XYZ EXCHANGEABLE SECURITIES TRUST, N-2/A, 1998-03-11

XYZ EXCHANGEABLE SECURITIES TRUST
N-2/A, 1998-03-11

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As filed with the Securities and Exchange Commission on March 11, 1998
Securities Act File No. 333-39241

Investment Company Act File No. 811-____

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

Form N-2

Registration Statement Under The Securities Act of 1933 /x/

Pre-Effective Amendment No. 1 /x/
Post-Effective Amendment No. / /
and/or
Registration Statement Under The Investment Company Act of 1940 /x/
Amendment No. 1 /x/

(check appropriate box or boxes)

XYZ Exchangeable Securities Trust
(Exact Name of Registrant as Specified in Charter)

c/o Puglisi & Associates
850 Library Avenue
Suite 204
Newark, Delaware 19715
(Address of Principal Executive Offices)

Registrant's Telephone Number, including Area Code: (302) 738-6680

RL&F Service Corp.
One Rodney Square
10th Floor
10th and King Streets
Wilmington, Delaware 19801
(Name and Address of Agent for Service)

Copies to:

Michael L. Fitzgerald, Esq.
Brown & Wood LLP
One World Trade Center
New York, New York 10048-0557

Approximate date of proposed public offering: As soon as practicable
after the effective date of this Registration Statement.

If any securities being registered on this form will be offered on a
delayed or continuous basis in reliance on Rule 415 under the Securities Act
of 1933, as amended, other than securities offered in connection with a
dividend reinvestment plan, check the following box. / /

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /

The registrant hereby amends this 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.

CROSS-REFERENCE SHEET*

Item Number in Form N-2 Caption in Prospectus
- ----------------------- ---------------------

PART A - INFORMATION REQUIRED IN A PROSPECTUS
<S> <C>
1. Outside Front Cover . . . . . . . . . . . . Front Cover Page
2. Inside Front and Outside
Back Cover Page . . . . . . . . . . . . . Front Cover Page; Inside Front Cover Page;
Underwriting
3. Fee Table and Synopsis . . . . . . . . . . . Prospectus Summary; Fee Table
4. Financial Highlights . . . . . . . . . . . . Not Applicable
5. Plan of Distribution . . . . . . . . . . . . Front Cover Page; Prospectus Summary; Net Asset
Value; Underwriting
6. Selling Shareholders . . . . . . . . . . . . Not Applicable
7. Use of Proceeds . . . . . . . . . . . . . . Use of Proceeds; Investment Objective and Policies
8. General Description of the Registrant . . . Front Cover Page; Prospectus Summary; The Trust;
Investment Objective and Policies; Investment
Restrictions; Risk Factors; Dividends and
Distributions; Additional Information.
9. Management . . . . . . . . . . . . . . . . . Trustees and Officers; Management Arrangements
10. Capital Stock, Long-Term Debt and Other
Securities . . . . . . . . . . . . . . . Description of Exchangeable Securities
11. Defaults and Arrears on Senior Securities . Not Applicable
12. Legal Proceedings . . . . . . . . . . . . . Not Applicable
13. Table of Contents of the Statement of
Additional
Information . . . . . . . . . . . . . . . Not Applicable

PART B - INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION

14. Cover Page . . . . . . . . . . . . . . . . . Not Applicable
15. Table of Contents . . . . . . . . . . . . . Not Applicable
16. General Information and History . . . . . . The Trust
17. Investment Objective and Policies . . . . . Prospectus Summary; Investment Objective and
Policies; Investment Restrictions
18. Management . . . . . . . . . . . . . . . . . Trustees; Management Arrangements; Underwriting;
Legal Matters; Experts
19. Control Persons and Principal Holders
of Securities . . . . . . . . . . . . . . Management Arrangements
20. Investment Advisory and Other Services . . . Management Arrangements
21. Brokerage Allocation and Other Practices . . Investment Objective and Policies
22. Tax Status . . . . . . . . . . . . . . . . . Certain United States Federal Income Tax
Considerations
23. Financial Statements . . . . . . . . . . . . Experts; Independent Auditor's Report; Statement
of Assets, Liabilities and Capital
PART C - OTHER INFORMATION

Information required to be included in Part C is set forth under the appropriate Item, so
numbered, in Part C to this Registration Statement.

</TABLE>
- ---------------------------
*PURSUANT TO THE GENERAL INSTRUCTIONS TO FORM N-2, ALL INFORMATION
REQUIRED TO BE SET FORTH IN PART B: STATEMENT OF ADDITINAL INFORMATION HAS
BEEN INCUDED IN PART A: THE PROSPECTUS.

Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such State.

PROSPECTUS SUBJECT TO COMPLETION
- ----------

PRELIMINARY PROSPECTUS DATED MARCH 11, 1998

1,000,000 EXCHANGEABLE SECURITIES
XYZ EXCHANGEABLE SECURITIES TRUST

(Exchangeable for Shares of Common Stock of XYZ Company, par value $ per
share)

Each of the Exchangeable Securities offered hereby (the "Exchangeable
Securities") of XYZ Exchangeable Securities Trust (the "Trust") represents a
proportionate share of beneficial interest in the Trust, which entitles the
holder to receive an annual distribution of $ , and will be exchanged for
between shares and one share of Common Stock, par value $ per
share (the "XYZ Common Stock"), of XYZ Company (the "Company") (or, in
certain circumstances, cash with an equal value) per Exchangeable Security
upon conclusion of the term of the Trust on , 2001 (the "Exchange
Date"). The annual distribution of $ per Exchangeable Security is
payable quarterly on each , , and , commencing ,
1998. The Exchangeable Securities are not subject to redemption.

The Trust is a newly created Delaware business trust established to
purchase and hold (i) a series of zero-coupon U.S. Government securities
("U.S. Treasury Securities") maturing on a quarterly basis through the
Exchange Date and (ii) a forward purchase contract (the "Contract") with an
existing stockholder (the "Contracting Stockholder") of the Company relating
to shares of XYZ Common Stock. The Trust's investment objective is to
distribute to holders of Exchangeable Securities on a quarterly basis $
per Exchangeable Security and, on the Exchange Date, a number of shares of
XYZ Common Stock (or, under certain circumstances, cash with an equal value)
per Exchangeable Security determined in accordance with the following formula
(the "Exchange Rate Formula"), subject to certain adjustments: (a) if the
Exchange Price is greater than or equal to $ per share of XYZ Common
Stock (the "Threshold Appreciation Price"), shares of XYZ Common Stock
per Exchangeable Security, (b) if the Exchange Price is less than the
Threshold Appreciation Price but is greater than the Initial Price, a
fractional share of XYZ Common Stock per Exchangeable Security so that the
value thereof (determined based on the Exchange Price) equals the Initial
Price and (c) if the Exchange Price is less than or equal to the Initial
Price, one share of XYZ Common Stock per Exchangeable Security. The
"Exchange Price" means the average Closing Price (as defined herein) per
share of XYZ Common Stock on the 20 Trading Days (as defined herein)
immediately prior to the second Trading Day preceding the Exchange Date. The
"Initial Price" is $ , which amount is equal to the last reported sale
price of the XYZ Common Stock on the New York Stock Exchange on ,
1998. Holders otherwise entitled to receive fractional shares in respect of
their aggregate holdings of Exchangeable Securities will receive cash in lieu
thereof. Pursuant to the terms of the Contract, the Contracting Stockholder
is obligated to deliver to the Trust on the Business Day immediately
preceding the Exchange Date a number of shares of XYZ Common Stock equal to
the number required by the Trust in order to exchange all of the Exchangeable
Securities on the Exchange Date in accordance with the Trust's investment
objective. In lieu of delivering shares of XYZ Common Stock on the Business
Day immediately preceding the Exchange Date, the Contracting Stockholder has
the right to satisfy its obligation under the Contract by delivering at such
time cash in an amount equal to the value of such number of shares at the
Exchange Price. Such right, if exercised by the Contracting Stockholder,
must be exercised with respect to all shares of XYZ Common Stock then
deliverable pursuant to the Contract. In the event that the Contracting
Stockholder elects to satisfy its obligations under the Contract by
delivering cash, holders of the Exchangeable Securities will receive cash
instead of XYZ Common Stock on the Exchange Date. AS DESCRIBED HEREIN, THE
EXCHANGE PRICE WILL REPRESENT A DETERMINATION OF THE VALUE OF A SHARE OF XYZ
COMMON STOCK IMMEDIATELY PRIOR TO THE EXCHANGE DATE. ACCORDINGLY, THERE CAN
BE NO ASSURANCE THAT THE AMOUNT RECEIVABLE BY HOLDERS OF THE EXCHANGEABLE
SECURITIES ON THE EXCHANGE DATE WILL BE EQUAL TO OR GREATER THAN THE ISSUE
PRICE OF THE EXCHANGEABLE SECURITIES. IF THE EXCHANGE PRICE OF THE XYZ
COMMON STOCK IS LESS THAN THE INITIAL PRICE, SUCH AMOUNT RECEIVABLE ON THE
EXCHANGE DATE WILL BE LESS THAN THE ISSUE PRICE PAID FOR THE EXCHANGEABLE
SECURITIES, IN WHICH CASE AN INVESTMENT IN EXCHANGEABLE SECURITIES WILL
RESULT IN A LOSS. See "Investment Objectives and Policies--General" and "--
The Contract."

The Contract provides that, from and after a Tax Event (as defined
herein), the Contracting Stockholder's obligations thereunder may be
accelerated, at the option of the Contracting Stockholder, in whole but not
in part, at the Tax Event Acceleration Price (as defined herein). In such
event, the U.S. Treasury Securities will be sold by the Trust, and the
proceeds therefrom will be distributed along with the Tax Event Acceleration
Price received under the Contract, after providing for any expenses of the
Trust. See "Investment Objective and Policies-- The Contract--Acceleration
Upon Tax Event."

In the event of a consolidation or merger of the Company or any
successor thereto into another entity, or the liquidation of the Company or
any such successor, or certain related events, in the event that the
Contracting Stockholder exercised its option to accelerate the Contract upon
the occurrence of a Tax Event or upon the occurrence of certain defaults by
the Contracting Stockholder under the Contract or the collateral arrangements
described herein, the Contract would be accelerated, the Trust's assets
(other than assets received pursuant to the Contract) would, after
satisfaction of the liabilities of the Trust as provided by applicable law,
be liquidated, the net assets of the Trust would be distributed pro rata to
the holders of the Exchangeable Securities and the term of the Trust would
expire. See "Investment Objective and Policies--The Contract--Reorganization
Events Causing a Termination of the Trust", "--Acceleration Upon Tax Event"
and "--Collateral Arrangements; Acceleration."

SEE "RISK FACTORS," BEGINNING ON PAGE 22 OF THIS PROSPECTUS, FOR CERTAIN
CONSIDERATIONS RELEVANT TO AN INVESTMENT IN THE EXCHANGEABLE SECURITIES.

Application will be made to list the Exchangeable Securities on the (New
York Stock Exchange (the "NYSE")). Prior to the offering there has been no
public market for the Exchangeable Securities.

SHARES OF CLOSED-END INVESTMENT COMPANIES HAVE IN THE PAST FREQUENTLY
TRADED AT A DISCOUNT FROM THEIR NET ASSET VALUES AND INITIAL PUBLIC OFFERING
PRICES. THE RISK OF LOSS ASSOCIATED WITH THIS CHARACTERISTIC OF CLOSED-END
INVESTMENT COMPANIES MAY BE GREATER FOR INVESTORS EXPECTING TO SELL SHARES
OF A CLOSED-END INVESTMENT COMPANY SOON AFTER THE COMPLETION OF AN INITIAL
PUBLIC OFFERING.

(continued on following page)

-------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Price to Sales Proceeds to
Public Load(1) the Trust(2)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Exchangeable Security . . . . . . . . $ $ $
- ---------------------------------------------------------------------------------------------------------
Total(3) . . . . . . . . . . . . . . . . $ $ $
- ---------------------------------------------------------------------------------------------------------

</TABLE>
(1) The Company and the Contracting Stockholder have agreed to
indemnify the Underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting estimated expenses of $ payable by the
Trust.
(3) The Trust has granted the Underwriters an option, exercisable
for 30 days from the date hereof, to purchase up to an
additional Exchangeable Securities to cover over-
allotments, if any. If all such Exchangeable Securities are
purchased, the total Price to Public, Sales Load and Proceeds to
the Trust will be $ , $ and $ , respectively.
See "Underwriting."

The Exchangeable Securities are offered by the several Underwriters,
subject to prior sale, when, as and if issued to and accepted by them, and
subject to approval of certain legal matters by counsel for the Underwriters
and certain other conditions. The Underwriters reserve the right to
withdraw, cancel or modify such offer and to reject orders in whole or in
part. It is expected that delivery of the Exchangeable Securities will be
made through the facilities of The Depository Trust Company on or about
, 1998.

___________________________

PAINEWEBBER INCORPORATED
___________________________

The date of this Prospectus is , 1998.

(continued from previous page)

The Exchangeable Securities are designed to provide investors with a
current distribution yield that is higher than the current dividend yield on
the XYZ Common Stock, while also providing the opportunity for investors to
share in the appreciation, if any, of the value of the XYZ Common Stock above
the Threshold Appreciation Price. However, the opportunity for equity
appreciation afforded by an investment in the Exchangeable Securities is less
than that afforded by a direct investment in the XYZ Common Stock because the
value of the XYZ Common Stock receivable by a holder of a Exchangeable
Securities upon exchange on the Exchange Date will exceed the issue price of
such Exchangeable Securities only if the Exchange Price exceeds the Threshold
Appreciation Price, which represents an appreciation of % over the Initial
Price. In addition, because each Exchange Security will entitle the holder
to receive only shares of XYZ Common Stock if the Exchange Price
exceeds the Threshold Appreciation Price, holders of the Exchangeable
Securities will be entitled to receive upon exchange only % of any
appreciation of the value of the XYZ Common Stock above the Threshold
Appreciation Price. Holders of Exchangeable Securities will realize the
entire decline in value if the Exchange Price is less than the Initial Price.
There can be no assurance that the distribution yield on the Exchangeable
Securities will be higher than the dividend yield on the XYZ Common Stock
over the term of the Trust.

The Exchangeable Securities may be a suitable investment for investors
who are able to understand the special nature of the Trust and the economic
characteristics of the Contract and the U.S. Treasury Securities held by the
Trust.

The Trust has adopted a fundamental policy that the Contract may not be
disposed of during the term of the Trust and that, except under limited
circumstances, the U.S. Treasury Securities may not be disposed of prior to
their respective maturities. As a result, the Trust will continue to hold
the Contract despite any significant decline in the market price of the XYZ
Common Stock or adverse changes in the financial condition of the Company.
The Trust will not be managed like a typical closed-end investment company.
The Trust will be treated as a grantor trust for United States Federal income
tax purposes and each holder of Exchangeable Securities will be treated as
the owner of its pro rata portion of the Contract and the U.S. Treasury
Securities. The U.S. Treasury Securities held by the Trust will be treated
for United States Federal income tax purposes as having original issue
discount and holders of Exchangeable Securities will be required to recognize
currently as income their pro rata portion of such original issue discount as
it accrues over the term of the Trust. The quarterly cash distributions paid
to the holders of Exchangeable Securities, which distributions are
anticipated to exceed the currently includable original issue discount, will
be treated as tax-free return of the holders' costs of the U.S. Treasury
Securities and any previously included original issue discount, and therefore
will not be considered current income to holders upon receipt thereof for
United States Federal income tax purposes. Although under current law
holders of Exchangeable Securities should not recognize income, gain or loss
with respect to the Contract over its term, holders will recognize taxable
gain or loss upon receipt of cash, if any, upon dissolution of the Trust.
For a discussion of certain United States Federal income tax considerations
for holders of the Exchangeable Securities, see "Certain United States
Federal Income Tax Considerations."

This Prospectus sets forth concisely information about the Trust that a
prospective investor ought to know before investing and should be read and
retained for future reference.

-------------------------

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE
IN TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
EXCHANGEABLE SECURITIES OR THE XYZ COMMON STOCK AT LEVELS ABOVE THOSE
WHICH MIGHT OTHERWISE PREVIAL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY
INCLUDE STABILIZING THE PURCHASE OF EXCHANGEABLE SECURITIES TO
COVER SYNDICATE SHORT PROVISIONS AND THE IMPOSITION OF PENALTY BIDS.
SUCH TRANSACTIONS MAY BE EFFECTED ON THE (NEW YORK STOCK EXCHANGE) (WITH
RESPECT TO THE EXCHANGEABLE SECURITIES), THE (WITH RESPECT TO THE
---------
XYZ COMMON STOCK) OR OTHERWISE. ANY STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.

PROSPECTUS SUMMARY

The following summary should be read in conjunction with the more
detailed information appearing elsewhere in this Prospectus. Unless
otherwise indicated, the information contained in this Prospectus assumes
that the Underwriters' over-allotment option is not exercised.

THE TRUST

XYZ Exchangeable Securities Trust (the "Trust") is a newly created
Delaware business trust that will be registered as a non-diversified closed-
end management investment company under the Investment Company Act of 1940,
as amended (the "Investment Company Act"). The term of the Trust will expire
on or shortly after , 2001 (the "Exchange Date"), except that the
Trust may be dissolved prior to such date under certain limited
circumstances. The Trust will be treated as a grantor trust for United
States Federal income tax purposes.

THE OFFERING

The Trust is offering 1,000,000 Exchangeable Securities,
each representing a proportionate share of beneficial interest in the Trust,
at an initial public offering price of $ per Exchangeable Security
(which amount is equal to the last reported sale price of the XYZ Common
Stock on the (New York Stock Exchange) on , 1998,
the date of the offering (the "Offering")). The Underwriters have been
granted an option, exercisable for 30 days from the date of this
Prospectus, to purchase up to an aggregate of additional
Exchangeable Securities to cover over- allotments, if any. See
"Underwriting."

THE COMPANY

The Company is (DESCRIPTION).

Reference is made to the accompanying prospectus of the Company with
respect to the shares of XYZ Common Stock which may be received by a holder
of Exchangeable Securities on the Exchange Date or upon earlier dissolution
of the Trust. The Company is not affiliated with the Trust, will not receive
any of the proceeds from the sale of the Exchangeable Securities and will
have no obligations with respect to the Exchangeable Securities. THE
PROSPECTUS OF THE COMPANY IS BEING ATTACHED HERETO AND DELIVERED TO
PROSPECTIVE PURCHASERS OF EXCHANGEABLE SECURITIES TOGETHER WITH THIS
PROSPECTUS FOR CONVENIENCE OF REFERENCE ONLY. THE PROSPECTUS OF THE COMPANY
DOES NOT CONSTITUTE A PART OF THIS PROSPECTUS, NOR IS IT INCORPORATED BY
REFERENCE HEREIN.

INVESTMENT OBJECTIVE AND POLICIES

The Trust will purchase and hold a series of zero-coupon U.S. Government
securities ("U.S. Treasury Securities") maturing on a quarterly basis through
the Exchange Date, and a forward purchase contract (the "Contract") with an
existing stockholder (the "Contracting Stockholder") of the Company relating
to shares of XYZ Common Stock. The Trust's investment objective is to
distribute to holders of the Exchangeable Securities ("Holders") on a
quarterly basis $ per Exchangeable Security (which amount equals the
pro rata portion of the fixed quarterly distributions from the proceeds of
the maturing U.S. Treasury Securities held by the Trust) and, on the Exchange
Date, a number of shares (such number of shares being hereinafter referred to
as the "Exchange Amount") of XYZ Common Stock (or, under certain
circumstances, cash with an equal value) per Exchangeable Security determined
in accordance with the following formula (the "Exchange Rate Formula"),
subject to certain adjustments: (a) if the Exchange Price is greater than or
equal to $ per share of XYZ Common Stock (the "Threshold Appreciation
Price"), shares of XYZ Common Stock per Exchangeable Security, (b) if
the Exchange Price is less than the Threshold Appreciation Price but is
greater than $ (the "Initial Price"), a fractional share of XYZ Common
Stock per Exchangeable Security so that the value thereof (determined based
on the Exchange Price) equals the Initial Price and (c) if the Exchange Price
is less than or equal to the Initial Price, one share of XYZ Common Stock per
Exchangeable Security. The "Exchange Price" means the average Closing Price
(as defined herein) per share of XYZ Common Stock on the 20 Trading Days (as
defined herein) immediately prior to the second Trading Day preceding the
Exchange Date. Holders otherwise entitled to receive fractional shares in
respect of their aggregate holdings of Exchangeable Securities will receive
cash in lieu thereof. See "Investment Objective and Policies--General" and
"--Fractional Interests."

The Contract is a commercial transaction entered into between the
Contracting Stockholder and the Trust. Pursuant to the terms of the
Contract, the Contracting Stockholder is obligated to deliver to the Trust on
the Business Day (as defined herein) immediately preceding the Exchange Date
a number of shares of XYZ Common Stock equal to the number required by the
Trust in order to exchange all of the Exchangeable Securities (including any
Exchangeable Securities issues pursuant to the over-allotment option granted
by the Trust to the Underwriters and Exchangeable Securities issued in
connection with the formation of the Trust) on the Exchange Date in
accordance with the Trust's investment objective. In lieu of delivering
shares of XYZ Common Stock immediately prior to the Exchange Date, the
Contracting Stockholder has the right to satisfy its obligation under the
Contract by delivering at such time cash in an amount equal to the value of
such number of shares at the Exchange Price. Such right, if exercised by the
Contracting Stockholder, must be exercised with respect to all shares of XYZ
Common Stock then deliverable pursuant to the Contract. In the event that
the Contracting Stockholder elects to satisfy its obligations under the
Contract by delivering cash, unless prohibited by applicable law then in
effect, Holders of the Exchangeable Securities will receive cash instead of
XYZ Common Stock on the Exchange Date. See "Investment Objective and
Policies--The Contract."

Holders of the Exchangeable Securities will receive distributions at
the rate per Exchangeable Security of $ per annum, or $ per
quarter, payable quarterly on each , , and (or,
if any such date is not a Business Day (as defined herein), on the
next succeeding Business Day), to Holders of record as of each ,
, and , respectively. The first distribution (in respect of
the period from , 1998 until , 1998) will be payable
on , 1998 to Holders of record as of , 1998, and
will equal $ per Exchangeable Security. See "Investment Objective and
Policies--Trust Assets."

On the Exchange Date, each outstanding Exchangeable Security will be
exchanged for between shares and one share of XYZ Common Stock (or,
pursuant to the right of the Contracting Stockholder, cash with an equal
value), depending on the Exchange Price. AS DESCRIBED HEREIN, THE EXCHANGE
PRICE WILL REPRESENT A DETERMINATION OF THE VALUE OF A SHARE OF XYZ COMMON
STOCK IMMEDIATELY PRIOR TO THE EXCHANGE DATE. ACCORDINGLY, THERE CAN BE NO
ASSURANCE THAT THE AMOUNT RECEIVABLE BY HOLDERS OF THE EXCHANGEABLE
SECURITIES ON THE EXCHANGE DATE WILL BE EQUAL TO OR GREATER THAN THE ISSUE
PRICE OF THE EXCHANGEABLE SECURITIES. IF THE EXCHANGE PRICE OF THE XYZ
COMMON STOCK IS LESS THAN THE INITIAL PRICE, SUCH AMOUNT RECEIVABLE ON THE
EXCHANGE DATE WILL BE LESS THAN THE ISSUE PRICE PAID FOR THE EXCHANGEABLE
SECURITIES, IN WHICH CASE AN INVESTMENT IN EXCHANGEABLE SECURITIES WILL
RESULT IN A LOSS. The number of shares of XYZ Common Stock distributable to
Holders on the Exchange Date, as determined pursuant to the Exchange Rate
Formula, will be subject to adjustment in the event of certain dividends or
distributions, subdivisions, splits, combinations, issuances of certain
rights or warrants or distributions of certain assets with respect to the XYZ
Common Stock. In the event of a consolidation or merger of the Company or
any successor thereto into another entity, or the liquidation of the Company
or any such successor, or certain related events, in the event that the
Contracting Stockholder exercises its option to accelerate the Contract upon
the occurrence of a Tax Event or upon the occurrence of certain defaults by
the Contracting Stockholder under the Contract or the collateral arrangements
described herein, the Contract would be accelerated, the Trust's assets
(other than assets received pursuant to the Contract) would be liquidated,
the net assets of the Trust would be distributed pro rata to the Holders of
the Exchangeable Securities and the terms of the Trust would expire. See
"Investment Objective and Policies--The Contract--Dilution Adjustments," "--
Reorganization Events Causing a Termination of the Trust," "--Acceleration
Upon Tax Event" and "--Collateral Arrangements; Acceleration."

TRUST ASSETS

The Trust's assets will primarily consist of: (i) a series of zero-
coupon U.S. Treasury Securities with face amounts and maturities
corresponding to the amounts and payment dates of the distributions payable
with respect to the Exchangeable Securities, comprising approximately ____%
of the initial assets of the Trust, and (ii) the Contract with the
Contracting Stockholder relating to shares of XYZ Common Stock, comprising
approximately ___% of the initial assets of the Trust.

Pursuant to the terms of the Contract, the Contracting Stockholder is
obligated to deliver to the Trust on the Business Day immediately preceding
the Exchange Date an aggregate number of shares of XYZ Common Stock equal to
the product of the Exchange Amount and the aggregate number of Exchangeable
Securities then outstanding. In lieu of delivering shares of XYZ Common
Stock on the Business Day immediately preceding the Exchange Date, the
Contracting Stockholder has the right to satisfy its obligation under the
Contract by delivering at such time cash in an amount equal to the value of
such number of shares at the Exchange Price. Such right, if exercised by the
Contracting Stockholder, must be exercised with respect to all shares of XYZ
Common Stock then deliverable pursuant to the Contract.

The Contract provides that, from and after a Tax Event (as defined
herein), the Contracting Stockholder's obligations thereunder may be
accelerated, at the option of the Contracting Stockholder, in whole but not
in part, at the Tax Event Acceleration Price (as defined herein). In such
event, the U.S. Treasury Securities will be sold by the Trust, and the
proceeds therefrom will be distributed along with the Tax Event Acceleration
Price received under the Contract after providing for any expenses of the
Trust. See "Investment Objective and Policies--The Contract--Acceleration
Upon Tax Event."

The purchase price under the Contract is equal to $ in
the aggregate (assuming the Underwriters' over-allotment option is not
exercised) and is payable to the Contracting Stockholder by the Trust on or
about , 1998. No other consideration is payable by the
Trust to the Contracting Stockholder in connection with its acquisition
of the Contract or the performance of the Contract by the Contracting
Stockholder. See "Investment Objective and Policies--The Contract."

The obligations of the Contracting Stockholder under the Contract will
be secured by a pledge of the maximum number of shares of XYZ Common Stock
deliverable by the Contracting Stockholder pursuant to the Contract (subject
to adjustment in accordance with the dilution adjustment provisions of the
Contract, as described herein). See "Investment Objective and Policies--The
Contract--Collateral Arrangements; Acceleration."

RELATIONSHIP TO XYZ COMMON STOCK

Holders of the Exchangeable Securities will receive distributions at
the rate of % of the issue price per annum. The Exchangeable
Securities are designed to provide investors with a current distribution
yield that is higher than the current dividend yield on the XYZ Common
Stock. The distribution yield does not represent payment of dividends on
XYZ Common Stock. Any future determination as to the payment of dividends
on the XYZ Common Stock will be at the discretion of the Company's Board of
Directors and will depend upon the Company's operating results,
financial condition and capital requirements, contractual restrictions,
general business conditions and such other factors as the Company's Board
of Directors deems relevant. There can be no assurance that the
distribution yield on the Exchangeable Securities will be higher than the
dividend yield on the XYZ Common Stock over the term of the Trust.
Holders of Exchangeable Securities will not be entitled to receive any
future dividends on the XYZ Common Stock unless and until such time, if
any, as the Trust shall have delivered XYZ Common Stock in exchange for
Exchangeable Securities on the Exchange Date or upon earlier dissolution of
the Trust, and unless the applicable record date for determining
stockholders entitled to receive such dividends occurs after such
delivery. See "Risk Factors--No Stockholder Rights."

The opportunity for equity appreciation afforded by an investment in the
Exchangeable Securities is less than that afforded by a direct investment in
the XYZ Common Stock because the value of the XYZ Common Stock receivable by
a Holder of a Exchangeable Securities upon exchange on the Exchange Date will
exceed the issue price of such Exchangeable Securities only if the Exchange
Price exceeds the Threshold Appreciation Price, which represents an
appreciation of % over the Initial Price. Moreover, each Exchangeable
Security will entitle the Holder to receive on the Exchange Date only
% (the percentage equal to the Initial Price divided by the Threshold
Appreciation Price) of any appreciation of the value of XYZ Common Stock
above the Threshold Appreciation Price. Holders of Exchangeable Securities
will realize the entire decline in value if the Exchange Price is less than
the Initial Price. See "Risk Factors--Limitations on Opportunity for Equity
Appreciation; Potential Losses."

DILUTION

The number of shares of XYZ Common Stock (or amount of cash) that
Holders of Exchangeable Securities are entitled to receive upon exchange on
the Exchange Date will not be adjusted for certain events, such as offerings
of XYZ Common Stock by the Company for cash or in connection with
acquisitions. The Company is not restricted from issuing additional shares
of XYZ Common Stock during the term of the Trust. In addition, principal
stockholders of the Company (including the beneficial owners of the
Contracting Stockholders) are not precluded from selling shares of XYZ Common
Stock, either pursuant to Rule 144 under the Securities Act of 1933, as
amended (the "Securities Act"), or by causing the Company to register such
shares. Neither the Company nor any Stockholder of the Company has any
obligation to consider the interests of Holders of Exchangeable Securities
for any reason. Additional issuances of shares of XYZ Common Stock may
materially and adversely affect the price of XYZ Common Stock and, because of
the relationship of the number of shares of XYZ Common Stock (or amount of
cash) to be received on the Exchange Date to the price of the XYZ Common
Stock, such other events may materially and adversely affect the trading
price of the Exchangeable Securities. There can be no assurance that the
Company will not take any of the foregoing actions, or that it will not make
offerings of, or that principal stockholders will not sell any, XYZ Common
Stock in the future, or as to the amount of any such offerings or sales. See
"Risk Factors--Dilution Adjustments".

TERM OF THE TRUST

The Trust will dissolve on or shortly after the Exchange Date, except if
terminated earlier under certain limited circumstances. On or shortly after
the Exchange Date, the shares of XYZ Common Stock (or cash) to be exchanged
for the Exchangeable Securities and any other remaining Trust assets, net of
any remaining Trust expenses or liabilities, if any, will be distributed pro
rata to Holders. In the event that a Reorganization Event (as defined below)
shall have occurred, the Contracting Stockholder shall have exercised its
option to accelerate the Contract upon the occurrence of a Tax Event or
certain defaults shall have occurred with respect to the Contracting
Stockholder under the Contract or the collateral arrangements described
herein, the Contract would accelerate, the Trust's assets (other than assets
received pursuant to the Contract) would, after satisfaction of the
liabilities of the Trust as provided by applicable law, be liquidated, the
net assets of the Trust would be distributed pro rata to the Holders and the
term of the Trust would expire. See "Investment Objective and Policies--The
Contract," "--Acceleration Upon Tax Event," "--Trust Dissolution" and "Risk
Factors--Limited Term."

CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

The Trust will be taxable as a grantor trust for United States Federal
income tax purposes. Accordingly, each Holder will be treated for United
States Federal income tax purposes as the owner of its pro rata portion of
the U.S. Treasury Securities and the Contract, and income received (including
original issue discount treated as received) by the Trust will generally be
treated as income of the Holders. See "Certain United States Federal Income
Tax Considerations."

The U.S. Treasury Securities held by the Trust will be treated for
United States Federal income tax purposes as having "original issue discount"
which will accrue over the term of the U.S. Treasury Securities. It is
currently anticipated that each quarterly cash distribution to the Holders
will be treated as a tax-free return of the Holders' costs of the U.S.
Treasury Securities and any previously included original issue discount, and
therefore will not be considered current income to Holders upon receipt
thereof for United States Federal income tax purposes. However, a Holder
(whether on the cash or accrual method of tax accounting) must recognize
currently as income original issue discount on the U.S. Treasury Securities
as it accrues. See "Certain United States Federal Income Tax
Considerations."

Under existing law, a Holder should not recognize income, gain or loss
upon the Trust's entry into the Contract or over the term of the Contract.
In general, the delivery of XYZ Common Stock pursuant to the Contract will
not be taxable to the Holders. A Holder will have taxable gain or loss upon
receipt of cash, if any, upon dissolution of the Trust or to the extent that
the Contracting Stockholder satisfies its obligation under the Contract with
cash. In general, each Holder's initial tax basis in any XYZ Common Stock
received from the Trust on the Exchange Date or upon earlier dissolution of
the Trust will be equal to its basis in its pro rata portion of the Contract
less the portion of such basis allocable to any cash that is received under
the Contract. See "Certain United States Federal Income Tax Considerations."

MANAGEMENT ARRANGEMENTS

The Trust will be internally managed and will not have an investment
adviser. The Trust's portfolio will not be actively managed. The
administration of the Trust will be overseen by the Trustees. The day-to-day
administration of the Trust will be carried out by (or its
successor) as trust administrator (the "Administrator"). (or
its successor) will also act as custodian for the Trust's assets (the
"Custodian") and as paying agent, transfer agent, and registrar (the "Paying
Agent") with respect to the Exchangeable Securities. Except as aforesaid,
and except for its role as collateral agent under the Trust's Security and
Pledge Agreement (see "Investment Objective and Policies--The Contract--
Collateral Arrangements; Acceleration"), has no other
affiliation with, and is not engaged in any other transaction with, the
Trust. For their services, the Contracting Stockholder will pay each of the
Administrator, Custodian and the Payment Agent at the closing of the Offering
a one-time, up-front amount in respect of its fee. See "Management
Arrangements."

RISK FACTORS

The Trust has adopted a fundamental policy that the Contract may not be
disposed of during the term of the Trust and that, unless the Trust dissolves
prior to the Exchange Date due to the occurrence of a "Reorganization Event,"
in the event that the Contracting Stockholder exercises its option to
accelerate the Contract upon the occurrence of a Tax Event or in the event of
a "Default" by the Contracting Stockholder, the U.S. Treasury Securities may
not be disposed of prior to their respective maturities. The Trust will
continue to hold the Contract despite any significant decline in the market
price of the XYZ Common Stock or adverse changes in the financial condition
of the Company.

Although the Exchangeable Securities are designed to provide investors
with a current distribution yield that is higher than the current dividend
yield on the XYZ Common Stock, there can be no assurance that the
distribution yield on the Exchangeable Securities will be higher than the
dividend yield on the XYZ Common Stock over the term of the Trust. In
addition, the opportunity for equity appreciation afforded by an investment
in the Exchangeable Securities is less than that afforded by a direct
investment in the XYZ Common Stock. The value of the XYZ Common Stock
receivable by a Holder of a Exchangeable Securities upon exchange on the
Exchange Date will exceed the issue price of such Exchangeable Securities
only if the Exchange Price exceeds the Threshold Appreciation Price, which
represents an appreciation of % over the Initial Price. Moreover, because
each Exchangeable Security will entitle the Holder to receive only
shares of XYZ Common Stock if the Exchange Price exceeds the Threshold
Appreciation Price, Holders of the Exchangeable Securities will be entitled
to receive upon exchange only % of any appreciation of the value of the
XYZ Common Stock above the Threshold Appreciation Price. AS DESCRIBED
HEREIN, THE EXCHANGE PRICE WILL REPRESENT A DETERMINATION OF THE VALUE OF A
SHARE OF XYZ COMMON STOCK IMMEDIATELY PRIOR TO THE EXCHANGE DATE.
ACCORDINGLY, THERE CAN BE NO ASSURANCE THAT THE AMOUNT RECEIVABLE BY HOLDERS
OF THE EXCHANGEABLE SECURITIES ON THE EXCHANGE DATE WILL BE EQUAL TO OR
GREATER THAN THE ISSUE PRICE OF THE EXCHANGEABLE SECURITIES. IF THE EXCHANGE
PRICE OF THE XYZ COMMON STOCK IS LESS THAN THE INITIAL PRICE, SUCH AMOUNT
RECEIVABLE ON THE EXCHANGE DATE WILL BE LESS THAN THE ISSUE PRICE PAID FOR
THE EXCHANGEABLE SECURITIES, IN WHICH CASE AN INVESTMENT IN EXCHANGEABLE
SECURITIES WILL RESULT IN A LOSS.

The Trust is classified as a "non-diversified" investment company under
the Investment Company Act. Consequently, the Trust is not limited by the
Investment Company Act in the proportion of its assets that may be invested
in the securities of a single issuer. Since the only securities held by the
Trust will be the U.S. Treasury Securities and the Contract, the Trust may be
subject to greater risk than would be the case for an investment company with
more diversified investments.

The trading prices of the Exchangeable Securities in the secondary
market will be directly affected by the trading prices of the XYZ Common
Stock in the secondary market. It is impossible to predict whether the price
of XYZ Common Stock will rise or fall. Trading prices of XYZ Common Stock
will be influenced by the Company's operating results and prospects and by
economic, financial and other factors and market conditions.

Holders of Exchangeable Securities will not be entitled to any rights
with respect to the XYZ Common Stock (including, without limitation, voting
rights and rights to receive any dividends or other distributions in respect
thereof) unless and until such time, if any, as the Trust shall have
delivered shares of XYZ Common Stock in exchange for Exchangeable Securities
on the Exchange Date or upon earlier dissolution of the Trust, and unless the
applicable record date, if any, for the exercise of such rights occurs after
such delivery.

The bankruptcy of the Contracting Stockholder could adversely affect the
time of exchange or, as a result, the amount received by the Holders of the
Exchangeable Securities. See "Risk Factors--Risk Relating to Bankruptcy of
the Contracting Stockholder."

Holders will experience a taxable event upon receipt of cash, if any,
upon dissolution of the Trust or to the extent that the Contracting
Stockholder satisfies its obligation under the Contract entirely with cash.
Because of an absence of authority as to the proper character of any gain or
loss resulting from such a taxable event, the ultimate tax consequences to
Holders as a result of the Contracting Stockholder electing to satisfy its
obligation under the Contract with cash is uncertain. See "Risk Factors."

LISTING

Application will be made to list the Exchangeable Securities on the
(NYSE).

FEE TABLE
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load (as a percentage of offering price) . . . . . . . . . . 3.0%(a)
Automatic Dividend Reinvestment Plan Fees . . . . . . . . . . . . . . . . Not Applicable
ANNUAL EXPENSES (as a percentage of net assets)
Management Fees(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.0%
Other Expenses(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.0%
TOTAL ANNUAL EXPENSES(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.0%

</TABLE>

EXAMPLE 1 YEAR 3 YEARS
---------------- -----------------
<S> <C> <C>
An investor would pay the following expenses on a $1,000
investment, including the maximum sales load of $ and
assuming (1) no annual expenses and (2) a 5% annual return
throughout the periods: $ $

</TABLE>
_______________
(a) See the cover page of this Prospectus and "Underwriting."
(b) See "Management Arrangements." The Trust will be internally managed;
consequently there will be no separate investment advisory fee paid by
the Trust. will act as the administrator of the Trust.
(c) The organization costs of the Trust in the amount of $ , the
costs associated with the initial registration and offering of the
Exchangeable Securities estimated to be approximately $ , and
approximately $ in respect of anticipated ongoing expenses over
the term of the Trust will be paid by the Contracting Stockholder. Any
unanticipated operating expenses of the Trust will be paid by
PaineWebber which will be reimbursed by the Contracting Stockholder.
See Management Arrangements--Estimated Expenses. Absent such
arrangements, the Trust's "Other Expenses" and "Total Annual Expenses"
would be approximately % of the Trust's net assets.

The foregoing Fee Table is intended to assist investors in understanding
the costs and expenses that a shareholder in the Trust will bear directly or
indirectly. The Example set forth above utilizes a 5% annual rate of return
as mandated by Securities and Exchange Commission regulations. THE EXAMPLE
SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES OR ANNUAL RATES
OF RETURN, AND ACTUAL EXPENSES OR ANNUAL RATES OF RETURN MAY BE MORE OR LESS
THAN THOSE ASSUMED FOR PURPOSES OF THE EXAMPLE.

THE TRUST

XYZ Exchangeable Securities Trust (the "Trust") is a newly
created Delaware business trust and will be registered as a closed-end
management investment company under the Investment Company Act. The Trust
was formed on October 24, 1997, pursuant to a Trust Agreement dated as
of such date (as amended and restated as of , 1998 the
"Declaration of Trust"). The term of the Trust will expire on or shortly
after , 2001, except that the Trust may be dissolved prior to
such date under certain limited circumstances. The Trust will be
treated as a grantor trust for United States Federal income tax purposes.
The Trust's principal office is located at 850 Library Avenue, Suite 204,
Newark, Delaware 19715, and its telephone number is (302) 738-6680.

USE OF PROCEEDS

The net proceeds of the Offering will be approximately $
(or approximately $ , if the Underwriters' over-allotment option
is exercised in full), after payment of the sales load and organizational and
offering costs. At the time of the closing of the Offering, or shortly
thereafter, the net proceeds of the Offering will be used to purchase a fixed
portfolio comprised of a series of zero-coupon U.S. Treasury Securities with
face amounts and maturities corresponding to the amounts and payment dates of
the distributions payable with respect to the Exchangeable Securities and to
pay the purchase price under the Contract to the Contracting Stockholder.

INVESTMENT OBJECTIVE AND POLICIES

GENERAL

The Trust will purchase and hold (i) a series of zero-coupon U.S.
Treasury Securities maturing on a quarterly basis through the Exchange Date
and (ii) the Contract with the Contracting Stockholder relating to shares of
XYZ Common Stock. The Trust's investment objective is to distribute to
Holders on a quarterly basis $ per Exchangeable Security (which
amount equals the pro rata portion of the fixed quarterly distributions from
the proceeds of the maturing U.S. Treasury Securities held by the Trust) and,
on the Exchange Date, a number of shares (such number of shares being
hereinafter referred to as the "Exchange Amount") of XYZ Common Stock (or,
under certain circumstances, cash with an equal value) per Exchangeable
Security determined in accordance with the following Exchange Rate Formula,
subject to adjustment as a result of certain dilution events: (a) if the
Exchange Price is greater than or equal to $ per share of XYZ Common
Stock (the "Threshold Appreciation Price"), shares of XYZ Common Stock
per Exchangeable Security, (b) if the Exchange Price is less than the
Threshold Appreciation Price but is greater than $ (the "Initial
Price"), a fractional share of XYZ Common Stock per Exchangeable Security so
that the value thereof (determined based on the Exchange Price) equals the
Initial Price and (c) if the Exchange Price is less than or equal to the
Initial Price, one share of XYZ Common Stock per Exchangeable Security.
THERE CAN BE NO ASSURANCE THAT THE AMOUNT RECEIVABLE BY HOLDERS OF THE
EXCHANGEABLE SECURITIES ON THE EXCHANGE DATE WILL BE EQUAL TO OR GREATER THAN
THE ISSUE PRICE OF THE EXCHANGEABLE SECURITIES. IF THE EXCHANGE PRICE OF THE
XYZ COMMON STOCK IS LESS THAN THE INITIAL PRICE, SUCH AMOUNT RECEIVABLE ON
THE EXCHANGE DATE WILL BE LESS THAN THE ISSUE PRICE PAID FOR THE EXCHANGEABLE
SECURITIES, IN WHICH CASE AN INVESTMENT IN EXCHANGEABLE SECURITIES WILL
RESULT IN A LOSS. Holders otherwise entitled to receive fractional shares of
XYZ Common Stock in respect of their aggregate holdings of Exchangeable
Securities will receive cash in lieu thereof. See "--Fractional Shares and
Units." The numbers of shares of XYZ Common Stock per Exchangeable Security
specified in clauses (a) and (c) of the Exchange Rate Formula are hereinafter
referred to as the "Share Components."

The "Exchange Price" means the average Closing Price per share of XYZ
Common Stock on the 20 Trading Days immediately prior to, but not including,
the second Trading Day preceding the Exchange Date. The "Closing Price" of
any security on any date of determination means the closing sale price (or,
if no closing price is reported, the last reported sale price) of such
security on the NYSE on such date or, if such security is not listed for
trading on the NYSE on any such date, as reported in the composite
transactions for the principal United States securities exchange on which
such security is so listed, or, if such security is not so listed on a United
States national or regional securities exchange, as reported by National
Association of Securities Dealers, Inc. Automated Quotation System or, if
such security is not so reported, the last quoted bid price for such security
in the over-the-counter market as reported by the National Quotation Bureau
or similar organization, or, if such bid price is not available, the market
value of such security on such date as determined by a nationally recognized
independent investment banking firm retained for this purpose by the
Administrator. In the event that the Exchange Rate Formula is adjusted as
described under "--The Contract--Dilution Adjustments" below, each of the
Closing Prices used in determining the Exchange Price will be similarly
adjusted to derive, for purposes of determining which of clauses (a), (b) or
(c) of the Exchange Rate Formula will apply on the Exchange Date, an Exchange
Price stated on a basis comparable to the Initial Price and the Threshold
Appreciation Price. A "Trading Day" is defined as a day on which the
security the Closing Price of which is being determined (A) is not suspended
from trading on any national or regional securities exchange or association
or over-the-counter market at the close of business and (B) has traded at
least once on the national or regional securities exchange or association or
over-the-counter market that is the primary market for the trading of such
security. The term "Business Day" means any day that is not a Saturday, a
Sunday or a day on which the NYSE, the NASDAQ National Market, or banking
institutions or trust companies in The City of New York are authorized or
obligated by law or executive order to close.

The Contract is a commercial transaction entered into between the
Contracting Stockholder and the Trust. Pursuant to the terms of the Contract,
the Contracting Stockholder is obligated to deliver to the Trust on the
Business Day immediately preceding the Exchange Date an aggregate number of
shares of XYZ Common Stock equal to the product of the Exchange Amount and
the aggregate number of Exchangeable Securities then outstanding. In lieu of
delivering shares of XYZ Common Stock on the Business Day immediately
preceding the Exchange Date, the Contracting Stockholder has the right to
satisfy its obligation under the Contract by delivering at such time cash in
an amount equal to the value of such number of shares at the Exchange Price.
Such right, if exercised by the Contracting Stockholder, must be exercised
with respect to all shares of XYZ Common Stock then deliverable pursuant to
the Contract. In the event that the Contracting Stockholder elects to
satisfy its obligations under the Contract by delivering cash, unless
prohibited by applicable law then in effect, Holders will receive cash
instead of XYZ Common Stock on the Exchange Date. On or prior to the sixth
Business Day immediately preceding the Exchange Date, the Administrator will
notify The Depository Trust Company (the "Depositary") and publish a notice
in The Wall Street Journal or another daily newspaper of national circulation
stating whether shares of XYZ Common Stock (or cash) will be delivered in
exchange for the Exchangeable Securities on the Exchange Date. At the time
such notice is published, the Exchange Price will not have been determined.
If the Contracting Stockholder elects to deliver shares of XYZ Common Stock,
Holders will be responsible for the payment of any and all brokerage costs
upon the subsequent sale thereof.

The Trust has adopted a fundamental policy as required by the
Declaration of Trust to invest at least 65% of its portfolio in the Contract.
The Contract will comprise approximately % of the Trust's initial assets.
The Trust has also adopted a fundamental policy that the Contract may not be
disposed of during the term of the Trust and that, unless the Trust dissolves
prior to the Exchange Date due to the occurrence of a "Reorganization Event"
with respect to the Company or any successor thereto, in the event that the
Contracting Stockholder exercises its option to accelerate the Contract upon
the occurrence of a Tax Event or in the event of a "Default" by the
Contracting Stockholder, the U.S. Treasury Securities may not be disposed of
prior to their respective maturities. The foregoing fundamental policies of
the Trust may not be changed without the vote of 100% in interest of the
Holders.

TRUST ASSETS

The Trust's assets primarily will consist of: (i) U.S. Treasury
Securities and (ii) the Contract. The Trust may also make certain temporary
investments. See "--Temporary Investments." For illustrative purposes only,
the following table shows the number of shares of XYZ Common Stock or amount
of cash that a Holder would receive for each Exchangeable Security at various
Exchange Prices. The table assumes that there will be no dilution
adjustments to the Exchange Rate Formula as described below under "--The
Contract--Dilution Adjustments." There can be no assurance that the Exchange
Price will be within the range set forth below. Given the Initial Price of
$ and the Threshold Appreciation Price of $ , a Holder would
receive on the Exchange Date the following number of shares of XYZ Common
Stock or amount of cash (in the event the Contracting Stockholder elects to
satisfy its obligation under the Contract with cash) per Exchangeable
Security:

Exchange Price of Number of Shares of
XYZ Common Stock XYZ Common Stock Amount of Cash
----------------- ------------------- --------------

The following table sets forth information regarding the distributions
to be received on the U.S. Treasury Securities, the portion of each year's
distributions that will constitute a return of capital for United States
Federal income tax purposes and the amount of original issue discount
accruing, assuming a yield-to-maturity accrual election, on the U.S. Treasury
Securities with respect to a Holder who acquires its Exchangeable Securities
at the issue price from an Underwriter pursuant to the Offering. See
"Certain United States Federal Income Tax Considerations."

<TABLE>
<CAPTION>
Annual
Inclusion of
Annual Gross Annual Gross Original Issue
Distributions Distributions Annual Return Discount in
from U.S. from U.S. of Capital per Income per
Treasury Treasury Securities per Exchangeable Exchangeable
Year Securities Exchangeable Security Security Security
---- ------------- ----------------------- -------------- --------------
<S> <C> <C> <C> <C>

$ $ $ $
1998
1999
2000
2001

</TABLE>

The anticipated annual distribution of $ per Exchange
Security is payable quarterly on each , , and
, commencing , 1998. Quarterly distributions on the
Exchangeable Securities will consist solely of the cash received from the
proceeds of the maturing U.S. Treasury Securities held by the Trust. The
Trust will not be entitled to any future dividends that may be declared on
the XYZ Common Stock. See "Dividends and Distributions."

ENHANCED YIELD; LESS POTENTIAL FOR EQUITY APPRECIATION THAN XYZ COMMON STOCK;
NO DEPRECIATION PROTECTION

Although the Exchangeable Securities will provide investors with a
current distribution yield (the Company has not paid any dividends on the XYZ
Common Stock) there can be on assurance that the distribution yield on the
Exchangeable Securities will be higher than the dividend yield on the XYZ
Common Stock over the term of the Trust. In addition, the opportunity for
equity appreciation afforded by an investment in the Exchangeable Securities
is less than that afforded by a direct investment in the XYZ Common Stock.
The value of the XYZ Common Stock receivable by a Holder of a Exchangeable
Securities on the Exchange Date will exceed the issue price of such
Exchangeable Securities only if the Exchange Price exceeds the Threshold
Appreciation Price, which represents an appreciation of % of the Initial
Price. Moreover, because each Exchangeable Security will entitle the Holder
to receive only shares of XYZ Common Stock if the Exchange Price exceeds
the Threshold Appreciation Price, Holders of the Exchangeable Securities will
be entitled to receive upon exchange only % (the percentage equal to
the Initial Price divided by the Threshold Appreciation Price) of any
appreciation of the value of the XYZ Common Stock above the Threshold
Appreciation Price. Holders of Exchangeable Securities will realize the
entire decline in value if the Exchange Prices is less than the Initial
Price.

THE COMPANY

(DESCRIPTION OF THE COMPANY)

The shares of XYZ Common Stock are traded on the (NYSE) under the symbol
" ". The following table sets forth, for the periods indicated, the range
of high and low closing sale prices per share of XYZ Common Stock on the
(NYSE Composite Tape).

High Low
---------------- ---------------
<S> <C> <C>
1996
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
1997
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
1998
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
1998
First Quarter
(through March __, 1998)

</TABLE>

At , 1998, there were approximately record holders
of the XYZ Common Stock, including Cede & Co., a nominee of the Depositary,
which holds shares of XYZ Common Stock on behalf of an indeterminate number
of beneficial owners. On March , 1998, the closing sale price on the
(NYSE) was $ per share of XYZ Common Stock.

The Company has not paid any dividends on the XYZ Common Stock. Any
future determination as to the payment of dividends will be at the
discretion of the Company's Board of Directors and will depend upon
the Company's operating results, financial condition and capital
requirements, contractual restrictions, general business conditions and
such other factors as the Company's Board of Directors deems relevant.

The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Accordingly, the
Company files reports, proxy and information statements and other information
with the Securities and Exchange Commission (the "Commission"). Copies of
such material can be inspected and copied at the public reference facilities
maintained by the Commission at the address specified under "Additional
Information." Reports, proxy and information statements and other information
concerning the Company may also be inspected at the offices of the NYSE.

THE COMPANY IS NOT AFFILIATED WITH THE TRUST, WILL NOT RECEIVE ANY OF
THE PROCEEDS FROM THE SALE OF THE EXCHANGEABLE SECURITIES AND WILL HAVE NO
OBLIGATIONS WITH RESPECT TO THE EXCHANGEABLE SECURITIES. THIS PROSPECTUS
RELATES ONLY TO THE EXCHANGEABLE SECURITIES OFFERED HEREBY AND DOES NOT
RELATE TO THE COMPANY OR THE XYZ COMMON STOCK. THE COMPANY HAS FILED A
REGISTRATION STATEMENT ON FORM S-3 WITH THE COMMISSION WITH RESPECT TO THE
SHARES OF XYZ COMMON STOCK THAT MAY BE RECEIVED BY A HOLDER OF EXCHANGEABLE
SECURITIES ON THE EXCHANGE DATE OR UPON EARLIER DISSOLUTION OF THE TRUST.
THE PROSPECTUS OF THE COMPANY (THE "XYZ PROSPECTUS") CONSTITUTING A PART OF
SUCH REGISTRATION STATEMENT INCLUDES INFORMATION RELATING TO THE COMPANY AND
THE XYZ COMMON STOCK, INCLUDING CERTAIN RISK FACTORS RELEVANT TO AN
INVESTMENT IN XYZ COMMON STOCK. THE XYZ PROSPECTUS IS BEING ATTACHED HERETO
AND DELIVERED TO PROSPECTIVE PURCHASERS OF EXCHANGEABLE SECURITIES TOGETHER
WITH THIS PROSPECTUS FOR CONVENIENCE OF REFERENCE ONLY. THE XYZ PROSPECTUS
DOES NOT CONSTITUTE A PART OF THIS PROSPECTUS, NOR IS IT INCORPORATED BY
REFERENCE HEREIN.

THE CONTRACT

General. The Contract is a commercial transaction entered into between
the Contracting Stockholder and the Trust. Pursuant to the terms of the
Contract, the Contracting Stockholder is obligated to deliver to the Trust on
the Business Day immediately preceding the Exchange Date an aggregate number
of shares of XYZ Common Stock equal to the product of the Exchange Amount and
the aggregate number of Exchangeable Securities then outstanding. In lieu of
delivering shares of XYZ Common Stock on the Business Day immediately
preceding the Exchange Date, the Contracting Stockholder has the right to
satisfy its obligation under the Contract by delivering at such time cash in
an amount (calculated to the nearest 1/100th of a dollar or, if there is not
a nearest 1/100th of a dollar, then to the next higher 1/100th of a dollar)
equal to the value of such number of shares at the Exchange Price. Such
right, if exercised by the Contracting Stockholder, must be exercised with
respect to all shares of XYZ Common Stock then deliverable pursuant to the
Contract.

Dilution Adjustments. The Exchange Rate Formula is subject to
adjustment if the Company shall: (i) pay a stock dividend or make a
distribution with respect to XYZ Common Stock in shares of such stock; (ii)
subdivide or split the outstanding shares of XYZ Common Stock into a greater
number of shares; (iii) combine the outstanding shares of XYZ Common Stock
into a smaller number of shares; (iv) issue by reclassification of shares of
XYZ Common Stock any shares of common stock of the Company; (v) issue rights
or warrants to all holders of XYZ Common Stock entitling them to subscribe
for or purchase shares of XYZ Common Stock at a price per share less than the
then current market price of the XYZ Common Stock (other than rights to
purchase XYZ Common Stock pursuant to a plan for the reinvestment of
dividends or interest); or (vi) pay a dividend or make a distribution to all
holders of XYZ Common Stock of evidences of its indebtedness or other assets
(excluding any stock dividends or distributions referred to in clause (i)
above or any cash dividends other than any Extraordinary Cash Dividends (as
defined below)) or issue to all holders of XYZ Common Stock rights or
warrants to subscribe for or purchase any of its securities (other than those
referred to in clause (v) above).

In the case of the events referred to in clauses (i), (ii), (iii) and
(iv) above, the Exchange Rate Formula shall be adjusted so that the Trust
will receive on the Business Day immediately preceding the Exchange Date the
number of shares of XYZ Common Stock (or, in the case of a reclassification
referred to in clause (iv) above, the number of shares of other common stock
of the Company issued pursuant thereto) which the Trust would have owned or
been entitled to receive immediately following any event described above had
the Contracting Stockholder's obligations under the Contract been satisfied
immediately prior to such event or any record date with respect thereto.

In the case of the event referred to in clause (v) above, the Exchange
Rate Formula shall be adjusted by multiplying each of the Share Components in
the Exchange Rate Formula in effect immediately prior to the date of issuance
of the rights or warrants referred to in clause (v) above by a fraction, the
numerator of which shall be the number of shares of XYZ Common Stock
outstanding on the date of issuance of such rights or warrants, immediately
prior to such issuance, plus the number of additional shares of XYZ Common
Stock offered for subscription or purchase pursuant to such rights or
warrants, and the denominator of which shall be the number of shares of XYZ
Common Stock outstanding on the date of issuance of such rights or warrants,
immediately prior to such issuance, plus the number of additional shares of
XYZ Common Stock which the aggregate offering price of the total number of
shares of XYZ Common Stock so offered for subscription or purchase pursuant
to such rights or warrants would purchase at the current market price
(determined as the average Closing Price per share of XYZ Common Stock on the
20 Trading Days immediately prior to the date such rights or warrants are
issued, subject to certain adjustments), which shall be determined by
multiplying such total number of shares by the exercise price of such rights
or warrants and dividing the product so obtained by such current market
price. To the extent that shares of XYZ Common Stock are not delivered after
the expiration of such rights or warrants, or if such rights or warrants are
not issued, the Exchange Rate Formula shall be readjusted to the Exchange
Rate Formula which would then be in effect had such adjustments for the
issuance of such rights or warrants been made upon the basis of delivery of
only the number of shares of XYZ Common Stock actually delivered.

In the case of the event referred to in clause (vi) above, the Exchange
Rate Formula shall be adjusted by multiplying each of the Share Components in
the Exchange Rate Formula in effect on the record date referred to below by a
fraction, the numerator of which shall be the market price per share of XYZ
Common Stock on the record date for the determination of stockholders
entitled to receive the dividend or distribution or the rights or warrants
referred to in clause (vi) above (such market price being determined as the
average Closing Price per share of XYZ Common Stock on the 20 Trading Days
immediately prior to such record date, subject to certain adjustments), and
the denominator of which shall be such market price per share of XYZ Common
Stock less the fair market value (as determined by a nationally recognized
independent investment banking firm retained for this purpose by the
Administrator, whose determination shall be conclusive) as of such record
date of the portion of the assets or evidences of indebtedness to be
distributed or of such subscription rights or warrants applicable to one
share of XYZ Common Stock.

An "Extraordinary Cash Dividend" means, with respect to any consecutive
12-month period, the amount, if any, by which the aggregate amount of all
cash dividends on the XYZ Common Stock occurring in such 12-month period
(excluding any such dividends occurring in such period for which a prior
adjustment to the Exchange Rate Formula was previously made) exceeds on a per
share basis 10% of the average of the Closing Prices per share of the XYZ
Common Stock over such 12-month period.

All adjustments to the Exchange Rate Formula will be calculated to the
nearest 1/10,000th of a share of XYZ Common Stock (or if there is not a
nearest 1/10,000th of a share to the next lower 1/10,000th of a share). No
adjustment in the Exchange Rate Formula shall be required unless such
adjustment would require an increase or decrease of at least one percent
therein; provided, however, that any adjustments which by reason of the
foregoing are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. If an adjustment is made to the
Exchange Rate Formula as described above, an adjustment will also be made to
the Exchange Price solely to determine which of clauses (a), (b) or (c) of
the Exchange Rate Formula will apply on the Exchange Date. The required
adjustment to the Exchange Price will be made by multiplying each of the
Closing Prices used in determining the Exchange Price by a fraction, the
numerator of which shall be the Share Component in clause (c) of the Exchange
Rate Formula immediately after such adjustment described above, and the
denominator of which shall the Share Component in clause (c) of the Exchange
Rate Formula immediately before such adjustment described above. Each such
adjustment to the Exchange Rate Formula shall be made successively.

In the event of a statutory merger effected solely for the purpose of
changing the state of incorporation of the Company, or any surviving entity
or subsequent surviving entity of the Company (a "Company Successor"), the
Exchange Rate Formula shall be adjusted so that the Trust will receive on the
Business Day immediately preceding the Exchange Date the number of shares of
capital stock of the continuing corporation in such statutory merger which
the Trust would have owned or been entitled to receive immediately following
such statutory merger had the Contracting Stockholder's obligations under the
Contract been satisfied immediately prior to the effective date for such
statutory merger.

The Administrator is required, within ten Business Days following the
occurrence of an event that requires an adjustment to the Exchange Rate
Formula (or if the Administrator is not aware of such occurrence, as soon as
practicable after becoming so aware), to provide written notice to the
Holders of the occurrence of such event and a statement in reasonable detail
setting forth the adjusted Exchange Rate Formula and the method by which the
adjustment to the Exchange Rate Formula was determined, provided that, in
respect of any adjustment to the Exchange Price, such notice will only
disclose the factor by which each of the Closing Prices used in determining
the Exchange Price is so multiplied in order to determine the Exchange Amount
on the Exchange Date. Until the Exchange Date, it will not be possible to
determine the Exchange Amount.

No adjustments will be made for certain other events, such as offerings
of XYZ Common Stock by the Company for cash or in connection with
acquisitions. Likewise, no adjustments will be made for any sales of XYZ
Common Stock by any principal stockholder of the Company.

Reorganization Events Causing a Dissolution of the Trust. In the event
of (A) any consolidation or merger of the Company or any Company Successor
with or into another entity (other than a (x) consolidation or merger in
which the Company is the continuing corporation and in which the XYZ Common
Stock outstanding immediately prior to the consolidation or merger is not
exchanged for cash, securities or other property of the Company or another
corporation or (y) a statutory merger effected solely for the purpose of
changing the state of incorporation of the Company or a Company Successor),
(B) any sale, transfer, lease or conveyance to another entity of the property
of the Company or any Company Successor as an entirety or substantially as an
entirety, (C) any statutory exchange of securities of the Company or any
Company Successor with another entity (other than in connection with a merger
or acquisition) or (D) any liquidation, dissolution, winding up or bankruptcy
of the Company or any Company Successor (any such event described in clause
(A), (B), (C) or (D), a "Reorganization Event"), the Contracting
Stockholder's obligations under the Contract shall be automatically
accelerated and the Contracting Stockholder shall be obligated to deliver to
the Trust, on the tenth Business Day after the effective date for such
Reorganization Event (the "Early Settlement Date"), an amount of cash per
Exchangeable Security equal to: (i) if the Transaction Value (as defined
below) is greater than or equal to the Threshold Appreciation Price,
multiplied by the Transaction Value, (ii) if the Transaction Value is less
than the Threshold Appreciation Price but greater than the Initial Price, the
Initial Price, and (iii) if the Transaction Value is less than or equal to
the Initial Price, the Transaction Value. "Transaction Value" means (i) for
any cash received in any such Reorganization Event, the amount of cash
received per share of XYZ Common Stock, (ii) for any property other than cash
or securities received in any such Reorganization Event, an amount equal to
the market value on the date the Reorganization Event is consummated of such
property received per share of XYZ Common Stock as determined by a nationally
recognized independent investment banking firm retained for this purpose by
the Administrator and (iii) for any securities received in any such
Reorganization Event, an amount equal to the average Closing Price per unit
of such securities on the 20 Trading Days immediately prior to, but not
including, the second Trading Day preceding the Early Settlement Date,
multiplied by the number of such securities received for each share of XYZ
Common Stock. Notwithstanding the foregoing, if any Marketable Securities
(as defined below) are received by holders of XYZ Common Stock in such
Reorganization Event, then in lieu of delivering cash as provided above, the
Contracting Stockholder may at its option deliver a proportional amount of
such Marketable Securities. If the Contracting Stockholder elects to deliver
Marketable Securities, Holders will be responsible for the payment of any and
all brokerage and other transaction costs upon the sale of such securities.
"Marketable Securities" means any securities listed on a U.S. national
securities exchange or reported by The NASDAQ National Market.

IF A REORGANIZATION EVENT OCCURS, THE TRUST'S ASSETS (OTHER THAN ASSETS
RECEIVED PURSUANT TO THE CONTRACT) WILL BE LIQUIDATED, THE NET ASSETS OF THE
TRUST WILL, AFTER SATISFACTION OF THE LIABILITIES OF THE TRUST AS PROVIDED BY
APPLICABLE LAW, BE DISTRIBUTED PRO RATA TO THE HOLDERS AND THE TERM OF THE
TRUST WILL EXPIRE. In such event, the U.S. Treasury Securities will be sold
by the Trust, and the proceeds therefrom will be distributed along with the
cash (or Marketable Securities) received under the Contract on the Early
Settlement Date after providing for any expenses of the Trust.

Acceleration Upon Tax Event. Pursuant to the terms of the Contract, the
Contracting Stockholder's obligations under the Contract may be accelerated,
at the option of the Contracting Stockholder, in whole but not in part, at
any time from and after the date (the "Tax Event Date") on which a Tax Event
(as defined below) shall occur at a price per Exchangeable Security (the "Tax
Event Acceleration Price") equal to (a) an amount of cash equal to the sum of
(i) all accumulated and unpaid distributions on such Exchangeable Security to
the date fixed for acceleration (the "Tax Event Acceleration Date"), (ii) the
sum of all distributions on such Exchangeable Security due after the Tax
Event Acceleration Date and on or prior to the Exchange Date and (iii) $
(equal to the distributions payable on such Exchangeable Securities for one
year), minus (b) the Liquidation Value (as defined below), plus (c) a number
of shares of XYZ Common Stock equal to the number that would be required to
be delivered on such date under the Contract if the Exchange Date were
redefined for all purposes to be the Tax Event Acceleration Date. The
obligation of the Contracting Stockholder to deliver shares of XYZ Common
Stock on the Tax Event Acceleration Date as described in clause (c) above may
be cash settled, at the option of the Contracting Stockholder, in whole but
not in part, by delivering to the Trust on the Tax Event Acceleration Date,
in lieu of the shares of XYZ Common Stock otherwise deliverable on the Tax
Event Acceleration Date in respect of which an election to exercise the cash
settlement option (the "Tax Event Cash Settlement Option") is made, cash in
an amount (calculated to the nearest 1/100th of a dollar or, if there is not
a nearest 1/100th of a dollar, then to the next higher 1/100th of a dollar)
equal to the value of such shares at the average Closing Price per share of
XYZ Common Stock on the 20 Trading Days immediately prior to, but not
including, the second Trading Day preceding the Tax Event Acceleration Date.

A "Tax Event" means that the Contracting Stockholder shall have
delivered to the Trust an opinion (the "Tax Event Opinion") from a nationally
recognized independent tax counsel experienced in such matters to the effect
that, as a result of (a) any amendment to, or change in, the laws (or any
regulations thereunder) of the United States or any taxing authority thereof
or therein or (b) any amendment to, clarification of, or change in, an
interpretation or application of such laws or regulations by any legislative
body, court, governmental agency or regulatory authority, enacted or
promulgated, or which interpretation is issued or which action is taken, on
or after the date of this Prospectus, there is more than an insubstantial
risk that, by reason of the Contracting Stockholder having entered into the
Contract, the Contracting Stockholder would be required to recognize gain for
United States Federal income tax purposes with respect to shares of XYZ
Common Stock deliverable under the Contract on a date that is prior to the
Business Day immediately preceding the Exchange Date.

The "Liquidation Value" is defined as the amount of the aggregate
proceeds received by the Trust from the sale of the U.S. Treasury Securities
allocable to one Exchangeable Securities, which shall be determined by the
Trustees on the basis of quotations from independent dealers. Upon receipt
of any notice from the Contracting Stockholder that it is exercising its
option to accelerate the Contract following the occurrence of a Tax Event,
the Trustees on the second Business Day immediately preceding the Tax Event
Acceleration Date shall solicit cash bids, for settlement on the Business Day
immediately preceding the Tax Event Acceleration Date, from three (or such
fewer number of dealers as may be providing such bids) United States
government securities primary dealers in The City of New York selected by the
Trustees after consultation with the Contracting Stockholder (which may
include the Administrator or its affiliates (or an affiliate of PaineWebber
Incorporated)) for the purchase by the quoting dealer of all U.S. Treasury
Securities then held by the Trust. If for any reason the Trustees are unable
to obtain the required bid on the second Business Day preceding the Tax Event
Acceleration Date, the Trustees shall attempt to obtain such bid daily until
they are able to obtain the required bid. The Trustees shall accept the
highest bid received that will result in the greatest amount of proceeds from
the sale of the U.S. Treasury Securities then held by the Trust and shall
sell all such U.S. Treasury Securities at that highest bid.

On August 5, 1997, the Taxpayer Relief Act of 1997 (the "Tax Act") was
enacted into law. The Tax Act adds new Section 1259 to the Internal Revenue
Code of 1986, as amended (the "Code"). In general, Section 1259 of the Code
requires taxpayers (including corporations) to recognize gain (but not loss)
upon entering into a "constructive sale" of any appreciated position in
stock. For these purposes, a taxpayer is treated as making a "constructive
sale" of an appreciated position in stock when the taxpayer (or a person
related to the taxpayer) enters into a forward contract to deliver the stock.
A "forward contract" is defined for these purposes as a contract to deliver a
substantially fixed amount of property for a substantially fixed price.
Section 1259 of the Code generally applies to constructive sales entered into
after June 8, 1997. The Contracting Stockholder does not believe that it
will be considered to have made a constructive sale of any of its XYZ Common
Stock as a result of having entered into the Contract. There can be no
assurance, however, that future guidance will not be issued under Section
1259 of the Code which would indicate that the Contracting Stockholder has
made a constructive sale of its shares of XYZ Common Stock as a result of
having entered into the Contract. If future guidance is issued indicating
that the Contracting Stockholder has made a constructive sale of its XYZ
Common Stock as a result of having entered into the Contract, such guidance
could result in a Tax Event. It cannot be predicted whether or not any
future guidance will be issued under Section 1259 of the Code which could
give rise to a Tax Event, nor can it be predicted whether the Contracting
Stockholder will elect to cause a Tax Event by delivering the Tax Event
Opinion to the Trust in the event that future guidance is issued under
Section 1259 of the Code which could give rise to a Tax Event.

The Administrator will provide notice of the Contracting Stockholder's
election to exercise its acceleration option to Holders of record of the
Exchangeable Securities not less than nine calendar days (14 calendar days if
the Tax Event Cash Settlement Option is elected) nor more than 30 calendar
days prior to the related Tax Event Acceleration Date. Such notice will
state the following and may contain such other information as the
Administrator deems advisable: (a) the Tax Event Acceleration Date, (b)
whether the Contracting Stockholder has elected to exercise the Tax Event
Cash Settlement Option, and (c) that distributions will cease to accumulate
on the Exchangeable Securities on the Tax Event Acceleration Date. Any such
notice will be provided by mail, sent to each Holder of record at such
Holder's address as it appears on the register for the Exchangeable
Securities, first class, postage prepaid. At or prior to the mailing of such
notice of acceleration, the Administrator will publish a public announcement
in The Wall Street Journal or another daily newspaper of national
circulation. At the time such announcement is published, neither the
Exchange Price nor the Liquidation Value will have been determined.

Collateral Arrangements; Acceleration. Pursuant to a Security and
Pledge Agreement among the Contracting Stockholder, the Trust and ,
as collateral agent (the "Collateral Agent"), the Contracting Stockholder's
obligations under the Contract will be secured by a security interest in the
maximum number of shares of XYZ Common Stock deliverable by the Contracting
Stockholder under the Contract (subject to adjustment in accordance with the
dilution adjustment provisions of the Contract, described above). The
Collateral Agent will promptly pay over to the Contracting Stockholder any
dividends, interest, principal or other payments received by the Collateral
Agent in respect of any collateral pledged by the Contracting Stockholder,
unless the Contracting Stockholder is in "Default" of its obligations under
the Security and Pledge Agreement, or unless the payment of such amount to
the Contracting Stockholder would cause the collateral to become insufficient
under the Security and Pledge Agreement. The Contracting Stockholder shall
have the right to vote any pledged shares of XYZ Common Stock for so long as
such shares are owned by it and pledged under the Security and Pledge
Agreement, unless the Contracting Stockholder is in "Default."

A "Collateral Event of Default" under the Security and Pledge Agreement
shall mean, at any time, failure of the collateral to consist of at least the
maximum number of shares of XYZ Common Stock deliverable by the Contracting
Stockholder under the Contract at such time if such failure is not remedied
on or before the third Business Day after notice of such failure is given by
the Collateral Agent to the Contracting Stockholder.

The occurrence of a Collateral Event of Default under the Security and
Pledge Agreement, or the bankruptcy or insolvency of the Contracting
Stockholder (each such event, a "Default") will cause an automatic
acceleration of the Contracting Stockholder's obligations under the Contract.
In any such event, the Contracting Stockholder will become obligated to
deliver a number of shares of XYZ Common Stock having an aggregate value
equal to the "Aggregate Acceleration Value" of the Contract. The Aggregate
Acceleration Value will be based on an "Acceleration Value" determined by the
Administrator on the basis of quotations from independent dealers. Each
quotation will be for an amount that would be paid to the relevant dealer in
consideration of an agreement between the Trust and such dealer that would
have the effect of preserving the Trust's rights to receive the number of
shares of XYZ Common Stock under a portion of the Contract that corresponds
to 1,000 of the Exchangeable Securities offered hereby. The Administrator
will request quotations from four nationally recognized independent dealers
on or as soon as reasonably practicable following the date of acceleration.
If four quotations are provided, the Acceleration Value will be the
arithmetic mean of the two quotations remaining after disregarding the
highest and the lowest quotations. If two or three quotations are provided,
the Acceleration Value will be the arithmetic mean of such quotations. If
one quotation is provided, the Acceleration Value will be such quotation.
The Aggregate Acceleration Value will be computed by dividing the
Acceleration Value by 1,000 and multiplying the quotient by the aggregate
number of Exchangeable Securities then outstanding, except that, if no
quotations are provided, the Aggregate Acceleration Value will be the product
of the average Closing Price per share of XYZ Common Stock on the 20 Trading
Days immediately prior to, but not including, the second Trading Day
preceding the acceleration date and the number of shares of XYZ Common Stock
that would be required to be delivered on such date under the Contract if the
Exchange Date were redefined for all purposes to be the acceleration date.
Upon the occurrence of a Default, the shares of XYZ Common Stock deliverable
for each Exchangeable Security will be based solely on the Aggregate
Acceleration Value described above for the Contract.

The Collateral Agent is a "financial institution" for purposes of
Sections 555 and 101(22) of Title 11 of the United States Code (the
"Bankruptcy Code"). The Trust believes that the Collateral Agent will be the
agent and custodian for the Trust such that the Trust will be a "financial
institution" as defined in Section 101(22) of the Bankruptcy Code. Upon any
acceleration, the Collateral Agent will distribute to the Trust, for
distribution pro rata to the Holders, the Aggregate Acceleration Value in the
form of shares of XYZ Common Stock then pledged. See "--Trust Dissolution."

Fractional Shares and Units. No fractional share of XYZ Common Stock
will be delivered if the Contracting Stockholder satisfies its obligations
under the Contract by delivering shares of XYZ Common Stock. In lieu of any
fractional share otherwise deliverable in respect of the Contracting
Stockholder's obligations under the Contract, the Trust shall be entitled to
receive an amount in cash equal to the value of such fractional share based
on the average Closing Price per share of XYZ Common Stock on the 20 Trading
Days immediately prior to, but not including, the second Trading Day
preceding the Exchange Date.

Description of Contracting Stockholder. The Contracting Stockholder is
. (The Contracting Stockholder may be an institutional investor in
corporate, partnership or other form or an individual, a trust, foundation or
other entity through which such institutional investor or individual holds
its shares of XYZ Common Stock. A brief description of the Contracting
Stockholder will be added by amendment. Specific information on the holdings
of the Contracting Stockholder, as required by the Securities Act of 1933, as
amended (the "Securities Act"), will be included in Appendix A to this
Prospectus.)

Purchase Price. The purchase price under the Contract is equal to $
in the aggregate and is payable to the Contracting Stockholder by the Trust
on or about , 1998. No other consideration is payable by the
Trust to the Contracting Stockholder in connection with its acquisition of
the Contract or the performance of the Contract by the Contracting
Stockholder.

The Contract will be valued by the Trust at fair value as determined in
good faith at the direction of the Trustees (if necessary, through
consultation with accountants, bankers and other specialists). See "Net
Asset Value."

THE U.S. TREASURY SECURITIES

The Trust will purchase and hold a series of zero-coupon U.S. Treasury
Securities with face amounts and maturities corresponding to the amounts and
payment dates of the distributions payable with respect to the Exchangeable
Securities. Up to ___% of the Trust's total assets may be invested in these
U.S. Treasury Securities. In the event that the Contract is accelerated as
described under "--Reorganization Event Causing a Termination of the Trust,"
"--Acceleration Upon Tax Event" or "--Collateral Arrangements; Acceleration,"
then the Administrator will liquidate any such U.S. Treasury Securities then
held in the Trust and distribute the proceeds therefrom pro rata to the
Holders, together with amounts distributed upon acceleration.

TEMPORARY INVESTMENTS

For cash management purposes, the Trust may invest the proceeds of the
U.S. Treasury Securities and any other cash held by the Trust in short-term
obligations of the U.S. Government maturing no later than the Business Day
preceding the next following distribution date.

TRUST DISSOLUTION

The Trust will dissolve on or shortly after the Exchange Date, except if
dissolved earlier under certain limited circumstances. Although the Trust
has adopted a fundamental policy that it will not dispose of the Contract
prior to the Exchange Date, under certain circumstances the Contract may
terminate prior to the Exchange Date. In the event that a Reorganization
Event shall have occurred, the Contracting Stockholder shall have exercised
its option to accelerate the Contract upon the occurrence of a Tax Event or a
Default shall have occurred, the Trust's assets (other than assets received
pursuant to the Contract) would be liquidated, the net assets of the Trust,
after satisfaction of the liabilities of the Trust as provided by applicable
law, would be distributed pro rata to the Holders and the term of the Trust
would expire. See "--The Contract--Reorganization Event Causing Termination
of the Trust," "--Acceleration Upon Tax Event" and "--Collateral
Arrangements; Acceleration."

Written notice of any dissolution shall be sent to Holders specifying
the record date for the distribution to Holders, the amount distributable
(including, if applicable, the number of shares of XYZ Common Stock or, if a
Reorganization Event shall have occurred, the number of units of any
Marketable Security) with respect to each Exchangeable Security and the time
of dissolution as determined by the Trustees. Any such notice will be
provided by mail, sent to each Holder at such Holder's address as it appears
on the register for the Exchangeable Securities, first class, postage prepaid
not less than nine days prior to the date on which such distribution is to be
made. At or prior to the mailing of such notice, the Administrator shall
publish a public announcement in The Wall Street Journal or another daily
newspaper of national circulation.

FRACTIONAL SHARES AND UNITS

No fractional shares of XYZ Common Stock, or fractional units of any
Marketable Security, will be distributed by the Trust to Holders of
Exchangeable Securities on the Exchange Date or upon earlier dissolution of
the Trust. All fractional shares or units to which Holders of Exchangeable
Securities would otherwise be entitled on the Exchange Date or upon earlier
dissolution of the Trust will be aggregated and liquidated by the
Administrator and, in lieu of the fractional shares or units to which a
Holder would otherwise have been entitled in respect of the total number of
Exchangeable Securities held by such Holder, such Holder will receive its pro
rata portion of the proceeds from such liquidation.

INVESTMENT RESTRICTIONS

The Trust has adopted a fundamental policy that the Trust may not
purchase any securities or instruments other than the U.S. Treasury
Securities, the Contract and the XYZ Common Stock or other assets received
pursuant to the Contract (including Marketable Securities) and, for cash
management purposes, short-term obligations of the U.S. Government; issue any
securities or instruments except for the Exchangeable Securities; make short
sales or purchase securities on margin; write put or call options; borrow
money; underwrite securities; purchase or sell real estate, commodities or
commodities contracts; or make loans. The Trust has adopted a fundamental
policy to invest at least 65% of its portfolio in the Contract. The Trust
has also adopted a fundamental policy that the Contract may not be disposed
of during the term of the Trust and that, unless the Trust dissolves prior to
the Exchange Date due to the occurrence of a Reorganization Event, in the
event that the Contracting Stockholder exercises its option to accelerate the
Contract upon the occurrence of a Tax Event or in the event of a Default, the
U.S. Treasury Securities may not be disposed of prior to their respective
maturities.

Because of the foregoing limitations, the Trust's investments will be
concentrated initially in the (insert Company's industry) industry, which is
the industry in which the Company currently operates. However, to the
extent that in the future the Company diversifies its operations into one or
more other industries, (add clause relating to Reference Property if
appropriate,) the Trust's investments will be less concentrated in the
(insert Company's industry) industry.

RISK FACTORS

NO ACTIVE PORTFOLIO MANAGEMENT

It is a fundamental policy of the Trust that the Contract may not be
disposed of during the term of the Trust and that, unless the Trust dissolves
prior to the Exchange Date due to the occurrence of a Reorganization Event,
in the event that the Contracting Stockholder exercises its option to
accelerate the Contract upon the occurrence of a Tax Event or in the event of
a Default, the U.S. Treasury Securities may not be disposed of prior to their
respective maturities. As a result, the Trust will continue to hold the
Contract despite any significant decline in the market price of the XYZ
Common Stock or adverse changes in the financial condition of the Company.
The Trust will not be managed like a typical closed-end investment company.

ABSENCE OF TRADING HISTORY; MARKETABILITY; POSSIBILITY OF THE EXCHANGEABLE
SECURITIES TRADING AT A DISCOUNT FROM NET ASSET VALUE

The Exchangeable Securities have no trading history and it is not
possible to predict how they will trade in the secondary market. The trading
price of the Exchangeable Securities may vary considerably prior to the
Exchange Date due to, among other things, fluctuations in trading prices of
the XYZ Common Stock (which may occur due to changes in the Company's
financial condition, results of operations or prospects, or because of
complex and interrelated political, economic, financial and other factors
that can affect the capital markets generally, the stock exchanges or
quotation systems on which the XYZ Common Stock is traded and the market
segment of which the Company is a part) and fluctuations in interest rates
and other factors that are difficult to predict and beyond the Trust's
control.

The Underwriter currently intends, but is not obligated, to make a
market in the Exchangeable Securities. There can be no assurance that a
secondary market will develop or, if a secondary market does develop, that it
will provide the Holders of the Exchangeable Securities with liquidity of
investment or that it will continue for the life of the Exchangeable
Securities. Application will be made to list the Exchangeable Securities on
the NYSE. There can be no assurance that such application will be accepted
or that, if accepted, the Exchangeable Securities will not later be delisted
or that trading in the Exchangeable Securities on the NYSE will not be
suspended. In the event of a delisting or suspension of trading on such
exchange, the Trust will apply for listing of the Exchangeable Securities on
another national securities exchange or for quotation on another trading
market. If the Exchangeable Securities are not listed or traded on any
securities exchange or trading market, or if trading of the Exchangeable
Securities is suspended, pricing information for the Exchangeable Securities
may be more difficult to obtain, and the price and liquidity of the
Exchangeable Securities may be adversely affected.

The Trust is a newly created closed-end investment company with no
previous operating history. Shares of closed-end investment companies
frequently trade at a discount from their net asset value, which is a risk
separate and distinct from the risk that the Trust's net asset value will
decrease. The Trust cannot predict whether the Exchangeable Securities will
trade at, below or above their net asset value. The risk of purchasing
investments that might trade at a discount is more pronounced for investors
who wish to sell their investments in a relatively short period of time after
completion of the Trust's initial public offering because for those investors
realization of a gain or loss on their investments is likely to be more
dependent upon the existence of a premium or discount than upon portfolio
performance. Exchangeable Securities are not subject to redemption.

DILUTION ADJUSTMENTS

The number of shares of XYZ Common Stock (or amount of cash) that the
Trust is entitled to receive pursuant to the Contract on the Business Day
immediately preceding the Exchange Date or upon acceleration of the Contract
is subject to adjustment for certain events arising from stock splits and
combinations, stock dividends and certain other actions of the Company that
modify its capital structure. See "Investment Objective and Policies--The
Contract--Dilution Adjustments." Such number of shares of XYZ Common Stock
(or amount of cash) to be received by the Trust will not be adjusted for
other events, such as offerings of XYZ Common Stock for cash or in connection
with acquisitions. In addition, principal stockholders of the Company
(including the beneficial owners of the Contracting Stockholders) are not
precluded from selling shares of XYZ Common Stock, either pursuant to Rule
144 under the Securities Act, or by causing the Company to register such
shares. Neither the Company nor any stockholder of the Company has any
obligation to consider the interests of the Holders of the Exchangeable
Securities for any reason. Additional issuances or sales that may materially
and adversely affect the price of the XYZ Common Stock and, because of the
relationship of the amount to be received pursuant to the Contract to the
price of the XYZ Common Stock, such other events may materially and adversely
affect the trading price of the Exchangeable Securities. There can be no
assurance that the Company will not take any of the foregoing actions, or
that it will not make offerings of, or that principal stockholders (including
the Contracting Stockholder) will not sell any, XYZ Common Stock in the
future, or as to the amount of any such offerings or sales.

LIMITED TERM

The term of the Trust will expire on or shortly after the Exchange Date,
unless the Trust is dissolved earlier under certain limited circumstances.
On or shortly after the Exchange Date, the Trust will distribute the shares
of XYZ Common Stock or cash received by the Trust pursuant to the Contract
and other net assets held by the Trust pro rata to Holders and dissolve
shortly thereafter. In the event that a Reorganization Event shall have
occurred, the Contracting Stockholder shall have exercised its option to
accelerate the Contract upon the occurrence of a Tax Event or a Default shall
have occurred, the Trust's assets (other than assets received pursuant to the
Contract) would, after satisfaction of the liabilities of the Trust as
provided by applicable law, be liquidated, the net assets of the Trust would
be distributed pro rata to Holders and the term of the Trust would expire.

NON-DIVERSIFIED PORTFOLIO

The Trust's assets will consist almost entirely of the Contract and the
U.S. Treasury Securities. As a result, investments in the Trust may be
subject to greater risk than would be the case for a company with a
diversified portfolio of investments.

COMPARISON TO OTHER EQUITY SECURITIES; RELATIONSHIP TO XYZ COMMON STOCK

The terms of the Exchangeable Securities are similar to those of
ordinary equity securities in that the value of the XYZ Common Stock is not
fixed. The amount of XYZ Common Stock (or, pursuant to the right of the
Contracting Stockholder, the amount of cash) that a Holder of Exchangeable
Securities will receive on the Exchange Date or any earlier date is based on
the Exchange Price of the XYZ Common Stock (see "Investment Objective and
Policies--General" and "--The Contract"). THERE CAN BE NO ASSURANCE THAT
SUCH AMOUNT RECEIVABLE BY THE HOLDER ON THE EXCHANGE DATE WILL BE EQUAL TO OR
GREATER THAN THE ISSUE PRICE PAID FOR THE EXCHANGEABLE SECURITIES. IF THE
EXCHANGE PRICE OF THE XYZ COMMON STOCK IS LESS THAN THE INITIAL PRICE, SUCH
AMOUNT RECEIVABLE ON THE EXCHANGE DATE WILL BE LESS THAN THE ISSUE PRICE PAID
FOR THE EXCHANGEABLE SECURITIES, IN WHICH CASE AN INVESTMENT IN EXCHANGEABLE
SECURITIES WILL RESULT IN A LOSS. ACCORDINGLY, A HOLDER OF EXCHANGEABLE
SECURITIES ASSUMES THE RISK THAT THE MARKET VALUE OF THE XYZ COMMON STOCK MAY
DECLINE, AND THAT SUCH DECLINE COULD BE SUBSTANTIAL. REFERENCE IS MADE TO
THE ACCOMPANYING PROSPECTUS OF THE COMPANY, INCLUDING THE INFORMATION UNDER
THE CAPTION "RISK FACTORS" THEREIN.

The trading prices of the Exchangeable Securities in the secondary
market will be affected by the trading prices of the XYZ Common Stock in the
secondary market. It is impossible to predict whether the price of XYZ
Common Stock will rise or fall. Trading prices of XYZ Common Stock will be
influenced by the Company's operating results and prospects and by economic,
financial and other factors and market conditions that can affect the capital
markets generally, including the level of, and fluctuations in, the trading
prices of stocks generally and sales of substantial amounts of XYZ Common
Stock in the market subsequent to the offering of the Exchangeable Securities
or the perception that such sales could occur.

LIMITATIONS ON OPPORTUNITY FOR EQUITY APPRECIATION; POTENTIAL LOSSES

The opportunity for equity appreciation afforded by an investment in the
Exchangeable Securities is less than the opportunity for equity appreciation
afforded by a direct investment in the XYZ Common Stock because the amount
receivable by a Holder of a Exchangeable Securities on the Exchange Date will
exceed the issue price of such Exchangeable Securities only if the Exchange
Price of the XYZ Common Stock exceeds the Threshold Appreciation Price (which
represents an appreciation of % over the Initial Price). Moreover, each
Exchangeable Security will entitle the Holder to receive on the Exchange Date
only % (the percentage equal to the Initial Price divided by the
Threshold Appreciation Price) of any appreciation of the value of XYZ Common
Stock above the Threshold Appreciation Price. See "Investment Objective and
Policies--The Contract." Because the price of the XYZ Common Stock is
subject to market fluctuations, the value of the XYZ Common Stock (or,
pursuant to the right of the Contracting Stockholder, the amount of cash)
received by the Trust on the Business Day immediately preceding the Exchange
Date, determined as described herein, may be more or less than the issue
price paid for the Exchangeable Securities.

NO STOCKHOLDER RIGHTS

Holders of the Exchangeable Securities will not be entitled to any
rights with respect to the XYZ Common Stock (including, without limitation,
voting rights and rights to receive any dividends or other distributions in
respect thereof) until such time, if any, as the Trust shall have delivered
the XYZ Common Stock in exchange for Exchangeable Securities only on the
Exchange Date or upon earlier dissolution of the Trust, and unless the
applicable record date, if any, for the exercise of such right occurs after
such delivery. For example, in the event that an amendment is proposed to
the Certificate of Incorporation of the Company and the record date for
determining the stockholders of record entitled to vote on such amendment
occurs prior to such delivery, Holders of the Exchangeable Securities will
not be entitled to vote on such amendment.

The Contracting Stockholder is not responsible for the determination or
calculation of the amount receivable by Holders of the Exchangeable
Securities on the Exchange Date or upon earlier dissolution of the Trust.
The Contract between the Trust and the Contracting Stockholder is a
commercial transaction and does not create any rights in, or for the benefit
of, any third party, including any Holder of Exchangeable Securities.

RISK RELATING TO BANKRUPTCY OF CONTRACTING STOCKHOLDER

The Trust believes that the Contract will constitute a
"securities contract" for purposes of the Bankruptcy Code, performance of
which would not under Section 555 of the Bankruptcy Code be subject to
the automatic stay provisions of the Bankruptcy Code in the event of
bankruptcy of the Contracting Stockholder. It is, however, possible
that the Contract will be determined not to qualify as a "securities
contract" for this purpose (or that there will be a delay while the
bankruptcy court considers such issue), in which case the bankruptcy of the
Contracting Stockholder may cause a delay in settlement of the Contract
with the Contracting Stockholder, or otherwise subject the Contract to the
bankruptcy proceedings, which could adversely affect the time of exchange
or, as a result, the amount received by the Holders in respect of the
Exchangeable Securities.

ACCELERATION UPON TAX EVENT

TAX MATTERS

Holders will experience a taxable event upon the exchange of
Exchangeable Securities to the extent that the Contracting Stockholder elects
to satisfy its obligations under the Contract with cash. Because of an
absence of authority as to the proper character of any gain or loss resulting
from such a taxable event, the ultimate tax consequences to Holders as a
result of the Contracting Stockholder electing to satisfy its obligations
under the Contract with cash is uncertain. Accordingly, prospective
investors in the Exchangeable Securities should consult their own tax
advisers in this regard. Investors should also consult their own tax
advisers concerning the proper treatment of their pro rata share of the
Trust's fees and expenses, and the application of the United States Federal
income tax laws to their particular situations as well as any consequences of
the purchase, ownership and disposition of the Exchangeable Securities
arising under the laws of any other taxing jurisdiction. The tax
consequences of investing in the Exchangeable Securities are described in
greater detail under "Certain United States Federal Income Tax
Considerations."

DESCRIPTION OF THE EXCHANGEABLE SECURITIES

Each Exchangeable Security represents a proportionate share of
beneficial interest in the Trust, and a total of 1,000,000 Exchangeable
Securities will be issued in the Offering, assuming no exercise of the
Underwriter's over-allotment option. Upon liquidation of the Trust, Holders
are entitled to share pro rata in the net assets of the Trust available for
distribution. Exchangeable Securities have no preemptive, redemption or
conversion rights. The Exchangeable Securities, when issued and outstanding,
will be fully paid and nonassessable.

Holders are entitled to one vote for each Exchangeable Security held on
all matters to be voted on by Holders and are not able to cumulate their
votes in the election of Trustees. The Trust intends to hold annual meetings
as required by the rules of the NYSE. The Holders have the right, upon the
declaration in writing or vote of more than two-thirds of the outstanding
Exchangeable Securities, to remove a Trustee. The Trustees will call a
meeting of Holders to vote on the removal of a Trustee upon the written
request of the record Holders of 10% of the Exchangeable Securities or to
vote on other matters upon the written request of the record Holders of 51%
of the Exchangeable Securities (unless substantially the same matter was
voted on during the preceding 12 months).

BOOK-ENTRY SYSTEM

The Exchangeable Securities will be issued in the form of one or more
global securities (the "Global Securities") deposited with the Depositary and
registered in the name of a nominee of the Depositary.

The Depositary has advised the Trust and the Underwriters as follows:
The Depositary is a limited-purpose trust company organized under the laws of
the State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and a
"clearing agency" registered pursuant to Section 17A of the Exchange Act.
The Depositary was created to hold securities of persons who have accounts
with the Depositary ("participants") and to facilitate the clearance and
settlement of securities transactions among its participants in such
securities through electronic book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of
certificates. Such participants include securities brokers and dealers,
banks, trust companies and clearing corporations. Indirect access to the
Depositary's book-entry system is also available to others, such as banks,
brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly.

Upon the issuance of a Global Security, the Depositary or its nominee
will credit the respective Exchangeable Securities represented by such Global
Security to the accounts of participants. The accounts to be credited shall
be designated by the Underwriters. Ownership of beneficial interests in such
Global Securities will be limited to participants or persons that may hold
interests through participants. Ownership of beneficial interests by
participants in such Global Securities will be shown on, and the transfer of
those ownership interests will be effected only through, records maintained
by the Depositary or its nominee for such Global Securities. Ownership of
beneficial interests in such Global Securities by persons that hold through
participants will be shown on, and the transfer of that ownership interest
within such participant will be effected only through, records maintained by
such participant. The laws of some jurisdictions require that certain
purchasers of securities take physical delivery of such securities in
definitive form. Such limits and such laws may impair the ability to
transfer beneficial interests in a Global Security.

So long as the Depositary for a Global Security, or its nominee, is the
registered owner of such Global Security, such Depositary or such nominee, as
the case may be, will be considered the sole owner or holder of the
Exchangeable Securities. Except as set forth below, owners of beneficial
interests in such Global Securities will not be entitled to have the
Exchangeable Securities registered in their names and will not receive or be
entitled to receive physical delivery of the Exchangeable Securities in
definitive form and will not be considered the owners or Holders thereof.

Payment of shares of XYZ Common Stock or amounts payable or other
consideration deliverable on exchange of, and any quarterly distributions on,
Exchangeable Securities registered in the name of or held by the Depositary
or its nominee will be made to the Depositary or its nominee, as the case may
be, as the registered owner or the holder of the Global Security. None of
the Trust, any Trustee, the Administrator, the Paying Agent or the Custodian
for the Exchangeable Securities will have any responsibility or liability for
any aspect of the records relating to, or payments made on account of,
beneficial ownership interests in a Global Security or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.

The Trust expects that the Depositary, upon receipt of any payment in
respect of a Global Security, will credit immediately participants' accounts
with payments in amounts proportionate to their respective beneficial
interests in such Global Security as shown on the records of the Depositary.
The Trust also expects that payments by participants to owners of beneficial
interests in such Global Security held through such participants will be
governed by standing instructions and customary practices, as is now the case
with securities held for the accounts of customers registered in "street
name," and will be the responsibility of such participants.

A Global Security may not be transferred except as a whole by
the Depositary to a nominee or a successor of the Depositary. If the
Depositary is at any time unwilling or unable to continue as depositary and
a successor depositary is not appointed by the Trust within ninety days,
the Trust will issue Exchangeable Securities in definitive registered form
to holders in exchange for their beneficial interest in the Global Security
representing such Exchangeable Securities. In addition, the Trust may at
any time and in its sole discretion determine not to have any Exchangeable
Securities represented by one or more Global Securities and, in such
extent, will issue Exchangeable Securities in definitive form to holders
in exchange for all their beneficial interests in any Global Securities
representing the Exchangeable Securities. Further, if the Trust so
specifies with respect to the Exchangeable Securities, an owner of a
beneficial interest in a Global Security representing Exchangeable
Securities may, on terms acceptable to the Trust and the Depositary for
such Global Security, receive Exchangeable Securities in definitive
form. In any such instance, an owner of a beneficial interest in
a Global Security will be entitled to physical delivery in definitive
form of Exchangeable Securities represented by such Global Security equal
in number to that represented by such beneficial interest and to have
such Exchangeable Securities registered in its name.

TRUSTEES

The Trustees of the Trust consist of three individuals, none of whom is
an "interested person" of the Trust as defined in the Investment Company Act.
The Trustees of the Trust are responsible for the overall supervision of the
operations of the Trust and perform the various duties imposed on the
trustees of management investment companies by the Investment Company Act.

The Trustees of the Trust are:

Principal Occupation
Name, Age and Address Title During Past Five Years
- --------------------- ----- ----------------------

Donald J. Puglisi, 52 Managing Trustee Professor of Finance
Department of Finance University of Delaware
University of Delaware
Newark, DE 19716

William R. Latham III, 53 Trustee Professor of Economics
Department of Economics University of Delaware
University of Delaware
Newark, DE 19716

James B. O'Neill, 58 Trustee Professor of Economics
Center for Economics University of Delaware
Education & Entrepreneurship
University of Delaware
Newark, DE 19716

COMPENSATION OF TRUSTEES

Each unaffiliated Trustee will be paid by the Contracting Stockholder,
in respect of its annual fees and anticipated out-of-pocket expenses, a one-
time, up-front fee of $10,800. The Trust's Managing Trustee will also
receive an additional up-front fee of $3,600 for serving in that capacity.
The Trustees will not receive, either directly or indirectly, any
compensation, including any pension or retirement benefits from the Trust.
None of the Trustees receives any compensation for serving as a trustee or
director of any other affiliated investment company.

MANAGEMENT ARRANGEMENTS

PORTFOLIO MANAGEMENT AND ADMINISTRATION

The Trust will be internally managed and will not have an investment
adviser. The Trust's portfolio will not be actively managed. The Trustees
of the Trust will authorize the purchase of the Contract and the U.S.
Treasury Securities as directed by the Declaration of Trust. It is a
fundamental policy of the Trust that the Contract may not be disposed of
during the term of the Trust and that, unless the Trust dissolves prior to
the Exchange Date due to the occurrence of a Reorganization Event, in the
event that the Contracting Stockholder exercises its option to accelerate the
Contract upon the occurrence of a Tax Event or in the event of a Default by
the Contracting Stockholder, the U.S. Treasury Securities may not be disposed
of prior to their respective maturities.

The Contracting Stockholder will pay all expenses incurred in the
operation of the Trust, including, among other things, accounting services,
expenses for legal and auditing services, taxes, costs of printing proxies,
listing fees, if any, stock certificates and shareholder reports, charges of
the Custodian (as defined below) and the Paying Agent (as defined below),
expenses of registering the Exchangeable Securities under Federal and state
securities laws, Commission fees, fees and expenses of Trustees, accounting
costs, insurance, brokerage costs, litigation and other extraordinary or non-
recurring expenses, mailing and other expenses properly payable by the Trust.
See "--Estimated Expenses."

ADMINISTRATOR

The day-to-day affairs of the Trust will be managed by ,
as trust administrator pursuant to an Administration Agreement. Under the
Administration Agreement, the Trustees have delegated most of their
operational duties to the Administrator, including without limitation, the
duties to: (i) receive invoices for and pay, or cause to be paid, all
expenses incurred by the Trust; (ii) with the approval of the Trustees,
engage legal and other professional advisors (other than the independent
public accountants for the Trust); (iii) instruct the Paying Agent to pay
distributions on Exchangeable Securities as described herein; (iv) cause the
legal and other professional advisors engaged by it to prepare and mail, file
or publish all notices, proxies, reports, tax returns and other
communications and documents for the Trust, and keep all books and records,
for the Trust; (v) at the direction of the Trustees, and upon being furnished
with reasonable security and indemnity as the Administrator may require,
institute and prosecute legal and other appropriate proceedings to enforce
the rights and remedies of the Trust; and (vi) make, or cause to be made, all
necessary arrangements with respect to meetings of Trustees and any meetings
of Holders of Exchangeable Securities. The Administrator will not, however,
select the independent public accountants for the Trust or sell or otherwise
dispose of the Trust assets (except in connection with an acceleration of the
Contract as described under "Investment Objective and Policies--The Contract-
- -Reorganization Event Causing a Termination of the Trust," "--Acceleration
Upon Tax Event" and "--Collateral Arrangements; Acceleration," or the
settlement of the Contract on the Business Day immediately preceding the
Exchange Date).

The Administration Agreement may be terminated by either the Trust or
the Administrator upon 60 days' prior written notice, except that no
termination shall become effective until a successor Administrator has been
chosen and has accepted the duties of the Administrator.

Except for its roles as Administrator, Custodian, Paying Agent,
Registrar and Transfer Agent of the Trust, and except for its role as
Collateral Agent under the Security and Pledge Agreement, has
no other affiliation with, and is not engaged in any other transactions with,
the Trust.

The address of the Administrator is .

CUSTODIAN

The Trust's custodian (the "Custodian") is
pursuant to a custodian agreement (the "Custodian Agreement"). In the event
of any termination of the Custodian Agreement by the Trust or the resignation
of the Custodian, the Trust must engage a new Custodian to carry out the
duties of the Custodian as set forth in the Custodian Agreement. The
Custodian will also act as Collateral Agent under the Security and Pledge
Agreement and will hold a perfected security interest in the XYZ Common Stock
or other assets consistent with the terms of the Contract pledged thereunder.

PAYING AGENT

The transfer agent, registrar and paying agent (the "Paying Agent") for
the Exchangeable Securities is pursuant to a paying
agent agreement (the "Paying Agent Agreement"). In the event of any
termination of the Paying Agent Agreement by the Trust or the resignation of
the Paying Agent, the Trust will use its best efforts to engage a new Paying
Agent to carry out the duties of the Paying Agent.

INDEMNIFICATION

The Trust will indemnify each Trustee, the Administrator, the Paying
Agent and the Custodian with respect to any claim, liability, loss which it
may incur in acting as Trustee, Administrator, Paying Agent or Custodian, as
the case may be, and any reasonable expense incurred in connection with any
such claim, liability or loss (including the reasonable costs and expenses of
the defense against any claim or liability) except in the case of willful
misfeasance, bad faith, gross negligence or reckless disregard of their
respective duties or where applicable law prohibits such indemnification.
Subject to the satisfaction of certain conditions, PaineWebber will reimburse
the Trust for any amounts it may be required to pay as indemnification to any
Trustee, the Administrator, the Paying Agent or the Custodian, and
PaineWebber will in turn be reimbursed by the Contracting Stockholder for all
such reimbursements paid by it.

ESTIMATED EXPENSES

At the closing of the Offering, the Contracting Stockholder will pay to
each of the Administrator, the Custodian and the Paying Agent, a one-time,
up-front amount in respect of its fee and, in the case of the Administrator,
certain anticipated ongoing expenses of the Trust over the term of the Trust.
The anticipated Trust expenses to be borne by the Contracting Stockholder
include, among other things, expenses for legal and independent accountants'
services, costs of printing proxies, Exchangeable Securities certificates and
Holder reports, and stock exchange fees. Organization costs of the Trust in
the amount of $ , and estimated costs of the Trust in connection with
the initial registration and public offering of the Exchangeable Securities
in the amount of approximately $ will be paid by the Contracting
Stockholder.

The amount payable to the Administrator in respect of the anticipated
ongoing expenses of the Trust was determined based on expense estimates made
in good faith on the basis of information currently available to the Trust,
including estimates furnished by the Trust's agents. PaineWebber will pay
any unanticipated operating expenses of the Trust. PaineWebber will be
reimbursed by the Contracting Stockholder for all fees and expenses of the
Trust paid by it.

DIVIDENDS AND DISTRIBUTIONS

The Trust intends to distribute to Holders on a quarterly basis the
proceeds of the U.S. Treasury Securities held by the Trust. The first
distribution, in respect of the period from , 1998 until ,
1998 will be made on , 1998 to Holders of record as of
, 1998, and will equal $ per Exchangeable Security.
Thereafter, distributions will be made on , ,
and of each year to Holders of record as of each ,
, and , respectively. Upon dissolution
of the Trust as described in "Investment Objective and Policies--Trust
Dissolution" each Holder will share pro rata in any remaining net assets of
the Trust.

NET ASSET VALUE

The net asset value of the Exchangeable Securities will be calculated by
the Trust no less frequently than quarterly by dividing the value of the net
assets of the Trust (the value of its assets less its liabilities) by the
total number of Exchangeable Securities outstanding. The Trust's net asset
value will be published semi-annually as part of the Trust's semi-annual
report to Holders and at such other times as the Trustees may determine. The
U.S. Treasury Securities held by the Trust will be valued at the mean between
the last current bid and asked prices or, if quotations are not available, as
determined in good faith by the Trust under the direction of the Trustees.
Short-term investments having a maturity of 60 days or less are valued at
cost with accrued interest or discount earned included in interest
receivable. The Contract will be valued at the mean of the bid prices
received by the Administrator from at least three independent broker-dealer
firms unaffiliated with the Trust who are in the business of making bids on
financial instruments similar to the Contract and with terms comparable
thereto.

CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

Set forth in full below is the opinion of Brown & Wood LLP, counsel to
the Trust, as to certain United States Federal income tax consequences of the
purchase, ownership and disposition of the Exchangeable Securities. Such
opinion is based upon laws, regulations, rulings and decisions now in effect,
all of which are subject to change (including retroactive changes in
effective dates) or possible differing interpretations. The discussion below
deals only with Exchangeable Securities held as capital assets and does not
purport to deal with persons in special tax situations, such as financial
institutions, insurance companies, regulated investment companies, dealers in
securities or currencies, tax-exempt entities, or persons holding
Exchangeable Securities as a hedge against currency risks, as a position in a
"straddle" or as a part of "hedging" or "conversion" transaction for tax
purposes. It also does not deal with Holders of Exchangeable Securities
other than original purchasers thereof (except where otherwise specifically
noted herein). Moreover, the discussion below generally does not address the
tax consequences of ownership of the XYZ Common Stock or Marketable
Securities. The following discussion also does not address the tax
consequences of investing in the Exchangeable Securities arising under the
laws of any state, local or foreign jurisdiction. Persons considering the
purchase of the Exchangeable Securities should consult their own tax advisors
concerning the application of the United States Federal income tax laws to
their particular situations as well as any consequences of the purchase,
ownership and disposition of the Exchangeable Securities arising under the
laws of any other taxing jurisdiction.

As used herein, the term "U.S. Holder" means a beneficial owner of
Exchangeable Securities that is for United States Federal income tax purposes
(i) a citizen or resident of the United States, (ii) a corporation, a
partnership or other entity created or organized in or under the laws of the
United States or of any political subdivision thereof, (iii) an estate the
income in which is subject to United States Federal income taxation
regardless of its source, or (iv) a trust if a court within the United States
is able to exercise primary supervision over the administration of the trust
and one or more United States persons have the authority to control all
substantial decisions of the trust. Notwithstanding the preceding sentence,
to the extent provided in Treasury regulations, certain trusts in existence
on August 20, 1996, and treated as United States persons prior to such date,
that elect to continue to be treated as United States persons also will be a
U.S. Holder. As used herein, the term "non-U.S. Holder" means a beneficial
owner of Exchangeable Securities that is not a U.S. Holder. Unless otherwise
specifically provided, the following opinion of Brown & Wood LLP assumes that
on the Exchange Date Holders of the Exchangeable Securities will receive
shares of XYZ Common Stock.

CLASSIFICATION OF THE TRUST

The Trust will be classified as a grantor trust under subpart E, Part I
of subchapter J of the Internal Revenue Code of 1986, as amended (the
"Code"). As such, Holders of the Exchangeable Securities will be treated for
United States Federal income tax purposes as owners of a pro rata undivided
interest in the Trust's assets which will consist of the U.S. Treasury
Securities and the Contract. Accordingly, each Holder will be required to
report on its United States Federal income tax return its pro rata share of
the entire income on the Trust's assets in accordance with such Holder's
regular method of tax accounting.

U.S. HOLDERS

As previously discussed, each U.S. Holder will be considered the owner
of its pro rata portion of the U.S. Treasury Securities and the Contract held
by the Trust. The cost to a U.S. Holder of its Exchangeable Securities will
be allocated among such U.S. Holder's pro rata portion of the U.S. Treasury
Securities and the Contract (in proportion to the relative fair market values
thereof on the date on which the U.S. Holder acquires its Exchangeable
Securities) in order to determine the U.S. Holder's initial tax basis in the
U.S. Holder's pro rata portion of the U.S. Treasury Securities and the
Contract. It is currently anticipated that % and % of the net proceeds
of the offering will be used by the Trust to purchase the U.S. Treasury
Securities and as payments under the Contract, respectively.

The U.S. Treasury Securities held by the Trust will be treated for
United States Federal income tax purposes as having original issue discount
which will accrue over the term of the U.S. Treasury Securities. In general,
a U.S. Holder will be treated as having purchased each U.S. Treasury Security
held by the Trust with original issue discount in an amount equal to the
excess of the U.S. Holder's pro rata portion of the amount payable on such
U.S. Treasury Security over the Holder's initial tax basis therefor as
discussed above. A U.S. Holder (whether on the cash or accrual method of tax
accounting) will be required to include such original issue discount in
income for United States Federal income tax purposes as it accrues in
accordance with a constant yield method. Because it is expected that 20% or
more of the holders of Exchangeable Securities will be accrual basis
taxpayers, original issue discount on any short-term U.S. Treasury Securities
(i.e., any U.S. Treasury Security with a maturity of one year or less from
the date it is purchased by the Trust) held by the Trust will also be
currently includable in income by U.S. Holders as it accrues on a straight-
line basis (unless a U.S. Holder elects to accrue such original issue
discount on a constant yield basis). A U.S. Holder's tax basis in its pro
rata portion of a U.S. Treasury Security will be increased by the amount of
any original issue discount included in income by the U.S. Holder with
respect to such U.S. Treasury Security (as described above). A U.S. Holder
will also be required to recognize capital gain or loss with respect to such
U.S. Holder's pro rata portion of the U.S. Treasury Securities upon an early
dissolution of the Trust in an amount equal to the difference between the
U.S. Holder's pro rata portion of the proceeds received by the Trust upon the
sale thereof and the U.S. Holder's tax basis in its pro rata portion of the
U.S. Treasury Securities. Such capital gain or loss would be long-term
capital gain or loss if the Exchangeable Securities have been held by the
U.S. Holder for more than one year.

Each U.S. Holder will also be treated as having entered into a pro rata
portion of the Contract. Under current law, a U.S. Holder should not be
required to recognize any income, gain or loss with respect to the Contract
until the earlier of the Exchange Date, a Tax Event Acceleration Date or the
occurrence of a Reorganization Event or "Default". On the Exchange Date, a
Tax Event Acceleration Date or upon a "Default", if the Contracting
Stockholder delivers XYZ Common Stock pursuant to the Contract in respect of
a U.S. Holder's Exchangeable Securities, the U.S. Holder will generally not
realize any taxable gain or loss upon the receipt of such XYZ Common Stock.
However, a U.S. Holder will generally be required to recognize taxable gain
or loss with respect to any cash received in lieu of fractional shares. The
amount of such gain or loss recognized by a U.S. Holder will be equal to the
difference, if any, between the amount of cash received by the U.S. Holder
and the portion of the U.S. Holder's tax basis in the Contract that is
allocable to the fractional shares. Any such taxable gain or loss will be
treated as short-term capital gain or loss. A U.S. Holder will have an
initial tax basis in any XYZ Common Stock received thereby on the Exchange
Date, a Tax Event Acceleration Date or upon a "Default" in an amount equal to
the U.S. Holder's tax basis in the Contract less the portion of such tax
basis that is allocable to any fractional shares (as described above) and
will realize taxable gain or loss with respect to any such XYZ Common Stock
received thereby on the Exchange Date, a Tax Event Acceleration Date or upon
a "Default" only upon the subsequent sale or disposition by the U.S. Holder
of such XYZ Common Stock. In addition, a U.S. Holder's holding period for
any XYZ Common Stock received by such U.S. Holder on the Exchange Date, a Tax
Event Acceleration Date or upon a "Default" will begin on the Exchange Date
or the day immediately following the Tax Event Acceleration Date or the day
of acceleration, respectively, and will not include the period during which
the U.S. Holder held the related Exchangeable Securities.

Alternatively, if the Contracting Stockholder satisfies its obligation
under the Contract in cash upon the Exchange Date, a U.S. Holder will
recognize taxable gain or loss on the Business Day immediately preceding the
Exchange Date or on the Tax Event Acceleration Date, respectively, with
respect to the Contract in an amount equal to the difference, if any, between
the total amount of cash received by such U.S. Holder in respect of XYZ
Common Stock and an amount equal to the U.S. Holder's tax basis in the
Contract. It is uncertain whether such gain or loss would be treated as
capital or ordinary gain or loss (although, in the case of a Tax Event, it
would appear that the better view is that such gain or loss would be
capital). If such gain or loss is properly treated as capital, then such
gain or loss will be treated as long-term capital gain or loss if the
Exchangeable Securities has been held by the U.S. Holder for more than one
year as of the Business Day immediately preceding the Exchange Date or as of
the Tax Event Acceleration Date, respectively. If such gain or loss is
properly treated as ordinary gain or loss, it is possible that the
deductibility of any loss by a U.S. Holder who is an individual could be
subject to the limitations applicable to miscellaneous itemized deductions
provided for under Section 67(a) of the Code. In general, Section 67(a) of
the Code provides that an individual may only deduct miscellaneous itemized
deductions for a particular taxable year to the extent that the aggregate
amount of the individuals's miscellaneous itemized deductions for such
taxable year exceed two percent of the individual's adjusted gross income for
such taxable year (the miscellaneous itemized deductions and other itemized
deductions allowable to high-income individuals, however, are generally
subject to further limitations under Section 68 of the Code). Prospective
investors in the Exchangeable Securities who are individuals should also be
aware that miscellaneous itemized deductions are not allowable in computing
the United States Federal alternative minimum tax imposed by Section 55 of
the Code. Moreover, the proper treatment of any cash received by a U.S.
Holder upon the occurrence of a Tax Event (other than cash representing
shares of XYZ Common Stock) is uncertain. It is likely that a U.S. Holder
should be required to recognize gain in an amount equal to such cash, but (as
described above) it is uncertain whether such gain should be treated as
capital gain or ordinary income. Prospective investors in the Exchangeable
Securities are urged to consult their own tax advisors concerning the
character of any gain or loss realized on the Exchange Date or on a Tax Event
Acceleration Date with respect to the Contract in the event that the
Contracting Stockholder elects to satisfy its obligations under the Contract
in cash on the Exchange Date or upon the occurrence of a Tax Event, as well
as the deductibility of any such loss.

Upon the sale or other disposition of an Exchangeable Security prior to
the Exchange Date, a U.S. Holder generally will be required to allocate the
total amount realized by such U.S. Holder upon such sale or other disposition
between the U.S. Holder's pro rata portion of the U.S. Treasury Securities
and the Contract based upon their relative fair market values (as determined
on the date of disposition). A U.S. Holder will generally be required to
recognize taxable gain or loss with respect to each such component (i.e., the
U.S. Holder's pro rata portion of the U.S. Treasury Securities and the
Contract) in an amount equal to the difference, if any, between the amount
realized with respect to each such component upon the sale or disposition of
the Exchangeable Securities (as determined in the manner described above) and
the U.S. Holder's adjusted tax basis in each such component. Any such gain
or loss will generally be treated as long-term capital gain or loss if the
U.S. Holder has held the Exchangeable Securities for more than one year at
the time of disposition.

The proper treatment of the payment by the Contracting Stockholder or
PaineWebber of various costs and expenses associated with the organization
and operation of the Trust is uncertain. It is possible that there will be
no United States Federal income tax consequences to U.S. Holders as a result
of any such payments. However, it is possible that the Internal Revenue
Service ("IRS") could assert that any such payments constitute income to U.S.
Holders. If the IRS were to prevail in treating such payments as income,
then an individual U.S. Holder who itemizes deductions could possibly
amortize and deduct over the term of the Trust (subject to any applicable
limitations such as Section 67(a) of the Code) its pro rata portion of the
one-time, up-front fees paid to the Administrator, the Custodian and the
Paying Agent, and could possibly deduct (subject to any applicable
limitations such as those in Section 67(a) of the Code) its pro rata portion
of the other expenses described under "Management Arrangements--Estimated
Expenses" incurred by the Trust resulting from its ongoing operations
(including the fees payable to the Trustees) as such expenses are incurred.
Brown & Wood LLP, counsel to the Trust, believes that a U.S. Holder's pro
rata portion of the expenses directly incurred by a U.S. Holder in connection
with the organization of the Trust, underwriting discounts and commissions
and other offering expenses should be includable in the cost to the U.S.
Holder of the Exchangeable Securities. However, there can be no assurance
that the IRS will not take a contrary view. If the IRS were to prevail in
treating such expenses as excludible from a U.S. Holder's cost of the
Exchangeable Securities, such expenses would not be includable in the basis
of the assets of the Trust and should instead, subject to the limitations
provided for under Section 67(a) of the Code, be amortizable and deductible
over the term of the Trust.

POSSIBLE ALTERNATIVE CHARACTERIZATIONS OF THE CONTRACT

Brown & Wood LLP, counsel to the Trust, believes the Contract should be
treated for United States Federal income tax purposes as a prepaid forward
contract for the purchase of a variable number of shares of XYZ Common Stock.
The IRS could conceivably take the view that the Contract should be treated
as a loan to the Contracting Stockholder in exchange for a contingent debt
obligation of the Contracting Stockholder. If the IRS were to prevail in
making such an assertion, a U.S. Holder might be required to include original
issue discount in income over the term of the Exchangeable Securities based
on the excess of the anticipated value of the XYZ Common Stock to be received
in respect of the Contract over the amount paid for the Contract. In
addition, a U.S. Holder would be required to include interest (rather than
capital gain) in income on the Exchange Date in an amount equal to the
excess, if any, of the value of the XYZ Common Stock received on the Exchange
Date (or the proceeds from prior disposition of the Contract) over the
aggregate of the basis of the Contract and any interest on the Contract
previously included in income (or might be entitled to an ordinary deduction
to the extent of interest previously included in income and not ultimately
received). The IRS could also conceivably take the view that a U.S. Holder
should simply include in income as interest the amount of cash actually
received each year in respect of the Exchangeable Securities.

MISCELLANEOUS TAX MATTERS

Special tax rules may apply to persons holding Exchangeable Securities
as part of a "synthetic security" or other integrated investment, or as part
of a straddle, hedging transaction or other combination of offsetting
positions. For instance, Section 1258 of the Code may possibly require
certain U.S. Holders of the Exchangeable Securities who enter into hedging
transactions or offsetting positions with respect to the Exchangeable
Securities to treat all or a portion of any gain realized on the Exchangeable
Securities as ordinary income in instances where such gain may have otherwise
been treated as capital gain. U.S. Holders hedging their positions with
respect to the Exchangeable Securities or otherwise holding their
Exchangeable Securities in a manner described above should consult their own
tax advisors regarding the applicability of Section 1258 of the Code, or any
other provision of the Code, to their investment in the Exchangeable
Securities.

If as a result of a Reorganization Event, cash, Marketable Securities,
or a combination of cash and Marketable Securities is delivered pursuant to
the Contract, U.S. Holders generally will be required to recognize taxable
gain or loss in respect of any cash received, including cash received in lieu
of fractional shares of Marketable Securities and, in some instances, in
respect of any Marketable Securities received upon receipt thereof.
Moreover, in some instances, U.S. Holders may be required to recognize at the
time of a Reorganization Event taxable gain or loss in respect of the amount
of cash (and, in some cases, Marketable Securities) which is fixed at the
time of such Reorganization Event and is to be delivered pursuant to the
Contract. It is uncertain whether any taxable gain or loss recognized by a
U.S. Holder as a result of a Reorganization Event would be capital or
ordinary. U.S. Holders are urged to consult their own tax advisors
concerning the specific tax consequences of a Reorganization Event on their
investment in a Exchangeable Securities.

THE TAXPAYER RELIEF ACT OF 1997

On August 5, 1997, the Taxpayer Relief Act of 1997 (the "Tax Act") was
enacted into law. The Tax Act adds new Section 1259 to the Code. In
general, Section 1259 of the Code requires taxpayers (including corporations)
to recognize gain (but not loss) upon entering into a "constructive sale" of
any appreciated position in stock. For these purposes, a taxpayer is treated
as making a "constructive sale" of an appreciated position in stock when the
taxpayer (or a person related to the taxpayer) enters into a forward contract
to deliver the stock. A "forward contract" is defined for these purposes as
a contract to deliver a substantially fixed amount of property for a
substantially fixed price. Section 1259 of the Code generally applies to
constructive sales entered into after June 8, 1997. The Contracting
Stockholder does not believe that it will be considered to have made a
constructive sale of any of its XYZ Common Stock as a result of having
entered into the Contract. There can be no assurance, however, that future
guidance will not be issued under Section 1259 of the Code which would
indicate that the Contracting Stockholder has made a constructive sale of its
shares of XYZ Common Stock as a result of having entered into the Contract.
If future guidance is issued indicating that the Contracting Stockholder has
made a constructive sale of its XYZ Common Stock as a result of having
entered into the Contract, such guidance could result in a Tax Event. It
cannot be predicted whether or not any future guidance will be issued under
Section 1259 of the Code which could give rise to a Tax Event, nor can it be
predicted whether the Contracting Stockholder will elect to cause a Tax Event
by delivering the Tax Event Opinion to the Trust in the event that future
guidance is issued under Section 1259 of the Code which could give rise to a
Tax Event.

The Tax Act of 1997 also reduces the maximum rates on long-term capital
gains recognized on capital assets held by individual taxpayers for more than
eighteen months as of the date of disposition (and would further reduce the
maximum rates on such gains in the year 2001 and thereafter for certain
individual taxpayers who meet specified conditions). Prospective investors
should consult their own tax advisors concerning these tax law changes.

NON-U.S. HOLDERS

Subject to the discussion below concerning income that is effectively
connected with a trade or business conducted by a non-U.S. Holder in the
United States, payments of interest (including original issue discount) made
with respect to the U.S. Treasury Securities will not be subject to United
States withholding tax, provided that such non-U.S. Holder complies with
applicable certification requirements. In general, for a non-U.S. Holder to
qualify for this exemption from taxation, the last United States payor in the
chain of payment prior to payment to a non-U.S. Holder (the "Withholding
Agent") must have received in the year in which a payment of interest or
principal occurs, or in either of the two preceding calendar years, a
statement that (i) is signed by the beneficial owner of the U.S. Treasury
Securities under penalties of perjury, (ii) certifies that such owner is not
a U.S. Holder and (iii) provides the name and address of the beneficial
owner. The statement may be made on an IRS Form W-8 or a substantially
similar form, and the beneficial owner must inform the Withholding Agent of
any change in the information on the statement within 30 days of such change.
If Exchangeable Securities are held through a securities clearing
organization or certain other financial institutions, the organization or
institution may provide a signed statement to the Withholding Agent.
However, in such case, the signed statement must be accompanied by a copy of
the IRS Form W-8 or the substitute form provided by the beneficial owner to
the organization or institution.

Any capital gain realized in respect of Exchangeable Securities by a
non-U.S. Holder will generally not be subject to United States Federal income
tax if (i) such gain in not effectively connected with a United States trade
or business of such non-U.S. Holder and (ii) in the case of an individual
non-U.S. Holder, such individual is not present in the United States for 183
days or more in the taxable year of the sale or other disposition, or the
gain is not attributable to a fixed place of business maintained by such
individual in the United States and such individual does not have a "tax
home" (as defined for United States Federal income tax purposes) in the
United States.

If any interest or gain realized by a non-U.S. Holder is effectively
connected with the non-U.S. Holder's conduct of a trade or business in the
United States, such interest or gain will be subject to regular United States
Federal income tax in the same manner as if the non-U.S. Holder were a U.S.
Holder. In addition, in such event, if such non-U.S. Holder is a foreign
corporation, such interest or gain may be included in the earnings and
profits of such non-U.S. Holder in determining such non-U.S. Holder's United
States branch profits tax liability.

BACKUP WITHHOLDING AND INFORMATION REPORTING

A beneficial owner of Exchangeable Securities may be subject to
information reporting and to backup withholding at a rate of 31 percent of
certain amounts paid to the beneficial owner unless such beneficial owner
provides proof of an applicable exemption or a correct taxpayer
identification number, and otherwise complies with applicable requirements of
the backup withholding rules.

Any amounts withheld under the backup withholding rules from a payment
to a beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States Federal income tax provided the required
information is furnished to the IRS.

NEW WITHHOLDING REGULATIONS

On October 6, 1997, the Treasury Department issued new regulations (the
"New Regulations") which make certain modifications to the withholding,
backup withholding and information reporting rules described above. The New
Regulations attempt to unify certification requirements and modify reliance
standards. The New Regulations will generally be effective for payments made
after December 31, 1998, subject to certain transition rules. Prospective
investors are urged to consult their own tax advisors regarding the New
Regulations.

PROSPECTIVE INVESTORS IN THE EXCHANGEABLE SECURITIES SHOULD BE AWARE
THAT THERE IS NO AUTHORITY DIRECTLY ADDRESSING THE PROPER UNITED STATES
FEDERAL INCOME TAX TREATMENT OF THE EXCHANGEABLE SECURITIES OR SECURITIES
WITH TERMS SUBSTANTIALLY THE SAME AS THE EXCHANGEABLE SECURITIES, AND THAT NO
RULING HAS BEEN REQUESTED FROM THE IRS WITH RESPECT TO THE EXCHANGEABLE
SECURITIES. ACCORDINGLY, THERE CAN BE NO ASSURANCE THAT THE IRS WILL AGREE
WITH THE FOREGOING DISCUSSION AND THAT THE IRS WILL NOT ASSERT A CONTRARY
POSITION AS TO THE PROPER UNITED STATES FEDERAL INCOME TAX TREATMENT OF THE
EXCHANGEABLE SECURITIES WHICH MIGHT CAUSE THE CHARACTER AND TIMING OF INCOME,
GAIN OR LOSS RECOGNIZED WITH RESPECT TO A EXCHANGEABLE SECURITY TO DIFFER
SIGNIFICANTLY FROM SUCH CHARACTER AND TIMING DISCUSSED ABOVE. PROSPECTIVE
INVESTORS IN THE EXCHANGEABLE SECURITIES ARE THEREFORE URGED TO CONSULT WITH
THEIR OWN TAX ADVISERS PRIOR TO MAKING AN INVESTMENT IN THE EXCHANGEABLE
SECURITIES.

UNDERWRITING

Subject to the terms and conditions set forth in a purchase
agreement dated as of , 1998 (the "Purchase Agreement"),
the Trust has agreed to sell to each of the underwriters named below (the
"Representative"), and each of the Underwriters, for whom PaineWebber
Incorporated is acting as representative, has severally agreed to
purchase, the aggregate number of Exchangeable Securities set forth
opposite its name below:

NUMBER OF
UNDERWRITER EXCHANGEABLE SECURITIES
----------- -----------------------

PaineWebber Incorporated . . . . . . . . . . . .

---------

Total . . . . . . . . . . . . . . . . . 1,000,000
____________
------------

In the Purchase Agreement, the several Underwriters have agreed,
respectively, subject to the terms and conditions set forth in the Purchase
Agreement, to purchase all of the Exchangeable Securities being sold pursuant
to the Purchase Agreement if any of the Exchangeable Securities are
purchased. In the event of a failure to close, any funds debited from any
investor's account maintained with an Underwriter will be credited to such
account and any funds received by such Underwriter by check or money order
from any investor will be returned to such investor by check.

The Underwriters have each advised the Trust that they propose initially
to offer the Exchangeable Securities to the public at the public offering
price set forth on the cover page of this Prospectus. The Underwriters have
also advised the Trust that they propose to offer Exchangeable Securities to
certain dealers at the initial public offering price less a concession not in
excess of $ per Exchangeable Security. Such Underwriters may allow,
and such dealers may reallow, a discount not in excess of $ per
Exchangeable Security to certain other dealers. After the initial public
offering, the public offering price, concession and discount may be changed.
The sales load of $ per Exchangeable Security is equal to % of the
initial public offering price. Investors must pay for any Exchangeable
Securities purchased in the initial public offering on or before ,
1998.

The Trust has granted the Underwriters an option, exercisable for 30
days from the date of this Prospectus to purchase up to an aggregate of
additional Exchangeable Securities (subject to decrease by the number of
Exchangeable Securities resulting from the split of the initial Exchangeable
Securities described below) to cover over-allotments, if any, at the initial
public offering price less the sales load. To the extent the Underwriters
exercise such option, the Underwriters will have a firm commitment, subject
to certain conditions, to purchase a number of additional Exchangeable
Securities.

Prior to the Offering, there has been no public market for the
Exchangeable Securities. Application will be made to list the Exchangeable
Securities on the NYSE.

The Company and its officers, directors and certain stockholders of the
Company and the Contracting Stockholder have agreed not to offer, sell,
contract to sell or otherwise dispose of, directly or indirectly, or file or
cause to be filed a registration statement under the Securities Act with
respect to, any shares of XYZ Common Stock, securities convertible into,
exchangeable for or repayable with such shares or rights or warrants to
acquire such shares, for a period of 90 days after the date of this
Prospectus without the prior written consent of PaineWebber Incorporated,
subject to certain exceptions.

The Company and the Contracting Stockholder have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act or to contribute to payments the Underwriters may be required
to make in respect thereof.

In connection with the creation of the Trust, PW Exchangeable Securities
Inc., an affiliate of PaineWebber Incorporated, has subscribed for and
purchased one of the Exchangeable Securities for a purchase price of
$100,000. Prior to the Offering, the initial Exchangeable Securities will be
split into the smallest whole number of Exchangeable Securities that would
result in the per Exchangeable Security amount recorded as capital, after
effecting the split, not exceeding the public offering price per Exchangeable
Security. Under the Contract, the Contracting Stockholder will be obligated
to deliver to the Trust on the Business Day immediately preceding the
Exchange Date a number of shares of XYZ Common Stock (or, pursuant to the
right of the Contracting Stockholder, cash with an equal value) in respect of
such Exchangeable Securities on the same terms as the Exchangeable Securities
offered hereby.

Until the distribution of the Exchangeable Securities is completed,
rules of the Commission may limit the ability of the Underwriters and any
selling group members to bid for and purchase the Exchangeable or shares of
the XYZ Common Stock. As an exception to these rules, the Representative is
permitted to engage in certain transactions that stabilize the price of the
Exchangeable Securities or the XYZ Common Stock. Such transactions consist
of bids or purchases for the purpose of pegging, fixing or maintaining the
price of the Exchangeable Securities or the XYZ Common Stock.

If the Underwriters create a short position in the Exchangeable
Securities in connection with the Offering, i.e., if they sell more
Exchangeable Securities than are set forth on the cover page of this
Prospectus, the Representative may reduce that short position by purchasing
Exchangeable Securities in the open market. The Representatives may also
elect to reduce any short position by exercising all or part of the over-
allotment option described above.

The Representative may also impose a penalty bid on certain Underwriters
and selling group members. This means that if the Representative purchases
Exchangeable Securities in the open market to reduce the Underwriters' short
position or to stabilize the price of the Exchangeable Securities, it may
reclaim the amount of the selling concession from the Underwriters and any
selling group members who sold those Exchangeable Securities as part of the
Offering.

In general, purchases of a security for the purpose of stabilization or
to reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases. The imposition of a
penalty bid might also have an effect on the price of a security to the
extent that it were to discourage resales of the security.

Neither the Trust nor any of the Underwriters makes any representation
or prediction as to the direction or magnitude of any effect that the
transactions described above may have on the price of the Exchangeable
Securities or the XYZ Common Stock. In addition, neither the Trust nor any
of the Underwriters makes any representation that the Representative will
engage in such transactions or that such transactions, once commenced, will
not be discontinued without notice.

Certain of the Underwriters render investment banking and other
financial services to the Company from time to time.

LEGAL MATTERS

Certain legal matters will be passed upon for the Trust and for the
Underwriters by their counsel, Brown & Wood LLP, New York, New York. Certain
matters of Delaware law will be passed upon for the Trust by Richards, Layton
& Finger, Wilmington, Delaware.

EXPERTS

The statement of assets, liabilities and capital included in this
Prospectus has been audited by , independent
auditors, as stated in their opinion appearing herein, and has been included
in reliance upon such opinion given on the authority of said firm as experts
in auditing and accounting.

ADDITIONAL INFORMATION

The Trust has filed with the Commission, Washington D.C. 20549, a
Registration Statement on Form N-2 under the Securities Act with respect to
the Exchangeable Securities offered hereby. Further information concerning
the Exchangeable Securities and the Trust may be found in the Registration
Statement, of which this Prospectus constitutes a part. The Registration
Statement may be inspected without charge at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and copies of all or any part thereof may be obtained
from such office after payment of the fees prescribed by the Commission. The
Commission maintains a Web site at http://www.sec.gov containing reports,
proxy and information statements and other information regarding registrants,
such as the Trust, that file electronically with the Commission.

INDEPENDENT AUDITORS' REPORT

To the Board of Trustees and Shareholders of XYZ Exchangeable Securities
Trust:

We have audited the accompanying statement of assets, liabilities and
capital of XYZ Exchangeable Securities Trust as of
, 1998. 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 in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statement of assets,
liabilities and capital is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the statement of assets, liabilities and capital. An audit also includes
assessing the accounting principles used and significant estimates made by
the Trust's management, as well as evaluating the overall financial statement
presentation. We believe that our audit of the financial statement provides
a reasonable basis for our opinion.

In our opinion, the statement of assets, liabilities and capital referred
to above presents fairly, in all material respects, the financial
position of XYZ Exchangeable Securities Trust, as of ,
1998, in conformity with generally accepted accounting principles.

New York, New York
, 1998

STATEMENT OF ASSETS, LIABILITIES AND CAPITAL

, 1998

ASSETS

Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $100,000
Deferred organization and offering costs (Note 1) . . . . . . . . . _________

Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . $________

LIABILITIES

Deferred organization and offering costs payable (Note 1) . . . . . $________

NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . $________

CAPITAL

Exchangeable Securities, par value $.10 per share;
shares authorized;
1 share issued and outstanding (Note 3) . . . . . . . . . . . . . . $________

Paid-in Capital in excess of par . . . . . . . . . . . . . . . . . ________

Total Capital-Equivalent of $
net asset value per share of
Exchangeable Securities (Note 1) . . . . . . . . . . . . . . $________

(1) The Trust was created as a Delaware business trust on October 24,
1997 and has had no operations other than matters relating
to its organization and registration as a non-diversified,
closed-end management investment company under the Investment
Company Act of 1940, as amended. Costs incurred in connection with
the organization of the Trust and ongoing administrative expenses
will be paid by the Contracting Stockholder.

(2) Offering expenses will be payable upon completion of the Offering and
will also be paid by the Contracting Stockholder.

(3) On ______________, 1998, the Trust issued one of the
Exchangeable Securities to PW Exchangeable Securities Inc., an
affiliate of PaineWebber Incorporated, in consideration for a
purchase price of $100,000.

The Declaration of Trust provides that prior to the Offering, the
Trust will split the outstanding Exchangeable Securities to be
effected on the date that the price and underwriting discount of the
Exchangeable Securities being offered to the public is determined,
but prior to the sale of the Exchangeable Securities to the Under-
writer. The one outstanding Exchangeable Securities will be split
into the smallest whole number of Exchangeable Securities that
would result in the per Exchangeable Security amount recorded as
capital, after effecting the split, not exceeding the public offering
price per Exchangeable Security, net of the underwriting discount per
Exchangeable Security.

- -------------------------------------------------- --------------------------------------------------
- -------------------------------------------------- --------------------------------------------------
<S> <C>
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS
BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH
THE OFFERING DESCRIBED HEREIN AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY 1,000,000 EXCHANGEABLE
THE TRUST OR THE UNDERWRITERS. THIS PROSPECTUS SECURITIES
DOES NOT CONSTITUTE AN OFFER TO SELL, OR
SOLICITATION OF AN OFFER TO BUY, OF ANY
SECURITIES OTHER THAN THOSE SPECIFICALLY OFFERED
HEREBY, OR OF ANY SECURITIES OFFERED HEREBY, IN
ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE AN OFFER OR SOLICITATION IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION XYZ EXCHANGEABLE SECURITIES
THAT THERE HAS BEEN NO CHANGE IN THE FACTS SET TRUST
FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE
TRUST SINCE THE DATE HEREOF OR SINCE THE DATES AS
OF WHICH INFORMATION IS SET FORTH HEREIN. IN THE
EVENT THAT ANY SUCH CHANGE SHALL OCCUR DURING THE
PERIOD IN WHICH APPLICABLE LAW REQUIRES DELIVERY
OF THIS PROSPECTUS, THIS PROSPECTUS WILL BE
AMENDED OR SUPPLEMENTED ACCORDINGLY. ____________________
______________

TABLE OF CONTENTS PROSPECTUS
Page
Prospectus Summary . . . . . . . . . . . . . ____________________
Fee Table . . . . . . . . . . . . . . . . . .
The Trust . . . . . . . . . . . . . . . . . .
Use of Proceeds . . . . . . . . . . . . . . .
Investment Objective and Policies . . . . . .
Investment Restrictions . . . . . . . . . . .
Risk Factors . . . . . . . . . . . . . . . . PAINEWEBBER INCORPORATED
Description of the Exchangeable Securities .
Trustees . . . . . . . . . . . . . . . . . .
Management Arrangements . . . . . . . . . . .
Dividends and Distributions . . . . . . . . .
Net Asset Value . . . . . . . . . . . . . . .
Certain United States Federal Income
Tax Considerations . . . . . . . . . . . .
Underwriting . . . . . . . . . . . . . . . .
Legal Matters . . . . . . . . . . . . . . . . , 1998
Experts . . . . . . . . . . . . . . . . . . .
Additional Information . . . . . . . . . . .
Independent Auditors' Report . . . . . . . .
Statement of Assets, Liabilities and Capital.

Prospectus relating to Common Stock
of XYZ Company

--------------

UNTIL , 1998 (25 DAYS AFTER THE
COMMENCEMENT OF THE OFFERING), ALL DEALERS
EFFECTING TRANSACTIONS IN THE EXCHANGEABLE
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN
ADDITION TO THE OBLIGATOIN OF DEALERS TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH
RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

</TABLE>

THE FOLLOWING PROSPECTUS OF XYZ COMPANY IS ATTACHED AND DELIVERED FOR
CONVENIENCE OF REFERENCE ONLY. THE PROSPECTUS OF XYZ COMPANY DOES NOT
CONSTITUTE A PART OF THE FOREGOING PROSPECTUS OF XYZ EXCHANGEABLE SECURITIES
TRUST, NOR IS IT INCORPORATED BY REFERENCE THEREIN.

(XYZ Company Prospectus)

PART C

OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS

1. FINANCIAL STATEMENTS
Independent Auditors' Report
Statement of Assets, Liabilities and Capital as of ,
1998

2. EXHIBITS
(a)(1) Trust Agreement//*
(2) Form of Amended and Restated Trust Agreement**
(3) Certificate of Trust//*
(b) Not applicable
(c) Not applicable
(d)(1) Form of Specimen certificate for Exchangeable Securities
(included in Exhibit 2(a)(2))**
(2) Portions of the Declaration of Trust of the Registrant
defining the rights of Holders of Exchangeable Securities
(included in Exhibit 2(a)(2))**
(e) Not applicable
(f) Not applicable
(g) Not applicable
(h)(1) Form of Purchase Agreement**
(2) Form of Registration Agreement**
(3) PaineWebber Incorporated Standard Dealer Agreement**
(i) Not applicable
(j) Form of Custodian Agreement**
(k)(1) Form of Paying Agent, Registrar and Transfer Agent
Agreement**
(2) Form of Administration Agreement**
(3) Form of Forward Purchase Contract**
(4) Form of Security and Pledge Agreement**
(5) Form of Fund Expense Agreement**
(6) Form of Fund Indemnity Agreement**
(l) Opinion and Consent of Brown & Wood LLP, counsel to the
Trust**
(m) Not applicable
(n)(1) Tax Opinion and Consent of Brown & Wood LLP, Counsel to the
Trust**
(2) Consent of ______, independent auditors for the Trust**
(o) Not applicable
(p) Form of Subscription Agreement**
(q) Not applicable
(r) Financial Data Schedule**
___________________
//

* Previously filed.

** To be filed by amendment.

ITEM 25. MARKETING ARRANGEMENTS

See Exhibits (h)(1), (h)(2) and (h)(3) to this Registration Statement.

ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the estimated expenses to be incurred in
connection with the offering described in this Registration Statement:

SEC Registration fees $ *
New York Stock Exchange listing fee *
Printing (other than certificates) *
Engraving and printing certificates *
Fees and expenses of qualification under state securities laws
(including fees of counsel) *
Accounting fees and expenses *
Legal fees and expenses *
NASD fees *
Miscellaneous *
--------
Total $ *
--------
_______________

* To be furnished by amendment.

ITEM 27. PERSON CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT

The Trust will be internally managed and will not have an investment
adviser. The information in the Prospectus under the caption "Management
Arrangements" is incorporated herein by reference.

ITEM 28. NUMBER OF HOLDERS OF SECURITIES

There will be one record holder of the Exchangeable Securities as of the
effective date of this Registration Statement.

ITEM 29. INDEMNIFICATION

Pursuant to the Amended and Restated Trust Agreement, the Trust will
agree to indemnify, to the fullest extent permitted by law, the Trustees
with respect to any claim, liability or loss arising out of or in connection
with such Trustee's acting as Trustee of the Trust. Pursuant to the
Purchase Agreement, the Contracting Stockholder will agree to indemnify the
Underwriters and the Trust against certain liabilities, including
liabilities under the Securities Act of 1933, as amended (the "Securities
Act"), or to contribute to payments the Underwriters and the Trust may be
required to make in respect thereof. Pursuant to the Registration
Agreement, the underlying issuer of the Common Stock will agree to indemnify
the Underwrtiers and the Trust against certain liabilities, including
liabilities under the Securities Act, arising from the registration of the
Common Stock of said issuer.

Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "1933 Act"), may be permitted
to trustees, officers and controlling persons of the Registrant, pursuant
to the foregoing provisions or otherwise, the Registrant has been advised
that in the opinion of the Securities and Exchange Commission (the
"Commission") such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a trustee,
officer or controlling person of the Registrant in the successful defense
of any action, suit or proceeding) is asserted by such trustee, officer
or controlling person in connection with the securities being registered,
the Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.

ITEM 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

The Trust is internally managed and does not have an investment adviser.

ITEM 31. LOCATION OF ACCOUNTS AND RECORDS

All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940, as amended, and the
rules promulgated thereunder are maintained at the offices of the Registrant
(850 Library Avenue, Suite 204, Newark, Delaware 19715), its custodian (
) and its paying agent ( ).

ITEM 32. MANAGEMENT SERVICES

Not applicable.

ITEM 33. UNDERTAKINGS

(a) The Registrant hereby undertakes to suspend the offering of the
shares covered hereby until it amends its prospectuses contained herein if
(1) subsequent to the effective date of this Registration Statement, its net
asset value per share declines more than 10 percent from its net asset value
per share as of the effective date of the Registration Statement or (2) the
net asset value per share increases to an amount greater than its net
proceeds as stated in the prospectuses contained herein.

(b) The Registrant hereby undertakes that (i) for purpose of determining
any liability under the Securities Act of 1933, the information omitted from
the form of prospectuses filed as part of this Registration Statement in
reliance upon Rule 430A and contained in a form of prospectus filed by the
registrant under Rule 497(h) under the Securities Act of 1933 shall be deemed
to be part of this registration statement as of the time it was declared
effective; (ii) for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of the securities at that time
shall be deemed to be the initial bona fide offering thereof.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Pre-
Effective Amendment to its Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Newark, State of Delaware on the 10th day of March, 1998.

XYZ EXCHANGEABLE SECURITIES TRUST

By:
/s/ Donald J. Puglisi
_____________________
Donald J. Puglisi
Managing Trustee

Pursuant to the requirements of the Securities Act of 1933,
this Pre-Effective Amendment to the Registrant's Registration Statement has
been signed below by the following persons, in the capacities and on the
date indicated.

Name Title Date
---- ----- ----

/s/ Donald J. Puglisi Managing Trustee March 10, 1998
_____________________
Donald J. Puglisi

William R. Latham III* Trustee
_________________________
William R. Latham III

James B. O'Neill* Trustee
_________________________
James B. O'Neill

*By /s/ Donald J. Puglisi March 10, 1998
-----------------------------------
Donald J. Puglisi, Attorney-in-fact

EXHIBIT INDEX

EXHIBIT DESCRIPTION
(a)(1) Trust Agreement//*
(2) Form of Amended and Restated Trust Agreement**
(3) Certificate of Trust//*
(b) Not applicable
(c) Not applicable
(d)(1) Form of Specimen certificate for Exchangeable Securities
(included in Exhibit 2(a)(2))**
(2) Portions of the Declaration of Trust of the Registrant
defining the rights of Holders of Exchangeable Securities
(included in Exhibit 2(a)(2))**
(e) Not applicable
(f) Not applicable
(g) Not applicable
(h)(1) Form of Purchase Agreement**
(2) Form of Registration Agreement**
(3) PaineWebber Incorporated Standard Dealer Agreement**
(i) Not applicable
(j) Form of Custodian Agreement**
(k)(1) Form of Paying Agent, Registrar and Transfer Agent
Agreement**
(2) Form of Administration Agreement**
(3) Form of Forward Purchase Contract**
(4) Form of Security and Pledge Agreement**
(5) Form of Fund Expense Agreement**
(6) Form of Fund Indemnity Agreement**
(l) Opinion and Consent of Brown & Wood LLP, counsel to the
Trust**
(m) Not applicable
(n)(1) Tax Opinion and Consent of Brown & Wood LLP, Counsel to the
Trust**
(2) Consent of __________, independent auditors for the Trust**
(o) Not applicable
(p) Form of Subscription Agreement**
(q) Not applicable
(r) Financial Data Schedule**
___________________
//

* Previously filed.

** To be filed by amendment.