THE DOW INDUSTRIALS(SM) ("DIAMONDS")(SM)
DIAMONDS TRUST, SERIES 1
A UNIT INVESTMENT TRUST
SEMI-ANNUAL REPORT
APRIL 30, 2006
(UNAUDITED)
"Dow Jones Industrial Average(SM)", "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 State
Street Global Markets, LLC pursuant to a "License Agreement" with Dow Jones and
have been sublicensed for use for certain purposes to the Trust, PDR Services
LLC and the American Stock Exchange LLC pursuant to separate "Sublicenses."
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.
DIAMONDS TRUST, SERIES 1
SCHEDULE OF INVESTMENTS
APRIL 30, 2006 (UNAUDITED)
--------------------------------------------------------------------------------
COMMON STOCKS SHARES VALUE
-----------------------------------------------------------------------------------------
3M Co. ..................................................... 4,269,970 $ 364,783,537
Alcoa, Inc. ................................................ 4,269,970 144,239,587
Altria Group, Inc. ......................................... 4,269,970 312,391,005
American Express Co. ....................................... 4,269,970 229,767,086
American International Group, Inc. ......................... 4,269,970 278,615,542
AT&T, Inc. ................................................. 4,269,970 111,915,914
Boeing Co. ................................................. 4,269,970 356,328,996
Caterpillar, Inc. .......................................... 4,269,970 323,407,528
Citigroup, Inc. ............................................ 4,269,970 213,285,001
Coca-Cola Co. (The)......................................... 4,269,970 179,167,941
Disney (Walt) Co. (The)..................................... 4,269,970 119,388,361
Du Pont (E.I.) de Nemours................................... 4,269,970 188,305,677
Exxon Mobil Corp. .......................................... 4,269,970 269,349,708
General Electric Co. ....................................... 4,269,970 147,698,262
General Motors Corp. ....................................... 4,269,970 97,696,914
Hewlett-Packard Co. ........................................ 4,269,970 138,645,926
Home Depot, Inc. ........................................... 4,269,970 170,499,902
Honeywell International, Inc. .............................. 4,269,970 181,473,725
Intel Corp. ................................................ 4,269,970 85,314,001
International Business Machines Corp. ...................... 4,269,970 351,589,330
Johnson & Johnson .......................................... 4,269,970 250,262,942
JPMorgan Chase & Co. ....................................... 4,269,970 193,771,239
McDonald's Corp. ........................................... 4,269,970 147,612,863
Merck & Co., Inc. .......................................... 4,269,970 146,972,367
Microsoft Corp. ............................................ 4,269,970 103,119,775
Pfizer, Inc. ............................................... 4,269,970 108,158,340
Procter & Gamble Co. ....................................... 4,269,970 248,554,954
United Technologies Corp. .................................. 4,269,970 268,196,816
Verizon Communications, Inc. ............................... 4,269,970 141,037,109
Wal-Mart Stores, Inc. ...................................... 4,269,970 192,276,749
--------------
Total Common Stocks -- (Cost $6,818,292,722)................ $6,063,827,097
==============
See accompanying notes to financial statements.
1
DIAMONDS TRUST, SERIES 1
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2006 (UNAUDITED)
--------------------------------------------------------------------------------
ASSETS
Investments in securities, at value....................... $6,063,827,097
Cash...................................................... 7,982,001
Receivable for income delivered for DIAMONDS in-kind
transactions........................................... 5,480
Dividends receivable...................................... 9,251,710
--------------
TOTAL ASSETS................................................ 6,081,066,288
--------------
LIABILITIES
Payable for income delivered for DIAMONDS in-kind
transactions........................................... 7,180
Income distribution payable............................... 6,782,495
Accrued Trustee expense................................... 246,300
Accrued expenses and other liabilities.................... 2,668,536
--------------
TOTAL LIABILITIES........................................... 9,704,511
--------------
NET ASSETS.................................................. $6,071,361,777
==============
NET ASSETS REPRESENTED BY:
Paid in surplus........................................... $7,121,890,478
Undistributed net investment income....................... 2,495,657
Accumulated net realized loss on investments.............. (298,558,733)
Net unrealized depreciation on investments................ (754,465,625)
--------------
NET ASSETS.................................................. $6,071,361,777
==============
NET ASSET VALUE PER DIAMOND................................. $113.60
--------
--------
UNITS OF FRACTIONAL UNDIVIDED INTEREST
("DIAMONDS") OUTSTANDING, UNLIMITED UNITS AUTHORIZED,
$0.00 PAR VALUE........................................ 53,443,009
--------------
COST OF INVESTMENTS......................................... $6,818,292,722
==============
See accompanying notes to financial statements.
2
DIAMONDS TRUST, SERIES 1
STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------
SIX MONTHS ENDED
APRIL 30, 2006 FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED
(UNAUDITED) OCTOBER 31, 2005 OCTOBER 31, 2004 OCTOBER 31, 2003
---------------- ------------------ ------------------ ------------------
INVESTMENT INCOME
Dividend income........ $ 84,444,661 $ 177,120,908 $ 145,895,782 $ 120,911,703
------------ ------------- ------------- --------------
EXPENSES:
Trustee expense........ 2,370,931 4,928,790 4,708,689 3,480,020
Marketing expense...... 2,003,796 4,307,114 4,019,534 3,230,848
DJIA license fee....... 1,267,000 2,655,783 3,750,004 1,947,815
Legal and audit
services.......... 36,929 149,889 89,900 249,444
SEC registration
expense........... 23,907 324,223 73,883 116,131
Printing and postage
expense........... 174,181 403,199 43,194 338,844
Other expense.......... 57,435 120,310 661 715
Amortization of
organization
costs............. -- -- -- 101,829
------------ ------------- ------------- --------------
Total expenses.............. 5,934,179 12,889,308 12,685,865 9,465,646
Trustee earnings
credit............... (104,508) (280,392) (88,355) (61,870)
------------ ------------- ------------- --------------
Net expenses after Trustee
earnings credit........... 5,829,671 12,608,916 12,597,510 9,403,776
------------ ------------- ------------- --------------
NET INVESTMENT INCOME....... 78,614,990 164,511,992 133,298,272 111,507,927
------------ ------------- ------------- --------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Net realized gain on
investment
transactions......... 230,172,710 651,853,900 213,134,509 276,147,528
Net change in
unrealized
appreciation
(depreciation)....... 350,576,844 (297,315,375) (133,449,812) 636,501,507
------------ ------------- ------------- --------------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS....... 580,749,554 354,538,525 79,684,697 912,649,035
------------ ------------- ------------- --------------
NET INCREASE IN NET ASSETS
RESULTING FROM
OPERATIONS................ $659,364,544 $ 519,050,517 $ 212,982,969 $1,024,156,962
============ ============= ============= ==============
See accompanying notes to financial statements.
3
DIAMONDS TRUST, SERIES 1
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
SIX MONTHS ENDED
APRIL 30, 2006 FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED
(UNAUDITED) OCTOBER 31, 2005 OCTOBER 31, 2004 OCTOBER 31, 2003
---------------- ------------------ ------------------ ------------------
INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS:
Net investment income... $ 78,614,990 $ 164,511,992 $ 133,298,272 $ 111,507,927
Net realized gain on
investment
transactions....... 230,172,710 651,853,900 213,134,509 276,147,528
Net change in unrealized
appreciation
(depreciation)..... 350,576,844 (297,315,375) (133,449,812) 636,501,507
--------------- -------------- -------------- --------------
NET INCREASE IN NET ASSETS
RESULTING FROM
OPERATIONS................. 659,364,544 519,050,517 212,982,969 1,024,156,962
--------------- -------------- -------------- --------------
UNDISTRIBUTED NET INVESTMENT
INCOME (LOSS) INCLUDED IN
PRICE OF UNITS ISSUED AND
REDEEMED................... 946,649 (2,410,446) (1,282,877) (398,863)
--------------- -------------- -------------- --------------
DISTRIBUTIONS TO UNITHOLDERS
FROM NET INVESTMENT
INCOME..................... (77,516,862) (168,178,022) (130,617,261) (110,187,836)
--------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN
NET ASSETS FROM ISSUANCE
AND REDEMPTION OF
DIAMONDS................... (1,921,419,002) (1,129,366,247) 2,118,716,178 959,445,015
--------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN
NET ASSETS DURING PERIOD... (1,338,624,671) (780,904,198) 2,199,799,009 1,873,015,278
NET ASSETS AT BEGINNING OF
PERIOD..................... 7,409,986,448 8,190,890,646 5,991,091,637 4,118,076,359
--------------- -------------- -------------- --------------
NET ASSETS END OF PERIOD*.... $ 6,071,361,777 $7,409,986,448 $8,190,890,646 $5,991,091,637
=============== ============== ============== ==============
*INCLUDES UNDISTRIBUTED NET
INVESTMENT INCOME.......... $ 2,495,657 $ 1,397,529 $ 5,063,559 $ 2,382,548
--------------- -------------- -------------- --------------
See accompanying notes to financial statements.
4
DIAMONDS TRUST, SERIES 1
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A DIAMOND OUTSTANDING DURING THE PERIOD
--------------------------------------------------------------------------------
SIX MONTHS FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED* ENDED ENDED ENDED ENDED ENDED
4/30/06 10/31/05 10/31/04 10/31/03 10/31/02 10/31/01
---------- ------------ ------------ ------------ ------------ ------------
NET ASSET VALUE, BEGINNING OF
YEAR......................... $ 104.31 $ 100.48 $ 98.20 $ 84.12 $ 90.84 $ 109.73
---------- ---------- ---------- ---------- ---------- ----------
INVESTMENT OPERATIONS:
Net investment income(1)..... 1.28 2.39(5) 1.94 1.91 1.73 1.56
Net realized and unrealized
gain (loss) on
investments................ 9.21 3.91 2.28 14.06 (6.77) (18.86)
---------- ---------- ---------- ---------- ---------- ----------
TOTAL FROM INVESTMENT
OPERATIONS................... 10.49 6.30 4.22 15.97 (5.04) (17.30)
---------- ---------- ---------- ---------- ---------- ----------
UNDISTRIBUTED NET INVESTMENT
INCOME INCLUDED IN PRICE OF
UNITS ISSUED AND REDEEMED.... 0.02 (0.03) 0.00(2) (0.01) 0.00(2) 0.00(2)
---------- ---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS FROM:
Net investment income........ (1.22) (2.44) (1.94) (1.88) (1.68) (1.59)
---------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF
PERIOD....................... $ 113.60 $ 104.31 $ 100.48 $ 98.20 $ 84.12 $ 90.84
========== ========== ========== ========== ========== ==========
TOTAL INVESTMENT RETURN(3)..... 10.12% 6.23% 4.27% 19.22% (5.71)% (15.91)%
RATIOS AND SUPPLEMENTAL DATA
Ratios to average net assets:
Net investment income........ 2.35% 2.27% 1.89% 2.12% 1.85% 1.51%
Total expenses............... 0.18% 0.18% 0.18% 0.18% 0.18% 0.18%
Net expenses excluding
trustee earnings credit.... 0.18% 0.17% 0.18% 0.18% 0.18% 0.18%
Net expenses excluding
trustee earnings credit and
fee waivers................ 0.17% 0.17% 0.18% 0.18% 0.18% 0.17%
Portfolio turnover rate(4)... 0.00%(6) 7.69% 13.88% 8.71% 0.26% 12.66%
NET ASSET VALUE, END OF YEAR
(000'S)...................... $6,071,362 $7,409,986 $8,190,891 $5,991,092 $4,118,076 $2,734,476
--------------------------------------------------------------------------------
* Unaudited
(1) Per share numbers have been calculated using the average shares method,
which more appropriately presents the per share data for the period.
(2) Amount shown represents less than $0.005.
(3) Total returns for periods less than one year are not annualized and do not
reflect broker commission charges.
(4) Portfolio turnover ratio excludes securities received or delivered from
processing creations or redemptions of DIAMONDS.
(5) Net investment income per unit reflects receipt of a one time dividend from
a portfolio holding (Microsoft Corp.). The effect of this dividend amounted
to $0.22 per share.
(6) Amount shown represents less than 0.005%.
See accompanying notes to financial statements.
5
DIAMONDS TRUST, SERIES 1
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2006 (UNAUDITED)
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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 "DIAMOND". 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, except for
securities listed on the NASDAQ which are valued at the NASDAQ official closing
price. If no closing sale price or official closing price is available, then the
security is valued at the last sale price on the exchange which is deemed to be
the principal market for the security. If there is no closing sale price
available or official closing price, and if the Trustee deems the last sale
price an inappropriate basis for evaluation, valuation will be determined by the
Trustee in good faith based on available information.
INVESTMENT RISK
The Trust invests in various investments which are exposed to risks, such market
risk. Due to the level of risk associated with certain investments it is at
least reasonably possibly that changes in the values of investment securities
will occur in the near term and that such changes could materially affect the
amounts reported in the financial statements.
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.
6
DIAMONDS TRUST, SERIES 1
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
APRIL 30, 2006 (UNAUDITED)
--------------------------------------------------------------------------------
EQUALIZATION
The Trust follows the accounting practice known as "Equalization" by which a
portion of the proceeds from sales and costs of reacquiring the Trust's units,
equivalent on a per unit basis to the amount of distributable net investment
income on the date of the transaction, is credited or charged to undistributed
net investment income. As a result, undistributed net investment income per unit
is unaffected by sales or reacquisitions of the Trust's units.
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 six months ended April 30, 2006, the Trust reclassified $230,172,710
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 Statements of Assets and
Liabilities.
At October 31, 2005, the Trust had the following capital loss carryforwards
which may be used to offset any net realized gains, expiring October 31:
2008..................................... 5,933,194
2010..................................... 2,065,467
2011..................................... 68,716,435
2012..................................... 221,260,584
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
7
DIAMONDS TRUST, SERIES 1
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
APRIL 30, 2006 (UNAUDITED)
--------------------------------------------------------------------------------
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 six months ended April 30, 2006:
NET ASSET VALUE OF THE TRUST FEE AS A PERCENTAGE OF 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 six months ended April 30, 2006, the Adjustment Amount
decreased the Trustee's fee by $34,908. The Adjustment Amount included a
deficiency of net transaction fees from processing orders of (-$69,600) and a
Trustee earnings credit of (+$104,508).
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, 2003, October 31, 2004, October
31, 2005 and the six-month period ended April 30, 2006 were $0.
Dow Jones & Company, Inc. ("Dow Jones"), the American Stock Exchange LLC (the
"AMEX"), the Sponsor, and State Street Global Markets, LLC ("SSGM") 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. SSGM is a
subsidiary of the Trustee.
INDEMNIFICATIONS
Under the Trust's organizational documents, its officers and trustees are
indemnified against certain liability arising of the performance of their duties
to the Trust. Additionally, in the normal course of business, the Trust enters
into contracts with service providers that contain general indemnification
clauses. The Trust's maximum exposure under these arrangements is unknown as
this would involve future claims that may be made against the Trust that have
not yet occurred. However, based on experience the Trust expects the risk of
loss to be remote.
8
DIAMONDS TRUST, SERIES 1
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
APRIL 30, 2006 (UNAUDITED)
--------------------------------------------------------------------------------
NOTE 4 -- TRUST TRANSACTIONS IN DIAMONDS
Transactions in DIAMONDS were as follows.
SIX MONTHS ENDED APRIL 30, 2006
-------------------------------
DIAMONDS AMOUNTS
------------ ----------------
DIAMONDS sold........................................ 61,800,000 $ 6,751,847,944
DIAMONDS issued upon dividend reinvestment........... 6,783 738,007
DIAMONDS redeemed.................................... (79,400,000) (8,673,058,304)
Net income equalization.............................. -- (946,649)
------------ ----------------
Net Decrease......................................... (17,593,217) $ (1,921,419,002)
============ ================
YEAR ENDED OCTOBER 31, 2005
-------------------------------
DIAMONDS AMOUNTS
------------ ----------------
DIAMONDS sold........................................ 117,800,000 $ 12,383,980,226
DIAMONDS issued upon dividend reinvestment........... 16,090 1,702,587
DIAMONDS redeemed.................................... (128,300,000) (13,517,459,506)
Net income equalization.............................. -- 2,410,446
------------ ----------------
Net Decrease......................................... (10,483,910) $ (1,129,366,247)
============ ================
YEAR ENDED OCTOBER 31, 2004
-----------------------------
DIAMONDS AMOUNTS
----------- ---------------
DIAMONDS sold.......................................... 72,900,000 $ 7,485,525,585
DIAMONDS issued upon dividend reinvestment............. 11,705 1,201,305
DIAMONDS redeemed...................................... (52,400,000) (5,369,293,589)
Net income equalization................................ -- 1,282,877
----------- ---------------
Net Increase........................................... 20,511,705 $ 2,118,716,178
=========== ===============
YEAR ENDED OCTOBER 31, 2003
-----------------------------
DIAMONDS AMOUNTS
----------- ---------------
DIAMONDS sold.......................................... 70,850,000 $ 6,167,457,123
DIAMONDS issued upon dividend reinvestment............. 4,321 385,016
DIAMONDS redeemed...................................... (58,800,000) (5,208,795,987)
Net income equalization................................ -- 398,863
----------- ---------------
Net Increase........................................... 12,054,321 $ 959,445,015
=========== ===============
9
DIAMONDS TRUST, SERIES 1
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
APRIL 30, 2006 (UNAUDITED)
--------------------------------------------------------------------------------
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 six months ended April 30, 2006, the Trust had net in-kind
contributions, net in-kind redemptions, purchases and sales of investment
securities of $4,823,459,157, $6,745,176,364, $0 and $0, respectively. At April
30, 2006, the cost of investments for federal income tax purposes was
$6,818,292,722 accordingly, gross unrealized appreciation was $162,771,285, and
gross unrealized depreciation was $917,236,910, resulting in net unrealized
depreciation of $754,465,625.
NOTE 6 -- TAX INFORMATION
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, 2005 is 100%.
For the fiscal year ended October 31, 2005, certain dividends paid by the Trust
may be designated as qualified dividend income and subject to a maximum tax rate
of 15%, as provided for by the Jobs and Growth Tax Relief Reconciliation Act of
2003. Complete information was reported in conjunction with your 2005 Form
1099-DIV.
10
DIAMONDS TRUST, SERIES 1
OTHER INFORMATION
APRIL 30, 2006 (UNAUDITED)
--------------------------------------------------------------------------------
FREQUENCY OF DISTRIBUTIONS OF DISCOUNTS AND PREMIUMS
BID/ASK PRICE(1) VS. NET ASSET VALUE (NAV)
FIVE YEAR PERIOD ENDING 4/30/06
NUMBER PERCENTAGE OF
RANGE OF DAYS TOTAL DAYS
----- ------- -------------
PREMIUM
More than 0.25%........................................... 16 1.3%
Between zero and 0.25%.................................... 564 44.9%
BID/ASK PRICE EQUAL TO NAV.................................. 45 3.6%
DISCOUNT
Between zero and -0.25%................................... 604 48.1%
Less than -0.25%.......................................... 27 2.1%
----- ----
Total:.................................................... 1,256 100%
===== ====
COMPARISON OF TOTAL RETURNS BASED ON NAV AND BID/ASK PRICE
CUMULATIVE TOTAL RETURNS
ONE YEAR FIVE YEAR SINCE FIRST TRADE(2)
-------- --------- --------------------
Return Based on NAV..................................... 13.93% 16.91% 67.21%
Return Based on Bid/Ask Price........................... 14.12% 17.16% 67.22%
Dow Jones Industrial Average............................ 14.17% 17.97% 69.43%
AVERAGE ANNUAL TOTAL RETURNS
ONE YEAR FIVE YEAR SINCE FIRST TRADE(2)
-------- --------- --------------------
Return Based on NAV..................................... 13.93% 3.17% 6.41%
Return Based on Bid/Ask Price........................... 14.12% 3.22% 6.41%
Dow Jones Industrial Average............................ 14.17% 3.36% 6.58%
---------------
(1) Currently, the calculation of the Bid/Ask Price is based on the midpoint of
the best bid and best offer on the AMEX at 4:00 p.m. However, prior to April
3, 2001, calculation of the Bid/Ask Price was based on the midpoint of the
best bid and best offer at the close of trading on the AMEX, ordinarily 4:15
p.m.
(2) The Trust commenced trading on the AMEX on January 20, 1998.
11
DIAMONDS TRUST, SERIES 1
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SPONSOR
PDR Services LLC
c/o American Stock Exchange LLC
86 Trinity Place
New York, NY 10006
TRUSTEE
State Street Bank and Trust Company
State Street Financial Center
One Lincoln Street
Boston, MA 02111
DISTRIBUTOR
ALPS Distributors, Inc.
1625 Broadway, Suite 2200
Denver, CO 80202
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers LLP
125 High Street
Boston, MA 02110
LEGAL COUNSEL
Carter, Ledyard & Milburn LLP
2 Wall Street
New York, NY 10005