As filed with the Securities and Exchange Commission on July 7, 1998
Registration No. 333-53675
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
Amendment No. 1 to
FORM S-6
For Registration Under the Securities Act
of 1933 of Securities of Unit Investment
Trusts Registered on Form N-8B-2
---------------------
A. EXACT NAME OF TRUST:
Schwab Trusts, Schwab Ten Trust, 1998 Series B
B. NAME OF DEPOSITORS:
<TABLE>
<S> <C> <C> <C>
Charles Schwab & Co., Inc. Reich & Tang Distributors, Inc.
C. COMPLETE ADDRESS OF DEPOSITORS' PRINCIPAL EXECUTIVE OFFICES:
Charles Schwab & Co., Inc. Reich & Tang Distributors, Inc.
101 Montgomery Street 600 Fifth Avenue
San Francisco, California 94104 New York, New York 10020
D. NAME AND COMPLETE ADDRESS OF AGENT FOR SERVICE:
COPY OF COMMENTS TO:
FRANCES COLE, ESQ. PETER J. DEMARCO MICHAEL R. ROSELLA, Esq.
Charles Schwab & Co., Inc. Reich & Tang Distributors, Inc. Battle Fowler LLP
101 Montgomery Street 600 Fifth Avenue 75 East 55th Street
San Francisco, California 94104 New York, New York 10020 New York, New York 10022
(212) 856-6858
</TABLE>
E. TITLE AND AMOUNT OF SECURITIES BEING REGISTERED:
An indefinite number of Units of Schwab Trusts, Schwab Ten Trust, 1998
Series B is being registered under the Securities Act of 1933 pursuant
to Section 24(f) of the Investment Company Act of 1940, as amended, and
Rule 24f-2 thereunder.
F. PROPOSED MAXIMUM AGGREGATE OFFERING PRICE TO THE PUBLIC OF THE SECURITIES
BEING REGISTERED:
Indefinite
G. AMOUNT OF FILING FEE:
No filing fee required.
H. APPROPRIATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after the effective date of the Registration
Statement.
/ / Check if it is proposed that this filing will become effective
immediately upon filing pursuant to Rule 487.
================================================================================
606976.5
<PAGE>
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INSERT LOGO
- --------------------------------------------------------------------------------
SCHWAB TRUSTS
SCHWAB TEN TRUST, 1998 SERIES B
The Trust is a unit investment trust designated Schwab Ten Trust, 1998 Series B
(the "Trust"). The Sponsors are Charles Schwab & Co., Inc. and Reich & Tang
Distributors, Inc. The objective of the Trust is to maximize total return
through a combination of capital appreciation and current dividend income. The
Sponsors cannot give any assurance that the Trust's objective can be achieved.
The Trust seeks to achieve its objective by attempting to outperform the Dow
Jones Industrial Average ("DJIA") by investing in a portfolio of the ten common
stocks which, out of the thirty stocks comprising the DJIA, have the highest
dividend yield (the "Strategic Ten"), determined as of two business days prior
to the Initial Date of Deposit. The Strategic Ten strategy is commonly referred
to as the "dogs of the Dow." The name "Dow Jones Industrial Average" is the
property of Dow Jones & Company, Inc., which is not affiliated with the Sponsors
and has not participated in any way in the creation of the Trust or in the
selection of the stocks included in the Trust and has not reviewed or approved
any information included in this Prospectus. Dow Jones & Company, Inc. has not
granted to the Trust or the Sponsors a license to use the Dow Jones Industrial
Average. The value of the Units of the Trust will fluctuate with fluctuations in
the value of the underlying Securities in the Trust. Therefore, Unitholders who
sell their Units prior to termination of the Trust may receive more or less than
their original purchase price upon sale. No assurance can be given that
dividends will be paid or that the Units will appreciate in value. The Trust
will terminate approximately one year after the Initial Date of Deposit. The
minimum purchase is 100 Units for individual purchasers, and 25 Units for
purchases by custodial accounts or Individual Retirement Accounts, self-employed
retirement plans (formerly Keogh Plans), pension funds and other tax-deferred
retirement plans.
This Prospectus consists of two parts. Part A contains the Summary of Essential
Information including descriptive material relating to the Trust and the
Statement of Financial Condition of the Trust. Part B contains general
information about the Trust. Part A may not be distributed unless accompanied by
Part B. Please read and retain both parts of this Prospectus for future
reference.
================================================================================
================================================================================
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
PROSPECTUS PART A DATED JULY 7, 1998
A-1
726317.1
<PAGE>
SUMMARY OF ESSENTIAL INFORMATION AS OF JULY 6, 1998:*
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<S> <C> <C>
INITIAL DATE OF DEPOSIT: July 7, 1998 TRUSTEE: The Chase Manhattan Bank
AGGREGATE VALUE OF SECURITIES.................. $149,989 TRUSTEE'S FEE: $.86 per 100 Units
NUMBER OF UNITS................................ 15,014 outstanding
FRACTIONAL UNDIVIDED INTEREST IN OTHER FEES AND EXPENSES: $.17 per 100
TRUST SECURITIES............................ 1/15,014 Units outstanding
PUBLIC OFFERING PRICE PER 100 UNITS SPONSORS: Charles Schwab & Co., Inc. and
Aggregate Value of Securities in Reich & Tang Distributors, Inc.
Trust ...................................... $149,989 AGENT FOR SPONSORS: Reich & Tang
Plus Estimated Organization Costs**......... $154 Distributors, Inc.
Divided By 15,014 Units (times 100) Public SPONSORS' PORTFOLIO SUPERVISORY,
Offering Price per 100 Units***+............ $1,000.00 BOOKKEEPING AND ADMINISTRATIVE
SPONSORS' REPURCHASE PRICE AND FEE: Maximum of $.25 per 100 Units
REDEMPTION PRICE PER outstanding (see "Trust Expenses and Charges"
100 UNITS++................................. $987.50 in Part B).
EVALUATION TIME: 4:00 p.m. New York Time RECORD DATES: December 15 and June 15
(or earlier close of the New York Stock Exchange). DISTRIBUTION DATES: December 31 and
MINIMUM INCOME OR PRINCIPAL June 30
DISTRIBUTION: $1.00 per 100 Units ROLLOVER NOTIFICATION DATE****:
LIQUIDATION PERIOD: Beginning seven days June 30, 1999 or another date as determined by
prior to the Mandatory Termination Date. the Sponsors.
MINIMUM VALUE OF TRUST: The Trust may MONTHLY DEFERRED SALES CHARGE
be terminated if the value of the Trust is less than PAYMENT DATES: October 5, 1998 and the
40% of the aggregate value of the Securities at the first business day of each month thereafter.
completion of the Deposit Period. SEMI-ANNUAL DEFERRED SALES CHARGE
MANDATORY TERMINATION DATE: The PAYMENT DATES: December 31, 1998 and
earlier of August 20, 1999 or the disposition of the June 30, 1999.
last Security in the Trust.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Schwab
Schwab Fee-Based Account/Strategic Ten
CUSIP NUMBERS: Cash: 808523260 Accounts: Investors:
Reinvestment: 808523278 Cash: 808523245 Cash: 808523229
Reinvestment: 808523252 Reinvestment:
808523237
</TABLE>
- ------------------
* The business day prior to the Initial Date of Deposit. The Initial Date of
Deposit is the date on which the Trust Agreement was signed and the deposit of
Securities with the Trustee made.
** Investors will reimburse the Sponsors, on a per 100 Units basis, for all
or a portion of the costs incurred in organizing and offering the Trust
(collectively, the "organization costs") -- including costs of preparing the
registration statement, the trust indenture and other closing documents,
registering units with the SEC and the states and the initial audit of the
Trust's portfolios. The estimated organization costs will be paid to the
Sponsors from the assets of the Trust as of the close of the initial public
offering period. To the extent that actual organization costs are less than the
estimated amount, only the actual organization costs will be deducted from the
assets of the Trust. To the extent that actual organization costs are greater
than the estimated amount, only the estimated organization costs included in the
Public Offering Price will be reimbursed to the Sponsors.
A-2
726317.1
<PAGE>
*** A maximum Deferred Sales Charge of $12.50 per 100 Units (1.25% of the
Initial Public Offering Price) will be paid through deductions subsequent to the
Initial Date of Deposit as described under "Deferred Sales Charge". See "Public
Offering-Discounts" in Part B for a description of reduced deferred sales
charges for certain investors. (See "Public Offering - Offering Price".) On a
repurchase or redemption of Units before the last Deferred Sales Charge Payment
Date, any remaining Deferred Sales Charge payments will be deducted from the
proceeds. Units purchased pursuant to the Reinvestment Plan are subject to that
portion of the Deferred Sales Charge remaining at the time of reinvestment (see
"Reinvestment Plan").
**** If a Unitholder ("Rollover Unitholder") so specifies on or prior to the
Rollover Notification Date, the Rollover Unitholder's terminating distribution
will be reinvested in an available series of the Schwab Ten Trust, if offered
(see "Trust Administration--Trust Termination").
+ Except for the amount representing the estimated organization costs, on
the Initial Date of Deposit there will be no cash in the Income or Principal
Accounts. Anyone purchasing Units after such date will have included in the
Public Offering Price a pro rata share of any cash in such Accounts.
++ This figure reflects deduction of the maximum Deferred Sales Charge of
$12.50 per 100 Units; the actual amount deducted upon redemption of Units will
depend upon the Deferred Sales Charge applicable to the redeeming Unitholder.
Any redemptions of 25,000 Units or more may, upon request by a redeeming
Unitholder, be made in kind. The Trustee will forward the distributed securities
to the Unitholder's broker-dealer account at The Depository Trust Company in
book-entry form. As of the close of the initial offering period, the Sponsors'
Repurchase Price and the Redemption Price per 100 Units for each Trust will be
reduced to reflect its estimated organization costs per 100 Units. See
"Liquidity--Trustee Redemption" in Part B.
A-3
726317.1
<PAGE>
FEE TABLE
- --------------------------------------------------------------------------------
This Fee Table is intended to help you to understand the costs and expenses that
you will bear directly or indirectly. See "Public Offering and Trust Expenses
and Charges." Although each Series has a term of only one year, and is a unit
investment trust rather than a mutual fund, this information is presented to
permit a comparison of fees, assuming the principal amount and distributions are
rolled over each year into a new Series subject only to the Deferred Sales
Charge and trust expenses.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Maximum Reduced
Deferred Sales Charge Deferred Sales Charge+
--------------------- ----------------------
Unitholder Transaction Expenses As a % of Amount
As a % of Initial Amount per Initial per
Offering Price 100 Units Offering Price 100 Units
----------------- --------- -------------- ---------
<S> <C> <C> <C> <C>
Deferred Sales Charge per Year ........................ 1.25%* $12.50 1.00%** $10.00
----- ------ ----- ------
Maximum Sales Charge Imposed Per Year on Reinvested Dividends 1.25%*** $12.50 1.00%** $10.00
===== ====== ===== ======
Organization Costs
Estimated Organization Costs........................... .103% $1.03 .103% $1.03
===== ===== ===== =====
Estimated Annual Fund Operating Expenses Amount
As a % of Amount per As a % of per
Net Assets 100 Units Net Assets 100 Units
---------- --------- ---------- ---------
Trustee's Fee.......................................... .086% $.86 .086% $.86
Other Operating Expenses............................... .017% .17 .017% .17
Portfolio Supervision, Bookkeeping and Administrative Fees .025% .25 .025% .25
----- ---- ----- ---
Total.............................................. .128% $1.28 .128% $1.28
===== ====== ===== =====
</TABLE>
<TABLE>
<CAPTION>
Examples
--------
<S> <C> <C> <C> <C> <C> <C>
Maximum Deferred Sales Charge Example: Cumulative Expenses Paid for Period:
-----------------------------------------
1 year 3 years
------ -------
An investor would pay the following expenses on a $1,000 investment, assuming
Trust operating expense ratio of .128% and a 5% annual return on the investment
throughout the periods......................................................... $15 $41
Reduced Deferred Sales Charge Example: Cumulative Expenses Paid for Period:
-----------------------------------------
1 year 3 years
------ -------
An investor would pay the following expenses on a $1,000 investment, assuming
Trust operating expense ratio of .128% and a 5% annual return on the investment
throughout the periods......................................................... $12 $34
</TABLE>
The Examples assume reinvestment of all dividends and distributions and utilizes
a 5% annual rate of return. For purposes of the Examples, the Deferred Sales
Charge imposed on reinvestment of dividends is not reflected until the year
following payment of the dividend; the cumulative expenses would be higher if
sales charges on reinvested dividends were reflected in the year of
reinvestment. The Examples should not be considered a representation of past or
future expenses or annual rate of return; the actual expenses and annual rate of
return may be more or less than those assumed for purposes of the Examples.
- ------------------
* The actual fee is a total of $12.50 per 100 Units, irrespective of
purchase or redemption price, deducted in installments over the life of the
Trust, commencing October 5, 1998. If a Holder sells or redeems Units before all
of these deductions have been made, the balance of the Deferred Sales Charge
will be deducted from the proceeds of sale or redemption. If the Unit price
exceeds $10 per Unit, the Deferred Sales Charge will be less than 1.25%; if the
Unit price is less than $10 per Unit, the Deferred Sales Charge will exceed
1.25%.
** The actual fee is a total of $10.00 per 100 Units, irrespective of
purchase or redemption price, deducted in installments over the life of the
Trust, commencing October 5, 1998. If a Holder sells or redeems Units before all
of these deductions have been made, the balance of the Deferred Sales Charge
will be deducted from the proceeds of sale or redemption. If the Unit price
exceeds $10 per Unit, the Deferred Sales Charge will be less than 1.00%; if the
Unit price is less than $10 per Unit, the Deferred Sales Charge will exceed
1.00%. See "Public Offering-Discounts" in Part B for a description of which
investors will be eligible for this reduced Deferred Sales Charge.
*** Reinvested dividends will be subject only to the Deferred Sales Charge
remaining at the time of reinvestment (see "Reinvestment Plan" in this Part A).
+ The Deferred Sales Charge is subject to a further reduction to $8.00 per
100 Units (.80% of the Initial Offering Price) under certain circumstances (see
"Public Offering-Discounts" in Part B).
A-4
726317.1
<PAGE>
OBJECTIVE. The objective of the Trust is to maximize total return through
capital appreciation and current dividend income. The Trust seeks to achieve its
objective by attempting to outperform the Dow Jones Industrial Average ("DJIA")
(which is not affiliated with the Sponsors) by creating a portfolio that follows
the investment strategy of investing in the ten (10) common stocks which, out of
the thirty stocks comprising the DJIA, have the highest dividend yield (the
"Strategic Ten"), determined as of two business days prior to the Initial Date
of Deposit. The Trust's portfolio will be comprised of these ten (10) stocks.
The Trust's assets will be allocated in approximately equal amounts among the
Strategic Ten. For the actual percentage of each stock in the portfolio, see
"Portfolio" herein. (Also, see "The Trust - Objective" and "The Trust - The
Securities" in Part B.) As used herein, the term "highest dividend yield" means
the yield for each Security calculated by annualizing the last quarterly or
semi-annual ordinary dividend distributed on that Security and dividing the
result by the market value of that Security as of two business days prior to the
Initial Date of Deposit. This rate is historical, and there is no assurance that
any dividends will be declared or paid in the future on the Securities in the
Trust. The Trust may not exceed the DJIA in any one year; however, historically,
long term cumulative returns from this strategy has outperformed the DJIA. As
used herein, the term "Securities" means the common stocks initially deposited
in the Trust and described in "Portfolio" in Part A and any additional common
stocks acquired and held by the Trust pursuant to the provisions of the
Indenture. Further, the Securities may appreciate or depreciate in value,
dependent upon the full range of economic and market influences affecting
corporate profitability, the financial condition of issuers and the price of
equity securities in general and the Securities in particular. Therefore, there
is no guarantee that the objective of the Trust will be achieved.
PORTFOLIO. The Portfolio contains 10 issues of common stock. 100% of the issues
are represented by the Sponsor's contracts to purchase. Based upon the principal
business of each issuer and current market values, the following industries are
represented in the Portfolio: Aluminum, 10.00%; Auto Manufacturing, 10.02%;
Banking and Finance, 9.96%; Consumer Products, 10.02%; Manufacturing, 10.02%;
Oil, 20.01%; Paper and Forest Products, 9.98%; Photography, 10.00%; and
Telecommunications, 9.99%.
PUBLIC OFFERING PRICE. The Public Offering Price per 100 Units of the Trust is
equal to the aggregate value of the underlying Securities (the price at which
they could be directly purchased by the public assuming they were available) in
the Trust divided by the number of Units outstanding times 100. The Deferred
Sales Charge of $12.50 per 100 Units (the "Deferred Sales Charge") will be
payable in installments over the life of the Trust. In addition, during the
initial offering period, cash in an amount sufficient to pay the per Unit
portion of all or a part of the estimated organization and offering costs
(collectively, "organization costs") of the Trust will be added to the Public
Offering Price per 100 Units. The price of a single Unit, or any multiple
thereof, is calculated by dividing the Public Offering Price per 100 Units by
100 and multiplying by the number of Units. Any cash held by the Trust will be
added to the Public Offering Price. For additional information regarding the
Public Offering Price, repurchase and redemption of Units and other essential
information regarding the Trust, see the "Summary of Essential Information." The
Public Offering Price per Unit may vary on a daily basis in accordance with
fluctuations in the aggregate value of the underlying Securities. The price to
be paid by each investor will be computed as of the date the Units are
purchased. (See "Public Offering" in Part B.)
DEFERRED SALES CHARGE. The Deferred Sales Charge will be deducted as follows:
for every Unitholder, a monthly charge of $.80 per 100 Units will be deducted
from the Principal Account in ten monthly installments commencing on October 5,
1998 (and the first business day of each month thereafter) ($8.00 total) (the
"Monthly Charge"); and for Unitholders bearing the Deferred Sales Charge of
$12.50 or $10.00 per 100 Units, a semi-annual charge of $2.25 or $1.00,
respectively, per 100 Units will be deducted from distributions from the Income
Account in two semi-annual installments on December 31, 1998 and June 30, 1999
($4.50 or $2.00 total) (the "Semi-Annual Charge"). See "Public
Offering-Discounts" in Part B for a description of reduced deferred sales
A-5
726317.1
<PAGE>
charges for certain investors. This deferred method of payment keeps more of the
Unitholders' money invested over a longer period of time. (See "Public Offering
- - Offering Price" in Part B.)
ESTIMATED NET ANNUAL DISTRIBUTIONS. The estimated net annual distributions to
Unitholders (based on the most recent annualized quarterly or semi-annual
ordinary dividend distributed with respect to the Securities and based on the
payment of the maximum Deferred Sales Charge, which includes a deduction of
$4.50 per 100 Units from the Income Account) as of two business days prior to
the Initial Date of Deposit per 100 Units was $21.37. This estimate will vary
with changes in the Trust's fee and expenses, actual dividends received, and
with the sale of Securities. There is no assurance that the estimated net annual
dividend distributions will be realized in the future.
DISTRIBUTIONS. Dividend distributions, if any, will be made on the Distribution
Dates to all Unitholders of record on the appropriate Record Date. For the
specific dates representing the Distribution Dates and Record Dates, see
"Summary of Essential Information" in Part A. The final distribution will be
made within a reasonable period of time after the termination of the Trust. (See
"Rights of Unitholders--Distributions" in Part B.) Unitholders may elect to
automatically reinvest distributions (other than the final distribution in
connection with the termination of the Trust), into additional Units of the
Trust, which are subject to the remainder of the Deferred Sales Charge. See
"Reinvestment Plan" in Part B.
MARKET FOR UNITS. The Sponsors, although not obligated to do so, intend to
maintain a secondary market for the Units and to continuously offer to
repurchase the Units of the Trust both during and after the initial public
offering period. The secondary market repurchase price will be based on the
market value of the Securities in the Trust portfolio and will be the same as
the redemption price less the remaining portion of the Deferred Sales Charge.
(See "Liquidity--Sponsors Repurchase" for a description of how the secondary
market repurchase price will be determined.) If a market is not maintained a
Unitholder will be able to redeem his Units with the Trustee (see
"Liquidity--Trustee Redemption" in Part B). As a result, the existence of a
liquid trading market for these Securities may depend on whether dealers will
make a market in these Securities. There can be no assurance of the making or
the maintenance of a market for any of the Securities contained in the portfolio
of the Trust or of the liquidity of the Securities in any markets made. In
addition, the Trust may be restricted under the Investment Company Act of 1940
from selling Securities to the Sponsors. The price at which the Securities may
be sold to meet redemptions and the value of the Units will be adversely
affected if trading markets for the Securities are limited or absent.
TERMINATION. During the seven-day period prior to the Mandatory Termination Date
(the "Liquidation Period"), Securities will begin to be sold in connection with
the termination of the Trust and all Securities will be sold or distributed by
the Mandatory Termination Date. The Trustee may utilize the services of the
Sponsors for the sale of all or a portion of the Securities in the Trust. Any
brokerage commissions received by the Sponsors from the Trust in connection with
such sales will be in accordance with applicable law. The Sponsors will
determine the manner, timing and execution of the sales of the underlying
Securities. The Sponsors will attempt to sell the Securities as quickly as they
are able during the Liquidation Period without, in their judgment, materially
adversely affecting the market price of the Securities, but all of the
Securities will in any event be disposed of by the end of the Liquidation
Period. The Sponsors do not anticipate that the period will be longer than seven
days, and it could be as short as one day, depending on the liquidity of the
Securities being sold.
Unitholders may elect one of the three options in receiving their terminating
distributions: (1) to receive their pro rata share of the underlying Securities
in-kind, (2) to receive cash upon the liquidation of their pro rata share of the
underlying Securities or (3) to invest the amount of cash they would have
received upon the liquidation of their
A-6
726317.1
<PAGE>
pro rata share of the underlying Securities in units of a future series of
Schwab Ten Trust (the "New Trust") (if one is offered) at a reduced deferred
sales charge (see "Rollover Option"). See "Trust Administration--Trust
Termination" in Part B for a description of how to select a termination
distribution option. Unitholders who have not chosen to receive
distributions-in-kind will be at risk to the extent that the market value of the
Securities declines prior to their being sold during the Liquidation Period; for
this reason the Sponsors will be inclined to sell the Securities in as short a
period as they can without materially adversely affecting the price of the
Securities. Because the Sponsor can start selling the Securities on August 14,
1999, Unitholders whose purchase of Units settles after August 13, 1998, will
have no assurance of realizing mid-term capital gains (see "Tax Status" in Part
B). Unitholders should consult their own tax advisers in this regard.
ROLLOVER OPTION. Unitholders may elect to roll over their terminating
distributions into the next available New Trust at a reduced deferred sales
charge. Rollover Unitholders must make this election on or prior to the Rollover
Notification Date. Upon making this election, a Unitholder's Units will be
redeemed and the proceeds will be reinvested in units of the next available New
Trust. See "Trust Administration--Trust Termination" in Part B for details to
make this election.
RISK CONSIDERATIONS. An investment in Units of the Trust should be made with an
understanding of the risks inherent in an investment in any of the Securities,
including, for common stocks, the risk that the financial condition of the
issuers of the Securities may become impaired or that the general condition of
the stock market may worsen (both of which may contribute directly to a decrease
in the value of the Securities and thus in the value of the Units). Investors
should consider the greater risk of the Trust's concentration and the effect on
their investment versus a more diversified portfolio and should compare returns
available on less concentrated portfolios before making an investment decision.
The portfolio of the Trust is fixed and not "managed" by the Sponsors. Investors
should note that since the Portfolio of the Trust will be determined as of two
business days prior to the Initial Date of Deposit, any changes in the
components of the DJIA or the Strategic Ten following such determination will
not cause a change in the composition of the Portfolio. Since the Trust will not
sell Securities in response to ordinary market fluctuation, but only (except for
certain extraordinary circumstances) at the Trust's termination or to meet
redemptions, the amount realized upon the sale of the Securities may not be the
highest price attained by an individual Security during the life of the Trust.
In connection with the deposit of Additional Securities subsequent to the
Initial Date of Deposit, if cash (or a letter of credit in lieu of cash) is
deposited with instructions to purchase Securities, to the extent the price of a
Security increases or decreases between the deposit and the time the Security is
purchased, Units may represent less or more of that Security and more or less of
the other Securities in the Trust. In addition, brokerage fees incurred in
purchasing Securities with cash deposited with instructions to purchase the
Securities will be an expense of the Trust. Price fluctuations during the period
from the time of deposit to the time the Securities are purchased, and payment
of brokerage fees, will affect the value of every Unitholder's Units and the
income per Unit received by the Trust.
The Sponsors cannot give any assurance that the business and investment
objectives of the issuers of the Securities will correspond with or in any way
meet the limited term objective of the Trust. (See "Risk Considerations" in Part
B of this Prospectus.)
REINVESTMENT PLAN. Unitholders may elect to automatically reinvest their
distributions, if any (other than the final distribution in connection with the
termination of the Trust) into additional units of the Trust, subject only to
any remaining deductions of the Deferred Sales Charge. See "Reinvestment Plan"
in Part B for details on how to enroll in the Reinvestment Plan.
UNDERWRITING. Charles Schwab & Co., Inc., 101 Montgomery Street, San Francisco,
California 94104, will act as Underwriter for all of the Units of the Schwab Ten
Trust, 1998 Series B. Units of the Trust shall be distributed exclusively by the
Underwriter to its customers (see "Public Offering--Distribution of Units" in
Part B).
A-7
726317.1
<PAGE>
SCHWAB TEN TRUST,
1998 SERIES B
STATEMENT OF FINANCIAL CONDITION AS OF JULY 6, 1998
ASSETS
<TABLE>
<CAPTION>
<S> <C>
Investment in Securities--Sponsors' Contracts to Purchase
Underlying Securities Backed by Letter of Credit (cost $149,989)(Note 1)................ $ 149,989
Cash.......................................................................................... 154
----------
Total......................................................................................... $ 150,143
==========
LIABILITIES AND INTEREST OF UNITHOLDERS
Reimbursement to Sponsors for Organization Costs (Note 2)..................................... $ 154
----------
Interest of Unitholders - Units of Fractional
Undivided Interest Outstanding (1998 Series B: 15,014 Units)............................ 149,989
-------
Total......................................................................................... $150,143
========
Net Asset Value per Unit (3).................................................................. $ 9.99
==========
</TABLE>
- -------------------------
Notes to Statement of Financial Condition:
The preparation of financial statements in accordance with generally
accepted accounting principles requires Trust management to make estimates and
assumptions that affect the reported amounts and disclosures. Actual results
could differ from those estimates.
(1) Schwab Ten Trust, 1998 Series B (the "Trust") is a unit investment
trust created under the laws of the State of New York and registered under the
Investment Company Act of 1940. The objective of the Trust, jointly sponsored by
Charles Schwab & Co., Inc. and Reich & Tang Distributors, Inc. (the "Sponsors")
is to maximize total return through capital appreciation and current dividend
income. An irrevocable letter of credit issued by BankBoston, N.A. in an amount
of $400,000 has been deposited with the Trustee for the benefit of the Trust to
cover the purchases of Securities. Aggregate cost to the Trust of the Securities
listed in the Portfolio of Investments is determined by the Trustee on the basis
set forth under "Public Offering--Offering Price" as of 4:00 p.m. on July 6,
1998. The Trust will terminate on August 20, 1999 or can be terminated earlier
under certain circumstances as further described in the Prospectus.
(2) A portion of the Public Offering Price consists of cash in an amount
sufficient to reimburse the Sponsor for the per Unit portion of all or a part of
the costs of establishing the Trust. These costs have been estimated at $1.03
per 100 Units for the Trust. A payment will be made as of the close of the
initial public offering period to an account maintained by the Trustee from
which the obligation of the investors to the Sponsors will be satisfied. To the
extent that actual organization costs are less than the estimated amount, only
the actual organization costs will be deducted from the assets of the Trust.
(3) The maximum Deferred Sales Charge of $12.50 per 100 Units (1.25% of the
Initial Public Offering Price) will be paid by Monthly and Semi-Annual Charges
subsequent to the Initial Date of Deposit. If Units are redeemed prior to the
last Deferred Sales Charge payment date, the remaining amount of the Deferred
Sales Charge applicable to such Units will be payable at the time of redemption.
Based on projected total assets of $50,000,000, the estimated maximum total
Deferred Sales Charge would be $625,000. To the extent that Unitholders pay a
reduced Deferred Sales Charge or the Trust is larger or smaller, the estimate
may vary.
A-8
726317.1
<PAGE>
SCHWAB TEN TRUST,
1998 SERIES B
PORTFOLIO OF INVESTMENTS
AS OF JULY 6, 1998
<TABLE>
<CAPTION>
Market
Value of
Stocks as a Cost of
Number Percentage Current Market Securities to
Portfolio of Ticker of the Dividend Value Per the Trust
No. Shares Name of Issuer (1) Symbol Trust (2) Yield(3) Share (4)
----- -------- ------------------ ------ --------- -------- ----- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Common Stocks:
1. 230 Aluminum Company of America AA 10.00% 2.30% $65.1875 $14,993
2. 271 AT&T Corporation T 9.99 2.38 55.3125 14,990
3. 177 Chevron Corporation CHV 9.99 2.88 84.6250 14,979
4. 204 Eastman Kodak Company EK 10.00 2.39 73.5000 14,994
5. 205 Exxon Corporation XON 10.02 2.23 73.3125 15,029
6. 212 General Motors Corporation GM 10.02 2.82 70.8750 15,025
7. 342 International Paper Company IP 9.98 2.28 43.7500 14,962
8. 126 J.P. Morgan & Company JPM 9.96 3.20 118.5625 14,939
9. 182 Minnesota Mining & Manufacturing MMM 10.02 2.66 82.6250 15,038
Company
10. 376 Philip Morris Companies, Inc. MO 10.02 4.00 40.0000 15,040
----- --------
Total Investment in Securities 100.00% $149,989
====== =======
</TABLE>
FOOTNOTES TO PORTFOLIO OF INVESTMENTS
(1) Contracts to purchase the Securities were entered into on July 6, 1998. All
such contracts are expected to be settled on or about the First Settlement
Date of the Trust which is expected to be July 10, 1998.
(2) Based on the cost of the Securities to the Trust.
(3) Current Dividend Yield for each security was calculated by annualizing the
last quarterly or semi-annual ordinary dividend received on the security
and dividing the result by its market value as of the close of trading on
July 6, 1998.
(4) Evaluation of Securities by the Trustee was made on the basis of closing
sales prices at the Evaluation Time on July 6, 1998. The Sponsors' Purchase
Price was $149,989.
The accompanying notes form an integral part of the Financial Statements.
A-9
726317.1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
THE UNITHOLDERS, SPONSORS AND TRUSTEE
SCHWAB TEN TRUST, 1998 SERIES B
We have audited the accompanying statement of Financial Condition of Schwab
Ten Trust, 1998 Series B, including the Portfolio of Investments, as of July 6,
1998. This financial statement is the responsibility of the Trust's management.
Our responsibility is to express an opinion on this financial statement based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the 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 with The Chase Manhattan Bank, Trustee, of an irrevocable letter of
credit deposited for the purchase of securities, as shown in the financial
statement as of July 6, 1998. An audit also includes assessing the accounting
principles used and significant estimates made by management, 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 Schwab Ten Trust, 1998
Series B, at July 6, 1998, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
New York, New York
July 6, 1998
A-10
726317.1
<PAGE>
- --------------------------------------------------------------------------------
[INSERT LOGO]
- --------------------------------------------------------------------------------
SCHWAB TRUSTS
SCHWAB TEN TRUST, 1998 SERIES B
PROSPECTUS PART B
PART B OF THIS PROSPECTUS MAY NOT BE
DISTRIBUTED UNLESS ACCOMPANIED BY
PART A
THE TRUST
ORGANIZATION. Schwab Ten Trust consists of a "unit investment trust"
designated as set forth in Part A. The Trust was created under the laws of the
State of New York pursuant to a Trust Indenture and Agreement (the "Trust
Agreement"), dated the Initial Date of Deposit, among Charles Schwab & Co., Inc.
and Reich & Tang Distributors, Inc., as Sponsors, and The Chase Manhattan Bank,
as Trustee.
On the Initial Date of Deposit, the Sponsors deposited with the Trustee
common stock, including funds and delivery statements relating to contracts for
the purchase of certain such securities (collectively, the "Securities") with an
aggregate value as set forth in Part A and cash or an irrevocable letter of
credit issued by a major commercial bank in the amount required for such
purchases. Thereafter the Trustee, in exchange for the Securities so deposited,
delivered to the Sponsors certificates evidencing the ownership of all Units of
the Trust. The Sponsors have a limited right to substitute other securities in
the Trust portfolio in the event of a failed contract. See "The
Trust--Substitution of Securities." The Sponsors may also, in certain
circumstances, direct the Trustee to dispose of certain Securities if the
Sponsors believe that, because of market or credit conditions, or for certain
other reasons, retention of the Security would be detrimental to Unitholders.
See "Trust Administration--Portfolio Supervision."
As of the Initial Date of Deposit, a "Unit" represents an undivided
fractional interest in the Securities and cash of the Trust as is set forth in
the "Summary of Essential Information." As additional Units are issued by the
Trust as a result of the deposit of Additional Securities, as described below,
the aggregate value of the Securities in the Trust will be increased and the
fractional undivided interest in the Trust represented by each Unit will be
decreased. To the extent that any Units are redeemed by the Trustee, the
fractional undivided interest or pro rata share in such Trust represented by
each unredeemed Unit will increase, although the actual interest in such Trust
represented by such fraction will remain unchanged. Units will remain
outstanding until redeemed upon tender to the Trustee by Unitholders, which may
include the Sponsors, or until the termination of the Trust Agreement.
DEPOSIT OF ADDITIONAL SECURITIES. With the deposit of the Securities in the
Trust on the Initial Date of Deposit, the Sponsors established a proportionate
relationship among the initial aggregate value of specified Securities in the
Trust. During the 90 days subsequent to the Initial Date of Deposit (the
"Deposit Period"), the Sponsors may deposit additional Securities in the Trust
that are substantially similar to the Securities already deposited in the Trust
("Additional Securities"), contracts to purchase Additional Securities or cash
(or a bank letter of credit in lieu of cash) with instructions to purchase
Additional Securities, in order to create
B-1
726317.1
<PAGE>
additional Units, maintaining to the extent practicable the original
proportionate relationship of the number of shares of each Security in the Trust
portfolio on the Initial Date of Deposit. These additional Units, which will
result in an increase in the number of Units outstanding, will each represent,
to the extent practicable, an undivided interest in the same number and type of
securities of identical issuers as are represented by Units issued on the
Initial Date of Deposit. It may not be possible to maintain the exact original
proportionate relationship among the Securities deposited on the Initial Date of
Deposit because of, among other reasons, purchase requirements, changes in
prices, or unavailability of Securities. The composition of the Trust portfolio
may change slightly based on certain adjustments made to reflect the disposition
of Securities and/or the receipt of a stock dividend, a stock split or other
distribution with respect to such Securities, including Securities received in
exchange for shares or the reinvestment of the proceeds distributed to
Unitholders. Deposits of Additional Securities in the Trust subsequent to the
Deposit Period must replicate exactly the existing proportionate relationship
among the number of shares of Securities in the Trust portfolio. Substitute
Securities may be acquired under specified conditions when Securities originally
deposited in the Trust are unavailable (see "The Trust--Substitution of
Securities" below).
OBJECTIVE. The objective of the Trust is to maximize total return through
capital appreciation and current dividend income. The Trust seeks to achieve its
objective by attempting to outperform the Dow Jones Industrial Average ("DJIA")
(which is not affiliated with the Sponsors) by creating a portfolio that follows
the investment strategy of investing in the ten (10) common stocks which, out of
the thirty (30) common stocks comprising the DJIA, have the highest dividend
yield (the "Strategic Ten"), determined as of two business days prior to the
Initial Date of Deposit. The Strategic Ten strategy is commonly referred to as
the "dogs of the Dow." The Trust's portfolio will be comprised of these ten (10)
stocks. The Trust's assets will be allocated in approximately equal amounts
among the Strategic Ten. For the actual percentage of each stock in the
portfolio, see "Portfolio" in Part A. (Also see "The Trust - Objective" and "The
Trust - The Securities" in Part B.) As used herein, the term "highest dividend
yield" means the yield for each Security calculated by annualizing the last
quarterly or semi-annual ordinary dividend distributed on that Security and
dividing the result by the market value of that Security as of two business days
prior to the Initial Date of Deposit. This rate is historical, and there is no
assurance that any dividends will be declared or paid in the future on the
Securities in the Trust. As used herein, the term "Securities" means the common
stocks initially deposited in the Trust and described in "Portfolio" in Part A
and any additional common stocks acquired and held by the Trust pursuant to the
provisions of the Indenture.
Investing in stocks comprising the DJIA with the highest dividend yields
may be effective in achieving the Trust's investment objective because regular
dividends are common for established companies and dividends have accounted for
a substantial portion of the total return on thirty common stocks comprising the
DJIA. There can be no assurance that the dividend rates will be maintained.
Reduction or elimination of a dividend could adversely affect the stock price as
well. Purchasing a portfolio of these stocks as opposed to one or two stocks can
achieve a more diversified holding. There is only one investment decision
instead of ten. An investment in the Trust can be cost-efficient, avoiding the
odd-lot costs of buying small quantities of securities directly. An investment
in a number of companies with high dividends relative to their stock prices is
designed to increase the Trust's potential for higher returns. The Trust's
return will consist of a combination of capital appreciation and current
dividend income. The Trust will terminate in approximately one year, at which
time investors may choose to either receive the distributions in kind, in cash
or reinvest in a subsequent series of the Schwab Ten Trust (if available) at a
reduced deferred sales charge. Further, the Securities may appreciate or
depreciate in value, dependent upon the full range of economic and market
influences affecting corporate profitability, the financial condition of issuers
and the prices of equity securities in general and the Securities in particular.
Investors should note that the Trust's selection criteria were applied to the
Securities two business days prior to the Initial Date of Deposit. Since the
B-2
726317.1
<PAGE>
Sponsors may deposit additional Securities in connection with the sale of
additional Units, the yields on these Securities may change subsequent to the
Initial Date of Deposit. Therefore, there is no guarantee that the objective of
the Trust will be achieved.
THE SECURITIES. Each of the Securities has been taken from the Dow Jones
Industrial Average ("DJIA"). The DJIA comprises 30 common stocks chosen by the
editors of The Wall Street Journal as representative of the broad market and of
American industry. The companies are major factors in their industries and their
stocks are widely held by individuals and institutional investors. Changes in
the components of the DJIA are made entirely by the editors of The Wall Street
Journal without consultation with the companies, the stock exchange or any
official agency. For the sake of continuity, changes are made rarely. Most
substitutions have been the result of mergers, but from time to time, changes
may be made to achieve a better representation. The components of the DJIA may
be changed at any time for any reason. Any changes in the components of the DJIA
after the date of this Prospectus will not cause a change in the identity of the
common stocks included in the Trust's portfolio, including any Additional
Securities deposited in the Trust. The Trust is not considered to be
"concentrated" in a particular category or industry.
The first DJIA, consisting of 12 stocks, was published in The Wall Street
Journal in 1896. The list grew to 20 stocks in 1916 and to 30 stocks on October
1, 1928. For two periods of 17 consecutive years each, there were no changes to
the list: March 1939 - July 1956 and June 1959 - August 1976. The DJIA last
changed on March 17, 1997.
<TABLE>
<CAPTION>
<S> <C>
Stocks Currently Comprising the DJIA
------------------------------------
AT&T Corporation International Business Machines Corporation
Allied Signal International Paper Company
Aluminum Company of America Johnson & Johnson
American Express Company J.P. Morgan & Company, Inc.
Boeing Company McDonald's Corporation
Caterpillar Inc. Merck & Company, Inc.
Chevron Corporation Minnesota Mining & Manufacturing Company
Coca-Cola Company Phillip Morris Companies, Inc.
E.I. du Pont de Nemours & Company Proctor & Gamble Company
Eastman Kodak Company Sears, Roebuck & Company
Exxon Corporation Travelers Group Inc.
General Electric Company Union Carbide Corporation
General Motors Corporation United Technologies Corporation
Goodyear Tire & Rubber Company Wal-Mart Stores, Inc.
Hewlett-Packard Company Walt Disney Company
</TABLE>
The yield for each Security was calculated by annualizing the last
quarterly or semi-annual ordinary dividend distributed and dividing the result
by the market value of the Security as of two business days prior to the Initial
Date of Deposit. This formula (an objective determination) served as the basis
for the Sponsors' selection of the Strategic Ten. The companies represented in
the Trust are some of the most well-known and highly capitalized companies in
America. The Securities were selected irrespective of any research
recommendation by the Sponsors. Investing in the stocks of the DJIA may be
effective as well as conservative because regular dividends are common for
established companies and dividends have accounted for a substantial portion of
the total return on stocks of the group of stocks comprising the DJIA.
B-3
726317.1
<PAGE>
Although the Schwab Ten Trust was not available until this year, during the
last 21 years, the strategy of investing in approximately equal values of the
ten highest yielding stocks each year generally would have yielded a higher
total return than an investment in all 30 stocks which make up the DJIA. The
following table shows the hypothetical performance of investing approximately
equal amounts in the Strategic Ten at the beginning of each year and rolling
over the proceeds. The total returns do not reflect sales charges, brokerage and
transaction costs, commissions or taxes and, therefore, will be different from
actual investment results. These results represent past performance of the
Strategic Ten and should not be considered indicative of future results of the
Trust. The Trust's annual total return may not exceed the DJIA in any one year;
however, historically, long term cumulative total returns from these strategies
has outperformed the cumulative returns of the DJIA. The Strategic Ten
underperformed the DJIA in certain years. Also, investors in the Trust may not
realize as high a total return as on a direct investment in the Strategic Ten
since the Trust has sales charges and expenses and may not be fully invested at
all times. Unit prices fluctuate with the value of the underlying stocks, and
there is no assurance that dividends on these stocks will be paid or that the
Units will appreciate in value.
B-4
726317.1
<PAGE>
The following table compares the actual performance of the DJIA and
approximately equal values of the Strategic Ten Strategy in each of the past 22
years, as of December 31 in each of these years:
<TABLE>
<CAPTION>
COMPARISON OF TOTAL RETURNS(1)
Dow Jones
Industrial
Year Ended Strategic Ten(2) Average (DJIA)
---------- ------------- --------------
<S> <C> <C> <C>
1976 34.80% 22.70%
1977 0.90 -12.70
1978 -0.10 2.70
1979 12.40 10.50
1980 27.20 21.50
1981 5.00 -3.40
1982 23.60 25.80
1983 38.70 25.70
1984 7.60 1.10
1985 29.50 32.80
1986 32.10 26.90
1987 6.10 6.00
1988 22.90 16.00
1989 26.50 31.70
1990 -7.60 -0.40
1991 39.30 23.90
1992 7.90 7.40
1993 27.30 16.80
1994 4.10 4.90
1995 36.70 36.40
1996 27.90 28.90
1997 21.90 24.90
</TABLE>
- --------------------------------
(1) Total Return represents the sum of Appreciation and Actual Dividend Yield.
(i) Appreciation for the Strategic Ten and the DJIA is calculated by
subtracting the opening market value of these Strategic Ten or DJIA stocks,
respectively, as of the first trading day on the New York Stock Exchange in
a given year from the market value of those stocks as of the last trading
day in that year, and dividing the result by the market value of the stocks
as of the first trading day in that year. (ii) Actual Dividend Yield for
the Strategic Ten is calculated by adding the total dividends received on
the stocks in the year and dividing the result by the market value of the
stocks as of the first trading day in that year. Actual Dividend Yield for
the DJIA is calculated by taking the total dividends credited to the DJIA
and dividing the result by the opening value of the DJIA as of the first
trading day in that year. Total return does not take into consideration any
sales charges, commissions, expenses or taxes.
(2) The Strategic Ten in any given year were selected by ranking the dividend
yields for each of the stocks in the DJIA as of the beginning of that year,
based upon an annualization of the last quarterly or semi-annual regular
dividend distribution (which would have been declared in the preceding year)
divided by that stock's market value on the first trading day on the New
York Stock Exchange in that year.
These results represent past performance and should not be considered
indicative of future results of the Trust. Unit prices may fluctuate with
the value of the underlying stocks, and there is no assurance that dividends
on these stock will be paid or that the Units will appreciate in value.
B-5
726317.1
<PAGE>
The contracts to purchase Securities deposited initially in the Trust are
expected to settle in three business days, in the ordinary manner for such
Securities. Settlement of the contracts for Securities is thus expected to take
place prior to the settlement of purchase of Units on the Initial Date of
Deposit.
SUBSTITUTION OF SECURITIES. In the event of a failure to deliver any
Security that has been purchased for the Trust under a contract ("Failed
Securities"), the Sponsors are authorized under the Trust Agreement to direct
the Trustee to acquire other securities ("Substitute Securities") to make up the
original corpus of the Trust.
The Substitute Securities must be purchased within 20 days after the sale
of the portfolio Security or delivery of the notice of the failed contract.
Where the Sponsors purchase Substitute Securities in order to replace Failed
Securities, (i) the purchase price may not exceed the purchase price of the
Failed Securities and (ii) the Substitute Securities must be substantially
similar to the Failed Securities. Such selection may include or be limited to
Securities previously included in the portfolio of the Trust. No assurance can
be given that the Trust will retain its present size and composition for any
length of time.
The Trustee shall notify all Unitholders of the acquisition of the
Substitute Security, within five days thereafter, and the Trustee shall, on the
next Distribution Date which is more than 30 days thereafter, make a pro rata
distribution of the amount, if any, by which the cost to the Trust of the Failed
Security exceeded the cost of the Substitute Security. In the event no
reinvestment is made, the proceeds of the sale of Securities will be distributed
to Unitholders as set forth under "Rights of Unitholders--Distributions." In
addition, if the right of substitution shall not be utilized to acquire
Substitute Securities in the event of a failed contract, the Sponsors will cause
to be refunded the sales charge attributable to such Failed Securities to all
Unitholders, and distribute the principal and dividends, if any, attributable to
such Failed Securities on the next Distribution Date. The proceeds from the sale
of a Security or the exercise of any redemption or call provision will be
distributed to Unitholders except to the extent such proceeds are applied to
meet redemptions of Units. (See "Liquidity--Trustee Redemption.")
RISK CONSIDERATIONS
FIXED PORTFOLIO. The value of the Units will fluctuate depending on all of
the factors that have an impact on the economy and the equity markets. These
factors similarly impact the ability of an issuer to distribute dividends.
Unlike a managed investment company in which there may be frequent changes in
the portfolio of securities based upon economic, financial and market analyses,
securities of a unit investment trust, such as the Trust, are not subject to
such frequent changes based upon continuous analysis. All the Securities in the
Trust are liquidated during a seven-day period at the termination of the
approximately one-year life of the Trust. Since the Trust will not sell
Securities in response to ordinary market fluctuation, but only at the Trust's
termination or upon the occurrence of certain events (See "Trust Administration
- - Portfolio Supervision") the amount realized upon the sale of the Securities
may not be the highest price attained by an individual Security during the life
of the Trust. Some of the Securities in the Trust may also be owned by other
clients of the Sponsors and their affiliates. However, because these clients may
have differing investment objectives, the Sponsors may sell certain Securities
from those accounts in instances where a sale by the Trust would be
impermissible, such as to maximize return by taking advantage of market
fluctuations. Investors should consult with their own financial advisers prior
to investing in the Trust to determine its suitability. (See "Trust
Administration--Portfolio Supervision" below.)
B-6
726317.1
<PAGE>
ADDITIONAL SECURITIES. Investors should be aware that in connection with
the creation of additional Units subsequent to the Initial Date of Deposit, the
Sponsors may deposit Additional Securities, contracts to purchase Additional
Securities or cash (or letter of credit in lieu of cash) with instructions to
purchase Additional Securities, in each instance maintaining the original
proportionate relationship, subject to adjustment under certain circumstances,
of the numbers of shares of each Security in the Trust. To the extent the price
of a Security increases or decreases between the time cash is deposited with
instructions to purchase the Security and the time the cash is used to purchase
the Security, Units may represent less or more of that Security and more or less
of the other Securities in the Trust. In addition, brokerage fees (if any)
incurred in purchasing Securities with cash deposited with instructions to
purchase the Securities will be an expense of the Trust. Price fluctuations
between the time of deposit and the time the Securities are purchased, and
payment of brokerage fees, will affect the value of every Unitholder's Units and
the Income per Unit received by the Trust. In particular, Unitholders who
purchase Units during the initial offering period would experience a dilution of
their investment as a result of any brokerage fees paid by the Trust during
subsequent deposits of Additional Securities purchased with cash deposited. In
order to minimize these effects, the Trust will try to purchase Securities as
near as possible to the Evaluation Time or at prices as close as possible to the
prices used to evaluate Trust Units at the Evaluation Time. In addition,
subsequent deposits to create additional Units will not be fully covered by the
deposit of a bank letter of credit. In the event that the Sponsors do not
deliver cash in consideration for the additional Units delivered, the Trust may
be unable to satisfy its contracts to purchase the Additional Securities without
the Trustee selling underlying Securities. Therefore, to the extent that the
subsequent deposits are not covered by a bank letter of credit, the failure of
the Sponsors to deliver cash to the Trust, or any delays in the Trust receiving
such cash, would have significant adverse consequences for the Trust.
COMMON STOCK. Since the Trust contains common stocks of domestic issuers,
an investment in Units of the Trust should be made with an understanding of the
risks inherent in any investment in common stocks including the risk that the
financial condition of the issuers of the Securities may become impaired or that
the general condition of the stock market may worsen (both of which may
contribute directly to a decrease in the value of the Securities and thus in the
value of the Units). Additional risks include risks associated with the right to
receive payments from the issuer which is generally inferior to the rights of
creditors of, or holders of debt obligations or preferred stock issued by the
issuer. Holders of common stocks have a right to receive dividends only when,
if, and in the amounts declared by the issuer's board of directors and to
participate in amounts available for distribution by the issuer only after all
other claims on the issuer have been paid or provided for. By contrast, holders
of preferred stocks usually have the right to receive dividends at a fixed rate
when and as declared by the issuer's board of directors, normally on a
cumulative basis. Dividends on cumulative preferred stock must be paid before
any dividends are paid on common stock and any cumulative preferred stock
dividend which has been omitted is added to future dividends payable to the
holders of such cumulative preferred stock. Preferred stocks are also usually
entitled to rights on liquidation which are senior to those of common stocks.
For these reasons, preferred stocks generally entail less risk than common
stocks.
Moreover, common stocks do not represent an obligation of the issuer and
therefore do not offer any assurance of income or provide the degree of
protection of debt securities. The issuance of debt securities or even preferred
stock by an issuer will create prior claims for payment of principal, interest
and dividends which could adversely affect the ability and inclination of the
issuer to declare or pay dividends on its common stock or the economic interest
of holders of common stock with respect to assets of the issuer upon liquidation
or bankruptcy. Further, unlike debt securities which typically have a stated
principal amount payable at maturity (which value will be subject to market
fluctuations prior thereto), common stocks have neither fixed principal amount
nor a maturity and have values which are subject to market fluctuations for as
long as the common stocks remain outstanding.
B-7
726317.1
<PAGE>
Common stocks are especially susceptible to general stock market movements and
to volatile increases and decreases in value as market confidence in and
perceptions of the issuers change. These perceptions are based on unpredictable
factors including expectations regarding government, economic, monetary and
fiscal policies, inflation and interest rates, economic expansion or
contraction, and global or regional political, economic or banking crises. The
value of the common stocks in the Trust thus may be expected to fluctuate over
the life of the Trust to values higher or lower than those prevailing on the
Initial Date of Deposit.
LEGISLATION. From time to time Congress considers proposals to reduce the
rate of the dividends-received deduction which is available to certain
corporations. Enactment into law of a proposal to reduce the rate would
adversely affect the after-tax return to investors who can take advantage of the
deduction. Although recent legislation has established a reduced tax rate of 20%
for capital gains realized by individual investors who have held assets for more
than 18 months, this rate will generally not be available for Unitholders
because the term of the Trust is approximately one year. Investors are urged to
consult their own tax advisers. Further, at any time after the Initial Date of
Deposit, legislation may be enacted, with respect to the Securities in the Trust
or the issuers of the Securities. Changing approaches to regulation,
particularly with respect to the environment, or with respect to the petroleum
or tobacco industries, may have a negative impact on certain companies
represented in the Trust. There can be no assurance that future legislation,
regulation or deregulation will not have a material adverse effect on the Trust
or will not impair the ability of the issuers of the Securities to achieve their
business goals.
LEGAL PROCEEDINGS AND LITIGATION. At any time after the Initial Date of
Deposit, legal proceedings may be initiated on various grounds, or legislation
may be enacted, with respect to the Securities in the Trust or to matters
involving the business of the issuer of the Securities. There can be no
assurance that future legal proceedings or legislation will not have a material
adverse impact on the Trust or will not impair the ability of the issuers of the
Securities to achieve their business and investment goals.
GENERALLY. There is no assurance that any dividends will be declared or
paid in the future on the Securities. Investors should be aware that there is no
assurance that the Trust's objective will be achieved.
PUBLIC OFFERING
OFFERING PRICE. In calculating the Public Offering Price, the aggregate
value of the Securities and any cash held to purchase Securities is divided by
the number of Units outstanding. In addition, during the initial offering period
a portion of the Public Offering Price per 100 Units also consists of cash in an
amount sufficient to pay the per 100 Units portion of all or a part of the cost
incurred in organizing and offering the Trust. See "Trust Expenses and Charges."
The aggregate value of the Securities is determined in good faith by the Trustee
on each "Business Day" as defined in the Indenture in the following manner:
because the Securities are listed on a national securities exchange, this
evaluation is based on the closing sale prices on that exchange as of the
Evaluation Time (unless the Trustee deems these prices inappropriate as a basis
for valuation). If the Trustee deems these prices inappropriate as a basis for
evaluation, then the Trustee may utilize, at the Trust's expense, an independent
evaluation service or services to ascertain the values of the Securities. The
independent evaluation service shall use any of the following methods, or a
combination thereof, which it deems appropriate: (a) on the basis of current bid
prices for comparable securities, (b) by appraising the value of the Securities
on the bid side of the market or by such other appraisal deemed appropriate by
the Trustee or (c) by any combination of the above, each as of the Evaluation
Time.
B-8
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<PAGE>
The sales charge consists of a Deferred Sales Charge of $12.50 per 100
Units (1.25% of the Initial Public Offering Price). The Deferred Sales Charge
will be paid through ten monthly deductions from the Principal Account of the
Trust of $.80 commencing on October 5, 1998 (and the first business day of each
month thereafter) and two semi-annual deductions from distributions from the
Income Account of $2.25 each on December 31, 1998 and June 30, 1999. If the
amount of the distribution from the Income Account is insufficient to pay the
SemiAnnual Charge, any unpaid amount shall be further deferred and deducted from
proceeds due to Unitholders upon termination. If the amount available in the
Principal Account of the Trust is insufficient to pay the Monthly Charge, the
Trustee shall sell Securities selected by the Sponsors sufficient to pay such
amounts. If the Public Offering Price paid by an investor exceeds $10.00 per 100
Units, the Deferred Sales Charge will be less than 1.25%; if the Public Offering
Price paid by an investor is less than $10.00 per 100 Units, the Deferred Sales
Charge will exceed 1.25%. To the extent the entire Deferred Sales Charge has not
been so deducted at the time of repurchase or redemption of the Units, any
unpaid amount will be deducted from the proceeds or in calculating an in kind
distribution. However, any remaining Deferred Sales Charge will be refunded by
the Sponsors when Units of any Schwab Ten Trust held at the time of the death
(including the death of a single joint tenant with rights of survivorship) or
disability (as defined in the Internal Revenue Code of 1986) of a Holder are
repurchased or redeemed. The Sponsors may require receipt of satisfactory proof
of the death or disability before releasing the portion of the proceeds
representing the amount waived. Units purchased pursuant to the Reinvestment
Plan are subject only to any remaining Deferred Sales Charge deductions (see
"Reinvestment Plan").
DISCOUNTS. Employees (and their immediate families) of Charles Schwab &
Co., Inc., and Reich & Tang Distributors, Inc. (and their affiliates) and of the
special counsel to the Sponsors may, pursuant to employee benefit arrangements,
purchase Units of the Trust at a price equal to the aggregate value of the
underlying securities in the Trust during the initial offering period, divided
by the number of Units outstanding plus a reduced Deferred Sales Charge of
$10.00 per 100 Units (1.00% of the Initial Public Offering Price). Such
arrangements result in less selling effort and selling expenses than sales to
employee groups of other companies. Resales or transfers of Units purchased
under the employee benefit arrangements may only be made through the Sponsors'
secondary market, so long as it is being maintained.
Units may be purchased in the primary or secondary market at the Public
Offering Price plus a reduced Deferred Sales Charge of $10.00 per 100 Units by
investors who purchase Units through registered investment advisers, certified
financial planners and registered broker-dealers who have agreements with
Charles Schwab & Co., Inc. ("Schwab Financial Advisor") or by investors in any
unit investment trust with an investment strategy based upon the Strategic Ten
that have purchased their investment within a two year period prior to the date
of this Prospectus who can purchase Units of the Trust in an amount not greater
in value than the amount of said investment made during this two year period
("Strategic Ten Investors"). Such Strategic Ten Investors who purchase Units of
the Trust through a Schwab Financial Advisor, may purchase Units in the primary
or secondary market at the Public Offering Price plus a Deferred Sales Charge of
$8.00 per 100 Units (.80% of the Initial Public Offering Price), if available in
the secondary market. The reduced Deferred Sales Charge of $10.00 per 100 Units
will be paid through ten monthly deductions of $.80 commencing October 5, 1998
(and the first business day of each month thereafter) and the semi-annual
deductions of $1.00 each on December 31, 1998 and June 30, 1999. The reduced
Deferred Sales Charge of $8.00 per 100 Units will only be subject to the monthly
charge described above.
DISTRIBUTION OF UNITS. During the initial offering period and thereafter to
the extent additional Units continue to be offered by means of this Prospectus,
Units will be distributed by the Sponsors at the Public Offering
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Price. The initial offering period is thirty days after each deposit of
Securities in the Trust and the Sponsors may extend the initial offering period
for successive thirty-day periods.
The Sponsors intend to qualify the Units for sale in substantially all
States.
SPONSORS' PROFITS. The Sponsors will receive a combined gross underwriting
commission equal to up to $12.50 per 100 Units or 1.25% of the Initial Public
Offering Price per 100 Units (equivalent to 1.266% of the net amount invested in
the Securities). Additionally, the Sponsors may realize a profit on the deposit
of the Securities in the Trust representing the difference between the cost of
the Securities to the Sponsors and the cost of the Securities to the Trust. (See
"Portfolio of Investments.") All or a portion of the Securities initially
deposited in the Trust may have been acquired through the Sponsors.
During the initial offering period and thereafter to the extent additional
Units continue to be offered by means of this Prospectus, the Sponsors may also
realize profits or sustain losses as a result of fluctuations after the Initial
Date of Deposit in the aggregate value of the Securities and hence in the Public
Offering Price received by the Sponsors for the Units. Cash, if any, made
available to the Sponsors prior to settlement date for the purchase of Units may
be used in the Sponsors' business subject to the limitations of 17 CFR
240.15c3-3 under the Securities Exchange Act of 1934 and may be of benefit to
the Sponsors.
Both upon acquisition of Securities and termination of the Trust, the
Trustee may utilize the services of the Sponsors for the purchase or sale of all
or a portion of the Securities in the Trust. The Sponsors may receive brokerage
commissions from the Trust in connection with such purchases and sales in
accordance with applicable law.
In maintaining a market for the Units (see "Sponsors Repurchase") the
Sponsors will realize profits or sustain losses in the amount of any difference
between the price at which they buy Units and the price at which they resell
such Units.
RIGHTS OF UNITHOLDERS
BOOK-ENTRY UNITS. Ownership of Units of the Trust will not be evidenced by
certificates. All evidence of ownership of the Units will be recorded in
book-entry form at The Depository Trust Company ("DTC") through an investor's
brokerage account. Units held through DTC will be deposited by the Sponsors with
DTC in the Sponsors' DTC account and registered in the nominee name CEDE &
COMPANY. Individual purchases of beneficial ownership interest in the Trust will
be made in book-entry form through DTC. Ownership and transfer of Units will be
evidenced and accomplished directly and indirectly only by book-entries made by
DTC and its participants. DTC will record ownership and transfer of the Units
among DTC participants and forward all notices and credit all payments received
in respect of the Units held by the DTC participants. Beneficial owners of Units
will receive written confirmation of their purchase and sale from Charles Schwab
& Co., Inc. Transfers, and the requirements therefor, will be governed by the
applicable procedures of DTC and the Unitholder's agreement with the DTC
participant in whose name the Unitholder's Units are registered on the transfer
records of DTC.
DISTRIBUTIONS. Dividends received by the Trust are credited by the Trustee
to an Income Account for the Trust. Other receipts, including the proceeds of
Securities disposed of, are credited to a Principal Account for the Trust.
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Distributions to each Unitholder from the Income Account are computed as of
the close of business on each Record Date for the following Distribution Date
and consist of an amount substantially equal to such Unitholder's pro rata share
of the income credited to the Income Account, less expenses. Distributions from
the Principal Account of the Trust (other than amounts representing failed
contracts, as previously discussed) will be computed as of each Record Date, and
will be made to the Unitholders of the Trust on or shortly after the
Distribution Date. Proceeds representing principal received from the disposition
of any of the Securities between a Record Date and a Distribution Date which are
not used for redemptions of Units will be held in the Principal Account and not
distributed until the next Distribution Date. Persons who purchase Units between
a Record Date and a Distribution Date will receive their first distribution on
the second Distribution Date after such purchase.
As of each Record Date, the Trustee will deduct from the Income Account of
the Trust, and, to the extent funds are not sufficient therein, from the
Principal Account of the Trust, amounts necessary to pay the expenses of the
Trust (as determined on the basis set forth under "Trust Expenses and Charges").
The Trustee also may withdraw from said accounts such amounts, if any, as it
deems necessary to establish a reserve for any applicable taxes or other
governmental charges that may be payable out of the Trust. Amounts so withdrawn
shall not be considered a part of such Trust's assets until such time as the
Trustee shall return all or any part of such amounts to the appropriate
accounts. In addition, the Trustee may withdraw from the Income and Principal
Accounts such amounts as may be necessary to cover redemptions of Units.
Distributions of amounts necessary to pay the Deferred Sales Charge will be made
from the Principal Account to the extent of the Monthly Charge of $.80 per 100
Units for all Unitholders and from distributions made from the Income Account to
the extent of the SemiAnnual Charge of either $2.25 or $1.00 per 100 Units for
those Unitholders paying Deferred Sales Charges of $12.50 and $10.00,
respectively, per 100 Units, to an account maintained by the Trustee for
purposes of satisfying investors' sales charge obligations.
The dividend distribution per 100 Units, if any, cannot be anticipated and
may be paid as Securities are redeemed, exchanged or sold, or as expenses of the
Trust fluctuate. No distribution need be made from the Income Account or the
Principal Account unless the balance therein is an amount sufficient to
distribute $1.00 per 100 Units.
RECORDS. The Trustee shall furnish Unitholders in connection with each
distribution a statement of the amount being distributed from the Income and
Principal Account, respectively, expressed in each case as a dollar amount per
100 Units. Within a reasonable time after the end of each calendar year, the
Trustee will furnish to each person who at any time during the calendar year was
a Unitholder of record, a statement showing (a) as to the Income Account:
dividends, interest and other cash amounts received, amounts paid for purchases
of Substitute Securities and redemptions of Units, if any, deductions for the
Deferred Sales Charge, applicable taxes and fees and expenses of the Trust, and
the balance remaining after such distributions and deductions, expressed both as
a total dollar amount and as a dollar amount representing the pro rata share of
each 100 Units outstanding on the last business day of such calendar year; (b)
as to the Principal Account: the Securities disposed of and the net proceeds
received therefrom, deductions for payment of disposition of any Securities and
the net proceeds received therefrom, deductions for the Deferred Sales Charge,
payments of applicable taxes and fees and expenses of the Trust, amounts paid
for purchases of Substitute Securities and redemptions of Units, if any, and the
balance remaining after such distributions and deductions, expressed both as a
total dollar amount and as a dollar amount representing the pro rata share of
each 100 Units outstanding on the last business day of such calendar year; (c) a
list of the Securities held, a list of Securities purchased, sold or otherwise
disposed of during the calendar year and the number of Units outstanding on the
last business day of such calendar year; (d) the Redemption Price per 100 Units
based upon the last computation thereof made during such calendar year; and (e)
amounts actually
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distributed to Unitholders during such calendar year from the Income and
Principal Accounts, separately stated, of the Trust, expressed both as total
dollar amounts and as dollar amounts representing the pro rata share of each 100
Units outstanding on the last business day of such calendar year.
The Trustee shall keep available for inspection by Unitholders at all
reasonable times during usual business hours, books of record and account of its
transactions as Trustee, including records of the names and addresses of
Unitholders, Units held, a current list of Securities in the portfolio and a
copy of the Trust Agreement.
TAX STATUS
The following is a general discussion of certain of the Federal income tax
consequences of the purchase, ownership and disposition of the Units. The
summary is limited to investors who hold the Units as "capital assets"
(generally, property held for investment) within the meaning of Section 1221 of
the Internal Revenue Code of 1986, as amended (the "Code").
In rendering the opinion set forth below, Battle Fowler LLP has examined
the Agreement, the final form of Prospectus dated the date hereof (the
"Prospectus") and the documents referred to therein, among others, and has
relied on the validity of said documents and the accuracy and completeness of
the facts set forth therein. In the Opinion of Battle Fowler LLP, special
counsel for the Sponsors, under existing law:
1. The Trust will be classified as a grantor trust for Federal income
tax purposes and not as a partnership or association taxable as a
corporation. Classification of the Trust as a grantor trust will cause the
Trust not to be subject to Federal income tax, and will cause the
Unitholders of the Trust to be treated for Federal income tax purposes as
the owners of a pro rata portion of the assets of the Trust. All income
received by the Trust will be treated as income of the Unitholders in the
manner set forth below.
2. The Trust is not subject to the New York Franchise Tax on Business
Corporations or the New York City General Corporation Tax. For a Unitholder
who is a New York resident, however, a pro rata portion of all or part of
the income of the Trust will be treated as income of the Unitholder under
the income tax laws of the State and City of New York. Similar treatment
may apply in other states.
3. During the 90-day period subsequent to the initial issuance date,
the Sponsors reserve the right to deposit Additional Securities that are
substantially similar to those establishing the Trust. This retained right
falls within the guidelines promulgated by the Internal Revenue Service
("IRS") and should not affect the taxable status of the Trust.
A taxable event will generally occur with respect to each Unitholder when
the Trust disposes of a Security (whether by sale, exchange or redemption) or
upon the sale, exchange or redemption of Units by such Unitholder. The price a
Unitholder pays for its Units, including sales charges, is allocated among its
pro rata portion of each Security held by the Trust (in proportion to the fair
market values thereof on the date the Unitholder purchases its Units) in order
to determine its initial cost for its pro rata portion of each Security held by
the Trust.
For Federal income tax purposes, a Unitholder's pro rata portion of
dividends paid with respect to a Security held by a Trust is taxable as ordinary
income to the extent of the issuing corporation's current and accumulated
"earnings and profits" as provided in Section 316 of the Code. A Unitholder's
pro rata portion of dividends paid on such Security that exceed such current and
accumulated earnings and profits will first reduce a Unitholder's
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tax basis in such Security, and to the extent that such dividends exceed a
Unitholder's tax basis in such Security will generally be treated as capital
gain.
A Unitholder's portion of gain, if any, upon the sale, exchange or
redemption of Units or the disposition of Securities held by the Trust will
generally be considered a capital gain and will be mid-term if the Unitholder
has held its Units for more than one year but not more than 18 months. Mid-term
capital gains are generally taxed at the same rates applicable to ordinary
income, although non-corporate Unitholders who realize mid-term capital gains
may be subject to a reduced tax rate of 28% on such gains, rather than the
"regular" maximum tax rate of 39.6%. Although recent legislation has established
a reduced tax rate of 20% for capital gains realized by non-corporate investors
who have held assets for more than 18 months, this rate will generally not be
available for Unitholders who are not eligible, or do not elect, to receive
their pro rata share of the Securities in-kind because the term of the Trust is
approximately one year. Tax rates may increase prior to the time when
Unitholders may realize gains from the sale, exchange or redemption of the Units
or Securities.
A Unitholder's portion of loss, if any, upon the sale or redemption of
Units or the disposition of Securities held by the Trust will generally be
considered a capital loss and will be long-term if the Unitholder has held its
Units for more than one year. Capital losses are deductible to the extent of
capital gains; in addition, up to $3,000 of capital losses ($1,500 in the case
of married individuals filing separately) recognized by non-corporate
Unitholders may be deducted against ordinary income.
Under Section 67 of the Code and the accompanying Regulations, a Unitholder
who itemizes his deductions may also deduct his pro rata share of the fees and
expenses of the Trust, but only to the extent that such amounts, together with
the Unitholder's other miscellaneous deductions, exceed 2% of his adjusted gross
income. The deduction of fees and expenses may also be limited by Section 68 of
the Code, which reduces the amount of itemized deductions that are allowed for
individuals with incomes in excess of certain thresholds.
After the end of each calendar year, the Trustee will furnish to each
Unitholder an annual statement containing information relating to the dividends
received by the Trust on the Securities, the gross proceeds received by the
Trust from the disposition of any Security, and the fees and expenses paid by
the Trust. The Trustee will also furnish annual information returns to each
Unitholder and to the Internal Revenue Service.
A corporation that owns Units will generally be entitled to a 70% dividends
received deduction with respect to such Unitholder's pro rata portion of
dividends that are taxable as ordinary income to Unitholders which are received
by the Trust from a domestic corporation under Section 243 of the Code or from a
qualifying foreign corporation under Section 245 of the Code (to the extent the
dividends are taxable as ordinary income, as discussed above) in the same manner
as if such corporation directly owned the Securities paying such dividends.
However, a corporation owning Units should be aware that Sections 246 and 246A
of the Code impose additional limitations on the eligibility of dividends for
the 70% dividends received deduction. These limitations include a requirement
that stock (and therefore Units) must generally be held at least 46 days (as
determined under Section 246(c) of the Code) during the 90-day period beginning
on the date that is 45 days before the date on which the stock becomes
ex-dividend. Moreover, the allowable percentage of the deduction will be reduced
from 70% if a corporate Unitholder owns certain stock (or Units) the financing
of which is directly attributable to indebtedness incurred by such corporation.
As discussed in the section "Termination", each Unitholder may have three
options in receiving its termination distributions, which are (i) to receive its
pro rata share of the underlying Securities in kind, (ii) to
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receive cash upon liquidation of its pro rata share of the underlying
Securities, or (iii) to invest the amount of cash he would receive upon the
liquidation of its pro rata share of the underlying Securities in units of a
future series of the Trust (if one is offered). There are special tax
consequences should a Unitholder choose option (i), the exchange of the
Unitholder's Units for a pro rata portion of each of the Securities held by the
Trust plus cash. Treasury Regulations provide that gain or loss is recognized
when there is a conversion of property into property that is materially
different in kind or extent. In this instance, the Unitholder may be considered
the owner of an undivided interest in all of the Trust's assets. By accepting
the pro rata share of the number of Securities of the Trust, in partial exchange
for its Units, the Unitholder should be treated as merely exchanging its
undivided pro rata ownership of Securities held by the Trust into sole ownership
of a proportionate share of Securities. As such, there should be no material
difference in the Unitholder's ownership, and therefore the transaction should
be tax free to the extent the Securities are received. Alternatively, the
transaction may be treated as an exchange that would qualify for nonrecognition
treatment to the extent the Unitholder is exchanging his undivided interest in
all of the Trust's Securities for his proportionate number of shares of the
underlying Securities. In either instance, the transaction should result in a
non-taxable event for the Unitholder to the extent Securities are received.
However, there is no specific authority addressing the income tax consequences
of an in-kind distribution from a grantor trust.
Entities that generally qualify for an exemption from Federal income tax,
such as many pension trusts, are nevertheless taxed under Section 511 of the
Code on "unrelated business taxable income." Unrelated business taxable income
is income from a trade or business regularly carried on by the tax-exempt entity
that is unrelated to the entity's exempt purpose. Unrelated business taxable
income generally does not include dividend or interest income or gain from the
sale of investment property, unless such income is derived from property that is
debt-financed or is dealer property. A tax-exempt entity's dividend income from
the Trust and gain from the sale of Units in the Trust or the Trust's sale of
Securities is not expected to constitute unrelated business taxable income to
such tax-exempt entity unless the acquisition of the Unit itself is
debt-financed or constitutes dealer property in the hands of the tax-exempt
entity.
Prospective investors are urged to consult their own tax advisers
concerning the Federal, state, local and any other tax consequences of the
purchase, ownership and disposition of Units prior to investing in the Trust.
RETIREMENT PLANS. This Trust may be well suited for purchase by Individual
Retirement Accounts ("IRAs"), Keogh plans, pension funds and other qualified
retirement plans. Generally, capital gains and income received in each of the
foregoing plans are exempt from Federal taxation. Except with respect to certain
IRAs known as Roth IRAs, distributions from such plans are generally treated as
ordinary income but may, in some cases, be eligible for special 5 or 10 year
averaging or tax-deferred rollover treatment. Five year averaging will not apply
to distributions after December 31, 1999. Ten year averaging has been preserved
in very limited circumstances. Holders of Units in IRAs, Keogh plans and other
tax-deferred retirement plans should consult their plan custodian as to the
appropriate disposition of distributions. Investors considering participation in
any such plan should review specific tax laws related thereto and should consult
their attorneys or tax advisers with respect to the establishment and
maintenance of any such plan. Such plans are offered by brokerage firms,
including Charles Schwab & Co., Inc., and other financial institutions. Fees and
charges with respect to such plans may vary.
Before investing in the Trust, the trustee or investment manager of an
employee benefit plan (e.g., a pension or profit sharing retirement plan) should
consider among other things (a) whether the investment is prudent under the
Employee Retirement Income Security Act of 1974 ("ERISA"), taking into account
the needs of the plan and
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all of the facts and circumstances of the investment in the Trust; (b) whether
the investment satisfies the diversification requirement of Section 404(a)(1)(C)
of ERISA; and (c) whether the assets of the Trust are deemed "plan assets" under
ERISA and the Department of Labor regulations regarding the definition of "plan
assets."
LIQUIDITY
SPONSORS REPURCHASE. The Sponsors may, under certain circumstances, as a
service to Unitholders, elect to purchase any Units tendered to the Trustee for
redemption (see "Trustee Redemption"). Factors which the Sponsors will consider
in making a determination will include the number of Units of all Trusts which
they have in inventory, their estimate of the salability and the time required
to sell such Units and general market conditions. For example, if in order to
meet redemptions of Units the Trustee must dispose of Securities, and if such
disposition cannot be made by the redemption date (three calendar days after
tender), the Sponsors may elect to purchase such Units. Such purchase shall be
made by payment to the Unitholder's brokerage account not later than the close
of business on the redemption date of an amount equal to the Redemption Price on
the date of tender less any unpaid Deferred Sales Charge.
Unitholders who wish to dispose of their Units should inquire of the
Sponsors as to current market prices prior to making a tender for redemption.
The aggregate value of the Securities will be determined by the Trustee on a
daily basis and computed on the basis set forth under "Trustee Redemption." The
Sponsors do not guarantee the enforceability, marketability or price of any
Securities in the Portfolio or of the Units. The Sponsors may discontinue the
repurchase of redemption requests if the supply of Units exceeds demand, or for
other business reasons. The date of repurchase is deemed to be the date on which
redemption requests are received in proper form by Charles Schwab & Co., Inc.,
except for redemption requests received after 4 P.M., New York Time when Units
will be deemed to have been repurchased on the next business day. In the event a
market is not maintained for the Units, a Unitholder may be able to dispose of
Units only by tendering them to the Trustee for redemption.
Units purchased by the Sponsors in the secondary market may be reoffered
for sale by the Sponsors at a price based on the aggregate value of the
Securities in the Trust subject to the remaining Deferred Sales Charge plus a
pro rata portion of amounts, if any, in the Income and Principal Accounts. Any
Units that are purchased by the Sponsors in the secondary market also may be
redeemed by the Sponsors if they determine such redemption to be in their best
interest.
TRUSTEE REDEMPTION. At any time prior to the Evaluation Time on the
business day preceding the commencement of the Liquidation Period (approximately
one year from the Date of Deposit), or on the date of any earlier termination of
the Trust, Units may also be tendered to the Trustee for redemption upon payment
of any relevant tax by contacting Charles Schwab & Co., Inc. In certain
instances, additional documents may be required, such as a trust instrument,
certificate of corporate authority, certificate of death or appointment as
executor, administrator or guardian. At the present time there are no specific
taxes related to the redemption of Units. No redemption fee will be charged by
the Sponsors or the Trustee. Units redeemed by the Trustee will be canceled.
Within three business days following a tender for redemption, the
Unitholder will be entitled to receive an amount for each Unit tendered equal to
the Redemption Price per Unit computed as of the Evaluation Time set forth under
"Summary of Essential Information" in Part A on the date of tender less any
unpaid Deferred Sales Charge. The "date of tender" is deemed to be the date on
which Units are received by the Trustee, except that
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with respect to Units received after the close of trading on the New York Stock
Exchange (4:00 p.m. Eastern Time), the date of tender is the next day on which
such Exchange is open for trading, and such Units will be deemed to have been
tendered to the Trustee on such day for redemption at the Redemption Price
computed on that day.
The Redemption Price per Unit is the pro rata share of the Unit in the
Trust determined by the Trustee on the basis of (i) the cash on hand in the
Trust or moneys in the process of being collected (during the initial offering
period a portion of the cash on hand includes an amount sufficient to pay the
per Unit portion of all or a part of the costs incurred in organizing and
offering the Trust, see "Trust Expenses and Charges"), (ii) the value of the
Securities in the Trust as determined by the Trustee, less (a) amounts
representing taxes or other governmental charges payable out of the Trust, (b)
the accrued expenses of the Trust and (c) cash allocated for the distribution to
Unitholders of record as of a Record Date prior to the evaluation being made.
The Trustee may determine the value of the Securities in the Trust in the
following manner: because the Securities are listed on a national securities
exchange, this evaluation is based on the closing sale prices on that exchange.
Unless the Trustee deems these prices inappropriate as a basis for evaluation or
if there is no such closing purchase price, then the Trustee may utilize, at the
Trust's expense, an independent evaluation service or services to ascertain the
values of the Securities. The independent evaluation service shall use any of
the following methods, or a combination thereof, which it deems appropriate: (a)
on the basis of current bid prices for comparable securities, (b) by appraising
the value of the Securities on the bid side of the market or (c) by any
combination of the above.
In connection with each redemption the Sponsors will direct the Trustee to
redeem Units in accordance with the procedures set forth in either (a) or (b)
below.
(a) A Unitholder will receive his redemption proceeds in cash. Amounts
paid on redemption allocable to the Unitholder's interest in the Income
Account shall be withdrawn from the Income Account, or, if the balance
therein is insufficient, from the Principal Account. All other amounts paid
on redemption shall be withdrawn from the Principal Account. The Trustee is
empowered to sell Securities in order to make funds available for
redemptions. Such sales, if required, could result in a sale of Securities
by the Trustee at a loss. To the extent Securities are sold, the size and
diversity of the Trust will be reduced. The Securities to be sold will be
selected by the Trustee in order to maintain, to the extent practicable,
the proportionate relationship among the number of shares of each stock.
Provision is made in the Indenture under which the Sponsors may, but need
not, specify minimum amounts in which blocks of Securities are to be sold
in order to obtain the best price for the Trust. While these minimum
amounts may vary from time to time in accordance with market conditions,
the Sponsors believe that the minimum amounts which would be specified
would be approximately 100 shares for readily marketable Securities.
Any Unitholder tendering 25,000 Units or more of the Trust for
redemption may request by written notice submitted at the time of tender
from the Trustee in lieu of a cash redemption a distribution of shares of
Securities and cash in an amount and value equal to the Redemption Price
Per Unit as determined as of the evaluation next following tender. To the
extent possible, in kind distributions ("In Kind Distributions") shall be
made by the Trustee through the distribution of each of the Securities in
book-entry form to the Unitholder's broker-dealer account at The Depository
Trust Company. An In Kind Distribution will be reduced by customary
transfer and registration charges. The tendering Unitholder will receive
his pro rata number of whole shares of each of the Securities comprising
the Trust portfolio and cash from the Income and Principal Accounts equal
to the balance of the Redemption Price to which the tendering Unitholder is
entitled. A Unitholder who elects to receive In Kind Distributions may
incur brokerage or other transaction
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costs in converting the Securities so distributed into cash subsequent to
their receipt of the Securities from the Trust. If funds in the Principal
Account are insufficient to cover the required cash distribution to the
tendering Unitholder, the Trustee may sell Securities in the manner
described above.
The Trustee is irrevocably authorized in its discretion, if the
Sponsors do not elect to purchase a Unit tendered for redemption or if the
Sponsors tender a Unit for redemption, in lieu of redeeming such Unit, to
sell such Unit in the over-the-counter market for the account of the
tendering Unitholder at prices which will return to the Unitholder an
amount in cash, net after deducting brokerage commissions, transfer taxes
and other charges, equal to or in excess of the Redemption Price for such
Unit. The Trustee will pay the net proceeds of any such sale to the
Unitholder on the day he would otherwise be entitled to receive payment of
the Redemption Price.
(b) The Trustee will redeem Units in kind by an in kind distribution
to The Chase Manhattan Bank as the Distribution Agent. A Unitholder will be
able 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 to
Unitholders will take the form of whole shares of Securities. Cash will be
distributed by the Distribution Agent in lieu of fractional shares. The
whole shares, fractional shares and cash distributed to the Distribution
Agent will aggregate an amount equal to the Redemption Price per Unit.
Distributions in kind on redemption of Units shall be held by the
Distribution Agent, whom each Unitholder 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 Unitholder as
follows:
(i) 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 Unitholder 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 Unitholder
requests a distribution of the Securities as set forth in paragraph (ii)
below. The Distribution Agent may sell the Securities through the Sponsors,
and the Sponsors may charge brokerage commissions on those sales.
(ii) If the tendering Unitholder requests distribution in kind and
tenders in excess of 25,000 Units, the Distribution Agent 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 Unitholder
together with book-entry credit to the account of the Unitholder's bank or
broker-dealer at DTC representing whole shares of each of the Securities
comprising the In Kind Distribution.
The 25,000 Unit threshold will not apply to redemptions in kind in
connection with a rollover at the termination of the Trust.
The portion of the Redemption Price which represents the Unitholder's
interest in the Income Account shall be withdrawn from the Income Account
to the extent available. The balance paid on any redemption, including
dividends receivable on stocks trading ex-dividend, if any, shall be drawn
from the Principal Account to the extent that funds are available for such
purpose. To the extent Securities are distributed in kind to the
Distribution Agent, the size of the Trust will be reduced. Sales by the
Distribution Agent may be required at a time when Securities would not
otherwise be sold and might result in lower prices than might otherwise be
realized. The Redemption Price received by a tendering Unitholder may be
more or less than
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the purchase price originally paid by such Unitholder, depending on the
value of the Securities in the Portfolio at the time of redemption.
The Trustee reserves the right to suspend the right of redemption and to
postpone the date of payment of the Redemption Price per Unit for any period
during which the New York Stock Exchange is closed, other than customary weekend
and holiday closings, or trading on that Exchange is restricted or during which
(as determined by the Securities and Exchange Commission) an emergency exists as
a result of which disposal or evaluation of the Bonds is not reasonably
practicable, or for such other periods as the Securities and Exchange Commission
may by order permit. The Trustee and the Sponsors are not liable to any person
or in any way for any loss or damage which may result from any such suspension
or postponement.
A Unitholder who wishes to dispose of his Units should inquire of his
broker in order to determine if there is a current secondary market price in
excess of the Redemption Price.
TRUST ADMINISTRATION
PORTFOLIO SUPERVISION. The Trust is a unit investment trust and is not a
managed fund. Traditional methods of investment management for a managed fund
typically involve frequent changes in a portfolio of securities on the basis of
economic, financial and market analyses. The Portfolio of the Trust, however,
will not be managed and therefore the adverse financial condition of an issuer
will not necessarily require the sale of its Securities from the portfolio.
Although the portfolio of the Trust is regularly reviewed, because of the
formula employed in selecting the Strategic Ten, it is unlikely that the Trust
will sell any of the Securities other than to satisfy redemptions of Units, or
to cease buying Additional Securities in connection with the issuance of
additional Units. However, the Trust Agreement provides that the Sponsors may
direct the disposition of Securities upon the occurrence of certain events
including: (1) default in payment of amounts due on any of the Securities; (2)
institution of certain legal proceedings; (3) default under certain documents
materially and adversely affecting future declaration or payment of amounts due
or expected; (4) determination of the Sponsors that the tax treatment of the
Trust as a grantor trust would otherwise be jeopardized; or (5) decline in price
as a direct result of serious adverse credit factors affecting the issuer of a
Security which, in the opinion of the Sponsors, would make the retention of the
Security detrimental to the Trust or the Unitholders. Furthermore, the Trust
will likely continue to hold a Security and purchase additional shares
notwithstanding its ceasing to be included among the Strategic Ten or even its
deletion from the DJIA.
In addition, the Trust Agreement provides as follows:
(a) If a default in the payment of amounts due on any Security occurs
pursuant to provision (1) above and if the Sponsors fail to give immediate
instructions to sell or hold that Security, the Trustee, within 30 days of
that failure by the Sponsors, shall sell the Security.
(b) It is the responsibility of the Sponsors to instruct the Trustee
to reject any offer made by an issuer of any of the Securities to issue new
securities in exchange and substitution for any Security pursuant to a
recapitalization or reorganization. If any exchange or substitution is
effected notwithstanding such rejection, any securities or other property
received shall be promptly sold unless the Sponsors direct that it be
retained.
(c) Any property received by the Trustee after the Initial Date of
Deposit as a distribution on any of the Securities in a form other than
cash or additional shares of the Securities shall be promptly sold unless
the
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Sponsors direct that it be retained by the Trustee. The proceeds of any
disposition shall be credited to the Income or Principal Account of the
Trust.
(d) The Sponsors are authorized to increase the size and number of
Units of the Trust by the deposit of Additional Securities, contracts to
purchase Additional Securities or cash or a letter of credit with
instructions to purchase Additional Securities in exchange for the
corresponding number of additional Units from time to time subsequent to
the Initial Date of Deposit, provided that the original proportionate
relationship among the number of shares of each Security established on the
Initial Date of Deposit is maintained to the extent practicable. The
Sponsors may specify the minimum numbers in which Additional Securities
will be deposited or purchased. If a deposit is not sufficient to acquire
minimum amounts of each Security, Additional Securities may be acquired in
the order of the Security most under-represented immediately before the
deposit when compared to the original proportionate relationship. If
Securities of an issue originally deposited are unavailable at the time of
the subsequent deposit, the Sponsors may (i) deposit cash or a letter of
credit with instructions to purchase the Security when it becomes
available, or (ii) deposit (or instruct the Trustee to purchase) either
Securities of one or more other issues originally deposited or a Substitute
Security.
TRUST AGREEMENT AND AMENDMENT. The Trust Agreement may be amended by the
Trustee and the Sponsors without the consent of any of the Unitholders: (1) to
cure any ambiguity or to correct or supplement any provision which may be
defective or inconsistent; (2) to change any provision thereof as may be
required by the Securities and Exchange Commission or any successor governmental
agency; or (3) to make such other provisions in regard to matters arising
thereunder as shall not adversely affect the interests of the Unitholders.
The Trust Agreement may also be amended in any respect, or performance of
any of the provisions thereof may be waived, with the consent of investors
holding 66 2/3% of the Units then outstanding for the purpose of modifying the
rights of Unitholders; provided that no such amendment or waiver shall reduce
any Unitholder's interest in the Trust without his consent or reduce the
percentage of Units required to consent to any such amendment or waiver without
the consent of the holders of all Units. The Trust Agreement may not be amended,
without the consent of the holders of all Units in the Trust then outstanding,
to increase the number of Units issuable or to permit the acquisition of any
Securities in addition to or in substitution for those initially deposited in
such Trust, except in accordance with the provisions of the Trust Agreement. The
Trustee shall promptly notify Unitholders, in writing, of the substance of any
such amendment.
TRUST TERMINATION. The Trust Agreement provides that the Trust shall
terminate as of the Evaluation Time on the business day preceding the
Liquidation Period or upon the earlier maturity, redemption or other
disposition, as the case may be, of the last of the Securities held in such
Trust and in no event is it to continue beyond the Mandatory Termination Date.
If the value of the Trust shall be less than the minimum amount set forth under
"Summary of Essential Information" in Part A, the Trustee may, in its
discretion, and shall, when so directed by the Sponsors, terminate the Trust.
The Trust may also be terminated at any time with the consent of investors
holding 100% of the Units then outstanding. When directed by the Sponsors, the
Trustee shall utilize the services of the Sponsors for the sale of all or a
portion of the Securities in the Trust, and in so doing, the Sponsors will
determine the manner, timing and execution of the sales of the underlying
Securities. Any brokerage commissions received by the Sponsors from the Trust in
connection with such sales will be in accordance with applicable law. In the
event of termination, written notice thereof will be sent by the Trustee to all
Unitholders. Such notice will provide Unitholders with the following three
options by which to receive their pro rata share of the net asset value of the
Trust and requires their election of one of the three options by notifying the
Trustee by
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returning a properly completed election request (to be supplied to Unitholders
at least 30 days prior to the commencement of the Liquidation Period):
1. A Unitholder whose interest in the Trust would entitle him to
receive at least one share of each underlying Security will have his Units
redeemed on commencement of the Liquidation Period by distribution of the
Unitholder's pro rata share of the net asset value of the Trust on such
date distributed in kind to the extent represented by whole shares of
underlying Securities and the balance in cash within three business days
following the commencement of the Liquidation Period. Unitholders
subsequently selling such distributed Securities will incur brokerage costs
when disposing of such Securities. Unitholders should consult their own tax
adviser in this regard;
2. to receive in cash such Unitholder's pro rata share of the net
asset value of the Trust derived from the sale by the Sponsors as the
agents of the Trustee of the underlying Securities over the Liquidation
Period. The Unitholder's pro rata share of its net assets of the Trust will
be distributed to such Unitholder within three days of the settlement of
the trade of the last Security to be sold; and/or
3. to invest such Unitholder's pro rata share of the net assets of the
Trust derived from the sale by the Sponsors as agents of the Trustee of the
underlying Securities in units of a subsequent series of the Schwab Ten
Trust (the "New Series") provided one is offered. It is expected that a
special redemption and liquidation will be made of all Units of this Trust
held by a Unitholder (a "Rollover Unitholder") who affirmatively notifies
the Trustee by the Rollover Notification Date set forth in the "Summary of
Essential Information" for the Trust in Part A. In the event that the
Sponsors determine that such a redemption and subsequent investment in a
New Series by a Rollover Unitholder may be effected under applicable law in
a manner that will not result in the recognition of either gain or loss for
U.S. federal income tax purposes with respect to any Securities that are
included in the portfolio of the New Series ("Duplicated Securities"),
Unitholders will be notified at least 30 days prior to the commencement of
the Liquidation Period of the procedures and process necessary to
facilitate such tax treatment. The Units of a New Series will be purchased
by the Unitholder within three business days of the settlement of the trade
for the last of the Unitholder's Securities to be sold. Such purchaser will
be entitled to a reduced deferred sales charge upon the purchase of units
of the New Series. It is expected that the terms of the New Series will be
substantially the same as the terms of the Trust described in this
Prospectus, and that similar options with respect to the termination of
such New Series will be available. The availability of this option does not
constitute a solicitation of an offer to purchase Units of a New Series or
any other security. A Unitholder's election to participate in this option
will be treated as an indication of interest only. At any time prior to the
purchase by the Unitholder of units of a New Series such Unitholder may
change his investment strategy and receive, in cash, the proceeds of the
sale of the Securities. An election of this option will not prevent the
Unitholder from recognizing taxable gain or loss (except in the case of a
loss, if and to the extent the New Series is treated as substantially
identical to the Trust) as a result of the liquidation, even though no cash
will be distributed to pay any taxes. Unitholders should consult their own
tax advisers in this regard.
Unitholders who do not make any election will be deemed to have elected to
receive the termination distribution in cash (option number 2).
The Sponsors have agreed that to the extent they effect the sales of
underlying securities for the Trustee in the case of the second and third
options such sales will be free of brokerage commissions. The Sponsors, on
behalf of the Trustee, will sell, unless prevented by unusual and unforeseen
circumstances, such as, among other
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reasons, a suspension in trading of a Security, the close of a stock exchange,
outbreak of hostilities and collapse of the economy, as quickly as practicable,
but all of the Securities will in any event be disposed of by the end of the
Liquidation Period. The Redemption Price Per Unit upon the settlement of the
last sale of Securities during the Liquidation Period will be distributed to
Unitholders in redemption of such Unitholders' interest in the Trust.
Depending on the amount of proceeds to be invested in Units of the New
Series and the amount of other orders for Units in the New Series, the Sponsors
may purchase a large amount of securities for the New Series in a short period
of time. The Sponsors' buying of securities may tend to raise the market prices
of these securities. The actual market impact of the Sponsors' purchases,
however, is currently unpredictable because the actual amount of securities to
be purchased and the supply and price of those securities is unknown. A similar
problem may occur in connection with the sale of Securities during the
Liquidation Period; depending on the number of sales required, the prices of and
demand for Securities, such sales may tend to depress the market prices and thus
reduce the proceeds of such sales. The Sponsors believe that the sale of
underlying Securities over the Liquidation Period is in the best interest of a
Unitholder and may mitigate the negative market price consequences stemming from
the trading of large amounts of Securities. The Securities may be sold in fewer
than seven days if, in the Sponsors' judgment, such sales are in the best
interest of Unitholders. The Sponsors, in implementing such sales of securities
on behalf of the Trustee, will seek to maximize the sales proceeds and will act
in the best interests of the Unitholders. There can be no assurance, however,
that any adverse price consequences of heavy trading will be mitigated.
Section 17(a) of the Investment Company Act of 1940 generally prohibits
principal transactions between registered investment companies and their
affiliates. Pursuant to an exemptive order issued by the Securities and Exchange
Commission, each terminating Schwab Ten Trust can sell Duplicated Securities
directly to a New Series. The exemption will enable the Trust to eliminate
commission costs on these transactions. The price for those securities
transferred will be the closing sale price on the sale date on the national
securities exchange where the securities are principally traded, as certified
and confirmed by the Trustee.
The Sponsors may for any reason, in their sole discretion, decide not to
sponsor any subsequent series of the Trust, without penalty or incurring
liability to any Unitholder. If the Sponsors so decide, the Sponsors will notify
the Trustee of that decision, and the Trustee will notify the Unitholders before
the commencement of the Liquidation Period. All Unitholders will then elect
either option 1 or option 2.
By electing to reinvest in the New Series, the Unitholder indicates his
interest in having his terminating distribution from the Trust invested only in
the New Series created following termination of the Trust; the Sponsors expect,
however, that a similar reinvestment program will be offered with respect to all
subsequent series of the Trust, thus giving Unitholders a yearly opportunity to
elect to "rollover" their terminating distributions into a New Series. The
availability of the reinvestment privilege does not constitute a solicitation of
offers to purchase units of a New Series or any other security. A Unitholder's
election to participate in the reinvestment program will be treated as an
indication of interest only. The Sponsors intend to coordinate the date of
deposit of a future series so that the terminating trust will terminate
contemporaneously with the creation of a New Series. The Sponsors reserve the
right to modify, suspend or terminate the reinvestment privilege at any time.
THE SPONSORS. Charles Schwab & Co., Inc. ("Schwab") was established in 1971
and is one of America's largest discount brokers. The firm provides low-cost
securities brokerage and related financial services to over 3.3 million active
customer accounts and has over 200 branch offices. Schwab also offers convenient
access to financial information services and provides products and services that
help investors make investment
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decisions. Schwab is a wholly owned subsidiary of The Charles Schwab
Corporation. Charles R. Schwab is the founder, Chairman, Chief Executive Officer
and a director of The Charles Schwab Corporation and, as of January 31, 1996,
the beneficial owner of approximately 20.1% of the outstanding shares of that
corporation. Mr. Schwab may be deemed to be a controlling person of Schwab.
Reich & Tang Distributors, Inc. a Delaware corporation, is engaged in the
brokerage business and is a member of the National Association of Securities
Dealers, Inc. Reich & Tang is also a registered investment advisor. Reich & Tang
maintains its principal business offices at 600 Fifth Avenue, New York, New York
10020. The sole shareholder of Reich & Tang, Reich & Tang Asset Management, Inc.
("RTAM Inc."), is wholly owned by NEIC Holdings, Inc. which, effective December
29, 1997, was wholly owned by NEIC Operating Partnership, L.P. ("NEICOP").
Subsequently, on March 31, 1998, NEICOP changed its name to Nvest Companies,
L.P. ("Nvest"). The general partners of Nvest are Nvest Corporation and Nvest
L.P. As of March 31, 1998, Metropolitan Life Insurance Company ("MetLife") owned
approximately 47% of the partnership interests of Nvest. Nvest, with a principal
place of business at 399 Boylston Street, Boston, MA 02116, is a holding company
of firms engaged in the securities and investment advisory business. These
affiliates in the aggregate are investment advisors or managers to over 80
registered investment companies. Reich & Tang is successor Sponsor to Bear
Stearns for numerous series of unit investment trusts, including New York
Municipal Trust, Series 1 (and Subsequent Series), Municipal Securities Trust,
Series 1 (and Subsequent Series), 1st Discount Series (and Subsequent Series),
Multi-State Series 1 (and Subsequent Series), Mortgage Securities Trust, Series
1 (and Subsequent Series), Insured Municipal Securities Trust, Series 1 (and
Subsequent Series) and 5th Discount Series (and Subsequent Series) and Equity
Securities Trust, Series 1, Signature Series, Gabelli Communications Income
Trust (and Subsequent Series).
MetLife is a mutual life insurance company with assets of $297.6 billion at
December 31, 1996. It is the second largest life insurance company in the United
States in terms of total assets. MetLife provides a wide range of insurance and
investment products and services to individuals and groups and is the leader
among United States life insurance companies in terms of total life insurance in
force, which exceeded $1.6 trillion at December 31, 1996 for MetLife and its
insurance affiliates. MetLife and its affiliates provide insurance or other
financial services to approximately 36 million people worldwide.
The information included herein is only for the purpose of informing
investors as to the financial responsibility of the Sponsors and their ability
to carry out their contractual obligations. The Sponsors will be under no
liability to Unitholders for taking any action, or refraining from taking any
action, in good faith pursuant to the Trust Agreement, or for errors in judgment
except in cases of their own willful misfeasance, bad faith, gross negligence or
reckless disregard of their obligations and duties.
The Sponsors may each resign at any time by delivering to the Trustee an
instrument of resignation executed by the individual Sponsor. If at any time
either of the Sponsors shall resign or fail to perform any of its duties under
the Trust Agreement or becomes incapable of acting or becomes bankrupt or its
affairs are taken over by public authorities, then the Trustee may either (a)
appoint a successor Sponsor; (b) terminate the Trust Agreement and liquidate the
Trust; or (c) continue to act as Trustee without terminating the Trust
Agreement. Any successor Sponsor appointed by the Trustee shall be satisfactory
to the Trustee and, at the time of appointment, shall have a net worth of at
least $1,000,000.
THE TRUSTEE. The Trustee is The Chase Manhattan Bank with its principal
executive office located at 270 Park Avenue, New York, New York 10017 (800)
428-8890 and its unit investment trust office at 4 New York
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Plaza, New York, New York 10004. The Trustee is subject to supervision by the
Superintendent of Banks of the State of New York, the Federal Deposit Insurance
Corporation and the Board of Governors of the Federal Reserve System.
The Trustee shall not be liable or responsible in any way for taking any
action, or for refraining from taking any action, in good faith pursuant to the
Trust Agreement, or for errors in judgment; or for any disposition of any
moneys, Securities or Units in accordance with the Trust Agreement, except in
cases of its own willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations and duties; provided, however, that the Trustee
shall not in any event be liable or responsible for any evaluation made by any
independent evaluation service employed by it. In addition, the Trustee shall
not be liable for any taxes or other governmental charges imposed upon or in
respect of the Securities or the Trust which it may be required to pay under
current or future law of the United States or any other taxing authority having
jurisdiction. The Trustee shall not be liable for depreciation or loss incurred
by reason of the sale by the Trustee of any of the Securities pursuant to the
Trust Agreement.
For further information relating to the responsibilities of the Trustee
under the Trust Agreement, reference is made to the material set forth under
"Rights of Unitholders."
The Trustee may resign by executing an instrument in writing and filing the
same with the Sponsors, and mailing a copy of a notice of resignation to all
Unitholders. In such an event the Sponsors are obligated to appoint a successor
Trustee as soon as possible. In addition, if the Trustee becomes incapable of
acting or becomes bankrupt or its affairs are taken over by public authorities,
the Sponsors may remove the Trustee and appoint a successor as provided in the
Trust Agreement. Notice of such removal and appointment shall be mailed to each
Unitholder by the Sponsors. If upon resignation of the Trustee no successor has
been appointed and has accepted the appointment within thirty days after
notification, the retiring Trustee may apply to a court of competent
jurisdiction for the appointment of a successor. The resignation or removal of
the Trustee becomes effective only when the successor Trustee accepts its
appointment as such or when a court of competent jurisdiction appoints a
successor Trustee. Upon execution of a written acceptance of such appointment by
such successor Trustee, all the rights, powers, duties and obligations of the
original Trustee shall vest in the successor.
Any corporation into which the Trustee may be merged or with which it may
be consolidated, or any corporation resulting from any merger or consolidation
to which the Trustee shall be a party, shall be the successor Trustee. The
Trustee must always be a banking corporation organized under the laws of the
United States or any State and have at all times an aggregate capital, surplus
and undivided profits of not less than $2,500,000.
EVALUATION OF THE TRUST. The value of the Securities in the Trust portfolio
is determined in good faith by the Trustee on the basis set forth under "Public
Offering--Offering Price." The Sponsors and the Unitholders may rely on any
evaluation furnished by the Trustee and shall have no responsibility for the
accuracy thereof. Determinations by the Trustee under the Trust Agreement shall
be made in good faith upon the basis of the best information available to it,
provided, however, that the Trustee shall be under no liability to the Sponsors
or Unitholders for errors in judgment, except in cases of its own willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations and duties. The Trustee, the Sponsors and the Unitholders may rely
on any evaluation furnished to the Trustee by an independent evaluation service
and shall have no responsibility for the accuracy thereof.
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TRUST EXPENSES AND CHARGES
Investors will reimburse the Sponsors on a per 100 Units basis, for all or
a portion of the estimated costs incurred in organizing and offering the Trust
(collectively, the "organization costs"), including the cost of the initial
preparation and execution of the Trust Agreement, registration of the Trust and
the Units under the Investment Company Act of 1940 and the Securities Act of
1933 and State registration fees, the initial fees and expenses of the Trustee,
legal expenses and other actual out-of-pocket expenses. The estimated
organization costs will be paid to the Sponsors from the assets of the Trust as
of the close of the initial offering period (which may be between 30 and 90
days). To the extent that actual organization costs are less than the estimated
amount, only the actual organization costs will be deducted from the assets of
the Trust. To the extent that actual organization costs are greater than the
estimated amount, only the estimated organization costs included in the Public
Offering Price will be reimbursed to the Sponsors. All advertising and selling
expenses, as well as any organizational costs not paid by the Trust, will be
borne by the Sponsors at no cost to the Trust.
The Sponsors will receive for portfolio supervisory, bookkeeping and
administrative services to the Trust an Annual Fee in the amount set forth under
"Summary of Essential Information" in Part A. The Sponsors' fee may exceed the
actual cost of providing portfolio supervisory, bookkeeping and administrative
services for the Trust, but at no time will the total amount received for
portfolio supervisory, bookkeeping and administrative services rendered to all
series of the Schwab Trusts in any calendar year exceed the aggregate cost to
the Sponsors of supplying such services in such year. (See "Portfolio
Supervision.")
The Trustee will receive, for its ordinary recurring services to the Trust,
an annual fee in the amount set forth under "Summary of Essential Information"
in Part A. For a discussion of the services performed by the Trustee pursuant to
its obligations under the Trust Agreement, see "Trust Administration" and
"Rights of Unitholders."
The Trustee's fees applicable to a Trust are payable as of each Record Date
from the Income Account of the Trust to the extent funds are available and then
from the Principal Account. Both the Sponsors' and Trustee's fees may be
increased without approval of the Unitholders by amounts not exceeding
proportionate increases in consumer prices for services as measured by the
United States Department of Labor's Consumer Price Index entitled "All Services
Less Rent."
The following additional charges are or may be incurred by the Trust: all
expenses (including counsel fees) of the Trustee incurred and advances made in
connection with its activities under the Trust Agreement, including the expenses
and costs of any action undertaken by the Trustee to protect the Trust and the
rights and interests of the Unitholders; fees of the Trustee for any
extraordinary services performed under the Trust Agreement; indemnification of
the Trustee for any loss or liability accruing to it without gross negligence,
bad faith or willful misconduct on its part, arising out of or in connection
with its acceptance or administration of the Trust; indemnification of the
Sponsors for any losses, liabilities and expenses incurred in acting as sponsors
of the Trust without gross negligence, bad faith or willful misconduct on its
part; and all taxes and other governmental charges imposed upon the Securities
or any part of the Trust (no such taxes or charges are being levied, made or, to
the knowledge of the Sponsors, contemplated). The above expenses, including the
Trustee's fees, when paid by or owing to the Trustee are secured by a first lien
on the Trust to which such expenses are charged. In addition, the Trustee is
empowered to sell the Securities in order to make funds available to pay all
expenses.
Unless the Sponsors otherwise direct, the accounts of the Trust shall be
audited not less than annually by independent auditors selected by the Sponsors.
The expenses of the audit shall be an expense of the Trust. So
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long as the Sponsors maintain a secondary market, the Sponsors will bear any
audit expense which exceeds $.50 cents per 100 Units. Unitholders covered by the
audit during the year may receive a copy of the audited financial statements
upon request.
REINVESTMENT PLAN
Income and principal distributions on Units (other than the final
distribution in connection with the termination of the Trust) may be reinvested
by participating in the Trust's reinvestment plan. Under the plan, the Units
acquired for participants will be either Units already held in inventory by the
Sponsors or new Units created by the Sponsors' deposit of Additional Securities
as described in "The Trust--Organization" in this Part B. Units acquired by
reinvestment will be subject to any remaining deductions of the Deferred Sales
Charge. In order to enable a Unitholder to participate in the reinvestment plan
with respect to a particular distribution on their Units, written notification
must be received by the Trustee within 10 days prior to the Record Date for such
distribution. Each subsequent distribution of income or principal on the
participant's Units will be automatically applied by the Trustee to purchase
additional Units of the Trust. The Sponsors reserve the right to demand, modify
or terminate the reinvestment plan at any time without prior notice. The
reinvestment plan for the Trust may not be available in all states.
OTHER MATTERS
LEGAL OPINIONS. The legality of the Units offered hereby and certain
matters relating to federal tax law have been passed upon by Battle Fowler LLP,
75 East 55th Street, New York, New York 10022 as counsel for the Sponsors.
Carter, Ledyard & Milburn, Two Wall Street, New York, New York 10005 have acted
as counsel for the Trustee.
INDEPENDENT AUDITORS. The Statement of Financial Condition, including the
Portfolio of Investments, is included herein in reliance upon the report of
Ernst & Young LLP, independent auditors, and upon the authority of said firm as
experts in accounting and auditing.
PERFORMANCE INFORMATION. Total returns, average annualized returns or
cumulative returns for various periods of the Strategic Ten, the related index
and this Trust may be included from time to time in advertisements, sales
literature and reports to current or prospective investors. Total return shows
changes in Unit price during the period plus any dividends and capital gains
received, divided by the public offering price as of the date of calculation.
Average annualized returns show the average return for stated periods of longer
than a year. From time to time, the Trust may compare the cost of purchasing
Trust shares to the cost of purchasing the individual securities which
constitute the Strategic Ten. In addition, the Trust may compare its deferred
sales charge to the sales charges assessed on unitholders by other unit
investment trusts. Sales material may also include an illustration of the
cumulative results of like annual investments in the Strategic Ten during an
accumulation period and like annual withdrawals during a distribution period.
Figures for actual portfolios will reflect all applicable expenses and, unless
otherwise stated, the maximum deferred sales charge. No provision is made for
any income taxes payable. Similar figures may be given for this Trust applying
the Strategic Ten investment strategy to other indexes. Returns may also be
shown on a combined basis. Trust performance may be compared to performance on a
total return basis of the Dow Jones Industrial Average, the S&P 500 Composite
Price Stock Index, or the average performance of mutual funds investing in a
diversified portfolio of U.S. stocks generally or growth stocks, or performance
data from Lipper Analytical Services, Inc. and Morningstar Publications, Inc. or
from publications such as Money, The New York Times, U.S. News and World Report,
Business Week, Forbes or Fortune. As with other performance data, performance
comparisons should not be considered representative of a Trust's relative
performance for any future period.
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<TABLE>
<CAPTION>
<S> <C> <C>
No person is authorized to give any information ---------------------------------
or to make any representations not contained in Parts INSERT LOGO
A and B of this Prospectus; and any information or ---------------------------------
representation not contained herein must not be SCHWAB TEN TRUST,
relied upon as having been authorized by the Trust, 1998 SERIES B
the Trustee or the Sponsors. The Trust is registered
as a unit investment trust under the Investment (A UNIT INVESTMENT TRUST)
Company Act of 1940. Such registration does not imply
that the Trust or any of its Units have been PROSPECTUS
guaranteed, sponsored, recommended or approved by the
United States or any state or any agency or officer DATED: JULY 7, 1998
thereof.
------------------
SPONSORS:
This Prospectus does not constitute an offer to CHARLES SCHWAB & CO., INC.
sell, or a solicitation of an offer to buy, 101 Montgomery Street
securities in any state to any person to whom it is San Francisco, California 94104
not lawful to make such offer in such state. 800-435-4000
Table of Contents REICH & TANG DISTRIBUTORS, INC.
600 Fifth Avenue
Title Page New York, New York 10020
- ----- ---- 800-237-7020
PART A
Summary of Essential Information..................A-2
Statement of Financial Condition..................A-8 TRUSTEE:
Portfolio of Investments..........................A-9
Report of Independent Auditors...................A-10 THE CHASE MANHATTAN BANK
4 New York Plaza
PART B New York, New York 10004
The Trust.........................................B-1
Risk Considerations...............................B-7
Public Offering...................................B-8
Rights of Unitholders............................B-10
Tax Status.......................................B-12
Liquidity........................................B-15
Trust Administration.............................B-18
Trust Expenses and Charges.......................B-24
Reinvestment Plan................................B-25
Other Matters....................................B-25
Parts A and B of this Prospectus do not contain
all of the information set forth in the registration
statement and exhibits relating thereto, filed with
the Securities and Exchange Commission, Washington,
D.C., under the Securities Act of 1933, and the
Investment Company Act of 1940, and to which
reference is made.
</TABLE>
MKT 3245-1
726317.1
<PAGE>
PART II -- ADDITIONAL INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM A -- BONDING ARRANGEMENTS
The employees of Reich & Tang Distributors L.P. are covered under Brokers'
Blanket Policy, Standard Form 14, in the amount of $11,000,000 (plus
$196,000,000 excess coverage under Brokers' Blanket Policies, Standard Form 14
and Form B Consolidated). This policy has an aggregate annual coverage of $15
million.
ITEM B -- CONTENTS OF REGISTRATION STATEMENT
This Registration Statement on Form S-6 comprises the following papers and
documents:
The facing sheet on Form S-6.
The Cross-Reference Sheet (incorporated by reference to the Cross-
Reference Sheet to Amendment No. 2 to the Registration Statement of
Schwab Trusts, Schwab Ten Trust, 1997 Series A).
The Prospectus consisting of pages.
Undertakings.
Signatures.
Written consents of the following persons:
Battle Fowler LLP (included in Exhibit 3.1)
Ernst & Young LLP
The following exhibits:
*99.1.1 -- Reference Trust Agreement including certain
amendments to the Trust Indenture and Agreement
referred to under Exhibit 99.1.1.1 below.
99.1.1.1 -- Form of Trust Indenture and Agreement (filed as
Exhibit 1.1.1 to Amendment No. 2 to Form S-6
Registration Statement No. 333-31133 of Schwab Trusts,
Schwab Ten Trust, 1997 Series A on November 4, 1997
and incorporated herein by reference).
99.1.3.5 -- Restated Articles of Incorporation of Charles
Schwab & Co., Inc (filed as Exhibit 1.3.5 to Amendment
No. 2 to Form S-6 Registration Statement No. 333-31133
of Schwab Trusts, Schwab Ten Trust, 1997 Series A on
November 4, 1997 and incorporated herein by
reference).
99.1.3.6 -- Certificate of Amendment of Articles of
Incorporation of Charles Schwab & Co., Inc (filed as
Exhibit 1.3.6 to Amendment No. 2 to Form S-6
Registration Statement No. 333-31133 of Schwab Trusts,
Schwab Ten Trust, 1997 Series A on November 4, 1997
and incorporated herein by reference).
99.1.3.7 -- Amended and Restated Bylaws of Charles Schwab & Co.,
Inc (filed as Exhibit 1.3.7 to Amendment No. 2 to Form
S-6 Registration Statement No. 333-31133 of Schwab
Trusts, Schwab Ten Trust, 1997 Series A on November 4,
1997 and incorporated herein by reference).
99.1.3.8 -- Certificate of Incorporation of Reich & Tang
Distributors, Inc. (filed as Exhibit 1.3.5 to Form S-6
Registration Statement No. 333-44301 of Equity
Securities Trust, Series 16, Signature Series, Zacks
All-Star Analysts Trust III on January 15, 1998 and
incorporated herein by reference).
99.1.3.9. -- By-Laws of Reich & Tang Distributors, Inc. (filed
as Exhibit 1.3.6 to Form S-6 Registration Statement
No. 333-44301 of Equity Securities Trust, Series 16,
Signature Series, Zacks All-Star Analysts Trust III on
January 15, 1998 and incorporated herein by
reference).
*99.3.1 -- Opinion of Battle Fowler LLP as to the legality of
the securities being registered, including their
consent to the filing thereof and to the use of their
name under the headings "Tax Status" and "Legal
Opinions" in the Prospectus, and to the filing of
their opinion regarding tax status of the Trust.
99.6.0 -- Power of Attorney of Reich & Tang Distributors,
Inc., the Depositor, by its officers and a majority of
its Directors (filed as Exhibit 6.0 to Form S-6
Registration Statement No. 333-44301 of Equity
Securities Trust, Series 16, Signature Series, Zacks
All-Star Analysts Trust III on January 15, 1998 and
incorporated herein by reference).
99.6.1 -- Powers of Attorney of Charles Schwab & Co., Inc.,
the Depositor, by its officers and a majority of its
Directors (filed as Exhibit 6.1 to Form S-6
Registration Statement No. 333-31133 of Schwab Trusts,
Schwab Strategic Ten Trust, 1997 Series A on July 11,
1997 and incorporated herein by reference).
*99.27 -- Financial Data Schedule (for EDGAR filing only).
- --------
* Filed herewith.
606976.5
<PAGE>
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Schwab Trusts, Schwab Ten Trust, 1998 Series B, has duly caused this Amendment
to the Registration Statement to be signed on its behalf by the undersigned,
hereunto duly authorized, in the City of New York and State of New York on the
7th day of July, 1998.
SCHWAB TRUSTS, SCHWAB
TEN TRUST, 1998 SERIES B
(Registrant)
CHARLES SCHWAB & CO., INC.
(Depositor)
By /s/ JIM WHITE
-------------------------------------
Jim White
(Authorized Signator)
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons,
who constitute the principal officers and a majority of the directors of Charles
Schwab & Co., Inc., the Depositor, in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
<S> <C> <C>
DAVID POTTRUCK Chief Executive Officer and Director
STEVEN SCHEID Chief Financial Officer and Director
CHARLES R. SCHWAB Director July 7, 1998
By /s/ JIM WHITE
-------------------------
Jim White
Attorney-In-Fact**
</TABLE>
- --------
** Executed copies of Powers of Attorney were filed as Exhibit 6.1 to
Registration Statement No. 333-31133 on July 11, 1997.
606976.5
<PAGE>
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Schwab Trusts, Schwab Ten Trust, 1998 Series B, has duly caused this Amendment
to the Registration Statement to be signed on its behalf by the undersigned,
hereunto duly authorized, in the City of New York and State of New York on the
7th day of July, 1998.
SCHWAB TRUSTS, SCHWAB
TEN TRUST, 1998 SERIES B
(Registrant)
REICH & TANG DISTRIBUTORS, INC.
(Depositor)
By /s/ PETER J. DEMARCO
-------------------------------------
Peter J. DeMarco
(Authorized Signator)
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons,
who constitute the principal officers and a majority of the directors of Reich &
Tang Distributors, Inc., the Depositor, in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
Name Title Date
<S> <C> <C>
RICHARD E. SMITH, III President and Director
PETER S. VOSS Director
G. NEAL RYLAND Director
STEVEN W. DUFF Director
ROBERT F. HOERLE Managing Director July 7, 1998
PETER J. DEMARCO Executive Vice President
RICHARD I. WEINER Vice President By /s/ PETER J. DEMARCO
--------------------------
BERNADETTE N. FINN Vice President Peter J. DeMarco
Attorney-In-Fact***
LORRAINE C. HYSLER Secretary
RICHARD DE SANCTIS Treasurer
EDWARD N. WADSWORTH Executive Officer
</TABLE>
- --------
*** Executed copies of Powers of Attorney were filed as Exhibit 6.0 to
Registration Statement No. 333-44301 on January 15, 1998.
606976.5
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference made to our firm under the caption "Independent
Auditors" in Part B of the Prospectus and to the use of our report dated July 6,
1998, in this Registration Statement (Form S-6 No. 333-53675) of Schwab Trusts,
Schwab Ten Trust, 1998 Series B.
New York, New York
July 6, 1998 ERNST & YOUNG LLP
606976.5
SCHWAB TRUSTS,
SCHWAB TEN TRUST, 1998 SERIES B
REFERENCE TRUST AGREEMENT
This Reference Trust Agreement (the "Agreement") dated July 7, 1998
among Charles Schwab & Co., Inc., Reich & Tang Distributors, Inc., as Depositors
and The Chase Manhattan Bank, as Trustee, sets forth certain provisions in full
and incorporates other provisions by reference to the document entitled "Schwab
Trusts, Schwab Ten Trust, 1997 Series A, and Subsequent Series, Trust Indenture
and Agreement" dated November 4, 1997 and as amended in part by this Agreement
(collectively, such documents hereinafter called the "Indenture and Agreement").
This Agreement and the Indenture, as incorporated by reference herein, will
constitute a single instrument.
WITNESSETH THAT:
WHEREAS, this Agreement is a Reference Trust Agreement as defined in
Sec tion 1.1 of the Indenture, and shall be amended and modified from time to
time by an Addendum as defined in Section 1.1 (1) of the Indenture, such
Addendum setting forth any Additional Securities as defined in Section 1.1 (2)
of the Indenture;
WHEREAS, the Depositors wish to deposit Securities, and any Additional
Securities as listed on any Addendums hereto, into the Trust and issue Units,
and Additional Units as the case maybe, in respect thereof pursuant to Section
2.5 of the Indenture; and
NOW THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, the Depositors and the Trustee as follows:
Part I
STANDARD TERMS AND CONDITIONS OF TRUST
Section 1. Subject to the provisions of Part II hereof, all the
provisions contained in the Indenture 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 following sections of the Indenture hereby are
amended as follows:
(a) All references to "Reich & Tang Distributors, L.P." are replaced
with "Reich & Tang Distributors, Inc."
688576.2
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<PAGE>
(b) Section 1.1 of the Agreement is amended to add the following
definitions:
"Distribution Agent" shall mean the Distribution Agent appointed in the
Distribution Agency Agreement, or its successor as appointed pursuant
to the Distribution Agency Agreement.
"Distribution Agency Agreement" shall mean the Distribution Agency
Agreement among the Depositors, Trustee and the Distribution Agent
dated as of July 7, 1998.
Definitions following these definitions shall be renumbered.
(c) Section 2.1 of the Agreement is amended by adding the following
paragraph after the second paragraph thereof:
"When and as directed by the Depositors, the Trustee or Distribution
Agent shall accept securities and cash to be deposited in a New Series
in exchange for Units of the New Series from persons other than
Unitholders participating in a rollover option. Notwithstanding the
fact that any Unitholder may acquire Units of the Trust by purchase or
by in-kind contribution, the Depositors will not deposit Securities
received by the Depositors on termination, or through a redemption of
Units, of a series of the Trust to a subsequent series of the Trust."
(d) Section 3.1 of the Agreement is amended in its entirety to read as
follows:
"Section 3.1. Initial Cost: Subject to reimbursement as hereinafter
provided, the cost of organizing the Trust and sale of the Trust Units
shall be borne by the Depositors, provided, however, that the
liability on the part of the Depositors under this section shall not
include any fees or other expenses incurred in connection with the
administration of the Trust subsequent to the deposit referred to in
Section 2.1. Upon notification from the Depositors that the primary
offering period is concluded, the Trustee shall withdraw from the
Account or Accounts specified in the Prospectus or, if no Account is
therein specified, from the Principal Account, and pay to the
Depositors the Depositors' reimbursable expenses of organizing the
Trust and sale of the Trust Units in an amount certified to the
Trustee by the Depositors but not in excess of the estimated per-Unit
amount set forth in the Prospectus multiplied by the number of Units
outstanding as of the conclusion of the primary offering period. If
the cash balance of the Principal Account is insufficient to make such
withdrawal, the Trustee shall, as directed by the Depositors, sell
Securities identified by the Depositors, or distribute to the
Depositors Securities having a value, as determined under Section 4.1
as of the date of distribution, sufficient for such
688576.2
-2-
<PAGE>
reimbursement. The reimbursement provided for in this section shall be
for the account of the Unitholders of record at the conclusion of the
primary offering period. Any assets deposited with the Trustee in
respect of the expenses reimbursable under this section shall be held
and administered as assets of the Trust for all purposes hereunder.
The Depositors shall deliver to the Trustee any cash identified in the
Statement of Net Assets of the Trust included in the Prospectus not
later than the First Settlement Date and the Depositors' obligation to
make such delivery shall be secured by the letter of credit deposited
pursuant to section 2.1. Any cash which the Depositors have identified
as to be used for reimbursement of expenses pursuant to this Section
shall be held by the Trustee, without interest, and reserved for such
purpose and, accordingly, prior to the conclusion of the primary
offering period, shall not be subject to distribution or, unless the
Depositors otherwise direct, used for payment of redemptions in excess
of the per-Unit amount payable pursuant to the next sentence. If a
Unitholder redeems Units prior to the conclusion of the primary
offering period, the Trustee shall pay to the Unitholder, in addition
to the Redemption Price of the tendered Units, an amount equal to the
estimated per-Unit cost of organizing the Trust and the sale Trust
Units set forth in the Prospectus multiplied by the number of Units
tendered for redemption; to the extent the cash on hand in the Trust
is insufficient for such payment, the Trustee shall have the power to
sell Securities in accordance with Section 5.2. As used herein, the
Depositors' reimbursable expenses of organizing the Trust and sale of
the Trust Units shall include the cost of the initial preparation and
typesetting of the registration statement, prospectuses (including
preliminary prospectuses), the indenture, and other documents relating
to the Trust, SEC and state blue sky registration fees, the cost of
the initial valuation of the portfolio and audit of the Trust, the
initial fees and expenses of the Trustee, and legal and other
out-of-pocket expenses related thereto but not including the expenses
incurred in the printing of preliminary prospectuses and prospectuses,
expenses incurred in the preparation and printing of brochures and
other advertising materials and any other selling expenses.
(e) Section 5.1 of the Agreement is amended as follows:
(1) In the second sentence of the first paragraph of such
Section, to add the word "and" immediately before the phrase
"(a)(3) all other assets of the Trust" and to delete all
language in such sentence subsequent to such phrase.
(2) In the third sentence of the first paragraph of such
Section, to delete the word 'and" before "(b)(3)" and to add
at the conclusion of such sentence "and (b)(4) unpaid
organizational and offering costs in the estimated amount
per Unit set forth in the Prospectus.
688576.2
-3-
<PAGE>
(3) To delete the second paragraph of such Section.
(f) Section 5.2 of the Agreement is amended by adding the following
prior to the first paragraph thereof:
"In connection with each redemption of Units, the Depositors
shall direct the Trustee to redeem Units in accordance with the
procedures set forth in either (a) or (b) of this Section 5.2. (a)
Trustee."
(g) Section 5.2 of the Agreement is further amended by adding the
following three paragraphs after the ninth paragraph of such Section 5.2.:
"(b) Distribution Agent-On any Business Day on which any Unit or
Units are tendered for redemption (the "Redemption Day") by a
Unitholder or his duly authorized attorney to the Trustee at its unit
investment trust office in the City of New York not later than the
Evaluation Time, such Units shall be redeemed by the Trustee on that
Redemption Day. Units in uncertificated form shall be tendered by
means of an appropriate request for redemption in form approved by the
Trustee. Unitholders must sign exactly as their name appears on the
register with the signature guaranteed by a participant in a signature
guarantee program acceptable to the Trustee, or in such other manner
as may be acceptable to the Trustee. The Trustee may also require
additional documents such as, but not limited to, trust instruments,
certificates of death, appointments as executor or administrator or
certificates of corporate authority. Subject to payment by such
Unitholder of any tax or other governmental charges which may be
imposed thereon, such redemption is to be made by distribution to the
Distribution Agent on behalf of the redeeming Unitholder on the
Redemption Day of (i) the Unitholder's pro rata portion as of the
Redemption Day of the Securities in the Trust as designated by the
Depositor and (ii) the Unitholder's pro rata portion of the cash in
the Trust as of the Redemption Day (herein called the "Redemption
Distribution"). The Distribution Agent will dispose of such assets in
accordance with the provisions of the Distribution Agent Agreement.
Fractional interests in shares distributed to the Distribution Agent,
which are not included in the Redemption Distribution, shall be held
in trust by the Distribution Agent, which is hereby designated a
subcustodian of the Trustee with respect to such fractional interests,
and shall be subject to such disposition as the Depositor shall
direct. Units received for redemption by the Trustee on any date after
the Evaluation Time will be held by the Trustee until the next
Business Day on which the New York Stock Exchange is open for trading
and will be deemed to have been tendered on such day for redemption at
the Redemption Price computed on that day. Units tendered for
redemption by the Depositors on any Business Day shall be deemed to
have been tendered before the Evaluation Time on such Business Day
provided that the Depositors advise
688576.2
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<PAGE>
the Trustee before the later of the Trustee's close of business and
5:00 pm New York City time. By such advice, the Depositors will be
deemed to certify that all Units so tendered were either (a) tendered
to the Depositors or to a retail dealer between the Evaluation Time on
the preceding Business Day and the Evaluation Time on such Business
Day or (b) acquired previously by the Depositors but which the
Depositors determined to redeem prior to the Evaluation Time on such
Business Day.
The portion of the Redemption Distribution which represents the
Unitholder's interest in the Income Account shall be withdrawn from
the Income Account to the extent available. The balance paid on any
redemption, including dividends receivable on stocks trading ex
dividend, if any, shall be withdrawn from the Principal Account to the
extent that funds are available for such purpose. If such available
balance shall be insufficient, the Trustee shall advance funds
sufficient to pay such amount to the Unitholder and shall be entitled
to reimbursement of such advance upon the deposit of additional monies
in the Income Account or Principal Account, whichever happens first.
Should any amounts so advanced with respect to declared but unreceived
dividends prove uncollectible because of default in payment of such
dividends, the Trustee shall have the right immediately to liquidate
Securities in amount sufficient to reimburse itself for such advances,
without interest. In the event that funds are withdrawn from the
Principal Account for payment of any portion of the Redemption
Distribution representing dividends receivable on stocks trading ex
dividend, the Principal Account shall be reimbursed when sufficient
funds are next available in the Income Account for such funds so
applied.
Unitholders requesting or required to receive a cash distribution
shall receive such distribution in accordance with the applicable
provisions of the Distribution Agency Agreement."
(h) Section 6.2 of the Agreement is amended by adding the following at
the end of the second paragraph thereof:
"The Trustee shall maintain and provide, upon the request of a
Unitholder or the Depositors, the Unitholders or the Unitholder's
designated representative with the cost basis of the Securities
represented by the Unitholder's Units."
(i) Section 9.2 of the Agreement is amended by deleting the fourth
paragraph thereof and by adding the following paragraph in its place:
"In the event that the Trust terminates on the Termination Date,
the Trustee shall, not less than 30 days prior to the Termination
Date, send a written notice to each Unitholder. Such notice shall
allow each Unitholder of
688576.2
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<PAGE>
record, to elect to redeem his Units at the net asset value on the
Termination Date and to receive, in partial payment of the Redemption
Price per Unit, an in-kind distribution of such Unitholder's pro rata
share of the Securities, to the extent of whole shares. The Trustee
will honor duly executed requests for such in-kind distribution
received by the close of business on the Termination Date. Redemption
of the Units of Unitholders electing such in-kind distribution shall
be made on the third business day following the Termination Date and
shall consist of (1) such Unitholder's pro rata share of Securities
(valued as of the Termination Date) to the extent of whole shares and
(2) cash equal to the balance of such Unitholder's Redemption Price.
Unitholders who do not effectively request an in-kind distribution
shall receive their distribution upon termination in cash. The Trustee
shall distribute the Unitholder's Securities to the account of the
Unitholder's bank or broker-dealer at Depositary Trust Company. An
in-kind distribution shall be reduced by customary transfer and
registration charges incurred by the Trustee."
(j) Section 9.2 of the Agreement is further amended by adding the
following paragraph after the sixth paragraph of such Section 9.2:
"In the event that the Depositors direct the Trustee that certain
Securities will be sold to a new series of the Trust (a "New Series"),
the Depositors will certify to the Trustee, within five days of each
sale from a Trust to a New Series, (1) that the transaction is
consistent with the policy of both the Trust and the New Series, as
recited in their respective registration statements and reports filed
under the Act, (2) the date of such transaction and (3) the closing
sales price on the national securities exchange for the sale date of
the securities subject to such sale. The Trustee will then countersign
the certificate, unless the Trustee disagrees with the closing sales
price listed on the certificate, whereupon the Trustee will promptly
inform the Depositors orally of any such disagreement and return the
certificate within five days to the Depositors with corrections duly
noted. Upon the Depositors' receipt of a corrected certificate, if the
Depositors verify the corrected price by reference to an independently
published list of closing sales prices for the date of the
transactions, the Depositors will ensure that the price of Units of
the New Series, and distributions to holders of the Trust with regard
to redemption of their Units or termination of the Trust, accurately
reflect the corrected price. To the extent that the Depositors
disagree with the Trustee's corrected price, the Depositors and the
Trustee will jointly determine the correct sales price by reference to
a mutually agreeable, independently published list of closing sales
prices for the date of the transaction. The Depositors and Trustee
will periodically review the procedures for sales and make such
changes as they deem necessary, consistent with Rule 17a-7(e)(2).
Finally, records of the procedures and of each transaction will be
maintained as provided in Rule 17a-7(f)."
688576.2
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<PAGE>
(k) Section 9.2 of the Agreement is further amended by deleting the
last paragraph thereof and by adding the following paragraph in its place:
"Upon the Depositors' request, the Trustee will include in the
written notice to be sent to Unitholders referred to in the fourth
paragraph of this section a form of election whereby Unitholders may
express interest in investing their terminating distribution in units
of another series of the Schwab Trusts (the "New Series"). The Trustee
will inform the Depositors of all Unitholders who, within the time
period specified in such notice, express such interest. The Depositors
will provide to such Unitholders applicable sales material with
respect to the New Series and a form, acceptable to the Trustee,
whereby a Unitholder may appoint the Distribution Agent the
Unitholder's agent to apply the Unitholder's distribution for the
acquisition of a unit or units of the New Series (a "Rollover"). Such
form will specify, among other things, the time by which it must be
returned to the Trustee in order to be effective and the manner in
which such purchase shall be made. Redemption of the Units of the
Unitholders electing such Rollover shall be made by distribution to
the Distribution Agent on behalf of redeeming Unitholder on a date on
or prior to the Termination Date selected by the Depositors and
specified in the notice (the "Rollover Date") and shall consist of (1)
such Unitholder's pro rata share of Securities (valued as of the
Rollover Date) and (2) cash equal to the balance of the Unitholder's
Redemption Price. The Distribution Agent will dispose of such assets
in accordance with the provisions of the Distribution Agency
Agreement. In the event that the Depositors determine that an in-kind
deposit into the New Series pursuant to Section 1.02 of the
Distribution Agency Agreement will not be permitted, the Units owned
by the Unitholders electing investment in a New Series will be
redeemed pursuant to Section 5.2(a) and the above-described notice
will include a form, acceptable to the Trustee, whereby a Unitholder
may appoint the Trustee the Unitholder's agent to apply the
Unitholder's cash distribution for the purchase of a unit or units of
the New Series. This paragraph shall not obligate the Depositors to
create any New Series or to provide any such investment election."
Section 2. This Reference Trust Agreement may be amended and modified
by Addendums, attached hereto, evidencing the purchase of Additional Securities
which have been deposited to effect an increase over the number of Units
initially specified in Part II of this Reference Trust Agreement ("Additional
Closings"). The Depositors and Trustee hereby agree that their respective
representations, agreements and certifications contained in the Closing
Memorandum dated March 3, 1998, relating to the initial deposit of Securities
continue as if such representations, agreements and certifications were made on
the date of such Additional Closings and with respect to the deposits made
therewith, except as such representations, agreements and certifications relate
to their respective By-Laws and as to which they each
688576.2
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<PAGE>
represent that their has been no amendment affecting their respective abilities
to perform their respective obligations under the Indenture.
Part II
SPECIAL TERMS AND CONDITIONS OF TRUST
Section 1. The following special terms and conditions are hereby
agreed to:
(a) The Securities (including Contract Securities) listed in the
Prospectus relating to this series of Equity Securities Trust (the "Prospectus")
have been deposited in the Trust under this Agreement (see "Portfolio" in Part A
of the Prospectus which for purposes of this Indenture and Agreement is the
Schedule of Securities or Schedule A).
(b) The number of Units delivered by the Trustee in exchange for the
Securities referred to in Section 2.3 is 15,014.
(c) For the purposes of the definition of Unit in item (24) of Section
1.1, the fractional undivided interest in and ownership of the Trust initially
is 1/15,014 as of the date hereof.
(d) The term Record Date shall mean the fifteenth day of December and
June commencing on December 15, 1998.
(e) The term Distribution Date shall mean the last business day of
December and June commencing on December 30, 1998.
(f) The First Settlement Date shall mean July 10, 1998.
(g) For purposes of Section 6.1(g), the liquidation amount is hereby
specified to be 40% of the aggregate value of the Securities at the completion
of the Deposit Period.
(h) For purposes of Section 6.4, the Trustee shall be paid per annum
an amount computed according to the following schedule, determined on the basis
of the number of Units outstanding as of the Record Date preceding the Record
Date on which the compensation is to be paid, provided, however, that with
respect to the period prior to the first Record Date, the Trustee's compensation
shall be computed at $.92 per 100 Units:
rate per 100 units number of Units outstanding
$0.92 5,000,000 or less
$0.86 5,000,001 - 10,000,000
688576.2
-8-
<PAGE>
$0.80 10,000,001 - 20,000,000
$0.68 20,000,001 or more
(i) For purposes of Section 7.4, the Depositors' maximum annual
supervisory fee is hereby specified to be $.25 per 100 Units outstanding.
(j) The Termination Date shall be August 20, 1999 or the earlier
disposition of the last Security in the Trust.
(k) The fiscal year for the Trust shall end on June 30 of each year.
(l) For purposes of Section 3.15, the Trust will have a Deferred Sales
Charge as specified in and as permitted by the Prospectus.
IN WITNESS WHEREOF, the parties hereto have caused this Reference
Trust Agreement to be duly executed on the date first above written.
[Signatures on separate pages]
688576.2
-9-
<PAGE>
CHARLES SCHWAB & CO, INC.
Depositor
By: /s/ Jim White
Authorized Signator
STATE OF CALIFORNIA )
: ss:
COUNTY OF SAN FRANCISCO )
On this 26th day of June, 1998, before me personally appeared James C.
White, to me known, who being by me duly sworn, said that he is an Authorized
Signator of Charles Schwab & Co., Inc. the Depositor, one of the corporations
described in and which executed the foregoing instrument, and that he signed his
name thereto by authority of the Board of Directors of said corporation.
Ruth Mary Stroup
Notary Public
688576.1
<PAGE>
REICH & TANG DISTRIBUTORS, INC.
Depositor
By: /s/ Peter DeMarco
Authorized Signator
STATE OF NEW YORK )
: ss:
COUNTY OF NEW YORK )
On this 6th day of July, 1998, before me personally appeared Peter
DeMarco, to me known, who being by me duly sworn, said that he is an Authorized
Signator of the Depositors, one of the corporations described in and which
executed the foregoing instrument, and that he signed his name thereto by
authority of the Board of Directors of said corporation.
/s/ Teresa Scilla
Notary Public
688576.1
<PAGE>
THE CHASE MANHATTAN BANK
Trustee
By: /s/ Rosalia Raviele
Vice President
STATE OF NEW YORK )
:ss.:
COUNTY OF NEW YORK )
On this 3rd day of July, 1998, before me personally appeared Rosalia
Raviele, to me known, who being by me duly sworn, said that he is an Authorized
Signator of The Chase Manhattan Bank, one of the corporations described in and
which executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by authority of the Board of Directors of said
corporation and that he signed his name thereto by like authority.
Ada Iris Vega
Notary Public
688576.1
BATTLE FOWLER LLP
A LIMITED LIABILITY PARTNERSHIP
75 East 55th Street
New York, New York 10022
(212) 856-7000
July 7, 1998
Charles Schwab & Co., Inc.
101 Montgomery Street
San Francisco, California 94104
Reich & Tang Distributors, Inc.
600 Fifth Avenue
New York, New York 10020
Re: Schwab Trusts, Schwab Ten Trust, 1998 Series B
----------------------------------------------
Dear Sirs:
We have acted as special counsel for Charles Schwab & Co., Inc. and Reich &
Tang Distributors, Inc., as Depositors, Sponsors and Principal Underwriters
(collectively, the "Depositors") of Schwab Trusts, Schwab Ten Trust, 1998 Series
B (the "Trust") in connection with the issuance by the Trust of units of
fractional undivided interest (the "Units") in the Trust. Pursuant to the Trust
Agreements referred to below, the Depositors have transferred to the Trust
certain securities and contracts to purchase certain securities together with an
irrevocable letter of credit to be held by the Trustee upon the terms and
conditions set forth in the Trust Agreements. (All securities to be acquired by
the Trust are collectively referred to as the "Securities").
In connection with our representation, we have examined copies of the
following documents relating to the creation of the Trust and the issuance and
sale of the Units: (a) the Trust
648314.1
<PAGE>
Charles Schwab & Co., Inc.
Reich & Tang Distributors, Inc.
July 7, 1998
Indenture and Agreement and related Reference Trust Agreement, each of even date
herewith, relating to the Trust (collectively the "Trust Agreements") among the
Depositors and The Chase Manhattan Bank, as Trustee; (b) the Notification of
Registration on Form N-8A and the Registration Statement on Form N-8B-2, as
amended, relating to the Trust, as filed with the Securities and Exchange
Commission (the "Commission") pursuant to the Investment Company Act of 1940
(the "1940 Act"); (c) the Registration Statement on Form S-6 (Registration No.
333-53675) filed with the Commission pursuant to the Securities Act of 1933 (the
"1933 Act"), and all Amendments thereto (said Registration Statement, as amended
by said Amendment(s) being herein called the "Registration Statement"); (d) the
proposed form of final Prospectus (the "Prospectus") relating to the Units,
which is expected to be filed with the Commission this day; (e) certified
resolutions of the Board of Directors of Reich & Tang Distributors, Inc. and of
the Board of Directors of Charles Schwab & Co., Inc. authorizing the execution
and delivery by the Depositors of the Trust Agreements and the consummation of
the transactions contemplated thereby; (f) the Certificate of Incorporation of
Reich & Tang Distributors, Inc.; (g) the Restated Articles of Incorporation, the
Certificate of Amendment of Articles of Incorporation and the Amended and
Restated Bylaws of Charles Schwab & Co., Inc.; and (h) a certificate of an
authorized officer of Reich & Tang Distributors, Inc. with respect to certain
factual matters contained therein.
We have examined the Order of Exemption from certain provisions of Sections
11(a) and 11(c) of the 1940 Act, filed on behalf of Reich & Tang Distributors
L.P.(the predecessor to Reich & Tang Distributors, Inc.); Equity Securities
Trust (Series 1, Signature Series and Subsequent Series), Mortgage Securities
Trust (CMO Series 1 and Subsequent Series), Municipal Securities Trust, Series 1
(and Subsequent Series) (including Insured Municipal Securities Trust, Series 1
(and Subsequent Series and 5th Discount Series and Subsequent Series)); New York
Municipal Trust (Series 1 and Subsequent Series); and A Corporate Trust (Series
1 and Subsequent Series) granted on October 9, 1996. In addition, we have
examined the Order of Exemption from certain provisions of Sections 2(a)(32),
2(a)(35), 22(d) and 26(a)(2) of the 1940 Act and Rule 22C-1 thereunder, filed on
behalf of Reich & Tang Distributors L.P.; Equity Securities Trust; Mortgage
Securities Trust; Municipal Securities Trust (including Insured Municipal
Securities Trust); New York Municipal Trust; A Corporate Trust; Schwab Trusts;
and all presently outstanding and subsequently issued series of these trusts and
all subsequently issued series of unit investment trusts sponsored by Reich &
Tang Distributors L.P. granted on October 29, 1997.
We have not reviewed the financial statements, compilation of the
Securities held by the Trust, or other financial or statistical data contained
in the Registration Statement and the Prospectus, as to which you have been
furnished with the reports of the accountants appearing in the Registration
Statement and the Prospectus.
648314.1
<PAGE>
Charles Schwab & Co., Inc.
Reich & Tang Distributors, Inc.
July 7, 1998
In addition, we have assumed the genuineness of all agreements, instruments
and documents submitted to us as originals and the conformity to originals of
all copies thereof submitted to us. We have also assumed the genuineness of all
signatures and the legal capacity of all persons executing agreements,
instruments and documents examined or relied upon by us.
Statements in this opinion as to the validity, binding effect and
enforceability of agreements, instruments and documents are subject: (i) to
limitations as to enforceability imposed by bankruptcy, reorganization,
moratorium, insolvency and other laws of general application relating to or
affecting the enforceability of creditors' rights, and (ii) to limitations under
equitable principles governing the availability of equitable remedies.
We are not admitted to the practice of law in any jurisdiction but the
State of New York and we do not hold ourselves out as experts in or express any
opinion as to the laws of other states or jurisdictions except as to matters of
Federal and Delaware corporate law.
Based exclusively on the foregoing, we are of the opinion that under
existing law:
(1) The Trust Agreements have been duly authorized and entered into by an
authorized officer of each of the Depositors and is a valid and binding
obligation of the Depositors in accordance with their respective terms.
(2) The registration of the Units on the registration books of the Trust by
the Trustee has been duly authorized by the Depositors in accordance with the
provisions of the Trust Agreements and issued for the consideration contemplated
therein, will constitute fractional undivided interests in the Trust, will be
entitled to the benefits of the Trust Agreements, and will conform in all
material respects to the description thereof contained in the Prospectus. Upon
payment of the consideration for the Units as provided in the Trust Agreements
and the Registration Statement, the Units will be fully paid and non-assessable
by the Trust.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name in the Registration Statement
and in the Prospectus under the headings "Tax Status" and "Legal Opinions". We
authorize you to deliver copies of this opinion to the Trustee and the Trustee
may rely on this opinion as fully and to the same extent as if it had been
addressed to it.
648314.1
<PAGE>
Charles Schwab & Co., Inc.
Reich & Tang Distributors, Inc.
July 7, 1998
This opinion is intended solely for the benefit of the addressees and the
Trustee in connection with the issuance of the Units of the Trust and may not be
relied upon in any other manner or by any other person without our express
written consent.
Very truly yours,
Battle Fowler LLP
648314.1
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND> The schedule contains summary financial
information extracted from the statement of
financial condition as of opening of business on
date of deposit and is qualified in its entirety
by reference to such financial statement.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-06-1998
<PERIOD-END> JUL-06-1998
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 149,989
<INVESTMENTS-AT-VALUE> 149,989
<RECEIVABLES> 0
<ASSETS-OTHER> 154
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 150,143
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 154
<TOTAL-LIABILITIES> 154
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<SHARES-COMMON-STOCK> 15,014
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<OVERDISTRIBUTION-NII> 0
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<OVERDISTRIBUTION-GAINS> 0
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<NET-ASSETS> 149,989
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 149,989
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.99
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
