SPDR TRUST SERIES 1, 485APOS, 1998-01-26

SPDR TRUST SERIES 1
485APOS, 1998-01-26

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As filed with the Securities and Exchange Commission on January 26, 1998

File No. 33-46080
811-7330
================================================================================

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

POST EFFECTIVE AMENDMENT NO. 6

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:

Kathleen H. Moriarty, Esq.
CARTER, LEDYARD & MILBURN
2 Wall Street
New York, New York 10005

It is proposed that this filing will become effective:

[X] 60 days after filing pursuant to paragraph (a)(1) of Rule 485.
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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 fee in the amount of $411,184.00 was
paid on December 22, 1997 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:

AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THE REGISTRATION
STATEMENT.

[_] Check box if it is proposed that this filing will become
effective on [date], at [time] 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
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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
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(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
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(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
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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
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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
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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
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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 January 26, 1998
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"(R), "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 SEPTEMBER 30, 1997+

Number of SPDRs
42,762,984

Fractional Undivided Interest in
Trust Represented by each SPDR

1/42,762,984th

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 (or minus) 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)

$94.78
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.

2
<PAGE>

Discretionary Termination: Trust may be terminated if at any time
the value of the securities held by the
Trust 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 September 30, 1998, 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".

3
<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 and Risk Factors").

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 ALPS Mutual Funds Services, Inc., a registered
broker-dealer and a member of the National Association of Securities Dealers,
Inc. (see "Underwriting").

4
<PAGE>

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 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 "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 accrued 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

5
<PAGE>

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.

6
<PAGE>

Until further notice is given as described below, the Transaction Fee charged
in connection with each creation or redemption of Creation Units through the
SPDR Clearing Process is $3,000 per Participating Party per day, regardless of
the number of Creation Units created or redeemed on such day (see "Procedures
for Creation of Creation Units" and "Procedure for Redemption of SPDRs"). 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 or
redemption 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 up to
$9,000 ((3) times $3,000) for a total not to exceed $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
10 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.
- -----------
* The amount of the Transaction Fee currently in effect will be available from
the Trustee.

7
<PAGE>

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).

PORTFOLIO ADJUSTMENTS

To maintain the correspondence 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
- -----------
* 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.

8
<PAGE>

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

Effective September 30, 1997, the Trust changed from a calendar year ending
on each December 31 to a fiscal year ending each September 30. For the fiscal
year ended September 30, 1997, 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

9
<PAGE>

Plans) and welfare plans (collectively, "Plans") subject to the fiduciary
responsibility requirements of the Employee Retirement Income Security Act of
1974, as amended ("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").

10
<PAGE>

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 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

11
<PAGE>

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

12
<PAGE>

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
delisted from the Exchange (see "Exchange Listing"). The Sponsor will also have
the discretionary right to terminate the Trust if at any time the net asset
value of the Trust is less than $350,000,000, as such dollar amount shall be
adjusted for inflation in accordance with the National Consumer Price Index for
All Urban Consumers (the "CPI-U")* as published 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. The License Agreement currently is scheduled to expire
on January 22, 2018. The Trust shall also terminate if the Trustee resigns or
becomes incapable of discharging its duties and a successor is not appointed
(see "Administration of the Trust--Termination").

UNDERWRITING

ALPS Mutual Funds Services, 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 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.

13
<PAGE>

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 under the laws of the State of Colorado and is located at
370 17th Street, Suite 3100, Denver, CO 80202. The Distributor is a registered
broker-dealer and a member of the National Association of Securities Dealers,
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.

14
<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.

15
<PAGE>

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 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.

16
<PAGE>

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

17
<PAGE>

interest in a trust from the direct ownership 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, substantially 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-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").

18
<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 September 30, 1997, and the results of its operations, the
changes in its net assets and the financial highlights for the periods
indicated, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards, which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included
confirmation of investments owned at September 30, 1997 by correspondence with
the custodian and brokers, provide a reasonable basis for the opinion
expressed above.

Price Waterhouse LLP

Boston, Massachusetts

November 14, 1997

19
<PAGE>

SPDR TRUST SERIES 1

STATEMENT OF ASSETS AND LIABILITIES

SEPTEMBER 30, 1997 (NOTE 1)

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

<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost $2,996,466,067)
(Note 2)..................................................... $4,051,417,592
Cash........................................................... 11,703,130
Receivable for SPDRs issued in-kind (Note 4)................... 142,165,405
Dividends receivable (Note 2).................................. 5,715,850
Deferred organization costs (Note 2)........................... 35,416
--------------
TOTAL ASSETS..................................................... 4,211,037,393
==============
LIABILITIES
Payable for investments purchased.............................. 142,117,918
Distributions payable (Note 2)................................. 13,154,925
Due to Sponsor (Note 3)........................................ 954,943
Accrued Trustee fees (Note 3).................................. 1,079,783
Accrued expenses and other liabilities......................... 785,147
--------------
TOTAL LIABILITIES................................................ 158,092,716
--------------
NET ASSETS....................................................... $4,052,944,677
==============
NET ASSETS REPRESENTED BY:
Paid in surplus relating to 42,762,984 units of fractional
undivided interest ("SPDRs") outstanding; unlimited units
authorized (Note 4).......................................... $3,000,177,285
Undistributed net investment income............................ 993,315
Accumulated net realized loss on investments................... (3,177,448)
Net unrealized appreciation on investments..................... 1,054,951,525
--------------
NET ASSETS....................................................... $4,052,944,677
==============
NET ASSET VALUE PER SPDR ($4,052,944,677/42,762,984 SPDRs)....... $ 94.78
==============
</TABLE>

See accompanying notes to financial statements

20
<PAGE>

SPDR TRUST SERIES 1

STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
FOR THE NINE MONTH
PERIOD ENDED FOR THE YEAR FOR THE YEAR
SEPTEMBER 30, 1997 ENDED ENDED
(NOTE 1) DECEMBER 31, 1996 DECEMBER 31, 1995
------------------ ----------------- -----------------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividend income (Note
2)................... $ 38,356,337(a) $ 29,620,992(a) $ 16,060,887(a)
------------ ------------ ------------
EXPENSES
Trustee expense (Note
3)................... 2,578,842 1,806,689 909,805
S&P license fee........ 563,541 347,506 218,098
SEC registration
expense.............. 450,401 203,447 136,000
Marketing expense...... 431,452 436,049 --
Legal and audit
services............. 143,826 135,000 80,000
Printing and postage
expense.............. 90,234 40,000 20,000
Amortization of
organization costs
(Note 2)............. 81,912 110,000 110,000
Miscellaneous expenses. 744 1,002 1,000
------------ ------------ ------------
Total expenses.......... 4,340,952 3,079,693 1,474,903
Rebate from Sponsor
(Note 3)............. (249,830) (434,407) (180,244)
------------ ------------ ------------
Net expenses............ 4,091,122 2,645,286 1,294,659
Trustee earnings credit
(Note 3).............. (194,498) (176,370) (107,356)
------------ ------------ ------------
Net expenses after
Trustee earnings
credit................ 3,896,624 2,468,916 1,187,303
------------ ------------ ------------
NET INVESTMENT INCOME... 34,459,713 27,152,076 14,873,584
------------ ------------ ------------
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Net realized gain on
investment
transactions......... 4,973,050 12,398,283 6,289,657
Net increase in
unrealized
appreciation......... 644,808,026 236,120,771 170,848,065
------------ ------------ ------------
NET REALIZED AND
UNREALIZED GAIN ON
INVESTMENTS........... 649,781,076 248,519,054 177,137,722
------------ ------------ ------------
NET INCREASE IN NET
ASSETS FROM
OPERATIONS............ $684,240,789 $275,671,130 $192,011,306
============ ============ ============
</TABLE>
- -----------

(a) Net of withholding tax expense of $289,809, $182,561, and $109,162 for
1997, 1996, and 1995, respectively.

See accompanying notes to financial statements

21
<PAGE>

SPDR TRUST SERIES 1

STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
FOR THE NINE MONTH
PERIOD ENDED FOR THE YEAR FOR THE YEAR
SEPTEMBER 30, 1997 ENDED ENDED
(NOTE 1) DECEMBER 31, 1996 DECEMBER 31, 1995
------------------ ----------------- -----------------
<S> <C> <C> <C>
INCREASE IN NET ASSETS FROM
OPERATIONS:
Net investment income..... $ 34,459,713 $ 27,152,076 $ 14,873,584
Net realized gain on
investment transactions. 4,973,050 12,398,283 6,289,657
Net increase in unrealized
appreciation............ 644,808,026 236,120,771 170,848,065
-------------- -------------- --------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS.......... 684,240,789 275,671,130 192,011,306
-------------- -------------- --------------
UNDISTRIBUTED NET
INVESTMENT INCOME
INCLUDED IN PRICE OF
UNITS ISSUED AND
REDEEMED, NET............
420,891 1,962,474 325,692
-------------- -------------- --------------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income..... (33,466,398) (27,037,456) (14,873,584)
In excess of net
investment
income.................. -- -- (310,588)
Net realized gains........ -- (3,078,255) (128,321)
-------------- -------------- --------------
TOTAL DISTRIBUTIONS TO
UNITHOLDERS.............. (33,466,398) (30,115,711) (15,312,493)
-------------- -------------- --------------
NET INCREASE IN NET ASSETS
FROM ISSUANCE AND
REDEMPTION OF SPDRS (NOTE
4).......................
1,393,422,226 759,578,491 401,629,719
-------------- -------------- --------------
NET INCREASE IN NET ASSETS
DURING PERIOD............ 2,044,617,508 1,007,096,384 578,654,224
NET ASSETS AT BEGINNING OF
PERIOD................... 2,008,327,169 1,001,230,785 422,576,561
-------------- -------------- --------------
NET ASSETS END OF PERIOD,
including
undistributed/(distribution
in excess of) net
investment income of
$993,315, $0, and
($1,122,255),
respectively............. $4,052,944,677 $2,008,327,169 $1,001,230,785
============== ============== ==============
</TABLE>

22
<PAGE>

SPDR TRUST SERIES 1

FINANCIAL HIGHLIGHTS

SELECTED DATA FOR A SPDR OUTSTANDING DURING THE PERIOD
- -------------------------------------------------------------------------------

<TABLE>
<CAPTION>
FOR THE
NINE MONTH FOR THE FOR THE FOR THE FOR THE
PERIOD ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
9/30/97 (NOTE 1) 12/31/96 12/31/95 12/31/94 12/31/93(1)
---------------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 74.08 $ 61.61 $ 45.93 $ 46.62 $ 43.54
---------- ---------- ---------- -------- --------
INVESTMENT OPERATIONS:
Net investment income
(2)................... 1.03 1.35 1.26 1.22 1.15
Net realized and
unrealized gain (loss)
on investments........ 20.67 12.52 15.70 (0.68) 3.06
---------- ---------- ---------- -------- --------
TOTAL FROM INVESTMENT
OPERATIONS............. 21.70 13.87 16.96 0.54 4.21
---------- ---------- ---------- -------- --------
LESS DISTRIBUTIONS FROM:
Net investment income.. (1.00) (1.28) (1.24) (1.23) (1.10)
In excess of net
investment income..... -- -- (0.03) -- --
Net realized gains..... -- (0.12) (0.01) 0.00 (0.03)
---------- ---------- ---------- -------- --------
TOTAL DISTRIBUTIONS..... (1.00) (1.40) (1.28) (1.23) (1.13)
---------- ---------- ---------- -------- --------
NET ASSET VALUE, END OF
PERIOD................. $ 94.78 $ 74.08 $ 61.61 $ 45.93 $ 46.62
========== ========== ========== ======== ========
TOTAL INVESTMENT RETURN. 29.38% 22.67% 37.23% 1.15% 9.78%
RATIOS AND SUPPLEMENTAL
DATA RATIO TO AVERAGE
NET ASSETS:
Total expenses (2)..... 0.19%(3) 0.20% 0.20% 0.20% 0.20%(3)
Net expenses after
Trustee earnings
credit (2)............ 0.18%(3) 0.18% 0.19% -- --
Net investment income
(2)................... 1.63%(3) 2.03% 2.35% 2.63% 2.62%(3)
Portfolio turnover rate
(4)................... 3.22% 4.37% 4.02% 4.07% 2.40%
Average Commission
Rate (5).............. $ 0.02 $ 0.02 -- -- --
NET ASSETS, END OF
PERIOD (000'S)......... $4,052,945 $2,008,327 $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,
$0.02, $0.01, $0.01 and $0.04 in 1997, 1996, 1995, 1994 and 1993,
respectively, and the ratio of expenses to average net assets would have
increased by 0.02%, 0.03%, 0.03%, 0.01% and 0.10% (on an annualized basis)
in 1997, 1996, 1995, 1994 and 1993, respectively.

(3) Annualized.

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

(5) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate for security transactions
on which a commission is charged.

See accompanying notes to financial statements

23
<PAGE>

SPDR TRUST SERIES 1

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 1997
- -------------------------------------------------------------------------------

NOTE 1--ORGANIZATION

SPDR Trust Series 1 (the "Trust") is a unit investment trust created under
the laws of the State of New York and registered under the Investment Company
Act of 1940. The Trust was created to provide investors with the opportunity
to purchase a security representing a proportionate undivided interest in a
portfolio of securities consisting of substantially all of the common stocks,
in substantially the same weighting, which comprise the Standard & Poor's 500
Composite Price Index (the "S&P Index"). Each unit of fractional undivided
interest in the Trust is referred to as a Standard & Poor's Depositary Receipt
("SPDR"). The Trust commenced operations on January 22, 1993 upon the initial
issuance of 150,000 SPDRs (equivalent to three "Creation Units"--see Note 4)
in exchange for a portfolio of securities assembled to reflect the intended
portfolio composition of the Trust. Effective September 30, 1997, the fiscal
year end of the Trust changed from December 31 to September 30.

NOTE 2--SIGNIFICANT ACCOUNTING POLICIES

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

SECURITY VALUATION

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

INVESTMENT TRANSACTIONS

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

24
<PAGE>

SPDR TRUST SERIES 1

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 30, 1997
- -------------------------------------------------------------------------------

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.

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.

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. Income and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally
accepted accounting principles. These differences are primarily due to
differing treatments for income equalization, in-kind transactions and losses
deferred due to wash sales. During 1997, the Trust reclassified $7,283,395 of
non-taxable security gains realized in the in-kind redemption of Creation
Units (Note 4) as an increase to paid in surplus in the Statement of Assets
and Liabilities. The Trust incurred net capital losses of $2,501,106 for the
year ended September 30, 1997. These losses may be utilized to offset any net
realized capital gains through September 30, 2005.

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

25
<PAGE>

SPDR TRUST SERIES 1

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 30, 1997
- -------------------------------------------------------------------------------

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-- 13/100 of 1% per annum plus or minus
$999,999,999 the Adjustment Amount
$1,000,000,000--and 11/100 of 1% per annum plus or minus
above 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 nine month period ended September 30, 1997,
the Adjustment Amount reduced the Trustee's fee by $163,230. The Adjustment
Amount included a deficiency of net transaction fees from processing orders of
($31,268) and a Trustee earnings credit of $194,498.

For the nine month period ended September 30, 1997, 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 18.45/100 of 1% per annum of the daily
net asset value of the Trust. The amount of such reimbursement for the nine
month period ended September 30, 1997 was $249,830.

NOTE 4--TRUST TRANSACTIONS IN SPDRS TRANSACTIONS IN SPDRS WERE AS FOLLOWS:

<TABLE>
<CAPTION>
NINE MONTH PERIOD ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, 1997 (NOTE 1) DECEMBER 31, 1996 DECEMBER 31, 1995
---------------------------- -------------------------- -------------------------
SPDRS AMOUNT SPDRS AMOUNT SPDRS AMOUNT
---------------------------- ---------- -------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
SPDRs sold.............. 23,800,000 $ 2,120,759,371 15,750,000 $1,100,700,575 11,700,000 $ 640,975,632
Dividend reinvestment
SPDRs issued........... 4,003 328,997 7,625 506,869 1,291 69,292
SPDRs redeemed.......... (8,150,000) (727,245,251) (4,900,000) (339,666,479) (4,650,000) (239,089,513)
Net income equalization. -- (420,891) -- (1,962,474) -- (325,692)
----------- --------------- ---------- -------------- ---------- -------------
Net increase............ 15,654,003 $ 1,393,422,226 10,857,625 $ 759,578,491 7,051,291 $ 401,629,719
=========== =============== ========== ============== ========== =============
</TABLE>

26
<PAGE>

SPDR TRUST SERIES 1

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 30, 1997
- -------------------------------------------------------------------------------

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 $1,500 to
$3,000 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.

NOTE 5--INVESTMENT TRANSACTIONS

For the nine month period ended September 30, 1997, the Trust had in-kind
contributions, in-kind redemptions, purchases and sales of investment
securities of $2,118,221,323, $725,169,854, $91,627,775, and $96,095,847,
respectively. At September 30, 1997, the cost of investments for federal
income tax purposes was $2,997,142,408, accordingly, gross unrealized
appreciation was $1,065,627,719 and gross unrealized depreciation was
$11,352,535, resulting in net unrealized appreciation of $1,054,275,184.

27
<PAGE>

SPDR TRUST SERIES 1

SCHEDULE OF INVESTMENTS (CONTINUED)

SEPTEMBER 30, 1997 (NOTE 1)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCKS SHARES VALUE
- ------------- ------- ----------
<S> <C> <C>
3Com Corp.*.............................................. 183,878 $9,423,747
Abbott Lab............................................... 426,658 27,279,446
Adobe Systems, Inc. ..................................... 38,353 1,932,020
Advanced Micro Devices, Inc.*............................ 76,025 2,475,564
Aeroquip-Vickers, Inc.................................... 16,151 791,399
Aetna, Inc............................................... 83,972 6,838,470
Ahmanson (H.F.) & Co..................................... 55,642 3,161,161
Air Products & Chemicals, Inc. .......................... 60,959 5,055,787
Airtouch Communications, Inc.*........................... 275,242 9,753,888
Alberto-Culver Co., Class B.............................. 31,484 958,294
Albertson's, Inc. ....................................... 140,014 4,882,988
Alcan Aluminum Ltd. ..................................... 126,980 4,412,555
Allegheny Teledyne, Inc.................................. 98,207 2,811,175
Allergan Pharmaceuticals, Inc............................ 36,090 1,306,007
Allied Signal, Inc....................................... 311,212 13,226,510
Allstate Corp. .......................................... 241,327 19,396,658
Alltel Corp.............................................. 100,745 3,475,703
Aluminum Co. of America.................................. 96,640 7,924,480
Alza Corp................................................ 46,864 1,359,056
Amerada Hess Corp........................................ 51,777 3,193,994
American Electric Power Co., Inc......................... 104,810 4,768,855
American Express Co...................................... 259,344 21,233,790
American General Corp.................................... 134,575 6,981,078
American Greetings Corp., Class A........................ 42,394 1,563,279
American Home Products Corp.............................. 355,687 25,965,151
American International Group, Inc........................ 389,007 40,140,660
American Stores Co....................................... 147,366 3,592,046
Ameritech Corp. ......................................... 301,900 20,076,350
Amgen, Inc............................................... 147,481 7,069,870
Amoco Corp............................................... 272,298 26,242,720
AMP, Inc................................................. 119,509 6,401,201
AMR Corp.*............................................... 49,785 5,510,577
Anadarko Petroleum Corp.................................. 31,684 2,275,307
Andrew Corp.*............................................ 50,577 1,324,485
Anheuser-Busch Cos., Inc. ............................... 272,100 12,278,512
</TABLE>
- -----------

(*) Denotes non-income producing security.

See accompanying notes to financial statements

28
<PAGE>

SPDR TRUST SERIES 1

SCHEDULE OF INVESTMENTS (CONTINUED)

SEPTEMBER 30, 1997 (NOTE 1)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCKS SHARES VALUE
- ------------- ------- ----------
<S> <C> <C>
Aon Corp................................................. 89,558 $4,735,379
Apache Corp. ............................................ 47,904 2,053,884
Apple Computer, Inc.*.................................... 70,020 1,518,559
Applied Materials, Inc.*................................. 100,589 9,581,102
Archer-Daniels-Midland Co................................ 311,326 7,452,366
Armco, Inc.*............................................. 60,895 365,370
Armstrong World Industries, Inc.......................... 23,036 1,544,852
ASARCO, Inc.............................................. 23,818 762,176
Ashland, Inc............................................. 41,336 2,247,645
AT & T Corp.............................................. 897,412 39,766,569
Atlantic Richfield Co.................................... 176,812 15,106,375
Autodesk, Inc............................................ 25,670 1,164,776
Automatic Data Processing, Inc........................... 160,332 8,016,600
Autozone, Inc.*.......................................... 81,316 2,439,480
Avery Dennison Corp...................................... 58,038 2,321,520
Autozone, Inc.*.......................................... 81,316 2,439,480
Avery Dennison Corp...................................... 58,038 2,321,520
Avon Products, Inc....................................... 71,856 4,455,072
Baker Hughes, Inc........................................ 91,823 4,017,256
Ball Corp................................................ 17,145 596,860
Baltimore Gas & Electric Co.............................. 82,175 2,280,356
Banc One Corp............................................ 317,114 17,698,925
Bank of New York, Inc.................................... 214,566 10,299,168
BankAmerica Corp......................................... 388,726 28,498,475
BankBoston Corp.......................................... 81,577 7,214,466
Bankers Trust Co. (N.Y.)................................. 53,262 6,524,595
Bard (C.R.), Inc......................................... 31,950 1,084,303
Barnett Banks, Inc....................................... 110,435 7,813,276
Barrick Gold Corp........................................ 201,487 4,986,803
Battle Mountain Gold Co.................................. 125,376 901,140
Bausch & Lomb, Inc....................................... 30,983 1,254,812
Baxter International, Inc................................ 153,662 8,028,839
Bay Networks, Inc.*...................................... 106,732 4,122,524
Becton, Dickinson & Co................................... 65,916 3,155,729
Bell Atlantic Corp....................................... 426,478 34,304,824
</TABLE>

See accompanying notes to financial statements
- ----------------------

(*) Denotes non-income producing security.

29
<PAGE>

SPDR TRUST SERIES 1

SCHEDULE OF INVESTMENTS (CONTINUED)

SEPTEMBER 30, 1997 (NOTE 1)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCKS SHARES VALUE
- ------------- ------- -----------
<S> <C> <C>
BellSouth Corp.......................................... 547,329 $25,313,966
Bemis Co., Inc.......................................... 29,430 1,316,993
Beneficial Corp......................................... 30,096 2,292,939
Bethlehem Steel Corp.*.................................. 60,838 627,392
Beverly Enterprises, Inc.*.............................. 53,448 928,659
Biomet, Inc............................................. 56,866 1,364,784
Black & Decker Corp..................................... 50,381 1,876,692
Block (H&R), Inc........................................ 58,618 2,264,120
Boeing Co............................................... 549,563 29,916,836
Boise Cascade Corp...................................... 26,736 1,124,583
Boston Scientific Corp.*................................ 108,093 5,965,382
Briggs & Stratton Corp.................................. 12,469 616,436
Bristol-Myers Squibb Co................................. 551,666 45,650,361
Brown-Forman Corp., Class B............................. 39,154 1,945,464
Browning-Ferris Industries, Inc......................... 116,084 4,418,447
Brunswick Corp.......................................... 55,121 1,943,015
Burlington Northern Santa Fe............................ 85,554 8,266,655
Burlington Resources, Inc............................... 70,139 3,599,007
Cabletron Systems, Inc.*................................ 87,171 2,789,472
Caliber System, Inc..................................... 22,118 1,199,902
Campbell Soup Co........................................ 255,706 12,529,594
Cardinal Health, Inc.................................... 60,819 4,318,149
Carolina Power & Light Co............................... 84,479 3,035,964
Case Corp............................................... 40,848 2,721,498
Caterpillar, Inc........................................ 208,834 11,263,984
Centex Corp............................................. 16,258 949,061
Central & South West Corp............................... 118,269 2,624,093
Ceridian Corp.*......................................... 44,770 1,656,490
Champion International Corp............................. 53,561 3,263,873
Charming Shoppes, Inc.*................................. 59,581 366,796
Chase Manhattan Corp.................................... 236,022 27,850,596
Chevron Corp............................................ 360,516 29,990,425
Chrysler Corp........................................... 377,208 13,885,969
Chubb Corp.............................................. 96,926 6,887,804
CIGNA Corp.............................................. 41,100 7,654,875
</TABLE>
- -----------

(*) Denotes non-income producing security.

See accompanying notes to financial statements

30
<PAGE>

SPDR TRUST SERIES 1

SCHEDULE OF INVESTMENTS (CONTINUED)

SEPTEMBER 30, 1997 (NOTE 1)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCKS SHARES VALUE
- ------------- --------- ----------
<S> <C> <C>
Cincinnati Milacron, Inc.................................. 21,064 $ 566,095
CINergy Corp.............................................. 87,942 2,940,561
Circuit City Stores, Inc.................................. 55,424 2,234,280
Cisco Systems, Inc.*...................................... 366,771 26,797,206
Citicorp.................................................. 254,764 34,122,453
Clear Channel Communications*............................. 51,434 3,336,781
Clorox Co................................................. 57,844 4,287,687
Coastal Corp.............................................. 58,874 3,606,033
Coca Cola Co.............................................. 1,368,813 83,412,042
Cognizant Corp............................................ 92,856 3,783,882
Colgate-Palmolive Co...................................... 161,767 11,273,138
Columbia / HCA Healthcare Corp............................ 365,225 10,500,219
Columbia Gas Systems, Inc................................. 30,331 2,123,170
Comcast Corp., Class A.................................... 193,421 4,980,591
Comerica, Inc............................................. 58,684 4,632,368
Compaq Computer Corp.*.................................... 414,122 30,955,625
Computer Associates International, Inc.................... 201,187 14,447,741
Computer Sciences Corp.*.................................. 42,637 3,016,568
ConAgra, Inc.............................................. 132,543 8,747,838
Conseco, Inc.............................................. 100,861 4,923,278
Consolidated Edison Co. of N.Y., Inc...................... 128,658 4,374,372
Consolidated Natural Gas Co............................... 53,107 3,090,164
Cooper Industries, Inc.................................... 66,129 3,575,099
Cooper Tire & Rubber Co................................... 39,584 1,051,450
Coors (Adolph) Co., Class B............................... 21,635 819,426
CoreStates Financial Corp................................. 114,870 7,602,958
Corning, Inc.............................................. 125,739 5,941,168
Costco Cos., Inc.*........................................ 117,338 4,414,842
Countrywide Credit Industries, Inc........................ 56,654 2,064,330
CPC International, Inc.................................... 78,794 7,298,294
Crane Co.................................................. 25,791 1,060,655
Crown Cork & Seal Co., Inc................................ 71,528 3,299,229
CSX Corp.................................................. 119,644 6,999,174
Cuc International, Inc.*.................................. 227,811 7,062,141
Cummins Engine Co., Inc................................... 21,624 1,688,024
</TABLE>
- -----------

(*) Denotes non-income producing security.

See accompanying notes to financial statements

31
<PAGE>

SPDR TRUST SERIES 1

SCHEDULE OF INVESTMENTS (CONTINUED)

SEPTEMBER 30, 1997 (NOTE 1)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCKS SHARES VALUE
- ------------- ------- ----------
<S> <C> <C>
CVS Corp................................................. 93,129 $5,296,712
Cyprus Amax Minerals Co.................................. 52,732 1,265,568
Dana Corp................................................ 57,162 2,822,374
Darden Restaurants, Inc.................................. 89,228 1,031,699
Data General Corp.*...................................... 21,897 583,008
Dayton-Hudson Corp....................................... 121,000 7,252,437
Deere & Co............................................... 140,226 7,537,147
Dell Computer Corp.*..................................... 183,944 17,819,575
Delta Air Lines, Inc..................................... 40,045 3,771,738
Deluxe Corp.............................................. 46,209 1,550,890
Digital Equipment Corp.*................................. 85,581 3,706,727
Dillards, Inc., Class A.................................. 63,057 2,762,685
Disney (Walt) Co. (The).................................. 372,653 30,045,148
Dominion Resources, Inc.................................. 100,909 3,821,928
Donnelley (R.R.) & Sons Co............................... 81,312 2,901,822
Dover Corp............................................... 62,708 4,256,306
Dow Chemical Co.......................................... 126,886 11,506,974
Dow Jones & Co., Inc..................................... 53,759 2,513,233
Dresser Industries, Inc.................................. 98,320 4,227,760
DSC Communications Corp.*................................ 65,712 1,770,117
DTE Energy Co............................................ 80,999 2,465,407
Du Pont (E.I.) de Nemours & Co., Inc..................... 624,020 38,416,231
Duke Power Co............................................ 197,040 9,741,165
Dun & Bradstreet Corp.................................... 95,290 2,703,854
Eastern Enterprises...................................... 11,374 424,392
Eastman Chemical Co...................................... 43,489 2,696,318
Eastman Kodak Co......................................... 180,442 11,717,452
Eaton Corp............................................... 43,012 3,973,234
Echlin, Inc.............................................. 34,965 1,225,960
Echo Bay Mines Ltd....................................... 72,864 414,414
Ecolab, Inc.............................................. 36,499 1,772,483
Edison International..................................... 223,569 5,645,117
EG & G, Inc.............................................. 26,863 555,728
EMC Corp.*............................................... 136,910 7,992,121
Emerson Electric Co...................................... 245,149 14,126,711
</TABLE>
- -----------

(*) Denotes non-income producing security.

See accompanying notes to financial statements

32
<PAGE>

SPDR TRUST SERIES 1

SCHEDULE OF INVESTMENTS (CONTINUED)

Engelhard Corp..................................... 80,890 $ 1,744,191
Enron Corp......................................... 169,843 6,538,955
Entergy Corp....................................... 130,039 3,389,141
Equifax, Inc....................................... 81,703 2,568,544
Exxon Corp......................................... 1,370,331 87,786,830
Federal Express Corp.*............................. 63,539 5,083,120
Freddie Mac........................................ 381,887 13,461,517
Fannie Mae......................................... 585,656 27,525,832
Federated Department Stores, Inc.*................. 115,129 4,964,938
Fifth Third Bancorp................................ 87,525 5,721,947
First Chicago NBD Corp. ........................... 167,734 12,621,983
First Data Corp. .................................. 246,742 9,268,246
First Union Corp................................... 316,316 15,835,570
Fleet Financial Group, Inc. ....................... 142,638 9,351,704
Fleetwood Enterprises, Inc......................... 19,587 657,389
Fleming Cos., Inc. ................................ 21,566 394,927
Fluor Corp......................................... 46,727 2,505,735
FMC Corp.*......................................... 20,407 1,811,121
Ford Motor Co. .................................... 654,115 29,598,704
Fort James Corp. .................................. 103,391 4,736,600
Fortune Brands, Inc................................ 93,626 3,154,026
Foster Wheeler Corp. .............................. 22,395 983,980
FPL Group, Inc..................................... 102,019 5,228,474
Freeport McMoran Copper & Gold..................... 108,626 3,129,787
Frontier Corp...................................... 88,635 2,038,605
Fruit of the Loom, Inc.*........................... 41,145 1,157,203
Gannett Co., Inc. ................................. 77,878 8,405,957
Gap, Inc. (The).................................... 149,155 7,467,072
General Dynamics Corp.............................. 35,069 3,055,387
General Electric Co................................ 1,807,764 123,040,937
General Mills, Inc. ............................... 88,327 6,089,043
General Motors Corp................................ 402,220 26,923,601
General Reinsurance Corp. ......................... 44,948 8,922,178
General Signal Corp................................ 27,538 1,191,019
Genuine Parts Co................................... 100,685 3,102,357
</TABLE>
- -----------

(*) Denotes non-income producing security.

See accompanying notes to financial statements

33
<PAGE>

SPDR TRUST SERIES 1

SCHEDULE OF INVESTMENTS (CONTINUED)

SEPTEMBER 30, 1997 (NOTE 1)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCKS SHARES VALUE
- ------------- ------- ----------
<S> <C> <C>
Georgia-Pacific Corp..................................... 50,956 $5,318,532
Giant Foods, Inc., Class A............................... 33,756 1,099,180
Gillette Co.............................................. 307,831 26,569,663
Golden West Financial Corp............................... 31,891 2,862,217
Goodrich (B.F.) Co....................................... 30,157 1,364,604
Goodyear Tire & Rubber Co. (The)......................... 86,950 5,977,812
GPU, Inc................................................. 66,841 2,397,921
Grace (W.R.) & Co........................................ 38,549 2,838,170
Grainger (W.W.), Inc..................................... 28,902 2,572,278
Great Atlantic & Pacific Tea Co., Inc.................... 20,755 658,971
Great Lakes Chemical Corp................................ 31,128 1,535,000
Green Tree Financial Corp................................ 72,841 3,423,527
GTE Corp................................................. 526,857 23,906,136
Guidant Corp............................................. 82,584 4,624,704
Halliburton Co........................................... 140,434 7,302,568
Harcourt General, Inc.................................... 39,975 1,981,261
Harland (John H.) Co..................................... 17,377 400,757
Harnischfeger Industries, Inc............................ 27,177 1,161,817
Harrahs Entertainment, Inc.*............................. 58,201 1,305,885
Harris Corp.............................................. 43,654 1,997,171
Hartford Financial Services Group........................ 64,496 5,550,687
Hasbro, Inc.............................................. 72,523 2,039,709
Healthsouth Corp.*....................................... 191,287 5,104,972
Heinz (H.J.) Co.......................................... 202,399 9,348,304
Helmerich & Payne, Inc................................... 14,164 1,133,120
Hercules, Inc............................................ 53,770 2,675,058
Hershey Foods Corp....................................... 75,858 4,285,977
Hewlett Packard Co....................................... 570,454 39,682,206
HFS, Inc.*............................................... 87,426 6,507,773
Hilton Hotels Corp....................................... 137,482 4,631,425
Home Depot, Inc. (The)................................... 402,655 20,988,392
Homestake Mining Co...................................... 81,178 1,243,038
Honeywell, Inc........................................... 70,739 4,752,777
Household International, Inc............................. 59,245 6,705,793
Houston Industries, Inc.................................. 149,945 3,261,299
</TABLE>
- -----------

(*) Denotes non-income producing security.

See accompanying notes to financial statements

34
<PAGE>

SPDR TRUST SERIES 1

SCHEDULE OF INVESTMENTS (CONTINUED)

SEPTEMBER 30, 1997 (NOTE 1)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCKS SHARES VALUE
- ------------- ------- ----------
<S> <C> <C>
Humana, Inc.*............................................ 90,968 $2,166,176
Huntington Bancshares, Inc............................... 86,974 3,136,500
Ikon Office Solutions, Inc............................... 72,721 1,858,931
Illinois Tool Works, Inc................................. 136,511 6,825,550
Inco, Ltd................................................ 94,258 2,362,341
Ingersoll Rand Co........................................ 87,813 3,781,447
Inland Steel Industries, Inc............................. 27,048 591,675
Intel Corp............................................... 904,113 83,460,931
International Business Machines Corp..................... 546,111 57,853,634
International Flavors & Fragrances, Inc.................. 58,926 2,887,374
International Paper Co................................... 165,571 9,116,753
Interpublic Group of Cos., Inc........................... 67,896 3,483,914
ITT Corp.*............................................... 64,956 4,400,769
ITT Industries, Inc...................................... 66,374 2,202,787
Jefferson-Pilot Corp..................................... 39,647 3,132,113
Johnson & Johnson........................................ 736,136 42,419,837
Johnson Controls, Inc.................................... 46,728 2,315,957
Jostens, Inc............................................. 21,881 593,522
K Mart Corp.*............................................ 271,573 3,802,022
Kaufman & Broad Home Corp................................ 21,056 456,652
Kellogg Co............................................... 230,808 9,722,787
Kerr-McGee Corp.......................................... 26,956 1,854,910
Keycorp.................................................. 123,771 7,874,930
Kimberly-Clark Corp...................................... 308,262 15,085,572
King World Productions, Inc.............................. 20,999 908,207
Kla-Tencor Corp.*........................................ 46,272 3,126,252
Knight Ridder, Inc. ..................................... 48,282 2,637,404
Kroger Co.*.............................................. 139,876 4,222,507
Laidlaw, Inc. ........................................... 175,730 2,624,967
Lilly (Eli) & Co......................................... 306,809 36,951,309
Limited, Inc. (The)...................................... 151,888 3,711,763
Lincoln National Corp.................................... 55,758 3,882,151
Liz Claiborne, Inc....................................... 40,157 2,206,125
Lockheed Martin Corp..................................... 105,199 11,216,843
</TABLE>
- -----------

(*) Denotes non-income producing security.

See accompanying notes to financial statements

35
<PAGE>

SPDR TRUST SERIES 1

SCHEDULE OF INVESTMENTS (CONTINUED)

SEPTEMBER 30, 1997 (NOTE 1)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCKS SHARES VALUE
- ------------- ------- ----------
<S> <C> <C>
Loews Corp............................................... 62,597 $7,069,549
Longs Drug Stores Corp................................... 22,243 593,610
Louisiana Land & Exploration Co.......................... 18,582 1,455,203
Louisiana Pacific Corp................................... 61,750 1,543,750
Lowes Cos., Inc.......................................... 94,032 3,655,494
LSI Logic Corp.*......................................... 74,777 2,402,211
Lucent Technologies, Inc................................. 353,340 28,753,042
Mallinckrodt, Inc........................................ 41,700 1,501,200
Manor Care, Inc.......................................... 34,992 1,163,484
Marriot International, Inc............................... 70,705 5,024,474
Marsh & McLennan Cos., Inc............................... 90,350 6,923,069
Masco Corp............................................... 90,714 4,155,835
Mattel, Inc.............................................. 161,141 5,337,796
May Department Stores Co................................. 131,618 7,173,181
Maytag Corp.............................................. 55,534 1,895,098
MBIA, Inc................................................ 24,324 3,051,142
MBNA Corp................................................ 182,481 7,390,480
McDermott International, Inc............................. 31,119 1,135,844
McDonald's Corp.......................................... 380,123 18,103,358
McGraw-Hill, Inc......................................... 55,740 3,772,901
MCI Communications Corp.................................. 378,793 11,127,044
Mead Corp................................................ 29,435 2,126,679
Medtronic, Inc........................................... 261,000 12,267,000
Mellon Bank Corp......................................... 140,960 7,717,560
Mercantile Stores Co., Inc............................... 20,512 1,290,974
Merck & Co., Inc......................................... 666,436 66,601,948
Meredith Corp............................................ 31,003 1,026,974
Merrill Lynch & Co., Inc................................. 181,608 13,473,043
MGIC Investment Corp..................................... 66,039 3,784,860
Micron Technology, Inc................................... 116,604 4,044,701
Microsoft Corp.*......................................... 661,673 87,547,609
Millipore Corp........................................... 24,139 1,185,828
Minnesota Mining & Manufacturing Co...................... 229,370 21,216,725
Mirage Resorts, Inc.*.................................... 96,512 2,907,424
</TABLE>
- -----------

(*) Denotes non-income producing security.

See accompanying notes to financial statements

36
<PAGE>

SPDR TRUST SERIES 1

SCHEDULE OF INVESTMENTS (CONTINUED)

SEPTEMBER 30, 1997 (NOTE 1)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCKS SHARES VALUE
- ------------- ------- -----------
<S> <C> <C>
Mobil Corp. ............................................ 434,434 $32,148,116
Monsanto Co............................................. 323,677 12,623,407
Moore Corp. Ltd. ....................................... 45,320 861,080
Morgan (J.P.) & Co., Inc................................ 101,860 11,573,842
Morgan Stanley, Dean Witter, Discover and Co............ 318,286 17,207,337
Morton International, Inc. ............................. 79,173 2,810,642
Motorola, Inc........................................... 327,953 23,571,622
Nacco Industries, Inc., Class A......................... 4,785 562,537
Nalco Chemical Co. ..................................... 37,057 1,484,596
National City Corp...................................... 121,465 7,477,689
National Semiconductor Corp.*........................... 75,810 3,108,210
National Service Industries, Inc........................ 23,473 1,031,345
NationsBank Corp. ...................................... 397,418 24,590,238
Navistar International Corp.*........................... 41,893 1,157,294
New York Times Co. (The), Class A....................... 54,223 2,846,708
Newell Co............................................... 88,610 3,544,400
Newmont Mining Corp..................................... 87,434 3,929,065
Nextlevel Systems, Inc.*................................ 74,268 1,243,989
Niagara Mohawk Power Corp.*............................. 82,411 788,055
NICOR, Inc.............................................. 27,977 1,049,138
Nike, Inc., Class B..................................... 158,897 8,421,541
Nordstrom, Inc.......................................... 44,906 2,862,758
Norfolk Southern Corp................................... 68,931 7,117,126
Northern States Power Co................................ 39,153 1,947,862
Northern Telecom Ltd.................................... 142,414 14,802,155
Northrop Corp. ......................................... 36,100 4,381,637
Norwest Corp............................................ 206,734 12,662,457
Novell, Inc.*........................................... 193,091 1,731,785
Nucor Corp. ............................................ 49,440 2,604,870
Occidental Petroleum Corp............................... 182,404 4,731,104
Ohio Edison Co. ........................................ 85,029 1,992,867
ONEOK, Inc. ............................................ 15,638 510,190
Oracle Systems Corp.*................................... 541,723 19,739,032
Oryx Energy Co.*........................................ 58,907 1,498,447
Owens Corning........................................... 29,297 1,069,341
</TABLE>
- -----------

(*) Denotes non-income producing security.

See accompanying notes to financial statements

37
<PAGE>

SPDR TRUST SERIES 1

SCHEDULE OF INVESTMENTS (CONTINUED)

SEPTEMBER 30, 1997 (NOTE 1)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCKS SHARES VALUE
- ------------- --------- ----------
<S> <C> <C>
Owens-Illinois, Inc.*.................................. 73,962 $2,510,085
P P & L Resources, Inc................................. 90,111 1,971,178
PACCAR, Inc............................................ 44,083 2,468,648
Pacific Enterprises.................................... 46,759 1,583,961
PacifiCorp............................................. 164,001 3,669,522
Pall Corp.............................................. 66,831 1,441,043
Parametric Technology Corp.*........................... 70,873 3,127,271
Parker-Hannifin Corp................................... 63,085 2,838,825
Peco Energy Co......................................... 124,142 2,909,578
Penney (J.C.) Co., Inc................................. 136,358 7,942,853
Pennzoil Co............................................ 26,120 2,081,438
Peoples Energy Corp.................................... 20,126 758,499
Pep Boys-Manny Moe & Jack.............................. 34,891 950,780
PepsiCo, Inc........................................... 846,568 34,338,914
Perkin-Elmer Corp...................................... 24,344 1,778,634
Pfizer, Inc............................................ 711,639 42,742,817
PG&E Corp.............................................. 242,277 5,617,798
Pharmacia & Upjohn, Inc................................ 278,266 10,156,709
Phelps Dodge Corp...................................... 34,336 2,665,332
Philip Morris Cos., Inc................................ 1,338,742 55,641,464
Phillips Petroleum Co.................................. 144,798 7,475,197
Pioneer Hi Bred International, Inc..................... 46,041 4,189,731
Pitney Bowes, Inc...................................... 80,944 6,733,529
Placer Dome, Inc....................................... 133,689 2,556,802
PNC Financial Corp..................................... 173,894 8,488,201
Polaroid Corp.......................................... 25,500 1,305,281
Potlatch Corp.......................................... 16,499 830,106
PPG Industries, Inc.................................... 100,103 6,275,207
Praxair, Inc........................................... 87,668 4,487,506
Procter & Gamble Co.................................... 745,476 51,484,436
Progressive Corp....................................... 38,868 4,163,735
Providian Financial Corp............................... 52,747 2,093,397
Public Service Enterprise, Inc......................... 128,909 3,319,407
Pulte Corp............................................. 12,668 484,551
</TABLE>
- -----------

(*) Denotes non-income producing security.

See accompanying notes to financial statements

38
<PAGE>

SPDR TRUST SERIES 1

SCHEDULE OF INVESTMENTS (CONTINUED)

SEPTEMBER 30, 1997 (NOTE 1)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCKS SHARES VALUE
- ------------- --------- -----------
<S> <C> <C>
Quaker Oats Co........................................ 75,582 $ 3,807,443
Ralston Purina Co..................................... 59,205 5,239,642
Raychem Corp.......................................... 24,770 2,093,065
Raytheon Co........................................... 128,970 7,625,351
Reebok International Ltd.............................. 31,306 1,524,211
Republic New York Corp................................ 30,192 3,430,566
Reynolds Metals Co.................................... 40,604 2,875,271
Rite Aid Corp......................................... 68,816 3,814,987
Rockwell International Corp........................... 118,162 7,436,821
Rohm & Haas Co........................................ 34,508 3,310,611
Rowan Cos., Inc.*..................................... 48,283 1,720,082
Royal Dutch Petroleum Co.............................. 1,183,801 65,700,955
Rubbermaid, Inc....................................... 84,659 2,164,096
Russell Corp.......................................... 21,501 632,936
Ryder Systems, Inc.................................... 42,450 1,525,547
SAFECO Corp........................................... 70,409 3,731,677
Safety-Kleen Corp..................................... 33,365 798,675
Salomon, Inc.......................................... 59,515 4,474,784
Sara Lee Corp......................................... 265,596 13,678,194
SBC Communications, Inc............................... 503,728 30,916,305
Schering-Plough Corp.................................. 403,528 20,781,692
Schlumberger Ltd...................................... 272,376 22,930,654
Schwab (Charles) Corp................................. 146,513 5,237,840
Scientific-Atlanta, Inc............................... 43,631 987,151
Seagate Technology, Inc.*............................. 135,941 4,910,869
Seagram Co. Ltd. (The)................................ 204,958 7,224,769
Sears, Roebuck & Co................................... 215,373 12,262,800
Service Corp. International........................... 132,874 4,276,882
Shared Medical System................................. 13,466 712,015
Sherwin-Williams Co................................... 95,601 2,814,254
Sigma Aldrich Corp.................................... 56,589 1,863,900
Silicon Graphics, Inc.*............................... 94,942 2,492,228
Snap On, Inc.......................................... 34,549 1,591,413
Sonat, Inc............................................ 48,487 2,466,776
</TABLE>
- -----------

(*) Denotes non-income producing security.

See accompanying notes to financial statements

39
<PAGE>

SPDR TRUST SERIES 1

SCHEDULE OF INVESTMENTS (CONTINUED)

SEPTEMBER 30, 1997 (NOTE 1)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCKS SHARES VALUE
- ------------- ------- ----------
<S> <C> <C>
Southern Co.............................................. 376,905 $8,503,919
Southwest Airlines Co.................................... 81,651 2,607,729
Springs Industries, Inc.................................. 11,038 579,495
Sprint Corp.............................................. 236,213 11,810,650
St. Jude Medical Center, Inc.*........................... 46,546 1,632,019
St. Paul Cos., Inc....................................... 46,344 3,779,933
Stanley Works (The)...................................... 49,205 2,115,815
State Street Corp........................................ 88,990 5,422,828
Stone Container Corp..................................... 54,567 849,199
Stride Rite Corp......................................... 28,544 387,128
Sun Co., Inc............................................. 41,175 1,803,980
Sun Microsystems, Inc.*.................................. 201,992 9,455,750
SunAmerica, Inc.......................................... 108,790 4,263,208
Suntrust Banks, Inc...................................... 122,083 8,294,014
Supervalu, Inc........................................... 29,256 1,148,298
Sysco Corp............................................... 96,889 3,578,837
Tandy Corp............................................... 56,914 1,913,733
Tektronix, Inc........................................... 18,764 1,265,397
Tele-Communications, Inc................................. 290,054 5,946,107
Tellabs, Inc.*........................................... 99,776 5,138,464
Temple-Inland, Inc....................................... 31,039 1,986,496
Tenet Healthcare Corp.*.................................. 166,113 4,838,041
Tenneco, Inc............................................. 95,216 4,558,466
Texaco, Inc.............................................. 290,782 17,864,919
Texas Instruments, Inc................................... 105,304 14,229,203
Texas Utilities Co....................................... 132,250 4,761,007
Textron, Inc............................................. 91,466 5,945,290
Thermo Electron Corp.*................................... 83,385 3,335,400
Thomas & Betts Corp...................................... 29,936 1,635,254
Time Warner, Inc......................................... 307,729 16,675,065
Times Mirror Co., Class A................................ 52,393 2,878,340
Timken Co................................................ 36,051 1,444,293
TJX Cos., Inc. (The)..................................... 84,770 2,590,783
Torchmark Corp........................................... 78,106 3,065,661
Toys R Us Co.*........................................... 155,686 5,526,853
</TABLE>

See accompanying notes to financial statements
- ----------------------

(*) Denotes non-income producing security.

40
<PAGE>

SPDR TRUST SERIES 1

SCHEDULE OF INVESTMENTS (CONTINUED)

SEPTEMBER 30, 1997 (NOTE 1)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCKS SHARES VALUE
- ------------- --------- ----------
<S> <C> <C>
Transamerica Corp...................................... 36,767 $3,658,317
Travelers, Inc......................................... 353,649 24,136,544
Tribune Co............................................. 69,074 3,682,508
TRW, Inc............................................... 67,619 3,710,593
Tupperware Corp........................................ 34,824 979,425
Tyco Laboratories, Inc................................. 146,050 11,985,228
U.S. Bancorp........................................... 134,304 12,960,325
U.S. Surgical Corp. ................................... 35,856 1,046,547
U.S. West Communication Group.......................... 262,801 10,117,838
U.S. West Media Group*................................. 337,746 7,535,958
Unicom Corp............................................ 120,247 2,810,774
Unilever N. V. (N.Y. shares)........................... 88,112 18,734,814
Union Camp Corp........................................ 38,493 2,374,537
Union Carbide Corp..................................... 66,341 3,229,977
Union Electric Co...................................... 56,884 2,186,479
Union Pacific Corp..................................... 136,911 8,574,051
Union Pacific Resources Group, Inc..................... 140,381 3,676,227
Unisys Corp.*.......................................... 97,765 1,497,027
United Healthcare Corp................................. 103,295 5,164,750
United Technologies Corp............................... 131,264 10,632,384
Unocal Corp............................................ 139,309 6,025,114
Unum Corp.............................................. 77,613 3,541,093
USAir Group, Inc.*..................................... 39,230 1,623,141
USF&G Corp............................................. 57,356 1,315,603
UST, Inc............................................... 103,604 3,166,397
USX-Marathon Group..................................... 157,758 5,866,626
USX-U.S. Steel Group................................... 47,562 1,652,780
V.F. Corp.............................................. 35,529 3,290,874
Viacom, Inc.*.......................................... 192,353 6,083,164
Wachovia Corp.......................................... 89,623 6,452,856
Wal-Mart Stores, Inc................................... 1,252,133 45,859,371
Walgreen Co............................................ 270,598 6,934,074
Warner-Lambert Co...................................... 149,524 20,176,395
Washington Mutual, Inc................................. 138,184 9,638,334
Waste Management, Inc.................................. 252,353 8,816,583
</TABLE>

See accompanying notes to financial statements
- ----------------------

(*) Denotes non-income producing security.

41
<PAGE>

SPDR TRUST SERIES 1

SCHEDULE OF INVESTMENTS (CONTINUED)

See accompanying notes to financial statements
- ----------------------

(*) Denotes non-income producing security.

42
<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 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
- -----------
* 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".

43
<PAGE>

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 September 30,
1997, 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)
every 15 seconds 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).
- -----------

*** As of December 31, 1997, 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.

44
<PAGE>

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

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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 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"). Severe economic or market disruptions 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 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

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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
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

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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 370 17th Street, Suite 3100, Denver, CO 80202
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.

Effective August 3, 1998, SPDRs may be created in advance of the receipt by
the Trustee of all or a portion of the Portfolio Deposit relating to such
SPDRs. In such cases, the Participating Party will remain liable for the full
deposit of the missing portion(s) of the Portfolio Deposit and will be
required to post collateral consisting of cash at least equal to 115% of the
marked-to-market value of such missing portion(s). Information concerning the
procedures for such cash collateralization will be available from the
Distributor prior to the effective date of these provisions. The Participant
Agreement for any Participating Party intending to follow such procedures will
contain terms and conditions permitting the Trust to buy the missing
portion(s) of the Portfolio Deposit at any time and will subject such
Participating Party to liability for any shortfall between the cost to the
Trust of purchasing such securities and the value of such collateral.

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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 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 not exceed $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

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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.

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

* As of December 31, 1997, the Exchange owned 4.68347% of the issued and
outstanding shares of common stock of the Depository and an affiliate of
the Exchange, AMEX Clearing Corp., owned 0.00188% of the issued and
outstanding shares of common stock of the Depository. Also as of such
date, the Trustee owned 4.35685% of the issued and outstanding shares of
the common stock of the Depository.

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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 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

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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 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 correspondence 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.

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<PAGE>

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 1997, there were 30 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

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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
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,

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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 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

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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 the fixed Mandatory Termination Date unless
terminated earlier under certain circumstances (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").

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<PAGE>

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 multiplied by 50,000 SPDRs in one Creation Unit aggregation
resulting in a net asset value per Creation Unit (the "NAV Amount"). The
Trustee then calculates 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

57
<PAGE>

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 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
- -----------
* 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>

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 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 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 aggregation not
to exceed (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.

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<PAGE>

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 103 separate
industry groups. Since 1968, the S&P Index has been a component of the U.S.
Commerce 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 1997. 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.

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<PAGE>

<TABLE>
<CAPTION>
CALENDAR
CALENDAR YEAR-END CHANGE IN AVERAGE
YEAR-END INDEX VALUE INDEX FOR YIELD FOR
YEAR INDEX VALUE* 1960=100 CALENDAR YEAR CALENDAR 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
1996..................... 740.74 1274.70 20.26 2.19
1997..................... 970.43 1,669.99 31.01 1.77
</TABLE>

- -----------
* 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.

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<PAGE>

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. Currently, the License Agreement is
scheduled to expire on January 22, 2018, in accordance with its terms. The
parties thereto may extend the term of the License Agreement beyond such date
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.

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<PAGE>

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.

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<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 900, investors
might expect a SPDR to trade at approximately $90. 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

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<PAGE>

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 the excess of net short-term capital
gains over net long-term capital losses) 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 the excess of net long-term capital
gains over net short-term capital losses are considered "capital gains
dividends" regardless of the length of time an investor has owned SPDRs. Any
loss on the sale or 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

65
<PAGE>

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. Under the
Taxpayer Relief Act of 1997, capital gains realized on the sale of property
held for more than one year but not more than eighteen months are considered
"mid-term gains." In the case of individuals, mid-term gains are taxed at
lower rates than ordinary income, but not as favorably as capital gains on
property held for more than eighteen months. The Trustee will identify in the
annual tax information statement provided to Beneficial Owners the breakdown
of capital gain distributions between mid-term gains and long-term gains.

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

66
<PAGE>

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 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.

Backup withholding at a rate of 31% will apply to dividends, capital gain
distributions, redemptions and sales of SPDRs unless (a) the Beneficial Owner
is a corporation or comes within certain other exempt categories and, when
required, demonstrates this fact, or (b) provides a taxpayer identification
number, certifies as to no loss of exemption from backup withholding, and
otherwise complies with applicable requirements of the backup withholding
rules. The amount of any backup withholding from a payment to a Beneficial
Owner will be allowed as a credit against the holder's U.S. federal income tax
liability and may entitle such holder to a refund from the U.S. Internal
Revenue Service, provided that the required information is furnished to the
U.S. Internal Revenue Service.

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, including the effect of possible legislative changes.

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<PAGE>

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.

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

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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

Until further notice, the Sponsor has undertaken that on each day during the
fiscal year ending September 30, 1998, 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 fiscal year expenses fall below the
0.1845% per annum level on any given day. For purposes of this undertaking 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. After September 30, 1998, the
Sponsor may discontinue this undertaking or renew it for an additional period
of time, or 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.

Subject to any applicable cap, 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.

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<PAGE>

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 the specific expenses discussed in the previous paragraph,
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 $549,500, 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. Pursuant to the provisions of an exemptive order, the
expenses set forth in this paragraph may be charged to the Trust by the
Trustee in an amount equal to the actual costs incurred, but in no case shall
such charges exceed 20/100 of 1% (0.20%) per annum of the daily net asset
value of the Trust.

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

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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>
FEE AS A PERCENTAGE OFNET ASSET VALUE
NET ASSET VALUE OF THE TRUST 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 fee indicated applies to that portion of the net asset value of the
Trust which falls in the size category indicated.

As of September 30, 1997, and as of December 31, 1997 the net asset value of
the Trust was $4,052,944,677 and $5,515,102,110, respectively. 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,

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<PAGE>

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 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

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<PAGE>

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 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

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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 equal
to the actual amounts incurred in connection with such transaction(s) but in
any case 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

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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.

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 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").
Information regarding Cash Redemption Payment amounts, number of outstanding
SPDRs and Transaction Fees may be obtained from the Trustee at the toll-free
number: 1-800-545-4189.

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<PAGE>

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 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.

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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

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<PAGE>

(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.

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,

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<PAGE>

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 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

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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.

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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").

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.

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Promptly after the end of each fiscal 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 fiscal 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.

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

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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 the net asset value
of the Trust 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

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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. Currently, the License
Agreement is scheduled to expire on January 22, 2018, in accordance with its
terms. The parties thereto may extend the term of the License Agreement beyond
such date without the consent of any of the Beneficial Owners of SPDRs. 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.

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

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

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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.

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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 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.

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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 Carter,
Ledyard & Milburn, New York, New York, as counsel for the Sponsor.

INDEPENDENT ACCOUNTANTS

The financial statements as of September 30, 1997 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.

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

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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; costs of fund management and administration;
cost and advantages of intraday trading; 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 lending their SPDR shares to short
sellers may generate stock loan credits which may supplement the return they
can earn from an investment in SPDRs. These stock loan credits may provide a
useful source of additional income for certain institutional investors who can
arrange to lend SPDRs. Potential short sellers may be advised that a short
rebate (functionally equivalent to partial use of proceeds of the short sale)
may reduce their cost of selling short.

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.) Based on projected differences between SPDRs and
conventional mutual funds with regard to capital gains distributions,
projections may be made regarding comparative capital gains distributions and
tax rates for taxable

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investors holding SPDRs over a long period of time. 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.

Specifically, information may be provided to prospective or current
investors comparing and contrasting the tax efficiencies of conventional
mutual funds with SPDRs. Both conventional mutual funds and the SPDR Trust may
be required to recognize capital gains incurred as a result of adjustments to
the composition of the S&P 500 Index and therefore to their respective
portfolios. From a tax perspective, however, a significant difference between
a conventional mutual fund and the SPDR Trust is the process by which their
shares are redeemed. In cases where a conventional mutual fund experiences
redemptions in excess of subscriptions ("net redemptions") and has
insufficient cash available to fund such net redemptions, such fund may have
to sell stocks held in its portfolio to raise and pay cash to redeeming
shareholders. A mutual fund will generally experience a taxable gain or loss
when it sells such portfolio stocks in order to pay cash to redeeming fund
shareholders. In contrast, the redemption mechanism for SPDRs does not involve
selling the portfolio stocks held by the SPDR Trust in the event of a
redemption. Instead, the SPDR Trust delivers the actual portfolio of stocks in
an "in-kind" exchange to any person redeeming SPDR shares in Creation Unit
size aggregations (i.e., 50,000 SPDRs per Creation Unit). While this "in-kind"
exchange is a taxable transaction to the redeeming entity (usually a
broker/dealer) making the exchange, it generally does not constitute a taxable
transaction at the SPDR Trust level and, consequently, there is no realization
of taxable gain or loss by the SPDR Trust with respect to such "in-kind"
exchanges. In a period of market appreciation of the S&P 500 Index and,
consequently, appreciation of SPDR shares, this "in-kind" redemption mechanism
has the effect of eliminating the recognition and distribution of those net
unrealized gains at the SPDR Trust level. Investors should note that although
the same result would obtain for conventional mutual funds utilizing an "in-
kind" redemption mechanism, the opportunities to redeem fund shares by
delivering portfolio stocks "in-kind" are limited in most mutual funds.

Investors may be informed that, while no unequivocal statement can be made
as to the net tax impact on a conventional mutual fund resulting from the
purchases and sales of its portfolio stocks over a period of time,
conventional funds that have accumulated substantial unrealized capital gains,
if they experience net redemptions and do not have sufficient available cash,
may be required to make taxable capital gains distributions that are generated
by changes in such fund's portfolio. In contrast, the "in-kind" redemption
mechanism of SPDRs may make them more tax efficient investments under most
circumstances than comparable conventional mutual fund shares. As discussed
above, the "in-kind" redemption feature of the SPDR Trust tends to lower the
amount of annual net capital gains distributions to SPDR holders as

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compared to their conventional mutual fund counterparts. Since shareholders
are generally required to pay income tax on capital gains distributions, the
smaller the amount of such distributions, the less taxes that are payable
currently. To the extent that the SPDR Trust is not required to recognize
capital gains, the SPDR holder is able, in effect, to defer tax on such gains
until he sells or otherwise disposes of his shares, or the SPDR Trust
terminates. If such holder retains his shares until his death, under current
law the tax basis of such shares would be adjusted to their then fair market
value.

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 investors
or current Beneficial Owners comparing and contrasting the relative advantages
of investing in SPDRs as compared to other investment 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

91
<PAGE>

of tax-exempt funds) or mutual funds such as those reported by Lipper
Analytical Services Inc., Money Magazine Fund Watch, Wiesenberger Investment
Companies Service, Morningstar Incorporated and Value Line Investment Survey
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 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. In addition to all other sources of
comparative information, comparative performance figures published by other
funds or money managers may be included from time to 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 minus one hundred percent (-100%) (i.e.
perfect negative linear association) to positive one hundred percent (100%)
(i.e., perfect linear association).

One important difference between SPDRs and conventional mutual fund shares
is that the SPDRs are available for purchase or sale on an intraday basis on
the American Stock Exchange. An investor who buys shares in a conventional
mutual fund will buy or sell shares at a price at or related to the closing
net asset value per share, as determined by the fund. In contrast, SPDRs are
not offered for purchase or redeemed for cash at a fixed relationship to
closing NAV. The tables below illustrate the distribution relationship of
SPDRs closing prices to NAV for the period 1/29/93 (the commencement date of
the SPDR Trust) through 12/31/97, the distribution relationships of high, low
and closing prices over the same period, and distribution of bid/asked spreads
for 1997. This table should help investors evaluate some of the advantages and
disadvantages of SPDRs relative to funds sold and redeemed at prices related
to closing NAV. Specifically, the table illustrates in an approximate way the
risks of buying or selling SPDRs at prices less favorable than closing NAV
and, correspondingly, the opportunities to buy or sell at prices more
favorable than closing NAV.

The investor who purchases or sells SPDRs may wish to evaluate the
opportunity to buy or sell on an intraday basis versus the assurance of a
transaction at or related to closing NAV. To assist investors in making this
comparison, the table illustrates the distribution of percentage ranges
between the high and the low price each day and between each extreme daily
value and the closing NAV for all trading days from 1/29/93 through 12/31/97.
The investor may wish to compare these ranges with the average bid/asked
spread on SPDRs and add any commissions charged by a broker.

92
<PAGE>

The trading ranges for this period will not necessarily be typical of trading
ranges in future years and the bid/asked spread on SPDRs may vary materially
over time and may be significantly greater at times in the future. There is
some evidence, for example, that the bid/asked spread will widen in more
volatile markets and narrow when markets are less volatile. Consequently, the
investor should expect wider bid/asked spreads to be associated with wider
daily spread ranges.

DAILY PERCENTAGE PRICE RANGES: AVERAGE AND FREQUENCY DISTRIBUTION FOR
SPDR TRUST AND S&P 500 COMPOSITE INDEX; HIGHS AND LOWS VS. CLOSE*

(From Inception of Trust through 12/31/97 Except as Noted)

S&P 500 COMPOSITE INDEX

<TABLE>
<CAPTION>
INTRADAY HIGH VALUE INTRADAY LOW VALUE
DAILY % PRICE RANGE ABOVE CLOSING VALUE BELOW CLOSING VALUE
-------------------- -------------------- --------------------
RANGE FREQUENCY % OF TOTAL FREQUENCY % OF TOTAL FREQUENCY % OF TOTAL
----- --------- ---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
0-- .25% 6 0.48% 610 49.00% 386 31.00%
.25-- .5% 226 18.15% 283 22.73% 353 28.35%
.5-- 1% 590 47.39% 231 18.55% 328 26.35%
1-- 1.5% 266 21.37% 70 5.62% 120 9.64%
1.5-- 2% 98 7.87% 36 2.89% 43 3.45%
2-- 2.5% 38 3.05% 10 0.80% 9 0.72%
2.5-- 3% 14 1.12% 3 0.24% 3 0.24%
3-- 3.5% 3 0.24% 1 0.08% 1 0.08%
> 3.5% 4 0.32% 1 0.08% 2 0.16%
- --------- ----- ------- ----- ------- ----- -------
Total 1,245 100.00% 1,245 100.00% 1,245 100.00%

Average Daily Range: 0.9403%

SPDR TRUST

<CAPTION>
INTRADAY HIGH VALUE INTRADAY LOW VALUE
DAILY % PRICE RANGE ABOVE CLOSING VALUE BELOW CLOSING VALUE
-------------------- -------------------- --------------------
RANGE FREQUENCY % OF TOTAL FREQUENCY % OF TOTAL FREQUENCY % OF TOTAL
----- --------- ---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
0-- .25% 24 1.93% 546 43.86% 399 32.05%
.25-- .5% 246 19.76% 316 25.38% 373 29.96%
.5-- 1% 500 40.16% 228 18.31% 295 23.69%
1-- 1.5% 283 22.73% 101 8.11% 115 9.24%
1.5-- 2% 111 8.92% 25 2.01% 39 3.13%
2-- 2.5% 47 3.78% 22 1.77% 17 1.37%
2.5-- 3% 25 2.01% 4 0.32% 5 0.40%
3-- 3.5% 3 0.24% 2 0.16% 0 0.00%
> 3.5% 6 0.48% 1 0.08% 2 0.16%
- --------- ----- ------- ----- ------- ----- -------
Total 1,245 100.00% 1,245 100.00% 1,245 100.00%
</TABLE>

- ----------- Average Daily Range: 0.9592%
* Source: FactSet Research Systems, Inc.

93
<PAGE>

FREQUENCY DISTRIBUTION FOR SPDR TRUST: HIGHS AND LOWS VS. NET
ASSET VALUE; BID/ASKED SPREAD DISTRIBUTION*

(From Inception of Trust through 12/31/97 Except as Noted)

SPDR TRUST

<TABLE>
<CAPTION>
CLOSING PRICE ON AMEX CLOSING PRICE ON AMEX
ABOVE TRUST NAV BELOW TRUST NAV
--------------------------------- ---------------------------------
RANGE FREQUENCY % OF TOTAL FREQUENCY % OF TOTAL
----- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
0-- .25% 558 91.78% 552 86.66%
.25-- .5% 45 7.40% 66 10.36%
.5-- 1% 3 0.49% 19 2.98%
1-- 1.5% 1 0.16% 0 0.00%
1.5-- 2% 1 0.16% 0 0.00%
2-- 2.5% 0 0.00% 0 0.00%
2.5-- 3% 0 0.00% 0 0.00%
3-- 3.5% 0 0.00% 0 0.00%
> 3.5% 0 0.00% 0 0.00%

- --------- -------- ------------ -------- ------------
Total 608 100.00% 637 100.00%
</TABLE>

Close was within 0.25% of NAV better than 89% of the time.

SPDR BID/ASKED SPREAD DISTRIBUTION (1997 Only)

<TABLE>
<CAPTION>
RANGE % OF TOTAL
-------------- ----------
<S> <C>
1/64 -- 1/16 2.38%
5/64 -- 1/8 74.02%
9/64 -- 3/16 21.32%
13/64 -- 1/4 2.06%
17/64 -- 5/16 0.13%
21/64 -- 3/8 0.09%
> 25/64 0.02%
-------------- -------
Total 100.00%
</TABLE>

The price range of shares for 1997 was from 73 3/8 to 98 15/16; consequently,
1/8 was from 0.17% to 0.13% of the share price.

- -----------
* Source: American Stock Exchange

94
<PAGE>

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.

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

95
<PAGE>

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 fiscal year. The Trustee estimates that
during fiscal year 1997, 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 fiscal year 1997.

96
<PAGE>

GLOSSARY OF DEFINED TERMS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
"Adjustment Amount"....................................................... 71
"Adjustment Day".......................................................... 57
"Balancing Amount"........................................................ 57
"Beneficial Owners"....................................................... 50
"Business Day"............................................................ 8
"Cash Component".......................................................... 5
"Cash Redemption Payment"................................................. 73
"Closing Time"............................................................ 46
"Code".................................................................... 9
"Commission".............................................................. 5
"Creation Unit"........................................................... 1
"Depository Agreement".................................................... 51
"Depository".............................................................. 8
"Distributor"............................................................. 13
"Dividend Equivalent Payment"............................................. 5
"Dividend Payment Date"................................................... 79
"DTC Cut-Off Time"........................................................ 76
"DTC Participants"........................................................ 50
"Evaluation Time"......................................................... 2
"Ex-Dividend Date"........................................................ 78
"Excess Cash Amounts"..................................................... 73
"Exchange"................................................................ 1
"Global Security"......................................................... 49
"Index Securities"........................................................ 4
"Indirect Participants"................................................... 50
"Initial Date of Deposit"................................................. 3
"License Agreement"....................................................... 62
"Misweighting Amount"..................................................... 53
"Misweighting"............................................................ 53
"NAV Amount".............................................................. 57
"NSCC Business Day"....................................................... 16
"NSCC".................................................................... 5
"Participant Agreement"................................................... 48
"Participating Party"..................................................... 5
"Portfolio Deposit Amount"................................................ 57
"Portfolio Deposit"....................................................... 6
"Portfolio"............................................................... 43
"Record Date"............................................................. 78
"Request Day"............................................................. 57
"S&P"..................................................................... 8
</TABLE>

97
<PAGE>

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
"S&P Index"............................................................... 1
"Securities".............................................................. 1
"Service"................................................................. 95
"SPDR Clearing Process"................................................... 6
"SPDR".................................................................... 1
"Sponsor"................................................................. 1
"Standard & Poor's"....................................................... 8
"Termination Date"........................................................ 13
"Transaction Fee"......................................................... 6
"Transmittal Date"........................................................ 46
"Trust Agreement"......................................................... 4
"Trust"................................................................... 1
"Trustee"................................................................. 4
"Weighting Analysis"...................................................... 54
</TABLE>

98
<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.

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

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

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

SPONSOR
PDR SERVICES
CORPORATION

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

TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ESSENTIAL INFORMATION..................................................... 2
PROSPECTUS SUMMARY........................................................ 4
SPECIAL CONSIDERATIONS AND RISK FACTORS................................... 15
REPORT OF INDEPENDENT ACCOUNTANTS......................................... 19
STATEMENT OF ASSETS AND LIABILITIES....................................... 20
SCHEDULE OF INVESTMENTS................................................... 28
THE TRUST................................................................. 43
THE PORTFOLIO............................................................. 52
THE S&P INDEX............................................................. 60
LICENSE AGREEMENT......................................................... 62
EXCHANGE LISTING.......................................................... 64
TAX STATUS OF THE TRUST................................................... 64
CONTINUOUS OFFERING OF SPDRs.............................................. 68
EXPENSES OF THE TRUST..................................................... 69
REDEMPTION OF SPDRS....................................................... 72
VALUATION................................................................. 77
ADMINISTRATION OF THE TRUST............................................... 78
RESIGNATION, REMOVAL AND LIABILITY........................................ 85
SPONSOR................................................................... 87
TRUSTEE................................................................... 88
DEPOSITORY................................................................ 88
LEGAL OPINION............................................................. 88
INDEPENDENT ACCOUNTANTS................................................... 88
INFORMATION AND COMPARISONS RELATING TO TRUST, SECONDARY MARKET TRADING,
NET ASSET SIZE, PERFORMANCE AND TAX TREATMENT........................... 88
DIVIDEND REINVESTMENT SERVICE............................................. 95
ADDITIONAL INFORMATION.................................................... 96
GLOSSARY OF DEFINED TERMS................................................. 97
</TABLE>

JANUARY 26, 1998
<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.C2)
Carter, Ledyard & Milburn
(included in Exhibit 99.C1)

The following exhibits:

Ex-27. Financial Data Schedule

Ex-99.C1 Opinion of Counsel as to legality of
securities being registered.

Ex-99.C2 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. 312 filed on June 27, 1997.
<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, in the City of New York, and State of New York, on the 26th day of
January, 1998.
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**

Gary L. Gastineau Vice President and Director***

Paul R. Shackford Treasurer and Director****

_______________________________

Joseph Stefanelli
Attorney-in-fact*
- --------

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

*** Executed copy of the power of attorney was previously filed with the
Commission 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.

**** Executed copy of the power of attorney is filed contemporaneously herewith
as Exhibit No.5.

<PAGE>

EXHIBIT INDEX

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

No. 1 Ex-27 Financial Data Schedule.

No. 2 Ex-99.C1 Copy of Opinion of Counsel as to legality of
securities being registered.

No. 4 Ex-99.C2 Consent of Independent Accountants.

<PAGE>

<ARTICLE> 6

<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 2,996,466,067
<INVESTMENTS-AT-VALUE> 4,051,417,592
<RECEIVABLES> 142,165,405
<ASSETS-OTHER> 17,454,396
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,211,037,393
<PAYABLE-FOR-SECURITIES> 142,117,918
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 15,974,798
<TOTAL-LIABILITIES> 158,092,716
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,000,177,285
<SHARES-COMMON-STOCK> 42,762,984
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 993,315
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (3,177,448)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,054,951,525
<NET-ASSETS> 4,052,944,677
<DIVIDEND-INCOME> 38,356,337
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 3,896,624
<NET-INVESTMENT-INCOME> 34,459,713
<REALIZED-GAINS-CURRENT> 4,973,050
<APPREC-INCREASE-CURRENT> 644,808,026
<NET-CHANGE-FROM-OPS> 684,240,789
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 33,466,398
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 23,800,000
<NUMBER-OF-SHARES-REDEEMED> 8,150,000
<SHARES-REINVESTED> 4,003
<NET-CHANGE-IN-ASSETS> 2,044,617,508
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,340,952
<AVERAGE-NET-ASSETS> 2,823,717,709
<PER-SHARE-NAV-BEGIN> 74.08
<PER-SHARE-NII> 1.03
<PER-SHARE-GAIN-APPREC> 20.67
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (1.00)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 94.78
<EXPENSE-RATIO> 0.19
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<PAGE>

Exhibit No.2

(Ex.99.C1)

(212) 238-8665

January 26, 1998

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. 6 to the Trust's registration Statement ("Post-Effective Amendment
No. 6") will be filed with the Securities and Exchange Commission (the
"Commission") and dated 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 as 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;

<PAGE>

(d) the Registration Statement on Form S-6 (File No. 33- 46080) filed with
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. 6
thereto proposed to be filed and dated 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 included in Post-Effective Amendment No. 6 (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"), as amended (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 (except "Blue Sky" laws) and the federal laws of 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; and

(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;

In addition, we have participated in conferences with
representatives of the Sponsor, the Exchange, the Trustee, 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>

(a) limitations imposed by bankruptcy, insolvency, reorganization,
arrangement, fraudulent conveyance, moratorium, or other laws relating to
or affecting the enforcement of creditors' rights 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 consent to the filing of this opinion as an exhibit to
Post-Effective Amendment No. 6 and to the use of our name where it appears in
the Post-Effective Amendment No. 6 and the Prospectus.

Very truly yours,

Carter, Ledyard & Milburn

<PAGE>

EXHIBIT NO. 3

(Ex. 99.C2)

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Prospectus constituting part of this Post
Effective Amendment No. 6 to the registration statement on Form S-6 (the
"Registration Statement") of our report dated November 14, 1997, relating to the
financial statements and financial highlights of SPDR Trust Series 1, 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

January 23, 1998