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<SEC-DOCUMENT>0000930413-03-002796.txt : 20030917
<SEC-HEADER>0000930413-03-002796.hdr.sgml : 20030917
<ACCEPTANCE-DATETIME>20030917115430
ACCESSION NUMBER:		0000930413-03-002796
CONFORMED SUBMISSION TYPE:	497
PUBLIC DOCUMENT COUNT:		1
FILED AS OF DATE:		20030917
EFFECTIVENESS DATE:		20030917

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			DIAMONDS TRUST SERIES I
		CENTRAL INDEX KEY:			0001041130
		IRS NUMBER:				133574560
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		497
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-31247
		FILM NUMBER:		03898936

	BUSINESS ADDRESS:	
		STREET 1:		PDR SERVICES CORP C/O AMERICAN STOCK EXC
		STREET 2:		86 TRINITY STREET
		CITY:			NEW YORK
		STATE:			NY
		ZIP:			10006
		BUSINESS PHONE:		2123061397

	MAIL ADDRESS:	
		STREET 1:		PDR SERVICES CORP C/O AMERI ST EX
		STREET 2:		86 TRINITY STREET
		CITY:			NEW YORK
		STATE:			NY
		ZIP:			10006
</SEC-HEADER>
<DOCUMENT>
<TYPE>497
<SEQUENCE>1
<FILENAME>c27335_497.txt
<TEXT>

                       SUPPLEMENTAL INFORMATION MEMORANDUM
                               FOR THE NETHERLANDS


                           Units issued in respect of


                                   DIAMONDS(R)


                            DIAMONDS TRUST, SERIES 1

            (A Unit Investment Trust organised in the United States)
  ----------------------------------------------------------------------------


This supplemental information memorandum ("Supplemental Information Memorandum")
dated September 12, 2003 incorporates the attached prospectus dated February 26,
2003 ("Prospectus" and, together with this Supplemental  Information Memorandum,
"Introduction  Memorandum"(1)) issued by the DIAMONDS Trust, Series 1 ("Trust").
Terms  defined in the  Prospectus  shall have the same meaning when used in this
Supplemental Information Memorandum.

The Introduction Memorandum constitutes an offering in the Netherlands only. The
Introduction Memorandum does not constitute an offer of, nor an invitation by or
on behalf of the Trust to purchase any  DIAMONDS,  and may not be used for or in
connection  with  any  offer  to,  or  solicitation  by,  anyone  in  any  other
jurisdiction  or in any  circumstance in which such offer or solicitation is not
authorized  by the Trust or is  unlawful.  No action is being taken to permit an
offering of DIAMONDS or the distribution of the  Introduction  Memorandum in any
jurisdiction where such action is required.

Application  has been made for DIAMONDS to be listed on the Official  Segment of
the Stock Market of Euronext Amsterdam N.V. ("Euronext  Amsterdam").  Trading of
DIAMONDS  will take  place  within  the  NextTrack  Segment.  This  Supplemental
Information  Memorandum  contains  additional  information  as  required  by the
Autoriteit  Financiele Markten ("AFM") and in connection with DIAMONDS listed on
Euronext Amsterdam, as required by Euronext Amsterdam.


- ----------
(1) The Introduction Memorandum constitutes a prospectus for the Dutch market as
required by the Autoriteit Financiele Markten and Euronext Amsterdam N.V.
<PAGE>


                                    DIAMONDS
                                       BY

                            DIAMONDS TRUST, SERIES 1

                       SUPPLEMENTAL INFORMATION MEMORANDUM
                               FOR THE NETHERLANDS

                                TABLE OF CONTENTS



                                                                            PAGE
                                                                           -----

DIAMONDS TRUST, SERIES 1                                                     S-3

UNITED STATES TAXATION                                                       S-8

NETHERLANDS TAXATION                                                        S-12

GENERAL AND STATUTORY INFORMATION                                           S-15






"Dow Jones Industrial Average(SM)",  "DJIA(R)", "Dow Jones(R)", "The Dow(R)" and
"DIAMONDS(R)" are trademarks of Dow Jones & Company, Inc. ("Dow Jones") and have
been licensed for use for certain  purposes by PDR Services LLC and the American
Stock Exchange LLC pursuant to a license agreement with Dow Jones.  DIAMONDS are
not  sponsored,  endorsed,  sold or promoted by Dow Jones and Dow Jones makes no
representation regarding the advisability of investing in the Trust.

                                      S-2
<PAGE>


                            DIAMONDS TRUST, SERIES 1

The Trust is a unit investment  trust organised in the United States ("US") that
issues  securities  called  "DIAMONDS",  which represent an undivided  ownership
interest in the portfolio of stocks held by the Trust. The portfolio consists of
all of the  component  common  stocks which  comprise  the Dow Jones  Industrial
Average ("DJIA").

PDR  Services  LLC,  the  sponsor  of  the  Trust   ("Sponsor"),   accepts  full
responsibility  for the accuracy of  information  contained in the  Introduction
Memorandum  other than that given in the Prospectus under the heading "Report of
Independent  Accountants," and confirms,  having made all reasonable  enquiries,
that to the best of its  knowledge  and  belief,  there  are no other  facts the
omission  of which  would  make any  statement  in the  Introduction  Memorandum
misleading.

The Trust is governed by the Standard  Terms and  Conditions  of Trust and Trust
Indenture  (collectively,  the "Trust Agreement")  between State Street Bank and
Trust Company, the trustee of the Trust ("Trustee"), and the Sponsor dated as of
January 1, 1998 and effective as of January 13, 1998. Terms defined in the Trust
Agreement shall have the same meaning when used in this Supplemental Information
Memorandum.

All orders to buy and sell DIAMONDS  trading on Euronext  Amsterdam will be made
in US dollars ($). The primary  trading  markets for the securities  held by the
Trust and the  securities  in the DJIA are the New York Stock  Exchange  and the
Nasdaq  Stock Market where the  securities  trade in US dollars.  Certain of the
securities  in the DJIA may trade in euro on  various  European  markets  and in
other currencies on other national markets.

The American  Stock  Exchange LLC ("Amex"),  the New York Stock Exchange and the
Nasdaq  Stock Market are in New York,  NY, US, in the US Eastern Time Zone,  and
have regular  trading hours between 9:30 a.m. and 4:00 p.m.  Regular trading for
DIAMONDS  ends at 4:15 p.m. on the Amex ("New York  Trading  Hours").  Investors
should be aware that Netherlands time is generally six hours ahead of US Eastern
Standard time. Trading on Euronext Amsterdam  currently occurs between the hours
of 9:00 a.m. and 5:30 p.m. in the Netherlands. Therefore, trading in DIAMONDS on
Euronext  Amsterdam  will begin  before US markets  open and end before  regular
trading concludes in the US. Also, the securities markets in the Netherlands and
the US will be closed on certain  national  holidays in each  country,  so there
will be days when  DIAMONDS can trade on Euronext  Amsterdam  but not in the US,
and vice versa.

On behalf of the Sponsor,  the Amex makes available every 15 seconds  throughout
the trading day at the Amex a number  representing the intraday indicative value
("IIV") for a DIAMONDS unit. The IIV represents, on a per

                                      S-3
<PAGE>


DIAMONDS unit basis,  the sum of an amount equal,  on a per Creation Unit basis,
to  the  dividends  on  the  securities  held  in the  Trust's  portfolio  (with
ex-dividend dates within the accumulation  period),  net of expenses and accrued
liabilities  for such  period,  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 may include a cash in lieu amount
to  compensate  for the  omission  of a  particular  Index  Security  from  such
Portfolio Deposit).(2)

During  trading hours on Euronext  Amsterdam,  Euronext N.V. will  calculate and
publish  throughout  its  trading  day an  intraday  figure in US dollars  for a
DIAMONDS unit called the indicative net asset value  ("INAV").(3) The INAV for a
DIAMONDS unit will be based on the market price of the active  futures  contract
of the DJIA as  negotiated  on GLOBEX(R).  Euronext  Amsterdam  will release any
changes in the calculation method for the INAV.

Because  Euronext  N.V.  uses a  different  methodology  and  different  data to
calculate  the INAV than that used to calculate  the IIV  published by the Amex,
the INAV and the IIV may not be the same.  Investors  interested  in creating or
redeeming  DIAMONDS or  purchasing or selling  DIAMONDS in the secondary  market
should not rely  solely on the INAV or IIV in making  investment  decisions  but
should also consider other market  information  and relevant  economic and other
factors  (including,  without limitation,  information  regarding the Index, the
Index Securities and financial instruments based on the Index).

DIAMONDS  will trade on  Euronext  Amsterdam  in round lots of 1 DIAMONDS  unit.
DIAMONDS  listed on  Euronext  Amsterdam  can only be  transferred  through  the
giro-based  securities  system of NECIGEF  (NEDERLANDS  CENTRAAL  INSTITUUT VOOR
GIRAAL EFFECTENVERKEER). No separate share certificates representing one or more
DIAMONDS unit will be issued.  Investors will pay  commissions and other charges
for their trades to their brokers.


- ----------
(2) The Amex makes every effort to ensure the accuracy of the IIV.  However,  it
should be noted that the IIV is derived from external sources.  The Amex accepts
no explicit or implicit liability for the accuracy,  completeness or updating of
the IIV, or for the value thereof.  The inability of the Amex to provide the IIV
will not in itself result in a halt in the trading of DIAMONDS on the Amex.

(3) Euronext  N.V.  makes  every  effort to  ensure  the  accuracy  of the INAV.
However,  it should be noted that the INAV is  derived  from  external  sources.
Euronext  N.V.  accepts no  explicit  or implicit  liability  for the  accuracy,
completeness or updating of the INAV, or for the value thereof. The inability of
Euronext  N.V.  to  provide  the INAV  will not  itself  result in a halt in the
trading of DIAMONDS on Euronext  Amsterdam.  The Sponsor is not  responsible for
the  calculation  of the INAV and accepts no explicit or implicit  liability for
the accuracy or completeness of the INAV, or of the value thereof.

                                      S-4
<PAGE>


The Trust is registered as a unit investment trust under the Investment  Company
Act of 1940, as amended, and DIAMONDS are registered under the Securities Act of
1933,  as amended,  with the US  Securities  and  Exchange  Commission  ("SEC").
Regulatory oversight of the Trust is primarily the province of the SEC.

On  September 9, 2003 the AFM has granted  authorization  pursuant to the Act on
the Supervision of Investment Institutions (WET TOEZICHT BELEGGINGSINSTELLINGEN,
or  "ASII"),  on the  understanding  that  pursuant  to the  foreign  investment
companies policy (BUITENLANDBELEID) of the AFM, the principal supervision of the
Trust is performed by the SEC. Due to the primary  supervisory  role of the SEC,
the Trust has been granted  exemptions by the AFM from various  requirements  as
set forth in the ASII.

The Sponsor may  discontinue  the listing of DIAMONDS on Euronext  Amsterdam and
terminate  the  license to offer  DIAMONDS  in the  Netherlands  if the  Sponsor
determines that to do so is in the best interest of the Trust and the investors,
which determination the Sponsor will make in its sole discretion. In that event,
delisting  of  DIAMONDS in the  Netherlands  will take effect as of the close of
business  on the fifth  (5th)  business  day  after  public  notice by  Euronext
Amsterdam of having received an application for  discontinuation  of the listing
of DIAMONDS and the AFM will terminate the Trust's  license to offer DIAMONDS in
the  Netherlands as soon as  practicable  following the delisting of DIAMONDS on
Euronext  Amsterdam.  After the DIAMONDS are delisted from  Euronext  Amsterdam,
investors may be able to trade DIAMONDS on other markets.  Higher brokerage fees
may apply for trades of DIAMONDS on other markets.

If the  Trust  were to  terminate  in  accordance  with the  terms of the  Trust
Agreement,  investors  would  be  notified  at  least  20  days  prior  to  such
termination,  as described in the Prospectus.  In the case of termination of the
Trust,  DIAMONDS shall similarly be delisted and the authority to offer DIAMONDS
in the Netherlands shall be withdrawn.

Any change in the conditions of the Trust,  whereby any right or security of the
investors  is to be reduced  or any  burden is to be  imposed on them,  can only
enter into force three months after  permission  as defined in Article 14 of the
Decree  on  the  Supervision  of  Investment   Institutions   (BESLUIT  TOEZICHT
BELEGGINGSINSTELLINGEN,  or "DSII") is granted, and within this period investors
are allowed to redeem their DIAMONDS under the usual conditions, as described in
the Prospectus.

On the date of publication of this Supplemental  Information  Memorandum,  there
were no substantial investors in the Trust as defined in Paragraph 3.26 of Annex
B to the DSII.  The Trust shall include actual  information  on any  substantial
investor  within the meaning of the DSII, if any, in its  semi-annual and annual
reports. An investor qualifies as a substantial investor if such investor

                                      S-5
<PAGE>


(directly  or  indirectly)  holds 25  percent  (25%) or more of the  outstanding
DIAMONDS or voting rights attached to such DIAMONDS.

In the event a meeting of the holders of DIAMONDS is convened,  an advertisement
giving  notice of the meeting will be  published in a national  newspaper in the
Netherlands   and  the  Euronext   Amsterdam   Daily  Official  List  (OFFICIELE
PRIJSCOURANT)  no  later  than  on the  fifteenth  day  prior  to the day of the
meeting.  The  advertisement  will  contain  the agenda and the  contents of all
documents  cognizance  of which is of  importance  to the  holders  of  DIAMONDS
trading on Euronext Amsterdam for the purposes of the agenda or an indication of
that and where these documents may be obtained in Amsterdam free of charge.

A copy of the semi-annual and annual reports of the Trust will be made generally
available  as soon as possible  after  publication  and can be obtained  free of
charge at the offices of SNS Securities N.V. Announcement of the availability of
the  semi-annual and annual reports will be made through an  advertisement  in a
national  newspaper in the Netherlands and the Euronext Amsterdam Daily Official
List.

Dividends on DIAMONDS trading on Euronext Amsterdam will be paid by the Trust in
immediately available funds in US dollars.

Any dividends or other  distributions  on DIAMONDS will be announced  through an
advertisement  in a  national  newspaper  in the  Netherlands  and the  Euronext
Amsterdam  Daily  Official  List or by  communication  addressed  to each  Dutch
investor.  In those  circumstances  where  the  actual  dividend  amount  is not
available  in time to allow for  publication  on the  Ex-Dividend  Date,  on the
Ex-Dividend  Date, the Euronext  Amsterdam  Daily Official List will include the
dividend  amount  estimated  as of the day before the  Ex-Dividend  Date and the
announcement  in the national  newspaper  will specify that the actual  dividend
amount will be available  from the SNS website at  www.snssecurities.nl/diamonds
prior to the opening of trading on Euronext Amsterdam.

Investors  should seek  professional  advice to  ascertain  (a) the possible tax
consequences,   (b)  the  legal   requirements  and  (c)  any  foreign  exchange
restrictions or exchange control requirements which they may encounter under the
laws of the countries of their citizenship,  residence or domicile and which may
be relevant to the subscription, holding or disposal of DIAMONDS.

Investors in the Trust are advised to review the Introduction  Memorandum in its
entirety and carefully consider the risk factors set out under the heading "RISK
FACTORS" on pages 10 to 13 of the  Prospectus,  and to refer to the  sections of
this Supplemental Information Memorandum entitled "United

                                      S-6
<PAGE>


States  Taxation"  and  "Netherlands  Taxation"  for a  discussion  of  the  tax
consequences of an investment by Dutch investors in DIAMONDS.

A Financial  Information  Leaflet  (FINANCIELE  BIJSLUITER)  is  available  with
information  about the Trust  including the costs and risks  associated  with an
investment in DIAMONDS. Investors are advised to obtain this leaflet and read it
carefully before buying DIAMONDS.

ENQUIRIES

All  enquiries  about  the Trust  should be  directed  to SNS  Securities  N.V.,
Nieuwezijds Voorburgwal 162, 1012 SJ Amsterdam,  the Netherlands.  Telephone 020
550 8509, telefax 020 427 3486.

The  2000,  2001 and 2002  annual  reports  of the  Trust  are  incorporated  by
reference. Copies of the reports, the Introduction Memorandum,  Trust Agreement,
latest  report(4)  and  Financial  Information  Leaflet can be obtained  free of
charge at the offices of SNS Securities N.V.

Additional  information regarding DIAMONDS may be obtained on the SNS Securities
N.V.'s website at www.snssecurities.nl/diamonds.


- ----------
(4) This report contains the information  required by Article 23(3) of the DSII,
including the composition  and total value of the investments of the Trust,  the
number of outstanding DIAMONDS and the value per DIAMONDS unit.

                                      S-7
<PAGE>


                             UNITED STATES TAXATION

GENERAL

The  following  is  a  general  description  of  the  material  US  federal  tax
consequences of the ownership and disposition of DIAMONDS applicable to a holder
of DIAMONDS (a) who, in the case of an  individual,  is neither a citizen of the
US nor a resident for either US income or estate tax purposes,  or (b) which, in
the case of an entity, is not a corporation  organised in the US or an estate or
trust  which is taxable by the US on all of its income  regardless  of source (a
"non-resident holder").

This description is for general information purposes only and is based on the US
Internal  Revenue  Code of  1986,  as  amended  ("Code"),  Treasury  regulations
promulgated thereunder, and judicial and administrative interpretations thereof,
all as in effect on the date hereof and all of which are subject to change.  The
tax  treatment  of a  non-resident  holder  may vary  depending  upon his or her
particular  situation.  Certain  non-resident  holders may be subject to special
rules not discussed  below.  The discussion below does not address the effect of
any  state,  local or foreign  tax law on a  non-resident  holder,  and does not
address  non-resident  holders  engaged in  business  in the US.  Purchasers  of
DIAMONDS  are  advised  to consult  their own tax  advisors  with  respect to an
investment in DIAMONDS.

INCOME TAX CONSEQUENCES OF DIAMONDS OWNERSHIP

ORDINARY INCOME DIVIDENDS

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) to non-resident  holders are generally subject to
US withholding  tax at a rate of thirty  percent (30%).  The amount is generally
withheld by the dividend paying agent from all dividend distributions.

In certain  circumstances,  the thirty percent (30%) withholding tax rate may be
reduced  pursuant  to an  income  tax  treaty.  Treaty  benefits  are  generally
available  only to persons that are qualified  residents of a country with which
the US has a treaty,  and who provide an IRS Form W-8BEN certifying  entitlement
to such benefits.  Pursuant to the US-Netherlands Income Tax Treaty, a qualified
resident of the Netherlands who provides such  certification  will be subject to
US withholding tax at a reduced rate of fifteen percent (15%).

TREATMENT OF CAPITAL GAIN DISTRIBUTIONS AND SALES PROCEEDS

Capital  gain  distributions  (distributions  from the  excess of net  long-term
capital gains over net short-term  capital losses) to  non-resident  holders and
proceeds from the sale of DIAMONDS by a  non-resident  holder will generally not
be subject to US withholding tax.

                                      S-8
<PAGE>


BACKUP WITHHOLDING RULES

"Backup  withholding"  is  required  on the  payment  of  certain  amounts to US
persons,  in order to enforce  collection  of income taxes owed by such persons.
Backup  withholding  is imposed at the  applicable  withholding  rate,  which is
currently  28 percent  (28%).  In  general,  non-US  persons  are exempt from US
"backup  withholding."  In  order  to  establish  such  exemption,   however,  a
non-resident holder generally must supply appropriate  documentation (generally,
an IRS Form  W-8BEN)  to the  paying  agent (or its  agent) or to the  financial
institution through which the non-resident holder holds DIAMONDS.  Payments that
cannot be reliably  associated with  documentation are generally  presumed to be
made  to a US  payee  who is not an  exempt  recipient,  in  which  case  backup
withholding will apply to all payments.

As an  exception  to this  general  rule,  a payee is  presumed to be foreign if
certain indicia of foreign status exist.  Additionally,  a payment that would be
subject to withholding  tax if made to a foreign person and which is exempt from
backup  withholding as a payment to a non-US account is presumed to be made to a
foreign payee.  Accordingly,  ordinary  dividends paid to a non-US account would
generally be subject to withholding tax at the rate of 30 percent (30%).

Payments to foreign  intermediaries are subject to a special set of presumptions
summarized  below.  Foreign  intermediaries  generally include foreign financial
institutions,  foreign clearing organisations,  foreign branches or offices of a
US  financial  institution  or US clearing  organisation,  and  certain  foreign
corporations.

If the foreign  intermediary has not provided a valid  intermediary  withholding
certificate,  it is generally treated as an undocumented owner of the payment. A
determination  must  then  be  made,  based  on  factors  set  forth  in the tax
regulations,  whether  to treat  the  payee  as an  individual,  trust,  estate,
corporation or partnership. If the payee is presumed to be an individual, trust,
estate or  partnership,  it is  presumed  to be a US person who is not an exempt
recipient and the backup  withholding rules would apply to all payments.  If the
payee is  presumed  to be a  corporation,  then it is also  presumed  to be a US
person.  However,  if the amount  paid  consists of an amount that is subject to
withholding,  such as dividends, the corporate payee is presumed to be a foreign
payee if there are indicia of foreign status,  in which case  withholding tax at
the 30 percent (30%) rate is imposed.

If the  foreign  intermediary  (other  than a  qualified  intermediary  that has
assumed primary  withholding  responsibility)  has provided a valid intermediary
withholding  certificate,  but the  intermediary's  withholding  certificate  is
unreliable  either  because  the  withholding  agent or payor has not been given
sufficient information to determine the proper amount of withholding or because

                                      S-9
<PAGE>


some or all of the underlying  certificates that are required to be attached are
lacking or are unreliable, the payment is presumed to be made to a foreign payee
for whom the foreign intermediary collects the payment. Therefore, a dividend is
subject to withholding tax at the 30 percent (30%) rate.

The amount of any "backup  withholding"  (in contrast to the US withholding  tax
imposed on ordinary  dividends) from a payment to a non-resident  holder will be
allowed as a credit  against the  non-resident  holder's  US federal  income tax
liability and may entitle such  non-resident  holder to a refund from the IRS to
the extent such "backup withholding" is not needed to satisfy the US withholding
tax liability  that may have  otherwise  been imposed on such payment,  provided
that the required information is furnished to the IRS.

US ESTATE TAX

The estate of an individual non-resident holder of DIAMONDS may be subject to US
estate tax on the value of such DIAMONDS, which are considered US situs property
for such purposes.  An estate tax credit is currently  available for the estates
of  non-residents,  the  effect of which is to exempt up to  $60,000 of US situs
property. US estate tax is imposed at the applicable rate, which is currently 49
percent  (49%).  If the  non-resident  holder is a domiciliary of a country with
which the US  maintains  an estate tax  treaty,  DIAMONDS  may be exempt from US
estate tax. The US-Netherlands Estate Tax Treaty generally exempts DIAMONDS from
US estate tax if the decedent was a domiciliary of the Netherlands.

The estate of a non-resident holder of DIAMONDS that is subject to US estate tax
must   generally   file  an  IRS  Form  706-NA   ("United   States   Estate  and
Generation-Skipping Transfer Tax Return--Estate of non-resident not a citizen of
the US") within nine months of the non-resident  holder's date of death. Subject
to certain exceptions, if the estate takes a tax return position that any estate
tax treaty of the US overrules or modifies any provision of the Code and thereby
effects  (or  potentially  effects) a reduction  of estate tax,  the estate must
disclose  such  position  on a  statement  attached  to such  return in the form
required by US Treasury regulations. The requirement of attaching a statement to
the estate tax  return is  generally  satisfied  by  attaching  an IRS Form 8833
("Treaty-Based  Return  Position  Disclosure  under Section 6114 or 7701(b)") to
such return.  If a tax return would not otherwise be required to be filed, a tax
return  must   nevertheless  be  filed  for  purposes  of  making  the  required
disclosures discussed above.

The US estate tax is a lien  against a  non-resident  decedent's  assets for ten
years  unless the tax is paid in full or otherwise  provided  for in  accordance
with US

                                      S-10
<PAGE>


Treasury  regulations.  Upon payment in full (or  provision for such payment) of
the US estate tax liability,  a transfer  certificate will be issued  permitting
the non-resident decedent's assets to be transferred without liability.

THE TAX  DISCUSSION  SET FORTH ABOVE IS INCLUDED FOR GENERAL  INFORMATION  ONLY.
PROSPECTIVE  INVESTORS  SHOULD CONSULT THEIR OWN TAX ADVISORS  CONCERNING THE US
AND FOREIGN TAX CONSEQUENCES TO THEM OF AN INVESTMENT IN DIAMONDS.

                                      S-11
<PAGE>


                              NETHERLANDS TAXATION

GENERAL

The following  summary  describes the principal  Netherlands tax consequences of
the  acquisition,  holding,  redemption  and disposal of DIAMONDS.  This section
solely  addresses the situation of investors  resident or deemed resident of the
Netherlands  (including the  individual  investor who has opted to be taxed as a
resident  of  the   Netherlands).   This  section  does  not  purport  to  be  a
comprehensive  description of all  Netherlands  tax  considerations  that may be
relevant to a decision to acquire,  hold or dispose of DIAMONDS.  Each  investor
should consult his or her own  professional  tax advisor with respect to the tax
consequences  of an  investment  in DIAMONDS.  The  discussion  of the principal
Netherlands  tax  consequences  of  the  acquisition,  holding,  redemption  and
disposal of DIAMONDS set forth below is included for general information only.

This summary is based on the  Netherlands tax  legislation,  published case law,
treaties,  rules,  regulations and similar documentation in force as at the date
hereof  without  prejudice  to any  amendments  introduced  at a later  date and
implemented with or without retroactive effect.

For the purpose of the principal Netherlands tax consequences  described herein,
it is assumed that:

(i)    neither the Trust is, nor one or more companies whose shares are included
       in the Index are, a resident or deemed to be a resident of the
       Netherlands for Netherlands tax purposes;

(ii)   no individual holder of DIAMONDS ("Individual Holder"), alone, or
       together with his or her partner (statutorily defined term) or certain
       other related persons, directly or indirectly, holds (a) an interest of 5
       percent (5%) or more of the total issued capital of the Trust or a
       company whose shares are included in the DJIA or of 5 percent (5%) or
       more of the issued capital of a certain class of DIAMONDS or a certain
       class of shares of a company whose shares are included in the DJIA, (b)
       rights to acquire, directly or indirectly, such interest or (c) certain
       profit sharing rights in the Trust or certain profit sharing rights in a
       company whose shares are included in the Index; and

(iii)  no corporate body holder of DIAMONDS ("Corporate Holder"), either
       directly or indirectly, holds an interest of 5 percent (5%) or more of
       the total issued capital of the Trust or a company whose shares are
       included in the DJIA, nor together with a related company (statutory
       defined term), holds an interest of 25 percent (25%) of the total issued
       capital of the Trust or of the total issued capital of a company whose
       shares are included in the DJIA.

                                      S-12
<PAGE>


DIVIDEND WITHHOLDING TAX

Distributions from the Trust are not subject to Netherlands dividend withholding
tax.

CORPORATE INCOME TAX AND INDIVIDUAL INCOME TAX

CORPORATE HOLDERS

If a Corporate  Holder is subject to  Netherlands  corporate  income tax and the
DIAMONDS are attributable to its (deemed) business assets,  distributions on the
DIAMONDS and the gains  realised upon the disposal,  transfer or  alientation of
the DIAMONDS are generally taxable in the Netherlands.

Special rules apply to Corporate Holders that are Netherlands qualifying pension
funds,  Netherlands  investment  institutions  (as  defined in Article 28 of the
Corporate  Income  Tax Act  1969)  and  other  entities  that  are  exempt  from
Netherlands corporate income tax.

In general,  the US dividend  withholding  tax which is withheld with respect to
distributions  made by the Trust will be creditable  for  Netherlands  corporate
income tax purposes in the hands of the beneficial owner of the DIAMONDS.

INDIVIDUAL HOLDERS

Distributions  derived  from  the  Trust  and  actual  gains  realised  upon the
disposal, transfer or alienation of DIAMONDS by an Individual Holder are subject
to individual income tax at the progressive  rates, the maximum being 52 percent
(52%), if:

(i)    the Individual Holder has an enterprise or an interest in an enterprise,
       to which enterprise or part thereof, as the case may be, DIAMONDS are
       attributable; or

(ii)   such income or gains qualify as income from miscellaneous activities
       (RESULTAAT UIT OVERIGE WERKZAAMHEDEN) within the meaning of Section 3.4
       of the Income Tax Act 2001, which include activities with respect to
       DIAMONDS that exceed "regular, active portfolio management" (NORMAAL,
       ACTIEF VERMOGENSBEHEER).

If the  above-mentioned  conditions  (i) or (ii) do not apply to the  Individual
Holder,  the actual  distributions  derived  from  DIAMONDS and the actual gains
realised  upon the  disposal of DIAMONDS  will not be taxable as such.  Instead,
such  Individual  Holder  will be taxed at a flat  rate of 30  percent  (30%) on
deemed income from  "savings and  investments"  (SPAREN EN BELEGGEN)  within the
meaning of Section 5.1 of the Income Tax Act 2001. This deemed income amounts to
4   percent   (4%)  of  the   average   of  the   individual's   "yield   basis"
(RENDEMENTSGRONDSLAG) within the meaning of Article 5.3 of the Income

                                      S-13
<PAGE>


Tax Act 2001 at the  beginning of the calendar year and the  individual's  yield
basis at the end of the calendar year,  insofar as the average exceeds a certain
threshold.  The fair  market  value of  DIAMONDS on 1 January and 31 December of
each year will be  included in the  individual's  yield  basis.  The fair market
value on 31 December is determined  by reference to the closing  market price on
Euronext on 31 December and this  closing  market price will also be used as the
reference value for 1 January of the subsequent year.

In general,  the US dividend  withholding  tax which is withheld with respect to
distributions  made by the Trust will be creditable for  Netherlands  individual
income tax purposes in the hands of the beneficial owner of the DIAMONDS.

GIFT AND INHERITANCE TAXES

Generally,  gift  and  inheritance  taxes  will  be due in  the  Netherlands  in
connection  with the  acquisition of DIAMONDS by way of gift by, or on the death
of, a holder of  DIAMONDS  who is a resident  or deemed to be a resident  of the
Netherlands at the time of the gift or of his or her death.

An individual of the  Netherlands  nationality is deemed to be a resident of the
Netherlands for the purpose of the Netherlands gift and inheritance tax if he or
she has been a resident of the  Netherlands  during the ten years  preceding the
gift or of his or her death. An individual of any other nationality is deemed to
be a resident of the  Netherlands  for the purpose of the  Netherlands  gift tax
only if he or she has been  residing in the  Netherlands  at any time during the
twelve  months  preceding  the time of the gift.  Applicable  tax  treaties  may
override deemed residency.

VALUE ADDED TAX (VAT)

No  Netherlands  VAT  should  arise in  respect  of the  issuance,  transfer  or
redemption of DIAMONDS or with regard to distributions on DIAMONDS.

OTHER TAXES AND DUTIES

No capital tax, net wealth tax,  registration  tax, customs duty,  transfer tax,
stamp  duty or any  other  similar  documentary  tax or duty  will be due in the
Netherlands  by an Individual  Holder or a Corporate  Holder in respect of or in
connection with the  subscription,  issue,  placement,  allotment or delivery of
DIAMONDS.

                                      S-14
<PAGE>


                        GENERAL AND STATUTORY INFORMATION

PAYING AGENT

The Trust has appointed SNS Securities N.V. as the Netherlands paying agent with
respect to the offering of DIAMONDS in the Netherlands.

LISTING

Application has been made to list DIAMONDS on the Official  Segment of the Stock
Market of Euronext  Amsterdam N.V.  Trading will take place within the NextTrack
Segment. Dealings are expected to commence on September 19, 2003. SNS Securities
N.V. is acting as the  listing  agent for  DIAMONDS  for the listing on Euronext
Amsterdam.

NOTICES

Any  notice  regarding  DIAMONDS  shall be  validly  given if  published  in the
Euronext Amsterdam Daily Official List and in at least one national newspaper in
the Netherlands.  Any such notice shall be deemed to have been given on the date
of  publication  or,  if  published  more  than  once,  on the date of the first
publication.

SNS Securities N.V. will make available to investors in the Netherlands investor
communications  from  the  Trust,  including  semi-annual  and  annual  reports,
prospectuses and communications and materials relating to investor meetings.

CLEARING AND SETTLEMENT

DIAMONDS have been accepted for settlement through NECIGEF.

ISIN code:      US2527871063

Security code:  44531

                                      S-15
<PAGE>


                        STOCK MOVEMENT INFORMATION CHART:
            DAILY CLOSING PRICE OF A DIAMONDS UNIT VS. DAILY CLOSING
                             INDEX LEVEL OF THE DJIA
                        VS. DAILY NAV OF A DIAMONDS UNIT
                         FOR THE PREVIOUS TWENTY MONTHS

        [The table below represents a line chart in the printed report.]

                     DIAMONDS              DIAMONDS              Dow Jones
                 Net Asset Value        Closing Price        Industrial Average
                 ---------------        -------------        ------------------
12/31/01             100.29                 99.8                 10021.5
                     100.84                100.85                10073.4
                     101.83                101.95                10172.1
                     102.7                 102.82                10259.7
                     102.07                102.14                10197
                     101.63                101.74                10150.5
                     101.06                100.86                10094.1
                     100.8                 100.9                 10067.9
                      99.99                100.07                 9987.53
                      99.03                 99.15                 9891.42
                      99.36                 99.5                  9924.15
                      97.27                 97.14                 9712.27
                      98.67                 98.23                 9850.04
                      97.8                  97.9                  9771.85
                      97.22                 97.28                 9713.8
                      97.39                 97.4                  9730.96
                      98.04                 98.08                 9796.07
                      98.48                 98.48                 9840.08
                      98.73                 98.88                 9865.75
                      96.26                 96.19                 9618.24
                      97.7                  97.84                 9762.86
1/31/02               99.28                 99.24                 9920
                      99.15                 99.25                 9907.26
                      96.95                 97                    9687.09
                      96.94                 96.8                  9685.43
                      96.65                 96.63                 9653.39
                      96.39                 96.17                 9625.44
                      97.57                 97.62                 9744.24
                      98.98                 98.85                 9884.78
                      98.76                 98.79                 9863.74
                     100.1                 100.05                 9989.67
                     100.23                100.26                10002
                      99.12                 99.16                 9903.04
                      97.54                 97.52                 9745.14
                      99.56                 99.82                 9941.17
                      98.5                  98.38                 9834.68
                      99.83                 99.98                 9968.15
                     101.6                 101.61                10145.7
                     101.3                 101.12                10115.3
                     101.43                101.65                10127.6
2/28/02              101.22                101.1                 10106.1
                     103.84                103.84                10368.9
                     106.03                105.92                10586.8
                     104.49                104.78                10433.4
                     105.92                105.93                10574.3
                     105.43                105.62                10525.4
                     105.9                 105.99                10572.5
                     106.29                106.11                10611.2
                     106.51                106.65                10632.4
                     105.25                105.32                10501.9
                     105.41                105.38                10517.1
                     106.15                106.15                10607.2
                     105.85                105.65                10577.8
                     106.43                106.69                10635.2
                     105.09                104.94                10501.6
                     104.88                104.57                10479.8
                     104.35                104.23                10427.7
                     102.89                103                   10281.7
                     103.61                103.77                10353.4
                     104.35                104.3                 10426.9
3/28/02              104.11                103.71                10403.9
                     103.7                 103.45                10362.7
                     103.21                103.16                10313.7
                     102.09                102.35                10198.3
                     102.45                102.23                10235.2
                     102.82                102.94                10271.6
                     102.61                102.7                 10249.1
                     102.21                102.27                10208.7
                     103.94                103.9                 10381.7
                     101.88                101.75                10176.1
                     102.03                101.99                10190.8
                     101.05                101.02                10093.7
                     103.13                103.14                10301.3
                     102.35                102.41                10220.8
                     102.22                101.98                10205.3
                     102.65                102.62                10257.1
                     101.44                101.38                10136.4
                     100.97                101.12                10089.2
                     100.38                100.25                10030.4
                     100.43                100.5                 10035.1
                      99.18                 98.84                 9910.72
                      98.27                 98.2                  9819.87
4/30/02               99.53                 99.42                 9946.22
                     100.68                100.89                10059.6
                     101.01                101.04                10091.9
                     100.16                100.1                 10006.6
                      98.17                 98.01                 9808.04
                      98.46                 98.2                  9836.55
                     101.52                101.28                10141.8
                     100.49                100.5                 10037.4
                      99.52                 99.49                 9939.92
                     101.24                101.24                10109.7
                     103.12                103.1                 10298.1
                     102.64                102.93                10243.7
                     103.11                103.18                10289.2
                     103.62                103.43                10353.1
                     102.38                102.49                10229.5
                     101.15                101.38                10105.7
                     101.73                101.59                10157.9
                     102.31                102.26                10216.1
                     101.19                101.05                10104.3
                      99.96                100.14                 9981.58
                      99.38                 99.32                 9923.04
                      99.32                 99.34                 9911.69
5/31/02               99.46                 99.25                 9925.25
                      97.3                  96.95                 9709.79
                      97.08                 97.11                 9687.84
                      98.2                  98.23                 9796.8
                      96.48                 96.5                  9624.64
                      96.12                 96.22                 9589.67
                      96.68                 96.48                 9645.4
                      95.4                  95.37                 9517.26
                      96.42                 96.49                 9617.71
                      95.27                 95.38                 9502.8
                      94.98                 95                    9474.21
                      97.12                 97.07                 9687.42
                      97.31                 98                    9706.12
                      95.87                 95.81                 9561.57
                      94.57                 94.45                 9431.77
                      92.62                 92.82                 9253.79
                      92.9                  93.15                 9281.82
                      91.35                 91.19                 9126.82
                      91.33                 91.23                 9120.11
                      92.83                 92.86                 9269.92
6/28/02               92.56                 92.53                 9243.26
                      91.23                 91.06                 9109.79
                      90.24                 90.27                 9007.75
                      90.71                 90.63                 9054.97
                      93.95                 94.17                 9379.5
                      92.92                 92.96                 9274.9
                      91.14                 91.19                 9096.09
                      88.31                 88.3                  8813.5
                      88.19                 88.14                 8801.53
                      87.02                 86.65                 8684.53
                      86.56                 86.79                 8639.19
                      84.9                  84.95                 8473.11
                      85.63                 85.46                 8542.48
                      84.32                 83.85                 8409.49
                      80.27                 80.02                 8019.26
                      77.93                 78.06                 7784.58
                      77.1                  77.17                 7702.34
                      81.99                 82.1                  8191.29
                      81.94                 81.78                 8186.31
                      82.72                 82.85                 8264.39
                      87.2                  86.72                 8711.88
                      86.88                 87.05                 8680.03
7/31/02               87.45                 87.15                 8736.59
                      85.16                 84.87                 8506.62
                      83.23                 83.14                 8313.13
                      80.54                 80.47                 8043.63
                      82.84                 83                    8274.09
                      84.67                 84.66                 8456.15
                      87.23                 87.25                 8712.02
                      87.58                 87.6                  8745.45
                      87.01                 86.9                  8688.89
                      84.97                 84.95                 8482.39
                      87.62                 87.47                 8743.31
                      88.37                 88.4                  8818.14
                      87.89                 87.73                 8778.06
                      90.01                 90.03                 8990.79
                      88.83                 89                    8872.07
                      89.75                 88.82                 8957.23
                      90.72                 90.95                 9053.64
                      88.91                 88.72                 8872.96
                      89.37                 89.33                 8919.01
                      88.42                 88.5                  8824.41
                      87.12                 87.08                 8694.09
                      86.89                 86.75                 8670.99
8/30/02               86.81                 86.52                 8663.5
                      83.26                 83.14                 8308.05
                      84.46                 84.05                 8425.12
                      83.04                 83.4                  8283.7
                      84.48                 84.55                 8427.2
                      85.4                  85.18                 8519.38
                      86.23                 86.49                 8602.61
                      86.03                 85.68                 8581.17
                      84.05                 84.14                 8379.41
                      83.39                 83.53                 8312.69
                      84.07                 84.15                 8380.18
                      82.34                 82.3                  8207.55
                      81.99                 81.33                 8172.45
                      79.69                 79.64                 7942.39
                      79.94                 79.67                 7986.02
                      78.8                  78.86                 7872.15
                      76.91                 77.07                 7683.13
                      78.51                 78.66                 7841.82
                      80.07                 79.81                 7997.12
                      77.11                 76.86                 7701.45
9/30/02               76.01                 76                    7591.93
                      79.48                 79.95                 7938.79
                      77.68                 77.92                 7755.61
                      77.29                 77.38                 7717.19
                      75.4                  75.95                 7528.4
                      74.35                 74.74                 7422.84
                      75.15                 75.4                  7501.49
                      73                    73.12                 7286.27
                      75.48                 75.42                 7533.95
                      78.64                 78.99                 7850.29
                      78.91                 78.94                 7877.4
                      82.69                 82.8                  8255.68
                      80.52                 80.28                 8036.03
                      82.94                 82.77                 8275.04
                      83.3                  83.1                  8322.4
                      85.46                 85.32                 8538.24
                      84.58                 84.73                 8450.16
                      85.02                 85.23                 8494.27
                      83.25                 83.03                 8317.34
                      84.52                 84.63                 8443.99
                      83.76                 84.05                 8368.04
                      83.77                 83.71                 8368.94
                      84.41                 84.43                 8427.41
10/31/02              84.12                 83.75                 8397.03
                      85.33                 85.3                  8517.64
                      85.86                 85.7                  8571.6
                      86.93                 86.8                  8678.27
                      87.88                 88                    8771.01
                      86.05                 86.05                 8586.24
                      85.56                 85.28                 8537.13
                      83.77                 83.96                 8358.95
                      84.08                 84.3                  8386
                      84.27                 84.58                 8398.49
                      85.71                 85.59                 8542.13
                      85.89                 85.88                 8579.09
                      84.97                 84.91                 8486.57
                      84.88                 85.06                 8474.78
                      86.42                 86.93                 8623.01
                      88.64                 88.74                 8845.15
                      88.24                 88.19                 8804.84
                      88.68                 88.46                 8849.4
                      86.97                 86.92                 8676.42
                      89.52                 89.53                 8931.68
11/29/02              89.16                 88.95                 8896.09
                      88.83                 88.87                 8862.57
                      87.63                 87.84                 8742.93
                      87.61                 87.75                 8737.85
                      86.46                 86.62                 8623.28
                      86.68                 86.83                 8645.77
                      84.96                 84.76                 8473.41
                      85.97                 85.42                 8574.26
                      86.13                 85.99                 8589.14
                      85.62                 85.65                 8538.4
                      84.57                 84.37                 8433.71
                      86.52                 86.7                  8627.4
                      85.59                 85.57                 8535.39
                      84.72                 84.78                 8447.35
                      83.93                 84.04                 8364.8
                      85.19                 85.35                 8511.32
                      85.01                 85.14                 8493.29
                      84.56                 84.63                 8448.11
                      84.4                  84.55                 8432.61
                      83.14                 82.96                 8303.78
                      83.43                 83.37                 8332.85
12/31/02              83.52                 83.51                 8341.63
                      86.2                  86.18                 8607.52
                      86.14                 86.36                 8601.69
                      87.86                 87.67                 8773.57
                      87.53                 87.72                 8740.59
                      86.1                  86.17                 8595.31
                      87.91                 87.77                 8776.18
                      87.99                 87.99                 8784.89
                      88                    88.09                 8785.98
                      88.57                 88.44                 8842.62
                      87.37                 87.68                 8723.18
                      87.14                 87.3                  8697.87
                      85.97                 86.11                 8586.74
                      84.53                 84.68                 8442.9
                      83.32                 83.36                 8318.73
                      83.82                 83.44                 8369.47
                      81.43                 81.4                  8131.01
                      80.02                 80.15                 7989.56
                      81.01                 80.76                 8088.84
                      81.23                 81.08                 8110.71
                      79.59                 79.3                  7945.13
1/31/03               80.67                 80.84                 8053.81
                      81.23                 81.12                 8109.82
                      80.27                 80.48                 8013.29
                      80.01                 80.12                 7985.18
                      79.47                 79.67                 7929.3
                      78.82                 78.85                 7864.23
                      79.38                 79.43                 7920.11
                      78.61                 78.7                  7843.11
                      77.83                 77.71                 7758.17
                      77.77                 78.02                 7749.87
                      79.35                 79.6                  7908.8
                      80.69                 80.81                 8041.15
                      80.36                 80.54                 8000.6
                      79.5                  79.58                 7914.96
                      80.28                 80.24                 8018.11
                      78.68                 78.71                 7858.24
                      79.19                 79.33                 7909.5
                      78.18                 78.22                 7806.98
                      78.96                 79.04                 7884.99
2/28/03               79.02                 79.31                 7891.08
                      78.49                 78.59                 7837.86
                      77.16                 77.26                 7704.87
                      77.89                 77.84                 7775.6
                      76.87                 76.87                 7673.99
                      77.53                 77.55                 7740.03
                      75.81                 75.75                 7568.18
                      75.37                 75.35                 7524.06
                      75.71                 75.72                 7552.07
                      78.41                 78.44                 7821.75
                      78.79                 78.96                 7859.71
                      81.62                 81.46                 8141.92
                      82.14                 82.14                 8194.23
                      82.86                 82.92                 8265.45
                      83.07                 83.05                 8286.6
                      85.32                 85.13                 8521.97
                      82.25                 82.24                 8214.68
                      82.9                  82.81                 8280.23
                      82.4                  82.38                 8229.88
                      82.13                 82.03                 8201.45
                      81.57                 81.57                 8145.77
3/31/03               80.03                 79.82                 7992.13
                      80.81                 80.79                 8069.86
                      82.99                 82.75                 8285.06
                      82.54                 82.45                 8240.38
                      82.91                 82.89                 8277.15
                      83.14                 82.94                 8300.41
                      83.15                 83.19                 8298.92
                      82.14                 82.24                 8197.94
                      82.37                 82.46                 8221.33
                      82.19                 82.2                  8203.41
                      83.67                 83.8                  8351.1
                      84.21                 84.42                 8402.36
                      82.79                 82.7                  8257.61
                      83.48                 83.48                 8337.65
                      83.39                 83.53                 8328.9
                      84.95                 84.92                 8484.99
                      85.26                 85.25                 8515.66
                      84.5                  84.44                 8440.04
                      83.16                 83.16                 8306.35
                      84.82                 84.79                 8471.61
                      85.13                 85.16                 8502.99
4/30/03               84.91                 84.86                 8480.09
                      84.66                 84.61                 8454.25
                      85.95                 85.81                 8582.68
                      85.44                 85.5                  8531.57
                      86.01                 85.99                 8588.36
                      85.74                 85.85                 8560.63
                      85.04                 85.13                 8491.22
                      86.2                  86.17                 8604.6
                      87.42                 87.34                 8726.73
                      86.97                 87.04                 8679.25
                      86.72                 86.84                 8647.82
                      87.37                 87.32                 8713.14
                      86.92                 86.99                 8678.97
                      85.07                 85.17                 8493.39
                      85.05                 85.07                 8491.36
                      85.36                 85.2                  8516.43
                      86.14                 86.04                 8594.02
                      86.21                 86.23                 8601.38
                      88.01                 87.87                 8781.35
                      88.13                 88                    8793.12
                      87.37                 87.41                 8711.18
5/30/03               88.76                 88.84                 8850.26
                      89.23                 89.34                 8897.81
                      89.49                 89.55                 8922.95
                      90.67                 90.71                 9038.98
                      90.69                 90.74                 9041.3
                      90.91                 90.84                 9062.79
                      90.08                 90.23                 8980
                      90.83                 91.03                 9054.89
                      92.18                 92.11                 9183.22
                      92.31                 92.43                 9196.55
                      91.51                 91.58                 9117.12
                      93.54                 93.5                  9318.96
                      93.58                 93.46                 9323.02
                      93.29                 93.26                 9293.8
                      92.15                 92.12                 9179.53
                      92.12                 91.84                 9200.75
                      90.84                 90.9                  9072.95
                      91.2                  91.19                 9109.85
                      90.22                 90.09                 9011.53
                      90.92                 90.83                 9079.04
                      90.02                 89.87                 8989.05
6/30/03               89.98                 89.91                 8985.44
                      90.57                 90.58                 9040.95
                      91.59                 91.66                 9142.84
                      90.86                 90.7                  9070.21
                      92.33                 92.36                 9216.79
                      92.42                 92.46                 9223.09
                      91.75                 91.83                 9156.21
                      90.54                 90.59                 9036.04
                      91.38                 91.39                 9119.59
                      91.95                 91.85                 9177.15
                      91.47                 91.59                 9128.97
                      91.16                 91.28                 9094.59
                      90.74                 90.72                 9050.82
                      91.99                 91.83                 9188.15
                      91.07                 91.15                 9096.69
                      91.69                 91.66                 9158.45
                      92.05                 92.06                 9194.24
                      91.23                 91.24                 9112.51
                      92.95                 92.91                 9284.57
                      92.77                 92.66                 9266.51
                      92.15                 92.27                 9204.46
                      92.1                  92.16                 9200.05
7/31/03               92.47                 92.47                 9233.8


- ----------
Sources:  The daily NAV and daily  closing  price of the Trust were  provided by
          the Amex and the daily  closing  index level for the DJIA was provided
          by Bloomberg.  Although  information  contained in the Stock  Movement
          Information  Chart above has been obtained  from sources  deemed to be
          reliable,  all information is provided "as is" without warranty of any
          kind.  Because of the possibility of human and mechanical  errors,  as
          well as other factors,  the Sponsor is not  responsible for any errors
          or  omissions  in the  information  contained  in the  Stock  Movement
          Information Chart above.

                                      S-16
<PAGE>


LEGAL PROCEEDINGS

As of the date of this  Supplemental  Information  Memorandum,  the Trust is not
involved  in any legal  proceedings  which  might have an impact on the  Trust's
future financial situation.

MATERIAL CHANGES

There are no material changes since the last full financial year.

STATEMENT OF THE LISTING AGENT

Pursuant to the Euronext  Amsterdam Listing Procedure Rules (EURONEXT  AMSTERDAM
REGLEMENT PROCEDURE BEURSNOTERING, the "Listing Procedure Rules") SNS Securities
N.V. has conducted a Due Diligence  examination  in conformity  with Articles 11
and  13 of  the  Listing  Procedure  Rules  with  regard  to  this  Introduction
Memorandum. The results of this examination have been used more particularly for
examination,  to the extent  possible,  of the accuracy and  completeness of the
essential  information contained herein, with the exception of the statements by
or approved by external experts.  Statements by or approved by such experts have
not been  subjected  to  examination.  This Due  Diligence  examination  has not
disclosed  any  information  leading  SNS  Securities  N.V.  to assume  that the
particulars in this Introduction  Memorandum do not present a true and fair view
of the actual  situation or that any  particulars  have been omitted  which,  if
disclosed,  would affect the information in this Introduction  Memorandum in any
material respect.  Because the information in this  Introduction  Memorandum was
provided by sources other than SNS Securities  N.V. SNS Securities N.V. does not
guarantee its accuracy and completeness  and does not accept any  responsibility
therefor.

                                      S-17
<PAGE>




                      [THIS PAGE INTENTIONALLY LEFT BLANK]




<PAGE>



PROSPECTUS

                           DIAMONDS(R) TRUST, SERIES 1
                            (A UNIT INVESTMENT TRUST)

                                   ----------


o    DIAMONDS Trust is an exchange traded fund designed to generally correspond
     to the price and yield performance of the Dow Jones Industrial Average.

o    DIAMONDS Trust holds all of the Dow Jones Industrial Average stocks.

o    Each DIAMONDS unit represents an undivided ownership interest in the
     DIAMONDS Trust.

o    The DIAMONDS Trust issues and redeems DIAMONDS units only in multiples of
     50,000 DIAMONDS in exchange for Dow Jones Industrial Average stocks and
     cash.

o    Individual DIAMONDS units trade on the American Stock Exchange like any
     other equity security.

o    Minimum trading unit: 1 DIAMONDS unit.

                                   ----------

                            SPONSOR: PDR SERVICES LLC
                  (SOLELY OWNED BY AMERICAN STOCK EXCHANGE LLC)


                             THE DOW(R) INDUSTRIALS
- --------------------------------------------------------------------------------
                                  DIAMONDS(R)
- --------------------------------------------------------------------------------

                                   ----------

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.

                                   ----------
                       PROSPECTUS DATED FEBRUARY 26, 2003
                                   ----------






                      COPYRIGHT(R) 2003 BY PDR SERVICES LLC
<PAGE>


                      [THIS PAGE INTENTIONALLY LEFT BLANK]



<PAGE>


                            DIAMONDS TRUST, SERIES 1


                                TABLE OF CONTENTS

SUMMARY .....................................................................  1
  Essential Information as of October 31, 2002 ..............................  1
  Highlights ................................................................  3
  Risk Factors .............................................................. 10
REPORT OF INDEPENDENT ACCOUNTANTS ........................................... 14
  Statement of Assets and Liabilities ....................................... 15
  Statements of Operations .................................................. 16
  Statements of Changes in Net Assets ....................................... 17
  Financial Highlights ...................................................... 18
  Notes to Financial Statements ............................................. 19
  Schedule of Investments ................................................... 23
THE TRUST ................................................................... 24
  Creation of Creation Units ................................................ 24
  Procedures for Creation of Creation Units ................................. 26
  Placement of Creation Orders Using
    DIAMONDS Clearing Process ............................................... 26
  Placement of Creation Orders Outside DIAMONDS Clearing Process ............ 26
  Securities Depository; Book-Entry-Only System ............................. 27
REDEMPTION OF DIAMONDS ...................................................... 29
Procedures for Redemption of Creation Units ................................. 29
Placement of Redemption Orders Using DIAMONDS Clearing Process .............. 32
Placement of Redemption Orders Outside DIAMONDS Clearing Process ............ 32
THE PORTFOLIO ............................................................... 32
Portfolio Securities Conform to the DJIA .................................... 33
Adjustments to the Portfolio Deposit ........................................ 35
THE DJIA .................................................................... 36
LICENSE AGREEMENT ........................................................... 41
EXCHANGE LISTING ............................................................ 42
TAX STATUS OF THE TRUST ..................................................... 43
  Income Tax Consequences to Beneficial Owners .............................. 43
  ERISA Considerations ...................................................... 46
CONTINUOUS OFFERING OF DIAMONDS ............................................. 46
DIVIDEND REINVESTMENT SERVICE ............................................... 47
EXPENSES OF THE TRUST ....................................................... 48
  Trustee Fee Scale ......................................................... 50
VALUATION ................................................................... 51
ADMINISTRATION OF THE TRUST ................................................. 51
  Distributions to Beneficial Owners ........................................ 51
  Statements to Beneficial Owners; Annual Reports ........................... 53
  Rights of Beneficial Owners ............................................... 53
  Amendments to the Trust Agreement ......................................... 54
  Termination of the Trust Agreement ........................................ 54
SPONSOR ..................................................................... 56
TRUSTEE ..................................................................... 57
DEPOSITORY .................................................................. 58
LEGAL OPINION ............................................................... 58
INDEPENDENT ACCOUNTANTS ..................................................... 58
CODE OF ETHICS .............................................................. 59
DAILY DIAMONDS TRADING INFORMATION .......................................... 59
INFORMATION AND COMPARISONS RELATING TO TRUST, SECONDARY MARKET TRADING,
  NET ASSET SIZE, PERFORMANCE AND TAX TREATMENT ............................. 59
GLOSSARY .................................................................... 67

"Dow Jones Industrial AverageSM",  "DJIA(R)",  "Dow Jones(R)",  "The Dow(R)" and
"DIAMONDS(R)"  are  trademarks  and service  marks of Dow Jones & Company,  Inc.
("Dow  Jones")  and have  been  licensed  for use for  certain  purposes  by PDR
Services  LLC and  the  American  Stock  Exchange  LLC  pursuant  to a  "License
Agreement"  with  Dow  Jones.  DIAMONDS  are not  sponsored,  endorsed,  sold or
promoted  by Dow Jones  and Dow  Jones  makes no  representation  regarding  the
advisability of investing in the Trust.

                                       i
<PAGE>


                                     SUMMARY

                  ESSENTIAL INFORMATION AS OF OCTOBER 31, 2002*

Glossary:                                All   defined   terms   used   in  this
                                         Prospectus  and page  numbers  on which
                                         their definitions  appear are listed in
                                         the Glossary on page 67.

Total Trust Assets:                      $4,126,001,020

Net Trust Assets:                        $4,118,076,359

Number of DIAMONDS:                      48,954,110

Fractional Undivided Interest
   in the Trust Represented
   by each DIAMONDS unit:                1/48,954,110th

Dividend Record Dates:                   Monthly

Dividend Payment Dates:                  Monthly

Trustee's Annual Fee:                    From 6/100 of one  percent to 10/100 of
                                         one  percent,  based  on the NAV of the
                                         Trust,  as the same may be  adjusted by
                                         certain amounts.

Estimated Ordinary Operating
   Expenses of the Trust:                18/100   of   one   percent   (0.1800%)
                                         (inclusive of Trustee's annual fee).**

NAV per DIAMONDS unit (based on the
   value of the Portfolio Securities,
   other net assets of the Trust and
   number of DIAMONDS outstanding):      $84.12

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:                                Dow Jones & Company, Inc.

Mandatory Termination Date:              The Trust is  scheduled to terminate no
                                         later than  January 13,  2123,  but may
                                         terminate    earlier    under   certain
                                         circumstances.

                                       1
<PAGE>


Discretionary Termination:               The Trust may be  terminated  if at any
                                         time the value of the  securities  held
                                         by the Trust is less than $350,000,000,
                                         as adjusted  for  inflation.  The Trust
                                         may  also  be  terminated  under  other
                                         circumstances.

Market Symbol:                           DIAMONDS  trade on the  American  Stock
                                         Exchange under the symbol "DIA".

Fiscal Year End:                         October 31

CUSIP:                                   252787106

- ----------
*    The Trust Agreement became effective,  the initial deposit was made and the
     Trust commenced operation on January 13, 1998.

**   Ordinary  operating expenses of the Trust currently are being accrued at an
     annual rate of 0.1800% and after  earnings  credits of 0.0018% are applied,
     the net  expenses of the Trust are  0.1782%.  Future  accruals  will depend
     primarily  on the level of the  Trust's  net  assets and the level of Trust
     expenses.  The Sponsor has undertaken that the ordinary  operating expenses
     will not  exceed an amount  that is  0.1800% of the daily NAV of the Trust,
     but this amount may be changed.  Therefore,  there is no guarantee that the
     Trust's ordinary  operating expenses will not exceed 0.1800% of the Trust's
     daily NAV.

                                       2
<PAGE>


                                   HIGHLIGHTS

o    DIAMONDS ARE OWNERSHIP INTERESTS IN THE DIAMONDS TRUST

     DIAMONDS Trust,  Series 1 ("Trust") is a unit investment  trust that issues
securities called  "DIAMONDS".  The Trust is organized under New York law and is
governed  by a trust  agreement  between  State  Street  Bank and Trust  Company
("Trustee") and PDR Services LLC  ("Sponsor"),  dated and executed as of January
13, 1998 ("Trust Agreement"). DIAMONDS represent an undivided ownership interest
in a portfolio of all of the common stocks of the Dow Jones  Industrial  Average
("DJIA").

o    DIAMONDS SHOULD CLOSELY TRACK THE VALUE OF THE STOCKS INCLUDED IN THE DJIA

     DIAMONDS  intend to  provide  investment  results  that,  before  expenses,
generally  correspond to the price and yield  performance  of the DJIA.  Current
information regarding the value of the DJIA is available from market information
services.  Dow Jones  obtains  information  for  inclusion in, or for use in the
calculation of, the DJIA from sources Dow Jones considers reliable.  None of Dow
Jones,  the Sponsor,  the Trust or the Exchange  accepts  responsibility  for or
guarantees the accuracy and/or  completeness of the DJIA or any data included in
the DJIA.

     The Trust holds the  Portfolio  and cash and is not  actively  "managed" by
traditional methods,  which typically involve effecting changes in the Portfolio
on the basis of  judgments  made  relating  to  economic,  financial  and market
considerations.  To maintain  the  correspondence  between the  composition  and
weightings of stocks held by the Trust ("Portfolio Securities" or, collectively,
"Portfolio") and component stocks of the DJIA ("Index Securities"),  the Trustee
adjusts the  Portfolio  from time to time to conform to periodic  changes in the
identity and/or relative  weightings of Index Securities.  The Trustee generally
makes these adjustments to the Portfolio within three (3) Business Days (defined
below)  before or after the day on which  changes in the DJIA are  scheduled  to
take effect.  Any change in the identity or weighting of an Index  Security will
result  in a  corresponding  adjustment  to  the  prescribed  Portfolio  Deposit
effective  on any day that  the New York  Stock  Exchange  is open for  business
("Business  Day") following the day on which the change to the DJIA takes effect
after the close of the market.

     The value of DIAMONDS fluctuates in relation to changes in the value of the
Portfolio.  The market price of each individual DIAMONDS may not be identical to
the net asset  value  ("NAV")  of such  DIAMONDS  but,  historically,  these two
valuations have been very close.

o    DIAMONDS TRADE ON THE AMERICAN STOCK EXCHANGE

     DIAMONDS   are  listed  for  trading  on  the   American   Stock   Exchange
("Exchange"),  and are bought and sold in the  secondary  market  like  ordinary
shares of stock at any time during the trading  day.  DIAMONDS are traded on the
Exchange in 100 DIAMOND round

                                       3
<PAGE>


lots,  but can be traded in odd lots of as little as one  DIAMOND.  The Exchange
may halt trading of DIAMONDS under certain circumstances.

o    BROKERAGE COMMISSIONS ON DIAMONDS

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

o    THE TRUST ISSUES AND REDEEMS DIAMONDS IN "CREATION UNITS"

     The Trust  issues and  redeems  DIAMONDS  only in  specified  large lots of
50,000 DIAMONDS or multiples  thereof referred to as "Creation  Units." Creation
Units are issued by the Trust to anyone who, after placing a creation order with
ALPS Distributors,  Inc. ("Distributor"),  deposits with the Trustee a specified
portfolio of Index  Securities and a cash payment  generally  equal to dividends
(net of expenses) accumulated up to the time of deposit.

     Fractional  Creation  Units may be  created  or  redeemed  only in  limited
circumstances.*  Creation  Units  are  redeemable  in  kind  only  and  are  not
redeemable  for cash.  Upon  receipt of one or more  Creation  Units,  the Trust
delivers to the redeeming holder a portfolio of Index  Securities  (based on NAV
of  the  Trust),  together  with  a  cash  payment.  Each  redemption  has to be
accompanied  by a Cash  Redemption  Payment that on any given Business Day is an
amount identical to the Cash Component of a Portfolio Deposit.

     If the Trustee  determines that one or more Index  Securities are likely to
be  unavailable,  or  available in  insufficient  quantity,  for  delivery  upon
creation of Creation Units,  the Trustee may permit the cash equivalent value of
one or more of these Index Securities to be included in the Portfolio Deposit as
a part of the Cash  Component in lieu  thereof.  If a creator is  restricted  by
regulation or otherwise  from  investing or engaging in a transaction  in one or
more Index Securities,  the Trustee may permit the cash equivalent value of such
Index  Securities  to be included in the  Portfolio  Deposit based on the market
value of such  Index  Securities  as of the  Evaluation  Time on the  date  such
creation  order  is  deemed  received  by the  Distributor  as part of the  Cash
Component in lieu of the inclusion of such Index Securities in the stock portion
of the  Portfolio  Deposit.  If the  Trustee  determines  that one or more Index
Securities are likely to be unavailable  or available in  insufficient  quantity
for delivery by the Trust upon the redemption of Creation Units, the Trustee may
deliver  the cash  equivalent  value of one or more of these  Index  Securities,
based on their market value as of the Evaluation Time on the date the redemption
order is deemed received by the Trustee,  as part of the Cash Redemption Payment
in lieu thereof.


- ----------
*  See the  discussion of termination of the Trust in this Summary and "Dividend
   Reinvestment  Service,"  however,  for a description of the  circumstances in
   which  DIAMONDS  may be  redeemed  or created  by the  Trustee in less than a
   Creation Unit size aggregation of 50,000 DIAMONDS.

                                       4
<PAGE>


o    CREATION ORDERS MUST BE PLACED WITH THE DISTRIBUTOR

     All orders to create Creation Units must be placed with the Distributor. To
be  eligible  to  place  these  orders,  an  entity  or  person  must  be  (a) a
"Participating  Party,"  or (b) a DTC  Participant,  and in each  case must have
executed  an  agreement  with  the  Distributor  and the  Trustee  ("Participant
Agreement").  The term  "Participating  Party"  means a  broker-dealer  or other
participant  in the  DIAMONDS  Clearing  Process,  through  the  Continuous  Net
Settlement  ("CNS")  System  of the  National  Securities  Clearing  Corporation
("NSCC"),  a  clearing  agency  registered  with  the  Securities  and  Exchange
Commission ("SEC"). Payment for orders is made by deposits with the Trustee of a
portfolio of securities,  substantially  similar in composition and weighting to
Index  Securities,  and a cash  payment  in an  amount  equal  to  the  Dividend
Equivalent  Payment,  plus or minus the Balancing Amount.  "Dividend  Equivalent
Payment" is an amount equal,  on a per Creation Unit basis,  to the dividends on
the Portfolio (with  ex-dividend dates within the accumulation  period),  net of
expenses and accrued liabilities for such period (including, without limitation,
(i)  taxes or other  governmental  charges  against  the  Trust  not  previously
deducted, if any, and (ii) accrued fees of the Trustee and other expenses of the
Trust (including legal and auditing  expenses) and other expenses not previously
deducted),  calculated as if all of the Portfolio  Securities  had been held for
the entire  accumulation  period for such distribution.  The Dividend Equivalent
Payment  and  the  Balancing  Amount  collectively  are  referred  to  as  "Cash
Component"  and the deposit of a portfolio of securities  and the Cash Component
collectively are referred to as a "Portfolio  Deposit." Persons placing creation
orders with the Distributor must deposit  Portfolio  Deposits either (i) through
the CNS clearing process of NSCC, as such processes have been enhanced to effect
creations and redemptions of Creation Units,  such processes  referred to herein
as the  "DIAMONDS  Clearing  Process,"  or (ii)  with the  Trustee  outside  the
DIAMONDS Clearing Process (I.E. through the facilities of DTC).

     The  Distributor  acts as underwriter  of DIAMONDS on an agency basis.  The
Distributor maintains records of the orders placed with it and the confirmations
of  acceptance  and  furnishes  to those  placing such orders  confirmations  of
acceptance of the orders.  The Distributor  also is responsible for delivering a
prospectus to persons creating DIAMONDS. The Distributor also maintains a record
of the delivery instructions in response to orders and may 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 1625 Broadway, Suite 2200, Denver, CO 80202,
toll free number: 1-800-843-2639.  The Distributor is a registered broker-dealer
and a member  of the  National  Association  of  Securities  Dealers,  Inc.  PDR
Services LLC, as Sponsor of the Trust,  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 SEC.

                                       5
<PAGE>


o    EXPENSES OF THE TRUST

     The expenses of the Trust are accrued daily and reflected in the NAV of the
Trust.  After  reflecting  waivers  but  before  reflecting  credits,  the Trust
currently is accruing ordinary operating expenses at an annual rate of 0.1800%.

     SHAREHOLDER FEES:*                                                    None*
     (fees paid directly from your investment)

     ESTIMATED TRUST ANNUAL ORDINARY OPERATING EXPENSES:

                                                                      AS A % OF
     CURRENT TRUST ANNUAL ORDINARY                                      TRUST
     OPERATING EXPENSES                                               NET ASSETS
     ------------------                                               ----------
     Trustee's Fee                                                     0.0698%
     Dow Jones License Fee                                             0.0447%
     Registration Fees                                                 0.0009%
     Marketing                                                         0.0442%
     Other Operating Expenses                                          0.0204%
                                                                       ------
     TOTAL:                                                            0.1800%
     Sponsor Waiver**                                                 (0.0000)%
                                                                       ------
     NET EXPENSE AFTER WAIVER                                          0.1800%
     Trustee Reduction for Balance Credits**                          (0.0018)%
                                                                       ------
     Net Expenses after Waivers and Reductions                         0.1782%
                                                                       ======

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


- ----------
*  Investors do not pay  shareholder  fees directly from their  investment,  but
   purchases and  redemptions of Creation Units are subject to Transaction  Fees
   (described  below in "A Transaction  Fee is Payable For Each Creation and For
   Each Redemption of Creation  Units"),  and purchases and sales of DIAMONDS in
   the  secondary  market are  subject to  ordinary  brokerage  commissions  and
   charges (described above in "Brokerage Commissions on DIAMONDS").

** For fiscal year 2002, the ordinary  operating  expenses of the Trust were not
   permitted to exceed  0.1800% of the Trust's daily net asset value because the
   Sponsor voluntarily  reimbursed the Trust for all ordinary operating expenses
   in excess of such amount.  The Sponsor reserves the right to discontinue this
   reimbursement policy in the future. Therefore, there is no guarantee that the
   Trust's  ordinary  operating  expenses will not exceed 0.1800% of the Trust's
   daily net asset  value.  Trust  expenses  are further  reduced by a Trustee's
   earnings  credit  of  0.0018%  of the  Portfolio's  daily  NAV as a result of
   uninvested cash balances in the Trust.

                                       6
<PAGE>


o    BAR CHART AND TABLE

     The bar chart below and the table on the next page entitled "Average Annual
Total Returns (for periods  ending  December 31, 2002)"  ("Table")  provide some
indication of the risks of investing in the Trust by showing the  variability of
the Trust's returns based on net assets and comparing the Trust's performance to
the performance of the DJIA. Past performance (both before and after tax) is not
necessarily an indication of how the Trust will perform in the future.

     The  after-tax  returns  presented  in the Table are  calculated  using the
highest  historical  individual  federal  marginal  income  tax rates and do not
reflect the impact of state and local taxes.  Your actual after-tax returns will
depend on your  specific  tax  situation  and may differ from those shown below.
After-tax  returns  are not  relevant to  investors  who hold  DIAMONDS  through
tax-deferred  arrangements,  such  as  401(k)  plans  or  individual  retirement
accounts.  The total  returns in the bar chart  below,  as well as the total and
after-tax  returns  presented  in the Table,  do not  reflect  Transaction  Fees
payable by those persons  purchasing and redeeming Creation Units, nor brokerage
commissions  incurred by those persons  purchasing  and selling  DIAMONDS in the
secondary market (see footnotes (2) and (3) to the Table).

         [The table below represents a bar chart in the printed report.]


                   26.92%     -4.85%      -5.53%      -15.10%
                 ----------------------------------------------
                    1999        2000        2001         2002

     This bar chart shows the  performance  of the Trust for each full  calendar
year since its  inception  on January 13,  1998.  During the period  shown above
(January 1, 1999 through  December 31, 2002),  the highest  quarterly return for
the Trust was  13.75%  for the  quarter  ended  12/31/2001,  and the  lowest was
- -17.44% for the quarter ended 9/30/2002.

                                       7
<PAGE>


AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDING DECEMBER 31, 2002)

                                                           PAST        SINCE
                                                         ONE YEAR   INCEPTION(4)
                                                         --------   ------------
DIAMONDS Trust, Series 1
   Return Before Taxes(1)(2)(3) .....................     -15.10%       3.18%
   Return After Taxes on Distributions(1)(2)(3) .....     -15.73%       2.54%
   Return After Taxes on Distributions and
     Redemption of Creation Units(1)(2)(3) ..........     -9.24%        2.28%
DJIA(5) .............................................     -15.01%       3.30%

- ----------
(1)  Includes all applicable  ordinary operating expenses set forth above in the
     section of "Highlights" entitled "Expenses of the Trust".

(2)  Does not include the  Transaction  Fee which is payable to the Trustee only
     by persons  purchasing and redeeming  Creation Units as discussed  below in
     the section of "Highlights" entitled "A Transaction Fee is Payable For Each
     Creation and For Each Redemption of Creation Units".  If these amounts were
     reflected, returns would be less than those shown.

(3)  Does not include brokerage commissions and charges incurred only by persons
     who make  purchases  and  sales of  DIAMONDS  in the  secondary  market  as
     discussed  above  in  the  section  of  "Highlights"   entitled  "Brokerage
     Commissions on DIAMONDS". If these amounts were reflected, returns would be
     less than those shown.

(4)  Investment operation commenced on January 13, 1998.

(5)  Does not reflect  deductions  for taxes,  operating  expenses,  Transaction
     Fees, brokerage commissions, or fees of any kind.

o    A TRANSACTION  FEE IS PAYABLE FOR EACH CREATION AND FOR EACH  REDEMPTION OF
     CREATION UNITS

     A transaction  fee payable to the Trustee in connection  with each creation
and  redemption  of Creation  Units made through the DIAMONDS  Clearing  Process
("Transaction Fee") is non-refundable,  regardless of the NAV of the Trust. This
Transaction  Fee is $1,000 per  Participating  Party per day,  regardless of the
number of Creation  Units  created or redeemed on such day. The $1,000 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 ("10 Basis Point Limit").

     For creations and redemptions  outside the DIAMONDS  Clearing  Process,  an
additional  amount not to exceed three (3) times the  Transaction Fee applicable
for one Creation  Unit is charged per Creation  Unit per day.  Under the current
schedule,  therefore,  the total fee  charged in  connection  with  creation  or
redemption   outside  the  DIAMONDS   Clearing  Process  would  be  $1,000  (the
Transaction  Fee for the creation or  redemption  of one Creation  Unit) plus an
additional  amount  up to  $3,000  (3 times  $1,000),  for a total not to exceed
$4,000.  Creators and redeemers  restricted from engaging in transactions in one
or more Index  Securities may pay the Trustee the Transaction Fee and may pay an
additional  amount  per  Creation  Unit  not  to  exceed  three  (3)  times  the
Transaction Fee applicable for one Creation Unit.

                                       8
<PAGE>


o    DIAMONDS ARE HELD IN BOOK ENTRY FORM ONLY

     The  Depository  Trust  Company  ("DTC")  or its  nominee  is the record or
registered owner of all outstanding  DIAMONDS.  Beneficial ownership of DIAMONDS
is shown on the records of DTC or its participants.  Individual certificates are
not issued for DIAMONDS. See "The Trust--Securities Depository;  Book-Entry-Only
System."

o    DIAMONDS MAKE PERIODIC DIVIDEND PAYMENTS

     DIAMONDS holders receive each calendar month an amount corresponding to the
amount of any cash  dividends  declared on the Portfolio  Securities  during the
applicable  period,  net of fees and expenses  associated  with operation of the
Trust, and taxes, if applicable. Because of such fees and expenses, the dividend
yield for DIAMONDS is ordinarily  less than that of the DJIA.  Investors  should
consult their tax advisors  regarding  tax  consequences  associated  with Trust
dividends, as well as those associated with DIAMONDS sales or redemptions.

     Monthly distributions based on the amount of dividends payable with respect
to Portfolio  Securities and other income received by the Trust, net of fees and
expenses,  and taxes,  if applicable,  are made via DTC and its  participants to
Beneficial  Owners on each  Dividend  Payment  Date.  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  Internal  Revenue  Code of 1986,  as
amended ("Code").  Although all income distributions are currently made monthly,
the Trustee may vary the periodicity  with which  distributions  are made. Those
Beneficial  Owners  interested in reinvesting  their monthly  distributions  may
participate  through DTC Participants in the DTC Dividend  Reinvestment  Service
("Service")  available  through  certain  brokers.  See  "The  Trust--Securities
Depository; Book-Entry-Only System."

o    THE TRUST INTENDS TO QUALIFY AS A REGULATED INVESTMENT COMPANY

     For the fiscal year ended  October 31,  2002,  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 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.
The Trust's regular monthly  distributions are based on the dividend performance
of the Portfolio during such monthly  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

                                       9
<PAGE>


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.

o    TERMINATION OF THE TRUST

     The  Trust  has a  specified  lifetime  term.  The  Trust is  scheduled  to
terminate on the first to occur of (a) January 13, 2123 or (b) the date 20 years
after the  death of the last  survivor  of  fifteen  persons  named in the Trust
Agreement, the oldest of whom was born in 1994 and the youngest of whom was born
in 1997.  Upon  termination,  the Trust may be liquidated and pro rata shares of
the  assets of the Trust,  net of  certain  fees and  expenses,  distributed  to
holders of DIAMONDS.

o    PURCHASES OF DIAMONDS BY REGISTERED INVESTMENT COMPANIES

     Purchases of DIAMONDS by  registered  investment  companies  are subject to
restrictions  set forth in Section  12(d)(1)  of the  Investment  Company Act of
1940. The Trust itself is also subject to the restrictions of Section  12(d)(1),
meaning (a) the Trust cannot invest in any registered investment company, to the
extent  that the  Trust  would  own more  than 3% of that  regulated  investment
company's  outstanding share position,  (b) the Trust cannot invest more than 5%
of its total assets in the securities of any one registered  investment company,
and (c) the  Trust  cannot  invest  more  than 10% of its  total  assets  in the
securities of registered investment companies in the aggregate.


                                  RISK FACTORS

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

INVESTMENT  IN THE TRUST  INVOLVES THE RISKS  INHERENT IN AN  INVESTMENT  IN ANY
EQUITY  SECURITY.An  investment  in the  Trust is  subject  to the  risks of any
investment in a portfolio of large-capitalization  common stocks,  including the
risk that the  general  level of stock  prices may  decline,  thereby  adversely
affecting the value of such  investment.  The value of Portfolio  Securities may
fluctuate in accordance  with changes in the financial  condition of the issuers
of Portfolio  Securities  (particularly  those that are heavily  weighted in the
DJIA), the value of common stocks generally and other factors.  The identity and
weighting of Index Securities and the Portfolio Securities also change from time
to time.

     The financial  condition of the issuers may become  impaired or the general
condition  of the stock  market  may  deteriorate  (either  of which may cause a
decrease  in the  value of the  Portfolio  and thus in the  value of  DIAMONDS).
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,

                                       10
<PAGE>


economic,  monetary and fiscal policies,  inflation and interest rates, economic
expansion or contraction, and global or regional political, economic and banking
crises.

     Holders of common  stocks of any given  issuer incur more risk than holders
of preferred  stocks and debt  obligations  of the issuer  because the rights of
common  stockholders,  as owners of the issuer,  generally  are  inferior to the
rights of  creditors  of, or holders of debt  obligations  or  preferred  stocks
issued by, such issuer.  Further,  unlike debt  securities that typically have a
stated principal amount payable at maturity,  or preferred stocks that typically
have a  liquidation  preference  and  may  have  stated  optional  or  mandatory
redemption provisions, common stocks have neither a fixed principal amount nor a
maturity.  Common stock values are subject to market fluctuations as long as the
common stock remains outstanding.  The value of the Portfolio may be expected to
fluctuate over the entire life of the Trust.

     There can be no assurance that the issuers of Portfolio Securities will pay
dividends.  Distributions  generally depend upon the declaration of dividends by
the  issuers of  Portfolio  Securities  and the  declaration  of such  dividends
generally depends upon various factors, including the financial condition of the
issuers and general economic conditions.

THE  TRUST IS NOT  ACTIVELY  MANAGED.The  Trust  is not  actively  "managed"  by
traditional  methods, and therefore the adverse financial condition of an issuer
will not result in the  elimination of its stocks from the Portfolio  unless the
stocks of such issuer are removed from the DJIA.

A LIQUID TRADING MARKET FOR CERTAIN PORTFOLIO  SECURITIES MAY NOT EXIST.Although
most of the Portfolio  Securities are listed on a national securities  exchange,
the principal trading market for some may be in the over-the-counter market. The
existence of a liquid trading market for certain Portfolio Securities may depend
on whether dealers will make a market in such stocks.  There can be no assurance
that a market will be made for any Portfolio Securities, that any market will be
maintained or that any such market will be or remain liquid.  The price at which
Portfolio  Securities  may be  sold  and  the  value  of the  Portfolio  will be
adversely  affected if trading  markets for Portfolio  Securities are limited or
absent.

THE TRUST MAY NOT ALWAYS BE ABLE EXACTLY TO  REPLICATE  THE  PERFORMANCE  OF THE
DJIA.The  Trust is not able to  replicate  exactly the  performance  of the DJIA
because the total return generated by the Portfolio is reduced by Trust expenses
and transaction costs incurred in adjusting the actual balance of the Portfolio.
It is also possible that, for a short period,  the Trust may not fully replicate
the performance of the DJIA due to the temporary unavailability of certain Index
Securities in the secondary market or due to other extraordinary circumstances.

INVESTMENT IN THE TRUST MAY HAVE ADVERSE TAX CONSEQUENCES.Investors in the Trust
should  also be  aware  that  there  are tax  consequences  associated  with the
ownership of DIAMONDS  resulting from the  distribution  of Trust  dividends and
sales of DIAMONDS

                                       11
<PAGE>


as well as under certain  circumstances the sales of stocks held by the Trust in
connection with redemptions.

NAV MAY NOT ALWAYS  CORRESPOND  TO MARKET  PRICE.The NAV of DIAMONDS in Creation
Unit size aggregations and, proportionately,  the NAV per DIAMONDS unit, changes
as  fluctuations  occur in the market value of Portfolio  Securities.  Investors
should  be aware  that the  aggregate  public  trading  market  price of  50,000
DIAMONDS may be different from the NAV of a Creation Unit (I.E., 50,000 DIAMONDS
may trade at a premium  over,  or at a discount to, the NAV of a Creation  Unit)
and similarly the public trading market price per DIAMONDS unit may be different
from  the NAV of a  Creation  Unit on a per  DIAMONDS  unit  basis.  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 DIAMONDS is closely related to, but
not identical  to, the same forces  influencing  the prices of Index  Securities
trading  individually  or in the aggregate at any point in time.  Investors also
should note that the size of the Trust in terms of total  assets held may change
substantially  over time and from time to time as Creation Units are created and
redeemed.

THE EXCHANGE MAY HALT TRADING IN DIAMONDS.DIAMONDS are listed for trading on the
Exchange  under the market symbol DIA.  Trading in DIAMONDS 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 DIAMONDS  inadvisable.  In
addition,  trading is subject to trading  halts caused by  extraordinary  market
volatility  pursuant to Exchange "circuit breaker" rules that require trading to
be halted for a specified period based on a specified market decline.  There can
be no assurance that the requirements of the Exchange  necessary to maintain the
listing of DIAMONDS will continue to be met or will remain unchanged.  The Trust
will be terminated if DIAMONDS are delisted from the Exchange.

DIAMONDS  ARE  SUBJECT TO MARKET  RISKS.DIAMONDS  are subject to the risks other
than those inherent in an investment in equity  securities,  discussed above, in
that the  selection  of the  stocks  included  in the  Portfolio,  the  expenses
associated with the Trust, or other factors distinguishing an ownership interest
in a trust from the direct ownership of a portfolio of stocks may affect trading
in DIAMONDS.

     Additionally,  DIAMONDS may perform  differently than other  investments in
portfolios  containing large capitalization stocks based upon or derived from an
index other than the DJIA. For example,  the great majority of component  stocks
of the DJIA are  drawn  from  among  the  largest  of the  large  capitalization
universe,  while  other  indexes  may  represent  a  broader  sampling  of large
capitalization  stocks.  Also,  other  indexes  may use  different  methods  for
assigning  relative  weights  to the index  components  than the price  weighted
method used by the DJIA.  As a result,  DJIA accords  relatively  more weight to
stocks with a higher price to market  capitalization ratio than a similar market
capitalization weighted index.

THE  REGULAR  SETTLEMENT  PERIOD FOR  CREATION  UNITS MAY BE  REDUCED.Except  as
otherwise  specifically noted, the time frames for delivery of stocks,  cash, or
DIAMONDS

                                       12
<PAGE>


in connection with creation and redemption activity within the DIAMONDS Clearing
Process 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  there  may  be a  corresponding  reduction  in  settlement  periods
applicable to DIAMONDS creations and redemptions.

CLEARING AND  SETTLEMENT  OF CREATION  UNITS MAY BE DELAYED OR FAIL.The  Trustee
delivers a portfolio of stocks for each Creation Unit  delivered for  redemption
substantially  identical in weighting and  composition to the stock portion of a
Portfolio  Deposit as in effect on the date the request for redemption is deemed
received by the  Trustee.  If  redemption  is  processed  through  the  DIAMONDS
Clearing  Process,  the  stocks  that are not  delivered  are  covered by NSCC's
guarantee  of the  completion  of such  delivery.  Any  stocks not  received  on
settlement date are marked-to-market until delivery is completed.  The Trust, to
the extent it has not already done so,  remains  obligated to deliver the stocks
to NSCC,  and the market risk of any  increase in the value of the stocks  until
delivery  is made by the Trust to NSCC  could  adversely  affect  the NAV of the
Trust.  Investors  should  note that the  stocks to be  delivered  to a redeemer
submitting a redemption  request outside of the DIAMONDS  Clearing  Process that
are not  delivered  to such  redeemer  are not  covered by NSCC's  guarantee  of
completion of delivery.

                                       13
<PAGE>


DIAMONDS TRUST SERIES 1
REPORT OF INDEPENDENT ACCOUNTANTS

TO THE TRUSTEE AND UNITHOLDERS OF DIAMONDS 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 DIAMONDS  Trust  Series 1 (the
"Trust") at October 31, 2002, and the results of its operations,  the changes in
its net  assets and the  financial  highlights  for the  periods  indicated,  in
conformity with accounting principles generally accepted in the United States of
America. 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 auditing  standards  generally  accepted in the United States of
America,  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  securities  at October  31,  2002 by
correspondence with the custodian, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
December 19, 2002

                                       14
<PAGE>


DIAMONDS TRUST SERIES 1
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 2002
================================================================================

ASSETS
    Investments in securities, at value .......................  $4,110,089,154
    Cash ......................................................       8,074,767
    Dividends receivable ......................................       7,735,269
    Deferred organization costs ...............................         101,830
                                                                 --------------
    Total Assets ..............................................   4,126,001,020
                                                                 --------------

LIABILITIES
    Payable for income related to DIAMONDS
       in-kind transactions ...................................         203,758
    Distribution payable ......................................       5,232,918
    Accrued Trustee fees ......................................         227,922
    Accrued expenses and other liabilities ....................       2,260,063
                                                                 --------------
    Total Liabilities .........................................       7,924,661
                                                                 --------------
    Net Assets ................................................  $4,118,076,359
                                                                 ==============

NET ASSETS REPRESENTED BY:
    Paid in surplus ...........................................  $5,451,218,721
    Undistributed net investment income .......................       1,062,457
    Accumulated net realized loss on investments ..............     (23,426,030)
    Net unrealized depreciation on investments ................  (1,310,778,789)
                                                                 --------------
Net Assets ....................................................  $4,118,076,359
                                                                 ==============
Net asset value per DIAMOND ...................................
                                                                         $84.12
                                                                 --------------
Units of fractional undivided interest ("DIAMONDS")
   outstanding, unlimited units authorized, $0.00 par value ...      48,954,110
                                                                 --------------
Cost of investments ...........................................  $5,420,867,943
                                                                 ==============

                See accompanying notes to financial statements.

                                       15
<PAGE>


DIAMONDS TRUST, SERIES 1
STATEMENTS OF OPERATIONS
================================================================================
                                    FOR THE YEAR   FOR THE YEAR   FOR THE YEAR
                                        ENDED          ENDED          ENDED
                                     OCTOBER 31,    OCTOBER 31,    OCTOBER 31,
                                        2002           2001           2000
                                   -------------   -------------   ------------
INVESTMENT INCOME
  Dividend income ...............  $  71,072,353   $  41,997,410   $ 27,110,365
EXPENSES:
  Trustee expense ...............      2,450,305       1,858,460      1,677,261
  DJIA license fee ..............      1,567,729       1,300,000      1,000,000
  Marketing expense .............      1,549,601         356,933      2,800,000
  Amortization of organization
    costs .......................        502,266         502,266        503,642
  Printing and postage expense ..        151,203         136,463        162,000
  Legal and audit services ......         64,908          49,800         56,389
  SEC registration expense ......         30,592         286,213        235,534
  Miscellaneous expense .........            687             218            700
                                   -------------   -------------   ------------
  Total expenses ................      6,317,291       4,490,353      6,435,526
  Rebate from Sponsor ...........             --              --     (2,597,968)
  Rebate from Trustee ...........             --              --       (599,740)
                                   -------------   -------------   ------------
  Net expenses ..................      6,317,291       4,490,353      3,237,818
  Trustee earnings credit .......        (61,606)       (160,833)      (133,506)
                                   -------------   -------------   ------------
  Net expenses after Trustee
    earnings credit .............      6,255,685       4,329,520      3,104,312
                                   -------------   -------------   ------------
Net Investment Income ...........     64,816,668      37,667,890     24,006,053
                                   -------------   -------------   ------------
REALIZED AND UNREALIZED GAIN
  (LOSS) ON INVESTMENTS
  Net realized gain on
    investment transactions .....    173,854,529     218,849,002    189,376,879
  Net increase in unrealized
    depreciation ................   (496,933,157)   (681,232,614)  (119,522,465)
                                   -------------   -------------   ------------
Net realized and unrealized
  gain (loss) on investments ....   (323,078,628)   (462,383,612)    69,854,414
                                   -------------   -------------   ------------
    Net Increase (Decrease)
      in Net Assets from
      Operations ................  $(258,261,960)  $(424,715,722)  $ 93,860,467
                                   =============   =============   ============

                See accompanying notes to financial statements.

                                       16
<PAGE>


DIAMONDS TRUST, SERIES 1
STATEMENTS OF CHANGES IN NET ASSETS
================================================================================

<TABLE>
<CAPTION>
                                                        FOR THE YEAR       FOR THE YEAR        FOR THE YEAR
                                                            ENDED              ENDED               ENDED
                                                         OCTOBER 31,        OCTOBER 31,         OCTOBER 31,
                                                            2002               2001                2000
                                                       --------------      --------------      --------------
<S>                                                    <C>                 <C>                 <C>
INCREASE (DECREASE) IN NET ASSETS
   RESULTING FROM OPERATIONS:
   Net investment income ..........................    $   64,816,668      $   37,667,890      $   24,006,053
   Net realized gain on investment transactions ...       173,854,529         218,849,002         189,376,879
Net increase in unrealized depreciation ...........      (496,933,157)       (681,232,614)       (119,522,465)
                                                       --------------      --------------      --------------
Net increase (decrease) in net assets
  resulting from operations .......................      (258,261,960)       (424,715,722)         93,860,467
                                                       --------------      --------------      --------------
Undistributed net investment income included
  in price of units issued and redeemed, net ......           913,179             733,997              63,116
                                                       --------------      --------------      --------------
Distributions to unitholders from
   net investment income ..........................       (62,477,206)        (38,220,448)        (24,417,662)
                                                       --------------      --------------      --------------
Net increase in net assets from issuance
  and redemption of DIAMONDS ......................     1,703,425,938       1,194,073,126         892,111,223
                                                       --------------      --------------      --------------
Net increase in net assets during period ..........     1,383,599,951         731,870,953         961,617,144
Net assets at beginning of period .................     2,734,476,408       2,002,605,455       1,040,988,311
                                                       --------------      --------------      --------------
Net assets end of period* .........................    $4,118,076,359      $2,734,476,408      $2,002,605,455
                                                       ==============      ==============      ==============
*Includes undistributed (distributions
  in excess of) net investment income .............    $    1,062,457      $   (1,277,005)     $     (724,447)
                                                       --------------      --------------      --------------
</TABLE>

                See accompanying notes to financial statements.

                                       17
<PAGE>


DIAMONDS TRUST, SERIES 1
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A DIAMOND OUTSTANDING DURING THE PERIOD
================================================================================

<TABLE>
<CAPTION>
                                                        FOR THE         FOR THE         FOR THE         FOR THE         FOR THE
                                                       YEAR ENDED      YEAR ENDED      YEAR ENDED      YEAR ENDED     PERIOD ENDED
                                                      10/31/2002(5)   10/31/2001(5)   10/31/2000(5)   10/31/1999(4)  10/31/1998(1)
                                                      -------------   -------------   -------------   -------------  -------------
<S>                                                    <C>             <C>             <C>             <C>           <C>
NET ASSET VALUE, BEGINNING OF PERIOD ................  $    90.84      $   109.73      $   107.31      $    85.94    $    77.32
INVESTMENT OPERATIONS:
   Net investment income ............................        1.73            1.56            1.43            1.41          0.98
   Net realized and unrealized
   gain (loss) on investments .......................       (6.77)         (18.86)           2.47           21.36          8.59
                                                       ----------      ----------      ----------      ----------    ----------
Total from investment operations ....................       (5.04)         (17.30)           3.90           22.77          9.57
                                                       ----------      ----------      ----------      ----------    ----------
Undistributed net investment income
   included in price of units issued
   and redeemed, net ................................        0.00(6)         0.00(6)         0.00(6)         0.08          0.05
                                                       ----------      ----------      ----------      ----------    ----------
LESS DISTRIBUTIONS FROM:
   Net investment income ............................       (1.68)          (1.59)          (1.48)          (1.48)        (1.00)
                                                       ----------      ----------      ----------      ----------    ----------
Net asset value, end of period ......................  $    84.12      $    90.84      $   109.73      $   107.31    $    85.94
                                                       ==========      ==========      ==========      ==========    ==========
Total investment return (4) .........................       (5.71)%        (15.91)%          3.68%          26.71%        12.44%
RATIOS AND SUPPLEMENTAL DATA
Ratios to average net assets:
   Net investment income ............................        1.85%           1.51%           1.34%           1.37%         1.49%(2)
   Net expenses .....................................        0.18%           0.17%           0.17%           0.18%         0.18%(2)
   Net expenses excluding trustee earnings credit ...        0.18%           0.18%           0.18%           0.18%         0.18%(2)
   Total expenses (7) ...............................        0.18%           0.18%           0.36%           0.37%         2.35%(2)
 Portfolio turnover rate (3) ........................        0.26%          12.66%          23.85%          34.70%         3.23%
Net asset value, end of period (000's) ..............  $4,118,076      $2,734,476      $2,002,605      $1,040,988    $  356,681
</TABLE>

- ----------
(1)  The Trust commenced operations on January 14, 1998.

(2)  Annualized.

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

(4)  Total returns for periods of less than one year are not  annualized  and do
     not include transaction fees.

(5)  Per share numbers have been  calculated  using the average  shares  method,
     which more appropriately presents the per share data for the period.

(6)  Amount shown represents less than $0.01.

(7)  Excludes  expenses  reimbursed  by the Sponsor and Trustee  from the period
     January 14, 1998 through  February 29, 2000 and the Sponsor from the period
     March 1, 2000 through October 31, 2000.

                See accompanying notes to financial statements.

                                       18
<PAGE>


DIAMONDS TRUST, SERIES 1
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2002
================================================================================


NOTE 1--ORGANIZATION

     DIAMONDS  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 units of beneficial  interest in the Trust  representing
proportionate  undivided interests in the portfolio of securities  consisting of
substantially  all of the component common stocks,  which comprise the Dow Jones
Industrial Average (the "DJIA").  Each unit of fractional  undivided interest in
the Trust is referred to as a "DIAMONDS Unit". The Trust commenced operations on
January 14, 1998 upon the initial  issuance of 500,000  DIAMONDS  (equivalent to
ten  "Creation  Units" -- see Note 4) in exchange for a portfolio of  securities
assembled to reflect the intended portfolio composition of the Trust.

NOTE 2--SIGNIFICANT ACCOUNTING POLICIES

     The  preparation  of financial  statements  in accordance  with  accounting
principles   generally  accepted  in  the  United  States  of  America  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 previous
closing sale price on the exchange  which is deemed to be the  principal  market
for the security. If there is no closing sale 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  monthly.  The Trust will distribute net realized capital gains,
if any, at least annually.

ORGANIZATION COSTS

     The  Trust  incurred  organization  costs of  $2,307,929,  which  have been
capitalized  and are being  charged to  operations  ratably  over a period of 60
months.

                                       19
<PAGE>


FEDERAL INCOME TAX

     The Trust has qualified  and intends to qualify 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 the fiscal year ended October
31, 2002, the Trust  reclassified  $175,913,344  of  non-taxable  security gains
realized in the in-kind  redemption of Creation Units (Note 4) as an increase to
paid in surplus in the Statement of Assets and  Liabilities.  The Trust incurred
net capital  losses of $9,197,094  for the fiscal period ended October 31, 1999,
$11,386,433  for the fiscal year ended October 31, 2000 and  $2,065,467  for the
fiscal year ended  October 31, 2002.  These losses may be utilized to offset any
net  realized  capital  gains  through  October 31,  2007,  October 31, 2008 and
October 31, 2010, respectively.

     The tax character of  distributions  paid during the year ended October 31,
2002, 2001 and 2000 were as follows:

DISTRIBUTIONS PAID FROM:               2002             2001            2000
                                    -----------      -----------     -----------
Ordinary Income ..................  $62,477,206      $38,220,448     $24,417,662
Long Term Capital Gain ...........           --               --              --
Return of Capital ................           --               --              --
                                    -----------      -----------     -----------
   Total .........................  $62,477,206      $38,220,448     $24,417,662

     As of October 31, 2002, the components of distributable earnings (excluding
unrealized  appreciation  (depreciation))  on a federal  income  tax basis  were
undistributed  ordinary income of $6,295,375 and undistributed long term capital
gain of $0.

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  and/or  received in exchange for the issuance  and/or  redemption  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 DJIA. For these services,  the Trustee received a fee
at the following annual rates for the year ended October 31, 2002:

                                       20
<PAGE>


                                                      FEE AS A PERCENTAGE OF
NET ASSET VALUE OF THE TRUST                       NET ASSET VALUE OF THE TRUST
- ----------------------------                       ----------------------------
$0--$499,999,999                                  10/100 of 1% per annum plus or
                                                  minus the Adjustment Amount

$500,000,000--$2,499,999,999                      8/100 of 1% per annum plus or
                                                  minus the Adjustment Amount

$2,500,000,000--and above                         6/100 of 1% per annum plus or
                                                  minus the Adjustment Amount

     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 DIAMONDS 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  October 31, 2002,  the  Adjustment
Amount decreased the Trustee's fee by $317,064.  The Adjustment  Amount included
an excess of net  transaction  fees from  processing  orders of  $255,458  and a
Trustee earnings credit of $61,606.

     PDR Services LLC (the "Sponsor", a wholly-owned  subsidiary of the American
Stock  Exchange LLC) agreed to reimburse the Trust for, or assume,  the ordinary
operating  expenses of the Trust which exceeded 18.00/100 of 1% per annum of the
daily net asset value of the Trust.  The amounts of such  reimbursements  by the
Sponsor  for the fiscal  years  ended  October  31,  2000,  October 31, 2001 and
October  31,  2002 were  $2,597,968,  $0 and $0  respectively.  From the  period
November 1, 1999 through  February 29, 2000, State Street Bank and Trust Company
(the "Trustee")  agreed to waive the Trustee's fee. The amount of such waiver by
the Trustee for the fiscal year ended October 31, 2000 was $599,740.

     Dow Jones & Company,  Inc. ("Dow  Jones"),  the American Stock Exchange LLC
(the  "AMEX"),  and PDR  Services  (the  "Sponsor")  have entered into a License
Agreement  pursuant to which  certain Dow Jones marks may be used in  connection
with the Trust subject to the payment of license fees.

NOTE 4--TRUST TRANSACTIONS IN DIAMONDS

     Transactions in DIAMONDS were as follows.

                                                          YEAR ENDED
                                                       OCTOBER 31, 2002
                                               ---------------------------------
                                                 DIAMONDS           AMOUNTS
                                               -----------      ---------------
DIAMONDS sold ..............................    85,000,000      $ 8,317,016,274
DIAMONDS issued upon
dividend reinvestment ......................         2,297              210,273
DIAMONDS redeemed ..........................   (66,150,000)      (6,612,887,430)
Net income equalization ....................            --             (913,179)
                                               -----------      ---------------
Net Increase ...............................    18,852,297      $ 1,703,425,938
                                               ===========      ===============

                                       21
<PAGE>


NOTE 4--TRUST TRANSACTIONS IN DIAMONDS (CONTINUED)

<TABLE>
<CAPTION>
                                         YEAR ENDED                          YEAR ENDED
                                      OCTOBER 31, 2001                    OCTOBER 31, 2000
                               -------------------------------     -------------------------------
                                 DIAMONDS          AMOUNTS           DIAMONDS          AMOUNTS
                               -----------     ---------------     -----------     ---------------
<S>                             <C>            <C>                  <C>            <C>
DIAMONDS sold .............     76,050,000     $ 7,610,021,285      30,350,000     $ 3,242,757,491
DIAMONDS issued upon
dividend reinvestment .....          1,055             107,143             378              40,754
DIAMONDS redeemed .........    (64,200,000)     (6,415,321,305)    (21,800,000)     (2,350,623,906)
Net income equalization ...             --            (733,997)             --             (63,116)
                               -----------     ---------------     -----------     ---------------
Net Increase ..............     11,851,055     $ 1,194,073,126       8,550,378     $   892,111,223
                               ===========     ===============     ===========     ===============
</TABLE>

     Except for under the  Trust's  dividend  reinvestment  plan,  DIAMONDS  are
issued and  redeemed by the Trust only in  Creation  Unit size  aggregations  of
50,000 DIAMONDS.  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 DIAMOND  (income  equalization)  and a balancing  cash  component  to
equate  the  transaction  to the net  asset  value  per unit of the Trust on the
transaction date. A transaction fee of $1,000 is charged in connection with each
creation or redemption of Creation Units through the DIAMONDS  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 fiscal  year ended  October  31,  2002,  the Trust had net  in-kind
contributions,  net  in-kind  redemptions,  purchases  and  sales of  investment
securities  of  $5,051,905,266,   $3,348,918,635,   $9,155,085  and  $9,089,365,
respectively.  At October 31, 2002, the cost of  investments  for federal income
tax purposes was $5,421,644,979  accordingly,  gross unrealized appreciation was
$15,016,048, and gross unrealized depreciation was $1,326,571,873,  resulting in
net unrealized  depreciation of  $1,311,555,825.  For the year ended October 31,
2002,  State  Street  Corporation  earned   approximately  $1,200  of  brokerage
commissions from investment transactions.

NOTE 6--TAX INFORMATION (UNAUDITED)

     For  Federal  income  tax  purposes,   the  percentage  of  Trust  ordinary
distributions  which qualify for the corporate  dividends received deduction for
the fiscal year ended October 31, 2002 is 100%.

                                       22
<PAGE>


DIAMONDS TRUST, SERIES 1
SCHEDULE OF INVESTMENTS
OCTOBER 31, 2002
================================================================================

COMMON STOCK                                            SHARES        VALUE
- ---------------------------------------------------   ---------   --------------

3M Co. ............................................   3,394,832   $  430,939,974
Alcoa, Inc. .......................................   3,394,832       74,889,994
American Express Co. ..............................   3,394,832      123,470,040
AT&T Corp. ........................................   3,394,832       44,268,609
Boeing Co. ........................................   3,394,832      100,996,252
Caterpillar, Inc. .................................   3,394,832      138,678,887
Citigroup, Inc. ...................................   3,394,832      125,439,042
Coca-Cola Co. (The) ...............................   3,394,832      157,791,791
Disney (Walt) Co. (The) ...........................   3,394,832       56,693,694
Du Pont (E.I.) de Nemours .........................   3,394,832      140,036,820
Eastman Kodak Co. .................................   3,394,832      111,859,714
Exxon Mobil Corp. .................................   3,394,832      114,270,045
General Electric Co. ..............................   3,394,832       85,719,508
General Motors Corp. ..............................   3,394,832      112,878,164
Hewlett-Packard Co. ...............................   3,394,832       53,638,346
Home Depot, Inc. ..................................   3,394,832       98,042,748
Honeywell International, Inc. .....................   3,394,832       81,272,278
Intel Corp. .......................................   3,394,832       58,730,594
International Business Machines Corp. .............   3,394,832      267,988,038
International Paper Co. ...........................   3,394,832      118,581,482
J.P. Morgan Chase & Co. ...........................   3,394,832       70,442,764
Johnson & Johnson Company .........................   3,394,832      199,446,380
McDonald's Corp. ..................................   3,394,832       61,480,408
Merck & Co., Inc. .................................   3,394,832      184,135,688
Microsoft Corp.* ..................................   3,394,832      181,521,667
Philip Morris Cos., Inc. ..........................   3,394,832      138,339,404
Procter & Gamble Co. ..............................   3,394,832      300,272,890
SBC Communications Inc. ...........................   3,394,832       87,111,389
United Technologies Corp. .........................   3,394,832      209,359,290
Wal-Mart Stores, Inc. .............................   3,394,832      181,793,254
                                                                  --------------
Total Investments -- (Cost $5,420,867,943)                        $4,110,089,154
                                                                  ==============


- ----------
(*) Denotes non-income producing security.


                 See accompanying notes to financial statements

                                       23
<PAGE>


                                    THE TRUST

     The Trust,  an exchange  traded fund or "ETF",  is a registered  investment
company  which both (a)  continuously  issues and redeems  "in-kind" its shares,
known as  DIAMONDS,  only in large  lot  sizes  called  Creation  Units at their
once-daily NAV and (b) lists DIAMONDS  individually  for trading on the American
Stock Exchange at prices established  throughout the trading day, like any other
listed equity security trading in the secondary market on the Exchange.

CREATION OF CREATION UNITS

     Portfolio  Deposits may be made through the  DIAMONDS  Clearing  Process or
outside  the  DIAMONDS  Clearing  Process  only  by  a  person  who  executed  a
Participant  Agreement with the  Distributor  and the Trustee.  The  Distributor
shall reject any order that is not submitted in proper form. A creation order is
deemed  received  by  the  Distributor  on  the  date  on  which  it  is  placed
("Transmittal  Date") if (a) such order is received by the Distributor not later
than the Closing Time on such  Transmittal Date and (b) all other procedures set
forth in the Participant Agreement are properly followed. The Transaction Fee is
charged at the time of creation of a Creation Unit, and an additional amount not
to exceed three (3) times the  Transaction  Fee applicable for one Creation Unit
is charged for creations outside the DIAMONDS  Clearing Process,  in part due to
the increased expense associated with settlement.

     The Trustee,  at the  direction of the Sponsor,  may  increase*,  reduce or
waive the Transaction  fee (and/or the additional  amounts charged in connection
with creations and/or  redemptions  outside the DIAMONDS  Clearing  Process) for
certain lot-size creations and/or redemptions of Creation Units. The Sponsor has
the right to vary the  lot-size of Creation  Units  subject to such an increase,
reduction or waiver.  The existence of any such variation  shall be disclosed in
the then current DIAMONDS Prospectus.

     The DJIA is a price-weighted  stock index; that is, the component stocks of
the DJIA are  represented  in exactly  equal  share  amounts and  therefore  are
accorded  relative  importance in the DJIA based on their prices.  The shares of
common stock of the stock portion of a Portfolio  Deposit on any date of deposit
will reflect the  composition  of the component  stocks of the DJIA on such day.
The  portfolio  of Index  Securities  that is the basis for a Portfolio  Deposit
varies as  changes  are made in the  composition  of the Index  Securities.  The
Trustee makes available to NSCC** before the commencement of trading

- ----------
*   Such increase is subject to the 10 Basis Point Limit.

**  As of December  31, 2002,  the  Depository  Trust and  Clearing  Corporation
    ("DTCC") owned 100% of the issued and outstanding  shares of common stock of
    NSCC. Also, as of such date, the National Association of Securities Dealers,
    Inc.,  the parent  Company of the Exchange,  owned 3.6372% of the issued and
    outstanding  shares of common  stock of DTCC ("DTCC  Shares"),  the Exchange
    owned  3.6372%  of  DTCC  Shares,   the  American  Stock  Exchange  Clearing
    Corporation LLC, a wholly-owned subsidiary of the Exchange, owned 0.0016% of
    DTCC Shares and the Trustee owned 4.59% of DTCC Shares.

                                       24
<PAGE>


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 of the Index  Securities  of the  Portfolio
Deposit on the  previous  Business  Day.  The  identity  of each Index  Security
required for a Portfolio Deposit, as in effect on October 31, 2002, 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  DIAMONDS  unit,  and (b) every 15
seconds  throughout  the day at the  Exchange  a number  representing,  on a per
DIAMONDS  unit  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
may occasionally include a cash in lieu amount to compensate for the omission of
a particular  Index Security from such 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  DIAMONDS  on the  Exchange.  Investors  interested  in creating
DIAMONDS or purchasing  DIAMONDS 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 DJIA, the Index  Securities and
financial instruments based on the DJIA).

     Upon receipt of one or more Portfolio  Deposits,  following  placement with
the Distributor of an order to create DIAMONDS,  the Trustee (a) delivers one or
more  Creation  Units to DTC, (b) removes the DIAMONDS  unit  position  from its
account at DTC and allocates it to the account of the DTC Participant  acting on
behalf of the investor creating  Creation  Unit(s),  (c) increases the aggregate
value of the Portfolio,  and (d) decreases the fractional  undivided interest in
the Trust represented by each DIAMONDS unit.

     Under  certain  circumstances,  (a) a  portion  of the stock  portion  of a
Portfolio  Deposit may consist of contracts to purchase certain Index Securities
or (b) a portion of the Cash Component may consist of cash in an amount required
to enable the Trustee to purchase such Index  Securities.  If there is a failure
to deliver Index  Securities that are the subject of such contracts to purchase,
the Trustee will acquire such Index Securities in a timely manner. To the extent
the price of any such Index Security  increases or decreases between the time of
creation and the time of its  purchase and  delivery,  DIAMONDS  will  represent
fewer or more  shares of such  Index  Security.  Therefore,  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 DIAMONDS.

                                       25
<PAGE>


PROCEDURES FOR CREATION OF CREATION UNITS

     All creation  orders must be placed in Creation  Units and 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  to be  effected  based on the NAV of the Trust as  determined  on such
date.  Orders must be  transmitted  by  telephone or other  transmission  method
acceptable to the Distributor and the Trustee,  pursuant to procedures set forth
in the Participant  Agreement and described in this prospectus.  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.

     All questions as to the number of shares of each Index Security, 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 are
determined  by the Trustee.  The Trustee may reject a creation  order if (a) the
depositor or group of depositors, upon obtaining the DIAMONDS ordered, would own
80% or more of the current  outstanding  DIAMONDS,  (b) the Portfolio Deposit is
not in proper form; (c)  acceptance of the Portfolio  Deposit would have certain
adverse tax consequences;  (d) the acceptance of the Portfolio Deposit would, in
the opinion of counsel, be unlawful; (e) the acceptance of the Portfolio Deposit
would  otherwise have an adverse effect on the Trust or the rights of Beneficial
Owners; or (f) circumstances  outside the control of the Trustee make it for all
practical purposes impossible to process creations of DIAMONDS.  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
and neither of them shall incur any  liability  for the failure to give any such
notification.

PLACEMENT OF CREATION ORDERS USING DIAMONDS CLEARING PROCESS

     Creation  Units  created  through the  DIAMONDS  Clearing  Process  must be
delivered  through  a  Participating  Party  that  has  executed  a  Participant
Agreement.  The Participant  Agreement authorizes the Trustee to transmit to the
Participating  Party  such trade  instructions  as are  necessary  to effect the
creation order. Pursuant to the 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  DIAMONDS  Clearing  Process in a "regular  way" manner by the third
NSCC  Business  Day) and the Cash  Component to the Trustee,  together with such
additional information as may be required by the Trustee.

PLACEMENT OF CREATION ORDERS OUTSIDE DIAMONDS CLEARING PROCESS

     Creation  Units  created  outside the  DIAMONDS  Clearing  Process  must be
delivered  through a DTC Participant  that has executed a Participant  Agreement
and has stated in its order that it is not using the DIAMONDS  Clearing  Process
and that  creation  will  instead be  effected  through a transfer of stocks and
cash. The requisite number of Index Securities

                                       26
<PAGE>


must be  delivered  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.
The Trustee, through the Federal Reserve Bank wire transfer system, must receive
the Cash Component no later than 2:00 p.m. on the next Business Day  immediately
following  the  Transmittal  Date.  If the  Trustee  does not  receive  both the
requisite Index Securities and the Cash Component in a timely fashion, the order
will be cancelled.  Upon written notice to the Distributor,  the cancelled order
may be resubmitted the following Business Day using a Portfolio Deposit as newly
constituted to reflect the current NAV of the Trust. The delivery of DIAMONDS 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.

SECURITIES DEPOSITORY; BOOK-ENTRY-ONLY SYSTEM

     DTC acts as securities depository for DIAMONDS. DIAMONDS are represented by
a single global  security,  registered in the name of Cede & Co., as nominee for
DTC and deposited with, or on behalf of, DTC.

     DTC 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. DTC holds securities of its participants ("DTC
Participants")  and to facilitate  the  clearance  and  settlement of securities
transactions among the DTC Participants through electronic book-entry changes in
their accounts, 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 DTC.*  Access to DTC system  also is
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 ("Indirect Participants").

     Upon  the  settlement  date of any  creation,  transfer  or  redemption  of
DIAMONDS,  DTC credits or debits,  on its book-entry  registration  and transfer
system,  the amount of  DIAMONDS  so  created,  transferred  or  redeemed to the
accounts of the  appropriate DTC  Participants.  The accounts to be credited and
charged  are  designated  by the  Trustee to NSCC,  in the case of a creation or
redemption through the DIAMONDS Clearing Process,  or by the Trustee and the DTC
Participant,  in the case of a creation or  redemption  outside of the  DIAMONDS
Clearing   Process.   Beneficial   ownership  of  DIAMONDS  is  limited  to  DTC
Participants,  Indirect  Participants and persons holding  interests through DTC
Participants  and Indirect  Participants.  Ownership of beneficial  interests in
DIAMONDS  (owners  of such  beneficial  interests  are  referred  to  herein  as
"Beneficial Owners") is shown on, and the transfer of ownership is effected only
through, records maintained by DTC (with respect to DTC Participants) and on the
records of DTC

- ----------
*  As of December 31, 2002, DTCC owned 100% of the issued and outstanding shares
   of the common stock of DTC.

                                       27
<PAGE>


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
DIAMONDS.  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 DIAMONDS.

     As long as Cede & Co.,  as  nominee  of DTC,  is the  registered  owner  of
DIAMONDS,  references to the  registered or record owner of DIAMONDS  shall mean
Cede & Co.  and shall not mean the  Beneficial  Owners of  DIAMONDS.  Beneficial
Owners of DIAMONDS are not entitled to have DIAMONDS  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  holders
thereof under the Trust Agreement.  Accordingly, each Beneficial Owner must rely
on the  procedures  of DTC, the DTC  Participant  and any  Indirect  Participant
through which such Beneficial Owner holds its interests,  to exercise any rights
under the Trust Agreement.

     The Trustee  recognizes DTC or its nominee as the owner of all DIAMONDS for
all purposes except as expressly set forth in the Trust  Agreement.  Pursuant to
the  agreement  between  the Trustee and DTC  ("Depository  Agreement"),  DTC is
required  to make  available  to the  Trustee  upon  request and for a fee to be
charged to the Trust a listing of the DIAMONDS holdings of each DTC Participant.
The Trustee inquires of each such DTC Participant as to the number of Beneficial
Owners holding  DIAMONDS,  directly or indirectly,  through the DTC Participant.
The Trustee  provides  each such DTC  Participant  with  copies of such  notice,
statement or other  communication,  in the form,  number and at the place as the
DTC Participant may reasonably request,  in order that the notice,  statement or
communication may be transmitted by the DTC Participant, directly or indirectly,
to the  Beneficial  Owners.  In  addition,  the  Trust  pays  to each  such  DTC
Participant  a fair and  reasonable  amount  as  reimbursement  for the  expense
attendant  to  such  transmittal,   all  subject  to  applicable  statutory  and
regulatory requirements.

     Distributions are made to DTC or its nominee, Cede & Co. DTC or Cede & Co.,
upon receipt of any payment of distributions in respect of DIAMONDS, is required
immediately  to credit  DTC  Participants'  accounts  with  payments  in amounts
proportionate to their respective  beneficial interests in DIAMONDS, as shown on
the  records of DTC or its  nominee.  Payments by DTC  Participants  to Indirect
Participants   and   Beneficial   Owners  of  DIAMONDS  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 DIAMONDS,  or for maintaining,  supervising or reviewing
any records  relating to such  beneficial  ownership  interests or for any other
aspect of the relationship between DTC

                                       28
<PAGE>


and the DTC Participants or the  relationship  between such DTC Participants and
the  Indirect  Participants  and  Beneficial  Owners  owning  through  such  DTC
Participants.

     DTC may  discontinue  providing its service with respect to DIAMONDS at any
time by  giving  notice to the  Trustee  and the  Sponsor  and  discharging  its
responsibilities   with  respect  thereto  under   applicable  law.  Under  such
circumstances,  the Trustee and the Sponsor  shall take action  either to find a
replacement  for DTC to perform its functions at a comparable cost or, if such a
replacement is unavailable, to terminate the Trust.


                             REDEMPTION OF DIAMONDS

     DIAMONDS  are  redeemable  only  in  Creation  Units.  Creation  Units  are
redeemable  in kind only and are not  redeemable  for cash  except as  described
under "Summary--Highlights--Termination of the Trust."

PROCEDURES FOR REDEMPTION OF CREATION UNITS

     Redemption   orders  must  be  placed  with  a  Participating   Party  (for
redemptions  through the  DIAMONDS  Clearing  Process) or DTC  Participant  (for
redemptions outside the DIAMONDS Clearing Process),  as applicable,  in the form
required by such Participating Party or DTC Participant. A particular broker may
not have executed a Participant Agreement,  and redemption orders may have to be
placed by the 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.  Redeemers
should afford  sufficient time to permit (a) proper submission of the order by a
Participating Party or DTC Participant to the Trustee and (b) the receipt of the
DIAMONDS to be redeemed  and any Excess Cash  Amounts by the Trustee in a timely
manner. Orders for redemption effected outside the DIAMONDS Clearing Process are
likely to require  transmittal by the DTC Participant earlier on the Transmittal
Date than orders effected using the DIAMONDS Clearing  Process.  These deadlines
vary by institution. Persons redeeming outside the DIAMONDS Clearing Process are
required to transfer  DIAMONDS through DTC and the Excess Cash amounts,  if any,
through the Federal Reserve Bank wire transfer system in a timely manner.

     Requests for  redemption may be made on any Business Day to the Trustee and
not to the  Distributor.  In the case of  redemptions  made through the DIAMONDS
Clearing  Process,  the Transaction Fee is deducted from the amount delivered to
the redeemer.  In the case of redemptions outside the DIAMONDS Clearing Process,
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, and
such amount is deducted from the amount delivered to the redeemer.

     The Trustee  transfers to the  redeeming  Beneficial  Owner via DTC and the
relevant  DTC  Participant(s)  a  portfolio  of stocks  for each  Creation  Unit
delivered, generally identical in weighting and composition to the stock portion
of a Portfolio Deposit as in

                                       29
<PAGE>


effect  (a) on the date a  request  for  redemption  is deemed  received  by the
Trustee or (b) in the case of the  termination  of the  Trust,  on the date that
notice of the termination of the Trust is given.  The Trustee also transfers via
the  relevant  DTC  Participant(s)  to the  redeeming  Beneficial  Owner a "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 the Portfolio Securities for the period through the date
of  redemption,  net of expenses  and  liabilities  for such  period  including,
without  limitation,  (i) taxes or other governmental  charges against the Trust
not  previously  deducted if any, and (ii) accrued fees of the Trustee and other
expenses  of the Trust,  as if the  Portfolio  Securities  had been held for the
entire  accumulation  period for such distribution,  plus or minus the Balancing
Amount. The redeeming Beneficial Owner must deliver to the Trustee any amount by
which the  amount  payable to the Trust by such  Beneficial  Owner  exceeds  the
amount of the Cash Redemption  Payment ("Excess Cash Amounts").  For redemptions
through the DIAMONDS  Clearing  Process,  the Trustee  effects a transfer of the
Cash  Redemption  Payment and stocks to the  redeeming  Beneficial  Owner by the
third (3rd) NSCC Business Day following the date on which request for redemption
is deemed received.  For redemptions outside the DIAMONDS Clearing Process,  the
Trustee  transfers the Cash  Redemption  Payment and the stocks 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 DIAMONDS
delivered upon redemption.

     If  the  Trustee  determines  that  an  Index  Security  is  likely  to  be
unavailable or available in insufficient quantity for delivery by the Trust upon
redemption,  the Trustee may elect to deliver the cash  equivalent  value of any
such Index  Securities,  based on its market value as of the Evaluation  Time on
the date such redemption is deemed received by the Trustee as a part of the Cash
Redemption Payment in lieu thereof.

     If a redeemer is restricted by  regulation or otherwise  from  investing or
engaging in a transaction in one or more Index Securities, the Trustee may elect
to deliver the cash equivalent value based on the market value of any such Index
Securities as of the Evaluation  Time on the date of the redemption as a part of
the Cash Redemption Payment in lieu thereof. In such case, the investor will pay
the Trustee the standard Transaction Fee, and may pay 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.

     The Trustee upon the request of a redeeming  investor,  may elect to redeem
Creation Units in whole or in part by providing such redeemer,  with a portfolio
of stocks differing in exact composition from Index Securities but not differing
in NAV 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 DJIA
Index.

                                       30
<PAGE>


     The  Trustee  may sell  Portfolio  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 required amount, such cash
proceeds  shall  be held by the  Trustee  and  applied  in  accordance  with the
guidelines applicable to residual cash set forth under "The Portfolio--Portfolio
Securities Conform to the DJIA".

     All  redemption  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.

     The calculation of the value of the stocks and the Cash Redemption  Payment
to be  delivered  to the  redeeming  Beneficial  Owner  is made  by the  Trustee
according to the  procedures set forth under  "Valuation"  and is 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  DIAMONDS are delivered to the Trustee
prior to DTC Cut-Off Time on such Transmittal Date, then the value of the stocks
and the Cash  Redemption  Payment to be  delivered  to the  Beneficial  Owner is
determined by the Trustee as of the Evaluation  Time on such  Transmittal  Date.
If, however,  a redemption order is submitted not later than the Closing Time on
a Transmittal  Date but either (a) the  requisite  DIAMONDS are NOT delivered by
DTC Cut-Off Time on the next Business Day immediately following such Transmittal
Date or (b) the  redemption  order is not  submitted  in proper  form,  then the
redemption  order is not deemed  received as of such  Transmittal  Date. In such
case, the value of the stocks and the Cash Redemption Payment to be delivered to
the Beneficial  Owner is 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 DIAMONDS are delivered  through DTC to the Trustee by DTC Cut-Off Time
on such Business Day pursuant to a properly submitted redemption order.

     The Trustee may suspend the right of  redemption,  or postpone  the date of
payment of the NAV for more than five (5) Business  Days  following  the date on
which the request for  redemption is deemed  received by the Trustee (a) for any
period  during which the New York Stock  Exchange is closed,  (b) for any period
during which an emergency  exists as a result of which disposal or evaluation of
the  Securities is not reasonably  practicable,  (c) or for such other period as
the SEC 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 that may result from any such suspension or postponement.

                                       31
<PAGE>


PLACEMENT OF REDEMPTION ORDERS USING DIAMONDS CLEARING PROCESS

     A redemption  order made through the  DIAMONDS  Clearing  Process is deemed
received  on the  Transmittal  Date if (a) such order is received by the Trustee
not  later  than the  Closing  Time on such  Transmittal  Date and (b) all other
procedures set forth in the  Participant  Agreement are properly  followed.  The
order  is  effected  based  on the  NAV of the  Trust  as  determined  as of the
Evaluation  Time on the  Transmittal  Date. A redemption  order made through the
DIAMONDS  Clearing  Process and  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 transfers the requisite
stocks (or  contracts to purchase such stocks which are expected to be delivered
in a "regular  way" manner) by the third (3rd) NSCC  Business Day  following the
date on which  the  request  for  redemption  is deemed  received,  and the Cash
Redemption Payment.

PLACEMENT OF REDEMPTION ORDERS OUTSIDE DIAMONDS CLEARING PROCESS

     A DTC  Participant  who wishes to place an order for redemption of DIAMONDS
to be effected outside the DIAMONDS Clearing Process need not be a Participating
Party,  but its  order  must  state  that the DTC  Participant  is not using the
DIAMONDS  Clearing  Process and that redemption will instead be effected through
transfer of DIAMONDS  directly  through DTC. An order is deemed  received by the
Trustee on the Transmittal Date if (a) such order is received by the Trustee not
later than the Closing Time on such Transmittal Date, (b) such order is preceded
or  accompanied  by the  requisite  number of DIAMONDS  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 ("DTC
Cut-Off  Time")  and  (iii) all other  procedures  set forth in the  Participant
Agreement are properly followed.  Any Excess Cash Amounts owed by the Beneficial
Owner  must be  delivered  no later  than 2:00  p.m.  on the next  Business  Day
immediately following the Transmittal Date.

     The Trustee  initiates  procedures  to transfer  the  requisite  stocks (or
contracts to purchase such stocks that 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.


                                  THE PORTFOLIO

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

                                       32
<PAGE>


would not be a  substantial  part of the Trust's net assets.  Although the Trust
may at any time fail to own  certain  of 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 DJIA and that derived from ownership of DIAMONDS.

PORTFOLIO SECURITIES CONFORM TO THE DJIA

     The DJIA is a  price-weighted  index of 30  component  common  stocks,  the
components of which are  determined  by the editors of THE WALL STREET  JOURNAL,
without any  consultation  with the companies,  the respective stock exchange or
any official agency.

     The Trust is not managed and therefore the adverse  financial  condition of
an issuer does not require the sale of stocks from the Portfolio. The Trustee on
a non-discretionary basis adjusts the composition of the Portfolio to conform to
changes in the composition  and/or weighting  structure of Index Securities.  To
the extent that the method of determining  the DJIA is changed by Dow Jones in a
manner that would affect the  adjustments  provided for herein,  the Trustee and
the Sponsor have the right to amend the Trust Agreement,  without the consent of
DTC or  Beneficial  Owners,  to conform the  adjustments  to such changes and to
maintain the objective of tracking the DJIA.

     The Trustee  aggregates  certain of these  adjustments and makes conforming
changes  to the  Portfolio  at least  monthly.  The  Trustee  directs  its stock
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.  Adjustments  are made more  frequently  in the case of  significant
changes  to the DJIA.  Specifically,  the  Trustee  is  required  to adjust  the
composition  of the Portfolio  whenever there is a change in the identity of any
Index Security  (I.E., a substitution  of one security for another) within three
(3)  Business  Days before or after the day on which the change is  scheduled to
take effect.  While other DJIA changes may lead to adjustments in the Portfolio,
the most common  changes are likely to occur as a result of changes in the Index
Securities  included  in the DJIA and as a result  of stock  splits.  The  Trust
Agreement sets forth the method of adjustments  which may occur  thereunder as a
result of corporate  actions to the DJIA, such as stock splits or changes in the
identity of the component stocks.

     For example,  in the event of an Index Security change (in which the common
stock  of one  issuer  held in the  DJIA is  replaced  by the  common  stock  of
another),   the  Trustee  may  sell  all  shares  of  the   Portfolio   Security
corresponding  to the old Index  Security  and use the  proceeds of such sale to
purchase  the  replacement  Portfolio  Security  corresponding  to the new Index
Security.  If the share price of the removed Portfolio  Security was higher than
the price of its  replacement,  the Trustee will  calculate  how to allocate the
proceeds of the sale of the removed  Portfolio  Security between the purchase of
its replacement and purchases of additional shares of other Portfolio Securities
so that the number of shares of each Portfolio  Security after the  transactions
would be as  nearly  equal as  practicable.  If the share  price of the  removed
Portfolio Security was lower than the price

                                       33
<PAGE>


of its  replacement,  the Trustee will calculate the number of shares of each of
the other  Portfolio  Securities  that must be sold in order to purchase  enough
shares of the  replacement  Portfolio  Security  so that the number of shares of
each  Portfolio  Security  after the  transactions  would be as nearly  equal as
practicable.

     In the event of a stock  split,  the price  weighting of the stock which is
split will drop.  The Trustee may make the  corresponding  adjustment by selling
the additional  shares of the Portfolio  Security received from the stock split.
The  Trustee  may then use the  proceeds  of the sale to buy an equal  number of
shares of each  Portfolio  Security-including  the Portfolio  Security which had
just  experienced  a stock  split.  In practice,  of course,  not all the shares
received in the split would be sold: enough of those shares would be retained to
make an  increase  in the number of split  shares  equal to the  increase in the
number of shares in each of the other  Portfolio  Securities  purchased with the
proceeds of the sale of the remaining shares resulting from such split.

     As a result of the  purchase  and sale of stock 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  stock  or cash  delivered  in lieu of Index
Securities or undistributed income or undistributed  capital gains). This amount
may not  exceed  for more than two (2)  consecutive  Business  Days  5/10th of 1
percent of the value of the  Portfolio.  If the  Trustee  has made all  required
adjustments  and is left with cash in excess of 5/10th of 1 percent of the value
of the Portfolio,  the Trustee will use such cash to purchase  additional  Index
Securities.

     All  portfolio  adjustments  are  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 Code.  Additionally,  the Trustee is required
to adjust the  composition  of the Portfolio at any time to insure the continued
qualification of the Trust as a regulated investment company.

     The Trustee relies on Dow Jones for  information as to the  composition and
weightings of 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,  the Trustee  shall use the  composition  and
weightings of Index Securities for the most recently effective Portfolio Deposit
for the  purposes of all  adjustments  and  determinations  (including,  without
limitation,  determination of the stock portion of the Portfolio  Deposit) until
the  earlier  of (a) such time as  current  information  with  respect  to 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 Portfolio  Securities (as
opposed to Index  Securities)  shall be used for the purposes of all adjustments
and determinations  (including,  without limitation,  determination of the stock
portion of the  Portfolio  Deposit)  until current  information  with respect to
Index Securities is available.

                                       34
<PAGE>


     If the Trust is  terminated,  the  Trustee  shall use the  composition  and
weightings  of Portfolio  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 Dow Jones may adjust the  composition of the DJIA because
of a merger or  acquisition  involving  one or more  Index  Securities.  In such
cases,  the Trust, as shareholder 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 stocks of the  issuer  will be removed
from the DJIA. As stocks of an issuer are often removed from the DJIA 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 is reinvested
in Index  Securities in accordance with the criteria set forth above. Any stocks
received as a part of the  consideration  that are not Index Securities are sold
as soon as  practicable  and the cash  proceeds of such sale are  reinvested  in
accordance with the criteria set forth above.

ADJUSTMENTS TO THE PORTFOLIO DEPOSIT

     On each  Business Day (each such day an  "Adjustment  Day"),  the number of
shares and identity of each Index  Security in a Portfolio  Deposit are adjusted
in  accordance  with the  following  procedure.  At the close of the  market the
Trustee  calculates  the NAV of the  Trust.  The NAV is divided by the number of
outstanding  DIAMONDS  multiplied  by  50,000  DIAMONDS  in one  Creation  Unit,
resulting in a NAV per Creation Unit ("NAV Amount"). The Trustee then calculates
the number of shares (without  rounding) of each of the component  stocks of the
DJIA in a Portfolio  Deposit for the following  Business Day ("Request Day"), so
that (a) the market  value at the close of the market on the  Adjustment  Day of
the stocks to be included in the Portfolio Deposit on Request Day, together with
the Dividend  Equivalent  Payment  effective for requests to create or redeem on
the Adjustment  Day, equals the NAV Amount and (b) the identity and weighting of
each of the stocks in a Portfolio Deposit mirrors  proportionately  the identity
and weightings of the stocks in the DJIA,  each as in effect on Request Day. For
each stock,  the number  resulting from such  calculation is rounded down to the
nearest whole share.  The  identities and weightings of the stocks so calculated
constitute the stock portion of the Portfolio  Deposit  effective on Request Day
and thereafter  until the next  subsequent  Adjustment Day, as well as Portfolio
Securities to be delivered by the Trustee in the event of request for redemption
on the Request Day and thereafter until the following Adjustment Day.

     In addition to the foregoing  adjustments,  if a corporate action such as a
stock split,  stock  dividend or reverse  split occurs with respect to any Index
Security  that  does  not  result  in an  adjustment  to the DJIA  divisor,  the
Portfolio Deposit shall be adjusted to take into account the corporate action in
each case rounded to the nearest whole share.

                                       35
<PAGE>


     On the  Request  Day and on each day that a  request  for the  creation  or
redemption is deemed  received,  the Trustee  calculates the market value of the
stock portion of the Portfolio Deposit as in effect on the 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 "Portfolio
Deposit Amount"). The Trustee then calculates the NAV Amount, based on the close
of the market on the  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,  (a) differences in the market value
of the  securities  in  the  Portfolio  Deposit  and  the  market  value  of the
Securities on Request Day and (b) any variances  from the proper  composition of
the Portfolio Deposit due to rounding.

     The Dividend  Equivalent  Payment and the Balancing Amount in effect at the
close of business on the Request Date are  collectively  referred to as the Cash
Component or the Cash Redemption  Payment. If the Balancing Amount is a positive
number (I.E., if the NAV Amount exceeds the Portfolio Deposit Amount) then, with
respect to creation,  the Balancing  Amount  increases the Cash Component of the
then effective Portfolio Deposit transferred to the Trustee by the creator. With
respect to redemptions, the Balancing Amount is added to the cash transferred to
the 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 creation,  this amount  decreases  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 must be paid by
the Trustee to the creator. With respect to redemptions, the Balancing Amount is
deducted from the cash transferred to the redeemer or, if such cash is less than
the  Balancing  Amount,  the  difference  must be paid  by the  redeemer  to the
Trustee.

     If 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,  of if a creator or redeemer is restricted from investing
or  engaging  in  transactions  in one or  more of such  Index  Securities,  the
Portfolio  Deposit so  constituted  shall  determine the Index  Securities to be
delivered  in  connection  with the  creation of DIAMONDS in Creation  Unit size
aggregations  and upon the  redemption  of  DIAMONDS  until  the time the  stock
portion of the Portfolio Deposit is subsequently adjusted.


                                    THE DJIA

     The DJIA was first published in 1896.  Initially comprised of 12 companies,
the DJIA has evolved into the most  recognizable  stock  indicator in the world,
and  the  only  index  composed  of  companies  that  have  sustained   earnings
performance over a significant period

                                       36
<PAGE>


of time. In its second century,  the DJIA is the oldest continuous  barometer of
the U.S. stock market, and the most widely quoted indicator of U.S. stock market
activity.

     The 30 stocks now comprising  the DJIA are all leaders in their  respective
industries,  and their stocks are widely held by individuals  and  institutional
investors.  These stocks  represent more than  one-quarter of the $12.7 trillion
market value of all US common stocks.

     Dow Jones is not  responsible for and shall not participate in the creation
or sale of  DIAMONDS  or in the  determination  of the timing of,  prices at, or
quantities and  proportions in which  purchases or sales of Index  Securities or
Securities  shall be made.  The  information in this  Prospectus  concerning Dow
Jones and the DJIA 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 DJIA for the years
1896 through 2002.  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 DJIA in the future, nor should the results be considered
as a representation of the performance of the Trust.

YEAR                         DJIA       POINT     YEAR %                   %
ENDED                       CLOSE      CHANGE     CHANGE      DIVS       YIELD
- -----                      --------   --------   --------   --------   --------
2002 ....................   8341.63   -1679.87    -16.76%     189.68       2.27%
2001 ....................  10021.50    -765.35      -7.10     181.07       1.81
2000 ....................  10786.85    -710.27      -6.18     172.08       1.60
1999 ....................  11497.12   2,315.69      25.20     168.52       1.47
1998 ....................   9181.43   1,273.18      16.10     151.13       1.65
1997 ....................   7908.25   1,459.98      22.60     136.10       1.72
1996 ....................   6448.27   1,331.20      26.00     131.14       2.03
1995 ....................   5117.12   1,282.70      33.50     116.56       2.28
1994 ....................   3834.44      80.30       2.10     105.66       2.76
1993 ....................   3754.09     453.00      13.70      99.66       2.65
1992 ....................   3301.11     132.30       4.20     100.72       3.05
1991 ....................   3168.83     535.20      20.30      95.18       3.00
1990 ....................   2633.66    -119.50      -4.30     103.70       3.94
1989 ....................   2753.20     584.60      27.00     103.00       3.74
1988 ....................   2168.57     229.70      11.80      79.53       3.67
1987 ....................   1938.83      42.90       2.30      71.20       3.67
1986 ....................   1895.95     349.30      22.60      67.04       3.54
1985 ....................   1546.67     335.10      27.70      62.03       4.01
1984 ....................   1211.57     -47.10      -3.70      60.63       5.00
1983 ....................   1258.64     212.10      20.30      56.33       4.48
1982 ....................   1046.54     171.50      19.60      54.14       5.17
1981 ....................    875.00     -89.00      -9.20      56.22       6.43
1980 ....................    963.99     125.30      14.90      54.36       5.64
1979 ....................    838.74      33.70       4.20      50.98       6.08
1978 ....................    805.01     -26.20      -3.10      48.52       6.03
1977 ....................    831.17    -173.50     -17.30      45.84       5.52
1976 ....................   1004.65     152.20      17.90      41.40       4.12
1975 ....................    852.41     236.20      38.30      37.46       4.39

                                       37
<PAGE>


YEAR                         DJIA       POINT     YEAR %                   %
ENDED                       CLOSE      CHANGE     CHANGE      DIVS       YIELD
- -----                      --------   --------   --------   --------   --------
1974 ....................    616.24    -234.60    -27.60%      37.72       6.12%
1973 ....................    850.86    -169.20     -16.60      35.33       4.15
1972 ....................   1020.02     129.80      14.60      32.27       3.16
1971 ....................    890.20      51.30       6.10      30.86       3.47
1970 ....................    838.92      38.60       4.80      31.53       3.76
1969 ....................    800.36    -143.40     -15.20      33.90       4.24
1968 ....................    943.75      38.60       4.30      31.34       3.32
1967 ....................    905.11     119.40      15.20      30.19       3.34
1966 ....................    785.69    -183.60     -18.90      31.89       4.06
1965 ....................    969.26      95.10      10.90      28.61       2.95
1964 ....................    874.13     111.20      14.60      31.24       3.57
1963 ....................    762.95     110.90      17.00      23.41       3.07
1962 ....................    652.10     -79.00     -10.80      23.30       3.57
1961 ....................    731.14     115.30      18.70      22.71       3.11
1960 ....................    615.89     -63.50      -9.30      21.36       3.47
1959 ....................    679.36      95.70      16.40      20.74       3.05
1958 ....................    583.65     148.00      34.00      20.00       3.43
1957 ....................    435.69     -63.80     -12.80      21.61       4.96
1956 ....................    499.47      11.10       2.30      22.99       4.60
1955 ....................    488.40      84.00      20.80      21.58       4.42
1954 ....................    404.39     123.50      44.00      17.47       4.32
1953 ....................    280.90     -11.00      -3.80      16.11       5.74
1952 ....................    291.90      22.70       8.40      15.43       5.29
1951 ....................    269.23      33.80      14.40      16.34       6.07
1950 ....................    235.41      35.30      17.60      16.13       6.85
1949 ....................    200.13      22.80      12.90      12.79       6.39
1948 ....................    177.30      -3.90      -2.10      11.50       6.49
1947 ....................    181.16       4.00       2.20       9.21       5.08
1946 ....................    177.20     -15.70      -8.10       7.50       4.23
1945 ....................    192.91      40.60      26.60       6.69       3.47
1944 ....................    152.32      16.40      12.10       6.57       4.31
1943 ....................    135.89      16.50      13.80       6.30       4.64
1942 ....................    119.40       8.40       7.60       6.40       5.36
1941 ....................    110.96     -20.20     -15.40       7.59       6.84
1940 ....................    131.13     -19.10     -12.70       7.06       5.38
1939 ....................    150.24      -4.50      -2.90       6.11       4.07
1938 ....................    154.76      33.90      28.10       4.98       3.22
1937 ....................    120.85     -59.10     -32.80       8.78       7.27
1936 ....................    179.90      35.80      24.80       7.05       3.92
1935 ....................    144.13      40.10      38.50       4.55       3.16
1934 ....................    104.04       4.10       4.10       3.66       3.52
1933 ....................     99.90      40.00      66.70       3.40       3.40
1932 ....................     59.93     -18.00     -23.10       4.62       7.71
1931 ....................     77.90     -86.70     -52.70       8.40      10.78
1930 ....................    164.58     -83.90     -33.80      11.13       6.76
1929 ....................    248.48     -51.50     -17.20      12.75       5.13
1928 ....................    300.00      97.60      48.20         NA         NA
1927 ....................    202.40      45.20      28.80         NA         NA
1926 ....................    157.20       0.50       0.30         NA         NA

                                       38
<PAGE>


YEAR                         DJIA       POINT     YEAR %                   %
ENDED                       CLOSE      CHANGE     CHANGE      DIVS       YIELD
- -----                      --------   --------   --------   --------   --------
1925 ....................     56.66      36.20      30.00%        NA         NA
1924 ....................    120.51      25.00      26.20         NA         NA
1923 ....................     95.52      -3.20      -3.30         NA         NA
1922 ....................     98.73      17.60      21.70         NA         NA
1921 ....................     81.10       9.10      12.70         NA         NA
1920 ....................     71.95     -35.30     -32.90         NA         NA
1919 ....................    107.23      25.00      30.50         NA         NA
1918 ....................     82.20       7.80      10.50         NA         NA
1917 ....................     74.38     -20.60     -21.70         NA         NA
1916 ....................     95.00      -4.20      -4.20         NA         NA
1915 ....................     99.15      44.60      81.70         NA         NA
1914 ....................     54.58     -24.20     -30.70         NA         NA
1913 ....................     78.78      -9.10     -10.30         NA         NA
1912 ....................     87.87       6.20       7.60         NA         NA
1911 ....................     81.68       0.30       0.40         NA         NA
1910 ....................     81.36     -17.70     -17.90         NA         NA
1909 ....................     99.05      12.90      15.00         NA         NA
1908 ....................     86.15      27.40      46.60         NA         NA
1907 ....................     58.75     -35.60     -37.70         NA         NA
1906 ....................     94.35      -1.90      -1.90         NA         NA
1905 ....................     96.20      26.60      38.20         NA         NA
1904 ....................     69.61      20.50      41.70         NA         NA
1903 ....................     49.11     -15.20     -23.60         NA         NA
1902 ....................     64.29      -0.30      -0.40         NA         NA
1901 ....................     64.56      -6.10      -8.70         NA         NA
1900 ....................     70.71       4.60       7.00         NA         NA
1899 ....................     66.08       5.60       9.20         NA         NA
1898 ....................     60.52      11.10      22.50         NA         NA
1897 ....................     49.41       9.00      22.20         NA         NA
1896 ....................     40.45         NA         NA         NA         NA

- ----------
Source: Dow Jones Indexes. Year-end index values reflect neither reinvestment of
dividends nor costs  associated with investing,  such as brokerage  commissions.
Yields are  calculated  by dividing  the sum of the most  recent four  quarterly
per-share  dividend  payments  of all  components  by the  sum of the  component
prices.

                                       39
<PAGE>


     The DJIA is a price-weighted stock index, meaning that the component stocks
of the DJIA are accorded  relative  importance  based on their  prices.  In this
regard, the DJIA is unlike many other stock indexes which weight their component
stocks by market  capitalization  (price times shares outstanding).  The DJIA is
called  an  "average"  because  originally  it was  calculated  by adding up the
component  stock  prices and then  dividing by the number of stocks.  The method
remains the same today, but the number of significant digits in the divisor (the
number that is divided into the total of the stock prices) has been increased to
eight  significant  digits to minimize  distortions due to rounding and has been
adjusted  over time to  insure  continuity  of the DJIA  after  component  stock
changes and corporate actions, as discussed below.

     The DJIA divisor is adjusted due to corporate actions that change the price
of any of its component shares.  The most frequent reason for such an adjustment
is a stock  split.  For  example,  suppose a company in the DJIA  issues one new
share for each share outstanding.  After this two-for-one "split," each share of
stock is worth half what it was  immediately  before,  other things being equal.
But without an adjustment in the divisor,  this split would produce a distortion
in the DJIA. An adjustment must be made to compensate so that the "average" will
remain  unchanged.  At Dow Jones,  this  adjustment  is handled by changing  the
divisor.* The formula used to calculate divisor adjustments is:

                                              Adjusted Sum      Unadjusted Sum
        New Divisor   =   Current Divisor x     of Prices   /      of Prices

     Changes in the  composition of the DJIA are made entirely by the editors of
THE WALL STREET JOURNAL without consultation with the companies,  the respective
stock exchange, or any official agency. Additions or deletions of components may
be made to achieve  better  representation  of the broad  market and of American
industry.

     In selecting  components for the DJIA, the following criteria are used: (a)
the company is not a utility or in the transportation  business; (b) the company
has a  premier  reputation  in its  field;  (c) the  company  has a  history  of
successful  growth;  and  (d)  there  is  wide  interest  among  individual  and
institutional  investors.  Whenever  one  component  is changed,  the others are
reviewed.  For the sake of historical  continuity,  composition changes are made
rarely.

     The most recent changes in the components of the DJIA were made,  effective
with trading Monday, November 1, 1999.

     Companies removed were:

o    Union Carbide Corp., which had been in the DJIA since 1928.

o    Goodyear Tire & Rubber Co., which had been in the DJIA since 1930.

- ----------
*  Currently,  the  divisor is  adjusted  after the close of business on the day
   prior to the occurrence of the split; the divisor is not adjusted for regular
   cash dividends.

                                       40
<PAGE>


o    Sears, Roebuck & Co., which had been in the DJIA since 1924.

o    Chevron, formerly Standard Oil Company of California, which had been in the
     DJIA since 1930. Companies added were:

o    Home Depot Inc.

o    Intel Corp.

o    Microsoft Corp.

o    SBC Communications

     Effective  January 1, 2001,  the DJIA replaced J.P.  Morgan & Co. with J.P.
Morgan Chase & Co. following the completed  acquisition of such company by Chase
Manhattan Corp.


                                LICENSE AGREEMENT

     The License  Agreement grants the Sponsor and the Exchange a license to use
the DJIA as a basis for  determining the composition of the Portfolio and to use
certain  trade  names  and  trademarks  of Dow  Jones  in  connection  with  the
Portfolio.  The License  Agreement may be amended  without the consent of any of
the Beneficial Owners of DIAMONDS.  Currently, in accordance with its terms, the
License Agreement has been renewed for a period of five years through the end of
2007  ("Renewal  Term") but should the assets of the Trust fall below $5 billion
at the end of any calendar year during the Renewal Term, Dow Jones may terminate
the License Agreement. The term of the License Agreement may be extended without
the consent of any of the Beneficial Owners of DIAMONDS.

     None of the Trust,  the Trustee,  the  Distributor,  DTC or any  Beneficial
Owner of  DIAMONDS  is entitled  to any rights  whatsoever  under the  foregoing
licensing  arrangements  or to use the trademarks and service marks "Dow Jones",
"DIAMONDS",  "The Dow",  "DJIA" or "Dow Jones Industrial  Average" or to use the
DJIA except as specifically described herein or as may be specified in the Trust
Agreement.

     The Trust is not sponsored, endorsed, sold or promoted by Dow Jones and Dow
Jones makes no representation or warranty, express or implied, to the Beneficial
Owners of DIAMONDS or any member of the public  regarding  the  advisability  of
investing in securities generally or in the Trust particularly.  Dow Jones' only
relationship  to the Trust is the licensing of certain  trademarks,  trade names
and service  marks of Dow Jones and of the DJIA which is  determined,  comprised
and calculated by Dow Jones without regard to the Trust or the Beneficial Owners
of DIAMONDS.  Dow Jones has no obligation to take the needs of the Sponsor,  the
Exchange,  the Trust or the Beneficial Owners of DIAMONDS into  consideration in
determining,  comprising or calculating  the DJIA. Dow Jones is not  responsible
for and has not  participated  in any  determination  or  calculation  made with
respect to issuance or  redemption  of DIAMONDS.  Dow Jones has no obligation or
liability  in  connection  with the  administration,  marketing  or  trading  of
DIAMONDS.

                                       41
<PAGE>


     DOW JONES DOES NOT GUARANTEE THE ACCURACY  AND/OR THE  COMPLETENESS  OF THE
DJIA OR ANY DATA INCLUDED  THEREIN AND DOW JONES SHALL HAVE NO LIABILITY FOR ANY
ERRORS,  OMISSIONS,  OR  INTERRUPTIONS  THEREIN.  DOW JONES  MAKES NO  WARRANTY,
EXPRESS OR IMPLIED,  AS TO RESULTS TO BE OBTAINED BY THE SPONSOR,  THE EXCHANGE,
THE TRUST,  BENEFICIAL OWNERS OF DIAMONDS OR ANY OTHER PERSON OR ENTITY FROM THE
USE OF THE DJIA OR ANY DATA  INCLUDED  THEREIN.  DOW JONES  MAKES NO  EXPRESS OR
IMPLIED WARRANTIES,  AND EXPRESSLY DISCLAIMS ALL WARRANTIES,  OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE OR USE, WITH RESPECT TO THE DJIA OR ANY DATA
INCLUDED THEREIN.  WITHOUT LIMITING ANY OF THE FOREGOING,  IN NO EVENT SHALL DOW
JONES HAVE ANY LIABILITY FOR ANY LOST PROFITS OR INDIRECT,  PUNITIVE  SPECIAL OR
CONSEQUENTIAL  DAMAGES  (INCLUDING  LOST  PROFITS),  EVEN  IF  NOTIFIED  OF  THE
POSSIBILITY  OF SUCH  DAMAGES.  THERE ARE NO THIRD  PARTY  BENEFICIARIES  OF ANY
AGREEMENTS OR ARRANGEMENTS BETWEEN DOW JONES, THE SPONSOR AND THE EXCHANGE.


                                EXCHANGE LISTING

     DIAMONDS  are listed on the  Exchange.  The Trust is not  required to pay a
listing  fee to the  Exchange.  Transactions  involving  DIAMONDS  in the public
trading market are subject to customary brokerage charges and commissions.

     The Sponsor's  aim in designing  DIAMONDS was to provide  investors  with a
security whose initial market value would  approximate  one-hundredth  (1/100th)
the value of the  DJIA.  Of  course,  the  market  value of a  DIAMONDS  unit is
affected by a variety of factors,  including capital gains  distributions  made,
and expenses incurred,  by the Trust, and therefore,  over time, a DIAMONDS unit
may no longer  approximate  1/100th the value of the DJIA. The market price of a
DIAMONDS unit should reflect its share of the dividends accumulated on Portfolio
Securities  and  may be  affected  by  supply  and  demand,  market  volatility,
sentiment and other factors.

     There  can be no  assurance  that  DIAMONDS  will  always  be listed on the
Exchange.  The Trust will be terminated  if DIAMONDS are delisted.  The Exchange
will  consider the  suspension of trading in or removal from listing of DIAMONDS
if (a) the Trust has more than 60 days remaining until termination and there are
fewer  than 50 record  and/or  beneficial  holders  of  DIAMONDS  for 30 or more
consecutive trading days; (b) the DJIA is no longer calculated or available;  or
(c) such other event occurs or  condition  exists  which,  in the opinion of the
Exchange, makes further dealings on the Exchange inadvisable.

     DIAMONDS also are listed and traded on the Singapore  Exchange Ltd. ("SGX")
pursuant to a joint venture  created by the Exchange and the SGX. In the future,
DIAMONDS  may be listed  and  traded on other  non-U.S.  exchanges  pursuant  to
similar arrangements.

                                       42
<PAGE>


                             TAX STATUS OF THE TRUST

     For the fiscal year ended  October 31,  2002,  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).

INCOME 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) are taxable to  Beneficial  Owners as
ordinary income. A dividend paid in January is 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
DTC and the DTC Participants 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 DIAMONDS.  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 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
monthly  dividends  paid by the Trust are not  based on the  Trust's  investment
company  taxable  income  and net  capital  gain,  but  rather  are based on the
dividends paid with respect to Portfolio  Securities.  As a result, a portion of
the  distributions  of the Trust may be  treated  as a return  of  capital  or a
capital  gain  dividend  for federal  income tax  purposes or the Trust may make
additional  distributions  in  excess  of the  yield  performance  of  Portfolio
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 are treated as a return of capital for
federal income tax

                                       43
<PAGE>


purposes  and  reduce a  Beneficial  Owner's  tax basis in  DIAMONDS.  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 monthly  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  DIAMONDS
fluctuates  significantly.  Beneficial Owners receive annually notification from
the  Trustee  through the DTC  Participants  as to the tax status of the Trust's
distributions.  A  distribution  paid  shortly  after a purchase  or creation of
DIAMONDS  may be  taxable  even  though in effect it may  represent  a return of
capital.

     Distributions  reinvested in additional  DIAMONDS  through the means of the
Service are nevertheless  taxable  dividends to Beneficial Owners acquiring such
additional  DIAMONDS to the same extent as if such  dividends  were  received in
cash.

     The sale of  DIAMONDS 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.

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

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

     Deposits of a Portfolio  Deposit  with the Trustee in exchange for Creation
Units do not result in the  recognition of taxable gain or loss by the Trust but
generally  constitute  a taxable  event to the investor  under the Code,  and an
investor generally  recognizes gain or loss with respect to each stock deposited
equal to the difference  between the amount realized in respect of the stock and
the investor's tax basis  therein.  The amount  realized with respect to a stock
deposited should be determined by allocating the value on the date of deposit of
the  DIAMONDS  received  (less  any  cash  paid to the  Trust,  or plus any cash
received  from the  Trust,  in  connection  with the  deposit)  among the stocks
deposited on

                                       44
<PAGE>


the basis of their  respective  fair  market  values at that  time.  The IRS may
assert that any resulting losses may not be deducted by an investor on the basis
that there has been no material  change in the investor's  economic  position or
that the transaction has no significant  economic or business utility or purpose
apart from the anticipated tax consequences.  Investors 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 investor or group of investors, upon
obtaining the DIAMONDS  ordered,  would own eighty  percent (80%) or more of the
outstanding  DIAMONDS,  and if  pursuant  to  section  351 of  the  Code  such a
circumstance  would result in the Trust  having a basis in the stocks  deposited
different  from the  market  value of such  stocks on the date of  deposit.  The
Trustee  has the  right to  require  information  regarding  DIAMONDS  ownership
pursuant to the  Participant  Agreement  and from DTC 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 DTC by Beneficial  Owners who are
non-resident  aliens  are  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 holders of DIAMONDS are
urged to consult their own tax advisors  concerning the  applicability of United
States withholding tax.

     Backup  withholding  at a rate equal to the fourth  lowest  income tax rate
applicable to  individuals  (which,  under current law, is 30% for 2003, 29% for
2004  and  2005,  28% for  2006  through  2010 and 31%  thereafter)  applies  to
dividends, capital gain distributions,  redemptions and sales of DIAMONDS unless
(a) the  Beneficial  Owner is a corporation or comes within certain other exempt
categories  and,  when  required,  demonstrates  this  fact,  or (b)  provides a
taxpayer identification number, certifies as to no loss of exemption from backup
withholding,  and otherwise complies with applicable  requirements of the backup
withholding  rules.  The  amount of any backup  withholding  from a payment to a
Beneficial Owner is 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,  if 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.

                                       45
<PAGE>


ERISA CONSIDERATIONS

     In considering the  advisability of an investment in DIAMONDS,  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 DIAMONDS is
permitted by the  documents and  instruments  governing the Plan and whether the
investment  satisfies  the  exclusive  benefit,   prudence  and  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 DIAMONDS
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 DIAMONDS. 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 DIAMONDS represent an interest
in the Trust,  and the Trust is registered  as an  investment  company under the
Investment  Company Act of 1940.  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.

     Employee benefit plans that are  governmental  plans (as defined in Section
3(32) of ERISA), certain church plans (as defined in Section 3(33) of ERISA) and
foreign plans (as described in Section  4(b)(4) of ERISA) are not subject to the
requirements  of  ERISA  or  Section  4975  of  the  Code.  The  fiduciaries  of
governmental  plans  should,  however,  consider the impact of their  respective
state pension codes on investments in DIAMONDS and the considerations  discussed
above, to the extent applicable.


                         CONTINUOUS OFFERING OF DIAMONDS

     Creation Units are offered  continuously to the public by the Trust through
the Distributor.  Persons making Portfolio  Deposits and creating Creation Units
receive no fees,  commissions or other form of compensation or inducement of any
kind from the Sponsor or the Distributor,  and no such person has any obligation
or  responsibility to the Sponsor or Distributor to effect any sale or resale of
DIAMONDS.

     Because new DIAMONDS 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 ("1933 Act"),  may be occurring.  Broker-dealers  and
other persons are

                                       46
<PAGE>


cautioned  that  some of their  activities  may  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 1933 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
DIAMONDS and sells the DIAMONDS  directly to its customers;  or if it chooses to
couple the creation of a supply of new DIAMONDS  with an active  selling  effort
involving  solicitation of secondary market demand for DIAMONDS. A determination
of  whether  one is an  underwriter  must  take into  account  all the facts and
circumstances pertaining to the activities of the broker-dealer or its client in
the particular case, and the examples mentioned above should not be considered a
complete  description of all the activities that could lead to categorization as
an underwriter.

     Dealers who are not  "underwriters" but are participating in a distribution
(as contrasted to ordinary  secondary  trading  transactions),  and thus dealing
with  DIAMONDS  that are part of an "unsold  allotment"  within  the  meaning of
Section  4(3)(C)  of the 1933  Act,  would be unable  to take  advantage  of the
prospectus-delivery exemption provided by Section 4(3) of the 1933 Act.

     The Sponsor  intends to qualify  DIAMONDS 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 Units
in  transactions  not involving a  broker-dealer  registered in such  investor's
state of domicile or residence  should  consult  their legal  advisor  regarding
applicable  broker-dealer or securities regulatory  requirements under the state
securities laws prior to such creation or redemption.


                          DIVIDEND REINVESTMENT SERVICE

     The Trust  has made the  Service  available  for use by  Beneficial  Owners
through DTC  Participants  for  reinvestment  of their cash  proceeds.  Some DTC
Participants  may not elect to utilize the  Service;  therefore,  an  interested
DIAMONDS  investor may wish to contact such  investor's  broker to ascertain the
availability  of the  Service  through  such  broker.  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.

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

     The Trustee generally uses the cash proceeds of dividends received from all
Beneficial  Owners  participating in reinvestment  through the Service to obtain
Index  Securities  necessary to create the  requisite  number of DIAMONDS at the
close of business on each DIAMONDS distribution date. Any cash balance remaining
after the requisite number of DIAMONDS has been created is distributed, on a pro
rata basis, to all Beneficial Owners

                                       47
<PAGE>


who  participated in the Service.  Brokerage  commissions,  if any,  incurred in
obtaining Index Securities necessary to create additional DIAMONDS with the cash
from the distributions is an expense of the Trust.*


                              EXPENSES OF THE TRUST

     Until further  notice,  the Sponsor has undertaken  that it will not permit
the ordinary operating  expenses of the Trust, as calculated by the Trustee,  to
exceed an amount  that is 18/100 of 1%  (0.1800%)  per annum of the daily NAV of
the Trust after taking into account any expense  offset  credits.  To the extent
the ordinary  operating expenses of the Trust do exceed such 0.1800% amount, the
Sponsor will reimburse the Trust for, or assume, the excess. 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
0.1800% per annum  level on any given day.  For  purposes  of this  undertaking,
ordinary  operating  expenses  of the  Trust  do not  include  taxes,  brokerage
commissions and any extraordinary non-recurring expenses,  including the cost of
any litigation to which the Trust or the Trustee may be a party. The Sponsor may
discontinue  this undertaking or renew it for a specified period of time, or may
choose to reimburse or assume  certain  Trust  expenses in later periods to keep
Trust  expenses at a level it believes to be  attractive  to  investors.  In any
event,  on any day and during any period over the life of the Trust,  total fees
and expenses of the Trust may exceed 0.1800% per annum.

     Ordinary  operating expenses of the Trust are currently being accrued at an
annual rate of 0.1800%.  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  0.1800% of the
Trust's daily net asset value and such rate may be changed without notice.

     Subject to any  applicable  cap, the Sponsor may charge the Trust a special
fee for  certain  services  the  Sponsor  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. 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; (b) fees payable to transfer agents for the provision of transfer
agency services;

- ----------
*  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 2002,
   the  approximate   amount  of  annual  brokerage   commissions   incurred  in
   implementing   the  Service  was  less  than   $0.001  per   DIAMONDS   unit.


                                       48
<PAGE>


(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 DIAMONDS  (whether in Creation  Units 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 DIAMONDS (whether in Creation Units 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; (h) expenses incurred in contacting  Beneficial
Owners of  DIAMONDS  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, the following expenses are or may be charged to the Trust: (a)
reimbursement  to the  Sponsor of amounts  paid by it to Dow Jones in respect of
annual licensing fees pursuant to the License  Agreement;  (b) federal and state
annual  registration fees for the issuance of DIAMONDS;  and (c) expenses of the
Sponsor  relating  to the  printing  and  distribution  of  marketing  materials
describing  DIAMONDS 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  $2,300,000, in connection with the organization of the Trust, are
being  capitalized  and amortized  over five years from the start of the Trust's
operations on a straight-line  basis and charged to the Trust,  unless the Trust
is  sooner  terminated  or if by law or  regulation  the  Trust is  required  to
amortize such costs over a shorter  period of time.  In such cases,  the Trustee
shall follow the requisite  time period for such  amortization.  Pursuant to the
provisions of an exemptive  order,  the expenses set forth in this paragraph may
be charged to the Trust by the  Trustee in an amount  equal to the actual  costs
incurred,  but in no case shall such  charges  exceed  20/100 of 1% (0.20%)  per
annum of the daily NAV of the Trust.

     If the  income  received  by the Trust in the form of  dividends  and other
distributions  on Portfolio  Securities is insufficient to cover Trust expenses,
the Trustee may make  advances to the Trust to cover such  expenses.  Otherwise,
the Trustee may sell  Portfolio  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 (a) dividend
payments  or other  income of the Trust when such  payments  or other  income is
received, (b) the amounts earned or benefits derived by the Trustee on cash held
by the  Trustee  for the  benefit  of the Trust,  and (c) the sale of  Portfolio
Securities.  Notwithstanding  the foregoing,  if any advance remains outstanding
for more than  forty-five  (45) Business  Days,  the Trustee may sell  Portfolio
Securities  to  reimburse  itself  for such  advance  and any  accrued  interest
thereon.  These 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 NAV of the
Trust.

     For services performed under the Trust Agreement, the Trustee is paid a fee
at an annual  rate of 6/100 of 1% to 10/100  of 1% of the NAV of the  Trust,  as
shown below, such

                                       49
<PAGE>


percentage  amount to vary depending on the NAV of the Trust,  plus or minus the
Adjustment  Amount.  The  compensation is computed on each Business Day based on
the NAV of the Trust on such day,  and the amount  thereof is accrued  daily and
paid  quarterly.  To the extent that the amount of the  Trustee's  compensation,
before  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. Notwithstanding the fee schedule set forth in the table below, in the
fourth year of the Trust's  operation and in subsequent years, the Trustee shall
be paid a minimum  fee of  $400,000  per annum as  adjusted by the CPI-U to take
effect at the  beginning  of the fourth  year and each year  thereafter.  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 also may waive
all or a portion of such fee.

                                TRUSTEE FEE SCALE

      NET ASSET VALUE                               FEE AS A PERCENTAGE OF NET
       OF THE TRUST                                  ASSET VALUE OF THE TRUST
      ---------------                               --------------------------
$0-$499,999,999 ................................  10/100 of 1% per annum plus or
                                                    minus the Adjustment Amount*
$500,000,000-$2,499,999,999 ....................  8/100 of 1% per annum plus or
                                                    minus the Adjustment Amount*
$2,500,000,000 and above .......................  6/100 of 1% per annum plus or
                                                    minus the Adjustment Amount*

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

     As of October 31, 2002,  and as of December 31, 2002,  the NAV of the Trust
was $4,118,076,359 and $4,727,574,814,  respectively.  No representation is made
as to the actual NAV of the Trust on any future  date as it is subject to change
at any  time  due to  fluctuations  in the  market  value  of  securities  or to
creations or redemptions made in the future.

     The Adjustment  Amount is calculated at the end of each quarter and applied
against the Trustee's fee for the following quarter.  "Adjustment  Amount" is an
amount which is intended, depending upon the circumstances, either to (a) reduce
the Trustee's fee by the amount that the  Transaction  Fees paid on creation and
redemption  exceed  the costs of those  activities,  and by the amount of excess
earnings  on cash  held  for the  benefit  of the  Trust*  or (b)  increase  the
Trustee's fee by the amount that the  Transaction Fee (plus  additional  amounts
paid in connection with creations or redemptions  outside the DIAMONDS  Clearing
Process),  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 uses such excess  amount
to reduce other Trust expenses,

- ----------
*  The excess earnings on cash amount is currently calculated, and applied, on a
   monthly basis.

                                       50
<PAGE>


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
is 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  DIAMONDS  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's  expenses.  If the  adjustment  is
negative, it is shown "above the line."


                                    VALUATION

     The NAV of the Trust is  computed  as of the  Evaluation  Time shown  under
"Summary--Essential Information" on each Business Day. The NAV of the Trust on a
per DIAMONDS unit basis is determined by subtracting all liabilities  (including
accrued  expenses and  dividends  payable) from the total value of the Portfolio
and other  assets and  dividing  the result by the total  number of  outstanding
DIAMONDS.

     The value of the  Portfolio is  determined  by the Trustee in good faith in
the following manner. If Portfolio Securities are listed on one or more national
securities  exchanges,  such  evaluation is generally  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  stocks are listed
thereon)  or,  if  there  is no such  appropriate  closing  sale  price  on such
exchange,  at  the  last  sale  price  (unless  the  Trustee  deems  such  price
inappropriate as a basis for evaluation). If the stocks 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 sale 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 stocks,  (c) by the Trustee's  appraising the value of
the  stocks  in  good  faith  on  the  bid  side  of the  market,  or (d) by any
combination thereof.


                           ADMINISTRATION OF THE TRUST

DISTRIBUTIONS TO BENEFICIAL OWNERS

     The regular  monthly  ex-dividend  date for DIAMONDS is the third Friday in
each  calendar  month,  unless such day is not a Business Day, in which case the
ex-dividend date is the immediately preceding Business Day ("Ex-Dividend Date").
Beneficial  Owners  reflected on the records of DTC and the DTC  Participants on
the second Business Day

                                       51
<PAGE>


following the Ex-Dividend Date ("Record Date") are entitled to receive an amount
representing  dividends  accumulated on Portfolio Securities through the monthly
dividend period which ends on the Business Day preceding such  Ex-Dividend  Date
(including  stocks with  ex-dividend  dates falling within such monthly dividend
period),  net of fees and  expenses,  accrued  daily  for such  period.  For the
purposes  of  all  dividend  distributions,  dividends  per  DIAMONDS  unit  are
calculated at least to the nearest  1/1000th of $0.01.  The payment of dividends
is made on the Monday  preceding  the third  (3rd)  Friday of the next  calendar
month or the next  subsequent  Business Day if such Monday is not a Business Day
("Dividend  Payment Date").  Dividend  payments are made through DTC and the DTC
Participants  to Beneficial  Owners then of record with funds  received from the
Trustee.

     Dividends  payable  to the Trust in  respect of  Portfolio  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 Portfolio,  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
Portfolio  Securities as dividends or distributions  and capital gains resulting
from  the  sale  of  Portfolio  Securities  are  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 the account generate
interest income or an equivalent benefit to the Trustee, such interest income or
benefit is used to reduce the Trustee's annual fee.

     Any additional  distributions  the Trust may need to make so as to continue
to qualify as a "regulated  investment company" 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 NAV of the Trust is reduced in direct proportion
to the amount of such additional distributions.  The magnitude of the additional
distributions,  if any, depends upon a number of factors, including the level of
redemption activity experienced by the Trust. Because substantially all proceeds
from the sale of stocks in connection with adjustments to the Portfolio are 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  typically  has to sell an  approximately  equal number of shares of
each of the Portfolio Securities sufficient to produce the cash required to make
such additional distributions.

     The Trustee may declare  special  dividends  if 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, and to
vary the  frequency  with which  periodic  distributions  are made  (E.G.,  from
monthly to quarterly) if it is determined by the

                                       52
<PAGE>


Sponsor and the Trustee that such a variance  would be  advisable to  facilitate
compliance  with the rules and  regulations  applicable to regulated  investment
companies or would  otherwise be  advantageous  to the Trust.  In addition,  the
Trustee may change the regular  ex-dividend  date for  DIAMONDS to another  date
within  the month or the  quarter if it is  determined  by the  Sponsor  and the
Trustee that such a change  would be  advantageous  to the Trust.  Notice of any
such variance or change shall be provided to  Beneficial  Owners via DTC and the
DTC Participants.

     As soon as  practicable  after  notice of  termination  of the  Trust,  the
Trustee will  distribute  via DTC and the DTC  Participants  to each  Beneficial
Owner  redeeming  Creation Units before the  termination  date specified in such
notice a portion of Portfolio Securities and cash as described above. Otherwise,
the Trustee will distribute to each  Beneficial  Owner (whether in Creation Unit
size aggregations or otherwise), as soon as practicable after termination of the
Trust, such Beneficial Owner's pro rata share of the NAV of the Trust.

     All  distributions  are  made  by the  Trustee  through  DTC  and  the  DTC
Participants  to  Beneficial  Owners as recorded on the book entry system of DTC
and the DTC Participants.

     The  settlement  date for the  creation  of  DIAMONDS  or the  purchase  of
DIAMONDS  in the  secondary  market  must occur on or before 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  DIAMONDS with
proceeds  received  from  distributions   described  above  may  elect  dividend
reinvestment  through DTC Participants by means of the Service,  if such service
is available through the Beneficial Owner's broker.

STATEMENTS TO BENEFICIAL OWNERS; ANNUAL REPORTS

     With  each   distribution,   the  Trustee  furnishes  for  distribution  to
Beneficial  Owners a  statement  setting  forth the  amount  being  distributed,
expressed as a dollar amount per DIAMONDS unit.

     Promptly  after the end of each fiscal year,  the Trustee  furnishes to the
DTC  Participants  for distribution to each person who was a Beneficial Owner of
DIAMONDS  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.

RIGHTS OF BENEFICIAL OWNERS

     Beneficial  Owners may sell  DIAMONDS  in the  secondary  market,  but must
accumulate enough DIAMONDS to constitute a full Creation Unit in order to redeem
through the Trust.  The death or  incapacity  of any  Beneficial  Owner does not
operate to

                                       53
<PAGE>


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 (a) have the  right to vote  concerning  the
Trust,  except with respect to termination and as otherwise  expressly set forth
in the Trust  Agreement,  (b) in any manner control the operation and management
of the Trust, or (c) be liable to any other person by reason of any action taken
by the  Sponsor or the  Trustee.  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.

AMENDMENTS TO THE TRUST AGREEMENT

     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 that may be defective or  inconsistent
or to make such other  provisions as will not adversely  affect the interests of
Beneficial  Owners;  (b) to change any  provision as may be required by the SEC;
(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 as may be necessary or advisable if
NSCC or DTC is unable or unwilling to continue to perform its functions; and (e)
to add or change any provision to conform the  adjustments  to the Portfolio and
the  Portfolio  Deposit to changes,  if any,  made by Dow Jones in its method of
determining the DJIA. The Trust Agreement may also be amended by the Sponsor and
the Trustee with the consent of the Beneficial  Owners of 51% of the outstanding
DIAMONDS to add  provisions to, or change or eliminate any of the provisions of,
the Trust Agreement or to modify the rights of Beneficial Owners;  although, the
Trust Agreement may not be amended without the consent of the Beneficial  Owners
of all  outstanding  DIAMONDS if such amendment would (a) permit the acquisition
of any  securities  other than those  acquired in accordance  with the terms and
conditions  of the Trust  Agreement;  (b) reduce the interest of any  Beneficial
Owner in the Trust;  or (c) reduce the percentage of Beneficial  Owners required
to consent to any such amendment.

     Promptly  after the  execution of an amendment,  the Trustee  receives from
DTC,  pursuant  to the  terms  of the  Depository  Agreement,  a list of all DTC
Participants holding DIAMONDS. The Trustee inquires of each such DTC Participant
as to the  number  of  Beneficial  Owners  for whom such DTC  Participant  holds
DIAMONDS,  and provides 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 Beneficial Owners.

TERMINATION OF THE TRUST AGREEMENT

     The Trust Agreement  provides that the Sponsor has the discretionary  right
to direct the Trustee to terminate the Trust if at any time the NAV of the Trust
is less than $350,000,000, as such dollar amount shall be adjusted for inflation
in accordance with

                                       54
<PAGE>


the CPI-U.  This  adjustment  is 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 may be terminated (a) by the agreement of the  Beneficial  Owners
of 662/3% of outstanding DIAMONDS; (b) if DTC 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 DIAMONDS,  or if the Trustee is no longer a participant in NSCC;
(d) if Dow Jones ceases  publishing  the DJIA;  (e) if the License  Agreement is
terminated;  or (f) if DIAMONDS are delisted from the  Exchange.  The Trust will
also terminate by its terms on the Termination Date.

     The Trust will terminate if either the Sponsor or the Trustee resigns or is
removed and a successor is not appointed.  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 must be given at least
twenty (20) days before  termination of the Trust to all Beneficial  Owners. The
notice must 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 DIAMONDS  (whether in Creation Unit size  aggregations  or
otherwise)  will receive in cash the NAV of the DIAMONDS held, and the date upon
which the books of the Trust shall be closed.  The notice  shall  further  state
that,  as of the  date  thereof  and  thereafter,  neither  requests  to  create
additional  Creation  Units nor  Portfolio  Deposits  will be accepted,  that no
additional  DIAMONDS  will be created  for the purpose of  reinvesting  dividend
distributions, and that, as of the date thereof and thereafter, the portfolio of
stocks delivered upon redemption shall be identical in composition and weighting
to  Portfolio  Securities  as of such date rather than the stock  portion of the
Portfolio  Deposit as in effect on the date  request  for  redemption  is deemed
received. Beneficial Owners of Creation Units may, in advance of the Termination
Date, redeem in kind directly from the Trust.

     Within a reasonable  period after the Termination  Date, the Trustee shall,
subject to any applicable provisions of law, use its best efforts to sell all of
the Portfolio  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  because of any such sale.  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 stock,  the closing or
restriction of trading on a stock exchange, the outbreak of hostilities,  or the
collapse of the economy.  The Trustee shall deduct from the proceeds of sale its
fees and all  other  expenses  and  transmit  the  remaining  amount  to DTC for
distribution,  together with a final statement  setting forth the computation of
the gross amount distributed.

                                       55
<PAGE>


     DIAMONDS not redeemed  before  termination of the Trust will be redeemed in
cash at NAV based on the proceeds of the sale of Portfolio  Securities,  with no
minimum aggregation of DIAMONDS required.


                                     SPONSOR

     The Sponsor is 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  DIAMONDS 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 DIAMONDS within a specified period.

     If at any time the  Sponsor  fails  to  undertake  or  perform  or  becomes
incapable of  undertaking  or performing  any of the duties  required  under the
Trust Agreement,  or resigns,  or becomes bankrupt or its affairs are taken over
by public authorities, the Trustee may appoint a successor Sponsor, agree to act
as Sponsor itself, or may terminate the Trust Agreement and liquidate the Trust.
Notice of the  resignation  or removal of the Sponsor and the  appointment  of a
successor  shall be mailed by the  Trustee to DTC and the DTC  Participants  for
distribution to Beneficial  Owners.  Upon a successor  Sponsor's  execution of a
written acceptance of appointment as Sponsor of the Trust, the successor Sponsor
becomes  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  appointment  by the
successor  Sponsor,  unless  the  Trustee  either  agrees to act as  Sponsor  or
terminates the Trust Agreement and liquidates the Trust.  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
DIAMONDS.

     The Trust Agreement provides that the Sponsor is not liable to the Trustee,
the Trust or to the Beneficial  Owners of DIAMONDS 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,  willful misconduct
or  willful  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 because of the sale of any Portfolio Securities. The Trust

                                       56
<PAGE>


Agreement  further  provides that the Sponsor and its  directors,  subsidiaries,
shareholders,  officers, employees, and affiliates under common control with the
Sponsor  shall be  indemnified  from the  assets of the Trust and held  harmless
against any loss,  liability or expense incurred without gross  negligence,  bad
faith,  willful misconduct or willful  malfeasance on the part of any such 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.


                                     TRUSTEE

     The  Trustee is 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.

     Information   regarding  Cash  Redemption   Payment   amounts,   number  of
outstanding  DIAMONDS and  Transaction  Fees may be obtained from the Trustee at
the toll-free number: 1-800-545-4189. Complete copies of the Trust Agreement and
a list of the parties that have executed a Participant Agreement may be obtained
from the Trustee's principal office.

     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 reflected on the records of DTC as owning DIAMONDS for distribution
to Beneficial  Owners as provided above not less than sixty (60) days before the
date such resignation is to take effect. Such resignation becomes effective upon
the appointment of and the acceptance of the Trust by a successor  Trustee.  The
Sponsor, upon receiving notice of such resignation, is obligated to use its best
efforts to appoint a successor  Trustee  promptly.  If no successor is appointed
within sixty (60) days after the date such notice of resignation  is given,  the
Trust shall terminate.

     If the Trustee becomes  incapable of acting as such or is adjudged 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.  The Sponsor
shall mail notice of such discharge and appointment via the DTC  Participants to
Beneficial Owners.  Upon a successor Trustee's execution of a written acceptance
of an appointment as Trustee for the Trust, the successor Trustee becomes vested
with all the rights,  powers,  duties and obligations of the original Trustee. A
successor  Trustee must be (a) a trust company,  corporation or national banking
association organized, doing business under the laws of the United States or any
state  thereof;  (b)  authorized  under such laws to  exercise  corporate  trust
powers;  and (c) at all times have an aggregate  capital,  surplus and undivided
profit of not less than $50,000,000.

                                       57
<PAGE>


     Beneficial  Owners of 51% of the then outstanding  DIAMONDS 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 as described above.

     The Trust Agreement limits Trustee's liabilities.  It provides, among other
things,  that the Trustee is not liable for (a) any action  taken in  reasonable
reliance on properly  executed  documents  or for the  disposition  of monies or
stocks or for the evaluations  required to be made thereunder,  except by reason
of its own gross negligence, bad faith, willful malfeasance, willful misconduct,
or reckless  disregard of its duties and  obligations;  (b) depreciation or loss
incurred by reason of the sale by the Trustee of any Portfolio  Securities;  (c)
any action the Trustee  takes where the Sponsor  fails to act; and (d) any taxes
or other governmental charges imposed upon or in respect of Portfolio 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.

     The  Trustee  and  its  directors,  subsidiaries,  shareholders,  officers,
employees,  and  affiliates  under  common  control  with  the  Trustee  will be
indemnified  from the assets of the Trust and held  harmless  against  any loss,
liability or expense  incurred  without  gross  negligence,  bad faith,  willful
misconduct,  willful malfeasance on the part of such 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.


                                   DEPOSITORY

     DTC is a limited  purpose trust  company and member of the Federal  Reserve
System.


                                  LEGAL OPINION

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


                             INDEPENDENT ACCOUNTANTS

     The financial statements as of October 31, 2002 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.

                                       58
<PAGE>


                                 CODE OF ETHICS

     The Trust and the Sponsor have adopted a code of ethics regarding  personal
securities  transactions  by  employees.   Subject  to  certain  conditions  and
standards,  the code  permits  employees  to  invest in  DIAMONDS  for their own
accounts.  The code is  designed  to prevent  fraud,  deception  and  misconduct
against the Trust and to provide reasonable standards of conduct. The code is on
file with the SEC and you may obtain a copy by  visiting  the SEC at the address
listed on the back cover of this  prospectus.  The code is also available on the
EDGAR  Database on the SEC's Internet site at  http:/www.sec.gov.  A copy may be
obtained,   after  paying  a   duplicating   fee,  by   electronic   request  at
publicinfo@sec.gov,  or by  writing  the SEC at the  address  listed on the back
cover of this prospectus.


                       DAILY DIAMONDS TRADING INFORMATION

     The  Sponsor  makes  available  daily a list of the names and the  required
number of shares of each of the Securities in the current Portfolio Deposit. The
Sponsor  also  intends to make  available  (a) on a daily  basis,  the  Dividend
Equivalent  Payment  effective  through and including the previous Business Day,
per outstanding  DIAMONDS unit, and (b) every 15 seconds  throughout the trading
day at the Exchange a number representing, on a per DIAMONDS unit 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 may include a cash in lieu amount
to  compensate  for the  omission  of a  particular  Index  Security  from  such
Portfolio  Deposit).  Intra-day  information  will be available  with respect to
trades and quotes and  underlying  trading  values  will be  published  every 15
seconds throughout the trading day. Information with respect to net asset value,
net accumulated dividend,  final dividend amount to be paid, shares outstanding,
estimated  cash amount and total cash amount per Creation Unit will be available
daily prior to the opening of trading on the Exchange.


                 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 DIAMONDS,  may be included from time to time in advertisements,
sales  literature  and  other  communications  and  in  reports  to  current  or
prospective Beneficial Owners.

     Information  may be provided to  prospective  investors to help them 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

                                       59
<PAGE>


regarding  the  purchase  of DIAMONDS 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 DIAMONDS 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
periods,  including annual,  year-to-date or daily periods. Such information may
also be expressed in terms of the total number of DIAMONDS outstanding as of one
or more 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 DIAMONDS,  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 before effecting the sale. Institutional
investors may be advised that lending their DIAMONDS shares to short sellers may
generate stock loan credits that may supplement the return they can earn from an
investment in DIAMONDS.  These stock loan credits may provide a useful source of
additional  income for certain  institutional  investors who can arrange to lend
DIAMONDS.   Potential   short  sellers  may  be  advised  that  a  short  rebate
(functionally  equivalent  to partial  use of  proceeds  of the short  sale) may
reduce their cost of selling short.

     Information   may  be  provided  to  investors   regarding   capital  gains
distributions by the Trust,  including  historical  information relating to such
distributions.  Comparisons between the Trust and other investment vehicles such
as mutual funds may be made regarding such capital gains distributions,  as well
as  relative  tax  efficiencies  between  the  Trust and such  other  investment
vehicles (E.G.,  realization of capital gains or losses to the Trust and to such
other  investment  vehicles in connection  with  redemption of their  respective
securities).  Based on projected  differences  between DIAMONDS 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 DIAMONDS over a long period of time.  Comparisons may also be
provided  regarding the probable tax impact  resulting  from  rebalancing of the
Trust  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  DIAMONDS.  Both  conventional  mutual  funds  and the  Trust may be
required to recognize

                                       60
<PAGE>


capital gains incurred as a result of adjustments to the composition of the DJIA
and therefore to their respective portfolios. From a tax perspective, however, a
significant  difference between a conventional  mutual fund and the 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  DIAMONDS  does not
involve  selling the portfolio  stocks.  Instead,  the Trust delivers the actual
portfolio  of stocks in an in-kind  exchange  to any person  redeeming  DIAMONDS
shares in Creation  Unit size  aggregations.  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 Trust
level and, consequently,  there is no realization of taxable gain or loss by the
Trust with respect to such in-kind exchanges. In a period of market appreciation
of the DJIA and, consequently,  appreciation of the portfolio stocks held in the
Trust,  this in-kind  redemption  mechanism  has the effect of  eliminating  the
recognition and  distribution of those net unrealized  gains at the Trust level.
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  DIAMONDS  may  make  them  more  tax   efficient   investments   under  most
circumstances  than  comparable  conventional  mutual fund shares.  As discussed
above, this in-kind  redemption  feature tends to lower the amount of annual net
capital  gains   distributions   to  DIAMONDS   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
Trust is not required to recognize  capital gains,  the DIAMONDS holder is able,
in effect,  to defer tax on such gains until he sells or  otherwise  disposes of
his shares, or the 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 DIAMONDS
also  may be  presented  over one or more  stated  periods,  such as for  daily,
monthly,   quarterly  or  annual  periods.   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 DIAMONDS may

                                       61
<PAGE>


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 DIAMONDS 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  DIAMONDS to other
investment  vehicles,  current  economic,  financial and  political  conditions,
investment philosophy or techniques, or the desirability of owning DIAMONDS.

     In addition, information on the performance of DIAMONDS based on changes in
price  per  DIAMONDS  with or  without  reinvesting  all  dividends  and/or  any
distributions  of capital in  additional  DIAMONDS 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 DIAMONDS  (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 DJIA  contained  in this
Prospectus, as updated from time to time, may also be included from time to time
in such  material.  Information on performance of DIAMONDS also may be presented
on an after tax basis,  using methods of calculation that are in accordance with
the SEC's  rules and  regulations.  The  performance  of the Trust,  of the DJIA
(provided  information is also given  reflecting the performance of the Trust in
comparison  to that DJIA) 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),  S&P 500 Index (a broad-based
index of 500 publicly  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

                                       62
<PAGE>


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 DIAMONDS 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  DIAMONDS and  conventional  mutual fund
shares is that DIAMONDS 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 NAV
per share, as determined by the fund. In contrast,  DIAMONDS are not offered for
purchase or redeemed for cash at a fixed relationship to closing NAV. The tables
below illustrate the distribution relationship of DIAMONDS closing prices to NAV
for the period  1/20/98 (the first trading date of the DIAMONDS  Trust)  through
12/31/02,  the  distribution  relationships of high, low and closing prices over
the same period,  and  distribution  of bid/asked  spreads for 2002.  This table
should help  investors  evaluate some of the  advantages  and  disadvantages  of
DIAMONDS  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 DIAMONDS at prices less favorable than closing NAV and, correspondingly,
the opportunities to buy or sell at prices more favorable than closing NAV.

     The  investor  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 1/20/98  through  12/31/02.  The investor may wish to compare  these ranges
with the average bid/asked spread on DIAMONDS 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 DIAMONDS 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
markets  that are more  volatile  and narrow  when  markets  are less  volatile.
Consequently,   the  investor  should  expect  wider  bid/asked  spreads  to  be
associated with wider daily spread ranges.

                                       63
<PAGE>


      DAILY PERCENTAGE PRICE RANGES: AVERAGE AND FREQUENCY DISTRIBUTION FOR
               DIAMONDS TRUST AND DJIA: HIGHS AND LOWS VS. CLOSE*
                         (FROM 1/20/98 THROUGH 12/31/02)

DOW JONES INDUSTRIAL AVERAGE

                                     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
 ---------  ---------  ----------   ---------  ----------  ---------  ----------
  0--0.25%        0       0.00%        326      26.18%        281       22.57%
0.25--0.5%        7       0.56%        222      17.83%        221       17.75%
 0.5--1.0%      204      16.39%        320      25.70%        318       25.54%
 1.0--1.5%      404      32.45%        169      13.57%        197       15.82%
 1.5--2.0%      296      23.78%         99       7.95%        114        9.16%
 2.0--2.5%      154      12.37%         58       4.66%         61        4.90%
 2.5--3.0%       91       7.31%         23       1.85%         21        1.69%
 3.0--3.5%       37       2.97%         14       1.12%         12        0.96%
     > 3.5       52       4.18%         14       1.12%         20        1.61%
- ----------    -----     -------      -----     -------      -----      -------
Total         1,245     100.00%      1,245     100.00%      1,245      100.00%

                          Average Daily Range: 1.7116%

DIAMONDS TRUST
                                     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
 ---------  ---------  ----------   ---------  ----------  ---------  ----------
  0--0.25%        0       0.00%        295      23.69%        270      21.69%
0.25--0.5%        5       0.40%        234      18.80%        208      16.71%
 0.5--1.0%      185      14.86%        329      26.43%        347      27.87%
 1.0--1.5%      418      33.57%        174      13.98%        197      15.82%
 1.5--2.0%      282      22.65%         99       7.95%        111       8.92%
 2.0--2.5%      164      13.17%         59       4.74%         47       3.78%
 2.5--3.0%       96       7.71%         23       1.85%         35       2.81%
 3.0--3.5%       43       3.45%         15       1.20%         10       0.80%
     > 3.5       52       4.18%         17       1.37%         20       1.61%
- ----------    -----     -------      -----     -------      -----      -------
Total         1,245     100.00%      1,245     100.00%      1,245     100.00%

                          Average Daily Range: 1.7507%

- ----------
*  Source: Bloomberg

                                       64
<PAGE>


      FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS FOR DIAMONDS TRUST:
           CLOSING AMEX PRICE VS. NET ASSET VALUE (NAV) AS OF 12/31/02

- --------------------------------------------------------------------------------
                   CALENDAR   CALENDAR   CALENDAR  CALENDAR              FROM
                    QUARTER    QUARTER    QUARTER   QUARTER  CALENDAR  1/20/1998
                    ENDING     ENDING     ENDING    ENDING     YEAR     THROUGH
     RANGE        3/31/2002  6/30/2002  9/30/2002 12/31/2002   2002   12/31/2002
- --------------------------------------------------------------------------------
      > 200   Days    --         --         --        --        --        --
                   -------------------------------------------------------------
  Basis Points  %     --         --         --        --        --        --
================================================================================
   150--200   Days    --         --         --        --        --        --
                   -------------------------------------------------------------
 Basis Points   %     --         --         --        --        --        --
================================================================================
   100--150   Days    --         --         --        --        --         1
                   -------------------------------------------------------------
 Basis Points   %     --         --         --        --        --       0.1%
================================================================================
   50--100    Days    --          1         --         4         5        14
                   -------------------------------------------------------------
 Basis Points   %     --        1.6%        --       6.3%      2.0%      1.1%
================================================================================
    25--50    Days     2          4          3         7        16        111
                   -------------------------------------------------------------
 Basis Points   %    3.3%       6.3%       4.7%      10.9%     6.3%      8.9%
================================================================================
    0--25     Days    32         24         23        26        105       507
                   -------------------------------------------------------------
 Basis Points   %    53.3%      37.5%      35.9%     40.6%     41.7%     40.7%
================================================================================
  Total Days  Days    34         29         26        37        126       633
================================================================================
  at Premium    %    56.7%      45.3%      40.6%     57.8%     50.0%     50.8%
                   -------------------------------------------------------------
 Closing Price Days    3          1          1         1         6        11
================================================================================
 Equal to NAV   %    5.0%       1.6%       1.6%      1.6%      2.4%      0.9%
================================================================================
  Total Days  Days    23         34         37        26        120       601
                   -------------------------------------------------------------
  at Discount   %    38.3%      53.1%      57.8%     40.6%     47.6%     48.3%
================================================================================
    0-- -25   Days    20         30         23        23        96        467
================================================================================
 Basis Points   %    33.3%      46.9%      35.9%     35.9%     38.1%     37.5%
                   -------------------------------------------------------------
   -25-- -50  Days     3          4         11         3        21        114
================================================================================
 Basis Points   %    5.0%       6.3%       17.2%     4.7%      8.3%      9.2%
================================================================================
  -50-- -100  Days    --         --          3        --         3        19
                   -------------------------------------------------------------
 Basis Points   %     --         --        4.7%       --       1.2%      1.5%
================================================================================
  -100-- -150 Days    --         --         --        --        --        --
                   -------------------------------------------------------------
 Basis Points   %     --         --         --        --        --        --
================================================================================
  -150-- -200 Days    --         --         --        --        --        --
                   -------------------------------------------------------------
 Basis Points   %     --         --         --        --        --        --
================================================================================
    <  -200   Days    --         --         --        --        --         1
                   -------------------------------------------------------------
 Basis Points   %     --         --         --        --        --       0.1%
================================================================================

Close was within .25% of NAV better than 79% of the time from 1/20/98 (the first
day of trading on the AMEX) through 12/31/02.

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

                                       65
<PAGE>


DIAMONDS BID/ASKED SPREAD DISTRIBUTION (2002 ONLY)

                    RANGE ($)                        % OF TOTAL
                   ----------                        ----------
                   0.01--0.05                          16.76%
                   0.06--0.10                          40.77%
                   0.10--0.15                          36.09%
                   0.15--0.20                           5.33%
                   0.20--0.25                           0.76%
                   0.25--0.50                           0.28%
                      > .0.50                           0.00%
                   ----------                          -------
                   Total                               100.00%

     The  price   range  of  shares  for  2002  was  from   $72.07  to  $106.89,
consequently, $0.25 was from 0.35% to 0.23% of the share price.

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

     Information  relating to the relative price  performance of DIAMONDS 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 DIAMONDS 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 DIAMONDS 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
DIAMONDS and the investment  categories,  indices or compilations  chosen and no
guarantees  can be made of future  results  regarding the  performance of either
DIAMONDS or the asset classes chosen for such comparisons.

                                       66
<PAGE>


                                    GLOSSARY



                                                                            PAGE
                                                                         -------

"10 Basis Point Limit" ......................................................  8
"Adjustment Amount" ......................................................... 50
"Adjustment Day" ............................................................ 35
"Balancing Amount" .......................................................... 36
"Beneficial Owners" ......................................................... 27
"Business Day" ..............................................................  3
"Cash Component" ............................................................  5
"Cash Redemption Payment" ................................................... 30
"Closing Time" .............................................................. 26
"Code" ......................................................................  9
"Creation Units" ............................................................  4
"Depository Agreement" ...................................................... 28
"DIAMONDS" ..................................................................  3
"DIAMONDS Clearing Process" ...................................................5
"Distributor" ...............................................................  4
"Dividend Equivalent Payment" ...............................................  5
"Dividend Payment Date" ..................................................... 52
"DJIA" ......................................................................  3
"DTC" .......................................................................  9
"DTCC" ...................................................................... 24
"DTC Cut-Off Time" .......................................................... 32
"DTC Participants" .......................................................... 27
"Evaluation Time" ...........................................................  1
"Ex-Dividend Date" .......................................................... 51
"Excess Cash Amounts" ....................................................... 30
"Exchange" ..................................................................  3
"Index Securities" ..........................................................  3
"Indirect Participants" ..................................................... 27
"License Agreement" .........................................................  i
"NAV" .......................................................................  3
"NAV Amount" ................................................................ 35
"NSCC Business Day" ......................................................... 13
"NSCC" ......................................................................  5
"Participant Agreement" .....................................................  5
"Participating Party" .......................................................  5
"Portfolio" .................................................................  3
"Portfolio Deposit" .........................................................  5
"Portfolio Deposit Amount" .................................................. 36
"Portfolio Securities" ......................................................  3
"Record Date" ............................................................... 52
"Request Day" ............................................................... 35
"SEC" .......................................................................  5
"Service" ...................................................................  9
"Sponsor" ...................................................................  3
"Transaction Fee" ...........................................................  8
"Transmittal Date" .......................................................... 24
"Trust" .....................................................................  3
"Trust Agreement" ...........................................................  3
"Trustee" ...................................................................  3

                                       67
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<PAGE>


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<PAGE>


DIAMONDS TRUST, SERIES 1


SPONSOR:
PDR SERVICES LLC


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


This  Prospectus  does not include all of the  information  with  respect to the
DIAMONDS  Trust set forth in its  Registration  Statement  filed with the SEC in
Washington, D.C. under the:

  o  Securities Act of 1933 (File No. 333-31247) and
  o  Investment Company Act of 1940 (File No. 811-9170).

TO OBTAIN COPIES FROM THE SEC AT PRESCRIBED RATES--

WRITE:  Public  Reference Section of the SEC
        450 Fifth Street, N.W., Washington, D.C. 20549-6009
CALL:   1-800-SEC-0330
VISIT:  http://www.sec.gov

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

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

PDR Services LLC has filed a registration statement on Form S-6 and Form N-8B-2
with the SEC covering DIAMONDS. While this prospectus is a part of the
registration statement on Form S-6, it does not contain all the exhibits filed
as part of the registration statement on Form S-6. You should consider reviewing
the full text of those exhibits.

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


PROSPECTUS DATED FEBRUARY 26, 2003


</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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