Rule 497(b)
Registration No. 333-01867
("QUILTS")
QUALIFIED UNIT INVESTMENT LIQUID TRUST SERIES
A Unit Investment Trust
Opportunity Trust 2002
This Trust consists of a unit investment trust designated QUILTS
Opportunity Trust 2002 (the "Trust"). The Sponsor of the Trust is OCC
Distributors (the "Sponsor"). The objectives of the Trust are to seek to
achieve safety of capital through investment in stripped United States Treasury
issued notes or bonds paying no current interest ("Treasury Obligations") and
to attempt to provide for capital appreciation through investment in Class A
shares ("Fund Shares") of the Oppenheimer Quest Opportunity Value Fund (the
"Fund"), a diversified, open-end management investment company (the Treasury
Obligations and Fund Shares collectively, the "Securities"). The Fund's
subadvisor is OpCap Advisors, an affiliate of the Sponsor. The Fund seeks
growth of capital over time through investments in a diversified portfolio of
common stocks, bonds and cash equivalents, the proportions of which will vary
based upon Fund management's assessment of the relative values of each
investment under prevailing market conditions. 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. The allocation between the Treasury
Obligations and the Fund Shares would seek to assure that an investor
purchasing Units in the Trust at inception would at least receive back the
original unit purchase price at the termination of the Trust from the maturity
value of the Treasury Obligations. The Sponsor cannot give assurance that the
Trust's objectives can be achieved. There are certain risks inherent in an
investment in the Fund Shares and Treasury Obligations. See "Risk Factors" in
Parts A and B of this Prospectus. 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.) The minimum
purchase is 1,000 Units for individual purchases and 250 Units for purchases by
Individual Retirement Accounts, self-employed retirement plans (formerly Keogh
Plans), pension funds and other tax-deferred retirement plans.
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 AUGUST 29,
1996 Please read and retain both parts of this
Prospectus for future reference.
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QUILTS
Opportunity Trust 2002
SUMMARY OF ESSENTIAL INFORMATION AS OF AUGUST 28, 1996 (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>
<S> <C>
CUSIP#: 747938165 Evaluation Time: 4:00 P.M. New York Time.
Sponsor: OCC Distributors Minimum Purchase: 1,000 Units
Date of Deposit: August 28, 1996 Minimum Principal Distribution: $1.00 per 1,000 Units.
Aggregate Value Liquidation Period: Beginning 30 days prior to the
of Securities:......................................$191,811.04 Mandatory Termination Date.
Number of Units: (The number of Units will be Minimum Value of Trust: The Trust may be terminated if
increased as the Sponsor deposits additional the value of the Trust is less than 40% of the aggregate
Securities into the Trust.).............................200,000 of the Securities at the completion of the Deposit period.
Fractional Undivided Interest in Trust Mandatory Termination Date: The earlier of
per 1,000 Units:........................................ 1/200 December 15, 2002 or the disposition of the last
Public Offering Price: Security in the Trust.
Aggregate Value of Securities Trustee: The Chase Manhattan Bank.
in Trust.........................................$191,811.04 Trustee's Annual Fee(3) and Estimated Expenses: $1.12
Divided By 200,000 Units multiplied per 1,000 Units outstanding.
by 1,000.............................................$959.06 Evaluator: Muller Data Corporation.
Plus Sales Charge of 4.0% of Public Offering Evaluator's Fee For Each Evaluation of Treasury
Price.................................................$39.96 Obligations: $8.00 per evaluation.
Public Offering Price per 1,000 Units(1)................$999.02 Estimated Annual Organizational Expenses:(4)(5) $ 1.20
Redemption Price per 1,000 Units............................$957.82 per 1,000 Units.
Sponsor's Repurchase Price per 1,000 Units:(2)..............$959.06 Record Date: Two business days after the Fund's ex-
Excess of Public Offering Price Over dividend date.
Redemption Price per 1,000 Units: .......................$41.20 Payment Date: Such day determined by the Trustee
Excess of Sponsor's Initial Repurchase Price which shall be as promptly as practicable after the
Over Redemption Price per 1,000 Units:....................$1.24 related Record Date.
</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 25,000 Units may, upon request of redeeming Unit
Holders to the Trustee, be made in kind. The Trustee will forward the
distributed Fund Shares 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) Any Rule 12b-1 fees paid by the Fund's distributor to the Trustee for
performing servicing functions with respect to the Fund Shares will be used
to reduce directly the expenses and fees otherwise payable by the Trust to
the Trustee.
(4) Although historically the sponsors of unit investment trusts ("UITs") have
paid all the costs of establishing UITs, 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 a five year period. See "Trust Expenses and Changes" in Part
B.
(5) Assumes the Trust will reach a size of 10,000,000 Units as estimated by the
Sponsor; organizational expenses per 1,000 Units will vary with the actual
size of the Trust. If the Trust does not reach this Unit level, the
Estimated Annual Organizational Expenses will be adversely affected.
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QUALIFIED
UNIT INVESTMENT LIQUID TRUST SERIES
("QUILTS")
THE TRUST
This trust consists of a unit investment trust designated
QUILTS Opportunity Trust 2002 (the "Trust"). 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"), The Chase Manhattan Bank, as trustee (the "Trustee")
and Muller Data Corporation, as Evaluator. The Trust consists of stripped
United States Treasury issued notes or bonds bearing no current interest (the
"Treasury Obligations") and Class A shares (the "Fund Shares") of the
Oppenheimer Quest Opportunity Value Fund (the "Fund"), a diversified, open-end
management investment company, or contracts and funds for the purchase thereof
(the Treasury Obligations and Fund Shares, collectively, the "Securities"). The
Trust contains Treasury Obligations maturing approximately six years from the
Date of Deposit.
Objectives. The objectives of the Trust are to attempt to
obtain safety of capital through investment in Treasury Obligations and to
attempt to provide for capital appreciation through investment in shares of the
Fund. The Fund seeks growth of capital over time through investments in a
diversified portfolio of common stocks, bonds and cash equivalents, the
proportions of which will vary based upon Fund management's assessment of the
relative values of each investment under prevailing market conditions. While
the Fund may offer its shareholders an ability to reinvest distributions that
are payable to such shareholders, the Trust will elect to receive all
distributions declared by the Fund in cash. There is, of course, no assurance
that the Trust's objectives will be achieved.
The Trust is structured to contain a sufficient amount of
Treasury Obligations to insure that an initial investor will receive, at the
maturity of the Trust, $1,000 per 1,000 Units. On the Initial Date of Deposit,
the Public Offering Price, including the sales charge, was $999.02 per 1,000
Units. However, an investor holding his Units to the Trust maturity may suffer
a loss to the extent the investor's purchase cost per 1,000 Units exceeds
$1,000 since the capital protection is limited to the aggregate maturity value
per Unit of Treasury Obligations. An investor who sells his Units prior to the
Trust maturity, or all investors if the Trust is terminated before the Treasury
Obligations mature, may suffer a loss to the extent that the price he receives
upon the sale or redemption of his Units is less than the purchase price of his
Units. The price paid for a Unit may differ from that set forth herein due to
changes in the value of the Securities in the portfolio subsequent to the Date
of Deposit. There is no assurance that a purchaser of Units on the date of the
Prospectus or subsequent to such date will receive, upon termination, his
purchase price per Unit. The Fund has not been structured to generate dividends
and therefore dividend distributions by the Trust are likely to be
insignificant. The maximization of dividend income is not an objective of the
Trust. The Trust is "concentrated" in Fund Shares, so investors should be aware
that the potential for capital appreciation is directly related to the
investment performance of the Fund itself. There are certain risks inherent in
an investment in a portfolio of Fund Shares and Treasury Obligations. See "Risk
Factors" in this Part A and "Risk Factors" in Part B. The Trust will terminate
approximately six years after the Initial Date of Deposit. All of the
Securities are represented by the Sponsor's contracts to purchase such
Securities, which are expected to settle on or about September 4, 1996.
Portfolio Summary. $200,000 face amount of Treasury Securities maturing on
November 15, 2002 and 2,088 Fund Shares were held in the Trust on the Initial
Date of Deposit. The Treasury Obligations and the Fund Shares represent 69.43%
and 30.57%, respectively, of the total of
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the aggregate offering side evaluation of Treasury Obligations and the
aggregate value of Fund Shares in the Trust on the Initial Date of Deposit.
With the deposit of the Securities in the Trust on the
Initial Date of Deposit, the Sponsor established a proportionate relationship
between the maturity amounts of Treasury Obligations and the number of Fund
Shares 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 on the Initial Date
of Deposit between the maturity amount of Treasury Obligations and the number
of Fund Shares in the portfolio of the Trust, 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 between the
Fund Shares and Treasury Obligations in the portfolio of the Trust 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 between the Fund Shares and
Treasury Obligations in the Trust Portfolio on the Initial Date of Deposit.
Within a period ending on the earlier of 90 days subsequent to the Date of
Deposit or the first Payment Date, substitute Treasury Obligations may be
acquired under specified conditions when Treasury Obligations originally
deposited in the Trust are unavailable. Any additional Treasury Obligations
added to the Trust will be substantially identical to those then held in the
Trust. (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 by the Sponsor, 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 thousand Units for the indicated initial
aggregate value of Securities in 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 Sponsor does not act as an underwriter, manager or
co-manager of a public offering of the securities of any issuer in the
portfolio of the Trust.
THE FUND
The Fund's portfolio will normally be invested primarily in
common stocks and securities convertible into common stock. During periods when
common stocks appear to be overvalued and when value differentials are such
that fixed-income obligations appear to present meaningful capital growth
opportunities relative to common stocks or pending investment in securities
with capital growth opportunities, up to 50% or more of the Fund's assets may
be invested in bonds and other fixed-income obligations. This may include cash
equivalents which do not generate capital appreciation. The bonds in which the
Fund invests will be limited to U.S. government obligations, mortgage-backed
securities, investment-grade corporate debt obligations and unrated
obligations, including those of foreign issuers, which Fund management believes
to be of comparable quality. The Fund's subadvisor is OpCap Advisors, an
affiliate of the Sponsor. (See "The Trust--Oppenheimer Quest Opportunity Value
Fund" in Part B of this Prospectus.)
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RISK FACTORS
Investors should be aware of the risks which an investment in
Units of the Trust may entail. During the life of the Trust, the value of the
portfolio Securities and hence the Units may fluctuate and therefore the Public
Offering Price and Redemption Price per Unit may be more or less than the price
paid by the investor. The Trust is "concentrated" in Fund Shares and investors
should be aware that the potential for capital appreciation is directly related
to the investment performance of the Fund itself. In addition, the value of the
Treasury Obligations will fluctuate inversely with changes in interest rates
and the value of Fund Shares will vary as the value of the underlying portfolio
securities of the Fund increases or decreases. The Treasury Obligations are
subject to substantially greater price fluctuations during periods of changing
interest rates than securities of comparable quality which make periodic
interest payments. (See "The Trust--Stripped U.S. Treasury Obligations.")
Although the Trust is structured to return to an initial Unit Holder his or her
purchase cost of a Unit through the distribution of the Treasury Obligations
maturity value on the mandatory termination date of the Trust, an investor will
have included the accrual of original issue discount on such Treasury
Obligations in income for Federal income tax purposes and will have paid
Federal income tax on such accrual. An investor holding his or her Units to the
Trust maturity may suffer a loss to the extent the investor's purchase cost of
per 1,000 Units exceeds $1,000 since the capital protection is limited to the
aggregate maturity value per 1,000 Units of Treasury Obligations. Similarly, an
investor who sells his or her Units prior to the Trust maturity, or all
investors if the Trust is terminated before the Treasury Obligations mature,
may suffer a loss to the extent that the price he or she receives upon the sale
or redemption of his or her Units is less than the purchase price of his or her
Units.
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 Trusts.
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 side evaluation during the initial offering period,
and the aggregate bid side evaluation thereafter, of the underlying Treasury
Obligations, and the net asset value of the Fund Shares (excluding any sales
charge) divided by the number of Units outstanding plus a sales charge of 4.0%
of the Public Offering Price or 4.167% of the net amount invested in Securities
per 1,000 Units of the Trust. (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" for the Trust herein. During the initial offering period orders
involving at least 25,000 Units or $25,000 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.
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DISTRIBUTIONS
Distributions of net income (other than amortized discount)
and long-term capital gains distributions received in respect to any of the
Securities by the Trust will be made by the Trust annually on or about the
Payment Date to Unit Holders of record on the preceding Record Date, see
"Summary of Essential Information". The Record Dates and Payment Dates were
established so as to occur on or shortly after the record dates and payment
dates of the Fund. The Fund declares and pays dividends from net investment
income and net long-term capital gains, if any, on an annual basis following
the
end of its fiscal year (October 31), usually in December of each year. (See
"Rights of Unit Holders--Distributions" in Part B. Unit Holders may elect to
automatically reinvest distributions (other than the final distribution in
connection with the termination of the Trust), into additional Units of the
Trust, which will not be subject to a sales charge. (See "Rights of Unit
Holders - Reinvestment" in Part B.)
Although Unit Holders will be required to include in income amounts of original
issue discount that have accrued during the taxable year on the Treasury
Obligations, no income will be currently distributed to the Unit Holders. (See
"Tax Status" in Part B.)
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 portfolio of the Trust. (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 portfolio of the Trust 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-day period prior to the Mandatory Termination
Date (approximately six years after the Initial Date of Deposit for the Trust)
(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 may 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 25,000 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 and "Tax Status--Disposition of
Units or Securities" in Part B for a description of the tax consequences of the
termination distribution options.
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
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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 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.
During the Liquidation Period, Unit Holders who have not
chosen to receive distributions-in-kind will be at risk to the extent that Fund
Shares 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. Fund Shares, as more fully described in
the prospectus for the Fund, will be redeemed through certain broker-dealers
and the Fund's transfer agent at the net asset value next computed after the
redemption request is received. Unit Holders should consult their own tax
advisers in this regard.
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INDEPENDENT AUDITORS' REPORT
The Sponsor, Trustee, and Unit Holders of
Qualified Unit Investment Liquid Trust Series
Opportunity Trust 2002
We have audited the accompanying Statement of Condition and
Portfolio of Qualified Unit Investment Liquid Trust Series ("QUILTS")
Opportunity Trust 2002 as of August 28, 1996. The statement is the
responsibility of the Sponsor. Our responsibility is to express an opinion on
the Statement of Condition and Portfolio 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 Statement 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 letter of
credit deposited in connection with the securities owned as of August 28, 1996,
pursuant to contracts to purchase, as shown in the Statement of Condition and
Portfolio, was confirmed to us by The Chase Manhattan Bank, the Trustee.
In our opinion, the accompanying Statement of Condition and
Portfolio present fairly, in all material respects, the financial position of
QUILTS Opportunity Trust 2002 as of August 28, 1996 in conformity with
generally accepted accounting principles.
BDO SEIDMAN, LLP
New York, New York
August 28, 1996
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QUILTS
OPPORTUNITY TRUST 2002
STATEMENT OF CONDITION
AS OF DATE OF DEPOSIT, AUGUST 28, 1996
TRUST PROPERTY
<TABLE>
<CAPTION>
Investment in Securities--Sponsor's Contracts to Purchase
<S> <C>
Underlying Securities Backed by Letter of Credit (1)................ $ 191,811.04
Organizational Costs(2)................................................. 60,000.00
-----------
Total................................................................... $ 251,811.04
==========
INTEREST OF UNIT HOLDERS
Liabilities: Accrued Liability(2)...................................... $ 60,000.00
-----------
Interest of Unit Holders-- Units of Fractional
Undivided Interest Outstanding
Cost to Unit Holders(3)............................................. $ 199,803.04
Less-Gross Underwriting Commissions(4).............................. 7,992.00
------------
Net Amount Applicable to Unit Holders............................... 191,811.04
----------
Total............................................................... $ 251,811.04
==========
</TABLE>
(1) Aggregate cost to the Trust of the Securities listed in the Portfolio
is determined by the Evaluator on the basis set forth under "Public
Offering--Offering Price" as of 4:00 p.m. on August 28, 1996. An
irrevocable letter of credit issued by Credit Lyonnais in an aggregate
amount of $2,000,000 has been deposited with the Trustee to cover the
purchase of $191,811.04 of Securities pursuant to contracts to purchase
such Securities.
(2) Organizational costs incurred by the Trust have been capitalized and
will be amortized over a five year period. The Trust will reimburse the
Sponsor for actual organizational costs incurred.
(3) Aggregate public offering price computed on Units of QUILTS
Opportunity Trust 2002 on the basis set forth under "Public
Offering--Offering Price" in Part B.
(4) Sales charge of 4.0% computed on Units of QUILTS Opportunity Trust
2002 on the basis set forth under "Public Offering Price" in Part B.
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<TABLE>
QUILTS
Opportunity Trust 2002
PORTFOLIO
AS OF AUGUST 28, 1996
<CAPTION>
Percentage Cost of
Portfolio Name of Issuer and Title of Securities of Securities
No. Represented by Contracts to Purchase(1) Fund (2) to Trust (3)
- -------------- ------------------------------------------------------- ---------------- ----------------
<S> <C> <C> <C> <C>
1 $200,000 Zero Coupon U.S. Treasury Bonds
Maturing November 15, 2002 69.43% $133,180.00
2 2,088 Class A Shares of Oppenheimer Quest
Opportunity Value Fund ($28.08 per Fund
Share) 30.57 58,631.04
-------- -------------
100.00% $191,811.04
======= ===========
</TABLE>
FOOTNOTES TO PORTFOLIO
(1) The Treasury Obligations have been purchased at a discount from the
maturity value because there is no stated interest income thereon (such
securities are often referred to as zero coupon securities). Over the life
of the Treasury Obligations such discount accrues and upon maturity thereof
the holder receives 100% of the Treasury Obligation maturity amount. The
Fund Shares have been valued at their net asset value as of the Evaluation
Time on the Initial Date of Deposit. The Fund's subadviser is OpCap
Advisors. All Securities are represented by contracts to purchase such
Securities. Forward contracts to purchase the Securities were entered into
on August 28, 1996. All such contracts are expected to be settled on or
about the First Settlement Date of the Trust which is expected to be
September 4, 1996.
(2) Offering prices of Treasury Obligations are determined by the Evaluator on
the basis stated under "Public Offering Price" herein. The offering side
evaluation is greater than the current bid side evaluation of the Treasury
Obligations, which is the basis on which Redemption Price per Unit is
determined (see "Liquidity--Trustee Redemption" in Part B of this
Prospectus). The aggregate value of the Treasury Obligations based on the
bid side evaluation of the Treasury Obligations on the day prior to the
Date of Deposit was $132,932 (which is $248 lower than the aggregate cost
of the Treasury Obligations to the Trust based on the offering side
evaluation). The loss to Sponsor on deposit totals $150.
UNDERWRITING
OCC Distributors, Two World Financial Center, 225 Liberty Street, New York,
New York 10281 will act as Underwriter for all of the Units of the Trust. The
Underwriter will distribute Units through various broker-dealers, banks and/or
other eligible participants (see "Public Offering -- Distribution of Units" in
Part B.)
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QUILTS Opportunity Trust
This Unit Investment Trust seeks to achieve safety of principal through
investment in U.S. Treasury zero coupon bonds, and to provide capital
appreciation through investment in shares of the Oppenheimer Quest Opportunity
Value Fund. The goal of combining Treasuries and the Fund shares is to assure
that an investor purchasing units at inception would, at maturity, receive back
the original unit purchase price of the Trust from the maturity value of the
Treasury obligations, as well as the value of the Fund.
The Oppenheimer Quest Opportunity Value Fund
Opportunity for Growth
The Class A shares of the Fund have an overall ***** (five-star) rating from
Morningstar.* For the five-year period ending 6/30/96 the Fund has a five-star
rating, a four-star rating for the three-year period, and for the one-year
period the Fund has a three-star rating. There were 5076, 2848, and 1696 hybrid
funds ranked in the one-, three- and five-year periods respectively. Ten percent
of the funds in a rating category receive five stars.
The Fund's objective is to seek long-term growth of capital through a
diversified mix of stocks, bonds and money market instruments. Although the
Fund has the ability to move in and out of the different asset classes
depending on what suits the current market environment, presently the Fund is
heavily weighted in equities to offer the best potential for growth. The Fund
manager employs a value-oriented investing approach, and seeks to produce
maximum total return, while seeking to avoid excess volatility (risk).**
- --------
* Morningstar proprietary ratings reflect historical risk-adjusted performance
and are subject to change every month. Funds with at least one year of
performance history are assigned from one-star (lowest) to five-star (highest).
The ratings cited were earned by the Class A shares only. The Fund's Class A,
B, and C shares have the same investment portfolio, but different expenses.
Morningstar ratings are calculated from a fund's 3-, 5- and 10-year average
annual returns in excess of 90-day Treasury bill returns with appropriate fee
adjustments and a risk factor that reflects fund performance below 90-day
T-bill returns. The one-year rating is calculated using the same methodology,
but is not a component of the overall rating. 10% of the funds in a rating
category receive five stars, 22.5% receive four stars, and 35% receive three
stars. The ratings factor in sales charges, expenses and fees. Past performance
is no guarantee of future result.
** Past performance of Class A shares of Oppenheimer Opportunity Value Fund is
no indication of the future performance of the unit investment trust.
C398980.1
<PAGE>
U.S. Treasury Zero Coupon Bonds
Preservation of Capital
U.S. Treasury bonds provide the Trust's maturity value. Treasury
zero coupon bonds are purchased at a deep discount and forego
regular payments of interest income to provide full face value to
unitholders at maturity. U.S. Treasury bonds are backed by the
full faith and credit of the U.S. Government.
Options at Maturity
The Trust offers great flexibility at maturity. You have three
options:
1. Receive distributions in cash
2. Receive a combination of cash and Fund shares
3. Reinvest all proceeds into additional Fund shares
Oppenheimer Quest Opportunity Value Fund Class A Shares***
Chart: Performance of Class A Shares since inception
Average Annual Total Return of the Oppenheimer Quest
Opportunity Value Fund Class A Shares (as of June 30, 1996)
One Year Five Years 10 Years Life
-------- ---------- -------- ----
20.9% 19.6% N/A 17.96%
Initial Investment: $10,000
- --------
***This graph represents performance of the Oppenheimer Quest Opportunity Value
Fund, Class A shares, based on a hypothetical investment of $10,000 from the
inception date of 1/31/89 to 6/30/96. This illustration reflects a purchase of
the net asset value, and includes reinvestment of all dividends and capital
gains distributions. Taxes are not included. The second component of Quilts
Opportunity Trust is U.S. Treasury zero coupon bonds, whose performance is not
represented in the above graph. The one-year, five-year, ten-year, and life of
Class A since inception Average Annual Total returns (as of 6/30/96) are
20.49%, 19.62%, n/a and 17.96% respectively, based on the NAV. Class A shares
of the Fund are purchased for the Trust at the NAV. See the Fund's prospectus
for complete details on fees and charges. Average annual total returns are
historical in nature and measure net investment income and capital gain or loss
from portfolio investments assuming reinvestment of dividends. This information
is for illustrative purposes only. Past performance does not guarantee future
results. Performance is historical, and investment returns and net asset value
of the Fund will fluctuate with market conditions so that shares of the Fund
may be worth more or less than their original purchase price at the time of
redemption.
398980.1
<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")
OPPORTUNITY TRUST 2002
THE TRUST
Organization. This Trust consists of a unit investment trust
designated QUILTS Opportunity Trust 2002. 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 among OCC Distributors, as
Sponsor, The Chase Manhattan Bank, as Trustee and Muller Data Corporation, as
Evaluator.
On the initial Date of Deposit, the Sponsor deposited with
the Trustee stripped United States Treasury issued notes or bonds paying no
current return (the "Treasury Obligations") and Class A shares of the
Oppenheimer Quest Opportunity Value Fund, a diversified, open-end management
investment company (the "Fund Shares") including funds and delivery statements
relating to contracts for the purchase of certain such securities
(collectively, 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 certificates of
beneficial interest (the "Certificates") evidencing the ownership of all Units
of the Trust. Through this Prospectus, the Sponsor is offering the Units,
including Additional Units, as defined below, for sale to the public. The
Sponsor has a limited right to substitute other securities in the Trust
portfolio in the event of a failed contract ("Substitute Securities"). 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 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" for the Trust. To the extent that any Units
are redeemed by the Trustee, the fractional undivided interest or pro rata
share in the Trust represented by each unredeemed Unit will increase, although
the actual interest in the 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 Underwriter, 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
between the maturity amounts of Treasury Obligations and the number of Fund
Shares in the portfolio. During the 90 days subsequent to the Initial Date of
Deposit, the Sponsor may deposit additional Securities in the Trusts 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, maintaining to the
extent practicable the original proportionate relationship between the
Securities in the portfolio of the Trust 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
398974.1
<PAGE>
Initial Date of Deposit. It may not be possible to maintain the exact original
proportionate relationship between the Treasury Obligations and the Fund Shares
deposited on the Initial Date of Deposit because of, among other reasons,
purchase requirements, changes in prices, or 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 between the Treasury Obligations and the Fund Shares in the
portfolio of the Trust on the Initial Date of Deposit. Within a period ending
on the earlier of 90 days subsequent to the Initial Date of Deposit or the
first Payment Date, substitute Treasury Obligations may be acquired under
specified conditions when Treasury Obligations originally deposited in the
Trust are unavailable. Any additional Treasury Obligations added to the Trust
will be substantially identical to those then held in the Trust. (See "The
Trust--Substitution of Securities.")
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 objectives of the Trust are to seek to
achieve safety of capital and to attempt to provide capital appreciation. The
Trust seeks to achieve these objectives by investing primarily in a portfolio
of stripped United States Treasury issued notes or bonds paying no current
interest and shares of the Oppenheimer Quest Opportunity Value Fund, a
diversified, open-end management investment company. The Fund seeks growth of
capital over time through investments in a diversified portfolio of common
stocks, bonds and cash equivalents, the proportions of which will vary based
upon Fund management's assessment of the relative values of each investment
under prevailing market conditions. The allocation between the Treasury
Obligations and the Fund Shares would seek to assure that an investor
purchasing units in the Trust at inception would at least receive back the
original unit purchase price at the termination of the Trust from the maturity
value of the Treasury Obligations. There can be no assurance that the Trust's
investment objectives can be achieved.
Portfolio. The Trust consists of those Securities listed in
the "Portfolio" for the Trust 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
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.
In selecting Treasury Obligations for the Trust, the Sponsor
normally will consider the following factors, among others: (i) the prices and
yields of such securities and (ii) the maturities of such securities. In
selecting the Fund Shares for deposit in the Trust, the following factors,
among others, were considered by the Sponsor: (i) the historical performance of
the Fund and (ii) the nature of the underlying Fund portfolio.
Stripped U.S. Treasury Obligations
The Treasury Obligations in the portfolio consist of United
States Treasury Obligations which have been stripped by the United States
Treasury of their unmatured interest coupons or such stripped coupons or
receipts or certificates evidencing such obligations or coupons. The obligor
with respect to the Treasury Obligations is the United States Government. Such
Treasury Obligations may
B-2
398974.1
<PAGE>
include certificates that represent rights to receive the payments that
comprise a U.S. Government bond.
Stripped U.S. Treasury bonds evidence the right to receive a
fixed payment at a future date from the U.S. Government, and are backed by the
full faith and credit of the U.S. Government. The Treasury Obligations can be
purchased at a deep discount because the buyer receives only the right to
receive one fixed payment at a specific date in the future and does not receive
any periodic interest payments. The effect of owning deep discount obligations
which do not make current interest payments is that a fixed yield is earned not
only on the original investment but also, in effect, on all discount earned
during the life of the discount obligations. This implicit reinvestment of
earnings at the same rate eliminates the risk of being unable to reinvest the
income on such obligations at a rate as high as the implicit yield on the
discount obligation, but at the same time eliminates the holder's ability to
reinvest at higher rates in the future. For this reason, the Treasury
Obligations are subject to substantially greater price fluctuations during
periods of changing market interest rates than are securities of comparable
quality which pay interest on a current basis. Investors should be aware that
income in respect of the accrual of original issue discount on the Treasury
Obligations, although not distributed on a current basis, will be includable by
a Unit Holder as income and will be subject to income tax on a current basis at
ordinary income tax rates (see "Tax Status").
Oppenheimer Quest Opportunity Value Fund
The following disclosure concerning the Fund and its
affiliates has been derived from the prospectus of the Oppenheimer Quest
Opportunity Value Fund. While the Sponsor has not independently verified its
information, it has no reason to believe that such information is not correct
in all material respects. No representation is made herein as to the accuracy
or adequacy of such information.
The portfolio contains Class A shares of the Oppenheimer
Quest Opportunity Value Fund. On October 31, 1995, the net assets of the Fund
were $634,511,114. The average net assets for the year ended October 31, 1995
for Class A shares of the Fund were $251,625,672. The Fund has retained an
investment adviser, OpCap Advisors (herein referred to as the "Adviser").
Objective. The Fund seeks growth of capital over time through
investments in a diversified portfolio of common stocks, bonds and cash
equivalents, the proportions of which will vary based upon Fund management's
assessment of the relative values of each investment under prevailing market
conditions.
Portfolio. The Fund's portfolio will normally be invested
primarily in common stocks and securities convertible into common stock During
periods when common stocks appear to be overvalued and when value differentials
are such that fixed-income obligations appear to present meaningful capital
growth opportunities relative to common stocks or pending investments in
securities with capital growth opportunities, up to 50% or more of the Fund's
assets may be invested in bonds and other fixed-income obligations. This may
include cash equivalents which do not generate capital appreciation. The bonds
in which the Fund invests will be limited to U.S. government obligations,
mortgage-backed securities, investment-grade corporate debt obligations and
unrated obligations, including those of foreign issuers, which Fund management
believes to be of comparable quality. To provide liquidity for the purchase of
new instruments and to effect redemptions of shares, the Fund typically invests
a part of its assets in various types of U.S. government securities and high
quality, short-term debt securities with remaining maturities of one year or
less such as government obligations, certificates of deposit, bankers'
acceptances, commercial paper, short-term corporate securities and repurchase
agreements ("money market instruments"). For temporary defensive purposes, the
Fund may invest up to 100%
B-3
398974.1
<PAGE>
of its assets in such securities. At any time that the Fund for temporary
defensive purposes invests in such securities, to the extent of such
investments, it is not pursuing its investment objectives.
Except as indicated, the investment objectives and policies
described above are fundamental and may not be changed without a vote of the
shareholders.
General Information Regarding the Fund. Shown below for the
periods indicated are per share income and capital changes for a share of
capital stock outstanding ("per share information") of the Fund. The Trust will
pay its pro rata share of the Fund's total expenses.
<TABLE>
<CAPTION>
Year
Year Year Year Year Year Year ended
ended ended ended ended ended ended 1/1/89(5)-
10/31/95 10/31/94 10/31/93 10/31/92 10/31/91 10/31/90 10/31/89
Per Share Operating Data:
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value: Start of period..................$19.69 $18.71 $16.73 $14.29 $9.74 $11.59 $10.00(2)
Income (loss) from investment operations:
Net Investment income..............................23 .18 .35 .09 .03 .25 .17
Net realized and unrealized gain (loss)
on investments..................................5.40 1.35 2.02 2.93 4.78 (1.64) 1.42
---- ---- ---- ---- ---- ------ ----
Total income (loss) from investment
operations......................................5.63 1.53 2.37 3.02 4.81 (1.39) 1.59
Dividends and distributions to shareholders:
Dividends from net investment income..............(.12) (.33) (.07) (.03) (.23) (.22) --
Distribution from net realized gain on investments(.61) (.22) (.32) (.55) (.03) (.24) --
----- ----- ----- ----- ----- ----- ------
Total dividends and distributions to Shareholders.(.73) (.55) (.39) (.58) (.26) (.46) --
Net Asset Value: End of period....................24.59 19.69 18.71 16.73 14.29 9.74 11.59
Total Return, at Net Asset Value(1)...............29.88% 8.41% 14.34% 21.93% 50.44% (12.62%) 15.90%
Ratios/Supplemental Data:
Net Assets, end of period (in millions)...........$367,240 $163,340 $127,225 $40,563 $8,446 $4,570 $3,868
Ratios to average net assets: .
Net investment income (loss)......................1.02% .96% 2.69% .72% .30%(3) 2.30%(3) 3.75%(3)(4)
Expenses..........................................1.69%(6) 1.78% 1.83% 2.27% 2.35%(3) 2.00%(3) 1.84%(3)(4)
Portfolio turnover rate...........................21% 42% 24% 32% 88% 206% 103%
</TABLE>
(1) Total return shown assumes reinvestment of all dividends and
distributions but does not reflect deductions for sales charges.
Aggregate (not annualized) total return is shown for any period shorter
than one year.
(2) Offering Price.
(3) During the periods noted the former advisor voluntarily waived all or a
portion of its fees and assumed some operating expenses of the Fund.
Without such waivers and assumptions, the ratios of net operating
expenses to average net assets and the ratios of net investment income to
average net assets would have been 3.33% and (.68%) for the year ended
10/31/91, 3.69% and .61% for the year ended 10/31/90, and 5.32% and .27%
(annualized) for the period 1/1/89 (commencement of operations) to
10/31/89.
(4) Annualized.
(5) Commencement of Operations.
(6) This amount consists of: management fees of 1.00%; 12b-1 fees of .50%; and
other operating expenses of .19%.
B-4
398974.1
<PAGE>
Risk Factors. The information provided below describes risks associated
with an investment in the Fund Shares:
Equity Securities There are two types of risk generally
associated with owning equity securities: market risk and financial risk.
Market risk is the risk associated with the movement of the stock market in
general. Financial risk is associated with the financial condition and
profitability of the underlying company. Smaller capitalization companies may
experience higher growth rates and higher failure rates than do larger
capitalization companies. The trading volume of securities of smaller
capitalization companies is normally less than that of larger capitalization
companies and, therefore, may disproportionately affect their market price,
tending to make them rise more in response to buying demand and fall more in
response to selling pressure than is the case with larger capitalization
companies.
Debt Securities There are two types of risk associated with
owning debt securities: interest rate risk and credit risk. Interest rate risk
relates to fluctuations in market value arising from changes in interest rates.
If interest rates rise, the value of debt securities will normally decline and
if interest rates fall, the value of debt securities will normally increase.
All debt securities, including U.S. government securities, which are generally
considered to be the most creditworthy of all debt obligations, are subject to
interest rate risk. Securities with longer maturities generally will have a
more pronounced reaction to interest rate changes than shorter term securities.
Credit risk relates to the ability of the issuer to make
periodic interest payments and ultimately repay principal at maturity. Bonds
rated Baa3 by Moody's Investors Service ("Moody's") or BBB-by Standard & Poor's
Corporation ("S&P"), which the Fund may acquire, are described by those rating
agencies as having speculative elements. If a debt security is rated below
investment grade by one rating agency and as investment grade by a different
rating agency, the Adviser will make a determination as to the debt security's
investment grade quality. For a general description of Moody's and S&P ratings
see "Description of Corporate Bond Ratings" herein. The ratings of Moody's and
S&P represent their opinions as to the quality of the obligations which they
undertake to rate. It should be emphasized, however, that ratings are relative
and subjective and although ratings may be useful in evaluating the safety of
interest and principal payments, they do not evaluate the market risk of these
securities. Therefore, although these ratings may be an initial criterion for
selection of such investments, the Adviser also will evaluate these securities
and the ability of the issuers of such securities to pay interest and
principal.
The nature and degree of market and financial risk affecting
an investment in the Fund will depend on the relative amounts of the Fund's
assets committed to equity, longer-term debt or money market securities at any
particular time.
Higher portfolio turnover can be expected to result in a
higher incidence of short-term capital gains upon which taxes will be payable
and will also result in correspondingly higher transaction costs.
Additional Risks of Foreign Securities The Fund may purchase
foreign securities that are listed on a domestic or foreign securities
exchange, traded in domestic or foreign over-the-counter markets or represented
by American Depository Receipts ("ADRs"). There is no limit to the amount of
such foreign securities the Fund may acquire. Certain factors and risks are
presented by investment in foreign securities which are in addition to the
usual risks inherent in domestic securities. Foreign companies are not
necessarily subject to uniform accounting, auditing and financial reporting
standards or other regulatory requirements comparable to those applicable to
U.S. companies. Thus, there may be less available information concerning
non-U.S. issuers of securities held by the Fund than is available
B-5
398974.1
<PAGE>
concerning U.S. companies. In addition, with respect to some foreign countries,
there is the possibility of nationalization, expropriation or confiscatory
taxation; income earned in the foreign nation being subject to taxation,
including withholding taxes on interest and dividends (see "Tax Status"), or
other taxes imposed with respect to investments in the foreign nation;
limitations on the removal of securities, property or other assets of the Fund;
difficulties in pursuing legal remedies and obtaining judgments in foreign
courts, or political or social instability or diplomatic developments which
could affect U.S. investments in those countries.
Securities of many non-U.S. companies may be less liquid and
their prices more volatile than securities of comparable U.S. companies.
Non-U.S. stock exchanges and brokers are generally subject to less governmental
supervision and regulation than in the U.S. and commissions on foreign stock
exchanges are generally higher than negotiated commissions on U.S.
transactions. In addition, there may in certain instances be delays in the
settlement of non-U.S. stock exchange transactions. Certain countries restrict
foreign investments in their securities markets. These restrictions may limit
or preclude investment in certain countries, industries or market sectors, or
may increase the cost of investing in securities of particular companies.
Purchasing the shares of investment companies which invest in securities of a
given country may be the only or the most efficient way to invest in that
country. This may require the payment of a premium above the net asset value of
such investment companies and the return will be reduced by the operating
expenses of those investment companies.
A decline in the value of the U.S. dollar against the value
of any particular currency will cause an increase in the U.S. dollar value of
the Fund's holdings denominated in such currency. Conversely, a decline in the
value of any particular currency against the U.S. dollar will cause a decline
in the U.S. dollar value of the Fund's holdings of securities denominated in
such currency. Some foreign currency values may be volatile and there is the
possibility of governmental controls on currency exchange or governmental
intervention in currency markets which could adversely affect the Fund. The
Fund does not intend to speculate in foreign currency in connection with the
purchase or sale of securities on a foreign securities exchange but may enter
into foreign currency contracts to hedge its foreign currency exposure. While
those transactions may minimize the impact of currency appreciation and
depreciation, the Fund will bear a cost for entering into the transaction and
such transactions do not protect against a decline in the security's value
relative to other securities denominated in that currency.
Repurchase Agreement The Fund may acquire securities subject
to repurchase agreements. Repurchase agreements involve certain risks. Under a
typical repurchase agreement, the Fund acquires a debt security for a
relatively short period (usually for one day and very seldom for more than one
week) subject to an obligation of the seller to repurchase (and the Fund's
obligation to resell) the security at an agreed-upon higher price, thereby
establishing a fixed investment return during the holding period. Pending such
repurchase, the seller of the instrument maintains securities as collateral
equal in market value to the repurchase price.
In the event a seller defaulted on its repurchase obligation,
the Fund might suffer a loss to the extent that the proceeds from the sale of
the collateral were less than the repurchase price. In the event of a seller's
bankruptcy, the Fund might be delayed in, or prevented from, selling the
collateral for the Fund's benefit. The Fund's Board of Directors has
established procedures, which are periodically reviewed by the Board, pursuant
to which the Adviser will monitor the creditworthiness of the dealers and banks
with which the Fund enters into repurchase agreement transactions.
Investment Restrictions And Techniques. The Fund is subject to certain
investment restrictions which are fundamental policies changeable only by
shareholder vote. The restrictions in (a), (b) and (c) below do not apply to
U.S. government securities. The Fund may not: (a) Purchase more than 10% of the
voting securities of any one issuer; (b) Purchase more than 10% of any class
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398974.1
<PAGE>
of security of any issuer, with all outstanding debt securities and all
preferred stock of an issuer each being considered as one class; (c)
Concentrate its investments in any particular industry, but if deemed
appropriate for attaining its investment objective, the Fund may invest up to
25% of its total assets (valued at the time of investment) in any one industry
classification used by the Fund for investment purposes (for this purpose, a
foreign government is considered an industry). Concentration of investment in
securities of one issuer may tend to increase the Fund's financial risk; (d)
Borrow money in excess of 10% of the value of the Fund's total assets; the Fund
may borrow only from banks and only as a temporary measure for extraordinary or
emergency purposes and will make no additional investments while such
borrowings exceed 5% of the total assets; (e) Invest more than 10% of the
Fund's total assets in illiquid securities, including securities for which
there is no readily available market, repurchase agreements which have a
maturity of longer than seven days, securities subject to legal or contractual
restrictions and certain over-the-counter options; and (f) Invest more than 5%
of the Fund's total assets in securities of issuers having a record, together
with predecessors, of less than three years of continuous operation.
Notwithstanding investment restriction (e) above, the Fund may purchase
securities which are not registered under the Securities Act of 1933 ("1933
Act") but which can be sold to "qualified institutional buyers" in accordance
with Rule 144A under the 1933 Act. Any such security will not be considered
illiquid so long as it is determined by the Board of Directors or the Adviser,
acting under guidelines approved and monitored by the Board, which has the
ultimate responsibility for any determination regarding liquidity, that an
adequate trading market exists for that security. This investment practice
could have the effect of increasing the level of illiquidity in the Fund during
any period that qualified institutional buyers become uninterested in
purchasing these restricted securities. The ability to sell to qualified
institutional buyers under Rule 144A is a relatively recent development and it
is not possible to predict how this market will develop. The Board will
carefully monitor any investments by the Fund in these securities.
Loans of Portfolio Securities The Fund may lend portfolio
securities if collateral (cash, U.S. Government or agency obligations or
letters of credit) securing such loans is maintained daily in an amount at
least equal to the market value of the securities loaned and if the Fund does
not incur any fees (except transaction fees of the custodian bank) in
connection with such loans. The Fund may call the loan at any time on five
days' notice and reacquire the loaned securities. The Fund would receive the
cash equivalent of the interest or dividends paid by the issuer on the
securities loan and would have the right to receive the interest on investment
of the cash collateral in short-term debt instruments. A portion of either or
both kinds of such interest may be paid to the borrower of such securities. The
Fund would continue to retain any voting rights with respect to the securities.
The value of the securities loaned, if any, is not expected to exceed 10% of
the value of the total assets of the Fund. There is a risk that the borrower of
the securities may default and the Fund may have difficulty in reacquiring the
loaned securities.
When-Issued and Delayed Delivery Securities and Firm
Commitments The Fund may purchase securities on a "when-issued" or "delayed
delivery" basis or may either purchase or sell securities on a "firm commitment
basis", whereby the price is fixed at the time of commitment but delivery and
payment may be as much as a month or more later. The underlying securities are
subject to market fluctuations and no interest accrues prior to delivery of the
securities.
Dividends And Distributions. The Fund declares and pays
dividends from net investment income on an annual basis following the end of
its fiscal year (October 31). The Fund may at times make payments from sources
other than income or net capital gains. Payments from such sources would, in
effect, represent a return of each shareholder's investment. All or a portion
of such payments would not be taxable to shareholders.
Distributions from net long-term and short-term capital
gains, if any, for the Fund normally are declared and paid annually, subsequent
to the end of its fiscal year. Short-term capital
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<PAGE>
gains include the gains from the disposition of securities held less than one
year, a portion of the premiums from expired put and call options written by
the Fund and net gains from closing transactions with respect to such options.
If required by tax laws to avoid excise or other taxes, dividends and/or
capital gains distributions may be made more frequently.
Investment Management Agreement The Fund is managed by the
Manager, Oppenheimer Management Corporation, which supervises the Fund's
investment program and handles its day-to-day business. The Manager carries out
its duties, subject to the policies established by the Board of Trustees, under
an Investment Advisory Agreement with the Fund which states the Manager's
responsibilities. The agreement sets forth the fees paid by the Fund to the
Manager and describes the expenses that the Fund pays to conduct its business.
The Manager has operated as an investment adviser since 1959.
The Manager (including a subsidiary) currently manages investment companies,
including other Oppenheimer funds, with assets of more than $50 billion as of
June 30, 1996, and with more than 2.8 million shareholder accounts. The Manger
is owned by Oppenheimer Acquisition Corp., a holding company that is owned in
part by senior officers of the Manager and controlled by Massachusetts Mutual
Life Insurance Company.
For its services under the Investment Advisory Agreement, the
Fund pays the Manger an annual fee based on the Fund's daily net assets at the
rate of 1.00% of the first $400 million of net assets, .90% of the next $400
million of net assets and .85% of net assets over $800 million. The Fund also
reimburses the Manager for bookkeeping and accounting services performed on
behalf of the Fund.
The Manager has retained OpCap Advisors to provide day-to-day
portfolio management of the Fund. OpCap Advisors is a majority-owned subsidiary
of Oppenheimer Capital, a registered investment advisor, whose employees
perform all investment advisory services provided to the Fund by OpCap
Advisors. The Sponsor, which is also a majority-owned subsidiary of Oppenheimer
Capital, is an affiliate of OpCap Advisors. The Fund's portfolio manager is
employed by OpCap Advisors and is primarily responsible for the selection of
the Fund's securities. The Manager will pay OpCap Advisors monthly an annual
fee based on the average daily net assets of the Fund equal to 40% of the
advisory fee collected by the Manager based on the total net assets of the Fund
as of November 22, 1995 (the "Base Amount") plus 30% of the investment advisory
fee collected by the Manager based on the total net assets of the Fund that
exceed the base amount. Oppenheimer Financial Corp., a holding company, holds a
33% interest in Oppenheimer Capital, a registered investment advisor, and
Oppenheimer Capital, L.P., a Delaware limited partnership whose units are
traded on the New York Stock Exchange and of which Oppenheimer Financial Corp.
is the sole general partner, owns the remaining 67% interest. Oppenheimer
Capital has operated as an investment advisor since 1968.
Prior to November 24, 1995, OpCap Advisors was named Quest
for Value Advisors and was the investment adviser to the Fund. Effective
November 24, 1995, the Manager acquired the investment advisory and other
contracts and business relationships and certain assets and liabilities of
Quest for Value Advisors, Quest for Value Distributors and Oppenheimer Capital
relating to twelve Quest for Value mutual funds, including the Fund. Pursuant
to this acquisition and Fund shareholder approval received on November 3, 1995,
the Fund entered into the following agreements, effective the date of this
Prospectus: the Investment Advisory Agreement between the Fund and the Manager,
and the distribution and service plans and agreements between the Fund and the
Distributor. Further, the Manager entered into a subadvisory agreement with the
Adviser for the benefit of the Fund.
OpCap Advisors may select its affiliate Oppenheimer & Co.,
Inc. ("Opco"), a registered broker-dealer to execute transactions for the Fund,
provided that the commissions, fees or other
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remuneration received by Opco are reasonable and fair compared to those paid to
other brokers in connection with comparable transactions. When selecting
broker-dealers other than Opco, OpCap Advisors may consider their record of
sales of shares of the Fund.
The Fund is responsible for bearing certain expenses
attributable to the Fund but not to a particular class ("Fund Expenses"),
including deferred organization expenses; taxes; registration fees; typesetting
of prospectuses and financial reports required for distribution to
shareholders; brokerage commissions; fees and related expenses of trustees or
directors who are not interested persons; legal, accounting and audit expenses;
custodian fees; insurance premiums; and trade association dues. Fund Expenses
will be allocated based on the total net assets of each class.
Each class of shares of the Fund will also be responsible for
certain expenses attributable only to that class ("Class Expenses"). These
Class Expenses may include distribution and service fees, transfer and
shareholder servicing agent fees, professional fees, printing and postage
expenses for materials distributed to current shareholders, state registration
fees and shareholder meeting expenses. Such items are considered Class Expenses
provided such fees and expenses relate solely to such Class.
The Fund's Plan of Distribution The Fund has adopted a
Distribution and Service Plan (the "Plan") pursuant to Rule 12b-1 to reimburse
the OppenheimerFunds Distributor, Inc. (the "Distributor") for a portion of its
costs incurred in connection with the personal service and maintenance of
shareholder accounts that hold Class A shares. Under the Plan, the Fund pays an
annual asset-based sales charge to the Distributor of 0.25% of the average
annual net assets of the class. The Fund also pays a service fee to the
Distributor of 0.25% of the average annual net assets of the class. The
Distributor uses all of the service fee and a portion of the asset-based sales
charge (equal to 0.15% annually for Class A shares purchased prior to September
1, 1993 and 0.10% annually for Class A shares purchased on or after September
1, 1993) to compensate dealers, brokers, banks and other financial institutions
quarterly for providing personal service and maintenance of accounts of their
customers that hold Class A shares. The Distributor retains the balance of the
asset-based sales charge to reimburse itself for its other expenditures under
the Plan.
Services to be provided include, among others, answering
customer inquiries about the Fund, assisting in establishing and maintaining
accounts in the Fund, making the Fund's investment plans available and
providing other services at the request of the Fund or the Distributor. The
payments under the Plan increase the annual expenses of Class A shares.
The Sponsor will not receive any Rule 12b-1 fees from the
Fund. Any Rule 12b-1 fees paid by the Fund's Distributor to the Trustee for
performing servicing functions with respect to the Fund Shares will be used to
reduce directly the expenses and fees otherwise payable by the Trust to the
Trustee. There can be no assurance that the Trustee will receive any Rule 12b-1
fees in the future.
Substitution of Securities. Neither the Sponsor nor the
Trustee shall be liable in any way for any default, failure or defect in any of
the Securities. In the event of a notice that any Treasury Obligation will not
be delivered ("Failed Treasury Obligations"), the Sponsor is authorized under
the Indenture to direct the Trustee to acquire other Treasury Obligations
("Substitute Treasury Obligations") within a period ending on the earlier of
the first Payment Date or 90 days after the Initial Date of Deposit. The cost
of the Substitution Treasury Obligations may not exceed the cost of the
Treasury Obligations which they replace. Any Substitution Treasury Obligation
deposited in the Trust will be substantially identical to every Treasury
Obligation then in the Trust. Whenever a Substitute Treasury Obligation has
been acquired for the Trust, the Trustee shall, within five days thereafter,
notify Unit Holders of the acquisition of the Substitute Treasury Obligation
and the Trustee shall, on the next Payment Date which is more than 30 days
thereafter make a pro rata distribution of the amount, if any,
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by which the cost to the Trust of the Failed Treasury Obligations exceeded the
cost of Substitute Treasury Obligations plus accrued interest, if any.
The Substitute Treasury Obligations must be purchased within
20 days after the sale of the portfolio Security or delivery of the notice of
the failed contract. Where the Sponsor purchases Substitute Treasury
Obligations in order to replace Failed Treasury Obligations, (i) the purchase
price may not exceed the purchase price of the Failed Treasury Obligations and
(ii) the Substitute Treasury Obligations must be substantially similar in terms
of maturity date, interest rate, yield to maturity, rating and purchase price
to the Treasury Obligations originally contracted for and not delivered. Where
the Sponsor purchases Substitute Treasury Obligations in order to replace
Treasury Obligations they sold, the Sponsor will endeavor to select Treasury
Obligations which are securities that possess characteristics that are
consistent with the objectives of the Trust as set forth above. Such selection
may include or be limited to Treasury Obligations previously included in the
portfolio of the Trust.
In the event no reinvestment is made, the proceeds of the
sale of Treasury Obligations will be distributed to Unit Holders as set forth
under "Risk Factors-Fund Shares and Treasury Obligations" and "Rights of Unit
Holders--Distributions." In addition, if the right of substitution shall not be
utilized to acquire Substitute Treasury Obligations in the event of a failed
contract, the Sponsor will cause to be refunded the sales charge attributable
to such Failed Treasury Obligations to all Unit Holders of the Trust, and
distribute the principal and accrued interest attributable to such Failed
Treasury Obligations on the next Distribution Date.
Because certain of the Treasury Obligations from time to time
may be substituted (see "Trust Administration--Portfolio Supervision") or may
be sold under certain circumstances, no assurance can be given that the Trust
will retain its present size and composition for any length of time. The
proceeds from the sale of a Security or the exercise of any redemption or call
provision will be distributed to Unit Holders except to the extent such
proceeds are applied to meet redemptions of Units. (See "Liquidity--Trustee
Redemption.")
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 ability of 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. Additionally, the Trust will not elect to reinvest any
distributions they are entitled to as a result of its ownership of Fund Shares.
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. (See "Trust Administration--Portfolio Supervision.") 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
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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 day
period at the termination of the 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.
Fund Shares and Treasury Obligations. The Sponsor has taken
steps to ensure that an investment in Fund Shares is equitable to all parties
and particularly that the interest of the Unit Holders is protected.
Accordingly, any sales charges which would otherwise be applicable will be
waived on Fund Shares sold to the Trust, since the Sponsor is receiving the
sales charge on all Units sold. In addition, the Trust Agreement requires the
Trustee to vote all Fund Shares held in the Trust in the same manner and ratio
on all proposals as the vote of owners of Fund Shares not held by the Trust.
The Fund Shares may appreciate or depreciate in value (or pay
dividends) depending on the full range or economic and market influences
affecting the securities in which the Fund is invested and the success of the
Fund's management in anticipating or taking advantage of such opportunities as
may occur. In addition, in the event of the inability of the Fund's Adviser to
act and/or claims or actions against the Fund by regulatory agencies or other
persons or entities, the value of the Fund Shares may decline thereby causing a
decline in the value of Units. Termination of the Fund prior to the Termination
Date of a Trust may result in the termination of the Trust sooner than
anticipated. Prior to a purchase of Units, investors should determine that the
aforementioned risks are consistent with their investment objectives.
The net asset value of the Fund Shares, like the value of the
Treasury Obligations, will fluctuate over the life of the Trust and may be more
or less than the price paid therefor by the Trust.
An investment in Units of the Trust should be made with an understanding of
the risks inherent in ownership of equity securities since the Portfolio of the
Fund is invested in equity securities which the Fund's Adviser believes may be
undervalued. However, the Sponsor believes that, upon termination of the Trust
on the mandatory termination date, even if the Fund Shares are worthless, the
Treasury Obligations will provide sufficient cash at maturity to equal $1,000
per 1,000 Units. Part of such cash will, however, represent an amount of
taxable original issue discount of the Treasury Obligations which was
previously accrued and included in the income of the Unit Holders.
A UNIT HOLDER PURCHASING A UNIT ON THE DATE OF THIS PROSPECTUS OR
THEREAFTER MAY RECEIVE TOTAL DISTRIBUTIONS, INCLUDING DISTRIBUTIONS MADE UPON
TERMINATION OF THE TRUST THAT ARE LESS THAN THE AMOUNT PAID FOR SUCH UNIT.
Sales of Securities in the portfolio under certain permitted
circumstances may result in an accelerated termination of the Trust. It is also
possible that, in the absence of a secondary market for the Units or otherwise,
redemptions of Units may occur in sufficient numbers to reduce the portfolio to
a size resulting in such termination. In addition, the Trust may be terminated
if the net aggregate value of the Trust is less than 40% of the aggregate value
of the Securities calculated immediately after the most recent deposit of
Securities in the Trust. Early termination of the Trust may have important
consequences to the Unit Holder; e.g., to the extent that Units were purchased
with a view to an investment of longer duration, the overall investment program
of the investor may require readjustment; or the overall return on investment
may be less than anticipated, and may result in a loss to a Unit Holder.
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In the event of the early termination of the Trust, the
Trustee will cause the Fund Shares to be sold and the proceeds thereof
distributed to the Unit Holders in proportion to their respective interests
therein, unless a Unit Holder elects to receive Fund Shares "in kind." (See
"Trust Administration--Trust Termination.") Proceeds from the sale of the
Treasury Obligations will be paid in cash.
In the event a contract to purchase Securities fails and
Substitute Treasury Obligations are not acquired, the Trustee will distribute
to Unit Holders the funds attributable to the failed contract. Investors should
be aware that in such an unlikely event, the amount of capital protection
provided by the Treasury Obligations may no longer be sufficient to assure that
an initial investor would receive back their original purchase price per Unit
at the termination of the Trust. The Sponsor will, in such case, refund the
sales charge applicable to the failed contract. If less than all the funds
attributable to a failed contract are applied to purchase Substitute Treasury
Obligations, the remaining money will be distributed to Unit Holders.
The Trustee will have no power to vary the investments of the
Trust, i.e., the Trustee will have no managerial power to take advantage of
market variations to improve a Unit Holder's investment but may dispose of
Securities only under limited circumstances.
To the best of the Sponsor's knowledge there was no
litigation pending as of the Initial Date of Deposit in respect of any Security
which might reasonably be expected to have a material adverse effect on the
Trust. At any time after the Initial Date of Deposit, litigation may be
instituted on a variety of grounds with respect to the Securities. The Sponsor
is unable to predict whether any such litigation may be instituted, or if
instituted, whether such litigation might have a material adverse effect on the
Trust.
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 during a 30 day period prior to the termination of the Trust. Since
the Trust will not sell Securities in response to ordinary market fluctuation,
but only at the Trust's termination, 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.
There is no assurance that any dividends will be declared or
paid in the future on the Fund Shares. Investors should be aware that there is
no assurance that the Trust's objectives will be achieved.
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. If the price of a Security increases or decreases between the time cash
is deposited with instructions to purchase the Security and 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
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
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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.
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 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 plus a
sales charge of 4.0% of the Public Offering Price (excluding any transaction
fees) or 4.167% of the net amount invested in Securities per 1,000 Units of the
Trust. 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 Evaluator on each "Business Day" as defined in the Trust Agreement
in the following manner: during the initial offering period on the basis of the
net asset value of the Fund Shares and the offering side evaluation of the
Treasury Obligations and following the initial offering period on the basis of
the net asset value of the Fund Shares and the bid side evaluation of the
Treasury Obligations. The evaluation generally shall be based on the closing
purchase price in the over-the-counter market (unless the Evaluator deems these
prices inappropriate as a basis for evaluation) or if there is no such closing
purchase price, then the Evaluator may ascertain the values of the Treasury
Obligations using any of the following methods, or a combination thereof, which
it deems appropriate: (a) on the basis of current offering prices for the
Treasury Obligations as obtained from investment dealers or brokers who
customarily deal in securities comparable to those held in the Trust, (b) if
offering prices are not available for the Treasury Obligations, on the basis of
current offering prices for comparable securities, (c) by appraising the value
of the Treasury Obligations on the offering side of the market or by such other
appraisal deemed appropriate by the Evaluator, or (d) by any combination of the
above, each as of the Evaluation Time.
Volume and Other Discounts. Units of the Trust are available
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
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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:
<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> <C>
Less than $25,000 4.00% 0.00% 4.00% 3.00%
$25,000 but less than $50,000 4.00% 0.25% 3.75% 2.90%
$50,000 but less than $100,000 4.00% 0.50% 3.50% 2.75%
$100,000 and above* 4.00% 0.75% 3.25% 2.50%
</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) OpCap 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 OpCap 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: Arkansas, California, Connecticut, District of
Columbia, Florida, Georgia, Illinois, Maryland, Mississippi, Nevada, New
Jersey, New York, North Carolina, Pennsylvania, South Carolina, Tennessee,
Texas and Virginia. Additional states may be added from time to time.
From time to time the Sponsor may implement programs under
which dealers of the Trust may receive nominal awards from the Sponsor for each
of their registered representatives who have sold a minimum number of UIT Units
during a specified time period. In addition, at various times the Sponsor may
implement other programs under which the sales force of a dealer may be
eligible to win other nominal awards for certain sales efforts, or under which
the Sponsor will reallow to any such
- --------
* For any transactions of 250,000 Units or more or over $250,000, the
Sponsor intends to negotiate the applicable sales charge and such charge
will be disclosed to any such purchaser.
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dealer that sponsors sales contests or recognition programs conforming to
criteria established by the Sponsor, or participates in sales programs
sponsored by the Sponsor, an amount not exceeding the total applicable sales
charges on the sales generated by such person at the public offering price
during such programs. Also, the Sponsor, in its discretion, may from time to
time, pursuant to objective criteria established by the Sponsor, pay fees to
qualifying dealers 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 not 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.
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.
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 4.0% of the Public Offering
Price per 1,000 Units (equivalent to 4.167% of the net amount invested in the
Securities of 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 has 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.
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
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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
Book-Entry Units. Ownership of Units of the Trust will not be
evidenced by certificates. All evidence of ownership of the Units will be
recorded in book-entry form either at Depository Trust Company ("DTC") through
an investor's broker's account or through registration of the Units on the
books of the Trustee. Units held through DTC will be deposited by the Sponsor
with DTC in the Sponsor's DTC account and registered in the nominee name CEDE &
CO. Individual purchases of beneficial ownership interest in the Trust will be
made in book-entry form through DTC or the Trustee. Ownership and transfer of
Units will be evidenced and accomplished directly and indirectly by
book-entries made by DTC and its participants if the Units are evidenced at
DTC, or otherwise will be evidenced and accomplished by book-entries made by
the Trustee. DTC will record ownership and transfer of the Units among DTC
participants and forward all notices and credit all payments received in
respect of the Units held by the DTC participants. Beneficial owners of Units
will receive written confirmation of their purchase and sale from the
broker-dealer or bank from whom their purchase was made. Units are transferable
by making a written request properly accompanied by a written instrument or
instruments of transfer which should be sent registered or certified mail for
the protection of the Unit Holder. Unit Holders must sign such written request
exactly as their names appear on the record of the Trust. Such signatures must
be guaranteed by a commercial bank or trust company, savings and loan
association or by a member firm of a national securities exchange.
Distributions. Dividends and distributions received by a
Trust, and/or Rule 12b-1 fees paid to the Trustee by the Fund's distributor
which are not applied to reduce the Trustee's annual fee, are credited by the
Trustee to an Income Account for that 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
Payment 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 Payment Date. Proceeds representing principal
received from the disposition of any of the Securities between a Record Date
and a Payment Date which are not used for redemptions of Units will be held in
the Principal Account and not distributed until the next Payment Date. Persons
who purchase Units between a Record Date and a Payment Date will receive their
first distribution on the Payment 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 the 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.
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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.
Reinvestment. Distributions of income, capital gains, if any,
or principal on Units (other than the final distribution in connection with the
termination of the Trust) may be reinvested by participating in a Trust's
reinvestment plan. Under the plan, the Units acquired will be Units already
held in inventory by the Sponsor. Units acquired by reinvestment will not be
subject to a sales charge. If, for any reason, the Sponsor does not have Units
of the Trust available for purchase, the Trustee shall make such Unit Holder's
distribution as described under "Distributions" above. The Sponsor reserves the
right to amend, modify or terminate the reinvestment plan at any time without
prior notice. The reinvestment plan for the Trust may not be available in all
states. In order to enable a Unit Holder to participate in the reinvestment
plan with respect to a particular distribution on their Units, written
notification must be received by the Trustee within 10 days prior to the Record
Date for such distribution. Each subsequent distribution of income or principal
on the participant's Units will be automatically applied by the Trustee to
purchase additional Units of a Trust.
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 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
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of the Trustee, legal expenses and other actual out-of-pocket expenses, will be
paid by the Trust and amortized over a five year period. All advertising and
selling expenses, as well as any organizational expenses not paid by the Trust,
will be borne by the Sponsor at no cost to the Trust.
Fees
The Sponsor will not charge the Trust a fee for its services as such. (See
"Sponsor's Profits.")
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. Such fee shall be reduced directly by any Rule 12b-1
fees paid by the Fund's distributor to the Trustee for performing servicing
functions with respect to the Fund Shares. There can be no assurance that the
Trustee will receive any Rule 12b-1 fees in the future. 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 the Trust are payable from
the Income Account of the Trusts 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 Trusts 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 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.
The fees and expenses set forth herein are payable out of the
Trust and when paid by or owing to the Trustee are secured by a lien on the
Trust. If the cash dividend, capital gains distributions and Rule 12b-1 fees
paid to the Trustee by the Fund's distributor are insufficient to provide for
amounts payable by the Trust, the Trustee has the power to sell Fund Shares
(not Treasury Obligations) to pay such amounts. To the extent Fund Shares are
sold, the size of the Trust will be reduced and the proportions of the types of
Securities will change. Such sales might be required at a time when Fund Shares
would not otherwise be sold and might result in lower prices than might
otherwise be realized. Moreover, due to the minimum amount in which Fund Shares
may be required to be sold, the proceeds of such sales may exceed the amount
necessary for the payment of such fees and expenses. If the cash dividends,
capital gains distributions, Rule 12b-1 fees paid to the Trustee by the Fund's
distributor and proceeds of Fund Shares sold after deducting the ordinary
expenses are
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insufficient to pay the extraordinary expenses of the Trust, the Trustee has
the power to sell Treasury Obligations to pay such extraordinary 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.
Status of the Trust. 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, has relied on the validity of said documents and the
accuracy and completeness of the facts set forth therein and has assumed that
the Trust will be operated in conformance with the Agreement and as described
in the Prospectus.
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 a 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. The Sponsor's right, during the 90-day period
subsequent to the Initial Date of Deposit, to deposit additional
Securities that are substantially similar to those deposited on the
Initial Date of Deposit satisfies the criteria set forth by the
Internal Revenue Service ("IRS") and should not affect the status of
the Trust.
Taxation of Treasury Obligations. The Trust will contain
Treasury Obligations originally issued at a discount ("original issue
discount"). In general, original issue discount can be defined as the
difference between the price at which a security was issued and its stated
redemption price at maturity. In the case of a Treasury Obligation issued after
July 2, 1982, original issue discount is deemed to accrue on a constant
interest method, which corresponds in general to the economic accrual of
interest (adjusted to eliminate proportionately on an elapsed-time basis any
excess of the amount paid for the Treasury Obligation over the sum of the issue
price and the accrued original issue discount on the acquisition date).
Each Unit Holder will be required to include original issue
discount with respect to his interest in a Treasury Obligation held by the
Trust at the same time and in the same manner as though the Unit Holder was the
direct holder of such interest. The tax basis of a Unit Holder with respect to
his interest in a Treasury Obligation will be increased by the amount of
original issue discount thereon so included in the Unit Holder's gross income.
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Taxation of Fund Shares. The Trust will also own shares in
the Fund, an entity that has elected and qualified for the special tax
treatment applicable to "regulated investment companies." If the Fund
distributes 90% or more of its investment company taxable income to its
shareholders, it will not be subject to Federal income tax on the amounts so
distributed. Moreover, if the Fund distributes at least 98% of its investment
company taxable income (including any net capital gain) it will not be subject
to the 4% excise tax on certain undistributed income of "regulated investment
companies." The Fund declares and pays dividends from net investment income on
an annual basis following the end of its fiscal year (October 31). The Fund
also normally declares and pays distributions from net long-term capital gains
annually, after the end of its fiscal year. Distributions by the Fund of its
taxable income and short-term capital gains to its shareholders will be taxable
as ordinary income to such shareholders. Distributions of the Fund's net
capital gain, which are designated as capital gain dividends by the Fund, will
be taxable to its shareholders as long-term capital gain, regardless of the
length of time the shareholders have held their investment in the Fund.
Dividends (but not capital gains) paid by the Fund, qualify for the 70%
dividends received deduction for corporations unless derived from interest
income or foreign source income. The allowable deduction percentage will be
reduced from 70% if a corporate Unit Holder owns Units the financing of which
is directly attributable to indebtedness incurred by such corporation. Unit
Holders should consult their tax adviser in this regard. Recent legislative
proposals, if enacted, would reduce the rate of the dividends received
deduction.
Dispositions of Units or Securities. 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.
The amount of gain recognized by a Unit Holder on a
disposition of a Treasury Obligation by the Trust will be equal to the excess,
if any, of such Unit Holder's pro rata portion of the gross proceeds realized
by the Trust on the disposition over the Unit Holder's tax basis, determined in
the manner set forth above, in his pro rata portion of the Treasury Obligation
disposed of. Any gain recognized on a sale or exchange of a Unit Holder's pro
rata interest in a Treasury Obligation that does not constitute realization of
accrued "market discount" in the case of a Treasury Obligation issued after
July 18, 1984, will be capital gain. Gain realized on the disposition of the
interest of a Unit Holder in a market discount Treasury Obligation is treated
as ordinary income to the extent the gain does not exceed the accrued market
discount. A Unit Holder has an interest in a market discount Treasury
Obligation when the Unit Holder's tax cost for his pro rata interest in the
Treasury Obligation is less than the stated redemption price thereof at
maturity (or the issue price plus original issue discount accrued up to the
acquisition date, in the case of an original issue discount Treasury
Obligation.) If a Unit Holder has an interest in a market discount Treasury
Obligation and has incurred debt to acquire Units, the deductibility of a
portion of the interest incurred on such debt may be deferred.
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 some or all 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).
A distribution of a pro rata share of the Securities by the
Trustee to a Unit Holder (or to his agent, including the Sponsor) upon
redemption of Units 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 the portion of his basis for his Units attributable
to those Securities prior to such
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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 Securities that were distributed to him by the
Trust, when a redeeming Unit Holder receives cash in lieu of fractional shares,
or when the Trustee sells Securities that cannot be distributed in kind.
A Unit Holder who receives cash upon liquidation of their pro
rata share of the underlying Securities will recognize gain or loss in the
manner described above.
If a Rollover Unit Holder invests his redemption proceeds in
units of an available series of the QUILTS Opportunity Trust (a "Rollover
QUILTS") holding securities substantially identical to the Securities, such
Unit Holder may not be entitled to a deduction for any losses recognized upon
the disposition of Securities. This loss disallowance rule will apply to the
extent that such Unit Holder is considered under the grantor trust rules
described above to be the owner of substantially identical securities as a
result of such Unit Holder's ownership of Units in a Rollover QUILTS, if such
Rollover QUILTS and substantially identical securities were acquired within a
period ending 30 days after such disposition. In addition, no deduction is
available for a loss incurred on the disposition of a Security if, 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 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 corporate Unit Holders, and to those
non-corporate Unit Holders who, as of the date of their sale or exchange of
their Units, the disposition of Securities by the Trust, or the redemption of
their Units for cash or their disposition of Securities received from the
Trust, have held their units for less than a year and a day. 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.
Treatment of Expenses of Trust. 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 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.
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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 are 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.
Tax-exempt prospective 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, 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.
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."
Retirement Plans for the Self-Employed--Keogh Plans. Units of the
Trust may be purchased by retirement plans established for self-employed
individuals, partnerships or unincorporated companies ("Keogh plans").
Qualified individuals may generally make annual tax-deductible contributions up
to the lesser of 25% 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
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 or the individual's
spouse (in the case of a married individual) participates in a qualified
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retirement plan and the individual's adjusted gross income exceeds $25,000 (in
the case of a single individual or a married individual filing a separate
return not residing with such person's spouse) or $40,000 (in the case of
married individuals filing a joint return). Special rules apply in the case of
married individuals living together who file separate returns. Generally, there
are penalties for premature distributions from an IRA before the attainment of
age 591/2, except in the case of the participant's death or disability and
certain other circumstances.
Corporate Pension and Profit-Sharing Plans. A pension or
profit-sharing plan for employees of a corporation may purchase Units of the
Trust.
Recent Legislation. As a result of the enactment of the Small
Business, Health Insurance and Welfare Reform Acts of 1996 (the "'96 Act"),
certain of the foregoing provisions have been amended. Pertinent provisions of
the '96 Act are described below:
Generally. Five year averaging will not apply to
distributions after December 31, 1999. Ten year averaging has been preserved in
very limited circumstances.
IRAs. Beginning January 1, 1997, a non-working spouse may be
eligible to establish an IRA and contribute up to $2,000, provided the combined
income of both spouses is at least equal to the amount contributed by both
spouses to IRAs.
SIMPLE Plans. The '96 Act provides for a new type of
retirement plan, a savings incentive match plan for employees (a "SIMPLE
Plan"), which may be adopted by certain employers that employ no more than 100
employees. Participants in a SIMPLE Plan are permitted to contribute up to
$6,000 to the Plan on a pre-tax basis and the employer makes either matching
contributions not in excess of 3 percent of compensation or non-elective
contributions equal to 2 percent of compensation. SIMPLE Plans are subject to
distribution rules similar to IRAs, except there is a 25 percent early
withdrawal penalty for withdrawals made during the first 2 years of
participation. Units of the Trust may be purchased by SIMPLE Plans.
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 portfolio of the Trust and will
be the same as the redemption price. The aggregate value will be determined by
the Evaluator 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 price of the Securities in the Trust. 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 10281. 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 4.0% sales charge (4.167% of the
net amount invested), plus a pro rata portion of amounts, if any, in the
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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
(three business 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.
Within three business days following a tender for redemption,
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 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 possible the
proportionate ratio of remaining Fund Shares and Treasury Obligations as of the
Initial Date of Deposit, provided, however, that, except to the extent the
Trust then lacks other assets sufficient to provide for payment of the
redemption, Treasury Obligations shall not be sold to the extent that the
maturity value per Unit outstanding of the Treasury Obligations remaining after
such sale would be less than the maturity value per Unit of the Treasury
Obligations on the Initial Date of Deposit. 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 100 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 Evaluator, 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 Evaluator may determine the value of the Securities in each
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Trust in the following manner: the net asset value of the Fund Shares and the
bid side evaluation of the Treasury Obligations. The evaluation shall generally
be based on the closing purchase price in the over-the-counter market (unless
the Evaluator deems these prices inappropriate as a basis for evaluation) or if
there is no such closing purchase price, then the Evaluator may ascertain the
values of the Treasury Obligations using any of the following methods, or a
combination thereof, which it deems appropriate: (a) on the basis of the
current bid prices for the Treasury Obligations as obtained from investment
dealers or brokers who customarily deal in securities comparable to those held
in the Trust, (b) if bid prices are not available for the Treasury Obligations,
on the basis of current bid prices for comparable securities, (c) by appraising
the value of the Treasury Obligations on the bid side of the market or (d) by
any combination of the above.
Any Unit Holder tendering 25,000 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 Fund Shares 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 Fund Shares and cash from the Principal Accounts equal to the
balance of the Redemption Price to which the tendering Unit Holder is entitled,
which will include the proceeds of the sale of the Treasury Obligations and
fractional Fund Shares. 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.
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
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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;
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 detrimenta l 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, if any exchange
or substitution is effected notwithstanding such rejection, any securities or
other property received shall be promptly sold unless the Sponsor directs that
it be retained.
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
between the Fund Shares and the Treasury Obligations 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 also replicate exactly the proportionate relationship in
the portfolio of the Trust at the Initial Date of Deposit.
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
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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 Unit Holders owning 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 Unit Holders. The Trust Agreement may not be
amended, without the consent of all Unit Holders 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 the 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. 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 25,000 Units, 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), 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 Fund Shares and the balance in cash within three
business days next following the commencement of the Liquidation
Period. Such Unit Holders may also elect to invest the proceeds of the
Treasury Obligations in Fund Shares at such shares' net asset value,
which shall be subject to Rule 12b-1 fees. 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 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 three business days of
the settlement of the trade of the last Security to be sold; and/or
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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 days immediately following the commencement of the
Liquidation Period, in units of an available series of QUILTS
Opportunity Trust ("Rollover QUILTS") provided one is offered. It is
expected that a special redemption and liquidation will be made of all
Units of these Trusts held by Unit Holder (a "Rollover Unit Holder")
who affirmatively notifies the Trustee in writing. 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 (as disclosed in the
prospectus for the Rollover QUILTS) 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 subsequent series of the QUILTS
Opportunity Trust will be available for each new 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 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 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 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. The Sponsor believes that the sale of underlying Securities
over a 30 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).
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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 $40 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.
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, with
its principal executive office located at 270 Park Avenue, New York, New York
10017 and its unit investment trust office at 770 Broadway, New York, New York
10003 (800) 428-8890. Effective on or shortly after October 28, 1996 the
address of the Trustee's unit investment trust office will be 4 New York Plaza,
New York, New York 10004. The customer service number will not change. The
Trustee is subject to the supervision by the Superintendent of Banks of the
State of New York, the Federal Deposit Insurance Corporation and the Board of
Governors of the Federal Reserve System.
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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 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.
The Evaluator. The Evaluator for the Trust is Muller Data
Corporation, a New York corporation, with main offices located at 395 Hudson
Street, New York, New York 10014. Muller Data Corporation is a wholly-owned
subsidiary of Thomson Publishing Corporation, a Delaware corporation.
The Trustee, the Sponsor and the Unit Holders may rely on any
evaluation furnished by the Evaluator and shall have no responsibility for the
accuracy thereof. Determinations by the Evaluator under the Trust Agreement
shall be made in good faith upon the basis of the best information available to
it, provided, however, that the Evaluator shall be under no liability to the
Sponsor or Unit Holders for errors in judgment, except in cases of its own
willful misfeasance, bad faith, negligence or reckless disregard of its
obligation and duties. The Evaluator shall not be liable or responsible for
depreciation or losses incurred by reason of the purchase, sale or retention of
any Securities.
The Evaluator may resign or may be removed by the Sponsor and
Trustee, and the Sponsor and the Trustee are to use their best efforts to
appoint a satisfactory successor. Such resignation or removal shall become
effective upon the acceptance of appointment by the successor Evaluator. If
upon resignation of the Evaluator no successor has accepted appointment within
thirty days after notice of resignation, the Evaluator may apply to a court of
competent jurisdiction for the appointment of a successor.
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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 Statement of Condition and
Portfolio 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.
Legal Matters. The Investment Company Act of 1940 (the "Act")
limits the amounts that registered investment companies (such as the Trust) can
own of other registered investment companies (such as the Fund). However,
Section 12(d)(1)(E) of the Act would exempt the Trust from these limitations if
the Fund is the only "investment security" held by the Trust. While the term
"investment security" is not defined in Section 12(d) of the Act, it is defined
in another section of the Act to exclude government securities (such as the
Treasury Obligations) from its scope. Therefore, since the Trust only owns
shares of the Fund and Treasury Obligations it complies with the exception of
Section 12(d)(1)(E). Further, the Office of Chief Counsel of the Division of
Investment Management of the Securities and Exchange Commission granted the
Sponsor "no action" assurance on this issue.
DESCRIPTION OF CORPORATE BONDS RATINGS
MOODY'S INVESTORS SERVICE, INC.
Aaa: Bonds which are rated Aaa are judged to be the best
quality. They carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa: Bonds which are rate Aa are judged to be of high qualify
by all standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as Aaa securities or fluctuations of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A: Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
Baa: Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
Ba: Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate and thereby
not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
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B: Bonds which are rated B generally lack characteristics of
a desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa: Bonds which are rated Caa are of poor standing. Such
issues may be in default or there may be present elements of danger with
respect to principal or interest.
Ca: Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
market shortcomings.
C: Bonds which are rated C are the lowest rated class of
bonds, and issues so rated can be regarded as having extremely poor prospects
of ever attaining any real investment standing.
Unrated: Where no rating has been assigned or where a rating
has been suspended or withdrawn, it may be for reasons unrelated to the quality
of the issue.
Should no rating be assigned, the reason may be one of the
following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities that
are not rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue
or issuer.
4. The issue was privately based, in which case the rating
is not published in Moody's Investors Service, Inc.'s publications.
Suspension or withdrawal may occur if new and material
circumstances arise, the effects of which preclude satisfactory analysis; if
there is no longer available reasonable up-to-date data to permit a judgment to
be formed; if a bond is called for redemption; or for other reasons.
Note: Those bonds in the Aa, A, Baa, Ba and B groups which
Moody's believe possess the strongest investment attributes are designated by
the symbols Aa-1, A-1, Baa-1, and B-1.
STANDARD & POOR'S CORPORATION
AAA: Bonds rated AAA have the highest rating assigned by
Standard & Poor's Corporation ("S&P"). Capacity to pay interest and repay
principal is extremely strong.
AA: Bonds rated AA have a very strong capacity to pay
interest and repay principal and differ from the higher rated issues only in
small degree.
A: Bonds rated A have a strong capacity to pay interest and
repay principal although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than bonds in the
highest rated categories.
BBB: Bonds rated BBB are regarded as having an adequate
capacity to pay interest and repay principal. Whereas they normally exhibit
adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay interest
and repay principal for bonds in this category then in higher rated categories.
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BB, B, CCC, CC, C: Bonds rated BB, B, CCC, CC and C are
regarded, on balance, as predominantly speculative with respect to capacity to
pay interest and repay principal in accordance with the terms of this
obligation. BB indicates the lowest degree of speculation and C the highest
degree of speculation. While such bonds will likely have some quality and
protective characteristics, they are outweighed by large uncertainties of major
risk exposures to adverse conditions.
C1: The rating C1 is reserve for income bonds on which no
interest is being paid.
D: Bonds rated D are in default, and payment of interest
and/or repayment of principal is in arrears.
Plus (+) or minus (-): The ratings from "AA" to "CCC" may be
modified by the addition of a plus or minus sign to show relative standing
within the major rating categories.
NR: Indicates that no rating has been requested, that there
is insufficient information on which to base a rating, or that S&P does not
rate a particular type of obligation as a matter of policy.
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<TABLE>
<CAPTION>
Qualified Unit Investment Liquid Trust Series ("QUILTS")
(A Unit Investment Trust)
Opportunity Trust 2002
Prospectus Dated: August 29, 1996
Sponsor: Trustee: Evaluator:
<S> <C> <C>
OCC Distributors The Chase Manhattan Bank Muller Data Corporation
Two World Financial Center 770 Broadway 395 Hudson Street
225 Liberty Street New York, New York 10003 New York, New York 10014
New York, New York 10281 (800) 428-8890
(800) 628-6664
</TABLE>
============================
Table of Contents
Title Page
PART A
Summary of Essential Information........................................A-2
The Trust...............................................................A-3
Independent Auditors' Report............................................A-8
Statement of Condition..................................................A-9
Portfolio...............................................................A-10
Underwriting............................................................A-10
PART B
The Trust...............................................................B-1
Risk Factors............................................................B-10
Public Offering.........................................................B-13
Rights of Unit Holders .................................................B-16
Tax Status..............................................................B-19
Liquidity...............................................................B-23
Trust Administration....................................................B-25
Other Matters...........................................................B-31
Description of Corporate Bond Ratings...................................B-31
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.
398974.1
