIZATION COSTS

The Trust incurred organization costs of $549,500, which have been
capitalized and are being charged to operations ratably over a period of 60
months from the commencement of operations.

NOTE 3--TRANSACTIONS WITH THE TRUSTEE AND SPONSOR

In accordance with the Trust Agreement, State Street Bank and Trust Company
(the "Trustee") maintains the Trust's accounting records, acts as custodian
and transfer agent to the Trust, and provides administrative services,
including filing of all required regulatory reports. The Trustee is also
responsible for determining the composition of the portfolio of securities
which must be delivered in exchange for the issuance of Creation Units of the
Trust, and for adjusting the composition of the Trust's portfolio from time to
time to conform to changes in the composition and/or weighting structure of
the S&P Index. For these services, the Trustee receives a fee at the following
annual rates:

<TABLE>
<CAPTION>
NET ASSET VALUE OF THE TRUST FEE AS A PERCENTAGE OF NET ASSET VALUE OF THE TRUST
---------------------------- ---------------------------------------------------
<S> <C>
$0--$499,999,999 15/100 of 1% per annum plus or minus the Adjustment Amount
$500,000,000--
$999,999,999 13/100 of 1% per annum plus or minus the Adjustment Amount
$1,000,000,000--and
above 11/100 of 1% per annum plus or minus the Adjustment Amount
</TABLE>

The Adjustment Amount is the sum of (a) the excess or deficiency of
transaction fees received by the Trustee, less the expenses incurred in
processing orders for creation and redemption of SPDRs and (b) the amounts
earned by the Trustee with respect to the cash held by the Trustee for the
benefit of the Trust. During the year ended December 31, 1995 the Adjustment
amount reduced the Trustee's fee by $114,926, of which $107,356 resulted from
amounts earned by the Trustee with respect to cash held in the Trust.

For the fiscal year ended December 31, 1995, PDR Services Corporation (the
"Sponsor", a wholly-owned subsidiary of the American Stock Exchange, Inc.)
agreed to reimburse the Trust for, or assume, the ordinary operating expenses
of the Trust which exceeded 20/100 of 1% for the period January 1, 1995
through November 1, 1995 and 19/100 of 1% for the period November 2, 1995
through December 31, 1995 per annum of the daily net asset value of the Trust.
The amount of such reimbursement for the year ended December 31, 1995 was
$180,244.

NOTE 4--TRUST TRANSACTIONS IN SPDRS

Transactions in SPDRs were as follows:

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
------------------------- -------------------------
SPDRS AMOUNT SPDRS AMOUNT
---------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
SPDRs sold............... 11,700,000 $ 640,975,632 9,750,000 $ 407,202,862
Dividend reinvestment
SPDRs issued............ 1,291 69,292 65 3,079
SPDRs redeemed........... (4,650,000) (239,089,513) (9,450,000) (425,900,603)
Net income equalization
received................ -- (325,692) -- (374,852)
---------- ------------- ---------- -------------
Net increase (decrease).. 7,051,291 $ 401,629,719 (699,935) $ (19,069,514)
========== ============= ========== =============
</TABLE>

19
<PAGE>

SPDR TRUST SERIES 1

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995

- -------------------------------------------------------------------------------

<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31, 1993
----------------------
SPDRS AMOUNT
--------- ------------
<S> <C> <C>
SPDRs sold.............................................. 9,750,000 $442,058,215
Dividend reinvestment SPDRs issued...................... -- --
SPDRs redeemed.......................................... -- --
Net income equalization received........................ -- (672,224)
--------- ------------
Net increase (decrease)................................. 9,750,000 $441,385,991
========= ============
</TABLE>

Except for under the Trust's dividend reinvestment plan, SPDRs are issued
and redeemed by the Trust only in Creation Unit size aggregations of 50,000
SPDRs. Such transactions are only permitted on an in-kind basis, with a
separate cash payment which is equivalent to the undistributed net investment
income per SPDR (income equalization) and a balancing cash component to equate
the transaction to the net asset value per unit of the Trust on the
transaction date. Transaction fees at scheduled amounts ranging from $250 to
$1,500 per Creation Unit are charged to those persons creating or redeeming
Creation Units. Transaction fees are received by the Trustee and used to
offset the expense of processing orders. Throughout the period ended December
31, 1995, the Trustee voluntarily reduced or waived its fee for creations of
Creation Units through the SPDR clearing process. The Trustee, in its sole
discretion, may terminate such reductions or waivers, or modify its
transaction fee schedule, subject to certain limitations.

NOTE 5--INVESTMENT TRANSACTIONS

For the year ended December 31, 1995, the Trust had in-kind contributions,
redemptions, purchases and sales of investment securities of $639,954,540,
$238,394,112, $25,728,012 and $25,720,467, respectively. At December 31, 1995,
the cost of investments for federal income tax purposes was substantially the
same as the cost for financial reporting purposes. Accordingly, gross
unrealized appreciation was $183,265,156 and gross unrealized depreciation was
$9,242,428, resulting in net unrealized appreciation of $174,022,728.

20
<PAGE>

SPDR TRUST SERIES 1

SCHEDULE OF INVESTMENTS

DECEMBER 31, 1995

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
COMMON STOCKS SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
Abbott Laboratories........................................ 173,061 $ 7,225,297
Advanced Micro Devices, Inc................................ 22,820 376,530
Aetna Life & Casualty Co. ................................. 24,891 1,723,702
Ahmanson (H.F.) & Co. ..................................... 25,819 684,204
Air Products & Chemicals, Inc. ............................ 24,428 1,288,577
Airtouch Communications Inc.*.............................. 108,303 3,059,560
Alberto-Culver Co., Class B................................ 6,164 211,888
Albertson's Inc............................................ 55,404 1,821,407
Alcan Aluminum Ltd......................................... 49,168 1,530,354
Alco Standard Corp......................................... 24,374 1,112,064
Alexander & Alexander Services, Inc........................ 9,546 181,374
Allergan Pharmaceuticals, Inc. ............................ 13,358 434,135
Allied Signal, Inc......................................... 61,934 2,941,865
Allstate Corp.............................................. 97,926 4,027,207
Alltel Corp. .............................................. 41,205 1,215,548
Aluminum Co. of America.................................... 39,037 2,064,081
Alza Corp., Class A*....................................... 17,497 433,051
Amdahl Corp.*.............................................. 26,175 222,488
Amerada Hess Corp.......................................... 20,450 1,083,850
American Brands, Inc. ..................................... 39,645 1,769,158
American Electric Power Co., Inc........................... 40,659 1,646,690
American Express Co. ...................................... 105,702 4,373,420
American General Corp...................................... 44,601 1,555,460
American Greetings Corp., Class A.......................... 16,364 452,056
American Home Products Corp. .............................. 67,831 6,579,607
American International Group, Inc. ........................ 103,587 9,581,798
American Stores Co. ....................................... 32,835 878,336
Ameritech Corp............................................. 120,894 7,132,746
Amgen Inc.*................................................ 58,010 3,444,344
Amoco Corp................................................. 108,288 7,783,200
AMP Inc.................................................... 46,808 1,796,257
AMR Corp.*................................................. 16,368 1,215,324
Andrew Corp.*.............................................. 8,569 327,764
Anheuser-Busch Cos., Inc................................... 55,861 3,735,704
Apple Computer, Inc........................................ 26,626 848,704
Applied Materials Inc. .................................... 38,670 1,522,631
Archer-Daniels-Midland Co.................................. 115,688 2,082,384
Armco Inc.*................................................ 23,861 140,183
Armstrong World Industries, Inc............................ 8,192 507,904
ASARCO, Inc. .............................................. 9,078 290,496
Ashland Inc. .............................................. 13,863 486,938
AT & T Corp................................................ 347,491 22,500,042
</TABLE>

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
COMMON STOCKS SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
Atlantic Richfield Co...................................... 35,166 $ 3,894,635
Autodesk, Inc.............................................. 10,420 356,885
Automatic Data Processing, Inc............................. 31,462 2,336,054
Avery Dennison Corp........................................ 11,878 595,385
Avon Products, Inc. ....................................... 15,042 1,133,791
Baker Hughes, Inc.......................................... 31,093 757,892
Ball Corp. ................................................ 6,645 182,738
Bally Entertainment Group*................................. 10,663 149,282
Baltimore Gas & Electric Co................................ 32,510 926,535
Banc One Corp. ............................................ 85,361 3,222,378
Bank of Boston Corp. ...................................... 24,570 1,136,363
Bank of New York Inc. ..................................... 43,672 2,129,010
BankAmerica Corp. ......................................... 80,797 5,231,606
Bankers Trust Co. (N.Y.)................................... 17,291 1,149,852
Bard (C.R.) Inc. .......................................... 12,123 390,967
Barnett Banks Inc. ........................................ 21,400 1,262,600
Barrick Gold Corp. ........................................ 77,323 2,039,394
Bausch & Lomb, Inc......................................... 12,593 498,998
Baxter International, Inc.................................. 60,431 2,530,548
Becton, Dickinson & Co..................................... 14,483 1,086,225
Bell Atlantic Corp......................................... 95,240 6,369,175
BellSouth Corp............................................. 216,989 9,439,022
Bemis Co., Inc............................................. 11,195 286,872
Beneficial Corp. .......................................... 11,646 542,995
Bethlehem Steel Corp.*..................................... 21,982 307,748
Beverly Enterprises Inc.*.................................. 19,004 201,918
Biomet, Inc.*.............................................. 25,351 453,149
Black & Decker Corp. ...................................... 18,924 667,071
Block (H&R) Inc............................................ 23,042 933,201
Boatmen's Bancshares, Inc. ................................ 27,794 1,136,080
Boeing Co. ................................................ 74,878 5,868,563
Boise Cascade Corp. ....................................... 9,754 337,732
Boston Scientific Corp.*................................... 35,255 1,727,495
Briggs & Stratton Corp. ................................... 6,466 280,463
Bristol-Myers Squibb Co. .................................. 110,604 9,498,119
Brown Group, Inc. ......................................... 3,959 56,416
Brown-Forman Corp., Class B................................ 15,167 553,596
Browning-Ferris Industries, Inc............................ 45,940 1,355,230
Brunswick Corp............................................. 21,015 504,360
Burlington Northern Santa Fe............................... 30,816 2,403,648
Burlington Resources, Inc. ................................ 27,913 1,095,585
Cabletron Systems Inc.*.................................... 15,615 1,264,815
Campbell Soup Co. ......................................... 54,601 3,276,060
Capital Cities/ABC, Inc. .................................. 33,634 4,149,595
Carolina Power & Light Co.................................. 34,127 1,177,382
Caterpillar, Inc........................................... 43,096 2,531,890
</TABLE>

See accompanying notes to financial statements

21
<PAGE>

SPDR TRUST SERIES 1

SCHEDULE OF INVESTMENTS (CONTINUED)

DECEMBER 31, 1995

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
COMMON STOCKS SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
Centex Corp. .............................................. 6,188 $ 215,033
Central & South West Corp.................................. 42,273 1,178,360
Ceridian Corp.*............................................ 14,458 596,393
Champion International Corp................................ 20,410 857,220
Charming Shoppes, Inc...................................... 23,349 67,128
Chase Manhattan Corp. ..................................... 38,321 2,323,211
Chemical Banking Corp. .................................... 54,545 3,204,519
Chevron Corp............................................... 142,199 7,465,448
Chrysler Corp.............................................. 83,590 4,628,796
Chubb Corp. ............................................... 18,973 1,835,638
CIGNA Corp. ............................................... 15,934 1,645,186
Cincinnati Milacron Inc. .................................. 7,467 196,009
CINergy Corp. ............................................. 34,365 1,052,428
Circuit City Stores Inc. .................................. 21,301 588,440
Cisco Systems Inc.*........................................ 59,416 4,433,919
Citicorp................................................... 92,870 6,239,455
Clorox Co.................................................. 11,418 817,814
Coastal Corp............................................... 23,139 861,928
Coca Cola Co............................................... 273,734 20,324,750
Colgate-Palmolive Co....................................... 31,748 2,230,297
Columbia/HCA Healthcare Corp. ............................. 96,995 4,922,496
Columbia Gas Systems, Inc.*................................ 11,117 487,758
Comcast Corp., Class A..................................... 51,901 943,949
Comerica Incorporated...................................... 24,328 976,161
Community Psychiatric Centers.............................. 9,928 121,618
Compaq Computer Corp.*..................................... 57,890 2,778,720
Computer Associates International Inc. .................... 52,610 2,992,194
Computer Sciences Corp.*................................... 11,892 835,413
ConAgra, Inc. ............................................. 52,016 2,145,660
Conrail Inc. .............................................. 17,280 1,209,600
Consolidated Edison Co. of N.Y., Inc. ..................... 51,440 1,646,080
Consolidated Freightways, Inc. ............................ 8,759 232,114
Consolidated Natural Gas Co................................ 20,205 916,802
Cooper Industries Inc. .................................... 23,770 873,548
Cooper Tire & Rubber Co. .................................. 18,410 453,346
Coors (Adolph) Co., Class B................................ 8,591 190,076
CoreStates Financial Corp. ................................ 30,703 1,162,876
Corning Inc. .............................................. 50,125 1,604,000
CPC International Inc. .................................... 31,995 2,195,657
Crane Co................................................... 6,894 254,216
Cray Research, Inc.*....................................... 5,974 147,857
Crown Cork & Seal Co., Inc.*............................... 19,814 827,235
CSX Corp................................................... 46,116 2,104,043
Cue International Inc.*.................................... 38,076 1,299,344
Cummins Engine Co., Inc.................................... 7,957 294,409
</TABLE>

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
COMMON STOCKS SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
Cyprus Amax Minerals Co,................................... 20,357 $ 531,827
Dana Corp. ................................................ 21,716 635,193
Darden Restaurants Inc. ................................... 35,037 416,064
Data General Corp.......................................... 7,938 109,148
Dayton-Hudson Corp. ....................................... 15,737 1,180,275
Dean Witter Discover & Co. ................................ 36,858 1,732,326
Deere & Co. ............................................... 57,163 2,014,996
Delta Air Lines Inc. ...................................... 11,227 829,395
Deluxe Corp. .............................................. 17,692 513,068
Detroit Edison Co. ........................................ 31,808 1,097,376
Dial Corp. ................................................ 19,671 582,753
Digital Equipment Corp.*................................... 32,143 2,061,170
Dillard Department Stores, Inc., Class A................... 24,945 710,933
Disney (Walt) Co. (The).................................... 113,902 6,720,218
Dominion Resources Inc. ................................... 38,088 1,571,130
Donnelley (R.R.) & Sons Co. ............................... 33,685 1,326,347
Dover Corp. ............................................... 25,031 923,018
Dow Chemical Co. .......................................... 57,100 4,018,413
Dow Jones & Co., Inc. ..................................... 21,225 846,347
Dresser Industries Inc. ................................... 38,846 946,871
DSC Communications Corp.................................... 25,126 926,521
Du Pont (E.I.) de Nemours & Co., Inc....................... 121,049 8,458,299
Duke Power Co. ............................................ 44,694 2,117,378
Dun & Bradstreet Corp. .................................... 37,138 2,404,686
Eastern Enterprises........................................ 4,469 157,532
Eastman Chemical Co........................................ 17,868 1,118,984
Eastman Kodak Co. ......................................... 74,502 4,991,634
Eaton Corp................................................. 17,130 918,596
Echlin, Inc. .............................................. 13,316 486,034
Echo Bay Mines Ltd......................................... 25,202 261,471
Ecolab Inc................................................. 14,114 423,420
EG & G Inc. ............................................... 10,546 255,741
Emerson Electric Co........................................ 49,081 4,012,372
Engelhard Corp. ........................................... 30,878 671,597
Enron Corp................................................. 54,569 2,080,443
ENSERCH Corp. ............................................. 15,257 247,926
Entergy Corp. ............................................. 49,096 1,436,058
Exxon Corp. ............................................... 270,891 21,705,141
Federal Express Corp.*..................................... 12,274 906,742
Federal Home Loan Mortgage Corp. .......................... 39,585 3,305,348
Federal National Mortgage Assn. ........................... 59,502 7,385,686
Federal Paper Board Co., Inc............................... 9,865 511,747
Federated Department Stores Inc.*.......................... 44,304 1,218,360
</TABLE>

See accompanying notes to financial statements

22
<PAGE>

SPDR TRUST SERIES 1

SCHEDULE OF INVESTMENTS (CONTINUED)

DECEMBER 31, 1995

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
COMMON STOCKS SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
First Bank Systems Inc. ................................... 28,308 $ 1,404,785
First Chicago NBD Corp. ................................... 69,334 2,738,693
First Data Corp. .......................................... 48,206 3,223,776
First Fidelity Bancorp..................................... 17,464 1,316,349
First Interstate Bancorp................................... 16,590 2,264,535
First Union Corp. ......................................... 37,535 2,087,884
Fleet Financial Group Inc.................................. 53,702 2,188,357
Fleetwood Enterprises Inc.................................. 10,321 265,766
Fleming Cos., Inc. ........................................ 8,374 172,714
Fluor Corp. ............................................... 18,102 1,194,732
FMC Corp.*................................................. 8,123 549,318
Ford Motor Co.............................................. 234,243 6,793,047
Foster Wheeler Corp........................................ 8,294 352,495
FPL Group, Inc. ........................................... 40,342 1,870,860
Freeport McMoran Copper & Gold............................. 44,764 1,258,988
Fruit of the Loom Inc.* ................................... 14,898 363,139
Gannett Co., Inc........................................... 30,626 1,879,671
Gap Inc. (The)............................................. 31,378 1,317,876
General Dynamics Corp. .................................... 13,880 820,655
General Electric Co........................................ 364,696 26,258,112
General Mills, Inc. ....................................... 34,582 1,997,111
General Motors Corp........................................ 163,322 8,635,651
General Public Utilities Corp. ............................ 25,085 852,890
General Reinsurance Corp. ................................. 17,978 2,786,590
General Signal Corp. ...................................... 10,078 326,275
Genuine Parts Co........................................... 26,592 1,090,272
Georgia-Pacific Corp....................................... 19,714 1,352,873
Giant Foods, Inc., Class A................................. 13,053 411,170
Giddings & Lewis, Inc. .................................... 7,518 124,047
Gillette Co. .............................................. 96,952 5,053,623
Golden West Financial Corp. ............................... 12,902 712,835
Goodrich (B.F.) Co. ....................................... 5,820 396,488
Goodyear Tire & Rubber Co. (The)........................... 33,539 1,521,832
Grace (W.R.) & Co.......................................... 20,736 1,226,016
Grainger (W.W.) Inc........................................ 10,901 722,191
Great Atlantic & Pacific Tea Co., Inc...................... 8,772 201,756
Great Lakes Chemical Corp. ................................ 14,269 1,027,368
Great Western Financial Corp. ............................. 30,099 767,524
GTE Corp................................................... 211,642 9,312,248
Halliburton Co. ........................................... 25,198 1,275,649
Handleman Co. ............................................. 7,675 44,131
Harcourt General, Inc. .................................... 16,081 673,392
Harland (John H.) Co. ..................................... 6,777 141,470
Harnischfeger Industries, Inc. ............................ 10,336 343,672
Harrahs Entertainment Inc.*................................ 22,599 548,026
</TABLE>

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
COMMON STOCKS SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
Harris Corp................................................ 8,569 $ 468,082
Hasbro Inc. ............................................... 19,323 599,013
Heinz (H.J.) Co. .......................................... 79,895 2,646,522
Helmerich & Payne Inc. .................................... 5,651 168,117
Hercules, Inc. ............................................ 24,312 1,370,589
Hershey Foods Corp. ....................................... 17,105 1,111,825
Hewlett Packard Co......................................... 111,627 9,348,761
Hilton Hotels Corp. ....................................... 10,645 654,667
Home Depot, Inc. (The)..................................... 103,887 4,973,590
Homestake Mining Co. ...................................... 30,358 474,344
Honeywell, Inc. ........................................... 28,005 1,361,743
Household International, Inc. ............................. 21,061 1,245,232
Houston Industries Inc. ................................... 57,510 1,394,617
Humana Inc.*............................................... 34,476 943,780
Illinois Tool Works Inc.................................... 25,420 1,499,780
Inco, Ltd.................................................. 25,667 853,428
Ingersoll Rand Co. ........................................ 23,399 821,890
Inland Steel Industries Inc................................ 10,555 252,632
Intel Corp................................................. 179,589 10,191,676
Intergraph Corp.*.......................................... 10,631 167,438
International Business Machines Corp. ..................... 124,009 11,377,826
International Flavors & Fragrances, Inc. .................. 24,362 1,169,376
International Paper Co. ................................... 55,609 2,106,191
Interpublic Group of Cos., Inc. ........................... 17,002 737,462
ITT Corporation............................................ 25,316 1,341,748
ITT Hartford Group Inc. ................................... 25,316 1,224,662
ITT Industries Inc......................................... 25,316 607,584
James River Corp. of Virginia.............................. 18,094 436,518
Jefferson-Pilot Corp. ..................................... 15,662 728,260
Johnson & Johnson.......................................... 141,401 12,107,461
Johnson Controls Inc. ..................................... 9,049 622,119
Jostens, Inc. ............................................. 8,528 206,804
K Mart Corp. .............................................. 98,716 715,691
Kaufman & Broad Home Corp. ................................ 7,721 114,850
Kellogg Co. ............................................... 47,453 3,665,744
Kerr-McGee Corp. .......................................... 11,266 715,391
Keycorp.................................................... 49,865 1,807,606
Kimberly-Clark Corp. ...................................... 61,086 5,054,866
King World Productions Inc.*............................... 8,070 313,721
Knight Ridder Inc. ........................................ 10,462 653,875
Kroger Co.*................................................ 26,991 1,012,162
Laidlaw Inc. .............................................. 58,333 597,913
Lilly (Eli) & Co........................................... 120,494 6,777,787
Limited Inc. (The)......................................... 78,128 1,357,474
Lincoln National Corp. .................................... 22,874 1,229,477
Liz Claiborne, Inc. ....................................... 16,245 450,799
</TABLE>

See accompanying notes to financial statements

23
<PAGE>

SPDR TRUST SERIES 1

SCHEDULE OF INVESTMENTS (CONTINUED)

DECEMBER 31, 1995

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
COMMON STOCKS SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
Lockheed Martin Corp. ..................................... 43,833 $ 3,462,807
Loews Corp. ............................................... 25,831 2,024,505
Longs Drug Stores Corp..................................... 4,683 224,199
Loral Corp. ............................................... 37,522 1,327,341
Louisiana Land & Exploration Co............................ 6,832 292,922
Louisiana Pacific Corp..................................... 23,770 576,422
Lowes Cos., Inc............................................ 34,724 1,163,254
LSI Logic Corporation*..................................... 27,914 914,184
Luby's Cafeterias Inc. .................................... 5,160 114,810
Mallinckrodt Group Inc..................................... 16,395 616,011
Manor Care, Inc............................................ 13,229 463,015
Marriott International, Inc................................ 26,594 1,017,220
Marsh & McLennan Companies, Inc............................ 15,828 1,404,735
Masco Corp. ............................................... 34,585 1,085,104
Mattel, Inc. .............................................. 48,664 1,496,418
May Department Stores Co. ................................. 54,440 2,300,090
Maytag Corp. .............................................. 23,685 479,621
MBNA Corp. ................................................ 32,740 1,207,287
McDermott International Inc. .............................. 11,997 263,934
McDonald's Corp. .......................................... 151,503 6,836,573
McDonnell Douglas Corp..................................... 24,637 2,266,604
McGraw-Hill Inc............................................ 10,998 958,201
MCI Communications Corp.................................... 147,792 3,861,066
Mead Corp. ................................................ 11,792 616,132
Medtronic Inc. ............................................ 50,188 2,804,254
Mellon Bank Corp........................................... 30,863 1,658,886
Melville Corp.............................................. 22,332 686,709
Mercantile Stores Co., Inc. ............................... 7,759 358,854
Merck & Co. Inc. .......................................... 269,717 17,733,893
Meredith Corp. ............................................ 6,090 255,019
Merrill Lynch & Co., Inc. ................................. 38,539 1,965,489
Micron Technology Inc...................................... 45,216 1,791,684
Microsoft Corp.*........................................... 129,303 11,346,338
Millipore Corp............................................. 9,953 409,317
Minnesota Mining & Manufacturing Co. ...................... 91,810 6,082,412
Mobil Corp................................................. 86,302 9,665,824
Monsanto Co. .............................................. 25,241 3,092,022
Moore Corp., Ltd........................................... 22,252 414,443
Morgan (J.P.) & Co., Inc. ................................. 41,064 3,295,386
Morgan Stanley Group, Inc. ................................ 16,748 1,350,307
Morton International Inc................................... 32,384 1,161,776
Motorola, Inc. ............................................ 128,695 7,335,615
Nacco Industries Inc., Class A............................. 1,950 108,225
Nalco Chemical Co.......................................... 14,992 451,634
National City Corp. ....................................... 32,163 1,065,399
</TABLE>

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
COMMON STOCKS SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
National Semiconductor Corp.*.............................. 27,296 $ 607,336
National Service Industries, Inc. ......................... 10,632 344,211
NationsBank Corp. ......................................... 58,940 4,103,697
Navistar International Corp.*.............................. 16,117 169,228
New York Times Co. (The), Class A.......................... 20,717 613,741
Newell Co. ................................................ 34,949 904,305
Newmont Mining Corp........................................ 19,150 866,537
Niagara Mohawk Power Corp. ................................ 32,306 310,945
NICOR Inc.................................................. 10,811 297,302
Nike Inc., Class B......................................... 31,406 2,186,643
Noram Energy Corp. ........................................ 28,004 248,535
Nordstrom Inc. ............................................ 17,882 724,221
Norfolk Southern Corp. .................................... 28,362 2,251,234
Northern States Power Co. ................................. 14,983 736,040
Northern Telecom Ltd....................................... 55,349 2,380,007
Northrop Corp. ............................................ 10,676 683,264
Norwest Corp. ............................................. 76,704 2,531,232
Novell Inc.*............................................... 79,492 1,132,761
Nucor Corp. ............................................... 19,280 1,101,370
NYNEX Corp. ............................................... 93,318 5,039,172
Occidental Petroleum Corp. ................................ 68,930 1,473,379
Ogden Corp. ............................................... 10,452 223,411
Ohio Edison Co............................................. 33,686 791,621
ONEOK Inc. ................................................ 6,098 139,492
Oracle Systems Corp.*...................................... 94,717 4,013,633
Oryx Energy Co.*........................................... 22,597 302,235
Outboard Marine Corp. ..................................... 4,426 90,180
Owens-Corning Fiberglas Corp.*............................. 11,129 499,414
P P & L Resources Inc. .................................... 33,618 840,450
PACCAR Inc................................................. 8,519 358,863
Pacific Enterprises........................................ 18,499 522,597
Pacific Gas & Electric Co. ................................ 92,907 2,636,236
Pacific Telesis Group...................................... 93,822 3,154,765
PacifiCorp................................................. 61,926 1,315,927
Pall Corp. ................................................ 24,822 667,091
Panhandle Eastern Corp. ................................... 31,483 877,589
Parker-Hannifin Corp. ..................................... 16,273 557,350
Peco Energy Co. ........................................... 48,769 1,469,166
Penney (J.C.) Co., Inc. ................................... 49,318 2,348,770
Pennzoil Co. .............................................. 9,937 419,838
Peoples Energy Corp. ...................................... 7,936 251,968
Pep Boys-Manny Moe & Jack.................................. 13,327 341,504
PepsiCo Inc. .............................................. 171,783 9,598,375
Perkin-Elmer Corp. ........................................ 9,363 353,453
Pfizer, Inc. .............................................. 137,817 8,682,471
</TABLE>

See accompanying notes to financial statements

24
<PAGE>

SPDR TRUST SERIES 1

SCHEDULE OF INVESTMENTS (CONTINUED)

DECEMBER 31, 1995

<TABLE>
- --------------------------------------------------------------------------------
COMMON STOCKS SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
Pharmacia & Upjohn Inc. ................................... 110,039 $ 4,264,011
Phelps Dodge Corp. ........................................ 15,327 954,106
Philip Morris Companies Inc. .............................. 183,179 16,577,699
Phillips Petroleum Co...................................... 56,746 1,936,457
Pioneer Hi Bred International Inc.......................... 18,522 1,030,286
Pitney Bowes Inc........................................... 33,351 1,567,497
Pittston Co................................................ 8,881 278,641
Placer Dome Inc............................................ 52,586 1,268,637
PNC Financial Corp......................................... 69,172 2,230,797
Polaroid Corp.............................................. 9,806 464,559
Potlatch Corp.............................................. 6,429 257,160
PPG Industries Inc......................................... 42,749 1,955,767
Praxair, Inc............................................... 30,680 1,031,615
Premark International Inc.................................. 13,603 688,652
Price-Costco Inc.*......................................... 41,627 634,812
Procter & Gamble Co........................................ 149,923 12,443,609
Providian Corp............................................. 20,944 853,468
Public Service Enterprise Inc.............................. 52,890 1,619,756
Pulte Corp................................................. 5,792 194,756
Quaker Oats Co............................................. 29,498 1,017,681
Ralston Purina Co.......................................... 22,385 1,396,264
Raychem Corp............................................... 9,578 544,749
Raytheon Co................................................ 53,384 2,522,394
Reebok International Ltd................................... 17,251 487,341
Republic New York Corp. ................................... 11,775 731,522
Reynolds Metals Co......................................... 13,909 787,597
Rite Aid Corp.............................................. 18,426 631,090
Roadway Services, Inc...................................... 8,557 418,223
Rockwell International Corp................................ 47,099 2,490,360
Rohm & Haas Co............................................. 14,862 956,741
Rowan Companies, Inc.*..................................... 18,528 182,964
Royal Dutch Petroleum Co.(a)............................... 116,893 16,496,525
Rubbermaid Inc............................................. 34,752 886,176
Russell Corp............................................... 8,395 232,961
Ryan's Family Steak Houses, Inc.*.......................... 12,174 85,218
Ryder Systems, Inc......................................... 17,451 431,912
SAFECO Corp................................................ 27,817 959,686
Safety-Kleen Corp.......................................... 13,192 206,125
Salomon Inc................................................ 23,485 833,717
Santa Fe Energy Resources Inc.*............................ 20,466 196,985
Santa Fe Pacific Gold Corp................................. 27,556 334,116
Sara Lee Corp.............................................. 105,124 3,350,827
SBC Communications Inc..................................... 132,855 7,639,162
SCE Corp................................................... 97,994 1,739,393
Schering-Plough Corp....................................... 80,238 4,393,030
</TABLE>

<TABLE>
- --------------------------------------------------------------------------------
COMMON STOCKS SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
Schlumberger Ltd.......................................... 52,908 $ 3,663,879
Scientific-Atlanta Inc.................................... 16,830 252,450
Seagram Co. Ltd. (The).................................... 81,672 2,827,893
Sears, Roebuck & Co....................................... 85,269 3,325,491
Service Corp. International............................... 22,825 1,004,300
Shared Medical System..................................... 5,200 282,750
Sherwin-Williams Co....................................... 18,755 764,266
Shoney's Inc.*............................................ 9,355 95,889
Sigma Aldrich Corp........................................ 10,961 542,569
Silicon Graphics Inc.*.................................... 34,647 952,792
Snap-On Inc............................................... 8,837 399,874
Sonat, Inc................................................ 19,157 682,468
Southern Co............................................... 144,845 3,566,808
Southwest Airlines Co..................................... 31,295 727,609
Springs Industries, Inc................................... 4,148 171,623
Sprint Corp............................................... 76,347 3,044,337
St. Jude Medical Center, Inc.*............................ 15,396 662,028
St. Paul Companies, Inc................................... 18,413 1,024,223
Stanley Works (The)....................................... 9,835 506,502
Stone Container Corp...................................... 20,196 290,317
Stride Rite Corp.......................................... 11,467 86,002
Sun Co., Inc.............................................. 16,675 456,478
Sun Microsystems, Inc.*................................... 42,022 1,917,254
Suntrust Banks Inc........................................ 24,955 1,709,417
Supervalu, Inc............................................ 14,818 466,767
Sysco Corp................................................ 40,126 1,304,095
Tandem Computers Inc.*.................................... 25,810 274,231
Tandy Corp................................................ 14,342 595,193
Tektronix, Inc............................................ 7,131 350,310
Tele Communications Inc.*................................. 142,613 2,834,433
Teledyne Inc.............................................. 11,960 306,475
Tellabs Inc.*............................................. 19,366 716,542
Temple-Inland, Inc........................................ 12,421 548,077
Tenet Healthcare Corp.*................................... 43,941 911,776
Tenneco Inc............................................... 38,929 1,931,852
Texaco Inc................................................ 56,941 4,469,868
Texas Instruments, Inc.................................... 41,172 2,130,651
Texas Utilities Co........................................ 49,425 2,032,603
Textron, Inc.............................................. 18,705 1,262,587
Thomas & Betts Corp....................................... 4,284 315,945
Time Warner Inc........................................... 84,462 3,198,998
Times Mirror Co., Class A................................. 24,790 839,761
Timken Co................................................. 7,073 270,542
TJX Companies Inc. (The).................................. 16,487 311,192
Torchmark Corp............................................ 15,881 718,615
Toys R Us Co.*............................................ 60,672 1,319,616
Transamerica Corp......................................... 15,065 1,097,862
Travelers Inc............................................. 69,993 4,400,810
</TABLE>

See accompanying notes to financial statements

25
<PAGE>

SPDR TRUST SERIES 1

SCHEDULE OF INVESTMENTS (CONTINUED)

DECEMBER 31, 1995

- --------

(a) An American Depository Receipt (ADR) is a certificate issued by a U.S. Bank
representing the right to receive securities of the foreign issuer described
above.
(*) Denotes non-income producing security.

See accompanying notes to financial statements

26
<PAGE>

THE TRUST

The Trust is a unit investment trust created under the laws of the State of
New York pursuant to the Trust Agreement.* The Securities held by the Trust
consist of a portfolio of common stocks or, in the case of securities not yet
delivered in connection with purchases made by the Trust or Portfolio
Deposits, confirmations of contracts to purchase such securities
(collectively, the "Portfolio").

CREATION OF CREATION UNITS

Portfolio Deposits may be deposited with the Trustee through the clearing
processes of NSCC, following placement with the Distributor of orders to
create SPDRs. The Distributor shall reject any order that is not submitted in
proper form. Investors may deposit Portfolio Deposits through the SPDR
Clearing Process or directly with the Trustee outside the SPDR Clearing
Process. The Transaction Fee will be charged at the time of creation of a
Creation Unit Size aggregation of SPDRs, and an additional amount not to
exceed three (3) times the Transaction Fee applicable for one Creation Unit
will be charged per Creation Unit to a creator creating outside the SPDR
Clearing Process depositing directly with the Trustee through DTC, in part due
to the increased expense associated with settlement outside the SPDR Clearing
Process. See "Prospectus Summary--Transaction Fee" for a detailed description
of the amount of the Transaction Fee and the additional amounts and
reductions, limitations and waivers applicable thereto, if any.

The Trustee, at the direction of the Sponsor in its sole discretion, from
time to time and for such periods as may be determined by the Sponsor in its
sole discretion, will increase** or reduce the amount and/or waive the
imposition altogether of the Transaction Fee (and/or the additional amounts
charged in connection with creations and/or redemptions outside the SPDR
Clearing Process) for certain lot-size creations and/or redemptions of SPDRs,
whether applied solely to creations and/or redemptions of SPDRs made through
the SPDR Clearing Process (see "Procedures for Creation of Creation Units"),
solely to creations and/or redemptions made outside the SPDR Clearing Process,
or to both methods of creation and/or redemption. The Sponsor also reserves
the right, from time to time, to vary the lot-size of the creations and/or
redemptions of SPDRs subject to such an increase and/or entitled to such a
reduction or waiver of the Transaction Fee and the additional amounts charged
in connection with creations and/or redemptions outside the SPDR Clearing
Process. The existence of such increase, reduction or waiver of the
Transaction Fee (as well as any additional amounts, if applicable) and the
lot-size of Creation Units affected shall be disclosed in the current SPDR
Prospectus (see "Prospectus Summary--Transaction Fee"). As of the date hereof,
the Sponsor does not contemplate the reduction, variation by lot-size or
waiver of Transaction Fees in connection with the creation or redemption of
SPDRs or of the additional amounts charged in connection with the creation or
redemption of SPDRs outside the SPDR Clearing Process beyond that which is
discussed herein under the caption "Prospectus Summary--Transaction Fee".

The shares of common stock of the Index Securities in a Portfolio Deposit on
any date of deposit will reflect the composition and relative weightings of
the Index Securities on such day. The portfolio of Index Securities that is
the basis for a Portfolio Deposit varies as changes are made in the
composition and weighting of the Index Securities (see "The Portfolio--
Adjustments to the Portfolio Deposit"). The Trustee will make available to
NSCC*** prior to the commencement of trading on each Business Day a list of
the names and required number of shares of each of the Index Securities in the
current Portfolio Deposit as well as the amount of the Dividend Equivalent
Payment for the previous Business Day. Under certain extraordinary
circumstances which may make it impossible for the Trustee to provide such
information to NSCC on a given Business Day, NSCC shall use the information
regarding the identity and weightings of the Index Securities of the Portfolio
Deposit on the previous Business Day. The identity of each of the Index
Securities required for a Portfolio Deposit, as in effect on
- --------
* Reference is hereby made to said Trust Agreement, and any statements
contained herein are qualified in their entirety by the provisions of said
Trust Agreement.

** Such increase is subject to the 10 Basis Point Limit discussed above under
"Prospectus Summary--Transaction Fee".

*** As of December 31, 1995, the AMEX Clearing Corp., a wholly-owned
subsidiary of the American Stock Exchange, Inc., owned 33% of the issued
and outstanding shares of common stock of NSCC.

27
<PAGE>

December 31, 1995, is set forth in the above Schedule of Investments. The
Sponsor makes available (a) on each Business Day, the Dividend Equivalent
Payment effective through and including the previous Business Day, per
outstanding SPDR, and (b) on a minute-by-minute basis throughout the day at
the Exchange a number representing, on a per SPDR basis, the sum of the
Dividend Equivalent Payment effective through and including the previous
Business Day, plus the current value of the securities portion of a Portfolio
Deposit as in effect on such day (which value will occasionally include a cash
in lieu amount to compensate for the omission of a particular Index Security
from such Portfolio Deposit--see "The Portfolio--Adjustments to the Portfolio
Deposit"). Such information is calculated based upon the best information
available to the Sponsor and may be calculated by other persons designated to
do so by the Sponsor. The inability of the Sponsor to provide such information
will not in itself result in a halt in the trading of SPDRs on the Exchange.
Investors interested in creating SPDRs or purchasing SPDRs in the secondary
market should not rely solely on such information in making investment
decisions but should also consider other market information and relevant
economic and other factors (including, without limitation, information
regarding the S&P Index, the Index Securities and financial instruments based
on the S&P Index).

Upon receipt of a Portfolio Deposit or Deposits, following placement with
the Distributor of an order to create SPDRs, the Trustee will deliver SPDRs in
Creation Unit size aggregations to the Depository. In turn, the SPDR position
will be removed from the Trustee's account at the Depository and will be
allocated to the account of the DTC Participant acting on behalf of the
depositor creating Creation Unit(s) (see "The Trust--Procedures for Creation
of Creation Units" and "The Trust--Book-Entry-Only System"). Each SPDR
represents a fractional undivided interest in the Trust in an amount equal to
one (1) divided by the total number of SPDRs outstanding. The Trustee may
reject a request to create Creation Units made by any depositor or group of
depositors if such depositor(s), upon the acceptance by the Trustee of such
request and the issuance to such depositor(s) of SPDRs, would own eighty
percent (80%) or more of the outstanding SPDRs (see "Tax Status of the
Trust"). The Trustee also may reject any Portfolio Deposit or any component
thereof under certain other circumstances (see "The Trust--Procedures for
Creation of Creation Units").

Additional SPDRs in Creation Unit size aggregations will be created upon
receipt of the appropriate Portfolio Deposits from creators. As additional
SPDRs in Creation Unit size aggregations are created, the aggregate value of
the Portfolio will be increased and the fractional undivided interest in the
Trust represented by each SPDR will be decreased. As discussed above, under
certain circumstances (1) a portion of the securities portion of a Portfolio
Deposit may consist of contracts to purchase certain Index Securities or (2) a
portion of the Cash Component may consist of cash in an amount to enable the
Trustee to purchase such Index Securities. In the event there is a failure to
deliver the Index Securities which are the subject of such contracts to
purchase, the Trustee will be instructed pursuant to the Agreement to acquire
such Index Securities in an expeditious manner. To the extent the price of any
such Index Security increases or decreases between the time of creation and
the time any such Index Security is purchased and delivered, SPDRs will
represent fewer or more shares of such Index Security and more or fewer of the
other Index Securities in the Trust. Hence, price fluctuations during the
period from the time the cash is received by the Trustee to the time the
requisite Index Securities are purchased and delivered will affect the value
of all SPDRs.

The identity and number of shares of the Index Securities required for a
Portfolio Deposit are determined in the manner described herein. Due to
changes in the composition and weighting of the Index Securities, the
composition and weighting of the Securities and the prescribed Portfolio
Deposit will also change from time to time (see "The Portfolio--Adjustments to
the Portfolio" and "The Portfolio--Adjustments to the Portfolio Deposit"). The
identity and weightings of the Index Securities to be delivered as part of a
Portfolio Deposit are determined daily and reflect the relative weighting of
the current S&P Index and, together with the Cash Component, have a value
equal to the net asset value of the Trust on a per Creation Unit basis at the
close of business on the day of request for creation. The composition of the
Portfolio is also adjusted from time to time to conform to the changes to the
S&P Index as described herein and as set forth in the Trust Agreement. As the
weightings and identities of the Index Securities change, substantially
identical changes to the composition of the required Portfolio Deposit are
made contemporaneously. Corresponding adjustments to the composition or

28
<PAGE>

weighting of the Portfolio, however, are not necessarily made
contemporaneously with adjustments to the required Portfolio Deposit, but are
made in accordance with the specifications set forth herein and in the Trust
Agreement (see "The Portfolio--Adjustments to the Portfolio"). Although the
composition of the securities portion of a Portfolio Deposit changes from time
to time, the interests of Beneficial Owners will not be adversely affected
because the composition of such securities and the aggregate value thereof,
together with the Cash Component, will be calculated based upon the
proportionate net asset value of the Trust (see "The Portfolio--Adjustments to
the Portfolio").

PROCEDURES FOR CREATION OF CREATION UNITS

To be eligible to place orders with the Distributor to create SPDRs in
Creation Unit size aggregations, an entity or person must be (1) a
Participating Party, with respect to creations through the SPDR Clearing
Process or (2) a DTC Participant with respect to creations/redemptions outside
the SPDR Clearing Process. All SPDRs, however created, will be entered on the
records of the Depository in the name of Cede & Co. for the account of a DTC
Participant (see "The Trust--Book Entry Only System").

All orders to create SPDRs must be placed in multiples of 50,000 SPDRs
(Creation Unit size). All orders to create SPDRs, whether through the SPDR
Clearing Process or outside the SPDR Clearing Process, must be received by the
Distributor by no later than the closing time of the regular trading session
on the New York Stock Exchange, Inc. ("Closing Time") (ordinarily 4:00 p.m.
New York time) in each case on the date such order is placed in order for
creation of SPDRs to be effected based on the net asset value of the Trust as
determined on such date. The date on which a creation order (or order to
redeem as discussed below) is placed is herein referred to as the "Transmittal
Date". Orders must be transmitted by telephone or other transmission method
acceptable to the Distributor and Trustee, pursuant to procedures set forth in
the Participant Agreement, as described below (see "Placement of Creation
Orders Using SPDR Clearing Process" and "Placement of Creation Orders Outside
SPDR Clearing Process").

Orders to create Creation Unit sized aggregations of SPDRs shall be placed
with a Participating Party or DTC Participant, as applicable, in the form
required by such Participating Party or DTC Participant. Investors should be
aware that their particular broker may not have executed a Participant
Agreement, and that, therefore, orders to create Creation Unit sized
aggregations of SPDRs may have to be placed by the investor's broker through a
Participating Party or a DTC Participant who has executed a Participant
Agreement. At any given time there may be only a limited number of broker-
dealers that have executed a Participant Agreement. Those placing orders to
create SPDRs through the SPDR Clearing Process should afford sufficient time
to permit proper submission of the order to the Distributor prior to the
Closing Time on the Transmittal Date.

Orders for creation that are effected outside the SPDR Clearing Process are
likely to require transmittal by the DTC Participant earlier on the
Transmittal Date than orders effected using the SPDR Clearing Process. Those
persons placing orders outside the SPDR Clearing Process should ascertain the
deadlines applicable to DTC and the Federal Reserve Bank wire system by
contacting the operations department of the broker or depository institution
effectuating such transfer of securities and Cash Component. The DTC
Participant notified of an order to create SPDRs outside the SPDR Clearing
Process shall be required to effect a transfer of (1) the requisite Index
Securities through DTC by 11:00 a.m. on the next Business Day immediately
following the Transmittal Date in such a way as to replicate the Portfolio
Deposit established on the Transmittal Date by the Trustee in calculating the
net asset value of the Trust and (2) the Cash Component through the Federal
Reserve Bank wire system so as to be received by the Trustee by 2:00 p.m. on
the next Business Day immediately following the Transmittal Date. If the
Trustee does not receive both the Index Securities by 11:00 a.m. and the Cash
Component by 2:00 p.m. on the Business Day immediately following the
Transmittal Date, such order shall be cancelled. Upon written notice to the
Distributor, such cancelled order may be resubmitted the following Business
Day using a Portfolio Deposit as newly constituted to reflect the current net
asset value of the Trust.

All questions as to the number of shares of each of the Index Securities,
the amount of the Cash Component and the validity, form, eligibility
(including time of receipt) and acceptance for deposit of any Index Securities

29
<PAGE>

to be delivered shall be determined by the Trustee, whose determination shall
be final and binding. The Trustee reserves the absolute right to reject a
creation order transmitted to it by the Distributor in respect of any
Portfolio Deposit or any component thereof if (a) the depositor or group of
depositors, upon obtaining the SPDRs ordered, would own 80% or more of the
current outstanding SPDRs, (b) the Portfolio Deposit is not in proper form;
(c) acceptance of the Portfolio Deposit would have certain adverse tax
consequences (see "Tax Status of the Trust"); (d) the acceptance of the
Portfolio Deposit would, in the opinion of counsel, be unlawful; (e) the
acceptance of the Portfolio Deposit would otherwise, in the discretion of the
Trustee, have an adverse effect on the Trust or the rights of Beneficial
Owners; or (f) in the event that circumstances outside the control of the
Trustee make it for all practical purposes impossible to process creations of
SPDRs. The Trustee and the Sponsor are under no duty to give notification of
any defects or irregularities in the delivery of Portfolio Deposits or any
component thereof nor shall either of them incur any liability for the failure
to give any such notification.

A list of the Participating Parties or DTC Participants that have executed a
Participant Agreement (as hereinafter defined) is available at the office of
the Trustee at 1776 Heritage Drive, North Quincy, Massachusetts 02171 and the
office of the Distributor at 6 St. James Avenue, Boston, Massachusetts 02116
during normal business hours.

PLACEMENT OF CREATION ORDERS USING SPDR CLEARING PROCESS

Portfolio Deposits created through the SPDR Clearing Process must be
delivered through a Participating Party (see "Prospectus Summary--Portfolio
Deposits") that has executed a Participant Agreement with the Distributor and
with the Trustee (as the same may be from time to time amended in accordance
with its terms, the "Participant Agreement"). The Participant Agreement
authorizes the Trustee to transmit to NSCC on behalf of the Participating
Party such trade instructions as are necessary to effect the Participating
Party's creation order. Pursuant to such trade instructions from the Trustee
to NSCC, the Participating Party agrees to transfer the requisite Index
Securities (or contracts to purchase such Index Securities that are expected
to be delivered in a "regular way" manner by the third (3rd) NSCC Business
Day) and the Cash Component to the Trustee, together with such additional
information as may be required by the Trustee. An order to create SPDRs
through the SPDR Clearing Process is deemed received by the Distributor on the
Transmittal Date if (i) such order is received by the Distributor not later
than the Closing Time on such Transmittal Date and (ii) all other procedures
set forth in the Participant Agreement are properly followed.

PLACEMENT OF CREATION ORDERS OUTSIDE SPDR CLEARING PROCESS

Portfolio Deposits created outside the SPDR Clearing Process must be
delivered through a DTC Participant that has executed a Participant Agreement
with the Distributor and with the Trustee. A DTC Participant who wishes to
place an order creating SPDRs to be effected outside the SPDR Clearing Process
need not be a Participating Party, but such orders must state that the DTC
Participant is not using the SPDR Clearing Process and that the creation of
SPDRs will instead be effected through a transfer of securities and cash. The
Portfolio Deposit transfer must be ordered by the DTC Participant in a timely
fashion so as to ensure the delivery of the requisite number of Index
Securities through DTC to the account of the Trustee by no later than 11:00
a.m. of the next Business Day immediately following the Transmittal Date. All
questions as to the number of Index Securities to be delivered, and the
validity, form and eligibility (including time of receipt) for the deposit of
any tendered securities, will be determined by the Trustee, whose
determination shall be final and binding. The cash equal to the Cash Component
must be transferred directly to the Trustee through the Federal Reserve wire
system in a timely manner so as to be received by the Trustee no later than
2:00 p.m. on the next Business Day immediately following the Transmittal Date.
An order to create SPDRs outside the SPDR Clearing Process is deemed received
by the Distributor on the Transmittal Date if (i) such order is received by
the Distributor not later than the Closing Time on such Transmittal Date and
(ii) all other procedures set forth in the Participant Agreement are properly
followed. However, if the Trustee does not receive both the requisite Index
Securities and the Cash Component in a timely fashion on the next Business Day
immediately following the Transmittal Date, such order will be cancelled. Upon
written notice to the Distributor, such cancelled order may be

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<PAGE>

resubmitted the following Business Day using a Portfolio Deposit as newly
constituted to reflect the current net asset value of the Trust. The delivery
of SPDRs so created will occur no later than the third (3rd) Business Day
following the day on which the creation order is deemed received by the
Distributor. Under the current schedule, the total fee charged in connection
with the creation of one Creation Unit outside the SPDR Clearing Process would
be $12,000 (see "Prospectus Summary--Transaction Fee").

BOOK-ENTRY-ONLY SYSTEM

The Depository acts as securities depository for SPDRs. SPDRs are
represented by a single global security (the "Global Security"), which is
registered in the name of Cede & Co., as nominee for the Depository and
deposited with, or on behalf of, the Depository. Certificates will not be
issued for SPDRs.

The Depository has advised the Sponsor and the Trustee as follows: The
Depository is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Securities Exchange Act of 1934, as amended. The Depository was created to
hold securities of its participants (the "DTC Participants") and to facilitate
the clearance and settlement of securities transactions among the DTC
Participants in such securities through electronic book-entry changes in
accounts of the DTC Participants, thereby eliminating the need for physical
movement of securities certificates. DTC Participants include securities
brokers and dealers, banks, trust companies, clearing corporations, and
certain other organizations, some of whom (and/or their representatives) own
the Depository.* Access to the Depository system is also available to others
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a DTC Participant, either directly or
indirectly (the "Indirect Participants"). The Depository agrees with and
represents to its participants that it will administer its book-entry system
in accordance with its rules and by-laws and requirements of law.

Upon the settlement date of any creation, transfer or redemption of SPDRs,
the Depository will credit or debit, on its book-entry registration and
transfer system, the amount of SPDRs so created, transferred or redeemed to
the accounts of the appropriate DTC Participants. The accounts to be credited
and charged shall be designated by the Trustee to NSCC, in the case of a
creation or redemption through the SPDR Clearing Process, or by the Trustee
and the DTC Participant, in the case of a creation or redemption transacted
outside of the SPDR Clearing Process (see "The Trust--Procedures for Creation
of Creation Units" and "Redemption of SPDRs"). Beneficial ownership of SPDRs
is limited to DTC Participants, Indirect Participants and persons holding
interests through DTC Participants and Indirect Participants. Ownership of
beneficial interests in SPDRs (owners of such beneficial interests are
referred to herein as "Beneficial Owners") will be shown on, and the transfer
of ownership will be effected only through, records maintained by the
Depository (with respect to DTC Participants) and on the records of DTC
Participants (with respect to Indirect Participants and Beneficial Owners that
are not DTC Participants). Beneficial Owners are expected to receive from or
through the DTC Participant a written confirmation relating to their purchase
of SPDRs. The laws of some jurisdictions may require that certain purchasers
of securities take physical delivery of such securities in definitive form.
Such laws may impair the ability of certain investors to acquire beneficial
interests in SPDRs.

So long as Cede & Co., as nominee of the Depository, is the registered owner
of SPDRs, references herein to the registered or record owners of SPDRs shall
mean Cede & Co. and shall not mean the Beneficial Owners of SPDRs. Beneficial
Owners of SPDRs will not be entitled to have SPDRs registered in their names,
will not receive or be entitled to receive physical delivery of certificates
in definitive form and will not be considered the record or registered holder
thereof under the Trust Agreement. Accordingly, each Beneficial Owner must
rely on
- --------

* As of December 31, 1995, the Exchange owns 4.54929% of the issued and
outstanding shares of common stock of the Depository and an affiliate of
the Exchange, AMEX Clearing Corp., owns .00181% of the issued and
outstanding shares of common stock of the Depository. Also as of such date,
the Trustee owns 3.44975% of the issued and outstanding shares of the
common stock of the Depository.

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<PAGE>

the procedures of the Depository, the DTC Participant and any indirect
Participant through which such Beneficial Owner holds its interests, to
exercise any rights of a holder of SPDRs under the Trust Agreement. The
Trustee and the Sponsor understand that under existing industry practice, in
the event the Trustee requests any action of SPDR holders, or a Beneficial
Owner desires to take any action that the Depository, as the record owner of
all outstanding SPDRs, is entitled to take, the Depository would authorize the
DTC Participants to take such action and that the DTC Participants would
authorize the indirect Participants and Beneficial Owners acting through such
DTC Participants to take such action or would otherwise act upon the
instructions of Beneficial Owners owning through them.

As described above, the Trustee recognizes the Depository or its nominee as
the owner of all SPDRs for all purposes except as expressly set forth in the
Trust Agreement. Conveyance of all notices, statements and other
communications to Beneficial Owners is effected as follows. Pursuant to the
agreement between the Trustee and the Depository (as the same may be from time
to time amended in accordance with its terms, the "Depository Agreement"), the
Depository is required to make available to the Trustee upon request and for a
fee to be charged to the Trust a listing of the SPDR holdings of each DTC
Participant. The Trustee shall inquire of each such DTC Participant as to the
number of Beneficial Owners holding SPDRs, directly or indirectly, through
such DTC Participant. The Trustee shall provide each such DTC Participant with
copies of such notice, statement or other communication, in such form, number
and at such place as such DTC Participant may reasonably request, in order
that such notice, statement or communication may be transmitted by such DTC
Participant, directly or indirectly, to such Beneficial Owners. In addition,
the Trust shall pay to each such DTC Participant a fair and reasonable amount
as reimbursement for the expenses attendant to such transmittal, all subject
to applicable statutory and regulatory requirements.

SPDR distributions shall be made to the Depository or its nominee, Cede &
Co., as the registered owner of all SPDRs. The Trustee and the Sponsor expect
that the Depository or its nominee, upon receipt of any payment of
distributions in respect of SPDRs, shall credit immediately DTC Participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in SPDRs as shown on the records of the Depository or its nominee.
The Trustee and the Sponsor also expect that payments by DTC Participants to
indirect Participants and Beneficial Owners of SPDRs held through such DTC
Participants will be governed by standing instructions and customary
practices, as is now the case with securities held for the accounts of
customers in bearer form or registered in a "street name," and will be the
responsibility of such DTC Participants. Neither the Trustee nor the Sponsor
has or will have any responsibility or liability for any aspects of the
records relating to or notices to Beneficial Owners, or payments made on
account of beneficial ownership interests in SPDRs, or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests or for any other aspect of the relationship between the Depository
and the DTC Participants or the relationship between such DTC Participants and
the indirect Participants and Beneficial Owners owning through such DTC
Participants.

Beneficial Owners may elect to have their distributions reinvested in
additional SPDRs (see "Dividend Reinvestment Service").

The Depository may determine to discontinue providing its service with
respect to SPDRs at any time by giving notice to the Trustee and the Sponsor
and discharging its responsibilities with respect thereto under applicable
law. Under such circumstances, the Trustee and the Sponsor shall take action
either to find a replacement for the Depository to perform its functions at a
comparable cost or, if such a replacement is unavailable, to terminate the
Trust (see "Termination of the Trust").

THE PORTFOLIO

Because the objective of the Trust is to provide investment results that
correspond substantially to the price and yield performance of the S&P Index,
the Portfolio will at any time consist of as many of the Index Securities as
is practicable. It is anticipated that cash or cash items (other than
dividends held for distribution) normally

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<PAGE>

would not be a substantial part of the Trust's net assets. Although the Trust
may at any time fail to own certain of the Index Securities, the Trust will be
substantially invested in Index Securities and the Sponsor believes that such
investment should result in a close correlation between the investment
performance of the S&P Index and that derived from ownership of SPDRs.

ADJUSTMENTS TO THE PORTFOLIO

The S&P Index is a capitalization-weighted index of 500 securities
calculated under the auspices of the S&P Committee of Standard and Poor's. At
any moment in time, the value of the Index equals the aggregate market value
of the total shares outstanding in each of the component 500 Index Securities,
evaluated at their respective last sale prices on the NYSE, AMEX or NASDAQ,
divided by a scaling factor (the "divisor") which yields a resulting index
value in the reported magnitude.

Periodically (typically, several times per quarter), Standard & Poor's may
determine that total shares outstanding have changed in one or more component
Index Securities due to secondary offerings, repurchases, conversions or other
corporate actions. Additionally, the S&P Committee may periodically
(ordinarily, several times per quarter) replace one or more component
securities in the Index due to mergers, acquisitions, bankruptcies, or other
market conditions, or if the issuers of such component securities fail to meet
the criteria for inclusion in the Index. In 1995, there were 33 company
changes to the Index. Ordinarily, whenever there is a change in shares
outstanding or a change in a component security included in the S&P Index,
Standard & Poor's adjusts the divisor to assure that there is no discontinuity
in the value of the S&P Index which might otherwise be caused by any such
change.

Because the investment objective of the Trust is to provide investment
results that generally correspond to the price and yield performance of the
S&P Index, such share, name, and divisor changes to the S&P Index create the
need for the Trust to make corresponding portfolio adjustments as described
below.

The Trustee adjusts the composition of the Portfolio from time to time to
conform to changes in the composition and/or weighting structure of the Index
Securities. The Trustee aggregates certain of these adjustments and makes
conforming changes to the Trust's portfolio at least monthly; however,
adjustments are made more frequently in the case of changes to the S&P Index
that are significant. Specifically, the Trustee is required to adjust the
composition of the Portfolio at any time that there is a change in the
identity of any Index Security (i.e., a substitution of one security in
replacement of another), which adjustment is to be made within three (3)
Business Days before or after the day on which the change in the identity of
such Index Security is scheduled to take effect at the close of the market.
Although the investment objective of the Trust is to provide investment
results which resemble the performance of the S&P Index, it is not always
efficient to replicate identically the share composition of the S&P Index if
the transaction costs incurred by the Trust in so adjusting the Portfolio
would exceed the expected misweighting that would ensue by failing to
replicate identically minor and insignificant share changes to the Index.
Accordingly, to further the investment objective of the Trust, minor
misweightings are generally permitted within the guidelines set forth below.
The Trustee is required to adjust the composition of the Portfolio at any time
that the weighting of any Security varies in excess of one hundred and fifty
percent (150%) of a specified percentage, which percentage varies from 8/100
of 1% to 2/100 of 1%, depending on the net asset value of the Trust (in each
case, the "Misweighting Amount"), from the weighting of such Security in the
S&P Index (a "Misweighting").

The Trustee shall examine each Security in the Portfolio on each Business
Day, comparing the weighting of each such Security in the Portfolio to the
weighting of the corresponding Index Security in the S&P Index, based on
prices at the close of the market on the preceding Business Day (a "Weighting
Analysis"). In the event that there is a Misweighting in any Security in
excess of one hundred and fifty percent (150%) of the applicable Misweighting
Amount, the Trustee shall calculate an adjustment to the Portfolio in order to
bring the Misweighting of such Security within the Misweighting Amount, based
on prices at the close of the market on the day on which such Misweighting
occurs. Also, on a monthly basis, the Trustee shall perform a Weighting
Analysis for each Security in the Portfolio, and in any case where there
exists a Misweighting exceeding one

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<PAGE>

hundred percent (100%) of the applicable Misweighting Amount, the Trustee
shall calculate an adjustment to the Portfolio in order to bring the
Misweighting of such Security within the applicable Misweighting Amount, based
on prices at the close of the market on the day on which such Misweighting
occurs. In the case of any adjustment to the Portfolio due to a Misweighting
as described herein, the purchase or sale of securities necessitated by such
adjustment shall be made within three (3) Business Days of the day on which
such Misweighting is determined. In addition to the foregoing adjustments, the
Trustee reserves the right to make additional adjustments periodically to
Securities that may be misweighted by an amount within the applicable
Misweighting Amount in order to reduce the overall Misweighting of the
Portfolio.

The foregoing guidelines with respect to Misweightings shall also apply to
any Index Security that (1) is likely to be unavailable for delivery or
available in insufficient quantity for delivery or (2) cannot be delivered to
the Trustee due to restrictions prohibiting a creator from engaging in a
transaction involving such Index Security. Upon receipt of an order for a
Creation Unit that will involve such an Index Security, the Trustee shall
determine whether the substitution of cash for such Index Security will cause
a Misweighting in the Trust's Portfolio with respect to such Index Security.
If a Misweighting results, the Trustee shall purchase the required number of
shares of such Index Security on the opening of the market on the following
Business Day. If a Misweighting does not result and the Trustee would not hold
cash in excess of the permitted amounts described herein, the Trustee may hold
such cash or, if such an excess would result, make the required adjustments to
the Portfolio in accordance with the procedures described herein.

Pursuant to these guidelines the Trustee shall calculate the required
adjustments and shall purchase and sell the appropriate securities. As a
result of the purchase and sale of securities in accordance with these
requirements, or the creation of Creation Units, the Trust may hold some
amount of residual cash (other than cash held temporarily due to timing
differences between the sale and purchase of securities or cash delivered in
lieu of Index Securities or undistributed income or undistributed capital
gains) as a result of such transactions, which amount shall not exceed for
more than two (2) consecutive Business Days 5/10th of 1 percent of the
aggregate value of the Securities. In the event that the Trustee has made all
required adjustments and is left with cash in excess of 5/10th of 1 percent of
the aggregate value of the Securities, the Trustee shall use such cash to
purchase additional Index Securities that are under-weighted in the Portfolio
as compared to their relative weightings in the S&P Index, although the
Misweighting of such Index Securities may not be in excess of the applicable
Misweighting Amount.

All adjustments to the Portfolio held by the Trustee shall be made by the
Trustee pursuant to the foregoing specifications and as set forth in the Trust
Agreement and shall be non-discretionary. All portfolio adjustments will be
made as described herein unless such adjustments would cause the Trust to lose
its status as a "regulated investment company" under Subchapter M of the
Internal Revenue Code. Additionally, the Trustee is required to adjust the
composition of the Portfolio at any time if it is necessary to insure the
continued qualification of the Trust as a regulated investment company (see
"Tax Status of the Trust"). The adjustments provided herein are intended to
conform the composition and weightings of the Portfolio, to the extent
practicable, to the composition and weightings of the Index Securities. Such
adjustments are based upon the S&P Index as it is currently determined by
Standard & Poor's. To the extent that the method of determining the S&P Index
is changed by Standard & Poor's in a manner that would affect the adjustments
provided for herein, the Trustee and the Sponsor shall have the right to amend
the Trust Agreement, without the consent of the Depository or Beneficial
Owners, to conform the adjustments provided herein and in the Trust Agreement
to such changes so that the objective of tracking the S&P Index is maintained.

In making the adjustments described herein, the Trustee shall rely on
industry sources for information as to the composition and weightings of the
Index Securities. If the Trustee becomes incapable of obtaining or processing
such information or NSCC is unable to receive such information from the
Trustee on any Business Day, then the Trustee shall use the composition and
weightings of the Index Securities for the most recently effective Portfolio
Deposit for the purposes of all adjustments and determinations described
herein (including, without limitation, determination of the securities portion
of the Portfolio Deposit) until the earlier of (a) such

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<PAGE>

time as current information with respect to the Index Securities is available
or (b) three (3) consecutive Business Days have elapsed. If such current
information is not available and three (3) consecutive Business Days have
elapsed, the composition and weightings of the Securities (as opposed to the
Index Securities) shall be used for the purposes of all adjustments and
determinations herein (including, without limitation, determination of the
securities portion of the Portfolio Deposit) until current information with
respect to the Index Securities is available.

At such time as the Trustee gives written notice of the termination of the
Trust (see "Administration of the Trust--Termination"), from and after the
date of such notice the Trustee shall use the composition and weightings of
the Securities as of such notice date for the purpose and determination of all
redemptions or other required uses of the basket.

From time to time Standard & Poor's may make adjustments to the composition
of the S&P Index as a result of a merger or acquisition involving one or more
of the Index Securities. In such cases, the Trust, as shareholder of
securities of an issuer that is the object of such merger or acquisition
activity, may receive various offers from would-be acquirors of the issuer.
The Trustee is not permitted to accept any such offers until such time as it
has been determined that the securities of the issuer will be removed from the
S&P Index. Since securities of an issuer are often removed from the S&P Index
only after the consummation of a merger or acquisition of such issuer, in
selling the securities of such issuer the Trust may receive, to the extent
that market prices do not provide a more attractive alternative, whatever
consideration is being offered to the shareholders of such issuer that have
not tendered their shares prior to such time. Any cash received in such
transactions will be reinvested in Index Securities in accordance with the
criteria set forth above. Any securities received as a part of the
consideration that are not Index Securities will be sold as soon as
practicable and the cash proceeds of such sale will be reinvested in
accordance with the criteria set forth above.

Purchases and sales of Securities resulting from the adjustments described
above will be made in the share amounts dictated by the foregoing
specifications, whether round lot or odd lot. Certain Index Securities,
however, may at times not be available in the quantities that the foregoing
calculations require. For this and other reasons, precise duplication of the
proportionate relationship between the Portfolio and the Index Securities may
not ever be possible but nevertheless will continue to be the objective in
connection with all acquisitions and dispositions of Securities.

The Trust is a unit investment trust registered under the 1940 Act, and is
not a managed fund. Traditional methods of investment management for a managed
fund typically involve frequent changes to a portfolio of securities on the
basis of economic, financial and market analyses. The Portfolio held by the
Trust, however, is not managed. Instead, the only purchases and sales that are
made with respect to the Portfolio will be those necessary to create, to the
extent feasible, a portfolio that is designed to replicate the S&P Index to
the extent practicable, taking into consideration the adjustments referred to
above. Since no attempt is made to "manage" the Trust in the traditional
sense, the adverse financial condition of an issuer will not be the basis for
the sale of its securities from the Portfolio unless the issuer is removed
from the S&P Index.

The Trust will be liquidated on a fixed date (see "Administration of the
Trust--Termination"). In addition, Beneficial Owners of SPDRs in Creation Unit
size aggregations have the right to redeem in kind (see "Redemption of
SPDRs").

ADJUSTMENTS TO THE PORTFOLIO DEPOSIT

On each Business Day (each such day an "Adjustment Day"), the number of
shares and/or identity of each of the Index Securities in a Portfolio Deposit
is adjusted in accordance with the following procedure. At the close of the
market on each Adjustment Day, the Trustee calculates the net asset value of
the Trust (see "Valuation"). The net asset value is divided by the number of
outstanding SPDRs in Creation Unit size aggregations, resulting in a net asset
value per Creation Unit (the "NAV Amount"). The Trustee then calculates

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<PAGE>

the number of shares (without rounding) of each of the component stocks of the
S&P Index in a Portfolio Deposit for the following Business Day ("Request
Day"), such that (1) the market value at the close of the market on Adjustment
Day of the securities to be included in the Portfolio Deposit on Request Day,
together with the Dividend Equivalent Payment effective for requests to create
or redeem on Adjustment Day, equals the NAV Amount and (2) the identity and
weighting of each of the securities in a Portfolio Deposit mirrors
proportionately the identity and weightings of the securities in the S&P
Index, each as in effect on Request Day. For each security, the number
resulting from such calculation is rounded to the nearest whole share, with a
fraction of 0.50 being rounded up. The identities and weightings of the
securities so calculated constitute the securities portion of the Portfolio
Deposit effective on Request Day and thereafter until the next subsequent
Adjustment Day, as well as the Securities to be delivered by the Trustee in
the event of request for redemption of SPDRs in Creation Unit size
aggregations on Request Day and thereafter until the following Adjustment Day
(see "Redemption of SPDRs"). In addition to the foregoing adjustments, in the
event that there shall occur a stock split, stock dividend or reverse split
with respect to any Index Security that does not result in an adjustment to
the S&P Index divisor, the Portfolio Deposit shall be adjusted to take account
of such stock split, stock dividend or reverse split by applying the stock
split, stock dividend or reverse stock split multiple (e.g., in the event of a
two-for-one stock split of an Index Security, by doubling the number of shares
of such Index Security in the prescribed Portfolio Deposit), in each case
rounded to the nearest whole share.

On Request Day and on each day that a request for the creation or redemption
of SPDRs in Creation Unit size aggregations is deemed received, the Trustee
calculates the market value of the securities portion of the Portfolio Deposit
as in effect on Request Day as of the close of the market and adds to that
amount the Dividend Equivalent Payment effective for requests to create or
redeem on Request Day (such market value and Dividend Equivalent Payment are
collectively referred to herein as the "Portfolio Deposit Amount"). The
Trustee then calculates the NAV Amount, based on the close of the market on
Request Day. The difference between the NAV Amount so calculated and the
Portfolio Deposit Amount is the "Balancing Amount". The Balancing Amount
serves the function of compensating for any differences between the value of
the Portfolio Deposit Amount and the NAV Amount at the close of trading on
Request Day due to, for example, (1) differences in the market value of the
securities in the Portfolio Deposit and the market value of the Securities on
Request Day and (2) any variances from the proper composition of the Portfolio
Deposit.

Notwithstanding the foregoing, on any Adjustment Day on which (a) no change
in the identity and/or share weighting of any Index Security is scheduled to
take effect that would cause the S&P Index divisor to be adjusted after the
close of the market on such Business Day,* and (b) no stock split, stock
dividend or reverse stock split with respect to any Index Security has been
declared to take effect on the corresponding Request Day, the Trustee reserves
the right to forego making any adjustment to the Securities portion of the
Portfolio Deposit and to use the composition and weightings of the Index
Securities for the most recently effective Portfolio Deposit for the Request
Day following such Adjustment Day. In addition, the Trustee further reserves
the right to calculate the adjustment to the number of shares and/or identity
of the Index Securities in a Portfolio Deposit as described above except that
such calculation would be employed two (2) Business Days rather than one (1)
Business Day prior to Request Day.

As previously discussed, the Dividend Equivalent Payment and the Balancing
Amount in effect at the close of business on Request Date are collectively
referred to as the Cash Component or the Cash Redemption Payment (see
"Prospectus Summary--Portfolio Deposits" and "Prospectus Summary--
Redemption"). If the Balancing Amount is a positive number (i.e., if the NAV
Amount exceeds the Portfolio Deposit Amount) then, with respect to the
creation of SPDRs, the Balancing Amount shall increase the Cash Component of
the then effective Portfolio Deposit transferred to the Trustee by a creator,
and with respect to redemptions of SPDRs in Creation Unit size aggregations,
the Balancing Amount shall be added to the cash transferred to a redeemer by
the Trustee. If the Balancing Amount is a negative number (i.e., if the NAV
Amount is less than the Portfolio Deposit
- --------
* Standard & Poor's publicly announces changes in the identity and/or
weighting of the S&P Index component securities up to five business days in
advance of the actual change. The announcements are made after the close of
trading on such day.

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<PAGE>

Amount) then, with respect to the creation of SPDRs such amount shall decrease
the Cash Component of the then effective Portfolio Deposit to be transferred
to the Trustee by the creator or, if such cash portion is less than the
Balancing Amount, the difference shall be paid by the Trustee to the creator,
and with respect to redemptions of SPDRs in Creation Unit size aggregations,
the Balancing Amount shall be deducted from the cash transferred to the
redeemer or, if such cash is less than the Balancing Amount, the difference
shall be paid by the redeemer to the Trustee.

In the event that the Trustee has included the cash equivalent value of one
or more Index Securities in the Portfolio Deposit because the Trustee has
determined that such Index Securities are likely to be unavailable or
available in insufficient quantity for delivery, the Portfolio Deposit so
constituted shall dictate the Index Securities to be delivered in connection
with the creation of SPDRs in Creation Unit size aggregations and upon the
redemption of SPDRs in Creation Unit size aggregations for all purposes
hereunder until such time as the securities portion of the Portfolio Deposit
is subsequently adjusted.

In connection with the creation or redemption of SPDRs, if an investor is
restricted by regulation or otherwise from investing or engaging in a
transaction in one or more Index Securities, the Trustee, in its discretion,
shall have the right to include the cash equivalent value of such Index
Securities in the Portfolio Deposit as part of the Cash Component (or the Cash
Redemption Payment, as the case may be) in lieu of the inclusion of such Index
Securities in the securities portion of the Portfolio Deposit for the
particular affected investor. The amount of such cash equivalent payment shall
be used by the Trustee in accordance with the guidelines regarding allowable
Misweightings and permitted amounts of cash (see "The Portfolio--Adjustments
to the Portfolio") which may require the Trustee to purchase the appropriate
number of shares of the Index Security that such investor was unable to
purchase. In any such case such investor shall pay the Trustee the standard
Transaction Fee, plus an additional amount per Creation Unit equal to three
(3) times the Transaction Fee applicable for one Creation Unit.

SELECTION AND ACQUISITION OF SECURITIES

In prescribing the method described above for selecting the Index Securities
that constitute the prescribed Portfolio Deposit from time to time, the
Sponsor intends to duplicate, to the extent practicable, the composition and
weighting of the Index Securities as of the relevant date.

The yield and price of common stocks deposited in the Trust are dependent on
a variety of factors, including money market conditions and general conditions
of the corporate equity markets. The Schedule of Investments set forth above
contains information as of the date set forth therein with respect to the
number of shares of each of the Index Securities in the Portfolio Deposit as
of such date. The proportionate relationship among such Securities
approximated (although it did not exactly duplicate) the proportionate
relationships of the Index Securities as of such date.

Because certain of the Securities from time to time may be sold or their
relative percentages changed under certain circumstances as described herein,
no assurance can be given that the Trust will retain for any length of time
its present size and composition (see "The Portfolio--Adjustments to the
Portfolio"). Also, the deposit of additional Portfolio Deposits and the
redemption of SPDRs in Creation Unit size aggregations will affect the size
and composition of the Trust. Neither the Sponsor nor the Trustee shall be
liable in any way for any default, failure or defect in any of the Securities.

THE S&P INDEX

The Sponsor selected the S&P Index as the basis for the selection of the
securities held by the Trust because it is well known to investors and, in the
opinion of the Sponsor, constitutes a broadly diversified, representative
segment of the market of all publicly traded common stocks in the United
States. The S&P Index is composed of 500 selected common stocks, all of which
are listed on the AMEX, the NYSE or NASDAQ and spans over 80 separate industry
groups. Since 1968, the S&P Index has been a component of the U.S. Commerce

37
<PAGE>

Department's list of Leading Indicators which track key sectors of the U.S.
economy. Current information regarding the market value of the S&P Index is
available from market information services. The S&P Index is determined,
comprised and calculated without regard to the Trust.

The Sponsor has been granted a license to use the S&P Index as a basis for
determining the composition of the Trust and to use certain trademarks of
Standard & Poor's in connection with the Trust (see "License Agreement").
Standard & Poor's is not responsible for and shall not participate in the
creation or sale of SPDRs or in the determination of the timing of, prices at,
or quantities and proportions in which purchases or sales of Index Securities
or Securities shall be made. The information in this Prospectus concerning S&P
and the Index has been obtained from sources that the Sponsor believes to be
reliable, but the Sponsor takes no responsibility for the accuracy of such
information.

The following table shows the actual performance of the S&P 500 Index for
the years 1960 through 1995. Stock prices fluctuated widely during this period
and were higher at the end than at the beginning. The results shown should not
be considered as a representation of the income yield or capital gain or loss
that may be generated by the S&P Index in the future, nor should the results
be considered as a representation of the performance of the Trust.

<TABLE>
<CAPTION>
YEAR-END CHANGE IN AVERAGE
YEAR-END INDEX VALUE INDEX YIELD
YEAR INDEX VALUE* 1960=100 FOR YEAR FOR YEAR**
- ---- ------------ ----------- --------- ----------
<S> <C> <C> <C> <C>
1960.............................. 58.11 100.00 % 3.47%
1961.............................. 71.55 123.13 23.13 2.98
1962.............................. 63.10 108.59 -11.81 3.37
1963.............................. 75.02 129.10 18.89 3.17
1964.............................. 84.75 145.84 12.97 3.01
1965.............................. 92.43 159.06 9.06 3.00
1966.............................. 80.33 138.24 -13.09 3.40
1967.............................. 96.47 166.01 20.09 3.20
1968.............................. 103.86 178.73 7.66 3.07
1969.............................. 92.06 158.42 -11.36 3.24
1970.............................. 92.15 158.58 0.10 3.83
1971.............................. 102.09 175.68 10.79 3.14
1972.............................. 118.05 203.15 15.63 2.84
1973.............................. 97.55 167.87 -17.37 3.06
1974.............................. 68.56 117.98 -29.72 4.47
1975.............................. 90.19 155.21 31.55 4.31
1976.............................. 107.46 184.93 19.15 3.77
1977.............................. 95.10 163.66 -11.50 4.62
1978.............................. 96.11 165.39 1.06 5.28
1979.............................. 107.94 185.75 12.31 5.47
1980.............................. 135.76 233.63 25.77 5.26
1981.............................. 122.55 210.89 -9.73 5.20
1982.............................. 140.64 242.02 14.76 5.81
1983.............................. 164.93 283.82 17.27 4.40
1984.............................. 167.24 287.80 1.40 4.64
1985.............................. 211.28 363.59 26.33 4.25
1986.............................. 242.17 416.75 14.62 3.49
1987.............................. 247.08 425.19 2.03 3.08
1988.............................. 277.72 477.92 12.40 3.64
1989.............................. 353.40 608.15 27.25 3.45
1990.............................. 330.22 568.26 -6.56 3.61
1991.............................. 417.09 717.76 26.31 3.24
1992.............................. 435.71 749.80 4.46 2.99
1993.............................. 464.45 802.70 7.06 2.78
1994.............................. 459.27 790.34 -1.54 2.82
1995.............................. 615.93 1059.92 +34.11 2.56
</TABLE>

38
<PAGE>

- --------
* Source: Standard & Poor's. Year-end index values shown do not reflect
reinvestment of dividends nor costs, such as brokerage charges and
transaction costs.

** Source: Standard & Poor's. Yields are obtained by dividing the aggregate
cash dividends by the aggregate market value of the stocks in the S&P
Index.

It is the understanding of the Sponsor that Standard & Poor's weights the
Index Securities primarily based on each stock's relative total market value;
that is, its market price per share times the number of shares outstanding.
Accordingly, each Index Security's influence on the value of the S&P Index is
directly proportionate to its market value. The percentage of the Trust's
assets invested in each of the Securities is calculated to approximate the
percentage each Index Security represents in the S&P Index.

LICENSE AGREEMENT

Under the terms of a license agreement with Standard & Poor's (the "License
Agreement"), the Sponsor has been granted a license to use the S&P Index as a
basis for determining the composition of the Trust and to use certain trade
names and trademarks of Standard & Poor's in connection with the Trust. The
License Agreement may be amended by the parties thereto without the consent of
any of the Beneficial Owners of SPDRs.

None of the Trust, the Trustee, the Distributor, the Depository or any
Beneficial Owner of SPDRs is entitled to any rights whatsoever under the
foregoing licensing arrangements or to use the trademarks "S&P", "Standard &
Poor's", "Standard & Poor's 500" or "S&P 500" or to use the S&P Index except
as specifically described herein or as may be specified in the Trust
Agreement.

The Trust is not sponsored, endorsed, sold or promoted by Standard & Poor's
and Standard & Poor's makes no representation or warranty, express or implied,
to the Trust, the Trustee, the Distributor, the Depository or Beneficial
Owners of SPDRs regarding the advisability of investing in Index Securities or
unit investment trusts generally or in the Trust particularly or the ability
of the S&P Index to track general stock market performance. Standard & Poor's
only relationship to the Trust is the licensing of certain trademarks and
trade names of Standard & Poor's and of the S&P Index which is determined,
comprised and calculated by Standard & Poor's without regard to the Trust or
the Beneficial Owners of SPDRs. Standard & Poor's has no obligation to take
the needs of the Trust or the Beneficial Owners of SPDRs into consideration in
determining, comprising or calculating the S&P Index. Standard & Poor's is not
responsible for and has not participated in any determination or calculation
made with respect to issuance or redemption of SPDRs. Standard & Poor's has no
obligation or liability in connection with the administration, marketing or
trading of SPDRs.

STANDARD & POOR'S DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF
THE S&P INDEX OR ANY DATA INCLUDED THEREIN. STANDARD & POOR'S MAKES NO
WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE SPONSOR, THE
TRUST, BENEFICIAL OWNERS OF SPDRS OR ANY OTHER PERSON OR ENTITY FROM THE USE
OF THE S&P INDEX OR ANY DATA INCLUDED THEREIN IN CONNECTION WITH THE USE
LICENSED UNDER THE LICENSE AGREEMENT, OR FOR ANY OTHER USE. STANDARD & POOR'S
MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL SUCH
WARRANTIES, INCLUDING WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE, WITH RESPECT TO THE S&P INDEX OR ANY DATA INCLUDED
THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL STANDARD &
POOR'S HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT OR CONSEQUENTIAL
DAMAGES (INCLUDING LOST PROFITS) EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH
DAMAGES.

39
<PAGE>

EXCHANGE LISTING

As described above, SPDRs are listed on the Exchange. Transactions involving
SPDRs in the public trading market are subject to customary brokerage charges
and commissions.

The Sponsor's aim in designing SPDRs was to provide investors with a
security whose market value would approximate one-tenth ( 1/10th) the value of
the S&P Index. Thus, for example, if the S&P Index were at 450, investors
might expect a SPDR to trade at approximately $45. Note, however, that the
market price of a SPDR should also reflect its share of the dividends
accumulated on the Securities (see "Administration of the Trust--Distributions
to Beneficial Owners") and may also be affected by supply and demand, market
volatility, sentiment and other factors.

There can be no assurance that SPDRs will always be listed on the Exchange.
The Exchange will consider the suspension of trading in or removal from
listing of SPDRs:

(a) if the Trust has more than 60 days remaining until termination and
there are fewer than 50 record and/or beneficial holders of SPDRs for 30 or
more consecutive trading days;

(b) if the S&P Index is no longer calculated or available; or

(c) if such other event shall occur or condition exists which, in the
opinion of the Exchange, makes further dealings on the Exchange
inadvisable.

The Trust is not required to pay a listing fee to the Exchange.

The Trust will be terminated in the event that SPDRs are delisted (see
"Administration of the Trust--Termination").

TAX STATUS OF THE TRUST

For the fiscal year ended December 31, 1995, the Trust believes that it
qualified for tax treatment as a "regulated investment company" under
Subchapter M of the Code. The Trust intends to continue to so qualify. To
qualify as a regulated investment company, the Trust must, among other things,
(a) derive in each taxable year at least 90% of its gross income from
dividends, interest, gains from the sale or other disposition of stock,
securities or foreign currencies, or certain other sources, (b) derive in each
taxable year less than 30% of its gross income from the sale or other
disposition of stock, securities, certain foreign positions, and certain other
assets held for less than three months, (c) meet certain diversification
tests, and (d) distribute in each year at least 90% of its investment company
taxable income. If the Trust qualifies as a regulated investment company,
subject to certain conditions and requirements, the Trust will not be subject
to federal income tax to the extent its income is distributed in a timely
manner. Any undistributed income may be subject to tax, including a four
percent (4%) excise tax imposed by section 4982 of the Code on certain
undistributed income of a regulated investment company that does not
distribute to shareholders in a timely manner at least ninety-eight percent
(98%) of its taxable income (including capital gains).

TAX CONSEQUENCES TO BENEFICIAL OWNERS

Dividends paid by the Trust from its investment company taxable income
(which includes dividends, interest and net short-term capital gains) will be
taxable to Beneficial Owners as ordinary income. A dividend paid in January
will be considered for federal income tax purposes to have been paid by the
Trust and received by Beneficial Owners on the preceding December 31 if the
dividend was declared in the preceding October, November or December to
Beneficial Owners of record as shown on the records of the Depository and the
DTC Participants (see "The Trust--Book-Entry-Only System") on a date in one of
those months.

Distributions paid by the Trust from net long-term capital gains ("net
capital gain") are taxable as long-term capital gain, regardless of the length
of time an investor has owned SPDRs. Any loss on the sale or

40
<PAGE>

exchange of a share held for six months or less may be treated as a long-term
capital loss to the extent of any capital gain dividends received by the
Beneficial Owner. For corporate investors, dividends from net investment
income (but not return of capital distributions or capital gain dividends)
generally will qualify for the corporate dividends-received deduction to the
extent of qualifying dividend income received by the Trust, subject to the
limitations contained in the Code. Investors should note that the regular
quarterly dividends paid by the Trust will not be based on the Trust's
investment company taxable income and net capital gain, but rather will be
based on the dividends paid with respect to the Securities. As a result, a
portion of the distributions of the Trust may be treated as a return of
capital or a capital gain dividend for federal income tax purposes or the
Trust may make additional distributions in excess of the yield performance of
the Securities in order to distribute all of its investment company taxable
income and net capital gain.

Distributions in excess of the Trust's current or accumulated earnings and
profits (as specially computed) generally will be treated as a return of
capital for federal income tax purposes and will reduce a Beneficial Owner's
tax basis in SPDRs. Return of capital distributions may result, for example,
if a portion of the dividends declared represents cash amounts deposited in
connection with Portfolio Deposits rather than dividends actually received by
the Trust. Under certain circumstances, a significant portion of the Trust's
regular quarterly dividends could be treated as return of capital
distributions. Such circumstances may be more likely to occur in periods
during which the number of outstanding SPDRs fluctuates significantly, as may
occur during the initial years of the Trust. Beneficial Owners will receive
annually notification from the Trustee through the DTC Participants as to the
tax status of the Trust's distributions (see "The Trust--Book-Entry-Only
System"). A distribution paid shortly after a purchase or creation of SPDRs
may be taxable even though in effect it may represent a return of capital.

Distributions reinvested in additional SPDRs through the means of the
Service (see "Dividend Reinvestment Service") will nevertheless be taxable
dividends to Beneficial Owners acquiring such additional SPDRs to the same
extent as if such dividends had been received in cash.

The sale of SPDRs by a Beneficial Owner is a taxable event, and may result
in a gain or loss, which generally should be a capital gain or loss for
Beneficial Owners that are not dealers in securities.

Under the Code, an in-kind redemption of SPDRs will not result in the
recognition of taxable gain or loss by the Trust but generally will constitute
a taxable event for the redeeming shareholder. Upon redemption, a Beneficial
Owner generally will recognize gain or loss measured by the difference on the
date of redemption between the aggregate value of the cash and securities
received and its tax basis in the SPDRs redeemed. Securities received upon
redemption (which will be comprised of the securities portion of the Portfolio
Deposit in effect on the date of redemption) generally will have an initial
tax basis equal to their respective market values on the date of redemption.
The Internal Revenue Service ("IRS") may assert that any resulting loss may
not be deducted by a Beneficial Owner on the basis that there has been no
material change in such Beneficial Owner's economic position or that the
transaction has no significant economic or business utility apart from the
anticipated tax consequences. Beneficial Owners of SPDRs in Creation Unit size
aggregations should consult their own tax advisors as to the consequences to
them of the redemption of SPDRs.

Dividend distributions, capital gains distributions, and capital gains from
sales or redemptions may also be subject to state, local and foreign taxes.

Deposit of a Portfolio Deposit with the Trustee in exchange for SPDRs in
Creation Unit size aggregations will not result in the recognition of taxable
gain or loss by the Trust but generally will constitute a taxable event to the
depositor under the Code, and a depositor generally will recognize gain or
loss with respect to each security deposited equal to the difference between
the amount realized in respect of the security and the depositor's tax basis
therein. The amount realized with respect to a security deposited should be
determined by allocating the value on the date of deposit of the SPDRs
received (less any cash paid to the Trust, or plus any cash received from the
Trust, in connection with the deposit) among the securities deposited on the
basis of their respective fair market values at that time. The IRS may assert
that any resulting losses may not be deducted by a

41
<PAGE>

depositor on the basis that there has been no material change in the
depositor's economic position or that the transaction has no significant
economic or business utility or purpose apart from the anticipated tax
consequences. Depositors should consult their own tax advisors as to the tax
consequences to them of a deposit to the Trust.

The Trustee has the right to reject the order to create Creation Units
transmitted to it by the Distributor if the depositor or group of depositors,
upon obtaining the SPDRs ordered, would own eighty percent (80%) or more of
the outstanding SPDRs, and if pursuant to section 351 of the Code such a
circumstance would result in the Trust having a basis in the securities
deposited different from the market value of such securities on the date of
deposit. The Trustee has the right to require information regarding SPDR
ownership pursuant to the Participant Agreement and from the Depository and to
rely thereon to the extent necessary to make the foregoing determination as a
condition to the acceptance of a Portfolio Deposit.

Ordinary income dividends received via the Depository by Beneficial Owners
who are non-resident aliens will be subject to a thirty percent (30%) United
States withholding tax unless a reduced rate of withholding or a withholding
exemption is provided under applicable tax treaties. Non-resident shareholders
are urged to consult their own tax advisors concerning the applicability of
United States withholding tax.

Thirty-one percent (31%) of the dividends, capital gains distributions, and
redemptions paid to shareholders who have not complied with IRS taxpayer
identification requirements will be withheld.

The tax discussion set forth above is included for general information only.
Prospective investors should consult their own tax advisors concerning the
federal, state, local and foreign tax consequences to them of an investment in
the Trust.

CONTINUOUS OFFERING OF SPDRS

SPDRs in Creation Unit size aggregations are offered continuously to the
public by the Trust through the Distributor and are delivered upon the deposit
of a Portfolio Deposit (see "The Trust--Procedure for Creation of Creation
Units"). A list of the identity and number of shares of each of the Index
Securities in the current Portfolio Deposit and the amount of the Dividend
Equivalent Payment effective through and including the previous Business Day
is made available by the Trustee to NSCC on each Business Day. Under certain
extraordinary circumstances which may make it impossible for the Trustee to
provide such information to NSCC on a given Business Day, NSCC shall use the
composition and weighting of the Index Securities for the most recently
effective Portfolio Deposit. The minimum number of SPDRs that may be created
as described herein is 50,000 or one Creation Unit. Persons making Portfolio
Deposits and creating Creation Unit aggregations of SPDRs will receive no
fees, commissions or other form of compensation or inducement of any kind from
the Sponsor or the Distributor, nor will any such person have any obligation
or responsibility to the Sponsor or Distributor to effect any sale or resale
of SPDRs.

Because new SPDRs can be created and issued on an ongoing basis, at any
point during the life of the Trust a "distribution", as such term is used in
the Securities Act of 1933, may be occurring. Broker-dealers and other persons
are cautioned that some activities on their part may, depending on the
circumstances, result in their being deemed participants in a distribution in
a manner which could render them statutory underwriters and subject them to
the prospectus-delivery and liability provisions of the Securities Act. For
example, a broker-dealer firm or its client may be deemed a statutory
underwriter if it takes Creation Units after placing a creation order with the
Distributor, breaks them down into the constituent SPDRs and sells the SPDRs
directly to its customers; or if it chooses to couple the creation of a supply
of new SPDRs with an active selling effort involving solicitation of secondary
market demand for SPDRs. A determination of whether one is an underwriter must
take into account all the facts and circumstances pertaining to the activities
of the broker-dealer or its client in the particular case, and the examples
mentioned above should not be considered a complete description of all the
activities that could lead to categorization as an underwriter.

42
<PAGE>

Dealers who are not "underwriters" but are participating in a distribution
(as contrasted to ordinary secondary trading transactions), and thus dealing
with SPDRs that are part of an "unsold allotment" within the meaning of
Section 4(3)(C) of the Securities Act, would be unable to take advantage of
the prospectus-delivery exemption provided by Section 4(3) of the Securities
Act. Firms that do incur a prospectus delivery obligation with respect to
SPDRs are reminded that under Securities Act rule 153, a prospectus-delivery
obligation under Section 5(b)(2) of the Act owed to an Exchange member in
connection with a sale on the Exchange is satisfied by the fact that SPDR
prospectuses will be available at the Exchange upon request. Of course, the
prospectus-delivery mechanism provided in rule 153 is only available with
respect to transactions on an exchange.

The Sponsor intends to qualify SPDRs in states selected by the Sponsor and
through broker-dealers who are members of the National Association of
Securities Dealers, Inc. Investors intending to create or redeem Creation Unit
size aggregations of SPDRs in transactions not involving a broker-dealer
registered in such investor's state of domicile or residence should consult
counsel regarding applicable broker-dealer or securities regulatory
requirements under such state securities laws prior to such creation or
redemption.

EXPENSES OF THE TRUST

The following charges are or may be accrued and paid by the Trust: (a) the
Trustee's fee as discussed more fully below, (b) fees payable to transfer
agents for the provision of transfer agency services; (c) fees of the Trustee
for extraordinary services performed under the Trust Agreement; (d) various
governmental charges; (e) any taxes, fees and charges payable by the Trustee
with respect to SPDRs (whether in Creation Unit size aggregations or
otherwise); (f) expenses and costs of any action taken by the Trustee or the
Sponsor to protect the Trust and the rights and interests of Beneficial Owners
of SPDRs (whether in Creation Unit size aggregations or otherwise); (g)
indemnification of the Trustee or the Sponsor for any losses, liabilities or
expenses incurred by it in the administration of the Trust without gross
negligence, bad faith, wilful misconduct or wilful malfeasance on its part or
reckless disregard of its obligations and duties; (h) expenses incurred in
contacting Beneficial Owners of SPDRs during the life of the Trust and upon
termination of the Trust; and (i) other out-of-pocket expenses of the Trust
incurred pursuant to actions permitted or required under the Trust Agreement.

In addition to those discussed above, the following expenses are or may be
charged to the Trust: (a) reimbursement to the Sponsor of amounts paid by it
to S&P in respect of annual licensing fees pursuant to the License Agreement
(see "License Agreement"), (b) federal and state annual registration fees for
the issuance of SPDRs, and (c) expenses of the Sponsor relating to the
printing and distribution of marketing materials describing SPDRs and the
Trust (including, but not limited to, associated legal, consulting,
advertising, and marketing costs and other out-of-pocket expenses such as
printing). In addition, initial fees and expenses totaling approximately
$531,500, in connection with the organization of the Trust, were capitalized
and are being amortized over five years from the start of the Trust's
operations on a straight-line basis and charged to the Trust.

The Sponsor reserves the right to charge the Trust a special sponsor fee
from time to time in reimbursement for certain services it may provide to the
Trust which would otherwise be provided by the Trustee in an amount not to
exceed the actual cost of providing such services. The Sponsor or the Trustee
from time to time may voluntarily assume some expenses or reimburse the Trust
so that total expenses of the Trust are reduced, although neither the Sponsor
nor the Trustee is obligated to do so and either one or both parties may
discontinue such voluntary assumption of expenses or reimbursement at any time
without notice.

Until further notice, the Sponsor has undertaken that on each day during the
fiscal year ending December 31, 1996, the ordinary operating expenses of the
Trust as calculated by the Trustee will not be permitted to exceed an amount
which is 18.45/100 of 1% (0.1845%) per annum of the daily net asset value of
the Trust. To the extent during such period the ordinary operating expenses of
the Trust do exceed such 0.1845% amount, the Sponsor will reimburse the Trust
for or assume such excess ordinary operating expenses. The Sponsor retains the
ability to be repaid by the Trust for expenses so reimbursed or assumed to the
extent that subsequently during the year expenses fall below the 0.1845% per
annum level on any given day. For purposes of this undertaking

43
<PAGE>

by the Sponsor, ordinary operating expenses of the Trust shall not include
taxes, brokerage commissions and, of course, such extraordinary non-recurring
expenses as may arise, including without limitation the cost of any litigation
to which the Trust or Trustee may be a party. The Sponsor may choose to
reimburse or assume certain Trust expenses in later periods in order to keep
Trust expenses at a level it believes to be attractive to investors, but is
not obligated to do so. In any event, it is possible that, on any day and
during any period over the life of the Trust, total fees and expenses of the
Trust may exceed 0.1845% per annum.

If the income received by the Trust in the form of dividends and other
distributions on the Securities is insufficient to cover Trust expenses, the
Trustee may make advances to the Trust to cover such expenses; otherwise the
Trustee may sell Securities in an amount sufficient to pay such expenses. The
Trustee may reimburse itself in the amount of any such advance, together with
interest thereon at a percentage rate equal to the then current overnight
federal funds rate, by deducting such amounts from (1) dividend payments or
other income of the Trust when such payments or other income is received, (2)
the amounts earned or benefits derived by the Trustee on cash held by the
Trustee for the benefit of the Trust, and (3) the sale of Securities.
Notwithstanding the foregoing, in the event that any advance remains
outstanding for more than forty-five (45) Business Days, the Trustee may sell
Securities to reimburse itself for the amount of such advance and any accrued
interest thereon. Such advances will be secured by a lien on the assets of the
Trust in favor of the Trustee. The expenses of the Trust are reflected in the
net asset value of the Trust (see "Valuation").

For services performed under the Trust Agreement, the Trustee is paid by the
Trust a fee at an annual rate of 11/100 of 1% to 15/100 of 1% of the net asset
value of the Trust, as shown below, such percentage amount to vary depending
on the net asset value of the Trust, plus or minus the Adjustment Amount (as
hereinafter defined). Such compensation is computed on each Business Day on
the basis of the net asset value of the Trust on such day, and the amount
thereof is accrued daily and paid monthly. To the extent that the amount of
the Trustee's compensation, prior to any adjustment in respect of the
Adjustment Amount, is less than specified amounts, the Sponsor has agreed to
pay the amount of any such shortfall. The Trustee, in its discretion, may also
waive all or a portion of such fee.

TRUSTEE FEE SCALE

<TABLE>
<CAPTION>
NET ASSET VALUE FEE AS A PERCENTAGE OF NET
OF THE TRUST 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>

As of December 31, 1995, the net asset value of the Trust was
$1,001,230,785. No representation is made as to the actual net asset value of
the Trust on any future date, as it is subject to change at any time due to
fluctuations in market value of Securities or to creations or redemptions made
in the future.

The Adjustment Amount shall be calculated at the end of each quarter and
applied against the Trustee's fee for the following quarter. The "Adjustment
Amount" is an amount which is intended, depending upon the circumstances,
either to (1) reduce the Trustee's fee by the amount that the Transaction Fees
paid on creation and redemption exceeds the costs of those activities, and by
the amount of excess earnings on cash held for the benefit of the Trust or (2)
increase the Trustee's fee by the amount that the Transaction Fee (plus
additional amounts paid in connection with creations or redemptions outside
the SPDR Clearing Process), if any, paid on creations or redemptions, falls
short of the actual costs of these activities. If in any quarter the
Adjustment Amount exceeds the fee payable to the Trustee as set forth above,
the Trustee shall use such excess amount to reduce other Trust expenses,
subject to certain federal tax limitations. To the extent that the amount of
such
- --------

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

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excess exceeds the Trust's expenses for such quarter, any remaining excess
shall be retained by the Trustee as part of its compensation. If in any
quarter the costs of processing creations and redemptions exceed the amounts
charged as a Transaction Fee (plus the additional amounts paid in connection
with creations or redemptions outside the SPDR Clearing Process) net of the
excess earnings, if any, on cash held for the benefit of the Trust, the
Trustee will augment the Trustee's fee by the resulting Adjustment Amount.

REDEMPTION OF SPDRS

SPDRs in Creation Unit size aggregations are redeemable in kind only and are
not redeemable for cash. SPDRs in Creation Unit size aggregations may be
redeemed by submitting a request for redemption, the requisite number of SPDRs
and the Excess Cash Amount (as defined below), if applicable, to the Trustee
in the manner specified below. Beneficial Owners of SPDRs may sell SPDRs in
the secondary market, but must accumulate enough SPDRs to constitute a
Creation Unit (i.e., 50,000 SPDRs) in order to redeem through the Trust. SPDRs
can be redeemed only when Creation Unit size aggregations are owned by a
Beneficial Owner and held in the account of a single Participating Party (with
respect to redemptions through the SPDR Clearing Process) or a single DTC
Participant (with respect to redemptions outside the SPDR Clearing Process).
SPDRs will remain outstanding until redeemed or until the termination of the
Trust.

PROCEDURE FOR REDEMPTION OF SPDRS

Requests for redemptions of Creation Units may be made on any Business Day
through the SPDR Clearing Process to the Trustee at its Quincy office or at
such other office as may be designated by the Trustee. Requests for
redemptions of Creation Units may also be made directly to the Trustee outside
the SPDR Clearing Process. Requests for redemption shall not be made to the
Distributor. In the case of redemptions made through the SPDR Clearing
Process, the Transaction Fee will be deducted from the amount delivered to the
redeemer. In case of redemptions tendered directly to the Trustee outside the
SPDR Clearing Process, a total fee will be charged on a per Creation Unit
basis per day. Such fee will be equal to the Transaction Fee plus an
additional amount not to exceed three (3) times the Transaction Fee applicable
for one Creation Unit per Creation Unit redeemed, (due in part to the
increased expense associated with delivery outside the SPDR Clearing Process)
and such amount will be deducted from the amount delivered to the redeemer
(see "Prospectus Summary--Transaction Fee"). In all cases, both the tender of
SPDRs for redemption and distributions to the redeemer in respect of SPDRs
redeemed will be effected through the Depository and the relevant DTC
Participant(s) to the Beneficial Owner thereof as recorded on the book entry
system of the Depository or the relevant DTC Participant, as the case may be
(see "The Trust--Book-Entry-Only System").

The Trustee will transfer to the redeeming Beneficial Owner via the
Depository and the relevant DTC Participant(s) a portfolio of Securities for
each Creation Unit size aggregation of SPDRs delivered, identical in weighting
and composition to the securities portion of a Portfolio Deposit as in effect
(1) on the date a request for redemption is deemed received by the Trustee as
described below, in the case of redemptions made either through the SPDR
Clearing Process or outside the SPDR Clearing Process or (2) on the date that
notice of the termination of the Trust is given, in the case of the
termination of the Trust (see "Administration of the Trust--Termination" and
"The Portfolio--Adjustments to the Portfolio"). The Trustee will also transfer
via the relevant DTC Participant(s) to the redeeming Beneficial Owner in cash
the "Cash Redemption Payment", which on any given Business Day is an amount
identical to the amount of the Cash Component and is equal to a proportional
amount of the following: dividends on all the Securities for the period
through the date of redemption, net of expenses and liabilities for such
period including, without limitation, (x) taxes or other governmental charges
against the Trust not previously deducted if any, and (y) accrued fees of the
Trustee and other expenses of the Trust (including legal and auditing
expenses) and other expenses not previously deducted (see "Expenses of the
Trust"), as if all the Securities had been held for the entire accumulation
period for such distribution, plus or minus the Balancing Amount. To the
extent that any amounts payable to the Trust by the redeeming Beneficial Owner
exceed the amount of the Cash Redemption Payment ("Excess Cash Amounts"), such
Beneficial Owner shall be required to deliver payment thereof to the Trustee.
In the case of redemptions

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made through the SPDR Clearing Process, the Trustee will effect a transfer of
the Cash Redemption Payment and Securities to the redeeming Beneficial Owner
by the third (3rd) NSCC Business Day following the date on which request for
redemption is deemed received. In the case of redemptions made outside the
SPDR Clearing Process, the Trustee will transfer the Cash Redemption Payment
and the securities to the redeeming Beneficial Owner by the third (3rd)
Business Day following the date on which the request for redemption is deemed
received. The Trustee will cancel all SPDRs delivered upon redemption.

In the event that the Trustee determines in its discretion that an Index
Security is likely to be unavailable or available in insufficient quantity for
delivery by the Trust upon the redemption of SPDRs in Creation Unit size
aggregations, the Trustee shall have the right in its discretion to deliver
the cash equivalent value of such Index Security or Index Securities, based on
the market value of such Index Security or Index Securities as of the
Evaluation Time on the date such redemption is deemed received by the Trustee
(see "Placement of Redemption Orders Using SPDR Clearing Process") as a part
of the Cash Redemption Payment in lieu of delivering such Index Security or
Index Securities to the redeemer. In connection with the redemption of SPDRs,
if a redeemer is restricted by regulation or otherwise from investing or
engaging in a transaction in one or more Index Securities, the Trustee shall
have the right in its discretion to deliver the cash equivalent value of such
Index Security or Index Securities based on the market value of such Index
Security or Index Securities as of the Evaluation Time on the date such
redemption order is deemed received by the Trustee (see "Placement of
Redemption Orders Outside SPDR Clearing Process") as a part of the Cash
Redemption Payment in lieu of delivering such Index Security or Index
Securities to the redeemer. In such case, such investor will pay the Trustee
the standard Transaction Fee, plus an additional amount per Creation Unit not
to exceed three (3) times the Transaction Fee applicable for one Creation Unit
(see "Prospectus Summary--Transaction Fee").

The Trustee may sell Securities to obtain sufficient cash proceeds to
deliver to the redeeming Beneficial Owner. To the extent cash proceeds are
received by the Trustee in excess of the amount required to be provided to the
redeeming Beneficial Owner, such cash amounts shall be held by the Trustee and
shall be applied in accordance with the guidelines applicable to Misweightings
(see "The Portfolio--Adjustments to the Portfolio").

If the income received by the Trust in the form of dividends and other
distributions on the Securities is insufficient to allow distribution of the
Cash Redemption Payment, the Trustee may advance out of its own funds any
amounts necessary in respect of redemptions of SPDRs; otherwise, the Trustee
may sell Securities in an amount sufficient to effect such redemptions. The
Trustee may reimburse itself in the amount of such advance, together with
interest thereon at a percentage rate equal to the then current overnight
federal funds rate, by deducting such amounts from (1) dividend payments or
other income of the Trust when such payments or other income is received, (2)
the amounts earned or benefits derived by the Trustee on cash held by the
Trustee for the benefit of the Trust, and (3) the sale of Securities.
Notwithstanding the foregoing, in the event that any advance remains
outstanding for more than forty-five (45) Business Days, the Trustee shall
sell Securities to reimburse itself for such advance and any accrued interest
thereon. Such advances will be secured by a lien on the assets of the Trust in
favor of the Trustee.

The Trustee may, in its discretion, and will when so directed by the
Sponsor, suspend the right of redemption, or postpone the date of payment of
the net asset value for more than five (5) Business Days following the date on
which the request for redemption is deemed received by the Trustee; for any
period during which the New York Stock Exchange is closed; for any period
during which an emergency exists as a result of which disposal or evaluation
of the Securities is not reasonably practicable; or for such other period as
the Commission may by order permit for the protection of Beneficial Owners.
Neither the Sponsor nor the Trustee is liable to any person or in any way for
any loss or damages which may result from any such suspension or postponement.

To be eligible to place orders with the Trustee to redeem SPDRs in Creation
Unit size aggregations, an entity or person must be (1) a Participating Party
with respect to redemptions through the SPDR Clearing Process, or (2) a DTC
Participant with respect to redemptions outside the SPDR Clearing Process.

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All orders to redeem SPDRs must be placed in multiples of 50,000 SPDRs
(Creation Unit size). Orders must be transmitted to the Trustee by telephone
or other transmission method acceptable to the Trustee so as to be received by
the Trustee not later than the Closing Time on the Transmittal Date, pursuant
to procedures set forth in the Participant Agreement. Severe economic or
market disruption or changes, or telephone or other communication failure, may
impede the ability to reach the Distributor, the Trustee, a Participating
Party, or a DTC Participant.

Orders to redeem Creation Unit size aggregations of SPDRs shall be placed
with a Participating Party or DTC Participant, as applicable, in the form
required by such Participating Party or DTC Participant. Investors should be
aware that their particular broker may not have executed a Participant
Agreement, and that, therefore, orders to redeem Creation Unit size
aggregations of SPDRs may have to be placed by the investor's broker through a
Participating Party or a DTC Participant who has executed a Participant
Agreement. At any given time there may be only a limited number of broker-
dealers that have executed a Participant Agreement. Those placing orders to
redeem SPDRs should afford sufficient time to permit (1) proper submission of
the order by a Participating Party or DTC Participant to the Trustee and (2)
the receipt of the SPDRs to be redeemed and the Excess Cash Amounts, if any,
by the Trustee in a timely manner, as described below. Orders for redemption
that are effected outside the SPDR Clearing Process are likely to require
transmittal by the DTC Participant earlier on the Transmittal Date than orders
effected using the SPDR Clearing Process. Those persons placing orders outside
the SPDR Clearing Process should ascertain the deadlines applicable to DTC and
the Federal Reserve Bank wire system by contacting the operations department
of the broker or depository institution effectuating such transfer of SPDRs
and Cash Redemption Payment. These deadlines will vary by institution. The
Participant notified of an order to redeem outside the SPDR Clearing Process
will be required to transfer SPDRs through DTC and the Excess Cash amounts, if
any, through the Federal Reserve Bank wire system in a timely manner (see
"Placement of Redemption Orders Outside the SPDR Clearing Process").

PLACEMENT OF REDEMPTION ORDERS USING SPDR CLEARING PROCESS

Orders to redeem SPDRs in Creation Unit size aggregations through the SPDR
Clearing Process must be delivered through a Participating Party (see
"Portfolio Deposit") that has executed the Participant Agreement with the
Distributor and with the Trustee (as the same may be from time to time amended
in accordance with its terms). An order to redeem SPDRs using the SPDR
Clearing Process is deemed received on the Transmittal Date if (i) such order
is received by the Trustee not later than the Closing Time on such Transmittal
Date and (ii) all other procedures set forth in the Participant Agreement are
properly followed; such order will be effected based on the net asset value of
the Trust as determined as of the Evaluation Time on the Transmittal Date. An
order to redeem SPDRs using the SPDR Clearing Process made in proper form but
received by the Trustee after the Closing Time will be deemed received on the
next Business Day immediately following the Transmittal Date. The Participant
Agreement authorizes the Trustee to transmit to NSCC on behalf of the
Participating Party such trade instructions as are necessary to effect the
Participating Party's redemption order. Pursuant to such trade instructions
from the Trustee to NSCC, the Trustee will transfer the requisite Securities
(or contracts to purchase such Securities which are expected to be delivered
in a "regular way" manner) by the third (3rd) NSCC Business Day following the
date on which such request for redemption is deemed received, and the Cash
Redemption Payment. The calculation of the value of the Securities and the
Cash Redemption Payment to be delivered by the Trustee to the redeeming
Beneficial Owner will be made according to the procedures set forth under
"Valuation," computed as of the Evaluation Time on the Business Day on which a
redemption order is deemed received by the Trustee.

PLACEMENT OF REDEMPTION ORDERS OUTSIDE SPDR CLEARING PROCESS

Orders to redeem SPDRs outside the SPDR Clearing Process must be delivered
through a DTC Participant that has executed the Participant Agreement with the
Distributor and with the Trustee. A DTC Participant who wishes to place an
order for redemption of SPDRs to be effected outside the SPDR Clearing Process
need not be

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a Participating Party, but such orders must state that the DTC Participant is
not using the SPDR Clearing Process and that redemption of SPDRs will instead
be effected through transfer of SPDRs directly through DTC. An order to redeem
SPDRs outside the SPDR Clearing Process is deemed received by the Trustee on
the Transmittal Date if (i) such order is received by the Trustee not later
than the Closing Time on such Transmittal Date, (ii) such order is preceded or
accompanied by the requisite number of SPDRs specified in such order, which
delivery must be made through DTC to the Trustee no later than 11:00 a.m. on
such Transmittal Date (the "DTC Cut-Off Time") and (iii) all other procedures
set forth in the Participant Agreement are properly followed. The Excess Cash
Amounts owed by the Beneficial Owner, if any, must be delivered no later than
2:00 p.m. on the Business Day immediately following the Transmittal Date.

After the Trustee has deemed an order for redemption outside the SPDR
Clearing Process received, the Trustee will initiate procedures to transfer
the requisite Securities (or contracts to purchase such Securities which are
expected to be delivered within three Business Days and the Cash Redemption
Payment to the redeeming Beneficial Owner by the third Business Day following
the Transmittal Date on which such redemption order is deemed received by the
Trustee.

The calculation of the value of the Securities and the Cash Redemption
Payment to be delivered to the redeeming Beneficial Owner will be made by the
Trustee according to the procedures set forth under "Valuation," computed as
of the Evaluation Time on the Business Day on which a redemption order is
deemed received by the Trustee. Therefore, if a redemption order in proper
form is submitted to the Trustee by a DTC Participant not later than the
Closing Time on the Transmittal Date, and the requisite SPDRs are delivered to
the Trustee prior to the DTC Cut-Off Time on such Transmittal Date, then the
value of the Securities and the Cash Redemption Payment to be delivered to the
Beneficial Owner will be determined by the Trustee as of the Evaluation Time
on such Transmittal Date. If, however, a redemption order is submitted to the
Trustee by a DTC Participant not later than the Closing Time on a Transmittal
Date but either (1) the requisite SPDRs are NOT delivered by the DTC Cut-Off
Time on such Transmittal Date or (2) the redemption order is not submitted in
proper form, then the redemption order will NOT be deemed received as of such
Transmittal Date. In such case, the value of the Securities and the Cash
Redemption Payment to be delivered to the Beneficial Owner will be computed as
of the Evaluation Time on the Business Day that such order is deemed received
by the Trustee, i.e., the Business Day on which the SPDRs are delivered
through DTC to the Trustee by the DTC Cut-Off Time on such Business Day
pursuant to a properly submitted redemption order.

VALUATION

The net asset value of the Trust is computed as of the Evaluation Time shown
under "Essential Information" on each Business Day. The net asset value of the
Trust on a per SPDR basis is determined by subtracting all liabilities
(including accrued expenses and dividends payable) from the total value of the
Trust's investments and other assets and dividing the result by the total
number of outstanding SPDRs.

The aggregate value of the Securities shall be determined by the Trustee in
good faith in the following manner: If the Securities are listed on one or
more national securities exchanges, such evaluation shall generally be based
on the closing sale price on that day (unless the Trustee deems such price
inappropriate as a basis for evaluation) on the exchange which is deemed to be
the principal market therefor (the New York or American Stock Exchange if the
securities are listed thereon) or, if there is no such appropriate closing
sale price on such exchange, at the closing bid price (unless the Trustee
deems such price inappropriate as a basis for evaluation). If the Securities
are not so listed or, if so listed and the principal market therefor is other
than on such exchange or there is no such closing bid price available, such
evaluation shall generally be made by the Trustee in good faith based on the
closing price on the over-the-counter market (unless the Trustee deems such
price inappropriate as a basis for evaluation) or if there is no such
appropriate closing price, (a) on current bid prices, (b) if bid prices are
not available, on the basis of current bid prices for comparable securities,
(c) by the Trustee's appraising the value of the securities in good faith on
the bid side of the market, or (d) by any combination thereof.

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ADMINISTRATION OF THE TRUST

RECORDS

The Trustee maintains records of the transactions of the Trust, including a
current list of the identity and number of shares of each of the Securities in
the Portfolio. Records of the creation of SPDRs in Creation Unit size
aggregations are also maintained by the Distributor. Record of ownership of
SPDRs is maintained by the Depository and by DTC Participants as described
above (see "The Trust--Book-Entry-Only System").

A complete copy of the Trust Agreement is maintained by the Trustee. A copy
of the Trust Agreement is available to Beneficial Owners at the corporate
trust office of the Trustee at 225 Franklin Street, Boston, Massachusetts
02110 during normal business hours.

VOTING

The Trustee has the right to vote all of the voting stocks in the Trust. The
Trustee votes the voting stocks of each issuer in the same proportionate
relationship as all other shares of each such issuer are voted to the extent
permissible and, if not permitted, abstains from voting.

DISTRIBUTIONS TO BENEFICIAL OWNERS

The regular quarterly ex-dividend date for SPDRs is the third Friday in each
of March, June, September and December, unless such day is not a Business Day,
in which case the ex-dividend date is the immediately preceding Business Day
(the "Ex-Dividend Date"). Beneficial Owners as reflected on the records of the
Depository and the DTC Participants on the second Business Day following the
Ex-Dividend Date (the "Record Date") are entitled to receive an amount
representing dividends accumulated on the Securities through the quarterly
dividend period which ends on the Business Day preceding such Ex-Dividend Date
(including Securities with ex-dividend dates falling within such quarterly
dividend period), net of fees and expenses, accrued daily for such period. For
the purposes of all dividend distributions, dividends per SPDR are calculated
at least to the nearest 1/100th of $0.01. The payment of dividends is made on
the last Business Day in the calendar month following each Ex-Dividend Date
(the "Dividend Payment Date"). Dividend payments will be made through the
Depository and the DTC Participants to Beneficial Owners then of record with
funds received from the Trustee. SPDRs are registered in book entry only,
which records are kept by the Depository (see "The Trust--Book-Entry-Only
System").

Dividends payable to the Trust in respect of the Securities are credited by
the Trustee to a non-interest bearing account as of the date on which the
Trust receives such dividends. Other moneys received by the Trustee in respect
of the Securities, including but not limited to the Cash Component, the Cash
Redemption Payment, all moneys realized by the Trustee from the sale of
options, warrants or other similar rights received or distributed in respect
of the Securities as dividends or distributions and capital gains resulting
from the sale of Securities are also credited by the Trustee to a non-interest
bearing account. All funds collected or received are held by the Trustee
without interest until distributed in accordance with the provisions of the
Trust Agreement. To the extent the amounts credited to such accounts generate
interest income or an equivalent benefit to the Trustee, such interest income
or benefit is used to reduce the Trustee's annual fee (see "Expenses of the
Trust").

The Trust intends to qualify as a regulated investment company for federal
income tax purposes. A regulated investment company is not subject to federal
income tax on its net investment income and capital gains that it distributes
to shareholders, so long as it meets certain overall distribution and
diversification requirements and other conditions under Subchapter M of the
Code. The Trust intends to satisfy these overall distribution and
diversification requirements and to otherwise satisfy any required conditions.
The Trustee intends to make additional distributions to the minimum extent
necessary (i) to distribute the entire annual investment company taxable
income of the Trust, plus any net capital gains (from sales of securities in
connection with adjustments to the Portfolio or to generate cash for such
distributions), and (ii) to avoid imposition of the excise tax imposed by
section 4982 of the Code (see "Tax Status of the Trust"). The additional
distributions, if needed, would

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consist of (a) an increase in the distribution scheduled for January to
include any amount by which estimated Trust investment company taxable income
and net capital gains for a year exceeds the amount of Trust taxable income
previously distributed with respect to such year or, if greater, the minimum
amount required to avoid imposition of such excise tax, and (b) a distribution
soon after actual annual investment company taxable income and net capital
gains of the Trust have been computed of the amount, if any, by which such
actual income exceeds the distributions already made. The net asset value of
the Trust will be reduced in direct proportion to the amount of such
additional distributions. The magnitude of the additional distributions, if
any, will depend upon a number of factors, including the level of redemption
activity experienced by the Trust. Because substantially all proceeds from the
sale of securities in connection with adjustments to the Portfolio will have
been used to purchase shares of Index Securities, the Trust may have no cash
or insufficient cash with which to pay such additional distributions. In that
case, the Trustee will have to sell shares of the Securities sufficient to
produce the cash required to make such additional distributions. In selecting
the Securities to be sold to produce cash for such distributions, the Trustee
will choose among the Securities that are over-weighted in the Portfolio
relative to their weightings in the S&P Index first and then from among all
other Securities in a manner so as to maintain the weightings of the
Securities within the applicable Misweighting Amount (see "The Portfolio--
Adjustments to the Portfolio").

The Trustee further reserves the right to declare special dividends if, in
its reasonable discretion, such action is necessary or advisable to preserve
the status of the Trust as a regulated investment company or to avoid
imposition of income or excise taxes on undistributed income.

The Trustee further reserves the right to vary the frequency with which
periodic distributions are made (e.g., from quarterly to monthly) if it is
determined by the Sponsor and the Trustee, in their discretion, that such a
variance would be advisable to facilitate compliance with the rules and
regulations applicable to regulated investment companies or would otherwise be
advantageous to the Trust. In addition, the Trustee reserves the right to
change the regular ex-dividend date for SPDRs to another date within the month
or quarter if it is determined by the Sponsor and the Trustee, in their
discretion, that such a change would be advantageous to the Trust. Notice of
any such variance or change (which notice shall include changes to the Record
Date, the Ex-Dividend Date, the Dividend Payment Date, and the accumulation
period resulting from such variance) shall be provided to Beneficial Owners
via the Depository and the DTC Participants (see "The Trust--Book-Entry-Only
System").

The Trustee may, in its discretion, advance out of its own funds any amounts
necessary to permit distributions via the Depository to Beneficial Owners. The
Trustee may reimburse itself in the amount of such advance, together with
interest thereon at a percentage rate equal to then current overnight federal
funds rate, by deducting such amounts from (1) dividend payments or other
income of the Trust when such payments or other income is received, (2) the
amounts earned or benefits derived by the Trustee on cash held by the Trustee
for the benefit of the Trust, and (3) the sale of Securities. Notwithstanding
the foregoing, in the event that any advance remains outstanding for more than
forty-five (45) Business Days, the Trustee shall sell Securities to reimburse
itself for such advance and any accrued interest thereon. Such advances will
be secured by a lien on the assets of the Trust in favor of the Trustee.

In addition, as soon as practicable after notice of termination of the
Trust, the Trustee will distribute via the Depository and the DTC Participants
to each Beneficial Owner redeeming SPDRs in Creation Unit size aggregations
prior to the termination date specified in such notice a portion of the
Securities and cash as described above (see "Redemption of SPDRs" and
"Administration of the Trust--Termination"). Otherwise, the Trustee will
distribute to each Beneficial Owner (whether in Creation Unit size
aggregations or otherwise), as soon as practical after termination of the
Trust, such Beneficial Owner's pro rata share of the net asset value of the
Trust (see "Administration of the Trust--Termination").

All distributions are made by the Trustee through the Depository and the DTC
Participants to Beneficial Owners as recorded on the book entry system of the
Depository and the DTC Participants (see "The Trust--Book-Entry-Only System").

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The settlement date for the creation of SPDRs in Creation Unit size
aggregations or the purchase of SPDRs in the secondary market must occur on or
prior to the Record Date in order for such creator or purchaser to receive a
distribution on the next Dividend Payment Date. If the settlement date for
such creation or a secondary market purchase occurs after the Record Date, the
distribution will be made to the prior securityholder or Beneficial Owner as
of such Record Date.

Any Beneficial Owner interested in acquiring additional SPDRs with proceeds
received from distributions described above may elect dividend reinvestment
through DTC Participants by means of the DTC Dividend Reinvestment Service,
described herein (see "Dividend Reinvestment Service"), if such service is
available through such Beneficial Owner's broker.

TRUST SUPERVISION

The Trust's Portfolio Securities are not managed and therefore the adverse
financial condition of an issuer of securities in the Trust does not, in
itself, require the sale of Securities from the Portfolio. The Trustee shall,
on a non-discretionary basis, make changes to the Portfolio as described above
(see "The Portfolio--Adjustments to the Portfolio").

The Trustee will direct its securities transactions only to brokers or
dealers, which may include affiliates of the Trustee, from whom it expects to
obtain the most favorable prices or execution of orders.

STATEMENTS TO BENEFICIAL OWNERS

With each distribution, the Trustee will furnish for distribution to
Beneficial Owners (see "The Trust--Book-Entry-Only System") a statement
setting forth the amount being distributed expressed as a dollar amount per
SPDR.

Promptly after the end of each calendar year, the Trustee will furnish to
the DTC Participants for distribution to each person who was a Beneficial
Owner of SPDRs at the end of such calendar year, an annual report of the Trust
containing financial statements audited by independent accountants of
nationally recognized standing and such other information as may be required
by applicable laws, rules and regulations.

The Trustee maintains a record of the creation and redemption of SPDRs in
Creation Unit size aggregations as well as creations of SPDRs in connection
with the Dividend Reinvestment Service. The Depository maintains a record on
its book entry system of the DTC Participant ownership of SPDRs and the number
of SPDRs owned (see "The Trust--Book-Entry-Only System"). Certificates are not
issued for SPDRs, whether in Creation Unit size denominations or otherwise.
Beneficial Owners have the rights accorded to holders of "book-entry"
securities under applicable law. Beneficial Owners may transfer SPDRs through
the Depository by instructing the DTC Participant holding the SPDRs for such
Beneficial Owner in accordance with standard securities industry procedures.

RIGHTS OF BENEFICIAL OWNERS

SPDRs in Creation Unit size aggregations (i.e., 50,000 SPDRs) may be
tendered to the Trustee for redemption (see "Redemption of SPDRs"). Beneficial
Owners may sell SPDRs in the secondary market, but must accumulate enough
SPDRs (i.e., 50,000 SPDRs) to constitute a full Creation Unit in order to
redeem through the Trust. The death or incapacity of any Beneficial Owner will
not operate to terminate the Trust nor entitle such Beneficial Owner's legal
representatives or heirs to claim an accounting or to take any action or
proceeding in any court for a partition or winding up of the Trust.

Beneficial Owners shall not have the right to vote concerning the Trust,
except as described below with respect to termination and as otherwise
expressly set forth in the Trust Agreement, or in any manner control the
operation and management of the Trust, nor shall any Beneficial Owner be
liable to any other person by reason of any action taken by the Sponsor or the
Trustee.

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AMENDMENT

The Trust Agreement may be amended from time to time by the Trustee and the
Sponsor without the consent of any Beneficial Owners (a) to cure any ambiguity
or to correct or supplement any provision thereof which may be defective or
inconsistent or to make such other provisions in regard to matters or
questions arising thereunder as will not adversely affect the interests of
Beneficial Owners; (b) to change any provision thereof as may be required by
the Commission; (c) to add or change any provision as may be necessary or
advisable for the continuing qualification of the Trust as a "regulated
investment company" under the Code; (d) to add or change any provision thereof
as may be necessary or advisable in the event that NSCC or the Depository is
unable or unwilling to continue to perform its functions as set forth therein;
and (e) to add or change any provision thereof to conform the adjustments to
the Portfolio and the Portfolio Deposit to changes, if any, made by Standard &
Poor's in its method of determining the S&P Index. The Trust Agreement may
also be amended from time to time by the Sponsor and the Trustee with the
consent of the Beneficial Owners of 51% of the outstanding SPDRs to add
provisions to or change or eliminate any of the provisions of the Trust
Agreement or to modify the rights of Beneficial Owners; provided, however,
that the Trust Agreement may not be amended without the consent of the
Beneficial Owners of all outstanding SPDRs if such amendment would (1) permit,
except in accordance with the terms and conditions of the Trust Agreement, the
acquisition of any securities other than those acquired in accordance with the
terms and conditions of the Trust Agreement; (2) reduce the interest of any
Beneficial Owner in the Trust; or (3) reduce the percentage of Beneficial
Owners required to consent to any such amendment.

Promptly after the execution of any such amendment, the Trustee shall
receive from the Depository, pursuant to the terms of the Depository
Agreement, a list of all DTC Participants holding SPDRs. The Trustee shall
inquire of each such DTC Participant as to the number of Beneficial Owners for
whom such DTC Participant holds SPDRs, and provide each such DTC Participant
with sufficient copies of a written notice of the substance of such amendment
for transmittal by each such DTC Participant to such Beneficial Owners (see
"The Trust--Book-Entry-Only System").

TERMINATION

The Trust Agreement provides that the Sponsor has the discretionary right to
direct the Trustee to terminate the Trust if at any time after six months
following and prior to three years following the Initial Date of Deposit the
net asset value of the Trust is less than $150,000,000 or if at any time after
three years following the Initial Date of Deposit such value is less than
$350,000,000, as such dollar amount shall be adjusted for inflation in
accordance with the CPI-U, such adjustment to take effect at the end of the
fourth year following the Initial Date of Deposit and at the end of each year
thereafter and to be made so as to reflect the percentage increase in consumer
prices as set forth in the CPI-U for the twelve month period ending in the
last month of the preceding fiscal year.

The Trust will also terminate in the event that SPDRs are delisted from the
Exchange. The Exchange will consider the suspension of trading in or the
delisting of SPDRs as discussed above (see "Exchange Listing").

The Trust may also be terminated (a) by the agreement of the Beneficial
Owners of 66 2/3% of outstanding SPDRs; (b) if the Depository is unable or
unwilling to continue to perform its functions as set forth under the Trust
Agreement and a comparable replacement is unavailable; (c) if NSCC no longer
provides clearance services with respect to SPDRs, or if the Trustee is no
longer a participant in NSCC; (d) if Standard & Poor's ceases publishing the
S&P Index; and (e) if the License Agreement is terminated. The Trust will also
terminate by its terms on the Termination Date.

If either the Sponsor or the Trustee shall resign or be removed and a
successor is not appointed, the Trust will terminate (see "Resignation,
Removal and Liability--The Trustee" and "Resignation, Removal and Liability--
The Sponsor"). The dissolution of the Sponsor or its ceasing to exist as a
legal entity for any cause whatsoever, however, will not cause the termination
of the Trust Agreement or the Trust unless the Trustee deems termination to be
in the best interests of Beneficial Owners.

52
<PAGE>

Prior written notice of the termination of the Trust will be given at least
twenty (20) days prior to termination of the Trust to all Beneficial Owners in
the manner described above (see "The Trust--Book-Entry-Only System"). The
notice will set forth the date on which the Trust will be terminated (the
"Termination Date"), the period during which the assets of the Trust will be
liquidated, the date on which Beneficial Owners of SPDRs (whether in Creation
Unit size aggregations or otherwise) will receive in cash the net asset value
of the SPDRs held and the date determined by the Trustee upon which the books
of the Trust shall be closed. Such notice shall further state that, as of the
date thereof and thereafter, neither requests to create additional Creation
Units nor Portfolio Deposits will be accepted, that no additional SPDRs will
be created for the purpose of reinvesting dividend distributions, and that, as
of the date thereof and thereafter, the portfolio of Securities delivered upon
redemption shall be identical in composition and weighting to the Securities
held in the Trust as of such date rather than the securities portion of the
Portfolio Deposit as in effect on the date request for redemption is deemed
received. Beneficial Owners of SPDRs in Creation Unit size aggregations may,
in advance of the Termination Date, redeem in kind directly from the Trust
(see "Redemption of SPDRs").

Within a reasonable period of time after the Termination Date the Trustee
shall, subject to any applicable provisions of law, use its best efforts to
sell all of the Securities not already distributed to redeeming Beneficial
Owners of Creation Units. The Trustee shall not be liable for or responsible
in any way for depreciation or loss incurred by reason of any such sale or
sales. The Trustee may suspend such sales upon the occurrence of unusual or
unforeseen circumstances, including but not limited to a suspension in trading
of a Security, the closing or restriction of trading on a stock exchange, the
outbreak of hostilities or the collapse of the economy. Upon receipt of
proceeds from the sale of the last Security, the Trustee shall deduct
therefrom its fees and all other expenses (see "Expenses of the Trust"). The
remaining amount shall be transmitted to the Depository for distribution via
the DTC Participants, together with a final statement setting forth the
computation of the gross amount distributed. SPDRs not redeemed prior to
termination of the Trust will be redeemed in cash at net asset value based on
the proceeds of the sale of the Securities. Such redemptions in cash at net
asset value shall be available to all Beneficial Owners, with no minimum
aggregation of SPDRs required (see "Administration of the Trust--Distributions
to SPDR Beneficial Owners").

RESIGNATION, REMOVAL AND LIABILITY

THE TRUSTEE

Under the Trust Agreement, the Trustee may resign and be discharged of the
Trust created by the Trust Agreement by executing a notice of resignation in
writing and filing such notice with the Sponsor and mailing a copy of the
notice of resignation to all DTC Participants that are reflected on the
records of the Depository as owning SPDRs for distribution to Beneficial
Owners as provided above (see "The Trust--Book-Entry-Only System") not less
than sixty (60) days before the date such resignation is to take effect. Such
resignation will become effective upon the appointment of and the acceptance
of the Trust by a successor Trustee or, if no successor is appointed within
sixty (60) days after the date such notice of resignation is given, the Trust
shall terminate (see "Administration of the Trust--Termination"). The Sponsor,
upon receiving notice of such resignation, is obligated to use its best
efforts to appoint a successor Trustee promptly.

In case the Trustee becomes incapable of acting as such or is adjudged a
bankrupt or is taken over by any public authority, the Sponsor may discharge
the Trustee and appoint a successor Trustee as provided in the Trust
Agreement. Notice of such discharge and appointment shall be mailed via the
DTC Participants to Beneficial Owners by the Sponsor.

Upon a successor Trustee's execution of a written acceptance of an
appointment as Trustee for the Trust, such successor Trustee will become
vested with all the rights, powers, duties and obligations of the original
Trustee.

A successor Trustee is required to be a trust company, corporation or
national banking association organized and doing business under the laws of
the United States or any state thereof; to be authorized under such laws to

53
<PAGE>

exercise corporate trust powers; and to have at all times an aggregate
capital, surplus and undivided profit of not less than $50,000,000.

Beneficial Owners of 51% of the then outstanding SPDRs may at any time
remove the Trustee by written instrument(s) delivered to the Trustee and the
Sponsor. The Sponsor shall thereupon use its best efforts to appoint a
successor Trustee in the manner specified above and in the Trust Agreement.

The Trust Agreement provides that the Trustee is not liable for any action
taken in reasonable reliance on properly executed documents or for the
disposition of monies or Securities or for the evaluations required to be made
thereunder, except by reason of its own gross negligence, bad faith, wilful
malfeasance, wilful misconduct, or reckless disregard of its duties and
obligations nor is the Trustee liable or responsible in any way for
depreciation or loss incurred by reason of the sale by the Trustee of any
Securities in the Trust. In the event of the failure of the Sponsor to act,
the Trustee may act and is not liable for any such action taken by it in good
faith. The Trustee is not personally liable for any taxes or other
governmental charges imposed upon or in respect of the Securities or upon the
interest thereon or upon it as Trustee or upon or in respect of the Trust
which the Trustee may be required to pay under any present or future law of
the United States of America or of any other taxing authority having
jurisdiction. In addition, the Trust Agreement contains other customary
provisions limiting the liability of the Trustee. The Trustee and its
directors, subsidiaries, shareholders, officers, employees, and affiliates
under common control with the Trustee (each a "Trustee Indemnified Party")
will be indemnified from the assets of the Trust and held harmless against any
loss, liability or expense incurred without gross negligence, bad faith,
wilful misconduct, wilful malfeasance on the part of such Trustee Indemnified
Party or reckless disregard of its duties and obligations, arising out of, or
in connection with its acceptance or administration of the Trust, including
the costs and expenses (including counsel fees) of defending against any claim
or liability.

THE SPONSOR

If at any time the Sponsor shall fail to undertake or perform or become
incapable of undertaking or performing any of the duties which by the terms of
the Trust Agreement are required of it to be undertaken or performed, or shall
resign, or shall become bankrupt or its affairs shall be taken over by public
authorities, the Trustee may appoint a successor Sponsor as shall be
satisfactory to the Trustee, agree to act as Sponsor itself, or may terminate
the Trust Agreement and liquidate the Trust (see "Termination"). Notice of the
resignation or removal of the Sponsor and the appointment of a successor shall
be mailed by the Trustee to the Depository and the DTC Participants for
distribution to Beneficial Owners (see "The Trust--Book-Entry-Only System").
Upon a successor Sponsor's execution of a written acceptance of such
appointment as Sponsor of the Trust, such successor Sponsor shall become
vested with all of the rights, powers, duties and obligations of the original
Sponsor. Any successor Sponsor may be compensated at rates deemed by the
Trustee to be reasonable.

The Sponsor may resign by executing and delivering to the Trustee an
instrument of resignation. Such resignation shall become effective upon the
appointment of a successor Sponsor and the acceptance of such appointment by
the successor Sponsor, unless the Trustee either agrees to act as Sponsor or
terminates the Trust Agreement and liquidates the Trust, which the Trustee
shall do if no successor Sponsor is appointed (see "Termination").

The dissolution of the Sponsor or its ceasing to exist as a legal entity for
any cause whatsoever will not cause the termination of the Trust Agreement or
the Trust unless the Trustee deems termination to be in the best interests of
the Beneficial Owners of SPDRs.

The Trust Agreement provides that the Sponsor is not liable to the Trustee,
the Trust or to the Beneficial Owners of SPDRs for taking any action or for
refraining from taking any action made in good faith or for errors in
judgment, but is liable only for its own gross negligence, bad faith, wilful
misconduct or wilful malfeasance in the performance of its duties or its
reckless disregard of its obligations and duties under the Trust Agreement.
The Sponsor is not liable or responsible in any way for depreciation or loss
incurred by the Trust by reason of

54
<PAGE>

the sale of any Securities of the Trust. The Trust Agreement further provides
that the Sponsor and its directors, subsidiaries, shareholders, officers,
employees, and affiliates under common control with the Sponsor (each a
"Sponsor Indemnified Party") shall be indemnified from the assets of the Trust
and held harmless against any loss, liability or expense incurred without
gross negligence, bad faith, wilful misconduct or wilful malfeasance on the
part of any Sponsor Indemnified Party in the performance of its duties or
reckless disregard of its obligations and duties under the Trust Agreement,
including the payment of the costs and expenses of defending against any claim
or liability.

SPONSOR

The Sponsor of the Trust is PDR Services Corporation, a Delaware corporation
incorporated on June 15, 1990 with offices c/o the Exchange, 86 Trinity Place,
New York, New York 10006. The Sponsor's Internal Revenue Service Employer
Identification Number is 13-3574560. The Exchange owns all of the Sponsor's
outstanding shares of common stock. The Exchange is a "control person" of the
Sponsor as such term is defined in the Securities Act of 1933.

The Sponsor, at its own expense, may from time to time provide additional
promotional incentives to brokers who sell SPDRs to the public. In certain
instances, these incentives may be provided only to those brokers who meet
certain threshold requirements for participation in a given incentive program,
such as selling a significant number of SPDRs within a specified time period.

TRUSTEE

The Trustee is State Street Bank and Trust Company, a bank and trust company
organized under the laws of the Commonwealth of Massachusetts with its
principal place of business at 225 Franklin Street, Boston, Massachusetts
02110. The Trustee's Internal Revenue Service Employer Identification Number
is 04-1867445. The Trustee is subject to supervision and examination by the
Massachusetts Division of Banks and the Federal Reserve Bank of Boston.

DEPOSITORY

The Depository Trust Company, New York, New York, a limited purpose trust
company and member of the Federal Reserve System, acts as Depository for
SPDRs. The Depository receives customary fees for its services.

LEGAL OPINION

The legality of the SPDRs offered hereby has been passed upon by Orrick,
Herrington & Sutcliffe, New York, New York, as counsel for the Sponsor. Ropes
& Gray, Boston, Massachusetts, acts as counsel for the Trustee.

INDEPENDENT ACCOUNTANTS

The financial statements as of December 31, 1995 and for the years ended
December 31, 1995 and December 31, 1994 and the period from January 22, 1993
(inception) to December 31, 1993 included in this Prospectus have been so
included in reliance upon the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.

55
<PAGE>

INFORMATION AND COMPARISONS RELATING TO TRUST, SECONDARY

MARKET TRADING, NET ASSET SIZE, PERFORMANCE AND TAX TREATMENT

Information regarding various aspects of the Trust, including the net asset
size thereof, as well as the secondary market trading, the performance and the
tax treatment of SPDRs, may be included from time to time in advertisements,
sales literature and other communications as well as in reports to current or
prospective Beneficial Owners.

Information may be provided to prospective investors to help such investors
assess their specific investment goals and to aid in their understanding of
various financial strategies. Such information may present current economic
and political trends and conditions and may describe general principles of
investing such as asset allocation, diversification and risk tolerance, as
well as specific investment techniques such as indexing and hedging. In
addition, information may be presented to prospective or current Beneficial
Owners regarding the purchase of SPDRs in the secondary market, such as margin
requirements, types of orders that may be entered, and information concerning
short sales. Similarly, market data symbols, trading fractions, other trading
information and the CUSIP number relating to SPDRs may be included in such
information. Comparisons with other investment vehicles, such as mutual funds,
may be made with respect to the application of such requirements and rules
applicable to short sales.

Information regarding the Trust's net asset size may be stated in
communications to prospective or current Beneficial Owners for one or more
time periods, including annual, year-to-date or daily periods. Such
information may also be expressed in terms of the total number of SPDRs
outstanding as of one or more time periods. Factors integral to the size of
the Trust's net assets, such as creation volume and activity, may also be
discussed, and may be specified from time to time or with respect to various
periods of time. Comparisons of such information during various periods may
also be made, and may be expressed by means of percentages.

Information may be provided to investors regarding the ability to engage in
short sales of SPDRs, including reference to the exemption from the "tick
test" provision of the SEC short sale rule (Rule 10a-1 under the Securities
Exchange Act of 1934), to permit short sales on "minus" or "zero-minus" ticks.
Selling short refers to the sale of securities which the seller does not own,
but which the seller arranges to borrow prior to effecting the sale.
Institutional investors may be advised that short sales in SPDRs may permit
partial use of proceeds of the short sale, and such investors may also be
informed that short sales in SPDRs may provide a useful source of additional
income for certain institutional investors who have arranged to lend SPDRs,
and that a stock loan premium may exist.

Information may be provided to investors regarding capital gains
distributions by the Trust, including historical information relating to such
distributions. Comparisons between the Trust and other investment vehicles
such as mutual funds may be made regarding such capital gains distributions,
as well as relative tax efficiencies between the Trust and such other
investment vehicles (e.g. realization of capital gains or losses to the Trust
and to such other investment vehicles in connection with redemption of their
respective securities). (See "Tax Status of the Trust" for discussion of tax
consequences to Beneficial Owners of SPDRs in connection with the sale or
redemption of SPDRs.) Comparisons may also be provided regarding the probable
tax impact resulting from rebalancing of the Trust portfolio (see "The
Portfolio--Adjustments to the Portfolio") and adjustments to the portfolio of
an actively managed investment vehicle.

Information regarding the secondary market trading activity of SPDRs also
may be presented over one or more stated time periods, such as for daily,
monthly, quarterly or annual periods. SPDR secondary market trading volume
information may be compared with similar information relating to other issues
trading on the Exchange during the same reporting period. Average daily
secondary market trading volume of SPDRs may also be reported from time to
time. Comparisons of such information during various periods may also be made,
and may be expressed by means of percentages.

Information may also be provided in communications to prospective or current
Beneficial Owners comparing and contrasting the relative advantages of
investing in SPDRs as compared to other investment

56
<PAGE>

vehicles, such as mutual funds, both on an individual and a group basis (e.g.,
stock index mutual funds). Such information may include comparisons of costs
and expense ratios, expressed either in dollars or basis points, stock lending
activities, permitted investments and hedging activities (e.g., engaging in
options or futures transactions), and portfolio turnover data and analyses. In
addition, such information may quote, reprint or include portions of
financial, scholarly or business publications or periodicals, including model
allocation schedules or portfolios, as the foregoing relate to the comparison
of SPDRs to other investment vehicles, current economic, financial and
political conditions, investment philosophy or techniques, or the desirability
of owning SPDRs.

In addition, information on the performance of SPDRs on the basis of changes
in price per SPDR with or without reinvesting all dividends and/or any
distributions of capital in additional SPDRs may be included from time to time
in such information. Total return measures the percentage growth in the total
dollar value of an investment in SPDRs (reflecting dividends and capital
appreciation but without provision for any income taxes payable). Average
annualized performance will be stated for various periods. Total return
figures may also be stated for a period from the Initial Date of Deposit, a
date at least twelve months prior to the end of the reporting period or for
annual periods for the life of the Trust. Information on the S&P Index
contained in this Prospectus, as updated from time to time, may also be
included from time to time in such material. The performance of the Trust, of
the S&P Index (provided information is also given reflecting the performance
of the Trust in comparison to that S&P Index) or both may also be compared to
the performance of money managers as reported in market surveys such as SEI
Fund Evaluation Survey (a leading data base of tax-exempt funds) or mutual
funds such as those reported by Lipper Analytical Services Inc., Money
Magazine Fund Watch or Wiesenberger Investment Companies Service, each of
which measures performance following their own specific and well-defined
calculation measures, or of the New York Stock Exchange Composite Index, the
American Stock Exchange Index (indices of stocks traded on the New York and
American Stock Exchanges, respectively), the Dow Jones Industrial Average (an
index of 30 widely traded industrial common stocks) or the NASDAQ Composite
Index (an unmanaged index of over-the-counter stocks) or similar measurement
standards during the same period of time. Information may also be included
regarding the aggregate amount of assets committed to index investing
generally by various types of investors, such as pension funds and other
institutional investors, which currently exceeds $300 billion.

Information on the relative price performance of SPDRs in relation to other
securities and/or indices may be represented in the form of "correlation".
Correlation is a standard measure of the degree of linear association between
two price series, and ranges from zero percent (0%) (i.e., no linear
association) to one hundred percent (100%) (i.e., perfect linear association).

Information relating to the relative price performance of SPDRs may be
compared against a wide variety of investment categories and asset classes,
including common stocks, small capitalization stocks, long and intermediate
term corporate and government bonds, Treasury bills, the rate of inflation in
the United States (based on the Consumer Price Index ("CPI")) and combinations
of various capital markets. Historical returns of these and other capital
markets in the United States may be provided by independent statistical
studies and sources, such as those provided by Ibbotson Associates of Chicago,
Illinois. The performance of these capital markets is based on the returns of
different indices. Information may be presented using the performance of these
and other capital markets to demonstrate general investment strategies. So,
for example, performance of SPDRs may be compared to the performance of
selected asset classes such as short-term U.S. Treasury bills, long-term U.S.
Treasury bonds, long-term corporate bonds, mid-capitalization stocks, foreign
stocks and small capitalization stocks and may also be measured against the
rate of inflation as set forth in well-known indices (such as the CPI).
Performance comparisons may also include the value of a hypothetical
investment in any of these capital markets. Performance of SPDRs may also be
compared to that of other indices or compilations that may be developed and
made available to the investing public in the future. Of course, such
comparisons will only reflect past performance of SPDRs and the investment
categories, indices or compilations chosen and no guarantees can be made of
future results regarding the performance of either SPDRs or the asset classes
chosen for such comparisons.

57
<PAGE>

DIVIDEND REINVESTMENT SERVICE

The Trust has made the DTC book-entry Dividend Reinvestment Service (the
"Service") available for use by Beneficial Owners through DTC Participants for
reinvestment of their cash proceeds. Note that some DTC Participants may not
elect to utilize the Service; therefore, after the Service is made available
for SPDRs, an interested SPDR investor may wish to contact such investor's
broker to ascertain the availability of the Service through such broker.
Interested Beneficial Owners should also note that each broker may require
investors to adhere to specific procedures and timetables in order to
participate in the Service and such investors should ascertain from their
broker such necessary details. SPDRs acquired pursuant to the Service will be
held by the Beneficial Owners in the same manner, and subject to the same
terms and conditions, as for original ownership of SPDRs.

Distributions reinvested in additional SPDRs through the Service will
nevertheless be taxable dividends to Beneficial Owners to the same extent as
if received in cash.

The Trustee will utilize the cash proceeds of dividends received from all
Beneficial Owners participating in reinvestment through the Service to obtain
Index Securities necessary to create the requisite number of SPDRs at the
close of business on each SPDR distribution date. Any cash balance remaining
after the requisite number of SPDRs has been created will be distributed, on a
pro rata basis, to all Beneficial Owners who participated in the Service. Note
that brokerage commissions, if any, incurred in obtaining the Index Securities
necessary to create additional SPDRs with the cash from the distributions will
be an expense of the Trust.*

ADDITIONAL INFORMATION

This Prospectus does not include all of the information with respect to the
Trust set forth in its registration statement and the exhibits thereto filed
with the Commission, under the Securities Act of 1933, and the 1940 Act, to
which reference is hereby made. Copies of such documents may be inspected
without charge at the Commission's offices at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and copies of all or any part thereof may be obtained
from such office after payment of the fees prescribed by the Commission. Such
information is also available at the offices of the Sponsor at 86 Trinity
Place, New York, New York.
- --------

* It is difficult to estimate the annual dollar amount of brokerage
commissions that might be incurred in connection with the Dividend
Reinvestment Service during any calendar year. The Trustee estimates that
during calendar year 1995, the approximate amount of annual brokerage
commissions incurred in implementing the Service was less than $.001 per
SPDR. There can be no guarantee that either the size of the Trust or the
number of outstanding SPDRs will remain constant, or that dividend
payments, the cost of brokerage commissions incurred to purchase Index
Securities or Beneficial Owner participation will remain the same as it was
during calendar year 1995.

58
<PAGE>

GLOSSARY OF DEFINED TERMS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
"Adjustment Amount"........................................................ 44
"Adjustment Day"........................................................... 35
"Beneficial Owners"........................................................ 31
"Business Day"............................................................. 6
"Cash Component"........................................................... 4
"Cash Redemption Payment".................................................. 45
"Closing Time"............................................................. 29
"Code"..................................................................... 6
"Commission"............................................................... 3
"Depository Agreement"..................................................... 32
"Depository"............................................................... 6
"Distributor".............................................................. 9
"Dividend Payment Date".................................................... 49
"DTC Participants"......................................................... 31
"DTC"...................................................................... 3
"Evaluation Time".......................................................... 2
"Ex-Dividend Date"......................................................... 49
"Excess Cash Amounts"...................................................... 45
"Exchange"................................................................. 1
"Global Security".......................................................... 31
"Index Securities"......................................................... 3
"Indirect Participants".................................................... 31
"Misweighting Amount"...................................................... 33
"Misweighting"............................................................. 33
"NAV Amount"............................................................... 35
"NSCC Business Day"........................................................ 11
"NSCC"..................................................................... 3
"Participant Agreement".................................................... 30
"Participating Party"...................................................... 3
"Portfolio Deposit"........................................................ 4
"Portfolio"................................................................ 27
"Record Date".............................................................. 49
"Request Day".............................................................. 36
"S&P Index"................................................................ 1
"Securities"............................................................... 1
"SPDR Clearing Process".................................................... 4
"SPDR"..................................................................... 1
"Sponsor".................................................................. 1
"Termination Date"......................................................... 8
"Transaction Fee".......................................................... 4
"Transmittal Date"......................................................... 29
"Trust Agreement".......................................................... 3
"Trust".................................................................... 1
"Trustee".................................................................. 3
"Weighting Analysis"....................................................... 33
</TABLE>

59
<PAGE>

[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND ANY
INFORMATION OR REPRESENTATIONS NOT STATED IN IT, OR IN THE REGISTRATION
STATEMENT AND EXHIBITS OF WHICH IT IS A PART, MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE TRUST, THE SPONSOR OR THE TRUSTEE. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF ANY
OFFER TO BUY, ANY SECURITY OTHER THAN THE REGISTERED SECURITIES TO WHICH IT
RELATES, OR AN OFFER TO SELL, OR A SOLICITATION OF ANY OFFER TO BUY,
SECURITIES IN ANY JURISDICTION WHERE SUCH OFFER OR SOLICITATION WOULD BE
UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT THE
INFORMATION IN IT IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. HOWEVER,
IF ANY MATERIAL CHANGE OCCURS WHILE THIS PROSPECTUS IS REQUIRED TO BE
DELIVERED, THIS PROSPECTUS WILL BE AMENDED OR SUPPLEMENTED ACCORDINGLY.

THE TRUST IS REGISTERED AS A UNIT INVESTMENT TRUST UNDER THE INVESTMENT
COMPANY ACT OF 1940. REGISTRATION DOES NOT IMPLY THAT THE TRUST OR SPDRS HAVE
BEEN GUARANTEED, SPONSORED, RECOMMENDED OR APPROVED BY THE UNITED STATES OR
ANY STATE OR ANY AGENCY OR OFFICER THEREOF.

----------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ESSENTIAL INFORMATION..................................................... 2
PROSPECTUS SUMMARY........................................................ 3
SPECIAL CONSIDERATIONS AND RISK FACTORS................................... 10
REPORT OF INDEPENDENT ACCOUNTANTS......................................... 13
STATEMENT OF ASSETS AND LIABILITIES....................................... 14
SCHEDULE OF INVESTMENTS................................................... 21
THE TRUST................................................................. 27
THE PORTFOLIO............................................................. 32
THE S&P INDEX............................................................. 37
LICENSE AGREEMENT......................................................... 39
EXCHANGE LISTING.......................................................... 40
TAX STATUS OF THE TRUST................................................... 40
CONTINUOUS OFFERING OF SPDRs.............................................. 42
EXPENSES OF THE TRUST..................................................... 43
REDEMPTION OF SPDRS....................................................... 45
VALUATION................................................................. 48
ADMINISTRATION OF THE TRUST............................................... 49
RESIGNATION, REMOVAL AND LIABILITY........................................ 53
SPONSOR................................................................... 55
TRUSTEE................................................................... 55
DEPOSITORY................................................................ 55
LEGAL OPINION............................................................. 55
INDEPENDENT ACCOUNTANTS................................................... 55
INFORMATION AND COMPARISONS RELATING TO TRUST, SECONDARY MARKET TRADING,
NET ASSET SIZE, PERFORMANCE AND TAX TREATMENT............................ 56
DIVIDEND REINVESTMENT SERVICE............................................. 58
ADDITIONAL INFORMATION.................................................... 58
GLOSSARY OF DEFINED TERMS................................................. 59
</TABLE>

STANDARD & POOR'S
DEPOSITARY
RECEIPTS(R)
("SPDRS")(R)
SPDR TRUST, SERIES 1

----------------
PROSPECTUS

----------------

SPONSOR
PDR SERVICES CORPORATION

----------------

APRIL 25, 1996
<PAGE>

CONTENTS OF REGISTRATION STATEMENT

This amendment to the Registration Statement on Form S-6 comprises the
following papers and documents:

The facing sheet.

The cross-reference sheet.

The prospectus

The undertaking to file reports.

The signatures.

Written consents of the following persons:

Price Waterhouse LLP
(included in Exhibit 99.C1)
Orrick, Herrington & Sutcliffe
(included in Exhibit 99.2)

The following exhibits:

Ex-99.2 Opinion of Counsel as to legality of
securities being registered.

Ex-99.C1 Consent of Independent Accountants.

FINANCIAL STATEMENTS

1. Statement of Financial Condition of the Trust as shown in the
current Prospectus for this series herewith.

2. Financial Statements of the Depositor:

PDR Services Corporation - Financial Statements, as part of
American Stock Exchange, Inc. current consolidated financial
statements incorporated by reference to Form 1-A, amendment
No. 310 filed on June 27, 1995.
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant,
SPDR Trust Series 1, has duly caused this amendment to the Registration
Statement to be signed on its behalf by the undersigned thereunto duly
authorized, and its seal to be hereunto affixed and attested, all in the City of
New York, and State of New York, on the 25th day of April, 1996.

SPDR TRUST SERIES 1
(Registrant)

By: PDR Services Corporation
(Depositor)

_____________________________
Joseph Stefanelli
President

Pursuant to the requirements of the Securities Act of 1933, this amendment
to the Registration Statement has been signed on behalf of PDR Services
Corporation the Depositor by the following persons who constitute a majority of
its Board of Directors and by the named persons who are in the following
capacities, in the City of New York and State of New York, on the date
indicated.

PDR SERVICES CORPORATION

Name Title/Office
- ---- ------------

Joseph Stefanelli President* and Director**

John Stimpfel Treasurer**

William Strauss Director**

Gary L. Gastineau Vice President and Director***

_______________________________
James F. Duffy
Attorney-in-fact*
- --------

* Executed copies of the power of attorney were previously filed with the
Securities and Exchange Commission in connection with Post-Effective
Amendment Number 1 to the Registration Statement dated May 20, 1994, as
Exhibit No. 3.

** Executed copies of the powers of attorney were previously filed with the
Securities and Exchange Commission in connection with the Registration
Statement on January 22, 1993 as Exhibit No. 9.

*** Executed copy of the power of attorney has been previously filed in
connection with Post Effective Amendment No. 1 to the Registration
Statement for MidCap SPDR Trust, Series 1 dated January 19, 1996 (File No.
33-89088), as Exhibit No. 4.
<PAGE>

EXHIBIT INDEX

EXHIBIT NO. TITLE OF DOCUMENT
- ----------- -----------------

Ex-99.2 Copy of Opinion of Counsel as to legality of
securities being registered.

Ex-99.C1 Consent of Independent Accountants.

<PAGE>

Exhibit 99.2

April 25, 1996

PDR Services Corporation
c/o American Stock Exchange
86 Trinity Place
New York, New York 10006

State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110

Re: SPDR Trust Series 1
-------------------

Ladies and Gentlemen:

We have served as counsel to the American Stock Exchange (the "Exchange")
and PDR Services Corporation as sponsor (the "Sponsor") of SPDR Trust Series 1
(hereinafter referred to as the "Trust"). It is proposed that Post-Effective
Amendment No. 4 to the Trust's registration Statement ("Post-Effective Amendment
No. 4") will be filed as of the date hereof in connection with the continued
issuance by the Trust of an indefinite number of units of fractional undivided
interest in the Trust (hereinafter referred to as the "Units") pursuant to Rule
24f-2 promulgated under the provisions of the Investment Company Act of 1940, as
amended.

In this regard, we have examined executed originals or copies of the
following:

(a) the Certificate of Incorporation, as amended, and the By-Laws of the
Sponsor, as amended, certified by the Secretary of the Sponsor of the
date hereof;

(b) resolutions of the Board of Directors of the Sponsor adopted on June
15, 1990, January 6, 1993, May 5, 1993 and March 1, 1995 relating to
the Trust and the issuance of the Units, certified by the Secretary of
the Sponsor on the date hereof;

(d) the Registration Statement on Form S-6 (File No. 33- 46080) filed with
the Securities and Exchange Commission (the "Commission") in
accordance with the Securities Act of 1933, as amended, and the rules
and regulations of the Commission promulgated thereunder
(collectively, the "1933 Act") and amendments thereto including
Amendment No. 3 ("Amendment No. 3") filed on January 22, 1993 (the
"Registration Statement") and Post-Effective Amendment No. 4 thereto
proposed to be filed as of the date hereof;

(e) the Notification of Registration of the Trust filed with the
Commission under the Investment Company Act of 1940, as amended and
the rules and regulations of the Commission promulgated thereunder
(collectively, the "1940 Act") on Form N-8A, as amended, (the "1940
Act Notification");

(f) the registration of the Trust filed with the Commission under the 1940
Act on Form N-8B-2 (File No. 811-7330), as amended (the "1940 Act
Registration");

(g) the prospectus dated April 25, 1996 included in Post- Effective
Amendment No. 4 (the "Prospectus");

(h) the Application of SPDR Trust Series 1 and the Sponsor for exemptions
under Sections 4(2), 14(a), 17(a), 22(d), 22(e), 24(d) and 26(a)(2)(C)
of the 1940 Act and Rule 22c-1 and pursuant to Section 17d-1, as
amended, the notice published and the order granted in connection
therewith (File No. 812-7545, collectively, the "Order");

(i) the Standard Terms and Conditions of the Trust dated as of January 1,
1993 between the Sponsor and State Street Bank and Trust Company (the
"Trustee") (the "Standard Terms");

(j) the Trust Indenture dated January 22, 1993 between the Sponsor and the
Trustee (the "Trust Indenture" and, collectively with the Standard
Terms, the "Indenture and Agreement");

(k) the Distribution Agreement dated as of January 1, 1993 among the
Sponsor, the Trust and PDR Distributors, Inc. (the "Distribution
Agreement"),

(l) the License Agreement between Standard & Poor's Corporation and the
Sponsor dated October 30, 1992;

(m) the form of global certificate of ownership for units (the
"Certificate") to be issued under the Indenture and Agreement; and
<PAGE>

(n) such other pertinent records and documents as we have deemed
necessary.

With your permission, in such examination, we have assumed the following:
(a) the authenticity of original documents and the genuineness of all
signatures; (b) the conformity to the originals of all documents submitted to us
as copies; (c) the truth, accuracy, and completeness of the information,
representations, and warranties contained in the records, documents, instruments
and certificates as we have reviewed; (d) except as specifically covered in the
opinions set forth below, with due authorization, execution, and delivery on
behalf of the respective parties thereto of documents referred to herein and the
legal, valid and binding effect thereof on such parties; and (e) the absence of
any evidence extrinsic to the provisions of the written agreement(s) between the
parties that the parties intended a meaning contrary to that expressed by those
provisions. However, we have not examined the securities deposited pursuant to
the Indenture and the Agreement (the "Securities") nor the contracts for the
Securities.

We express no opinion as to matters of law in jurisdictions other than the
State of New York and the United States, except to the extent necessary to
render the opinion as to the Sponsor and the Indenture and Agreement in
paragraphs (i) and (iii) below with respect to Delaware law. As you know, we are
not licensed to practice law in the State of Delaware, and our opinion in
paragraph (i) as to Delaware law is based solely on review of the official
statutes of the State of Delaware.

Based on such examination, and having regard for legal considerations which
we deem relevant, we are of the opinion that:

(i) the Sponsor is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Delaware with full
corporate power to conduct its business as described in the Prospectus;

(ii) the Sponsor is duly qualified as a foreign corporation and is in
good standing as such within the State of New York;

(iii) the Indenture and Agreement has been duly authorized, executed
and delivered by the Sponsor and, assuming the due authorization, execution
and delivery by the other parties thereto, is a valid and binding agreement
of the Sponsor, enforceable against the Sponsor in accordance with its
terms;

(iv) the Trust has been duly formed and is validly existing as an
investment trust under the laws of the
<PAGE>

State of New York and has been duly registered under the 1940 Act;

(v) the terms and provisions of the Units conform in all material
respects to the description thereof contained in the Prospectus;

(vi) the consummation of the transactions contemplated under the
Indenture and the fulfillment of the terms thereof will not be in violation
of the Sponsor's Certificate of Incorporation, as amended, or By-Laws, as
amended and will not conflict with any applicable laws or regulations
applicable to the Sponsor in effect on the date hereof;

(vii) the Certificate to be issued by the Trust, when duly executed by
the Sponsor and the Trustee in accordance with the Indenture and Agreement,
upon delivery against payment therefor as described in the Registration
Statement and Prospectus will constitute fractional undivided interests in
the Trust enforceable against the Trust in accordance with its terms, will
be entitled to the benefits of the Indenture and Agreement and will be
fully paid and non-assessable; and

In addition, we have participated in conferences with
representatives of the Sponsor, the Exchange, the Trustee, the Trustee's
counsel, the Trust's accountants and others concerning the Registration
Statement and the Prospectus and have considered the matters required to be
stated therein and the statements contained therein, although we have not
independently verified the accuracy, completeness or fairness of such
statements. Based upon and subject to the foregoing, nothing has come to our
attention to cause us to believe that the Registration Statement, as of the date
hereof, contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, or that the Prospectus, as of the date hereof, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading (it being
understood that we have not been requested to and do not make any comment in
this paragraph with respect to the financial statements, schedules and other
financial and statistical information contained in the Registration Statement or
the Prospectus).

Our opinion that any document is valid, binding, or enforceable
in accordance with its terms is qualified as to:
<PAGE>

SIGNATURE

(a) limitations imposed by bankruptcy, insolvency, reorganization,
arrangement, fraudulent conveyance, moratorium, or other laws relating to
or affecting the enforcement of creditors' right generally;

(b) rights to indemnification and contribution which may be limited by
applicable law or equitable principles; and

(c) general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law.

We hereby represent that the Amendment contains no disclosure which would
render it ineligible to become effective immediately upon filing pursuant to
paragraph (b) of Rule 485 of the Commission.

We hereby consent to the filing of this opinion as an exhibit to
Post-Effective Amendment No. 4 and to the use of our name where it appears in
the Post-Effective Amendment No. 4 and the Prospectus.

Very truly yours,

Orrick, Herrington & Sutcliffe

<PAGE>

EXHIBIT 99.C1

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Prospectus constituting part of this Post
Effective Amendment No. 4 to the registration statement on Form S-6 (the
"Registration Statement") of our report dated February 16, 1996, relating to the
financial statements and financial highlights of SPDR Trust Series I, which
appears in such Prospectus. We also consent to the reference to us under the
heading "Independent Accountants" in such Prospectus.

Price Waterhouse LLP
Boston, Massachusetts
April 23, 1996