SPDR TRUST SERIES 1, 485BPOS, 2000-01-26

SPDR TRUST SERIES 1
485BPOS, 2000-01-26

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<PAGE>

As filed with the Securities and Exchange Commission on January 26, 2000

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

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

POST EFFECTIVE AMENDMENT NO. 8

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 LLC

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

PDR SERVICES LLC
c/o AMERICAN STOCK EXCHANGE LLC
86 Trinity Place
New York, New York 10006

D. Name and complete address of agent for service:

Michael J. Ryan, Jr.
PDR SERVICES LLC
c/o AMERICAN STOCK EXCHANGE LLC
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

<PAGE>

E. Title and amount of securities being registered:

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

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

Indefinite pursuant to Rule 24f-2

G. Amount of filing fee:

In accordance with Rule 24f-2, a fee in the amount of $356,902.00
was paid on December 28, 1999 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.

[x] Check box if it is proposed that this filing will become effective
on January 26, 2000, pursuant to paragraph (b) of Rule 485.
================================================================================

<PAGE>

SPDR TRUST SERIES 1

Cross Reference Sheet

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

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

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

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

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

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

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

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

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

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

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

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

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

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

i
<PAGE>

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

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

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

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

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

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

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

(g) Notice to holders as to
change in:

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

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

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

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

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

ii
<PAGE>

(h) Consent of holders
required to change:

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

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

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

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

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

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

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

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

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

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

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

iii
<PAGE>

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

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

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

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

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

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

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

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

(d) Schedule of distributions.... *

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

iv
<PAGE>

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

20. Certain miscellaneous provi-
sions of Trust Agreement

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

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

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

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

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

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

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

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

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

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

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

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

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

v
<PAGE>

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

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

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

30. Persons controlling depositor.. *

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

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

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

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

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

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

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

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

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

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

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

vi
<PAGE>

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

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

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

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

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

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

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

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

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

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

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

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

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

vii
<PAGE>

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

viii
<PAGE>

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

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

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

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

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

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

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

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

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

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

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

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

ix
<PAGE>

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

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

x
<PAGE>

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

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

<PAGE>

Prospectus

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

SPDR Trust, Series 1

(A Unit Investment Trust)

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

.SPDR Trust is a Pooled Investment Designed to Closely Track the Price and
Yield Performance of the S&P 500(R) Index.

.SPDR Trust Portfolio Holds All of the S&P 500 Index Stocks.

.Each SPDR Represents an Undivided Ownership Interest in the SPDR Trust
Portfolio.

.The SPDR Trust Issues and Redeems SPDRs Only in Multiples of 50,000 SPDRs
(called "Creation Units") in Exchange for S&P 500 Index Stocks and Cash.

.Individual SPDRs Trade on the American Stock Exchange Like Any Other Equity
Security.

.Minimum Trading Unit: 1 SPDR.

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

SPONSOR: PDR SERVICES LLC
(Solely Owned by American Stock Exchange LLC)

[LOGO OF SPDR]
----------------------

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

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

This Prospectus consists of two parts: Part A and Part B.

Prospectus Part A Dated January 26, 2000

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

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

TABLE OF CONTENTS

FRONT COVER PAGE
SPDRs PROSPECTUS PART A--HIGHLIGHTS
<TABLE>
<S> <C>
SPDRs Are Ownership Interests in the SPDR Trust......................... A-2
SPDRs Trade on the American Stock Exchange.............................. A-2
The SPDR Trust Issues and Redeems SPDRs in Multiples of 50,000 SPDRs
called "Creation Units"................................................ A-2
Brokerage Commissions on SPDRs.......................................... A-3
SPDRs Are Based on a Broad Market Index................................. A-3
SPDRs Should Closely Track the Value of the Underlying S&P 500 Index
Stocks................................................................. A-3
Expenses of the Trust................................................... A-3
SPDRs Make Periodic Dividend Payments................................... A-4
The Trustee Votes the Underlying Shares................................. A-4
Termination of the SPDR Trust........................................... A-4
Risk Factors............................................................ A-5
SPDRs PROSPECTUS PART B
Essential Information................................................... B-2
Report of Independent Accountants....................................... B-4
Statement of Assets and Liabilities..................................... B-5
Statement of Operations................................................. B-6
Statement of Changes in Net Assets...................................... B-7
Financial Highlights.................................................... B-8
Notes to Financial Statements........................................... B-9
Schedule of Investments................................................. B-13
Prospectus Summary...................................................... B-28
Risk Factors and Special Considerations................................. B-39
General................................................................. B-39
Net Asset Value and Market Prices....................................... B-41
Trading Considerations.................................................. B-41
Market Risks............................................................ B-41
Year 2000 Problem....................................................... B-43
The Trust............................................................... B-44
Creation of Creation Units.............................................. B-44
Procedures for Creation of Creation Units............................... B-47
Placement of Creation Orders Using SPDR Clearing Process................ B-49
Placement of Creation Orders Outside SPDR Clearing Process.............. B-49
Book-Entry-Only System.................................................. B-51
The Portfolio........................................................... B-54
Adjustments to the Portfolio............................................ B-54
</TABLE>

TABLE OF CONTENTS cont'd
<TABLE>
<S> <C>
Adjustments to the Portfolio Deposit.................................... B-58
Selection and Acquisition of Securities................................. B-61
The S&P 500 Index....................................................... B-61
License Agreement....................................................... B-64
Exchange Listing........................................................ B-65
Tax Status of the Trust................................................. B-66
Tax Consequences to Beneficial Owners................................... B-66
Continuous Offering of SPDRs............................................ B-69
Expenses of the Trust................................................... B-70
Redemption of SPDRs..................................................... B-73
Procedure for Redemption of SPDRs....................................... B-74
Placement of Redemption Orders Using SPDR Clearing Process.............. B-77
Placement of Redemption Orders Outside SPDR Clearing Process............ B-78
Valuation............................................................... B-79
Administration of the Trust............................................. B-79
Records................................................................. B-79
Voting.................................................................. B-80
Distributions to Beneficial Owners...................................... B-80
Trust Supervision....................................................... B-83
Statements to Beneficial Owners......................................... B-83
Register of Ownership and Transfer...................................... B-83
Rights of Beneficial Owners............................................. B-83
Amendment............................................................... B-84
Termination............................................................. B-85
Resignation, Removal and Liability...................................... B-86
The Trustee............................................................. B-86
The Sponsor............................................................. B-88
Sponsor................................................................. B-89
Trustee................................................................. B-89
Depository.............................................................. B-89
Legal Opinion........................................................... B-89
Independent Accountants................................................. B-89
Information and Comparisons Relating to Trust, Secondary Market Trading,
Net Asset Size, Performance and Tax Treatment.......................... B-90
Dividend Reinvestment Service........................................... B-97
Glossary of Defined Terms............................................... B-99
</TABLE>

"S&P(R)", "S&P 500"(R), "Standard & Poor's 500"(R), "Standard & Poor's
Depositary Receipts"(R) and "SPDRs"(R) are trademarks of The McGraw-Hill
Companies, Inc. PDR Services LLC and American Stock Exchange LLC 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.

A-1
<PAGE>

SPDRs PROSPECTUS PART A--HIGHLIGHTS

.SPDRs ARE OWNERSHIP INTERESTS IN THE SPDR TRUST

The SPDR Trust (the "Trust") is a unit investment trust that issues
securities called Standard & Poor's Depositary Receipts or "SPDRs". SPDRs
represent an undivided ownership interest in the portfolio of stocks held by
the SPDR Trust. The SPDR Trust holds all of the common stocks of the Standard
& Poor's 500 Composite Stock Price Index(R) (the "S&P 500 Index") and is
intended to provide investment results that, before expenses, generally
correspond to the price and yield performance of the S&P 500 Index.

.SPDRs TRADE ON THE AMERICAN STOCK EXCHANGE

SPDRs are listed for trading on the American Stock Exchange (the
"Exchange"). SPDRs are bought and sold in the secondary market like ordinary
shares of stock at any time during the trading day. SPDRs are traded on the
Exchange in 100 SPDR round lots, but can be traded in odd lots of as little as
1 SPDR. Note that trading of SPDRs on the Exchange will be halted under the
circumstances described in the paragraphs below relating to the risks of
investing in SPDRs.

. THE SPDR TRUST ISSUES AND REDEEMS SPDRs IN MULTIPLES OF 50,000 SPDRs
CALLED "CREATION UNITS"

The Trust only issues SPDRs in specified large-sized minimum numbers (50,000
SPDRs or multiples thereof) referred to as "Creation Units." Most SPDR holders
however, purchase and sell SPDRs in the secondary trading market on the
Exchange, in lots of any size.

Creation Units are issued by the Trust to anyone who, after placing a
creation order with the Distributor, deposits with State Street Bank and Trust
Company, the "Trustee" of the Trust, a specified portfolio of S&P 500 Index
securities, as well as a cash payment generally equal to accumulated dividends
of the securities (net of expenses) up to the time of deposit.

SPDRs are not individually redeemable, except upon termination of the Trust.
SPDRs can be redeemed only by tendering to the Trust 50,000 SPDRs (or
multiples thereof)--the same Creation Unit-sized minimum number. The Trust
will then deliver a portfolio of S&P 500 Index securities (based on net asset
value of the Trust), together with a cash payment (generally equal to
accumulated dividends as of the date of redemption) to the redeeming holder.

Procedures to be followed when engaging in these "creation" and redemption
transactions are set forth in Part B of this Prospectus.

A-2
<PAGE>

.BROKERAGE COMMISSIONS ON SPDRs

Secondary market purchases and sales of SPDRs are subject to ordinary
brokerage commissions.

.SPDRs ARE BASED ON A BROAD MARKET INDEX

The Sponsor selected the S&P 500 Index, composed of 500 publicly traded
stocks, as the basis for SPDRs because it is well-known to investors and, in
the opinion of the Sponsor, constitutes a representative segment of the market
of all publicly traded stocks. Current information regarding the market value
of the S&P 500 Index is available from market information services. Standard &
Poor's obtains information for inclusion in or for use in the calculation of
the S&P 500 Index from sources which S&P considers reliable, but neither S&P,
the Sponsor, the Trust nor the Exchange accepts responsibility for or
guarantees the accuracy and/or completeness of the S&P 500 Index or any data
included in it.

. SPDRs SHOULD CLOSELY TRACK THE VALUE OF THE UNDERLYING S&P 500 INDEX
STOCKS

To maintain the correspondence between the composition and weightings of
securities held by the Trust (the "Securities") and the stocks in the S&P 500
Index, the Securities will be adjusted by the Trustee from time to time to
conform to periodic changes in the identity and/or relative weightings of S&P
500 Index stocks. The SPDR Trust Agreement contains directions to the Trustee
specifying how changes to the S&P 500 Index are to be replicated by the Trust.

The value of SPDRs will fluctuate in relation to changes in the value of the
Trust's portfolio of securities. However, at any point in time, the market
price of each individual SPDR may not be identical to the net asset value of
such SPDR. Historically, these two valuations have been very close. See Part B
of this Prospectus for a description of the comparisons of market price and
net asset value. Of course, these comparisons only reflect past performance
and no guarantee can be made of future performance.

The current value of the S&P 500 Index will ordinarily continue to be
reported even when trading is interrupted in some or all of its component
stocks. In that event, the reported index level will be based on the current
market price of those stocks still being traded (if any) and the last reported
prices for those stocks that are not currently trading. As a result, reported
index levels may at times be based on non-current price information with
respect to some or even all of the stocks in the S&P 500 Index.

.EXPENSES OF THE TRUST

Fees and expenses to be charged to the Trust are described in Part B of this
Prospectus and include, among other costs, the Trustee's fees, S&P licensing
fees, federal registration fees and expenses of the Sponsor relating to the
printing and distribution of marketing materials. The expenses of the Trust
will be accrued daily

A-3
<PAGE>

and reflected in the net asset value of the Trust. Before reflecting waivers
and credits, the Trust is currently accruing ordinary operating expenses at an
annual rate of 0.1967%*:

Estimated Trust Annual Ordinary Operating Expenses

<TABLE>
<CAPTION>
As a % of
Trust Net Assets
----------------
<S> <C>
Trustee's Fee 0.1125%
S&P License Fee 0.0350%
Registration Fees 0.0056%
Marketing Expenses 0.0400%
Other Operating Expenses 0.0036%
-------
*Total: 0.1967%
</TABLE>

Future accruals will depend primarily on the level of the Trust's net
assets and the level of expenses.

*For fiscal year 1999, the ordinary operating expenses of the Trust were
not permitted to exceed 0.1800% of the Trust's daily net asset value
because the Trustee voluntarily waived a portion of its fee. The Trustee
reserves the right to discontinue this voluntary waiver policy in the
future. Therefore, there is no guarantee that the Trust's ordinary
operating expenses will not exceed 0.18% of the Trust's daily net asset
value. Trust expenses were further reduced by a Trustee's earnings credit
to 0.1742% of the Trust's daily net asset value. This Trustee's earnings
credit is a reduction of Trust expenses as a result of uninvested cash
balances in the Trust. The appropriate annual ordinary operating expense
figure, for comparative purposes, is 0.1800%.

.SPDRs MAKE PERIODIC DIVIDEND PAYMENTS

SPDR holders will be paid on the last Business Day of April, July,
October and January an amount corresponding to the amount of any cash
dividends on the Trust's portfolio of securities during the applicable
period, net of fees and expenses associated with operation of the Trust.
Because of such fees and expenses, the dividend yield for SPDRs will
ordinarily be less than that of the S&P 500 Index. The SPDR holder should
be aware of the tax consequences associated with Trust dividends, as well
as those associated with SPDR sales or redemptions. Investors should
consult their tax advisors in this regard.

.THE TRUSTEE VOTES THE UNDERLYING SHARES

The Trustee will vote any voting stocks held by the Trust in the same
proportion as all other voting shares of such stocks are voted.
Consequently, holders of SPDRs will not be able to vote the shares of the
stocks underlying the SPDRs.

.TERMINATION OF THE SPDR TRUST

The SPDR Trust has a specified lifetime term. The Trust is scheduled to
terminate no later than January 22, 2118, but it may terminate earlier
under certain circumstances described in Part B of this Prospectus.

A-4
<PAGE>

Trading of SPDRs cannot occur after termination of the underlying Trust.
Upon termination, the Trust may be liquidated, and SPDR holders at that time
will receive a distribution of their pro rata share of the assets of the
Trust, net of certain fees and expenses.

.RISK FACTORS

Investors can lose money by investing in SPDRs. Investors should carefully
consider the risk factors described below together with all of the other
information included in Part B of this Prospectus before deciding to invest in
SPDRs.

. SPDRs are subject to the risks of any investment in a broadly based
portfolio of common stocks, including the risk that the general level of
stock prices may decline. A significant decline in the value of the
Trust's portfolio can be expected to result in a similar decline in value
of the corresponding SPDRs. Therefore, the value an investor receives from
the sale of a SPDR may be less than the investor's original purchase
price.

. Investors should understand that the Trust may never be able to replicate
exactly the performance of the S&P 500 Index because of the operational
fees and expenses incurred by the Trust or because of the temporary
unavailability of certain S&P 500 Index securities.

. Investors cannot be assured that the issuers of securities held by the
Trust will pay dividends, and distributions on such securities will
generally depend upon the declaration of dividends by the securities'
issuers.

. The market price that an investor pays per SPDR on the Exchange may differ
from the net asset value of the SPDR. This difference in price may be due
to the fact that the supply and demand in the market for SPDRs at any
point in time is not always identical to the supply and demand in the
market for the underlying basket of S&P 500 Index securities.

. Investors will not be able to sell SPDRs during any period that the
Exchange halts trading in SPDRs. The Exchange may halt the trading of
SPDRs under certain circumstances described in Part B of this Prospectus,
for example, as a result of the activation of market-wide "circuit
breakers," or whenever Exchange officials determine that it is appropriate
in the interest of a fair and orderly market or to protect investors.

. The Exchange maintains certain requirements to list securities, including
SPDRs, on the Exchange. Investors cannot be assured that the Trust will
continue to meet the requirements necessary to maintain the listing of
SPDRs on the Exchange or that the Exchange will not change the listing
requirements. The Trust may be terminated if SPDRs are delisted from the
Exchange.

. The Sponsor of the Trust has been granted a license to use the S&P 500
Index as a basis for determining the composition of the Trust and to use
certain trade

A-5
<PAGE>

names and trademarks of Standard & Poor's. The Trust may be terminated
if the license agreement is terminated.

. The Trust may also be terminated if the net asset value of the entire
Trust falls below $350,000,000.

. SPDRs are subject to the risk that extraordinary events may cause any
of the providers of services to the Trust, such as the Trustee or the
Sponsor, to close or otherwise fail to perform its obligations to the
Trust. In the event of such a failure, if no suitable successor is
available or willing to assume the obligations of its predecessor, the
Trust then will be terminated.

. Many computer systems were designed in such a way that they may be
unable to distinguish between the year 2000 and the year 1900 and
therefore may not properly process and calculate date-related
information and data (commonly known as the "Year 2000 Problem"). As
with all investment and financial entities, the Year 2000 Problem may
have an adverse impact upon the handling of securities trades, pricing
and account services and other activities conducted by or for the
Trust. The Sponsor and the Trustee have taken steps to address the
Year 2000 Problem with respect to the computer systems they use and to
obtain reasonable assurances that similar steps have been taken by the
Trust's other service providers. Operations ran smoothly from the last
week in December through the first few weeks of January, but the Year
2000 Problem may yet have an adverse impact on financial market
participants and other entities, including the companies whose stocks
are contained in the Trust's Portfolio.

A-6
<PAGE>

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

SPDR Trust, Series 1

(A Unit Investment Trust)

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

[LOGO OF SPDR APPEARS HERE]

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

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

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

This Prospectus consists of two parts: Part A and Part B.

Prospectus Part B Dated January 26, 2000

----------------------
<PAGE>

SPDR PROSPECTUS PART B--ESSENTIAL INFORMATION AS OF SEPTEMBER 30, 1999+

Number of SPDRs
102,669,568

Fractional Undivided Interest in
Trust Represented by each SPDR

1/102,669,568th

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:
18/100 of one percent (0.18%) (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)

$128.39
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.

B-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 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". Ordinary operating expenses are
currently being accrued at an annual rate of 0.18%; future accruals will
depend primarily on the level of the Trust's net assets and the level of
Trust expenses. There is no guarantee that the Trust's ordinary operating
expenses will not exceed 0.18% of the Trust's daily net asset value and
such rate may be changed without notice.
++++ The Trust may also be terminated under other circumstances. See
"Administration of the Trust--Termination".

B-3
<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, 1999, 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, 1999 by correspondence with
the custodian and brokers, provide a reasonable basis for the opinion
expressed above.

PricewaterhouseCoopers LLP

Boston, Massachusetts

November 22, 1999

B-4
<PAGE>

SPDR Trust Series 1
Statement of Assets and Liabilities
September 30, 1999

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

<TABLE>
<S> <C>
Assets
Investments in securities, at value (cost $13,597,115,126).... $13,163,739,469
Cash.......................................................... 43,489,739
Receivable for investments sold............................... 38,522,940
Dividends receivable.......................................... 14,559,165
---------------
Total Assets.................................................... 13,260,311,313
===============
Liabilities
Payable for investments purchased............................. 24,662,762
Income distributions payable.................................. 39,276,300
Due to Sponsor................................................ 4,149,108
Accrued Trustee fees.......................................... 1,756,104
Accrued expenses and other liabilities........................ 8,475,120
---------------
Total Liabilities............................................... 78,319,394
---------------
Net Assets...................................................... $13,181,991,919
===============
Net assets represented by:
Paid in surplus relating to 102,669,568 units of fractional
undivided interest ("SPDRs") outstanding; unlimited units
authorized.................................................. $13,704,048,621
Distribution in excess of net investment income............... (3,151,817)
Accumulated net realized loss on investments.................. (85,529,228)
Net unrealized depreciation on investments.................... (433,375,657)
---------------
Net Assets...................................................... $13,181,991,919
===============
Net asset value per SPDR ($13,181,991,919/102,669,568 SPDRs).... $ 128.39
===============
</TABLE>

See accompanying notes to financial statements

B-5
<PAGE>

SPDR Trust Series 1
Statement of Operations
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
For the nine
For the year For the year month period For the year
ended ended ended ended
September 30, September 30, September 30, December 31,
1999 1998 1997 1996
-------------- --------------- ------------- ------------
<S> <C> <C> <C> <C>
Investment Income
Dividend income (a).... $ 162,164,007 $ 93,269,315 $ 38,356,337 $ 29,620,992
-------------- --------------- ------------ ------------
Expenses
Trustee expense........ 13,488,118 6,990,046 2,578,842 1,806,689
Marketing expense...... 4,795,915 2,213,340 431,452 436,049
S&P license fee........ 4,264,396 2,504,990 563,541 347,506
SEC registration
expense............... 670,400 1,125,070 450,401 203,447
Legal and audit
services.............. 120,000 229,520 143,826 135,000
Amortization of
organization costs.... -- 35,416 81,912 110,000
Other expenses......... 244,966 130,705 90,978 41,002
-------------- --------------- ------------ ------------
Total expenses.......... 23,583,795 13,229,087 4,340,952 3,079,693
Rebate from Sponsor.... -- (410,301) (249,830) (434,407)
Rebate from Trustee.... (2,002,824) (1,149,645) -- --
-------------- --------------- ------------ ------------
Net expenses............ 21,580,971 11,669,141 4,091,122 2,645,286
Trustee earnings credit. (700,001) (488,977) (194,498) (176,370)
-------------- --------------- ------------ ------------
Net expenses after
Trustee earnings
credit................. 20,880,970 11,180,164 3,896,624 2,468,916
-------------- --------------- ------------ ------------
Net investment income... 141,283,037 82,089,151 34,459,713 27,152,076
-------------- --------------- ------------ ------------
Realized and unrealized
gain on investments
Net realized gain on
investment
transactions.......... 2,248,743,945 1,878,084,944 4,973,050 12,398,283
Net increase in
unrealized
appreciation
(depreciation)........ 219,582,548 (1,707,909,730) 644,808,026 236,120,771
-------------- --------------- ------------ ------------
Net realized and
unrealized gain on
investments............ 2,468,326,493 170,175,214 649,781,076 248,519,054
-------------- --------------- ------------ ------------
Net increase in net
assets from operations. $2,609,609,530 $ 252,264,365 $684,240,789 $275,671,130
============== =============== ============ ============
</TABLE>
- -----------

(a) Net of withholding tax expense of $1,559,617, $586,136, $289,809, and
$182,561 for 1999, 1998, 1997, and 1996, respectively.

See accompanying notes to financial statements

B-6
<PAGE>

SPDR Trust Series 1
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
For the nine
For the year For the year month For the year
ended ended period ended ended
September 30, September 30, September 30, December 31,
1999 1998 1997 1996
--------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Increase in net assets from
operations:
Net investment income............. $ 141,283,037 $ 82,089,151 $ 34,459,713 $ 27,152,076
Net realized gain on investment
transactions..................... 2,248,743,945 1,878,084,944 4,973,050 12,398,283
Net increase (decrease) in
unrealized appreciation.......... 219,582,548 (1,707,909,730) 644,808,026 236,120,771
--------------- -------------- -------------- --------------
Net increase in net assets from
operations........................ 2,609,609,530 252,264,365 684,240,789 275,671,130
--------------- -------------- -------------- --------------
Undistributed net investment income
included in price of units issued
and redeemed, net................. 3,650,519 6,830,907 420,891 1,962,474
--------------- -------------- -------------- --------------
Distributions to unitholders from:
Net investment income............. (141,283,037) (82,089,151) (33,466,398) (27,037,456)
In excess of net investment
income........................... (2,999,602) (4,796,055) -- --
Net realized gains................ -- -- -- (3,078,255)
--------------- -------------- -------------- --------------
Total distributions to unitholders. (144,282,639) (86,855,206) (33,466,398) (30,115,711)
--------------- -------------- -------------- --------------
Net increase in net assets from
issuance and redemption of SPDRs.. 2,643,670,384 3,844,189,382 1,393,422,226 759,578,491
--------------- -------------- -------------- --------------
Net increase in net assets during
period............................ 5,112,647,794 4,016,399,448 2,044,617,508 1,007,096,384
Net assets at beginning of period.. 8,069,344,125 4,052,944,677 2,008,327,169 1,001,230,785
--------------- -------------- -------------- --------------
Net assets end of period*.......... $13,181,991,919 $8,069,344,125 $4,052,944,677 $2,008,327,169
=============== ============== ============== ==============
*Includes undistributed
(distributions in excess of) net
investment income................. $ (3,151,817) $ (3,802,740) $ 993,315 $ --
--------------- -------------- -------------- --------------
</TABLE>

B-7
<PAGE>

SPDR Trust Series 1

Financial Highlights

Selected data for a SPDR outstanding during the period
- -------------------------------------------------------------------------------

<TABLE>
<CAPTION>
For the For the For the For the For the For the
year year period year year year
ended ended ended ended ended ended
9/30/99 9/30/98 9/30/97 12/31/96 12/31/95 12/31/94
----------- ---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period... $ 101.80 $ 94.78 $ 74.08 $ 61.61 $ 45.93 $ 46.62
----------- ---------- ---------- ---------- ---------- --------
Investment Operations:
Net investment income.. 1.49 1.41 1.03 1.35 1.26 1.22
Net realized and
unrealized gain (loss)
on investments........ 26.59 7.01 20.67 12.52 15.70 (0.68)
----------- ---------- ---------- ---------- ---------- --------
Total from investment
operations............. 28.08 8.42 21.70 13.87 16.96 0.54
----------- ---------- ---------- ---------- ---------- --------
Less distributions from:
Net investment income.. (1.46) (1.32) (1.00) (1.28) (1.24) (1.23)
In excess of net
investment income..... (0.03) (0.08) -- -- (0.03) --
Net realized gains..... -- -- -- (0.12) (0.01) --
----------- ---------- ---------- ---------- ---------- --------
Total distributions..... (1.49) (1.40) (1.00) (1.40) (1.28) (1.23)
----------- ---------- ---------- ---------- ---------- --------
Net asset value, end of
period................. $ 128.39 $ 101.80 $ 94.78 $ 74.08 $ 61.61 $ 45.93
=========== ========== ========== ========== ========== ========
Total investment return. 27.54% 8.82% 29.38% 22.67% 37.23% 1.15%
Ratios and supplemental
data
Ratio to average net
assets:
Total expenses (1)..... 0.18% 0.19% 0.19%(2) 0.20% 0.20% 0.20%
Net expenses after
rebates and Trustee
earnings credit (1)... 0.17% 0.18% 0.18%(2) 0.18% 0.19% --
Net investment income.. 1.18% 1.35% 1.63%(2) 2.03% 2.35% 2.63%
Portfolio turnover
rate (3).............. 6.23% 4.71% 3.22% 4.37% 4.02% 4.07%
Net assets, end of
period (000's)......... $13,181,992 $8,069,344 $4,052,945 $2,008,327 $1,001,231 $422,577
</TABLE>
- ----------

(1) Net of expenses reimbursed by the Trustee in 1999, the Sponsor and Trustee
in 1998, and the Sponsor in 1994 through the period ended 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
0.02%, 0.03%, 0.02%, 0.03%, 0.03%, and 0.01% in 1999, 1998, 1997, 1996,
1995, and 1994, respectively.

(2) Annualized.

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

See accompanying notes to financial statements

B-8
<PAGE>

SPDR Trust Series 1

Notes to Financial Statements

September 30, 1999
- -------------------------------------------------------------------------------

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.

B-9
<PAGE>

SPDR Trust Series 1

Notes to Financial Statements (continued)

September 30, 1999
- -------------------------------------------------------------------------------

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 1999, the Trust reclassified $2,312,821,331 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, 1999, the Trust had capital loss carryforwards of $33,523 and
$27,798,414 which will expire on September 30, 2005 and September 30, 2006,
respectively.

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 Fee as a percentage of net asset value
Trust of the Trust
---------------------- ----------------------------------------
<C> <S>
$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>

B-10
<PAGE>

SPDR Trust Series 1

Notes to Financial Statements (continued)

September 30, 1999
- -------------------------------------------------------------------------------

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, 1999, the Adjustment
Amount reduced the Trustee's fee by $661,597. The Adjustment Amount included a
deficiency of net transaction fees from processing orders of ($38,404) and a
Trustee earnings credit of $700,001.

For the year ended September 30, 1999, State Street Bank and Trust Company
(the "Trustee") agreed to reimburse the Trust for, or assume, the ordinary
operating expenses of the Trust, before the Trustee earnings credit, which
exceeded 18.00/100 of 1% per annum of the daily net asset value of the Trust.
The amount of such reimbursement by the Trustee for the year ended September
30, 1999 was $2,002,824.

Note 4--Trust Transactions in SPDRs

Transactions in SPDRs were as follows:

<TABLE>
<CAPTION>
Year Ended Year Ended
September 30, 1999 September 30, 1998
----------------------------- -------------------
SPDRs Amount SPDRs Amount
------------ --------------- ----------- ---------------
<S> <C> <C> <C> <C>
SPDRs sold.............. 136,600,000 $15,863,560,260 123,400,000 $12,952,751,200
Dividend reinvestment
SPDRs issued.......... 3,564 446,517 3,020 309,869
SPDRs redeemed.......... (113,200,000) (13,216,685,874) (86,900,000) (9,102,040,780)
Net income equalization. -- (3,650,519) -- (6,830,907)
------------ --------------- ----------- ---------------
Net increase............ 23,403,564 $ 2,643,670,384 36,503,020 $ 3,844,189,382
============ =============== =========== ===============
<CAPTION>
Nine Month Period Ended Year Ended
September 30, 1997 (Note 1) December 31, 1996
----------------------------- ----------------------------
SPDRs Amount SPDRs Amount
------------ --------------- ----------- ---------------
<S> <C> <C> <C> <C>
SPDRs sold.............. 23,800,000 $ 2,120,759,371 15,750,000 $ 1,100,700,575
Dividend reinvestment
SPDRs issued.......... 4,003 328,997 7,625 506,869
SPDRs redeemed.......... (8,150,000) (727,245,251) (4,900,000) (339,666,479)
Net income equalization. -- (420,891) -- (1,962,474)
------------ --------------- ----------- ---------------
Net increase............ 15,654,003 $ 1,393,422,226 10,857,625 $ 759,578,491
============ =============== =========== ===============
</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

B-11
<PAGE>

SPDR Trust Series 1

Notes to Financial Statements (continued)

September 30, 1999
- -------------------------------------------------------------------------------

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, 1999, the Trust had in-kind contributions,
in-kind redemptions, purchases and sales of investment securities of
$15,127,322,773, $12,516,390,306, $816,374,449, and $748,897,781,
respectively. At September 30, 1999, the cost of investments for federal
income tax purposes was $13,605,472,051, accordingly, gross unrealized
appreciation was $879,768,618 and gross unrealized depreciation was
$1,321,501,200, resulting in net unrealized depreciation of $441,732,582.

B-12
<PAGE>

SPDR Trust Series 1

Schedule of Investments

September 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stocks Shares Value
- ------------- --------- ------------
<S> <C> <C>
3Com Corp.*............................................. 450,377 $ 12,948,339
Abbott Lab.............................................. 1,890,002 69,457,573
Adaptec, Inc.*.......................................... 129,000 5,103,563
ADC Telecommunications, Inc.*........................... 154,446 6,477,079
Adobe Systems, Inc...................................... 76,531 8,686,269
Advanced Micro Devices, Inc.*........................... 183,949 3,161,623
AES Corp.*.............................................. 238,341 14,062,119
Aetna, Inc.............................................. 173,797 8,559,502
Aflac, Inc.............................................. 332,506 13,923,689
Air Products & Chemicals, Inc........................... 287,926 8,367,849
Alberto-Culver Co., Class B............................. 73,744 1,705,330
Albertson's, Inc........................................ 527,697 20,877,013
Alcan Aluminum Ltd...................................... 273,374 8,542,938
Alcoa, Inc.............................................. 457,962 28,422,267
Allegheny Teledyne, Inc................................. 241,051 4,067,736
Allergan Pharmaceuticals, Inc........................... 82,448 9,069,280
Allied Signal, Inc...................................... 688,438 41,263,253
Allied Waste Industries, Inc.*.......................... 245,212 2,865,915
Allstate Corp........................................... 997,120 24,865,680
Alltel Corp............................................. 382,841 26,942,435
Alza Corp.*............................................. 126,436 5,413,041
Amerada Hess Corp....................................... 111,079 6,803,589
Ameren Corp............................................. 172,312 6,515,548
America Online, Inc..................................... 1,378,606 143,375,024
American Electric Power Co., Inc........................ 242,836 8,286,779
American Express Co..................................... 561,252 75,558,550
American General Corp................................... 313,757 19,825,520
American Greetings Corp., Class A....................... 87,031 2,241,048
American Home Products Corp............................. 1,632,224 67,737,296
American International Group, Inc....................... 1,926,637 167,497,004
Ameritech Corp.......................................... 1,366,800 91,831,875
Amgen, Inc.*............................................ 637,028 51,917,782
AMR Corp.*.............................................. 180,631 9,844,389
AmSouth Bancorp......................................... 215,769 5,057,086
Anadarko Petroleum Corp................................. 153,524 4,692,077
</TABLE>
- -----------
(*) Denotes non-income producing security.

See accompanying notes to financial statements

B-13
<PAGE>

SPDR Trust Series 1

Schedule of Investments (continued)

September 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stocks Shares Value
- ------------- --------- ------------
<S> <C> <C>
Andrew Corp.*........................................... 103,223 $ 1,793,500
Anheuser-Busch Cos., Inc................................ 583,887 40,908,583
Aon Corp................................................ 324,616 9,596,460
Apache Corp............................................. 138,826 5,995,548
Apple Computer, Inc.*................................... 199,118 12,606,658
Applied Materials, Inc.*................................ 468,089 36,364,664
Archer-Daniels-Midland Co............................... 773,211 9,423,509
Armstrong World Industries, Inc......................... 53,075 2,385,058
ASARCO, Inc............................................. 54,231 1,454,069
Ashland, Inc............................................ 91,922 3,090,877
Associates First Capital Corp. ......................... 910,976 32,795,136
AT&T Corp............................................... 3,981,186 173,181,591
Atlantic Richfield Co................................... 404,028 35,806,981
Autodesk, Inc........................................... 73,844 1,615,338
Automatic Data Processing, Inc.......................... 775,017 34,585,134
Autozone, Inc.*......................................... 187,187 5,252,935
Avery Dennison Corp..................................... 142,917 7,538,872
Avon Products, Inc...................................... 324,405 8,049,299
Baker Hughes, Inc....................................... 413,180 11,982,220
Ball Corp............................................... 39,937 1,759,724
Banc One Corp........................................... 1,464,931 50,997,910
Bank of New York, Inc................................... 918,069 30,697,932
BankAmerica Corp........................................ 2,157,614 120,152,130
BankBoston Corp......................................... 374,587 16,247,711
Bard (C.R.), Inc........................................ 67,912 3,196,109
Barrick Gold Corp....................................... 488,473 10,624,288
Bausch & Lomb, Inc...................................... 73,206 4,827,021
Baxter International, Inc............................... 366,096 22,057,284
BB&T Corp............................................... 391,339 12,669,600
Bear Stearns Cos., Inc.................................. 146,547 5,632,900
Becton, Dickinson & Co.................................. 313,400 8,794,787
Bed Bath & Beyond, Inc.*................................ 174,300 6,075,087
Bell Atlantic Corp...................................... 1,930,910 129,974,379
BellSouth Corp.......................................... 2,355,076 105,978,420
Bemis Co., Inc.......................................... 69,252 2,345,912
</TABLE>
- -----------
(*) Denotes non-income producing security.

See accompanying notes to financial statements

B-14
<PAGE>

SPDR Trust Series 1

Schedule of Investments (continued)

September 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stocks Shares Value
- ------------- --------- ------------
<S> <C> <C>
Best Buy Co., Inc.*..................................... 256,355 $ 15,910,032
Bestfoods............................................... 349,599 16,955,551
Bethlehem Steel Corp.*.................................. 154,688 1,140,824
Biomet, Inc............................................. 141,043 3,711,194
Black & Decker Corp..................................... 111,615 5,099,410
Block (H&R), Inc........................................ 119,432 5,187,828
BMC Software, Inc.*..................................... 295,909 21,175,988
Boeing Co............................................... 1,199,553 51,130,947
Boise Cascade Corp...................................... 68,915 2,511,090
Boston Scientific Corp.*................................ 494,008 12,195,822
Briggs & Stratton Corp.................................. 30,541 1,782,831
Bristol-Myers Squibb Co................................. 2,480,375 167,425,312
Brown-Forman Corp., Class B............................. 87,442 5,454,195
Brunswick Corp.......................................... 115,390 2,870,326
Burlington Northern Santa Fe............................ 565,638 15,555,045
Burlington Resources, Inc............................... 225,159 8,274,593
Cabletron Systems, Inc.*................................ 208,658 3,273,322
Campbell Soup Co........................................ 542,322 21,218,348
Capital One Financial Corp.............................. 251,052 9,791,028
Cardinal Health, Inc.................................... 341,252 18,598,234
Carnival Corp........................................... 756,699 32,916,406
Carolina Power & Light Co............................... 199,721 7,065,130
Case Corp............................................... 96,658 4,814,777
Caterpillar, Inc........................................ 445,532 24,420,723
CBS Corp.*.............................................. 880,158 40,707,307
Cendant Corp.*.......................................... 881,390 15,644,672
Centex Corp............................................. 77,192 2,281,989
Central & South West Corp. ............................. 270,053 5,704,870
CenturyTel, Inc. ....................................... 175,636 7,135,213
Ceridian Corp.*......................................... 181,308 4,510,037
Champion International Corp. ........................... 120,357 6,183,341
Chase Manhattan Corp.................................... 1,039,585 78,358,719
Chevron Corp. .......................................... 816,643 72,477,066
Chubb Corp.............................................. 220,432 10,980,269
CIGNA Corp.............................................. 248,664 19,333,626
</TABLE>
- -----------
(*) Denotes non-income producing security.

See accompanying notes to financial statements

B-15
<PAGE>

SPDR Trust Series 1

Schedule of Investments (continued)

September 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stocks Shares Value
- ------------- --------- ------------
<S> <C> <C>
Cincinnati Financial Corp............................... 208,247 $ 7,815,770
CINergy Corp. .......................................... 199,501 5,648,372
Circuit City Stores, Inc................................ 251,428 10,607,119
Cisco Systems, Inc.*.................................... 4,056,903 278,151,412
Citigroup, Inc.......................................... 4,203,635 184,959,940
Clear Channel Communications*........................... 416,618 33,277,363
Clorox Co. ............................................. 295,266 11,293,924
CMS Energy Corp. ....................................... 146,702 4,978,699
Coastal Corp. .......................................... 270,148 11,059,184
Coca Cola Enterprises, Inc. ............................ 531,672 11,995,849
Coca-Cola Co. .......................................... 3,071,984 147,647,231
Colgate-Palmolive Co. .................................. 728,208 33,315,516
Columbia Energy Group................................... 103,708 5,742,831
Columbia/HCA Healthcare Corp............................ 711,030 15,064,948
Comcast Corp., Class A.................................. 920,887 36,720,369
Comerica, Inc........................................... 193,303 9,785,964
Compaq Computer Corp.................................... 2,105,164 48,287,199
Computer Associates International, Inc. ................ 673,225 41,235,031
Computer Sciences Corp.................................. 199,382 14,019,047
Compuware Corp.*........................................ 445,920 11,621,790
ConAgra, Inc............................................ 615,420 13,885,414
Conoco, Inc............................................. 772,402 21,144,505
Conseco, Inc. .......................................... 399,314 7,711,752
Consolidated Edison, Inc. .............................. 276,026 11,455,079
Consolidated Natural Gas Co. ........................... 119,971 7,483,191
Consolidated Stores Corp.*.............................. 140,113 3,091,243
Constellation Energy Group, Inc......................... 193,738 5,448,881
Cooper Industries, Inc. ................................ 118,212 5,526,411
Cooper Tire & Rubber Co. ............................... 98,144 1,729,788
Coors (Adolph) Co., Class B............................. 49,325 2,669,716
Corning, Inc............................................ 305,735 20,961,956
Costco Wholesale Corp.*................................. 275,991 19,871,352
Countrywide Credit Industries, Inc. .................... 139,040 4,484,040
Crane Co................................................ 90,593 2,032,680
Crown Cork & Seal Co., Inc.............................. 158,194 3,836,205
</TABLE>
- -----------
(*) Denotes non-income producing security.

See accompanying notes to financial statements

B-16
<PAGE>

SPDR Trust Series 1

Schedule of Investments (continued)

September 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stocks Shares Value
- ------------- --------- ------------
<S> <C> <C>
CSX Corp. .............................................. 264,665 $ 11,215,179
Cummins Engine Co., Inc................................. 51,036 2,542,231
CVS Corp. .............................................. 483,812 19,745,577
Cyprus Amax Minerals Co................................. 122,503 2,404,121
Dana Corp............................................... 210,611 7,818,933
Danaher Corp............................................ 170,794 8,998,709
Darden Restaurants, Inc. ............................... 174,912 3,421,716
Data General Corp.*..................................... 59,115 1,245,110
Dayton-Hudson Corp. .................................... 553,634 33,252,642
Deere & Co.............................................. 290,774 11,249,319
Dell Computer Corp.*.................................... 3,172,409 132,646,351
Delphi Automotive Systems Corp.......................... 703,839 11,305,414
Delta Air Lines, Inc. .................................. 176,142 8,542,887
Deluxe Corp............................................. 98,216 3,339,344
Dillard's, Inc., Class A................................ 135,624 2,754,863
Disney (Walt) Co. (The)................................. 2,557,574 66,177,227
Dollar General Corp..................................... 268,361 8,285,646
Dominion Resources, Inc. ............................... 234,705 10,591,063
Donnelley (R.R.) & Sons Co.............................. 164,306 4,744,336
Dover Corp. ............................................ 250,053 10,220,916
Dow Chemical Co. ....................................... 275,601 31,315,164
Dow Jones & Co., Inc.................................... 112,615 6,010,826
DTE Energy Co........................................... 178,021 6,431,009
Du Pont (E.I.) de Nemours & Co., Inc.................... 1,216,580 74,059,307
Duke Power Co. ......................................... 450,113 24,812,479
Dun & Bradstreet Corp................................... 204,937 6,122,493
Eastern Enterprises..................................... 21,834 1,013,916
Eastman Chemical Co. ................................... 98,128 3,925,120
Eastman Kodak Co. ...................................... 395,275 29,818,558
Eaton Corp.............................................. 90,341 7,797,558
Ecolab, Inc............................................. 162,022 5,529,001
Edison International.................................... 434,154 10,555,369
EG & G, Inc. ........................................... 61,285 2,439,909
EMC Corp.*.............................................. 1,261,312 90,104,976
Emerson Electric Co. ................................... 541,077 34,189,303
</TABLE>
- -----------
(*) Denotes non-income producing security.

See accompanying notes to financial statements

B-17
<PAGE>

SPDR Trust Series 1

Schedule of Investments (continued)

September 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stocks Shares Value
- ------------- --------- ------------
<S> <C> <C>
Engelhard Corp. ........................................ 144,770 $ 2,633,004
Enron Corp. ............................................ 887,640 36,615,150
Entergy Corp............................................ 314,300 9,095,056
Equifax, Inc............................................ 181,235 5,097,234
Exxon Corp.............................................. 3,023,120 229,568,175
Fannie Mae.............................................. 1,272,165 79,748,843
FDX Corp.*.............................................. 375,644 14,556,205
Federated Department Stores, Inc.*...................... 260,964 11,400,865
Fifth Third Bancorp..................................... 337,287 20,521,806
First Data Corp. ....................................... 526,823 23,114,359
First Energy Corp. ..................................... 293,855 7,493,303
First Union Corp. ...................................... 1,194,868 42,492,493
Firstar Corp............................................ 1,234,424 31,632,115
Fleet Financial Group, Inc. ............................ 707,079 25,896,768
Fleetwood Enterprises, Inc. ............................ 46,543 939,587
Florida Progress Corp................................... 118,420 5,476,925
Fluor Corp.............................................. 92,185 3,710,446
FMC Corp.*.............................................. 41,845 2,019,021
Ford Motor Co........................................... 1,508,299 75,697,756
Fort James Corp......................................... 278,000 7,419,125
Fortune Brands, Inc..................................... 209,591 6,759,310
Foster Wheeler Corp..................................... 52,967 638,914
FPL Group, Inc.......................................... 227,549 11,462,781
Franklin Resources, Inc................................. 316,311 9,726,563
Freddie Mac............................................. 860,164 44,728,528
Freeport-McMoran Copper & Gold.......................... 200,004 3,112,562
Gannett Co., Inc........................................ 349,770 24,199,712
Gap, Inc. (The)......................................... 1,075,852 34,427,268
Gateway 2000, Inc.*..................................... 393,592 17,490,244
General Dynamics Corp................................... 249,359 15,569,353
General Electric Co..................................... 4,088,347 484,724,641
General Instrument Corp.*............................... 213,115 10,256,159
General Mills, Inc...................................... 186,016 15,090,548
General Motors Corp..................................... 804,659 50,643,226
Genuine Parts Co........................................ 217,735 5,783,586
</TABLE>
- -----------
(*) Denotes non-income producing security.

See accompanying notes to financial statements

B-18
<PAGE>

SPDR Trust Series 1

Schedule of Investments (continued)

September 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stocks Shares Value
- ------------- --------- ------------
<S> <C> <C>
Georgia-Pacific Corp.................................... 215,555 $ 8,729,978
Gillette Co............................................. 1,354,948 45,983,548
Global Crossing Ltd.*................................... 958,969 25,412,684
Golden West Financial Corp.............................. 70,190 6,896,168
Goodrich (B.F.) Co...................................... 137,538 3,988,602
Goodyear Tire & Rubber Co. (The)........................ 191,295 9,206,072
GPU, Inc................................................ 162,206 5,291,971
Grace (W. R.) & Co.*.................................... 94,656 1,520,412
Grainger (W.W.), Inc.................................... 108,470 5,213,339
Great Atlantic & Pacific Tea Co., Inc................... 49,532 1,501,439
Great Lakes Chemical Corp............................... 75,877 2,888,068
GTE Corp................................................ 1,208,955 92,938,416
Guidant Corp............................................ 374,005 20,056,018
Halliburton Co.......................................... 545,440 22,363,040
Harcourt General, Inc................................... 89,210 3,713,366
Harrahs Entertainment, Inc.*............................ 160,269 4,447,465
Harris Corp............................................. 103,876 2,869,575
Hartford Financial Services Group....................... 284,786 11,640,628
Hasbro, Inc............................................. 246,764 5,290,003
HCR Manor Care, Inc..................................... 136,322 2,343,034
Healthsouth Corp.*...................................... 514,652 3,120,078
Heinz (H.J.) Co......................................... 448,376 19,280,168
Helmerich & Payne, Inc.................................. 65,834 1,666,423
Hercules, Inc........................................... 126,987 3,635,003
Hershey Foods Corp...................................... 174,664 8,503,954
Hewlett-Packard Co...................................... 1,265,406 116,417,352
Hilton Hotels Corp...................................... 327,135 3,230,458
Home Depot, Inc. (The).................................. 1,852,184 127,106,127
Homestake Mining Co..................................... 302,616 2,780,285
Honeywell, Inc.......................................... 158,012 17,588,711
Household International, Inc............................ 599,769 24,065,731
Humana, Inc.*........................................... 215,797 1,483,604
Huntington Bancshares, Inc.............................. 294,886 7,832,909
Ikon Office Solutions, Inc.............................. 175,930 1,880,252
Illinois Tool Works, Inc................................ 314,045 23,415,980
</TABLE>
- -----------
(*) Denotes non-income producing security.

See accompanying notes to financial statements

B-19
<PAGE>

SPDR Trust Series 1

Schedule of Investments (continued)

September 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stocks Shares Value
- ------------- --------- ------------
<S> <C> <C>
IMS Health, Inc......................................... 397,692 $ 9,072,349
Inco, Ltd............................................... 240,384 5,138,208
Ingersoll-Rand Co....................................... 206,393 11,338,715
Intel Corp.............................................. 4,127,917 306,755,832
International Business Machines Corp.................... 2,256,788 273,917,643
International Flavors & Fragrances, Inc................. 133,217 4,595,987
International Paper Co.................................. 509,702 24,497,552
Interpublic Group of Cos., Inc.......................... 352,921 14,513,876
ITT Industries, Inc..................................... 114,043 3,627,993
J.C. Penney Co., Inc.................................... 326,595 11,226,703
J.P. Morgan & Co., Inc.................................. 219,284 25,053,197
Jefferson-Pilot Corp.................................... 130,631 8,254,246
Johnson & Johnson....................................... 1,672,743 153,683,263
Johnson Controls, Inc................................... 106,650 7,072,228
Jostens, Inc............................................ 49,757 951,603
K mart Corp.*........................................... 621,523 7,264,050
Kansas City Southern Industries, Inc.................... 137,279 6,374,894
Kaufman & Broad Home Corp............................... 51,182 1,055,629
Kellogg Co.............................................. 495,217 18,539,686
Kerr-McGee Corp......................................... 108,449 5,971,473
Keycorp................................................. 564,449 14,569,840
Kimberly-Clark Corp..................................... 657,219 34,503,997
King World Productions, Inc.*........................... 88,838 3,331,425
Kla-Tencor Corp.*....................................... 111,134 7,223,710
Knight Ridder, Inc...................................... 98,596 5,410,456
Kohls Corp.*............................................ 203,074 13,428,268
Kroger Co.*............................................. 1,036,102 22,859,000
Laidlaw, Inc............................................ 423,150 2,856,263
Lehman Brothers Holdings, Inc. ......................... 147,432 8,597,129
Lexmark International Group, Inc.*...................... 163,128 13,131,804
Lilly (Eli) & Co........................................ 1,364,953 87,356,992
Limited, Inc. (The)..................................... 264,813 10,129,097
Lincoln National Corp................................... 249,978 9,389,799
Liz Claiborne, Inc...................................... 79,014 2,449,434
Lockheed Martin Corp.................................... 486,388 15,898,808
</TABLE>
- -----------
(*) Denotes non-income producing security.

See accompanying notes to financial statements

B-20
<PAGE>

SPDR Trust Series 1

Schedule of Investments (continued)

September 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stocks Shares Value
- ------------- --------- ------------
<S> <C> <C>
Loews Corp.............................................. 134,306 $ 9,426,602
Longs Drug Stores Corp.................................. 51,291 1,532,319
Louisiana Pacific Corp.................................. 108,820 1,700,313
Lowes Cos., Inc......................................... 466,124 22,723,545
LSI Logic Corp.*........................................ 181,306 9,337,259
Lucent Technologies, Inc................................ 3,822,223 247,966,717
Mallinckrodt, Inc....................................... 89,821 2,711,471
Marriott International, Inc............................. 306,035 10,003,519
Marsh & McLennan Cos., Inc.............................. 330,214 22,619,659
Masco Corp.............................................. 533,335 16,533,385
Mattel, Inc............................................. 522,987 9,936,753
May Department Stores Co................................ 418,320 15,242,535
Maytag Corp............................................. 109,846 3,659,245
MBIA, Inc............................................... 121,434 5,661,860
MBNA Corp............................................... 991,514 22,618,913
McDermott International, Inc. .......................... 75,569 1,530,272
McDonald's Corp......................................... 1,682,606 72,352,058
McGraw-Hill, Inc........................................ 249,598 12,074,303
MCI Worldcom, Inc.*..................................... 2,327,705 167,303,797
Mckesson HBOC, Inc...................................... 346,622 10,052,038
Mead Corp............................................... 129,548 4,453,213
Mediaone Group, Inc.*................................... 757,416 51,740,980
Medtronic, Inc.......................................... 1,463,256 51,945,588
Mellon Bank Corp........................................ 629,416 21,242,790
Merck & Co., Inc........................................ 2,919,739 189,235,584
Meredith Corp........................................... 65,169 2,366,449
Merrill Lynch & Co., Inc................................ 461,727 31,022,283
MGIC Investment Corp.................................... 139,061 6,640,163
Micron Technology, Inc.*................................ 312,653 20,810,965
Microsoft Corp.*........................................ 6,362,125 576,169,945
Milacron, Inc........................................... 50,739 900,617
Millipore Corp.......................................... 57,027 2,142,077
Minnesota Mining & Manufacturing Co..................... 498,721 47,908,386
Mirage Resorts, Inc.*................................... 232,526 3,269,897
Mobil Corp.............................................. 978,880 98,622,160
</TABLE>
- -----------
(*) Denotes non-income producing security.

See accompanying notes to financial statements

B-21
<PAGE>

SPDR Trust Series 1

Schedule of Investments (continued)

September 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stocks Shares Value
- ------------- --------- -----------
<S> <C> <C>
Monsanto Co.............................................. 789,415 $28,172,248
Morgan Stanley, Dean Witter, Discover and Co............. 714,047 63,684,067
Motorola, Inc............................................ 750,842 66,074,096
Nabisco Group Holdings Corp.............................. 409,164 6,137,460
Nacco Industries, Inc., Class A.......................... 10,775 752,903
National City Corp....................................... 771,990 20,602,483
National Semiconductor Corp.*............................ 212,552 6,482,836
National Service Industries, Inc......................... 55,808 1,757,952
Navistar International Corp.*............................ 83,010 3,859,965
Network Appliance, Inc.*................................. 91,198 6,532,057
New Century Energies, Inc................................ 142,580 4,767,519
New York Times Co. (The), Class A........................ 221,619 8,310,713
Newell Rubbermaid, Inc................................... 352,953 10,081,220
Newmont Mining Corp...................................... 207,893 5,379,231
Nextel Communications, Inc.*............................. 414,802 28,128,761
Niagara Mohawk Power Corp.*.............................. 234,608 3,621,761
NICOR, Inc............................................... 64,059 2,382,194
Nike, Inc., Class B...................................... 352,819 20,066,581
Nordstrom, Inc........................................... 169,801 4,584,627
Norfolk Southern Corp.................................... 467,195 11,446,277
Nortel Networks Corp..................................... 1,656,578 84,485,478
Northern States Power Co................................. 191,608 4,131,548
Northern Trust Corp...................................... 134,291 11,213,298
Northrop Corp............................................ 87,236 5,544,938
Novell, Inc.*............................................ 410,673 8,495,798
Nucor Corp............................................... 110,396 5,257,610
Occidental Petroleum Corp................................ 435,847 10,078,962
Office Depot, Inc.*...................................... 469,601 4,784,060
Omnicom Group, Inc. ..................................... 216,472 17,141,876
ONEOK Systems, Inc. ..................................... 39,324 1,192,009
Oracle Systems Corp.*.................................... 1,796,616 81,746,028
Owens Corning............................................ 69,972 1,517,518
Owens-Illinois, Inc.*.................................... 199,384 3,950,296
PACCAR, Inc.............................................. 98,096 4,990,634
PacifiCorp............................................... 373,156 7,509,765
</TABLE>
- -----------
(*) Denotes non-income producing security.

See accompanying notes to financial statements

B-22
<PAGE>

SPDR Trust Series 1

Schedule of Investments (continued)

September 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stocks Shares Value
- ------------- --------- ------------
<S> <C> <C>
Paine Webber Group, Inc................................. 181,186 $ 6,567,993
Pall Corp............................................... 161,084 3,735,135
Parametric Technology Corp.*............................ 342,260 4,620,510
Parker-Hannifin Corp.................................... 138,146 6,190,668
Paychex, Inc............................................ 312,501 10,664,097
PE Corp.-- PE Biosystems Group.......................... 127,754 9,230,226
Peco Energy Co.......................................... 233,075 8,740,313
Peoples Energy Corp..................................... 46,673 1,642,306
PeopleSoft, Inc......................................... 295,110 4,998,426
Pep Boys-- Manny Moe & Jack............................. 66,049 982,479
PepsiCo, Inc............................................ 1,826,523 55,252,321
Pfizer, Inc............................................. 4,822,137 173,295,548
PG&E Corp............................................... 477,657 12,359,375
Pharmacia & Upjohn, Inc................................. 629,050 31,216,606
Phelps Dodge Corp....................................... 66,855 3,681,203
Philip Morris Cos., Inc................................. 2,985,403 102,063,465
Phillips Petroleum Co................................... 314,447 15,329,291
Pitney Bowes, Inc....................................... 336,284 20,492,306
Placer Dome, Inc........................................ 407,510 6,061,711
PNC Financial Corp...................................... 380,214 20,032,525
Polaroid Corp........................................... 58,782 1,528,332
Potlatch Corp........................................... 38,383 1,580,900
PP&L Resources, Inc..................................... 197,979 5,357,807
PPG Industries, Inc..................................... 210,123 12,607,380
Praxair, Inc............................................ 198,923 9,150,458
Procter & Gamble Co..................................... 1,653,066 154,974,937
Progressive Corp........................................ 91,391 7,465,502
Providian Financial Corp................................ 178,274 14,117,072
Public Service Enterprise, Inc.......................... 273,844 10,577,224
Pulte Corp.............................................. 57,392 1,248,276
Quaker Oats Co.......................................... 168,865 10,448,522
QUALCOMM, Inc........................................... 200,704 37,970,688
Ralston Purina Co. ..................................... 407,724 11,339,824
Raytheon Co. ........................................... 418,851 20,785,481
Reebok International Ltd.*.............................. 73,713 787,808
</TABLE>
- -----------
(*) Denotes non-income producing security.

See accompanying notes to financial statements

B-23
<PAGE>

SPDR Trust Series 1

Schedule of Investments (continued)

September 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stocks Shares Value
- ------------- --------- ------------
<S> <C> <C>
Regions Financial Corp. ................................ 272,881 $ 8,186,430
Reliant Energy, Inc..................................... 362,036 9,797,599
Republic New York Corp.................................. 132,067 8,113,866
Reynolds Metals Co...................................... 81,834 4,940,728
Rite Aid Corp. ......................................... 330,122 4,559,810
Rockwell International Corp............................. 235,890 12,384,225
Rohm & Haas Co. ........................................ 268,424 9,696,817
Rowan Cos., Inc.*....................................... 112,880 1,834,300
Royal Dutch Petroleum Co................................ 2,668,070 157,582,884
Russell Corp. .......................................... 49,265 698,947
Ryder System, Inc. ..................................... 90,357 1,841,024
SAFECO Corp............................................. 164,232 4,598,496
Safeway, Inc.*.......................................... 623,297 23,724,242
Sara Lee Corp. ......................................... 1,127,819 26,433,258
SBC Communications, Inc. ............................... 2,455,565 125,387,288
Schering-Plough Corp. .................................. 1,834,095 80,012,394
Schlumberger Ltd........................................ 686,572 42,782,018
Schwab (Charles) Corp................................... 1,024,766 34,521,805
Scientific-Atlanta, Inc................................. 93,646 4,641,330
Seagate Technology, Inc.*............................... 278,747 8,588,892
Seagram Co. Ltd. (The).................................. 537,286 24,446,513
Sealed Air Corp.*....................................... 105,698 5,423,629
Sears, Roebuck & Co..................................... 475,296 14,912,412
Sempra Energy........................................... 295,267 6,145,244
Service Corp. International............................. 328,082 3,465,366
Shared Medical Systems.................................. 32,866 1,536,486
Sherwin-Williams Co..................................... 213,577 4,471,768
Sigma-Aldrich Corp...................................... 126,167 4,005,802
Silicon Graphics, Inc.*................................. 234,919 2,569,427
SLM Holding Corp. ...................................... 204,463 8,791,909
Snap On, Inc. .......................................... 79,948 2,598,310
Solectron Corp.*........................................ 335,958 24,125,984
Sonat, Inc. ............................................ 142,630 5,660,628
Southern Co............................................. 853,134 21,968,200
SouthTrust Corp......................................... 206,000 7,390,250
</TABLE>
- -----------
(*) Denotes non-income producing security.

See accompanying notes to financial statements

B-24
<PAGE>

SPDR Trust Series 1

Schedule of Investments (continued)

September 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stocks Shares Value
- ------------- --------- -----------
<S> <C> <C>
Southwest Airlines Co. .................................. 635,990 $ 9,659,098
Springs Industries, Inc. ................................ 25,322 859,365
Sprint Corp. ............................................ 1,082,690 58,735,932
Sprint Corp. (PCS Group)*................................ 544,054 40,566,026
St. Jude Medical Center, Inc.*........................... 105,496 3,323,124
St. Paul Cos., Inc....................................... 283,176 7,787,340
Stanley Works (The)...................................... 115,887 2,918,904
Staples, Inc.*........................................... 583,345 12,724,213
State Street Corp. ...................................... 202,226 13,068,855
Summit Bancorp........................................... 213,520 6,926,055
Sun Microsystems, Inc.*.................................. 962,136 89,478,648
Sunoco, Inc. ............................................ 106,680 2,920,365
SunTrust Banks, Inc...................................... 399,904 26,293,688
Supervalu, Inc. ......................................... 150,391 3,280,404
Synovus Financial Corp. ................................. 342,274 6,396,245
SYSCO Corp............................................... 414,522 14,534,178
Tandy Corp............................................... 243,918 12,607,512
Tektronix, Inc. ......................................... 59,786 2,002,831
Tellabs, Inc.*........................................... 491,612 27,991,158
Temple-Inland, Inc....................................... 65,004 3,932,742
Tenet Healthcare Corp.*.................................. 397,831 6,986,907
Tenneco, Inc. ........................................... 207,463 3,526,871
Texaco, Inc. ............................................ 672,090 42,425,681
Texas Instruments, Inc. ................................. 976,620 80,326,995
Texas Utilities Co. ..................................... 334,100 12,466,106
Textron, Inc............................................. 188,828 14,610,566
Thermo Electron Corp.*................................... 202,143 2,716,297
Thomas & Betts Corp...................................... 71,806 3,662,106
Time Warner, Inc......................................... 1,607,052 97,628,409
Times Mirror Co., Class A................................ 90,514 5,956,953
Timken Co. .............................................. 83,086 1,339,762
TJX Cos., Inc. (The)..................................... 382,638 10,737,779
Torchmark Corp. ......................................... 160,228 4,145,900
Tosco Corp. ............................................. 189,810 4,792,703
Toys R Us Co.*........................................... 314,060 4,710,900
</TABLE>
- -----------
(*) Denotes non-income producing security.

See accompanying notes to financial statements

B-25
<PAGE>

SPDR Trust Series 1

Schedule of Investments (continued)

September 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stocks Shares Value
- ------------- --------- ------------
<S> <C> <C>
Tribune Co.............................................. 296,786 $ 14,765,103
Tricon Global Restaurants, Inc.*........................ 193,825 7,934,711
TRW, Inc................................................ 150,948 7,509,663
Tupperware Corp......................................... 72,100 1,460,025
Tyco Laboratories, Inc. ................................ 1,045,385 107,936,001
U. S. West, Inc......................................... 626,494 35,749,314
U.S. Bancorp............................................ 898,717 27,130,019
Unicom Corp............................................. 268,819 9,929,502
Unilever N.V. (N.Y. Shares)............................. 712,110 48,512,494
Union Carbide Corp...................................... 165,606 9,408,491
Union Pacific Corp...................................... 309,892 14,894,184
Union Pacific Resources Group, Inc. .................... 315,834 5,073,084
Union Planters Corp..................................... 179,010 7,294,658
Unisys Corp.*........................................... 382,616 17,265,547
United Healthcare Corp. ................................ 216,634 10,547,368
United Technologies Corp. .............................. 603,709 35,807,490
Unocal Corp. ........................................... 304,097 11,270,595
Unum Corp. ............................................. 297,562 8,759,481
US Air Group, Inc.*..................................... 92,432 2,426,340
UST, Inc. .............................................. 220,368 6,652,359
USX-Marathon Group...................................... 391,876 11,462,373
USX-U.S. Steel Group.................................... 113,140 2,913,355
V.F. Corp............................................... 152,281 4,720,711
Viacom, Inc.*........................................... 863,019 36,462,553
Vulcan Materials Co. ................................... 121,428 4,447,301
Wachovia Corp. ......................................... 254,588 20,016,981
Wal-Mart Stores, Inc. .................................. 5,542,495 263,614,918
Walgreen Co. ........................................... 1,256,630 31,886,986
Warner-Lambert Co. ..................................... 1,064,529 70,658,112
Washington Mutual, Inc.................................. 723,151 21,152,167
Waste Management, Inc................................... 764,250 14,711,812
Watson Pharmaceuticals, Inc.*........................... 115,554 3,531,619
Wellpoint Health Networks, Inc.*........................ 76,112 4,338,384
Wells Fargo & Co. ...................................... 2,059,929 81,624,687
Wendy's International, Inc. ............................ 154,358 4,071,192
</TABLE>
- -----------
(*) Denotes non-income producing security.

See accompanying notes to financial statements

B-26
<PAGE>

SPDR Trust Series 1

Schedule of Investments (continued)

See accompanying notes to financial statements

B-27
<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in Part B of 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 Composite Stock Price Index (the "S&P 500
Index") in the form of a security that closely tracks the S&P 500 Index and
that may be traded as a share of common stock. The investment objective of the
Trust is to provide investment results that, before expenses, generally
correspond to the price and yield performance of the component common stocks of
the S&P 500 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").

B-28
<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

B-29
<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.

B-30
<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.

B-31
<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 500 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 500 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 500 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.

B-32
<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 have been amortized on a straight
line basis over five years following the Initial Date of Deposit. The Trustee's
fees are set forth generally in the Summary of Essential Information and more
specifically in "Expenses of the Trust" below. Other expenses of the Trust are
also described more fully in "Expenses of the Trust".

Federal Income Tax Considerations

For the fiscal year ended September 30, 1999, the Trust believes that it
qualified for tax treatment as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). The
Trust intends to continue to so qualify and to distribute annually its entire
investment company taxable income and net capital gain. Distributions that are
taxable as ordinary income to Beneficial Owners generally are expected to
constitute dividend income for federal income tax purposes and to be eligible
for the dividends-received deduction available to many corporations to the
extent of qualifying dividend income received by the Trust (see "Tax Status of
the Trust"). The Trust's regular quarterly distributions are based on the
dividend performance of the Securities held during such quarterly distribution
period rather than the actual taxable income of the Trust. As a result, a
portion of the distributions of the Trust may be treated as a return of capital
or a capital gain dividend for federal income tax purposes or the Trust may be
required to make additional distributions to maintain its status as a regulated
investment company or to avoid imposition of income or excise taxes on
undistributed income (see "Tax Status of the Trust" and "Administration of the
Trust--Distributions to Beneficial Owners").

ERISA Considerations

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

B-33
<PAGE>

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

Restrictions on Purchases by Investment Companies

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

Investment Management

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

Distributions

Quarterly distributions based on the amount of dividends payable with respect
to Securities held by the Trust and other income, if any, received by the
Trust, net of fees and expenses, are made via the Depository and its
participants to Beneficial Owners (see "The Trust--Book-Entry-Only System") on
each

B-34
<PAGE>

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
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

B-35
<PAGE>

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

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

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

Termination

The Trust will terminate by its terms on the first to occur of: (i) the date
one hundred twenty-five (125) years from the Initial Date of Deposit (i.e.,
January 22, 2118) or (ii) the date twenty (20) years after the death of the
last survivor of eleven persons named in the Agreement, the oldest of whom was
born in 1990 and the youngest of whom was born in 1993 (the "Termination
Date"). The Trust may also be terminated earlier upon the agreement of the
Beneficial Owners of 66 2/3% of the then outstanding SPDRs or in the event that
SPDRs are delisted from the Exchange (see "Exchange Listing"). The Sponsor

B-36
<PAGE>

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 500 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 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
- -----------
* 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.

B-37
<PAGE>

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.

B-38
<PAGE>

RISK FACTORS AND SPECIAL CONSIDERATIONS

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 500 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 500 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.

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<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 500
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 500 Index. It is also
possible that for a short period of time, the Trust may not fully replicate
the performance of the S&P 500 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.

B-40
<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 Index
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

B-41
<PAGE>

expenses associated with the Trust or other factors distinguishing an
ownership 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

B-42
<PAGE>

Trust in connection with redemptions under certain circumstances (see "Tax
Status of the Trust--Tax Consequences to Beneficial Owners").

Year 2000 Problem

Many computer systems were designed in such a way that they may be unable to
distinguish between the year 2000 and the year 1900 and therefore may not
properly process and calculate date-related information and data (commonly
known as the "Year 2000 Problem"). As with all investment and financial
entities, the Year 2000 Problem may have an adverse impact upon the handling
of securities trades, pricing and account services and other activities
conducted by or for the Trust. The Sponsor and the Trustee have taken steps to
address the Year 2000 Problem with respect to the computer systems they use
and to obtain reasonable assurances that similar steps have been taken by the
Trust's other service providers. Operations ran smoothly from the last week in
December through the first few weeks of January, but the Year 2000 Problem may
yet have an adverse impact on financial market participants and other
entities, including the companies whose stocks are contained in the Trust's
Portfolio.

B-43
<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 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
- -----------
* 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".

B-44
<PAGE>

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,
1999, 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 500 Index, the Index Securities and
financial instruments based on the S&P 500 Index).
- -----------

*** As of December 31, 1999, Stock Clearing Corporation, a wholly-owned
subsidiary of the New York Stock Exchange, owned 50% of the issued and
outstanding shares of common stock of NSCC. Also as of such date, National
Clearing Corporation, a wholly-owned subsidiary of the National
Association of Securities Dealers, Inc., the parent company of the
Exchange, owned 50% of the issued and outstanding shares of common stock
of NSCC.

B-45
<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 500 Index and, together with the Cash Component, have a value
equal to the net asset value of the Trust on a per Creation

B-46
<PAGE>

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 500 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 Participating Party or DTC Participant. Investors should be
aware that their particular

B-47
<PAGE>

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 transfer 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 transfer 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 next 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 circumstances outside the control of the
Trustee make it for all practical purposes

B-48
<PAGE>

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 through the SPDR Clearing Process in a "regular way" manner by
the third (3rd) NSCC Business Day) and the Cash Component to the Trustee,
together with such additional information as may be required by the Trustee.
An order to create SPDRs through the SPDR Clearing Process is deemed received
by the Distributor on the Transmittal Date if (i) such order is received by
the Distributor not later than the Closing Time on such Transmittal Date and
(ii) all other procedures set forth in the Participant Agreement are properly
followed.

Placement of Creation Orders Outside SPDR Clearing Process

Portfolio Deposits created outside the SPDR Clearing Process must be
delivered through a DTC Participant that has executed a Participant Agreement
with the Distributor and with the Trustee. A DTC Participant who wishes to
place an order creating SPDRs to be effected outside the SPDR Clearing Process
need not be a Participating Party, but such orders must state that the DTC
Participant is not using the SPDR Clearing Process and that the creation of
SPDRs will instead be effected through a transfer of securities and cash. The
Portfolio Deposit transfer must be ordered by the DTC Participant in a timely
fashion so as to ensure the delivery of the requisite number of Index
Securities through DTC to the account of the Trustee by no later than 11:00
a.m. of the next Business Day immediately following the Transmittal Date. All
questions as to the number of Index Securities to be delivered, and the
validity, form and eligibility (including time of receipt) for the deposit of
any tendered securities, will be determined by the Trustee, whose
determination shall be final and

B-49
<PAGE>

binding. The cash equal to the Cash Component must be transferred directly to
the Trustee through the Federal Reserve Bank wire transfer 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").

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 as described below. In
these circumstances, the initial deposit will have a value greater than the
net asset value of the SPDRs on the date the order is placed in proper form
since in addition to available Deposit Securities, cash collateral must be
deposited with the Trustee in an amount equal to the sum of (i) the Cash
Component, plus (ii) 115% of the market value of the undelivered Deposit
Securities (the "Additional Cash Deposit"). The Trustee will hold such
Additional Cash Deposit as collateral in an account separate and apart from
the Trust. The order shall be deemed to be received on the Business Day on
which the order is placed provided that the order is placed in proper form
prior to 4:00 p.m., New York time, on such date and federal funds in the
appropriate amount are deposited with the Trustee by 11:00 a.m., New York
time, the next following Business Day. If the order is not placed in proper
form by 4:00 p.m. or federal funds in the appropriate amount are not received
by 11:00 a.m. the next following Business Day, then the order may be deemed to
be rejected and the investor shall be liable to the Trust for losses, if any,
resulting therefrom. An additional amount of cash shall be required to be
deposited with the Trustee, pending delivery of the missing Deposit Securities
to the extent necessary to maintain the Additional Cash Deposit with the
Trustee in an amount at least equal to 115% of the daily marked to market
value of the missing Deposit Securities. To the extent that missing Deposit
Securities are not received by 1:00 p.m., New York time, on the third Business
Day following the day on which the purchase order is deemed received or in the
event a mark to market payment is not made within one Business Day following
notification by the Distributor that such a payment is required, the Trustee
may use the Additional Cash Deposit to purchase the missing Deposit
Securities. Authorized Participants will be liable to the Trust for the costs
incurred by the Trust in connection with any such

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purchases. These costs will be deemed to include the amount by which the
actual purchase price of the Deposit Securities exceeds the market value of
such Deposit Securities on the day the purchase order was deemed received by
the Distributor plus the brokerage and related transaction costs associated
with such purchases. The Trustee will return any unused portion of the
Additional Cash Deposit once all of the missing Deposit Securities have been
properly received or purchased by the Trustee and deposited into the Trust. In
addition, a transaction fee of $4,000 will be charged in all cases. The
delivery of Creation Units of SPDRs so created will occur no later than the
third Business Day following the day on which the purchase order is deemed
received. The Participant Agreement for any Participating Party intending to
follow such procedures will contain terms and conditions permitting the Trust
to use such collateral 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. The Trust will have no liability for any such
shortfall.

Book-Entry-Only System

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

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

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

* As of December 31, 1999, the National Association of Securities Dealers,
Inc., the parent company of the Exchange, owned 4.6% of the issued and
outstanding shares of the common stock of the Depository, the Exchange
owned 4.6% of the issued and outstanding shares of common stock of the
Depository and a wholly-owned subsidiary of the Exchange, American Stock
Exchange Clearing LLC, owned .00189% of the issued and outstanding shares
of common stock of the Depository. Also as of such date, the Trustee owned
5.1884% of the issued and outstanding shares of the common stock of the
Depository.

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available to others such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a DTC Participant,
either directly or indirectly (the "Indirect Participants"). The Depository
agrees with and represents to its participants that it will administer its
book-entry system in accordance with its rules and by-laws and requirements of
law.

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

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

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<PAGE>

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

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

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

The Depository may determine to discontinue providing its service with
respect to SPDRs at any time by giving notice to the Trustee and the Sponsor
and discharging its responsibilities with respect thereto under applicable
law. Under such

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<PAGE>

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 500
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 500
Index and that derived from ownership of SPDRs.

Adjustments to the Portfolio

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

Periodically (typically, several times per quarter), Standard & Poor's may
determine that total shares outstanding have changed in one or more component
Index Securities due to secondary offerings, repurchases, conversions or other
corporate actions. Additionally, the S&P Committee may periodically
(ordinarily, several times per quarter) replace one or more component
securities in the Index due to mergers, acquisitions, bankruptcies, or other
market conditions, or if the issuers of such component securities fail to meet
the criteria for inclusion in the Index. In 1999, there were 42 company
changes to the S&P 500 Index. Ordinarily, whenever there is a change in shares
outstanding or a change in a component security included in the S&P 500 Index,
Standard & Poor's adjusts the divisor to assure that there is no discontinuity
in the value of the S&P 500 Index which might otherwise be caused by any such
change.

Because the investment objective of the Trust is to provide investment
results, before expenses, that generally correspond to the price and yield
performance of the S&P 500 Index, such share, name, and divisor changes to the
S&P 500 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

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<PAGE>

frequently in the case of changes to the S&P 500 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 500 Index, it is not always efficient to replicate
identically the share composition of the S&P 500 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 S&P 500 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 500
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 500 Index, based on
prices at the close of the market on the preceding Business Day (a "Weighting
Analysis"). In the event that there is a Misweighting in any Security in
excess of one hundred and fifty percent (150%) of the applicable Misweighting
Amount, the Trustee shall calculate an adjustment to the Portfolio in order to
bring the Misweighting of such Security within the Misweighting Amount, based
on prices at the close of the market on the day on which such Misweighting
occurs. Also, on a monthly basis, the Trustee shall perform a Weighting
Analysis for each Security in the Portfolio, and in any case where there
exists a Misweighting exceeding one 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

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<PAGE>

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

Pursuant to these guidelines the Trustee shall calculate the required
adjustments and shall purchase and sell the appropriate securities. As a
result of the purchase and sale of securities in accordance with these
requirements, or the creation of Creation Units, the Trust may hold some
amount of residual cash (other than cash held temporarily due to timing
differences between the sale and purchase of securities or cash delivered in
lieu of Index Securities or undistributed income or undistributed capital
gains) as a result of such transactions, which amount shall not exceed for
more than two (2) consecutive Business Days 5/10th of 1 percent of the
aggregate value of the Securities. In the event that the Trustee has made all
required adjustments and is left with cash in excess of 5/10th of 1 percent of
the aggregate value of the Securities, the Trustee shall use such cash to
purchase additional Index Securities that are under-weighted in the Portfolio
as compared to their relative weightings in the S&P 500 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 500 Index as it is currently determined by
Standard & Poor's. To the extent that the method of determining the S&P 500
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 500 Index
is maintained.

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<PAGE>

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 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 500 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 500 Index. Since securities of an issuer are often removed from the S&P
500 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,

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<PAGE>

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 500 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 500 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").

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 500 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 500 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

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<PAGE>

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 500 Index divisor,
the Portfolio Deposit shall be adjusted to take account of such stock split,
stock dividend or reverse split by applying the stock split, stock dividend or
reverse stock split multiple (e.g., in the event of a two-for-one stock split
of an Index Security, by doubling the number of shares of such Index Security
in the prescribed Portfolio Deposit), in each case rounded to the nearest
whole share.

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

Notwithstanding the foregoing, on any Adjustment Day on which (a) no change
in the identity and/or share weighting of any Index Security is scheduled to
take effect that would cause the S&P 500 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.
- -----------
* Standard & Poor's publicly announces changes in the identity and/or
weighting of the S&P 500 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>

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
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.

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Selection and Acquisition of Securities

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

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

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

THE S&P 500 INDEX

The Sponsor selected the S&P 500 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 500 Index is composed of 500 selected common stocks, all of
which are listed on the AMEX, the NYSE or NASDAQ and spans over 107 separate
industry groups. Since 1968, the S&P 500 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
500 Index is available from market information services. The S&P 500 Index is
determined, comprised and calculated without regard to the Trust.

The Sponsor has been granted a license to use the S&P 500 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

B-61
<PAGE>

this Prospectus concerning S&P and the S&P 500 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 1999. 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 500 Index in the future, nor should the
results be considered as a representation of the performance of the Trust.

B-62
<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
1998..................... 1,229.23 2,115.35 26.67 1.49
1999..................... 1,469.25 2,528.48 19.53 1.14
</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 500
Index.

B-63
<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 500 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 500 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 500 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 500 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 500 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 500 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 500
Index. Standard & Poor's is not responsible for and has not participated in
any determination or calculation made with respect to issuance or redemption
of SPDRs. Standard & Poor's has no obligation or liability in connection with
the administration, marketing or trading of SPDRs.

STANDARD & POOR'S DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF
THE S&P 500 INDEX OR ANY DATA

B-64
<PAGE>

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 500 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 500 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.

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 500 Index. Thus, for example, if the S&P 500 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 500 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").

B-65
<PAGE>

TAX STATUS OF THE TRUST

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, 1999, the Trust believes that it qualified for tax
treatment as a "regulated investment company" under Subchapter M of the Code.
The Trust intends to continue to so qualify. To qualify as a regulated
investment company, the Trust must, among other things, (a) derive in each
taxable year at least 90% of its gross income from dividends, interest, gains
from the sale or other disposition of stock, securities or foreign currencies,
or certain other sources, (b) meet certain diversification tests, and (c)
distribute in each year at least 90% of its investment company taxable income.
If the Trust qualifies as a regulated investment company, subject to certain
conditions and requirements, the Trust will not be subject to federal income
tax to the extent its income is distributed in a timely manner. Any
undistributed income may be subject to tax, including a four percent (4%)
excise tax imposed by section 4982 of the Code on certain undistributed income
of a regulated investment company that does not distribute to shareholders in
a timely manner at least ninety-eight percent (98%) of its taxable income
(including capital gains).

Tax Consequences to Beneficial Owners

Dividends paid by the Trust from its investment company taxable income
(which includes dividends, interest and 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

B-66
<PAGE>

of the Trust may be treated as a return of capital or a capital gain dividend
for federal income tax purposes or the Trust may make additional distributions
in excess of the yield performance of the Securities in order to distribute
all of its investment company taxable income and net capital gain.

Distributions in excess of the Trust's current or accumulated earnings and
profits (as specially computed) generally will be treated as a return of
capital for federal income tax purposes and will reduce a Beneficial Owner's
tax basis in SPDRs. Return of capital distributions may result, for example,
if a portion of the dividends declared represents cash amounts deposited in
connection with Portfolio Deposits rather than dividends actually received by
the Trust. Under certain circumstances, a significant portion of the Trust's
regular quarterly dividends could be treated as return of capital
distributions. Such circumstances may be more likely to occur in periods
during which the number of outstanding SPDRs fluctuates significantly, as may
occur during the initial years of the Trust. Beneficial Owners will receive
annually notification from the Trustee through the DTC Participants as to the
tax status of the Trust's distributions (see "The Trust--Book-Entry-Only
System"). A distribution paid shortly after a purchase or creation of SPDRs
may be taxable even though in effect it may represent a return of capital.
Capital gains realized by non-corporate taxpayers are generally taxable at a
maximum rate of 20% if the taxpayer has a holding period of more than twelve
months.

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

B-67
<PAGE>

tax consequences. Beneficial Owners of SPDRs in Creation Unit size
aggregations should consult their own tax advisors as to the consequences to
them of the redemption of SPDRs.

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

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

B-68
<PAGE>

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.

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

B-69
<PAGE>

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 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

Ordinary operating expenses of the Trust are currently being accrued at an
annual rate of 0.18%; future accruals will depend primarily on the level of
the Trust's net assets and the level of Trust expenses. There is no guarantee
that the Trust's ordinary operating expenses will not exceed 0.18% of the
Trust's daily net asset value and such rate may be changed without notice.

Until further notice, the Sponsor has undertaken that 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. The Sponsor

B-70
<PAGE>

may discontinue this undertaking or renew it for specified 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.

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 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

B-71
<PAGE>

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 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 of Net 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.

B-72
<PAGE>

As of September 30, 1999, and as of December 31, 1999 the net asset value of
the Trust was $13,181,991,919.00 and $19,806,669,736.00, 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, 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. The
net Adjustment Amount is usually a credit to the Trust. To make the expense
ratio of the Trust comparable to the expense ratio of most other investment
companies, it is shown as a "below the line" adjustment to Trust expenses. If
the adjustment is negative it is shown "above the line".

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.

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Procedure for Redemption of SPDRs

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

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

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

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

In connection with the redemption of SPDRs, if a redeemer is restricted by
regulation or otherwise from investing or engaging in a transaction in one or
more Index Securities, the Trustee shall have the right in its discretion to
deliver the cash equivalent value of such Index Security or Index Securities
based on the market value of such Index Security or Index Securities as of the
Evaluation Time on the date such redemption order is deemed received by the
Trustee (see "Placement of Redemption Orders Outside SPDR Clearing Process")
as a part of the Cash Redemption Payment in lieu of delivering such Index
Security or Index Securities to the redeemer. In such case, such investor will
pay the Trustee the standard Transaction Fee, plus an additional amount 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, in its discretion, upon the request of a redeeming investor,
may redeem Creation Units in whole or in part by providing such redeemer with
a portfolio of Securities differing in exact composition from the Index
Securities but not differing in net asset value from the then-current
Portfolio Deposit. Such a redemption is likely to be made only if it were
determined that it would be appropriate in order to maintain the Trust's
correspondence to the composition and weighting of the S&P 500 Index, for
instance, in connection with the replacement of one of the Index Securities.

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

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accordance with the guidelines applicable to Misweightings (see "The
Portfolio--Adjustments to the Portfolio").

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

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

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

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

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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 transfer 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 transfer 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.

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

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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 the next Business Day immediately following 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 next Business Day immediately following the Transmittal Date.

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

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

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delivered by the DTC Cut-Off Time on the next Business Day immediately
following such Transmittal Date or (2) the redemption order is not submitted
in proper form, then the redemption order will not be deemed received as of
such Transmittal Date. In such case, the value of the Securities and the Cash
Redemption Payment to be delivered to the Beneficial Owner will be computed as
of the Evaluation Time on the Business Day that such order is deemed received
by the Trustee, i.e., the Business Day on which the SPDRs are delivered
through DTC to the Trustee by the DTC Cut-Off Time on such Business Day
pursuant to a properly submitted redemption order.

VALUATION

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

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

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").

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

Voting

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

Distributions to Beneficial Owners

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

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

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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
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 500 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

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

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

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

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

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

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DTC Participants by means of the DTC Dividend Reinvestment Service, described
herein (see "Dividend Reinvestment Service"), if such service is available
through such Beneficial Owner's broker.

Trust Supervision

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

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

Statements to Beneficial Owners

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

Promptly after the end of each 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

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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 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 500 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").

B-84
<PAGE>

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 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 500 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
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

B-85
<PAGE>

Portfolio Deposits will be accepted, that no additional SPDRs will be created
for the purpose of reinvesting dividend distributions, and that, as of the
date thereof and thereafter, the portfolio of Securities delivered upon
redemption shall be identical in composition and weighting to the Securities
held in the Trust as of such date rather than the securities portion of the
Portfolio Deposit as in effect on the date request for redemption is deemed
received. Beneficial Owners of SPDRs in Creation Unit size aggregations may,
in advance of the Termination Date, redeem in kind directly from the Trust
(see "Redemption of SPDRs").

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

RESIGNATION, REMOVAL AND LIABILITY

The Trustee

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

B-86
<PAGE>

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.

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.

B-87
<PAGE>

The Sponsor

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

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

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

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

B-88
<PAGE>

SPONSOR

The Sponsor of the Trust is PDR Services LLC, a Delaware limited liability
company incorporated on April 6, 1998 with offices c/o the Exchange, 86
Trinity Place, New York, New York 10006. The Sponsor's Internal Revenue
Service Employer Identification Number is 52-2127241. The Exchange is the sole
member of the Sponsor and the Exchange is a "control person" of the Sponsor as
such term is defined in the Securities Act of 1933.

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

TRUSTEE

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

DEPOSITORY

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

LEGAL OPINION

The legality of the SPDRs offered hereby has been passed upon by Carter,
Ledyard & Milburn, New York, New York, as counsel for the Sponsor.

INDEPENDENT ACCOUNTANTS

The financial statements as of September 30, 1999 included in this
Prospectus have been so included in reliance upon the report of
PricewaterhouseCoopers LLP, independent accountants, 160 Federal Street,
Boston, Massachusetts, given on the authority of said firm as experts in
auditing and accounting.

B-89
<PAGE>

INFORMATION AND COMPARISONS RELATING TO TRUST, SECONDARY MARKET TRADING, NET
ASSET SIZE, PERFORMANCE AND TAX TREATMENT

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

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

B-90
<PAGE>

(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 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 the portfolio stocks held in the SPDR Trust,
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

B-91
<PAGE>

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 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.

B-92
<PAGE>

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 500 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 500 Index (provided information is also given reflecting the
performance of the Trust in comparison to that S&P 500 Index) or both may also
be compared to the performance of money managers as reported in market surveys
such as SEI Fund Evaluation Survey (a leading data base of tax-exempt funds)
or mutual funds such as those reported by Lipper Analytical Services Inc.,
Money Magazine Fund Watch, 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

B-93
<PAGE>

(the commencement date of the SPDR Trust) through 12/31/99, the distribution
relationships of high, low and closing prices over the same period, and
distribution of bid/asked spreads for 1999. 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 12/31/99.
The investor may wish to compare these ranges with the average bid/asked
spread on SPDRs and add any commissions charged by a broker. 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.

B-94
<PAGE>

Daily Percentage Price Ranges: Average and Frequency Distribution for
SPDR Trust and S&P 500 Composite Stock Price Index; Highs and Lows vs. Close*

(From Inception of Trust through 12/31/99 Except as Noted)

S&P 500 COMPOSITE STOCK PRICE 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% 8 0.46% 794 45.40% 488 27.90%
.25-- .5% 233 13.32% 352 20.13% 449 25.67%
.5-- 1% 715 40.88% 360 20.58% 465 26.59%
1-- 1.5% 408 23.33% 125 7.15% 196 11.21%
1.5-- 2% 214 12.24% 62 3.54% 92 5.26%
2-- 2.5% 96 5.49% 37 2.12% 37 2.12%
2.5-- 3% 40 2.29% 10 0.57% 10 0.57%
3-- 3.5% 16 0.91% 4 0.23% 5 0.29%
greater
than 3.5% 19 1.09% 5 0.29% 7 0.40%
- --------- ----- ------- ----- ------- ----- -------
Total 1,749 100.00% 1,749 100.00% 1,749 100.00%

Average Daily Range: 1.1215%

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% 21 1.20% 682 38.99% 472 26.99%
.25-- .5% 243 13.89% 412 23.56% 474 27.10%
.5-- 1% 588 33.62% 366 20.93% 452 25.84%
1-- 1.5% 463 26.47% 172 9.83% 218 12.46%
1.5-- 2% 246 14.07% 45 2.57% 80 4.57%
2-- 2.5% 94 5.37% 46 2.63% 27 1.54%
2.5-- 3% 53 3.03% 17 0.97% 11 0.63%
3-- 3.5% 15 0.86% 4 0.23% 7 0.40%
greater
than 3.5% 26 1.49% 5 0.29% 8 0.46%
- --------- ----- ------- ----- ------- ----- -------
Total 1,749 100.00% 1,749 100.00% 1,749 100.00%
</TABLE>

- ----------- Average Daily Range: 1.1771%
* Source: FactSet Research Systems, Inc.

B-95
<PAGE>

Frequency Distribution for SPDR Trust: Closing Price vs.

Net Asset Value; Bid/Asked Spread Distribution*

(From Inception of Trust through 12/31/99 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% 755 88.62% 739 83.22%
.25-- .5% 89 10.45% 124 13.96%
.5-- 1% 7 0.82% 25 2.82%
1-- 1.5% 1 0.12% 0 0.00%
1.5-- 2% 0 0.00% 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 852 1.00% 888 100.00%
</TABLE>

Note: The closing price on the AMEX equaled the NAV on nine days.

Close was within .25% of NAV better than 86% of the time.

SPDR BID/ASKED SPREAD DISTRIBUTION (1999 Only)

<TABLE>
<CAPTION>
Range % of Total
-------------- ----------
<S> <C>
1/64 -- 1/16 0.83%
5/64 -- 1/8 10.41%
9/64 -- 3/16 67.15%
13/64 -- 1/4 20.99%
17/64 -- 5/16 0.36%
21/64 -- 3/8 0.14%
> 25/64 0.12%
-------------- -------
Total 100.00%
</TABLE>

The price range of shares for 1999 was from 120 3/8 to 147 9/16;
consequently, 1/8 was from 0.10% to 0.08% of the share price.

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

B-96
<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

B-97
<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.*
- -----------

* 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 1999, the approximate amount of annual brokerage
commissions incurred in implementing the Service was less than $0.001 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 1999.

B-98
<PAGE>

GLOSSARY OF DEFINED TERMS

<TABLE>
<CAPTION>
Page
----
<S> <C>
"Adjustment Amount"....................................................... B-73
"Adjustment Day".......................................................... B-58
"Balancing Amount"........................................................ B-59
"Beneficial Owners"....................................................... B-52
"Business Day"............................................................ B-32
"Cash Component".......................................................... B-29
"Cash Redemption Payment"................................................. B-74
"Closing Time"............................................................ B-47
"Code".................................................................... B-33
"Commission".............................................................. B-29
"Creation Units".......................................................... A-2
"Depository Agreement".................................................... B-53
"Depository".............................................................. B-32
"Distributor"............................................................. B-37
"Dividend Equivalent Payment"............................................. B-29
"Dividend Payment Date"................................................... B-80
"DTC Cut-Off Time"........................................................ B-78
"DTC Participants"........................................................ B-51
"Evaluation Time"......................................................... B-2
"Ex-Dividend Date"........................................................ B-80
"Excess Cash Amounts"..................................................... B-74
"Exchange"................................................................ A-2
"Global Security"......................................................... B-51
"Index Securities"........................................................ B-28
"Indirect Participants"................................................... B-52
"Initial Date of Deposit"................................................. B-3
"License Agreement"....................................................... B-64
"Misweighting Amount"..................................................... B-55
"Misweighting"............................................................ B-55
"NAV Amount".............................................................. B-58
"NSCC Business Day"....................................................... B-40
"NSCC".................................................................... B-29
"Participant Agreement"................................................... B-49
"Participating Party"..................................................... B-29
"Portfolio Deposit Amount"................................................ B-59
"Portfolio Deposit"....................................................... B-30
"Portfolio"............................................................... B-44
"Record Date"............................................................. B-80
"Request Day"............................................................. B-58
"S&P"..................................................................... A-1
</TABLE>

B-99
<PAGE>

<TABLE>
<CAPTION>
Page
-----------
<S> <C>
"S&P 500 Index".................................................... B-28
"Securities"....................................................... A-3
"Service".......................................................... B-97
"SPDR Clearing Process"............................................ B-30
"SPDR"............................................................. Front Cover
"Sponsor".......................................................... Front Cover
"Standard & Poor's"................................................ A-1
"Termination Date"................................................. B-36
"Transaction Fee".................................................. B-30
"Transmittal Date"................................................. B-47
"Trust Agreement".................................................. B-28
"Trust"............................................................ A-2
"Trustee".......................................................... A-2
"Weighting Analysis"............................................... B-55
</TABLE>

B-100
<PAGE>

STANDARD & POOR'S DEPOSITARY RECEIPTS (SPDRs)
SPDR TRUST, SERIES 1

SPONSOR:
PDR SERVICES LLC

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

This Prospectus does not include all of the information with respect to the
SPDR Trust set forth in its Registration Statement filed with the Securities
and Exchange Commission (the "Commission") in Washington, D.C. under the:

. Securities Act of 1933 (File No. 33-46080) and
. Investment Company Act of 1940 (File No. 811-7330).

To obtain copies from the Commission at prescribed rates--
Write: Public Reference Section of the Commission
450 Fifth Street, N.W., Washington, D.C. 20549
Call: 1-800-SEC-0330
Visit: http://www.sec.gov

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

No person is authorized to give any information or make any representation
about the SPDR Trust not contained in this Prospectus, and you should not rely
on any other information. Read and keep both parts of this Prospectus for
future reference.

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

Prospectus dated January 26, 2000
<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:

PricewaterhouseCoopers LLP

(included in Exhibit 99.C2)
Carter, Ledyard & Milburn
(included in Exhibit 99.C1)

The following exhibits:

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

Ex-99.C2 Consent of Independent Accountants.

Ex-99.C3 Powers of Attorney

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 LLC - Financial Statements, as part of American
Stock Exchange LLC current consolidated financial statements
incorporated by reference to the Amendment to Form 1-A dated
June 28, 1999.
<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, 2000.
SPDR TRUST SERIES 1
(Registrant)

By: PDR Services LLC
(Depositor)

/s/ Joseph Stefanelli
-----------------------------
Joseph Stefanelli
Executive Vice President
of American Stock Exchange LLC,
the sole member of PDR Services LLC

Pursuant to the requirements of the Securities Act of 1933, this amendment
to the Registration Statement has been signed on behalf of PDR Services LLC 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 LLC

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

Joseph Stefanelli Executive Vice President
of American Stock Exchange LLC,
the sole member of PDR Services LLC
and Director*

Gary L. Gastineau Director*

Lawrence G. Larkin Director*

Clifford J. Weber Director*

By
/s/ Joseph Stefanelli
----------------------------
Joseph Stefanelli
Attorney-in-fact*
- --------

Executed copy of the power of attorney is being filed as Exhibit No.3 to
this Post Effective Amendment No. 8 to the Registration Statement dated
January 26, 2000 (File No. 33-46080)

<PAGE>

EXHIBIT INDEX

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

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

Ex-99.C2 Consent of Independent Accountants.

Ex-99.C3 Powers of Attorney

<PAGE>

Exhibit 99.C1

(212) 238-8665

January 26, 2000

PDR Services LLC
c/o American Stock Exchange LLC
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 LLC (the
"Exchange") and PDR Services LLC as sponsor (the "Sponsor") of SPDR Trust
Series 1 (hereinafter referred to as the "Trust"). It is proposed that Post-
Effective Amendment No. 8 to the Trust's registration Statement ("Post-Effective
Amendment No. 8") 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. 8
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. 8 (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 September 30, 1997 among the
Sponsor, the Trust and ALPS Mutual Funds Services, 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 limited liability company 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 Units to be issued by the Trust, when duly issued by 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 represent that the Amendment contains no disclosure which would
render it ineligible to become effective immediately upon filing pursuant to
paragraph (b) of Rule 485 of Commission.

We hereby consent to the filing of this opinion as an exhibit to
Post-Effective Amendment No. 8 and to the use of our name where it appears in
Post-Effective Amendment No. 8 and the Prospectus.

Very truly yours,

Carter, Ledyard & Milburn

<PAGE>

EXHIBIT 99.C2

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Prospectus constituting part of this Post
Effective Amendment No. 8 to the registration statement on Form S-6 (the
"Registration Statement") of our report dated November 22, 1999, 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.

PricewaterhouseCoopers LLP
Boston, Massachusetts

January 24, 2000

<PAGE>

EXHIBIT 99.C3

POWER OF ATTORNEY
-----------------

KNOW ALL MEN BY THESE PRESENTS that the undersigned director of PDR
Services, LLC (the "Company"), a Delaware limited liabilty company, does hereby
constitute and appoint Michael J. Ryan, Jr., Michael Cavalier, Joseph
Stefanelli and Ivonne Lugo, and any of them, as his true and lawful attorneys-
in-fact for him and in his name to sign, execute, deliver and file with the
Securities and Exchange Commission Registration Statements under the Securities
Act of 1933 and Investment Company Act of 1940 and any and all amendments
thereto, and any and all certificates, letters, applications or other documents
connected therewith which such attorneys-in-fact may deem necessary or advisable
for the registration under such Acts of Units of undivided fractional interest
in all series of SPDR Trust Series 1, MidCap SPDR Trust Series 1, DIAMONDS Trust
Series 1 and any other similar unit investment trust for which the Company is a
sponsor and to take any and all action that the said attorneys-in-fact may deem
necessary or advisable in order to carry out fully the intent of the foregoing
appointment, hereby ratifying and approving the acts of said attorneys-in-fact.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 26th day
of January, 2000.

/s/ Lawrence G. Larkin
By: ____________________________
Lawrence G. Larkin
<PAGE>

POWER OF ATTORNEY
-----------------

KNOW ALL MEN BY THESE PRESENTS that the undersigned director of PDR
Services, LLC (the "Company"), a Delaware limited liabilty company, does hereby
constitute and appoint Michael J. Ryan, Jr., Michael Cavalier, Joseph Stefanelli
and Ivonne Lugo, and any of them, as his true and lawful attorneys-in-fact for
him and in his name to sign, execute, deliver and file with the Securities and
Exchange Commission Registration Statements under the Securities Act of 1933 and
Investment Company Act of 1940 and any and all amendments thereto, and any and
all certificates, letters, applications or other documents connected therewith
which such attorneys-in-fact may deem necessary or advisable for the
registration under such Acts of Units of undivided fractional interest in all
series of SPDR Trust Series 1, MidCap SPDR Trust Series 1, DIAMONDS Trust Series
1 and any other similar unit investment trust for which the Company is a sponsor
and to take any and all action that the said attorneys-in-fact may deem
necessary or advisable in order to carry out fully the intent of the foregoing
appointment, hereby ratifying and approving the acts of said attorneys-in-fact.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 26th day
of January, 2000.

/s/ Clifford J. Weber
By: ____________________________
Clifford J. Weber
<PAGE>

EXHIBIT 99.C3

POWER OF ATTORNEY
-----------------

KNOW ALL MEN BY THESE PRESENTS that the undersigned director of PDR
Services LLC (the "Company"), a Delaware limited liability company, does hereby
constitute and appoint Michael J. Ryan, Jr., Michael Cavalier, Joseph
Stefanelli and Ivonne Lugo, and any of them, as his true and lawful attorneys-
in-fact for him and in his name to sign, execute, deliver and file with the
Securities and Exchange Commission Registration Statements under the Securities
Act of 1933 and Investment Company Act of 1940 and any and all amendments
thereto, and any and all certificates, letters, applications or other documents
connected therewith which such attorneys-in-fact may deem necessary or advisable
for the registration under such Acts of Units of undivided fractional interest
in all series of SPDR Trust Series 1, MidCap SPDR Trust Series 1, DIAMONDS Trust
Series 1 and any other similar unit investment trust for which the Company is a
sponsor and to take any and all action that the said attorneys-in-fact may deem
necessary or advisable in order to carry out fully the intent of the foregoing
appointment, hereby ratifying and approving the acts of said attorneys-in-fact.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 26th day
of January, 2000.

/s/ Gary L. Gastineau
By: ____________________________
Gary L. Gastineau
<PAGE>

EXHIBIT 99.C3

POWER OF ATTORNEY
-----------------

KNOW ALL MEN BY THESE PRESENTS that the undersigned Executive Vice
President of American Stock Exchange LLC, the sole member (the "Member") of PDR
Services LLC (the "Company"), a Delaware limited liabilty company, and a
director of the Company, does hereby constitute and appoint Michael J. Ryan,
Jr., Michael Cavalier and Ivonne Lugo, and any of them, as his true and lawful
attorneys-in-fact for him and in his name to sign, execute, deliver and file
with the Securities and Exchange Commission Registration Statements under the
Securities Act of 1933 and Investment Company Act of 1940 and any and all
amendments thereto, and any and all certificates, letters, applications or other
documents connected therewith which such attorneys-in-fact may deem necessary or
advisable for the registration under such Acts of Units of undivided fractional
interest in all series of SPDR Trust Series 1, MidCap SPDR Trust Series 1,
DIAMONDS Trust Series 1 and any other similar unit investment trust for which
the Company is a sponsor and to take any and all action that the said attorneys-
in-fact may deem necessary or advisable in order to carry out fully the intent
of the foregoing appointment, hereby ratifying and approving the acts of said
attorneys-in-fact.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 26th day
of January, 2000.

/s/ Joseph B. Stefanelli
By: ____________________________
Joseph B. Stefanelli