Rule 497(b)
Registration No. 333-25983
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INSERT LOGO
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EQUITY SECURITIES TRUST
SERIES 12
1997 TRIPLE STRATEGY TRUST II
The Trust is a unit investment trust designated Equity Securities Trust, Series
12, 1997 Triple Strategy Trust II (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 attempting to outperform 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 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 Financial 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 MAY 6, 1997
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SUMMARY OF ESSENTIAL INFORMATION AS OF MAY 5, 1997:*
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DATE OF DEPOSIT: May 6, 1997 MANDATORY TERMINATION DATE: The earlier of
AGGREGATE VALUE OF SECURITIES.................. $211,948 June 8, 1998 or the disposition of the last Security in
AGGREGATE VALUE OF SECURITIES the Trust.
PER 100 UNITS............................... $970.50 CUSIP NUMBERS: Cash: 294762174
NUMBER OF UNITS................................ 21,839 Reinvestment: 294762182
FRACTIONAL UNDIVIDED INTEREST IN TRUSTEE: The Chase Manhattan Bank
TRUST....................................... 1/21,839 TRUSTEE'S FEE: $.90 per 100 Units outstanding
PUBLIC OFFERING PRICE+ ESTIMATED ORGANIZATIONAL EXPENSES**:
Aggregate Value of Securities in $.57 per 100 Units
Trust.................................... $211,948 ESTIMATED OFFERING COSTS**: $.43 per 100
Divided By 21,839 Units (times 100)......... $970.50 Units
Plus Sales Charge of 2.95% of Public OTHER FEES AND EXPENSES: $.17 per 100 Units
Offering Price per 100 Units............. $29.50 outstanding
Public Offering Price per 100 Units++....... $1,000.00 SPONSOR: Reich & Tang Distributors L.P.
SPONSOR'S REPURCHASE PRICE AND SPONSOR'S SUPERVISORY FEE: Maximum of $.25
REDEMPTION PRICE PER per 100 Units outstanding (see "Trust Expenses and
100 UNITS+++................................ $970.50 Charges" in Part B).
EVALUATION TIME: 4:00 p.m. New York Time. EXPECTED SETTLEMENT DATEo: May 9, 1997
MINIMUM INCOME OR PRINCIPAL RECORD DATE: June 15 and December 15
DISTRIBUTION: $1.00 per 100 Units DISTRIBUTION DATE: June 30 and December 31
MINIMUM VALUE OF TRUST: The Trust may be ROLLOVER NOTIFICATION DATE***: May 8,
terminated if the value of the Trust is less than 40% of 1998 or another date as determined by the Sponsor.
the aggregate value of the Securities at the completion
of the Deposit Period.
LIQUIDATION PERIOD: Beginning 30 days prior to
the Mandatory Termination Date.
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* 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 2,500,000 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 terminating
distribution will be reinvested as received in an available series of the Equity
Securities Trust, Triple Strategy Trust, 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.
o The business day on which all contracts to purchase securities in
the Trust are expected to settle.
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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 attempting to outperform 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
combination of the three investment strategies is hereinafter referred to as the
"Triple Strategy". 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, overlap will result in a
difference in the actual weighting of the stocks in the portfolio 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. The Trust may not exceed the DJIA in any one year;
however, historically, long term cumulative returns from these strategies has
outperformed the DJIA. 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. 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 price of equity securities in general and the Securities in particular.
Therefore, there is no guarantee that the objective of the Trust will be
achieved.
PORTFOLIO. The Portfolio contains 10 issues. 100% of the issues are represented
by the Sponsor's contracts to purchase. Based upon the principal business of
each issuer and current market values, the following industries are represented
in the Portfolio*: Auto Manufacturing 13.35%, Banking and Finance 1.88%,
Chemical 1.89%, Consumer Products 37.01%, Manufacturing 1.92%, Oil 15.44%, Paper
and Forest Products 13.28%, Photography 1.88%, and Telecommunications 13.35%.
The Focus Five stocks are AT&T Corporation, Exxon Corporation, General Motors
Corporation, International Paper Company, and Philip Morris Companies, Inc. and
the Penultimate Pick is Philip Morris Companies, Inc., a consumer products
company with a significant concentration in the tobacco industry.
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
10,000 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.)
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* 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.
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DISTRIBUTIONS. Dividend distributions, if any, will be made semi-annually 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. (See
"Rights of Certificateholders--Distributions" in Part B.) Certificateholders may
elect to automatically reinvest distributions (other than the final distribution
in connection with the termination of the Trust), into additional Units of the
Trust, which are subject to a reduced sales charge. See "Reinvestment Plan" 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 of 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 30-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. Any
brokerage commissions received by the Sponsor from the Trust in connection with
such sales will be 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 30 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
Equity Securities Trust (if one is offered) at a reduced sales charge (see
"Rollover Option"). 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 the market value of the Securities may decline prior
to their being sold during the Liquidation Period; 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.
ROLLOVER OPTION. Certificateholders may elect to roll over their terminating
distributions into the next available series of Equity Securities Trust at a
reduced sales charge. Rollover Certificateholders must make this election prior
to the Rollover Notification Date. Upon making this election, a
Certificateholder's Units will be redeemed and the proceeds will be reinvested
in units of the next available series of Equity Security Trust. See "Trust
Administration--Trust Termination" in Part B for details to make this election.
RISK CONSIDERATIONS. An investment in Units of the Trust should be made with an
understanding of the risks inherent in an investment in any of 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
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contribute directly to a decrease in the value of the Securities and thus in the
value of the Units). Further, the nature of the combination of the three
investment strategies in the portfolio causes the Trust to be concentrated in
the Penultimate Pick. The Penultimate Pick is a company deriving a substantial
portion of its income from the tobacco industry, the risk of investment in which
may include litigation, efforts by the Food and Drug Administration to regulate
the tobacco industry, and adverse publicity. Investors should consider the
greater risk of the Trust's concentration and the effect on their investment
versus a more diversified 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
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.)
REINVESTMENT PLAN. Certificateholders may elect to automatically reinvest their
distributions, if any (other than the final distribution in connection with the
termination of the Trust) into additional units of the Trust at a reduced sales
charge of 1.00%. See "Reinvestment Plan" in Part B for details on how to enroll
in the Reinvestment Plan.
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 12, 1997 Triple Strategy Trust II. The Underwriter will distribute
Units through various broker-dealers, banks and/or other eligible participants
(see "Public Offering--Distribution of Units" in Part B).
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EQUITY SECURITIES TRUST
SERIES 12
1997 TRIPLE STRATEGY TRUST II
STATEMENT OF FINANCIAL CONDITION AS OF OPENING OF BUSINESS, MAY 6, 1997
ASSETS
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Investment in Securities--Sponsor's Contracts to Purchase
Underlying Securities Backed by Letter of Credit (cost $211,948)(Note 1).......................... $211,948
Organizational Costs (Note 2)........................................................................... 14,250
Offering Costs (Note 3)................................................................................. 10,750
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Total................................................................................................... $236,948
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LIABILITIES AND INTEREST OF CERTIFICATEHOLDERS
Accrued Liabilities (Notes 2 and 3)..................................................................... $25,000
Interest of Certificateholders - Units of Fractional
Undivided Interest Outstanding (Series 12: 21,839 Units)......................................... 211,948
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Total................................................................................................... $236,948
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Net Asset Value per Unit................................................................................ $9.71
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Notes to Statement:
(1) Equity Securities Trust, Series 12, 1997 Triple Strategy Trust II (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 objective of
the Trust, sponsored by Reich & Tang Distributors L.P. (the "Sponsor") is to
maximize total return through capital appreciation and current dividend income.
On May 6, 1997, 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 21,839 units of the Trust. An irrevocable letter
of credit issued by the Bank of Boston in an amount of $1,000,000 has been
deposited with the Trustee for the benefit of the Trust to cover the purchases
of such Securities as well as any outstanding purchases of previously-sponsored
unit investment trusts of the Sponsor. 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 May 5, 1997.
The Trust will terminate on June 8, 1998 or earlier under certain circumstances
as further described in the Prospectus.
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 12
1997 TRIPLE STRATEGY TRUST II
PORTFOLIO
AS OF OPENING OF BUSINESS, MAY 6, 1997
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<CAPTION>
Market
Value of Cost of
Number Stocks as a Securities
of Percentage Current Market to the
Portfolio Shares Name of Issuer Ticker of the Dividend Value Per Trust
No. Symbol Trust(1) Yield(3) Share (4)
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1. 835 AT&T Corporation T 13.35% 3.91% $33.875 $28,286
2. 57 Chevron Corporation CHV 1.89 3.31 70.250 4,004
3. 48 Eastman Kodak Company EK 1.88 2.12 82.875 3,978
4. 37 E.I. du Pont de Nemours & DD 1.89 2.33 108.250 4,005
Company
5. 490 Exxon Corporation XON 13.55 2.70 58.625 28,726
6. 488 General Motors Corporation GM 13.35 3.47 58.000 28,304
7. 622 International Paper Company IP 13.28 2.21 45.250 28,146
8. 38 J.P. Morgan & Company JPM 1.88 3.37 104.750 3,980
9. 45 Minnesota, Mining & MMM 1.92 2.35 90.375 4,067
Manufacturing Co.
10. 1783 Philip Morris Companies, Inc. MO 37.01 3.63 44.000 78,452
Total Investment in Securities 100% $211,948
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FOOTNOTES TO PORTFOLIO
(1) Based on the cost of the Securities to the Trust.
(2) Contracts to purchase the Securities were entered into on May 5, 1997. All
such contracts are expected to be settled on or about the First Settlement
Date of the Trust which is expected to be May 9, 1997.
(3) Current Dividend Yield for each security was calculated by annualizing the
last quarterly or semi-annual ordinary dividend received on the security
and dividing the result by its market value as of the close of trading on
May 5, 1997.
(4) 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 $212,541. The Sponsor's Loss
on the Initial Date of Deposit is $593.
The accompanying notes form an integral part of the Financial Statements.
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustee and Certificateholders,
Equity Securities Trust, Series 12,
1997 Triple Strategy Trust II
In our opinion, the accompanying Statement of Financial Condition,
including the Portfolio, presents fairly, in all material respects, the
financial position of Equity Securities Trust, Series 12, 1997 Triple Strategy
Trust II (the "Trust") at opening of business, May 6, 1997, 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, May 6, 1997, by correspondence with the Sponsor, provides a reasonable
basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
May 6, 1997
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NOW YOU CAN TAKE ADVANTAGE OF THREE WINNING STRATEGIES
THE TRUST
Investing in the stock market has proven year after year to be a good way
to beat inflation. The Dow Jones Industrial Average (DJIA)* is a leading stock
market indicator that provides the data for this fact. This average is a
sampling of thirty stocks that represent some of the largest and strongest
companies in the world. Their long record of steady earnings, financial
resources and economic power have earned them the investor confidence that has
given them the nickname "blue chip" stocks.
THE STRATEGY
Now you have the opportunity to invest in three strategies simultaneously
that have been proven to "beat" the DJIA without having to spend the time,
effort and money to buy each stock individually. The Triple Strategy Trust is a
unit investment trust portfolio designed to take advantage of three winning
strategies. Historically, these three strategies have each individually beaten
the returns of the DJIA over the past twenty-two years. The first strategy is to
pick the Top Ten highest yielding stocks of the thirty stocks that are contained
in the DJIA. The second strategy is to choose the five lowest priced stocks of
the Top Ten. We call these the Focus Five. The last strategy is to choose the
second lowest priced stock of the Focus Five. This is called the Penultimate
Pick. These three strategies are then combined to produce a portfolio of ten
stocks with the weighting among the strategies selected by the Sponsor. Each
stock's concentration will reflect the individual weightings of the three
strategies. Both Chart A and Chart B show the effect these strategies may have
on your investment. For example, if you had invested $10,000 in 1975 in the
DJIA, your investment would be worth approximately $250,000 today, and if,
hypothetically, you had invested the same $10,000 during the same time period,
applying the Triple Strategy, your investment would be worth approximately
$1,000,000 today. These returns do not include sales charge, commissions, or
reflect the effect of market fluctuations if a portfolio of the strategies was
sold at any point in time, and there can be no assurance that these results will
be achieved. Past performance is no guarantee of future results.
[Chart A is a bar graph and Chart B is a shaded line graph both illustrating the
cumulative results of a $10,000 investment for the period from 1975 through
1996.]
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* The DJIA is the property of Dow Jones & Company, Inc. and the company is
not affiliated with the Sponsor and has not participated in any way in the
creation of the trust or in the portfolio and has not approved any
information included herein.
487073.2
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THE TRUST'S CONCEPT
The Trust's concept is a simple one: To create a portfolio which combines
these three winning strategies. The diversification of the Top Ten stocks
combined with a concentration of the higher yielding Penultimate Pick and the
Focus Five stocks gives the Trust the opportunity to produce above average
returns. The portfolio is held for one year and then it is liquidated. (For more
information see "Options at termination.")
PRINCIPALS OF INVESTING IN THE TRIPLE STRATEGY TRUST;
Time Invested vs. Investment Timing - This Trust is based on the theory that you
are rolling over your portfolio each year. The Trust may not exceed the DJIA in
any one year; however, historically, long term cumulative returns from this
philosophy beat the DJIA. It's not the timing of the purchase that counts, it's
the length of time that you are invested. Contrarian Reasoning - Buy what others
are selling. Dividends Count - Dividends contribute greatly to your total
return. Layered Strategies Work - Look at Chart A in this brochure and notice
how the DJIA has been beaten by these three strategies. It is our opinion that
if one strategy works well then three strategies may work better.
ONE PORTFOLIO, THREE STRATEGIES
IF YOU ARE LOOKING FOR A GOOD OPPORTUNITY TO INVEST WITH A
STRATEGY THAT HAS CONSISTENTLY OUTPERFORMED THE MOST POPULAR
STOCK MARKET INDICATOR, THEN THIS MAY BE THE INVESTMENT FOR YOU.
FEATURES and BENEFITS
o Convenience - Ownership of ten blue chip stocks with the ease of a single
purchase.
o Liquidity - You may sell your units on any business day at the then
current net asset value. However, since market values fluctuate, your
units may be worth more or less than your original investment.
o Low minimum investment - Invest as little as $1,000.
o Options at termination - You may receive cash, stock-in-kind (unitholders
owning 2,500 units or more) or roll your proceeds into the new Triple
Strategy Trust at a reduced sales charge.
o No management fees - This is an unmanaged portfolio and therefore no
additional management fees are charged.
Risk Considerations - An investment in Units of the Trust should be made with an
understanding of the risks associated with investments in common stocks, which
include the risk that the financial condition of the issuers may become impaired
or that the general condition of the stock market may worsen. In addition,
because the Trust may be considered to be "concentrated" in stocks of companies
deriving a substantial portion of their income from a singular industry, and
that the combination of the three investment strategies causes the Trust to be
"concentrated" in the Penultimate Pick, investors should consider the greater
risk of such concentrations and the effect on their investment versus a more
diversified portfolio and compare those returns before making an investment
decision. Units of the Trust are not deposits or obligations of, or guaranteed
by, any bank and Units are not federally insured or otherwise protected by the
Federal Deposit Insurance Corporation and involve investment risk including loss
of principal.
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EQUITY SECURITIES TRUST
SERIES 12
1997 TRIPLE STRATEGY TRUST II
PROSPECTUS PART B
PART B OF THIS PROSPECTUS MAY NOT BE
DISTRIBUTED UNLESS ACCOMPANIED BY
PART A
THE TRUST
ORGANIZATION. Equity Securities Trust, Series 12, 1997 Triple Strategy
Trust II 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
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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 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 attempting to outperform 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
combination of the three investment strategies is hereinafter referred to as the
"Triple Strategy".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, overlap will result in a
difference in the actual weighting of the stocks in the portfolio 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. 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
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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, at which time 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 (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, 6 of the original
companies are still in the DJIA today. For two periods of 17 consecutive years
each, there were no changes to the list: March 1939 - July 1956 and June 1959 -
August 1976. The DJIA last changed on March 17, 1997.
List as of October 1, 1928 Current List
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Allied Chemical AT&T Corporation
American Can Allied Signal
American Smelting Aluminum Company of America
American Sugar American Express Company
American Tobacco Boeing Company
Atlantic Refining Caterpillar Inc.
Bethlehem Steel Corporation Chevron Corporation
Chrysler Corporation Coca-Cola Company
General Electric Company E.I. du Pont de Nemours & Company
General Motors Corporation Eastman Kodak Company
General Railway Signal Exxon Corporation
Goodrich General Electric Company
International Harvester General Motors Corporation
International Nickel Goodyear Tire & Rubber Company
Mack Trucks Hewlett-Packard Co.
Nash Motors International Business Machines Corporation
North American International Paper Company
Paramount Publix Johnson & Johnson
Postum, Inc. J.P. Morgan & Company
McDonald's Corporation
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Radio Corporation of America (RCA) Merck & Company, Inc.
Sears, Roebuck & Company Minnesota Mining & Manufacturing Company
Standard Oil of New Jersey Philip Morris Companies, Inc.
Texas Corporation Proctor & Gamble Company
Texas Gulf Sulphur Sears, Roebuck & Company
Union Carbide Corporation Travelers Corp. Inc.
United States Steel Company Union Carbide Corporation
Victor Talking Machine United Technologies Corporation
Westinghouse Electric Corporation Wal-Mart Stores, Inc.
Woolworth Corporation Walt Disney Company
Wright Aeronautical
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, 1997 Triple Strategy Trust II was
not available until this year, during the last 22 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, Penultimate Pick and the combined Triple Strategy at the beginning
of each year and rolling over the proceeds. The total returns do not reflect
sales charges, commissions or taxes. These results represent past performance of
the Top Ten, Focus Five, Penultimate Pick and Triple Strategy, and should not be
considered indicative of future results of the Trust. The Trust's annual total
return may not exceed the DJIA in any one year; however, historically, long term
cumulative total returns from these strategies has outperformed the cumulative
returns of the DJIA. The Top Ten, Focus Five, Penultimate Pick and Triple
Strategy 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, Penultimate Pick or Triple Strategy 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, Penultimate Pick
or Triple Strategy in each of the past 22 years, as of December 31 in each of
these years:
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COMPARISON OF TOTAL RETURNS(1)
<TABLE>
<CAPTION>
Dow Jones
Industrial
Penultimate Triple Average
Year Ended Top Ten(2) Focus Five(2) Pick(2) Strategy(3) (DJIA)
<S> <C> <C> <C> <C> <C>
1975 55.90% 70.10% 157.20% 84.68% 44.40%
1976 34.80 40.76 55.10 42.46 22.70
1977 0.90 4.50 4.30 3.74 -12.70
1978 0.10 1.70 1.00 1.20 2.70
1979 12.40 9.90 -10.10 6.40 10.50
1980 27.22 40.52 50.60 39.86 21.50
1981 5.00 0.00 27.30 6.46 -3.40
1982 23.60 37.40 95.30 46.22 25.79
1983 38.70 36.11 36.10 36.62 25.70
1984 7.60 12.60 -2.80 8.52 1.10
1985 29.50 37.84 26.40 33.86 32.80
1986 32.10 27.90 29.60 29.08 26.90
1987 6.10 11.06 3.30 8.54 6.00
1988 22.90 18.40 19.50 19.52 16.00
1989 26.50 10.50 12.90 14.18 31.70
1990 -7.57 -15.27 -17.40 -14.12 -0.40
1991 39.30 61.79 185.60 82.12 23.90
1992 7.90 23.10 69.10 29.26 7.40
1993 27.30 34.30 39.10 33.86 16.80
1994 4.15 8.60 -37.40 -1.50 4.90
1995 36.70 30.50 21.70 29.98 36.40
1996 27.90 26.00 28.10 26.80 28.90
</TABLE>
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(1) Total Return represents the sum of Appreciation and Actual Dividend Yield.
(i) 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 of 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. (ii) 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. Total return does not take into consideration any sales
charges, commissions, expenses or taxes.
(2) 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.
(3) The Triple Strategy combines the Total Return of the three investment
strategies, the Top Ten, Focus Five and Penultimate Pick, in any given year
based upon the same weighted average which the Trust will be employing: 20%
comprised of the Top Ten, 60% of the Focus Five and 20% of the Penultimate
Pick.
These results represent past performance and should not be considered
indicative of future results of the Trust. Unit prices may fluctuate with
the value of the underlying stocks, and there is no assurance that dividends
on these stock will be paid or that the Units will appreciate in value.
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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 of
the factors that have an impact on the economy and the equity markets. These
factors similarly impact 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 30-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
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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 30-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 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
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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. 20549. Copies can be obtained from the Public Reference Section
of the Securities and Exchange Commission at the same address at prescribed
rates.
TOBACCO COMPANIES. The Trust may be considered to be concentrated in the
common stock of a company engaged in the production and distribution of tobacco
products. Litigation, congressional regulatory efforts and adverse publicity
continue to effect the tobacco industry.
The U.S. tobacco products industry has undergone substantial consolidation
over the years. Prompted mainly by the combined challenges of declining U.S.
consumption trends in a highly developed marketplace and the steady rise in
legal and regulatory burdens, many manufacturers have consolidated in order to
remain competitive. The domestic cigarette industry is an approximately $45
billion industry, with cigarettes accounting for nearly 95% of the total. The
remaining 5% of usage is for cigars, moist smokeless tobacco, chewing tobacco,
and snuff. The three leading cigarette producers, Philip Morris Cos., RJR
Nabisco Holdings and Brown & Williamson, account for approximately 90% of
domestic sales. This market condition has produced cartel-like pricing practices
and abnormally high profit margins, cash flows, and investment returns.
Ironically, government-imposed regulations placed on this industry over the
years may have actually helped make the industry even more profitable. The
increased restrictions on where the industry can advertise (all forms of
electronic media advertising were banned in 1971) have allowed these companies
to keep their marketing spending well below the levels that they would have
otherwise been.
The number of reports linking cigarette smoking with bad health is
growing. Recent reports have included medical findings scientifically linking
cigarette smoking with cancer and the Environmental Protection Agency's staff
linking secondhand smoke exposure to cancer among nonsmokers. In addition,
Congress's effort to impose federally mandated smoking, harsher health warnings,
a ban on tobacco marketing to under age consumers and possibly higher federal
taxes will also effect the industry's outlook.
U.S. consumption of cigarettes in 1996 is estimated by the U.S. Department
of Agriculture ("USDA") to be essentially unchanged from 1995's level of
approximately 487 billion cigarettes (or 24.3 billion packs). That will mark the
fourth consecutive year of stable total consumption, which previously had
declined at an average of 2% to 3% annually in the two decades preceding 1993.
Selling-price restraints in recent years have halted the long decline in
cigarette unit sales. However, many factors remain that will continue to place
downward pressure on unit sales in the future. These factors include the
increased number of restrictions on where people can smoke, publicity about the
dangers of smoking, and the declining social acceptance of cigarette smoking.
In an effort to compensate for bleak growth prospects in home markets,
domestic cigarette companies have for many years looked for growth abroad.
Expanding international markets during the late 1980s resulted in rapidly rising
marketing quotas. However, demand for U.S. tobacco dropped sharply in 1992 and
1993 due to a world excess supply of less
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expensive foreign tobacco. Changes in manufacturing blending practices to
accommodate increasing domestic demand for low-priced generic cigarettes were
another factor. U.S. cigarette manufacturers responded by importing record
levels of the less-expensive tobacco to blend into existing supplies. Faced with
declining domestic sales and marketing quotas, the U.S. tobacco program was
modified in 1993 to effectively limit the volume of imported tobacco.
Cigarettes are subject to substantial excise taxes in the United States
and similar taxes in most foreign markets. This taxation has had an adverse
effect on per-capita cigarette consumption. The USDA estimated that from January
1993 to the end of 1996, annual per-capita consumption of cigarettes will have
fallen by an estimated 6%, to a projected 125 packs per person. This 1.5%
annualized drop in per-capita consumption would have likely been even greater if
the retail price of cigarettes had risen steeply. It actually only rose by 1.5%
annually; this rate of price increase was well below that of other products in
the 1980s, which averaged nearly 10% per year.
Changes in disposable personal income are important for observers of the
tobacco industries to note because they influence how much consumers spend on
those products. Although the quantity of such products consumed tends to remain
steady during both good times and bad, consumers tend to "trade down" to less
expensive brands during recessions. Conversely, good economic times tend to help
sales of premium-priced products.
The Sponsor believes that the information summarized above for the tobacco
companies describes some of the more significant aspects relating to the risks
associated with investing in the Trust which may have a "concentration" in this
industry. The sources of such information are obtained from research reports as
well as other publicly available documents. While the Sponsor has not
independently verified this information, it has no reason to believe that such
information is not correct in all material respects.
LEGISLATION. From time to time Congress considers proposals to reduce the
rate of the dividends-received deduction 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.
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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 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
--------------- --------------------------------
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 1.95% 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
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"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 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 2.25% 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
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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.
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
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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 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:
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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.
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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 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
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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.
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 4 New York Plaza,
New York, New York 10004, 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
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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 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.
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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 are not liable to any person or
in any way for any loss or damage which may result from any such suspension or
postponement.
A 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.
(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
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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. Any brokerage commissions received by the Sponsor
from the Trust in connection with
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such sales will be 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 by returning a properly completed election request (to
be supplied to Certificateholders at least 20 days prior to such date):
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 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 30 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 30 days
immediately following the commencement of the Liquidation Period, in units
of a subsequent series of Equity Securities Trust, Triple Strategy Trust
(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 30 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
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of hostilities and collapse of the economy, on each business day during the 30
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 30 day sales period. The Redemption
Price Per Unit upon the settlement of the last sale of Securities during the 30
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 30 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 30 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 30 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.
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.
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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
twelve subsidiaries, divisions and affiliates offering a wide array of
investment styles and products to institutional clients. These affiliates in the
aggregate are investment advisors or managers to over 43 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).
On August 30, 1996, New England Mutual Life Insurance Company ("The
New England") and Metropolitan Life Insurance Company ("MetLife") merged, with
MetLife being the continuing company. RTAM L.P. remains 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, owns 51% of the outstanding limited
partnership interest of NEIC L.P. MetLife is a mutual life insurance company
with assets of $142.2 billion at March 31, 1996. It is the second largest life
insurance company in the United States in terms of total assets. MetLife
provides a wide range of insurance and investment products and services to
individuals and groups and is the leader among United States life insurance
companies in terms of total life insurance in force, which exceeded $1.2
trillion at March 31, 1996 for MetLife and its insurance affiliates. MetLife and
its affiliates provide insurance or other financial services to approximately 36
million people worldwide.
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 4 New York Plaza, New York,
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<PAGE>
New York 10004. The Trustee is subject to supervision by the Superintendent of
Banks of the State of New York, the Federal Deposit Insurance Corporation and
the Board of Governors of the Federal Reserve System.
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, 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
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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.
Unless the Sponsor otherwise directs, 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.
REINVESTMENT PLAN
Income and principal distributions on Units (other than the final
distribution in connection with the termination of the Trust) may be reinvested
by participating in the Trust's reinvestment plan. Under the plan, the Units
acquired for participants will be either Units already held in inventory by the
Sponsor or new Units created by the Sponsor's deposit of Additional Securities
as described in "The Trust-Organization" in this Part B. Units acquired by
reinvestment will be subject
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to a reduced sales charge of 1.00%. In order to enable a Certificateholder to
participate in the reinvestment plan with respect to a particular distribution
on their Units, written notification must be received by the Trustee within 10
days prior to the Record Date for such distribution. Each subsequent
distribution of income or principal on the participant's Units will be
automatically applied by the Trustee to purchase additional Units of the Trust.
The Sponsor reserves the right to demand, modify or terminate the reinvestment
plan at any time without prior notice. The reinvestment plan for the Trust may
not be available in all states.
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 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, any
purchaser who purchases Units under the Exchange Privilege will pay a lower
sales charge than that which would be paid for the Units by a new investor. 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) the
reduced sales charge or (ii) an amount which when coupled with the sales charge
paid by the Certificateholder upon his original purchase of Units of the Trust
would equal the sales charge applicable in the direct purchase of units of an
Exchange Trust.
Exercise of the Exchange Privilege by Certificateholders is subject to the
following conditions (i) the Sponsor must be maintaining a secondary market in
the units of the available Exchange Trust, (ii) at the time of the
Certificateholder's election to participate in the Exchange Privilege, there
must be units of the Exchange Trust available for sale, either under the initial
primary distribution or in the Sponsor's secondary market, (iii) exchanges will
be effected in whole units only, (iv) Units of the Mortgage Securities Trust may
only be acquired in blocks of 1,000 Units and (v) Units of the Equity Securities
Trust may only be acquired in blocks of 100 Units. Certificateholders will not
be permitted to advance any funds in excess of their redemption in order to
complete the exchange. Any excess proceeds received from a Certificateholder for
exchange will be remitted to such Certificateholder.
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
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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.
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.
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 determined as set forth in
the relevant Redemption Trust's prospectus. The purchase price of the units will
be based on the aggregate offer price of the in the Conversion Trust's portfolio
securities 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,
any Certificateholder who purchases Units under the Conversion Offer will pay a
lower sales charge than that which would be paid for the Units by a new
investor. 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) the reduced sales charge 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 would equal the sales charge applicable in the
direct purchase of Units of a Conversion Trust.
The exercise of the Conversion Offer is subject to the following
limitations: (i) the Conversion Offer is limited only to unit owners of any
Redemption Trust, (ii) 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,
(iii) exchanges under the Conversion Offer will be effected in whole units only,
(iv) units of the Mortgage Securities Trust may only be acquired in blocks of
1,000 units, (v) units of the Equity Securities Trust may only be acquired in
blocks of 100 Units. 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.
B-26
487073.2
<PAGE>
The Sponsor reserves the right to modify, suspend or terminate the
Conversion Offer. The Sponsor will provide Certificateholders with 60 days prior
written notice of any termination or material amendment to the Conversion Offer,
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 Trusts eligible for the Conversion
Offer, to add any new unit investment trust sponsored by Reich & Tang or a
sponsor controlled by or under common control with Reich & Tang, or to delete a
series which has been terminated from eligibility for the Conversion Offer, (ii)
there is a suspension of the redemption of units of a Conversion Trust under
Section 22(e) of the Act, or (iii) a Conversion 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.
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, 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 a portion of the sales
charge.
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 Financial Condition, including
the Portfolio, is 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.
B-27
487073.2
<PAGE>
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 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.
B-28
487073.2
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B-29
487073.2
<PAGE>
<TABLE>
<S> <C>
No person is authorized to give any information or to ----------------------------------------------------
make any representations not contained in Parts A and B of EQUITY SECURITIES TRUST
this Prospectus; and any information or representation not ----------------------------------------------------
contained herein must not be relied upon as having been THE TRIPLE STRATEGY 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 12
guaranteed, sponsored, recommended or approved by the 1997 TRIPLE STRATEGY TRUST II
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: MAY 6, 1997
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
Statement of Financial Condition...........................A-6
Portfolio..................................................A-7
Report of Independent Accountants..........................A-8 TRUSTEE:
PART B THE CHASE MANHATTAN BANK
The Trust.................................................B-1 4 New York Plaza
Risk Considerations.......................................B-6 New York, New York 10004
Public Offering...........................................B-10
Rights of Certificateholders..............................B-12
Tax Status................................................B-13
Liquidity.................................................B-16
Trust Administration......................................B-18
Trust Expenses and Charges................................B-23
Reinvestment Plan.........................................B-24
Exchange Privilege and Conversion Offer...................B-25
Other Matters.............................................B-27
</TABLE>
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.
487073.2
