Rule 497(b)
Registration No. 333-02467
("QUILTS")
QUALIFIED UNIT INVESTMENT LIQUID TRUST SERIES
A Unit Investment Trust
QUILTS Laddered Income--U.S. Treasury Series 18 (ACTP)
QUILTS consists of a unit investment trust designated QUILTS Laddered
Income--U.S. Treasury Series 18 (ACTP) (the "Trust"). The sponsor of the Trust
is OCC Distributors (the "Sponsor"). The objectives of the Trust are to provide
safety of principal and scheduled distributions of principal and interest. The
Trust seeks to achieve these objectives by investment in a portfolio of U.S.
Treasury Obligations (the "Treasury Securities") that are backed by the full
faith and credit of the United States Government. The Trust is designed to have
regularly scheduled payments of principal during its life from a portfolio of
Securities with laddered maturities. 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 Trust may be appropriate for investors who desire to participate in a
portfolio of taxable fixed income securities offering the safety of principal
provided by an investment backed by the full faith and credit of the United
States. In addition, many investors may benefit from the exemption from state
and local personal income taxes that will pass through the Trust to Unit
Holders. (See "Tax Status" in Part B of this Prospectus.)
This Prospectus consists of two parts. Part A contains a Summary of
Essential Information for the Trust including descriptive material relating to
the Trust, the Statement of Condition of the Trust and the Portfolio of the
Trust. Part B contains general information about the Trust. Part A may not be
distributed unless accompanied by Part B.
QUILTS are not a deposit or other obligation of, or guaranteed by, a
depository institution. QUILTS are not insured by the FDIC and are 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 APRIL 17, 1996 Please read and
retain both parts of this Prospectus for future reference.
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<TABLE>
QUILTS Laddered Income
U.S. Treasury Series 18 (ACTP)
SUMMARY OF ESSENTIAL INFORMATION AS OF APRIL 16, 1996 (the initial Date of
Deposit which is the date on which the Trust Agreement was signed and the
deposit of Securities with the Trustee was made).
<S> <C>
CUSIP#: 747938108 Evaluation Time: 12:00 Noon New York Time on
Sponsor: OCC Distributors. the initial Date of Deposit and 4:00 P.M. thereafter.
Date of Deposit: April 16, 1996. Minimum Purchase: 1,000 Units.
Aggregate Principal Amount Minimum Principal Distribution: $1.00 per 1,000
of Securities .......................$ 450,000 Units.
Number of Units (The number of Units will be Weighted Average Maturity of Securities in the
increased as the Sponsor deposits additional Portfolio: .69 Years.
Securities into the Trust.)............450,000 Minimum Value of Trust: The Trust may be
Fractional Undivided Interest in Trust terminated if the value of the Securities in the Trust is
per 1,000 Units..........................1/450 less than 40% of the original aggregate principal
Public Offering Price: amount of Securities in the Trust.
Aggregate Offering Price of Securities Mandatory Termination Date: The earlier of
in Trust............................$443,391 December 12, 1996 or the disposition of the last
Divided By 450,000 Units multied by 1,000$985.31 Security in the Trust.
Plus Sales Charge of .60% of Public Offering Trustee and Evaluator: The Chase Manhattan Bank
Price..................................$5.95 (National Association).
Public Offering Price per 1,000 Units(1)$991.26 Trustee's Annual Fee and Estimated Expenses:
Redemption Price per 1,000 Units.......$985.31 $.50 per 1,000 Units.
Sponsor's Initial Repurchase Price Annual Supervisory Fee (Payable to an affiliate of the
per 1,000 Units......................$985.31 Sponsor): Maximum of $.10 per $1,000
Excess of Public Offering Price Over principal amount of Securities. (See "Trust Expenses
Redemption Price per 1,000 Units.........$5.95 and Charges" in Part B.)
Excess of Sponsor's Initial Repurchase Price
Over Redemption Price per 1,000 Units....$5.95
INFORMATION PER 1,000 UNITS
BASED UPON SCHEDULED DISTRIBUTIONS
Gross annual interest income (cash)................................$28.60
Less estimated annual fees and expenses(4)......................... .63
Estimated net annual interest income (cash)(2).....................27.97
Estimated daily interest accrual (Does not include income accrual from
original issue discount bonds.)................................. .122
Estimated long term return (Does not include income accrual from original issue
discount bonds. The estimated long-term return is increased for transactions
entitled to a discount.)(3)(5)..................................4.09%
Scheduled Distribution Dates: Record Date/Payment Date Record Date/Payment Date
September 1, 1996 - September 5, 1996 November 10, 1996 - November 14, 1996
September 15, 1996 - September 19, 1996 November 17, 1996 - November 21, 1996
September 29, 1996 - October 3, 1996 December 8, 1996 - December 12, 1996
October 13, 1996 - October 17, 1996
October 27, 1996 - October 31, 1996
</TABLE>
(1)No accrued interest will be added for any person contracting to purchase
Units on the date of this Prospectus. Anyone ordering Units after such Date
will pay accrued interest from April 22, 1996 to the date of the settlement
(three business days after order) (the "First Settlement Date"), less
distributions from the Interest Account subsequent to April 22, 1996.
(2)The first scheduled distribution of $1.36 per 1,000 Units for Treasury Income
Series 18 will be made on September 5, 1996 (the "First Payment Date") to all
Unit Holders of record on September 1, 1996 (the "First Record Date").
Thereafter, distributions per 1,000 Units of Treasury Income Series 18 will
be made on each scheduled payment date (the "Scheduled Payment Dates") except
for the final distribution on December 12, 1996 of $2.73 per 1,000 Units of
Treasury Income Series 18.
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(3)Estimated long term return is calculated by the Trust by computing the
average of the yields to maturity (or earlier call date) of the Securities in
the portfolio of the Trust in accordance with accepted practices (taking into
account the amortization of premiums, accretion of discounts, market value,
and estimated retirement of each Security) and subtracting from the average
yield so calculated the fees, expenses and sales charge of the Trust. This
return does not include the effects of any delay in payments to Unit Holders
and a calculation which includes those effects would be lower. (See
"Estimated Long Term Return" in Part B.)
(4)Assumes the Trust will reach a size of 25,000,000 Units as estimated by the
Sponsor; expenses per Unit will vary with the actual size of the Trust. If
the Trust does not reach this Unit level, the Estimated Annual Fees and
Expenses per Unit, the Estimated Long Term Return will be adversely affected.
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QUALIFIED
UNIT INVESTMENT LIQUID TRUST SERIES
("QUILTS")
The Trust. QUILTS consists of a unit investment trust designated QUILTS
Laddered Income--U.S. Treasury Series 18 (ACTP) ("Treasury Income Series 18" or
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") and The Chase
Manhattan Bank (National Association), as trustee (the "Trustee"). The Trustee
will act as the Evaluator for the Trust. On the initial Date of Deposit, the
Sponsor deposited with the Trustee United States Treasury Obligations that are
backed by the full faith and credit of the United States Government with respect
to the Trust, including delivery statements relating to contracts for the
purchase of certain such Securities (the "Securities") in the aggregate amount
set forth in the "Summary of Essential Information" for the Trust and cash or an
irrevocable letter of credit issued by a major commercial bank in the amount
required for such purchases. Thereafter, the Trustee, in exchange for the
Securities so deposited, delivered to the Sponsor all of the Units of the Trust,
which Units are being offered by this Prospectus. On the initial Date of
Deposit, each Unit in the Trust represents an undivided interest in the
principal and net income of the Trust in the ratio of one Unit for each $1.00
principal amount of Securities initially deposited in the Trust. (See "The Trust
Organization" in Part B.)
Objectives. The objectives of the Trust are to obtain safety of principal
and current distributions of interest. The Trust seeks to achieve these
objectives through investment in a fixed, laddered portfolio of United States
Treasury Securities. The Trust is also structured to provide protection against
changes in interest rates and to pass through to Unit Holders the exemption from
state personal income taxes afforded to direct owners of United States
obligations.
55% of the aggregate principal amount of the Securities in the Trust are
U.S. Treasury bills which have maturities of one year or less (hereinafter
referred to as "U.S. Treasury Bills"). U.S. Treasury Bills are discounted
government securities which provide for the payment of principal and interest at
maturity. (For the amount of U.S. Treasury Bills in the Trust, and the cost of
such Securities to the Trust, see "Portfolio" in this Part A.)
The Securities are direct obligations of the United States and are backed
by its full faith and credit. The value of the Units and estimated long-term
return to new purchasers will fluctuate with the value of the Securities
included in the portfolio of the Trust which will generally decrease or increase
inversely with changes in prevailing interest rates. (See "Tax Status" in Part B
of this Prospectus.)
With the deposit of the Securities in the Trust on the initial Date of
Deposit, the Sponsor established a proportionate relationship among the face
amounts of each Security in the portfolio of the Trust. During the 90-day period
following the initial Date of Deposit, the Sponsor may deposit additional
Securities ("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 new Units,
maintaining to the extent practicable the original proportionate relationship
among the face amounts of each Security in the portfolio of the Trust. It may
not be possible to maintain the exact original proportionate relationship among
the Securities deposited on the initial Date of Deposit because of, among other
reasons, purchase requirements, change in prices, or unavailability of
Securities. Replacement Securities may be acquired under specified conditions.
(See "The Trust" and "Trust Administration" in Part B of this Prospectus.) Units
may be continuously offered to the public by means of this Prospectus (see
"Public Offering" in Part B) resulting in a potential increase in the number of
Units outstanding. Deposits of Additional Securities in the portfolio of the
Trust subsequent to the 90-day period following the initial Date of Deposit must
replicate exactly the proportionate relationship among the face amounts of
Securities comprising the portfolio of the Trust at the end of
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the initial 90-day period. No assurance can be given that the Trust's objectives
will be achieved. In addition, an investment in the Trust can be affected by
fluctuations in interest rates.
Portfolio Summaries. General. The Trust is comprised of those Securities
listed in the "Portfolio" in this Part A. The portfolio of the Trust initially
consists of contracts to purchase U.S. Treasury Obligations fully secured by the
full faith and credit of the United States, certain of which have been purchased
at a market discount or premium. Certain Securities may have been purchased on a
"when, as, and if" issued basis. Interest on these Securities begins accruing to
the benefit of holders on their respective dates of delivery. Unit Holders will
be "at risk" with respect to these Securities (i.e. may derive either gain or
loss from fluctuations in the offering side evaluation of the Securities) from
the date they commit for Units. The Trust consists of the Securities (or
contracts to purchase the Securities) listed in the Portfolio as may continue to
be held from time to time in the Trust and any Additional Securities deposited
in the Trust in connection with the sale of additional Units to the public as
described above, together with the accrued and undistributed interest thereon
and undistributed cash realized from the sale or redemption of Securities. (See
"Trust Administration" in Part B of this Prospectus.) Neither the Sponsor nor
the Trustee shall be liable in any way for any default, failure or defect in any
of the Securities. However, should any deposited contract fail, the Sponsor
shall, within 90 days from the initial Date of Deposit, acquire replacement
Securities and substitute them in the portfolio of the Trust. If the failed
Securities are not substituted or if the purchase price of the substituted
Securities does not exceed the cost of the original contracts, the Sponsor shall
make a pro rata distribution of the amount, if any, by which the cost of the
failed contract exceeded the cost of the substituted Security on the next
scheduled distribution date.
On the Date of Deposit each Unit represented the fractional undivided
interest in the Trust set forth under "Summary of Essential Information."
Thereafter, if any Units are redeemed by the Trustee the face amount of
Securities in the Trust will be reduced by amounts allocable to redeemed Units,
and the fractional undivided interest represented by each Unit in the balance
will be increased. However, if additional Units are issued by the Trust (through
deposit of Securities by the Sponsor in connection with the sale of additional
Units), the aggregate value of Securities in the Trust will be increased by
amounts allocable to additional Units and the fractional undivided interest
represented by each Unit in the balance will be decreased. Units will remain
outstanding until redeemed upon tender to the Trustee by any Unit Holder (which
may include the Sponsor) or until the termination of the Indenture.
The Sponsor has a limited right to substitute other Securities in the Trust
portfolio in the event of a failed contract. (See "The Trust--Substitution of
Securities" in Part B.) Each Unit in the Trust represents an undivided interest
in the principal and net income of the Trust in the ratio of one Unit for each
$1.00 principal amount of Securities initially deposited in the Trust. (See "The
Trust--Organization" in Part B.) (For the specific number of Units in the Trust,
see the "Summary of Essential Information" in this Part A.) The Sponsor has not
participated as a sole underwriter or manager, co- manager or member of
underwriting syndicates from which any of the Securities were acquired for the
Trust.
Treasury Income Series 18. Treasury Income Series 18 consists of a fixed
portfolio of interest-bearing U.S. Treasury Obligations with laddered maturities
from August 31, 1996 to December 12, 1996. As Securities mature, Treasury Income
Series 18 will return to Unit Holders from August through November 1996
approximately 11% of the face amount of the amount invested and 22% in December
1996 of the face amount of the amount invested.
On the initial Date of Deposit 67% of the Securities in Treasury Income
Series 18 were purchased at a "market" discount from par value at maturity.
Based on the offering side evaluation on the initial Date of Deposit 67% of the
aggregate principal amount of Securities in the portfolio were acquired at a
discount from par, 33% were at a premium over par and none were at par. A Unit
Holder may receive more or less than his original purchase price upon
disposition of his Units because the value of Units fluctuates with the value of
the underlying Securities, which vary inversely with interest rates. On the
initial Date of Deposit, the bid side evaluation was lower than the offering
side evaluation
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by .03% of the aggregate offering price of the Treasury Income Series 18.
(See "Public Offering" in Part B.)
All of the issues of Treasury Income Series 18 are represented by the
Sponsor's contracts to purchase, which are expected to be settled on or about
April 22, 1996 and none of the issues has been deposited in the Trust.
RISK FACTORS
An investment in Units of the Trust should be made with an understanding
of the risks which an investment in fixed rate debt obligations may entail,
including the risk that the value of the portfolio of the Trust and hence of the
Units of the Trust will decline with increases in interest rates. The value of
the underlying Securities will fluctuate inversely with changes in interest
rates. The high inflation of prior years, together with the fiscal measures
adopted to attempt to deal with it, have resulted in wide fluctuations in
interest rates and, thus, in the value of fixed rate long term debt obligations
generally. The Sponsor cannot predict whether such fluctuations will continue in
the future.
In selecting Securities for deposit in the Trust, the following factors,
among others, were considered by the Sponsor: (i) the prices of the Securities
relative to other comparable securities; (ii) the maturities of these
Securities; and (iii) whether the Securities were issued after July 18, 1984.
Investment in the Trust should be made with the understanding that the
value of U.S. Treasury Bills is subject to greater fluctuation in response to
changes in interest rates. In addition, the accrued market discount of such
Securities is not taxable to certain categories of Unit Holders of the Trust
until the Securities in the Trust are disposed of or mature.
PUBLIC OFFERING PRICE
The Public Offering Price of each Unit of the Trust is equal to the
aggregate offering price of the Securities in the Trust divided by the number of
Units of the Trust outstanding, plus a sales charge of .60% or .6036% of the net
amount invested in Securities per Unit. In addition, for Units ordered after the
date hereof, accrued interest will be payable from the First Settlement Date for
Units of the Trust (three business days from the date hereof) to the expected
date of settlement (three business days after order). For additional information
regarding the Public Offering Price, the descriptions of interest and principal
distributions, repurchase and redemption of Units and other essential
information regarding the Trust, see the "Summary of Essential Information" in
this Part A. The Public Offering Price per Unit may vary on a daily basis in
accordance with fluctuations in the aggregate offering price of the Securities.
(See "Public Offering--Offering Price" in Part B.)
DISTRIBUTIONS
Distributions of interest income, less expenses, will be made by the Trust
on a scheduled basis. The first interest distributions will be made on the First
Payment Date to all Unit Holders of record on the First Record Date of the Trust
and thereafter distributions will be made on a scheduled basis. Distributions of
principal will also be made on a scheduled basis. (See "Rights of Unit
Holders--Interest and Principal Distributions" in Part B.) For estimated
scheduled distributions, the amount of the first distribution and the specific
dates representing the First Payment Date, the First Record Date and the
Scheduled Payment Dates see "Summary of Essential Information" in Part A.
ESTIMATED LONG TERM RETURN
Units of the Trust are offered to investors on a "dollar price" basis
(using the computation method previously described under "Public Offering
Price") as distinguished from a "yield price" basis often used in offerings of
tax exempt bonds (involving the lesser of the yield as computed to maturity of
bonds or to an earlier redemption date). Since they are offered on a dollar
price basis, the rate of
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return on an investment in Units of the Trust is measured in terms of "Estimated
Long Term Return." This calculation of performance is mandated by the rules of
the Securities and Exchange Commission.
Estimated Long Term Return is calculated by: (1) computing the yield to
maturity or to an earlier call date (whichever results in a lower yield) for
each Security in the Trust portfolio in accordance with accepted practices,
which practices take into account not only the interest payable on the
Securities but also the amortization of premiums or accretion of discounts, if
any; (2) calculating the average of the yields for the Securities in the Trust
portfolio by weighing each Security's yield by the market value of the Security
and by the amount of time remaining to the date to which the Security is priced
(thus creating an average yield for the portfolio of the Trust); and (3)
reducing the average yield for the portfolio of the Trust in order to reflect
estimated fees and expenses of the Trust and the maximum sales charge paid by
Unit Holders. The resulting Estimated Long Term Return represents a measure of
the return to Unit Holders earned over the estimated life of the Trust. The
Estimated Long Term Return as of the day prior to the initial Date of Deposit is
stated for the Trust under "Summary of Essential Information" in Part A.
The Estimated Net Annual Interest Income per Unit of the Trust will vary
with changes in the fees and expenses of the Trustee and the Evaluator
applicable to the Trust and with the redemption, maturity, sale or other
disposition of the Securities in the Trust. The Public Offering Price will vary
with changes in the offering prices (bid prices in the case of the secondary
market) of the Securities. Therefore, there is no assurance that the present
Estimated Long Term Return will be realized in the future.
MARKET FOR UNITS
The Sponsor, although not obligated to do so, currently 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 aggregate bid price of the Securities in the Trust portfolio; and the
reoffer price will be based on the aggregate offering price of the Securities
plus a sales charge of .60% (.6036% of the net amount invested) plus net accrued
interest. If a market is not maintained a Unit Holder will be able to redeem his
Units with the Trustee at a price based on the aggregate bid price of the Unit.
(See "Liquidity--Sponsor Repurchase" in Part B.)
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INDEPENDENT AUDITORS' REPORT
The Sponsor, Trustee, and Unit Holders of
Qualified Unit Investment Liquid Trust Series ("QUILTS")
QUILTS Laddered Income--U.S. Treasury Series 18 (ACTP)
We have audited the accompanying Statement of Condition and Portfolio of
Qualified Unit Investment Liquid Trust Series ("QUILTS"), QUILTS Laddered
Income--U.S. Treasury Series 18 (ACTP) as of April 16, 1996. These statements
are 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 April 16, 1996, pursuant to contracts
to purchase, as shown in the Statement of Condition and Portfolio, was confirmed
to us by Credit Lyonnais.
In our opinion, the accompanying Statement of Condition and Portfolio
presents fairly, in all material respects, the financial position of Treasury
Income Series 18 (ACTP) as of April 16, 1996 in conformity with generally
accepted accounting principles.
BDO SEIDMAN, LLP
New York, New York
April 16, 1996
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<TABLE>
QUILTS
STATEMENT OF CONDITION
AS OF DATE OF DEPOSIT, APRIL 16, 1996
TRUST PROPERTY
<CAPTION>
Treasury
Income
Series 18
<CAPTION>
<S> <C>
Investment in Securities:
Sponsor's Contracts to Purchase Underlying Securities
Backed by an Irrevocable Letter of Credit(1)............................. $443,391
Accrued Interest to Date of Deposit on Securities(1)...................... 3,047
--------
Total..................................................................... $446,438
========
LIABILITY AND INTEREST OF UNIT HOLDERS
Liability for Accrued Interest on Securities(1)(4)........................ $3,047
------
Interest of Unit Holders
Units of Fractional Undivided Interest Outstanding:
Cost to Unit Holders(2)............................................. 446,069
Less Gross Underwriting Commissions(3).............................. (2,678)
-------
Net Amount Applicable to Unit Holders..................................... 443,391
-------
Total $446,438
</TABLE>
(1)Aggregate cost to the Trust of the Securities listed in the portfolio is
based on offering prices determined by the Evaluator on the basis set forth
under "Public Offering--Offering Price" as of 12:00 Noon on April 16, 1996.
An irrevocable letter of credit issued by Credit Lyonnais in an amount of
$2,000,000 has been deposited with the Trustee to cover the purchase of
$450,000 principal amount of Securities pursuant to contracts to purchase
such Securities and $3,146 accrued interest on such Securities to the
expected dates of settlement.
(2)Aggregate public offering price (exclusive of interest) is computed on
450,000 Units for Treasury Income Series 18 on the basis set forth under
"Public Offering--Offering Price" in Part B.
(3) Sales charge of .60% is computed on 450,000 Units of Treasury Income
Series 18 on the basis set forth under "Public Offering Price" in Part B.
(4) On the basis set forth under "Public Offering--Accrued Interest" in Part B,
the Trustee will advance the amount of accrued interest as of April 22,
1996 (the "First Settlement Date"), and all accrued interest to the First
Settlement Date will be distributed to the Sponsor as the Unit Holder of
record as of the First Settlement Date. Consequently, the amount of accrued
interest to be added to the public offering price of Units will include
only accrued interest from the First Settlement Date to date of settlement,
less any distributions from the Interest Account subsequent to the First
Settlement Date.
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QUILTS
Treasury Income Series 18 (ACTP)
AS OF DATE OF DEPOSIT, APRIL 16, 1996
Coupon/ Cost of
Portfolio ggregate Princip itle of Securities Maturity Securities
No. A Amount TContracted for (1) Date(s) to Trust (2)
1 $50,000 U.S. Treasury Note 6.250% $50,172
8/31/96
2 $50,000 U.S. Treasury Bill 0.000% 48,926
9/19/96
3 $50,000 U.S. Treasury Note 6.500% 50,281
9/30/96
4 $50,000 U.S. Treasury Bill 0.000% 48,727
10/17/96
5 $50,000 U.S. Treasury Note 6.875% 50,414
10/31/96
6 $50,000 U.S. Treasury Bill 0.000% 48,517
11/14/96
7 $50,000 U.S. Treasury Note 4.375% 49,727
11/15/96
8 $100,000 U.S. Treasury Bill 0.000% 96,627
________ 12/12/96 ________
$450,000 $443,391
======== ========
ESTIMATED CASH FLOWS TO UNIT HOLDERS
The table below sets forth the per 1,000 Units estimated distributions of
interest and principal to Unit Holders. The table assumes no changes in Trust
expenses, no redemptions or sales of the underlying U.S. Treasury Obligations
prior to maturity and the receipt of all principal due upon maturity. To the
extent the foregoing assumptions change actual distributions will vary.
<TABLE>
<S> <C> <C> <C>
Estimated Interest Estimated Principal Estimated Total
Quilts Treasury Income Series 18 Distribution Distribution* Distribution
- -------------------------------- ------------- ------------- ------------
September 5, 1996 1.36 111.11 112.47
September 19, 1996 1.36 111.11 112.47
October 3, 1996 1.36 111.11 112.47
October 17, 1996 1.36 111.11 112.47
October 31, 1996 1.36 111.11 112.47
November 14, 1996 1.36 111.11 112.47
November 21, 1996 1.36 111.11 112.47
December 12, 1996 2.73 222.22 224.95
</TABLE>
* A portion of the Estimated Principal Distribution includes interest earned on
U.S. Treasury Bills.
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FOOTNOTES TO PORTFOLIO
(1) Contracts to purchase the Securities were entered into on April 16, 1996,
for the Trust. All contracts are expected to be settled on or about the
First Settlement Date of the Trust which is expected to be April 22, 1996.
(2) Evaluation of Securities by the Evaluator was made on the basis of current
offering prices for the Securities. The offering prices are greater than
the current bid prices of the Securities which are the basis on which Unit
Value is determined for purposes of redemption of Units. (See "Public
Offering--Comparison of Public Offering Price, Sponsor's Repurchase Price
and Redemption Price" in Part B.)
<TABLE>
<S> <C>
The aggregate value of Securities in the Trust, Additional information regarding the
based on the bid prices on the Date of Deposit, Trust is as follows:
are as follows:
Value of Securities Based Upon
Bid Side Evaluation Sponsor's Purchase Price
$443,251 $443,467
Cost of Securities Based Upon Sponsor's Profit (Loss)
Offering Side Evaluation (Date of Deposit)
$443,391 $ (76)
Difference in Dollars Annual Interest Income
$140 $ 12,870
% Difference Between Bid Side Evaluation
and Offering Side Evaluation
.03%
</TABLE>
UNDERWRITING
OCC Distributors, World Financial Center, 200 Liberty Street, New York, NY
10281, will act as Underwriter for all of the Units of the Trust. The
Underwriter may 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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PROSPECTUS PART B
Part B of this Prospectus may not be Distributed unless Accompanied by Part A
QUALIFIED UNIT INVESTMENT LIQUID TRUST SERIES ("QUILTS")
QUILTS Laddered Income--U.S. Treasury Series 18 (ACTP)
("Treasury Income Series")
THE TRUST
Organization. "QUILTS" is comprised of a "unit investment trust"
designated as set forth above in Part A. The Trust was created under the laws
of the State of New York pursuant to a Trust Indenture and Agreement (the
"Trust Agreement"), dated the Date of Deposit, between OCC Distributors, as
Sponsor and The Chase Manhattan Bank (National Association), as Trustee. The
Trustee acts as the Evaluator for the Trust.
On the Date of Deposit the Sponsor deposited with the Trustee the
underlying securities and contracts and funds (represented by the irrevocable
letter(s) of credit issued by major commercial bank(s) for the purchase of
such securities (the "Securities"). (See "Portfolio" in Part A of this
Prospectus.) The Trust is created simultaneously with the execution of the
Trust Agreement and the deposit of the Securities with the Trustee. The
Trustee then immediately delivered to the Sponsor units of beneficial interest
(the "Units") comprising the entire ownership of the Trusts. Through this
Prospectus, the Sponsor is offering the Units, including Additional Units, as
defined below, for sale to the public. The holders of Units (the "Unit
Holders") will have the right to have their Units redeemed at a price based on
the aggregate bid side evaluation of the Securities (the "Redemption Price")
if they cannot be sold in the secondary market which the Sponsor, although not
obligated to, proposes to maintain. In addition, the Sponsor may offer for
sale through this Prospectus Units which the Sponsor may have repurchased in
the secondary market or upon the tender of such Units for redemption.
With the deposit of the Treasury Securities in the Trust on the initial
Date of Deposit, the Sponsor established a proportionate relationship among
the principal amounts of interest bearing and non-interest bearing U.S.
Treasury Obligations of specified ranges of maturities on the portfolios of
the Trust. During the 90-day period following the Date of Deposit, the Sponsor
is permitted under the Trust Agreement to deposit additional Securities (the
"Additional Securities") and any cash in the Trust not held for distribution
to Unit Holders prior to the deposit, resulting in a corresponding increase in
the number of Units outstanding (the "Additional Units"). Such Additional
Units may be continuously offered for sale to the public by means of this
Prospectus. The Sponsor anticipates that any Additional Securities deposited
in the Trust during the 90-day period subsequent to the Date of Deposit will
maintain, as far as practicable, the original proportionate relationship among
the principal amounts of U.S. Treasury Obligations in the portfolio
established on the Date of Deposit. Precise duplication of this original
proportionate relationship may not be possible because fractions of U.S.
Treasury Obligations may not be purchased or for other reasons, but
duplication will continue to be the goal in connection with any such deposit
of Additional Securities. (These original proportionate relationships on the
Date of Deposit are set forth in "Summary of Essential Information," for each
Trust in Part A.) Deposits of Additional Securities in the portfolio of the
Trust subsequent to the 90-day period following the Date of Deposit must
replicate exactly the proportionate relationship among the principal amounts
of Securities comprising the portfolios of each Trust at the time of
replication.
A "Unit" represents an undivided interest or pro rata share in the
principal and interest of the Trust in the ratio of one Unit for each $1.00
principal amount of Securities initially deposited in the Trust. Because
regular payments of principal are to be received and certain of the Securities
will mature in accordance with their terms or may be sold under certain
circumstances described herein and because Additional Securities may be
deposited into the Trust from time to time, the Trust is not expected to
retain its present size and composition. 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
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unchanged. Units will remain outstanding until redeemed upon tender to the
Trustee by Unit Holders, which may include the Sponsor, or until the termination
of the Trust Agreement.
Objectives. The Trust offers investors the opportunity to participate in
a portfolio of U. S. Treasury Obligations with a greater diversification than
they might be able to acquire themselves. The objectives of the Trust are to
provide safety of principal and monthly distributions of interest. Investors
should be aware that there is no assurance the Trust's objectives will be
achieved. Even though the portfolio of the Trust consists primarily of U.S.
Treasury Obligations which pay interest no more often than semi-annually, the
Trust will pay interest bi-weekly through advances made by the Trustee, which
will then be reimbursed when interest is received. (See "Interest and
Principal Distributions" in this Part B.)
Since disposition of Units prior to final liquidation of the Trust may
result in an investor receiving less than the amount paid for such Units
(see"Public Offering--Comparison of Public Offering Price, Sponsor's
Repurchase Price and Redemption Price" in this Part B), the purchase of a Unit
should be looked upon as a long-term investment. The Trust is not designed to
be a complete investment program.
Portfolios. General. The Trust consists of the Securities (or contracts
to purchase such Securities together with an irrevocable letter or letters of
credit for the purchase of such contracts) listed under "Portfolio" in Part A
of this Prospectus, as long as such Securities may continue to be held from
time to time in the Trust (including certain securities deposited in the Trust
in exchange or substitution for any Securities pursuant to the Trust
Agreement) together with accrued and undistributed interest thereon and
undistributed and uninvested cash realized from the disposition of Securities.
Because certain of the Securities from time to time may be redeemed or will
mature in accordance with their terms or may be sold under certain
circumstances described herein, the Trust is not expected to retain for any
length of time its present size and composition.
The Sponsor although not obligated to do so, intends to maintain a
secondary market for the Units on the bid side of the market for the Units.
(See "Liquidity--Sponsor Repurchase", herein.) Unit Holders of the Trust, in
the absence of a secondary market for Units will have the right to have one or
more of their Units redeemed with the Trustee at a price equal to the
Redemption Price thereof (see"Liquidity--Sponsor Repurchase" in this Part B)
based on the then aggregate bid price for the Securities in the portfolio. Due
to fluctuations in the market price of the Securities in the portfolios and
the fact that the initial Public Offering Price is based on the offering side
of the market and includes a sales charge among other factors, the amount
realized by a Unit Holder upon the redemption or sale of Units may be less
than the price paid for such units by the Unit Holder.
Treasury Trust. The portfolio of the Trust consists of Securities issued
by the United States of America ("U.S. Treasury Obligations"), which are
direct obligations of the United States and therefore are backed by the full
faith and credit of the United States Government. The U.S. Treasury
Obligations are different issues of bonds, bills, notes, debentures and other
debt obligations with fixed final maturity dates. None of the U.S. Treasury
Obligations have any equity or conversion features. 45% of the U.S. Treasury
Obligations in the Trust are current interest-bearing obligations of the
United States of America, or in the case of U.S. Treasury Obligations not
delivered on the initial Date of Deposit contracts to purchase such
obligations assigned to the Trustee. 55% of the U.S. Treasury Obligations in
the Trust consist of U.S. Treasury bills with maturities of one year or less
(hereinafter referred to as "U.S. Treasury Bill"). The balance of the
portfolio of the Trust consists of interest-bearing obligations. A U.S.
Treasury Bill makes no present interest payments. Rather, it makes one payment
on its face amount at maturity.
U. S. Treasury Obligations represent 100% of the aggregate market value of
the portfolio of the Trust. These U.S. Treasury Obligations are sold by the
United States Department of Treasury (the "Treasury") to finance shortfalls
between the Treasury's income and expenditures. Such gaps may have been planned
and accounted for in the budget, or they may arise from unexpected changes in
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economic, political, fiscal and other circumstances. U.S. Treasury Obligations
constitute public debt of the United States and are, therefore, direct
obligations of the United States.
When selecting U.S. Treasury Obligations for the Trust, the following
factors, among others, were considered by the Sponsor: (i) the prices and
yields of such U.S. Treasury Obligations relative to other comparable
securities; (ii) the maturities of such U.S. Treasury Obligations; and (iii)
whether the U.S. Treasury Obligations were issued after July 18, 1984.
The yields on U.S. Treasury Obligations of the type deposited in the
Trust are dependent on a variety of factors, including general money market
conditions, fluctuations in prevailing interest rates, general conditions of
the government securities markets, size of a particular offering and the
maturity of the obligations.
RISK FACTORS
Risk Factors. An investment in Units of the Trust should be made with an
understanding of the risks which an investment in fixed rate debt obligations
may entail, including the risk that the value of the portfolios the Trust, and
hence of the Units, will decline with increases in prevailing interest rates.
The value of the underlying Securities will fluctuate inversely with changes
in prevailing interest rates. In recent years, the national economy has
experienced significant variations in rates of inflation and economic growth,
substantial increases in the national debt, substantial increase in reliance
upon foreign investors to finance the national debt, and material
reformulation of federal tax, monetary and regulatory policies. These
conditions have been associated with wide fluctuations in prevailing interest
rates and thus in the value of fixed rate debt obligations. The Sponsor cannot
predict whether such fluctuations will continue in the future.
The Securities in the portfolios of the Trust were chosen in part on the
basis of their respective stated maturity dates. The range of maturity dates
of each of the Securities contained in the portfolio of the Trust are shown on
the "Portfolio" in Part A of this Prospectus.
The Trust may be appropriate for investors who desire to invest in a
portfolio of taxable fixed income federal securities offering the safety of
principal provided by an investment in U.S. Treasury Obligations backed by the
full faith and credit of the United States Government. The Trust will
generally pass through to Unit Holders the exemptions from state and local
personal income taxes afforded to direct owners of U.S. Obligations. (See "Tax
Status".)
Certain of the Securities in the Trust may have been acquired at a
market premium. Securities trade at a premium because the prevailing interest
rates on the Securities are higher than interest on comparable debt securities
being issued at currently prevailing interest rates. The current returns of
securities trading at a market premium are higher than the current returns of
comparably rated debt securities of a similar type issued at currently
prevailing interest rates because premium securities tend to decrease in
market value as they approach maturity, when the face amount becomes payable.
Because part of the purchase price is thus returned not at maturity but
through current income payments, an early redemption at par of a security
purchased at a premium or a maturity at par of a security purchased at a
premium will result in a reduction in yield and a loss of principal to the
Unit Holders. If currently prevailing interest rates for newly issued and
otherwise comparable securities increase, the market premium of previously
issued securities will decline and if currently prevailing interest rates for
newly issued comparable securities decline, the market premium of previously
issued securities will increase, all other things being equal. Furthermore,
the value of the Units will fluctuate with fluctuations in the value of the
underlying Securities in the portfolios of the Trust. Therefore, Unit Holders
who sell their Units prior to termination may receive more or less than their
original purchase price upon sale. Market premium attributable to interest
rate changes does not indicate market confidence in the issue.
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 failure to deliver any Security that has been purchased for
the Trust under a contract, including those Securities purchased on a
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"when, as, and if" issued basis ("Failed Securities"), the Sponsor is
authorized under the Trust Agreement to direct the Trustee to acquire other
securities ("Replacement Securities") and to substitute them in the portfolio of
the Trust within 90 days of the initial Date of Deposit.
Replacement Securities must be deposited with the Trustee within 20 days
after delivery of notice of a Failed Security (but in no event later than the
90th day following the initial Date of Deposit) and the purchase price thereof
(exclusive of accrued interest) may not exceed the amount of funds reserved by
the Trustee pursuant to a letter of credit supplied by the Sponsor for the
purchase of the failed Security. The Replacement Securities must (i) be U.S.
Treasury Obligations, (ii) have a fixed maturity approximately the same as the
fixed maturity of the Security replaced, and (iii) be purchased at a price
that results in a yield to maturity and in a current return, in each case as
of the date on which such Replacement are deposited with the Trustee, which is
equivalent (taking into consideration then current market conditions and the
relative creditworthiness of the underlying obligation) to the yield to
maturity and current return of the related Failed Security. Whenever a
Replacement Security has been acquired for the Trust, the Trustee shall,
within five days thereafter, notify all Unit Holders of the acquisition of the
Replacement Security and shall, no later than the next Scheduled Payment Date,
make a pro rata distribution of the amount, if any, by which the cost to the
Trust of the Failed Security exceeded the cost of the Replacement Security.
If the right of limited substitution described in the preceding
paragraph shall not be utilized to acquire Replacement Securities in the event
of a failed contract, the Sponsor will refund to each Unit Holder the portion
of the sales charge and the pro rata portion of the cost of such Failed
Securities, and distribute the principal and accrued interest attributable to
such Failed Securities on the next Scheduled Payment Date. In all cases,
accrued interest attributable to Failed Securities will be paid to Unit
Holders until such time as Replacement Securities are acquired. All such
interest paid to a Unit Holder which accrued after the expected date of
settlement for purchase of his Units will be paid by the Sponsor.
Because certain of the Securities from time to time may be redeemed or
will mature in accordance with their terms 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" in this Part
B.)
Discount. Some of the aggregate principal amount of Securities in the
Trust may have been purchased at a "market" discount from par value at
maturity. The coupon interest rates on the discount bonds at the time they
were purchased and deposited in the Trust were lower than the current market
interest rates for newly issued bonds of comparable rating and type. At the
time of issuance the discount bonds were for the most part issued at then
current coupon interest rates. The current yields (coupon interest income as a
percentage of market price) of discount bonds will be lower than the current
yields of comparably rated bonds of similar type newly issued at current
interest rates because discount bonds tend to increase in market value as they
approach maturity and the full principal amount becomes payable. A market
discount bond held to maturity will have a larger portion of its total return
in the form of capital gain and less in the form of interest income than a
comparable bond newly issued at current yield and a lower current market value
than otherwise comparable bonds with a shorter term of maturity. If prevailing
interest rates rise, the value of discount bonds will decrease; and if
prevailing interest rates decline, the value of discount bonds will increase.
The discount does not necessarily indicate a lack of market confidence in the
issuer.
PUBLIC OFFERING
Offering Price. The Public Offering Price per Unit of the Trust is
computed by adding to the aggregate offering price of the Securities in the
Trust divided by the number of Units outstanding for the Trust, an amount
equal to .60% of the aggregate offering price of the Securities per Unit which
is equal to .6036% of the Public Offering Price. A proportionate share of
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accrued interest on the Securities from the First Settlement Date to the
expected date of settlement for the Units is added to the Public Offering
Price. Accrued interest is the accumulated and unpaid interest on a Security
from the last day on which interest was paid and is accounted for daily by the
Trust at the initial daily rate set forth under "Summary of Essential
Information" in Part A. The Public Offering Price for the Trust can vary on a
daily basis from the amount stated in this Prospectus in accordance with
fluctuations in the prices 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 offering side evaluation of the Securities is determined
by the Evaluator (a) on the basis of current offering prices of the
Securities, (b) if an offering price is not available for any particular
Security, on the basis of current offering prices for comparable securities,
(c) by determining the value of the Securities on the offer side of the market
by appraisal, or (d) by any combination of the above. This evaluation is made
on the initial Date of Deposit as of 12:00 Noon New York Time and as of 4:00
P.M. each business day thereafter during the initial public offering,
effective for all orders received during the preceding 24-hour period. With
respect to the initial evaluation of the offering prices of certain Securities
which at the initial Date of Deposit were subject to syndicate offering period
pricing restrictions, it is the practice of the Evaluator to determine such
evaluation on the basis of the syndicate offering price, unless other factors
cause the Evaluator to conclude that such syndicate offering price does not
then accurately reflect the free market value of such Securities, in which
case the Evaluator will also take into account the other criteria described
above for the purpose of making its determination.
The Evaluator may obtain current bid or offering prices for the
Securities from investment dealers or brokers (including the Sponsor) that
customarily deal in U.S. Treasury Obligations with respect to the Trust, or
from any other reporting service or source of information which the Evaluator
deems appropriate.
Accrued Interest. Accrued interest is the accumulation of unpaid
interest on a bond from the last day on which interest thereon was paid.
Interest on Securities in the Trust is actually paid semi-annually to the
Trust. However, interest on the Securities in the applicable Trust is
accounted for daily on an accrual basis. Because of this, the Trust always has
an amount of interest earned but not yet collected by the Trustee because of
non-collected coupons. For this reason, the Public Offering Price of Units of
the Trust will have added to it the proportionate share of accrued and
undistributed interest to date of settlement.
In an effort to reduce the amount of accrued interest which would
otherwise have to be paid in addition to the Public Offering Price on the sale
of Units to the public, the Trustee will advance the amount of accrued
interest as of the First Settlement Date as set forth in the "Summary of
Essential Information" in Part A and the same will be distributed to the
Sponsor as the Unit Holder of record as of the First Settlement Date.
Consequently, the amount of accrued interest to be added to the Public
Offering Price of Units will include only accrued interest from the First
Settlement Date to date of settlement, less any distributions from the
Interest Account subsequent to the First Settlement Date. Thus, since the
First Settlement Date is the date of settlement for anyone ordering Units on
the date of this Prospectus, no accrued interest will be added to the Public
Offering Price of Units ordered on the initial Date of Deposit.
Except through an advancement of its own funds, the Trustee will have no
cash for distribution to Unit Holders until it receives interest payments on
the Securities in the Trust. The Trustee has agreed to make advancements of
its own funds in order to reduce the amount of time before monthly
distributions of interest in Unit Holders commence (see "Interest and
Principal Distributions"). The Trustee will recover its advancements without
interest or other costs to the Trust from interest received on the Securities
in the Trust. When these advancements have been recovered, regular
distributions of interest to Unit Holders will be commenced. The Interest
Account during the initial months of the Trust will include some cash
representing interest which has been collected but will predominantly consist
of uncollected accrued interest which is not available for distribution. Since
the Trust normally receives the interest on Securities twice a year and the
interest on the Securities in the Trust is accrued on a daily basis, the Trust
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usually will have an amount of interest accrued but not actually received and
distributed to Unit Holders. A Unit Holder will not recover his proportionate
share of accrued interest until the Units are sold or redeemed, or the Trust
is terminated. At that time, the Unit Holder will receive his proportionate
share of the accrued interest computed to the settlement date in the case of
sale or termination and to the date of tender in the case of redemption.
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 plus accrued interest.
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 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 .60% of the Public Offering Price per
Unit (equivalent to .6036% of the net amount invested in the Securities).
Additionally, the Sponsor may realize a profit on the deposit of the
Securities in the Trust representing the difference between the cost of the
Securities to the Sponsor and the cost of the Securities to the Trust (see
"Portfolio" in Part A). The Sponsor may realize profits or sustain losses with
respect to Securities deposited in the Trust which were acquired from
underwriting syndicates of which it was a member.
The Sponsor may have participated as a sole underwriter or manager,
co-manager or member of underwriting syndicates from which some of the
aggregate principal amount of the Securities were acquired for the Trusts 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
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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 each Trust (each based
on the offering side evaluation of the Securities in the Trust) each exceeded
the Redemption Price and the Sponsor's secondary market Repurchase Price per
Unit (based upon the current bid side evaluation of the Securities in the
Trust) by the amounts shown under "Summary of Essential Information" 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 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."
ESTIMATED LONG TERM RETURN
Units of the Trust are offered to investors on a "dollar price" basis
(using the computation method previously described under "Public Offering
Price") as distinguished from a "yield price" basis (involving the lesser of
the yield as computed to maturity of bonds or to an earlier redemption date).
Since they are offered on a dollar price basis, the rate of return on an
investment in Units of the Trust is measured in terms of "Estimated Long Term
Return." This calculation of performance is mandated by the rules of the
Securities and Exchange Commission.
Estimated Long Term Return is calculated by: (1 ) computing the yield to
maturity or to an earlier call date (whichever results in a lower yield) for
the Security in the Trust's portfolio in accordance with accepted practices,
which practices take into account not only the interest payable on the
Security but also the amortization of premiums or accretion of discounts, if
any; (2) calculating the average of the yields for the Securities in the
Trust's portfolio by weighing each Security's yield by the market value of the
Security and by the amount of time remaining to the date to which the Security
is priced (thus creating an average yield for the portfolio of the Trust); and
(3) reducing the average yield for the portfolio of the Trust in order to
reflect estimated fees and expenses of the Trust and the maximum sales charge
paid by Unit Holders. The resulting Estimated Long Term Return represents a
measure of the return to Unit Holders earned over the estimated life of the
Trust. The Estimated Long Term Return as of the day prior to the initial Date
of Deposit is stated for the Trust under "Summary of Essential Information" in
Part A.
The Estimated Net Annual Interest Income per Unit of the Trust will vary
with changes in the fees and expenses of the Trustee and the Evaluator
applicable to the Trust and with the redemption, maturity, sale or other
disposition of the Securities in the Trust. The Public Offering Price will
vary with changes in the offering prices (bid prices in the case of the
secondary market) of the Securities. Therefore, there is no assurance that the
present Estimated Long Term Return will be realized in the future.
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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.
Interest and Principal Distributions. Interest received by the Trust is
credited by the Trustee to an Interest Account for the Trust and a deduction
is made to reimburse the Trustee with interest for any amounts previously
advanced. Proceeds representing principal received from the maturity,
redemption, sale or other disposition of the Securities are credited to a
Principal Account of the Trust. Cash credited to the Interest Account and
Principal Account will not be reinvested by the Trust prior to distribution.
Such cash balances are maintained by the Trustee and any income generated
thereon inures to the benefit of the Trustee and not the Trust.
Distributions to each Unit Holder from the Interest Account are computed
as of the close of business on each Record Date for the following Payment Date
and consist of an amount substantially equal to 11% of such Unit Holder's pro
rata share of the Estimated Net Annual Interest Income in the Interest Account
with the final scheduled payment representing 22% of such Estimated Net Annual
Interest Income. 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 for the Trust, and will be made to the Unit
Holder of the Trust on or shortly after the next Scheduled 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 second succeeding Scheduled Payment Date. Persons who purchase Units
between a Record Date and a Payment Date will receive their first distribution
on the second Payment Date after such purchase.
Normally, interest payments on the Securities in the portfolio of the
Trust which pay interest, are made on a semi-annual basis. Therefore, it
usually takes several months after the Date of Deposit for the Trustee to
receive sufficient interest payments on the Securities to begin distributions
of interest to Unit Holders. Further, because interest payments are not
received by the Trust at a constant rate throughout the year, interest
distributions may be more or less than the amount credited to the Interest
Account as of a given Record Date. For the purpose of minimizing fluctuations
in the distributions from the Interest Account, the Trustee will advance
sufficient funds, without interest, as may be necessary to provide interest
distributions of approximately equal amounts. All funds in respect of the
Securities received and held by the Trustee prior to distribution to Unit
Holders may be of benefit to the Trustee and do not bear interest to Unit
Holders.
In order to acquire the "when, as, and if issued" Securities contracted
for by the Trust, if any, it may be necessary to pay on the settlement dates
for delivery of such Securities amounts covering accrued interest on such
Securities which exceed (1) the amounts paid by Unit Holders and (2) the
amount
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which will be made available under the letter of credit furnished by the
Sponsor on the initial Date of Deposit for the purchase of such Securities.
The Trustee has agreed to pay for any amounts necessary to cover any such
excess and will be reimbursed therefor, without interest, when funds become
available from interest payments on the particular Securities with respect to
which such payments may have been made. Also, since interest on the Securities
in the portfolio of the Trust does not accrue to the benefit of Unit Holders
until their respective dates of delivery, the Trustee will, in order to
provide income to the Unit Holders for this period of non-accrual, reduce its
fee applicable to the Trust in an amount equal to the amount of interest that
would have so accrued on such Securities in the Trust between the date of
settlement for the Units and such dates of delivery. To the extent such
non-accrual is in excess of the reduction in the Trustee's fee, the amount of
such excess will be distributed to Unit Holders as a return of capital.
As of the first day of each month, the Trustee will deduct from the
Interest Account of the Trust, and, to the extent funds are not sufficient
therein, from the Principal Account of the Trust, amounts necessary to pay the
expenses of the Trust (see "Trust Expenses and Charges" in this Part B). 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 Interest and
Principal Accounts such amounts as may be necessary to cover purchases of
Replacement Securities and redemptions of Units by the Trustee.
The estimated scheduled distribution per Unit for the Trust will
initially be in the amount shown under "Summary of Essential Information" in
Part A and will change and may be reduced as Securities mature or are
redeemed, exchanged or sold, or as expenses of the Trust fluctuate. No
distribution need be made from the Principal Account until the balance therein
is an amount sufficient to distribute $1.00 per 1,000 Units.
Records. The Trustee shall furnish Unit Holders of the Trust, in
connection with each distribution, a statement of the amount of interest, if
any, and the amount of other receipts, if any, which are being distributed,
expressed in each case as a dollar amount per Unit. 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 Interest Account: interest received (including
any earned original issue discount and amounts representing interest received
upon any disposition of Securities), amounts paid for purchases of Replacement
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 Unit 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
(including any unearned original issue discount but excluding any portion
representing accrued interest), deductions for payments of applicable taxes
and fees and expenses of the Trust, amounts paid for purchases of Replacement
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 Unit outstanding on
the last business day of such calendar year; (c) a list of the Securities held
and the number of Units outstanding on the last business day of such calendar
year; (d) the Redemption Price per Unit 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 Interest 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 Unit
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 of the Trust and a copy of the Trust Agreement.
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TAX STATUS
In the opinion of Battle Fowler LLP, counsel for the Sponsor, under
existing law:
The Trust is not an association taxable as a corporation for
United States federal income tax purposes and income of the Trust will
be treated as income of the Unit Holders in the manner set forth below.
Each Unit Holder will be considered the owner of a pro rata portion of
each asset of the Trust under the grantor trust rules of Sections
671-678 of the Internal Revenue Code of 1986, as amended (the "Code").
Each Unit Holder will be considered to have received his pro rata
share of interest derived from the Trust asset when such interest is
received by the Trust. Each Unit Holder will be required to include in
his gross income, as determined for Federal income tax purposes,
original issue discount with respect to his interest in a Security held
by the Trust at the same time and in the same manner as though the Unit
Holder were the direct owner of such interest. Each Unit Holder's pro
rata share of each expense paid by the Trust is deductible by the Unit
Holder to the same extent as though the expense had been paid directly
by him.
Each Unit Holder will have a taxable event when a Security is
disposed of (whether by sale, exchange, redemption, or payment at
maturity) or when the Unit Holder redeems or sells his Units. The total
tax cost of each Unit to a Unit Holder must be allocated among the cash
and Securities held in the Trust in accordance with their relative fair
market value on the date the Unit Holder purchases his Units in order to
determine his per Unit tax basis for the Securities represented thereby.
If a Unit Holder's tax cost of his pro rata interest in a Security
exceeds the amount payable in respect of such pro rata interest upon the
maturity of the Security, such excess is a "bond premium" which may be
amortized by the Unit Holder at the Unit Holder's election as provided
in Section 171 of the Code.
The tax basis of a Unit Holder with respect to his interest in a
Security will be increased by the amount of original issue discount thereon
properly included in the Unit Holder's gross income as determined for Federal
income tax purposes.
The amount of gain recognized by a Unit Holder on a disposition of a
Security by the Trust will be equal to the difference between such Unit
Holder's pro rata portion of the gross proceeds realized by the Trust on the
disposition and the Unit Holder's tax cost basis in his pro rata portion of
the Security disposed of. Any gain recognized on a sale or exchange of a Unit
Holder's pro rata interest in a Security, and not constituting a realization
of accrued "market discount" in the case of a Security issued after July 18,
1984, and any loss will be a capital gain or loss, except in the case of a
dealer or financial institution. Gain realized on the disposition of the
interest of a Unit Holder in a market discount Security 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 Security in a case in which
the Unit Holder's tax cost for his pro rata interest in the Security 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 Security). If a Unit Holder has an interest in a
market discount Security and has incurred debt to acquire Units, the
deductibility of a portion of the interest incurred on such debt may be
deferred. Any capital gain or loss arising from the disposition of Unit
Holder's pro rata interest in a Security will be a long-term capital gain or
loss if the Unit Holder has held his Units and the Trust has held the Security
for more than one year. Net capital gains (i.e., the excess of net long-term
capital gain over net short-term capital loss) of individuals, estates and
trusts are subject to a maximum nominal tax rate of 28%. Such net capital
gains may, however, result in a disallowance of itemized deductions and/or
affect a personal exemption phase-out. For taxable year beginning after
December 31, 1992, net capital gain from the disposition of property held for
investment is excluded from investment income for purposes of computing the
limitation on the deduction for investment interest applicable to individuals.
A taxpayer may, however, elect to include such net capital gain in investment
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income if the taxpayer reduces the amount of net capital gain that is
otherwise eligible for the maximum 28% rate by such amount.
If the Unit Holder sells or redeems a Unit for cash, he is deemed
thereby to have disposed of his entire pro rata interest in all Trust assets
represented by the Unit and will have a taxable income or loss measured by the
difference between his per Unit tax basis for such assets, as described above,
and the amount realized.
Under the personal income tax laws of the State and City of New York,
the income of the Trust will be treated as the income of the Unit Holders.
The Trust may contain one or more Securities which were 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 Security issued before July 2, 1982, original issue discount is deemed to
accrue (be "earned") ratably over the period from the date of issuance of the
Security to the date of maturity and is apportioned among the original holder
of the obligation and subsequent purchasers in accordance with a ratio, the
numerator of which is the number of calendar days the obligation was owned by
the holder and the denominator of which is the total number of calendar days
from the date of issuance of the obligation to its date of maturity. Gain or
loss upon the disposition of an original issue discount Security is measured
by the difference between the amount realized upon disposition and the amount
paid for such obligation. A holder may, however, exclude from gross income
that portion of such gain attributable to accrued interest and the "earned"
portion of original issue discount.
In the case of a Security issued after July 1, 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
Security over the sum of the issue price and the accrued original issue
discount on the acquisition date). Unit Holders generally will be required to
recognize the accrual of original issue discount as interest income currently
even though they will not receive a corresponding amount of cash until later
years. The tax basis in the Security is increased by the amount of original
issue discount that is deemed to accrue while the Security is held. The
difference between the amount realized on a disposition of the Security
(excluding accrued interest) and the adjusted tax basis of the Security will
give rise to taxable gain or loss upon a disposition of the Security by the
Trust (or a sale or redemption of Units by a Unit Holder).
The general rule that requires the holder of a debt instrument issued at
a discount to include in gross income on a current basis the sum of the daily
portions of original issue discount does not apply to a debt instrument that
has a fixed maturity not more than one year from the date of issue. For
short-term Government obligations held by a cash method taxpayer, if no
special election is made by the holder, income is not realized until the sale,
maturity, or other disposition of the obligation, and is ordinary income to
the extent the gain realized does not exceed an amount equal to the ratable
share of acquisition discount. Gain, if any, in excess of such amount should
be a short-term capital gain. Acquisition discount is the excess of the stated
redemption price at maturity of the obligation over the basis of the taxpayer
in the obligation. For accrual basis taxpayers and taxpayers treated for this
purpose as if they use the accrual method (dealers, banks, regulated
investment companies, common trust funds, and taxpayers engaged in hedging
transactions), acquisition discount on short-term Governmental obligations is
includible in income as it accrues, on a straight line basis, unless a special
election is made. Limitations apply to the deductibility of interest on loans
incurred to acquire short-term obligations and special rules apply to
short-term obligations that are a stripped bond or stripped coupon.
A Unit Holder who is neither a citizen nor a resident of the United
States and is not a United States domestic corporation (a "foreign Unit
Holder") will not generally be subject to United States Federal income tax on
his, her or its pro rata share of interest and original issue discount on a
Security held in the Trust or any gain from the sale or other disposition of
his, her or its pro rata interest in a Security held in the Trust, which
interest or original issue discount is not effectively connected with
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the conduct by the foreign Unit Holder of a trade or business within the
United States and which gain is either (i) not from sources within the United
States or (ii) not so effectively connected, provided that:
(a) with respect to interest and original issue discount the
Security was issued after July 18, 1984;
(b) with respect to any U.S. source capital gain, the foreign
Unit Holder (if an individual) is not present in the United States
for 183 days or more during his or her taxable year in which the
gain was realized and so certifies; and
(c) the foreign Unit Holder provides the required
certifications regarding (i) his, her or its status and, (ii) in the
case of U.S. source income, the fact that the interest, original
issue discount or gain is not effectively connected with the conduct
by the foreign Unit Holder of a trade or business within the United
States.
The interest and/or dividend income received by a foreign Unit Holder
from an entity of which it owns 10% or more of the voting stock in the case of
a corporation or 10% or more of the profits or capital interest in the case of
a partnership, will, however, be subject to federal income taxation. Foreign
Unit Holders should consult their own tax counsel with respect to United
States tax consequences of ownership of Units.
Each Unit Holder (other than a foreign Unit Holder who has properly
provided the certifications described above) will be requested to provide the
Unit Holder's taxpayer identification number to the Trustee and to certify
that the Unit Holder has not been notified that payments to the Unit Holder
are subject to back-up withholding. If the taxpayer identification number and
an appropriate certification are not provided when requested, 31% back-up
withholding will apply.
The foregoing discussion relates only to United States Federal and, to
the extent stated, New York State and City income taxes.
Investors should consult their tax counsel for advice with respect to
their own particular tax situations.
After the end of each calendar year, the Trustee will furnish to each
Unit Holder an annual statement containing information relating to the
interest received by the Trust on the Securities, the gross proceeds received
by the Trust from the disposition of any Security (resulting from redemption
or payment at maturity of any Security or the sale by the Trust of any
Security), and the fees and expenses paid by the Trust. The Trustee will also
furnish required annual information returns to each Unit Holder and to the
Internal Revenue Service.
The Sponsor believes that Unit Holders who are individuals should not
generally be subject to state personal income taxes on the interest (including
original issue discount) received through the Trust. However, Unit Holders
(including individuals) may be subject to state and local taxes on any capital
gains (or market discount treated as ordinary income) derived from the Trust
and to other state and local taxes with respect to the interest derived from
the Trust. Moreover, Unit Holders will probably not be entitled to a deduction
for state tax purposes for their share of the fees and expenses paid by the
Trust or for any interest on indebtedness incurred to purchase or carry their
Units. Even though the Sponsor believes that interest income (including
original issue discount) received through the Trust is exempt from state
personal income taxes on individuals in most states, Unit Holders should
consult their own tax advisers with respect to state and local taxation
matters.
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 bid price of the Securities in the Trust portfolio and will
be the same as the redemption price. The aggregate bid price 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
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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 10080-6116. Units
received after 4 P.M., New York Time, will be deemed to have been repurchased
on the next business day. In the event a market is not maintained for the
Units, a Unit Holder may be able to dispose of Units only by tendering them to
the Trustee for redemption.
Units purchased by the Sponsor in the secondary market may be reoffered
for sale by the Sponsor at a price based on the aggregate offering price of
the Securities in the Trust plus a .60% sales charge (.6036% of the net amount
invested) plus net accrued interest. 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 all Trusts which it has in inventory, its estimate of the salability
and the time required to sell such Units and general market conditions. For
example, if in order to meet redemptions of Units the Trustee must dispose of
Securities, and if such disposition cannot be made by the redemption date
(seven calendar days after tender), the Sponsor may elect to purchase such
Units. Such purchase shall be made by payment to the Unit Holder not later
than the close of business on the redemption date of an amount equal to the
Redemption Price on the date of tender.
Trustee Redemption. Units may also be tendered to the Trustee for
redemption at its corporate trust office at 770 Broadway, New York, New York
10003, upon proper delivery of such Units and payment of any relevant tax. At
the present time there are no specific taxes related to the redemption of
Units. No redemption fee will be charged by the Sponsor or the Trustee. Units
redeemed by the Trustee will be cancelled.
Within seven calendar days following a tender for redemption, or, if
such seventh day is not a business day, on the first business day prior
thereto, the Unit Holder will be entitled to receive in cash an amount for
each Unit tendered equal to the Redemption Price per Unit computed as of the
Evaluation Time set forth under "Summary of Essential Information" 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.
Accrued interest paid on redemption shall be withdrawn from the Interest
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 Redemption Price per Unit is the pro rata share of each 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 based on the bid prices of such Securities and (iii)
interest accrued thereon, 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 the Trust (1) on the basis of current
bid prices of the Securities obtained from dealers or brokers who customarily
deal in bonds comparable to those held by the Trust, (2) on the basis of bid
prices for bonds comparable to any Securities for which bid prices are not
available, (3) by
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determining the value of the Securities by appraisal, or (4) by any
combination of the above. The Evaluator will determine the aggregate current
bid price evaluation of the Securities in the Trust, taking into account the
market value of the Securities in the manner described as set forth under
"Public Offering--Offering Price."
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. Except for the purchase of Replacement
Securities, Additional Securities or, as discussed herein, the acquisition of
any Securities for the Trust other than Securities initially deposited by the
Sponsor is prohibited. The Sponsor may direct the Trustee to dispose of
Securities upon (i) default in payment of principal or interest on such
Securities, (ii) default under other documents adversely affecting debt
service on such Securities, or (iii) decline in price or the occurrence of
other market or credit factors that in the opinion of the Sponsor would make
the retention of such Securities in the Trust detrimental to the interests of
the Unit Holders. If a default in the payment of principal or interest on any
of the Securities occurs and if the Sponsor fails to instruct the Trustee to
sell or hold such Securities, the Trust Agreement provides that the Trustee
may sell such Securities. The Trustee shall not be liable for any depreciation
or loss by reason of any sale of Securities or by reason of the failure of the
Sponsor to give directions to the Trustee. An affiliate of the Sponsor, OpCap
Advisors, will perform the portfolio supervisory functions noted herein on
behalf of the Sponsor and receive the Annual Supervisory Fee noted in Part A.
The Sponsor is authorized by the Trust Agreement to direct the Trustee
to accept or reject certain plans for the refunding or refinancing of any of
the Securities. Any bonds received in exchange or substitution will be held by
the Trustee subject to the terms and conditions of the Agreement to the same
extent as the Securities originally deposited. Within five days after such
deposit, notice of such exchange and deposit shall be given by the Trustee to
each Unit Holder registered on the books of the Trustee, including an
identification of the Securities eliminated and the Securities substituted
therefor.
Trust Agreement, Amendment and Termination. The Trust Agreement may be
amended by the Trustee and the Sponsor without the consent of any of the Unit
Holders: (1) to cure any ambiguity or to correct or supplement any provision
which may be defective or inconsistent; (2) to change any provision thereof as
may be required by the Securities and Exchange Commission or any successor
governmental agency; or (3) to make such other provisions in regard to matters
arising thereunder as shall not adversely affect the interests of the Unit
Holders.
The Trust Agreement may also be amended in any respect, or performance
of any of the provisions thereof may be waived, with the consent of the Unit
Holders owning 662/3% of the Units then
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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 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 the Trust, or to provide the Trustee with the
power to engage in business or investment activities not specifically
authorized in the Indenture as originally adopted or so as to adversely affect
the characterization of the Trust as a grantor trust for federal income tax
purposes, 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.
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
end of the calendar year preceding the fiftieth anniversary of the execution
of the Trust Agreement. 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 Unit Holders representing 100% of the Units then outstanding.
In the event of termination, written notice thereof will be sent by the
Trustee to all Unit Holders. Within a reasonable period after termination, the
Trustee must sell any Securities remaining in the terminated Trust, and, after
paying all expenses and charges incurred by the Trust, distribute to each Unit
Holder, upon surrender for cancellation of his Units, his pro rata share of
the Interest and Principal Accounts.
Alternatively, upon the termination of the Trust and further upon
receipt by the Trust, and subject to the conditions of an appropriate
exemptive order from the Securities and Exchange Commission, each Unit
Holder's pro rata share of the net asset value of the Trust will automatically
be invested on behalf of each Unit Holder in a mutual fund which invests in
U.S. government securities (the "Reinvestment Fund"). A copy of the current
Prospectus of the Reinvestment Fund will be delivered to Unit Holders at least
30 days prior to the time reinvestment is made. At any time prior to the time
of reinvestment, Unit Holders may elect not to invest in the Reinvestment
Fund, in which case, their pro rata share of liquidation proceeds will be sent
to them. This investment in the Reinvestment Fund will not prevent Unit
Holders from recognizing taxable gain or loss as a result of the liquidation
of the Trust, even though no cash will be distributed to Unit Holders to pay
any taxes. However, Unit Holders may redeem any shares in the Reinvestment
Fund in order to generate cash to pay these taxes. Unit Holders should consult
their own tax advisers regarding this matter.
The Sponsor. OCC Distributors is the Sponsor of the Qualified Unit
Investment Liquid Trust Series and all subsequent series. Effective as of
November 28, 1995, the Sponsor changed its name from Quest for Value
Distributors to OCC Distributors. The Sponsor is a majority-owned subsidiary
of Oppenheimer Capital. Since 1969, Oppenheimer Capital has managed assets for
many of the nation's largest pension plan clients. Today, the firm has over
$37 billion under management, from separate accounts and money market funds.
The Quest for Value organization was created in 1988 to introduce mutual funds
designed to help individual investors achieve their financial goals. OCC
Distributors is committed to retirement planning and services geared to the
long term investment goals of the individual investor. The Sponsor, a Delaware
general partnership, is engaged in the mutual fund distribution business. It
is a member of the National Association of Securities Dealers, Inc.
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, negligence
or reckless disregard of its obligations and duties.
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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 Trust; or (c)
continue to act as Trustee without terminating the Trust Agreement. Any
successor sponsor appointed by the Trustee shall be satisfactory to the
Trustee and, at the time of appointment, shall have a net worth of at least
$1,000,000.
The Trustee. The Trustee is The Chase Manhattan Bank (National
Association), a national banking association with its principal executive
office located at 1 Chase Manhattan Plaza, New York, New York 10081 and its
unit investment trust office at 770 Broadway, New York, New York 10003 (800)
428-8890. The Trustee is subject to the supervision by the Comptroller of the
Currency, the Federal Deposit Insurance Corporation and the Board of Governors
of the Federal Reserve System.
The Trustee shall not be liable or responsible in any way for taking any
action, or for refraining from taking any action, in good faith pursuant to
the Trust Agreement, or for errors in judgment; or for an disposition of any
moneys, Securities or Certificates in accordance with the Trust Agreement,
except in case of its own willful misfeasance, bad faith, negligence or
reckless disregard of its obligations and duties. In addition, the Trustee
shall not be liable for any taxes or other governmental charges imposed upon
or in respect of the Securities or the Trusts 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 Trustee will act as Evaluator for the Trust.
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
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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.
TRUST EXPENSES AND CHARGES
At no cost to the Trusts, the Sponsor has borne all of the expenses
incurred in creating and establishing the Trust, including the cost of the
initial preparation and execution of the Trust Agreement, registration of the
Trust and the Units under the Investment Company Act of 1940 and the
Securities Act of 1933, blue sky registration fees, legal expenses,
advertising and selling expenses, expenses of the Trustee, including but not
limited to, an amount equal to interest accrued on certain "when issued" bonds
since the date of settlement for the Units, initial fees and other
out-of-pocket expenses.
The Sponsor will not charge the Trust a fee for its services as such.
The Sponsor's affiliate will receive for portfolio supervisory services
to the Trust an annual fee in the amount set forth under "Summary of Essential
Information" in Part A. The Sponsor's fee may exceed the actual cost of
providing portfolio supervisory services for the Trust, but at no time will
the total amount received for portfolio supervisory services rendered to all
series of the Qualified Unit Investment Laddered Trust Series in any calendar
year exceed the aggregate cost to the Sponsor of supplying such services in
such year. (See "Trust Administration--Portfolio Supervision.")
The Trustee's annual fee and estimated expenses are set forth under
"Summary of Essential Information" in Part A. For a discussion of the services
performed by the Trustee pursuant to its obligations under the Trust
Agreement, see "Trust Administration" and "Rights of Unit Holders."
The Trustee's fee applicable to the Trust is calculated based upon the
principal amount of Securities in the Trust on the Record Date of such month,
payable monthly as of the Record Date from the Interest Account of the Trust
to the extent funds are available and then from the Principal Account. Both
the supervisory fee and the Trustee's fee 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."
The following additional charges are or may be incurred by the Trust:
all expenses (including counsel fees) of the Trustee incurred and advances
made in connection with its activities under the Trust Agreement, including
the expenses and costs of any action undertaken by the Trustee to protect the
Trust and the rights and interests of the Unit Holders; fees of the Trustee
for any extraordinary services performed under the Trust Agreement;
indemnification of the Trustee for any loss or liability accruing to it
without 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 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 Securities in order to
make funds available to pay all expenses.
The accounts of the Trust shall be audited not less than annually by
independent public accountants selected by the Sponsor. The expenses of the
audit shall be an expense of the Trust. So long as the Sponsor maintains a
secondary market, the Sponsor will bear any audit expense which exceeds 50
Cents per 1,000 Units. Unit Holders covered by the audit during the year may
receive a copy of the audited financial upon request.
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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 Messrs. Battle
Fowler LLP, 75 East 55th Street, New York, New York 10022 as counsel for the
Sponsor. Messrs. Carter, Ledyard & Milburn, Two Wall Street, New York, New
York 10005 have acted as counsel for the Trustee.
Independent Auditors. The Statements of Condition and Portfolios are
included herein in reliance upon the report of BDO Seidman, LLP, independent
auditors, and upon the authority of said firm as experts in accounting and
auditing.
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Qualified Unit Investment Liquid Trust Series ("QUILTS")
(A Unit Investment Trust)
QUILTS Laddered Income--U.S. Treasury Series 18 (ACTP)
Prospectus Dated: April 17, 1996
Sponsor: Trustee and Evaluator:
OCC Distributors The Chase Manhattan Bank
Two World Financial Center (National Association)
225 Liberty Street 770 Broadway
New York, New York 10080-6116 New York, New York 10003
(800) 628-6664 (800) 428-8890
============================
Table of Contents
Title Page
PART A
Summary of Essential Information...........................................A-2
Independent Auditors' Report...............................................A-8
Statements of Condition....................................................A-9
Portfolio and Cash Flow Information.......................................A-10
Underwriting..............................................................A-11
PART B
The Trust....................................................................1
Risk Factors.................................................................3
Public Offering..............................................................5
Estimated Long Term Return ..................................................7
Rights of Unit Holders ......................................................8
Tax Status..................................................................10
Liquidity...................................................................12
Trust Administration........................................................14
Trust Expenses and Charges..................................................17
Other Matters...............................................................18
No person is authorized to give any information or to make any
representations not contained in Parts A and B of this Prospectus; and any
information or representation not contained herein must not be relied upon as
having been authorized by the Trust, the Trustee, the Evaluator, or the
Sponsor. The Trust is a registered as unit investment trust under the
Investment Company Act of 1940. Such registration does not imply that the
Trust or any of its Units have been guaranteed, sponsored, recommended or
approved by the United States or any state or any agency or officer thereof.
This Prospectus does not constitute an offer to sell, or a solicitation
of an offer to buy, securities in any state to any person to whom it is not
lawful to make such offer in such state.
Parts A and B of this Prospectus do not contain all of the information
set forth in the registration statement and exhibits thereto, filed with the
Securities and Exchange Commission, Washington, D.C., under the Securities Act
of 1933, and the Investment Company Act of 1940, and to which reference is
made.
355471.1
