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As filed with the Securities and Exchange Commission on April 28, 1998
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
_____________________
A. Exact Name of Trust:
NATIONAL EQUITY TRUST
Equity Portfolio Series 3
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:
Copy to:
LEE B. SPENCER, JR., ESQ. KENNETH W. ORCE, ESQ.
PRUDENTIAL SECURITIES INCORPORATED CAHILL GORDON & REINDEL
One Seaport Plaza 80 Pine Street
199 Water Street New York, New York 10005
New York, New York 10292
E. Title and amount of securities being registered:
An indefinite number of Units of
NATIONAL EQUITY TRUST,
Equity Portfolio Series 3
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.
===========================================================================
The registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall hereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the registration
statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
<PAGE>
NATIONAL EQUITY TRUST
Equity Portfolio Series 3
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)
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
I. Organization and General Information
1. (a) Name of Trust .........................) Prospectus front cover
(b) Title of securities issued ............)
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 ..................................) *
II. General Description of the Trust and
Securities of the Trust
_______________________
* Inapplicable, answer negative or not required.
i
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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
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
_______________________
* Inapplicable, answer negative or not required.
ii
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(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 under-
writer, 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 under-
lying securities .......................... The Trust -- Portfolio
Summary; The Trust --
Objectives and
Securities Selection;
Rights of Unit
Holders
_______________________
* Inapplicable, answer negative or not required.
iii
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-- 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 ............. *
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 Liabil-
(a) Amendment .............................) ity; Sponsor --
Resignation;
(b) Termination ...........................) Trustee -- Limitations
on Liabil-
(c) and (d) Trustee, removal and ity; Trustee -
successor ...........................) Resignation;
Amendment and
Termination of
(e) and (f) Depositor, removal and the Indenture
successor ...........................)
21. Loans to security holders ................... *
22. Limitation on liability ..................... The Trust -- Portfolio
Summary; Sponsor --
Limitations on
Liability; Trustee --
_______________________
* Inapplicable, answer negative or not required.
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Limitations on
Liability; Evaluator
-- Limitations on
Liability
23. Bonding arrangements ........................ Additional Information
-- Item A
24. Other material provisions of trust
agreement ................................. *
III. Organization, Personnel and
Affiliated Persons of Depositor
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
_______________________
* Inapplicable, answer negative or not required.
v
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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 ....................) *
39. (a) Organization of principal under-
writer ..............................) 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
_______________________
* Inapplicable, answer negative or not required.
vi
<PAGE>
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
IV. Information Concerning the Trustee
or Custodian
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
V. Information Concerning Insurance of
Holders of Securities
51. Insurance of holders of trust's
securities ................................. The Trust -- Insurance
on the Securities in
the Portfolio of an
Insured Trust
_______________________
* Inapplicable, answer negative or not required.
vii
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VI. Policy of Registrant
52. (a) Provisions of trust agreement with
respect to selection or elimina-
tion 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
VII. Financial and Statistical Information
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
_______________________
* Inapplicable, answer negative or not required.
viii
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy them be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of such state.
<PAGE>
SUBJECT TO COMPLETION, DATED APRIL 28, 1998
NATIONAL EQUITY TRUST
EQUITY PORTFOLIO SERIES 3
(EQUITY INCOME SERIES)
- --------------------------------------------------------------------------------
The objective of the Trust is total return through a combination of capital
appreciation and, to a lesser extent, dividend income through an investment for
approximately one year in a fixed portfolio consisting of the common stocks
selected by the Sponsor by applying an objective stock selection screening
procedure. 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 one year
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, (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) and (4) exchanging certain underlying Securities
received in kind for units of a new trust (if one is offered) in accordance with
the procedures set forth under 'Securities Disposition Options--Termination
Option--In-Kind Exchange'.
The minimum purchase is $250.00.
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SPONSOR: [LOGO]
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
PLEASE READ AND RETAIN Prospectus dated May , 1998
THIS PROSPECTUS FOR FUTURE REFERENCE.
</TABLE>
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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.
- --------------------------------------------------------------------------------
The NATIONAL EQUITY TRUST, Equity Portfolio Series 3 (the 'Trust') is
composed of the common stock selected by the Sponsor as set forth below (the
'Securities' or 'Security' or 'Strategy Stocks', 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.')
Securities Selection. The portfolio of the Trust consists of the common
stocks selected by the Sponsor through the application of the following
objective stock selection process ('Strategy Stocks') on May , 1998 (the
'Selection Date'):
A. Begin with the stocks comprising the Standard & Poor's 500
Composite Stock Price Index* and eliminate the 10% of the companies with
the lowest market capitalization;
B. Eliminate any stock that is included in the Dow Jones Industrial
Average** and eliminate any issuer considered to be in the gas, water or
electric utility business;
C. Eliminate stocks based upon a formula which analyzes (1) declines
in annualized dividends and (2) earnings per share (EPS) performance,
during the previous four twelve month periods***;
D. Select the 15 companies having the highest dividend yield as of the
Selection Date.
Investors should note that the above criteria were applied on the Selection
Date. Subsequent to the Selection Date one or more of the Strategy Stocks may
not be included in the S&P 500, the DJIA or may otherwise not qualify as a
Strategy Stock if the above screening process were applied at such later date.
None of these events will result in the removal of a Security from the portfolio
of the Trust. The Securities were selected irrespective of any buy or sell
recommendation by the Sponsor.
The Sponsor may, however, on and subsequent to the Date of Deposit, deposit
additional Securities and/or contracts to purchase additional Securities
together with a letter of credit which reflect the Portfolio as of the Date of
Deposit, subject to permitted adjustments, and/or cash (or a letter of credit in
lieu of cash) with instructions to purchase additional Securities and sell such
additional Units created. 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 and adjust the
proportionate relationship accordingly for all future subsequent deposits. 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 made at such later time.
THE OBJECTIVE of the Trust is total return through a combination of capital
appreciation and, to a lesser extent, dividend income through an investment for
approximately one year in a portfolio of the Strategy Stocks. (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) 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
- ------------------
* Standard & Poor's, S&P, and S&P 500 are registered trademarks of The
McGraw-Hill Companies Inc. Standard & Poor's has not participated in any way
in the creation of the Trust or in the selection of the stocks included in
the Trust and has not approved any information included in this Prospectus.
The Trust is not sponsored, managed, sold or promoted by Standard & Poor's.
** The Dow Jones Industrial Average is the property of Dow Jones Company, Inc.
Dow Jones & Company, Inc. has not participated in any way in the creation of
the Trust or in the selection of the stocks included in the Trust and has
not approved any information included in this Prospectus. The Trust is not
sponsored, managed, sold or promoted by Dow Jones & Company, Inc.
*** As of the end of the month immediately prior to the Selection Date. The
annualized dividend is based upon the last dividend declared in a period.
The EPS number is based upon the latest reported EPS.
A-1
<PAGE>
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.)
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, plus the
applicable sales charge. 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.') The total sales charge consists of
an Initial Sales Charge and a Deferred Sales Charge, the total of which equals
2.75% of the Public Offering Price or 2.778% of the net asset value of the
Trust. The Initial Sales Charge is computed by deducting the Deferred Sales
Charge ($17.50 per 1,000 Units) from the aggregate sales charge; thus, on the
date of the Summary of Essential Information, the Initial Sales Charge is $10
per 1,000 Units or 1% of the Public Offering Price. The Initial Sales Charge
will vary with changes in the aggregate sales charge and is deducted from the
purchase price of a Unit at the time of purchase and paid to the Sponsor. The
Initial Sales Charge will be reduced on a graduated basis on purchases of
$50,000 or more. The Deferred Sales Charge is paid through reduction of the net
asset value of the Trust by $1.75 per 1,000 Units monthly on each Deferred Sales
Charge Deduction Date commencing on the first Deferred Sales Charge Deduction
Date shown on the Summary of Essential Information. Units purchased pursuant to
the Reinvestment Program are subject only to remaining deductions of the
Deferred Sales Charge (see 'Reinvestment Program'). Unitholders investing the
proceeds of distribution from a previous terminating Series of National Equity
Trust Equity Portfolio Series, upon purchase of Units of the Trust, will be
subject only to the Deferred Sales Charge on such Units. Any investor may
acquire Units by an in-kind deposit of securities which replicates
proportionately the portfolio of the Trust and cash, if any, in the Trust. If a
Unit Holder exchanges, redeems or sells his Units to the Sponsor prior to the
last Deferred Sales Charge Deduction Date, the Unit Holder is obligated to pay
any remaining Deferred Sales Charge.
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.') The
Sponsor's Repurchase Price, like the Redemption Price, will reflect the
deduction from the value of the underlying Securities of any unpaid amount of
the Deferred Sales Charge. Investors should note that the Deferred Sales Charge
of $1.75 per 1,000 Units will be deducted from the net asset value on the first
of each month commencing on the first Deferred Sales Charge Deduction Date shown
on the Summary of Essential Information, and to the extent the entire Deferred
Sales Charge has not been so deducted or paid at the time of redemption of the
Units, the remainder will be deducted from the proceeds of redemption or in
calculating an in-kind redemption.
RISK FACTORS--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
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 values which are subject to market
fluctuations for as long as the common stock 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 the Date of
Deposit. The value of a Unit may be subject to greater volatility than an
investment in a more diversified portfolio since the Trust Portfolio contains
only fifteen stocks.
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.
A-2
<PAGE>
TRUST TERMINATION--The Trust will terminate on the Termination Date set
forth in the Summary of Essential Information, approximately one year 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 Chase Manhattan Bank, as 'Distribution Agent' in accordance with one or more
of the following four 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;
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. Such purchaser will be entitled to a reduced sales
load upon the purchase of units of the New Series. It is expected that the
terms of the New Series will be substantially the same as the terms of the
Trust described in this Prospectus, and that similar options in a
subsequent series of the Trust will occur in each New Series of the Trust
approximately one year after that New Series' creation. 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; and
4. Termination Option--In-Kind Exchange
Unitholders desiring to exchange their interests in units of a
terminating series of National Equity Trust Equity Portfolio Series
('Terminating Trust') for Units of the Trust ('New Trust') may do so by so
advising their account executive. Such exchange will be effected by an
in-kind redemption from the Terminating Trust and subsequent in-kind
deposit with the Trustee of the New Trust, as follows:
The number and types of securities constituting a Unit of the New
Trust will be deposited on behalf of a Unitholder in connection with the
creation of a Unit by the Trustee. Certain of the stocks contained in the
Terminating Trust are likely to be included in the portfolio of the New
Trust ('Duplicated Stocks'). A Unitholder in the Terminating Trust electing
to receive his interest in such Terminating Trust in-kind and desiring to
purchase Units in the New Trust by an in-kind contribution to the New Trust
would direct that The Chase Manhattan Bank act as agent (the 'Agent') for
such Unitholder to carry out the transactions necessary to consummate the
in-kind deposit. The Agent would be authorized to receive the Unitholder's
in-kind distribution from the Terminating Trust and to assemble and
deposit, on the Unitholder's behalf, the package of stocks needed to make
up a Unit in the New Trust. Such assembly and deposit would include an
in-kind contribution to the New Trust of an appropriate amount of the
Unitholder's interest in Duplicated Stocks. Securities distributed in-kind
from the Terminating Trust not required to make up a Unit in the New Trust
would be sold by the Agent with the cash proceeds of each sale utilized by
the Agent to purchase the stocks, other than the Duplicated Stocks,
necessary to constitute a Unit of the New Trust. The proceeds of such sales
will be reduced and the cost of such purchases will be increased by any
applicable brokerage commissions. If additional cash is needed to purchase
stocks, such cash would be paid to the Agent by the Unitholder. Any cash
not used to make up a Unit in the New Trust would be distributed to the
Unitholder. Fractional interests received from the Terminating Trust will
be sold by the Agent with the cash proceeds of such sale used to purchase
securities for deposit in the New Trust or, if not so utilized, distributed
to the Unitholder. Upon receipt of the in-kind deposit, the Trustee will
issue the appropriate number of Units in the New Trust to the Unitholder on
whose behalf the Agent acted. Units acquired pursuant to an in-kind deposit
into a New Trust by a Unitholder of a Terminating Trust will not be subject
to an Initial Sales Charge but only subject to a Deferred Sales Charge.
The receipt in-kind from the Terminating Trust and the deposit in the New
Trust of the Duplicated Stocks will not be a taxable event to a Unitholder. (See
Part B--'Tax Status of the Trust'.)
A-3
<PAGE>
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 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.
ADDITIONAL RISK FACTORS--SPECIAL CONSIDERATIONS--An investment in Units of
the Trust should be made with an understanding of the following risks:
The portfolio of the Trust is concentrated in investments in the financial
service industry. Its investments and performance, accordingly, will be affected
by general market and economic conditions as well as other risk factors
particular to the financial services industry. Financial services companies are
subject to extensive government regulation which may limit both the amount and
types of loans and other financial commitments they can make, and the interest
rates and fees they can charge. Profitability is largely dependent on the
availability and cost of capital funds, and can fluctuate significantly when
interest rates change. Credit losses resulting from financial difficulties of
borrowers can negatively impact the industry. Insurance companies may be subject
to severe price competition, claims activity, marketing competition and general
economic conditions. Particular insurance lines will also be influenced by
specific matters. Property and casualty insurer profits may be affected by
certain weather catastrophes and other disasters. Life and health insurer
profits may be affected by mortality risks and morbidity rates. Individual
insurance companies may be subject to material risks including reserve
inadequacy problems in investment portfolios (due to real estate or 'junk' bond
holdings, for example), and the inability to collect from reinsurance carriers.
Insurance companies are subject to extensive governmental regulation, including
the imposition of maximum rate levels, which may not be adequate for some lines
of business. Proposed or potential antitrust or tax law changes also may affect
adversely insurance companies' policy sales, tax obligations and profitability.
Congress is currently considering legislation that would reduce the
separation between commercial and investment banking businesses. If enacted this
could significantly impact the industry and the Securities in the Trust. While
banks may be able to expand the services which they offer if legislation
broadening bank powers is enacted, expanded powers could expose banks to
well-established competitors, particularly as the historical distinctions
between banks and other financial institutions erode. In addition, the financial
services industry is an evolving and competitive industry that is undergoing
significant change with various consolidations and the continual development of
new products, structures and a regulatory frame-work that is anticipated to be
subject to further change.
Many issuers within the financial services industry are smaller capitalized
companies and therefore may be subject to certain risks not associated with
larger companies.
Financial services industries may be subject to greater governmental
regulation than many other industries and changes in governmental policies and
the need for regulatory approvals may have a material effect on the services
offered by companies in the financial services industries. Governmental
regulation may limit both the financial commitments banks can make, including
the
A-4
<PAGE>
amounts and types of loans, and the interest rates and fees they can charge. In
addition, governmental regulation in certain foreign countries may impose
interest rate controls, currency controls, credit controls and price controls.
Companies in the financial services sector are subject to rapid business
changes, significant competition, value fluctuations due to the concentration of
loans in particular industries significantly affected by economic conditions
(such as real estate or energy) and volatile performance dependent upon the
availability and cost of capital and prevailing interest rates. In addition,
general economic conditions significantly affect these companies. Credit and
other losses resulting from the financial difficulty of borrowers or other third
parties potentially may have an adverse effect on companies in these industries.
Foreign banks, particularly those of Japan, have reported financial difficulties
attributed to increased competition, regulatory changes, and general economic
difficulties.
The financial services area in the United States currently is changing
relatively rapidly as existing distinctions between various financial service
segments become less clear. For instance, recent business combinations have
included insurance, finance, and securities brokerage under single ownership.
Some primarily retail corporations have expanded into securities and insurance
fields. Investment banking, securities brokerage and investment advisory
companies are subject to government regulation and risk due to securities
trading and underwriting activities.
Many of the investment considerations discussed in connection with banks,
savings institutions and loan associations, and finance companies also apply to
insurance companies. The performance of insurance company investments will be
subject to risk from several factors. The earnings of insurance companies will
be affected by interest rates, pricing (including severe pricing competition
from time to time), claims activity, marketing competition and general economic
conditions.
A-5
<PAGE>
SUMMARY OF ESSENTIAL INFORMATION
NATIONAL EQUITY TRUST
EQUITY PORTFOLIO SERIES 3
AS OF MAY , 1998*
<TABLE>
<S> <C>
AGGREGATE VALUE OF SECURITIES.................................... $
NUMBER OF UNITS..................................................
FRACTIONAL UNDIVIDED INTEREST IN THE TRUST REPRESENTED BY EACH
UNIT...........................................................
Aggregate value of Securities in the Trust**................ $
Divided by Units (times 1,000)......................... $ 990.00
Plus maximum sales charge of 2.75% of Public Offering Price,
(2.778% of net amount
invested in Securities)***................................ $ 27.50
Less Deferred Sales Charge per 1,000 Units.................. (17.50)
------------
Public Offering Price per 1,000 Units****................... $ 1,000.00
Plus the amount per 1,000 Units in the Income Account....... $ 0.00
------------
Total per 1,000 Units.................................. $ 1,000.00
------------
------------
REDEMPTION AND SPONSOR'S SECONDARY MARKET REPURCHASE PRICE PER
1,000 UNITS***** (based on the value of the underlying
Securities less the Deferred Sales Charge per 1,000 Units)..... $ 972.50
RECORD DATES: The tenth day of 1998, 1998,
1998 and 1999.
QUARTERLY DISTRIBUTION DATES: The twenty-fifth day of 1998,
1998, 1998 and , 1999 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: $ per 1,000 Units.+
ORGANIZATIONAL EXPENSES: $ 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: , 1999++
SPONSOR'S LOSS ON DEPOSIT: $
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.
DEFERRED SALES CHARGE DEDUCTION DATES: The 1st day of each month
commencing 1, 1998.
</TABLE>
- ------------------
* The Date of Deposit. The 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.
** After deduction of the Deferred Sales Charge then payable (zero on the
date of this Summary of Essential Information).
*** The sales charge consists of an Initial Sales Charge and a Deferred Sales
Charge. The Initial Sales Charge is computed by deducting the Deferred
Sales Charge ($17.50 per 1,000 Units) from the aggregate sales charge (a
maximum of 2.75% of the Public Offering Price); thus on the date of this
Summary of Essential Information, the maximum Initial Sales Charge is $10
per 1,000 Units or 1% of the Public Offering Price. The Initial Sales
Charge is deducted from the purchase price at the time of purchase and is
reduced on a graduated basis on purchases of $50,000 or more (see Part
B--'Public Offering of Units-- Volume Discount'). The Deferred Sales
Charge is paid through reduction of the net asset value of the Trust by
$1.75 per 1,000 Units on each Deferred Sales Charge Deduction Date. On a
repurchase or redemption of Units before the last Deferred Sales Charge
Deduction Date, any remaining Deferred Sales Charge payments will be
deducted from the proceeds. Units purchased pursuant to the Reinvestment
Program are subject to that portion of the Deferred Sales Charge remaining
at the time of reinvestment (see Part B--'Reinvestment Program').
**** 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.
***** 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. Reflects
deductions for remaining Deferred Sales Charge payments ($17.50 per 1,000
Units initially). 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 $ 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 $ 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-6
<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 one year, and is a unit investment trust rather than a mutual
fund, this information is presented to permit a comparison of fees, assuming the
principal amount and distributions are rolled over each year into a New Series
subject only to the Deferred Sales Charge and trust expenses.
<TABLE>
<CAPTION>
UNIT HOLDER TRANSACTION EXPENSES
- -------------------------------------------------------------------------------------------------------------
<S> <C>
Maximum Initial Sales Charge Imposed on Purchase (as a percentage of offering price)......................... 1.00%(a)
Deferred Sales Charge per Year (as a percentage of original purchase price).................................. 1.75%(b)
-----
Total................................................................................................... 2.75%
-----
-----
Maximum Sales Charge Imposed Per Year on Reinvested Dividends................................................
Estimated Annual Trust Operating Expenses (as a percentage of average net assets)
Trustee's Fee.............................................................................................. %
Organizational Costs and Expenses(d)......................................................................... %
Other Operating Expenses (including Portfolio Supervision, Bookkeeping and Administrative Fees).............. %
-----
Total(f)................................................................................................ %
-----
-----
<CAPTION>
AMOUNT PER
1,000
UNIT HOLDER TRANSACTION EXPENSES UNITS
- ------------------------------------------------------------------------------------------------------------- ----------
<S> <C>
Maximum Initial Sales Charge Imposed on Purchase (as a percentage of offering price)......................... $10.00
Deferred Sales Charge per Year (as a percentage of original purchase price).................................. 17.50
----------
Total................................................................................................... $27.50
----------
----------
Maximum Sales Charge Imposed Per Year on Reinvested Dividends................................................ $17.50(c)
----------
----------
Estimated Annual Trust Operating Expenses (as a percentage of average net assets)
Trustee's Fee.............................................................................................. $
Organizational Costs and Expenses(d).........................................................................
Other Operating Expenses (including Portfolio Supervision, Bookkeeping and Administrative Fees)..............
----------
Total(f)................................................................................................ $
----------
----------
</TABLE>
EXAMPLE
<TABLE>
<CAPTION>
CUMULATIVE EXPENSES
PAID FOR PERIOD:
--------------------
1 3
YEAR YEARS(E)
-------- --------
<S> <C> <C>
An investor would pay the following expenses on a $1,000
investment, assuming the Trust's operating expense ratio of
% and a 5% annual return on the investment throughout
the periods................................................ $ $
</TABLE>
The Example assumes a redemption and reinvestment of all dividends and
distributions and utilizes a 5% annual rate of return. For purposes of the
Example, the Deferred Sales Charge imposed on reinvestment of dividends is not
reflected until the year following payment of the dividend; the cumulative
expenses would be higher if sales charges on reinvested dividends were reflected
in the year of reinvestment. THE 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 maximum Initial Sales Charge is actually the difference between
2.75% and the Deferred Sales Charge ($17.50 per 1,000 Units) and would exceed 1%
if the Public Offering Price exceeds $1,000 per 1,000 Units.
(b) The actual fee is $1.75 per month per 1,000 Units, irrespective of
purchase or redemption price, deducted in each of the last 10 months of each
one-year Portfolio. If a Holder sells, exchanges or redeems Units before all of
these deductions have been made, the balance of the Deferred Sales Charge will
be deducted from the Unit proceeds. If the Unit price exceeds $1 per Unit, the
Deferred Sales Charge will be less than 1.75%; if the Unit price is less than $1
per Unit, the Deferred Sales Charge will exceed 1.75%.
(c) Reinvested dividends will be subject only to the Deferred Sales Charge
remaining at the time of reinvestment (see 'Reinvestment Program' in Part B).
(d) 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.
(e) Although each Trust has a term of only approximately one year 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 subject only to the
Deferred Sales Charge.
(f) The estimates do not include the cost borne by Unitholders of
purchasing and selling securities.
A-7
<PAGE>
The following table shows the actual performance of the Dow Jones
Industrial Average and the S&P 500 Index and the Strategy Stocks in each of the
past twenty-five years as of the date indicated for each of such years. Such
annual returns do not take into account commissions, sales charges, expenses or
taxes. As demonstrated by the table, the Strategy Stocks outperformed the DJIA
and the S&P 500 Index in most of the 25 years.
<TABLE>
<CAPTION>
COMPARISON OF TOTAL RETURNS(1)
---------------------------------------
YEAR ENDED S&P 500
12/31/ DJIA(2) INDEX(3) STRATEGY STOCKS
- ---------- ------- -------- ---------------
<S> <C> <C> <C>
1973 -13.12 % % %
1974 -23.14
1975 44.40
1976 22.72
1977 -12.71
1978 2.69
1979 10.52
1980 21.41
1981 -3.40
1982 25.79
1983 25.68
1984 1.06
1985 32.78
1986 26.91
1987 6.02
1988 15.95
1989 31.71
1990 -0.57
1991 23.93
1992 7.35
1993 16.71
1994 4.93
1995 36.20
1996 28.57
1997 24.78
</TABLE>
- ------------------
(1) Total Return represents the sum of the percentage change in index value or
in market value of the Strategy Stocks between the first trading day of a
period and the last trading day of a period and the total dividends paid on
each group of stocks during the period divided by the opening index value or
market value of the Strategy Stocks as of the first trading day of a period.
Total return does not take into consideration any sales charges,
commissions, expenses or taxes.
(2) An index of 30 stocks compiled by Dow Jones & Company, Inc.
(3) An index of 500 stocks compiled by Standard & Poor's Corporation.
The total return figures shown above are not guarantees of future
performance and should not be used as a predictor of returns to be expected in
connection with the Portfolio. Such total return figures do not reflect sales
charges, commissions, expenses or taxes. As indicated in the above table, the
Strategy Stocks underperformed the DJIA and the S&P 500 Index in certain years
and there can be no assurance that the Portfolio of the Trust will outperform
the DJIA or the S&P 500 Index over the life of the Trust.
A-8
<PAGE>
The chart below represents past performance of the the DJIA, S&P 500 Index
and the Strategy Stocks (but not the Trust) and should not be considered
indicative of future results. From January 1973 through December 1997 the
average annual total return for the DJIA, the S&P 500 Index and the Strategy
Stocks was %, % and %, respectively. The chart reflects a
hypothetical assumption that $10,000 was invested on January 1, 1973 and the
investment strategy followed for 25 years. For the Dow Jones Industrial Average
and the S&P 500 Index the chart assumes that all dividends during a year are
reinvested at the end of that year and does not reflect sales charges,
commissions, expenses or taxes. For the Strategy Stocks the chart assumes an
initial sales charge rate of 1% and a deferred rate of 1.75% in the first year
and 1.75% in each of the subsequent years and an estimated annual expense rate
of $22.50 per $10,000 invested. There can be no assurance that the Trust will
outperform the DJIA or the S&P 500 Index over its approximately one-year life or
over consecutive rollover periods, if available.
<TABLE>
<CAPTION>
VALUE OF $10,000 INVESTED ON
JANUARY 1, 1973
---------------------------------------
YEAR ENDED S&P 500
12/31/ DJIA INDEX STRATEGY STOCKS
- ---------- ------- -------- ---------------
<S> <C> <C> <C>
1973 $8,688 $
1974 6,678
1975 9,642
1976 11,833
1977 10,329
1978 10,607
1979 11,723
1980 14,233
1981 13,749
1982 17,295
1983 21,736
1984 21,966
1985 29,167
1986 37,016
1987 39,244
1988 45,504
1989 59,933
1990 59,591
1991 73,851
1992 79,280
1993 92,527
1994 97,089
1995 132,235
1996 170,014
1997 212,144
</TABLE>
Past performance of any series may not be indicative of results of future
series. Trust performance may be compared to the performance on the same basis
of the DJIA, the S&P 500 Composite Price Stock Index, the Hang Seng Index, the
Financial Times Industrial Ordinary Share Index and the ten highest yielding
stocks in each of the Hang Seng Index and Financial Times Industrial Ordinary
Share Index, or performance data from publications such as Morningstar
Publications, Inc. This performance may also be compared for various periods
with an investment in short-term U.S. Treasury securities; however, the investor
should bear in mind that Treasury securities are fixed income obligations,
having the highest credit characteristics, while equity securities involve
greater risk because they have no maturities, and income thereon is subject to
the financial condition of, and declaration by, the issuers.
PORTFOLIO SUMMARY AS OF DATE OF DEPOSIT
The Portfolio contains 15 issues of Securities [ ] of which are traded
on the New York Stock Exchange. The Securities are representative of industry
groups as follows:
- ------------------
* Percentages computed on the basis of the aggregate net asset value of the
Securities in the Trust on the Date of Deposit.
A-9
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE UNIT HOLDERS, SPONSOR AND TRUSTEE
OF THE NATIONAL EQUITY TRUST EQUITY PORTFOLIO SERIES 3
We have audited the accompanying Statement of Financial Condition including
Schedule of Portfolio Securities of the National Equity Trust Equity Portfolio
Series 3 as of , 1998. This financial statement is the
responsibility of the Trustee and Sponsor (see note (e) 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 , 1998, 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 3 as of , 1998, in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
, 1998
A-10
<PAGE>
STATEMENT OF FINANCIAL CONDITION
NATIONAL EQUITY TRUST EQUITY PORTFOLIO SERIES 3
AS OF DATE OF DEPOSIT, , 1998
TRUST PROPERTY
<TABLE>
<S> <C>
Sponsor's Contracts to Purchase underlying Securities backed
by an irrevocable letter of credit(a)..................... $
Organizational Costs(f).....................................
-----------
Total.................................................. $
-----------
-----------
LIABILITIES AND INTEREST OF UNIT HOLDERS
Liabilities--
Payment of deferred portion of sales charge(b)......... $
Accrued Liability(f)...................................
-----------
Subtotal...............................................
-----------
Interest of Holders--
Units of fractional undivided interest outstanding:
Cost to investors(c)..............................
Gross underwriting commission(d)..................
-----------
Net amount applicable to investors..........................
-----------
Total........................................ $
-----------
-----------
</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 $ million dollars has been deposited
with the Trustee for the purchase of Securities pursuant to contracts to
purchase such Securities.
(b) Represents the aggregate amount of mandatory distributions of $1.75 per
1,000 Units per month payable on the 1st day of each month from 1998 through
1999. Distributions will be made to an account maintained by the
Trustee from which the Holders' Deferred Sales Charge obligation to the Sponsor
will be satisfied. If Units are redeemed prior to 1999, the remaining
portion of the distribution applicable to such Units will be transferred to such
account on the redemption date.
(c) The aggregate Public Offering Price is computed on the basis set forth
under 'Public Offering of Units--Public Offering Price.'
(d) The aggregate maximum sales charge of 2.75% of the Public Offering
Price per Unit is computed on the basis set forth under 'Public Offering of
Units--Public Offering Price.'
(e) 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.
(f) Organizational costs borne by the Trust will be amortized generally
over the life of the Trust. Registration fees, which are included in
organizational costs, will be charged directly to capital during the initial
public offering period. Organizational costs have been estimated based on a
Trust with projected total assets of $ million. To the extent the assets of
the Trust are fewer or greater, the estimate may vary.
A-11
<PAGE>
SCHEDULE OF PORTFOLIO SECURITIES
NATIONAL EQUITY TRUST EQUITY PORTFOLIO SERIES 3
ON DATE OF DEPOSIT, MAY , 1998
<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>
-----------
-----------
-----------
</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 May , 1998. 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 May , 1998. The aggregate purchase price to the
Sponsor for the Securities deposited in the Trust is $ .
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-12
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[This page intentionally left blank]
<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 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Risk Factors.......................................................... A-2
Summary of Essential Information...................................... A-6
Fee Table............................................................. A-7
Independent Auditors' Report.......................................... A-10
Statement of Financial Condition...................................... A-11
Schedule of Portfolio Securities...................................... A-12
The Trust............................................................. B-1
Portfolio Summary................................................... B-2
Tax Status of the Trust............................................... B-3
Retirement Plans...................................................... B-4
Public Offering of Units.............................................. B-4
Public Offering Price............................................... B-4
Public Distribution................................................. B-4
Secondary Market.................................................... B-5
Profit of Sponsor................................................... B-5
Volume Discount..................................................... B-5
Employee Discount................................................... B-6
Exchange Option....................................................... B-6
Federal Income Tax Consequences..................................... B-7
Reinvestment Program.................................................. B-7
Termination Options................................................... B-8
Expenses and Charges.................................................. B-10
Expenses............................................................ B-10
Fees................................................................ B-10
Other Charges....................................................... B-10
Rights of Unit Holders................................................ B-10
Ownership of Units.................................................. B-10
Certain Limitations................................................. B-11
Distributions....................................................... B-11
Reports and Records................................................. B-11
Redemption.......................................................... B-12
Purchase by the Sponsor of Units Tendered for Redemption............ B-13
Computation of Redemption Price per Unit............................ B-13
Sponsor............................................................... B-14
Limitations on Liability............................................ B-14
Responsibility...................................................... B-14
Resignation......................................................... B-15
Trustee............................................................... B-15
Limitations on Liability............................................ B-15
Responsibility...................................................... B-15
Resignation......................................................... B-15
Amendment and Termination of the Indenture............................ B-16
Amendment........................................................... B-16
Termination......................................................... B-16
Legal Opinions........................................................ B-16
Independent Auditors.................................................. B-16
</TABLE>
------------------------------------------------------
NATIONAL EQUITY TRUST
EQUITY PORTFOLIO SERIES 3
------------------------------------------------------
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
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<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 3
THE TRUST
National Equity Trust, Equity Portfolio Series 3 (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 common stock issued
by the companies whose common stocks meet the criteria set forth on page A-1
(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 a combination of capital
appreciation, and to a lesser extent, dividend income, through an investment for
approximately one year in the Strategy Stocks. 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 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 would no longer
qualify as a Strategy Stock subsequent to the initial date of deposit if the
Strategy Stocks were chosen on such later date(s).
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.
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
- ------------------
* 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>
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' the 'Unitholders' or the '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
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 one-year life or
that future portfolios selected using the same methodology as the Trust during
consecutive one-year 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.
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
B-2
<PAGE>
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.')
As it is anticipated that Securities generally will not be sold to pay the
Deferred Sales Charge until after the last Deferred Sales Charge Deduction Date,
Holders will be at risk with respect to changes in the market value of
Securities between the accrual of each monthly deferred sales charge and the
actual sale of Securities to satisfy the payment of the Deferred Sales Charge.
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 the New York 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 (including the
Initial Sales Charge) 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 Deferred Sales Charge and 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
Deferred Sales Charge and the charge for organizational expenses.
Accordingly, Unit Holders should not increase the total cost for their
Units by the amount of the Deferred Sales Charge and 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. In the case of a corporate Unit Holder, such
dividends will qualify for the 70% dividends received deduction for
corporations to the same extent as though the dividend paying stock were
held directly by the corporate Unit Holder. 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.
The receipt in-kind from the Terminating Trust and the deposit in the New
Trust of the Duplicated Stocks will not be a taxable event to a Unitholder. The
Unitholder's basis in such Duplicated Stocks will be the Unitholder's basis in
such securities prior to the distribution from the Terminating Trust and the
holding period of such Duplicated Stocks will be the shorter of the period
during which the Unit Holder held the Units and the period for which the
Duplicated Stocks were held in the Terminating Trust. To the extent securities
received in-kind are sold by the Agent on behalf of the Unitholder of such
securities, a Unitholder will have a taxable gain or loss, which will be a
capital gain or loss except in the case of a dealer.
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
B-3
<PAGE>
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.
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 and thereafter is computed by determining the value (as set forth below)
of the Securities in the Trust, dividing such sum by the number of Units
outstanding and then adding a sales charge as set forth in the table under
'Volume Discount,' herein. 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.')
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.
The sales charge consists of an Initial Sales Charge and a Deferred Sales
Charge. The Initial Sales Charge is computed by deducting the Deferred Sales
Charge ($17.50 per 1,000 Units) from the aggregate sales charge; thus on the
date of the Summary of Essential Information, the maximum Initial Sales Charge,
1% of the Public Offering Price, is $10 per 1,000 Units. The Initial Sales
Charge is deducted from the purchase price at the time of purchase. The Deferred
Sales Charge will initially be $17.50 per 1,000 Units but will be reduced each
month by one tenth; the Deferred Sales Charge will be paid through monthly
deductions of $1.75 per 1,000 Units per month commencing on the first Deferred
Sales Charge Deduction Date as shown in the Summary of Essential Information. To
the extent the entire Deferred Sales Charge has not been so deducted at the time
of repurchase, redemption or exchange of the Units, any unpaid amount will be
deducted from the proceeds or in calculating an in kind distribution. For
purchases of Units with a value of $50,000 or more, the Initial Sales Charge is
reduced on a graduated basis as shown below under 'Volume Discount.' Units
purchased pursuant to the Reinvestment Program are subject only to any remaining
Deferred Sales Charge deductions (see 'Reinvestment Program'). Unitholders
investing the proceeds of distribution from a previous terminating Series of
National Equity Trust Top Ten Portfolio Series, upon purchase of Units of the
Trust, will be subject only to the Deferred Sales Charge on such Units. Unit
Holders acquiring Units of the Trust pursuant to an exchange of units of a
different unit investment trust will not be charged an initial sales charge at
the time of the exchange but such Units acquired will be subject to the Deferred
Sales Charge.
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 offering period is 30 days unless all Units are sold
prior thereto, whereupon the initial public offering period will terminate. 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
B-4
<PAGE>
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.
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 other than the
payment of any Deferred Sales Charge then due. 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 as set forth in the table below in the
primary market and secondary market. The Sponsor may have also realized a book
profit (or a loss) on the deposit of the Securities in the Trust representing
the difference between the cost of the Securities to the Sponsor and the cost of
the Securities to the Trust. (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.') 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.
VOLUME DISCOUNT
Although under no obligation to do so, the Sponsor intends to permit volume
purchasers of Units to purchase Units at a reduced sales charge. The Sponsor may
at any time upon prior notice to Unit Holders change the amount by which the
sales charge is reduced, or may discontinue the discount altogether.
The sales charge for the Trust in the primary market will be reduced
pursuant to the following graduated scale for sales to any person of Units with
a value of $50,000 or more. The sales charge in the secondary market consists of
an Initial Sales Charge which will be reduced pursuant to the following
graduated scale and the remaining portions of the Deferred Sales Charge.
B-5
<PAGE>
<TABLE>
<CAPTION>
PRIMARY MARKET DEALER CONCESSION SECONDARY MARKET
------------------------------------------------ ----------------- -----------------------------
PERCENT OF PERCENT OF DEFERRED PERCENT OF PERCENT OF PERCENT OF
PUBLIC OFFERING NET AMOUNT SALES CHARGE PUBLIC OFFERING PUBLIC OFFERING NET AMOUNT
PURCHASES PRICE INVESTED PER 1,000 UNITS PRICE PRICE INVESTED
- --------------------- --------------- ---------- --------------- ----------------- --------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Less than $50,000.... 2.75% 2.778% $ 17.50 2.10% 1.00% 1.010%
$50,000-$99,999...... 2.50% 2.519% 17.50 1.90% 0.75% 0.756%
$100,000-$249,999.... 2.00% 2.005% 17.50 1.40% 0.50% 0.503%
$250,000 or more..... * * 17.50 1.20% 0.25% 0.251%
</TABLE>
- ------------------
* Deferred Sales Charge only.
The reduced sales charges as shown on the chart above will apply to such
purchases of Units in any fourteen-day period which qualify for the volume
discount by the same person, including a partnership or corporation, other than
a dealer, in the amounts stated herein, and for this purpose, purchases of Units
of this Trust will be aggregated with concurrent purchases of Units of any other
trust that may be offered by the Sponsor.
Units held in the name of the purchaser's spouse, in the name of a
purchaser's child under the age of 21 or in the name of an entity controlled by
the purchaser are deemed for the purposes hereof to be acquired in the name of
the purchaser. The reduced sales charges are also applicable to a trustee or
other fiduciary, including a partnership or corporation, purchasing Units for a
single trust estate or single fiduciary account.
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 at a price equal to the net asset value of the
Securities in the Trust divided by the number of Units outstanding plus a
reduced sales charge equal to the Deferred Sales Charge per Unit, subject to a
limit of 5% of the Units.
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 the Equity Portfolio 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 unit. Exchange
transactions will be effected only in whole units; thus, any proceeds not used
to acquire
B-6
<PAGE>
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)].
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 subject only to
any remaining deductions of the Deferred Sales Charge. (Reinvestment Units are
not subject to the Initial Sales Charge.)
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.
B-7
<PAGE>
TERMINATION OPTIONS
The Trust will terminate on the Termination Date set forth in the Summary
of Essential Information, approximately one year 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 four
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;
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. Such purchaser will be entitled to a reduced sales
load upon the purchase of units of the New Series. It is expected that the
terms of the New Series will be substantially the same as the terms of the
Trust described in this Prospectus, and that similar options in a
subsequent series of the Trust will occur in each New Series of the Trust
approximately one year after that New Series' creation. 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; and
4. Termination Option--In-Kind Exchange
Unitholders desiring to exchange their interests in units of a
terminating series of National Equity Trust Equity Portfolio Series
('Terminating Trust') for Units of the Trust ('New Trust') may do so by so
advising their account executive. Such exchange will be effected by an
in-kind redemption from the Terminating Trust and subsequent in-kind
deposit with the Trustee of the New Trust, as follows:
The number and types of securities constituting a Unit of the New
Trust will be deposited on behalf of a Unitholder in connection with the
creation of a Unit by the Trustee. Certain of the stocks contained in the
Terminating Trust are likely to be included in the portfolio of the New
Trust ('Duplicated Stocks'). A Unitholder in the Terminating Trust electing
to receive his interest in such Terminating Trust in-kind and desiring to
purchase Units in the New Trust by an in-kind contribution to the New Trust
would direct that The Chase Manhattan Bank act as agent (the 'Agent') for
such Unitholder to carry out the transactions necessary to consummate the
in-kind deposit. The Agent would be authorized to receive the Unitholder's
in-kind distribution from the Terminating Trust and to assemble and
deposit, on the Unitholder's behalf, the package of stocks needed to make
up a Unit in the New Trust. Such assembly and deposit would include an
in-kind contribution to the New Trust of an appropriate amount of the
Unitholder's interest in Duplicated Stocks. Securities distributed in-kind
from the Terminating Trust not required to make up a Unit in the New Trust
would be sold by the Agent with the cash proceeds of each sale utilized by
the Agent to purchase the stocks, other than the Duplicated Stocks,
necessary to constitute a Unit of the New Trust. The proceeds of such sales
will be reduced and the cost of such purchases will be increased by any
applicable brokerage commissions. If additional cash is needed to purchase
stocks, such cash would be paid to the Agent by the Unitholder. Any cash
not used to make up a Unit in the New Trust would be distributed to the
Unitholder. Fractional interests received from the Terminating Trust will
be sold by the Agent with the cash proceeds of such sale used to purchase
securities for deposit in the New Trust or, if not so utilized, distributed
to the Unitholder. Upon receipt of the in-kind deposit, the Trustee will
issue the appropriate number of Units in the New Trust to the Unitholder on
whose behalf the Agent acted. Units acquired pursuant to an in-kind deposit
into a New Trust by a Unitholder of a Terminating Trust will not be subject
to an Initial Sales Charge but only subject to a Deferred Sales Charge.
B-8
<PAGE>
The ability to purchase Units of the New Trust by the deposit of
securities in-kind will also be offered to persons who were not Unitholders
in a prior Trust and any such person may contribute whole shares in-kind to
a New Trust. Such person will be required to pay the Initial Sales Charge
to the Sponsor in connection with the in-kind purchase of Units, which
Units will be subject to a Deferred Sales Charge.
The receipt in-kind from the Terminating Trust and the deposit in the
New Trust of the Duplicated Stocks will not be a taxable event to a
Unitholder. (See Part B--'Tax Status of the Trust'.)
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 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 yearly
opportunity to elect to 'rollover' their terminating distributions into a new
series. The availability of the reinvestment privilege does not constitute a
solicitation of offers to purchase units of a new series or any other security.
A 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.
The Sponsor reserves the right to modify, suspend or terminate the
reinvestment privilege at any time.
B-9
<PAGE>
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, 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. In addition to the
Trustee's fee, the Trustee receives income to the extent that it holds funds on
deposit in various accounts which are non-interest bearing to Unit Holders
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 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.
B-10
<PAGE>
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.')
It is anticipated that the deferred sales charge will reduce the Principal
Account and that amounts in the Principal Account will be sufficient to cover
the cost of the deferred sales charge. Distributions of amounts necessary to pay
the deferred portion of the sales charge will be made to an account maintained
by the Trustee for purposes of satisfying Unit Holders' deferred sales charge
obligations. Although the Sponsor has the right to collect the deferred sales
charge monthly, in order to keep Unit Holders as fully invested as possible, it
is anticipated that no Securities will be sold to pay the deferred sales charge
to the Sponsor until after the Termination Date set forth in the Summary of
Essential Information.
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
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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 portions of the Deferred Sales Charge and 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 for trading, and such Units will be deemed to have been
tendered to the Trustee on such day for redemption at the Redemption Price
computed on that day.
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:
(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) 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
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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 accrued Deferred Sales Charges
and any Deferred Sales Charge balance, 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-13
<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.
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 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.
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
B-14
<PAGE>
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.
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
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<PAGE>
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.
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<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 3
TABLE OF CONTENTS
PAGE
----
Risk Factors.......................................................... A-2
Summary of Essential Information...................................... A-6
Fee Table............................................................. A-7
Independent Auditors' Report.......................................... A-10
Statement of Financial Condition...................................... A-11
Schedule of Portfolio Securities...................................... A-12
The Trust............................................................. B-1
Portfolio Summary................................................... B-2
Tax Status of the Trust............................................... B-3
Retirement Plans...................................................... B-4
Public Offering of Units.............................................. B-4
Public Offering Price............................................... B-4
Public Distribution................................................. B-4
Secondary Market.................................................... B-5
Profit of Sponsor................................................... B-5
Volume Discount..................................................... B-5
Employee Discount................................................... B-6
Exchange Option....................................................... B-6
Federal Income Tax Consequences..................................... B-7
Reinvestment Program.................................................. B-7
Termination Options................................................... B-8
Expenses and Charges.................................................. B-10
Expenses............................................................ B-10
Fees................................................................ B-10
Other Charges....................................................... B-10
Rights of Unit Holders................................................ B-10
Ownership of Units.................................................. B-10
Certain Limitations................................................. B-11
Distributions....................................................... B-11
Reports and Records................................................. B-11
Redemption.......................................................... B-12
Purchase by the Sponsor of Units Tendered for Redemption............ B-13
Computation of Redemption Price per Unit............................ B-13
Sponsor............................................................... B-14
Limitations on Liability............................................ B-14
Responsibility...................................................... B-14
Resignation......................................................... B-15
Trustee............................................................... B-15
Limitations on Liability............................................ B-15
Responsibility...................................................... B-15
Resignation......................................................... B-15
Amendment and Termination of the Indenture............................ B-16
Amendment........................................................... B-16
Termination......................................................... B-16
Legal Opinions........................................................ B-16
Independent Auditors.................................................. B-16
------------------------------------------------------
NATIONAL EQUITY TRUST
EQUITY PORTFOLIO SERIES 3
------------------------------------------------------
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
- --------------------------------------------------------------------------------
UTS103 3/98
<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:
(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.
II-1
<PAGE>
(5) Ex-4.a - Trust Indenture and Agreement, dated April 25,
1995.
(1) Ex-4.b - Draft of Reference Trust Agreement.
(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.
____________________
(1) Filed herewith.
(2) To be filed by amendment.
(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, National
Equity Trust, Top Ten Portfolio Series 3, Registration No. 333-15919,
and National Equity Trust, Low Five Portfolio Series 17, Registration
No. 333-44543.
(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 3, has duly caused
this 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 27th day of April, 1998.
NATIONAL EQUITY TRUST
Equity Portfolio Series 3
(Registrant)
By PRUDENTIAL SECURITIES INCORPORATED
(Depositor)
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
James D. Price
Hardwick Simmons
Lee B. Spencer, Jr.
Brian M. Storms
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.
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<PAGE>
CONSENT OF COUNSEL
The consent of Cahill Gordon & Reindel to the use of its name in
the Prospectus included in this Registration Statement will be contained in
its opinion to be filed as Exhibit 5 to this Registration Statement.
_______________________
CONSENT OF INDEPENDENT AUDITORS
[to be filed by Amendment]
II-4
<PAGE>
Executed in 6 Parts
Counterpart No. ( )
NATIONAL EQUITY TRUST
EQUITY PORTFOLIO SERIES 3
REFERENCE TRUST AGREEMENT
This Reference Trust Agreement dated , 1998
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. 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
instrument 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>
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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 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
<PAGE>
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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 Section 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, provided however, that no
such distribution shall be made if the
assets of the Trust subsequent to such
distribution would not exceed any
Deferred Sales Charge payable and other
trust expenses."
(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
deposit 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 incurred, 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
<PAGE>
-5-
not affect calculations made prior
thereto and 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 3.
B. The Units of the Trust shall 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
as of the date hereof.
F. A Unit of the Trust is hereby declared
initially equal to 1/ th of the Trust.
G. The term "First Settlement Date" shall mean
, 1998.
<PAGE>
-6-
H. The terms "Computation Day" and "Record
Date" shall mean 10, 10, 10, and
10.
I. The term "Distribution Date" shall mean
25, 25, 25, and 25.
J. The term "Termination Date" shall mean
, 1999.
K. The Trustee's Annual Fee shall be $
(per 1,000 Units) for 100,000,000 and above units
outstanding; $0.80 (per 1,000 Units) for 50,000,000 -
99,999,999 units outstanding; $0.86 (per 1,000 Units)
for 49,999,999 and below units outstanding. In
calculating the Trustee's annual 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]
