As filed with the Securities and Exchange Commission on September 11, 1997
Registration No. 333-31133
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-6
For Registration Under the Securities Act
of 1933 of Securities of Unit Investment
Trusts Registered on Form N-8B-2
---------------------
A. EXACT NAME OF TRUST:
Schwab Trusts, Schwab Ten Trust, 1997 Series A
B. NAME OF DEPOSITORS:
Charles Schwab & Co., Inc. Reich & Tang Distributors L.P.
C. COMPLETE ADDRESS OF DEPOSITORS' PRINCIPAL EXECUTIVE OFFICES:
Charles Schwab & Co., Inc. Reich & Tang Distributors L.P.
101 Montgomery Street 600 Fifth Avenue
San Francisco, California 94104 New York, New York 10020
D. NAME AND COMPLETE ADDRESS OF AGENT FOR SERVICE:
<TABLE>
<S> <C> <C> <C>
COPY OF COMMENTS TO:
FRANCES COLE, ESQ. PETER J. DEMARCO MICHAEL R. ROSELLA, Esq.
Charles Schwab & Co., Inc. Reich & Tang Distributors L.P. Battle Fowler LLP
101 Montgomery Street 600 Fifth Avenue 75 East 55th Street
San Francisco, California 94104 New York, New York 10020 New York, New York 10022
(212) 856-6858
</TABLE>
E. TITLE AND AMOUNT OF SECURITIES BEING REGISTERED:
An indefinite number of Units of Schwab Trusts, Schwab Ten Trust,
1997 Series A is being registered under the Securities Act of 1933
pursuant to Section 24(f) of the Investment Company Act of 1940, as
amended, and Rule 24f-2 thereunder.
F. PROPOSED MAXIMUM AGGREGATE OFFERING PRICE TO THE PUBLIC OF THE SECURITIES
BEING REGISTERED:
Indefinite
G. AMOUNT OF FILING FEE:
No filing fee required.
H. APPROPRIATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after the effective date of the Registration Statement.
/ / Check if it is proposed that this filing will become immediately upon
filing pursuant to Rule 487.
The registrant hereby amends the registration statement on such date or dates as
may be necessary to delay its effective date until the registrant shall file a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
606976.2
<PAGE>
Schwab Trust, Schwab Ten Trust, 1997 Series A
CROSS-REFERENCE SHEET
Pursuant to Rule 404 of Regulation C
Under the Securities Act of 1933
(Form N-8B-2 Items Required by Instruction as
to the Prospectus in Form S-6)
<TABLE>
<CAPTION>
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
----------- ---------------------
I. Organization And General Information
<S> <C> <C>
1. (a) Name of trust.......................................................... Front cover of Prospectus
(b) Title of securities issued............................................. Front cover of Prospectus
2. Name and address of each depositor.......................................... The Sponsors
3. Name and address of trustee................................................. The Trustee
4. Name and address of principal underwriters.................................. Distribution of Units
5. State of organization of trust.............................................. Organization
6. Execution and termination of trust agreement................................ Trust Agreement, Amendment and Termination
7. Changes of name............................................................. None
8. Fiscal year................................................................. Not applicable
9. Litigation.................................................................. None
II. General Description of The Trust and Securities of the Trust
10. (a) Registered or bearer securities......................................... Book-Entry Units
(b) Cumulative or distributive securities................................... Interest and Principal Distributions
(c) Redemption.............................................................. Trustee Redemption
(d) Conversion, transfer, etc............................................... Book-Entry Units, Sponsors Repurchase,
Trustee Redemption
(e) Periodic payment plan................................................... Not Applicable
(f) Voting rights........................................................... Trust Agreement, Amendment and Termination
(g) Notice to certificateholders............................................ Records, Portfolio, Substitution of
Securities, Trust Agreement,
Amendment and Termination, The
Sponsors, The Trustee
(h) Consents required....................................................... Trust Agreement and Amendment, Trust
Termination
(i) Other provisions........................................................ Tax Status
11. Type of securities comprising units.......................................... Objective, Portfolio, The Securities,
Substitution of Securities
12. Certain information regarding periodic payment certificates................. Not Applicable
-i-
606976.2
<PAGE>
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
----------- ---------------------
13. (a) Load, fees, expenses, etc........................................ Summary of Essential Information, Public Offering
Price, Discounts, Sponsors' Profits, Trust
Administration, Trust Expenses and Charges,
Reinvestment Plan
(b) Certain information regarding periodic payment
certificates.............................................. Not Applicable
(c) Certain percentages.............................................. Summary of Essential Information, Public Offering
Price, Discounts
(d) Price differences................................................ Discounts, Distribution of Units
(e) Other loads, fees, expenses...................................... None
(f) Certain profits receivable by depositors, principal
underwriters, trustee or affiliated persons............... Trust Termination
(g) Ratio of annual charges to income................................ Not Applicable
14. Issuance of trust's securities........................................ Organization, Book-Entry Units
15. Receipt and handling of payments from purchasers...................... Public Offering Price
16. Acquisition and disposition of underlying securities.................. Organization, Substitution of Securities,
Portfolio, Portfolio Supervision
17. Withdrawal or redemption.............................................. Summary of Essential Information, Market for
Units, Sponsors Repurchase, Trustee
Redemption
18. (a) Receipt, custody and disposition of income....................... Distributions
(b) Reinvestment of distributions.................................... Reinvestment Plan
(c) Reserves or special funds........................................ Distributions
(d) Schedule of distributions........................................ Not Applicable
19. Records, accounts and reports......................................... Records
20. Certain miscellaneous provisions of trust agreement
(a) Amendment........................................................ Trust Agreement and Amendment, Trust Termination
(b) Termination...................................................... Trust Agreement and Amendment, Trust Termination
(c) and (d) Trustee, removal and successor........................... The Trustee
(e) and (f) Depositor, removal and successor......................... The Sponsors
21. Loans to security holders............................................. None
22. Limitations on liability.............................................. The Sponsors, The Trustee Evaluation of the Trust
23. Bonding arrangements.................................................. Part II - Item A
24. Other material provisions of trust agreement.......................... None
III. Organization, Personnel and Affiliated Persons of Depositor
25. Organization of depositor.............................................. The Sponsors
26. Fees received by depositor............................................. Not Applicable
27. Business of depositor.................................................. The Sponsors
-ii-
606976.2
<PAGE>
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
----------- ---------------------
28. Certain information as to officials and affiliated persons of
depositor.......................................................... Not Applicable
29. Voting securities of depositor........................................ Not Applicable
30. Persons controlling depositor......................................... None
31. Payments by depositor for certain services
rendered to trust......................................... Not Applicable
32. Payments by depositor for certain other services
rendered to trust.................................................. Not Applicable
33. Remuneration of employees of depositor for certain services
rendered to trust.................................................. Not Applicable
34. Remuneration of other persons for certain services
rendered to trust.................................................. Not Applicable
IV. Distribution and Redemption of Securities
35. Distribution of trust's securities by states.......................... Distribution of Units
36. Suspension of sales of trust's securities............................. None
37. Revocation of authority to distribute................................. None
38. (a) Method of distribution........................................... Distribution of Units
(b) Underwriting agreements.......................................... Distribution of Units
(c) Selling agreements............................................... Distribution of Units
39. (a) Organization of principal underwriters........................... The Sponsors
(b) N.A.S.D. membership of principal underwriters.................... The Sponsors
40. Certain fees received by principal underwriters....................... The Sponsors
41. (a) Business of principal underwriters............................... The Sponsors
(b) Branch offices of principal underwriters......................... None
(c) Salesmen of principal underwriters............................... Not Applicable
42. Ownership of trust's securities by certain persons.................... Not Applicable
43. Certain brokerage commissions received by
principal underwriters................................... Not Applicable
44. (a) Method of valuation............................................. Summary of Essential Information, Statement of
Financial Condition, Liquidity, Distributions
(b) Schedule as to offering price................................... Summary of Essential Information
(c) Variation in offering price to certain persons.................. Distribution of Units, Discounts
45. Suspension of redemption rights...................................... Not Applicable
46. (a) Redemption valuation............................................ Summary of Essential Information, Market for Units,
Termination, Offering Price, Sponsors Repurchase,
Trustee Redemption
(b) Schedule as to redemption price................................. Summary of Essential Information
-iii-
606976.2
<PAGE>
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
----------- ---------------------
47. Maintenance of position in underlying securities................. Market for Units, Offering Price, Sponsors Repurchase,
Trustee Redemption
V. Information Concerning the Trustee or Custodian
48. Organization and regulation of trustee................................ The Trustee
49. Fees and expenses of trustee.......................................... Trust Expenses and Charges
50. Trustee's lien........................................................ Trust Expenses and Charges
VI. Information Concerning Insurance of Holders of Securities
51. Insurance of holders of trust's securities............................ Not Applicable
VII. Policy of Registrant
52. (a) Provisions of trust agreement with respect to selection or
elimination of underlying securities.................... Portfolio Supervision, Substitution of Securities,
Agreement and Amendment, Trust Termination
(b) Transactions involving elimination of underlying
securities................................................ Not Applicable
(c) Policy regarding substitution or elimination of underlying Portfolio Supervision, Substitution of Securities
securities................................................ Trust Agreement and Amendment, Trust Termination
(d) Fundamental policy not otherwise covered......................... None
53. Tax status of trust................................................... Tax Status
VIII. Financial and Statistical Information
54. Trust's securities during last ten years.............................. Not Applicable
55. Hypothetical account for issuers of periodic payment plans............ Not Applicable
56. Certain information regarding periodic payment certificates........... Not Applicable
57. Certain information regarding periodic payment plans.................. Not Applicable
58. Certain other information regarding
periodic payment plans.................................... Not Applicable
59. Financial statements (Instruction 1(c) to Form S-6)................... Statement of Financial Condition
</TABLE>
-iv-
606976.2
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these Securities has been filed with the
Securities and Exchange Commission. These Securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or solicitation
of an offer to buy nor shall there be any sale of these Securities in any State
in which such offer, solicitation or sale would be unlawful prior to the
registration or qualification under the Securities Laws of any state.
SUBJECT TO COMPLETION DATED SEPTEMBER 11, 1997
- --------------------------------------------------------------------------------
INSERT LOGO
- --------------------------------------------------------------------------------
SCHWAB TRUSTS
SCHWAB TEN TRUST, 1997 SERIES A
The Trust is a unit investment trust designated Schwab Ten Trust, 1997 Series A
(the "Trust"). The Sponsors are Charles Schwab & Co., Inc. and 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 Sponsors
cannot 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 investing in a portfolio of the DJIA's ten
highest dividend yielding common stocks (the "Strategic Ten"), determined as of
two business days prior to the Initial Date of Deposit. The Strategic Ten
strategy is also commonly referred to as the "Dogs of the Dow". The name "Dow
Jones Industrial Average" is the property of Dow Jones & Company, Inc., which is
not affiliated with the Sponsors 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 Sponsors 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, Unitholders who sell their Units prior to termination of
the Trust may receive more or less than their original purchase price upon sale.
No assurance can be given that dividends will be paid or that the Units will
appreciate in value. The Trust will terminate approximately one year after the
Initial Date of Deposit. The minimum purchase is $1,000 or 100 Units for
individual purchasers, and $250 or 25 Units for purchases by Individual
Retirement Accounts, self-employed retirement plans (formerly Keogh Plans),
pension funds and other tax-deferred retirement plans.
This Prospectus consists of two parts. Part A contains 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 ______ __, 1997
A-1
480911.7
<PAGE>
SUMMARY OF ESSENTIAL INFORMATION AS OF _______ __, 1997:*
<TABLE>
<S> <C> <C> <C>
DATE OF DEPOSIT: _______ __, 1997 CUSIP NUMBERS:
AGGREGATE VALUE OF SECURITIES............... $_____ Schwab Fee-Based Accounts:
AGGREGATE VALUE OF SECURITIES Cash: _________; Cash: __________
PER 100 UNITS........................... $_____ Reinvestment: __________ Reinvestment: _________
NUMBER OF UNITS............................. _____ TRUSTEE: The Chase Manhattan Bank
FRACTIONAL UNDIVIDED INTEREST IN TRUSTEE'S FEE: $___ per 100 Units outstanding
TRUST................................... 1/____ ORGANIZATIONAL EXPENSES****: $___ per 100
PUBLIC OFFERING PRICE PER 100 UNITS Units
Aggregate Value of Securities in OFFERING COSTS****: $___ per 100 Units
Trust.............................. $_____ OTHER FEES AND EXPENSES: $___ per 100 Units
Divided By ___ Units (times 100)........ $_____ outstanding
Public Offering Price per 100 Units**+ $_____ SPONSORS: Charles Schwab & Co., Inc. and Reich &
SPONSORS' REPURCHASE PRICE AND Tang Distributors L.P.
REDEMPTION PRICE PER AGENT FOR SPONSORS: Reich & Tang Distributors
100 UNITS++............................. $_____ L.P.
EVALUATION TIME: 4:00 p.m. New York Time. SPONSORS' PORTFOLIO SUPERVISORY,
MINIMUM INCOME OR PRINCIPAL BOOKKEEPING AND ADMINISTRATIVE FEE:
DISTRIBUTION: $1.00 per 100 Units Maximum of $___ per 100 Units outstanding (see
LIQUIDATION PERIOD: Beginning 30 days prior to "Trust Expenses and Charges" in Part B).
the Mandatory Termination Date. RECORD DATES: December 15 and June 15
MINIMUM VALUE OF TRUST: The Trust may be DISTRIBUTION DATES: December 31 and June 30
terminated if the value of the Trust is less than 40% ROLLOVER NOTIFICATION DATE*****: ______
of the aggregate value of the Securities at the __, 1998 or another date as determined by the Sponsors.
completion of the Deposit Period. DEFERRED SALES CHARGE PAYMENT DATES:
MANDATORY TERMINATION DATE: The earlier of The ______ of each month commencing
_____ __, 1998 or the disposition of the last
Security in the Trust. ____________ ___, 1997.
EXPECTED SETTLEMENT DATE***: , 1997
</TABLE>
- ------------------
* The business day prior to the Initial Date of Deposit. The Initial
Date of Deposit is the date on which the Trust Agreement was signed and the
deposit of Securities with the Trustee made.
** A Deferred Sales Charge of 1.25% of the Public Offering Price will
be paid through ten monthly deductions subsequent to the Initial Date of
Deposit. See "Public Offering-Discounts" in Part B for a description of reduced
deferred sales charges for certain investors. The Deferred Sales Charge is paid
through reduction of the net asset value of the Trust by $______ per 100 Units
on each Deferred Sales Charge Payment Date. (See "Public Offering - Offering
Price") On a repurchase or redemption of Units before the last Deferred Sales
Charge Payment Date, any remaining Deferred Sales Charge payments will be
deducted from the proceeds. Units purchased pursuant to the Reinvestment Plan
are subject to that portion of the Deferred Sales Charge remaining at the time
of reinvestment (see "Reinvestment Plan").
*** The business day on which contracts to purchase securities in the
Trust are expected to settle.
**** The Trust (and therefore the Unitholders) will bear all or a
portion of its organizational costs, which include the following: 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. These
figures are based upon the assumption that the Trust will reach a size of
_________ Units as estimated by the Sponsors; 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.
A-2
480911.7
<PAGE>
****** If a Unitholder ("Rollover Unitholder") so specifies on or prior to the
Rollover Notification Date, the Rollover Unitholder's terminating distribution
will be reinvested in an available series of the Schwab Ten Trust, 1998 Series,
if offered (see "Trust Administration--Trust Termination").
+ 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 ______ Units may, upon request by a
redeeming Unitholder, be made in kind. The Trustee will forward the distributed
securities to the Unitholder's broker-dealer account at The Depository Trust
Company in book-entry form. See "Liquidity--Trustee Redemption" in Part B. This
reflects deductions for the remaining Deferred Sales Charge payments ($________
initially).
A-3
480911.7
<PAGE>
FEE TABLE
- --------------------------------------------------------------------------------
This Fee Table is intended to help you to understand the costs and expenses that
you will bear directly or indirectly. See "Public Offering and Trust Expenses
and Charges." Although each Series has a term of only one year, and is a unit
investment trust rather than a mutual fund, this information is presented to
permit a comparison of fees, assuming the principal amount and distributions are
rolled over each year into a new Series subject only to the Deferred Sales
Charge.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Unitholder Transaction Expenses Maximum Reduced
Deferred Sales Charge Deferred Sales Charge
--------------------- ---------------------
As a % of Amount As a % of Amount
Initial per Initial per
Offering Price 100 Units Offering Price 100 Units
-------------- --------- -------------- ---------
<S> <C> <C> <C> <C>
Deferred Sales Charge per Year .................................... 1.25%* $ ------ 1.00%** $ ------
----- -------- ----- --------
Maximum Sales Charge Imposed Per Year on Reinvested Dividends...... 1.25%*** $------ 1.00%*** $-------
===== ======= ===== =======
Estimated Annual Fund Operating Expenses Amount
per Amount
As a % of 100 As a % of per
---
Net Assets Units Net Assets 100 Units
---------- ----- ---------- ---------
Trustee's Fee...................................................... ----% $------ ----% $------
Organizational Expenses............................................ ----% ------ ----% ------
Other Operating Expenses........................................... ----% ------ ----% ------
----- ------ ----- -------
Portfolio Supervision, Bookkeeping and Administrative Fees.. ----% ------ ----% ------
Total....................................................... ----% $------ ----% $------
===== ======= ===== =======
Examples
Maximum Deferred Sales Charge Example: Cumulative Expenses Paid for Period:
------------------------------------------------------------
3 5 10
1 year years years years
------ ----- ----- -----
An investor would pay the following expenses on a $1,000 investment, assuming the
Trust operating expense ratio of ______% and a 5% annual return on the investment
throughout the periods................................................................. $---- $---- $---- $----
Reduced Deferred Sales Charge Example: Cumulative Expenses Paid for Period:
-------------------------------------------------------------
3 5 10
1 year years years years
------ ----- ----- -----
An investor would pay the following expenses on a $1,000 investment, assuming the
Trust operating expense ratio of ______% and a 5% annual return on the investment
throughout the periods................................................................. $---- $---- $---- $----
</TABLE>
The Examples assume reinvestment of all dividends and distributions and
utilizes a 5% annual rate of return. For purposes of the Examples, the
Deferred Sales Charge imposed on reinvestment of dividends is not reflected
until the year following payment of the dividend; the cumulative expenses
would be higher if sales charges on reinvested dividends were reflected in the
year of reinvestment. The Examples should not be considered a representation
of past or future expenses or annual rate of return; the actual expenses and
annual rate of return may be more or less than those assumed for purposes of
the Examples.
- ------------------
* The actual fee is $_______ per month per 100 Units, irrespective of
purchase or redemption price, deducted in each of the last ten (10) months of
each one-year Portfolio. If a Holder sells Units before all of these deductions
have been made, the balance of the Deferred Sales Charge will be deducted from
the sales proceeds. If the Unit price exceeds $10 per Unit, the Deferred Sales
Charge will be less than _____%; if the Unit price is less than $10 per Unit,
the Deferred Sales Charge will exceed _____%.
** The actual fee is $________ per month per 100 Units, irrespective of
purchase or redemption price, deducted in each of the last ten (10) months of
each one-year Portfolio. If a Holder sells Units before all of these deductions
have been made, the balance of the Deferred Sales Charge will be deducted from
the sales proceeds. If the Unit price exceeds $10 per Unit, the Deferred Sales
Charge will be less than _____%; if the Unit price is less than $10 per Unit,
the Deferred Sales Charge will exceed _____%. See "Public Offering-Discounts" in
Part B for a description of which investors will be eligible for this reduced
Deferred Sales Charge.
*** Reinvested dividends will be subject only to the Deferred Sales
Charge remaining at the time of reinvestment (see "Reinvestment Plan" in this
Part A).
A-4
480911.7
<PAGE>
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 Sponsors) by creating a portfolio that follows
the investment strategy of investing in the DJIA's ten (10) common stocks having
the highest dividend yield (the "Strategic Ten"), determined as of two business
days prior to the Initial Date of Deposit. The Trust's portfolio will be
comprised of these ten (10) stocks. The Trust's assets will be allocated in
approximately equal amounts among the Strategic Ten. 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 this strategy
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 of common stock. 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:---------------------------------------------------
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------.
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. The deferred
sales charge of 1.25% (the "Deferred Sales Charge") will be payable in ten
monthly installments over the life of the Trust. 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." The Public Offering Price per Unit may vary on a daily basis in
accordance with fluctuations in the aggregate value of the underlying
Securities. 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.)
DEFERRED SALES CHARGE. The Deferred Sales Charge is a monthly charge which will
initially be $____ per 100 Units and is accrued in ten monthly installments
commencing on __________________, 1997 ($_____ total). See "Public Offering-
Discounts" in Part B for a description of reduced deferred sales charges for
certain investors. This deferred method of payment keeps more of the
Unitholders' money invested over a longer period of time. (See "Public Offering
- - Offering Price" in Part B.)
ESTIMATED NET ANNUAL DISTRIBUTIONS. The estimated net annual distributions to
Unitholders (based on the most recent quarterly or semi-annual ordinary dividend
distributed with respect to the Securities) as of two business days prior to the
Initial Date of Deposit per 100 Units was $________. This estimate will vary
with changes in the Trust's fee and expenses, actual dividends received, and
with the sale of Securities. There is no assurance that the estimated net annual
dividend distributions will be realized in the future.
A-5
480911.7
<PAGE>
DISTRIBUTIONS. Dividend distributions, if any, will be made on the Distribution
Dates to all Unitholders of record on the Record Date. For the specific on or
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
Unitholders--Distributions" in Part B.) Unitholders 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 the remainder of the Deferred Sales Charge. See "Reinvestment Plan" in Part
B.
MARKET FOR UNITS. The Sponsors, although not obligated to do so, intend 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--Sponsors Repurchase" for a description of how
the secondary market repurchase price will be determined.) If a market is not
maintained a Unitholder 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 Sponsors. 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
Sponsors for the sale of all or a portion of the Securities in the Trust. Any
brokerage commissions received by the Sponsors from the Trust in connection with
such sales will be in accordance with applicable law. The Sponsors will
determine the manner, timing and execution of the sales of the underlying
Securities. The Sponsors will attempt to sell the Securities as quickly as they
are able during the Liquidation Period without, in their 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 Sponsors do 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.
Unitholders 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 _______ 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
Schwab Ten Trust (the "New Trust") (if one is offered) at a reduced deferred
sales charge (see "Rollover Option"). See "Trust Administration--Trust
Termination" in Part B for a description of how to select a termination
distribution option. Unitholders who have not chosen to receive
distributions-in-kind will be at risk to the extent that the market value of the
Securities declines prior to their being sold during the Liquidation Period; for
this reason the Sponsors will be inclined to sell the Securities in as short a
period as they can without materially adversely affecting the price of the
Securities. Unitholders should consult their own tax advisers in this regard.
ROLLOVER OPTION. Unitholders may elect to roll over their terminating
distributions into the next available New Trust at a reduced deferred sales
charge. Rollover Unitholders must make this election on or prior to the Rollover
Notification Date. Upon making this election, a Unitholder's Units will be
redeemed and the proceeds will be reinvested in units of the next available New
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 contribute
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directly to a decrease in the value of the Securities and thus in the value of
the Units). 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 Sponsors. Investors should note that since the Portfolio of
the Trust will be determined as of two business days prior to the Initial Date
of Deposit, any changes in the components of the DJIA or the Strategic Ten
following such determination will not cause a change in the composition of the
Portfolio. Since the Trust will not sell Securities in response to ordinary
market fluctuation, but only (except for certain extraordinary circumstances) 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 Unitholder's Units and the income per Unit received by the Trust.
The Sponsors 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. Unitholders 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, subject only to
any remaining deductions of the Deferred Sales Charge. See "Reinvestment Plan"
in Part B for details on how to enroll in the Reinvestment Plan.
UNDERWRITING. Charles Schwab & Co., Inc., 101 Montgomery Street, San Francisco,
California 94104, will act as Underwriter for all of the Units of the Schwab Ten
Trust, 1997 Series A. Units of the Trust shall be distributed exclusively by the
Underwriter to its customers (see "Public Offering--Distribution of Units" in
Part B).
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SCHWAB TEN TRUST,
1997 SERIES A
STATEMENT OF FINANCIAL CONDITION AS OF OPENING OF BUSINESS, _______ __, 1997
ASSETS
<TABLE>
<S> <C>
Investment in Securities--Sponsors' Contracts to Purchase
Underlying Securities Backed by Letter of Credit (cost $_______)(Note 1)............... $___________
Organizational Costs (Note 2)................................................................... ___________
Offering Costs (Note 3)......................................................................... ___________
Total........................................................................................... $===========
LIABILITIES AND INTEREST OF UNITHOLDERS
Accrued Liabilities (Notes 2 and 3)............................................................. $___________
Interest of Unitholders - Units of Fractional
Undivided Interest Outstanding (1997 Series A: ______ Units).......................... ___________
Total........................................................................................... $===========
Net Asset Value per Unit........................................................................ $===========
- -------------------------
Notes to Statement:
(1) Schwab Ten Trust, 1997 Series A (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, jointly sponsored by
Charles Schwab & Co., Inc., and Reich & Tang Distributors L.P. (the "Sponsors")
is to maximize total return through capital appreciation and current dividend
income. On _______ __, 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 ______ Units of the Trust. An
irrevocable letter of credit issued by ___________ in an amount of $_______ has
been deposited with the Trustee for the benefit of the Trust to cover the
purchases of such Securities. Aggregate cost to the Trust of the Securities
listed in the Portfolio is determined by the Trustee on the basis set forth
under "Public Offering--Offering Price" as of 4:00 p.m. on _______ __, 1997. The
Trust will terminate on _____ __, 1998 or earlier under certain circumstances as
further described in the Prospectus.
(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 Sponsors for actual organizational costs incurred.
(3) Offering costs incurred by the Trust will be amortized over the
term of the initial offering period.
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.
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SCHWAB TEN TRUST,
1997 SERIES A
PORTFOLIO
AS OF OPENING OF BUSINESS, _______ __, 1997
Market
Value of Cost of
Stocks as a Securities
Number Percentage Current Market to the
Portfolio of Ticker of the Dividend Value Per Trust
No. Shares Name of Issuer (1) Symbol Trust (2) Yield(3) Share (4)
----- -------- ------------------ ------ --------- -------- ----- ----
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
_________ ______
Total Investment in Securities 100% $======
=========
</TABLE>
FOOTNOTES TO PORTFOLIO
(1) Contracts to purchase the Securities were entered into on _______ __,
1997. All such contracts are expected to be settled on or about the
First Settlement Date of the Trust which is expected to be ________ __,
1997.
(2) Based on the cost of the Securities to the Trust.
(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 ________ __, 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 Sponsors' Purchase Price is $_______. The
Sponsors' Profit/(Loss) on the Initial Date of Deposit is $______.
The accompanying notes form an integral part of the Financial Statements.
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustee and Unitholders,
Schwab Ten Trust,
1997 Series A
In our opinion, the accompanying Statement of Financial Condition,
including the Portfolio, presents fairly, in all material respects, the
financial position of Schwab Ten Trust, 1997 Series A (the "Trust") at opening
of business, _______ __, 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, _______ __, 1997, by
correspondence with the Sponsors, provides a reasonable basis for the opinion
expressed above.
ERNST & YOUNG LLP
New York, New York
_______ __, 1997
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[INSERT LOGO]
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SCHWAB TRUSTS
SCHWAB TEN TRUST, 1997 SERIES A
PROSPECTUS PART B
PART B OF THIS PROSPECTUS MAY NOT BE
DISTRIBUTED UNLESS ACCOMPANIED BY
PART A
THE TRUST
ORGANIZATION. Schwab Ten Trust 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 Charles Schwab & Co., Inc.
and Reich & Tang Distributors L.P., as Sponsors, and The Chase Manhattan Bank,
as Trustee.
On the Initial Date of Deposit, the Sponsors 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 Sponsors certificates evidencing the ownership of all Units of
the Trust. The Sponsors have 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 Sponsors may also, in certain
circumstances, direct the Trustee to dispose of certain Securities if the
Sponsors believe that, because of market or credit conditions, or for certain
other reasons, retention of the Security would be detrimental to Unitholders.
See "Trust Administration Portfolio--Supervision."
As of the Initial Date of Deposit, a "Unit" represents an undivided
interest or pro rata share in the Securities of the Trust in the ratio of one
thousand Units for the indicated amount of the aggregate market value of the
Securities initially deposited in the Trust as is set forth in the "Summary of
Essential Information." 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 Unitholders, which may include the Sponsors, 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 Sponsors established a
proportionate relationship among the initial aggregate value of specified
Securities in the Trust. During the 90 days subsequent to the Initial Date of
Deposit (the "Deposit Period"), the Sponsors may deposit additional
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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 will
result in an 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
Unitholders. 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 Sponsors) by creating a
portfolio that follows the investment strategy of investing in the DJIA's ten
(10) common stocks having the highest dividend yield (the "Strategic Ten"),
determined as of two business days prior to the Initial Date of Deposit. The
Strategic Ten strategy is also commonly referred to as the "Dogs of the Dow".
The Trust's portfolio will be comprised of these ten (10) stocks. The Trust's
assets will be allocated in approximately equal amounts among the Strategic Ten.
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 stocks 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. An investment
in a number of companies with high dividends relative to their stock prices is
designed to increase the Trust's potential for higher returns. The Trust's
return will consist of a combination of capital appreciation and current
dividend income. The Trust will terminate in approximately one year, at which
time investors may choose to either receive the distributions in kind (if they
own at least ________ Units), in cash or reinvest in a subsequent series of the
Schwab Ten Trust (if available) at a reduced deferred 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 Sponsors may deposit additional Securities in
connection with the sale of additional Units, the yields on these Securities may
change subsequent to the Initial Date of Deposit. Therefore, there is no
guarantee that the objective of the Trust will be achieved.
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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. 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.
Current DJIA
------------
AT&T Corporation International Business Machines Corporation
Allied Signal International Paper Company
Aluminum Company of America Johnson & Johnson
American Express Company J.P. Morgan & Company, Inc.
Boeing Company McDonald's Corporation
Caterpillar Inc. Merck & Company, Inc.
Chevron Corporation Minnesota Mining & Manufacturing Company
Coca-Cola Company Phillip Morris Companies, Inc.
E.I. du Pont de Nemours & Company Proctor & Gamble Company
Eastman Kodak Company Sears, Roebuck & Company
Exxon Corporation Travelers Group Inc.
General Electric Company Union Carbide Corporation
General Motors Corporation United Technologies Corporation
Goodyear Tire & Rubber Company Wal-Mart Stores, Inc.
Hewlett-Packard Co. Walt Disney Company
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 Sponsors' selection of the Strategic Ten. The companies represented in
the Trust are some of the most well-known and highly capitalized companies in
America. The Securities were selected irrespective of any research
recommendation by the Sponsors. 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 Schwab Ten Trust 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 the Strategic Ten at the beginning of each year and rolling
over the proceeds. The total returns do not reflect sales charges, brokerage and
transaction costs, commissions or taxes and, therefore, will be different from
actual
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investment results. These results represent past performance of the
Strategic Ten 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 Strategic Ten
underperformed the DJIA in certain years. Also, investors in the Trust may not
realize as high a total return as on a direct investment in the Strategic Ten
since the Trust has sales charges and expenses and may not be fully invested at
all times. Unit prices fluctuate with the value of the underlying stocks, and
there is no assurance that dividends on these stocks will be paid or that the
Units will appreciate in value.
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The following table compares the actual performance of the DJIA and
approximately equal values of the Strategic Ten Strategy in each of the past 21
years, as of December 31 in each of these years:
COMPARISON OF TOTAL RETURNS(1)
<TABLE>
<CAPTION>
Dow Jones
Industrial
Year Ended Strategic Ten(2) Average (DJIA)
<S> <C> <C> <C>
1976 4.80% 22.70%
1977 0.90 -12.70
1978 -0.10 2.70
1979 12.40 10.50
1980 27.20 21.50
1981 5.00 -3.40
1982 23.60 25.80
1983 38.70 25.70
1984 7.60 1.10
1985 29.50 32.80
1986 32.10 26.90
1987 6.10 6.00
1988 22.90 16.00
1989 26.50 31.70
1990 -7.60 -0.40
1991 39.30 23.90
1992 7.90 7.40
1993 27.30 16.80
1994 4.10 4.90
1995 36.70 36.40
1996 27.90 28.90
</TABLE>
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(1) Total Return represents the sum of Appreciation and Actual Dividend
Yield. (i) Appreciation for the Strategic Ten and the DJIA is calculated
by subtracting the opening market value of these Strategic Ten or DJIA
stocks, respectively, 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. (ii) Actual
Dividend Yield for the Strategic Ten is calculated by adding the total
dividends received on the stocks in the year and dividing the result by
the market value of the stocks as of the first trading day in that year.
Actual Dividend Yield for the DJIA is calculated by taking the total
dividends credited to the DJIA and dividing the result by the opening
value of the DJIA as of the first trading day in that year. Total return
does not take into consideration any sales charges, commissions, expenses
or taxes.
(2) The Strategic Ten 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.
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 Sponsors are 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 Sponsors, at their option, are
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 Sponsors purchase 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 Sponsors purchase Substitute
Securities in order to replace Securities it sold, the Sponsors 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 Unitholders 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 Unitholders as set forth under "Rights of
Unitholders--Distributions." In addition, if the right of substitution shall not
be utilized to acquire Substitute Securities in the event of a failed contract,
the Sponsors will cause to be refunded the sales charge attributable to such
Failed Securities to all Unitholders, 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 Unitholders 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 (See "Trust Administration - Portfolio
Supervision") 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.
Some of the Securities in the Trust may also be owned by other clients of the
Sponsors and their affiliates. However, because these clients may have differing
investment objectives, the Sponsors may sell certain Securities from those
accounts in instances where a sale by the Trust would be impermissible, such as
to maximize return by taking advantage of market fluctuations. Investors should
consult with their own financial advisers prior to investing in the Trust to
determine its suitability. (See "Trust Administration--Portfolio Supervision"
below.)
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ADDITIONAL SECURITIES. Investors should be aware that in connection
with the creation of additional Units subsequent to the Initial Date of Deposit,
the Sponsors 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 Unitholder's Units and
the Income per Unit received by the Trust. In particular, Unitholders who
purchase Units during the initial offering period would experience a dilution of
their investment as a result of any brokerage fees paid by the Trust during
subsequent deposits of Additional Securities purchased with cash deposited. In
order to minimize these effects, the Trust will try to purchase Securities as
near as possible to the Evaluation Time or at prices as close as possible to the
prices used to evaluate Trust Units at the Evaluation Time.
COMMON STOCK. Since the Trust contains common stocks of domestic
issuers, an investment in Units of the Trust should be made with an
understanding of the risks inherent in any investment in common stocks including
the risk that the financial condition of the issuers of the Securities may
become impaired or that the general condition of the stock market may worsen
(both of which may contribute directly to a decrease in the value of the
Securities and thus in the value of the Units). Additional risks include risks
associated with the right to receive payments from the issuer which is generally
inferior to the rights of creditors of, or holders of debt obligations or
preferred stock issued by the issuer. Holders of common stocks have a right to
receive dividends only when, if, and in the amounts declared by the issuer's
board of directors and to participate in amounts available for distribution by
the issuer only after all other claims on the issuer have been paid or provided
for. By contrast, holders of preferred stocks usually have the right to receive
dividends at a fixed rate when and as declared by the issuer's board of
directors, normally on a cumulative basis. Dividends on cumulative preferred
stock must be paid before any dividends are paid on common stock and any
cumulative preferred stock dividend which has been omitted is added to future
dividends payable to the holders of such cumulative preferred stock. Preferred
stocks are also usually entitled to rights on liquidation which are senior to
those of common stocks. For these reasons, preferred stocks generally entail
less risk than common stocks.
Moreover, common stocks do not represent an obligation of the issuer
and therefore do not offer any assurance of income or provide the degree of
protection of debt securities. The issuance of debt securities or even preferred
stock by an issuer will create prior claims for payment of principal, interest
and dividends which could adversely affect the ability and inclination of the
issuer to declare or pay dividends on its common stock or the economic interest
of holders of common stock with respect to assets of the issuer upon liquidation
or bankruptcy. Further, unlike debt securities which typically have a stated
principal amount payable at maturity (which value will be subject to market
fluctuations prior thereto), common stocks have neither fixed principal amount
nor a maturity and have values which are subject to market fluctuations for as
long as the common stocks remain outstanding. Common stocks are especially
susceptible to general stock market movements and to volatile increases and
decreases in value as market confidence in and perceptions of the issuers
change. These perceptions are based on unpredictable factors including
expectations regarding government, economic, monetary and fiscal policies,
inflation and interest rates, economic expansion or contraction, and global or
regional political, economic or banking crises. The value of the common stocks
in the Trust thus may be expected to fluctuate over the life of the Trust to
values higher or lower than those prevailing on the Initial Date of Deposit.
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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. Although recent legislation has established a reduced tax rate of 20%
for capital gains realized by individual investors who have held assets for more
than 18 months, this rate will generally not be available for Unitholders
because the term of the Trust is approximately one year. 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
or tobacco industries, may have a negative impact on certain companies
represented in the Trust. There can be no assurance that future legislation,
regulation or deregulation will not have a material adverse effect on the Trust
or will not impair the ability of the issuers of the Securities to achieve their
business goals.
LEGAL PROCEEDINGS AND LITIGATION. At any time after the Initial Date of
Deposit, legal proceedings may be initiated on various grounds, or legislation
may be enacted, with respect to the Securities in the Trust or to matters
involving the business of the issuer of the Securities. There can be no
assurance that future legal proceedings or legislation will not have a material
adverse impact on the Trust or will not impair the ability of the issuers of the
Securities to achieve their business and investment goals.
GENERALLY. There is no assurance that any dividends will be declared or
paid in the future on the Securities. Investors should be aware that there is no
assurance that the Trust's objective will be achieved.
PUBLIC OFFERING
OFFERING PRICE. In calculating the Public Offering Price, the aggregate
value of the Securities and any cash held to purchase Securities is divided by
the number of Units outstanding. 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.
The sales charge consists of a Deferred Sales Charge of $_____ per 100
Units or 1.25% of the Public Offering Price. The Deferred Sales Charge will be
paid through ten monthly deductions commencing on the first Deferred Sales
Charge Payment Date as shown in the Summary of Essential Information. To the
extent the entire Deferred Sales Charge has not been so deducted at the time of
repurchase or redemption of the Units, any unpaid amount will be deducted from
the proceeds or in calculating an in kind distribution. However, any remaining
Deferred Sales Charge will be waived when Units of any Schwab Ten Trust held at
the time of the death (including the death of a single joint tenant with rights
of survivorship) or disability (as defined in the Internal Revenue Code of 1986)
of a Holder are repurchased or redeemed. The Sponsors may require receipt of
satisfactory proof of the death or disability before releasing the portion of
the proceeds representing the amount waived. Units purchased pursuant to the
Reinvestment Plan are subject only to any remaining Deferred Sales Charge
deductions (see "Reinvestment Plan"). The implementation of the Deferred Sales
Charge is contingent upon the granting of an order by the Securities and
Exchange Commission exempting the Sponsors from certain provisions of the
Investment Company Act of 1940. The Sponsors intend to delay the Initial Date of
Deposit until such order is granted by the Commission.
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DISCOUNTS. Employees (and their immediate families) of Charles Schwab &
Co., Inc., and Reich & Tang Distributors L.P. (and their affiliates) and of the
special counsel to the Sponsors 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 plus a reduced Deferred Sales Charge of 1.0%
of the Public Offering Price. 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 Sponsors' secondary market, so long as it is being
maintained.
Units may be purchased in the primary or secondary market at the Public
Offering Price plus a reduced Deferred Sales Charge of 1.0% by investors who
purchase Units through registered investment advisers, certified financial
planners and registered broker-dealers who have agreements with Charles Schwab &
Co., Inc. ("Schwab Financial Advisor") or by investors in any unit investment
trust with an investment strategy based upon the Strategic Ten that have
purchased their investment within a two year period prior to the date of this
Prospectus who can purchase Units of the Trust in an amount not greater in value
than the amount of said investment made during this two year period.
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 Sponsors at the Public
Offering Price. The initial offering period is thirty days after each deposit of
Securities in the Trust and the Sponsors may extend the initial offering period
for successive thirty-day periods.
The Sponsors intend to qualify the Units for sale in substantially all
States.
SPONSORS' PROFITS. The Sponsors will receive a combined gross
underwriting commission equal to up to 1.25% of the Public Offering Price per
100 Units (equivalent to 1.266% of the net amount invested in the Securities).
Additionally, the Sponsors may realize a profit on the deposit of the Securities
in the Trust representing the difference between the cost of the Securities to
the Sponsors and the cost of the Securities to the Trust (See "Portfolio"). The
Sponsors 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 Sponsors.
During the initial offering period and thereafter to the extent
additional Units continue to be offered by means of this Prospectus, the
Sponsors 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 Sponsors for the Units. Cash,
if any, made available to the Sponsors prior to settlement date for the purchase
of Units may be used in the Sponsors' 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 Sponsors.
Both upon acquisition of Securities and termination of the Trust, the
Trustee may utilize the services of the Sponsors for the purchase or sale of all
or a portion of the Securities in the Trust. The Sponsors 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 "Sponsors Repurchase") the
Sponsors will realize profits or sustain losses in the amount of any difference
between the price at which they buy Units and the price at which they resell
such Units.
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RIGHTS OF UNITHOLDERS
BOOK-ENTRY UNITS. Ownership of Units of the Trust will not be evidenced
by certificates. All evidence of ownership of the Units will be recorded in
book-entry form at Depository Trust Company ("DTC") through an investor's
brokerage account. Units held through DTC will be deposited by the Sponsors with
DTC in the Sponsors' DTC account and registered in the nominee name CEDE & CO.
Individual purchases of beneficial ownership interest in the Trust will be made
in book-entry form through DTC. Ownership and transfer of Units will be
evidenced and accomplished directly and indirectly by book-entries made by DTC
and its participants. DTC will record ownership and transfer of the Units among
DTC participants and forward all notices and credit all payments received in
respect of the Units held by the DTC participants. Beneficial owners of Units
will receive written confirmation of their purchase and sale from Charles Schwab
& Co., Inc. from whom their purchase was made. Units are transferable by making
a written request properly accompanied by a written instrument or instruments of
transfer which should be sent registered or certified mail for the protection of
the Unitholder. Unitholders must sign such written request exactly as their
names appear on the record of the Trust. Such signatures must be guaranteed by a
commercial bank or trust company, savings and loan association or by a member
firm of a national securities exchange.
DISTRIBUTIONS. Dividends 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 Unitholder 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 Unitholder'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 Unitholders of the Trust on or shortly after the
Distribution Date. Proceeds representing principal received from the disposition
of any of the Securities between a Record Date and a Distribution Date which are
not used for redemptions of Units will be held in the Principal Account and not
distributed until the next Distribution Date. Persons who purchase Units between
a Record Date and a Distribution Date will receive their first distribution on
the Distribution Date after such purchase.
As of each Record Date, the Trustee will deduct from the Income Account
of the Trust, and, to the extent funds are not sufficient therein, from the
Principal Account of the Trust, amounts necessary to pay the expenses of the
Trust (as determined on the basis set forth under "Trust Expenses and Charges").
The Trustee also may withdraw from said accounts such amounts, if any, as it
deems necessary to establish a reserve for any applicable taxes or other
governmental charges that may be payable out of the Trust. Amounts so withdrawn
shall not be considered a part of such Trust's assets until such time as the
Trustee shall return all or any part of such amounts to the appropriate
accounts. In addition, the Trustee may withdraw from the Income and Principal
Accounts such amounts as may be necessary to cover redemptions of Units by the
Trustee. Distributions of amounts necessary to pay the Deferred Sales Charge
will be made from the Principal Account to an account maintained by the Trustee
for purposes of satisfying investors' sales charge obligations.
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 Unitholders 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
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person who at any time during the calendar year was a Unitholder 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
Unitholders 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 Unitholders 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
Unitholders, Units 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"). Unitholders 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 Sponsors, under existing law:
1. The Trust will be classified as a grantor trust for Federal
income tax purposes and not as a partnership or association taxable as
a corporation. Classification of the Trust as a grantor trust will
cause the Trust not to be subject to Federal income tax, and will cause
the Unitholders 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 Unitholders 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 Unitholder 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
Unitholder under the income tax laws of the State and City of New York.
Similar treatment may apply in other states.
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3. During the 90-day period subsequent to the initial issuance
date, the Sponsors reserve 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 Unitholder
when the Trust disposes of a Security (whether by sale, exchange or redemption)
or upon the sale, exchange or redemption of Units by such Unitholder. The price
a Unitholder 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 Unitholder 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 Unitholder'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 Unitholder's pro rata portion
of dividends paid on such Security that exceed such current and accumulated
earnings and profits will first reduce a Unitholder's tax basis in such
Security, and to the extent that such dividends exceed a Unitholder's tax basis
in such Security will generally be treated as capital gain.
A Unitholder'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 Unitholder
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 of 28% on
such gains, rather than the "regular" maximum tax rate of 39.6%. Although recent
legislation has established a reduced tax rate of 20% for capital gains realized
by individual investors who have held assets for more than 18 months, this rate
will generally not be available for Unitholders because the term of the Trust is
approximately one year. Tax rates may increase prior to the time when
Unitholders may realize gains from the sale, exchange or redemption of the Units
or Securities.
A Unitholder'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 Unitholder 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 Unitholders may be deducted against ordinary income.
Under Section 67 of the Code and the accompanying Regulations, a
Unitholder 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 Unitholder's other miscellaneous deductions, exceed 2% of his
adjusted gross income. The deduction of fees and expenses may also be limited by
Section 68 of the Code, which reduces the amount of itemized deductions that are
allowed for individuals with incomes in excess of certain thresholds.
After the end of each calendar year, the Trustee will furnish to each
Unitholder 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
Unitholder 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 Unitholder's pro rata portion
of dividends that are taxable as ordinary income to Unitholders 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
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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 Unitholder owns certain stock
(or Units) the financing of which is directly attributable to indebtedness
incurred by such corporation. Accordingly, corporate Unitholders should consult
their tax adviser in this regard.
As discussed in the section "Termination", each Unitholder 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
Unitholder choose option (i), the exchange of the Unitholder'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 Unitholder 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 Unitholder
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 Unitholder'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
Unitholder 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
Unitholder 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.
Prospective tax-exempt investors are urged to consult their own tax
advisers prior to investing in the Trust.
RETIREMENT PLANS. This Trust may be well suited for purchase by
Individual Retirement Accounts ("IRAs"), Keogh plans, pension funds and other
qualified retirement plans. Generally, capital gains and income received in each
of the foregoing plans are exempt from Federal taxation. All distributions from
such plans are generally treated as ordinary income but may, in some cases, be
eligible for special 5 or 10 year averaging or tax-deferred rollover treatment.
Five year averaging will not apply to distributions after December 31, 1999. Ten
year averaging has been preserved in very limited circumstances. Holders of
Units in IRAs, Keogh plans and other tax-deferred retirement plans should
consult their plan custodian as to the appropriate disposition of distributions.
Investors considering participation in any such plan should review specific tax
laws related thereto and should consult their attorneys or tax advisers with
respect to the establishment and maintenance of any such plan. Such plans are
offered by brokerage firms, including the Sponsor of this Trust, and other
financial institutions. Fees and charges with respect to such plans may vary.
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Before investing in the Trust, the trustee or investment manager of an
employee benefit plan (e.g., a pension or profit sharing retirement plan) should
consider among other things (a) whether the investment is prudent under the
Employee Retirement Income Security Act of 1974 ("ERISA"), taking into account
the needs of the plan and all of the facts and circumstances of the investment
in the Trust; (b) whether the investment satisfies the diversification
requirement of Section 404(a)(1)(C) of ERISA; and (c) whether the assets of the
Trust are deemed "plan assets" under ERISA and the Department of Labor
regulations regarding the definition of "plan assets."
LIQUIDITY
SPONSORS REPURCHASE. The Sponsors may, under certain circumstances, as
a service to Unitholders, elect to purchase any Units tendered to the Trustee
for redemption (see "Trustee Redemption"). Factors which the Sponsors will
consider in making a determination will include the number of Units of all
Trusts which they have in inventory, their 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 Sponsors may elect to purchase such Units. Such purchase
shall be made by payment to the Unitholder's brokerage account not later than
the close of business on the redemption date of an amount equal to the
Redemption Price on the date of tender.
Unitholders who wish to dispose of their Units should inquire of the
Sponsors 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
Sponsors do not guarantee the enforceability, marketability or price of any
Securities in the Portfolio or of the Units. The Sponsors may discontinue the
repurchase of redemption requests if the supply of Units exceeds demand, or for
other business reasons. The date of repurchase is deemed to be the date on which
redemption requests are received in proper form by Charles Schwab & Co., Inc.,
except for redemption requests received after 4 P.M., New York Time when Units
will be deemed to have been repurchased on the next business day. In the event a
market is not maintained for the Units, a Unitholder may be able to dispose of
Units only by tendering them to the Trustee for redemption.
Units purchased by the Sponsors in the secondary market may be
reoffered for sale by the Sponsors at a price based on the aggregate value of
the Securities in the Trust plus the remaining Deferred Sales Charge plus a pro
rata portion of amounts, if any, in the Income Account. Any Units that are
purchased by the Sponsors in the secondary market also may be redeemed by the
Sponsors if they determine such redemption to be in their best interest.
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 upon payment of any relevant tax by contacting the
Charles Schwab & Co., Inc. broker, dealer or financial institution holding such
Units in street name. In certain instances, additional documents may be
required, such as a trust instrument, certificate of corporate authority,
certificate of death or appointment as executor, administrator or guardian. At
the present time there are no specific taxes related to the redemption of Units.
No redemption fee will be charged by the Sponsors or the Trustee. Units redeemed
by the Trustee will be canceled.
Within three business days following a tender for redemption, the
Unitholder 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
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(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 Unitholder 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 Sponsors 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 Sponsors believe 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
Unitholders 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 Unitholder tendering ______ Units or more of the Trust for
redemption may request by written notice submitted at the time of tender from
the Trustee in lieu of a cash redemption a distribution of shares of Securities
and cash in an amount and value equal to the Redemption Price Per Unit as
determined as of the evaluation next following tender. To the extent possible,
in kind distributions ("In Kind Distributions") shall be made by the Trustee
through the distribution of each of the Securities in book-entry form to the
Unitholder's broker-dealer account at The Depository Trust Company. An In Kind
Distribution will be reduced by customary transfer and registration charges. The
tendering Unitholder 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
Unitholder is entitled. A Unitholder who elects to receive In Kind Distributions
may incur brokerage or other transaction costs in converting the Securities so
distributed into cash subsequent to their receipt of the Securities from the
Trust. If funds in the Principal Account are insufficient to cover the required
cash distribution to the tendering Unitholder, the Trustee may sell Securities
in the manner described above.
The Trustee is irrevocably authorized in its discretion, if the
Sponsors do not elect to purchase a Unit tendered for redemption or if the
Sponsors tender 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
Unitholder at prices which will return to the Unitholder 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 Unitholder on the day he would otherwise be
entitled to receive payment of the Redemption Price.
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The Trustee reserves the right to suspend the right of redemption and
to postpone the date of payment of the Redemption Price per Unit for any period
during which the New York Stock Exchange is closed, other than customary weekend
and holiday closings, or trading on that Exchange is restricted or during which
(as determined by the Securities and Exchange Commission) an emergency exists as
a result of which disposal or evaluation of the Bonds is not reasonably
practicable, or for such other periods as the Securities and Exchange Commission
may by order permit. The Trustee and the Sponsors 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 Unitholder who wishes to dispose of his Units should inquire of his
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 Strategic Ten, 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 Sponsors 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 Sponsors 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 Sponsors, would make the retention of the
Security detrimental to the Trust or the Unitholders. Furthermore, the Trust
will likely continue to hold a Security and purchase additional shares
notwithstanding its ceasing to be included among the Strategic Ten 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 Sponsors fail to give
immediate instructions to sell or hold that Security, the Trustee,
within 30 days of that failure by the Sponsors, shall sell the
Security.
(b) It is the responsibility of the Sponsors to instruct the
Trustee to reject any offer made by an issuer of any of the Securities
to issue new securities in exchange and substitution for any Security
pursuant to a recapitalization or reorganization, if any exchange or
substitution is effected notwithstanding such rejection, any securities
or other property received shall be promptly sold unless the Sponsors
direct 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 Sponsors direct 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 Sponsors are 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
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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 Sponsors 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 Sponsors 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 Sponsors without the consent of any of the Unitholders: (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 Unitholders.
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 investors
holding 66 2/3% of the Units then outstanding for the purpose of modifying the
rights of Unitholders; provided that no such amendment or waiver shall reduce
any Unitholder'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 Units. The Trust Agreement may not be amended,
without the consent of the holders of all Units 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 Unitholders, 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 Sponsors, terminate the Trust. The Trust may also be terminated
at any time with the consent of investors holding 100% of the Units then
outstanding. The Trustee may utilize the services of the Sponsors for the sale
of all or a portion of the Securities in the Trust, and in so doing, the
Sponsors will determine the manner, timing and execution of the sales of the
underlying Securities. Any brokerage commissions received by the Sponsors from
the Trust in connection with 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 Unitholders. Such notice will provide Unitholders 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 Unitholders at least 20 days prior to such date):
1. A Unitholder who owns at least ______ 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
Unitholder'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.
Unitholders subsequently selling such distributed Securities will incur
brokerage costs when disposing of such Securities. Unitholders should
consult their own tax adviser in this regard;
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2. to receive in cash such Unitholder's pro rata share of the
net asset value of the Trust derived from the sale by the Sponsors as
the agents of the Trustee of the underlying Securities over a period
not to exceed 30 days immediately following the commencement of the
Liquidation Period. The Unitholder's pro rata share of its net assets
of the Trust will be distributed to such Unitholder within three days
of the settlement of the trade of the last Security to be sold; and/or
3. to invest such Unitholder's pro rata share of the net
assets of the Trust derived from the sale by the Sponsors as agents 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 the Schwab Ten 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 Unitholder (a "Rollover Unitholder") 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 Unitholder 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 deferred sales charge 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 Unitholder'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 Unitholder
of units of a New Series such Unitholder 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 Unitholder
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. Unitholders should consult their own
tax advisers in this regard.
Unitholders who do not make any election will be deemed to have elected
to receive the termination distribution in cash (option number 2).
The Sponsors have agreed that to the extent they 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 such sales will be free of brokerage
commissions. The Sponsors, on behalf of the Trustee, will sell, unless prevented
by unusual and unforeseen circumstances, such as, among other reasons, a
suspension in trading of a Security, the close of a stock exchange, outbreak of
hostilities and collapse of the economy, on each business day during the 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 Unitholders in redemption of such
Unitholders' 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 Sponsors
may purchase a large amount of securities for the New Series in a short period
of time. The Sponsors' buying of securities may tend to raise the market prices
of these securities. The actual market impact of the Sponsors' 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 Sponsors believe that the sale of underlying
Securities over a 30-day period as described above is in the best interest of a
Unitholder and may mitigate the negative market price consequences stemming from
the trading of large amounts of
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Securities. The Securities may be sold in fewer than 30 days if, in the
Sponsors' judgment, such sales are in the best interest of Unitholders. The
Sponsors, 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 Unitholders. 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 Sponsors will generally
follow the following guidelines in selling the Securities: for highly liquid
Securities, the Sponsors 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 Sponsors 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 Sponsors intend 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 Sponsors may for any reason, in their sole discretion, decide not
to sponsor any subsequent series of the Trust, without penalty or incurring
liability to any Unitholder. If the Sponsors so decide, the Sponsors will notify
the Trustee of that decision, and the Trustee will notify the Unitholders before
the commencement of the Liquidation Period. All Unitholders will then elect
either option 1, if eligible, or option 2.
By electing to reinvest in the New Series, the Unitholder indicates his
interest in having his terminating distribution from the Trust invested only in
the New Series created following termination of the Trust; the Sponsors expect,
however, that a similar reinvestment program will be offered with respect to all
subsequent series of the Trust, thus giving Unitholders 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 Unitholder's
election to participate in the reinvestment program will be treated as an
indication of interest only. The Sponsors intend 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 Sponsors reserve the
right to modify, suspend or terminate the reinvestment privilege at any time.
THE SPONSORS. Charles Schwab & Co., Inc. ("Schwab") was established in
1971 and is one of America's largest discount brokers. The firm provides
low-cost securities brokerage and related financial services to over 3.3 million
active customer accounts and has over 200 branch offices. Schwab also offers
convenient access to financial information services and provides products and
services that help investors make investment decisions. Schwab is a wholly owned
subsidiary of The Charles Schwab Corporation. Charles R. Schwab is the founder,
Chairman, Chief Executive Officer and a director of The Charles Schwab
Corporation and, as of January 31, 1996, the beneficial owner of approximately
20.1% of the outstanding shares of that corporation. Mr. Schwab may be deemed to
be a controlling person of Schwab.
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 Reich & Tang
Distributors L.P. 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 eleven
subsidiaries, divisions and affiliates offering a wide array of investment
styles and products to institutional clients.
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These affiliates in the aggregate are investment advisors or managers
to over 54 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 55% 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 Sponsors and their ability
to carry out their contractual obligations. The Sponsors will be under no
liability to Unitholders 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 their own willful misfeasance, bad faith, gross negligence or
reckless disregard of their obligations and duties.
The Sponsors may each resign at any time by delivering to the Trustee
an instrument of resignation executed by the individual Sponsor. If at any time
either of the Sponsors 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, 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.
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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 Unitholders."
The Trustee may resign by executing an instrument in writing and filing
the same with the Sponsors, and mailing a copy of a notice of resignation to all
Unitholders. In such an event the Sponsors are 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 Sponsors 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
Unitholder by the Sponsors. 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 Sponsors and the Unitholders 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 Sponsors or Unitholders 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 Sponsors and the Unitholders may
rely on any evaluation furnished to the Trustee by an independent evaluation
service and shall have no responsibility for the accuracy thereof.
TRUST EXPENSES AND CHARGES
All or a portion of the expenses incurred in creating and establishing
the Trust, including the cost of the initial preparation and execution of the
Trust Agreement, registration of the Trust and the Units under the Investment
Company Act of 1940 and the Securities Act of 1933, the initial fees and
expenses of the Trustee, legal expenses and other actual out-of-pocket expenses,
will be paid by the Trust and charged to capital over the life of the Trust.
Offering costs, including the costs of registering securities with the
Securities and Exchange Commission and the states, will be charged to capital
over the term of the initial offering period, which may be between 30 and 90
days. All advertising and selling expenses, as well as any organizational
expenses not paid by the Trust, will be borne by the Sponsors at no cost to the
Trust.
The Sponsors will receive for portfolio supervisory, bookkeeping and
administrative services to the Trust an Annual Fee in the amount set forth under
"Summary of Essential Information" in Part A. The Sponsors' fee may exceed the
actual cost of providing portfolio supervisory, bookkeeping and administrative
services for the Trust, but at no time will the total amount received for
portfolio supervisory, bookkeeping and administrative services rendered to all
series of the Schwab Trusts in any calendar year exceed the aggregate cost to
the Sponsors of supplying such services in such year. (See "Portfolio
Supervision.")
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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 Unitholders."
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 the Sponsors' and Trustee's fees may be
increased without approval of the Unitholders 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 Unitholders; 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
Sponsors 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 Sponsors, 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 Sponsors otherwise direct, the accounts of the Trust shall
be audited not less than annually by independent public accountants selected by
the Sponsors. The expenses of the audit shall be an expense of the Trust. So
long as the Sponsors maintain a secondary market, the Sponsors will bear any
audit expense which exceeds $.50 cents per 1,000 Units. Unitholders 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
Sponsors or new Units created by the Sponsors' deposit of Additional Securities
as described in "The Trust--Organization" in this Part B. Units acquired by
reinvestment will be subject to any remaining deductions of the Deferred Sales
Charge. In order to enable a Unitholder 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 Sponsors reserve 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.
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 Sponsors.
Carter, Ledyard & Milburn, Two Wall Street, New York, New York 10005 have acted
as counsel for the Trustee.
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INDEPENDENT ACCOUNTANTS. The Statement of Financial Condition,
including the Portfolio, is included herein in reliance upon the report of Ernst
& Young 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 Strategic Ten, 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 as of the date of
calculation. Average annualized returns show the average return for stated
periods of longer than a year. From time to time, the Trust may compare the cost
of purchasing Trust shares to the cost of purchasing the individual securities
which constitute the Strategic Ten. In addition, the Trust may compare its
deferred sales charge to the sales charges assessed on unitholders by other unit
investment trusts. Sales material may also include an illustration of the
cumulative results of like annual investments in the Strategic Ten 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 deferred sales charge. No provision is made for
any income taxes payable. Similar figures may be given for this Trust applying
the Strategic Ten investment strategy 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 the average performance of mutual funds investing in a
diversified portfolio of U.S. stocks generally or growth stocks, or performance
data from Lipper Analytical Services, Inc. and Morningstar Publications, Inc. or
from publications such as Money, The New York Times, U.S. News and World Report,
Business Week, Forbes or Fortune. As with other performance data, performance
comparisons should not be considered representative of a Trust's relative
performance for any future period.
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<TABLE>
<S> <C>
No person is authorized to give any information or to -------------------------------
make any representations not contained in Parts A and B of this SCHWAB TRUSTS
Prospectus; and any information or representation not contained -------------------------------
herein must not be relied upon as having been authorized by the
Trust, the Trustee or the Sponsors. The Trust is registered as SCHWAB TEN TRUST,
a unit investment trust under the Investment Company Act of 1997 SERIES A
1940. Such registration does not imply that the Trust or any of
its Units have been guaranteed, sponsored, recommended or (A UNIT INVESTMENT TRUST)
approved by the United States or any state or any agency or
officer thereof. PROSPECTUS
------------------ DATED: ____________ ___, 1997
This Prospectus does not constitute an offer to sell, or a
solicitation of an offer to buy, securities in any state to any SPONSORS:
person to whom it is not lawful to make such offer in such
state. CHARLES SCHWAB & CO., INC.
101 Montgomery Street
Table of Contents San Francisco, California 94104
Title Page REICH & TANG DISTRIBUTORS L.P.
600 Fifth Avenue
PART A New York, New York 10020
Summary of Essential Information.............................A-2 800-237-7020
Statement of Financial Condition.............................A-8
Portfolio....................................................A-9
Report of Independent Accountants...........................A-10
TRUSTEE:
PART B
The Trust....................................................B-1 THE CHASE MANHATTAN BANK
Risk Considerations..........................................B-6 4 New York Plaza
Public Offering..............................................B-8 New York, New York 10004
Rights of Unitholders.......................................B-10
Tax Status..................................................B-11
Liquidity...................................................B-14
Trust Administration........................................B-16
Trust Expenses and Charges..................................B-21
Reinvestment Plan...........................................B-22
Other Matters...............................................B-22
Parts A and B of this Prospectus do not contain all of the information
set forth in the registration statement and exhibits relating thereto, filed
with the Securities and Exchange Commission, Washington, D.C., under the
Securities Act of 1933, and the Investment Company Act of 1940, and to which
reference is made.
</TABLE>
480911.7
<PAGE>
PART II -- ADDITIONAL INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM A -- BONDING ARRANGEMENTS
The employees of Reich & Tang Distributors L.P. are covered under Brokers'
Blanket Policy, Standard Form 14, in the amount of $11,000,000 (plus
$196,000,000 excess coverage under Brokers' Blanket Policies, Standard Form 14
and Form B Consolidated). This policy has an aggregate annual coverage of $15
million.
ITEM B -- CONTENTS OF REGISTRATION STATEMENT
This Registration Statement on Form S-6 comprises the following papers and
documents:
The facing sheet on Form S-6.
The Cross-Reference Sheet.
The Prospectus consisting of pages.
Undertakings.
Signatures.
Written consents of the following persons:
Battle Fowler LLP (included in Exhibit 3.1)
Ernst & Young LLP
The following exhibits:
*99.1.1 -- Reference Trust Agreement including certain amendments to
the Trust Indenture and Agreement referred to under Exhibit
99.1.1.1 below.
*99.1.1.1 -- Form of Trust Indenture and Agreement.
*99.2.1 -- Form of Certificate.
*99.3.1 -- Opinion of Battle Fowler LLP as to the legality of the
securities being registered, including their consent to the
filing thereof and to the use of their name under the
headings "Tax Status" and "Legal Opinions" in the
Prospectus, and to the filing of their opinion regarding tax
status of the Trust.
99.6.0 -- Power of Attorney of Reich & Tang Distributors L.P., the
Depositor, by its officers and a majority of its Directors
(filed as Exhibit 6.0 to Amendment No. 1 to Form S-6
Registration Statement No. 33-62627 of Equity Securities
Trust, Series 6, Signature Series, Gabelli Entertainment and
Media Trust on November 16, 1995 and incorporated herein by
reference).
99.6.1 -- Powers of Attorney of Charles Schwab & Co., Inc., the
Depositor, by its officers and a majority of its Directors
(filed as Exhibit 6.1 to Form S-6 Registration Statement No.
333-31133 of Schwab Trusts, Schwab Strategic Ten Trust, 1997
Series A on July 11, 1997 and incorporated herein by
reference).
*99.27 -- Financial Data Schedule (for EDGAR filing only).
- --------
* To be filed by amendment.
II-1
606976.2
<PAGE>
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Schwab Trusts, Schwab Ten Trust, 1997 Series A, has duly caused this Amendment
to the Registration Statement to be signed on its behalf by the undersigned,
hereunto duly authorized, in the City of New York and State of New York on the
11th day of September, 1997.
SCHWAB TRUSTS, SCHWAB
TEN TRUST, 1997 SERIES A
(Registrant)
CHARLES SCHWAB & CO., INC.
(Depositor)
By /S/ WILLIAM J. KLIPP
-------------------------------
William J. Klipp
(Authorized Signator)
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons,
who constitute the principal officers and a majority of the directors of Charles
Schwab & Co., Inc., the Depositor, in the capacities and on the dates indicated.
Name Title Date
---- ----- ----
DAVID POTTRUCK Chief Executive Officer and Director
STEVEN SCHEID Chief Financial Officer and Director
CHARLES R. SCHWAB Director
September 11, 1997
By /S/ WILLIAM J. KLIPP
---------------------------
William J. Klipp
Attorney-In-Fact*
- ----------------------
*Executed copies of Powers of Attorney were filed as Exhibit 6.1 to
Registration Statement No. 333-31133 on July 11, 1997.
II-2
606976.2
<PAGE>
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Schwab Trusts, Schwab Ten Trust, 1997 Series A, has duly caused this Amendment
to the Registration Statement to be signed on its behalf by the undersigned,
hereunto duly authorized, in the City of New York and State of New York on the
11th day of September, 1997.
SCHWAB TRUSTS, SCHWAB
TEN TRUST, 1997 SERIES A
(Registrant)
REICH & TANG DISTRIBUTORS L.P.
(Depositor)
By: Reich & Tang Asset Management, Inc.
By /s/ PETER J. DEMARCO
-------------------------------------------
Peter J. DeMarco
(Authorized Signator)
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons,
who constitute the principal officers and a majority of the directors of Reich &
Tang Asset Management, Inc., General Partner of Reich & Tang Distributors L.P.,
the Depositor, in the capacities and on the dates indicated.
Name Title Date
PETER S. VOSS President, Chief Executive Officer and
Director
G. NEAL RYLAND Executive Vice President,
Treasurer and Chief
Financial Officer
EDWARD N. WADSWORTH Clerk September 11, 1997
RICHARD E. SMITH III Director
STEVEN W. DUFF Director
By /s/ PETER J. DEMARCO
BERNADETTE N. FINN Vice President ----------------------
Peter J. DeMarco
LORRAINE C. HYSLER Secretary Attorney-In-Fact*
RICHARD DE SANCTIS Vice President and
Treasurer
- ----------------------------
* Executed copies of Powers of Attorney were filed as Exhibit 6.0 to Amendment
No. 1 to Registration Statement No. 33-62627 on November 16, 1995.
II-3
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
registration statement on Form S-6 (the "Registration Statement") of our report
dated _________ __, 1997, relating to the Statement of Financial Condition,
including the Portfolio, of Schwab Trusts, Schwab Ten Trust, 1997 Series A,
which appears in such Prospectus. We also consent to the reference to us under
the heading "Independent Accountants" in such Prospectus.
Ernst & Young LLP
_________ __, 1997
II-3
606976.2
