AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 15, 1995
REGISTRATION NO. 33- _____
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
FORM S-6
For Registration Under the Securities Act
of 1933 of Securities of Unit Investment
Trusts Registered on Form N-8B-2
---------------------------
A. EXACT NAME OF TRUST:
Qualified Unit Investment Liquid Trust Series ("QUILTS"), Equity
Strategic Ten, Series 1
B. NAME OF DEPOSITOR:
OCC Distributors
C. COMPLETE ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES:
OCC Distributors
Two World Financial Center
225 Liberty Street
New York, New York 10080-6116
D. NAME AND COMPLETE ADDRESS OF AGENT FOR SERVICE:
COPY OF COMMENTS TO:
SUSAN A. MURPHY MICHAEL R. ROSELLA, Esq.
Senior Vice President Battle Fowler LLP
Quest Cash Management Services Park Avenue Tower
Oppenheimer Capital 75 East 55th Street
Two World Financial Center New York, New York 10022
225 Liberty Street (212) 856-6858
New York, New York 10080-6116
E. TITLE AND AMOUNT OF SECURITIES BEING REGISTERED:
An indefinite number of Units of Qualified Unit Investment Liquid Trust
Series ("QUILTS"), Equity Strategic Ten, Series 1 is being registered
under the Securities Act of 1933 pursuant to Section 24(f) of the
Investment Company Act of 1940, as amended, and Rule 24f-2 thereunder.
F. PROPOSED MAXIMUM AGGREGATE OFFERING PRICE TO THE PUBLIC OF THE SECURITIES
BEING REGISTERED:
Indefinite
G. AMOUNT OF FILING FEE:
$500 (as required by Rule 24f-2)
H. APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after the effective date of the Registration
Statement.
_____ Check if it is proposed that this filing will become effective
immediately upon filing pursuant to Rule 487.
===============================================================================
The registrant hereby amends the registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
325425.1
<PAGE>
Qualified Unit Investment Liquid Trust Series ("QUILTS")
Equity Strategic Ten, Series 1
CROSS-REFERENCE SHEET
Pursuant to Rule 404 of Regulation C
Under the Securities Act of 1933
(Form N-8B-2 Items Required by Instruction as
to the Prospectus in Form S-6)
FORM N-8B-2 FORM S-6
ITEM NUMBER HEADING IN PROSPECTUS
----------- ---------------------
I. ORGANIZATION AND GENERAL INFORMATION
1. (a) Name of trust..................... Front cover of Prospectus
(b) Title of securities issued........ Front cover of Prospectus
2. Name and address of each depositor..... The Sponsor
3. Name and address of trustee............ The Trustee
4. Name and address of principal
underwriters........................... Distribution of Units
5. State of organization of trust......... Organization
6. Execution and termination of trust
agreement.............................. Trust Agreement, Amendment and
Termination
7. Changes of name........................ Not Applicable
8. Fiscal year............................ Not Applicable
9. Litigation............................. None
II. GENERAL DESCRIPTION OF THE TRUST AND SECURITIES OF THE TRUST
10. (a) Registered or bearer securities... Book Entry Units
(b) Cumulative or distributive
securities........................ Interest and Principal Distributions
(c) Redemption........................ Trustee Redemption
(d) Conversion, transfer, etc......... Book Entry Units, Sponsor
Repurchase, Trustee Redemption
(e) Periodic payment plan............. Not Applicable
(f) Voting rights..................... Trust Agreement, Amendment and
Termination
(g) Notice to certificateholders...... Records, Portfolio, Substitution of
Securities, Trust Agreement,
Amendment and Termination, The
Sponsor, the Trustee
(h) Consents required................. Trust Agreement, Amendment and
Termination
(i) Other provisions.................. Tax Status
11. Type of securities comprising units.... Objectives, Portfolio, Portfolio
Summary
12. Certain information regarding
periodic payment certificates.......... Not Applicable
i
325425.1
<PAGE>
FORM N-8B-2 FORM S-6
ITEM NUMBER HEADING IN PROSPECTUS
----------- ---------------------
13. (a) Load, fees, expenses, etc......... Summary of Essential Information,
Public Offering Price, Market for
Units, Volume and Other Discounts,
Sponsor's Profits, Trust Expenses
and Charges
(b) Certain information regarding
periodic payment certificates..... Not Applicable
(c) Certain percentages............... Summary of Essential Information,
Public Offering Price, Market for
Units, Volume and Other Discounts
(d) Price differences................. Volume and Other Discounts,
Distribution of Units
(e) Other loads, fees, expenses....... Book Entry Units
(f) Certain profits receivable by
depositors, principal
underwriters, trustee or
affiliated persons................ Sponsor's Profits, Portfolio Summary
(g) Ratio of annual charges to income. Not Applicable
14. Issuance of trust's securities......... Organization, Certificates
15. Receipt and handling of payments
from purchasers........................ Organization
16. Acquisition and disposition of
underlying securities.................. Organization, Objectives, Portfolio,
Portfolio Supervision
17. Withdrawal or redemption............... Comparison of Public Offering Price,
Sponsor's Repurchase Price and
Redemption Price, Sponsor
Repurchase, Trustee Redemption
18. (a) Receipt, custody and
disposition of income............. Monthly Distributions, Interest and
Principal Distributions, Portfolio
Supervision
(b) Reinvestment of distributions..... Not Applicable
(c) Reserves or special funds......... Interest and Principal Distributions
(d) Schedule of distributions......... Not Applicable
19. Records, accounts and reports.......... Records
20. Certain miscellaneous provisions of
trust agreement
(a) Amendment......................... Trust Agreement, Amendment and
Termination
(b) Termination....................... Trust Agreement, Amendment and
Termination
(c) and (d) Trustee, removal and
successor.......................... The Trustee
(e) and (f) Depositor, removal and
successor.......................... The Sponsor
21. Loans to security holders.............. Not Applicable
22. Limitations on liability............... The Sponsor, The Trustee, The
Evaluator
23. Bonding arrangements................... Part II - Item A
24. Other material provisions of trust
agreement.............................. Not Applicable
III. Organization, Personnel and Affiliated Persons of Depositor
25. Organization of depositor.............. The Sponsor
26. Fees received by depositor............. Not Applicable
ii
325425.1
<PAGE>
FORM N-8B-2 FORM S-6
ITEM NUMBER HEADING IN PROSPECTUS
----------- ---------------------
27. Business of depositor.................. The Sponsor
28. Certain information as to officials
and affiliated persons of depositor.... Not Applicable
29. Voting securities of depositor......... Not Applicable
30. Persons controlling depositor.......... Not Applicable
31. Payments by depositor for certain
services rendered to trust............. Not Applicable
32. Payments by depositor for certain
other services rendered to trust....... Not Applicable
33. Remuneration of employees of
depositor for certain services
rendered to trust...................... Not Applicable
34. Remuneration of other person for
certain services rendered to trust..... Not Applicable
IV. Distribution and Redemption of Securities
35. Distribution of trust's securities
by states.............................. Distribution of Units
36. Suspension of sales of trust's
securities............................. Not Applicable
37. Revocation of authority to distribute.. None
38. (a) Method of distribution............ Distribution of Units
(b) Underwriting agreements........... Distribution of Units
(c) Selling agreements................ Distribution of Units
39. (a) Organization of principal
underwriters...................... The Sponsor
(b) N.A.S.D. membership of principal
underwriters...................... The Sponsor
40. Certain fees received by principal
underwriters........................... The Sponsor
41. (a) Business of principal
underwriters...................... The Sponsor
(b) Branch offices of principal
underwriters...................... The Sponsor
(c) Salesmen of principal
underwriters...................... The Sponsor
42. Ownership of trust's securities by
certain persons........................ Not Applicable
43. Certain brokerage commissions
received by principal underwriters..... Not Applicable
44. (a) Method of valuation............... Summary of Essential Information,
Market for Units, Offering Price,
Accrued Interest, Volume and Other
Discounts, Distribution of
Units, Comparison of Public Offering
Price, Sponsor's Repurchase Price
and Redemption Price, Sponsor
Repurchase, Trustee Redemption
(b) Schedule as to offering price..... Summary of Essential Information
(c) Variation in offering price to
certain persons................... Distribution of Units, Volume and
Other Discounts
45. Suspension of redemption rights........ Not Applicable
iii
325425.1
<PAGE>
FORM N-8B-2 FORM S-6
ITEM NUMBER HEADING IN PROSPECTUS
----------- ---------------------
46. (a) Redemption valuation.............. Comparison of Public Offering Price,
Sponsor's Repurchase Price and
Redemption Price, and Redemption
Price, and Trustee Redemption
(b) Schedule as to redemption price... Summary of Essential Information
47. Maintenance of position in underlying
securities............................. Comparison of Public Offering Price,
Sponsor's Repurchase Price and
Redemption Price, Sponsor
Repurchase, Trustee Redemption
V. Information Concerning the Trustee or Custodian
48. Organization and regulation of
trustee................................ The Trustee
49. Fees and expenses of trustee........... Trust Expenses and Charges
50. Trustee's lien......................... Trust Expenses and Charges
VI. Policy of Registrant
51. (a) Provisions of trust agreement
with respect to selection or
elimination of underlying
securities........................ Objectives, Portfolio, Portfolio
Supervision, Substitution of
Securities
(b) Transactions involving
elimination of underlying
securities........................ Not Applicable
(c) Policy regarding substitution
or elimination of underlying
securities........................ Substitution of Securities
(d) Fundamental policy not otherwise
covered........................... Not Applicable
52. Tax status of trust.................... Tax Status
VII. FINANCIAL AND STATISTICAL INFORMATION
53. Trust's securities during last ten
years.................................. Not Applicable
54. Hypothetical account for issuers of
periodic payment plans................. Not Applicable
55. Certain information regarding
periodic payment certificates.......... Not Applicable
56. Certain information regarding
periodic payment plans................. Not Applicable
57. Certain other information regarding
periodic payment plans................. Not Applicable
58. Financial statements (Instruction
1(c) to Form S-6) ..................... Statement of Financial Condition
iv
325425.1
<PAGE>
Subject to Completion Dated December 15, 1995
("QUILTS")
QUALIFIED UNIT INVESTMENT LADDERED TRUST SERIES
A Unit Investment Trust
Equity Strategic Ten, Series 1
- -------------------------------------------------------------------------------
The Trust is a unit investment trust designated QUILTS Equity
Strategic Ten, Series 1. The Sponsor of the Trust is OCC Distributors (the
"Sponsor"). The objective of the Equity Strategic Ten, Series 1 is to maximize
total return through a combination of capital appreciation and current
dividend income. The Trust seeks to outperform the Dow Jones Industrial
Average ("DJIA") by investing for about one year in its ten highest dividend
yielding common stocks ("DJIA Strategic Ten") on the day prior to the initial
Date of Deposit. The name "Dow Jones Industrial Average" is the property of
Dow Jones & Company, Inc., which is not affiliated with the Sponsor, has not
participated in any way in the creation of the Trust or in the selection of
the stocks included in the Trust and has not reviewed or approved any
information included in this Prospectus. The value of the Units of the Trust
will fluctuate with fluctuations in the value of the underlying Securities in
the portfolio of the Trust. Therefore, Unit Holders who sell their Units prior
to termination of the Trust may receive more or less than their original
purchase price upon sale. No assurance can be given that dividends will be
paid or that the Units will appreciate in value. Units of the Trust may be
suited for purchase by IRAs, self-employed retirement plans (formerly Keogh
Plans), pension, profit-sharing and other qualified retirement plans.
Investors considering participation in any such plan should review specific
tax laws and pending legislation related thereto and should consult their
attorneys or tax advisers with respect to the establishment and maintenance of
any such plan. (See "Retirement Plans" and "Tax Status" in Part B of this
Prospectus.)
This Prospectus consists of two parts. Part A contains a Summary of
Essential Information for the Trust including descriptive material relating to
the Trust, the Statement of Condition of the Trust and the Portfolio of the
Trust. Part B contains general information about the Trust. Part A may not be
distributed unless accompanied by Part B.
QUILTS is not a deposit or other obligation of, or guaranteed by, a
depository institution. QUILTS is not insured by the FDIC and is subject to
investment risks, including possible loss of the principal amount invested.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE COMMISSION OR ANY STATE SECURITIES CORPORATION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
PROSPECTUS PART A DATED DECEMBER __, 1995
Please read and retain both parts of this
Prospectus for future reference.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any State.
324120.3
<PAGE>
QUILTS
Equity Strategic Ten, Series 1
SUMMARY OF ESSENTIAL INFORMATION AS OF DECEMBER __, 1995 (The
business day prior to the initial Date of Deposit. The initial Date
of Deposit is the date on which the Trust Agreement was signed and
the deposit of Securities with the Trustee was made.)
<TABLE>
<CAPTION>
Trustee was made.)
<S> <C>
CUSIP#: Evaluation Time: 12:00 Noon New York Time on the
Sponsor: OCC Distributors initial Date of Deposit and 4:00 P.M. thereafter.
Date of Deposit: December __, 1995 Minimum Purchase: 1,000 Units
Aggregate Value Minimum Principal Distribution: $1.00 per 1,000 Units.
of Securities:.......................................$___ Liquidation Period: Beginning __ days prior to the Mandatory
Number of Units: (The number of Units will be Termination Date.
increased as the Sponsor deposits additional Minimum Value of Trust: The Trust may be terminated if the
Securities into the Trust.)...........................___ value of the Trust is less than 40% of the aggregate of the
Fractional Undivided Interest in Trust Securities at the completion of the Deposit period.
per 1,000 Units:.................................. 1/___ Mandatory Termination Date: The earlier of __________, 1997 or
Public Offering Price: the disposition of the last Security in the Trust.
Aggregate Value of Securities Trustee: The Chase Manhattan Bank (National Association).
in Trust..........................................$___ Trustee's Annual Fee and Estimated Expenses: $___ per
Divided By _____ Units multiplied 1,000 Units outstanding.
by 1,000..........................................$___ Annual Supervisory Fee (Payable to an affiliate of the
Plus Sales Charge of 2.75% of Public Offering Sponsor): Maximum of $___ per $1,000 Units outstanding
Price.............................................$___ (see "Trust Expenses and Charges" in Part B).
Public Offering Price per 1,000 Units(1).............$___ Estimated Organizational Expenses:(3) $ ___ per 1,000 Units.
Redemption Price per 1,000 Units........................$___ Record Date(4): 15th day of the first month of each quarter.
Sponsor's Repurchase Price and Redemption Dividend Payment Date(4): Last day of the first month of each
Price per 1,000 Units:(2).........................$___ quarter.
Excess of Public Offering Price Over Rollover Notification Date(5): _________, 1997 or another date as
Redemption Price per 1,000 Units: ...................$___ determined by the Sponsor.
Excess of Sponsor's Initial Repurchase Price
Over Redemption Price per 1,000 Units:...............$___
</TABLE>
(1)On the Initial Date of Deposit there will be no cash in the Income or
Capital Accounts. Anyone purchasing Units after such date will have
included in the Public Offering Price a pro rata share of any cash in such
Accounts.
(2)Any redemptions of over _______ Units may, upon request of redeeming Unit
Holders to the Trustee, be made in kind. The Trustee will forward the
distributed securities to the Unit Holder's bank or broker-dealer account
at the Depository Trust Company in book-entry form. See "Liquidity -
Trustee Redemption" in Part B.
(3)Although historically the sponsors of unit investment trusts ("UITs") have
paid all the costs of establishing UIT, this Trust (and therefore the Unit
Holders) will bear all or a portion of its organizational costs. Such
organizational costs include: the cost of preparing and printing the
registration statement, the trust indenture and other closing documents;
and the initial audit of the Trust. Total organizational expenses will be
amortized over the life of the Trust. See "Trust Expenses and Changes" in
Part B.
(4)The first dividend distribution will be made on _________ 31, 1996 (the
"First Payment Date") to all Unit Holders of record on _________ 15, 1996
(the "First Record Date"). The regular quarterly payment will begin on
____________, 1996 (the "Quarterly Payment Date").
(5)If a Unit Holder ("Rollover Unit Holder") so specifies prior to the
Rollover Notification Date, the Rollover Unit Holder's Units will be
redeemed in kind and the underlying distributed Securities will be sold by
the Sponsor, on behalf of the Trustee, during the Liquidation Period. The
proceeds will be reinvested as received in an available series of the
QUILTS Equity Strategic Ten, if offered (see "Trust Administration Trust
Termination").
A-2
324120.3
<PAGE>
QUALIFIED
UNIT INVESTMENT LADDERED TRUST SERIES
("QUILTS")
THE TRUST
The Trust is a unit investment trust designated QUILTS, Equity
Strategic Ten, Series 1. The Trust was created under the laws of the State of
New York by a Trust Indenture and Agreement (the "Trust Agreement"), dated the
initial Date of Deposit, between OCC Distributors, as sponsor (the "Sponsor")
and The Chase Manhattan Bank (National Association), as trustee (the
"Trustee"). On the initial Date of Deposit, the Sponsor deposited with the
Trustee the underlying Securities including delivery statements relating to
contracts for the purchase of certain such Securities (the "Securities") in
the aggregate amount set forth in the "Summary of Essential Information" for
the Trust and cash or an irrevocable letter of credit issued by a major
commercial bank in the amount required for such purchases. Thereafter, the
Trustee, in exchange for the Securities so deposited, delivered to the Sponsor
a certificate evidencing the ownership of all of the Units of the Trust, which
Units are being offered by this Prospectus. (See "The Trust Organization" in
Part B.) The Trust will terminate one year after the initial Date of Deposit.
Objectives. The objective of the Trust is to maximize total return
through capital appreciation and current dividend income. The Trust will
invest for twelve (12) months in approximately equal values of the ten (10)
common stocks in the Dow Jones Industrial Average ("DJIA") having the highest
dividend yield on the business day prior to the initial Date of Deposit (the
"DJIA Strategic Ten"). As used herein, the term "highest dividend yield" means
the yield for each Security calculated by annualizing the last quarterly or
semi-annual ordinary dividend distributed on that Security and dividing the
result by the market value of that Security on the business day prior to the
initial Date of Deposit. This rate is historical, and there is no assurance
that any dividends will be declared or paid in the future on the Securities in
the Trust. As used herein, the term "Securities" means the common stocks
initially deposited in the Trust and described under Portfolio and any
additional common stocks acquired and held by the Trust pursuant to the
provisions of the Indenture (see "The Trust--Organization" and "Risk
Factors--Additional Securities" in Part B of this Prospectus). Further, the
Securities may appreciate or depreciate in value, dependent upon the full
range of economic and market influences affecting corporate profitability, the
financial condition of issuers and the prices of equity securities in general
and the Securities in particular. Therefore, there is no guarantee that the
objective of the Trust will be achieved.
Portfolio Summary. General. The Trust is comprised of those
Securities listed in the "Portfolio" in this Part A. The Trust contains an
underlying portfolio of ten (10) common stocks issued by companies engaged
primarily in the following industries: . Although there are certain risks of
price volatility associated with investment in common stocks (particularly
with an investment in one or two common stocks), your risk is reduced because
your capital is divided among 10 stocks from ___ different industry groups.
With the deposit of the Securities in the Trust on the initial Date
of Deposit, the Sponsor established a proportionate relationship among the
aggregate value of the specified Securities in the Trust. During the 90 days
subsequent to the initial Date of Deposit, the Sponsor may, but is not
obligated to, deposit from time to time additional Securities in the Trust
("Additional Securities"), contracts to purchase Additional Securities or cash
(or a bank letter of credit in lieu of cash) with instructions to purchase
Additional Securities, maintaining to the extent practicable the original
proportionate relationship of the number of shares of each Security in the
Trust portfolio immediately
A-3
324120.3
<PAGE>
prior to such deposit, thereby creating additional Units which will be offered
to the public by means of this Prospectus. These additional Units will each
represent, to the extent practicable, an undivided interest in the same number
and type of securities of identical issuers as are represented by Units issued
on the initial Date of Deposit. It may not be possible to maintain the exact
original proportionate relationship among the number of shares of Securities
in the Trust portfolio on the initial Date of Deposit with the deposit of
Additional Securities because of, among other reasons, purchase requirements,
changes in prices, or the unavailability of Securities. Deposits of Additional
Securities in the Trust subsequent to the 90-day period following the initial
Date of Deposit must replicate exactly the proportionate relationship among
the shares of each Security in the Trust portfolio at the end of the initial
90-day period. The number and identity of Securities in the Trust will be
adjusted to reflect the disposition of Securities and/or the receipt of a
stock dividend, a stock split or other distribution with respect to such
Securities. The portfolio of the Trust may change slightly based on such
disposition. Securities received in exchange for shares will be similarly
treated. Substitute Securities may be acquired under specified conditions when
Securities originally deposited in the Trust are unavailable (see "The
Trust--Substitution of Securities" in Part B). As additional Units are issued
by the Trust as a result of the deposit of Additional Securities, the
aggregate value of the Securities in the Trust will be increased and the
fractional undivided interest in the Trust represented by each unit will be
decreased. As of the Date of Deposit, Units in the Trust represent an
undivided interest in the principal and net income of the Trust in the ratio
of one hundred Units for the indicated initial aggregate value of Securities
in the Trust on the initial Date of Deposit as is set forth in the Summary of
Essential Information (see "The Trust--Organization" in Part B) (For the
specific number of Units in the Trust as of the initial Date of Deposit, see
"Summary of Essential Information" in this Part A).
The DJIA Strategic Ten. The yield for each security was calculated by
annualizing the last quarterly or semi-annual ordinary dividend distributed
and dividing the result by the market value of the Security one business day
prior to the initial Date of Deposit. This formula (an objective
determination) served as the basis for the Sponsor's selection of the DJIA
Strategic Ten. The companies represented in the Trust are some of the most
well-known and highly capitalized companies in America. The Securities were
selected irrespective of any research recommendation by the Sponsor. Investing
in the stocks of the DJIA may be effective as well as conservative because
regular dividends are common for established companies and dividends have
accounted for a substantial portion of the total return on stocks of the DJIA
as a group.
Although Equity Strategic Ten Portfolios were not available until
this year, during the last 20 years, the strategy of investing in
approximately equal values of these stocks each year generally would have
yielded a higher total return than an investment in all 30 stocks which make
up the DJIA. The following table shows the hypothetical performance of
investing approximately equal amounts in each of the DJIA Strategic Ten (but
not any QUILTS Equity Strategic Ten Series) at the beginning of each year and
rolling over the proceeds. They do not reflect sales charges, commissions or
taxes. These results represent past performance of the DJIA Strategic Ten, and
should not be considered indicative of future results of the Trust. The DJIA
Strategic Ten underperformed the DJIA in certain years. Also, investors in the
Trust may not realize as high a total return as on a direct investment in the
Strategic Ten since the Trust has sales charges and expenses and may not be
fully invested at all times. Unit prices fluctuate with the value of the
underlying stocks, and there is no assurance that dividends on these stocks
will be paid or that the Units will appreciate in value.
The following table compares the actual performance of the DJIA and
approximately equal values of the DJIA Strategic Ten in each of the past 20
years, as of December 31 in each of these years:
A-4
324120.3
<PAGE>
<TABLE>
<CAPTION>
COMPARISON OF DIVIDENDS, APPRECIATION AND TOTAL RETURN
DJIA Strategic Ten(1) Dow Jones Industrial Average (DJIA)
----------------------------------------------------------- -----------------------------------------------------------
Actual Dividend Actual Dividend
Year Appreciation(2) Yield (3) Total Return(4) Appreciation(2) Yield (3) Total Return(4)
<S> <C> <C> <C> <C> <C> <C>
1975 49.06% 7.96% 57.02% 38.32% 6.08% 44.40%
1976 27.69 7.12 34.81 17.86 4.86 22.72
1977 -6.75 5.92 -0.83 -17.27 4.56 -12.71
1978 -6.94 7.10 0.16 -3.15 5.84 2.69
1979 3.94 8.41 12.35 4.19 6.33 10.52
1980 17.83 8.54 26.37 14.93 6.48 21.41
1981 -0.94 8.41 7.47 -9.23 5.83 -3.40
1982 17.24 8.22 25.46 19.60 6.19 25.79
1983 30.22 8.24 38.46 20.30 5.38 25.68
1984 0.69 6.65 7.34 -3.76 4.82 1.06
1985 21.66 6.97 28.63 27.66 5.12 32.78
1986 23.76 0.81 34.57 22.58 4.33 26.91
1987 1.87 5.10 6.97 2.26 3.76 6.02
1988 15.71 5.79 21.50 11.85 4.10 15.95
1989 20.35 6.95 27.30 26.96 4.75 31.71
1990 13.00 5.06 -7.94 -4.34 3.77 -0.57
1991 28.16 5.21 33.37 20.32 3.61 23.93
1992 3.62 4.70 8.32 4.17 3.17 7.34
1993 22.71 4.21 26.92 13.72 3.00 16.72
1994 -0.19 4.08 3.89 2.14 2.81 4.95
</TABLE>
- --------------------
(1) The DJIA Strategic Ten any given year were selected by ranking the
dividend yields for each of the stocks in the DJIA as of the beginning of
that year, based upon an annualization of the last quarterly or
semi-annual regular dividend distribution (which would have been declared
in the preceding year) divided by that stock's market value on the first
trading day on the New York Stock Exchange in that year.
(2) Appreciation for the DJIA Strategic Ten is calculated by subtracting the
market value of these stocks as of the first trading day on the New York
Stock Exchange in a given year from the market value of those stocks as
the last trading day in that year, and dividing the result by the market
value of the stocks as of the first trading day in that year. Appreciation
for the DJIA is calculated by subtracting the opening value of the DJIA as
of the first trading dy in each year from the closing value of the DJIA as
of the last trading day in that year, and dividing the result by the
opening value of the DJIA as of the first trading day in that year.
(3) Actual Dividend Yield for the DJIA Strategic Ten is calculated by adding
the total dividends received on the stocks in the year and dividing the
result by the market value of the stocks as of the first trading day in
that year. Actual Dividend Yield for the DJIA is calculated by taking the
total dividends credited to the DJIA and dividing the result by the
opening value of the DJIA as of the first trading day in that year.
(4) Total Return represents the sum of Appreciation and Actual Dividend Yield.
Total Return does not take into consideration any reinvestment of dividend
income. From January 1975 through December 1994, the DJIA Strategic Ten
achieved an average annual total return of 18.55%, as compared to the
average annual total return of the DJIA which was 14.32%. These stocks
also had a higher average dividend yield in each of the last 20 years and
outperformed the DJIA in 14 of these years. When viewed for at least three
consecutive years, this strategy never lost money.
A-5
324120.3
<PAGE>
RISK FACTORS
An investment in Units of the Trust should be made with an
understanding of the risks inherent in any investment in the Securities
including, for common stocks, the risk that the financial condition of the
issuers of the Securities may become impaired or that the general condition of
the stock market may worsen (both of which may contribute directly to a
decrease in the value of the Securities and thus in the value of the Units).
The portfolio of the Trust is fixed and not "managed" by the Sponsor. All the
Securities in the Trust are liquidated during a 30 business day period at the
termination of the one year life of the Trust. Since the Trust will not sell
Securities in response to ordinary market fluctuation, but only at the Trust's
termination or to meet redemptions, the amount realized upon the sale of the
Securities may not be the highest price attained by an individual Security
during the life of the Trust. In addition, the Trust is considered to be
"concentrated" in stocks of companies deriving a substantial portion of their
income from the petroleum refining industry. Investment in this industry may
pose additional risks including the volatility of oil prices, the impact of
oil cartels, political uncertainty in the Middle East and increasing costs
associated with environmental damage caused by oil companies and compliance
with environmental regulations and legislation.
In connection with the deposit of Additional Securities subsequent to
the initial Date of Deposit, if cash (or a letter of credit in lieu of cash)
is deposited with instructions to purchase Securities, to the extent the price
of a Security increases or decreases between the deposit and the time the
Security is purchased, Units may represent less or more of that Security and
more or less of the other Securities in the Trust. In addition, brokerage fees
incurred in purchasing Securities with cash deposited with instructions to
purchase the Securities will be an expense of the Trust. Price fluctuations
during the period from the time of deposit to the time the Securities are
purchased, and payment of brokerage fees, will affect the value of every Unit
Holder's Units and the income per Unit received by the Trust.
The Sponsor cannot give any assurance that the business and
investment objectives of the issuers of the Securities will correspond with or
in any way meet the limited term objectives of the Trust. (See "Risk Factors"
in Part B of this Prospectus).
PUBLIC OFFERING PRICE
The Public Offering Price of each Unit of the Trust is equal to the
aggregate offering price of the Securities in the Trust divided by the number
of Units of the Trust outstanding, plus a sales charge of 2.75% of the Public
Offering Price or 2.828% of the net amount invested in Securities per Unit
(see "Summary of Essential Information"). Any cash held by the Trust will be
added to the Public Offering Price. For additional information regarding the
Public Offering Price, the description of dividend and principal
distributions, repurchase and redemption of Units and other essential
information regarding the Trust, see the "Summary of Essential Information"
herein. During the initial offering period orders involving at least 50,000
Units or $50,000 will be entitled to a volume discount from the Public
Offering Price. The Public Offering Price per Unit may vary on a daily basis
in accordance with fluctuations in the aggregate value of the underlying
Securities. (See "Public Offering" in Part B.) The price of a single Unit, or
any multiple thereof, is calculated by dividing the Public Offering Price per
1,000 Units by 1,000 and multiplying by the number of Units.
DISTRIBUTIONS
Distributions of dividends received, less expenses, will be made by
the Trust quarterly. The first dividend distributions will be made on the
First Distribution Date to all Unit Holders of record on the First Record Date
and thereafter distributions will be made quarterly on the 15th day of the
first month of every quarter (the "Quarterly Distribution Date"). (See "Rights
of Unit Holders -- Distributions" in
A-6
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<PAGE>
Part B. For the specific dates representing the First Distribution Date and
the First Record Date, see "Summary of Essential Information.")
MARKET FOR UNITS
The Sponsor, although not obligated to do so, intends to maintain a
secondary market for the Units of the Trust after the initial public offering
has been completed. The secondary market repurchase price will be based on the
market value of the Securities in the Trust portfolio. (See "Liquidity --
Sponsor Repurchase" for a description on how the secondary market repurchase
price will be determined.) If a market is not maintained a Unit Holder will be
able to redeem his or her Units with the Trustee (See Liquidity -- Trustee
Redemption" in Part B). The principal trading market for certain other
Securities may be in the over-the-counter market. As a result, the existence
of a liquid trading market for these Securities may depend on whether dealers
will make a market in these Securities. There can be no assurance of the
making or the maintenance of a market for any of the Securities contained in
the Trust portfolio or of the liquidity of the Securities in any markets made.
In addition, the Trust may be restricted under the Investment Company Act of
1940 from selling Securities to the Sponsor. The price at which the Securities
may be sold to meet redemptions and the value of the Units will be adversely
affected if trading markets for the Securities are limited or absent.
TERMINATION
During the 30 business day period prior to the Mandatory Termination
Date (the "Liquidation Period"), Securities will begin to be sold in
connection with the termination of the Trust and all Securities will be sold
or distributed by the Mandatory Termination Date. The Trustee may utilize the
services of the Sponsor for the sale of all or a portion of the Securities in
the Trust. The Sponsor will receive brokerage commissions from the Trust in
connection with such sales in accordance with applicable law. The Sponsor will
determine the manner, timing and execution of the sales of the underlying
Securities. Unit Holders may elect one of the three options in receiving their
terminating distributions. Unit Holders may elect: (1) to receive their pro
rata share of the underlying Securities in kind, if they own at least _______
Units, (2) to receive cash upon the liquidation of their pro rata share of the
underlying Securities, or (3) to invest the amount of cash they would have
received upon the liquidation of their pro rata share of the underlying
Securities in units of a future series of the Trust (if one is offered) at a
reduced sales charge. See "Trust Administration--Trust Termination" in Part B
for a description of how to select a termination distribution option.
The Sponsor will attempt to sell the Securities as quickly as it can
during the Liquidation Period without, in its judgment, materially adversely
affecting the market price of the Securities, but all of the Securities will
in any event be disposed of by the end of the Liquidation Period. The Sponsor
does not anticipate that the period will be longer than 30 business days, and
it could be as short as one day, depending on the liquidity of the Securities
being sold. The liquidity of any Security depends on the daily trading volume
of the Security and the amount that the Sponsor has available for sale on any
particular day.
It is expected (but not required) that the Sponsor will generally
follow the following guidelines in selling the Securities: for highly liquid
Securities, the Sponsor will generally sell Securities on the first day of the
Liquidation Period; for less liquid Securities, on each of the first two days
of the Liquidation Period, the Sponsor will generally sell any amount of any
underlying Securities at a price no less than 1/2 of one point under the last
closing sale price of those Securities. On each of the following two days, the
price limit will increase to one point under the last closing sale price.
After four days, the Sponsor intends to sell at least a fraction of the
remaining underlying Securities, the numerator of which is one and the
denominator of which is the total number of days remaining (including that
day) in the Liquidation Period, without any price restrictions.
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<PAGE>
During the Liquidation Period, Unit Holders who have not chosen to
receive distributions-in-kind will be at risk to the extent that Securities
are not sold; for this reason the Sponsor will be inclined to sell the
Securities in as short a period as they can without materially adversely
affecting the price of the Securities. Unit Holders should consult their own
tax advisers in this regard.
A-8
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Sponsor, Trustee, and Unit Holders of
Qualified Unit Investment Liquid Trust Series ("QUILTS")
Equity Strategic Ten, Series 1
We have audited the accompanying Statements of Condition and
Portfolios of Qualified Unit Investment Liquid Trust Series ("QUILTS"), Equity
Strategic Ten, Series 1 as of December __, 1995. These statements are the
responsibility of the Sponsor. Our responsibility is to express an opinion on
the Statements of Condition and Portfolios based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the Statements of Condition and
Portfolio are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the Statement
of Condition and Portfolio. An audit also includes assessing the accounting
principles used and significant estimates made by the Sponsor, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion. The irrevocable letters of
credit deposited in connection with the securities owned as of December __,
1995, pursuant to contracts to purchase, as shown in the Statements of
Condition and Portfolio, was confirmed to us by The Chase Manhattan Bank
(National Association), the Trustee.
In our opinion, the accompanying Statements of Condition and
Portfolio present fairly, in all material respects, the financial position of
Equity Strategic Ten, Series 1 as of December __, 1995 in conformity with
generally accepted accounting principles.
BDO SEIDMAN, LLP
New York, New York
December __, 1995
A-9
324120.3
<PAGE>
QUILTS
EQUITY STRATEGIC TEN
STATEMENT OF CONDITION
AS OF DATE OF DEPOSIT, DECEMBER , 1995
TRUST PROPERTY
SERIES 1
Investment in Securities--Sponsor's Contracts to
Purchase Underlying Securities Backed by Letter
of Credit (1)........................................ $
Accrued Income Receivable...............................
Organizational Costs(2).................................
Offering Costs(3)....................................... ---------
Total................................................... $
=========
INTEREST OF UNIT HOLDERS
Liability for Accrued Income to Date of Deposit......... $
Interest of Unit Holders-- Units of Fractional
Undivided Interest Outstanding
(Equity Strategic Ten, Series 1: Units)
Cost to Unit Holders(4)............................. ---------
Accrued Liabilities(2 and 3)........................ ---------
Less-Gross Underwriting Commissions(5).............. ---------
Net Amount Applicable to Unit Holders............... ---------
Total............................................... $
=========
- ---------------
(1) Aggregate cost to the Trust of the Securities listed in the Portfolio is
determined by the Trustee on the basis set forth under "Public
Offering--Offering Price" as of 4:00 p.m. on December , 1995. Irrevocable
letters of credit issued by The Chase Manhattan Bank in an aggregate
amount of $ have been deposited with the Trustee to cover the purchase of
$ of Securities pursuant to contracts to purchase such Securities.
(2) Organizational costs incurred by the Trust have been deferred and
will be amortized over the life of the Trust. The Trust will reimburse
the Sponsor for actual organizational costs incurred. To the extent the
Trust is larger or smaller, the actual dollar amount reimbursed may vary.
(3) Offering costs incurred by the Trust have been deferred and will be
amortized no later than the close of the period during which Units of
the Trust are first sold to the public.
(4) Aggregate public offering price computed on Units of Equity Strategic
Ten, Series 1 on the basis set forth under "Public Offering--Offering
Price" in Part B.
(5) Sales charge of 2.75% computed on Units of Equity Strategic Ten,
Series 1 on the basis set forth under "Public Offering Price" in Part
B.
A-10
324120.3
<PAGE>
<TABLE>
<CAPTION>
QUILTS
Equity Strategic Ten, Series 1
PORTFOLIO
AS OF DECEMBER __, 1995
Percentage Market Cost of
Portfolio Number of of Value Securities
No. Shares Name of Issuer (2) Fund (1) Per Share to Trust (3)
- ----------- ----------- ---------------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
% $ $
-------------
-------------
Total Investment in Securities
-------------
Accrued Income Receivable
--------- -------------
Grand Total % $
--------- =============
</TABLE>
FOOTNOTES TO PORTFOLIO
(1) Based on the cost of the Securities to the Trust.
(2) Forward contracts to purchase the Securities were entered into on . All
such contracts are expected to be settled on or about the First
Settlement Date of the Trust which is expected to be December , 1995.
(3) Evaluation of Securities by the Trustee was made on the basis of closing
sales prices at the Evaluation Time on the day prior to the Initial Date
of Deposit.
Additional information regarding the Trust is as follows:
Sponsor's Profit/Loss
Sponsor's (Initial Date
Purchase Price of Deposit)
-------------- -------------
$ $
A-11
324120.3
<PAGE>
UNDERWRITING SYNDICATES
The names and addresses of the Underwriters of the Units and their
participation in the offering of QUILTS Equity Strategic Ten are as follows:
Name and Address Series 1
================ ========
Sponsor
- -------
OCC Distributors
World Financial Center
200 Liberty Street
New York, NY 10281
Underwriters
- ------------
A-12
324120.3
<PAGE>
PROSPECTUS PART B
Part B of this Prospectus may not be Distributed
unless Accompanied by Part A
QUALIFIED UNIT INVESTMENT LIQUID TRUST SERIES ("QUILTS")
EQUITY STRATEGIC TEN, SERIES 1
THE TRUST
Organization. "QUILTS" is a "unit investment trust" designated as set
forth above in Part A. The Trust was created under the laws of the State of
New York pursuant to a Trust Indenture and Agreement (the "Trust Agreement")
dated the Date of Deposit between OCC Distributors, as Sponsor, and The Chase
Manhattan Bank (National Association), as Trustee.
The Portfolio of the Trust contains common stocks in the Dow Jones
Industrial Average ("DJIA") (which is not affiliated with the Sponsor) having
the highest dividend yield on the business day prior to the initial Date of
Deposit (the "DJIA Strategic Ten"). As used herein, the term "highest dividend
yield" means the yield for each Security calculated by annualizing the last
quarterly or semi-annual ordinary dividend distributed on that Security and
dividing the result by the market value of that Security on the business day
prior to the initial Date of Deposit. This rate is historical, and there is no
assurance that any dividends will be declared or paid in the future on the
Securities in the Trust. As used herein, the term "Securities" means the
common stocks initially deposited in the Trust and described under Portfolio
and any additional common stocks acquired and held by the Trust pursuant to
the provisions of the Indenture.
On the initial Date of Deposit, the Sponsor deposited with the
Trustee the Securities with an aggregate value as set forth in Part A and cash
or an irrevocable letter of credit issued by a major commercial bank in the
amount required for such purchases. Thereafter the Trustee, in exchange for
the Securities so deposited, delivered to the Sponsor the Certificates
evidencing the ownership of all Units of the Trust. The Sponsor has a limited
right to substitute other securities in the Trust portfolio in the event of a
failed contract. See "The Trust--Substitution of Securities". The Sponsor may
also, in certain circumstances, direct the Trustee to dispose of certain
Securities if the Sponsor believes that, because of market or credit
conditions, or for certain other reasons, retention of the Security would be
detrimental to Unit Holders. (See "Trust Administration--Portfolio
Supervision.")
As of the day prior to the initial Date of Deposit, a "Unit"
represents an undivided interest or pro rata share in the Securities of the
Trust in the ratio of one thousand Units for the indicated amount of the
aggregate market value of the Securities initially deposited in the Trust as
is set forth in the "Summary of Essential Information". To the extent that any
Units are redeemed by the Trustee, the fractional undivided interest or pro
rata share in such Trust represented by each unredeemed Unit will increase,
although the actual interest in such Trust represented by such fraction will
remain unchanged. Units will remain outstanding until redeemed upon tender to
the Trustee by Unit Holders, which may include the Sponsor or the
Underwriters, or until the termination of the Trust Agreement.
With the deposit of the Securities in the Trust on the initial Date
of Deposit, the Sponsor established a proportionate relationship among the
initial aggregate value of specified Securities in the Trust. During the 90
days subsequent to the initial Date of Deposit, the Sponsor may deposit
additional Securities in the Trust that are substantially similar to the
Securities already deposited in the Trust ("Additional Securities"), contracts
to purchase Additional Securities or cash (or a bank letter of credit in lieu
of cash) with instructions to purchase Additional Securities, in order to
create additional Units,
324120.3
<PAGE>
maintaining to the extent practicable the original proportionate relationship
of the number of shares of each Security in the Trust portfolio on the initial
Date of Deposit. These additional Units will each represent, to the extent
practicable, an undivided interest in the same number and type of securities
of identical issuers as are represented by Units issued on the initial Date of
Deposit. It may not be possible to maintain the exact original proportionate
relationship among the Securities deposited on the initial Date of Deposit
because of, among other reasons, purchase requirements, changes in prices, or
unavailability of Securities. The number and identity of Securities in the
Trust will be adjusted to reflect the disposition of Securities and/or the
receipt of a stock dividend, a stock split or other distribution with respect
to shares. Securities received in exchange for shares will be similarly
treated. The portfolio of the Trust may change slightly based on such
disposition and reinvestment. Substitute Securities may be acquired under
specified conditions when Securities originally deposited in the Trust are
unavailable (see "The Trust--Substitution of Securities" below). Units may be
continuously offered to the public by means of this Prospectus (see "Public
Offering--Distribution of Units") resulting in a potential increase in the
number of Units outstanding. As additional Units are issued by the Trust as a
result of the deposit of Additional Securities, the aggregate value of the
Securities in the Trust will be increased and the fractional undivided
interest in the Trust represented by each Unit will be decreased.
Objectives. The objective of the Trust is to maximize total return
through capital appreciation and current dividend income. The Trust will
invest for one year in approximately equal values of the ten (10) common
stocks in the DJIA having the highest dividend yield one business day prior to
the initial Date of Deposit. Investing in DJIA stocks with the highest
dividend yields may be effective in achieving the Trust's investment
objectives because regular dividends are common for established companies and
dividends have accounted for a substantial portion of the total return on DJIA
stocks as a group. Further, the Securities may appreciate or depreciate in
value, dependent upon the full range of economic and market influences
affecting corporate profitability, the financial condition of issuers and the
prices of equity securities in general and the Securities in particular.
Investors should note that the Trust's selection criteria were applied to the
Securities one business day prior to the initial Date of Deposit. Since the
Sponsors may deposit additional Securities in connection with the sale of
additional Units, the yields on these Securities may change subsequent to the
initial Date of Deposit. Therefore, there is no guarantee that the objective
of the Trust will be achieved.
The DJIA Strategic Ten. The Trust is a fixed diversified portfolio of
the ten common stocks in the Dow Jones Industrial Average having the highest
dividend yield one business day prior to the initial Date of Deposit. The
Trust seeks a higher total return than the DJIA by acquiring these ten
established, widely held stocks with the highest yield one business day before
the Trust is created, and holding them for about one year. There can be no
assurance that the dividend rates will be maintained. Reduction or elimination
of a dividend could adversely affect the stock price as well. Purchasing a
portfolio of these stocks as opposed to one or two can achieve a more
diversified holding. There is only one investment decision instead of ten,
four quarterly dividends instead of 40. An investment in the Trust can be
cost-efficient, avoiding the odd-lot costs of buying small quantities of
securities directly. Investment in a number of companies with high dividends
relative to their stock prices (usually because their stock prices are
depressed) is designed to increase the Trust's potential for higher returns.
The Trust's return will consist of a combination of capital appreciation and
current dividend income. The Trust will terminate in about one year, when
investors may choose to either receive the distribution in kind (if they own
at least ____ Units) in cash or reinvest in the next QUILTS Equity Strategic
Ten Series (if available) at a reduced sales charge.
The Dow Jones Industrial Average. Each of the Securities has been
taken from the DJIA. The DJIA comprises 30 common stocks chosen by the editors
of The Wall Street Journal as representative of the board market and of
American industry. The companies are major factors in their industries and
their stocks are widely held by individuals and institutional investors.
Changes in the
B-2
324120.3
<PAGE>
components of the DJIA are made entirely by the editors of The Wall Street
Journal without consultation with the companies, the stock exchange or any
official agency. For the sake of continuity, changes are made rarely. Most
substitutions have been the result of mergers, but from time to time, changes
may be made to achieve a better representation. The components of the DJIA may
be changed at any time for any reason. Any changes in the components of the
DJIA after the date of this Prospectus will not cause a change in the identity
of the common stocks included in the Trust Portfolio, inducing any additional
Securities deposited in the Trust.
The first DJIA, consisting of 12 stocks, was published in The Wall
Street Journal in 1896. The list grew to 20 stocks in 1916 and to 30 stocks on
October 1, 1928. Taking into account a number of name changes, 9 of the
original companies are still in the DJIA today. For two periods of 17
consecutive years each, there were no changes to the list: March 14, 1939 -
July 1956 and June 1, 1959 - August 6, 1976.
List as of October 1, 1928 Current List
- -------------------------- ------------
Allied Chemical AT&T Corporation
American Can Allied Signal
American Smelting Aluminum Company of America
American Sugar American Express Company
American Tobacco Bethlehem Steel Corporation
Atlantic Refining Boeing Company
Bethlehem Steel Corporation Caterpillar Inc.
Chrysler Corporation Chevron Corporation
General Electric Company Coca-Cola Company
General Motors Corporation Walt Disney Company
General Railway Signal E.I. du Pont de Nemours & Company
Goodrich Eastman Kodak Company
International Harvester Exxon Corporation
International Nickel General Electric Company
Mack Trucks General Motors Corporation
Nash Motors Goodyear Tire & Rubber Company
North American International Business Machines Corporation
Paramount Publix International Paper Company
Postum, Inc. McDonald's Corporation
Radio Corporation of America (RCA) Merck & Company, Inc.
Sears, Roebuck & Company Minnesota Mining & Manufacturing Company
Standard Oil of New Jersey J.P. Morgan & Company, Inc.
Texas Corporation Phillip Morris Companies, Inc.
Texas Gulf Sulphur Proctor & Gamble Company
Union Carbide Corporation Sears, Roebuck & Company
United States Steel Company Texaco, Inc.
Victor Talking Machine Union Carbide Corporation
Westinghouse Electric Corporation United Technologies Corporation
Woolworth Corporation Westinghouse Electric Corporation
Wright Aeronautical Woolworth Corporation
Portfolio. The Trust consists of those Securities listed in the
"Portfolio" in Part A (or contracts to purchase such Securities together with
an irrevocable letter or letters of credit for the purchase of such contracts)
and Additional Securities deposited upon the creation of additional Units as
set forth above and Substitute Securities acquired by the Trust as long as
such Securities may continue to be held from time to time in the Trust
together with uninvested cash realized from the
B-3
324120.3
<PAGE>
disposition of Securities. Because certain of the Securities from time to time
may be sold under certain circumstances, as described (see "Trust
Administration"), no assurance can be given that the Trust will retain for any
length of time its present size and composition. The Trustee has not
participated and will not participate in the selection of Securities for the
Trust, and neither the Sponsor nor the Trustee will be liable in any way for
any default, failure or defect in any Securities.
All of the Securities are publicly traded on the New York Stock
Exchange. The contracts to purchase Securities deposited initially in the
Trust are expected to settle in three business days, in the ordinary manner
for such Securities. Settlement of the contracts for Securities is thus
expected to take place prior to the settlement of purchase of Units on the
initial Date of Deposit.
RISK FACTORS
Fixed Portfolio. The value of the Units will fluctuate depending on
all the factors that have an impact on the economy and the equity markets.
These factors similarly impact on the value of a Portfolio Security's issuer
and the ability of such an issuer to distribute dividends. The Trust is not a
"managed registered investment company" and Securities will not be sold by the
Trustee as a result of ordinary market fluctuations. Unlike a managed
investment company in which there may be frequent changes in the portfolio of
securities based upon economic, financial and market analyses, securities of a
unit investment trust, such as the Trust, are not subject to such frequent
changes based upon continuous analysis. However, the Sponsor may direct the
disposition by the Trustee of Securities upon the occurrence of certain
events. Some of the Securities in the Trust may also be owned by other clients
of the Sponsor and its affiliates. However, because these clients may have
differing investment objectives, the Sponsor may sell certain Securities from
those accounts in instances where a sale by the Trust would be impermissible,
such as to maximize return by taking advantage of market fluctuations. (See
"Trust Administration--Portfolio Supervision" below.) Potential investors also
should be aware that the Sponsor may change its views as to the investment
merits of any of the Securities during the life of the Trust and therefore
should consult their own financial advisers with regard to a purchase of
Units. In addition, investors should be aware that the Sponsor, and its
affiliates, currently act and will continue to act as investment adviser for
managed investment companies and managed private accounts that may have
similar or different investment objectives from the Trust. Some of the
Securities in the Trust may also be owned by these other clients of the
Sponsor and its affiliates. However, because these clients have "managed"
portfolios and may have differing investment objectives, the Sponsor may sell
certain Securities from those accounts in instances where a sale by the Trust
would be impermissible, such as to maximize return by taking advantage of
market fluctuation. Investors should consult with their own financial advisers
prior to investing in the Trust to determine its suitability. (See "Trust
Administration--Portfolio Supervision.") All the Securities in the Trust are
liquidated or distributed during a 30 business day period at the termination
of the one-year life of the Trust. Since the Trust will not sell Securities in
response to ordinary market fluctuation, but only at the Trust's termination
or upon the occurrence of certain events, the amount realized upon the sale of
the Securities may not be the highest price attained by an individual Security
during the life of the Trust.
Additional Securities. Investors should be aware that in connection
with the creation of additional Units subsequent to the initial Date of
Deposit, the Sponsor may deposit Additional Securities, contracts to purchase
Additional Securities or cash (or letter of credit in lieu of cash) with
instructions to purchase Additional Securities, in each instance maintaining
the original proportionate relationship, subject to adjustment under certain
circumstances, of the numbers of shares of each Security in the Trust. To the
extent the price of a Security increases or decreases between the time cash is
deposited with instructions to purchase the Security at the time the cash is
used to purchase the Security, Units may represent less or more of that
Security and more or less of the other Securities in the Trust. In addition,
brokerage fees (if any) incurred in purchasing Securities with cash deposited
B-4
324120.3
<PAGE>
with instructions to purchase the Securities will be an expense of the Trust.
Price fluctuations between the time of deposit and the time the Securities are
purchased, and payment of brokerage fees, will affect the value of every Unit
Holder's Units and the Income per Unit received by the Trust. In particular,
Unit Holders who purchase Units during the initial offering period would
experience a dilution of their investment as a result of any brokerage fees
paid by the Trust during subsequent deposits of Additional Securities
purchased with cash deposited. In order to minimize these effects, the Trust
will try to purchase Securities as near as possible to the Evaluation Time or
at prices as close as possible to the prices used to evaluate Trust Units at
the Evaluation Time.
Common Stock. Since the Trust contains common stocks of domestic
issuers, an investment in Units of the Trust should be made with an
understanding of the risks inherent in any investment in common stocks
including the risk that the financial condition of the issuers of the
Securities may become impaired or that the general condition of the stock
market may worsen (both of which may contribute directly to a decrease in the
value of the Securities and thus in the value of the Units). Additional risks
include risks associated with the right to receive payments from the issuer
which is generally inferior to the rights of creditors of, or holders of debt
obligations or preferred stock issued by, the issuer. Holders of common stocks
have a right to receive dividends only when, if, and in the amounts declared
by the issuer's board of directors and to participate in amounts available for
distribution by the issuer only after all other claims on the issuer have been
paid or provided for. By contrast, holders of preferred stocks usually have
the right to receive dividends at a fixed rate when and as declared by the
issuer's board of directors, normally on a cumulative basis. Dividends on
cumulative preferred stock must be paid before any dividends are paid on
common stock and any cumulative preferred stock dividend which has been
omitted is added to future dividends payable to the holders of such cumulative
preferred stock. Preferred stocks are also usually entitled to rights on
liquidation which are senior to those of common stocks. For these reasons,
preferred stocks generally entail less risk than common stocks.
Moreover, common stocks do not represent an obligation of the issuer
and therefore do not offer any assurance of income or provide the degree of
protection of debt securities. The issuance of debt securities or even
preferred stock by an issuer will create prior claims for payment of
principal, interest and dividends which could adversely affect the ability and
inclination of the issuer to declare or pay dividends on its common stock or
the economic interest of holders of common stock with respect to assets of the
issuer upon liquidation or bankruptcy. Further, unlike debt securities which
typically have a stated principal amount payable at maturity (which value will
be subject to market fluctuations prior thereto), common stocks have neither
fixed principal amount nor a maturity and have values which are subject to
market fluctuations for as long as the common stocks remain outstanding.
Common stocks are especially susceptible to general stock market movements and
to volatile increases and decreases in value as market confidence in and
perceptions of the issuers change. These perceptions are based on
unpredictable factors including expectations regarding government, economic,
monetary and fiscal policies, inflation and interest rates, economic expansion
or contraction, and global or regional political, economic or banking crises.
The value of the common stocks in the Trust thus may be expected to fluctuate
over the life of the Trust to values higher or lower than those prevailing on
the initial Date of Deposit.
Petroleum Refining Companies. The Portfolio may be considered to be
concentrated in common stocks of companies engaged in refining and marketing
oil and related products. According to the U.S. Department of Commerce, the
factors which will most likely shape the industry to 1996 and beyond include
the price and availability of oil from the Middle East, changes in United
States environmental policies and the continued decline in U.S. production of
crude oil. Possible effects of these factors may be increased U.S. and world
dependence on oil from the Organization of Petroleum Exporting Countries
("OPEC") and highly uncertain and potentially more volatile oil prices and a
higher rate of growth for natural gas production than for other fuels. Factors
which the Sponsor believes may
B-5
324120.3
<PAGE>
increase the profitability of oil and petroleum operations include increasing
demand for oil and petroleum products as a result of the continued increases
in annual miles driven and the improvement in refinery operating margins
caused by increases in average domestic refinery utilization rates. The
existence of surplus crude oil production capacity and the willingness to
adjust production levels are the two principal requirements for stable crude
oil markets. Without excess capacity, supply disruptions in some countries
cannot be compensated for by others. Surplus capacity in Saudi Arabia and a
few other countries and the utilization of that capacity during the Persian
Gulf crisis prevented severe market disruption. Although unused capacity can
contribute to market stability, it ordinarily creates pressure to overproduce
and contributes to market uncertainty. The likely restoration of a large
portion of Kuwait and Iraq's production and export capacity over the next few
years could lead to such a development in the absence of substantial growth in
world oil demand. Formerly, OPEC members attempted to exercise control over
production levels in each country through a system of mandatory production
quotas. As a result of the crisis in the Middle East, the mandatory system has
since been replaced with a voluntary system. Production under the new system
has had to be curtailed on at least one occasions as a result of weak prices,
even in the absence of supplies from Iraq. The pressure to deviate from
mandatory quotas, if they are reimposed, is likely to be substantial and could
lead to a weakening of prices. In the longer term, additional capacity and
production will be required to accommodate the expected increases in world oil
demand and to compensate for expected sharp drops in U.S. crude oil production
and exports from the former Soviet Union. Only a few OPEC countries,
particularly Saudi Arabia, have the petroleum reserves that will allow the
required increase in production capacity to be attained. Given the large-scale
financing that is required, the prospect that such expansion will occur soon
enough to meet the increased demand is uncertain.
Declining U.S. crude oil production will likely lead to increased
dependence on OPEC oil, putting refiners at risk of continued and
unpredictable supply disruptions. Increasing sensitivity to environmental
concerns will also pose serious challenges to the industry over the coming
decade. Refiners are likely to be required to make heavy capital investments
and make major production adjustments in order to comply with increasingly
stringent environmental legislation, such as the 1990 amendments to the Clean
Air Act. If the cost of these changes is substantial enough to cut deeply into
profit, smaller refiners may be forced out of the industry entirely. Moreover,
lower consumer demand due to increases in energy efficiency and conservation,
due to gasoline reformulations that call for less crude oil, due to warmer
winters or due to a general slowdown in economic growth in this country and
abroad, could negatively affect the price of oil and the profitability of oil
companies. Cheaper oil could also decrease demand for natural gas. However, no
assurance can be given that the demand for or the price of oil will increase
or that if either anticipated increase does take place, it will not be marked
by great volatility.
In addition, any future scientific advances concerning new sources of
energy and fuels or legislative changes relating to the energy industry or the
environment could have a negative impact on the petroleum product or natural
gas industry. While legislation has been enacted to deregulate certain aspects
of the oil industry, no assurances can be given that new or additional
regulations will not be adopted. Each of the problems referred to could
adversely affect the financial stability of the issuers of any petroleum
industry stocks in the Trust.
Legislation. From time to time Congress considers proposals to reduce
the rate of the dividends-received deductions. Enactment into law of a
proposal to reduce the rate would adversely affect the after-tax return to
investors who can take advantage of the deduction. Unit Holders are urged to
consult their own tax advisers. Further, at any time after the Initial Date of
Deposit, legislation may be enacted, with respect to the Securities in the
Trust or the issuers of the Securities. Changing approaches to regulation,
particularly with respect to the environment or with respect to the petroleum
industry, may have a negative impact on certain companies represented in the
Trust. There can be no
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assurance that future legislation, regulation or deregulation will not have a
material adverse effect on the Trust or will not impair the ability of the
issuers of the Securities to achieve their business goals.
PUBLIC OFFERING
Offering Price. The Public Offering Price per 1,000 Units of the
Trust is equal to the aggregate value of the underlying Securities (the price
at which they could be directly purchased by the public assuming they were
available) in the Trust divided by the number of Units outstanding times 1,000
plus a sales charge of 2.75% of the Public Offering Price per 1,000 Units or
2.828% of the net amount invested in Securities per 1,000 Units including,
during the initial public offering period. In addition, the net amount
invested in Securities will involve a proportionate share of amounts in the
Income Account and Principal Account, if any. The Public Offering Price can
vary on a daily basis from the amount stated on the cover of this Prospectus
in accordance with fluctuations in the market value of the Securities and the
price to be paid by each investor will be computed as of the date the Units
are purchased.
The aggregate value of the Securities is determined in good faith by
the Trustee on each "Business Day" as defined in the Indenture in the
following manner: because the Securities are listed on a national securities
exchange, this evaluation is based on the closing sale prices on that exchange
as of the Evaluation Time (unless the Trustee deems these prices inappropriate
as a basis for valuation). If the Trustee deems these prices inappropriate as
a basis for evaluation, then the Trustee may utilize, at the Trust's expense,
an independent evaluation service or services to ascertain the values of the
Securities. The independent evaluation service shall use any of the following
methods, or a combination thereof, which it deems appropriate: (a) on the
basis of current bid prices for comparable securities, (b) by appraising the
value of the Securities on the bid side of the market or by such other
appraisal deemed appropriate by the Trustee, or (c) by any combination of the
above, each as of the Evaluation Time.
Volume and Other Discounts. Units of the Trust are available to Unit
Holders at a volume discount ("Volume Discount") from the Public Offering
Price during the initial public offering. Volume Discount will result in a
reduction of the sales charge applicable to such purchases. Furthermore,
Volume Discount applies to the cumulative Units purchased by a Unit Holder
during a period of 60 days from the initial date of sale of the Units to such
Unit Holder. Units purchased by the same purchasers in separate transactions
during the 60-day period will be aggregated for purposes of determining if
such purchaser is entitled to a Volume Discount provided that such purchaser
must own at least the lesser of either (i) the required number of Units, or
(ii) the required dollar amount at the Public Offering Price, at the time such
determination is made. Units held in the name of the spouse of the purchaser
or in the name of a child of the purchaser under 21 years of age are deemed
for the purposes hereof to be registered in the name of the purchaser. Volume
Discount is also applicable to a trustee or other fiduciary purchasing
securities for a single trust estate or single fiduciary account. As a result
of such discounts, units are sold to dealers/agents at prices which represent
a concession as reflected below. The Sponsor reserves the right to change
these discounts from time to time. The amount of Volume Discount, the
approximate sales charge and the dealer concession applicable to such
purchases are as follows:
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<TABLE>
<CAPTION>
Volume Discount
from Public Approximate Approximate
Number of Units Sales Offering per Reduced Dealer/Agent
or Dollar Amounts Charge Unit Sales Charge Concession
----------------- ------ ------------ ------------ ----------
<S> <C> <C> <C> <C>
Less than 50,000 2.75% - - 1.85%
50,000 but less than 100,000 % % % %
100,000 but less than 150,000 % % % %
150,000 and above* % % % %
</TABLE>
Net Asset Value Purchases. No sales charge will be applied to the
following transactions: purchases by persons who for at least 90 days have
been directors, trustees, officers or full-time employees of any of (i) the
funds distributed by OCC Distributors, (ii) Op Cap Advisors and (iii) OCC
Distributors, or their affiliates, their immediate relatives or any trust,
pension, profit sharing or other benefit plan for any of them; purchases by
any account advised by Oppenheimer Capital, the parent of Op Cap Advisors; and
purchases by an employee of a broker-dealer having a dealer or servicing
agreement with OCC Distributors and/or a participating member of the
Oppenheimer Capital brokered CD selling group or of a bank or financial
intermediary currently offering QUILTS to its customers.
Distribution of Units. During the initial offering period (i) Units
issued on the initial Date of Deposit and (ii) Additional Units issued after
such date in respect of additional deposits of Securities, will be distributed
by the Sponsor and dealers at the Public Offering Price. The initial offering
period in each case is thirty days unless extended by the Sponsor for Units
specified in (i) and (ii) in the preceding sentence. In addition, Units may be
distributed through dealers who are members of the National Association of
Securities Dealers, Inc. or other financial intermediaries as permitted by
law. Certain banks and thrifts will make Units of the Trust available to their
customers on an agency basis. A portion of the sale charge paid by their
customers is retained by or remitted to the banks. Under the Glass-Steagall
Act, banks are prohibited from underwriting Units; however, the Glass-Steagall
Act does permit certain agency transactions and the banking regulators have
indicated that these particular agency transactions are permitted under such
Act. In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law.
The Sponsor intends to qualify the Units of the Trust for sale in the
following states: ____________________________________________________________.
Additional states may be added from time to time.
The Sponsor may provide additional concessions to its affiliates in
connection with the distribution of the Units. The Sponsor reserves the right
to change the dealers concession at any time. Such Units may then be
distributed to the public by the dealers at the Public Offering Price then in
effect. The Sponsor reserves the right to reject, in whole or in part, any
order for the purchase of Units. Also, the Sponsor in its discretion may from
time to time pursuant to objective criteria established by the Sponsor pay
fees to qualifying Underwriters, brokers, dealers, banks and/or others for
certain services or activities which are primarily intended to result in sales
of Units of the Trust. Such payments are made by the Sponsor out of its own
assets and out of the assets of the Trust. These programs will not change the
price Unit Holders pay for their Units or the amount that the Trust will
receive from the Units sold.
- --------
* For any transactions of 150,000 Units or more or over $150,000, the
Sponsor intends to negotiate the applicable sales charge and such charge
will be disclosed to any such purchaser.
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Sponsor's Profits. The Sponsor will receive a gross underwriting
commission (although the net commission retained will be lower because of the
concession paid to dealers) equal to 2.75% of the Public Offering Price per
Unit (equivalent to 2.828% of the net amount invested in the Securities) for
the Trust. Additionally, the Sponsor may realize a profit on the deposit of
the Securities in the Trust representing the difference between the cost of
the Securities to the Sponsor and the cost of the Securities to the Trust (see
"Portfolio" in Part A). The Sponsor may realize profits or sustain losses with
respect to Securities deposited in the Trust which were acquired from
underwriting syndicates of which it was a member.
The Sponsor may have participated as a sole underwriter or manager,
co-manager or member of underwriting syndicates from which some of the
aggregate principal amount of the Securities were acquired for the Trust in
the amounts set forth in Part A.
During the initial offering period and thereafter to the extent
Additional Units continue to be issued and offered for sale to the public the
Sponsor may also realize profits or sustain losses as a result of fluctuations
after the initial Date of Deposit in the offering prices of the Securities and
hence in the Public Offering Price received by the Sponsor for the Units.
Cash, if any, made available to the Sponsor prior to settlement date for the
purchase of Units may be used in the Sponsor's business subject to the
limitations of 17 CFR 240.15c3-3 under the Securities Exchange Act of 1934,
and may be of benefit to the Sponsor.
[Both upon acquisition of Securities and termination of the Trust,
the Trustee may utilize the services of the Sponsor for the purchase or sale
of all or a portion of the Securities in the Trust. The Sponsor will receive
brokerage commissions from the Trust in connection with such purchases and
sales in accordance with applicable law.]
In maintaining a market for the Units (see "Liquidity--Sponsor
Repurchase") the Sponsor will realize profits or sustain losses in the amount
of any difference between the price at which they buy Units and the price at
which they resell such Units.
Comparison of Public Offering Price, Sponsor's Repurchase Price and
Redemption Price. Although the Public Offering Price of Units of the Trust
will be determined on the basis of the current offering prices of the
Securities in the Trust, the value at which Units may be redeemed or sold in
the secondary market will be determined on the basis of the current bid prices
of such Securities. On the initial Date of Deposit, the Public Offering Price
and the Sponsor's Initial Repurchase Price per Unit of the Trust (based on the
offering side evaluation of the Securities in the Trust) each exceeded the
Redemption Price and the Sponsor's secondary market Repurchase Price per Unit
(based upon the current bid side evaluation of the Securities in the Trust) by
the amounts shown under "Summary of Essential Information" for the Trust in
Part A of this Prospectus. On the initial Date of Deposit, the bid side
evaluation for the Trust was lower than the offering side evaluation for the
Trust by the amount set forth in Part A. For this reason, among others
(including fluctuations in the market prices of such Securities and the fact
that the Public Offering Price includes the applicable sales charge), the
amount realized by a Unit Holder upon any redemption or Sponsor repurchase of
Units may be less than the price paid for such Units. See "Liquidity--Sponsor
Repurchase."
RIGHTS OF UNIT HOLDERS
Certificates. Ownership of Units of the Trust is evidenced by
registered Certificates executed by the Trustee and the Sponsor. Certificates
may be issued in denominations of one thousand or more Units. Certificates are
transferable by presentation and surrender to the Trustee properly endorsed
and/or accompanied by a written instrument or instruments of transfer.
Although no such charge is presently made or contemplated, the Trustee may
require a Unit Holder to pay $2.00 for each
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Certificate reissued or transferred and any governmental charge that may be
imposed in connection with each such transfer or interchange. Mutilated,
destroyed, stolen or lost Certificates will be replaced upon delivery of
satisfactory indemnity and payment of expenses incurred.
Distributions. Dividends and interest received by the Trust are
credited by the Trustee to an Income Account for the Trust. Other receipts,
including the proceeds of Securities disposed of, are credited to a Principal
Account for the Trust.
Distributions to each Unit Holder from the Income Account are
computed as of the close of business on each Record Date for the following
Distribution Date. Distributions from the Principal Account of the Trust
(other than amounts representing failed contracts, as previously discussed)
will be computed as of each Record Date, and will be made to the Unit Holders
of the Trust on or shortly after the Distribution Date. Proceeds representing
principal received from the disposition of any of the Securities between a
Record Date and a Distribution Date which are not used for redemptions of
Units will be held in the Principal Account and not distributed until the next
Distribution Date. Persons who purchase Units between a Record Date and a
Distribution Date will receive their first distribution on the Distribution
Date following the first Record Date on which they are a Unit Holder of
record.
As of each month the Trustee will deduct from the Income Account of
the Trust, and, to the event funds are not sufficient therein, from the
Principal Account of the Trust, amounts necessary to pay the expenses of the
Trust (as determined on the basis set forth under "Trust Expenses and
Charges"). The Trustee also may withdraw from said accounts such amounts, if
any, as it deems necessary to establish a reserve for any applicable taxes or
other governmental charges that may be payable out of the Trust. Amounts so
withdrawn shall not be considered a part of such Trust's assets until such
time as the Trustee shall return all or any part of such amounts to the
appropriate accounts. In addition, the Trustee may withdraw from the Income
and Principal Accounts such amounts as may be necessary to cover redemptions
of Units by the Trustee.
The dividend distribution per 1,000 Units cannot be estimated and
will change and may be reduced as Securities are redeemed, exchanged or sold,
or as expenses of the Trust fluctuate. No distribution need be made from the
Principal Account until the balance therein is an amount sufficient to
distribute $1.00 per 1,000 Units.
Records. The Trustee shall furnish Unit Holders in connection with
each distribution a statement of the amount of dividends and interest, if any,
and the amount of other receipts, if any, which are being distributed,
expressed in each case as a dollar amount per 1,000 Units. Within a reasonable
time after the end of each calendar year the Trustee will furnish to each
person who at any time during the calendar year was a Unit Holder of record, a
statement showing (a) as to the Income Account: dividends, interest and other
cash amounts received, amounts paid for purchases of Substitute Securities and
redemptions of Units, if any, deductions for applicable taxes and fees and
expenses of the Trust, and the balance remaining after such distributions and
deductions, expressed both as a total dollar amount and as a dollar amount
representing the pro rata share of each 1,000 Units outstanding on the last
business day of such calendar year; (b) as to the Principal Account: the dates
of disposition of any Securities and the net proceeds received therefrom,
deductions for payments of applicable taxes and fees and expenses of the
Trust, amounts paid for purchases of Substitute Securities and redemptions of
Units, if any, and the balance remaining after such distributions and
deductions, expressed both as a total dollar amount and as a dollar amount
representing the pro rata share of each 1,000 Units outstanding on the last
business day of such calendar year; (c) a list of the Securities held, a list
of Securities purchased, sold or otherwise disposed of during the calendar
year and the number of Units outstanding on the last business day of such
calendar year; (d) the Redemption Price per 1,000 Units based upon the last
computation thereof made during such calendar year; and (e) amounts actually
distributed to Unit Holders during such calendar year from the Income and
Principal
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<PAGE>
Accounts, separately stated, of the Trust, expressed both as total dollar
amounts and as dollar amounts representing the pro rata share of each 1,000
Units outstanding on the last business day of such calendar year.
The Trustee shall keep available for inspection by Unit Holders at
all reasonable times during usual business hours, books of record and account
of its transactions as Trustee, including records of the names and addresses
of Unit Holders, Certificates issued or held, a current list of Securities in
the portfolio and a copy of the Trust Agreement.
Expenses and Charges.
Initial Expenses
All or a portion of the expenses incurred in creating and
establishing the Trust, including the cost of the initial preparation and
execution of the Trust Agreement, the initial fees and expenses of the
Trustee, legal expenses and other actual out-of-pocket expenses, will be paid
by the Trust and amortized over the life of the Trust. All advertising and
selling expenses, as well as any organizational expenses not paid by the
Trust, will be borne by the Sponsors at no cost to the Trust.
Fees
The Sponsor will not charge the Trust a fee for their services as
such. (See "Sponsor's Profits.")
The Sponsor will receive for portfolio supervisory services to the
Trust an Annual Fee in the amount set forth under "Summary of Essential
Information" in Part A. The Sponsor's fee may exceed the actual cost of
providing portfolio supervisory services for the Trust, but at no time will
the total amount received for portfolio supervisory services rendered to all
series in any calendar year exceed the aggregate cost to the Sponsor of
supplying such services in such year. (See "Portfolio Supervision.")
The Trustee will receive, for its ordinary recurring services to the
Trust, an annual fee in the amount set forth under "Summary of Essential
Information" in Part A. For a discussion of the services performed by the
Trustee pursuant to its obligations under the Trust Agreement, see "Trust
Administration" and "Rights of Unit Holders".
The Trustee's fees applicable to a Trust are payable from the Income
Account of the Trust to the extent funds are available and then from the
Principal Account. Both fees may be increased without approval of the Unit
Holders by amounts not exceeding proportionate increases in consumer prices
for services as measured by the United States Department of Labor's Consumer
Price Index entitled "All Services Less Rent."
Other Charges
The following additional charges are or may be incurred by the Trust:
all expenses (including audit and counsel fees) of the Trustee incurred and
advances made in connection with its activities under the Trust Agreement,
including annual audit expenses of independent public accountants selected by
the Sponsor (so long as the Sponsor maintains a secondary market, the Sponsor
will bear any audit expense which exceeds 50 cents per 1,000 Units), the
expenses and costs of any action undertaken by the Trustee to protect the
Trust and the rights and interests of the Unit Holders; fees of the Trustee
for any extraordinary services performed under the Trust Agreement;
indemnification of the Trustee for any loss or liability accruing to it
without gross negligence, bad faith
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<PAGE>
or willful misconduct on its part, arising out of or in connection with its
acceptance or administration of the Trust; indemnification of the Sponsor for
any losses, liabilities and expenses incurred in acting as sponsors of the
Trust without gross negligence, bad faith or willful misconduct on its part;
and all taxes and other governmental charges imposed upon the Securities or
any part of the Trust (no such taxes or charges are being levied, made or, to
the knowledge of the Sponsor, contemplated). The above expenses, including the
Trustee's fees, when paid by or owing to the Trustee are secured by a first
lien on the Trust to which such expenses are charged. In addition, the Trustee
is empowered to sell the Securities in order to make funds available to pay
all expenses.
TAX STATUS
The following is a general discussion of certain of the Federal
income tax consequences of the purchase, ownership and disposition of the
Units. The summary is limited to investors who hold the Units as "capital
assets" (generally, property held for investment) within the meaning of
Section 1221 of the Internal Revenue Code of 1986, as amended (the "Code").
Unit Holders should consult their tax advisers in determining the Federal,
state, local and any other tax consequences of the purchase, ownership and
disposition of Units.
In rendering the opinion set forth below, Battle Fowler LLP has
examined the Agreement, the final form of Prospectus dated the date hereof
(the "Prospectus") and the documents referred to therein, among others, and
has relied on the validity of said documents and the accuracy and completeness
of the facts set forth therein.
In the opinion of Battle Fowler LLP, special counsel for the Sponsor,
under existing law:
1. The Trust will be classified as a grantor trust for Federal income
tax purposes and not as a partnership or association taxable as a
corporation. Classification of the Trust as a grantor trust will cause
the Trust not to be subject to Federal income tax, and will cause the
Unit Holders of the Trust to be treated for Federal income tax purposes
as the owners of a pro rata portion of the assets of the Trust. All
income received by the Trust will be treated as income of the Unit
Holders in the manner set forth below.
2. The Trust is not subject to the New York State Franchise Tax on
Business Corporations or the New York City General Corporation Tax. For a
Unit Holder who is a New York resident, however, a pro rata portion of
all or part of the income of the Trust will be treated as the income of
the Unit Holder under the income tax laws of the State and City of New
York. Similar treatment may apply in other states.
3. During the 90-day period subsequent to the initial issuance date,
the Sponsor reserves the right to deposit additional Securities that are
substantially similar to those establishing the Trust. This retained
right falls within the guidelines promulgated by the Internal Revenue
Service ("IRS") and should not affect the taxable status of the Trust.
A taxable event will generally occur with respect to each Unit Holder
when the Trust disposes of a Security (whether by sale, exchange or
redemption) or upon the sale, exchange or redemption of Units by such Unit
Holder. The price a Unit Holder pays for his Units, including sales charges,
is allocated among his pro rata portion of each Security held by the Trust (in
proportion to the fair market values thereof on the date the Unit Holder
purchases his Units) in order to determine his initial cost for his pro rata
portion of each Security held by the Trust.
For Federal income tax purposes, a Unit Holder's pro rata portion of
dividends paid with respect to a Security held by a Trust are taxable as
ordinary income to the extent of such corporation's
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current and accumulated "earnings and profits" as defined by Section 316 of
the Code. A Unit Holder's pro rata portion of dividends paid on such Security
that exceed such current and accumulated earnings and profits will first
reduce a Unit Holder's tax basis in such Security, and to the extent that such
dividends exceed a Unit Holder's tax basis in such Security will generally be
treated as capital gain.
A distribution of Securities by the Trustee to a Unit Holder (or to
his agent, including the Sponsor) upon redemption of Units (or an exchange of
Units for Securities by the Unit Holder with the Sponsor) will not be a
taxable event to the Unit Holder or to other Unit Holders. The redeeming or
exchanging Unit Holder's basis for such Securities will be equal to his basis
for the same Securities (previously represented by his Units) prior to such
redemption or exchange, and his holding period for such Securities will
include the period during which he held his Units. A Unit Holder will have a
taxable gain or loss, which will be a capital gain or loss except in the case
of a dealer or a financial institution, when the Unit Holder (or his agent,
including the Sponsor) sells the Securities so received in redemption for
cash, when a redeeming or exchanging Unit Holder receives cash in lieu of
fractional shares, when the Unit Holder sells his Units for cash or when the
Trustee sells the Securities from the Trust. However, to the extent a Rollover
Unit Holder invests his redemption proceeds in units of an available series of
the QUILTS Equity Strategic Ten (a "Rollover QUILTS"), such Unit Holder
generally will not be entitled to a deduction for any losses recognized upon
the disposition of any Securities to the extent that such Unit Holder is
considered the owner of substantially identical securities under the grantor
trust rules described above as applied to such Unit Holder's ownership of
Units in a Rollover QUILTS, if such substantially identical securities were
acquired within a period ending 30 days after such disposition. If a loss is
incurred on the disposition of a Security and, during the period beginning 30
days before the disposition of such Security and ending 30 days after such
date, the taxpayer acquires, enters into a contract to acquire, or acquires an
option to acquire, substantially identical Securities, a tax loss is generally
not available.
A Unit Holder's portion of gain, if any, upon the sale, exchange or
redemption of Units or the disposition of Securities held by the Trust will
generally be considered a capital gain and will be long-term if the Unit
Holder has held his Units for more than one year. Individuals who realize
long-term capital gains may be subject to a reduced tax rate on such gains.
Such lower rate will be unavailable to those non-corporate Unit Holders who,
as of the Mandatory Termination Date (or earlier termination of the Trust),
have held their units for less than a year and a day. Similarly, with respect
to non-corporate Rollover Unit Holders, this lower rate will be unavailable
if, as of the beginning of the Liquidation Period, such Rollover Unit Holders
have held their shares for less than a year and a day. The deduction of
capital losses is subject to limitations. Tax rates may increase prior to the
time when Unit Holders may realize gains from the sale, exchange or redemption
of Units or Securities.
A Unit Holder's portion of loss, if any, upon the sale or redemption
of Units or the disposition of Securities held by the Trust will generally be
considered a capital loss and will be long-term if the Unit Holder has held
his Units for more than one year. Capital losses are deductible to the extent
of capital gains; in addition, up to $3,000 of capital losses of non-corporate
Unit Holders may be deducted against ordinary income.
Under Section 67 of the Code and the accompanying Regulations, a Unit
Holder who itemizes his deductions may also deduct his pro rata share of the
fees and expenses of the Trust, but only to the extent that such amounts,
together with the Unit Holder's other miscellaneous deductions, exceed 2% of
his adjusted gross income. The deduction of fees and expenses may also be
limited by Section 68 of the Code, which reduces the amount of itemized
deductions that are allowed for individuals with incomes in excess of certain
thresholds.
After the end of each calendar year, the Trustee will furnish to each
Unit Holder an annual statement containing information relating to the
dividends received by the Trust on the
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Securities, the gross proceeds received by the Trust from the disposition of
any Security, and the fees and expenses paid by the Trust. The Trustee will
also furnish annual information returns to each Unit Holder and to the
Internal Revenue Service.
A corporation that owns Units will generally be entitled to a 70%
dividends received deduction with respect to such Unit Holder's pro rata
portion of dividends received by the Trust from a domestic corporation under
Section 243 of the Code or from a qualifying foreign corporation under Section
245 of the Code (to the extent the dividends are taxable as ordinary income,
as discussed above) in the same manner as if such corporation directly owned
the Securities paying such dividends. However, a corporation owning Units
should be aware that Sections 246 and 246A of the Code impose additional
limitations on the eligibility of dividends for the 70% dividends received
deduction. These limitations include a requirement that stock (and therefore
Units) must generally be held at least 46 days (as determined under Section
246(c) of the Code). Moreover, the allowable percentage of the deduction will
be reduced from 70% if a corporate Unit Holder owns certain stock (or Units)
the financing of which is directly attributable to indebtedness incurred by
such corporation. Accordingly, Unit Holders should consult their tax adviser
in this regard. Recent legislative proposals if enacted would reduce the rate
of the dividends received deduction.
As discussed in the section "Termination", each Unit Holder may have
three options in receiving their termination distributions, which are (i) to
receive their pro rata share of the underlying Securities in kind, (ii) to
receive cash upon liquidation of their pro rata share of the underlying
Securities, or (iii) to invest the amount of cash they would receive upon the
liquidation of their pro rata share of the underlying Securities in units of a
future series of the Trust (if one is offered).
Entities that generally qualify for an exemption from Federal income
tax, such as many pension trusts, are nevertheless taxed under Section 511 of
the Code on "unrelated business taxable income." Unrelated business taxable
income is income from a trade or business regularly carried on by the
tax-exempt entity that is unrelated to the entity's exempt purpose. Unrelated
business taxable income generally does not include dividend or interest income
or gain from the sale of investment property, unless such income is derived
from property that is debt-financed or is dealer property. A tax-exempt
entity's dividend income from the Trust and gain from the sale of Units in the
Trust or the Trust's sale of Securities is not expected to constitute
unrelated business taxable income to such tax-exempt entity unless the
acquisition of the Unit itself is debt-financed or constitutes dealer property
in the hands of the tax-exempt entity.
Before investing in the Trust, the trustee or investment manager of
an employee benefit plan (e.g., a pension or profit sharing retirement plan)
should consider among other things (a) whether the investment is prudent under
the Employee Retirement Income Security Act of 1974 ("ERISA"), taking into
account the needs of the plan and all of the facts and circumstances of the
investment in the Trust; (b) whether the investment satisfies the
diversification requirement of Section 404(a)(1)(C) of ERISA; and (c) whether
the assets of the Trust are deemed "plan assets" under ERISA and the
Department of Labor regulations regarding the definition of "plan assets."
Prospective tax-exempt investors are urged to consult their own tax
advisers prior to investing in the Trust.
Retirement Plans
This Trust may be well suited for purchase by Individual Retirement
Accounts ("IRAs"), Keogh plans, pension funds and other qualified retirement
plans, certain of which are briefly described below. Generally, capital gains
and income received in each of the foregoing plans are exempt from Federal
taxation. All distributions from such plans are generally treated as ordinary
income but may,
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in some cases, be eligible for special 5 or 10 year averaging or tax-deferred
rollover treatment. Unit Holders in IRAs, Keogh plans and other tax-deferred
retirement plans should consult their plan custodian as to the appropriate
disposition of distributions. Investors considering participation in any of
these plans should review specific tax laws related thereto and should consult
their attorneys or tax advisers with respect to the establishment and
maintenance of any of these plans. These plans are offered by brokerage firms,
including the Sponsor of the Trust, and other financial institutions. Fees and
charges with respect to such plans may vary.
Retirement Plans for the Self-Employed--Keogh Plans. Units of the
Trust may be purchased by retirement plans established pursuant to
Self-Employed Individuals Tax Retirement Act of 1962 ("Keogh plans") for
self-employed individuals, partnerships or unincorporated companies. Qualified
individuals may generally make annual tax-deductible contributions up to the
lesser of 20% of annual compensation or $30,000 to Keogh plans. The assets of
the plan must be held in a qualified trust or other arrangement which meets
the requirements of the Code. Generally, there are penalties for premature
distributions from a plan before attainment of age 591/2, except in the case
of a participant's death or disability and certain other related
circumstances. Keogh plan participants may also establish separate IRAs (see
below) to which they may contribute up to an additional $2,000 per year
($2,250 in a spousal account).
Individual Retirement Account--IRA. Any individual (including one
covered by an employer retirement plan) can establish an IRA or make use of a
qualified IRA arrangement set up by an employer or union for the purchase of
Units of the Trust. Any individual can make a contribution in an IRA equal to
the lesser of $2,000 ($2,250 in a spousal account) or 100% of earned income;
such investment must be made in cash. However, the deductible amount an
individual may contribute will be reduced if the individual's adjusted gross
income exceeds $25,000 (in the case of a single individual), $40,000 (in the
case of married individuals filing a joint return) or $200 (in the case of a
married individual filing a separate return). A married individual filing a
separate return will not be entitled to any deduction if the individual is
covered by an employer-maintained retirement plan without regard to whether
the individual's spouse is an active participant in an employer retirement
plan. Unless nondeductible contributions were made in 1987 or a later year,
all distributions from an IRA will be treated as ordinary income but generally
are eligible for tax-deferred rollover treatment. It should be noted that
certain transactions which are prohibited under Section 408 of the Code will
cause all or a portion of the amount in an IRA to be deemed to be distributed
and subject to tax at that time. A participant's entire interest in an IRA
must be, or commence to be, distributed to the participant not later than the
April 1 following the taxable year during which the participant attains age
701/2. Taxable distributions made before attainment of age 591/2, except in
the case of the participant's death or disability or where the amount
distributed is part of a series of substantially equal periodic (at least
annual) payments that are to be made over the life expectancies of the
participant and his or her beneficiary, are generally subject to a surtax in
an amount equal to 10% of the distribution.
Corporate Pension and Profit-Sharing Plans. A pension or
profit-sharing plan for employees of a corporation may purchase Units of the
Trust.
LIQUIDITY
Sponsor Repurchase. The Sponsor, although not obligated to do so,
currently intends to maintain a secondary market for the Units and
continuously to offer to repurchase the Units. The Sponsor's secondary market
repurchase price after the initial public offering is completed, will be based
on the aggregate value of the Securities in the Trust portfolio and will be
the same as the redemption price. The aggregate value will be determined by
the Trustee on a daily basis after the initial public offering is completed
and computed on the basis set forth under "Liquidity--Trustee Redemption."
During the initial offering period, the Sponsor's repurchase price will be
based on the aggregate offering
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price of the Securities in the Trusts. Unit Holders who wish to dispose of
their Units should inquire of the Sponsor as to current market prices prior to
making a tender for redemption. The Sponsor may discontinue repurchase of
Units if the supply of Units exceeds demand, or for other business reasons.
The date of repurchase is deemed to be the date on which Units are received in
proper form by OCC Distributors, Two World Financial Center, 225 Liberty
Street, New York, NY 10080-6116. Units received after 4 P.M., New York Time,
will be deemed to have been repurchased on the next business day. In the event
a market is not maintained for the Units, a Unit Holder may be able to dispose
of Units only by tendering them to the Trustee for redemption.
Units purchased by the Sponsor in the secondary market may be
reoffered for sale by the Sponsor at a price based on the aggregate offering
price of the Securities in the Trust plus a 2.75% sales charge (2.828% of the
net amount invested) plus a pro rata portion of amounts, if any, in the Income
Account. Any Units that are purchased by the Sponsor in the secondary market
also may be redeemed by the Sponsor if it determines such redemption to be in
its best interest.
The Sponsor may, under certain circumstances, as a service to Unit
Holders, elect to purchase any Units tendered to the Trustee for redemption
(see "Liquidity--Trustee Redemption" in this Part B). Factors which the
Sponsor will consider in making a determination will include the number of
Units of the Trust which it has in inventory, its estimate of the salability
and the time required to sell such Units and general market conditions. For
example, if in order to meet redemptions of Units the Trustee must dispose of
Securities, and if such disposition cannot be made by the redemption date
(seven calendar days after tender), the Sponsor may elect to purchase such
Units. Such purchase shall be made by payment to the Unit Holder not later
than the close of business on the redemption date of an amount equal to the
Redemption Price on the date of tender.
Trustee Redemption. Units may also be tendered to the Trustee for
redemption at its corporate trust office at 770 Broadway, New York, New York
10003, upon proper delivery of such Units and payment of any relevant tax. At
the present time there are no specific taxes related to the redemption of
Units. No redemption fee will be charged by the Sponsor or the Trustee. Units
redeemed by the Trustee will be cancelled.
Certificates representing Units to be redeemed must be delivered to
the Trustee and must be properly endorsed or accompanied by proper instruments
of transfer with signature guaranteed (or by providing satisfactory indemnity,
as in the case of lost, stolen or mutilated Certificates). Thus, redemptions
of Units cannot be effected until Certificates representing such Units have
been delivered by the person seeking redemption. (See "Certificates.") Unit
Holders must sign exactly as their names appear on the faces of their
Certificates. In certain instances the Trustee may require additional
documents such as, but not limited to, trust instruments, certificates of
death, appointments as executor or administrator or certificates of corporate
authority.
Within seven calendar days following a tender for redemption, or, if
such seventh day is not a business day, on the first business day prior
thereto, the Unit Holder will be entitled to receive in cash an amount for
each Unit tendered equal to the Redemption Price per Unit computed as of the
Evaluation Time set forth under "Summary of Essential Information" for each
Trust in Part A on the date of tender. The "date of tender" is deemed to be
the date on which Units are received by the Trustee, except that with respect
to Units received after the close of trading on the New York Stock Exchange,
the date of tender is the next day on which such Exchange is open for trading,
and such Units will be deemed to have been tendered to the Trustee on such day
for redemption at the Redemption Price computed on that day.
A Unit Holder will receive his redemption proceeds in cash and
amounts paid on redemption shall be withdrawn from the Income Account, or, if
the balance therein is insufficient, from
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the Principal Account. All other amounts paid on redemption shall be withdrawn
from the Principal Account. The Trustee is empowered to sell Securities in
order to make funds available for redemptions. Such sales, if required, could
result in a sale of Securities by the Trustee at a loss. To the extent
Securities are sold, the size and diversity of the Trust will be reduced. The
Securities to be sold will be selected by the Trustee in order to maintain, to
the extent practicable, the proportionate relationship among the number of
shares of each of the Securities in the Portfolio. Provision is made in the
Indenture under which the Sponsor may, but need not, specify minimum amounts
in which blocks of Securities are to be sold in order to obtain the best price
for the Trust. While these minimum amounts may vary from time to time in
accordance with market conditions, the Sponsor believes that the minimum
amounts which would be specified would be approximately 1,000 shares for
readily marketable Securities.
The Redemption Price per Unit is the pro rata share of the Unit in
the Trust determined by the Trustee on the basis of (i) the cash on hand in
the Trust or moneys in the process of being collected, (ii) the value of the
Securities in the Trust as determined by the Trustee, less (a) amounts
representing taxes or other governmental charges payable out of the Trust, (b)
the accrued expenses of the Trust and (c) cash allocated for the distribution
to Unit Holders of record as of the business day prior to the evaluation being
made. The Trustee may determine the value of the Securities in the Trust in
the following manner: if the Securities are listed on a national securities
exchange or the NASDAQ national market system, this evaluation is generally
based on the closing sale prices on that exchange or that system (unless the
Trustee deems these prices inappropriate as a basis for valuation). If the
Securities are not so listed or, if so listed and the principal market
therefor is other than on the exchange, the evaluation shall generally be
based on the closing purchase price in the over-the-counter market (unless the
Trustee deems these prices inappropriate as a basis for evaluation) or if
there is no such closing purchase price, then the Trustee may utilize, at the
Trust's expense, an independent evaluation service or services to ascertain
the values of the Securities. The independent evaluation service shall use any
of the following methods, or a combination thereof, which it deems
appropriate: (a) on the basis of current bid prices for comparable securities,
(b) by appraising the value of the Securities on the bid side of the market or
(c) by any combination of the above.
Any Unit Holder tendering _______ Units or more of the Trust for
redemption may request by written notice submitted at the time of tender from
the Trustee in lieu of a cash redemption a distribution of shares of
Securities and cash in an amount and value equal to the Redemption Price Per
Unit as determined as of the evaluation next following tender. To the extent
possible, in kind distributions ("In Kind Distributions") shall be made by the
Trustee through the distribution of each of the Securities in book-entry form
to the account of the Unit Holder's bank or broker-dealer at The Depository
Trust Company. An In Kind Distribution will be reduced by customary transfer
and registration charges. The tendering Unit Holders will receive his pro rata
number of whole shares of each of the Securities comprising the portfolio and
cash from the Principal Accounts equal to the balance of the Redemption Price
to which the tendering Unit Holder is entitled. If funds in the Principal
Account are insufficient to cover the required cash distribution to the
tendering Unit Holder, the Trustee may sell Securities in the manner described
above.
The Trustee is irrevocably authorized in its discretion, if the
Sponsor does not elect to purchase a Unit tendered for redemption or if the
Sponsor tenders a Unit or Units for redemption, in lieu of redeeming such
Unit, to sell such Unit in the over-the-counter market for the account of the
tendering Unit Holder at prices which will return to the Unit Holder an amount
in cash, net after deducting brokerage commissions, transfer taxes and other
charges, equal to or in excess of the Redemption Price for such Unit. The
Trustee will pay the net proceeds of any such sale to the Unit Holder on the
day he would otherwise be entitled to receive payment of the Redemption Price.
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The Trustee reserves the right to suspend the right of redemption and
to postpone the date of payment of the Redemption Price per Unit for any
period during which the New York Stock Exchange is closed, other than
customary weekend and holiday closings, or trading on that Exchange is
restricted or during which (as determined by the Securities and Exchange
Commission) an emergency exists as a result of which disposal or evaluation of
the Securities is not reasonably practicable, or for such other periods as the
Securities and Exchange Commission may by order permit. The Trustee and the
Sponsor are not liable to any person or in any way for any loss or damage
which may result from any such suspension or postponement.
A Unit Holder who wishes to dispose of his Units should inquire of
his bank or broker in order to determine if there is a current secondary
market price in excess of the Redemption Price.
TRUST ADMINISTRATION
Portfolio Supervision. The Trust is a unit investment trust and is
not a managed fund. Traditional methods of investment management for a managed
fund typically involve frequent changes in a portfolio of securities on the
basis of economic, financial and market analyses. The Portfolio of the Trust,
however, will not be managed and therefore the adverse financial condition of
an issuer will not necessarily require the sale of its Securities from the
Portfolio. However, the Sponsor may direct the disposition of Securities upon
the occurrence of certain events including:
1. default in payment of amounts due on any of the Securities;
2. institution of certain legal proceedings;
3. default under certain documents materially and adversely
affecting future declaration or payment of amounts due or
expected; or
4. determination of the Sponsor that the tax treatment of the Trust
as a grantor trust would otherwise be jeopardized; or
5. decline in price as a direct result of serious adverse credit
factors affecting the issuer of a Security which, in the opinion
of the Sponsor, would make the retention of the Security
detrimental to the Trust or the Unit Holders.
If a default in the payment of amounts due on any Security occurs and
if the Sponsor fails to give immediate instructions to sell or hold that
Security, the Trust Agreement provides that the Trustee, within 30 days of
that failure by the Sponsor, may sell the Security.
The Trust Agreement provides that it is the responsibility of the
Sponsor to instruct the Trustee to reject any offer made by an issuer of any
of the Securities to issue new securities in exchange and substitution for any
Security pursuant to a recapitalization or reorganization, except that the
Sponsor may instruct the Trustee to accept such an offer or to take any other
action with respect thereto as the Sponsor may deem proper if the issuer
failed to declare or pay, amounts owed with respect thereto.
The Trust Agreement also authorizes the Sponsor to increase the size
and number of Units of the Trust by the deposit of Additional Securities,
contracts to purchase Additional Securities or cash or a letter of credit with
instructions to purchase Additional Securities in exchange for the
corresponding number of additional Units within 90 days subsequent to the
initial Date of Deposit, provided that the original proportionate relationship
among the number of shares of each Security
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established on the Initial Date of Deposit is maintained to the extent
practicable. Deposits of Additional Securities in the Trust subsequent to the
90-day period following the initial Date of Deposit must replicate exactly the
proportionate relationship among the shares of each Security in the Trust
portfolio at the end of the initial 90-day period.
With respect to deposits of Additional Securities (or cash or a
letter of credit with instructions to purchase Additional Securities), in
connection with creating additional Units of the Trust, the Sponsor may
specify the minimum numbers in which Additional Securities will be deposited
or purchased. If a deposit is not sufficient to acquire minimum amounts of
each Security, Additional Securities may be acquired in the order of the
Security most under-represented immediately before the deposit when compared
to the original proportionate relationship. If Securities of an issue
originally deposited are unavailable at the time of the subsequent deposit,
the Sponsor may (1) deposit cash or a letter of credit with instructions to
purchase the Security when it becomes available, or (2) deposit (or instruct
the Trustee to purchase) either Securities of one or more other issues
originally deposited or a Substitute Security.
Trust Agreement and Amendment. The Trust Agreement may be amended by
the Trustee and the Sponsor without the consent of any of the Unit Holders:
(1) to cure any ambiguity or to correct or supplement any provision which may
be defective or inconsistent; (2) to change any provision thereof as may be
required by the Securities and Exchange Commission or any successor
governmental agency; or (3) to make such other provisions in regard to matters
arising thereunder as shall not adversely affect the interests of the Unit
Holders.
The Trust Agreement may also be amended in any respect, or
performance of any of the provisions thereof may be waived, with the consent
of the holders of Certificates evidencing 662/3% of the Units then outstanding
for the purpose of modifying the rights of Unit Holders; provided that no such
amendment or waiver shall reduce any Unit Holder's interest in the Trust
without his consent or reduce the percentage of Units required to consent to
any such amendment or waiver without the consent of the holders of all
Certificates. The Trust Agreement may not be amended, without the consent of
the holders of all Certificates in the Trust then outstanding, to increase the
number of Units issuable or to permit the acquisition of any Securities in
addition to or in substitution for those initially deposited in such Trust,
except in accordance with the provisions of the Trust Agreement. The Trustee
shall promptly notify Unit Holders, in writing, of the substance of any such
amendment.
Trust Termination. The Trust Agreement provides that the Trust shall
terminate upon the maturity, redemption or other disposition, as the case may
be, of the last of the Securities held in such Trust but in no event is it to
continue beyond the Mandatory Termination Date. If the value of the Trust
shall be less than the minimum amount set forth under "Summary of Essential
Information" in Part A, the Trustee may, in its discretion, and shall, when so
directed by the Sponsor, terminate the Trust. The Trust may also be terminated
at any time with the consent of the holders of 100% of the Units then
outstanding. The Trustee may utilize the services of the Sponsor for the sale
of all or a portion of the Securities in the Trust. The Sponsor will receive
brokerage commissions from the Trust in connection with such sales in
accordance with applicable law. In the event of termination, written notice
thereof will be sent by the Trustee to all Unit Holders. Such notice will
provide Unit Holders with three options by which to receive their pro rata
share of the net asset value of the Trust.
1. A Unit Holder who owns at least __________ Units and
whose interest in the Trust would entitle him to receive at least one
share of each Security, and who so elects by notifying the Trustee
prior to the commencement of the Liquidation Period by returning a
properly completed election request (to be supplied to Unit Holders
at least 20 days prior to such date) (see Part A - "Summary of
Essential Information" for the date of the commencement of the
Liquidation Period), and whose interest in the Trust entitles him to
receive at least one
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share of each underlying Security, will have his Units redeemed on
commencement of the Liquidation Period by distribution of the Unit
Holder's pro rata share of the net asset value of the Trust on such
date distributed in kind to the extent represented by whole shares of
underlying Securities and the balance in cash within three business
days next following the commencement of the Liquidation Period. Unit
Holders subsequently selling such distributed Securities will incur
brokerage costs when disposing of such Securities. Unit Holders
should consult their own tax adviser in this regard.
A Unit Holder may also elect prior to the commencement
of the Liquidation Period by so specifying in a properly completed
election request, the following two options with regard to the
termination distribution of such Unit Holder's interest in the Trust
as set forth below.
2. to receive in cash such Unit Holder's pro rata share of
the net asset value of the Trust derived from the sale by the Sponsor
as the agent of the Trustee of the underlying Securities over a
period not to exceed 30 business days immediately following the
commencement of the Liquidation Period. The Unit Holder's Redemption
Price per Unit on the settlement date of the last trade of a Security
in the Trust will be distributed to such Unit Holder within 3
business days of the settlement of the trade of the last Security to
be sold; and/or
3. to invest such Unit Holder's pro rata share of the net
asset value of the Trust derived from the sale by the Sponsor as
agent of the Trustee of the underlying Securities over a period not
to exceed 30 business days immediately following the commencement of
the Liquidation Period, in units of an available series of QUILTS
Equity Strategic Ten ("Rollover QUILTS") provided one is offered. It
is expected that a special redemption and liquidation will be made of
all Units of this Trust held by Unit Holder (a "Rollover Unit
Holder") who affirmatively notifies the Trustee in writing by the
Rollover Notification Date set forth in the "Summary of Essential
Information" in Part A. The availability of this option does not
constitute a solicitation of an offer to purchase Units of a Rollover
QUILTS or any other security. A Unit Holder's election to participate
in this option will be treated as an indication of interest only. A
Rollover Unit Holder's Units will be redeemed in kind and the
Securities disposed of over the Liquidation Period. As long as the
Unit Holder confirms his interest in purchasing units of the Rollover
QUILTS and units are available, the proceeds of the sales (net of
brokerage commissions, governmental charges and any other selling
expenses) will be reinvested in units of the Rollover QUILTS at their
net asset value plus the applicable sales charge. Such purchaser may
be entitled to a reduced sales load of approximately 1.85% of the
Public Offering Price upon the purchase of units of the Rollover
QUILTS. It is expected that the terms of the Rollover QUILTS will be
substantially the same as the terms of the Trust described in this
Prospectus, and that a similar procedure for redemption, liquidation
and investment in a subsequent QUILTS Equity Strategic Ten series
will be available for each new Trust approximately one year after the
creation of that Trust. At any time prior to the purchase by the Unit
Holder of units of a Rollover QUILTS such Unit Holder may change his
investment strategy and receive, in cash, the proceeds of the sale of
the Securities. An election of this option will not prevent the Unit
Holder from recognizing taxable capital gain or loss (except in the
case of a loss, if the Rollover QUILTS is treated as substantially
identical to the Trust) as a result of the liquidation, even though
no cash will be distributed to pay taxes. Unit Holders should consult
their own tax advisers in this regard. (See "Tax Status".)
The Sponsor has agreed to effect the sales of underlying securities
for the Trustee in the case of the second and third options over a period not
to exceed 30 business days immediately following the commencement of the
Liquidation Period. The Sponsor, on behalf of the Trustee, will sell the
distributed Securities as quickly as practicable, unless prevented by unusual
and unforeseen
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circumstances, such as, among other reasons, a suspension in trading of a
Security, the close of a stock exchange, outbreak of hostilities and collapse
of the economy. The Redemption Price Per Unit upon the settlement of the last
sale of Securities during the Liquidation Period will be distributed to Unit
Holders in redemption of such Unit Holders' interest in the Trust.
Depending on the amount of proceeds to be invested in Units of
Rollover QUILTS and the amount of other orders for Units in Rollover QUILTS,
the Sponsor may purchase a large amount of securities for Rollover QUILTS in a
short period of time. The Sponsor's buying of securities may tend to raise the
market prices of these securities. The actual market impact of the Sponsor's
purchases, however, is currently unpredictable because the actual amount of
securities to be purchased and the supply and price of those securities is
unknown. A similar problem may occur in connection with the sale of Securities
during the Liquidation Period; depending on the number of sales required, the
prices of and demand for Securities, such sales may tend to depress the market
prices and thus reduce the proceeds of such sales. The Sponsor believes that
the sale of underlying Securities over a 30 business day period as described
above is in the best interest of a Unit Holder and may mitigate the negative
market price consequences stemming from the trading of large amounts of
Securities. The Securities may be sold in fewer than 30 days if, in the
Sponsor's judgment, such sales are in the best interest of Unit Holders. The
Sponsor, in implementing such sales of securities on behalf of the Trustee,
will seek to maximize the sales proceeds and will act in the best interests of
the Unit Holders. There can be no assurance, however, that any adverse price
consequences of heavy trading will be mitigated.
Unit Holders who do not make any election will be deemed to have
elected to receive the Redemption Price per Unit in cash (option number 2).
The Sponsor may for any reason, in its sole discretion, decide not to
sponsor any subsequent series of the Trust, without penalty or incurring
liability to any Unit Holder. If the Sponsor so decides, the Sponsor will
notify the Trustee of that decision, and the Trustee will notify the Unit
Holders prior to the commencement of the Liquidation Period. All Unit Holders
will then elect either option 1, if eligible, or option 2.
The Sponsor reserves the right to modify, suspend or terminate the
reinvestment privilege at any time.
Investors should be aware that the staff of the Division of
Investment Management of the Securities and Exchange Commission ("SEC") is of
the view that the rollover described in option 3 above would constitute an
"exchange offer" for the purposes of Section 11(c) of the Investment Company
Act of 1940, and would therefore be prohibited absent an exemptive order. The
Sponsor has received an exemptive order under Section 11(c) which it believes
permits it to offer the rollover option, but no assurance can be given that
the SEC will concur with the Sponsor's position and additional regulatory
approvals may be required.
The Sponsor. Effective as of November 28, 1995 the Sponsor, Quest for
Value Distributors, changed its name to OCC Distributors. The Sponsor is a
majority-owned subsidiary of Oppenheimer Capital. Since 1969, Oppenheimer
Capital has managed assets for many of the nation's largest pension plan
clients. Today, the firm has over $37 billion under management from separate
accounts and money market funds. The Quest for Value organization was created
in 1988 to introduce mutual funds designed to help individual investors
achieve their financial goals. OCC Distributors is committed to retirement
planning and services geared to the long term investment goals of the
individual investor. The Sponsor, a Delaware general partnership, is engaged
in the mutual fund distribution business. It is a member of the National
Association of Securities Dealers, Inc.
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The information included herein is only for the purpose of informing
investors as to the financial responsibility of the Sponsor and its ability to
carry out its contractual obligations.
The Sponsor is liable for the performance of its obligations arising
from its responsibilities under the Trust Agreement, but will be under no
liability to Unit Holders for taking any action, or refraining from taking any
action, in good faith pursuant to the Trust Agreement, or for errors in
judgment except in cases of its own willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations and duties.
The Sponsor may resign at any time by delivering to the Trustee an
instrument of resignation executed by the Sponsor. If at any time the Sponsor
shall resign or fail to perform any of its duties under the Trust Agreement or
becomes incapable of acting or becomes bankrupt or its affairs are taken over
by public authorities, then the Trustee may either (a) appoint a successor
Sponsor; (b) terminate the Trust Agreement and liquidate the Trusts; or (c)
continue to act as Trustee without terminating the Trust Agreement. Any
successor sponsor appointed by the Trustee shall be satisfactory to the
Trustee and, at the time of appointment, shall have a net worth of at least
$1,000,000.
The Trustee. The Trustee is The Chase Manhattan Bank (National
Association), a national banking association with its principal executive
office located at 1 Chase Manhattan Plaza, New York, New York 10081 and its
unit investment trust office at 770 Broadway, New York, New York 10003 (800)
428-8890. The Trustee is subject to the supervision by the Comptroller of the
Currency, the Federal Deposit Insurance Corporation and the Board of Governors
of the Federal Reserve System.
The Trustee shall not be liable or responsible in any way for taking
any action, or for refraining from taking any action, in good faith pursuant
to the Trust Agreement, or for errors in judgment; or for an disposition of
any moneys, Securities or Certificates in accordance with the Trust Agreement,
except in case of its own willful misfeasance, bad faith, negligence or
reckless disregard of its obligations and duties. In addition, the Trustee
shall not be liable for any taxes or other governmental charges imposed upon
or in respect of the Securities or the Trust which it may be required to pay
under current or future law of the United States or any other taxing authority
having jurisdiction. The Trustee shall not be liable for depreciation or loss
incurred by reason of the sale by the Trustee of any of the Securities
pursuant to the Trust Agreement.
For further information relating to the responsibilities of the
Trustee under the Trust Agreement, reference is made to the material set forth
under "Rights of Unit Holders."
The Trustee may resign by executing an instrument in writing and
filing the same with the Sponsor, and mailing a copy of a notice of
resignation to all Unit Holders. In such an event the Sponsor is obligated to
appoint a successor Trustee as soon as possible. In addition, if the Trustee
becomes incapable of acting or becomes bankrupt or its affairs are taken over
by public authorities, the Sponsor may remove the Trustee and appoint a
successor as provided in the Trust Agreement. Notice of such removal and
appointment shall be mailed to each Unit Holder by the Sponsor. If upon
resignation of the Trustee no successor has been appointed and has accepted
the appointment within thirty days after notification, the retiring Trustee
may apply to a court of competent jurisdiction for the appointment of a
successor. The resignation or removal of the Trustee becomes effective only
when the successor Trustee accepts its appointment as such or when a court of
competent jurisdiction appoints a successor Trustee. Upon execution of a
written acceptance of such appointment by such successor Trustee, all the
rights, powers, duties and obligations of the original Trustee shall vest in
the successor.
Any corporation into which the Trustee may be merged or with which it
may be consolidated, or an corporation resulting from any merger or
consolidation to which the Trustee shall
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be a party, shall be the successor Trustee. The Trustee must always be a
banking corporation organized under the laws of the United States or any State
and have at all times an aggregate capital, surplus and undivided profits of
not less than $2,500,000.
OTHER MATTERS
Legal Opinions. The legality of the Units offered hereby and certain
matters relating to federal tax law have been passed upon by Battle Fowler
LLP, 75 East 55th Street, New York, New York 10022 as counsel for the Sponsor.
Messrs. Carter, Ledyard & Milburn, Two Wall Street, New York, New York 10005
have acted as counsel for the Trustee.
Independent Auditors. The Statements of Condition and Portfolios are
included herein in reliance upon the report of BDO Seidman, LLP, independent
auditors, and upon the authority of said firm as experts in accounting and
auditing.
B-23
324120.3
<PAGE>
Qualified Unit Investment Liquid Trust Series ("QUILTS")
(A Unit Investment Trust)
Equity Strategic Ten, Series 1
Prospectus Dated: December __, 1995
Sponsor: Trustee:
OCC Distributors The Chase Manhattan Bank
Two World Financial Center (National Association)
225 Liberty Street 770 Broadway
New York, New York 10080- 6116 New York, New York 10003
(800) 628-6664 (800) 428-8890
============================
Table of Contents
Title Page
- -----
PART A
Summary of Essential Information................................... A-2
Independent Auditors' Report....................................... A-9
Statement of Condition..............................................A-10
Portfolio and Cash Flow Information.................................A-11
Underwriting Syndicates.............................................A-12
PART B
The Trust...........................................................B-1
Risk Factors........................................................B-4
Public Offering.....................................................B-7
Rights of Unit Holders .............................................B-9
Tax Status..........................................................B-12
Liquidity...........................................................B-15
Trust Administration................................................B-18
No person is authorized to give any information or to make any
representations not contained in Parts A and B of this Prospectus; and any
information or representation not contained herein must not be relied upon as
having been authorized by the Trust, the Trustee, the Evaluator, or the
Sponsor. The Trust is a registered as unit investment trust under the
Investment Company Act of 1940. Such registration does not imply that the
Trust or any of its Units have been guaranteed, sponsored, recommended or
approved by the United States or any state or any agency or officer thereof.
This Prospectus does not constitute an offer to sell, or a solicitation of an
offer to buy, securities in any state to any person to whom it is not lawful
to make such offer in such state. Parts A and B of this Prospectus do not
contain all of the information set forth in the registration statement and
exhibits thereto, filed with the Securities and Exchange Commission,
Washington, D.C., under the Securities Act of 1933, and the Investment Company
Act of 1940, and to which reference is made.
324120.3
<PAGE>
PART II--ADDITIONAL INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM A--BONDING ARRANGEMENTS
The employees of Quest for Value Distributors are covered under Brokers'
Blanket Policy, Standard Form 14, in the amount of $1,000,000.
ITEM B--CONTENTS OF REGISTRATION STATEMENT
This Registration Statement on Form S-6 comprises the following papers
and documents: The facing sheet on Form S-6.
The Cross-Reference Sheet.
The Prospectus consisting of pages.
Undertakings.
Signatures.
Written consents of the following persons:
Battle Fowler LLP (included in Exhibit 3.1)
BDO Seidman, LLP
The Chase Manhattan Bank (National Association) (included in
Exhibit 5.1)
The following exhibits:
*1.1 -- Reference Trust Agreements including certain Amendments to
the Trust Indenture and Agreement referred to under Exhibit
1.1.1 below.
*1.1.1 -- Trust Indenture and Agreement.
1.3.4 -- Agreement of General Partnership of Quest for Value
Distributors dated July 9, 1987 (filed as Exhibit 1.3.4 to
Form S-6 Registration Statement No. 33-57284 of Quest for
Value's Unit Investment Laddered Treasury Securities
("QUILTS") on January 21, 1993 and incorporated herein by
reference).
1.4 -- Form of Master Agreement Among Underwriters (filed as Exhibit
1.4 to Amendment No. 2 to Form S-6 Registration Statement
No. 33-57284 of Quest for Value's Unit Investment Laddered
Trust Series ("QUILTS"), QUILTS Monthly Income -- U.S.
Treasury Series 1; QUILTS Monthly Income -- U.S. Treasury
Series 2 and QUILTS Asset Builder -- U.S. Treasury Series 3
on March 19, 1993 and incorporated herein by reference).
*2.1 -- Form of Certificate.
*3.1 -- Opinion of Battle Fowler LLP as to the legality of the
securities being registered, including their consent to the
filing thereof and to the use of their name under the
headings "Tax Status" and "Legal Opinions" in the Prospectus,
and to the filing of their opinion regarding tax status of
the Trust.
- --------
* To be filed by Amendment.
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325425.1
<PAGE>
*5.1 -- Consent of the Evaluator.
6.0 -- Powers of Attorney of Quest for Value Distributors, by the
majority of the Board of Directors and certain officers of
Oppenheimer Financial Corp., its Managing General Partner
(filed as Exhibit 6.0 to Amendment No. 2 to Form S-6
Registration Statement No. 33-57284 of Quest for Value's
Unit Investment Laddered Trust Series ("QUILTS"), QUILTS
Monthly Income -- U.S. Treasury Series 1; QUILTS Monthly
Income -- U.S. Treasury Series 2 and QUILTS Asset Builder --
U.S. Treasury Series 3 on March 19, 1993 and as Exhibit 6.0
to Pre-Effective amendment No. 1 to Form S-6 Registration
Statement No. 33-57284 of Quest for Value's Investment Unit
Investment Laddered Trust Series ("QUILTS") on March 5, 1993
and incorporated herein by reference).
*27 -- Financial Data Schedule (for EDGAR filing only).
- --------
* To be filed by Amendment.
II-ii
325425.1
<PAGE>
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file
with the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Qualified Unit Investment Liquid Trust Series ("QUILTS"), Equity
Strategic Ten, Series 1 has duly caused this Registration Statement to be
signed on its behalf by the undersigned, hereunto duly authorized, in the City
of New York and State of New York on the 15th day of December, 1995.
QUALIFIED UNIT INVESTMENT LIQUID TRUST SERIES
("QUILTS"), EQUITY STRATEGIC TEN, SERIES 1
(Registrant)
OCC DISTRIBUTORS
(Depositor)
By: OPPENHEIMER FINANCIAL CORP.,
as Managing General Partner of the Depositor
By: /s/ SUSAN A. MURPHY
------------------------------------------------
(Susan A. Murphy, Attorney-in-Fact)
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons, who
constitute the principal officers and a majority of the directors of
Oppenheimer Financial Corp., the Managing General Partner of the Depositor, in
the capacities and on the date indicated.
NAME TITLE DATE
- ---- ----- ----
STEPHEN ROBERT* Chief Executive Officer and Director
- ------------------
Stephen Robert
NATHAN GANTCHER* Chief Operating Officer and Director
- ------------------
Nathan Gantcher
ROGER EINIGER* Chief Administrative Officer and Director
- ------------------
Roger Einiger
JOSEPH LAMOTTA* Director
- ------------------
Joseph LaMotta
ANTONIO FERNANDEZ* Chief Financial Officer and Treasurer
- ------------------
Antonio Fernandez
*By: /s/ SUSAN A. MURPHY December 15, 1995
-----------------------
(Susan A. Murphy, Attorney-in-Fact)
- ----------------
* Executed copy of Power of Attorney filed as Exhibit 6.0 to Amendment No. 2
to Registration Statement No. 33-57284 on March 19, 1993, and as Exhibit
6.0 to the Pre-Effective Amendment No. 1 to Registration Statement
No. 33-57284 on March 5, 1993.
II-iii
325425.1
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
The Sponsor, Trustee, and Unit Holders of
QUILTS, Equity Strategic Ten, Series 1
We have issued our report dated December __, 1995 on the Statements of
Condition and Portfolios of Qualified Unit Investment Liquid Trust Series
("QUILTS"), Equity Strategic Ten, Series 1 as of December __, 1995 contained
in the Registration Statement on Form S-6 and the Prospectus. We consent to
the use of our report in the Registration Statement and Prospectus and to the
use of our name as it appears under the caption "Independent Auditors."
BDO Seidman, LLP
New York, New York
December __, 1995
II-iv
325425.1
<PAGE>
