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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 18, 1997
REGISTRATION NO. 333-39217
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
------------------------
A. EXACT NAME OF TRUST:
NATIONAL EQUITY TRUST
EQUITY PORTFOLIO SERIES 1
B. NAME OF DEPOSITOR:
PRUDENTIAL SECURITIES INCORPORATED
------------------------
C. COMPLETE ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICE:
ONE SEAPORT PLAZA
199 WATER STREET
NEW YORK, NEW YORK 10292
------------------------
D. NAME AND COMPLETE ADDRESS OF AGENT FOR SERVICE:
<TABLE>
<S> <C>
LEE B. SPENCER, JR., ESQ. Copy to:
PRUDENTIAL SECURITIES INCORPORATED KENNETH W. ORCE, ESQ.
ONE SEAPORT PLAZA CAHILL GORDON & REINDEL
199 WATER STREET 80 PINE STREET
NEW YORK, NEW YORK 10292 NEW YORK, NEW YORK 10005
</TABLE>
E. TITLE AND AMOUNT OF SECURITIES BEING REGISTERED:
AN INDEFINITE NUMBER OF UNITS OF
NATIONAL EQUITY TRUST, EQUITY PORTFOLIO SERIES 1
PURSUANT TO RULE 24F-2 PROMULGATED UNDER
THE INVESTMENT COMPANY ACT OF 1940 AS AMENDED.
F. PROPOSED MAXIMUM AGGREGATE OFFERING PRICE TO THE PUBLIC OF THE SECURITIES
BEING REGISTERED:
INDEFINITE
G. AMOUNT OF FILING FEE:
N/A
------------------------
H. APPROXIMATE DATE OF PROPOSED SALE TO PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE
OF THE REGISTRATION STATEMENT.
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<PAGE>
NATIONAL EQUITY TRUST EQUITY PORTFOLIO SERIES 1
CROSS-REFERENCE SHEET
PURSUANT TO RULE 404(C) OF REGULATION C
UNDER THE SECURITIES ACT OF 1933
(FORM N-8B-2 ITEMS REQUIRED BY INSTRUCTION AS
TO THE PROSPECTUS IN FORM S-6)
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FORM N-8B-2 FORM S-6
ITEM NUMBER HEADING IN PROSPECTUS
------------------------------------- -------------------------------------
I. ORGANIZATION AND GENERAL INFORMATION
<S> <C> <C>
1. (a) Name of Trust.................... Prospectus front cover
(b) Title of securities issued....... Prospectus front cover
2. Name and address of each depositor... Sponsor; Prospectus back cover
3. Name and address of trustee.......... Trustee
4. Name and address of each principal
underwriter........................ Sponsor
5. State of organization of trust....... The Trust
6. Execution and termination of trust
agreement.......................... Summary of Essential Information; The
Trust; Amendment and Termination of
the Indenture
7. Changes of Name...................... *
8. Fiscal year.......................... *
9. Litigation........................... *
<CAPTION>
II. GENERAL DESCRIPTION OF THE TRUST AND SECURITIES OF THE TRUST
<S> <C> <C>
10. (a) Registered or bearer
securities..................... *
(b) Cumulative or distributive
securities..................... *
(c) Redemption....................... Rights of Unit Holders--Redemption
(d) Conversion, transfer, etc........ Rights of Unit Holders--Redemption
(e) Periodic payment plan............ *
(f) Voting rights.................... *
(g) Notice to certificateholders..... The Trust; Rights of Unit
Holders--Reports and Records;
Sponsor--Responsibility; Sponsor--
Resignation; Trustee--Resignation;
Amendment and Termination of the
Indenture
(h) Consents required................ The Trust; Amendment and Termination
of the Indenture
(i) Other provisions................. Tax Status
11. Type of securities comprising
units.............................. Prospectus front cover; The Trust
</TABLE>
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* Inapplicable, answer negative or not required.
i
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12. Certain information regarding
periodic payment certificates...... *
13. (a) Load, fees, expenses, etc........ Summary of Essential Information;
Public Offering of Units--Public
Offering Price; Public Offering of
Units--Sponsor's and Underwriter's
Profits; Public Offering of
Units--Volume Discount; Public
Offering of Units--Employee
Discount; Exchange Option;
Reinvestment Program; Expenses and
Charges; Sponsor--Responsibility
(b) Certain information regarding
periodic payment certificates.. *
(c) Certain percentages.............. Summary of Essential Information;
Public Offering of Units--Public
Offering Price; Public Offering of
Units--Profit of Sponsor; Public
Offering of Units--Volume Discount;
Public Offering of Units--Employee
Discount; Exchange Option
(d) Price Differentials.............. Public Offering of Units--Employee
Discount
(e) Certain other fees, etc. payable
by holders..................... Rights of Unit Holders--Certificates
(f) Certain other profits receivable
by depositor, principal
underwriter, trustee or
affiliated persons ............ The Trust--Objectives and Securities
Selection; Rights of Unit
Holders--Redemption--Purchase by
the Sponsor of Units Tendered for
Redemption
(g) Ratio of annual charges to
income......................... *
14. Issuance of trust's securities....... The Trust; Rights of Unit
Holders--Certificates
15. Receipt and handling of payments from
purchasers......................... *
16. Acquisition and disposition of
underlying securities.............. The Trust--Portfolio Summary; The
Trust--Objectives and Securities
Selection; Rights of Unit
Holders--Redemption; Sponsor--
Responsibility
17. Withdrawal or redemption............. Rights of Unit Holders--Redemption
18. (a) Receipt, custody and disposition
of income...................... Rights of Unit Holders--Distribution
of Interest and Principal; Rights of
Unit Holders--Reports and Records
(b) Reinvestment of distributions.... Reinvestment Programs
(c) Reserves or special funds........ Expenses and Charges; Rights of Unit
Holders--Distribution of Interest
and Principal
(d) Schedule of distributions........ *
</TABLE>
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* Inapplicable, answer negative or not required.
ii
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<TABLE>
<S> <C> <C>
19. Records, accounts and reports........ Rights of Unit Holders--Distributions
of Interest and Principal; Rights of
Unit Holders--Reports and Records
20. Certain miscellaneous provisions of
trust agreement.................... Sponsor--Limitations on Liability;
(a) Amendment........................ Sponsor--Resignation;
(b) Termination...................... Trustee--Limitations on Liability;
(c) and (d) Trustee, removal and
successor...................... Trustee--Resignation;
(e) and (f) Depositor, removal and
successor...................... Amendment and Termination of the
Indenture
21. Loans to security holders............ *
22. Limitation on liability.............. The Trust--Portfolio Summary;
Sponsor--Limitations on Liability;
Trustee--Limitations on Liability;
Evaluator--Limitations on Liability
23. Bonding arrangements................. Additional Information--Item A
24. Other material provisions of trust
agreement.......................... *
<CAPTION>
III. ORGANIZATION, PERSONNEL AND AFFILIATED PERSONS OF DEPOSITOR
<S> <C> <C>
25. Organization of depositor............ Sponsor
26. Fees received by depositor........... *
27. Business of depositor................ Sponsor
28. Certain information as to officials
and affiliated persons of
depositor.......................... Contents of Registration
Statement--Part II
29. Companies controlling depositor...... Sponsor
30. Persons controlling depositor........ *
31. Payments by depositor for certain
services rendered to trust......... *
32. Payments by depositor for certain
other services rendered to trust... *
33. Remuneration of employees of
depositor for certain services
rendered to trust.................. *
34. Remuneration of other persons for
certain services rendered to
trust.............................. *
35. Distribution of trust's securities in
states............................. Public Offering of Units--Public
Distribution
36. Suspension of sales of trust's
securities......................... *
37. Revocation of authority to
distribute......................... *
38. (a) Method of distribution........... *
(b) Underwriting agreements.......... Public Offering of Units
(c) Selling agreements............... *
</TABLE>
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* Inapplicable, answer negative or not required.
iii
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<TABLE>
<S> <C> <C>
39. (a) Organization of principal
underwriter.................... Sponsor
(b) N.A.S.D. membership of principal
underwriter.................... Sponsor
40. Certain fees received by principal
underwriter........................ *
41. (a) Business of principal
underwriter.................... Sponsor
(b) Branch offices of principal
underwriter.................... *
(c) Salesmen of principal
underwriter.................... *
42. Ownership of trust's securities by
certain persons.................... *
43. Certain brokerage commissions
received by principal
underwriter........................ *
44. (a) Method of valuation.............. Summary of Essential Information;
Public Offering of Units--Public
Offering Price; Public Offering of
Units--Public Distribution; Public
Offering of Units--Secondary Market
(b) Schedule as to offering price.... *
(c) Variation in offering price to
certain persons................ Public Offering of Units--Public
Distribution; Public Offering of
Units--Volume Discount; Public
Offering of Units--Employee
Discount; Exchange Option
45. Suspension of redemption rights...... *
46. (a) Redemption Valuation............. Summary of Essential Information;
Rights of Unit Holders--Redemption--Computation
of Redemption Price per Unit
(b) Schedule as to redemption
price.......................... *
47. Maintenance of position in underlying
securities......................... Public Offering of Units--Secondary
Market; Rights of Unit
Holders--Redemption--Computation
of Redemption Price per Unit;
Rights of Unit
Holders--Redemption--Purchase by
the Sponsor of Units Tendered for
Redemption
<CAPTION>
IV. INFORMATION CONCERNING THE TRUSTEE OR CUSTODIAN
<S> <C> <C>
48. Organization and regulation of
trustee............................ Trustee
49. Fees and expenses of trustee......... Expenses and Charges
50. Trustee's lien....................... Expenses and Charges--Other Charges
</TABLE>
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* Inapplicable, answer negative or not required.
iv
<PAGE>
<TABLE>
<CAPTION>
V. INFORMATION CONCERNING INSURANCE OF HOLDERS OF SECURITIES
<S> <C> <C>
51. Insurance of holders of trust's
securities......................... The Trust--Insurance on the
Securities in the Portfolio of an
Insured Trust
<CAPTION>
VI. POLICY OF REGISTRANT
<S> <C> <C>
52. (a) Provisions of trust agreement
with respect to selection or
elimination of underlying
securities..................... Prospectus front cover; The
Trust--Portfolio Summary; The
Trust--Insurance on the Securities
in the Portfolio of an Insured
Trust; The Trust--Objectives and
Securities Selection;
Sponsor--Responsibility
(b) Transactions involving
elimination of underlying
securities .................... *
(c) Policy regarding substitution or
elimination of underlying
securities .................... Sponsor--Responsibility
(d) Fundamental policy not otherwise
covered........................ *
53. Tax status of trust.................. Prospectus front cover; Tax Status
<CAPTION>
VII. FINANCIAL AND STATISTICAL INFORMATION
<S> <C> <C>
54. Trust's securities during last ten
years.............................. *
55.
56. Certain information regarding
periodic payment certificates...... *
57.
58.
59. Financial statements (Instruction
1(c) to Form S-6).................. Statement of Financial Condition of
the Trust
</TABLE>
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* Inapplicable, answer negative or not required.
v
<PAGE>
NATIONAL EQUITY TRUST
EQUITY PORTFOLIO SERIES 1
(REIT PORTFOLIO)
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The objective of the Trust is total return through an investment for
approximately two years in a portfolio consisting of equity securities issued by
publicly traded real estate investment trusts ('REITs'). The value of the Units
of the Trust will fluctuate with the value of the portfolio of underlying
Securities. Units of the Trust may be suited for purchase by Individual
Retirement Accounts, Keogh Plans and other tax-deferred retirement plans.
Unit Holders may elect, prior to the Termination Date (approximately two years
after the creation of the Trust), one or more of the following options: (1)
receiving their pro rata share of the underlying Securities in kind, (2)
receiving cash upon the liquidation of their pro rata share of the underlying
Securities and (3) investing the amount of cash they would have received upon
the liquidation of their pro rata share of the underlying Securities in units of
a new trust (if one is offered).
The minimum purchase is $250.
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SPONSOR: [LOGO] Prudential
Securities
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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.
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PLEASE READ AND RETAIN Prospectus dated December 18, 1997
THIS PROSPECTUS FOR FUTURE REFERENCE.
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<PAGE>
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This Prospectus does not contain all the information with respect to the
investment company set forth in its registration statement and exhibits relating
thereto which have been filed with the Securities and Exchange Commission,
Washington, D.C. under the Securities Act of 1933 and the Investment Company Act
of 1940, and to which reference is hereby made.
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The NATIONAL EQUITY TRUST, Equity Portfolio Series 1 (the 'Trust') (REIT
Portfolio) is composed of equity securities, i.e. common stock and/or common
shares of beneficial interest issued by publicly traded REITs (the 'Securities'
or 'Security,' as the context requires), and contracts and funds for the
purchase thereof and/or cash (or a letter of credit in lieu of cash) with
instructions to the Trustee to purchase Securities. Subsequent to the Date of
Deposit, the Sponsor may, but is not obligated to, deposit additional
Securities, contracts to purchase additional Securities together with a letter
of credit and/or cash (or a letter of credit in lieu of cash) with instructions
to purchase additional Securities maintaining to the extent practicable the
proportionate relationship of the number of shares of each Security in the
portfolio of the Trust (the 'Portfolio') immediately prior to such deposit
thereby creating additional Units which Units the Sponsor intends to offer by
means of this Prospectus. (See Part B--'The Trust.')
THE OBJECTIVE of the Trust is total return through an investment for
approximately two years in a portfolio of equity securities issued by REITs.
(See 'Summary of Essential Information' for the Termination Date of the Trust.)
There can be no assurance that such objective can be realized. The factors
affecting the value of the Securities are those factors that have an impact upon
the value of equity securities in general and particularly those factors that
affect the economic and financial condition of each issuer of a Security in
particular. (Total return includes (i) capital appreciation--the value per Unit
of the Securities in the Portfolio of the Trust at the termination of the Trust
less the value per Unit of the Securities in the Portfolio of the Trust at the
commencement of the Trust plus (ii) the dividends paid on the Securities during
the life of the Trust.)
SECURITIES SELECTION. The portfolio of the Trust was selected by the
Sponsor's equity research department's REIT analysts ('REIT Research'). The
equity research department rates REIT stocks 'buy,' 'hold' or 'sell.' All of the
Securities in the Trust were rated 'buy' by REIT Research on the initial Date of
Deposit.
REITs generally have interests in income-producing real estate. Equity
REITs such as those in the Portfolio emphasize direct property investment,
holding their invested assets primarily in the ownership of real estate or other
equity interests. There are two principal types of REITs: those which hold
primarily real estate and benefit from the underlying net rental income
generated from the properties ('Equity REITs') and those which hold primarily
mortgages which are secured by real estate assets and benefit predominantly from
the difference between the interest income on the mortgage loans and the
interest expense on the capital used to finance the loans ('Mortgage REITs'). A
third type combines the investment strategies of the Equity REITs and the
Mortgage REITs ('Hybrid REITs'). The objective of an Equity REIT is to purchase
income-producing real estate properties in order to generate cash flow from
rental income and a gradual asset appreciation, and they typically invest in
properties such as office, retail, industrial, hotel, parking facilities,
apartment buildings and health care facilities. A REIT, to qualify for special
tax treatment under the federal income tax law, must conform to certain
requirements of the Internal Revenue Code of 1986, as amended (the 'Code'). In
general, a REIT must hold at least 75% of its total assets in real estate assets
and distribute at least 95% of its taxable income (without regard to any net
capital gains) on an annual basis. All of the Securities in the Trust were
issued by Equity REITs. In this prospectus a reference to common stock shall
include both common stock and common shares of beneficial interest issued by a
REIT organized as a trust.
The Securities were selected for inclusion in the Trust Portfolio as of the
Date of Deposit. Subsequent to such date, the Securities may no longer be rated
'buy' by REIT Research. However, the Sponsor may, on and subsequent to the
initial Date of Deposit, create additional Units and sell such additional Units
created. Such additional Units will be created by the deposit of additional
Securities which reflect the Portfolio as of the initial Date of Deposit,
subject to permitted adjustments, and/or contracts to purchase additional
Securities together with a letter of credit and/or cash (or a letter of credit
in lieu of cash) with instructions to purchase additional Securities. The
original proportionate relationship between the number of shares of each
Security in the Trust will be adjusted to reflect the occurrence of a stock
dividend, a stock split, merger, reorganization or a similar event which affects
the capital structure of the issuer of a Security in the Trust but which does
not affect the Trust's percentage ownership of the common stock equity of such
issuer at the time of such event. The proportionate relationship will be
adjusted for all future subsequent deposits to reflect such events. If the Trust
receives the securities of another issuer as the result of a merger or
reorganization of, or a spin-off, or split-up by the issuer of a Security
included in the original Portfolio, the Trust may under certain circumstances
hold those securities as if they were one of the Securities initially deposited
and adjust the proportionate relationship accordingly for all future subsequent
deposits. The sale of additional Units and the sale of Units in the secondary
market may continue even though the Securities would no longer be chosen for
deposit into the Trust if the selection process were to be made at such later
time and even if a Security were rated 'hold' or 'sell' by Equity Research at
such time.
PORTFOLIO ACQUISITION--On the initial Date of Deposit all of the Securities
deposited in the Trust were acquired by the Sponsor in open market purchases on
the New York Stock Exchange. Subsequent to the initial Date of Deposit and
during the
A-1
<PAGE>
initial offering period, it is expected that all of the Securities which the
Sponsor deposits in the Trust will have been acquired by the Sponsor in
transactions in which the Sponsor will have acted as sole underwriter to the
issuers of the Securities. The Sponsor, in its capacity as underwriter, will
acquire the Securities at prices below the current market value of the
Securities due to various factors, including the size of the purchase,
expectation of holding period and cost of issuance. All of the Securities will
be deposited in the Trust based upon their market value as of the dates of
deposit. As a result of the Sponsor's ability to purchase these Securities below
market value, the Sponsor will offer Units of the Trust with no sales charge
during the initial offering period. By virtue of buying stock at below market
prices, the Sponsor will realize a profit on the deposit of the Securities to
the Trust in an amount of up to 5% of the market value of these Securities.
Notwithstanding the preceding, the Sponsor may create additional Units by
depositing Securities acquired on the applicable national stock exchanges.
RISK FACTORS--Many factors can have an adverse impact on the performance of
a particular REIT, its cash available for distribution, the credit quality of a
particular REIT or the real estate industry generally. Risks associated with the
direct ownership of real estate include, among other factors, general and local
economic conditions, decline in real estate values, the financial health of
tenants, overbuilding and increased competition for tenants, oversupply of
properties for sale, changing demographics, changes in interest rates, changes
in government regulations, faulty construction, changes in neighborhood values,
and the unavailability of construction financing or mortgage loans at rates
acceptable to developers. Variations in rental income and space availability and
vacancy rates in terms of supply and demand are additional factors affecting
real estate generally and REITs in particular. Investors should also be aware
that REITs may not be diversified and are subject to the risks of financing
projects. REITs are also subject to defaults by borrowers and the market's
perception of the REIT industry generally.
Certain REITs in the Trust may be structured as UPREITs. This form of REIT
owns an interest in a partnership that owns real estate, which can result in a
potential conflict of interest between shareholders who may want to sell an
asset and partnership interest holders who would be subject to tax liability if
the REIT sells the property. In some cases, REITs have entered into 'no sell'
agreements, which are designed to avoid a taxable event to the holders of
partnership units by preventing the REIT from selling the property. This
arrangement could mean that the REIT would refuse a lucrative offer for an asset
or be forced to hold on to a poor asset. Since 'no sell' agreements are often
undisclosed, the Sponsor is unable to state whether any of the REITs in the
Trust have entered into this kind of arrangement.
REIT Taxation. Each of the REITs in which the Trust invests will generally
state its intention to operate in such manner as to qualify for taxation as a
'real estate investment trust' under the Internal Revenue Code, although, of
course, no assurance can be given that each REIT will at all times so qualify.
So long as an issuer qualifies as a REIT, it will, in general, be subject to
Federal income tax only on income that is not distributed to stockholders. In
order to qualify as a REIT for any taxable year, a REIT must, among other
things, hold at least 75% of its assets in real estate, cash items and
government securities; derive at least 75% of its gross income from rent from
real property and interest on mortgages; derive at least 95% of its gross income
from sources that satisfy the 75% gross income test described in the preceding
clause, plus dividends, interest and gain from the sale or disposition of
certain stock or securities; and distribute to its stockholders annually an
amount at least equal to 95% of its REIT taxable income (computed without regard
to net capital gain or the dividends paid deduction). Failure to qualify for
taxation as a REIT in any taxable year will subject an issuer to tax on its
taxable income at regular corporate rates and certain other taxes. Distributions
to stockholders in any year in which an issuer fails to qualify as a REIT will
not be deductible by the issuer. Unless entitled to relief under specific
statutory provisions, the issuer would not qualify for taxation as a REIT for
the next four taxable years after failing to qualify in any year. Each REIT may
also be subject to state, local or other taxation in various state, local or
other jurisdictions.
Since the Trust Portfolio consists of common stock, an investment in Units
of the Trust should be made with an understanding of the risks inherent in any
investment in common stocks. The risks of investing in common stock include
risks associated with the rights to receive payments from the issuer which are
generally inferior to creditors of, or holders of debt obligations or preferred
stocks issued by, the issuer. Holders of common stock have a right to receive
dividends only when and if, and in the amounts, declared by the issuer's board
of directors and to participate in amounts available for distribution by the
issuer only after all other claims on the issuer have been paid or provided for.
By contrast, holders of preferred stocks have the right to receive dividends at
a fixed rate when and as declared by the issuer's board of directors, normally
on a cumulative basis. Dividends on cumulative preferred stock must be paid
before any dividends are paid on common stock and any cumulative preferred stock
dividend which has been omitted is added to future dividends payable to the
holders of such cumulative preferred stock. Preferred stocks are also entitled
to rights on liquidation which are senior to those of common stocks. For these
reasons, preferred stocks generally entail less risk than common stocks.
Moreover, common stock does not represent an obligation of the issuer and
therefore does not offer any assurance of income or provide the same degree of
protection of capital as debt securities. The issuance of debt securities or
even preferred stock by an issuer will create prior claims for payment of
principal, interest and dividends which could adversely affect the ability and
inclination of the issuer to declare or pay dividends on its common stock or the
rights of holders of common stock with respect to assets of the issuer upon
liquidation or bankruptcy. Further, unlike debt securities which typically have
a stated principal amount payable at maturity (which value will be subject to
market fluctuations prior thereto), common stock has neither a fixed principal
amount nor a maturity and has values which are subject to market fluctuations
for as long as the common stock
A-2
<PAGE>
remains outstanding. The value of the common stock in the Trust thus may be
expected to fluctuate over the life of the Trust to values higher or lower than
those prevailing on a date of deposit. The value of a Unit may be subject to
greater volatility than an investment in a more diversified portfolio both in
terms of the number of issuers and the concentration in issues from one
industry.
The value of the Units will fluctuate depending on all the factors that
have an impact on the economy and the equity markets. These factors similarly
impact on the ability of an issuer to pay dividends. The Trust is not a
'managed' registered investment company and Securities will not be sold by the
Trustee as a result of ordinary market fluctuations.
DISTRIBUTIONS of dividends received (net of expenses) and return of
capital, if any, by the Trust will be made quarterly on or shortly after the
Quarterly Distribution Date to Unit Holders of record on the Record Date
immediately preceding such Quarterly Distribution Date. (See Part B--'Rights of
Unit Holders--Distributions.') Because the expenses of the Trust may exceed the
dividend income received by the Trust there can be no assurance that there will
be any amounts available for distribution to Unit Holders.
PUBLIC OFFERING PRICE of the Units of the Trust during the initial offering
period is equal to the value of the underlying Securities in the Trust's
Portfolio divided by the number of Units outstanding in the Trust, with no sales
charge imposed during the initial offering period (expected to be only on the
date of the Prospectus). After the initial offering period the Units will be
offered at a Public Offering Price determined by aggregating the value of
Securities reduced by Trust liabilities, dividing such net amount by the number
of Units outstanding and adding a sales charge of 4% of the Public Offering
Price (4.167% of the net amount invested in Securities). A proportionate share
of amounts, if any, in the Income Account is also added to the Public Offering
Price. (See Part B--'Public Offering of Units--Public Offering Price.')
SECONDARY MARKET--The Sponsor, although not obligated to do so, presently
intends to maintain a secondary market for the Units in the Trust as more fully
described under Part B--'Public Offering of Units--Secondary Market.' If such a
market is not maintained, a Unit Holder will be able to dispose of his Units
only by tendering his Units to the Trustee for redemption. (See Part B--'Rights
of Unit Holders--Redemption--Computation of Redemption Price per Unit.')
TRUST TERMINATION--The Trust will terminate on the Termination Date set
forth in the Summary of Essential Information, approximately two years after the
initial Date of Deposit (unless terminated earlier; see part B--'Amendment and
Termination of the Indenture--Termination'). A Unit Holder's Units will be
redeemed in-kind on the Termination Date by distribution of the Unit Holder's
pro rata share of the Securities and any cash in the Portfolio of the Trust on
such date to the Distribution Agent who will act as agent for such Unit Holder.
SECURITIES DISPOSITION OPTIONS--A Unit Holder who so elects by notifying
the Trustee prior to the Termination Date of the Trust will have the Securities
received on the Termination Date disposed of on behalf of such Unit Holder by
The Chase Manhattan Bank, as 'Distribution Agent' in accordance with one or more
of the following options as elected by such Unit Holder:
1. to have such underlying Securities distributed in kind no later
than the business day next following the Termination Date. Unit Holders
subsequently selling such distributed Securities will incur brokerage costs
when disposing of such Securities;
2. to receive the Unit Holder's pro rata share of the cash received
by the Distribution Agent (less expenses) upon the sale by the Distribution
Agent of the underlying Securities attributable to Unit Holders electing
this option over a period not to exceed 10 business days immediately
following the Termination Date. Amounts received by the Distribution Agent
over such 10 business day period representing the proceeds of the
underlying Securities sold will be held by The Chase Manhattan Bank in
accounts which are non-interest bearing to Unit Holders and which are
available for use by The Chase Manhattan Bank pursuant to normal banking
procedures and will be distributed to Unit Holders within 5 business days
after the settlement of the trade for the last Security to be sold; and
3. to invest the proceeds from the sale of the underlying Securities
attributable to Unit Holders electing this option within 30 days of the
Termination Date, as received by the Distribution Agent upon the sale of
such underlying Securities over a period not to exceed 10 business days
immediately following the Termination Date, in units of a subsequent series
of National Equity Trust as designated by the Sponsor (the 'New Series') if
such New Series is offered at such time. The Units of a New Series will be
purchased by the Unit Holder upon the settlement of the trade for the last
Security to be sold. It is expected that the terms of the New Series will
be substantially the same as the terms of the Trust described in this
Prospectus, and that similar options in a subsequent series of the Trust
will occur in each New Series of the Trust. The availability of this option
does not constitute a solicitation of an offer to purchase Units of a New
Series or any other security. A Unit Holder's election to participate in
this option will be treated as an indication of interest only. At any time
prior to the purchase by the Unit Holder of units of a New Series, such
Unit Holder may change his investment strategy and receive, in cash, the
proceeds of the sale of the Securities.
Unit Holders who do not elect as set forth above will have their Units
redeemed on the Termination Date and be deemed to have elected to receive the
cash proceeds from the sale of such Unit Holder's pro rata share of the
underlying Securities (option 2).
A-3
<PAGE>
Under each option a Unit Holder will receive the Redemption Price per Unit
(net asset value) determined as of the Evaluation Time on the Termination Date.
The Distribution Agent will sell the underlying Securities in the case of the
second and third option over a period not to exceed 10 business days immediately
following the Termination Date. The proceeds of any such sales will be reduced
by any applicable brokerage commissions. The sale arrangement is one in which
The Chase Manhattan Bank will be selling the Securities as agent for the Unit
Holder and is separate from the Trust which terminates on the Termination Date.
The proceeds of such sales may be more or less than the value of the Securities
on the Termination Date. The Sponsor, on behalf of the Distribution Agent if the
Sponsor effects such sales, or the Distribution Agent if the Sponsor does not,
will, unless prevented by unusual and unforeseen circumstances, such as, among
other reasons, a suspension in trading of a Security, the close of a stock
exchange, outbreak of hostilities and collapse of the economy, sell on each
business day during the 10 business day period at least a number of shares of
each Security which then remains in the Portfolio equal to the number of such
shares in the Portfolio at the beginning of such day multiplied by a fraction
the numerator of which is one and the denominator of which is the number of days
remaining in the 10 business day sales period. The proceeds of sale will not be
distributed by the Distribution Agent until the settlement of the trade upon the
sale of the last Security during the 10 business day period.
Depending on the amount of proceeds to be invested in Units of the New
Series and the number of other orders for Units in the New Series, the Sponsor
may purchase a large amount of securities for the New Series in a short period
of time. The Sponsor's buying of securities may tend to raise the market prices
of these Securities. The actual market impact of the Sponsor's purchases,
however, is currently unpredictable because the actual amount of securities to
be purchased and the supply and price of those securities is unknown. A similar
problem may occur in connection with the sale of Securities during the 10
business day period following the Termination Date; depending on the number of
sales required, the prices of, and demand for Securities, such sales may tend to
depress the market prices and thus reduce the proceeds to be credited to Unit
Holders. The Sponsor believes that the sale of underlying Securities over a 10
business day period as described above is in the best interest of Unit Holders
and may mitigate the negative market price consequences stemming from the
trading of large amounts of Securities. The Sponsor, in implementing such sales
of Securities on behalf of the Distribution Agent, will seek to maximize the
sales proceeds and will act in the best interest of the Unit Holder. The
proceeds of the sale of the Securities will be in an amount equal to amounts
realized upon the sale of the Securities over the 10 business day period. There
can be no assurance, however, that any adverse price consequences of heavy
trading will be mitigated.
A-4
<PAGE>
SUMMARY OF ESSENTIAL INFORMATION
NATIONAL EQUITY TRUST
EQUITY PORTFOLIO SERIES 1
REIT PORTFOLIO
AS OF DECEMBER 17, 1997*
<TABLE>
<CAPTION>
INITIAL OFFERING SECONDARY
PERIOD MARKET
---------------- ------------
<S> <C> <C>
AGGREGATE VALUE OF SECURITIES.................................... $ 250,000.38 $ 250,000.38
NUMBER OF UNITS.................................................. 250,000 250,000
FRACTIONAL UNDIVIDED INTEREST IN THE TRUST REPRESENTED BY EACH
UNIT........................................................... 1/250,000th 1/250,000th
Aggregate value of Securities in the Trust.................. $ 250,000.38 $ 250,000.38
Divided by 250,000 Units (times 1,000)...................... $ 1,000.00 $ 1,000.00
Plus a sales charge: (4% of the Public Offering Price
(4.167% of the net amount invested in Securities) after the
initial offering period)................................... $ -0- $ 41.67
---------------- ------------
Public Offering Price per 1,000 Units**..................... $ 1,000.00 $ 1,041.67
Plus the amount per 1,000 Units in the Income Account....... $ 0 $ 0
---------------- ------------
Total per 1,000 Units.................................. $ 1,000.00 $ 1,041.67
---------------- ------------
---------------- ------------
REDEMPTION AND SPONSOR'S SECONDARY MARKET REPURCHASE PRICE PER
1,000 UNITS*** (based on the value of the underlying
Securities).................................................... $ 1,000.00
RECORD DATES: Quarterly on the tenth day of February, May, August
and November .
QUARTERLY DISTRIBUTION DATES: The twenty-fifth day of February,
May, August and November or as soon thereafter as possible.
MINIMUM PRINCIPAL DISTRIBUTION: No distribution need be made from
the Principal Account if the balance therein is less than $1.00
per 1,000 Units.
TRUSTEE'S FEE AND ESTIMATED EXPENSES: $.90 per 1,000 Units.+
ORGANIZATIONAL EXPENSES: $1.38 per 1,000 Units.+
SPONSOR'S PORTFOLIO SUPERVISION FEE+: Maximum of $0.25 per 1,000
Units.
EVALUATION TIME: 4:00 P.M. New York Time
TERMINATION DATE: December 20, 1999++
SPONSOR'S LOSS ON DEPOSIT: $(136.44)
MINIMUM VALUE OF TRUST: The Indenture may be terminated if the
value of the Trust is less than 40% of the value of the
Securities calculated after the last deposit of Securities.
</TABLE>
- ------------------
* The initial Date of Deposit. The initial Date of Deposit is the date on
which the Trust Indenture and Agreement was signed and the initial deposit
of Securities with the Trustee was made.
** This price is computed as of the Date of Deposit and may vary from such
price on the date of this Prospectus or any subsequent date. Subsequent to
the initial offering period (expected to be only on the date of this
Prospectus) a sales charge of 4% of the Public Offering Price (4.167% of the
net amount invested in Securities) will be added.
*** This price is computed as of the Date of Deposit and may vary from such
price on the date of this Prospectus or any subsequent date. The redemption
and repurchase price will be further reduced to reflect the Trust's costs of
liquidating Securities to meet the redemption currently estimated at $2.59
per 1,000 Units.
+ See: 'Expenses and Charges' herein. The fee and the organizational costs
accrue daily and are payable on each Distribution Date. Estimated dividends
from the Securities, based on the last dividends actually paid, are expected
by the Sponsor to be sufficient to pay the estimated expenses of the Trust.
In addition, brokerage fees borne by the Trust in connection with the
purchase of Securities by the Trustee with cash deposited in the Trust are
currently estimated at $2.59 per 1,000 Units.
++ The Trust may be terminated prior to the Termination Date. See Part
B--'Amendment and Termination of the Indenture--Termination.' The sale of
Securities will occur during the 10 business day period subsequent to the
Termination Date.
A-5
<PAGE>
FEE TABLE
This Fee Table is intended to help you to understand the costs and expenses
that you will bear directly or indirectly. See Part B--'Public Offering of
Units' and 'Expenses and Charges.' Although the Trust has a term of only
approximately two years, and is a unit investment trust rather than a mutual
fund, this information is presented to permit a comparison of fees, assuming the
principal amount and distributions are rolled over every two years into a New
Series.
<TABLE>
<CAPTION>
INITIAL OFFERING SECONDARY
UNIT HOLDER TRANSACTION EXPENSES PERIOD MARKET
- ---------------------------------------- --------------------- -----------------------
<S> <C> <C> <C> <C>
Sales Charge Imposed on Purchase(a)..... -0- % -$0- 4.167% $ 41.67
Annual Trust Operating Expenses (as a
percentage of average net assets):
Trustee's Fee......................... .079% $ .79 .079% $ .79
Organizational Costs and
Expenses(b),(e).................... .138% $ 1.38 .138% $ 1.38
Other Operating Expenses (including
Portfolio Supervision, Bookkeeping
and Administrative Fees)(e)........ .036% $ .36 .036% $ .36
------ ------ --------- ---------
Total(c)...................... .253% $ 2.53 4.420% $ 44.20
------ ------ --------- ---------
------ ------ --------- ---------
</TABLE>
EXAMPLE
<TABLE>
<CAPTION>
INITIAL OFFERING SECONDARY
PERIOD MARKET
-------------------- ---------------------
CUMULATIVE EXPENSES CUMULATIVE
EXPENSES PAID FOR
PAID FOR PERIOD: PERIOD:
-------------------- ---------------------
1 3 1 3
YEAR YEARS(D) YEAR YEARS(D)
-------- -------- --------- --------
<S> <C> <C> <C> <C>
An investor would pay the following expenses on a $1,000
investment, assuming the Trust's operating expense ratio of
0.253% (initial offering period purchase) and 4.42%
(secondary market purchase) and a 5% annual return on the
investment throughout the periods.......................... $ 2.53 $ 7.97 $44 $ 96
</TABLE>
The Example assumes a reinvestment of all dividends and distributions and
utilizes a 5% annual rate of return. THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OR ANNUAL RATE OF RETURN; THE ACTUAL
EXPENSES AND ANNUAL RATE OF RETURN MAY BE MORE OR LESS THAN THOSE ASSUMED FOR
PURPOSES OF THE EXAMPLE.
- ------------------
(a) The sales charge of 4.00% does not apply during the initial offering
period.
(b) Includes all or a portion of the cost of the preparation, printing and
execution of the Indenture, Registration Statement and other documents relating
to the Trust, federal and state registration fees and costs, the initial fees
and expenses of the Trustee, legal and auditing expenses and other out of pocket
expenses. The organizational costs will be amortized generally over the life of
the Trust, except that the registration fees included in the organizational cost
and expense amount will be charged directly to capital during the initial public
offering period.
(c) The estimates do not include the cost borne by Unitholders of
purchasing and selling securities.
(d) Although each Trust has a term of only approximately two years and is a
unit investment trust rather than a mutual fund, this information is presented
to permit a comparison of fees and expenses, assuming the principal amount and
distributions are rolled over each year into a New Series.
(e) Such amounts are estimated and the actual amounts may vary.
PORTFOLIO SUMMARY AS OF DATE OF DEPOSIT
The Portfolio contains 5 issues of Securities all of which are traded on
the New York Stock Exchange. The Securities are representative of REITs
investing in asset classes as follows: Retail: 12.0%*; Apartment: 24.0%*;
Office: 20.0%*; Industrial/Apartment: 20.0%*; Office/Industrial: 24.0%*.
- ------------------
* Percentages computed on the basis of the aggregate net asset value of the
Securities in the Trust on the Date of Deposit.
A-6
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE UNIT HOLDERS, SPONSOR AND TRUSTEE
OF THE NATIONAL EQUITY TRUST EQUITY PORTFOLIO SERIES 1
We have audited the accompanying Statement of Financial Condition including
Schedule of Portfolio Securities of the National Equity Trust Equity Portfolio
Series 1 as of December 17, 1997. This financial statement is the responsibility
of the Trustee and Sponsor (see note (d) to the statement of financial
condition). 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 financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. Our procedures included
confirmation of the irrevocable letter of credit for the purchase of securities,
as shown in the Statement of Financial Condition and Schedule of Portfolio
Securities as of December 17, 1997, by correspondence with The Chase Manhattan
Bank, the Trustee. An audit also includes assessing the accounting principles
used and significant estimates made by the Trustee, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents fairly,
in all material respects, the financial position of the National Equity Trust
Equity Portfolio Series 1 as of December 17, 1997, in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
December 17, 1997
A-7
<PAGE>
STATEMENT OF FINANCIAL CONDITION
NATIONAL EQUITY TRUST EQUITY PORTFOLIO SERIES 1
AS OF DATE OF DEPOSIT, DECEMBER 17, 1997
TRUST PROPERTY
<TABLE>
<S> <C>
Sponsor's Contracts to Purchase underlying Securities backed
by an irrevocable letter of credit(a)..................... $250,000.38
Organizational Costs(e)..................................... 138,345.00
-----------
Total.................................................. $388,345.38
-----------
-----------
LIABILITIES AND INTEREST OF UNIT HOLDERS
Accrued Liability........................................... $138,345.00
INTEREST OF UNIT HOLDERS
Units of fractional undivided interest outstanding:
Cost to investors(b).............................. 250,000.38
Gross underwriting commission(c).................. 0.00
-----------
Net amount applicable to investors.......................... 250,000.38
-----------
Total........................................ $388,345.38
-----------
-----------
</TABLE>
- ------------------
(a) The aggregate value of the Securities represented by Contracts to
Purchase listed under 'Schedule of Portfolio Securities' included herein and
their cost to the Trust are the same. An irrevocable letter of credit drawn on
Standard Chartered Bank, in the amount of $125 million dollars has been
deposited with the Trustee for the purchase of Securities pursuant to contracts
to purchase such Securities.
(b) The aggregate Public Offering Price is computed on the basis set forth
under 'Public Offering of Units--Public Offering Price.'
(c) There is no sales charge during the Initial Offering Period. See
'Summary of Essential Information' for additional information.
(d) The Trustee has custody of and responsibility for all accounting and
financial books, records, financial statements and related data of the Trust and
is responsible for establishing and maintaining a system of internal controls
directly related to, and designed to provide reasonable assurance as to the
integrity and reliability of, financial reporting of the Trust. The Trustee is
also responsible for all estimates and accruals reflected in the Trust's
financial statements. The Trustee determines the price for each underlying
Security included in the Trust's Schedule of Portfolio Securities on the basis
set forth in 'Public Offering of Units--Public Offering Price.' Under the
Securities Act of 1933, as amended (the 'Act'), the Sponsor is deemed to be an
issuer of the Trust's Units. As such, the Sponsor has the responsibility of an
issuer under the Act with respect to financial statements of the Trust included
in the Registration Statement under the Act and amendments thereto.
(e) Organizational costs borne by the Trust will be amortized generally
over the life of the Trust. Registration fees of approximately $81,000, which
are included in organizational costs, will be charged directly to capital at the
end of the initial public offering period which is expected to be December 19,
1997. Organizational costs have been estimated based on a Trust with projected
total assets of $100,250,000. To the extent the assets of the Trust are fewer or
greater, the estimate may vary.
A-8
<PAGE>
SCHEDULE OF PORTFOLIO SECURITIES
NATIONAL EQUITY TRUST EQUITY PORTFOLIO SERIES 1
ON DATE OF DEPOSIT, DECEMBER 17, 1997
<TABLE>
<CAPTION>
CURRENT PERCENTAGE OF
ANNUAL AGGREGATE PRICE COST OF
DIVIDEND NUMBER MARKET PER STOCKS
PORTFOLIO PER OF VALUE SHARE TO TO
NO. NAME OF ISSUER SHARE(1) SHARES OF TRUST TRUST TRUST(2)
- --------- ------------------------------------------ -------- ------ ------------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
1. CarrAmerica Realty Corporation $ 1.75 1,603 20.0% $31.1875 $ 49,993.57
2. Developers Diversified Realty Corporation $ 2.52 792 12.0% 37.8750 $ 29,997.00
3. Equity Residential Properties Trust $ 2.68 1,168 24.0% 51.3750 $ 60,006.00
4. Pacific Gulf Properties Inc. $ 1.68 2,193 20.0% 22.8125 $ 50,027.81
5. Spieker Properties Inc. $ 2.28 1,428 24.0% 42.0000 $ 59,976.00
-----------
$250,000.38
-----------
-----------
</TABLE>
- ------------------
(1) Based on the latest quarterly or semiannual declaration. There can be no
assurance that future dividend payments, if any, will be maintained in an
amount equal to the dividend listed above.
(2) The Securities were acquired by the Sponsor on December 17, 1997. All
Securities are represented entirely by contracts to purchase. Valuation of
Securities by the Trustee was made on the basis of the closing sale price on
the New York Stock Exchange on December 17, 1997. The aggregate purchase
price to the Sponsor for the Securities deposited in the Trust is
$250,136.82.
The Sponsor may have acted as an underwriter, manager or co-manager of a
public offering of the Securities in the Trust during the last three years.
Affiliates of the Sponsor may serve as specialists in the Securities in this
Trust on one or more stock exchanges and may have a long or short position in
any of these stocks or in options on any of these stocks, and may be on the
opposite side of public orders executed on the floor of an exchange where the
Securities are listed. An officer, director or employee of the Sponsor may be an
officer or director of one or more of the issuers of the Securities in the
Trust. The Sponsor may trade for its own account as an odd-lot dealer, market
maker, block positioner and/or arbitrageur in any of the Securities or options
relating thereto. The Sponsor, its affiliates, directors, elected officers,
employees and employee benefits programs may have either a long or short
position in any Security or option relating thereto.
A-9
<PAGE>
PROSPECTUS--PART B:
- --------------------------------------------------------------------------------
Note that Part B of this Prospectus may not be distributed unless accompanied by
Part A.
- --------------------------------------------------------------------------------
NATIONAL EQUITY TRUST
EQUITY PORTFOLIO SERIES 1
THE TRUST
National Equity Trust, Equity Portfolio Series 1 (the 'Trust') is one of a
series of similar but separate unit investment trusts created by the Sponsor.
The Trust was created under the laws of the State of New York pursuant to a
Trust Indenture and Agreement and a related Reference Trust Agreement dated the
Date of Deposit (collectively, the 'Indenture'),* between Prudential Securities
Incorporated (the 'Sponsor') and The Chase Manhattan Bank (the 'Trustee'). On
the Date of Deposit, the Sponsor deposited with the Trustee the securities
issued by the REITs listed on the Schedule of Portfolio Securities
(collectively, the 'Securities' or, singularly, the 'Security,' as the context
requires) and/or contracts and funds (represented by irrevocable letter(s) of
credit issued by major commercial bank(s)) for the purchase of such equity
securities at prices which reflect the value of the Securities as of the close
of the market as of the Date of Deposit and/or cash (or a letter of credit in
lieu of cash) with instructions to the Trustee to purchase such Securities (see
Schedule of Portfolio Securities). The Trustee then immediately delivered to the
Sponsor the units (the 'Units') comprising the entire ownership of the Trust as
of the Date of Deposit which Units the Sponsor, through this Prospectus, is
offering for sale to the public. Each such Unit represented on the initial Date
of Deposit an identical number and type of shares in identical issuers.
The objective of the Trust is total return through an investment in a
portfolio of equity securities issued by REITs. There can be no assurance that
such objective can be realized. The factors affecting the value of the
Securities are those factors that have an impact upon the value of equity
securities in general and those factors that affect the economic and financial
condition of each issuer of a Security and an investment in real estate in
particular.
Subsequent to the initial deposit of Securities on the Date of Deposit, the
Sponsor may, but is not obligated to, deposit from time to time additional
Securities identical to those already in the Trust and in the same proportions
(including contracts together with an irrevocable letter of credit for the
purchase thereof) and/or cash (or a letter of credit in lieu of cash) with
instructions to the Trustee to purchase additional Securities in the Trust, to
receive in exchange therefor additional Units, and to offer such Units to the
public by means of this Prospectus. Any such additional deposits during the 90
day period subsequent to the Date of Deposit may be in amounts which maintain
only to the extent practicable the original proportionate relationship between
the number of shares of each Security in the Portfolio of the Trust. It may not
be possible to maintain the exact original proportionate relationship because of
price changes or other reasons. Thus, for example in connection with the deposit
by the Sponsor of cash (or a letter of credit in lieu of cash) with instructions
to purchase additional Securities in order to create Additional Units, to the
extent that the price of a Security fluctuates between the time the cash is
deposited and the time the cash is used to purchase the Security, Units may
represent more or less of that Security and more or less of other Securities in
the Portfolio of the Trust. In addition, the brokerage fees incurred in
purchasing Securities with such deposited cash will be borne by the Trust. Any
Unit Holder who purchased Units prior to the purchase of Securities with such
deposited cash would experience dilution as a result of any such brokerage fees.
Any cash deposited with instruction to purchase Securities not used to purchase
Securities and any interest not used to pay Trust expenses will be distributed
to Unit Holders on the earlier of the first Distribution Date or 90 days after
the Date of Deposit. Additional Units may be continuously offered for sale to
the public by means of this Prospectus. Subsequent to the 90 day period
following the Date of Deposit any deposit of additional Securities and cash must
exactly replicate the Portfolio immediately prior to such deposit. The Sponsor
may acquire large volumes of additional Securities for deposit into the Trust
over a short period of time. Such acquisitions may tend to raise the market
prices of these Securities. The Sponsor cannot currently predict the actual
market impact of the Sponsor's purchases of additional Securities, because the
actual volume of Securities to be purchased and the supply and price of such
Securities is not known. As additional Units are issued by the Trust as a result
of the deposit of additional Securities by the Sponsor, the aggregate value of
the Securities in the Trust will be increased and the fractional undivided
interest in the Trust represented by each Unit will be decreased.
The Sponsor may deposit additional Securities and may continue to sell
Units of the Trust even though one or more of the Securities is no longer rated
'buy' by the REIT research department of the Sponsor on the date of deposit of
the additional Securities or sale of the Units.
Notwithstanding the availability of the above-mentioned irrevocable
letter(s) of credit, it is expected that the Sponsor will pay for the Securities
as the contracts for their purchase become due. A substantial portion of such
contracts have not become due by the date of this Prospectus. To the extent
Units are sold prior to the settlement of such contracts, the Sponsor will
receive the purchase price of such Units prior to the time at which it pays for
Securities pursuant to such contracts and have the use of such funds during this
period.
- ------------------
* Reference is hereby made to said Indenture and any statements contained herein
are qualified in their entirety by the provisions of said Indenture.
B-1
<PAGE>
Units will be sold to investors at the Public Offering Price next computed
after receipt of the investor's order to purchase Units, if Units are available
to fill orders on the day that that price is set. If Units are not available or
are insufficient to fill the order, the investor's order will be rejected by the
Sponsor. The number of Units available may be insufficient to meet demand
because of the Sponsor's inability to or decision not to purchase and deposit
underlying Securities in amounts sufficient to maintain the proportionate
numbers of shares of each Security as required to create additional Units. The
Sponsor may, if unable to accept orders on any given day, offer to execute the
order as soon as sufficient Units can be created. An investor who agrees to this
will be deemed to place a new order for that number of Units each day until that
order is accepted. The investor's order will then be executed, when Units are
available, at the Public Offering Price next calculated after such continuing
order is accepted. The investor will, of course, be able to revoke his purchase
offer at any time prior to acceptance by the Sponsor. The Sponsor will execute
orders to purchase in the order it determines that they are received, i.e.,
orders received first will be filled first, except that indications of interest
prior to the effectiveness of the registration of the offering of Trust Units
which become orders upon effectiveness will be accepted according to the order
in which the indications of interest were received.
The holders of Units (the 'Unit Holders' or 'Unit Holder,' as the context
requires) will have the right to have their Units redeemed at a price based on
the net asset value (the 'Redemption Price') if they cannot be sold in the
secondary market which the Sponsor, although not obligated to do so, proposes to
maintain. The Sponsor, Prudential Securities Incorporated, is a wholly-owned,
indirect subsidiary of The Prudential Insurance Company of America. The Trust
has a mandatory termination date set forth under Part A--'Summary of Essential
Information,' but may be terminated prior thereto upon the occurrence of certain
events (see 'Amendment and Termination of the Indenture--Termination'),
including a reduction in the value of the Trust below the value set forth under
Part A--'Summary of Essential Information.'
On the Date of Deposit, a Unit represented the fractional undivided
interest in the Securities set forth under Part A--'Summary of Essential
Information' in the ratio of 1 Unit for each approximately $1.00 net asset value
of Securities initially deposited in such Trust. If any Units are redeemed by
the Trustee, the number of Securities in the Trust will be reduced by an amount
allocable to redeemed Units and the fractional undivided interest in such Trust
represented by each unredeemed Unit will be increased. Units will remain
outstanding until redeemed upon tender to the Trustee by any Unit Holder (which
may include the Sponsor) or until the termination of the Trust pursuant to the
Indenture.
PORTFOLIO SUMMARY
The Portfolio is comprised of REITs that the Sponsor believes offer an
opportunity for total return over the life of the Trust. Investors should
carefully review the Portfolio and the objectives of the Trust and consider
their ability to assume the risks involved before investing in the Trust.
REITs are structured as either corporations or business trusts. REITs will
not be subject to corporate income taxes provided the REIT satisfies the
applicable requirements of the Internal Revenue Code. The major tests for the
tax-qualified status are that the REIT (i) be managed by one or more trustees or
directors, (ii) issue shares of transferable interest to its owners, (iii) have
at least 100 shareholders, (iv) during the last half of each taxable year have
no more than 50% of the shares held by five or fewer individuals, (v) invest
substantially all of its capital in real estate assets and derive substantially
all of its gross income from real estate related assets and (vi) distribute at
least 95% of its taxable income (without regard to any net capital gains) to its
shareholders each year.
The Securities deposited in the Trust on the initial Date of Deposit
consist entirely of interests in REITs. There are two principal types of REITs:
Equity REITs which typically hold primarily real estate and benefit from the
underlying net rental income generated from the properties, and Mortgage REITs,
which typically hold primarily mortgages which are secured by real estate assets
and benefit predominantly from the difference between the interest income on the
mortgage loans and the interest expense on the capital used to finance the
loans. A third type, Hybrid REITs, combines the investment strategies of the
Equity REITs and the Mortgage REITs.
In addition to being classified according to investment type, REITS may be
categorized further in terms of their specialization by property type (e.g.,
retail, multifamily, industrial, office, etc.,) or geographic focus (nationwide,
regional or metropolitan area). Additional stratification is then possible
within certain product types (e.g., factory outlets, community centers, and
regional malls are all categories within the retail sector).
The Securities in the portfolio of the Trust were selected by the Sponsor
based upon the availability of REIT shares to the Sponsor and its ability to
purchase such shares and based upon REIT Research recommendations. On the
initial Date of Deposit the REITs deposited were rated 'buy' by the Sponsor.
Among the factors considered in assigning the 'buy' rating were the income and
capital appreciation potential of the stocks. The REIT Research analysts
consider various factors including the geographic focus of the real estate in a
REIT, the property type, the risks of investment in each property type, the
management of the REIT, the capitalization and financial strength of the REIT,
the income potential, the anticipated level of depreciation and obsolescence of
the property type, the general economy in a particular geographic location and
the impact of potential environmental issues.
RISK FACTORS--Investment in the Trust should be made with an understanding
that the value of the underlying Securities, and therefore the value of the
Units, will fluctuate, depending on the full range of economic and market
influences which may affect the market value of the Securities, including the
profitability and financial condition of issuers, conditions in the real estate
industry,
B-2
<PAGE>
market conditions and values of common stocks generally, and other factors. The
Trust is not appropriate for investors requiring conservation of capital.
The Sponsor's buying and selling of the Securities, especially during the
initial offering of Units of the Trust or to satisfy redemptions of Units may
impact upon the value of the underlying Securities and the Units. The
publication of the list of the Securities selected for the Trust may also cause
increased buying activity in certain of the REITs comprising the Portfolio.
After such announcement, investment advisory and brokerage clients of the
Sponsor and its affiliates may purchase individual Securities appearing on the
list during the course of the initial offering period. Such buying activity in
the stock of these REITs prior to the purchase of the Securities by the Trust
may cause the Trust to purchase the REITs at a higher price than those buyers
who purchase REIT shares prior to the purchases by the Trust and may also
increase the amount of the profit realized by the Sponsor on the purchase of the
Securities from their issuers. In addition, the issuances of the additional
Securities by the REITs in the transactions underwritten by the Sponsor may, in
certain circumstances, have an adverse impact on the value of the Securities and
the Units.
Since the Trust will consist entirely of shares issued by REITs, a domestic
corporation or business trust which invests primarily in income producing real
estate or real estate related loans or mortgages, an investment in the Trust
will be subject to risks similar to those associated with the direct ownership
of real estate (in addition to securities markets risks) because of its policy
of concentration in the securities of companies in the real estate industry.
These include declines in the value of real estate, illiquidity of real property
investments, risks related to general and local economic conditions, dependency
on management skill, heavy cash flow dependency, possible lack of availability
of mortgage funds, excessive levels of debt or overleveraged financial
structure, overbuilding, extended vacancies of properties, increase competition,
increases in property taxes and operating expenses, changes in zoning laws,
losses due to costs resulting from the clean-up of environmental problems,
liability to third parties for damages resulting from environmental problems,
casualty or condemnation losses, economic or regulatory impediments to raising
rents, changes in neighborhood values and the appeal of properties to tenants
and changes in interest rates. In addition to these risks, Equity REITs may be
more likely to be affected by changes in the value of the underlying property
owned by the trusts. Further, REITs are dependent upon the management skills of
the issuers and generally may not be diversified. REITs are also subject to
heavy cash flow dependency, defaults by borrowers and self-liquidation. In
addition, REITs could possibly fail to qualify for tax free pass-through of
income under the Code, or to maintain their exemptions from registration under
the Investment Company Act of 1940 (the '1940 Act'). The above factors may also
adversely affect a borrower's or a lessee's ability to meet its obligations to
the REIT. In the event of a default by a borrower or lessee, the REIT may
experience delays in enforcing its rights as a mortgagee or lessor and may incur
substantial costs associated with protecting its investments.
Real estate investment trusts are financial vehicles that have as their
objective the pooling of capital from a number of investors in order to
participate directly in real estate ownership or financing. REITs may be
self-managed or managed by separate advisory companies for a fee which is
ordinarily based on a percentage of the assets of the REIT in addition to
reimbursement of operating expenses. Since the Trust will consist entirely of
shares issued by REITs, an investment in the Trust will be subject to varying
degrees of risk generally incident to the ownership of real property (in
addition to securities market risks) and will involve more risk than a portfolio
of common stocks that is not concentrated in a particular industry or group of
industries.* The underlying value of the Trust's Securities and the Trust's
ability to make distributions to its Unit Holders may be adversely affected by
adverse changes in national economic conditions, adverse changes in local market
conditions due to changes in general or local economic conditions and
neighborhood characteristics, increased competition from other properties,
obsolescence of property, changes in the availability, cost and terms of
mortgage funds, the impact of present or future environmental legislation and
compliance with environmental laws, the ongoing need for capital improvements,
particularly in older properties, changes in real estate tax rates and other
operating expenses, regulatory and economic impediments to raising rents,
adverse changes in governmental rules and fiscal policies, dependency on
management skills, civil unrest, acts of God, including earthquakes and other
natural disasters (which may result in uninsured losses), acts of war, adverse
changes in zoning laws, and other factors which are beyond the control of the
issuers of the REITs in the Trust. The value of the REITs may at times be
particularly sensitive to devaluation in the event of rising interest rates.
A significant amount of the assets of a REIT may be invested in investments
in specific geographic areas or in specific property types, i.e., hotels,
shopping malls, residential complexes, and office buildings; the impact of
economic conditions on REITs can also be expected to vary with geographic
location and property type. Variations in rental income and space availability
and vacancy rates in terms of supply and demand are additional factors affecting
real estate generally and REITs in particular. In addition, investors should be
aware that REITs may not be diversified and are subject to the risks of
financing projects. REITs are also subject to defaults by borrowers, the
market's perception of the REIT industry generally, and the possibility of
failing to qualify for tax-free pass-through of income under the Internal
Revenue Code, and to maintain exemption from the Investment Company Act of 1940.
A default by a borrower or lessee may cause the REIT to experience delays in
enforcing its rights as mortgagee or lessor and to incur significant costs
related to protecting its investments.
Uninsured Losses. The issuer of REITs generally maintains comprehensive
insurance on presently owned and subsequently acquired real property assets,
including liability, fire and extended coverage. However, there are certain
types of losses, generally
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* A Trust is considered to be 'concentrated' in a particular industry when the
Securities in that industry constitute 25% or more of the total asset value
of the portfolio.
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<PAGE>
of a catastrophic nature, such as earthquakes and floods, that may be
uninsurable or not economically insurable, as to which the REITs properties are
at risk in their particular locales. The management of REIT issuers use their
discretion in determining amounts, coverage limits and deductibility provisions
of insurance, with a view to requiring appropriate insurance on their
investments at a reasonable costs and on suitable terms. This may result in
insurance coverage that in the event of a substantial loss would not be
sufficient to pay the full current market value or current replacement cost of
the lost investment. Inflation, changes in building codes and ordinances,
environmental considerations, and other factors also might make it infeasible to
use insurance proceeds to replace a facility after it has been damaged or
destroyed. Under such circumstances, the insurance proceeds received by REITs
might not be adequate to restore its economic position with respect to such
property.
Environmental Liability. Under various federal, state, and local
environmental laws, ordinances and regulations, a current or previous owner or
operator of real property may be liable for the costs of removal or remediation
of hazardous or toxic substances on, under or in such property. Such laws often
impose liability whether or not the owner or operator caused or knew of the
presence of such hazardous or toxic substances and whether or not the storage of
such substances was in violation of a tenant's lease. In addition, the presence
of hazardous or toxic substances, or the failure to remediate such property
properly, may adversely affect the owner's ability to borrow using such real
property as collateral. No assurance can be given that one or more of the REITs
in the Trust may not be presently liable or potentially liable for any such
costs in connection with real estate assets they presently own or subsequently
acquire while such REITs shares are held in the Trust.
Americans with Disabilities Act. Under the Americans with Disabilities Act
of 1990 (the 'ADA'), all public accommodations are required to meet certain
federal requirements related to physical access and use by disabled persons. In
the event that any of the REITs in the Trust invest in or hold mortgages in real
estate properties subject to the ADA, a determination that any such properties
are not in compliance with the ADA could result in imposition of fines or an
award of damages to private litigants. If any of the REITs in the Trust were
required to make modifications to comply with the ADA, the REIT's ability to
make expected distributions to the Trust could be adversely affected, thus
adversely affecting the ability of the Trust to make distributions to Unit
Holders.
Property Taxes. Real estate generally is subject to real property taxes.
The real property taxes on the properties underlying the REITs in the Trust may
increase or decrease as property tax rates change and as the properties are
assessed or reassessed by taxing authorities. An increase in real estate taxes
may adversely affect the value of the Securities.
Since the Trust consists of common stocks, an investment in Units of the
Trust should be made with an understanding of the risks inherent in any
investment in common stock. The risks of investing in common stock include risks
associated with the rights to receive payments from the issuer which are
generally inferior to creditors of, or holders of debt obligations or preferred
stocks issued by, the issuer. Holders of common stock have a right to receive
dividends only when and if, and in the amounts, declared by the issuer's board
of directors and to participate in amounts available for distribution by the
issuer only after all other claims on the issuer have been paid or provided for.
An investment in Units of the Trust should be made with an understanding
that the value of the underlying Securities, and therefore the value of Units,
will fluctuate, depending upon the full range of economic and market influences
which may affect the market value of such Securities. Certain risks are inherent
in an investment in equity securities, including the risk that the financial
condition of one or more of the issuers of the Securities may worsen or the
general condition of the common stock market may weaken. In each case, the value
of the Portfolio Securities and hence the value of Units may decline. Common
stocks are susceptible to general stock market movements and to volatile and
unpredictable increases and decreases in value as market confidence in and
perceptions of the issuers change from time to time. Such perceptions are based
upon varying reactions to such factors as expectations regarding domestic
economic, monetary and fiscal policies, inflation and interest rates, economic
expansion or contraction, and political, economic or banking crises. The Sponsor
cannot predict the direction or scope of any of these factors. Additionally,
equity markets have been at historically high levels and no assurance can be
given that these levels will continue. Therefore there can be no assurance that
the Trust will be effective in achieving its objective over its life or that
future portfolios selected using the same methodology as the Trust during
consecutive periods will meet their objectives. The Trust is not designed to be
a complete equity investment program.
By contrast, holders of preferred stocks have the right to receive
dividends at a fixed rate when and as declared by the issuer's board of
directors, normally on a cumulative basis. Dividends on cumulative preferred
stock must be paid before any dividends are paid on common stock and any
cumulative preferred stock dividend which has been omitted is added to future
dividends payable to the holders of such cumulative preferred stock. Preferred
stocks are also entitled to rights on liquidation which are senior to those of
common stock. For these reasons, preferred stocks generally entail less risk
than common stock. Moreover, common stock does not represent an obligation of
the issuer and therefore does not offer any assurance of income or provide the
degree of protection of capital of debt securities. The issuance of debt
securities or even preferred stock by an issuer will create prior claims for
payment of principal, interest and dividends which could adversely affect the
ability and inclination of the issuer to declare or pay dividends on its common
stock or the rights of holders of common stock with respect to assets of the
issuer upon liquidation or bankruptcy. Further, unlike debt securities which
typically have a stated principal amount payable at maturity (which value will
be subject to market fluctuations prior thereto), common stock has neither a
fixed principal amount nor a maturity and has a value which is subject to market
fluctuations for as long as the common stock remains outstanding. The value of
the common stocks in the Trust thus may be expected to fluctuate over the life
of the Trust to values higher or lower than those prevailing on the Date of
Deposit.
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<PAGE>
The value of the Units will fluctuate depending on all the factors that
have an impact on the economy and the equity markets. These factors similarly
impact on the ability of an issuer to distribute dividends. There is no
assurance that any dividends will be declared or paid in the future on the
Securities. The Trust is not a 'managed' registered investment company and
Securities will not be sold by the Trustee as a result of ordinary market
fluctuations. The Sponsor may direct the disposition by the Trustee of
Securities only upon the occurrence of certain events. (See
'Sponsor--Responsibility.')
The Trust consists of the Securities (and/or contracts to purchase such
Securities together with an irrevocable letter or letters of credit for the
purchase of such contracts and/or cash (or a letter of credit in lieu of cash)
with instructions to purchase such Securities) listed under Part A--'Schedule of
Portfolio Securities' herein, and the Securities deposited upon the creation of
additional Units as set forth above and substitute Securities acquired by the
Trust as long as such Securities may continue to be held from time to time in
the Trust together with uninvested cash realized from the disposition of
Securities. Neither the Sponsor nor the Trustee will be liable in any way for
any default, failure or defect in any Securities.
All of the Securities are publicly traded on a national stock exchange. The
contracts to purchase Securities deposited initially in the Trust are expected
to settle in the ordinary manner for such Securities. Settlement of the
contracts for Securities is thus expected to take place prior to the settlement
of Units purchased on the date of this prospectus.
TAX STATUS OF THE TRUST
In the opinion of Cahill Gordon & Reindel, special counsel for the Sponsor,
under existing Federal income tax law:
The Trust is not an association taxable as a corporation for Federal
income tax purposes, and income received by the Trust will be treated as
income of the Unit Holders in the manner set forth below.
Each Unit Holder will be considered the owner of a pro rata portion of
each asset in the Trust under the grantor trust rules of Sections 671-678
of the Internal Revenue Code of 1986, as amended (the 'Code'). A Unit
Holder should determine the tax cost for each asset represented by the
Holder's Units by allocating the total cost for such Units among the assets
in the Trust represented by the Units in proportion to the relative fair
market values thereof on the date the Unit Holder purchases such Units. The
proceeds received by a Unit Holder upon termination of the Trust or
redemption of Units will reflect the actual amounts paid to them, net of
the charge for organizational expenses. The relevant tax reporting forms
sent to Unit Holders will reflect the actual amount paid to them net of the
charge for organizational expenses. Accordingly, Unit Holders should not
increase the total cost for their Units by the amount of the charge for
organizational expenses.
A Unit Holder will be considered to have received all of the dividends
paid on the Holder's pro rata portion of each Security when such dividends
are received by the Trust including the portion of such dividend used to
pay operating expenses. An individual Unit Holder who itemizes deductions
will be entitled to an itemized deduction for the Holder's pro rata share
of fees and expenses paid by the Trust as though such fees and expenses
were paid directly by the Unit Holder, but only to the extent that this
amount together with the Unit Holder's miscellaneous deductions exceeds 2%
of the Holder's adjusted gross income. A corporate Unit Holder will not be
subject to this 2% floor.
Under the position taken by the Internal Revenue Service in Revenue
Ruling 90-7, a distribution by the Trustee to a Unit Holder (or to the
Distribution Agent as the Holder's agent) of such Holder's pro rata share
of the Securities in kind upon redemption or termination of the Trust will
not be a taxable event to the Unit Holder. Such Unit Holder's basis for
Securities so distributed will be equal to the Holder's basis for the same
Securities (previously represented by the Holder's Units) prior to such
distribution and the holding period for such Securities will be the shorter
of the period during which the Unit Holder held the Units and the period
for which the Securities were held in the Trust. A Unit Holder will have a
taxable gain or loss, which will be a capital gain or loss except in the
case of a dealer, when the Unit Holder disposes of such Securities in a
taxable transfer.
Under the income tax laws of the State and City of New York, the Trust
is not an association taxable as a corporation and the income of the Trust
will be treated as the income of the Unit Holders.
If the proceeds received by the Distribution Agent upon the sale or
redemption of an underlying Security exceed a Unit Holder's adjusted tax cost
allocable to the Security disposed of, that Unit Holder will realize a taxable
gain to the extent of such excess. Conversely, if the proceeds received by the
Distribution Agent upon the sale or redemption of an underlying Security are
less than a Unit Holder's adjusted tax cost allocable to the Security disposed
of, that Unit Holder will realize a loss for tax purposes to the extent of such
difference except that upon reinvestment of proceeds in a New Series the
Internal Revenue Service may seek to disallow such loss to the extent that the
underlying securities in each trust are substantially identical and the purchase
of units of the New Series takes place less than thirty-one days after the sale
of the underlying Security. Under the Code, capital gain of individuals, estates
and trusts from Securities held for more than 1 year, but not more than 18
months, is subject to a maximum nominal tax rate of 28% and for Securities held
for more than 18 months, the maximum nominal tax rate is 20%. Such capital gain
may, however, result in a disallowance of itemized deductions and/or affect a
personal exemption phase-out. These maximum lower capital gain rates of either
28% or 20% will be unavailable with respect to those Securities which have been
held for less than a year and a day at the time of sale (including sales
occasioned by mandatory or early termination of the Trust or exchange or
rollover of Units). Unit Holders should note that the termination option that
they elect will affect their ability to achieve an eighteen month holding
period.
The Trust will own shares in REITs, entities that have elected and
qualified for the special tax treatment applicable to 'real estate investment
trusts' under the Code. A number of complex requirements must be satisfied in
order for REIT status to be maintained. If the REIT distributes 95% or more of
its real estate investment trust taxable income, subject to certain adjustments,
to
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<PAGE>
its shareholders, it will not be subject to Federal income tax on the amounts so
distributed. Moreover, if the REIT distributes at least 85% of its ordinary
income and 95% of its capital gain net income it will not be subject to the 4%
excise tax on certain undistributed income of REITs.
Distributions made to shareholders out of a REIT's current or accumulated
earnings and profits generally will be taxed to shareholders as ordinary
dividend income, except that, subject to the discussion below regarding the new
tax rates contained in the Taxpayer Relief Act of 1997 (the '1997 Act'),
distributions of net capital gain designated by the REIT as capital gain
dividends will be taxed to shareholders as long-term capital gain (to the extent
they do not exceed the REIT's actual net capital gain for the taxable year)
without regard to the period for which the REIT shares have been held. To the
extent that distributions exceed current or accumulated earnings and profits,
they will constitute a return of capital, rather than dividend or capital gain
income, and will reduce the tax basis of the shareholder's shares with respect
to which the distribution is made. To the extent that distributions exceed such
basis, they will be taxed in the same manner as gain from the sale of those
shares.
A REIT is permitted under the Code to elect to retain and pay income tax on
its net capital gain for any taxable year. Under the 1997 Act, however, for
taxable years beginning after December 31, 1997, if the REIT so elects, a
shareholder must include in income such shareholder's proportionate share of the
REIT's undistributed net capital gain for the taxable year, and will be deemed
to have paid such shareholder's proportionate share of the income tax paid by
the REIT with respect to such undistributed net capital gain. Such tax would be
credited against the shareholder's tax liability and subject to normal refund
procedures. In addition, each shareholder's basis in such shareholder's shares
would be increased by the amount of undistributed net capital gain (less the tax
paid by the REIT) included in the shareholder's income.
The 1997 Act also alters the taxation of capital gain income for
individuals (and for certain trusts and estates). Gain from the sale or exchange
of certain investments held for more than 18 months will be taxed at a maximum
rate of 20%. Gain from the sale or exchange of such investments held for 18
months or less, but for more than one year, will be taxed at a maximum rate of
28%. The 1997 Act also provides a maximum rate of 25% for 'unrecaptured section
1250 gain' recognized on the sale or exchange of certain real estate assets. The
1997 Act allows the Internal Revenue Service to prescribe regulations on how the
1997 Act's new capital gain rates will apply to sales of capital assets by
'pass-thru entities,' which include REITs. To date regulations have not yet been
promulgated. However, in Notice 97-64, issued on November 10, 1997, the Internal
Revenue Service indicated that such regulations will provide that whether
capital gain dividends are taxed at the 28%, 25% or 20% rate will be determined
by reference to the REIT's holding period in the property that generates the
gain and the amount of unrecaptured straight-line depreciation attributable to
such property.
Each Unit Holder should consult his, her or its tax advisor with respect to
the application of the above general information to his, her or its own personal
situation.
RETIREMENT PLANS
Units of the Trust may be suited for purchase by Individual Retirement
Accounts and pension plans or profit sharing and other qualified retirement
plans. Investors considering participation in any such plan should review
specific tax laws and pending legislation relating thereto and should consult
their attorneys or tax advisors with respect to the establishment and
maintenance of any such plan.
PUBLIC OFFERING OF UNITS
PUBLIC OFFERING PRICE
The Public Offering Price of the Units during the initial public offering
period (expected to be only on the date of the Prospectus) is computed by
determining the value (as set forth below) of the Securities in the Trust,
adding cash and other Trust assets less Trust liabilities and dividing such sum
by the number of Units outstanding. The Units outstanding may be split (or split
in reverse). A proportionate share of money in the Income and Principal Accounts
and amounts receivable in respect of stocks trading ex-dividend other than money
required to redeem previously tendered Units or money required to be distributed
to Unit Holders on a Distribution Date will be added to the Public Offering
Price. (See 'Rights of Unit Holders--Distributions.')
After the initial offering period the Public Offering Price of the Units
will be computed by adding a sales charge to the net asset value of a Unit. Such
sales charge will equal 4% of the Public Offering Price (4.167% of the net
amount invested).
The Public Offering Price on the date of this Prospectus or on any
subsequent date will vary from the Public Offering Price as of the Date of
Deposit set forth in the 'Summary of Essential Information' in accordance with
fluctuations in the value of the Securities in the Trust.
The aggregate value of the Securities is determined in good faith by the
Trustee on each 'Business Day' as defined in the Indenture in the following
manner: the evaluation is generally based on the closing trade prices on the New
York Stock Exchange as of the Evaluation Time (unless the Trustee deems these
prices inappropriate as a basis for valuation) or, if there is no closing trade
price at that time on that exchange, at the mean between the closing bid and
asked prices. If the Securities are not so listed or, if so listed and the
principal market therefor is other than on the exchange, the evaluation shall
generally be based on the current bid price on the over-the-counter market
(unless the Trustee deems these prices inappropriate as a basis for evaluation).
If current bid or closing prices are unavailable, the evaluation is determined
(a) on the basis of current bid prices for comparable securities, (b) by
appraising the value of the Securities on the bid side of the market or by such
other appraisal deemed appropriate by the Trustee, (c) on the basis of the last
trade price of the Security or (d) by any combination of the above, each as of
the Evaluation Time.
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<PAGE>
PUBLIC DISTRIBUTION
During the initial public offering period (i) for Units issued on the Date
of Deposit and (ii) for additional Units issued after such date in respect of
additional deposits of Securities, Units will be distributed to the public by
the Sponsor and through dealers at the Public Offering Price, calculated on each
business day. The initial public offering period may be extended by the Sponsor
so long as additional deposits are being made or Units remain unsold. Upon
termination of the initial offering period, in each case, unsold Units or Units
acquired by the Sponsor in the secondary market referred to below may be offered
to the public by this Prospectus at the then current Public Offering Price
calculated daily. Units will be sold without a sales charge during the initial
public offering period, however after such period Units will be sold with a
sales charge of 4.00%.
The Sponsor intends to qualify Units in states selected by the Sponsor for
sale by the Sponsor and through dealers who are members of the National
Association of Securities Dealers, Inc. The Sponsor reserves the right to
reject, in whole or in part, any order for the purchase of Units.
In addition, sales of Units may be made pursuant to distribution
arrangements with certain banks which are acting as agents for their customers.
These banks are making Units of the Trust available to their customers on an
agency basis. A portion of the sales charge paid by these customers is retained
by or remitted to the banks in amounts comparable to the dealer concession. The
Glass-Steagall Act prohibits banks from underwriting certain securities,
including Units of the Trust; however, this Act does permit certain agency
transactions, and banking regulators have not indicated that these particular
agency transactions are impermissible under this Act. In certain states, any
bank making Units available must be registered as a broker-dealer in that state.
SECONDARY MARKET
While not obligated to do so, it is the Sponsor's present intention to
maintain a secondary market for Units of the Trust and to offer continuously to
repurchase Units from Unit Holders at the Sponsor's Repurchase Price which
price, subject to change at any time, will be computed as stated under 'Rights
of Unit Holders--Redemption--Computation of Redemption Price.' The Sponsor, of
course, does not in any way guarantee the enforceability, marketability or price
of any Securities in the Portfolio or of the Units. There is no sales charge
incurred when a Unit Holder sells Units back to the Sponsor. Any Units
repurchased by the Sponsor may be reoffered to the public by the Sponsor at the
then current Public Offering Price. The Sponsor will become the owner of Units
repurchased as of the trade date. Any profit or loss resulting from the resale
of such Units will belong to the Sponsor.
If the supply of Units exceeds demand (or for any other business reason),
the Sponsor may, at any time, occasionally, from time to time, or permanently,
discontinue the repurchase of Units. In such event Unit Holders wishing to
dispose of their Units may redeem their Units through the Trustee. (See 'Rights
of Unit Holders--Redemption--Computation of Redemption Price per Unit.') If the
Sponsor repurchases Units in the secondary market at the 'Redemption Price,' it
may reoffer these units in the secondary market at the 'Public Offering Price,'
or the Sponsor may tender Units so purchased to the Trustee for redemption. In
no event will the price offered by the Sponsor for the repurchase of Units be
less than the current Redemption Price for those Units. (See 'Rights of Unit
Holders--Redemption.') The Sponsor may, of course, redeem any Units that it has
purchased in the secondary market to the extent that it determines that it is
undesirable to continue to hold such Units in its inventory. Factors which the
Sponsor will consider in making such a determination will include the number of
units of all series of unit trusts which it has in its inventory, the
saleability of such units and its estimate of the time required to sell such
units and general market conditions.
PROFIT OF SPONSOR
The Sponsor receives a sales charge of 4% of the Public Offering Price for
sales in the secondary market. The Sponsor may have also realized a profit (or a
loss) on the deposit of the Securities in the Trust on the initial Date of
Deposit representing the difference between the cost of the Securities to the
Sponsor and the cost of the Securities to the Trust. (For the amount of such
difference on the initial deposit, see Part A--'Summary of Essential
Information.') The Sponsor may also realize profits or sustain losses in respect
of Securities which were acquired from the Sponsor or from underwriting
syndicates of which it was a member. (See Part A--'Portfolio Summary as of the
Date of Deposit.') The Sponsor, in connection with its acting as underwriter
with regard to the Securities deposited in the Trust subsequent to the initial
Date of Deposit, may realize a profit of up to 5% of the market value of the
Securities. An underwriter or underwriting syndicate purchases common stock from
the issuer on a negotiated or competitive bid basis as principal with the motive
of marketing such common stock to investors at a profit. In addition, the
Sponsor may realize profits (or sustain losses) due to daily fluctuations in the
value of the Securities in the Trust and thus in the Public Offering Price of
Units received by the Sponsor. Cash, if any, received by the Sponsor from the
Unit Holders prior to the settlement date for purchase of Securities may be used
in the Sponsor's business to the extent permitted by applicable regulations and
may be of benefit to the Sponsor.
The Sponsor may also realize profits (or sustain losses) while maintaining
a secondary market in the Units, in the amount of any difference between the
prices at which the Sponsor buys Units and the prices at which the Sponsor
resells such Units or the prices at which the Sponsor redeems such Units, as the
case may be.
EMPLOYEE DISCOUNT
The Sponsor intends, at the discretion of the Sponsor, to permit employees
of Prudential Securities Incorporated and its subsidiaries and affiliates to
purchase Units of the Trust in the secondary market at a price equal to the net
asset value of the Units.
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<PAGE>
EXCHANGE OPTION
Unit Holders may elect to exchange any or all of their Units of this Series
of the National Equity Trust for units of one or more of any other series in the
Prudential Securities Incorporated family of unit investment trusts or for any
units of any additional trusts that may from time to time be made available for
such exchange by the Sponsor (collectively referred to as the 'Exchange
Trusts'). Such units may be acquired at prices based on reduced sales charges
per unit. Units of certain series received in exchange for Units of other unit
investment trusts will be subject to a deferred sales charge only. The purpose
of such reduced sales charge is to permit the Sponsor to pass on to the Unit
Holder who wishes to exchange Units the cost savings resulting from such
exchange of Units. The cost savings result from reductions in the time and
expense related to advice, financial planning and operational expense required
for the Exchange Option.
Exchange Trusts may have different investment objectives; a Unit Holder
should read the prospectus for the applicable Exchange Trust carefully to
determine its investment objective prior to exercise of this option.
This option will be available provided the Sponsor maintains a secondary
market in both the Units of this Series and units of the applicable Exchange
Trust and provided that units of the applicable Exchange Trust are available for
sale and are lawfully qualified for sale in the jurisdiction in which the Unit
Holder is a resident. While it is the Sponsor's present intention to maintain a
secondary market for the units of all such trusts, there is no obligation on its
part to do so. Therefore, there is no assurance that a market for units will in
fact exist on any given date on which a Unit Holder wishes to sell or exchange
his Units; thus there is no assurance that the Exchange Option will be available
to any Unit Holder. The Sponsor reserves the right to modify, suspend or
terminate this option. Sixty days notice will be given prior to the date of the
termination of or a material amendment to the Exchange Option except that no
notice need be given in certain circumstances approved by the Securities and
Exchange Commission. In the event the Exchange Option is not available to a Unit
Holder at the time he wishes to exercise it, the Unit Holder will be immediately
notified and no action will be taken with respect to his Units without further
instruction from the Unit Holder.
To exercise the Exchange Option, a Unit Holder should notify the Sponsor of
his desire to exchange his Units for one or more units of the Exchange Trusts.
Upon the exchange of Units of the Trust, any Deferred Sales Charge balance will
be deducted from the exchange proceeds. If units of the applicable outstanding
series of the Exchange Trust are at that time available for sale, the Unit
Holder may select the series or group of series for which he desires his Units
to be exchanged. The Unit Holder will be provided with a current prospectus or
prospectuses relating to each series in which he indicates interest.
Units of the Exchange Trust trading in the secondary market maintained by
the Sponsor, if so maintained, will be sold to the Unit Holder at a price equal
to the aggregate bid side evaluation per unit of the securities in that
portfolio and the applicable sales charge of $15 per unit of the Exchange Trust
for a trust with a 1 unit minimum purchase. The reduced sales charge for units
of any Exchange Trust acquired during the initial offering period for such units
will result in a price for such units equal to the offering side evaluation per
unit of the securities in the Exchange Trust's portfolio plus accrued interest,
if any, plus a reduced sales charge of $25 per Exchange Trust $1,000 unit. Units
of the Trust will not be available for exchange during the initial offering
period. Exchange transactions will be effected only in whole units; thus, any
proceeds not used to acquire whole units will be paid to the exchanging Unit
Holder unless the Unit Holder adds the amount of cash necessary to purchase one
additional whole Exchange Trust unit.
Owners of units of any registered unit investment trust, other than
Prudential Securities Incorporated sponsored trusts, which was initially offered
at a minimum applicable sales charge of 3.0% of the public offering price
exclusive of any applicable sales charge discounts, may elect to apply the cash
proceeds of sale or redemption of those units directly to acquire units of any
Exchange Trust trading in the secondary market at the reduced sales charge of
$20 per Unit, subject to the terms and conditions applicable to the Exchange
Option. Units of any Exchange Trust acquired during the initial offering period
for such units may be sold at a price equal to the ask side evaluation per unit
of the securities in the Portfolio plus a reduced sales charge of $25 per unit.
To exercise this option, the owner should notify his retail broker. He will be
given a prospectus of each series in which he indicates interest, units of which
are available. The Sponsor reserves the right to modify, suspend or terminate
the option at any time without further notice, including the right to increase
the reduced sales charge applicable to this option (but not in excess of $5 more
per unit than the corresponding fee then charged for a unit of an Exchange Trust
which is being exchanged).
For example, assume that a Unit Holder, who has three units of a Trust with
a 4.25% sales charge and a current price of $1,100 per unit, sells his units and
exchanges the proceeds for units of a series of an Exchange Trust with a current
price of $950 per unit and an ordinary sales charge of 4.25%. The proceeds from
the Unit Holder's units will aggregate $3,300. Since only whole units of an
Exchange Trust may be purchased under the Exchange Option, the Holder would be
able to acquire four units in the Exchange Trust for a total cost of $3,860
($3,800 for units and $60 for the $15 per unit sales charge) by adding an extra
$560 in cash. Were the Unit Holder to acquire the same number of units at the
same time in the regular secondary market maintained by the Sponsor, the price
would be $3,968.68 [$3,800 for the units and $168.68 for the 4.25% sales charge
(4.439% of the net amount invested)].
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FEDERAL INCOME TAX CONSEQUENCES
An exchange of Units pursuant to the Exchange Option will constitute a
'taxable event' under the Code, i.e., a Unit Holder will recognize gain or loss
at the time of the exchange except that upon an exchange of Units of this Series
of the National Equity Trust for units of any other series of the Exchange
Trusts which are grantor trusts for United States federal income tax purposes
the Internal Revenue Service may seek to disallow any loss incurred upon such
exchange to the extent that the underlying securities in each trust are
substantially identical and the purchase of units of an Exchange Trust takes
place less than thirty-one days after the sale of the Units. Unit Holders are
advised to consult their own tax advisors as to the tax consequences of
exchanging Units in their particular case.
REINVESTMENT PROGRAM
Unit Holders may elect to have the distributions with respect to their
Units automatically reinvested in additional Units of the Trust.
A Unit Holder holding Units in 'street name' may participate in the Trust's
reinvestment program (the 'Program') by contacting his broker, dealer or
financial institution. The Unit Holder's completed notice of election to
participate in the Program must be received by the Trustee at least ten days
prior to the Record Date applicable to any distribution in order for the Program
to be in effect as to such distribution. Elections may be modified or revoked on
similar notice.
Such distributions, to the extent reinvested in the Trust, will be used by
the Trustee at the direction of the Sponsor in one or both of the following
manners. (i) The distributions may be used by the Trustee to purchase Units of
this Series of the Trust held in the Sponsor's inventory. The purchase price
payable by the Trustee for each of such Units will be equal to the applicable
Trust evaluation per Unit on (or as soon as possible after) the close of
business on the Distribution Date. The Units so purchased by the Trustee will be
issued or credited to the accounts of Unit Holders participating in the Program.
(ii) If there are no Units in the Sponsor's inventory, the Sponsor may purchase
additional Securities for deposit into the Trust (as described in Part B, 'The
Trust'). The additional Securities with any necessary cash will be deposited by
the Sponsor with the Trustee in exchange for new Units. The distributions may
then be used by the Trustee to purchase the new Units from the Sponsor. The
price for such new Units will be the applicable Trust evaluation per Unit on (or
as soon as possible after) the close of business on the Distribution Date. (See
'Public Offering of Units--Public Offering Price.') The Units so purchased by
the Trustee will be issued or credited to the accounts of Unit Holders
participating in the Program. The Sponsor may terminate the Program if it does
not have sufficient Units in its inventory or if it is no longer deemed
practical to create additional Units. The cost of administering the reinvestment
program will be borne by the Trust and thus will be borne indirectly by all Unit
Holders.
The Sponsor reserves the right to modify, suspend or terminate the
reinvestment privilege at any time.
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TERMINATION OPTIONS
The Trust will terminate on the Termination Date set forth in the Summary
of Essential Information, approximately two years after the Date of Deposit
(unless terminated earlier; see part B--'Amendment and Termination of the
Indenture--Termination'). A Unit Holder's Units will be redeemed in kind on the
Termination Date by distribution of the Unit Holder's pro rata share of the
Securities and any cash in the Portfolio of the Trust on such date to the
Distribution Agent who will act as agent for such Unit Holder.
SECURITIES DISPOSITION OPTIONS--A Unit Holder who so elects by notifying
the Trustee prior to the Termination Date of the Trust will have the Securities
received on the Termination Date disposed of on behalf of such Unit Holder by
the Distribution Agent in accordance with one or more of the following options
as elected by such Unit Holder:
1. to have such underlying Securities distributed in kind no later
than the business day next following the Termination Date. Unit Holders
subsequently selling such distributed Securities will incur brokerage costs
when disposing of such Securities;
2. to receive the Unit Holder's pro rata share of the cash received
by the Distribution Agent (less expenses) upon the sale by the Distribution
Agent of the underlying Securities attributable to Unit Holders electing
this option over a period not to exceed 10 business days immediately
following the Termination Date. Amounts received by the Distribution Agent
over such 10 business day period representing the proceeds of the
underlying Securities sold will be held by The Chase Manhattan Bank in
accounts which are non-interest bearing to Unit Holders and which are
available for use by The Chase Manhattan Bank pursuant to normal banking
procedures and will be distributed to Unit Holders within 5 business days
after the settlement of the trade for the last Security to be sold; and
3. to invest the proceeds from the sale of the underlying Securities
attributable to Unit Holders electing this option within 30 days of the
Termination Date, as received by the Distribution Agent upon the sale of
such underlying Securities over a period not to exceed 10 business days
immediately following the Termination Date, in units of a subsequent series
of National Equity Trust as designated by the Sponsor (the 'New Series') if
such New Series is offered at such time. The Units of a New Series will be
purchased by the Unit Holder upon the settlement of the trade for the last
Security to be sold. It is expected that the terms of the New Series will
be substantially the same as the terms of the Trust described in this
Prospectus, and that similar options in a subsequent series of the Trust
will occur in each New Series of the Trust. The availability of this option
does not constitute a solicitation of an offer to purchase Units of a New
Series or any other security. A Unit Holder's election to participate in
this option will be treated as an indication of interest only. At any time
prior to the purchase by the Unit Holder of units of a New Series, such
Unit Holder may change his investment strategy and receive, in cash, the
proceeds of the sale of the Securities.
Unit Holders who do not elect as set forth above will have their Units
redeemed on the Termination Date and be deemed to have elected to receive the
cash proceeds from the sale of such Unit Holder's pro rata share of the
underlying Securities (option 2).
Under each option a Unit Holder will receive the Redemption Price per Unit
(net asset value) determined as of the Evaluation Time on the Termination Date.
The Distribution Agent will sell the underlying Securities in the case of the
second and third option over a period not to exceed 10 business days immediately
following the Termination Date. The proceeds of any such sales will be reduced
by any applicable brokerage commissions. The sale arrangement is one in which
The Chase Manhattan Bank will be selling the Securities as agent for the Unit
Holder and is separate from the Trust which terminates on the Termination Date.
The proceeds of such sales may be more or less than the value of the Securities
on the Termination Date. The Sponsor, on behalf of the Distribution Agent if the
Sponsor effects such sales, or the Distribution Agent if the Sponsor does not,
will, unless prevented by unusual and unforeseen circumstances, such as, among
other reasons, a suspension in trading of a Security, the close of a stock
exchange, outbreak of hostilities and collapse of the economy, sell on each
business day during the 10 business day period at least a number of shares of
each Security which then remains in the Portfolio equal to the number of such
shares in the Portfolio at the beginning of such day multiplied by a fraction
the numerator of which is one and the denominator of which is the number of days
remaining in the 10 business day sales period. The proceeds of sale will not be
distributed by the Distribution Agent until the settlement of the trade upon the
sale of the last Security during the 10 business day period.
Depending on the amount of proceeds to be invested in Units of the New
Series and the number of other orders for Units in the New Series, the Sponsor
may purchase a large amount of securities for the New Series in a short period
of time. The Sponsor's buying of securities may tend to raise the market prices
of these Securities. The actual market impact of the Sponsor's purchases,
however, is currently unpredictable because the actual amount of securities to
be purchased and the supply and price of those securities is unknown. A similar
problem may occur in connection with the sale of Securities during the 10
business day period following the Termination Date; depending on the number of
sales required, the prices of, and demand for Securities, such sales may tend to
depress the market prices and thus reduce the proceeds to be credited to Unit
Holders. The Sponsor believes that the sale of underlying Securities over a 10
business day period as described above is in the best interest of Unit Holders
and may mitigate the negative market price consequences stemming from the
trading of large amounts of Securities. The Sponsor, in implementing such sales
of Securities on behalf of the Distribution Agent, will seek to maximize the
sales proceeds and will act in the best interest of the Unit Holder. The
proceeds of the sale of the Securities will be in an amount equal to amounts
realized upon
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the sale of the Securities over the 10 business day period. There can be no
assurance, however, that any adverse price consequences of heavy trading will be
mitigated.
It should also be noted that Unit Holders will realize taxable capital
gains or losses on the liquidation of the Securities representing their Units,
but, due to the procedures for investing in the New Series, no cash would be
distributed at that time to pay any taxes.
The Sponsor may for any reason, in its sole discretion, decide not to
sponsor any subsequent series of the Trust, without penalty or incurring
liability to any Unit Holder. The Sponsor may offer a subsequent trust but not
within a short time period subsequent to the termination of the Trust and,
consequently, such trust may not accommodate a 'rollover' from the Trust. If the
Sponsor so decides, the Sponsor will notify the Trustee of that decision, and
the Trustee will notify the Unit Holders before the Termination Date. All Unit
Holders will then elect either option 1 or option 2. There can be no assurance
that any rollover or exchange from one series to another will achieve the
desired tax result. The Sponsor is not a tax advisor and each Unit holder should
consult his, her or its tax advisor with regard to any gains or losses on the
stock in the Trust and the tax treatment thereof.
By electing to reinvest in the new series, the Unit Holder indicates his
interest in having his terminating distribution from the Trust invested only in
the new series created next following termination of the Trust; the Sponsor
expects, however, that a similar reinvestment program will be offered with
respect to all subsequent series of the Trust, thus giving Unit Holders a
periodic opportunity to elect to 'rollover' their terminating distributions into
a new series. The availability of the reinvestment privilege does not constitute
a solicitation of offers to purchase units of a new series or any other
security. A Unit Holder's election to participate in the reinvestment program
will be treated as an indication of interest only. The Sponsor intends to
coordinate the date of deposit of a future series so that the terminating trust
will terminate within a few weeks of the creation of a New Trust.
EXPENSES AND CHARGES
EXPENSES
All or a portion of the Organizational expenses and charges incurred in
connection with the establishment of the Trust including the cost of the
preparation, printing and execution of the Indenture, Registration Statement and
other documents relating to the Trust, Federal and State registration fees and
costs, the initial fees and expenses of the Trustee, legal and auditing expenses
and other out-of-pocket expenses, will be paid by the Trust. Historically, the
costs of establishing unit investment trusts have been borne by a trust's
sponsor. Advertising and selling expenses will be paid by the Sponsor and the
underwriters, if any, at no cost to the Trust.
FEES
The Sponsor's fee (the 'Supervisory Fee'), earned for portfolio supervisory
services as set forth under 'Sponsor--Responsibility,' is based upon the
largest number of Units outstanding during the life of the Trust. The
Supervision Fee is as set forth in Part A, 'Summary of Essential Information'
and may exceed the actual costs of providing portfolio supervisory services for
this Trust, but at no time will the total amount the Sponsor receives for
portfolio supervisory services rendered to all series of the National Equity
Trust in any calendar year exceed the aggregate cost to it of supplying such
services in such year. The Supervisory Fee will be paid to the Sponsor by the
Trust. (See 'Sponsor--Responsibility.') For its service as Trustee under the
Indenture, the Trustee receives an annual fee in the amount set forth under Part
A--'Summary of Essential Information.' The Trustee's fee and the Trust expenses
accrue monthly and are payable quarterly on or before each Distribution Date
from the Income Account, to the extent funds are available and thereafter from
the Principal Account. Such Trustee's fee may be increased without approval of
the Unit Holders in proportion to increases under the classification 'All
Services Less Rent' in the Consumer Price Index published by the United States
Department of Labor but such fee will not be increased in excess of increases in
the Trustee's costs. The Trustee also receives benefits to the extent that it
holds funds on deposit in various non-interest bearing accounts created under
the Indenture.
OTHER CHARGES
The following additional charges are or may be incurred by the Trust as
more fully described in the Indenture: (a) fees of the Trustee for extraordinary
services, (b) expenses of the Trustee (including legal and auditing expenses)
and of counsel designated by the Sponsor, (c) various governmental charges, (d)
expenses and costs of any action taken by the Trustee to protect the Trust and
the rights and interests of the Unit Holders, (e) indemnification of the Trustee
for any losses, liabilities or expenses incurred by it in the administration of
the Trust without negligence, bad faith, willful misfeasance or willful
misconduct on its part or reckless disregard of its obligations and duties, (f)
indemnification of the Sponsor for any losses, liabilities and expenses incurred
in acting as Sponsor or Depositor under the Indenture without gross negligence,
bad faith, willful misfeasance or willful misconduct or reckless disregard of
its obligations and duties, (g) expenditures incurred in contacting Unit Holders
upon termination of the Trust
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<PAGE>
and (h) to the extent then lawful, expenses (including legal, auditing and
printing expenses) of maintaining registration or qualification of the Units
and/or the Trust under Federal or State securities laws so long as the Sponsor
is maintaining a market for the Units.
The fees and expenses set forth herein are payable out of the Trust and
when paid by or owing to the Trustee are secured by a lien on the property of
the Trust. If the balance in the Income and Principal Accounts are insufficient
to provide for amounts payable by the Trust, the Trustee has the power to sell
Securities to pay such amounts. To the extent Securities are sold, the size of
such Trust will be reduced and the proportions of the various Securities in the
Trust may change. Such sales might be required at a time such as to result in
lower prices than might otherwise be realized. Moreover, due to the minimum
proceeds of sale of a Security the proceeds of such sales may exceed the amount
necessary for the payment of such fees and expenses.
RIGHTS OF UNIT HOLDERS
OWNERSHIP OF UNITS
Unit Holders are required to hold their Units in uncertificated form. The
Trustee will credit a Unit Holder's account with the number of Units held by the
Unit Holder. Units are transferable only on the records of the Trustee upon
presentation of evidence satisfactory to the Trustee for each transfer and any
sums payable for taxes or other governmental charges imposed upon these
transactions and compliance with the formalities necessary to redeem Units.
CERTAIN LIMITATIONS
The death or incapacity of any Unit Holder will not operate to terminate
the Trust nor entitle the legal representatives or heirs of such Unit Holder to
claim an accounting or to take any other action or proceeding in any court for a
partition or winding up of the Trust.
No Unit Holder shall have the right to vote except with respect to removal
of the Trustee or amendment and termination of the Trust as prescribed in the
Indenture (see 'Administration of the Trust--Amendment' and 'Administration of
the Trust--Termination'). Unit Holders shall have no right to control the
operation or administration of the Trust in any manner.
DISTRIBUTIONS
Cash amounts received by the Trust will be distributed as set forth below
on a pro rata basis to Unit Holders of record as of the preceding Record Date.
All distributions will be net of applicable expenses and funds required for the
redemption of Units. (See 'Summary of Essential Information,' 'Expenses and
Charges' and 'Rights of Unit Holders--Redemption.') Because the expenses of the
Trust may exceed the dividend income received by the Trust there can be no
assurance that there will be any amounts available for distribution to Unit
Holders. See 'Expenses and Charges--Other Charges.'
The Trustee will credit to the Income Account all cash dividends received
by and payable to the Trust. Other cash receipts will be credited to the
Principal Account. The pro rata share of the Income Account and the pro rata
share of cash in the Principal Account represented by each Unit will be computed
by the Trustee as of the Record Date. (See 'Summary of Essential Information' in
Part A.) Proceeds received from the disposition of any of the Securities not
used to redeem Units or pay Trust expenses will be distributed on the fifth
business day following the receipt of such proceeds to Unit Holders of record on
the business day following the receipt of such proceeds by the Trustee. The
distribution to Unit Holders as of each Record Date will be made on the
following Distribution Date or shortly thereafter (approximately 15 days after
the Record Date) and shall consist of an amount equal to such Unit Holders' pro
rata share of the income credited to the Income Account after deducting
estimated expenses (the 'Income Distribution'). Persons who purchase Units
between a Record Date and a Distribution Date will receive their first
distribution on the second Distribution Date following their purchase of Units.
The Trustee may make additional distributions to Unit Holders on such dates as
the Sponsor shall direct. No distribution need be made from the Principal
Account if the balance therein is less than an amount sufficient to distribute
$1.00 per 1,000 Units. Funds which are available for future distributions,
payments of expenses and redemptions are in accounts which are non-interest
bearing to Unit Holders and are available for use by The Chase Manhattan Bank,
pursuant to normal banking procedures.
As of each Distribution Date the Trustee will deduct from the Income
Account and, to the extent funds are not sufficient therein, from the Principal
Account, amounts necessary to pay the expenses of the Trust. (See 'Expenses and
Charges.') The Trustee may also withdraw from said accounts such amounts, if
any, as it deems necessary to establish a reserve for any governmental charges
payable out of the Trust. Amounts so withdrawn shall not be considered a part of
a Trust's assets for purposes of determining the amount of distributions until
such time as the Trustee shall return all or any part of such amounts to the
appropriate account. In addition, the Trustee may withdraw from the Income
Account and the Principal Account such amounts as may be necessary to cover
redemption of Units by the Trustee. (See 'Rights of Unit Holders--Redemption.')
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<PAGE>
The Trustee will follow a policy that it will place securities acquisition
or disposition transactions with a broker or dealer only if it expects to obtain
the most favorable prices and executions of orders. Transactions in securities
held in the Trust are generally made in brokerage transactions (as distinguished
from principal transactions) and the Sponsor may act as broker therein and
receive commissions thereon if the Trustee expects thereby to obtain the most
favorable prices and execution. The furnishing of statistical and research
information to the Trustee by any of the securities dealers through which
transactions are executed will not be considered in placing securities
transactions.
REPORTS AND RECORDS
With each distribution, the Trustee will furnish to the Unit Holders a
statement of the amount of dividends and other receipts, if any, distributed,
expressed in each case as a dollar amount per Unit.
Within a reasonable time after the end of each calendar year, the Trustee
will furnish to each person who was a Unit Holder of record at any time during
the calendar year a statement setting forth: (1) as to the Income Account:
dividends and other cash amounts received, deductions for payment of applicable
taxes and for fees and expenses of the Trust, redemptions of Units, and the
balance remaining after such distributions and deductions, expressed both as a
total dollar amount and as a dollar amount representing the pro rata share of
each Unit outstanding on the last business day of such calendar year; (2) as to
the Principal Account: the dates of disposition and identity of any Securities
and the net proceeds received therefrom, deductions for payments of applicable
taxes, for fees and expenses of the Trust, for redemptions of Units, and the
balance remaining after such distributions and deductions, expressed both as a
total dollar amount and as a dollar amount representing the pro rata share of
each Unit outstanding on the last business day of such calendar year; (3) a list
of the Securities held and the number of Units outstanding on the last business
day of such calendar year; (4) the Redemption Price per Unit based upon the last
computation thereof made during such calendar year; and (5) amounts actually
distributed during such calendar year from the Income Account and from the
Principal Account, separately stated, expressed both as total dollar amounts and
as dollar amounts representing the pro rata share of each Unit outstanding on
the last business day of such calendar year. The accounts of the Trust may be
audited not less frequently than annually by independent certified public
accountants designated by the Sponsor, and the report of such accountants will
be furnished by the Trustee to Unit Holders upon request.
The Trustee shall keep available for inspection by Unit Holders at all
reasonable times during usual business hours, books of record and account of its
transactions as Trustee, including records of the names and addresses of Unit
Holders, a current list of Securities in the Portfolio and a copy of the
Indenture.
REDEMPTION
Tender of Units
Units may be tendered to the Trustee for redemption at its unit investment
trust office at 4 New York Plaza, New York, New York 10004, upon delivery of a
request for redemption and payment of any relevant tax. No redemption fee will
be charged by the Sponsor or the Trustee. Units redeemed by the Trustee will be
cancelled.
Unit Holders must have their signature guaranteed by an officer of a
national bank or trust company or by a member firm of either the New York,
Midwest or Pacific Stock Exchanges. In certain instances the Trustee may require
additional documents such as, but not limited to, trust instruments,
certificates of death, appointments as executor or administrator or certificates
of corporate authority.
Within seven calendar days following such tender, or if the seventh
calendar day is not a business day, on the first business day prior thereto, a
Unit Holder (including the Sponsor) will be entitled to receive in kind an
amount for each Unit tendered equal to the Redemption Price per Unit computed as
of the Evaluation Time set forth in the 'Summary of Essential Information' in
Part A on the date of tender (see 'Redemption--Computation of Redemption Price
per Unit'). The 'date of tender' is deemed to be the date on which Units are
received by the Trustee, except that as regards Units received after the
Evaluation Time, the date of tender is the next day on which the New York Stock
Exchange is open from trading, and such Units will be deemed to have been
tendered to the Trustee on such day for redemption at the Redemption Price
computed on that day.
The Trustee will redeem Units in kind. A Unit Holder will be able (except
during a period described below), not later than the seventh calendar day
following such tender (or if the seventh calendar day is not a business day on
the first business day prior thereto), to receive in kind an amount per Unit
equal to the Redemption Price per Unit as determined as of the day of tender. In
kind distributions (the 'In Kind Distribution') will take the form of whole
shares of Securities. Cash will be distributed in lieu of fractional shares and
will be distributed in cash. The cash and the whole shares will aggregate an
amount equal to the Redemption Price per Unit.
Distributions in kind on redemption of Units shall be held by The Chase
Manhattan Bank, as the Distribution Agent, whom each Unit Holder shall be deemed
to have designated as his agent upon purchase of a Unit, for the account, and
for disposition in accordance with the instructions of, the tendering Unit
Holder as follows:
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(a) The Distribution Agent shall sell the In Kind Distribution as of
the close of business on the date of tender or as soon thereafter as
possible and remit to the Unit Holder not later than seven calendar days
thereafter the net proceeds of sale, after deducting brokerage commissions
and transfer taxes, if any, on the sale unless the tendering Unit Holder
requests a distribution of the Securities as set forth in paragraph (b)
below. The Distribution Agent may sell the Securities through the Sponsor,
and the Sponsor may charge brokerage commissions on those sales. The
Trustee may offer Units tendered to it for redemption and cash liquidation
to the Sponsor on behalf of any Unit Holder, to obtain this more favorable
price for the Unit Holder.
(b) Subsequent to 90 days after the initial offering period, if the
tendering Unit Holder requests distribution in kind and tenders Units with
a value in excess of $250,000, the Trustee shall sell any portion of the In
Kind Distribution represented by fractional interests in shares in
accordance with the foregoing and distribute the net cash proceeds plus any
other distributable cash to the tendering Unit Holder together with
certificates representing whole shares of each of the Securities comprising
the In Kind Distribution. (In a case in which the Unit Holder requests a
distribution in kind, the Trustee may, in lieu of distributing Securities
in kind to the Unit Holder, offer the Sponsor the opportunity to acquire
the tendered Units in exchange for the number of shares of each Security
and cash which the Unit Holder is otherwise entitled to receive from the
Trust. The federal income tax consequences to the Unit Holder would be
identical in either case.)
Any amounts paid on redemption representing income received will be
withdrawn from the Income Account to the extent funds are available. In
addition, in implementing the redemption procedures described above, the Trustee
and the Distribution Agent shall make any adjustments necessary to reflect
differences between the Redemption Price of the Units and the value of the In
Kind Distribution in whole shares as of the date of tender. To the extent that
Units are redeemed, the size of the Trust will be reduced.
The right of redemption may be suspended and payment of the Redemption
Price per Unit postponed for more than seven calendar days following a tender of
Units for redemption for any period during which the New York Stock Exchange is
closed, other than for weekend and holiday closing, or trading on that Exchange
is restricted or during which (as determined by the Securities and Exchange
Commission) an emergency exists as a result of which disposal or evaluation of
the Securities is not reasonably practicable, or for such other periods as the
Securities and Exchange Commission may by order permit. Neither the Trustee nor
the Sponsor is liable to any person or in any way for any loss or damage that
may result from any such suspension or postponement.
PURCHASE BY THE SPONSOR OF UNITS TENDERED FOR REDEMPTION
The Indenture requires that the Trustee notify the Sponsor of any tender of
Units for redemption. So long as the Sponsor is maintaining a secondary market
for Units, the Sponsor, prior to the close of business on the day of tender, may
purchase any Units tendered to the Trustee for redemption by making payment
therefor to the Unit Holder in an amount not less than the Redemption Price and
not later than the day on which the Units would otherwise have been redeemed by
the Trustee, i.e., the Unit Holder will receive the Redemption Price from the
Sponsor within 7 days of the date of tender (see 'Public Offering of
Units--Secondary Market'). Units held by the Sponsor may be tendered to the
Trustee for redemption as any other Units. The offering price of any Units
resold by the Sponsor will be the Public Offering Price determined in the manner
provided in this Prospectus (see 'Public Offering of Units--Public Offering
Price'). Any profit resulting from the resale of such Units will belong to the
Sponsor, which likewise will bear any loss resulting from a reduction in the
offering or redemption price subsequent to its acquisition of such Units (see
'Public Offering of Units--Profit of Sponsor').
COMPUTATION OF REDEMPTION PRICE PER UNIT
The Redemption Price per Unit of the Trust is determined by the Trustee as
of the Evaluation Time on the date any such determination is made. The
Redemption Price per Unit is each Unit's pro rata share, determined by the
Trustee of: (1) the aggregate value of the Securities in the Trust, (2) cash on
hand in the Trust including dividends receivable on stocks trading ex-dividend
as of the date of computation and (3) any other assets of the Trust, less (a)
amounts representing taxes or governmental charges payable out of a Trust, (b)
the accrued but unpaid expenses of the Trust and (c) cash held for distribution
to Unit Holders of record as of a date prior to the evaluation.
The aggregate value of the Securities is determined in good faith by the
Trustee in the following manner: the evaluation is generally based on the
closing trade prices as of the Evaluation Time on the New York Stock Exchange
(unless the Trustee deems these prices inappropriate as a basis for valuation)
or, if there is no closing trade price on that exchange, at the mean between the
closing bid and asked prices. If the Securities are not so listed or, if so
listed and the principal market therefor is other than on that exchange, the
evaluation shall generally be based on the current bid price on the
over-the-counter market (unless the Trustee deems these prices inappropriate as
a basis for evaluation). If current bid or closing prices are unavailable, the
evaluation is generally determined (a) on the basis of current bid prices for
comparable securities, (b) by appraising the value of the Securities on the bid
side of the market or by such other appraisal deemed appropriate by the Trustee,
(c) on the basis of the last trade price of the Security or (d) by any
combination of the above, each as of the Evaluation Time.
B-14
<PAGE>
SPONSOR
Prudential Securities Incorporated ('Prudential Securities') is a Delaware
corporation and is engaged in the underwriting, securities and commodities
brokerage business and is a member of the New York Stock Exchange, Inc., other
major securities exchanges and commodity exchanges and the National Association
of Securities Dealers, Inc. Prudential Securities, a wholly-owned subsidiary of
Prudential Securities Group Inc. and an indirect wholly-owned subsidiary of The
Prudential Insurance Company of America, is engaged in the investment advisory
business. Prudential Securities has acted as principal underwriter and managing
underwriter of other investment companies. In addition to participating as a
member of various selling groups or as an agent of other investment companies,
Prudential Securities executes orders on behalf of investment companies for the
purchase and sale of securities of such companies and sells securities to such
companies in its capacity as a broker or dealer in securities.
Prudential Securities is distributor for series of Prudential Government
Securities Trust, The Blackrock Government Income Trust, Command Government
Fund, Command Money Fund, Command Tax-Free Fund, Global Utility Fund, Inc.,
Nicholas-Applegate Fund, Inc., Prudential Allocation Fund, Prudential California
Municipal Fund, Prudential Distressed Securities Fund, Inc., Prudential
Diversified Bond Fund, Inc., Prudential Dryden Fund, Prudential Emerging Growth
Fund, Inc., Prudential Equity Fund, Inc., Prudential Equity Income Fund,
Prudential Europe Growth Fund, Inc., Prudential Global Genesis Fund, Inc., The
Global Government Plus Fund, Inc., Prudential Global Limited Maturity Fund,
Inc., Prudential Global Natural Resources Fund, Inc., The Global Total Return
Fund, Inc., Prudential Government Income Fund, Prudential High Yield Fund, Inc.,
Prudential Institutional Liquidity Portfolio, Inc., Prudential Intermediate
Global Income Fund, Inc., Prudential Jennison Series Fund, Inc., Prudential
MoneyMart Assets, Inc., Prudential Mortgage Income Fund, Inc., Prudential
MultiSector Fund, Inc., Prudential Municipal Bond Fund, Prudential Municipal
Series Fund, Prudential National Municipals Fund, Inc., Prudential Pacific
Growth Fund, Inc., Prudential Small Companies Fund, Inc., Prudential Special
Money Market Fund, Inc., Prudential Structured Maturity Fund, Inc., Prudential
Tax-Free Money Fund, Inc., Prudential Utility Fund, Inc., and Prudential World
Fund, Inc.
On October 21, 1993, Prudential Securities entered into an omnibus
settlement with the Securities and Exchange Commission (the 'SEC'), state
securities regulators (with the exception of the Texas Securities Commissioner
who joined the settlement on January 18, 1994) and the National Association of
Securities Dealers, Inc. (the 'NASD') to resolve allegations that from 1980
through 1990 Prudential Securities sold certain limited partnership interests in
violation of securities laws to persons for whom such securities were not
suitable and misrepresented the safety, potential returns and liquidity of these
investments. Without admitting or denying the allegations asserted against it,
Prudential Securities consented to the entry of an SEC Administrative Order
which stated that Prudential Securities conduct violated the federal securities
laws, directed Prudential Securities to cease and desist from violating the
federal securities laws, pay civil penalties, and adopt certain remedial
measures to address the violations.
Pursuant to the terms of the SEC settlement, Prudential Securities agreed
to the imposition of $10,000,000 civil penalty, established a settlement fund in
the amount of $300,000,000 and procedures to resolve legitimate claims for
compensatory damages by purchasers of the partnership interests. Prudential
Securities has agreed to provide additional funds, if necessary, for the purpose
of the settlement fund. Prudential Securities settlement with the state
securities regulators included an agreement to pay a penalty of $500,000 per
jurisdiction. Prudential Securities consented to a censure and to the payment of
a $5,000,000 fine in settling the NASD action.
LIMITATIONS ON LIABILITY
The Sponsor is liable for the performance of its obligations arising from
its responsibilities under the Indenture, but will be under no liability to Unit
Holders for taking any action or refraining from taking any action in good faith
or for errors in judgment or be liable or responsible in any way for any
default, failure or defect in any Security or for depreciation or loss incurred
by reason of the sale of any Securities, except in cases of willful misfeasance,
bad faith, gross negligence or reckless disregard of its obligations and duties
(see 'Sponsor--Responsibility').
RESPONSIBILITY
The Trust is not a managed registered investment company. Securities will
not be sold by the Trustee to take advantage of ordinary market fluctuations.
Although the Sponsor and Trustee do not presently intend to dispose of
Securities, the Indenture permits the Sponsor to direct the Trustee to dispose
of any Security upon the happening of certain events, including, without
limitation, default under certain documents or other occurrences, including
legal actions which might adversely affect future declaration and payment of
dividends, institution of certain legal proceedings, and a decline in market
price to such an extent, or such other adverse market or credit factor, as in
the opinion of the Sponsor would make retention of a Security detrimental to the
Trust and to the interests of the Unit Holders or if required to pay the
Deferred Sales Charge. The Sponsor may instruct the Trustee to tender a Security
for cash or sell
B-15
<PAGE>
the Security on the open market when in its opinion it is in the best interest
of the Unit Holders to do so in the event of a public tender offer or merger or
acquisition announcement.
As part of the portfolio supervisory services, the Sponsor and/or an
affiliate thereof intend to continuously monitor developments affecting the
Securities in the Trust in order to determine whether the Trustee should be
directed to dispose of any such Securities.
It is the responsibility of the Sponsor to instruct the Trustee to reject
any offer made by an issuer of any of the Securities to issue new securities in
exchange and substitution for any Security pursuant to a recapitalization or
reorganization, except that the Sponsor may instruct the Trustee to accept such
an offer or to take any other action with respect thereto as the Sponsor may
deem proper if the issuer failed to declare or pay or the Sponsor anticipates
such issuer will fail to pay or declare anticipated dividends with respect
thereto. If the Trust receives the securities of another issuer as the result of
a merger or reorganization of, or a spin-off, or split-up by the issuer of a
Security included in the original Portfolio, the Trust may under certain
circumstances hold those securities as if they were one of the Securities
initially deposited and adjust the proportionate relationship accordingly for
all future subsequent deposits.
Any securities so received in exchange or substitution will be held by the
Trustee subject to the terms and conditions of the Indenture to the same extent
as Securities originally deposited thereunder. Within five days after the
deposit of securities in exchange or substitution for any of the underlying
Securities, the Trustee is required to give notice thereof to each Unit Holder,
identifying the Securities eliminated and the Securities substituted therefor.
Except as otherwise set forth in the Prospectus, the acquisition by the Trust of
any securities other than the Securities initially deposited is prohibited.
The proceeds resulting from the disposition of any Security in the Trust
will be distributed as set forth under 'Rights of Unit Holders--Distributions'
to the extent such proceeds are not utilized for the purpose of redeeming Units
or paying Trust expenses.
RESIGNATION
If at any time the Sponsor shall resign under the Indenture or shall fail
to perform or be incapable of performing its duties thereunder or shall become
bankrupt or its affairs are taken over by public authorities, the Indenture
directs the Trustee to either (1) appoint a successor Sponsor or Sponsors at
rates of compensation deemed reasonable by the Trustee not exceeding amounts
prescribed by the Securities and Exchange Commission, (2) act as Sponsor itself
without terminating the Trust or (3) terminate the Trust. The Trustee will
promptly notify Unit Holders of any such action.
TRUSTEE
The Trustee is The Chase Manhattan Bank, a New York Bank with its principal
executive office located at 270 Park Avenue, New York, New York 10017 and its
unit investment trust office at 4 New York Plaza, New York, New York 10004. The
Trustee is subject to supervision by the Superintendent of Banks of the State of
New York, the Federal Deposit Insurance Corporation and the Board of Governors
of the Federal Reserve System. In connection with the storage and handling of
certain Securities deposited in the Trust, the Trustee may use the services of
The Depository Trust Company. These services may include safekeeping of the
Securities and coupon-clipping, computer book-entry transfer and institutional
delivery services. The Depository Trust Company is a limited purpose trust
company organized under the Banking Law of the State of New York, a member of
the Federal Reserve System and a clearing agency registered under the Securities
Exchange Act of 1934.
LIMITATIONS ON LIABILITY
The Trustee shall not be liable or responsible in any way for depreciation
or loss incurred by reason of the disposition of any moneys, Securities or in
respect of any evaluation or for any action taken in good faith reliance on
prima facie properly executed documents except in cases of willful misfeasance,
bad faith, negligence or reckless disregard of its obligations and duties. In
addition, the Indenture provides that the Trustee shall not be personally liable
for any taxes or other governmental charges imposed upon or in respect of the
Trust which the Trustee may be required to pay under current or future laws of
the United States or any other taxing authority having jurisdiction.
RESPONSIBILITY
The Trustee shall not be liable for any default, failure or defect in any
Security or for any depreciation or loss by reason of any such sale of
Securities or by reason of the failure of the Sponsor to give directions to the
Trustee.
Additionally, the Trustee may sell Securities designated by the Sponsor, or
if not so directed, in its own discretion, for the purpose of redeeming Units
tendered for redemption.
B-16
<PAGE>
Amounts received by the Trust upon the sale of any Security under the
conditions set forth above will be deposited in the Principal Account when
received and to the extent not used for the redemption of Units will be
distributable by the Trustee to Unit Holders of record on the Record Date next
prior to a Distribution Date.
For information relating to the responsibilities of the Trustee under the
Indenture, reference is also made to the material set forth under 'Rights of
Unit Holders' and 'Sponsor--Resignation.'
RESIGNATION
By executing an instrument in writing and filing the same with the Sponsor,
the Trustee and any successor may resign. In such an event the Sponsor is
obligated to appoint a successor trustee as soon as possible. If the Trustee
becomes incapable of acting or becomes bankrupt or its affairs are taken over by
public authorities, the Sponsor may remove the Trustee and appoint a successor
as provided in the Indenture. The Sponsor may also remove the Trustee if it
determines (i) that a material deterioration in the creditworthiness of the
Trustee or (ii) one or more negligent acts on the part of the Trustee having a
materially adverse effect has occurred such that replacement of the Trustee is
in the best interest of the Unit Holders. Such resignation or removal shall
become effective upon the acceptance of appointment by the successor trustee. If
upon resignation of a trustee no successor has been appointed and has accepted
the appointment within thirty days after notification, the retiring trustee may
apply to a court of competent jurisdiction for the appointment of a successor.
The resignation or removal of a trustee becomes effective only when the
successor trustee accepts its appointment as such or when a court of competent
jurisdiction appoints a successor trustee. A successor trustee has the same
rights and duties as the original trustee except to the extent, if any, that the
Indenture is modified as permitted by its terms.
AMENDMENT AND TERMINATION OF THE INDENTURE
AMENDMENT
The Indenture may be amended by the Trustee and the Sponsor without the
consent of Unit Holders (a) to cure any ambiguity or to correct or supplement
any provision thereof which may be defective or inconsistent, (b) to change any
provision thereof as may be required by the Securities and Exchange Commission
or any successor governmental agency, and (c) to make such other provisions as
shall not adversely affect the interest of the Unit Holders; provided that the
Indenture may also be amended by the Sponsor and the Trustee (or the performance
of any of the provisions of the Indenture may be waived) with the consent of
Unit Holders evidencing 51% of the Units at the time outstanding for the
purposes of adding any provisions to or changing in any manner or eliminating
any of the provisions of the Indenture or of modifying in any manner the rights
of Unit Holders. In no event shall the Indenture be amended so as to increase
the number of Units issuable thereunder except as the result of the additional
deposits of Securities, to permit the deposit of Securities after the Date of
Deposit except in accordance with the terms and conditions of the Indenture as
initially adopted, to permit any other acquisition of securities or other
property by the Trustee either in addition to or in substitution for any of the
Securities on hand in the Trust or to permit the Trustee to vary the investment
of the Unit Holders or to empower the Trustee to engage in business or to engage
in investment activities not specifically authorized in the Indenture as
originally adopted; or so as to adversely affect the characterization of the
Trust as a grantor trust for Federal income tax purposes. In the event of any
amendment requiring the consent of Unit Holders, the Trustee is obligated to
promptly notify all Unit Holders of the substance of such amendment.
TERMINATION
The Trust may be terminated at any time by the consent of the holders of
51% of the Units or by the Trustee upon the direction of the Sponsor when the
aggregate net value of all Trust assets is less than 40% of the Securities
deposited in the Trust on the Date of Deposit and subsequent thereto. However,
in no event may the Trust continue beyond the Termination Date set forth under
'Summary of Essential Information' in Part A. In the event of termination,
written notice thereof will be sent by the Trustee to all Unit Holders.
LEGAL OPINIONS
Certain legal matters in connection with the Units offered hereby have been
passed upon by Messrs. Cahill Gordon & Reindel, a partnership including a
professional corporation, 80 Pine Street, New York, New York 10005, as special
counsel for the Sponsor.
INDEPENDENT AUDITORS
The financial statements included in this Prospectus have been audited by
Deloitte & Touche LLP, certified public accountants, as stated in their report
appearing herein, and are included in reliance upon such report given upon the
authority of that firm as experts in accounting and auditing.
B-17
<PAGE>
- --------------------------------------------------------------------------------
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS WITH RESPECT TO THIS INVESTMENT COMPANY NOT CONTAINED IN THIS
PROSPECTUS; AND ANY INFORMATION OR REPRESENTATION NOT CONTAINED HEREIN MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, SECURITIES IN ANY STATE TO
ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH OFFER IN SUCH STATE.
- --------------------------------------------------------------------------------
NATIONAL EQUITY TRUST
EQUITY PORTFOLIO SERIES 1
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Risk Factors.......................................................... A-2
Summary of Essential Information...................................... A-5
Fee Table............................................................. A-6
Independent Auditors' Report.......................................... A-7
Statement of Financial Condition...................................... A-8
Schedule of Portfolio Securities...................................... A-9
The Trust............................................................. B-1
Portfolio Summary................................................... B-2
Tax Status of the Trust............................................... B-5
Retirement Plans...................................................... B-6
Public Offering of Units.............................................. B-6
Public Offering Price............................................... B-6
Public Distribution................................................. B-7
Secondary Market.................................................... B-7
Profit of Sponsor................................................... B-7
Exchange Option....................................................... B-8
Federal Income Tax Consequences..................................... B-9
Reinvestment Program.................................................. B-9
Termination Options................................................... B-10
Expenses and Charges.................................................. B-11
Expenses............................................................ B-11
Fees................................................................ B-11
Other Charges....................................................... B-11
Rights of Unit Holders................................................ B-12
Ownership of Units.................................................. B-12
Certain Limitations................................................. B-12
Distributions....................................................... B-12
Reports and Records................................................. B-13
Redemption.......................................................... B-13
Purchase by the Sponsor of Units Tendered for Redemption............ B-14
Computation of Redemption Price Per Unit............................ B-14
Sponsor............................................................... B-15
Limitations on Liability............................................ B-15
Responsibility...................................................... B-15
Resignation......................................................... B-16
Trustee............................................................... B-16
Limitations on Liability............................................ B-16
Responsibility...................................................... B-16
Resignation......................................................... B-17
Amendment and Termination of the Indenture............................ B-17
Amendment........................................................... B-17
Termination......................................................... B-17
Legal Opinions........................................................ B-17
Independent Auditors.................................................. B-17
</TABLE>
------------------------------------------------------
NATIONAL EQUITY TRUST
EQUITY PORTFOLIO SERIES 1
(REIT PORTFOLIO)
------------------------------------------------------
SPONSOR
PRUDENTIAL SECURITIES INCORPORATED
ONE SEAPORT PLAZA
199 WATER STREET
NEW YORK, NEW YORK 10292
TRUSTEE
THE CHASE MANHATTAN BANK
270 PARK AVENUE
NEW YORK, NEW YORK 10017
- --------------------------------------------------------------------------------
<PAGE>
PART II.
ADDITIONAL INFORMATION NOT REQUIRED IN PROSPECTUS
CONTENTS OF REGISTRATION STATEMENT
ITEM A-BONDING ARRANGEMENTS
The employees of Prudential Securities Incorporated are covered under
Broker's Blanket Policies, Standard Form No. 14 in the aggregate amount of
$62,500,000.
ITEM B-CONTENTS OF REGISTRATION STATEMENT
This Registration Statement on Form S-6 comprises the following papers and
documents:
The cross-reference sheet.
The Prospectus.
Signatures.
Written consents of the following persons:
Cahill Gordon & Reindel (included in Exhibit 5).
(2) Deloitte & Touche LLP
The following Exhibits:
<TABLE>
<S> <C> <C>
(4) Ex-3.(i) -- Certificate of Incorporation of Prudential Securities Incorporated dated March 29, 1993.
(7) Ex-3.(ii) -- Revised By-Laws of Prudential Securities Incorporated as amended through June 21, 1996.
(5) Ex-4.a -- Trust Indenture and Agreement, dated April 25, 1995.
(2) Ex-4.b -- Reference Trust Agreement dated December 17, 1997.
(2) Ex-5 -- Opinion of counsel as to the legality of the securities being registered.
(6) Ex-24 -- Powers of Attorney executed by a majority of the Board of Directors of Prudential Securities
Incorporated.
(2) Ex-27 -- Financial Data Schedule.
Ex-99.1 -- Information as to Officers and Directors of Prudential Securities Incorporated is incorporated by
reference to Schedules A and D of Form BD filed by Prudential Securities Incorporated pursuant to
Rules 15b1-1 and 15b3-1 under the Securities Exchange Act of 1934 (1934 Act File No. 8-16267).
(3) Ex-99.2 -- Affiliations of Sponsor with other investment companies.
(3) Ex-99.3 -- Broker's Blanket Policies, Standard Form No. 14 in the aggregate amount of $62,500,000.
(5) Ex-99.4 -- Distribution Agency Agreement among Prudential Securities Incorporated, as Depositor, United
States Trust Company of New York, as Trustee, and United States Trust Company of New York, as
Distribution Agent.
(8) Ex-99.5 -- Amendment to Distribution Agency Agreement among Prudential Securities Incorporated, as
Depositor, The Chase Manhattan Bank, as Trustee, and The Chase Manhattan Bank, as Distribution
Agent.
(9) Ex-99.6 -- Amendment to Distribution Agency Agreement dated September 23, 1996 among Prudential Securities
Incorporated, as Depositor, The Chase Manhattan Bank, as Trustee, and The Chase Manhattan Bank,
as Distribution Agent included as part of the Reference Trust Agreement filed as Exhibit 4.b to
National Equity Trust Top Ten Portfolio Series 1.
</TABLE>
(Footnotes on next page)
II-1
<PAGE>
(Footnotes from previous page)
- ------------------
(2) Filed herewith.
(3) Incorporated by reference to exhibit of same designation filed with the
Securities and Exchange Commission as an exhibit to the Registration
Statement under the Securities Act of 1933 of Prudential Unit Trusts,
Insured Tax-Exempt Series 1, Registration No. 2-89263.
(4) Incorporated by reference to exhibit of same designation filed with the
Securities and Exchange Commission as an exhibit to the Registration
Statement under the Securities Act of 1933 of Government Securities Equity
Trust Series 5, Registration No. 33-57992.
(5) Incorporated by reference to exhibit of same designation filed with the
Securities and Exchange Commission as an exhibit to the Registration
Statement under the Securities Act of 1933 of National Equity Trust, Low
Five Portfolio Series 1, Registration No. 33-55475.
(6) Incorporated by reference to exhibit of same designation filed with the
Securities and Exchange Commission as an exhibit to the Registration
Statement under the Securities Act of 1933 of National Municipal Trust,
Series 172, Registration No. 33-54681 and National Equity Trust, Top Ten
Portfolio Series 3, Registration No. 333-15919.
(7) Incorporated by reference to exhibit of same designation filed with the
Securities and Exchange Commission as an exhibit to the Registration
Statement under the Securities Act of 1933 of National Municipal Trust,
Series 186, Registration No. 33-54697.
(8) Incorporated by reference to exhibit of same designation filed with the
Securities and Exchange Commission as an exhibit to the Registration
Statement under the Securities Act of 1933 of National Equity Trust, Low
Five Portfolio Series 6, Registration No. 333-01889.
(9) Incorporated by reference to exhibit of same designation filed with the
Securities and Exchange Commission as an exhibit to the Registration
Statement under the Securities Act of 1933 of National Equity Trust Top Ten
Portfolio Series 1, Registration No. 333-02753.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant,
National Equity Trust, Equity Portfolio Series 1, has duly caused this Amendment
No. 2 to the Registration Statement to be signed on its behalf by the
undersigned thereunto duly authorized, in the City of New York, and State of New
York on the 17th day of December, 1997.
NATIONAL EQUITY TRUST
EQUITY PORTFOLIO SERIES 1
(Registrant)
By PRUDENTIAL SECURITIES INCORPORATED
(Depositor)
By: /s/ RICHARD R. HOFFMANN
------------------------------
Richard R. Hoffmann
First Vice President
By the following persons,* who
constitute a majority of the Board of
Directors of Prudential Securities
Incorporated
Alan D. Hogan
A. Laurence Norton, Jr.
Leland B. Paton
Martin Pfinsgraff
Vincent T. Pica II
Hardwick Simmons
Lee B. Spencer, Jr.
By: /s/ RICHARD R. HOFFMANN
-----------------------------
Richard R. Hoffmann
First Vice President--Unit
Investment Trust Department,
As Authorized Signatory for
Prudential Securities Incorporated
and Attorney-in-Fact for the
persons listed
above
- ------------------
* Pursuant to Powers of Attorney previously filed.
II-3
<PAGE>
CONSENT OF COUNSEL
The consent of Cahill Gordon & Reindel to the use of its name in the
Prospectus included in this Registration Statement is contained in its opinion
filed as Exhibit 5 to this Registration Statement.
II-4
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our report dated December 17, 1997, accompanying
the financial statement of the National Trust, Equity Portfolio Series 1
included herein and to the reference to our Firm as experts under the heading
'Independent Auditors' in the prospectus which is a part of this registration
statement.
DELOITTE & TOUCHE LLP
New York, New York
December 17, 1997
II-5
<PAGE>
Executed in 6 Parts
Counterpart No. ( )
NATIONAL EQUITY TRUST
EQUITY PORTFOLIO SERIES 1
REFERENCE TRUST AGREEMENT
This Reference Trust Agreement dated December 17, 1997 among
Prudential Securities Incorporated, as Depositor and The Chase Manhattan Bank,
as Trustee, sets forth certain provisions in full and incorporates other
provisions by reference to the document entitled "National Equity Trust Low Five
Portfolio Series, Trust Indenture and Agreement" (the "Basic Agreement") dated
April 25, 1995, as amended. Such provisions as are set forth in full herein and
such provisions as are incorporated by reference constitute a single instrument
(the "Indenture").
WITNESSETH THAT:
In consideration of the premises and of the mutual agreements herein
contained, the Depositor and the Trustee agree as follows:.
PART I.
STANDARD TERMS AND CONDITIONS OF TRUST
Subject to the provisions of Part II hereof, all the provisions
contained in the Basic Agreement are herein incorporated by reference in their
entirety and shall be deemed to be a part of this instrument as fully and to the
same extent as though said provisions had been set forth in full in this in-
strument except that the Basic Agreement is hereby amended in the following
manner:
A. Article I, entitled "Definitions", paragraph 22, shall be
amended as follows:
"Trustee shall mean The Chase Manhattan Bank or any
successor trustee appointed as hereinafter provided."
<PAGE>
-2-
B. Article II, entitled "Deposit of Securities; Acceptance of Trust",
shall be amended as follows:
The second sentence of Section 2.03 Issue of Units shall be
amended by deleting the words "on any day on which the Depositor
is the only Unit Holder."
C. Article III, entitled "Administration of Trust", shall be amended as
follows:
(i) The first part of the first sentence of Section 3.01
Initial Costs shall be amended to substitute the following
language before the phrase "provided, however":
"With respect to the Trust, the cost of the preparation and
printing of the Indenture, Registration Statement and other
documents relating to the Trust, Federal and State registration
fees and costs, the initial fees and expenses of the Trustee,
legal and auditing expenses and other out-of-pocket
organizational expenses, to the extent not borne by the
Depositor, shall be paid by the Trust;"
Section 3.01 shall be further amended to add the following
language:
"To the extent the funds in the Income and Principal Accounts of
the Trust shall be insufficient to pay the expenses borne by the
Trust specified in this Section 3.01, the Trustee shall advance
out of its own funds and cause to be deposited and credited to
the Income Account such amount as may be required to permit
payment of such expenses. The Trustee shall be reimbursed for
such advance on each Record Date from funds on hand in the Income
Account or, to the extent funds are not available in such
Account, from the Principal Account in the amount deemed to have
accrued as of such Record Date as provided in the following
sentence (less prior payments on account of such advances, if
any), and the provisions
<PAGE>
-3-
of Section 6.04 with respect to the reimbursement of
disbursements for Trust expenses, including, without
limitation, the lien in favor of the Trustee therefor and the
authority to sell Securities as needed to fund such
reimbursement, shall apply to the payment of expenses and the
amounts advanced pursuant to this Section. For the purposes of
the preceding sentence and the addition provided in clause (a)(3)
of Sec- tion 5.01, the expenses borne by the Trust pursuant to
this Section shall be deemed to have been paid on the date of the
Reference Trust Agreement and to accrue at a daily rate over the
time period specified for their amortization provided in the
Prospectus; provided, however, that nothing herein shall be
deemed to prevent, and the Trustee shall be entitled to, full
reimbursement for any advances made pursuant to this Section no
later than the termination of the Trust. For purposes of
calculating the accrual of organizational expenses under this
Section 3.01, the Trustee shall rely on the written estimates of
such expenses provided by the Depositor pursuant to Section
5.01."
(ii) The third paragraph of Section 3.05 Distribution shall
be amended to add the following sentence at the end thereof:
"The Trustee shall make a special distribution of the cash
balance in the Income and Principal accounts available for such
distribution to Unit Holders of record on such dates as the
Depositor shall direct."
(iii) The second to the last paragraph of Section 3.08 Sale
of Securities shall be amended to replace the word "equal"
with the following phrase: "be sufficient to pay."
D. Article V, entitled "Trust Evaluation, Redemption, Transfer of Units,"
Section 5.01 Trust Evaluation shall be amended as follows:
<PAGE>
-4-
(i) the second sentence of the first paragraph of Section
5.01 shall be amended by deleting the word "and" appearing
at the end of subsection (a)(2) of such sentence and
inserting the following after "(a)(3)": "amounts
representing organizational expenses paid from the Trust
less amounts representing accrued organizational expenses
of the Trust, and (a)(4)."
(ii) The following shall be added at the end of the first
paragraph of Section 5.01:
Until the Depositor has informed the Trustee that there will
be no further deposits of Additional Securities pursuant to
section 3.06, the Depositor shall provide the Trustee with
written estimates of (i) the total organizational expenses to be
borne by the Trust pursuant to Section 3.01 and (ii) the total
number of Units to be issued in connection with the initial de-
posit and all anticipated deposits of Additional Securities.
For purposes of calculating the value of the Trust and Unit
Value, the Trustee shall treat all such anticipated expenses as
having been paid and all liabilities therefor as having been in-
curred, and all Units as having been issued, in each case on
the date of the Reference Trust Agreement, and, in connection
with each such calculation, shall take into account a pro rata
portion of such expense and liability based on the actual number
of Units issued as of the date of such calculation. In the
event the Trustee is informed by the Depositor of a revision in
its estimate of total expenses or total Units and upon the
conclusion of the deposit of Additional Securities, the Trustee
shall base calculations made thereafter on such revised estimates
or actual expenses, respectively, but such adjustment shall not
affect calculations made prior thereto and
<PAGE>
-5-
no adjustment shall be made in respect thereof.
(iii) The second paragraph of Section 5.01 shall be amended
by replacing "(a)(3)" with "(a)(4)" in the first line.
E. Reference to United States Trust Company of New York in its capacity
as Trustee is replaced by the Chase Manhattan Bank throughout the
Basic Agreement.
Part II.
SPECIAL TERMS AND CONDITIONS OF TRUST
The following special terms and conditions are hereby agreed to:
A. The Trust is denominated National Equity Trust, Equity Portfolio
Series 1.
B. The Units of the Trust shall not be subject to a deferred sales
charge.
C. The contracts for the purchase of common stock listed in Schedule
A hereto are those which, subject to the terms of this Indenture, have
been or are to be deposited in Trust under this Indenture as of the date
hereof.
D. The term "Depositor" shall mean Prudential Securities
Incorporated.
E. The aggregate number of Units referred to in Sections 2.03 and
9.01 of the Basic Agreement is 250,000 as of the date hereof.
F. A Unit of the Trust is hereby declared initially equal to
1/250,000th of the Trust.
G. The term "First Settlement Date" shall mean December 23, 1997.
H. The terms "Computation Day" and "Record Date" shall mean
quarterly on February 10, May 10, August 10, and November 10.
<PAGE>
-6-
I. The term "Distribution Date" shall mean quarterly on February 25,
May 25, August 25, and November 25.
J. The term "Termination Date" shall mean December 20, 1999.
K. The Trustee's Annual Fee shall be $ .79 (per 1,000 Units) for
100,000,000 and above units outstanding; $0.85 (per 1,000 Units) for
50,000,000 - 99,999,999 units outstanding; $0.91 (per 1,000 Units) for
49,999,999 and below units outstanding. In calculating the Trustee's an-
nual fee, the fee applicable to the number of units outstanding shall
apply to all units outstanding.
L. The Depositor's Portfolio supervisory service fee shall be $0.25
per 1,000 Units.
[Signatures and acknowledgments on separate pages]
<PAGE>
-7-
The Schedule of Portfolio Securities in Part A of the prospectus included
in this Registration Statement for National Equity Trust, Equity
Portfolio Series 1 is hereby incorporated by reference herein as Schedule A
hereto.
<PAGE>
[Letterhead of Cahill Gordon & Reindel]
December 17, 1997
Prudential Securities Incorporated
One Seaport Plaza
New York, New York 10292
Re: National Equity Trust,
Equity Portfolio Series 1
-------------------------
Gentlemen:
We have acted as special counsel for you as Depositor of the National
Equity Trust, Equity Portfolio Series 1 (the "Trust"), in connection with the
issuance under the Trust Indenture and Agreement, dated April 25, 1995, as
amended, and related Reference Trust Agreement, dated December 17, 1997 (such
Trust Indenture and Agreement and Reference Trust Agreement collectively
referred to as the "Indenture"), among you, as Depositor and The Chase Manhattan
Bank, as Trustee, of units of fractional undivided interest in said Trust (the
"Units") comprising the Units of National Equity Trust, Equity Portfolio Series
1. In rendering our opinion expressed below, we have relied in part upon the
opinions and representations of your officers and upon opinions of counsel to
Prudential Securities Incorporated.
Based upon the foregoing, we advise you that, in our opinion, when the
Indenture has been duly executed and delivered on behalf of the Depositor and
the Trustee and when the Receipt For Units evidencing the Units has been duly
executed and delivered by the Trustee to the Depositor in accordance with the
Indenture, the Units will be legally issued, fully
<PAGE>
-2-
paid and nonassessable by the Trust, and will constitute valid and binding
obligations of the Trust and the Depositor in accordance with their terms,
except that enforceability of certain provisions thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors generally and by general equitable principles.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (File No. 333-39217) relating to the Units referred to
above and to the use of our name and to the reference to our firm in said
Registration Statement and the related Prospectus. Our consent to such ref-
erence does not constitute a consent under Section 7 of the Securities Act, as
in consenting to such reference we have not certified any part of the
Registration Statement and do not otherwise come within the categories of
persons whose consent is required under said Section 7 or under the rules and
regulations of the Commission thereunder.
Very truly yours,
Cahill Gordon & Reindel
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS FOR NATIONAL EQUITY TRUST EQUITY PORTFOLIO SERIES 1 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<RESTATED>
<SERIES>
<NAME>
NATIONAL EQUITY TRUST
EQUITY PORTFOLIO SERIES
<NUMBER> 1
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-17-1997
<PERIOD-START> DEC-17-1997
<PERIOD-END> DEC-17-1997
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<INVESTMENTS-AT-VALUE> 250,000
<RECEIVABLES> 0
<ASSETS-OTHER> 138,345
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</TABLE>
