<PAGE> 1
STANDARD AND POOR'S DEPOSITARY RECEIPTS(TM) ("SPDRS")(TM)
SPDR TRUST SERIES 1
A UNIT INVESTMENT TRUST
ANNUAL REPORT
SEPTEMBER 30, 1998
"S&P", "S&P 500", "Standard & Poor's", "Standard & Poor's Depositary Receipts",
and "SPDRs" are trademarks of McGraw-Hill, Inc. and have been licensed for use
by PDR Services LLC and the American Stock Exchange LLC. The Trust, however, is
not sponsored by or affiliated with Standard & Poor's Corporation or
McGraw-Hill, Inc.
<PAGE> 2
SPDR TRUST SERIES 1
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
COMMON STOCKS SHARES VALUE
- -------------------------------------------------------------------------
<C> <C> <C>
3Com Corp.* ................................. 346,282 $ 10,410,103
Abbott Lab. ................................. 1,529,590 66,441,566
Adobe Systems, Inc. ....... ................. 70,555 2,447,377
Advanced Micro Devices, Inc.* ............... 142,143 2,638,529
Aeroquip-Vickers, Inc. ...................... 29,251 840,966
Aetna, Inc. ................................. 145,118 10,085,701
Ahmanson (H.F.) & Co. ....................... 120,874 6,708,507
Air Products & Chemicals, Inc. .............. 227,516 6,768,601
Airtouch Communications, Inc.* .............. 562,294 32,050,758
Alberto-Culver Co., Class B ................. 57,744 1,349,766
Albertson's, Inc. ........................... 238,026 12,883,157
Alcan Aluminum Ltd. ......................... 232,080 5,439,375
Allegheny Teledyne, Inc. .................... 184,690 3,289,791
Allergan Pharmaceuticals, Inc. .............. 66,318 3,871,313
Allied Signal, Inc. ......................... 559,998 19,809,929
Allstate Corp. .............................. 814,420 33,951,134
Alltel Corp. ................................ 265,992 12,601,371
Aluminum Co. of America ..................... 182,834 12,981,214
Alza Corp. .................................. 86,852 3,767,206
Amerada Hess Corp. .......................... 84,431 4,870,613
Ameren Corp. ................................ 132,636 5,562,422
American Electric Power Co., Inc. ........... 192,636 9,403,045
American Express Co. ........................ 448,798 34,837,945
American General Corp. ...................... 250,929 16,028,090
American Greetings Corp., Class A ........... 66,905 2,646,929
American Home Products Corp. ................ 1,303,620 68,277,097
American International Group, Inc. .......... 1,041,166 80,169,782
American Stores Co. ......................... 273,898 8,816,092
Ameritech Corp. ............................. 1,095,893 51,917,931
Amgen, Inc.* ................................ 248,162 18,751,741
Amoco Corp. ................................. 950,530 51,209,804
AMP, Inc. ................................... 221,171 7,906,863
AMR Corp.* .................................. 184,112 10,206,709
Anadarko Petroleum Corp. .................... 118,570 4,661,283
Andrew Corp. * .............................. 91,919 1,217,927
Anheuser-Busch Cos., Inc. ................... 475,345 25,668,630
Aon Corp. ................................... 167,478 10,802,331
Apache Corp. ................................ 91,946 2,465,302
Apple Computer, Inc.* ....................... 130,275 4,966,734
Applied Materials, Inc.* .................... 370,517 9,355,554
Archer-Daniels-Midland Co. .................. 602,054 10,084,404
Armco, Inc.* ................................ 110,791 553,955
Armstrong World Industries, Inc. ............ 41,612 2,226,242
ASARCO, Inc. ................................ 42,605 814,821
Ascend Communications, Inc.* ................ 184,302 8,385,741
Ashland, Inc. ............................... 76,306 3,529,153
Associates First Capital Corp. .............. 341,920 22,310,280
AT & T Corp. ................................ 1,794,103 104,842,894
Atlantic Richfield Co. ...................... 314,114 22,282,462
Autodesk, Inc. .............................. 47,724 1,252,755
Automatic Data Processing, Inc. ............. 298,133 22,285,442
Autozone, Inc. * ............................ 151,731 3,736,376
Avery Dennison Corp. ........................ 109,216 4,771,374
Avon Products, Inc. ......................... 265,592 7,453,176
Baker Hughes, Inc. .......................... 320,220 6,704,606
Ball Corp. .................................. 31,015 1,093,279
Baltimore Gas & Electric Co. ................ 150,706 5,029,813
Banc One Corp. .............................. 688,883 29,363,638
Bank of New York, Inc. ...................... 741,088 20,287,284
BankAmerica Corp. ........................... 677,995 40,764,449
BankBoston Corp. ............................ 295,604 9,754,932
Bankers Trust Co. (N.Y.) .................... 89,825 5,299,675
Bard (C.R.), Inc. ........................... 58,392 2,153,205
Barrick Gold Corp. .......................... 374,090 7,481,800
Battle Mountain Gold Co. .................... 231,897 1,405,876
Bausch & Lomb, Inc. ......................... 56,774 2,235,476
Baxter International, Inc. .................. 272,909 16,238,085
BB & T Corp. ................................ 274,700 8,223,831
Bear Stearns Cos., Inc. ..................... 107,056 3,312,045
Becton, Dickinson & Co. ..................... 245,802 10,108,607
Bell Atlantic Corp. ......................... 1,539,144 74,552,287
BellSouth Corp. ............................. 971,985 73,141,871
Bemis Co., Inc. ............................. 54,032 1,894,497
Bestfoods ................................... 278,398 13,484,903
Bethlehem Steel Corp.* ...................... 116,877 964,235
Biomet, Inc. ................................ 108,662 3,769,213
Black & Decker Corp. ........................ 94,273 3,924,114
Block (H&R), Inc. ........................... 107,034 4,428,532
BMC Software, Inc..* ........................ 212,600 12,753,874
Boeing Co. .................................. 999,207 34,285,290
Boise Cascade Corp. ......................... 52,820 1,337,006
Boston Scientific Corp.* .................... 195,877 10,063,181
Briggs & Stratton Corp. ..................... 23,745 976,513
Bristol-Myers Squibb Co. .................... 987,568 102,583,626
Brown-Forman Corp., Class B ................. 70,992 4,259,520
Browning-Ferris Industries, Inc. ............ 172,460 5,216,915
Brunswick Corp. ............................. 101,203 1,309,314
Burlington Northern Santa Fe ................ 474,728 15,191,296
Burlington Resources, Inc. .................. 180,493 6,745,926
Cabletron Systems, Inc.* .................... 160,336 1,803,780
Campbell Soup Co. ........................... 445,438 22,355,420
Capital One Financial Corp. ................. 64,582 6,684,237
Cardinal Health, Inc. ....................... 130,741 13,499,008
Carolina Power & Light Co. .................. 142,830 6,596,961
Case Corp. .................................. 75,414 1,640,255
Caterpillar, Inc. ........................... 356,434 15,883,590
CBS Corp. ................................... 710,428 17,227,879
Cendant Corp.* .............................. 827,176 9,615,921
Centex Corp. ................................ 60,060 2,072,070
Central & South West Corp. .................. 216,820 6,192,921
Ceridian Corp.* ............................. 72,792 4,176,441
Champion International Corp. ................ 98,157 3,073,541
Chase Manhattan Corp. ....................... 849,520 36,741,740
Chevron Corp. ............................... 647,223 54,407,183
</TABLE>
See accompanying notes to financial statements
1
<PAGE> 3
SPDR TRUST SERIES 1
SCHEDULE OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
COMMON STOCKS SHARES VALUE
- -------------------------------------------------------------------------
<C> <C> <C>
Chrysler Corp. .............................. 643,749 $ 30,819,483
Chubb Corp. ................................. 161,564 10,178,532
CIGNA Corp. ................................. 208,000 13,754,000
Cincinnati Financial Corp. .................. 160,129 4,923,967
Cincinnati Milacron, Inc. ................... 39,644 612,004
CINergy Corp. ............................... 161,167 6,164,638
Circuit City Stores, Inc. ................... 101,042 3,365,962
Cisco Systems, Inc.* ........................ 1,542,521 95,347,079
Citicorp .................................... 448,417 41,674,755
Clear Channel Communications* ............... 248,564 11,806,790
Clorox Co. .................................. 98,059 8,089,867
Coastal Corp. ............................... 215,800 7,283,250
Coca Cola Co. ............................... 2,441,511 140,692,071
Colgate-Palmolive Co. ....................... 291,061 19,937,678
Columbia / HCA Healthcare Corp. ............. 628,326 12,605,790
Columbia Gas Systems, Inc. .................. 84,187 4,935,463
Comcast Corp., Class A ...................... 360,243 16,908,906
Comerica, Inc. .............................. 148,200 8,123,212
Compaq Computer Corp. ....................... 1,648,790 52,142,984
Computer Associates International, Inc. ..... 537,405 19,883,985
Computer Sciences Corp. ..................... 157,532 8,585,494
ConAgra, Inc. ............................... 474,582 12,784,053
Conseco, Inc. ............................... 307,882 9,409,644
Consolidated Edison, Inc. ................... 225,423 11,750,174
Consolidated Natural Gas Co. ................ 97,265 5,300,943
Consolidated Stores Corp.* .................. 108,363 2,126,624
Cooper Industries, Inc. ..................... 107,717 4,389,468
Cooper Tire & Rubber Co. .................... 76,098 1,369,764
Coors (Adolph) Co., Class B ................. 38,681 1,776,908
Corning, Inc. ............................... 232,886 6,855,582
Costco Cos., Inc.* .......................... 216,613 10,262,041
Countrywide Credit Industries, Inc. ......... 106,748 4,443,386
Crane Co. ................................... 70,794 1,663,659
Crown Cork & Seal Co., Inc. ................. 130,221 3,483,412
CSX Corp. ................................... 220,894 9,291,354
Cummins Engine Co., Inc. .................... 39,326 1,169,949
CVS Corp. ................................... 385,032 16,869,214
Cyprus Amax Minerals Co. .................... 95,992 1,271,894
Dana Corp. .................................. 162,629 6,068,095
Darden Restaurants, Inc. .................... 147,735 2,363,760
Data General Corp.* ......................... 44,487 483,796
Dayton-Hudson Corp. ......................... 426,198 15,236,578
Deere & Co. ................................. 231,933 7,015,973
Dell Computer Corp.* ........................ 1,257,816 82,701,402
Delta Air Lines, Inc. ....................... 74,291 7,224,800
Deluxe Corp. ................................ 83,936 2,386,930
Dillards, Inc., Class A ..................... 113,618 3,216,810
Disney (Walt) Co. (The) ..................... 2,027,002 51,308,488
Dollar General Corp. ........................ 179,365 4,775,593
Dominion Resources, Inc. .................... 189,569 8,459,517
Donnelley (R.R.) & Sons Co. ................. 132,706 4,669,592
Dover Corp. ................................. 225,150 6,951,506
Dow Chemical Co. ............................ 220,364 18,827,349
Dow Jones & Co., Inc. ....................... 85,903 3,994,490
DTE Energy Co. .............................. 136,273 6,157,836
Du Pont (E.I.) de Nemours & Co., Inc......... 1,118,807 62,793,043
Duke Power Co. .............................. 355,021 23,497,952
Dun & Bradstreet Corp. ...................... 156,375 4,222,125
Eastern Enterprises ......................... 15,024 632,886
Eastman Chemical Co. ........................ 79,979 4,033,941
Eastman Kodak Co. ........................... 316,152 24,442,501
Eaton Corp. ................................. 69,809 4,376,152
Ecolab, Inc. ................................ 133,237 3,788,927
Edison International ........................ 349,588 8,980,042
EG & G, Inc. ................................ 47,885 1,083,398
Electronic Data Systems Corp. ............... 484,084 16,065,538
EMC Corp. * ................................. 487,317 27,868,441
Emerson Electric Co. ........................ 435,206 27,091,573
Engelhard Corp. ............................. 147,793 2,614,089
Enron Corp. ................................. 321,456 16,976,895
Entergy Corp. ............................... 243,218 7,478,954
Equifax, Inc. ............................... 150,779 5,380,926
Exxon Corp. ................................. 2,415,705 169,552,295
Fannie Mae................................... 1,027,960 66,046,430
Federal Express Corp.* ...................... 149,225 6,733,778
Freddie Mac.................................. 670,438 33,144,779
Federated Department Stores, Inc.* .......... 212,304 7,722,558
Fifth Third Bancorp ......................... 256,180 14,730,350
First Chicago NBD Corp. ..................... 282,817 19,372,964
First Data Corp. ............................ 437,850 10,289,475
First Union Corp. ........................... 965,534 49,423,272
First Energy Corp. .......................... 233,559 7,254,926
Fleet Financial Group, Inc. ................. 277,906 20,408,722
Fleetwood Enterprises, Inc. ................. 36,645 1,106,221
Fluor Corp. ................................. 69,895 2,870,063
FMC Corp.* .................................. 37,057 1,910,752
Ford Motor Co. .............................. 1,204,437 56,533,262
Fort James Corp. ............................ 214,387 7,034,573
Fortune Brands, Inc. ........................ 173,390 5,136,679
Foster Wheeler Corp. ........................ 41,267 567,421
FPL Group, Inc. ............................. 174,933 12,190,643
Franklin Resources, Inc ..................... 249,752 7,492,560
Freeport McMoran Copper &Gold ............... 149,868 1,779,683
Frontier Corp. .............................. 166,554 4,559,416
Fruit of the Loom, Inc.* .................... 74,763 1,126,118
Gannett Co., Inc. ........................... 276,667 14,818,976
Gap, Inc. (The) ............................. 386,028 20,362,977
Gateway 2000, Inc.* ......................... 155,854 8,123,890
General Dynamics Corp. ...................... 128,240 6,436,045
General Electric Co. ........................ 3,225,733 256,647,382
General Instrument Corp.* ................... 143,376 3,100,506
General Mills, Inc. ......................... 148,852 10,419,640
General Motors Corp. ........................ 643,435 35,187,852
General Reinsurance Corp. ................... 75,031 15,231,293
</TABLE>
See accompanying notes to financial statements
2
<PAGE> 4
SPDR TRUST SERIES 1
SCHEDULE OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
COMMON STOCKS SHARES VALUE
- -------------------------------------------------------------------------
<C> <C> <C>
General Signal Corp. ........................ 48,977 $ 1,662,157
Genuine Parts Co. ........................... 166,097 4,993,291
Georgia-Pacific Corp. ....................... 93,404 4,261,558
Gillette Co. ................................ 1,105,542 42,286,981
Golden West Financial Corp. ................. 58,342 4,773,105
Goodrich (B.F.) Co. ......................... 66,576 2,176,203
Goodyear Tire & Rubber Co. (The) ............ 159,364 8,187,325
GPU, Inc. ................................... 124,810 5,304,425
Grace (W. R.) & Co.* ........................ 73,306 911,743
Grainger (W.W.), Inc. ....................... 100,250 4,223,031
Great Atlantic & Pacific Tea Co., Inc. ...... 38,494 933,480
Great Lakes Chemical Corp. .................. 58,635 2,279,436
GTE Corp. ................................... 954,211 52,481,605
Guidant Corp. ............................... 151,854 11,275,159
Halliburton Co. ............................. 440,287 12,575,697
Harcourt General, Inc. ...................... 72,838 3,523,538
Harnischfeger Industries, Inc. .............. 49,727 559,429
Harrahs Entertainment, Inc.* ................ 105,063 1,398,651
Harris Corp. ................................ 80,608 2,579,456
Hartford Financial Services Group ........... 224,698 10,659,111
Hasbro, Inc. ................................ 133,182 3,928,869
HBO & Co. ................................... 415,092 11,985,781
HCR Manor Care, Inc.* ....................... 104,452 3,061,749
Healthsouth Corp.* .......................... 392,394 4,144,662
Heinz (H.J.) Co. ............................ 362,802 18,548,252
Helmerich & Payne, Inc. ..................... 51,520 1,081,920
Hercules, Inc. .............................. 98,430 2,959,052
Hershey Foods Corp. ......................... 142,185 9,730,786
Hewlett Packard Co. ......................... 1,029,067 54,476,234
Hilton Hotels Corp. ......................... 252,348 4,305,688
Home Depot, Inc. (The) ...................... 1,450,414 57,291,353
Homestake Mining Co. ........................ 167,623 2,032,429
Honeywell, Inc. ............................. 121,562 7,787,566
Household International, Inc. ............... 488,378 18,314,175
Houston Industries, Inc. .................... 284,863 8,866,361
Humana, Inc.* ............................... 167,404 2,741,241
Huntington Bancshares, Inc. ................. 206,406 5,185,951
Ikon Office Solutions, Inc. ................. 134,964 970,054
Illinois Tool Works, Inc. ................... 241,784 13,177,228
IMS Health, Inc. ............................ 154,522 9,570,706
Inco, Ltd. .................................. 171,449 1,757,352
Ingersoll Rand Co. .......................... 164,738 6,249,748
Intel Corp. ................................. 1,668,685 143,089,739
International Business Machines Corp. ....... 926,777 118,627,456
International Flavors &Fragrances, Inc. ..... 108,959 3,595,647
International Paper Co. ..................... 306,911 14,309,725
Interpublic Group of Cos., Inc. ............. 128,541 6,933,180
ITT Industries, Inc. ........................ 121,156 4,104,160
Jefferson-Pilot Corp. ....................... 99,787 6,037,114
Johnson & Johnson ........................... 1,334,116 104,394,577
Johnson Controls, Inc. ...................... 85,670 3,983,655
Jostens, Inc. ............................... 39,323 815,952
K Mart Corp.* ............................... 497,325 5,936,817
Kaufman & Broad Home Corp. .................. 39,266 920,297
Kellogg Co. ................................. 393,963 12,976,156
Kerr-McGee Corp. ............................ 49,139 2,235,825
Keycorp ..................................... 435,676 12,580,144
Kimberly-Clark Corp. ........................ 535,399 21,683,659
King World Productions, Inc. ................ 75,928 1,983,619
Kla-Tencor Corp.* ........................... 85,862 2,135,817
Knight Ridder, Inc. ......................... 79,768 3,549,676
Kohls Corp.* ................................ 157,132 6,128,148
Kroger Co.* ................................. 258,194 12,909,700
Laidlaw, Inc ................................ 328,042 3,095,896
Lehman Brothers Holdings, Inc. .............. 118,767 3,355,168
Lilly (Eli) & Co. ........................... 1,088,872 85,272,288
Limited, Inc. (The) ......................... 220,813 4,844,085
Lincoln National Corp. ...................... 95,864 7,884,814
Liz Claiborne, Inc. ......................... 67,051 1,755,898
Lockheed Martin Corp. ....................... 195,338 19,692,512
Loews Corp. ................................. 116,001 9,787,584
Longs Drug Stores Corp. ..................... 40,059 1,609,871
Louisiana Pacific Corp. ..................... 112,498 2,292,147
Lowes Cos., Inc. ............................ 349,998 11,134,311
LSI Logic Corp.* ............................ 140,195 1,769,962
Lucent Technologies, Inc. ................... 1,298,870 89,703,209
Mallinckrodt, Inc. .......................... 75,520 1,534,000
Marriott International, Inc. ................ 234,125 5,589,734
Marsh & McLennan Cos., Inc. ................. 253,814 12,627,246
Masco Corp. ................................. 337,000 8,298,625
Mattel, Inc. ................................ 296,542 8,303,176
May Department Stores Co. ................... 232,660 11,981,990
Maytag Corp. ................................ 83,544 3,989,226
MBIA, Inc. .................................. 92,492 4,965,664
MBNA Corp. .................................. 486,221 13,918,076
McDermott International, Inc. ............... 58,327 1,571,184
McDonald's Corp. ............................ 673,924 40,224,839
McGraw-Hill, Inc. ........................... 99,194 7,861,125
MCI Worldcom, Inc.* ......................... 1,749,496 85,506,594
Mead Corp. .................................. 107,270 3,157,761
Mediaone Group, Inc. ........................ 598,620 26,601,176
Medtronic, Inc. ............................. 460,181 26,632,975
Mellon Bank Corp. ........................... 256,991 14,150,567
Mercantile Bancorp, Inc. .................... 136,162 6,586,837
Merck & Co., Inc. ........................... 1,179,521 152,821,690
Meredith Corp. .............................. 55,449 1,774,368
Merrill Lynch & Co., Inc. ................... 339,257 16,072,300
Meyer (Fred), Inc. .......................... 150,586 5,854,031
MGIC Investment Corp. ....................... 115,488 4,258,620
Micron Technology, Inc.* .................... 214,630 6,532,801
Microsoft Corp.* ............................ 2,447,412 269,368,283
Millipore Corp. ............................. 44,391 846,203
Minnesota Mining & Manufacturing Co. ........ 399,667 29,450,462
Mirage Resorts, Inc.* ....................... 179,512 3,006,826
</TABLE>
See accompanying notes to financial statements
3
<PAGE> 5
SPDR TRUST SERIES 1
SCHEDULE OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
COMMON STOCKS SHARES VALUE
- -------------------------------------------------------------------------
<C> <C> <C>
Mobil Corp. ................................. 776,155 $ 58,939,270
Monsanto Co. ................................ 587,401 33,114,731
Moore Corp. Ltd. ............................ 86,292 911,459
Morgan (J.P.) & Co., Inc. ................... 175,900 14,885,537
Morgan Stanley, Dean Witter, Discover
and Co. ................................... 573,727 24,706,119
Morton International,Inc. ................... 127,742 2,794,356
Motorola, Inc. .............................. 590,506 25,207,225
Nacco Industries, Inc.,Class A .............. 8,435 843,500
Nalco Chemical Co. .......................... 67,819 2,000,661
National City Corp. ......................... 323,087 21,303,549
National Semiconductor Corp.* ............... 164,726 1,595,783
National Service Industries, Inc. ........... 43,724 1,393,703
NationsBank Corp. ........................... 951,427 50,901,344
Navistar International Corp.* ............... 52,218 1,181,432
New York Times Co. (The),Class A ............ 176,060 4,841,650
Newell Co. .................................. 162,484 7,484,419
Newmont Mining Corp. ........................ 159,749 3,873,913
Nextel Communications, Inc.* ................ 267,420 5,398,541
Niagara Mohawk Power Corp.* ................. 156,324 2,403,482
NICOR, Inc. ................................. 50,203 2,080,287
Nike, Inc., Class B ......................... 276,691 10,185,687
Nordstrom, Inc. ............................. 155,540 3,849,615
Norfolk Southern Corp. ...................... 381,911 11,099,288
Northern States Power Co. ................... 147,664 4,143,821
Northern Telecom Ltd. ....................... 640,664 20,501,248
Northern Trust Corp. ........................ 112,673 7,689,932
Northrop Corp. .............................. 67,186 4,904,578
Norwest Corp. ............................... 744,039 26,645,897
Novell, Inc.* ............................... 355,476 4,354,581
Nucor Corp. ................................. 90,365 3,671,078
Occidental Petroleum Corp. .................. 345,566 7,429,669
Omnicom Group Inc. .......................... 166,194 7,478,730
ONEOK, Inc. ................................. 30,038 1,021,292
Oracle Systems Corp.* ....................... 955,247 27,821,569
Oryx Energy Co.* ............................ 107,919 1,396,202
Owens Corning ............................... 54,077 1,760,882
Owens-Illinois, Inc.* ....................... 153,886 3,847,150
P P & L Resources, Inc. ..................... 136,691 3,536,880
PACCAR, Inc. ................................ 80,003 3,295,124
PacifiCorp .................................. 301,388 5,782,882
Pall Corp. .................................. 125,092 2,775,479
Parametric Technology Corp.* ................ 263,660 2,653,079
Parker-Hannifin Corp. ....................... 114,356 3,394,944
Paychex, Inc. ............................... 168,100 8,601,677
Peco Energy Co. ............................. 211,241 7,723,499
Penney (J.C.) Co., Inc. ..................... 252,188 11,332,698
Pennzoil Co. ................................ 47,940 1,680,896
Peoples Energy Corp. ........................ 36,377 1,309,572
Pep Boys-Manny Moe & Jack ................... 64,381 861,096
PepsiCo, Inc. ............................... 1,450,791 42,707,660
Perkin-Elmer Corp. .......................... 46,298 3,180,094
Pfizer, Inc. ................................ 1,295,811 137,274,978
PG&E Corp. .................................. 376,602 12,027,726
Pharmacia & Upjohn, Inc. .................... 498,115 24,999,147
Phelps Dodge Corp. .......................... 59,077 3,083,081
Philip Morris Cos., Inc. .................... 2,413,438 111,168,988
Phillips Petroleum Co. ...................... 250,710 11,313,289
Pioneer Hi Bred International, Inc. ......... 236,998 6,221,198
Pitney Bowes, Inc. .......................... 270,379 14,211,796
Placer Dome, Inc. ........................... 247,219 3,414,712
PNC Financial Corp. ......................... 293,020 13,185,900
Polaroid Corp. .............................. 46,206 1,134,935
Potlatch Corp. .............................. 29,959 1,020,478
PPG Industries, Inc. ........................ 169,602 9,253,909
Praxair, Inc. ............................... 161,003 5,262,786
Procter & Gamble Co. ........................ 1,327,068 94,138,886
Progressive Corp. ........................... 72,320 8,154,080
Provident Cos., Inc. ........................ 134,640 4,544,100
Providian Financial Corp. ................... 96,461 8,181,099
Public Service Enterprise, Inc. ............. 221,502 8,707,797
Pulte Corp. ................................. 45,010 1,105,558
Quaker Oats Co. ............................. 129,579 7,645,161
Ralston Purina Co. .......................... 304,846 8,916,745
Raychem Corp. ............................... 77,249 1,882,944
Raytheon Co. ................................ 338,795 18,273,755
Reebok International Ltd.* .................. 57,420 778,759
Regions Financial Corp. ..................... 210,032 7,613,660
Republic New York Corp. ..................... 110,526 4,365,777
Reynolds Metals Co. ......................... 74,358 3,778,316
Rite Aid Corp. .............................. 254,732 9,042,986
RJR Nabisco, Inc. ........................... 315,320 7,942,123
Rockwell International Corp. ................ 180,700 6,527,788
Rohm & Haas Co. ............................. 174,045 4,840,627
Rowan Cos., Inc.* ........................... 88,484 989,915
Royal Dutch Petroleum Co. ................... 2,121,600 101,041,200
Rubbermaid, Inc. ............................ 154,294 3,693,413
Russell Corp. ............................... 38,351 1,006,714
Ryder Systems, Inc. ......................... 77,603 1,930,375
SAFECO Corp. ................................ 135,348 5,642,320
Sara Lee Corp. .............................. 457,692 24,715,368
SBC Communications, Inc. .................... 1,822,934 81,006,630
Schering-Plough Corp. ....................... 724,581 75,039,420
Schlumberger Ltd. ........................... 538,984 27,117,632
Schwab (Charles) Corp. ...................... 269,649 10,617,429
Scientific-Atlanta, Inc. .................... 79,945 1,688,838
Seagate Technology, Inc.* ................... 248,825 6,236,177
Seagram Co. Ltd. (The) ...................... 337,038 9,668,778
Sealed Air Corp.* ........................... 81,383 2,594,077
Sears, Roebuck & Co. ........................ 383,224 16,933,710
Sempra Energy ............................... 225,525 5,877,745
Service Corp. International ................. 250,540 7,985,962
Shared Medical System ....................... 25,328 1,347,133
Sherwin-Williams Co. ........................ 176,005 3,806,108
</TABLE>
See accompanying notes to financial statements
4
<PAGE> 6
SPDR TRUST SERIES 1
SCHEDULE OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
COMMON STOCKS SHARES VALUE
- -------------------------------------------------------------------------
<C> <C> <C>
Sigma Aldrich Corp. ......................... 103,204 $ 2,980,016
Silicon Graphics, Inc.* ..................... 180,490 1,692,094
SLM Holding Corp. ........................... 167,486 5,432,827
Snap On, Inc. ............................... 62,308 1,919,865
Sonat, Inc. ................................. 110,950 3,314,631
Southern Co. ................................ 697,685 20,538,102
Southwest Airlines Co. ...................... 337,369 6,747,380
Springs Industries, Inc. .................... 20,124 699,309
Sprint Corp. ................................ 425,190 30,613,680
St. Jude Medical Center, Inc.* .............. 87,126 2,014,789
St. Paul Cos., Inc. ......................... 233,008 7,572,760
Stanley Works (The) ......................... 90,341 2,687,645
State Street Corp. .......................... 163,594 8,926,098
Stone Container Corp.* ...................... 101,365 874,273
Summit Bancorp. ............................. 163,746 6,140,475
Sun Co., Inc. ............................... 79,872 2,555,904
Sun Microsystems, Inc.* ..................... 375,734 18,716,250
SunAmerica, Inc. ............................ 190,841 11,641,301
Suntrust Banks, Inc. ........................ 201,866 12,515,692
Supervalu, Inc. ............................. 114,384 2,666,577
Synovus Financial Corp. ..................... 264,950 5,232,763
Sysco Corp. ................................. 333,444 7,856,774
Tandy Corp. ................................. 93,310 4,992,085
Tektronix, Inc. ............................. 51,326 795,553
Tele-Communications, Inc.* .................. 518,701 20,294,177
Tellabs, Inc. * ............................. 185,575 7,388,205
Temple-Inland, Inc. ......................... 57,288 2,742,663
Tenet Healthcare Corp.* ..................... 307,918 8,852,642
Tenneco, Inc. ............................... 158,457 5,209,274
Texaco, Inc. ................................ 534,760 33,522,767
Texas Instruments, Inc. ..................... 390,219 20,584,052
Texas Utilities Co. ......................... 270,243 12,583,190
Textron, Inc. ............................... 164,962 10,000,821
Thermo Electron Corp.* ...................... 155,479 2,341,902
Thomas & Betts Corp. ........................ 55,426 2,109,652
Time Warner, Inc. ........................... 586,085 51,319,068
Times Mirror Co., Class A ................... 85,212 4,526,888
Timken Co. .................................. 65,018 983,397
TJX Cos., Inc. (The) ........................ 318,986 5,681,938
Torchmark Corp. ............................. 142,919 5,136,152
Toys R Us Co.* .............................. 253,215 4,098,918
Transamerica Corp. .......................... 62,020 6,574,120
Travelers, Inc. ............................. 1,139,950 42,748,125
Tribune Co. ................................. 123,332 6,205,141
Tricon Global Restaurants, Inc.* ............ 155,072 6,047,808
TRW, Inc. ................................... 124,587 5,528,548
Tupperware Corp. ............................ 63,426 745,256
Tyco Laboratories, Inc. ..................... 579,601 32,022,955
U. S. West, Inc. ............................ 491,589 25,777,698
U.S. Bancorp ................................ 733,982 26,102,235
U.S. Surgical Corp. ......................... 70,785 2,950,850
Unicom Corp. ................................ 206,185 7,706,164
Unilever N. V. (N.Y. shares) ................ 630,486 38,617,267
Union Camp Corp. ............................ 70,755 2,785,978
Union Carbide Corp. ......................... 126,856 5,470,665
Union Pacific Corp. ......................... 238,178 10,152,337
Union Pacific Resources Group, Inc. ......... 257,062 3,165,076
Union Planters Corp. ........................ 131,000 6,582,750
Unisys Corp.* ............................... 251,834 5,729,224
United Healthcare Corp. ..................... 191,721 6,710,235
United Technologies Corp. ................... 223,909 17,115,044
Unocal Corp. ................................ 223,369 8,097,126
Unum Corp. .................................. 130,632 6,490,778
USAir Group, Inc.* .......................... 86,999 4,404,324
UST, Inc. ................................... 189,298 5,596,122
USX-Marathon Group .......................... 291,415 10,327,019
USX-U.S. Steel Group ........................ 87,474 2,088,442
V.F. Corp. .................................. 123,319 4,578,218
Venator Group, Inc.* ........................ 137,995 1,198,832
Viacom, Inc.* ............................... 356,627 20,684,366
Wachovia Corp. .............................. 204,280 17,414,870
Wal-Mart Stores, Inc. ....................... 2,213,354 120,904,462
Walgreen Co. ................................ 477,929 21,058,747
Warner-Lambert Co. .......................... 809,004 61,079,802
Washington Mutual, Inc. ..................... 384,498 12,976,807
Waste Management, Inc. ...................... 555,597 26,703,381
Wells Fargo & Co. ........................... 84,187 29,886,385
Wendy's International, Inc. ................. 133,234 2,956,129
Westvaco Corp. .............................. 104,196 2,500,704
Weyerhaeuser Co. ............................ 189,763 8,005,627
Whirlpool Corp. ............................. 76,698 3,604,806
Willamette Industries, Inc. ................. 113,151 3,246,019
Williams Cos., Inc. (The) ................... 418,524 12,032,565
Winn-Dixie Stores, Inc. ..................... 148,856 5,535,583
Worthington Industries, Inc. ................ 96,922 1,211,525
Wrigley (Wm) Jr. Co. ........................ 116,815 8,870,639
Xerox Corp. ................................. 322,959 27,370,775
Total Investments - (Cost $8,705,757,098) $8,052,798,893
==============
</TABLE>
(*) Denotes non-income producing security.
See accompanying notes to financial statements
5
<PAGE> 7
SPDR TRUST SERIES 1
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1998
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments in securities, at value (cost $8,705,757,098) ..... $8,052,798,893
Cash .......................................................... 29,508,087
Receivable for investments sold ............................... 40,492,999
Dividends receivable .......................................... 10,157,070
--------------
TOTAL ASSETS ................................................... 8,132,957,049
LIABILITIES
Payable for investments purchased ............................. 27,938,301
Payable for income delivered for SPDR's redeemed in-kind ...... 140,581
Distributions payable ......................................... 27,343,651
Due to Sponsor ................................................ 3,706,835
Accrued Trustee fees .......................................... 2,206,713
Accrued expenses and other liabilities ........................ 2,276,843
--------------
Total Liabilitities ............................................ 63,612,924
--------------
NET ASSETS ..................................................... $8,069,344,125
==============
NET ASSETS REPRESENTED BY:
Paid in surplus relating to 79,266,004 units of
fractional undivided interest ("SPDRs") outstanding;
unlimited units authorized ................................... $8,747,556,906
Distribution in excess of net investment income ............... (3,802,740)
Accumulated net realized loss on investments .................. (21,451,836)
Net unrealized depreciation on investments .................... (652,958,205)
--------------
NET ASSETS ..................................................... $8,069,344,125
==============
NET ASSET VALUE PER SPDR ($8,069,344,125 / 79,266,004 SPDRs) ... $ 101.80
==============
</TABLE>
See accompanying notes to financial statements
6
<PAGE> 8
<TABLE>
<CAPTION>
SPDR TRUST SERIES 1
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------------------------------------------------------
FOR THE YEAR FOR THE NINE MONTH FOR THE YEAR FOR THE YEAR
ENDED PERIOD ENDED ENDED ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1997 DECEMBER 31, 1996 DECEMBER 31, 1995
------------------ ------------------ ----------------- -----------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend income (a) ........................ $ 93,269,315 $ 38,356,337 $ 29,620,992 $ 16,060,887
--------------- ------------ ------------ ------------
EXPENSES
Trustee expense ............................ 6,990,046 2,578,842 1,806,689 909,805
S&P license fee ............................ 2,504,990 563,541 347,506 218,098
Marketing expense .......................... 2,213,340 431,452 436,049 --
SEC registration expense ................... 1,125,070 450,401 203,447 136,000
Legal and audit services ................... 229,520 143,826 135,000 80,000
Other expenses ............................. 130,705 90,978 41,002 21,000
Amortization of organization costs ......... 35,416 81,912 110,000 110,000
--------------- ------------ ------------ ------------
Total expenses ............................... 13,229,087 4,340,952 3,079,693 1,474,903
Rebate from Sponsor ........................ (410,301) (249,830) (434,407) (180,244)
Rebate from Trustee ........................ (1,149,645) -- -- --
--------------- ------------ ------------ ------------
Net expenses ................................. 11,669,141 4,091,122 2,645,286 1,294,659
Trustee earnings credit .................... (488,977) (194,498) (176,370) (107,356)
--------------- ------------ ------------ ------------
Net expenses after Trustee earnings credit ... 11,180,164 3,896,624 2,468,916 1,187,303
--------------- ------------ ------------ ------------
NET INVESTMENT INCOME ........................ 82,089,151 34,459,713 27,152,076 14,873,584
--------------- ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Net realized gain on
investment transactions ................... 1,878,084,944 4,973,050 12,398,283 6,289,657
Net increase in unrealized
appreciation (depreciation) ............... (1,707,909,730) 644,808,026 236,120,771 170,848,065
--------------- ------------ ------------ ------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS .............................. 170,175,214 649,781,076 248,519,054 177,137,722
--------------- ------------ ------------ ------------
NET INCREASE IN NET ASSETS FROM OPERATIONS ... $ 252,264,365 $684,240,789 $275,671,130 $192,011,306
=============== ============ ============ ============
(a) Net of withholding tax expense of $586,136, $289,809, $182,561, and $109,162 for 1998, 1997, 1996, and 1995, respectively.
See accompanying notes to financial statements
</TABLE>
7
<PAGE> 9
<TABLE>
<CAPTION>
SPDR TRUST SERIES 1
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------------------------------------------------------
FOR THE YEAR FOR THE NINE MONTH FOR THE YEAR FOR THE YEAR
ENDED PERIOD ENDED ENDED ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1997 DECEMBER 31, 1996 DECEMBER 31, 1995
------------------ ------------------ ----------------- -----------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income....................... $ 82,089,151 $ 34,459,713 $ 27,152,076 $ 14,873,584
Net realized gain on
investment transactions.................... 1,878,084,944 4,973,050 12,398,283 6,289,657
Net increase (decrease)
in unrealized appreciation................. (1,707,909,730) 644,808,026 236,120,771 170,848,065
--------------- -------------- -------------- --------------
NET INCREASE IN NET ASSETS FROM OPERATIONS.... 252,264,365 684,240,789 275,671,130 192,011,306
--------------- -------------- -------------- --------------
UNDISTRIBUTED NET INVESTMENT INCOME
INCOME INCLUDED IN PRICE OF UNITS
ISSUED AND REDEEMED, NET.................... 6,830,907 420,891 1,962,474 325,692
--------------- -------------- -------------- --------------
DISTRIBUTIONS TO UNITHOLDERS FROM:
Net investment income....................... (82,089,151) (33,466,398) (27,037,456) (14,873,584)
In excess of net investment income.......... (4,796,055) -- -- (310,588)
Net realized gains.......................... -- -- (3,078,255) (128,321)
--------------- -------------- -------------- --------------
TOTAL DISTRIBUTIONS TO UNITHOLDERS............ (86,885,206) (33,466,398) (30,115,711) (15,312,493)
--------------- -------------- -------------- --------------
NET INCREASE IN NET ASSETS FROM
ISSUANCE AND REDEMPTION OF SPDRS............. 3,844,189,382 1,393,422,226 759,578,491 401,629,719
--------------- -------------- -------------- --------------
NET INCREASE IN NET ASSETS DURING PERIOD...... 4,016,399,448 2,044,617,508 1,007,096,384 578,654,224
NET ASSETS AT BEGINNING OF PERIOD............. 4,052,944,677 2,008,327,169 1,001,230,785 422,576,561
--------------- -------------- -------------- --------------
NET ASSETS END OF PERIOD*..................... $ 8,069,344,125 $4,052,944,677 $2,008,327,169 $1,001,230,785
=============== ============== ============== ==============
*INCLUDES UNDISTRIBUTED (DISTRIBUTIONS
IN EXCESS OF) NET INVESTMENT INCOME......... $ (3,802,740) $ 993,315 $ -- $ (1,122,255)
--------------- -------------- -------------- --------------
See accompanying notes to financial statements
</TABLE>
8
<PAGE> 10
<TABLE>
<CAPTION>
SPDR TRUST SERIES 1
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SPDR OUTSTANDING DURING THE PERIOD
- ------------------------------------------------------------------------------------------------------------------------------------
FOR THE YEAR FOR THE PERIOD FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED
9/30/98 9/30/97 12/31/96 12/31/95 12/31/94 12/31/93(1)
------------ -------------- ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ... $ 94.78 $ 74.08 $ 61.61 $ 45.93 $ 46.62 $ 43.54
---------- ---------- ---------- ---------- -------- --------
Investment Operations:
Net investment income ................ 1.41 1.03 1.35 1.26 1.22 1.15
Net realized and unrealized gain
(loss) on investments ............... 7.01 20.67 12.52 15.70 (0.68) 3.06
---------- ---------- ---------- ---------- -------- --------
Total from investment operations ....... 8.42 21.70 13.87 16.96 0.54 4.21
---------- ---------- ---------- ---------- -------- --------
Less distributions from:
Net investment income ................ (1.32) (1.00) (1.28) (1.24) (1.23) (1.10)
In excess of net investment income ... (0.08) -- -- (0.03) -- --
Net realized gains ................... -- -- (0.12) (0.01) -- (0.03)
---------- ---------- ---------- ---------- -------- --------
Total distributions .................... (1.40) (1.00) (1.40) (1.28) (1.23) (1.13)
---------- ---------- ---------- ---------- -------- --------
NET ASSET VALUE, END OF PERIOD ......... $ 101.80 $ 94.78 $ 74.08 $ 61.61 $ 45.93 $ 46.62
========== ========== ========== ========== ======== ========
TOTAL INVESTMENT RETURN ................ 8.82% 29.38% 22.67% 37.23% 1.15% 9.78%
RATIOS AND SUPPLEMENTAL DATA
Ratio to average net assets:
Total expenses (2) ................... 0.19% 0.19%(3) 0.20% 0.20% 0.20% 0.20%(3)
Net expenses after rebates and
Trustee earnings credit (2) ....... 0.18% 0.18%(3) 0.18% 0.19% -- --
Net investment income ................ 1.35% 1.63%(3) 2.03% 2.35% 2.63% 2.62%(3)
Portfolio turnover rate (4) ............ 4.71% 3.22% 4.37% 4.02% 4.07% 2.40%
NET ASSETS, END OF PERIOD (000'S) ...... $8,069,344 $4,052,945 $2,008,327 $1,001,231 $422,577 $461,557
- ------------------------------------------------------------------------------------------------------------------------------------
(1) The Trust commenced operations on January 22, 1993.
(2) Net of expenses reimbursed by the Sponsor and Trustee in 1998 and Sponsor in 1994 through 9/30/97. If the Trust had borne all
expenses reimbursed by the Sponsor and Trustee as noted, the ratio of expenses to average net assets would have increased by
0.03%, 0.02%, 0.03%, 0.03%, and 0.01% in 1998, 1997, 1996, 1995, and 1994, respectively.
(3) Annualized.
(4) Portfolio turnover ratio excludes securities received or delivered from processing creations or redemptions of SPDRs.
</TABLE>
9
<PAGE> 11
SPDR TRUST SERIES 1
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
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.
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 were capitalized and
charged to operations ratably over a period of 60 months from the commencement
of operations.
10
<PAGE> 12
SPDR TRUST SERIES 1
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 (CONTINUED)
- --------------------------------------------------------------------------------
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 and electing, the Trust will not be
subject to federal income taxes to the extent it distributes its taxable income,
including any net realized capital gains, for each fiscal year. In addition, by
distributing during each calendar year substantially all of its net investment
income and capital gains, if any, the Trust will not be subject to federal
excise tax. Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
income equalization, in-kind transactions and losses deferred due to wash sales.
Net investment income per share calculations in the financial highlights for all
years presented exclude these differences. During 1998, the Trust reclassified
$1,896,359,332 of non-taxable security gains realized in the in-kind redemption
of Creation Units (Note 4) as an increase to paid in surplus in the Statement of
Assets and Liabilities. At September 30, 1998, the Trust had a capital loss
carryforward of $33,523. This loss 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 weighting structure of the S&P Index. For
these services, the Trustee receives a fee at the following annual rates:
<TABLE>
<CAPTION>
NET ASSET VALUE OF THE TRUST FEE AS A PERCENTAGE OF NET ASSET VALUE OF THE TRUST
---------------------------- ---------------------------------------------------
<S> <C>
$0 - $499,999,999 15/100 of 1% per annum plus or minus the Adjustment Amount
$500,000,000 - $999,999,999 13/100 of 1% per annum plus or minus the Adjustment Amount
$1,000,000,000 - and above 11/100 of 1% per annum plus or minus the Adjustment Amount
</TABLE>
The Adjustment Amount is the sum of (a) the excess or deficiency of transaction
fees received by the Trustee, less the expenses incurred in processing orders
for creation and redemption of SPDRs and (b) the amounts earned by the Trustee
with respect to the cash held by the Trustee for the benefit of the Trust.
During the year ended September 30, 1998, the Adjustment Amount reduced the
Trustee's fee by $464,611. The Adjustment Amount included a deficiency of net
transaction fees from processing orders of ($24,366) and a Trustee earnings
credit of $488,977.
For the year ended September 30, 1998, PDR Services LLC (the "Sponsor", a
wholly-owned subsidiary of the American Stock Exchange LLC) and State Street
Bank and Trust Company (the "Trustee") 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 by the Sponsor and Trustee for the year ended September 30, 1998
was $410,301 and $1,149,645, respectively.
11
<PAGE> 13
SPDR TRUST SERIES 1
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 (CONTINUED)
- --------------------------------------------------------------------------------
NOTE 4 -- TRUST TRANSACTIONS IN SPDRS
Transactions in SPDRs were as follows:
<TABLE>
<CAPTION>
Year Ended Nine Month Period Ended
September 30, 1998 September 30, 1997 (Note 1)
SPDRs Amount SPDRs Amount
----------- ---------------- ----------- ---------------
<S> <C> <C> <C> <C>
SPDRs sold 123,400,000 $12,952,751,200 23,800,000 $2,120,759,371
Dividend reinvestment
SPDRs issued 3,020 309,869 4,003 328,997
SPDRs redeemed (86,900,000) (9,102,040,780) (8,150,000) (727,245,251)
Net income equalization -- (6,830,907) -- (420,891)
----------- --------------- ---------- --------------
Net increase 36,503,020 $ 3,844,189,382 15,654,003 $1,393,422,226
=========== =============== ========== ==============
</TABLE>
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1996 December 31, 1995
SPDRs Amount SPDRs Amount
----------- ---------------- ----------- ---------------
<S> <C> <C> <C> <C>
SPDRs sold 15,750,000 $ 1,100,700,575 11,700,000 $ 640,975,632
Dividend reinvestment
SPDRs issued 7,625 506,869 1,291 69,292
SPDRs redeemed (4,900,000) (339,666,479) (4,650,000) (239,089,513)
Net income equalization -- (1,962,474) -- (325,692)
----------- --------------- ---------- --------------
Net increase 10,857,625 $ 759,578,491 7,051,291 $ 401,629,719
=========== =============== ========== ==============
</TABLE>
Except for under the Trust's dividend reinvestment plan, SPDRs are issued and
redeemed by the Trust only in Creation Unit size aggregations of 50,000 SPDRs.
Such transactions are only permitted on an in-kind basis, with a separate cash
payment which is equivalent to the undistributed net investment income per SPDR
(income equalization) and a balancing cash component to equate the transaction
to the net asset value per unit of the Trust on the transaction date. A
transaction fee of $3,000 is charged in connection with each creation or
redemption of Creation Units through the SPDR Clearing Process per Participating
party per day, regardless of the number of Creation Units created or redeemed.
Transaction fees are received by the Trustee and used to offset the expense of
processing orders.
NOTE 5 -- INVESTMENT TRANSACTIONS
For the year ended September 30, 1998, the Trust had in-kind contributions,
in-kind redemptions, purchases and sales of investment securities of
$10,913,082,425, $7,072,750,005, $283,177,518, and $288,937,344, respectively.
At September 30, 1998, the cost of investments for federal income tax purposes
was $8,705,674,300, accordingly, gross unrealized appreciation was $272,638,288
and gross unrealized depreciation was $925,513,695, resulting in net unrealized
depreciation of $652,875,407.
12
<PAGE> 14
SPDR TRUST SERIES 1
REPORT OF INDEPENDENT ACCOUNTANTS
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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, 1998, 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, 1998
by correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PriceWaterhouseCoopers LLP
Boston, Massachusetts
November 23, 1998
13
<PAGE> 15
SPDR TRUST SERIES 1
- --------------------------------------------------------------------------------
SPONSOR
PDR Services LLC
c/o American Stock Exchange LLC
86 Trinity Place
New York, NY 10006
TRUSTEE
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
DISTRIBUTOR
ALPS Mutual Funds Services, Inc.
370 17th Street, Suite 3100
Denver, CO 80202
INDEPENDENT ACCOUNTANTS
PriceWaterhouseCoopers LLP
160 Federal Street
Boston, MA 02110
LEGAL COUNSEL
Carter, Ledyard & Milburn
2 Wall Street
New York, NY 10005
