As filed with the Securities and Exchange Commission on September 19, 1996
Registration No. 333-
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-6
For Registration Under the Securities Act
of 1933 of Securities of Unit Investment
Trusts Registered on Form N-8B-2
---------------------
A. EXACT NAME OF TRUST:
Equity Securities Trust, Series 10, 1996 Triple Play Series
B. NAME OF DEPOSITOR:
Reich & Tang Distributors L.P.
C. COMPLETE ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES:
Reich & Tang Distributors L.P.
600 Fifth Avenue
New York, New York 10020
D. NAME AND COMPLETE ADDRESS OF AGENT FOR SERVICE:
COPY OF COMMENTS TO:
PETER J. DEMARCO MICHAEL R. ROSELLA, Esq.
Reich & Tang Distributors L.P. Battle Fowler LLP
600 Fifth Avenue 75 East 55th Street
New York, New York 10020 New York, New York 10022
(212) 856-6858
E. TITLE AND AMOUNT OF SECURITIES BEING REGISTERED:
An indefinite number of Units of Equity Securities Trust, Series 10,
1996 Triple Play Series is being registered under the Securities Act
of 1933 pursuant to Section 24(f) of the Investment Company Act of
1940, as amended, and Rule 24f- 2 thereunder.
F. PROPOSED MAXIMUM AGGREGATE OFFERING PRICE TO THE PUBLIC OF THE
SECURITIES BEING REGISTERED:
Indefinite
G. AMOUNT OF FILING FEE:
$500 (as required by Rule 24f-2)
H. APPROPRIATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after the effective date of the
Registration Statement.
/ / Check if it is proposed that this filing will become
effective immediately upon filing pursuant to Rule 487.
The registrant hereby amends the registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
C/M: 11939.0010 402025.1
<PAGE>
Equity Securities Trust, Series 10, 1996 Triple Play Series
CROSS-REFERENCE SHEET
Pursuant to Rule 404 of Regulation C
Under the Securities Act of 1933
(Form N-8B-2 Items Required by Instruction as
to the Prospectus in Form S-6)
<TABLE>
<CAPTION>
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
----------- ---------------------
I. Organization And General Information
<S> <C>
1. (a) Name of trust............................................... Front cover of Prospectus
(b) Title of securities issued.................................. Front cover of Prospectus
2. Name and address of trustee...................................... The Trustee
3. Name and address of each depositor............................... The Sponsor
4. Name and address of principal underwriters....................... Distribution of Units
5. State of organization of trust................................... Organization
6. Execution and termination of trust agreement..................... Trust Agreement, Amendment and Termination
7. Changes of name.................................................. Not applicable
8. Fiscal year...................................................... Not applicable
9. Litigation....................................................... None
II. General Description of The Trust and Securities of the Trust
10. (a) Registered or bearer securities............................. Certificates
(b) Cumulative or distributive securities....................... Interest and Principal Distributions
(c) Redemption.................................................. Trustee Redemption
(d) Conversion, transfer, etc................................... Certificates, Sponsor's Repurchase, Trustee Redemption
(e) Periodic payment plan....................................... Not Applicable
(f) Voting rights............................................... Trust Agreement, Amendment and Termination
(g) Notice to certificateholders................................ Records, Portfolio, Substitution of Securities, Trust
Agreement, Amendment and Termination, The
Sponsor, The Trustee
(h) Consents required........................................... Trust Agreement, Amendment and Termination
(i) Other provisions............................................ Tax Status
11. Type of securities comprising units.............................. Objectives, Portfolio, Portfolio Summary
12. Certain information regarding periodic payment certificates...... Not Applicable
13. (a) Load, fees, expenses, etc................................... Summary of Essential Information, Public Offering
Price, Market for Units, Volume and Other Discounts,
Sponsor's Profits, Trust Expenses and Charges
(b) Certain information regarding periodic payment
certificates............................................ Not Applicable
</TABLE>
-i-
C/M: 11939.0010 402025.1
<PAGE>
<TABLE>
<CAPTION>
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
----------- ---------------------
<S> <C>
(c) Certain percentages......................................... Summary of Essential Information, Public Offering
Price, Market for Units, Volume and Other Discounts
(d) Price differences........................................... Volume and Other Discounts, Distribution of Units
(e) Other loads, fees, expenses................................. Certificates
(f) Certain profits receivable by depositors, principal
underwriters, trustee or affiliated persons............. Sponsor's Profits, Portfolio Summary
(g) Ratio of annual charges to income........................... Not Applicable
14. Issuance of trust's securities................................... Organization, Certificates
15. Receipt and handling of payments from purchasers Organization
16. Acquisition and disposition of underlying securities............. Organization, Objectives, Portfolio, Portfolio
Supervision
17. Withdrawal or redemption......................................... Comparison of Public Offering Price, Sponsor's
Repurchase Price and Redemption Price, Sponsor's
Repurchase, Trustee Redemption
18. (a) Receipt, custody and disposition of income.................. Distributions, Dividend and Principal Distributions,
Portfolio Supervision
(b) Reinvestment of distributions............................... Not Applicable
(c) Reserves or special funds................................... Dividend and Principal Distributions
(d) Schedule of distributions................................... Not Applicable
19. Records, accounts and reports.................................... Records
20. Certain miscellaneous provisions of trust agreement
(a) Amendment................................................... Trust Agreement, Amendment and Termination
(b) Termination................................................. Trust Agreement, Amendment and Termination
(c) and (d) Trustee, removal and successor...................... The Trustee
(e) and (f) Depositor, removal and successor.................... The Sponsor
21. Loans to security holders........................................ Not Applicable
22. Limitations on liability......................................... The Sponsor, The Trustee, The Evaluator
23. Bonding arrangements............................................. Part II - Item A
24. Other material provisions of trust agreement..................... Not Applicable
III. Organization, Personnel and Affiliated Persons of Depositor
25. Organization of depositor........................................ The Sponsor
26. Fees received by depositor....................................... Not Applicable
27. Business of depositor............................................ The Sponsor
28. Certain information as to officials and affiliated persons of
depositor..................................................... Not Applicable
29. Voting securities of depositor................................... Not Applicable
30. Persons controlling depositor.................................... Not Applicable
31. Payments by depositor for certain services
rendered to trust....................................... Not Applicable
</TABLE>
-ii-
C/M: 11939.0010 402025.1
<PAGE>
<TABLE>
<CAPTION>
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
----------- ---------------------
<S> <C>
32. Payments by depositor for certain other services
rendered to trust............................................. Not Applicable
33. Remuneration of employees of depositor for certain services
rendered to trust............................................. Not Applicable
34. Remuneration of other persons for certain services
rendered to trust............................................. Not Applicable
IV. Distribution and Redemption of Securities
35. Distribution of trust's securities by states..................... Distribution of Units
36. Suspension of sales of trust's securities........................ Not Applicable
37. Revocation of authority to distribute............................ None
38. (a) Method of distribution...................................... Distribution of Units
(b) Underwriting agreements..................................... Distribution of Units
(c) Selling agreements.......................................... Distribution of Units
39. (a) Organization of principal underwriters...................... The Sponsor
(b) N.A.S.D. membership of principal underwriters............... The Sponsor
40. Certain fees received by principal underwriters.................. The Sponsor
41. (a) Business of principal underwriters.......................... The Sponsor
(b) Branch offices of principal underwriters.................... The Sponsor
(c) Salesmen of principal underwriters.......................... The Sponsor
42. Ownership of trust's securities by certain persons............... Not Applicable
43. Certain brokerage commissions received by
principal underwriters.................................. Not Applicable
44. (a) Method of valuation......................................... Summary of Essential Information, Market for
Units,Offering Price, Accrued Interest, Volume and
Other Discounts, Distribution of Units, Comparison of
Public Offering Price, Sponsor's Repurchase Price and
Redemption Price, Sponsor's Repurchase, Trustee
Redemption
(b) Schedule as to offering price............................... Summary of Essential Information
(c) Variation in offering price to certain persons.............. Distribution of Units, Volume and Other Discounts
45. Suspension of redemption rights.................................. Not Applicable
46. (a) Redemption valuation........................................ Comparison of Public Offering Price, Sponsor's
Repurchase Price and Redemption Price, Redemption
Price, and Trustee Redemption
(b) Schedule as to redemption price............................. Summary of Essential Information
47. Maintenance of position in underlying securities................. Comparison of Public Offering Price, Sponsor's
Repurchase Price and Redemption Price, Sponsor's
Repurchase, Trustee Redemption
V. Information Concerning the Trustee or Custodian
48. Organization and regulation of trustee........................... The Trustee
</TABLE>
-iii-
C/M: 11939.0010 402025.1
<PAGE>
<TABLE>
<CAPTION>
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
----------- ---------------------
<S> <C>
49. Fees and expenses of trustee..................................... Trust Expenses and Charges
50. Trustee's lien................................................... Trust Expenses and Charges
VI. Information Concerning Insurance of Holders of Securities
51. Insurance of holders of trust's securities....................... None
VII. Policy of Registrant
52. (a) Provisions of trust agreement with respect to selection or
elimination of underlying securities.................... Objectives, Portfolio, Portfolio Supervision,
Substitution of Securities
(b) Transactions involving elimination of underlying
securities.............................................. Not Applicable
(c) Policy regarding substitution or elimination of underlying
securities.............................................. Submission of Securities
(d) Fundamental policy not otherwise covered.................... Not Applicable
53. Tax status of trust.............................................. Tax Status
VIII. Financial and Statistical Information
54. Trust's securities during last ten years......................... Not Applicable
55. Hypothetical account for issuers of periodic payment plans....... Not Applicable
56. Certain information regarding periodic payment certificates...... Not Applicable
57. Certain information regarding periodic payment plans............. Not Applicable
58. Certain other information regarding
periodic payment plans.................................. Not Applicable
59. Financial statements (Instruction 1(c) to Form S-6).............. Statement of Financial Condition
</TABLE>
-iv-
C/M: 11939.0010 402025.1
<PAGE>
SUBJECT TO COMPLETION DATED SEPTEMBER 19, 1996
- --------------------------------------------------------------------------------
INSERT LOGO
- --------------------------------------------------------------------------------
EQUITY SECURITIES TRUST
SERIES 10
1996 TRIPLE PLAY SERIES
The Trust is a unit investment trust designated Equity Securities Trust, Series
10, 1996 Triple Play Series (the "Trust"). The Sponsor is Reich & Tang
Distributors L.P. The objective of the Trust is to maximize total return
through a combination of capital appreciation and current dividend income. The
Sponsor can not give any assurance that the Trust's objective can be achieved.
The Trust seeks to achieve its objective by outperforming the Dow Jones
Industrial Average ("DJIA") by creating a portfolio that combines the following
three investment strategies: (1) investing in the DJIA's ten highest dividend
yielding common stocks ("Top Ten"), (2) investing in the five lowest priced
stocks of the Top Ten ("Focus Five") and (3) investing in a single stock which
is the second-lowest priced of the Focus Five ("Penultimate Pick"); each
determined as of two business days prior to the Initial Date of Deposit. The
name "Dow Jones Industrial Average" is the property of Dow Jones & Company,
Inc., which is not affiliated with the Sponsor and has not participated in any
way in the creation of the Trust or in the selection of the stocks included in
the Trust and has not reviewed or approved any information included in this
Prospectus. Dow Jones & Company, Inc. has not granted to the Trust or the
Sponsor a license to use the Dow Jones Industrial Average. The value of the
Units of the Trust will fluctuate with fluctuations in the value of the
underlying Securities in the Trust. Therefore, Certificateholders who sell
their Units prior to termination of the Trust may receive more or less than
their original purchase price upon sale. No assurance can be given that
dividends will be paid or that the Units will appreciate in value. The Trust
will terminate approximately one year after the Initial Date of Deposit.
Minimum Purchase: 100 Units.
This Prospectus consists of two parts. Part A contains the Summary of Essential
Information including descriptive material relating to the Trust and the
Statement of Condition of the Trust. Part B contains general information about
the Trust. Part A may not be distributed unless accompanied by Part B. Please
read and retain both parts of this Prospectus for future reference.
================================================================================
================================================================================
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 COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
PROSPECTUS PART A DATED SEPTEMBER __, 1996
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any State.
C/M: 11939.0010 400833.1
<PAGE>
SUMMARY OF ESSENTIAL INFORMATION AS OF SEPTEMBER __, 1996:*
<TABLE>
<S> <C>
DATE OF DEPOSIT: September __, 1996 MINIMUM VALUE OF TRUST: The Trust may be
AGGREGATE VALUE OF SECURITIES.................. $________ terminated if the value of the Trust is less than 40% of
AGGREGATE VALUE OF SECURITIES the aggregate value of the Securities at the completion
PER 100 UNITS............................... $________ of the Deposit Period.
NUMBER OF UNITS................................ ________ MANDATORY TERMINATION DATE: The earlier of
FRACTIONAL UNDIVIDED INTEREST IN _____________, 1997 or the disposition of the last Security
TRUST....................................... 1/_______ in the Trust.
TRUSTEE: The Chase Manhattan Bank
PUBLIC OFFERING PRICE+ TRUSTEE'S FEE: $.___ per 100 Units outstanding
Aggregate Value of Securities in ESTIMATED ORGANIZATIONAL EXPENSES**:
Trust**.................................. $________ $.___ per 100 Units
Divided By ________ Units (times 100)....... $________ ESTIMATED OFFERING COSTS**: $.___ per 100
Plus Sales Charge of 2.95% of Public Units
Offering Price per 100 Units............. $________ OTHER FEES AND EXPENSES: $.__ per 100 Units
Public Offering Price per 100 Units++....... $________ outstanding
SPONSOR'S REPURCHASE PRICE AND SPONSOR: Reich & Tang Distributors L.P.
REDEMPTION PRICE PER SPONSOR'S SUPERVISORY FEE: Maximum of $.__
100 UNITS+++................................ $________ per 100 Units outstanding (see "Trust Expenses and
EXCESS OF PUBLIC OFFERING PRICE OVER Charges" in Part B).
REDEMPTION PRICE PER RECORD DATE: __________________, 1997
100 UNITS................................... $________ DISTRIBUTION DATE: ______________, 1997
EVALUATION TIME: 4:00 p.m. New York Time. ROLLOVER NOTIFICATION DATE***:
MINIMUM INCOME OR PRINCIPAL _____________, 1997 or another date as determined by
DISTRIBUTION: $1.00 per 100 Units the Sponsor.
LIQUIDATION PERIOD: Beginning 60 days prior to
the Mandatory Termination Date.
</TABLE>
- ------------------
* The business day prior to the Initial Date of Deposit. The Initial Date
of Deposit is the date on which the Trust Agreement was signed and the deposit
of Securities with the Trustee made.
** Although historically the sponsors of unit investment trusts ("UITs")
have paid all the costs of establishing such UITs, this Trust (and therefore
the Certificateholders) will bear all or a portion of its organizational costs.
Such organizational costs include: the cost of preparing and printing the
registration statement, the trust indenture and the closing documents; and the
initial audit of the Trust. Total organizational expenses will be amortized
over the life of the Trust. Offering costs, including the costs of registering
securities with the Securities and Exchange Commission and the states, will be
amortized over the term of the initial offering period, which may be between 30
and 90 days. See "Trust Expenses" in Part B. Assumes the Trust will reach a
size of 10,000,000 Units as estimated by the Sponsor; organizational expenses
and offering costs per 100 Units will vary with the actual size of the Trust.
If the Trust does not reach this Unit level, the Estimated Organizational
Expenses and Offering Costs per 100 Units will be higher.
*** If a Certificateholder ("Rollover Certificateholder") so specifies prior
to the Rollover Notification Date, the Rollover Certificateholder's Units will
be redeemed in kind and the underlying distributed Securities will be sold by
the Sponsor, on behalf of the Trustee, during the Liquidation Period. The
proceeds will be reinvested as received in an available series of the Equity
Securities Trust, Triple Play Series, if offered (see "Trust Administration -
Trust Termination").
+ Per 100 Units.
++ On the Initial Date of Deposit there will be no cash in the Income or
Principal Accounts. Anyone purchasing Units after such date will have included
in the Public Offering Price a pro rata share of any cash in such Accounts.
+++ Any redemptions of over 2,500 Units may, upon request by a redeeming
Certificateholder, be made in kind. The Trustee will forward the distributed
securities to the Certificateholder's bank or broker-dealer account at The
Depository Trust Company in book-entry form. See "Liquidity--Trustee
Redemption" in Part B.
A-2
C/M: 11939.0010 400833.1
<PAGE>
DESCRIPTION OF PORTFOLIO:
Number of Issues: __ (__ issuers)
Percent of Issues represented by the Sponsor's contracts to
purchase: 100%
Expected settlement date: , 1996
Percent of Issues by Industry*:
___________________ (__)..................................____%
___________________ (__)..................................____%
___________________ (__)..................................____%
___________________ (__)..................................____%
___________________ (__)..................................____%
___________________ (__)..................................____%
___________________ (__)..................................____%
___________________ (__)..................................____%
___________________ (__)..................................____%
___________________ (__)................................. ____%
------
100.00%
======
- ------------------
* A trust is considered to be "concentrated" in a particular category or
industry when the securities in that category or that industry constitute
25% or more of the aggregate face amount of the portfolio.
OBJECTIVE. The objective of the Trust is to maximize total return through
capital appreciation and current dividend income. The Trust seeks to achieve
its objective by outperforming the Dow Jones Industrial Average ("DJIA") (which
is not affiliated with the Sponsor) by creating a portfolio that combines the
following three investment strategies: (1) investing in the DJIA's ten (10)
common stocks having the highest dividend yield (the "Top Ten"), (2) investing
in the DJIA's five (5) common stocks having the lowest per share stock price of
the Top Ten (the "Focus Five") and (3) investing in a single stock which is the
DJIA's second-lowest priced of the Focus Five (the "Penultimate Pick"); each
determined as of two business days prior to the Initial Date of Deposit. The
Trust's portfolio will be comprised of ten (10) stocks. Approximately 20% of
the Trust's assets will be allocated to the Top Ten, approximately 60% will be
allocated to the Focus Five and approximately 20% will be allocated to the
Penultimate Pick. Within these three categories, stocks will be purchased in
approximately equal dollar amounts. Due to the fact that all of the Focus Five
are also represented in the Top Ten, and that the Penultimate Pick appears in
both the Focus Five and Top Ten, such overlap will result in a difference in
the actual weighting of the stocks comprising the Top Ten, Focus Five and
Penultimate Pick as well as the actual weighting of the three strategies
relative to each other in the portfolio on the Initial Date of Deposit. For the
actual percentage of each stock in the portfolio, see "Portfolio" herein.
(Also, see "The Trust - Objective" and "The Trust - The Securities" in Part B.)
As used herein, the term "highest dividend yield" means the yield for each
Security calculated by annualizing the last quarterly or semi-annual ordinary
dividend distributed on that Security and dividing the result by the market
value of that Security as of two business days prior to the Initial Date of
Deposit. This rate is historical, and there is no assurance that any dividends
will be declared or paid in the future on the Securities in the Trust. As used
herein, the term "Securities" means the common stocks initially deposited in
the Trust and described in "Portfolio" in Part A and any additional common
stocks acquired and held by the Trust pursuant to the provisions of the
Indenture.
PUBLIC OFFERING PRICE. The Public Offering Price per 100 Units of the Trust is
equal to the aggregate value of the underlying Securities (the price at which
they could be directly purchased by the public assuming they were available) in
the Trust divided by the number of Units outstanding times 100 plus a sales
charge of 2.95% of the Public Offering Price per 100 Units or 3.04% of the net
amount invested in Securities per 100 Units. The price of a single Unit, or any
multiple thereof, is calculated by dividing the Public Offering Price per 100
Units by 100 and multiplying by the number of Units. Any cash held by the Trust
will be added to the Public Offering Price. For additional information
regarding the Public Offering Price, repurchase and redemption of Units and
other essential information regarding the Trust, see the "Summary of Essential
Information." During the initial offering period orders involving at least
5,000 Units will be entitled to a volume discount from the Public Offering
Price. The Public Offering Price per Unit may vary on a daily basis in
accordance with fluctuations in the aggregate value of the underlying
Securities and the price to be paid by each investor will be computed as of the
date the Units are purchased. (See "Public Offering" in Part B.)
A-3
C/M: 11939.0010 400833.1
<PAGE>
DISTRIBUTIONS. Dividend distributions, if any, will be made on the Distribution
Dates to all Certificateholders of record on the Record Date. For the specific
dates representing the Distribution Dates and Record Dates, See "Summary of
Essential Information" in Part A. The final distribution will be made within a
reasonable period of time after the termination of the Trust.
Certificateholders may elect to automatically reinvest distributions (other
than the final distribution in connection with the termination of the Trust)
into additional Units of a Trust, which will not be subject to a sales charge.
(See "Rights of Certificateholders--Distributions" in Part B.)
MARKET FOR UNITS. The Sponsor, although not obligated to do so, intends to
maintain a secondary market for the Units and to continuously offer to
repurchase the Units of the Trust both during and after the initial public
offering. The secondary market repurchase price will be based on the market
value of the Securities in the Trust portfolio and will be the same as the
redemption price. (See "Liquidity--Sponsor Repurchase" for a description on how
the secondary market repurchase price will be determined.) If a market is not
maintained a Certificateholder will be able to redeem his Units with the
Trustee (see "Liquidity--Trustee Redemption" in Part B). As a result, the
existence of a liquid trading market for these Securities may depend on whether
dealers will make a market in these Securities. There can be no assurance of
the making or the maintenance of a market for any of the Securities contained
in the portfolio of the Trust or of the liquidity of the Securities in any
markets made. In addition, the Trust may be restricted under the Investment
Company Act of 1940 from selling Securities to the Sponsor. The price at which
the Securities may be sold to meet redemptions and the value of the Units will
be adversely affected if trading markets for the Securities are limited or
absent.
TERMINATION. During the 60-day period prior to the Mandatory Termination Date
(the "Liquidation Period"), Securities will begin to be sold in connection with
the termination of the Trust and all Securities will be sold or distributed by
the Mandatory Termination Date. The Trustee may utilize the services of the
Sponsor for the sale of all or a portion of the Securities in the Trust. The
Sponsor may receive brokerage commissions from the Trust in connection with
such sales in accordance with applicable law. The Sponsor will determine the
manner, timing and execution of the sales of the underlying Securities. The
Sponsor will attempt to sell the Securities as quickly as it can during the
Liquidation Period without, in its judgment, materially adversely affecting the
market price of the Securities, but all of the Securities will in any event be
disposed of by the end of the Liquidation Period. The Sponsor does not
anticipate that the period will be longer than 60 days, and it could be as
short as one day, depending on the liquidity of the Securities being sold.
Certificateholders may elect one of the three options in receiving their
terminating distributions: (1) to receive their pro rata share of the
underlying Securities in-kind, if they own at least 2,500 units, (2) to receive
cash upon the liquidation of their pro rata share of the underlying Securities
or (3) to invest the amount of cash they would have received upon the
liquidation of their pro rata share of the underlying Securities in units of a
future series of the Trust (if one is offered) at a reduced sales charge. See
"Trust Administration--Trust Termination" in Part B for a description of how to
select a termination distribution option. Certificateholders who have not
chosen to receive distributions-in-kind will be at risk to the extent that
Securities are not sold; for this reason the Sponsor will be inclined to sell
the Securities in as short a period as it can without materially adversely
affecting the price of the Securities. Certificateholders should consult their
own tax advisers in this regard.
RISK CONSIDERATIONS. An investment in Units of the Trust should be made with an
understanding of the risks inherent in any investment in the Securities
including for common stocks, the risk that the financial condition of the
issuers of the Securities may become impaired or that the general condition of
the stock market may worsen (both of which may contribute directly to a
decrease in the value of the Securities and thus in the value of the Units). In
addition, the Trust may be considered to be "concentrated" in stocks of
companies deriving a substantial portion of their income from the petroleum
refining industry. Investment in this industry may pose additional risks
including the volatility of oil prices, the impact of oil cartels, political
uncertainty in the Middle East and increasing costs associated with
environmental damage caused by oil companies and compliance with environmental
regulations and legislation. Further, the nature of the combination of the
three investment strategies in the portfolio causes the Trust to be
concentrated in the Penultimate Pick. Investors should consider the greater
risk of the Trust's concentration versus the safety that comes with a less
concentrated portfolio and should compare returns available on less
concentrated portfolios before making an investment decision. The portfolio of
the Trust is fixed and not "managed" by the Sponsor. Since the Trust will not
sell Securities in response to ordinary market fluctuation, but only at the
Trust's termination or to meet redemptions, the amount realized upon the sale
of the Securities may not be the highest price attained by an individual
Security during the life of the Trust. In connection with the deposit of
Additional Securities subsequent to the Initial Date of Deposit, if cash (or a
letter of credit in lieu of cash) is deposited with instructions to purchase
Securities, to the extent the price of a Security increases or decreases
between the deposit and the time the Security is purchased, Units may represent
less or more of that Security and more or less of the other Securities in the
Trust. In addition, brokerage fees incurred in purchasing Securities with cash
deposited with instructions to purchase the Securities will be an expense of
the Trust. Price fluctuations during the period from the time of deposit to the
time the
A-4
C/M: 11939.0010 400833.1
<PAGE>
Securities are purchased, and payment of brokerage fees, will affect the value
of every Certificateholder's Units and the income per Unit received by the
Trust.
The Sponsor cannot give any assurance that the business and investment
objectives of the issuers of the Securities will correspond with or in any way
meet the limited term objective of the Trust. (See "Risk Considerations" in
Part B of this Prospectus.)
UNDERWRITING. Reich & Tang Distributors L.P., 600 Fifth Avenue, New York, New
York 10020, will act as Underwriter for all of the Units of Equity Securities
Trust, Series 10, 1996 Triple Play Series. The Underwriter will distribute
Units through various broker-dealers, banks and/or other eligible participants
(see "Public Offering--Distribution of Units" in Part B).
A-5
C/M: 11939.0010 400833.1
<PAGE>
<TABLE>
<CAPTION>
EQUITY SECURITIES TRUST
SERIES 10
1996 TRIPLE PLAY SERIES
STATEMENT OF CONDITION AS OF OPENING OF BUSINESS, SEPTEMBER __, 1996
ASSETS
<S> <C>
Investment in Securities--Sponsor's Contracts to Purchase
Underlying Securities Backed by Letter of Credit (cost $____)(Note 1)............................. $_______
Organizational Costs(Note 2)............................................................................ ______
Offering Costs( Note 3)................................................................................. ______
-----------
Total................................................................................................... $_______
===========
LIABILITIES AND INTEREST OF CERTIFICATEHOLDERS
Accrued Liabilities(Notes 2 and 3)...................................................................... $________
Interest of Certificateholders.......................................................................... ________
Undivided Interest Outstanding (Series 10: ______ Units)................................................ ________
Total................................................................................................... $________
===========
Net Asset Value per Unit.......................................................................... $________
===========
</TABLE>
- -------------------------
Notes to Statement:
(1) Equity Securities Trust, Series 10, 1996 Triple Play Series (the
"Trust") is a unit investment trust created under the laws of the State of New
York and registered under the Investment Company Act of 1940. The Trust was
created to provide investors with the opportunity to invest in common stock of
companies with new and superior technology or advanced or innovative products
or product lines. On the Date of Deposit, Portfolio Deposits were received by
The Chase Manhattan Bank, the Trust's Trustee, in the form of executed
securities transactions, in exchange for ___________ units of the Trust. An
irrevocable letter of credit issued by the Bank of Boston in an amount of
$____________ has been deposited with the Trustee for the benefit of the Trust
to cover the purchases of such Securities. Aggregate cost to the Trust of the
Securities listed in the Portfolio is determined by the Trustee on the basis
set forth under "Public Offering--Offering Price" as of 4:00 p.m. on September
__, 1996.
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures. Actual results
could differ from those estimates.
(2) Organizational costs incurred by the Trust have been deferred and
will be amortized on a straight line basis over the life of the Trust. The
Trust will reimburse the Sponsor for actual organizational costs incurred.
(3) Offering costs incurred by the Trust will be charged to capital no
later than the close of the period during which Units of the Trust are first
sold to the public.
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EQUITY SECURITIES TRUST
SERIES 10
1996 TRIPLE PLAY SERIES
PORTFOLIO
AS OF SEPTEMBER __, 1996
Market Cost of
Value of Securities
Stocks as a Market to the
Portfolio Number of Name of Issuer and Percentage Value Per Trust
No. Shares (1) Ticket Symbol (2) of Trust Share (3)
- --------- ---------- ------------------ ----------- --------- ----------
1 % $
------ ------
Total Investment in
Securities 100% $
====== ======
FOOTNOTES TO PORTFOLIO
(1) Based on the cost of the Securities to the Trust.
(2) Contracts to purchase the Securities were entered into on September __,
1996. All such contracts are expected to be settled on or about the First
Settlement Date of the Trust which is expected to be September __, 1996.
(3) Evaluation of Securities by the Trustee was made on the basis of closing
sales prices at the Evaluation Time on the day prior to the Initial Date
of Deposit. The Sponsor's Purchase Price is $________. The Sponsor's
Profit/Loss on the Initial Date of Deposit is $__________.
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustee and Certificateholders,
Equity Securities Trust, Series 10
1996 Triple Play Series
In our opinion, the accompanying Statement of Condition, including the
Portfolio, presents fairly, in all material respects, the financial position of
Equity Securities Trust, Series 10, 1996 Triple Play Series (the "Trust") at
opening of business, September __, 1996, in conformity with generally accepted
accounting principles. This financial statement is the responsibility of the
Trust's management; our responsibility is to express an opinion on this
financial statement based on our audit. We conducted our audit of this
financial statement in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statement is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statement, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit, which included
confirmation of the contracts for the securities at opening of business,
September __, 1996, by correspondence with the Sponsor, provides a reasonable
basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
September __, 1996
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EQUITY SECURITIES TRUST
SERIES 10
1996 TRIPLE PLAY SERIES
PROSPECTUS PART B
PART B OF THIS PROSPECTUS MAY NOT BE
DISTRIBUTED UNLESS ACCOMPANIED BY
PART A
THE TRUST
ORGANIZATION. Equity Securities Trust, Series 10, 1996 Triple Play Series
consists of a "unit investment trust" designated as set forth 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 Initial Date of
Deposit, among Reich & Tang Distributors L.P., as Sponsor, and The Chase
Manhattan Bank, as Trustee.
On the Initial Date of Deposit, the Sponsor deposited with the Trustee
common stock, including funds and delivery statements relating to contracts for
the purchase of certain such securities (collectively, the "Securities") with
an aggregate value as set forth in Part A and cash or an irrevocable letter of
credit issued by a major commercial bank in the amount required for such
purchases. Thereafter the Trustee, in exchange for the Securities so deposited,
delivered to the Sponsor the Certificates evidencing the ownership of all Units
of the Trust. The Sponsor has a limited right to substitute other securities in
the Trust portfolio in the event of a failed contract. See "The
Trust--Substitution of Securities." The Sponsor may also, in certain
circumstances, direct the Trustee to dispose of certain Securities if the
Sponsor believes that, because of market or credit conditions, or for certain
other reasons, retention of the Security would be detrimental to
Certificateholders. See "Trust Administration Portfolio--Supervision."
As of the Initial Date of Deposit, a "Unit" represents an undivided
interest or pro rata share in the Securities of the Trust in the ratio of one
hundred Units for the indicated amount of the aggregate market value of the
Securities initially deposited in the Trust as is set forth in the "Summary of
Essential Information". As additional Units are issued by the Trust as a result
of the deposit of Additional Securities, as described below, the aggregate
value of the Securities in the Trust will be increased and the fractional
undivided interest in the Trust represented by each Unit will be decreased. To
the extent that any Units are redeemed by the Trustee, the fractional undivided
interest or pro rata share in such Trust represented by each unredeemed Unit
will increase, although the actual interest in such Trust represented by such
fraction will remain unchanged. Units will remain outstanding until redeemed
upon tender to the Trustee by Certificateholders, which may include the
Sponsor, or until the termination of the Trust Agreement.
DEPOSIT OF ADDITIONAL SECURITIES. With the deposit of the Securities in
the Trust on the Initial Date of Deposit, the Sponsor established a
proportionate relationship among the initial aggregate value of specified
Securities in the Trust. During the 90 days subsequent to the Initial Date of
Deposit (the "Deposit Period"), the Sponsor may deposit additional Securities
in the Trust that are substantially similar to the Securities already deposited
in the Trust ("Additional Securities"), contracts to purchase Additional
Securities or cash (or a bank letter of credit in lieu of cash) with
instructions to purchase Additional Securities, in order to create additional
Units, maintaining to the extent practicable the original proportionate
relationship of the number of shares of each Security in the Trust portfolio on
the Initial Date of Deposit. These additional Units, which may result in a
potential increase in the number of Units outstanding, will each represent, to
the extent practicable, an undivided interest in the same number and type of
securities of identical issuers as are represented by Units issued on the
Initial Date of Deposit. It may not be possible to maintain the exact original
proportionate relationship among the Securities deposited on the Initial Date
of Deposit because of, among other reasons, purchase requirements, changes in
prices, or unavailability of Securities. The composition of the Trust portfolio
may change slightly based on certain adjustments made to reflect the
disposition of Securities and/or the receipt of a stock dividend, a stock split
or other
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distribution with respect to such Securities, including Securities received in
exchange for shares or the reinvestment of the proceeds distributed to
Certificateholders. Deposits of Additional Securities in the Trust subsequent
to the Deposit Period must replicate exactly the existing proportionate
relationship among the number of shares of Securities in the Trust portfolio.
Substitute Securities may be acquired under specified conditions when
Securities originally deposited in the Trust are unavailable (see "The
Trust--Substitution of Securities" below).
OBJECTIVE. The objective of the Trust is to maximize total return through
capital appreciation and current dividend income. The Trust seeks to achieve
its objective by outperforming the Dow Jones Industrial Average ("DJIA") (which
is not affiliated with the Sponsor) by creating a portfolio that combines the
following three investment strategies: (1) investing in the DJIA's ten (10)
common stocks having the highest dividend yield (the "Top Ten"), (2) investing
in the DJIA's five (5) common stocks having the lowest per share stock price of
the Top Ten (the "Focus Five") and (3) investing in a single stock which is the
DJIA's second-lowest priced of the Focus Five (the "Penultimate Pick"); each
determined as of two business days prior to the Initial Date of Deposit. The
Trust's portfolio will be comprised of ten (10) stocks. Approximately 20% of
the Trust's assets will be comprised of the Top Ten, approximately 60% will be
comprised of the Focus Five and approximately 20% will be comprised of the
Penultimate Pick. Within these three categories, stocks will be purchased in
approximately equal dollar amounts. Due to the fact that all of the Focus Five
are also represented in the Top Ten, and that the Penultimate Pick appears in
both the Focus Five and Top Ten, such overlap will result in a difference in
the actual weighting of the stocks comprising the Top Ten, Focus Five and
Penultimate Pick as well as the actual weighting of the three strategies
relative to each other in the portfolio on the Initial Date of Deposit. For the
actual percentage of each stock in the portfolio, see "Portfolio" in Part A.
(Also see "The Trust - Objective" and "The Trust - The Securities" in Part B.)
As used herein, the term "highest dividend yield" means the yield for each
Security calculated by annualizing the last quarterly or semi-annual ordinary
dividend distributed on that Security and dividing the result by the market
value of that Security as of two business days prior to the Initial Date of
Deposit. This rate is historical, and there is no assurance that any dividends
will be declared or paid in the future on the Securities in the Trust. As used
herein, the term "Securities" means the common stocks initially deposited in
the Trust and described in "Portfolio" in Part A and any additional common
stocks acquired and held by the Trust pursuant to the provisions of the
Indenture.
Investing in DJIA stocks with the highest dividend yields may be
effective in achieving the Trust's investment objective because regular
dividends are common for established companies and dividends have accounted for
a substantial portion of the total return on DJIA stocks as a group. The Trust
seeks a higher total return than the DJIA by acquiring these ten established
widely held stocks two business days before the Trust is created and holding
them for approximately one year. There can be no assurance that the dividend
rates will be maintained. Reduction or elimination of a dividend could
adversely affect the stock price as well. Purchasing a portfolio of these
stocks as opposed to one or two can achieve a more diversified holding. There
is only one investment decision instead of ten. An investment in the Trust can
be cost-efficient, avoiding the odd-lot costs of buying small quantities of
securities directly. Investment in a number of companies with high dividends
relative to their stock prices is designed to increase the Trust's potential
for higher returns. The Trust's return will consist of a combination of capital
appreciation and current dividend income. The Trust will terminate in
approximately one year, when investors may choose to either receive the
distributions in kind (if they own at least 2,500 Units), in cash or reinvest
in a subsequent series of Equity Securities Trust, Triple Play Series (if
available) at a reduced sales charge. Further, the Securities may appreciate or
depreciate in value, dependent upon the full range of economic and market
influences affecting corporate profitability, the financial condition of
issuers and the prices of equity securities in general and the Securities in
particular. Investors should note that the Trust's selection criteria were
applied to the Securities two business days prior to the Initial Date of
Deposit. Since the Sponsor may deposit additional Securities in connection with
the sale of additional Units, the yields on these Securities may change
subsequent to the Initial Date of Deposit. Therefore, there is no guarantee
that the objective of the Trust will be achieved.
THE SECURITIES. Each of the Securities has been taken from the Dow Jones
Industrial Average ("DJIA"). The DJIA comprises 30 common stocks chosen by the
editors of The Wall Street Journal as representative of the broad market and of
American industry. The companies are major factors in their industries and
their stocks are widely held by individuals and institutional investors.
Changes in the components of the DJIA are made entirely by the editors of The
Wall Street Journal without consultation with the companies, the stock exchange
or any official agency. For the sake of continuity, changes are made rarely.
Most substitutions have been the result of mergers, but from time to time,
changes may be made to achieve a better representation. The components of the
DJIA may be changed at any time for any reason. Any changes in the components
of the DJIA after the date of this Prospectus will not cause a change in the
identity of the common stocks included in the Trust's portfolio, including any
Additional Securities deposited in the Trust.
The first DJIA, consisting of 12 stocks, was published in The Wall Street
Journal in 1896. The list grew to 20 stocks in 1916 and to 30 stocks on October
1, 1928. Taking into account a number of name changes, 9 of the original
companies
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are still in the DJIA today. For two periods of 17 consecutive years each,
there were no changes to the list: March 14, 1939 - July 1956 and June 1, 1959
- - August 6, 1976.
List as of October 1, 1928 Current List
- -------------------------- ------------
Allied Chemical AT&T Corporation
American Can Allied Signal
American Smelting Aluminum Company of America
American Sugar American Express Company
American Tobacco Bethlehem Steel Corporation
Atlantic Refining Boeing Company
Bethlehem Steel Corporation Caterpillar Inc.
Chrysler Corporation Chevron Corporation
General Electric Company Coca-Cola Company
General Motors Corporation Walt Disney Company
General Railway Signal E.I. du Pont de Nemours & Company
Goodrich Eastman Kodak Company
International Harvester Exxon Corporation
International Nickel General Electric Company
Mack Trucks General Motors Corporation
Nash Motors Goodyear Tire & Rubber Company
North American International Business Machines Corporation
Paramount Publix International Paper Company
Postum, Inc. McDonald's Corporation
Radio Corporation of America (RCA) Merck & Company, Inc.
Sears, Roebuck & Company Minnesota Mining & Manufacturing Company
Standard Oil of New Jersey J.P. Morgan & Company, Inc.
Texas Corporation Phillip Morris Companies, Inc.
Texas Gulf Sulphur Proctor & Gamble Company
Union Carbide Corporation Sears, Roebuck & Company
United States Steel Company Texaco, Inc.
Victor Talking Machine Union Carbide Corporation
Westinghouse Electric Corporation United Technologies Corporation
Woolworth Corporation Westinghouse Electric Corporation
Wright Aeronautical Woolworth Corporation
The yield for each Security was calculated by annualizing the last
quarterly or semi-annual ordinary dividend distributed and dividing the result
by the market value of the Security as of two business days prior to the
Initial Date of Deposit. This formula (an objective determination) served as
the basis for the Sponsor's selection of the Top Ten. The companies represented
in the Trust are some of the most well-known and highly capitalized companies
in America. The Securities were selected irrespective of any research
recommendation by the Sponsor. Investing in the stocks of the DJIA may be
effective as well as conservative because regular dividends are common for
established companies and dividends have accounted for a substantial portion of
the total return on stocks of the DJIA as a group.
Although the Equity Securities Trust, Triple Play Series was not
available until this year, during the last 20 years, the strategy of investing
in approximately equal values of the ten highest yielding stocks each year
generally would have yielded a higher total return than an investment in all 30
stocks which make up the DJIA. The following table shows the hypothetical
performance of investing approximately equal amounts in each of the Top Ten,
Focus Five and Penultimate Pick (but not the Equity Securities Trust, Triple
Play Series) at the beginning of each year and rolling over the proceeds. They
do not reflect sales charges, commissions or taxes. These results represent
past performance of the Top Ten, Focus Five and Penultimate Pick, separately
but not collectively, and should not be considered indicative of future results
of the Trust. The Top Ten, Focus Five and Penultimate Pick each underperformed
the DJIA in certain years. Also, investors in the Trust may not realize as high
a total return as on a direct investment in each of the Top Ten, Focus Five or
Penultimate Pick since the Trust has sales charges and expenses and may not be
fully invested at all times. Unit prices fluctuate with the value of the
underlying stocks, and there is no assurance that dividends on these stocks
will be paid or that the Units will appreciate in value.
The following table compares the actual performance of the DJIA and
approximately equal values of each of the Top Ten, Focus Five or Penultimate
Pick in each of the past 20 years, as of December 31 in each of these years:
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COMPARISON OF DIVIDENDS, APPRECIATION AND TOTAL RETURN
Top Ten(1)
----------------------------------------------------------------
Year Appreciation(2) Actual Dividend Yield (3) Total Return(4)
---- --------------- ------------------------- ---------------
1976 27.80% 7.10% 34.90%
1977 -7.58 5.82 -1.76
1978 -6.95 7.04 0.09
1979 4.58 8.39 12.97
1980 18.69 8.53 27.22
1981 -0.88 8.37 7.49
1982 17.81 8.23 26.04
1983 30.52 8.38 38.90
1984 -8.19 13.99 5.80
1985 22.19 7.23 29.42
1986 23.97 10.82 34.79
1987 0.94 5.13 6.07
1988 15.92 8.72 24.64
1989 18.65 6.60 25.25
1990 -12.61 5.04 -7.57
1991 28.11 6.97 35.08
1992 -5.12 12.96 7.84
1993 16.81 10.11 26.92
1994 0.06 4.09 4.15
1995 24.18 12.43 36.61
COMPARISON OF DIVIDENDS, APPRECIATION AND TOTAL RETURN
Focus Five(1)
-----------------------------------------------------------------
Year Appreciation(2) Actual Dividend Yield (3) Total Return(4)
---- --------------- ------------------------- ---------------
1976 33.35% 7.41% 40.76% %
1977 -0.39 6.04 5.65
1978 -5.39 7.16 1.23
1979 1.80 8.10 9.90
1980 31.87 8.65 40.52
1981 -4.39 8.02 3.63
1982 34.58 7.30 41.88
1983 27.33 8.78 36.11
1984 3.77 7.11 10.88
1985 30.24 7.60 37.84
1986 24.13 6.18 30.31
1987 6.23 4.83 11.06
1988 10.30 11.54 21.84
1989 13.49 4.35 17.84
1990 -20.60 5.33 -15.27
1991 56.41 5.38 61.79
1992 1.91 21.08 22.99
1993 18.02 15.83 33.85
1994 5.04 3.56 8.60
1995 10.70 19.72 30.42
COMPARISON OF DIVIDENDS, APPRECIATION AND TOTAL RETURN
Penultimate Pick(1)
----------------------------------------------------------------
Year Appreciation(2) Actual Dividend Yield (3) Total Return(4)
---- --------------- ------------------------- ---------------
1976 % % %
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
COMPARISON OF DIVIDENDS, APPRECIATION AND TOTAL RETURN
Dow Jones Industrial Average (DJIA)
----------------------------------------------------------------
Year Appreciation(2) Actual Dividend Yield (3) Total Return(4)
---- --------------- ------------------------- ---------------
1976 17.86% 4.86% 22.72%
1977 -17.27 4.56 -12.71
1978 -3.15 5.84 2.69
1979 4.19 6.33 10.52
1980 14.93 6.48 21.41
1981 -9.23 5.83 -3.40
1982 19.60 6.19 25.79
1983 20.30 5.38 25.68
1984 -3.76 4.82 1.06
1985 27.66 5.12 32.78
1986 22.58 4.33 26.91
1987 2.26 3.76 6.02
1988 11.85 4.10 15.95
1989 26.96 4.75 31.71
1990 -4.34 3.77 -0.57
1991 20.32 3.61 23.93
1992 4.17 3.18 7.35
1993 13.72 3.02 16.74
1994 2.14 2.81 4.95
1995 33.45 3.04 36.49
- --------------------------------
(1) The Top Ten, Focus Five and Penultimate Pick in any given year were
selected by ranking the dividend yields for each of the stocks in the DJIA
as of the beginning of that year, based upon an annualization of the last
quarterly or semi-annual regular dividend distribution (which would have
been declared in the preceding year) divided by that stock's market value
on the first trading day on the New York Stock Exchange in that year.
(2) Appreciation for the Top Ten, Focus Five and Penultimate Pick is calculated
by subtracting the market value of these stocks as of the first trading day
on the New York Stock Exchange in a given year from the market value of
those stocks as the last trading day in that year, and dividing the result
by the market value of the stocks as of the first trading day in that year.
Appreciation for the DJIA is calculated by subtracting the opening value of
the DJIA as of the first trading day in each year from the closing value of
the DJIA as of the last trading day in that year, and dividing the result
by the opening value of the DJIA as of the first trading day in that year.
(3) Actual Dividend Yield for the Top Ten, Focus Five and Penultimate Pick is
calculated by adding the total dividends received on the stocks in the year
and dividing the result by the market value of the stocks as of the first
trading day in that year. Actual Dividend Yield for the DJIA is calculated
by taking the total dividends credited to the DJIA and dividing the result
by the opening value of the DJIA as of the first trading day in that year.
(4) Total Return represents the sum of Appreciation and Actual Dividend Yield.
Total Return does not take into consideration any reinvestment of dividend
income.
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The contracts to purchase Securities deposited initially in the Trust are
expected to settle in three business days, in the ordinary manner for such
Securities. Settlement of the contracts for Securities is thus expected to take
place prior to the settlement of purchase of Units on the Initial Date of
Deposit.
SUBSTITUTION OF SECURITIES. In the event of a failure to deliver any
Security that has been purchased for the Trust under a contract ("Failed
Securities"), the Sponsor is authorized under the Trust Agreement to direct the
Trustee to acquire other securities ("Substitute Securities") to make up the
original corpus of the Trust. In addition, the Sponsor, at its option, is
authorized under the Trust Agreement to direct the Trustee to reinvest in
Substitute Securities the proceeds of the sale of any of the Securities only if
such sale was due to unusual circumstances as set forth under "Trust
Administration-- Portfolio Supervision."
The Substitute Securities must be purchased within 20 days after the sale
of the portfolio Security or delivery of the notice of the failed contract.
Where the Sponsor purchases Substitute Securities in order to replace Failed
Securities, (i) the purchase price may not exceed the purchase price of the
Failed Securities and (ii) the Substitute Securities must be substantially
similar to the Failed Securities. Where the Sponsor purchases Substitute
Securities in order to replace Securities it sold, the Sponsor will endeavor to
select Securities which are equity securities that possess characteristics that
are consistent with the objective of the Trust as set forth above. Such
selection may include or be limited to Securities previously included in the
portfolio of the Trust. No assurance can be given that the Trust will retain
its present size and composition for any length of time.
The Trustee shall notify all Certificateholders of the acquisition of the
Substitute Security, within five days thereafter, and the Trustee shall, on the
next Distribution Date which is more than 30 days thereafter, 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 Substitute Security plus accrued
interest, if any. In the event no reinvestment is made, the proceeds of the
sale of Securities will be distributed to Certificateholders as set forth under
"Rights of Certificateholders--Distributions." In addition, if the right of
substitution shall not be utilized to acquire Substitute Securities in the
event of a failed contract, the Sponsor will cause to be refunded the sales
charge attributable to such Failed Securities to all Certificateholders, and
distribute the principal and dividends, if any, attributable to such Failed
Securities on the next Distribution Date. The proceeds from the sale of a
Security or the exercise of any redemption or call provision will be
distributed to Certificateholders except to the extent such proceeds are
applied to meet redemptions of Units. (See "Liquidity--Trustee Redemption.")
RISK CONSIDERATIONS
FIXED PORTFOLIO. The value of the Units will fluctuate depending on all
the factors that have an impact on the economy and the equity markets. These
factors similarly impact on the ability of an issuer to distribute dividends.
Unlike a managed investment company in which there may be frequent changes in
the portfolio of securities based upon economic, financial and market analyses,
securities of a unit investment trust, such as the Trust, are not subject to
such frequent changes based upon continuous analysis. All the Securities in the
Trust are liquidated during a 60-day period at the termination of the one-year
life of the Trust. Since the Trust will not sell Securities in response to
ordinary market fluctuation, but only at the Trust's termination or upon the
occurrence of certain events, the amount realized upon the sale of the
Securities may not be the highest price attained by an individual Security
during the life of the Trust. However, the Sponsor may direct the disposition
by the Trustee of Securities upon the occurrence of certain events. Some of the
Securities in the Trust may also be owned by other clients of the Sponsor and
their affiliates. However, because these clients may have differing investment
objectives, the Sponsor may sell certain Securities from those accounts in
instances where a sale by the Trust would be impermissible, such as to maximize
return by taking advantage of market fluctuations. Investors should consult
with their own financial advisers prior to investing in the Trust to determine
its suitability. (See "Trust Administration--Portfolio Supervision" below.) All
the Securities in the Trust are liquidated or distributed during a 60-day
period at the termination of the approximately one-year life of the Trust.
ADDITIONAL SECURITIES. Investors should be aware that in connection with
the creation of additional Units subsequent to the Initial Date of Deposit, the
Sponsor may deposit Additional Securities, contracts to purchase Additional
Securities or cash (or letter of credit in lieu of cash) with instructions to
purchase Additional Securities, in each instance maintaining the original
proportionate relationship, subject to adjustment under certain circumstances,
of the numbers of shares of each Security in the Trust. To the extent the price
of a Security increases or decreases between the time cash is deposited with
instructions to purchase the Security and the time the cash is used to purchase
the Security, Units may represent less or more of that Security and more or
less of the other Securities in the Trust. In addition, brokerage fees (if any)
incurred in purchasing Securities with cash deposited with instructions to
purchase the Securities will be an expense of
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the Trust. Price fluctuations between the time of deposit and the time the
Securities are purchased, and payment of brokerage fees, will affect the value
of every Certificateholder's Units and the Income per Unit received by the
Trust. In particular, Certificateholders who purchase Units during the initial
offering period would experience a dilution of their investment as a result of
any brokerage fees paid by the Trust during subsequent deposits of Additional
Securities purchased with cash deposited. In order to minimize these effects,
the Trust will try to purchase Securities as near as possible to the Evaluation
Time or at prices as close as possible to the prices used to evaluate Trust
Units at the Evaluation Time.
COMMON STOCK. Since the Trust contains common stocks of domestic issuers,
an investment in Units of the Trust should be made with an understanding of the
risks inherent in any investment in common stocks including the risk that the
financial condition of the issuers of the Securities may become impaired or
that the general condition of the stock market may worsen (both of which may
contribute directly to a decrease in the value of the Securities and thus in
the value of the Units). Additional risks include risks associated with the
right to receive payments from the issuer which is generally inferior to the
rights of creditors of, or holders of debt obligations or preferred stock
issued by, the issuer. Holders of common stocks have a right to receive
dividends only when, if, and in the amounts declared by the issuer's board of
directors and to participate in amounts available for distribution by the
issuer only after all other claims on the issuer have been paid or provided
for. By contrast, holders of preferred stocks usually have the right to receive
dividends at a fixed rate when and as declared by the issuer's board of
directors, normally on a cumulative basis. Dividends on cumulative preferred
stock must be paid before any dividends are paid on common stock and any
cumulative preferred stock dividend which has been omitted is added to future
dividends payable to the holders of such cumulative preferred stock. Preferred
stocks are also usually entitled to rights on liquidation which are senior to
those of common stocks. For these reasons, preferred stocks generally entail
less risk than common stocks.
Moreover, common stocks do not represent an obligation of the issuer and
therefore do not offer any assurance of income or provide the degree of
protection of debt securities. The issuance of debt securities or even
preferred stock by an issuer will create prior claims for payment of principal,
interest and dividends which could adversely affect the ability and inclination
of the issuer to declare or pay dividends on its common stock or the economic
interest of holders of common stock with respect to assets of the issuer upon
liquidation or bankruptcy. Further, unlike debt securities which typically have
a stated principal amount payable at maturity (which value will be subject to
market fluctuations prior thereto), common stocks have neither fixed principal
amount nor a maturity and have values which are subject to market fluctuations
for as long as the common stocks remain outstanding. Common stocks are
especially susceptible to general stock market movements and to volatile
increases and decreases in value as market confidence in and perceptions of the
issuers change. These perceptions are based on unpredictable factors including
expectations regarding government, economic, monetary and fiscal policies,
inflation and interest rates, economic expansion or contraction, and global or
regional political, economic or banking crises. The value of the common stocks
in the Trust thus may be expected to fluctuate over the life of the Trust to
values higher or lower than those prevailing on the Initial Date of Deposit.
PENULTIMATE PICK. The Trust may be considered to be "concentrated" in
common stock of a particular issuer. Information regarding such company is
available by inspecting or copying certain reports, proxies and informational
statements and other information filed by such company in accordance with the
Securities Exchange Act of 1934 at the public reference facilities maintained
at the Securities and Exchange Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20544. Copies can be obtained from the Public Reference
Section of the Securities and Exchange Commission at the same address at
prescribed rates.
PETROLEUM REFINING COMPANIES. The Trust may be considered to be
concentrated in common stocks of companies engaged in refining and marketing
oil and related products. According to the U.S. Department of Commerce, the
factors which will most likely shape the industry to 1996 and beyond include
the price and availability of oil from the Middle East, changes in United
States environmental policies and the continued decline in U.S. production of
crude oil. Possible effects of these factors may be increased U.S. and world
dependence on oil from the Organization of Petroleum Exporting Countries
("OPEC") and highly uncertain and potentially more volatile oil prices and a
higher rate of growth for natural gas production than for other fuels. Factors
which the Sponsor believes may increase the profitability of oil and petroleum
operations include increasing demand for oil and petroleum products as a result
of the continued increases in annual miles driven and the improvement in
refinery operating margins caused by increases in average domestic refinery
utilization rates. The existence of surplus crude oil production capacity and
the willingness to adjust production levels are the two principal requirements
for stable crude oil markets. Without excess capacity, supply disruptions in
some countries cannot be compensated for by others. Surplus capacity in Saudi
Arabia and a few other countries and the utilization of that capacity during
the Persian Gulf crisis prevented severe market disruption. Although unused
capacity can contribute to market stability, it ordinarily creates pressure to
overproduce and contributes to market uncertainty. The likely restoration
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of a large portion of Kuwait and Iraq's production and export capacity over the
next few years could lead to such a development in the absence of substantial
growth in world oil demand. Formerly, OPEC members attempted to exercise
control over production levels in each country through a system of mandatory
production quotas. As a result of the crisis in the Middle East, the mandatory
system has since been replaced with a voluntary system. Production under the
new system has had to be curtailed on at least one occasions as a result of
weak prices, even in the absence of supplies from Iraq. The pressure to deviate
from mandatory quotas, if they are reimposed, is likely to be substantial and
could lead to a weakening of prices. In the longer term, additional capacity
and production will be required to accommodate the expected increases in world
oil demand and to compensate for expected sharp drops in U.S. crude oil
production and exports from the former Soviet Union. Only a few OPEC countries,
particularly Saudi Arabia, have the petroleum reserves that will allow the
required increase in production capacity to be attained. Given the large-scale
financing that is required, the prospect that such expansion will occur soon
enough to meet the increased demand is uncertain.
Declining U.S. crude oil production will likely lead to increased
dependence on OPEC oil, putting refiners at risk of continued and unpredictable
supply disruptions. Increasing sensitivity to environmental concerns will also
pose serious challenges to the industry over the coming decade. Refiners are
likely to be required to make heavy capital investments and make major
production adjustments in order to comply with increasingly stringent
environmental legislation, such as the 1990 amendments to the Clean Air Act. If
the cost of these changes is substantial enough to cut deeply into profit,
smaller refiners may be forced out of the industry entirely. Moreover, lower
consumer demand due to increases in energy efficiency and conservation, due to
gasoline reformulations that call for less crude oil, due to warmer winters or
due to a general slowdown in economic growth in this country and abroad, could
negatively affect the price of oil and the profitability of oil companies.
Cheaper oil could also decrease demand for natural gas. However, no assurance
can be given that the demand for or the price of oil will increase or that if
either anticipated increase does take place, it will not be marked by great
volatility.
In addition, any future scientific advances concerning new sources of
energy and fuels or legislative changes relating to the energy industry or the
environment could have a negative impact on the petroleum product or natural
gas industry. While legislation has been enacted to deregulate certain aspects
of the oil industry, no assurances can be given that new or additional
regulations will not be adopted. Each of the problems referred to could
adversely affect the financial stability of the issuers of any petroleum
industry stocks in the Trust.
[RISK FACTORS for other Industry concentrations to be inserted]
LEGISLATION. From time to time Congress considers proposals to reduce the
rate of the dividends-received deductions which is available to certain
corporations. Enactment into law of a proposal to reduce the rate would
adversely affect the after-tax return to investors who can take advantage of
the deduction. Investors are urged to consult their own tax advisers. Further,
at any time after the Initial Date of Deposit, legislation may be enacted, with
respect to the Securities in the Trust or the issuers of the Securities.
Changing approaches to regulation, particularly with respect to the environment
or with respect to the petroleum industry, may have a negative impact on
certain companies represented in the Trust. There can be no assurance that
future legislation, regulation or deregulation will not have a material adverse
effect on the Trust or will not impair the ability of the issuers of the
Securities to achieve their business goals.
LEGAL PROCEEDINGS AND LITIGATION. At any time after the Initial Date of
Deposit, legal proceedings may be initiated on various grounds, or legislation
may be enacted, with respect to the Securities in the Trust or to matters
involving the business of the issuer of the Securities. There can be no
assurance that future legal proceedings or legislation will not have a material
adverse impact on the Trust or will not impair the ability of the issuers of
the Securities to achieve their business and investment goals.
GENERALLY. There is no assurance that any dividends will be declared or
paid in the future on the Securities. Investors should be aware that there is
no assurance that the Trust's objective will be achieved.
PUBLIC OFFERING
OFFERING PRICE. In calculating the Public Offering Price, the aggregate
value of the Securities is determined in good faith by the Trustee on each
"Business Day" as defined in the Indenture in the following manner: because the
Securities are listed on a national securities exchange, this evaluation is
based on the closing sale prices on that exchange as of the Evaluation Time
(unless the Trustee deems these prices inappropriate as a basis for valuation).
If the Trustee deems these prices inappropriate as a basis for evaluation, then
the Trustee may utilize, at the Trust's expense, an independent evaluation
service or services to ascertain the values of the Securities. The independent
evaluation service shall use any of the following
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methods, or a combination thereof, which it deems appropriate: (a) on the basis
of current bid prices for comparable securities, (b) by appraising the value of
the Securities on the bid side of the market or by such other appraisal deemed
appropriate by the Trustee or (c) by any combination of the above, each as of
the Evaluation Time.
VOLUME AND OTHER DISCOUNTS. Units are available at a volume discount from
the Public Offering Price during the initial public offering based upon the
number of Units purchased. This volume discount will result in a reduction of
the sales charge applicable to such purchases. The amount of the volume
discount and the approximate reduced sales charge on the Public Offering Price
applicable to such purchases are as follows:
NUMBER OF UNITS APPROXIMATE REDUCED SALES CHARGE
--------------- --------------------------------
5,000 but less than 10,000 2.70%
10,000 but less than 25,000 2.45%
25,000 but less than 50,000 2.20%
50,000 but less than 100,000 2.00%
100,000 or more 1.75%
These discounts will apply to all purchases of Units by the same
purchaser during the initial public offering period. Units purchased by the
same purchasers in separate transactions during the initial public offering
period will be aggregated for purposes of determining if such purchaser is
entitled to a discount provided that such purchaser must own at least the
required number of Units at the time such determination is made. Units held in
the name of the spouse of the purchaser or in the name of a child of the
purchaser under 21 years of age are deemed for the purposes hereof to be
registered in the name of the purchaser. The discount is also applicable to a
trustee or other fiduciary purchasing securities for a single trust estate or
single fiduciary account.
Employees (and their immediate families) of Reich & Tang Distributors
L.P. (and its affiliates) and of the special counsel to the Sponsor, may,
pursuant to employee benefit arrangements, purchase Units of the Trust at a
price equal to the aggregate value of the underlying securities in the Trust
during the initial offering period, divided by the number of Units outstanding
at no sales charge. Such arrangements result in less selling effort and selling
expenses than sales to employee groups of other companies. Resales or transfers
of Units purchased under the employee benefit arrangements may only be made
through the Sponsor's secondary market, so long as it is being maintained.
Investors in any open-end management investment company or unit
investment trust that have purchased their investment within a five-year period
prior to the date of this Prospectus can purchase Units of the Trust in an
amount not greater in value than the amount of said investment made during this
five-year period at a reduced sales charge of [2.5%] of the public offering
price.
Units may be purchased in the primary or secondary market at the Public
Offering Price (for purchases which do not qualify for a volume discount) less
the concession the Sponsor typically allows to brokers and dealers for
purchases (see "Public Offering--Distribution of Units") by (1) investors who
purchase Units through registered investment advisers, certified financial
planners and registered broker-dealers who in each case either charge periodic
fees for financial planning, investment advisory or asset management service,
or provide such services in connection with the establishment of an investment
account for which a comprehensive "wrap fee" charge is imposed, (2) bank trust
departments investing funds over which they exercise exclusive discretionary
investment authority and that are held in a fiduciary, agency, custodial or
similar capacity, (3) any person who, for at least 90 days, has been an
officer, director or bona fide employee of any firm offering Units for sale to
investors or their immediate family members (as described above) and (4)
officers and directors of bank holding companies that make Units available
directly or through subsidiaries or bank affiliates. Notwithstanding anything
to the contrary in this Prospectus, such investors, bank trust departments,
firm employees and bank holding company officers and directors who purchase
Units through this program will not receive the volume discount.
DISTRIBUTION OF UNITS. During the initial offering period and thereafter
to the extent additional Units continue to be offered by means of this
Prospectus, Units will be distributed by the Sponsor and dealers at the Public
Offering Price. The initial offering period is thirty days after each deposit
of Securities in the Trust and the Sponsor may extend the initial offering
period for successive thirty day periods. Certain banks and thrifts will make
Units of the Trust available to their customers on an agency basis. A portion
of the sales 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
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under such Act. In addition, state securities laws on this issue may differ
from the interpretations of federal law expressed herein and banks and
financial institutions may be required to register as dealers pursuant to state
law.
The Sponsor intends to qualify the Units for sale in substantially all
States through dealers who are members of the National Association of
Securities Dealers, Inc. Units may be sold to dealers at prices which represent
a concession of up to 2.5% per Unit, subject to the Sponsor's right to change
the dealers' concession from time to time. In addition, for transactions of at
least 100,000 Units or more, the Sponsor intends to negotiate the applicable
sales charge and such charge will be disclosed to any such purchaser. 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. The Sponsor reserves the
right to change the discounts from time to time.
Broker-dealers of the Trust, banks and/or others are eligible to
participate in a program in which such firms receive from the Sponsor a nominal
award for each of their registered representatives who have sold a minimum
number of units of unit investment trusts created by the Sponsor during a
specified time period. In addition, at various times the Sponsor may implement
other programs under which the sales forces of brokers, dealers, banks and/or
others may be eligible to win other nominal awards for certain sales efforts or
under which the Sponsor will reallow to any such brokers, dealers, banks and/or
others that sponsor sales contests or recognition programs conforming to
criteria established by the Sponsor, or participate in sales programs sponsored
by the Sponsor, an amount not exceeding the total applicable sales charges on
the sales generated by such person at the public offering price during such
programs. Also, the Sponsor in its discretion may from time to time pursuant to
objective criteria established by the Sponsor pay fees to qualifying 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 their own assets and not out of the assets of the
Trust. These programs will not change the price Certificateholders pay for
their Units or the amount that the Trust will receive from the Units sold.
SPONSOR'S PROFITS. The Sponsor will receive a combined gross underwriting
commission equal to up to 2.95% of the Public Offering Price per 100 Units
(equivalent to 3.04% 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"). The
Sponsor may realize profits or sustain losses with respect to Securities
deposited in the Trust which were acquired from underwriting syndicates of
which they were a member. All or a portion of the Securities deposited in the
Trust may have been acquired through the Sponsor.
During the initial offering period and thereafter to the extent
additional Units continue to be offered by means of this Prospectus, the
Underwriter may also realize profits or sustain losses as a result of
fluctuations after the Initial Date of Deposit in the aggregate value of the
Securities and hence in the Public Offering Price received by the Sponsor for
the Units. Cash, if any, made available to the Sponsor prior to settlement date
for the purchase of Units may be used in the Sponsor's business subject to the
limitations of 17 CFR 240.15c3-3 under the Securities Exchange Act of 1934 and
may be of benefit to the Sponsor.
Both upon acquisition of Securities and termination of the Trust, the
Trustee may utilize the services of the Sponsor for the purchase or sale of all
or a portion of the Securities in the Trust. The Sponsor may receive brokerage
commissions from the Trust in connection with such purchases and sales in
accordance with applicable law.
In maintaining a market for the Units (see "Sponsor Repurchase") the
Sponsor will realize profits or sustain losses in the amount of any difference
between the price at which it buys Units and the price at which it resells such
Units.
RIGHTS OF CERTIFICATEHOLDERS
CERTIFICATES. Ownership of Units of the Trust is evidenced by registered
Certificates executed by the Trustee and the Sponsor. Certificates may be
issued in denominations of one hundred or more Units. Certificates are
transferable by presentation and surrender to the Trustee properly endorsed
and/or accompanied by a written instrument or instruments of transfer. Although
no such charge is presently made or contemplated, the Trustee may require a
Certificateholder to pay $2.00 for each Certificate reissued or transferred and
any governmental charge that may be imposed in connection with each such
transfer or interchange. Mutilated, destroyed, stolen or lost Certificates will
be replaced upon delivery of satisfactory indemnity and payment of expenses
incurred.
DISTRIBUTIONS. Dividends received by the Trust are credited by the
Trustee to an Income Account for the Trust. Other receipts, including the
proceeds of Securities disposed of, are credited to a Principal Account for the
Trust.
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Distributions to each Certificateholder from the Income 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 such
Certificateholder's pro rata share of the income credited to the Income
Account, less expenses. Distributions from the Principal Account of the Trust
(other than amounts representing failed contracts, as previously discussed)
will be computed as of each Record Date, and will be made to the
Certificateholders of the Trust on or shortly after the Distribution Date.
Proceeds representing principal received from the disposition of any of the
Securities between a Record Date and a Distribution Date which are not used for
redemptions of Units will be held in the Principal Account and not distributed
until the next Distribution Date. Persons who purchase Units between a Record
Date and a Distribution Date will receive their first distribution on the
Distribution Date after such purchase.
As of each Record Date, the Trustee will deduct from the Income 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 (as determined on the basis set forth under "Trust Expenses and
Charges"). The Trustee also may withdraw from said accounts such amounts, if
any, as it deems necessary to establish a reserve for any applicable taxes or
other governmental charges that may be payable out of the Trust. Amounts so
withdrawn shall not be considered a part of such Trust's assets until such time
as the Trustee shall return all or any part of such amounts to the appropriate
accounts. In addition, the Trustee may withdraw from the Income and Principal
Accounts such amounts as may be necessary to cover redemptions of Units by the
Trustee.
The dividend distribution per 100 Units, if any, cannot be anticipated
and may be paid as Securities are redeemed, exchanged or sold, or as expenses
of the Trust fluctuate. No distribution need be made from the Income Account or
the Principal Account until the balance therein is an amount sufficient to
distribute $1.00 per 100 Units.
RECORDS. The Trustee shall furnish Certificateholders in connection with
each distribution a statement of the amount of dividends and interest, if any,
and the amount of other receipts, if any, which are being distributed,
expressed in each case as a dollar amount per 100 Units. Within a reasonable
time after the end of each calendar year, the Trustee will furnish to each
person who at any time during the calendar year was a Certificateholder of
record, a statement showing (a) as to the Income Account: dividends, interest
and other cash amounts received, amounts paid for purchases of Substitute
Securities and redemptions of Units, if any, deductions for applicable taxes
and fees and expenses of the Trust, and the balance remaining after such
distributions and deductions, expressed both as a total dollar amount and as a
dollar amount representing the pro rata share of each 100 Units outstanding on
the last business day of such calendar year; (b) as to the Principal Account:
the dates of disposition of any Securities and the net proceeds received
therefrom, deductions for payments of applicable taxes and fees and expenses of
the Trust, amounts paid for purchases of Substitute Securities and redemptions
of Units, if any, and the balance remaining after such distributions and
deductions, expressed both as a total dollar amount and as a dollar amount
representing the pro rata share of each 100 Units outstanding on the last
business day of such calendar year; (c) a list of the Securities held, a list
of Securities purchased, sold or otherwise disposed of during the calendar year
and the number of Units outstanding on the last business day of such calendar
year; (d) the Redemption Price per 100 Units based upon the last computation
thereof made during such calendar year; and (e) amounts actually distributed to
Certificateholders during such calendar year from the Income and Principal
Accounts, separately stated, of the Trust, expressed both as total dollar
amounts and as dollar amounts representing the pro rata share of each 100 Units
outstanding on the last business day of such calendar year.
The Trustee shall keep available for inspection by Certificateholders 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
Certificateholders, Certificates issued or held, a current list of Securities
in the portfolio and a copy of the Trust Agreement.
TAX STATUS
The following is a general discussion of certain of the Federal income
tax consequences of the purchase, ownership and disposition of the Units. The
summary is limited to investors who hold the Units as "capital assets"
(generally, property held for investment) within the meaning of Section 1221 of
the Internal Revenue Code of 1986, as amended (the "Code"). Certificateholders
should consult their tax advisers in determining the Federal, state, local and
any other tax consequences of the purchase, ownership and disposition of Units.
In rendering the opinion set forth below, Battle Fowler LLP has examined
the Agreement, the final form of Prospectus dated the date hereof (the
"Prospectus") and the documents referred to therein, among others, and has
relied on the validity
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of said documents and the accuracy and completeness of the facts set forth
therein. In the Opinion of Battle Fowler LLP, special counsel for the Sponsor,
under existing law:
1. The Trust will be classified as a grantor trust for Federal
income tax purposes and not as a partnership or association taxable as a
corporation. Classification of the Trust as a grantor trust will cause
the Trust not to be subject to Federal income tax, and will cause the
Certificateholders of the Trust to be treated for Federal income tax
purposes as the owners of a pro rata portion of the assets of the Trust.
All income received by the Trust will be treated as income of the
Certificateholders in the manner set forth below.
2. The Trust is not subject to the New York Franchise Tax on
Business Corporations or the New York City General Corporation Tax. For a
Certificateholder who is a New York resident, however, a pro rata portion
of all or part of the income of the Trust will be treated as income of
the Certificateholder under the income tax laws of the State and City of
New York. Similar treatment may apply in other states.
3. During the 90-day period subsequent to the initial issuance date,
the Sponsor reserves the right to deposit Additional Securities that are
substantially similar to those establishing the Trust. This retained
right falls within the guidelines promulgated by the Internal Revenue
Service ("IRS") and should not affect the taxable status of the Trust.
A taxable event will generally occur with respect to each
Certificateholder when the Trust disposes of a Security (whether by sale,
exchange or redemption) or upon the sale, exchange or redemption of Units by
such Certificateholder. The price a Certificateholder pays for his Units,
including sales charges, is allocated among his pro rata portion of each
Security held by the Trust (in proportion to the fair market values thereof on
the date the Certificateholder purchases his Units) in order to determine his
initial cost for his pro rata portion of each Security held by the Trust.
For Federal income tax purposes, a Certificateholder's pro rata portion
of dividends paid with respect to a Security held by a Trust is taxable as
ordinary income to the extent of such corporation's current and accumulated
"earnings and profits" as defined by Section 316 of the Code. A
Certificateholder's pro rata portion of dividends paid on such Security that
exceed such current and accumulated earnings and profits will first reduce a
Certificateholder's tax basis in such Security, and to the extent that such
dividends exceed a Certificateholder's tax basis in such Security will
generally be treated as capital gain.
A Certificateholder's portion of gain, if any, upon the sale, exchange or
redemption of Units or the disposition of Securities held by the Trust will
generally be considered a capital gain and will be long-term if the
Certificateholder has held his Units for more than one year. Long-term capital
gains are generally taxed at the same rates applicable to ordinary income,
although individuals who realize long-term capital gains may be subject to a
reduced tax rate on such gains, rather than the "regular" maximum tax rate of
39.6%. Tax rates may increase prior to the time when Certificateholders may
realize gains from the sale, exchange or redemption of the Units or Securities.
A Certificateholder's portion of loss, if any, upon the sale or
redemption of Units or the disposition of Securities held by the Trust will
generally be considered a capital loss and will be long-term if the
Certificateholder has held his Units for more than one year. Capital losses are
deductible to the extent of capital gains; in addition, up to $3,000 of capital
losses recognized by non-corporate Certificateholders may be deducted against
ordinary income.
Under Section 67 of the Code and the accompanying Regulations, a
Certificateholder who itemizes his deductions may also deduct his pro rata
share of the fees and expenses of the Trust, but only to the extent that such
amounts, together with the Certificateholder's other miscellaneous deductions,
exceed 2% of his adjusted gross income. The deduction of fees and expenses may
also be limited by Section 68 of the Code, which reduces the amount of itemized
deductions that are allowed for individuals with incomes in excess of certain
thresholds.
After the end of each calendar year, the Trustee will furnish to each
Certificateholder an annual statement containing information relating to the
dividends received by the Trust on the Securities, the gross proceeds received
by the Trust from the disposition of any Security, and the fees and expenses
paid by the Trust. The Trustee will also furnish annual information returns to
each Certificateholder and to the Internal Revenue Service.
A corporation that owns Units will generally be entitled to a 70%
dividends received deduction with respect to such Certificateholder's pro rata
portion of dividends that are taxable as ordinary income to Certificateholders
which are received by the Trust from a domestic corporation under Section 243
of the Code or from a qualifying foreign corporation under Section 245 of the
Code (to the extent the dividends are taxable as ordinary income, as discussed
above) in the same manner as if such corporation directly owned the Securities
paying such dividends. However, a corporation owning Units should
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be aware that Sections 246 and 246A of the Code impose additional limitations
on the eligibility of dividends for the 70% dividends received deduction. These
limitations include a requirement that stock (and therefore Units) must
generally be held at least 46 days (as determined under Section 246(c) of the
Code). Moreover, the allowable percentage of the deduction will be reduced from
70% if a corporate Certificateholder owns certain stock (or Units) the
financing of which is directly attributable to indebtedness incurred by such
corporation. Accordingly, corporate Certificateholders should consult their tax
adviser in this regard.
As discussed in the section "Termination," each Certificateholder may
have three options in receiving his termination distributions, which are (i) to
receive his pro rata share of the underlying Securities in kind, (ii) to
receive cash upon liquidation of his pro rata share of the underlying
Securities, or (iii) to invest the amount of cash he would receive upon the
liquidation of his pro rata share of the underlying Securities in units of a
future series of the Trust (if one is offered). There are special tax
consequences should a Certificateholder choose option (i), the exchange of the
Certificateholder's Units for a pro rata portion of each of the Securities held
by the Trust plus cash. Treasury Regulations provide that gain or loss is
recognized when there is a conversion of property into property that is
materially different in kind or extent. In this instance, the Certificateholder
may be considered the owner of an undivided interest in all of the Trust's
assets. By accepting the proportionate number of Securities of the Trust, in
partial exchange for his Units, the Certificateholder should be treated as
merely exchanging his undivided pro rata ownership of Securities held by the
Trust into sole ownership of a proportionate share of Securities. As such,
there should be no material difference in the Certificateholder's ownership,
and therefore the transaction should be tax free to the extent the Securities
are received. Alternatively, the transaction may be treated as an exchange that
would qualify for nonrecognition treatment to the extent the Certificateholder
is exchanging his undivided interest in all of the Trust's Securities for his
proportionate number of shares of the underlying Securities. In either
instance, the transaction should result in a non-taxable event for the
Certificateholder to the extent Securities are received. However, there is no
specific authority addressing the income tax consequences of an in-kind
distribution from a grantor trust, and investors are urged to consult their tax
advisers in this regard.
Entities that generally qualify for an exemption from Federal income tax,
such as many pension trusts, are nevertheless taxed under Section 511 of the
Code on "unrelated business taxable income." Unrelated business taxable income
is income from a trade or business regularly carried on by the tax-exempt
entity that is unrelated to the entity's exempt purpose. Unrelated business
taxable income generally does not include dividend or interest income or gain
from the sale of investment property, unless such income is derived from
property that is debt-financed or is dealer property. A tax-exempt entity's
dividend income from the Trust and gain from the sale of Units in the Trust or
the Trust's sale of Securities is not expected to constitute unrelated business
taxable income to such tax-exempt entity unless the acquisition of the Unit
itself is debt-financed or constitutes dealer property in the hands of the
tax-exempt entity.
Before investing in the Trust, the trustee or investment manager of an
employee benefit plan (e.g., a pension or profit-sharing retirement plan)
should consider among other things (a) whether the investment is prudent under
the Employee Retirement Income Security Act of 1974 ("ERISA"), taking into
account the needs of the plan and all of the facts and circumstances of the
investment in the Trust; (b) whether the investment satisfies the
diversification requirement of Section 404(a)(1)(C) of ERISA; and (c) whether
the assets of the Trust are deemed "plan assets" under ERISA and the Department
of Labor regulations regarding the definition of "plan assets".
Prospective tax-exempt investors are urged to consult their own tax
advisers prior to investing in the Trust.
LIQUIDITY
SPONSOR REPURCHASE. Certificateholders 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 aggregate value of the Securities will be determined
by the Trustee on a daily basis and computed on the basis set forth under
"Trustee Redemption." The Sponsor does not guarantee the enforceability,
marketability or price of any Securities in the Portfolio or of the Units. The
Sponsor may discontinue the 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 Certificates representing Units are physically received in
proper form, i.e., properly endorsed, by Reich & Tang Distributors L.P., 600
Fifth Avenue, New York, New York 10020. 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 Certificateholder may be able
to dispose of Units only by tendering them to the Trustee for redemption.
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Units purchased by the Sponsor in the secondary market may be reoffered
for sale by the Sponsor at a price based on the aggregate value of the
Securities in the Trust plus a 2.95% sales charge (or 3.04% of the net amount
invested) plus a pro rata portion of amounts, if any, in the Income Account.
Any Units that are purchased by the Sponsor in the secondary market also may be
redeemed by the Sponsor if it determines such redemption to be in its best
interest.
The Sponsor may, under certain circumstances, as a service to
Certificateholders, elect to purchase any Units tendered to the Trustee for
redemption (see "Trustee Redemption"). 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 (three calendar days after
tender), the Sponsor may elect to purchase such Units. Such purchase shall be
made by payment to the Certificateholder 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. At any time prior to the termination of the Trust
(approximately one year from the Date of Deposit), 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 Certificates representing
such Units and payment of any relevant tax. At the present time there are no
specific taxes related to the redemption of Units. No redemption fee will be
charged by the Sponsor or the Trustee. Units redeemed by the Trustee will be
cancelled.
Certificates representing Units to be redeemed must be delivered to the
Trustee and must be properly endorsed or accompanied by proper instruments of
transfer with signature guaranteed (or by providing satisfactory indemnity, as
in the case of lost, stolen or mutilated Certificates). Thus, redemptions of
Units cannot be effected until Certificates representing such Units have been
delivered by the person seeking redemption. (See "Certificates.")
Certificateholders must sign exactly as their names appear on the faces of
their Certificates. In certain instances the Trustee may require additional
documents such as, but not limited to, trust instruments, certificates of
death, appointments as executor or administrator or certificates of corporate
authority.
Within three business days following a tender for redemption, the
Certificateholder will be entitled to receive 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 (4:00 p.m. Eastern Time), the date of
tender is the next day on which such Exchange is open for trading, and such
Units will be deemed to have been tendered to the Trustee on such day for
redemption at the Redemption Price computed on that day.
A Certificateholder will receive his redemption proceeds in cash and
amounts paid on redemption shall be withdrawn from the Income Account, or, if
the balance therein is insufficient, from the Principal Account. All other
amounts paid on redemption shall be withdrawn from the Principal Account. The
Trustee is empowered to sell Securities in order to make funds available for
redemptions. Such sales, if required, could result in a sale of Securities by
the Trustee at a loss. To the extent Securities are sold, the size and
diversity of the Trust will be reduced. The Securities to be sold will be
selected by the Trustee in order to maintain, to the extent practicable, the
proportionate relationship among the number of shares of each Stock. Provision
is made in the Indenture under which the Sponsor may, but need not, specify
minimum amounts in which blocks of Securities are to be sold in order to obtain
the best price for the Trust. While these minimum amounts may vary from time to
time in accordance with market conditions, the Sponsor believes that the
minimum amounts which would be specified would be approximately 100 shares for
readily marketable Securities.
The Redemption Price per Unit is the pro rata share of the Unit in the
Trust determined by the Trustee on the basis of (i) the cash on hand in the
Trust or moneys in the process of being collected, (ii) the value of the
Securities in the Trust as determined by the Trustee, less (a) amounts
representing taxes or other governmental charges payable out of the Trust, (b)
the accrued expenses of the Trust and (c) cash allocated for the distribution
to Certificateholders of record as of the business day prior to the evaluation
being made. The Trustee may determine the value of the Securities in the Trust
in the following manner: because the Securities are listed on a national
securities exchange) this evaluation is based on the closing sale prices on
that exchange. Unless the Trustee deems these prices inappropriate as a basis
for evaluation or if there is no such closing purchase price, then the Trustee
may utilize, at the Trust's expense, an independent evaluation service or
services to ascertain the values of the Securities. The independent evaluation
service shall use any of the following methods, or a combination thereof, which
it
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deems appropriate: (a) on the basis of current bid prices for comparable
securities, (b) by appraising the value of the Securities on the bid side of
the market or (c) by any combination of the above.
Any Certificateholder tendering 2,500 Units or more of the Trust for
redemption may request by written notice submitted at the time of tender from
the Trustee in lieu of a cash redemption a distribution of shares of Securities
and cash in an amount and value equal to the Redemption Price Per Unit as
determined as of the evaluation next following tender. To the extent possible,
in kind distributions ("In Kind Distributions") shall be made by the Trustee
through the distribution of each of the Securities in book-entry form to the
account of the Certificateholder's bank or broker-dealer at The Depository
Trust Company. An In Kind Distribution will be reduced by customary transfer
and registration charges. The tendering Certificateholder will receive his pro
rata number of whole shares of each of the Securities comprising the Trust
portfolio and cash from the Principal Accounts equal to the balance of the
Redemption Price to which the tendering Certificateholder is entitled. If funds
in the Principal Account are insufficient to cover the required cash
distribution to the tendering Certificateholder, the Trustee may sell
Securities in the manner described above.
The Trustee is irrevocably authorized in its discretion, if the Sponsor
does not elect to purchase a Unit tendered for redemption or if the Sponsor
tenders a Unit for redemption, in lieu of redeeming such Unit, to sell such
Unit in the over-the-counter market for the account of the tendering
Certificateholder at prices which will return to the Certificateholder 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 Certificateholder 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 Bonds is
not reasonably practicable, or for such other periods as the Securities and
Exchange Commission may by order permit. The Trustee and the Sponsor is not
liable to any person or in any way for any loss or damage which may result from
any such suspension or postponement.
A Certificateholder who wishes to dispose of his Units should inquire of
his bank or broker in order to determine if there is a current secondary market
price in excess of the Redemption Price.
TRUST ADMINISTRATION
PORTFOLIO SUPERVISION. The Trust is a unit investment trust and is not a
managed fund. Traditional methods of investment management for a managed fund
typically involve frequent changes in a portfolio of securities on the basis of
economic, financial and market analyses. The Portfolio of the Trust, however,
will not be managed and therefore the adverse financial condition of an issuer
will not necessarily require the sale of its Securities from the portfolio.
Although the portfolio of the Trust is regularly reviewed, because of the
formula employed in selecting the Top Ten, Focus Five and Penultimate Pick, it
is unlikely that the Trust will sell any of the Securities other than to
satisfy redemptions of Units, or to cease buying Additional Securities in
connection with the issuance of additional Units. However, the Trust Agreement
provides that the Sponsor may direct the disposition of Securities upon the
occurrence of certain events including: (1) default in payment of amounts due
on any of the Securities; (2) institution of certain legal proceedings; (3)
default under certain documents materially and adversely affecting future
declaration or payment of amounts due or expected; (4) determination of the
Sponsor that the tax treatment of the Trust as a grantor trust would otherwise
be jeopardized; or (5) decline in price as a direct result of serious adverse
credit factors affecting the issuer of a Security which, in the opinion of the
Sponsor, would make the retention of the Security detrimental to the Trust or
the Certificateholders. Furthermore, the Trust will likely continue to hold a
Security and purchase additional shares notwithstanding its ceasing to be
included among the Top Ten, Focus Five and Penultimate Pick, or even its
deletion from the DJIA.
In addition, the Trust Agreement provides as follows:
(a) If a default in the payment of amounts due on any Security
occurs pursuant to provision 1 above and if the Sponsor fails to give
immediate instructions to sell or hold that Security, the Trustee, within
30 days of that failure by the Sponsor, shall sell the Security.
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(b) It is the responsibility of the Sponsor to instruct the Trustee
to reject any offer made by an issuer of any of the Securities to issue
new securities in exchange and substitution for any Security pursuant to
a recapitalization or reorganization, if any exchange or substitution is
effected notwithstanding such rejection, any securities or other property
received shall be promptly sold unless the Sponsor directs that it be
retained.
(c) Any property received by the Trustee after the Initial Date of
Deposit as a distribution on any of the Securities in a form other than
cash or additional shares of the Securities, which shall be retained, or
shall be promptly sold unless the Sponsor directs that it be retained by
the Trustee. The proceeds of any disposition shall be credited to the
Income or Principal Account of the Trust.
(d) The Sponsor is authorized to increase the size and number of
Units of the Trust by the deposit of Additional Securities, contracts to
purchase Additional Securities or cash or a letter of credit with
instructions to purchase Additional Securities in exchange for the
corresponding number of additional Units from time to time subsequent to
the Initial Date of Deposit, provided that the original proportionate
relationship among the number of shares of each Security established on
the Initial Date of Deposit is maintained to the extent practicable. The
Sponsor may specify the minimum numbers in which Additional Securities
will be deposited or purchased. If a deposit is not sufficient to acquire
minimum amounts of each Security, Additional Securities may be acquired
in the order of the Security most under-represented immediately before
the deposit when compared to the original proportionate relationship. If
Securities of an issue originally deposited are unavailable at the time
of the subsequent deposit, the Sponsor may (i) deposit cash or a letter
of credit with instructions to purchase the Security when it becomes
available, or (ii) deposit (or instruct the Trustee to purchase) either
Securities of one or more other issues originally deposited or a
Substitute Security.
TRUST AGREEMENT AND AMENDMENT. The Trust Agreement may be amended by the
Trustee and the Sponsor without the consent of any of the Certificateholders:
(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
Certificateholders.
The Trust Agreement may also be amended in any respect, or performance of
any of the provisions thereof may be waived, with the consent of the holders of
Certificates evidencing 66 2/3% of the Units then outstanding for the purpose
of modifying the rights of Certificateholders; provided that no such amendment
or waiver shall reduce any Certificateholder's interest in the Trust without
his consent or reduce the percentage of Units required to consent to any such
amendment or waiver without the consent of the holders of all Certificates. The
Trust Agreement may not be amended, without the consent of the holders of all
Certificates in the Trust then outstanding, to increase the number of Units
issuable or to permit the acquisition of any Securities in addition to or in
substitution for those initially deposited in such Trust, except in accordance
with the provisions of the Trust Agreement. The Trustee shall promptly notify
Certificateholders, in writing, of the substance of any such amendment.
TRUST TERMINATION. The Trust Agreement provides that the Trust shall
terminate upon the maturity, redemption or other disposition, as the case may
be, of the last of the Securities held in such Trust but in no event is it to
continue beyond the Mandatory Termination Date. If the value of the Trust shall
be less than the minimum amount set forth under "Summary of Essential
Information" in Part A, the Trustee may, in its discretion, and shall, when so
directed by the Sponsor, terminate the Trust. The Trust may also be terminated
at any time with the consent of the holders of Certificates representing 100%
of the Units then outstanding. The Trustee may utilize the services of the
Sponsor for the sale of all or a portion of the Securities in the Trust, and in
so doing, the Sponsor will determine the manner, timing and execution of the
sales of the underlying Securities. The Sponsor may receive brokerage
commissions from the Trust in connection with such sales in accordance with
applicable law. In the event of termination, written notice thereof will be
sent by the Trustee to all Certificateholders. Such notice will provide
Certificateholders with the following three options by which to receive their
pro rata share of the net asset value of the Trust and requires their election
of one of the three options by notifying the Trustee prior to the commencement
of the Liquidation Period by returning a properly completed election request
(to be supplied to Certificateholders at least 20 days prior to such date) (see
Part A--"Summary of Essential Information" for the date of the commencement of
the Liquidation Period):
1. A Certificateholder who owns at least 2,500 units and whose
interest in the Trust would entitle him to receive at least one share of
each underlying Security will have his Units redeemed on commencement of
the Liquidation Period by distribution of the Certificateholder's pro
rata share of the net asset value of the Trust on such date distributed
in
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kind to the extent represented by whole shares of underlying Securities
and the balance in cash within three business days next following the
commencement of the Liquidation Period. Certificateholders subsequently
selling such distributed Securities will incur brokerage costs when
disposing of such Securities. Certificateholders should consult their own
tax adviser in this regard;
2. to receive in cash such Certificateholder's pro rata share of the
net asset value of the Trust derived from the sale by the Sponsor as the
agent of the Trustee of the underlying Securities over a period not to
exceed 60 days immediately following the commencement of the Liquidation
Period. The Certificateholder's pro rata share of its net assets of the
Trust will be distributed to such Certificateholder within three days of
the settlement of the trade of the last Security to be sold; and/or
3. to invest such Certificateholder's pro rata share of the net
assets of the Trust derived from the sale by the Sponsor as agent of the
Trustee of the underlying Securities over a period not to exceed 60 days
immediately following the commencement of the Liquidation Period, in
units of a subsequent series of Equity Securities Trust, Triple Play
Series (the "New Series") provided one is offered. It is expected that a
special redemption and liquidation will be made of all Units of this
Trust held by a Certificateholder (a "Rollover Certificateholder") who
affirmatively notifies the Trustee by the Rollover Notification Date set
forth in the "Summary of Essential Information" for the Trust in Part A.
The Units of a New Series will be purchased by the Certificateholder
within three business days of the settlement of the trade for the last
Security to be sold. Such purchaser will be entitled to a reduced sales
load upon the purchase of units of the New Series. It is expected that
the terms of the New Series will be substantially the same as the terms
of the Trust described in this Prospectus, and that similar options with
respect to the termination of such New Series will be available. The
availability of this option does not constitute a solicitation of an
offer to purchase Units of a New Series or any other security. A
Certificateholder's election to participate in this option will be
treated as an indication of interest only. At any time prior to the
purchase by the Certificateholder of units of a New Series such
Certificateholder may change his investment strategy and receive, in
cash, the proceeds of the sale of the Securities. An election of this
option will not prevent the Certificateholder from recognizing taxable
gain or loss (except in the case of a loss, if and to the extent the New
Series is treated as substantially identical to the Trust) as a result of
the liquidation, even though no cash will be distributed to pay any
taxes. Certificateholders should consult their own tax advisers in this
regard.
Certificateholders who do not make any election will be deemed to have
elected to receive the termination distribution in cash (option number 2).
The Sponsor has agreed to effect the sales of underlying securities for
the Trustee in the case of the second and third options over a period not to
exceed 60 days immediately following the commencement of the Liquidation Period
free of brokerage commissions. The Sponsor, on behalf of the Trustee, will
sell, unless prevented by unusual and unforeseen circumstances, such as, among
other reasons, a suspension in trading of a Security, the close of a stock
exchange, outbreak of hostilities and collapse of the economy, on each business
day during the 60 day period at least a number of shares of each Security which
then remains in the portfolio based on the number of shares of each issue in
the portfolio) multiplied by a fraction the numerator of which is one and the
denominator of which is the number of days remaining in the 60 day sales
period. The Redemption Price Per Unit upon the settlement of the last sale of
Securities during the 60 day period will be distributed to Certificateholders
in redemption of such Certificateholders' interest in the Trust.
Depending on the amount of proceeds to be invested in Units of the New
Series and the amount of other orders for Units in the New Series, the Sponsor
may purchase a large amount of securities for the New Series in a short period
of time. The Sponsor's buying of securities may tend to raise the market prices
of these securities. The actual market impact of the Sponsor's purchases,
however, is currently unpredictable because the actual amount of securities to
be purchased and the supply and price of those securities is unknown. A similar
problem may occur in connection with the sale of Securities during the 60 day
period immediately following the commencement of the Liquidation Period;
depending on the number of sales required, the prices of and demand for
Securities, such sales may tend to depress the market prices and thus reduce
the proceeds of such sales. The Sponsor believes that the sale of underlying
Securities over a 60 day period as described above is in the best interest of a
Certificateholder and may mitigate the negative market price consequences
stemming from the trading of large amounts of Securities. The Securities may be
sold in fewer than 60 days if, in the Sponsor's judgment, such sales are in the
best interest of Certificateholders. The Sponsor, in implementing such sales of
securities on behalf of the Trustee, will seek to maximize the sales proceeds
and will act in the best interests of the Certificateholders. There can be no
assurance, however, that any adverse price consequences of heavy trading will
be mitigated.
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It is expected (but not required) that the Sponsor will generally follow
the following guidelines in selling the Securities: for highly liquid
Securities, the Sponsor will generally sell Securities on the first day of the
Liquidation Period; for less liquid Securities, on each of the first two days
of the Liquidation Period, the Sponsor will generally sell any amount of any
underlying Securities at a price no less than 1/2 of one point under the last
closing sale price of those Securities. On each of the following two days, the
price limit will increase to one point under the last closing sale price. After
four days, the Sponsor intends to sell at least a fraction of the remaining
underlying Securities, the numerator of which is one and the denominator of
which is the total number of days remaining (including that day) in the
Liquidation Period, without any price restrictions.
The Sponsor may for any reason, in its sole discretion, decide not to
sponsor any subsequent series of the Trust, without penalty or incurring
liability to any Certificateholder. If the Sponsor so decides, the Sponsor will
notify the Trustee of that decision, and the Trustee will notify the
Certificateholders before the commencement of the Liquidation Period. All
Certificateholders will then elect either option 1, if eligible, or option 2.
By electing to reinvest in the New Series, the Certificateholder
indicates his interest in having his terminating distribution from the Trust
invested only in the New Series created following termination of the Trust; the
Sponsor expects, however, that a similar reinvestment program will be offered
with respect to all subsequent series of the Trust, thus giving
Certificateholders a yearly opportunity to elect to "rollover" their
terminating distributions into a New Series. The availability of the
reinvestment privilege does not constitute a solicitation of offers to purchase
units of a New Series or any other security. A Certificateholder's election to
participate in the reinvestment program will be treated as an indication of
interest only. The Sponsor intends to coordinate the date of deposit of a
future series so that the terminating trust will terminate contemporaneously
with the creation of a New Series. The Sponsor reserves the right to modify,
suspend or terminate the reinvestment privilege at any time.
Investors should be aware that the staff of the Division of Investment
Management of the Securities and Exchange Commission ("SEC") is of the view
that the rollover described in option 3 above would constitute an "exchange
offer" for the purposes of Section 11(c) of the Investment Company Act of 1940,
and would therefore be prohibited absent an exemptive order. The Sponsor has an
application for an exemptive order pending under Section 11(c) which it
believes will permit it to offer the rollover option, but no assurance can be
given that the SEC will concur with the Sponsor's position and additional
regulatory approvals may be required.
THE SPONSOR. The Sponsor, Reich & Tang Distributors L.P. (successor to
the Unit Investment Trust Division of Bear, Stearns & Co. Inc.), a Delaware
limited partnership, is engaged in the brokerage business and is a member of
the National Association of Securities Dealers, Inc. Reich & Tang is also a
registered investment advisor. Reich & Tang maintains its principal business
offices at 600 Fifth Avenue, New York, New York 10020. Reich & Tang Asset
Management L.P. ("RTAM L.P."), a registered investment adviser having its
principal place of business at 399 Boylston Street, Boston, MA 02116, is the
99% limited partner of the Sponsor. RTAM L.P. is 99.5% owned by New England
Investment Companies, L.P. ("NEIC L.P.") and Reich & Tang Asset Management,
Inc. ("RTAM Inc."), a wholly owned subsidiary of NEIC L.P., owns the remaining
.5% interest of RTAM L.P. and is its general partner. NEIC L.P.'s general
partner is New England Investment Companies, Inc. ("NEIC"), a holding company
offering a broad array of investment styles across a wide range of asset
categories through ten investment advisory/management affiliates and two
distribution affiliates. These affiliates in the aggregate are investment
advisors or managers to over 57 registered investment companies. Reich & Tang
is successor Sponsor to Bear Stearns for numerous series of unit investment
trusts, including New York Municipal Trust, Series 1 (and Subsequent Series),
Municipal Securities Trust, Series 1 (and Subsequent Series), 1st Discount
Series (and Subsequent Series), Multi-State Series 1 (and Subsequent Series),
Mortgage Securities Trust, Series 1 (and Subsequent Series), Insured Municipal
Securities Trust, Series 1 (and Subsequent Series) and 5th Discount Series (and
Subsequent Series) and Equity Securities Trust, Series 1, Signature Series,
Gabelli Communications Income Trust (and Subsequent Series).
Effective August 30, 1996, New England Mutual Life Insurance Company
("The New England") merged with Metropolitan Life Insurance Company
("MetLife"), with MetLife being the survivor of the merger. RTAM L.P. will
remain a wholly-owned subsidiary of NEIC L.P. but RTAM Inc., its sole general
partner, is now an indirect subsidiary of MetLife. Also, MetLife New England
Holdings, Inc., a wholly-owned subsidiary of MetLife, now owns 55% of the
outstanding limited partnership interest of NEIC L.P. MetLife was incorporated
under the laws of New York in 1866 and since 1868 has been engaged in the life
insurance business under its present name. By the early 1900s, it had become
the largest life insurance company in the United States and is currently the
second largest life insurance company in the United States in terms of total
assets. MetLife's assets as of June 30, 1995 were over $130 billion, and its
adjusted capital as of that date
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exceeded $8 billion. Subsidiaries of MetLife manage over $25 billion of assets
for mutual funds, institutional and other investment advisory clients.
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 will be under no liability
to Certificateholders for taking any action, or refraining from taking any
action, in good faith pursuant to the Trust Agreement, or for errors in
judgment except in cases of its own willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations and duties.
The Sponsor may resign at any time by delivering to the Trustee an
instrument of resignation executed by the Sponsor. If at any time the Sponsor
shall resign or fail to perform any of its duties under the Trust Agreement or
becomes incapable of acting or becomes bankrupt or its affairs are taken over
by public authorities, then the Trustee may either (a) appoint a successor
Sponsor; (b) terminate the Trust Agreement and liquidate the 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 with its principal
executive office located at 270 Park Avenue, New York, New York 10017 (800)
428-8890 and its unit investment trust office at 770 Broadway, New York, New
York 10003. Effective on or shortly after October 28, 1996 the address of the
Trustee's unit investment trust office will be 4 New York Plaza, New York, New
York 10004. The customer service number will not change. The Trustee is subject
to 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 any disposition of any
moneys, Securities or Certificates in accordance with the Trust Agreement,
except in cases of its own willful misfeasance, bad faith, gross negligence or
reckless disregard of its obligations and duties; provided, however, that the
Trustee shall not in any event be liable or responsible for any evaluation made
by any independent evaluation service employed by it. In addition, the Trustee
shall not be liable for any taxes or other governmental charges imposed upon or
in respect of the Securities or the Trust which it may be required to pay under
current or future law of the United States or any other taxing authority having
jurisdiction. The Trustee shall not be liable for depreciation or loss incurred
by reason of the sale by the Trustee of any of the Securities pursuant to the
Trust Agreement.
For further information relating to the responsibilities of the Trustee
under the Trust Agreement, reference is made to the material set forth under
"Rights of Certificateholders."
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
Certificateholders. 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 Certificateholder 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 any 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.
EVALUATION OF THE TRUST. The value of the Securities in the Trust
portfolio is determined in good faith by the Trustee on the basis set forth
under "Public Offering--Offering Price." The Sponsor and the Certificateholders
may rely on any evaluation furnished by the Trustee and shall have no
responsibility for the accuracy thereof. Determinations by the Trustee under
the Trust Agreement shall be made in good faith upon the basis of the best
information available to it, provided, however, that the Trustee shall be under
no liability to the Sponsor or Certificateholders for errors in judgment,
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except in cases of its own willful misfeasance, bad faith, gross negligence or
reckless disregard of its obligations and duties. The Trustee, the Sponsor and
the Certificateholders may rely on any evaluation furnished to the Trustee by
an independent evaluation service and shall have no responsibility for the
accuracy thereof.
TRUST EXPENSES AND CHARGES
All or a portion of the expenses incurred in creating and establishing
the Trust, including the cost of the initial preparation and execution of the
Trust Agreement, registration of the Trust and the Units under the Investment
Company Act of 1940 and the Securities Act of 1933, the initial fees and
expenses of the Trustee, legal expenses and other actual out-of-pocket
expenses, will be paid by the Trust and charged to capital over the life of the
Trust. Offering costs, including the costs of registering securities with the
Securities and Exchange Commission and the states, will be charged to capital
over the term of the initial offering period, which may be between 30 and 90
days. All advertising and selling expenses, as well as any organizational
expenses not paid by the Trust, will be borne by the Sponsor at no cost to the
Trust.
The Sponsor will receive for portfolio supervisory services to the Trust
an Annual Fee in the amount set forth under "Summary of Essential Information"
in Part A. The Sponsor's fee may exceed the actual cost of providing portfolio
supervisory services for the Trust, but at no time will the total amount
received for portfolio supervisory services rendered to all series of the
Equity Securities Trust in any calendar year exceed the aggregate cost to the
Sponsor of supplying such services in such year. (See "Portfolio Supervision.")
The Trustee will receive, for its ordinary recurring services to the
Trust, an annual fee in the amount set forth under "Summary of Essential
Information" in Part A. For a discussion of the services performed by the
Trustee pursuant to its obligations under the Trust Agreement, see "Trust
Administration" and "Rights of Certificateholders."
The Trustee's fees applicable to a Trust are payable as of each Record
Date from the Income Account of the Trust to the extent funds are available and
then from the Principal Account. Both fees may be increased without approval of
the Certificateholders 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 Certificateholders; fees of the Trustee for
any extraordinary services performed under the Trust Agreement; indemnification
of the Trustee for any loss or liability accruing to it without gross
negligence, bad faith or willful misconduct on its part, arising out of or in
connection with its acceptance or administration of the Trust; indemnification
of the Sponsor for any losses, liabilities and expenses incurred in acting as
sponsors of the Trust without gross negligence, bad faith or willful misconduct
on its part; and all taxes and other governmental charges imposed upon the
Securities or any part of the Trust (no such taxes or charges are being levied,
made or, to the knowledge of the Sponsor, contemplated). The above expenses,
including the Trustee's fees, when paid by or owing to the Trustee are secured
by a first lien on the Trust to which such expenses are charged. In addition,
the Trustee is empowered to sell the Securities in order to make funds
available to pay all expenses.
The 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 100 Units. Certificateholders covered by the audit during the year
may receive a copy of the audited financials upon request.
EXCHANGE PRIVILEGE AND CONVERSION OFFER
EXCHANGE PRIVILEGE. Certificateholders will be able to elect to exchange
any or all of their Units of this Trust for Units of one or more of any
available series of Equity Securities Trust, Insured Municipal Securities
Trust, Municipal Securities Trust, New York Municipal Trust or Mortgage
Securities Trust (the "Exchange Trusts") at a reduced sales charge as set forth
below. Under the Exchange Privilege, the Sponsor's repurchase price during the
initial offering period of the Units being surrendered will be based on the
market value of the Securities in the Trust portfolio or on the aggregate offer
price of the Bonds in the other Trust Portfolios; and, after the initial
offering period has been completed, will be based on the aggregate bid price of
the Bonds in the particular Trust portfolio. Units in an Exchange Trust then
will be sold to the Certificateholder at a price based on the aggregate offer
price of the Bonds in the Exchange Trust portfolio (or for units of Equity
Securities Trust, based on the market value of the underlying securities in the
Trust portfolio) during the initial public
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offering period of the Exchange Trust; and after the initial public offering
period has been completed, based on the aggregate bid price of the Bonds in the
Exchange Trust Portfolio if its initial offering has been completed plus
accrued interest (or for units of Equity Securities Trust, based on the market
value of the underlying securities in the Trust portfolio) and a reduced sales
charge as set forth below.
Except for Certificateholders who wish to exercise the Exchange Privilege
within the first five months of their purchase of Units of the Trust, the sales
charge applicable to the purchase of units of an Exchange Trust shall be
approximately 1.5% of the price of each Exchange Trust unit (or 1,000 Units for
the Mortgage Securities Trust or 100 Units for the Equity Securities Trust).
For Certificateholders who wish to exercise the Exchange Privilege within the
first five months of their purchase of Units of the Trust, the sales charge
applicable to the purchase of units of an Exchange Trust shall be the greater
of (i) approximately 1.5% of the price of each Exchange Trust unit (or 1,000
Units for the Mortgage Securities Trust or 100 Units for the Equity Securities
Trust), or (ii) an amount which when coupled with the sales charge paid by the
Certificateholder upon his original purchase of Units of the Trust at least
equals the sales charge applicable in the direct purchase of units of an
Exchange Trust. The Exchange Privilege is subject to the following conditions:
1. The Sponsor must be maintaining a secondary market in both the
Units of the Trust held by the Certificateholder and the Units of the
available Exchange Trust. While the Sponsor has indicated its intention
to maintain a market in the Units of all Trusts sponsored by it, the
Sponsor is under no obligation to continue to maintain a secondary market
and therefore there is no assurance that the Exchange Privilege will be
available to a Certificateholder at any specific time in the future. At
the time of the Certificateholder's election to participate in the
Exchange Privilege, there also must be Units of the Exchange Trust
available for sale, either under the initial primary distribution or in
the Sponsor's secondary market.
2. Exchanges will be effected in whole units only. Any excess
proceeds from the Units surrendered for exchange will be remitted and the
selling Certificateholder will not be permitted to advance any new funds
in order to complete an exchange. Units of the Mortgage Securities Trust
may only be acquired in blocks of 1,000 Units. Units of the Equity
Securities Trust may only be acquired in block of 100 Units.
3. The Sponsor reserves the right to suspend, modify or terminate
the Exchange Privilege. The Sponsor will provide Certificateholders of
the Trust with 60 days' prior written notice of any termination or
material amendment to the Exchange Privilege, provided that, no notice
need be given if (i) the only material effect of an amendment is to
reduce or eliminate the sales charge payable at the time of the exchange,
to add one or more series of the Trust eligible for the Exchange
Privilege or to delete a series which has been terminated from
eligibility for the Exchange Privilege, (ii) there is a suspension of the
redemption of units of an Exchange Trust under Section 22(e) of the
Investment Company Act of 1940, or (iii) an Exchange Trust temporarily
delays or ceases the sale of its units because it is unable to invest
amounts effectively in accordance with its investment objectives,
policies and restrictions. During the 60-day notice period prior to the
termination or material amendment of the Exchange Privilege described
above, the Sponsor will continue to maintain a secondary market in the
units of all Exchange Trusts that could be acquired by the affected
Certificateholders. Certificateholders may, during this 60-day period,
exercise the Exchange Privilege in accordance with its terms then in
effect. In the event the Exchange Privilege is not available to a
Certificateholder at the time he wishes to exercise it, the
Certificateholder will immediately be notified and no action will be
taken with respect to his Units without further instructions from the
Certificateholder.
To exercise the Exchange Privilege, a Certificateholder should notify the
Sponsor of his desire to exercise his Exchange Privilege. If Units of a
designated, outstanding series of an Exchange Trust are at the time available
for sale and such Units may lawfully be sold in the state in which the
Certificateholder is a resident, the Certificateholder will be provided with a
current prospectus or prospectuses relating to each Exchange Trust in which he
indicates an interest. He may then select the Trust or Trusts into which he
desires to invest the proceeds from his sale of Units. The exchange transaction
will operate in a manner essentially identical to a secondary market
transaction except that units may be purchased at a reduced sales charge.
EXAMPLE: Assume that after the initial public offering has been completed, a
Certificateholder has five units of a Trust with a current value of $700 per
unit which he has held for more than 5 months and the Certificateholder wishes
to exchange the proceeds for units of a secondary market Exchange Trust with a
current price of $725 per unit. The proceeds from the Certificateholder's
original units will aggregate $3,500. Since only whole units of an Exchange
Trust may be purchased under the Exchange Privilege, the Certificateholder
would be able to acquire four units (or 4,000 Units of the Mortgage Securities
Trust or 400 Units of the Equity Securities Trust) for a total cost of
$2,943.50 ($2,900 for units and $43.50 for
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the sales charge). The remaining $556.50 would be remitted to the
Certificateholder in cash. If the Certificateholder acquired the same number of
units at the same time in a regular secondary market transaction, the price
would have been $3,059.50 ($2,900 for units and $159.50 for the sales charge,
assuming a 5 1/2% sales charge times the public offering price).
THE CONVERSION OFFER. Unit owners of any registered unit investment trust
for which there is no active secondary market in the units of such trust (a
"Redemption Trust") will be able to elect to redeem such units and apply the
proceeds of the redemption to the purchase of available Units of one or more
series of Municipal Securities Trust, Insured Municipal Securities Trust,
Mortgage Securities Trust, New York Municipal Trust or Equity Securities Trust
(the "Conversion Trusts") at the Public Offering Price for units of the
Conversion Trust based on a reduced sales charge as set forth below. Under the
Conversion Offer, units of the Redemption Trust must be tendered to the trustee
of such trust for redemption at the redemption price, which is based upon the
market value of the underlying securities in the Trust portfolio or the
aggregate bid side evaluation of the underlying bonds in other Trust portfolios
and is generally about 1 1/2% to 2% lower than the offering price for such
bonds. The purchase price of the units will be based on the aggregate offer
price of the underlying bonds in the Conversion Trust portfolio during its
initial offering period; or, at a price based on the aggregate bid price of the
underlying bonds if the initial public offering of the Conversion Trust has
been completed, plus accrued interest and a sales charge as set forth below. If
the participant elects to purchase units of the Equity Securities Trust under
the Conversion Offer, the purchase price of the units will be based, at all
times, on the market value of the underlying securities in the Trust portfolio
plus a sales charge.
Except for Certificateholders who wish to exercise the Conversion Offer
within the first five months of their purchase of units of a Redemption Trust,
the sales charge applicable to the purchase of Units of the Conversion Trust
shall be approximately 1.5% of the price of each Unit (or per 1,000 Units for
the Mortgage Securities Trust or 100 Units for the Equity Securities Trust).
For Certificateholders who wish to exercise the Conversion Offer within the
first five months of their purchase of units of Redemption Trust, the sales
charge applicable to the purchase of Units of a Conversion Trust shall be the
greater of (i) approximately 1.5% of the price of each Unit (or per 1,000 Units
for the Mortgage Securities or 100 Units for the Equity Securities Trust) or
(ii) an amount which when coupled with the sales charge paid by the
Certificateholder upon his original purchase of units of the Redemption Trust
at least equals the sales charge applicable in the direct purchase of Units of
a Conversion Trust. The Conversion Offer is subject to the following
limitations:
1. The Conversion Offer is limited only to unit owners of any
Redemption Trust, defined as a unit investment trust for which there is
no active secondary market at the time the Certificateholder elects to
participate in the Conversion Offer. At the time of the unit owner's
election to participate in the Conversion Offer, there also must be
available units of a Conversion Trust, either under a primary
distribution or in the Sponsor's secondary market.
2. Exchanges under the Conversion Offer will be effected in whole
units only. Unit owners will not be permitted to advance any new funds in
order to complete an exchange under the Conversion Offer. Any excess
proceeds from units being redeemed will be returned to the unit owner.
Units of the Mortgage Securities Trust may only be acquired in blocks of
1,000 units. Units of the Equity Securities Trust may only be acquired in
blocks of 100 Units.
3. The Sponsor reserves the right to modify, suspend or terminate
the Conversion Offer at any time without notice to unit owners of
Redemption Trusts. In the event the Conversion Offer is not available to
a unit owner at the time he wishes to exercise it, the unit owner will be
notified immediately and no action will be taken with respect to his
units without further instruction from the unit owner. The Sponsor also
reserves the right to raise the sales charge based on actual increases in
the Sponsor's costs and expenses in connection with administering the
program, up to a maximum sales charge of 2% per unit (or per 1,000 units
for the Mortgage Securities Trust or 100 Units for the Equity Securities
Trust).
To exercise the Conversion Offer, a unit owner of a Redemption Trust
should notify his retail broker of his desire to redeem his Redemption Trust
Units and use the proceeds from the redemption to purchase Units of one or more
of the Conversion Trusts. If Units of a designated, outstanding series of a
Conversion Trust are at that time available for sale and if such Units may
lawfully be sold in the state in which the unit owner is a resident, the unit
owner will be provided with a current prospectus or prospectuses relating to
each Conversion Trust in which he indicates an interest. He then may select the
Trust or Trusts into which he decides to invest the proceeds from the sale of
his Units. The transaction will be handled entirely through the unit owner's
retail broker. The retail broker must tender the units to the trustee of the
Redemption Trust for redemption and then apply the proceeds to the redemption
toward the purchase of units of a Conversion Trust at a price based on the
aggregate offer or bid side evaluation per Unit of the Conversion Trust,
depending on which price is applicable,
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plus accrued interest and the applicable sales charge. The certificates must be
surrendered to the broker at the time the redemption order is placed and the
broker must specify to the Sponsor that the purchase of Conversion Trust Units
is being made pursuant to the Conversion Offer. The unit owner's broker will be
entitled to retain $5 of the applicable sales charge.
EXAMPLE: Assume a unit owner has five units of a Redemption Trust which has
held for more than 5 months with a current redemption price of $675 per unit
based on the aggregate bid price of the underlying bonds and the unit owner
wishes to participate in the Conversion Offer and exchange the proceeds for
units of a secondary market Conversion Trust with a current price of $750 per
Unit. The proceeds for the unit owner's redemption of units will aggregate
$3,375. Since only whole units of a Redemption Trust may be purchased under the
Conversion Offer, the unit owner will be able to acquire four units of the
Conversion Trust (or 4,000 units of the Mortgage Securities Trust or 400 Units
of the Equity Securities Trust) for a total cost of $3,045 ($3,000 for units
and $45 for the sale charge). The remaining $330 would be remitted to the unit
owner in cash. If the unit owner acquired the same number of Conversion Trust
units at the same time in a regular secondary market transaction, the price
would have been $3,165 ($3,000 for units and $165 sales charge, assuming a 5
1/2% sales charge times the public offering price).
TAX CONSEQUENCES OF THE EXCHANGE PRIVILEGE AND THE CONVERSION OFFER. A
surrender of Units pursuant to the Exchange Privilege or the Conversion Offer
will constitute a "taxable event" to the Certificateholder under the Internal
Revenue Code. The Certificateholder will realize a tax gain or loss that will
be of a long- or short-term capital or ordinary income nature depending on the
length of time the units have been held and other factors. (See "Tax Status".)
A Certificateholder's tax basis in the Units acquired pursuant to the Exchange
Privilege or Conversion Offer will be equal to the purchase price of such
Units. Investors should consult their own tax advisors as to the tax
consequences to them of exchanging or redeeming units and participating in the
Exchange Privilege or Conversion Offer.
OTHER MATTERS
LEGAL OPINIONS. The legality of the Units offered hereby and certain
matters relating to federal tax law have been passed upon by Battle Fowler LLP,
75 East 55th Street, New York, New York 10022 as counsel for the Sponsor.
Carter, Ledyard & Milburn, Two Wall Street, New York, New York 10005 have acted
as counsel for the Trustee.
INDEPENDENT ACCOUNTANTS. The Statement of Condition and Portfolio are
included herein in reliance upon the report of Price Waterhouse LLP,
independent accountants, and upon the authority of said firm as experts in
accounting and auditing.
PERFORMANCE INFORMATION. Total returns, average annualized returns or
cumulative returns for various periods of the Top Ten, the Focus Five and the
Penultimate Pick, the related index and this Trust may be included from time to
time in advertisements, sales literature and reports to current or prospective
investors. Total return shows changes in Unit price during the period plus
reinvestment of dividends and capital gains, divided by the maximum public
offering price. Average annualized returns show the average return for stated
periods of longer than a year. Sales material may also include an illustration
of the cumulative results of like annual investments in the Top Ten, the Focus
Five and the Penultimate Pick during an accumulation period and like annual
withdrawals during a distribution period. Figures for actual portfolios will
reflect all applicable expenses and, unless otherwise stated, the maximum sales
charge. No provision is made for any income taxes payable. Similar figures may
be given for this Trust applying the Top Ten, Focus Five and Penultimate Pick
Ten and their investment strategies to other indexes. Returns may also be shown
on a combined basis. Trust performance may be compared to performance on a
total return basis of the Dow Jones Industrial Average, the S&P 500 Composite
Price Stock Index, or performance data from Lipper Analytical Services, Inc.
and Morningstar Publications, Inc. or from publications such as Money, The New
York Times, U.S. News and World Report, Business Week, Forbes or Fortune. As
with other performance data, performance comparisons should not be considered
representative of a Trust's relative performance for any future period.
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<TABLE>
<S> <C>
No person is authorized to give any information or to ----------------------------------------------------
make any representations not contained in Parts A and B of EST SIGNATURE SERIES
this Prospectus; and any information or representation not ----------------------------------------------------
contained herein must not be relied upon as having been THE TRIPLE PLAY TRUST
authorized by the Trust, the Trustee or the Sponsor. The ----------------------------------------------------
Trust is registered as a unit investment trust under the
Investment Company Act of 1940. Such registration does EQUITY SECURITIES TRUST
not imply that the Trust or any of its Units have been SERIES 10
guaranteed, sponsored, recommended or approved by the 1996 TRIPLE PLAY SERIES
United States or any state or any agency or officer thereof.
(A UNIT INVESTMENT TRUST)
------------------
PROSPECTUS
This Prospectus does not constitute an offer to sell, or
a solicitation of an offer to buy, securities in any state to DATED: SEPTEMBER __, 1996
any person to whom it is not lawful to make such offer in
such state.
SPONSOR:
Table of Contents
REICH & TANG DISTRIBUTORS L.P.
Title Page 600 Fifth Avenue
New York, New York 10020
PART A 212-830-5400
Summary of Essential Information...........................A-2
Description of Portfolio...................................A-3
Statement of Condition.....................................A-6
Report of Independent Accountants..........................A-8 TRUSTEE:
PART B THE CHASE MANHATTAN BANK
The Trust..................................................B-1 770 Broadway
Risk Considerations........................................B-5 New York, New York 10003
Public Offering............................................B-7
Rights of Certificateholders...............................B-9
Tax Status.................................................B-10
Liquidity..................................................B-12
Trust Administration.......................................B-14
Trust Expenses and Charges.................................B-19
Exchange Privilege and Conversion Offer....................B-19
Other Matters..............................................B-22
Parts A and B of this Prospectus do not contain all of the information
set forth in the registration statement and exhibits relating 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.
</TABLE>
C/M: 11939.0010 400833.1
<PAGE>
PART II -- ADDITIONAL INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM A -- BONDING ARRANGEMENTS
The employees of Reich & Tang Distributors L.P. are covered under Brokers'
Blanket Policy, Standard Form 14, in the amount of $11,000,000 (plus
$196,000,000 excess coverage under Brokers' Blanket Policies, Standard Form 14
and Form B Consolidated).
This policy has an aggregate annual coverage of $15 million.
ITEM B -- CONTENTS OF REGISTRATION STATEMENT
This Registration Statement on Form S-6 comprises the following papers and
documents:
The facing sheet on Form S-6.
The Cross-Reference Sheet.
The Prospectus consisting of pages.
Undertakings.
Signatures.
Written consents of the following persons:
Battle Fowler LLP (included in Exhibit 3.1)
Price Waterhouse LLP
The following exhibits:
*99.1.1 -- Reference Trust Agreement including certain amendments to
the Trust Indenture and Agreement referred to under Exhibit
99.1.1.1 below.
99.1.1.1 -- Form of Trust Indenture and Agreement (filed as Exhibit
1.1.1 to Amendment No. 1 to Form S-6 Registration Statement
No. 33-62627 of Equity Securities Trust, Series 6, Signature
Series, Gabelli Entertainment and Media Trust on November 16,
1995 and incorporate herein by reference).
99.1.3.4 -- Certificate of Formation and Agreement among Limited
Partners, as amended, of Reich & Tang Distributors L.P.
(filed as Exhibit 99.1.3.4 to Post-Effective Amendment No. 10
to Form S-6 Registration Statements Nos. 2-98914, 33-00376,
33-00856 and 33-01869 of Municipal Securities Trust, Series
28, 39th Discount Series, Series 29 & 40th Discount Series
and Series 30 & 41st Discount Series, respectively, on
October 31, 1995 and incorporated herein by reference).
99.1.4 -- Form of Agreement Among Underwriters (filed as Exhibit 1.4
to Amendment No. 1 to Form S-6 Registration Statement No.
33-62627 of Equity Securities Trust, Series 6, Signature
Series, Gabelli Entertainment and Media Trust on November 16,
1995 and incorporated herein by reference).
99.2.1 -- Form of Certificate (filed as Exhibit 99.2.1 to Amendment
No. 1 to Form S-6 Registration Statement No. 33-62627 of
Equity Securities Trust, Series 6, Signature Series, Gabelli
Entertainment and Media Trust on November 16, 1995 and
incorporated herein by reference).
*99.3.1 -- Opinion of Battle Fowler LLP as to the legality of the
securities being registered, including their consent to the
filing thereof and to the use of their name under the
headings "Tax Status" and "Legal Opinions" in the Prospectus,
and to the filing of their opinion regarding tax status of
the Trust.
99.6.0 -- Power of Attorney of Reich & Tang Distributors L.P., the
Depositor, by its officers and a majority of its Directors
(filed as Exhibit 6.0 to Amendment No. 1 to Form S-6
Registration Statement No. 33-62627 of Equity Securities
Trust, Series 6, Signature Series, Gabelli Entertainment and
Media Trust on November 16, 1995 and incorporated herein by
reference).
*99.27 -- Financial Data Schedule (for EDGAR filing only).
- --------
* To be filed by amendment.
C/M: 11939.0010 402025.1
<PAGE>
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Equity Securities Trust, Series 10, 1996 Triple Play Series, has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, hereunto duly authorized, in the City of New York and State of New
York on the 19th day of September, 1996.
EQUITY SECURITIES TRUST, SERIES 10
1996 Triple Play Series
(Registrant)
REICH & TANG DISTRIBUTORS L.P.
(Depositor)
By: Reich & Tang Asset Management, Inc.
By /s/ PETER J. DEMARCO
--------------------------------------
Peter J. DeMarco
(Authorized Signator)
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons, who
constitute the principal officers and a majority of the directors of Reich &
Tang Asset Management, Inc., General Partner of Reich & Tang Distributors L.P.,
the Depositor, in the capacities and on the dates indicated.
Name Title Date
- ---- ----- ----
PETER S. VOSS President, Chief Executive
Officer and Director
G. NEAL RYLAND Executive Vice President,
Treasurer and Chief
Financial Officer
EDWARD N. WADSWORTH Clerk
September 19, 1996
RICHARD E. SMITH III Director
STEVEN W. DUFF Director
By /s/PETER J. DEMARCO
BERNADETTE N. FINN Vice President ----------------------
Peter J. DeMarco
LORRAINE C. HYSLER Secretary Attorney-In-Fact*
RICHARD DE SANCTIS Vice President and
Treasurer
- --------
* Executed copies of Powers of Attorney were filed as Exhibit 6.0 to
Amendment No. 1 to Registration Statement No. 33- 62627 on November 16,
1995.
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CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
registration statement on Form S-6 (the "Registration Statement") of our report
dated September , 1996, relating to the Statement of Condition, including the
Portfolio, of Equity Securities Trust, Series 10, 1996 Triple Play Series with
appears in such Prospectus. We also consent to the reference to us under the
heading "Independent Accountants" in such Prospectus.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
September , 1996
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