ESTEE LAUDER AUTOMATIC COMMON EXCHANGE SECURITY TRUST II, N-2/A, 1999-02-03

ESTEE LAUDER AUTOMATIC COMMON EXCHANGE SECURITY TRUST II
N-2/A, 1999-02-03

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 3, 1999
SECURITIES ACT FILE NO. 333-57125
INVESTMENT COMPANY ACT FILE NO. 811-8827_

================================================================================

U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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

FORM N-2
|X| REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
|X| PRE-EFFECTIVE AMENDMENT NO. 2
[_] POST-EFFECTIVE AMENDMENT NO.

AND/OR

|X| REGISTRATION STATEMENT UNDER THE
|X| INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 2

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

ESTEE LAUDER AUTOMATIC
COMMON EXCHANGE SECURITY TRUST II
(Exact Name of Registrant as Specified in Charter)

C/O GOLDMAN, SACHS & CO.
85 BROAD STREET
NEW YORK, NEW YORK 10004
(Address of Principal Executive Offices)

Registrant's Telephone Number, including Area Code: (212) 902-1000

KENNETH L. JOSSELYN, ESQ.
85 BROAD STREET
NEW YORK, NEW YORK 10004
(Name and Address of Agent for Service)

COPIES TO:

Robert E. Buckholz, Jr., Esq.
Sullivan & Cromwell
125 Broad Street
New York, New York 10004

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

APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:

As soon as practicable after the effective date of this Registration
Statement.

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

It is proposed that this filing will become effective when declared
effective pursuant to section 8(c).

If appropriate, check the following box:

|_| This amendment designates a new effective date for a previously
filed registration statement.

|_| This form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act and the Securities Act
registration statement number of the earlier effective registration statement
for the same offering is 333-________.

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

<PAGE>

CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>

Title of Securities Proposed Maximum Amount of
Being Registered Aggregate Offering Price(1) Registration Fee
================================================================================================================
<S> <C> <C>

Trust Automatic Common
Exchange Securities $172,500,000 $47,955(2)
.================================================================================================================
<FN>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) $2,950 previously paid.
</FN>
</TABLE>

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH AS DATE THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================

<PAGE>

ESTEE LAUDER AUTOMATIC COMMON EXCHANGE SECURITY TRUST II

CROSS-REFERENCE SHEET

(PURSUANT TO RULE 481(A) UNDER THE SECURITIES ACT OF 1933)

PART A & B OF PROSPECTUS*

ITEM
NUMBER CAPTION LOCATION IN PROSPECTUS
- ------ ------- ----------------------
<S> <C> <C>

1. Outside Front Cover......................................... Front Cover Page
2. Cover Pages; Other Offering Information..................... Front Cover Page; Underwriting
3. Fee Table and Synopsis...................................... Prospectus Summary
4. Financial Highlights........................................ Not Applicable
5. Plan of Distribution........................................ Front Cover Page; Prospectus Summary;
Underwriting
6. Selling Shareholders........................................ Not Applicable
7. Use of Proceeds............................................. Prospectus Summary-The Trust's Investment
Policies; Use of Proceeds; Investment Objective
and Policies
8. General Description of the Registrant....................... Front Cover Page; Prospectus Summary;
The Trust; Investment Objective and Policies;
Risk Factors
9. Management.................................................. The Trust
10. Capital Stock, Long-Term Debt, and Other
Securities................................................. Investment Objective and Policies; Description of
the Securities; Certain Federal Income Tax
Considerations
11. Defaults and Arrears on Senior Securities................... Not Applicable
12. Legal Proceedings........................................... Not Applicable
13. Table of Contents of the Statement
of Additional Information.................................. Not Applicable
14. Cover Page.................................................. Not Applicable
15. Table of Contents........................................... Not Applicable
16. General Information and History............................. The Trust
17. Investment Objective and Policies........................... Investment Objective and Policies
18. Management.................................................. The Trust
19. Control Persons and Principal Holders of
Securities................................................. The Trust
20. Investment Advisory and Other Services...................... The Trust
21. Brokerage Allocation and Other Practices.................... Investment Objective and Policies
22. Tax Status.................................................. Certain Federal Income Tax Considerations
23. Financial Statements........................................ Statement of Assets and Liabilities

- ---------------------------
<FN>

* Pursuant to the General Instructions to Form N-2, all information
required to be set forth in Part B: Statement of Additional Information
has been included in Part A: The Prospectus. Information required to be
included in Part C is set forth under the appropriate item so numbered
in Part C of this Registration Statement.
</FN>
</TABLE>

<PAGE>

RED HERRING TEXT
- ----------------

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THESE
SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL NOR DOES IT SEEK AN OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION
WHERE THE OFFER OR SALE IS NOT PERMITTED.

<PAGE>

SUBJECT TO COMPLETION. DATED FEBRUARY 3, 1999.

_______ Securities

ESTEE LAUDER AUTOMATIC COMMON EXCHANGE SECURITY
TRUST II

$____ Trust Automatic Common Exchange Securities (TRACES(TM)/(sm))
(Subject to exchange into Shares of Class A Common Stock
of The Estee Lauder Companies Inc.)
---------------------------

The $____ Trust Automatic Common Exchange Securities are a new series
of securities issued by the Estee Lauder Automatic Common Exchange Security
Trust II. The Trust will pay quarterly distributions of $____ on each Security.
On February __, 2002, the Trust will exchange each Security for either:

o Between 0.___ shares and one share of Class A Common Stock of The
Estee Lauder Companies Inc.,

o Cash equal to the value of those shares, or

o A combination of shares and cash.

The number of shares or amount of cash that will be delivered in exchange for
each Security will be based on the price of the Class A Common Stock during the
twenty business days before February __, 2002.

Under the circumstances described in this prospectus, the shares or
cash may be delivered between February __, 2002 and May __, 2002, instead of on
February __, 2002.

This is the first issuance of Securities by the Trust. As a result,
there is currently no public market for the Securities. The Trust will apply to
list the Securities on the New York Stock Exchange under the symbol "ECJ".

The Class A Common Stock is currently traded on the New York Stock
Exchange under the symbol "EL". The last reported sale price of the Class A
Common Stock on the New York Stock Exchange on February __, 1999, was $_____ per
share. The Company is not affiliated with the Trust.

The Trust is a newly organized, finite term closed-end investment
company. Shares of this type of fund frequently trade at a discount from net
asset value. This risk is separate from the risk that the Trust's net asset
value will fall. The Trust cannot predict whether the Securities will trade at,
below or above net asset value. The risk of purchasing investments in a
closed-end company that might trade at a discount may be greater for investors
who wish to sell their investments soon after completion of this offering.

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

This prospectus sets forth information about the Trust that you should
know before investing. You are advised to read this prospectus and to retain it
for future reference. Additional information about the Trust has been filed with
the Securities and Exchange Commission and is available upon written or oral
request and without charge. See "Further Information".

Consider carefully the "risk factors" beginning on page ___ of this
prospectus.

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

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

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

Per Security Total

Initial Public Offering P..................$________ $________
Sales Load.................................Not applicable Not applicable
Proceeds to the Trust......................$________ $________

The Underwriter may, under certain circumstances, purchase up to an
additional _______ Securities from the Trust at the Initial Public Offering
Price.

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

The Underwriter expects to deliver the Securities against payment in
New York, New York on February __, 1999.

GOLDMAN, SACHS & CO.

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

Prospectus dated February __, 1999.
<PAGE>

PROSPECTUS SUMMARY

This summary is not a complete description of the Trust or the
Securities. It does not contain all the information that may be important to
you. To understand this offering fully, you must read this entire prospectus
carefully, including the Risk Factors beginning on page __.

This prospectus includes a Glossary, beginning on page __. You should
refer to the Glossary if you wish to understand the terms used in this
prospectus in detail.

THE TRUST

The Trust is a newly organized trust that exists only to offer the
Securities. The Trust's only activities will be to issue the Securities and to
invest in the U.S. Treasury securities and stock purchase contracts described in
this prospectus.

THE TRUST'S INVESTMENT OBJECTIVE

The Trust's investment objective is to give the holder of each Security
a quarterly cash distribution of $____ and, on February __, 2002 (the "Exchange
Date"), between 0.____ and 1 shares of Class A Common Stock (or cash equal to
the value of those shares). The number of shares, or amount of cash, that a
holder will receive in exchange for a single Security will vary, depending on
the average market price of the Class A Common Stock over the twenty business
days before the Exchange Date.

o If the average market price is less than $_______ but equal to or
greater than $______, the holder of each Security will receive the
number of shares of Class A Common Stock that has a value equal to
$_______.

o If the average market price is equal to or greater than $_______, the
holder of each Security will receive 0.__ shares of Class A Common
Stock.

o If the average market price is less than $_______, the holder of each
Security will receive one share of Class A Common Stock.

This formula will be adjusted if the Company takes certain steps that combine,
split or dilute the value of the Class A Common Stock. If this formula would
require the Trust to deliver a fraction of a share of Class A Common Stock to
any holder, the Trust will instead deliver cash equal to the value of that
fraction of a share.

Because of this formula, the holders of the Securities will receive
part of any increase in the value of the Class A Common Stock above $_____.
However, the holders of the Securities will not receive any increase in the
value of the Class A Common Stock unless that value rises higher than $____. The
holders will bear the entire amount of any decrease in the value of the Class A
Common Stock.

For more detail, please see "Investment Objective and Policies".

THE TRUST'S INVESTMENT POLICIES

To achieve its investment objective, the Trust will invest all the
proceeds of the Securities in:

<PAGE>

o "Stripped" U.S. Treasury securities that will mature during each
quarter through February __, 2002. The Trust will use the payments it
receives as these U.S. Treasury securities mature to pay the
quarterly distributions on the Securities.

o A stock purchase contract (the "Contract") with a stockholder of the
Company (the "Seller"). The Seller will be required to deliver shares
of Class A Common Stock to the Trust on the Exchange Date.
Alternatively, the Seller may choose to deliver the equivalent amount
of cash. If the Seller performs its obligations, the Contract will
provide the Trust with the shares of Class A Common Stock or cash
that the Trust must deliver to the holders of the Securities on the
Exchange Date.

The Seller has the right to extend the Exchange Date under the Contract
to May __, 2002. If the Seller extends the Exchange Date, the Seller will not be
required to deliver the shares of Class A Common Stock or cash under the
Contract until May __, 2002. However, the Seller can then accelerate the
delivery of shares or cash to any date between February __, 2002 and May __,
2002. If the Seller extends or accelerates the Exchange Date under the Contract,
the holders of the Securities will not receive the shares or cash in exchange
for the Securities until the extended or accelerated Exchange Date and the
number of shares and amount of cash to be delivered would be calculated as of
such extended or accelerated Exchange Date. However, the holders of the
Securities would receive an additional, partial cash distribution on the
Securities for the period of the delay.

In some circumstances, the holders of the Securities may receive cash
or other common equity securities instead of or in addition to the Class A
Common Stock. For more detail, please see "-The Securities-Modifications to
Delivery Requirements".

The Seller will pledge collateral to the Trust to secure the Seller's
obligations under the Contract. The collateral will initially be the shares of
Class A Common Stock that the Seller must deliver under the Contract. However,
if the Seller complies with its obligations under the Contract and its pledge,
the Seller may pledge U.S. Treasury securities instead of the shares of Class A
Common Stock.

The Trust will not change its investments, even if the value of the
Contract or the Class A Common Stock falls significantly or the financial
condition of the Company suffers. Furthermore, because the Trust is a grantor
trust for purposes of the U.S. federal tax laws, the trustees of the Trust will
not have the power to change the Trust's investments.

For more detail, please see "Investment Objective and Policies".

THE OFFERING

The Trust is offering _________ Securities to the public at a purchase
price of $____ per Security. This price is equal to the last reported sale price
of the Class A Common Stock on the date of this prospectus. The Securities are
being offered through Goldman, Sachs & Co. ("Goldman Sachs"), 85 Broad Street,
New York, New York 10004 (the "Underwriter").

In addition, the Trust has granted the Underwriter an option to
purchase up to _______ additional Securities. These Securities may be used only
to cover over-allotments. For more detail, please see "Underwriting".

<PAGE>

THE SECURITIES

The Trust will pass through to the holders of the Securities all
payments that it receives on the U.S. Treasury securities that it purchases with
the proceeds of the Securities. Similarly, the Trust will deliver to the holders
of the Securities all shares of Class A Common Stock, cash or other securities,
that it receives from the Seller under the Contract.

DISTRIBUTIONS. The holder of each Security will receive a distribution
of $____ each quarter. The Trust will pay these distributions on each March __,
June __, September __ and December __. However, if the Trust would be required
to make a distribution on a Saturday, Sunday or legal holiday, the Trust will
pay that distribution on the next business day instead. The Trust will make each
payment to the holder of the Security whose name appears in the Trust's books on
the business day before the applicable payment date. The first distribution will
be payable on March __, 1999 to holders of record on the previous business day.

The only source of cash for the quarterly distributions on the
Securities will be the cash received from the U.S. Treasury securities purchased
by the Trust with the proceeds of the Securities. Part of each year's
distributions on the Securities will be treated as a return of capital under the
U.S. federal income tax laws. For more detail, please see "Description of
Securities-Distributions-Tax Treatment of Distributions" and "Certain Federal
Income Tax Considerations".

EXCHANGE FOR CLASS A COMMON STOCK. On the Exchange Date, each Security
will be exchanged automatically for between 0.__ shares and one share of Class A
Common Stock, as determined by the formula described under "-The Trust's
Investment Objective". However, if the Seller delivers cash instead of Class A
Common Stock under the Contract, the holders of the Securities will receive cash
instead of the Class A Common Stock. The amount of cash will be based on the
average market price of the Class A Common Stock during the twenty business days
before the cash is delivered. The number of shares of Class A Common Stock or
amount of cash that will be delivered in exchange for the Securities will be
adjusted if the Company takes certain actions that have the effect of combining,
splitting or diluting the value of the Class A Common Stock.

MODIFICATIONS TO DELIVERY REQUIREMENTS. In some circumstances, the
holders of the Securities may receive cash or other common equity securities
instead of or in addition to the Class A Common Stock, or the holders of the
Securities may receive the Class A Common Stock, cash or other securities on a
date other than February __, 2002:

o The Exchange Date may be extended and then accelerated by the Seller
as described above. In this case, the holders of the Securities would
not receive the shares and cash until the extended or accelerated
date, but the holders would receive an additional, partial cash
distribution on the Securities for the period of delay. For further
detail, please see "Investment Objective and Policies-The
Contract-Extension and Acceleration of the Exchange Date at the
Option of the Seller".

o The Seller may elect to deliver cash instead of Class A Common Stock
under the Contract. If the Seller decides to deliver cash instead of
Class A Common Stock under the Contract, it may do so in connection
with a "rollover offering" - that is, an offering of securities that
refinances the Securities. If the Seller completes a rollover
offering, the Seller will deliver the cash under the Contract by the
fifth business day after completing that offering. In this case, the
holders of the Securities would not receive the cash payable on
exchange of the Securities until the Seller pays it to the Trust. For
further

<PAGE>

detail, please see "Investment Objective and Policies-The Contract-
Cash Settlement; Rollover Offerings".

o If the Company merges with another entity, the Company is liquidated,
or certain similar events occur, holders of Securities may receive
other common equity securities, cash or other property equal to the
value of the other consideration received by the Company's stockholders
in that transaction, rather than shares of Class A Common Stock. If at
least 30% of the consideration received by the Company's stockholders
in the merger consists of cash or cash equivalents, then the Seller
will be required to deliver any consideration other than common equity
securities to the Trust within five days after the Seller receives that
consideration. In this case, the holders of the Securities will receive
cash or other property representing part of the merger consideration on
a date before the scheduled Exchange Date, and common equity securities
representing the rest of the merger consideration on the Exchange Date.
For further detail, please see "Investment Objective and Policies-The
Contract-Reorganization Events".

o If the Company declares a dividend consisting of the shares of common
stock of another issuer, the Seller will be required to deliver the
shares received in the dividend, together with the Class A Common
Stock. In this case, the holders of Securities will receive both shares
of Class A Common Stock and shares of the other issuer, or cash equal
to the value of those shares. For further detail, please see
"Investment Objective and Policies-The Contract-Spin-Off
Distributions".

o If the Seller defaults under the Contract or its collateral
arrangements, the Contract would be accelerated. In this case, the
holder of each Security would then receive an early distribution of
the shares of Class A Common Stock, cash or other common equity
securities, instead of receiving the Class A Common Stock, or cash or
other securities, that would otherwise be delivered on the Exchange
Date. For further detail, please see "Investment Objective and
Policies-The Contract-Collateral Arrangements; Acceleration Upon
Default By the Seller".

For more detail, please see "Investment Objective and Policies".

VOTING RIGHTS. Holders will have the right to vote on changes to the
terms of the Securities, on the replacement of the trustees of the Trust and the
Trust's custodian, paying agent, transfer agent, registrar and other agents, and
on other matters affecting the Trust, as described below under the caption
"Description of Securities". However, holders of the Securities will not have
any voting rights with respect to the Class A Common Stock until they actually
receive shares of Class A Common Stock in exchange for the Securities. For more
detail, please see "Description of Securities-Voting".

LISTING. The Trust will apply to list the Securities on the New York
Stock Exchange (the "NYSE") under the symbol "ECJ".

THE COMPANY

The Company, founded in 1946 by Estee and Joseph Lauder, is one of the
world's leading manufacturers and marketers of quality skin care, makeup,
fragrance and hair care products. The Company's products are sold in over 100
countries and territories under the following well-recognized brand names:
Estee Lauder, Clinique, Aramis, Prescriptives, Origins, M.A.C., Bobbi Brown
essentials, jane and Aveda. The Company is also the global licensee for
fragrances and cosmetics for the Tommy Hilfiger, Donna Karan New York and DKNY
brands. Each brand is distinctly positioned within the cosmetics market.

<PAGE>

The Company has prepared a prospectus that describes the Company and
the Class A Common Stock (the "Company Prospectus"). The Company Prospectus is
attached as Annex A to this prospectus. The Company is not affiliated with the
Trust and will not receive any of the proceeds from the sale of the Securities.

CERTAIN FEDERAL INCOME TAX CONSIDERATIONS

The Trust will be treated as a grantor trust under the U.S. federal
income tax laws. This means that under these laws, each holder will be treated
as if it owned directly its proportionate share of the assets held by the Trust.
Similarly, income and original issue discount received by the Trust will
generally be treated as income of the holders.

Under the U.S. federal income tax laws, the U.S. Treasury securities
held by the Trust will be treated as having "original issue discount" that will
accrue over the term of the U.S. Treasury securities. However, when the Trust
actually receives cash on these U.S. Treasury securities, these cash payments
will not be included in the holders' income. Instead, these payments will reduce
the holder's aggregate tax basis in the Securities. A holder will have taxable
gain or loss if the Trust receives cash instead of Class A Common Stock.

Holders should be aware that the Trust's assets could be characterized
differently under the federal income tax laws. Other characterizations could
require holders to include more interest in income than they would under the
analysis outlined above. For more detail, please see "Certain Federal Income Tax
Considerations".

RISK FACTORS

An investment in the Securities involves risk. Some of the risks of an
investment in the Securities are described under "Risk Factors", beginning on
page __. These risks include the following:

o The Trust will not dispose of the Contract even if the price of the
Class A Common Stock falls significantly or the financial condition
of the Company suffers. The holders will bear the entire amount of
any decrease in the value of the Class A Common Stock.

o Similarly, the Trust will not dispose of the U.S. Treasury securities
before they mature or the Trust terminates, whichever comes first,
even if their value falls significantly.

o If the price of Class A Common Stock rises, a holder of a Security
will not receive all of this increase in value. Holders will not
receive any of this increase if the average market price of the Class
A Common Stock at the Exchange Date is below $______. Holders will
receive only ____% of any increase in the value of the Class A Common
Stock over $____. On the other hand, holders of Securities will bear
all of any decrease in the value of the Class A Common Stock.

o The distributions on the Securities will be higher than the annual
dividends paid on the Class A Common Stock in the past year. However,
the distributions on the Securities will remain fixed. As a result,
if the dividend on the Class A Common Stock is raised, the
distributions on the Securities may then be lower than the dividends
paid on the Class A Common Stock.

o The number of shares of Class A Common Stock or amount of cash that
holders may receive on the Exchange Date will be adjusted if the
Company takes certain actions described in this prospectus that

<PAGE>

have the effect of combining, splitting or diluting the value of the
Class A Common Stock. The number of shares to be received by holders
may not be adjusted for other events that may adversely affect the
price of the Class A Common Stock, such as offerings of Class A
Common Stock for cash or in connection with acquisitions.

o The only assets held by the Trust will be the U.S. Treasury
securities and the Contract. An investment in the Trust will be
riskier than an investment in an investment company with diversified
investments.

o The trading prices of the Securities in the secondary market will be
directly affected by the trading prices of the Class A Common Stock
in the secondary market. The trading prices of the Class A Common
Stock will be influenced by the Company's operating results and
prospects and by economic, financial and other factors and market
conditions. The trading prices of the Securities will also be
affected by fluctuations in interest rates and other factors that are
difficult to predict and beyond the Trust's control.

o There can be no assurance that a secondary market will develop for
the Securities. If a secondary market does develop, there can be no
assurance that it will provide the holders with liquidity for their
investment or that it will continue for the life of the Securities.

o Holders of the Securities will not be entitled to any rights with
respect to the Class A Common Stock unless they actually receive
Class A Common Stock in exchange for the Securities. For example,
holders of Securities will not be entitled to vote the shares of
Class A Common Stock or receive dividends.

FEES AND EXPENSES

UNDERWRITER'S COMPENSATION. The Seller will compensate the Underwriter
for the offering of the Securities because a significant portion of the proceeds
of the sale of the Securities will be used by the Trust to purchase the Contract
from the Seller. The Underwriting Agreement requires the Seller to pay the
Underwriter $___ for each Security sold in the offering.

ORGANIZATIONAL AND OFFERING COSTS. The Trust's organizational costs
will be approximately $10,000. The Trust's costs in connection with the offering
of the Securities will be approximately $______. Goldman Sachs will pay these
organizational and offering costs.

COSTS OF OTHER SERVICE PROVIDERS. At the closing of the offering of the
Securities, Goldman Sachs will make a one-time, up-front payment of $_____ to
the Trust's administrator, custodian, paying agent and trustees as compensation
for their services to the Trust. Goldman Sachs will also pay the Trust's
administrator $____ to cover the Trust's anticipated expenses. Goldman Sachs
will pay any ongoing expenses of the Trust above these estimated amounts and
reimburse the Trust for any amounts it may pay as indemnification to the Trust's
administrator, custodian, paying agent or any trustee. If Goldman Sachs does not
pay these expenses and obligations, the Trust will have to pay them, and this
will reduce the amount available to distribute to holders.

DISCLOSURE REQUIRED BY THE SECURITIES AND EXCHANGE COMMISSION. The
Securities and Exchange Commission (the "SEC") requires the Trust to present its
expenses in the following format. The SEC has stated that it intends this
requirement to assist investors in understanding the various costs and expenses
that an investor in the Securities will bear directly or indirectly.

Because the Trust will not bear any fees or expenses, investors will
not bear any expenses directly.

<PAGE>

INVESTOR TRANSACTION EXPENSES
Maximum Sales Load (as a percentage of the Initial
Public Offering Price).......................................... ___%(a)
Dividend Reinvestment and Cash Purchase Plan Fees................. N/A

ANNUAL EXPENSES (AS A PERCENTAGE OF NET ASSETS)
Management Fees(b)................................................ 0%
Other Expenses(c)................................................. 0%
------
Total Annual Expenses(c)..................................... 0%
======

(a) See "Underwriting".
(b) See "The Trust". The Trust will be internally managed; consequently,
there will be no separate investment advisory fee paid by the Trust.
The Chase Manhattan Bank will act as the administrator of the Trust.
(c) The organization costs of the Trust in the amount of $10,000,
compensation.
payable to the Trust's trustees, administrator, custodian, collateral
agent and paying agent in the amount of $________ and approximately
$_____ in respect of costs associated with the initial registration
and offering of the Securities will be paid by Goldman Sachs.
Anticipated ongoing expenses of the Trust over the term of the Trust,
estimated to be approximately $_____, as well as any unanticipated
operating expenses of the Trust, will also be paid by Goldman Sachs.
See "The Trust--Expenses of the Trust". Absent such arrangements, the
Trust's "Other Expenses" and "Total Annual Expenses" would be
approximately __% of the Trust's net assets.

The SEC also requires that closed-end investment companies present an
illustration of cumulative expenses (both direct and indirect) that an investor
would bear. The example must factor in the applicable Sales Load and must assume
that investors will receive a 5% annual return and will reinvest all
distributions at net asset value. PLEASE NOTE THAT THE ASSUMPTION OF A 5% ANNUAL
RETURN DOES NOT ACCURATELY REFLECT THE TRUST'S TERMS. SEE "INVESTMENT OBJECTIVE
AND POLICIES". ALSO, THE TRUST DOES NOT PERMIT HOLDERS TO REINVEST THE
DISTRIBUTIONS ON THE SECURITIES.

EXAMPLE 1 YEAR 3 YEARS
- ------- ------ -------
<S> <C> <C>

You would bear the following expenses on a $10,000 investment,
including the applicable sales load of $__ and assuming (1) no
annual expenses and (2) a 5% annual return throughout the period.............. $ $

</TABLE>
8

<PAGE>

THE TRUST

CREATION AND FORM OF THE TRUST

The Trust is a newly organized New York trust. It is a registered,
non-diversified, closed-end management investment company under the Investment
Company Act of 1940 (the "Investment Company Act"). The Trust was formed on June
17, 1998 under a trust agreement, which was amended and restated as of February
__, 1999 to reflect the terms of this offering (the "Trust Agreement"). The
Trust's address is 85 Broad Street, New York, New York 10004 (telephone no.
(212) 902-1000).

THE TRUSTEES

The Trust will be internally managed by three trustees (the
"Trustees"). One of the Trustees will be designated as the Trust's "Managing
Trustee". The Trustees will be responsible for the Trust's general management
and operations. However, the Trustees will not have the power to vary the
investments held by the Trust. See "Investment Objective and Policies". Goldman
Sachs will pay each Trustee, on behalf of the Trust, a one-time, up-front fee to
cover the Trustee's annual fee and anticipated out-of-pocket expenses. The
Managing Trustee will also receive an additional up-front fee for serving in
that capacity.

Goldman Sachs, as the Trust's sponsor and the initial holder of the
Trust's Securities, has elected three individuals to serve as the Trustees.
Their names, ages, addresses and titles, their principal occupations during the
past five years and their compensation are as follows:

PRINCIPAL OCCUPATION
DURING
NAME, AGE AND ADDRESS TITLE PAST FIVE YEARS COMPENSATION
===================== ===== ====================== ============
<S> <C> <C> <C>

Donald J. Puglisi, 53 Managing Trustee Professor of Finance $_____
Department of Finance University of Delaware
University of Delaware
Newark, DE 19716
William R. Latham III, 54 Trustee Professor of Economics $_____
Department of Economics University of Delaware
University of Delaware
Newark, DE 19716
James B. O'Neill, 59 Trustee Professor of Economics $_____
Center for Education & University of Delaware
Entrepreneurship
University of Delaware
Newark, DE 19716
</TABLE>

None of the Trustees is an "interested person" of the Trust as defined
in the Investment Company Act. Furthermore, none of the Trustees is a director,
officer or employee of the Underwriter or of the Trust's administrator, or of
any affiliate of the Underwriter or the Trust's administrator. Each of the
Trustees serves as a trustee of other similar trusts, but none of the Trustees
receives any compensation for serving as a trustee or director of any other
affiliated investment company.

<PAGE>

OTHER SERVICE PROVIDERS

ADMINISTRATOR. The Trust's day-to-day affairs will be managed by The
Chase Manhattan Bank as Administrator under an Administration Agreement, dated
as of February __, 1999 (the "Administration Agreement"). Under the
Administration Agreement, the Trustees have delegated most of their operational
duties to the Administrator, including the duties to:

o receive and pay invoices for expenses incurred by the Trust;

o with the approval of the Trustees, engage legal and other
professional advisors (other than the independent public accountants
for the Trust);

o instruct the Trust's paying agent to pay the distributions on the
Securities;

o prepare, mail, file and publish all notices, proxies, reports, tax
returns and other documents for the Trust, or direct the Trust's
paying agent to do so, and keep the Trust's books and records;

o select and engage an independent investment banking firm (after
consultation with the Seller), when the Trust is required to do so
under the Contract;

o at the direction of the Trustees, institute and prosecute legal and
other appropriate proceedings to enforce the Trust's rights and
remedies, but the Administrator is required to do so only if it
receives any indemnity that it requests; and

o make all necessary arrangements for meetings of the Trustees and any
meetings of holders.

The Administrator will not select the independent public accountants
for the Trust. The Administrator also will not sell any of the Trust's assets,
or permit any other agent of the Trust to do so, except when the Contract
requires the Trust to make a delivery, when the Trust is required to sell
fractional shares, when the collateral agreements securing the Contract require
the Trust to sell collateral posted by the Seller, and when the Trust
terminates.

CUSTODIAN. The Trust's assets will be held by The Chase Manhattan Bank
as the Trust's custodian (the "Custodian") under a Custodian Agreement, dated as
of February __, 1999 (the "Custodian Agreement").

COLLATERAL AGENT. The Custodian will also act as collateral agent (the
"Collateral Agent") under the collateral agreement between the Trust and the
Seller (the "Collateral Agreement"). The Collateral Agent will hold a perfected
security interest in the Class A Common Stock and U.S. Government obligations or
other assets pledged by the Seller under the Collateral Agreement. If the Seller
defaults under the Contract or the Collateral Agreement, it will be the
Collateral Agent that sells the collateral posted by the Seller and pays the
proceeds of that sale to the Custodian for distribution to the holders of the
Securities.

PAYING AGENT. ChaseMellon Shareholder Services, L.L.C. will serve as
the transfer agent, registrar and paying agent (the "Paying Agent") for the
Securities under a Paying Agent Agreement, dated as of February __, 1999 (the
"Paying Agent Agreement").

OTHER INFORMATION CONCERNING THE TRUST'S AGENTS. The Administrator, the
Custodian, the Collateral Agent and the Paying Agent each have the right to
resign at any time upon required notice to the Trust. The Trustees have the
right to remove any of these agents of the Trust at any time on 60 days' notice
or immediately if the agent defaults under the applicable agreement or the

<PAGE>

Investment Company Act, suffers a bankruptcy, or under certain other
circumstances. In order to ensure that all the agents of the Trust are the same
financial institution or affiliate financial institutions, if any of these
agents resigns or is removed, the appointment of each of the other agents
automatically terminates. However, no resignation or removal of any of these
agents will be effective until a successor is appointed. If any of these agents
resigns or is removed, the Trustees are required to appoint a successor with the
qualifications specified in the Trust Agreement.

Except for their respective roles as Administrator, Custodian,
Collateral Agent and Paying Agent, The Chase Manhattan Bank and ChaseMellon
Shareholder Services, L.L.C. have no other affiliation with, and are not engaged
in any other transactions with, the Trust.

INDEMNIFICATION

The Trust will indemnify each Trustee, the Administrator, the
Custodian, the Collateral Agent and the Paying Agent against any liabilities or
costs (including the costs of defending against any liability) that it may incur
in acting in that capacity, except for willful misfeasance, bad faith, gross
negligence or reckless disregard of their respective duties or where applicable
law prohibits that indemnification. The Seller has agreed to reimburse the Trust
for any amounts it may be required to pay under these indemnifications. If the
Seller does not pay these expenses and obligations, the Trust will have to pay
them, and this will reduce the amount available to distribute to holders.

EXPENSES OF THE TRUST

At the closing of the offering of the Securities, Goldman Sachs will
pay to the Administrator, the Custodian, the Collateral Agent and the Paying
Agent a one-time, up-front payment of $_______ to cover their fees. Goldman
Sachs will also pay the Administrator a one-time up-front payment of $________
to cover the Trust's anticipated expenses. The anticipated Trust expenses to be
paid by the Administrator out of this amount include, among other things:

o expenses for legal and independent accountants' services;

o costs of printing proxies, Securities certificates and holder
reports;

o fidelity bond coverage for the Trustee; and

o the Trustees' compensation described above.

In addition, Goldman Sachs will pay the costs of organizing the Trust in the
amount of $10,000 and estimated costs in connection with the initial
registration and public offering of the Securities in the amount of $_______.

The amount that Goldman Sachs will pay to the Administrator to cover
the Trust's ongoing expenses was determined based on estimates made in good
faith on the basis of information currently available to the Trust, including
estimates furnished by the Trust's agents. It is possible, however, that the
actual operating expenses of the Trust will be substantially more than this
amount. Goldman Sachs has agreed to pay any excess expenses beyond this amount.
If Goldman Sachs does not pay those excess expenses, the Trust will have to pay
them, and this will reduce the amount available to distribute to holders.

TRUST TERMINATION

The Trust will terminate automatically ten business days after the
final Exchange Date. However, if the Contract is accelerated, then the Trust
will terminate 10 business days after the

<PAGE>

Class A Common Stock, cash or other common equity securities required to be
delivered under the Contract are delivered. If the Trust terminates before all
the distributions on the Securities have been paid, the Trust's Administrator
will sell any U.S. Treasury securities then held in the Trust and distribute the
proceeds pro rata to the holders of the Securities, together with the shares or
cash delivered under the Contract.

VALUATION FOR INVESTMENT COMPANY ACT PURPOSES

In calculating the Trust's net asset value as required by the
Investment Company Act, the Trust Agreement provides that (i) the U.S. Treasury
securities held by the Trust will be valued at the mean between the last current
bid and asked prices or, if quotations are not available, as determined in good
faith by the Trustees, (ii) short-term investments having a maturity of 60 days
or less will be valued at cost with accrued interest or discount earned included
in interest receivable and (iii) the Contract will be valued on the basis of the
bid price received by the Trust for the Contract, or any portion of the Contract
covering not less than 1,000 shares, from an independent broker-dealer firm
unaffiliated with the Trust to be named by the Trustees who is in the business
of making bids on financial instruments similar to the Contract and with
comparable terms, or if such a bid quotation is not available, as determined in
good faith by the Trustees.

INVESTMENT COMPANY ACT EXEMPTION

The SEC has issued an order that exempts the Trust from the
requirements of Section 12(d)(1) of the Investment Company Act that restrict the
amount of Securities that registered investment companies could otherwise own.
Accordingly, registered investment companies may hold Securities in excess of
the limits imposed by Sections 12(d)(1)(A)(i) and 12(d)(1)(C) of the Investment
Company Act. However, any such investment company will be required to vote its
Securities in proportion to the votes of all other holders.

USE OF PROCEEDS

The net proceeds of this offering will be used immediately upon the
closing of this offering to:

o purchase a portfolio of stripped U.S. Treasury securities with face
amounts and maturities corresponding to the quarterly distributions
payable with respect to the Securities; and

o pay the purchase price to the Seller under the Contract.

INVESTMENT OBJECTIVE AND POLICIES

This prospectus includes a Glossary that states the definitions given
to some of the capitalized terms used in this prospectus in the Contract, the
Trust Agreement and the Collateral Agreement. You should refer to the Glossary
if you wish to understand the terms used in this prospectus in detail. Some of
these definitions are summarized in the descriptions below.

INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS; FUNDAMENTAL POLICIES

The Trust's investment objective is to give the holder of each Security
a quarterly cash distribution of $____ and, on the Exchange Date, between 0.____
and 1 shares of Class A Common Stock (or cash equal to the value of some or all
of those shares). The number of shares, or amount of cash, that a holder will
receive in exchange for a single Security will vary, depending on the average
market price of the Class A Common Stock over the twenty business days before

<PAGE>

the Exchange Date. The value of the Class A Common Stock (or cash or Marketable
Securities received in lieu of Class A Common Stock) that will be received by a
holder under the Securities may be more or less than the amount the holder paid
for the Securities.

To achieve its investment objective, the Trust will use the proceeds of
the Securities to buy and hold:

o a portfolio of stripped U.S. Treasury securities that will mature
during each quarter through February __, 2002; and

o the Contract.

The Trust has adopted the following fundamental policies:

o the Trust will invest at least 70% of its total assets in the
Contract;

o the Contract may not be disposed of during the term of the Trust;

o the U.S. Treasury securities held by the Trust may not be disposed of
before the earlier of their respective maturities and the termination
of the Trust; and

o the Trust may not purchase any securities or instruments other than
the U.S. Treasury securities, the Contract and the Class A Common
Stock or other assets received pursuant to the Contract and, for cash
management purposes, the short-term obligations of the U.S.
Government described under "-Temporary Investments" below; issue any
securities or instruments except for the Securities; make short sales
or purchases on margin; write put or call options; borrow money;
underwrite securities; purchase or sell real estate, commodities or
commodities contracts; make loans (other than the purchase of
stripped U.S. Treasury securities as described in this prospectus);
or take any action that would or could cause the Trust not to be a
"grantor trust" for purposes of the U.S. federal income tax laws.

The foregoing investment objective and policies are fundamental
policies of the Trust that may not be changed without the approval of a majority
of the Trust's outstanding Securities. A "majority of the Trust's outstanding
Securities" means the lesser of (i) 67% of the Securities represented at a
meeting at which more than 50% of the outstanding Securities are represented,
and (ii) more than 50% of the outstanding Securities.

Because of the foregoing limitations, the Trust's investments will be
concentrated in the cosmetics industry, which is the industry in which the
Company operates. The Trust is not permitted to purchase restricted securities.

THE COMPANY AND THE CLASS A COMMON STOCK

The Company is a pioneer in the cosmetics industry and believes it is a
leader in the industry due to the global recognition of its brand names, its
leadership in product innovation, its strong

<PAGE>

market position in key geographic markets and the consistently high quality of
its products. The Company sells products principally through limited
distribution channels to complement the images associated with its brands. These
channels encompassing over 9,000 points of sale, consist primarily of upscale
department stores, speciality retailers, upscale perfumeries and pharmacies and,
to a lesser extent, free-standing company stores, stores on cruise ships,
in-flight and duty free shops in airports and cities. The Company believes that
its strategy of pursuing limited distribution strengthens its relationships with
retailers, enables its brands to be among the best selling product lines at the
stores and heightens the aspirational quality of its brands. With the
acquisitions of jane and Aveda in fiscal 1998, the Company has broadened its
distribution to include new channels, namely self-select outlets and salons.

The Company's fiscal year ends on June 30.

The shares of Class A Common Stock are traded on the NYSE. The
following table sets forth, for the calendar quarters indicated, the reported
high and low sales prices of the shares of Class A Common Stock on the NYSE
Consolidated Tape and the cash dividends per share of Class A Common Stock. As
of January 27, 1999, there were 2,579 record holders of the Class A Common
Stock, including The Depository Trust Company, which holds shares of Class A
Common Stock on behalf of an indeterminate number of beneficial owners.

CASH
DIVIDEND
HIGH LOW PER SHARE
-------- -------- ----------
<S> <C> <C> <C>

Fiscal 1998
First Quarter.................................. $50 15/16 $44 3/4 $.085
Second Quarter................................. 56 3/8 39 .085
Third Quarter.................................. 69 48 1/2 .085
Fourth Quarter................................. 73 15/16 60 7/8 .085

Fiscal 1999
First Quarter.................................. $70 1/4 $49 1/2 $.085
Second Quarter................................. 86 1/2 46 11/16 .085
Third Quarter (through February 2, 1999)....... 85 3/4 76 3/4 .085(1)

<FN>
- ---------------------------

(1) The third-quarter dividend with respect to the Class A Common Stock is payable on
April 6, 1999 to holders of record on March 16, 1999.

</FN>
</TABLE>

Holders will not be entitled to any rights with respect to the Class A
Common Stock (including voting rights and rights to receive dividends or other
distributions on the Class A Common Stock) unless they actually receive shares
of Class A Common Stock in exchange for the Securities.

Please refer to the attached Company Prospectus, dated February __,
1999 (pages A-1 through A-_ hereto), which describes the Company and the Class A
Common Stock. The Company is not affiliated with the Trust and will not receive
any of the proceeds from the sale of the Securities. The Company Prospectus
relates to an aggregate of _________ shares of Class A Common Stock (and an
additional aggregate _______ shares if the Underwriter exercises its
over-allotment option).

THE CONTRACT

The Trust will enter into a Contract with the Seller obligating the
Seller to deliver to the Trust on the Exchange Date a number of shares of Class
A Common Stock equal to the product of the Exchange Rate (as defined below)
times the initial number of shares of Class A Common Stock covered by the
Contract. The aggregate initial number of shares of Class A Common Stock under

<PAGE>

the Contract will equal the aggregate number of Securities offered by this
prospectus (and will be increased if the Underwriter exercises its
over-allotment option).

The aggregate purchase price that the Trust will pay under the Contract
will be $______. The Trust will pay this purchase price on the closing date of
this offering (or, for the portion of the Contract relating to the Securities to
be sold under the Underwriter's over-allotment option, on the closing date for
the exercise of that option). This purchase price was arrived at by arm's-length
negotiation between the Trust and the Seller, taking into consideration factors
including the price, the expected dividend level and volatility of the Class A
Common Stock, current interest rates, the term of the Contract, current market
volatility generally, the collateral pledged by the Seller, the value of other
similar instruments and the costs and anticipated proceeds of the offering of
the Securities.

The Contract provides that if the Seller delivers Securities to the
Trust on or before the Exchange Date, the Seller's obligation to deliver Class A
Common Stock (or cash) will be proportionately reduced. The delivery of
Securities in partial or complete satisfaction of the Seller's obligations will
not, however, affect the amount of Class A Common Stock or cash that will be
received by the holder of each Security that remain outstanding on the Exchange
Date.

All matters relating to the administration of the Contract will be the
responsibility of either the Administrator or the Custodian.

THE EXCHANGE RATE. The "Exchange Rate" will be calculated by a formula
based on the "Average Market Price" of the Class A Common Stock on the Exchange
Date:

o If the Average Market Price is less than $_______ (the "Appreciation
Threshold Price") but equal to or greater than $_____ (the "Initial
Price"), the Exchange Rate will be the number of shares of Class A
Common Stock having a value (determined at the Average Market Price)
equal to the original Initial Price.

o If the Average Market Price is equal to or greater than the
Appreciation Threshold Price, the Exchange Rate will be _______
shares of Class A Common Stock.

o If the Average Market Price is less than the Initial Price, the
Exchange Rate will be one share of Class A Common Stock.

This formula will be adjusted if the Company takes certain steps that combine,
split or dilute the value of the Class A Common Stock. See "-The
Contract-Dilution Adjustments". The Exchange Rate will be rounded upward or
downward to the nearest 1/10,000 (or if there is not a nearest 1/10,000, to the
next lower 1/10,000). If this formula would require the Trust to deliver a
fraction of a share of Class A Common Stock to any holder, the Trust will
instead deliver cash equal to the value of that fraction of a share.

The "Average Market Price" per share of Class A Common Stock on any
date means the average Closing Price of a share of Class A Common Stock on the
20 Trading Days immediately before but not including that date. The Average
Market Price will be calculated in a different manner if a Seller carries out a
Rollover Offering (as defined below), as described under "-Cash Settlement;
Rollover Offerings".

The "Closing Price" of the Class A Common Stock (or any other common
equity security) on any date means the closing sale price (or, if no closing
sale price is reported, the last reported sale price) of that security as
reported on the NYSE Consolidated Tape on that date or, if the security is not
listed for trading on the NYSE on that date, as reported in the composite
transactions for the principal United States national or regional securities
exchange on which the security is so listed, or if the security is not listed on
a United States national or regional securities exchange on that

<PAGE>

date, as reported by the NASDAQ National Market or, if the security is not
reported by that market on that date, the last quoted bid price for the security
in the over-the-counter market as reported by the National Quotation Bureau or
any similar organization. However, if any event that results in an adjustment to
the number of shares of Class A Common Stock deliverable under the Contract, as
described under "-The Contract-Dilution Adjustments", occurs before the Exchange
Date, the Closing Price as determined pursuant to the foregoing will be
appropriately adjusted, in the manner described under "--The Contract--Dilution
Adjustments" to reflect the occurrence of that event.

A "Trading Day" for any common equity security means a day on which the
security (A) is not suspended from trading on any United States national or
regional securities exchange or association or over-the-counter market at the
close of business and (B) has traded at least once on the United States national
or regional securities exchange or association or over-the-counter market that
is the primary market for the trading of that security.

For illustrative purposes only, the following chart shows the number of
shares of Class A Common Stock that a holder would receive for each Security at
various Average Market Prices. The chart assumes that there would be no
adjustments to the number of shares of Class A Common Stock deliverable under
the Contract by reason of the occurrence of any of the events described under
"-The Contract-Dilution Adjustments". There can be no assurance that the Average
Market Price on the Exchange Date will be within the range set forth below.
Given the Initial Price of $_____ per Security and the Appreciation Threshold
Price of $_____, a holder would receive in connection with the exchange of
Securities on the Exchange Date the following number of shares of Class A Common
Stock:

AVERAGE MARKET PRICE NUMBER OF SHARES
OF CLASS A COMMON STOCK OF CLASS A COMMON STOCK
PER SECURITY
- ------------------------------- -------------------------------

EXTENSION AND ACCELERATION OF THE EXCHANGE DATE AT THE OPTION OF THE
SELLER. The Seller has the right to extend the Exchange Date under the Contract
to May __, 2002. If the Seller extends the Exchange Date, it will not be
required to deliver the shares of Class A Common Stock or cash until May __,
2002. However, once the Seller extends the Exchange Date, it can then accelerate
the delivery of shares or cash to any date between February __, 2002 and May __,
2002. If the Seller extends or accelerates the Exchange Date, the holders of the
Securities will not receive shares or cash in exchange for the Securities until
the extended or accelerated Exchange Date, and the number of shares and amount
of cash to be delivered would be calculated as of the extended or accelerated
Exchange Date. However, the holders of the Securities would receive an
additional, partial cash distribution on the Securities on the extended or
accelerated Exchange Date.

The amount of the additional, partial distribution that would be paid
on the Securities would be prorated to reflect the number of days by which the
Exchange Date is extended beyond February ___, 2002. For example, if the
Exchange Date is extended to May __, 2002 and then accelerated to April __, 2002
(i.e., two-thirds of the time between February __, 2002 and May __, 2002), the
additional distribution would be equal to two-thirds of the regular quarterly
distribution.

<PAGE>

CASH SETTLEMENT; ROLLOVER OFFERINGS. The Seller may elect to deliver
cash, instead of shares of Class A Common Stock, on the Exchange Date (whether
or not extended or accelerated) under the Contract. If the Seller chooses to
deliver cash instead of shares of Class A Common Stock, the amount of that cash
will be equal to the value, based on the Average Market Price at the Exchange
Date, of the number of shares that the Seller would otherwise be required to
deliver on the Exchange Date.

The Seller also may choose to deliver cash, instead of shares of Class
A Common Stock, in connection with a "Rollover Offering". A "Rollover Offering"
is a reoffering or refinancing of Securities effected by the Seller not earlier
than February __, 2002, by means of a completed public offering or offerings, or
another similar offering (which may include one or more exchange offers), by or
on behalf of the Seller. If the Seller chooses to carry out a Rollover Offering,
the "Average Market Price" will be the Closing Price per share of Class A Common
Stock on the Trading Day immediately before the date that the Rollover Offering
is priced (the "Pricing Date") or, if the Rollover Offering is priced after 4:00
P.M., New York City time, on the Pricing Date, the Closing Price per share on
the Pricing Date.

If the Seller carries out a Rollover Offering that is consummated on or
before the Exchange Date, the cash payable by the Seller will be delivered to
the Trust within five Trading Days of the Exchange Date (which may be extended
and accelerated as described above), instead of on the Exchange Date itself.
Accordingly, the holders of the Securities may not receive a portion of the cash
deliverable in exchange for the Securities until the fifth Trading Day after the
Exchange Date.

DILUTION ADJUSTMENTS. The Exchange Rate will be adjusted if the Company
(i) pays a stock dividend or makes a distribution with respect to the Class A
Common Stock in shares of that stock, (ii) subdivides or splits its outstanding
shares of Class A Common Stock, (iii) combines its outstanding shares of Class A
Common Stock into a smaller number of shares, or (iv) issues by reclassification
of its shares of Class A Common Stock any shares of other common stock of the
Company. In any such event, the Exchange Rate will be adjusted as follows: for
each share of Class A Common Stock that would have been deliverable under a
Security upon exchange before the adjustment, the holder of that Security will
receive the number of shares of Class A Common Stock (or, in the case of a
reclassification referred to in clause (iv) above, the number of shares of other
common stock of the Company issued pursuant to that reclassification), or the
fraction of such shares, that a stockholder who held one share of Class A Common
Stock immediately before that event would be entitled solely by reason of that
event to hold immediately after that event.

In addition, if the Company issues rights or warrants to all holders of
Class A Common Stock entitling them to purchase shares of Class A Common Stock
at a price per share less than the Then-Current Market Price (as defined below)
of the Class A Common Stock (other than rights to purchase Class A Common Stock
pursuant to a plan for the reinvestment of dividends or interest), then the
Exchange Rate will be adjusted pursuant to the following formula:

A = ER x OS + AS
-------
OS + PS
where

ER = the Exchange Rate before the adjustment;

OS = the number of shares of Class A Common Stock outstanding
immediately before the time (determined as described below) the
adjustment is effected by reason of the issuance of those rights
or warrants;

<PAGE>

AS = the number of additional shares of Class A Common Stock offered
for purchase pursuant to those rights or warrants; and

PS = the number of additional shares of Class A Common Stock that the
aggregate offering price of the total number of shares of Class A
Common Stock so offered for purchase would purchase at the
Then-Current Market Price.

To the extent that, after expiration of those rights or warrants, any of the
shares of Class A Common Stock offered by such rights or warrants are not
actually delivered, the Exchange Rate will be further adjusted to equal the
Exchange Rate that would have been in effect if the foregoing adjustment had
been made upon the basis of delivery of only the number of shares of Class A
Common Stock actually delivered.

The "Then-Current Market Price" of the Class A Common Stock, for the
purpose of making any dilution adjustment, means the average Closing Price per
share of Class A Common Stock for the five Trading Days immediately before the
time that adjustment is effected (or, in the case of an adjustment effected at
the opening of business on the business day after a record date, as described
below, immediately before the earlier of the time the adjustment is effected and
the related "ex-date" on which the shares of Class A Common Stock first trade
regular way on their principal market without the right to receive the relevant
dividend, distribution or issuance)

In addition, if the Company pays a dividend or makes a distribution to
all holders of Class A Common Stock of evidences of its indebtedness or other
non-cash assets (excluding any stock dividends or distributions in shares of
Class A Common Stock described above and any Spin-Off Distributions (as defined
below)) or issues to all holders of Class A Common Stock rights or warrants to
subscribe for or purchase any of its securities (other than rights or warrants
referred to in the second paragraph of this subsection), then the Exchange Rate
will be adjusted pursuant to the following formula:

A = ER x T
-------
T-V
where

ER = the Exchange Rate before the adjustment;

T = the Then-Current Market Price per share of Class A Common Stock;
and

V = the fair market value (as determined by a nationally recognized
independent investment banking firm retained for this purpose by
the Administrator) as of the time the adjustment is effected of
the portion of those evidences of indebtedness, non-cash assets or
rights or warrants applicable to one share of Class A Common
Stock.

In addition, if the Company distributes cash (other than any Permitted
Dividend (as defined below), any cash distributed in consideration of fractional
shares of Class A Common Stock and any cash distributed in a Reorganization
Event (as defined below)), by dividend or otherwise, to all holders of Class A
Common Stock or makes an Excess Purchase Payment (as defined below), then the
Exchange Rate will be adjusted pursuant to the following formula:

A = ER x T
-------
T-D
where

ER = the Exchange Rate before the adjustment;

<PAGE>

T = the Then-Current Market Price per share of Class A Common Stock on
the record date for that distribution; and

D = the amount of that distribution applicable to one share of Class A
Common Stock that would not be a Permitted Dividend or, in the
case of an Excess Purchase Payment, the aggregate amount of that
Excess Purchase Payment divided by the number of outstanding
shares of Class A Common Stock on that record date.

For purposes of these adjustments,

(a) the term "Permitted Dividend" means any quarterly cash dividend on
the Class A Common Stock, other than a quarterly cash dividend that
exceeds the immediately preceding quarterly cash dividend, and then
only to the extent that the per share amount of that dividend results
in an annualized dividend yield on the Class A Common Stock above
12.5%; and

(b) the term "Excess Purchase Payment" means the excess, if any, of (i)
the cash and the value (as determined by a nationally recognized
independent investment banking firm retained for this purpose by the
Administrator) of all other consideration paid by the Company with
respect to one share of Class A Common Stock acquired in a tender
offer or exchange offer by the Company, over (ii) the Then-Current
Market Price per share of Class A Common Stock.

If any adjustment in the Exchange Rate must be made pursuant to the
formulas described above, corresponding adjustments will be made to the Initial
Price and the Appreciation Threshold Price.

Dilution adjustments will be effected: (i) in the case of any dividend,
distribution or issuance described above, as of the opening of business on the
business day after the record date for determination of holders of Class A
Common Stock entitled to receive that dividend, distribution or issuance or, if
the announcement of any such dividend, distribution or issuance is after that
record date, at the time that dividend, distribution or issuance is announced by
the Company; (ii) in the case of any subdivision, split, combination or
reclassification described above, on the effective date of that transaction;
(iii) in the case of any Excess Purchase Payment for which the Company
announces, at or before the time it commences the relevant share repurchase, the
repurchase price for those shares to be repurchased, on the date of that
announcement; and (iv) in the case of any other Excess Purchase Payment, on the
date that the holders of Class A Common Stock become entitled to payment with
respect to that Excess Purchase Payment. There will be no adjustment under the
Contract for any dividends, distributions, issuances or repurchases that may be
declared or announced after the Exchange Date.

If an adjustment is made because the Company announces or declares a
record date for a dividend, distribution, issuance or repurchase, and the
dividend, distribution, issuance or repurchase does not actually occur, then the
Exchange Rate will be further adjusted to equal the Exchange Rate that would
have been in effect if the adjustment for that dividend, distribution, issuance
or repurchase had not been made. If an adjustment is made because the Company
announces a share repurchase, and the Company reduces the repurchase price or
repurchases fewer shares than announced, then upon completion of that share
repurchase, the Exchange Rate will be further adjusted to equal the Exchange
Rate that would have been in effect if the adjustment for that repurchase had
been based on the actual price and amount repurchased. All dilution adjustments
will be rounded upward or downward to the nearest 1/10,000 (or if there is not a
nearest 1/10,000, to the next lower 1/10,000). No adjustment in the Exchange
Rate will be required unless that adjustment would require an increase or
decrease of at least one percent in the Exchange Rate. However, any adjustments
that are not required to be made because of this limit will be carried forward
and taken into account in any subsequent adjustment.

<PAGE>

REORGANIZATION EVENTS. If a Reorganization Event occurs, the Seller
will be required to deliver on the Exchange Date, in lieu of each share of Class
A Common Stock initially subject to the Contract, cash in an amount equal to:

o If the Transaction Value (as defined below) is less than the
Appreciation Threshold Price but equal to or greater than the
Initial Price, the original Initial Price.

o If the Transaction Value is greater than or equal to the Appreciation
Threshold Price, 0.__ multiplied by the Transaction Value.

o If the Transaction Value is less than the Initial Price, the
Transaction Value.

This amount of cash is referred to as the "Basic Reorganization Event Amount".

If the consideration received by the holders of Class A Common Stock in
the Reorganization Event (the "Merger Consideration") includes Marketable
Securities, the Seller may choose to deliver those Marketable Securities on the
Exchange Date in lieu of delivering the cash value of those Marketable
Securities as described above. If the Seller chooses to deliver Marketable
Securities on the Exchange Date, the holders of the Securities will be
responsible for paying all brokerage and other transaction costs when they
resell those securities.

Notwithstanding the foregoing, if at least 30% of the Merger
Consideration consists of cash or cash equivalents (a "Cash Merger"), then
delivery of the Merger Consideration, other than any consideration consisting of
Marketable Securities, will be accelerated as follows. The Seller will be
required:

o within five business days after the Seller receives the Merger
Consideration, to deliver to the Trust the portion of the Merger
Consideration, other than Marketable Securities, calculated as
described below (the "Accelerated Portion") (and the Trust will
promptly distribute this property to the holders of the Securities);
and

o on the Exchange Date, to deliver to the Trust the number of
Marketable Securities calculated as described below.

The Accelerated Portion per Security will be the portion of the Merger
Consideration, other than Marketable Securities, that has a Value (as defined
below) equal to the amount determined pursuant to the following formula:

AP = BREA x OC
==
TV

where:

AP = the Value of the Accelerated Portion;

BREA = the Basic Reorganization Event Amount;

OC = the Value of the portion of the Merger Consideration received
in exchange for a single share of Common Stock that consists of
assets other than Marketable Securities; and

TV = the Transaction Value.

The number of Marketable Securities that the Trust will be required to
deliver on the Exchange Date in exchange for each Security will be determined by
applying the Exchange Rate,

<PAGE>

adjusted as described below, to the Average Market Price of the Marketable
Securities on the Exchange Date. To calculate the Exchange Rate, the Initial
Price will be adjusted pursuant to the following formula:

A = IP x MS
==
TV

where

IP = the Initial Price before the adjustment;

MS = the Value per share of the Marketable Securities; and

TV = the Transaction Value.

Similarly, the Appreciation Threshold Price will be adjusted pursuant to the
following formula:

A = ATP x MS
==
TV

where

ATP = the Appreciation Threshold Price before the adjustment;

MS = the Value per share of the Marketable Securities; and

TV = the Transaction Value.

The Exchange Rate will be adjusted pursuant to the following formula:

A = ER x SC
==
MS

where

ER = the Exchange Rate (computed on the basis of the adjusted Initial
Price and Appreciation Threshold Price and the Average Market
Price of the Marketable Securities);

SC = the aggregate Value of the Marketable Securities included in the
Merger Consideration received in exchange for a single share of
Class A Common Stock; and

MS = the Value per share of the Marketable Securities.

For purposes of the foregoing formulas, "Value" means (i) in respect of
cash, the amount of such cash; (ii) in respect of any property other than cash
or Marketable Securities, an amount equal to the market value on the date the
Reorganization Event is consummated (as determined by a nationally recognized
independent investment banking firm retained for this purpose by the
Administrator); and (iii) in respect of any share of Marketable Securities, an
amount equal to the average Closing Price per share of those Marketable
Securities for the 20 Trading Days immediately before the date the
Reorganization Event is consummated.

A "Reorganization Event" is (A) any consolidation or merger of the
Company, or any surviving entity or subsequent surviving entity of the Company
(a "Company Successor"), with or into

<PAGE>

another entity (other than a merger or consolidation in which the Company is the
continuing corporation and in which the Class A Common Stock outstanding
immediately before the merger or consolidation is not exchanged for cash,
securities or other property of the Company or another corporation), (B) any
sale, transfer, lease or conveyance to another corporation of the property of
the Company or any Company Successor as an entirety or substantially as an
entirety, (C) any statutory exchange of securities of the Company or any Company
Successor with another corporation (other than in connection with a merger or
acquisition) or (D) any liquidation, dissolution or winding up of the Company or
any Company Successor.

"Transaction Value" means the sum of (i) for any cash received in the
Reorganization Event, the amount of such cash received per share of Class A
Common Stock, (ii) for any property other than cash or Marketable Securities
received in the Reorganization Event, an amount equal to the market value on the
date the Reorganization Event is consummated of the property received per share
of Class A Common Stock (as determined by a nationally recognized independent
investment banking firm retained for this purpose by the Administrator) and
(iii) for any Marketable Securities received in the Reorganization Event, an
amount equal to the average Closing Price per share of those Marketable
Securities for the 20 Trading Days immediately before the Exchange Date (or, in
the case of a Cash Merger, for the 20 Trading Days immediately before the date
the Reorganization Event is consummated) multiplied by the number of those
Marketable Securities received for each share of Class A Common Stock.

The number of shares of Marketable Securities included in the calculation of
Transaction Value for purposes of the preceding clause (iii) will be adjusted if
a dilution event of the type described under "--Dilution Adjustments" occurs
with respect to the issuer of the Marketable Securities between the time of the
Reorganization Event and the Exchange Date.

"Marketable Securities" means any common equity securities (whether
voting or non-voting) listed on a U.S. national or regional securities exchange
or reported by the NASDAQ National Market.

No dilution adjustments will be made for events, other than those
described above, such as offerings of Class A Common Stock (other than through
the issuance of rights or warrants described above) for cash or in connection
with acquisitions.

SPIN-OFF DISTRIBUTIONS. If the Company makes a "Spin-Off Distribution"
during the term of the Contract, then the Seller will be required to deliver on
the Exchange Date, together with each share of Class A Common Stock delivered
under the Contract, the number of Marketable Securities distributed in respect
of a single share of Class A Common Stock in that Spin-Off Distribution. After
the Company makes such a distribution, the "Closing Price" of Class A Common
Stock, for purposes of calculating the Exchange Rate and for all other purposes
under the Contract, will be determined by reference to (A) the Closing Price per
share of the Class A Common Stock and (B) the product of (x) the Closing Price
per share of the spun-off Marketable Securities and (y) the number of shares of
such Marketable Securities distributed per share of Class A Common Stock in the
Spin-Off Distribution. The number of shares of Marketable Securities that the
Seller is required to deliver will be adjusted if any event that would, if it
had occurred with respect to the Class A Common Stock or the Company, have
required an adjustment pursuant to the provisions described under "-Dilution
Adjustments" occurs with respect to those Marketable Securities or their issuer
between the time of the Spin-Off Distribution and the Exchange Date.

A "Spin-Off Distribution" means a distribution by the Company to
holders of Class A Common Stock of Marketable Securities issued by an issuer
other than the Company.

<PAGE>

COLLATERAL ARRANGEMENTS; ACCELERATION UPON DEFAULT BY THE SELLER. The
Seller's obligations under the Contract initially will be secured by a security
interest in the maximum number of shares of Class A Common Stock deliverable
under the Contract (adjusted in accordance with the dilution adjustment
provisions of the Contract, described above), pursuant to the Collateral
Agreement.

If a Reorganization Event occurs, the Collateral Agreement will require
the Seller to pledge as alternative collateral all Marketable Securities
deliverable in such event in exchange for the maximum number of shares of Class
A Common Stock deliverable under the Contract at the time of the Reorganization
Event, plus cash in an amount equal to 100% of the Seller's Cash Delivery
Obligations (as defined below). Instead of delivering cash, the Seller may
choose to deliver U.S. Government obligations with an aggregate market value,
when pledged and at daily mark-to-market valuations after that time, of not less
than 105% of those Cash Delivery Obligations. The Collateral Agent will be
required, under the Collateral Agreements, to invest any such cash in U.S.
Treasury securities maturing on or before February __, 2002. The Seller's "Cash
Delivery Obligations" will be the Transaction Value of any Merger Consideration,
other than Marketable Securities, in respect of the maximum number of shares
covered by the Contract at the time of the Reorganization Event. The number of
shares of Marketable Securities required to be pledged will be adjusted if any
event requiring a dilution adjustment under the Contract occurs. If the
Reorganization Event is a Cash Merger, the collateral in respect of the Seller's
Cash Delivery Obligations will be released when the Seller delivers the
Accelerated Portion.

If the Company makes a Spin-Off Distribution, the Collateral Agreement
will require the Seller to pledge as additional collateral all Marketable
Securities deliverable in such distribution in respect of the maximum number of
shares of Class A Common Stock deliverable under the Contract at the time of
such Spin-Off Distribution. The number of these Marketable Securities required
to be pledged will also be adjusted if any event requiring a dilution adjustment
under the Contract occurs.

Unless the Seller is in default in its obligations under the Collateral
Agreement, the Seller will be permitted to substitute for the pledged shares of
Class A Common Stock collateral consisting of short-term, direct obligations of
the U.S. Government. The Seller may substitute short-term, direct U.S.
Government obligations in substitution for the pledge shares of Marketable
Securities at any time. Any U.S. Government obligations pledged as substitute
collateral for the Class A Common Stock, or for Marketable Securities received
in a Reorganization Event or Spin-Off Distribution, will be required to have an
aggregate market value at the time of delivery and at daily mark-to-market
valuations after that time of not less than 150% (or, from and after any
Insufficiency Determination that is not cured by the close of business on the
next business day, as described below, 200%) of the product of the market price
of the Class A Common Stock or Marketable Securities at the time of each
valuation times the number of shares of Class A Common Stock or Marketable
Securities for which those obligations are being substituted.

The Collateral Agent will promptly pay over to the Seller any
dividends, interest, principal or other payments received by the Collateral
Agent on any collateral pledged by the Seller, including any substitute
collateral, unless the Seller is in default in its obligations under the
Collateral Agreement, or unless the payment of that amount to the Seller would
cause the collateral to become insufficient under the Collateral Agreement. The
Seller will have the right to vote any pledged shares of Marketable Securities
for so long as those shares are owned by it and pledged under the Collateral
Agreement, unless an event of default occurs under the Contract or Collateral
Agreement.

If the Collateral Agent determines (an "Insufficiency Determination")
that the collateral pledged by the Seller fails to meet the foregoing
requirements at any valuation, and that failure is not cured by the close of
business on the business day after that determination, then, unless a Collateral
Event of Default (as defined below) under the Collateral Agreement has occurred
and is

<PAGE>

continuing, the Collateral Agent will commence (i) sales of the collateral
consisting of U.S. Government obligations and (ii) purchases, using the proceeds
of those sales, of shares of Class A Common Stock or Marketable Securities in an
amount sufficient to cause the collateral to meet the requirements under the
Collateral Agreement. The Collateral Agent will discontinue those sales and
purchases if a Collateral Event of Default occurs under the Collateral
Agreement.

A "Collateral Event of Default" under the Collateral Agreement means,
at any time, (A) if no U.S. Government obligations are pledged as substitute
collateral at that time, failure of the collateral to include of at least the
maximum number of shares of Class A Common Stock covered by the Contract at that
time (or, if a Reorganization Event or Spin-Off Distribution has occurred at or
before that time, failure of the collateral to include the maximum number of
shares of any Marketable Securities required to be pledged as described above);
(B) if any U.S. Government obligations are pledged as substitute collateral for
shares of Class A Common Stock (or shares of Marketable Securities) at that
time, failure of those U.S. Government obligations to have a market value at
that time of at least 105% of the market price per share of Class A Common Stock
(or Shares of Marketable Securities) times the difference between (x) the
maximum number of shares of Class A Common Stock (or shares of Marketable
Securities) deliverable under the Contract at that time and (y) the number of
shares of Class A Common Stock (or shares of Marketable Securities) pledged as
collateral at that time; and (C) at any time after a Reorganization Event in
which consideration other than Marketable Securities was delivered, failure of
any U.S. Government obligations pledged as collateral for Cash Delivery
Obligations to have a market value at that time of at least 105% of those Cash
Delivery Obligations, if that failure is not cured within one business day after
notice of that failure is delivered to the Seller.

If a Collateral Event of Default occurs under the Collateral Agreement,
or the Seller suffers a bankruptcy or insolvency, the Seller's obligations under
the Contract will automatically be accelerated. In that event, the Seller will
become obligated to deliver the number of shares of Class A Common Stock (or,
after a Reorganization Event or Spin-Off Distribution, the Marketable Securities
or cash or a combination of Marketable Securities and cash deliverable instead
of or in addition to those shares of Class A Common Stock) then deliverable
under the Contract, or any U.S. Government obligations then pledged as
collateral for the Seller's obligations.

If the Contract is accelerated, (i) the Collateral Agent will
distribute to the Trust, for distribution to the holders of the Securities, the
shares of Class A Common Stock and Marketable Securities then pledged by the
Seller and/or cash generated from the sale of U.S. Government obligations then
pledged by the Seller and (ii) the Custodian will sell the stripped U.S.
Treasury securities acquired by the Trust at the closing of this offering and
then held by the Trust, and distribute the proceeds pro rata to the holders. If,
by the Exchange Date, any substitute collateral has not been replaced by Class A
Common Stock (or, after a Reorganization Event or Spin-Off Distribution, cash or
Marketable Securities, as applicable) sufficient to meet the Seller's
obligations under the Contract, the Collateral Agent will distribute to the
Trust for distribution pro rata to the holders the market value of the Class A
Common Stock and Marketable Securities required to be delivered under the
Contract, in the form of any shares of Class A Common Stock or Marketable
Securities then pledged by the Seller plus cash generated from the sale of U.S.
Government obligations then pledged by the Seller (or, after a Reorganization
Event, the market value of the alternative consideration required to be
delivered under the Contract, in the form of any Marketable Securities then
pledged, plus any cash then pledged, plus cash generated from the sale of U.S.
Government obligations then pledged).

CALCULATION OF MARKET PRICES. In calculating any market price,
including any Average Market Price, Then-Current Market Price, Value or
Transaction Value:

o If no Closing Price for the Class A Common Stock is determined for
one or more (but not all) of the Trading Days during the relevant
period, those Trading Days will be

<PAGE>

disregarded in the calculation of the market price. No additional
Trading Days will be added to the calculation period.

o If no Closing Price for the Class A Common Stock is determined for
any of the Trading Days during the relevant period, the market price
will be the most recently available Closing Price for the Class A
Common Stock before that period began.

THE SELLER. The Seller is The Estee Lauder 1994 Trust. Please see the
caption "TRACES Stockholder" in the Company Prospectus for information about the
Seller.

THE U.S. TREASURY SECURITIES

The Trust will purchase and hold a series of zero-coupon ("stripped")
U.S. Treasury securities with face amounts and maturities corresponding to the
distributions payable with respect to the Securities and the payment dates under
the Securities. See "Description of Securities- Distributions". Up to 30% of the
Trust's total assets may be invested in these U.S. Treasury securities. If the
Contract is accelerated, then the U.S. Treasury securities then held in the
Trust will be sold by the Administrator and the proceeds of that sale will be
distributed pro rata to the holders, together with the amounts distributed upon
acceleration. See "-Collateral Arrangements; Acceleration Upon Default By the
Seller" and "The Trust-Trust Termination".

If the Seller extends the Exchange Date to May __,2002, it will be
required to deliver additional U.S. Treasury securities to the Trust to pay the
additional, partial distribution described above under "-The Contract-Extension
and Acceleration of the Exchange Date at the Option of the Seller". If the
Seller later accelerates the Exchange Date, the Seller will be required to
repurchase those additional U.S. Treasury securities from the Trust on or before
the Exchange Date, at a price equal to the total amount of unpaid distributions
on the Securities through the Exchange Date.

TEMPORARY INVESTMENTS

For cash management purposes, the Trust may invest the proceeds of the
U.S. Treasury securities and any other cash held by the Trust in short-term
obligations of the U.S. Government maturing no later than the business day
before the next distribution date. Under the Paying Agent Agreement, the Paying
Agent is responsible for investing, as instructed by the Trustees, all such cash
that is not paid to cover Trust expenses in short-term U.S. Treasury securities
maturing on or shortly before the next quarterly distribution date. Not more
than 5% of the Trust's total assets will be invested in those short-term
obligations or held in cash at any one time.

DESCRIPTION OF SECURITIES

Each Security represents an equal proportional interest in the Trust,
and a total of _______ Securities will be issued (assuming that the Underwriter
does not exercise its over-allotment option). The Securities have no preemptive,
redemption or conversion rights. The Securities are fully paid and nonassessable
by the Trust. The only securities that the Trust is authorized to issue are the
Securities offered hereby and those sold to the initial holder referred to
below. See "Underwriting".

DISTRIBUTIONS

AMOUNT AND TIMING. The Trust intends to distribute to holders on a
quarterly basis an amount equal to $____ per Security. This amount equals the
pro rata portion of the fixed quarterly cash distributions from the proceeds of
the maturing U.S. Treasury securities held by the Trust.

<PAGE>

The first distribution will be made on March __, 1999 to holders of record as of
the preceding business day. Distributions will then be made on March __, June
__, September __ and December __ of each year to holders of record as of the
preceding business day. Part of each distribution will be treated as a tax-free
return of the holder's investment. See "-Tax Treatment of Distributions" and
"Certain Federal Income Tax Considerations-Recognition of Original Issue
Discount on the U.S. Treasury Securities".

Upon termination of the Trust, as described under the caption "The
Trust-Trust Termination", each holder will receive any remaining net assets of
the Trust.

Quarterly distributions on the Securities will consist solely of the
cash received from the U.S. Treasury securities. The Trust will not be entitled
to any dividends that may be declared on the Class A Common Stock. See "Risk
Factors-Shareholder Rights".

The Trust does not permit the reinvestment of distributions.

TAX TREATMENT OF DISTRIBUTIONS. The following table sets forth
information regarding the distributions to be received on the stripped U.S.
Treasury securities described under "Investment Objective and Policies" above
(assuming that the Underwriter does not exercise its over-allotment option), the
portion of each year's distributions that will constitute a return of capital
for U.S. federal income tax purposes and the amount of original issue discount
accruing (assuming a yield-to-maturity accrual election in respect of any
short-term U.S. Treasury securities) on those U.S. Treasury securities with
respect to a holder that acquires its Securities at the issue price from the
Underwriter pursuant to the original offering. See "Certain Federal Income Tax
Considerations-Recognition of Original Issue Discount on the U.S. Treasury
Securities".

ANNUAL GROSS ANNUAL GROSS
DISTRIBUTIONS DISTRIBUTIONS FROM ANNUAL INCLUSION OF
FROM U.S. TREASURY ANNUAL RETURN OF ORIGINAL ISSUE
U.S. TREASURY SECURITIES CAPITAL PER DISCOUNT IN
YEAR SECURITIES PER SECURITY SECURITY INCOME PER SECURITY
- ---- -------------- ------------------ ---------------- -------------------
<S> <C> <C> <C> <C>

1999...........................
2000...........................
2001...........................
2002...........................

</TABLE>

VOTING

Holders are entitled to a full vote for each Security held on all matters
to be voted on by holders and are not able to cumulate their votes in the
election of Trustees. The Trustees have been selected initially by Goldman
Sachs, as the Trust's sponsor and the initial holder of the Trust's Securities.
The Trust intends to hold annual meetings as required by the rules of the NYSE.
The Trustees may call special meetings of holders for action by holder vote as
may be required by either the Investment Company Act or the Trust Agreement. The
holders have the right, upon the declaration in writing or vote of more than
two-thirds of the outstanding Securities, to remove a Trustee. The Trustees will
call a meeting of holders to vote on the removal of a Trustee upon the written
request of the holders of record of 10% of the Securities or to vote on other
matters upon the written request of the holders of record of 51% of the
Securities (unless substantially the same matter was voted on during the
previous 12 months). The Trustees will establish, and notify the holders in
writing of, the record date for each such meeting. The record date must be not
less than 10 nor more than 50 days before the meeting date. Holders at the close
of business on the record date will be entitled to vote at the meeting. The
Trust will also assist in communications with other holders as required by the
Investment Company Act.

<PAGE>

BOOK-ENTRY-ONLY ISSUANCE

The Depository Trust Company ("DTC") will act as securities depository
for the Securities. The information in this section concerning DTC and DTC's
book-entry system is based upon information obtained from DTC. The Securities
will be issued only as fully-registered securities registered in the name of
Cede & Co. (as nominee for DTC). One or more fully-registered global Security
certificates will be issued, representing in the aggregate the total number of
Securities, and will be deposited with DTC or ChaseMellon Shareholder Services,
L.L.C., as DTC's custodian.

DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York Banking
Law, a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("Participants") deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, eliminating the need
for physical movement of securities certificates. Direct Participants include
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations ("Direct Participants"). Access to the DTC
system is also available to others such as securities brokers and dealers, banks
and trust companies that clear through or maintain a custodial relationship with
a Direct Participant, either directly or indirectly ("Indirect Participants").

Purchases of Securities within the DTC system must be made by or
through a Direct Participant, which will receive a credit for the Securities on
DTC's records. The ownership interest of each actual purchaser of a Security
("Beneficial Owner") is in turn to be recorded on the Direct or Indirect
Participants' records. Beneficial Owners will not receive written confirmation
from DTC of their purchases, but Beneficial Owners are expected to receive
written confirmations providing details of the transactions, as well as periodic
statements of their holdings, from the Direct or Indirect Participants through
which the Beneficial Owners purchased Securities. Transfers of ownership
interests in Securities are to be accomplished by entries made on the books of
Participants acting on behalf of Beneficial Owners. Beneficial Owners will not
receive certificates representing their ownership interests in Securities,
except upon a resignation of DTC.

DTC has no knowledge of the actual Beneficial Owners of the Securities;
DTC's records reflect only the identity of the Direct Participants to whose
accounts those Securities are credited, which may or may not be the Beneficial
Owners. The Participants will remain responsible for keeping account of their
holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.

Payments on the Securities will be made to DTC. DTC's practice is to
credit Direct Participants' accounts on the relevant payment date in accordance
with their respective holdings shown on DTC's records unless DTC has reason to
believe that it will not receive payments on that payment date. Payments by
Participants to Beneficial Owners will be governed by standing instructions and
customary practices and will be the responsibility of that Participant and not
of DTC or the Trust, subject to any statutory or regulatory requirements as may
be in effect from time to time. Payment of dividends to DTC is the
responsibility of the Trust, disbursement of those payments to Direct
Participants is the responsibility of DTC, and disbursement of those payments to
the Beneficial Owners is the responsibility of Direct and Indirect Participants.

<PAGE>

Except as provided herein, a Beneficial Owner of an interest in a
global Security will not be entitled to receive physical delivery of Securities.
Accordingly, each Beneficial Owner must rely on the procedures of DTC to
exercise any rights under the Securities.

DTC may discontinue providing its services as securities depository
with respect to the Securities at any time by giving reasonable notice to the
Trust. Under those circumstances, if a successor securities depository is not
obtained, certificates representing the Securities will be printed and delivered
in accordance with DTC's instructions.

RISK FACTORS

INTERNAL MANAGEMENT; NO PORTFOLIO MANAGEMENT AND NO CHANGE IN ASSETS

The Trust will not be managed like a typical closed-end investment
company. The Trust will be internally managed by its Trustees and will not have
any separate investment adviser.

The Trust will not dispose of the Contract even if the price of the
Class A Common Stock falls significantly or the financial condition of the
Company suffers (or if, after a Reorganization Event or Spin-Off Distribution,
comparable developments occur affecting any Marketable Securities or the issuer
of those Marketable Securities).

Similarly, the Trust will not dispose of the U.S. Treasury securities
held by the Trust before they mature or the Trust terminates, whichever comes
first, even if their value falls significantly.

LIMITED OPPORTUNITY FOR INCREASE IN VALUE; RISK OF DECREASE IN VALUE OF CLASS A
COMMON STOCK

Because the Contract allows the Seller to deliver less than a full
share of Class A Common Stock for each outstanding Security if the Average
Market Price is higher than the Initial Price, the Securities have more limited
appreciation potential than the Class A Common Stock. If the price of Class A
Common Stock rises, a holder of a Security will not receive all of this increase
in value. Holders will not receive any of this increase if the average market
price of the Class A Common Stock at the Exchange Date is below $______. Holders
will receive only ____% of any increase in the value of the Class A Common Stock
over $____. On the other hand, holders of Securities will bear all of any
decrease in the value of the Class A Common Stock. The value of the Class A
Common Stock to be received by holders on the Exchange Date (and any cash
received in lieu of those shares) may be less than the amount paid for the
Securities. Furthermore, the Securities may trade below the value of the Class A
Common Stock if the Class A Common Stock appreciates in value.

FIXED RATE OF DISTRIBUTIONS

The distributions on the Securities will be at a fixed rate for the
entire term of the Trust. If the dividend on the Class A Common Stock is raised,
distributions on the Securities may be lower than the dividends paid on the
Class A Common Stock.

DILUTION ADJUSTMENTS

The number of shares of Class A Common Stock that holders are entitled
to receive at the termination of the Trust will be adjusted for some events,
like stock splits and combinations, stock dividends and certain other actions of
the Company that modify its capital structure. See "Investment Objective and
Policies-The Contract-Dilution Adjustments". The number of shares to be received
by holders may not be adjusted for other events, such as offerings of Class A

<PAGE>

Common Stock for cash or in connection with acquisitions, that may adversely
affect the price of the Class A Common Stock. These other events may adversely
affect the trading price of the Securities. There can be no assurance that the
Company will not take any of the foregoing actions, or that it will not make
offerings of Class A Common Stock, or that major stockholders will not sell any
Class A Common Stock, in the future, or as to the amount of any such offerings
or sales.

NON-DIVERSIFIED STATUS

The Trust is considered non-diversified under the Investment Company
Act, which means that the Trust is not limited in the proportion of its assets
that may be invested in the obligations of a single issuer. The only assets held
by the Trust will be the U.S. Treasury securities and the Contract, and
potentially a small amount of other short-term investments. As a result, an
investment in the Trust will be riskier than an investment in an investment
company with diversified investments.

TRADING VALUE AFFECTED BY CLASS A COMMON STOCK PRICE AND OTHER FACTORS

The Trust is a newly organized closed-end investment company with no
previous operating history and the Securities are innovative securities. It is
not possible to predict how the Securities will trade in the secondary market.

The trading prices of the Securities in the secondary market will be
directly affected by the trading prices of the Class A Common Stock in the
secondary market. The trading prices of the Class A Common Stock may fluctuate,
due to changes in the Company's financial condition, results of operations or
prospects, or because of complex and interrelated political, economic, financial
and other factors that can affect the capital markets generally, the stock
exchanges or quotation systems on which the Class A Common Stock is traded and
the market segment of which the Company is a part. The trading price of the
Securities may also fluctuate due to, among other things, fluctuations in
interest rates and other factors that are difficult to predict and beyond the
Trust's control. The Trust believes, however, that because of the yield on the
Securities and the formula for determining the number of shares of Class A
Common Stock to be delivered on the Exchange Date, the Securities will tend to
trade at a premium to the market value of the Class A Common Stock if the Class
A Common Stock price falls and at a discount to the market value of the Class A
Common Stock if the Class A Common Stock price rises. There can, however, be no
assurance that the Securities will trade at a premium to the market value of the
Class A Common Stock.

Shares of closed-end investment companies frequently trade at a
discount from net asset value. This characteristic of investments in a
closed-end investment company is a risk separate and distinct from the risk that
the Trust's net asset value will fall. The Trust cannot predict whether its
shares will trade at, below or above net asset value. The risk of purchasing
investments in a closed-end investment company that might trade at a discount
may be greater for investors who wish to sell their investments soon after
completion of an initial public offering because for those investors,
realization of a gain or loss on their investments is likely to be more
dependent upon the existence of a premium or discount than upon portfolio
performance.

LIMITED TRADING MARKET FOR SECURITIES

Goldman Sachs currently intends, but is not obligated, to make a market
in the Securities. There can be no assurance that a secondary market will
develop or, if a secondary market does develop, that it will provide the holders
with liquidity of investment or that it will continue for the life of the
Securities. Goldman Sachs may stop making a market in the Securities at any time
without notice. The Trust will apply to list the Securities on the NYSE. If that
application is accepted, there

<PAGE>

can be no assurance that the Securities will not later be delisted or that
trading in the Securities on the NYSE will not be suspended. If the Securities
are delisted or suspended from trading on that exchange, the Trust will apply
for listing of the Securities on another national or regional securities
exchange or for quotation on another trading market. If the Securities are not
listed or traded on any securities exchange or trading market, or if trading of
the Securities is suspended, pricing information for the Securities may be more
difficult to obtain, and the price and liquidity of the Securities may be
adversely affected.

SHAREHOLDER RIGHTS

Holders of the Securities will not be entitled to any rights with
respect to the Class A Common Stock unless and until they actually receive Class
A Common Stock in exchange for the Securities. For example, holders of
Securities will not be entitled to vote the shares of Class A Common Stock or
receive dividends.

CERTAIN FEDERAL INCOME TAX CONSIDERATIONS

The following discussion of the principal United States federal income tax
consequences of ownership of Securities represents the opinion of Sullivan &
Cromwell, counsel to the Trust. It deals only with Securities held as capital
assets by a holder who acquires its Securities at the issue price from the
Underwriter pursuant to the original offering, and not with special classes of
holders, such as dealers in securities or currencies, traders that elect to mark
to market, banks, life insurance companies, persons who are not United States
Holders (as defined below), persons that hold Securities that are part of a
hedging transaction, straddle or conversion transaction, or persons whose
functional currency is not the U.S. dollar. The summary is based on the Internal
Revenue Code of 1986, as amended (the "Code"), its legislative history, existing
and proposed regulations under the Code, published rulings and court decisions,
all as currently in effect and all subject to change or different interpretation
at any time, perhaps with retroactive effect. It should be noted that the Trust
has not sought a ruling from the Internal Revenue Service with respect to the
federal income tax consequences of ownership of Securities, and the Internal
Revenue Service is not required to agree with the opinion of Sullivan &
Cromwell.

PROSPECTIVE PURCHASERS OF SECURITIES SHOULD CONSULT THEIR OWN TAX
ADVISORS CONCERNING THE CONSEQUENCES, IN THEIR PARTICULAR CIRCUMSTANCES, UNDER
THE CODE AND THE LAWS OF ANY STATE, LOCAL OR OTHER TAXING JURISDICTION, OF
OWNERSHIP OF SECURITIES.

A "United States Holder" is a beneficial owner of Securities who or
that is (i) a citizen or resident of the United States, (ii) a domestic
corporation, (iii) an estate the income of which is subject to United States
federal income tax without regard to its source or (iv) a trust if a court
within the United States is able to exercise primary supervision over the
administration of the trust and one or more United States persons have the
authority to control all substantial decisions of the trust.

Holders should be aware that there are alternative characterizations of
the Trust's assets which could result in different federal income tax
consequences. See "--Alternative Characterizations" below. While Sullivan &
Cromwell does not believe these alternative characterizations should apply for
federal income tax purposes, there can be no assurance in this regard, and
holders should consult their tax advisors concerning the risks associated with
alternative characterizations. The following discussion assumes that no such
alternative characterizations will apply.

TAX STATUS OF THE TRUST. The Trust will be treated as a grantor trust
for federal income tax purposes and, under the grantor trust rules of the Code,
each holder will be considered the owner

<PAGE>

of its pro rata portions of the stripped U.S. Treasury securities and the
Contract in the Trust. Income received by the Trust will be treated as income of
the holders in the manner set forth below.

RECOGNITION OF ORIGINAL ISSUE DISCOUNT ON THE U.S. TREASURY SECURITIES.
The U.S. Treasury securities in the Trust will consist of stripped U.S. Treasury
securities. A holder will be required to treat its pro rata portion of each U.S.
Treasury security initially acquired by the Trust as a bond that was originally
issued on the date the Trust acquired such security. A holder will include
original issue discount in income over the life of the U.S. Treasury securities
in an amount equal to the holder's pro rata portion of the excess of the amounts
payable on those U.S. Treasury securities over the amount paid for the U.S.
Treasury securities by the Trust. The amount of that excess will constitute only
part of the total amounts payable in respect of U.S. Treasury securities held by
the Trust, however. Consequently, a substantial portion of each quarterly cash
distribution to the holders will be treated as a tax-free return of the holders'
investment in the U.S. Treasury securities and will not be considered current
income for federal income tax purposes. See "Description of
Securities-Distributions-Tax Treatment of Distributions".

A holder (whether on the cash or accrual method of tax accounting) will
be required to include original issue discount (other than original issue
discount on short-term U.S. Treasury securities as defined below) in income for
federal income tax purposes as it accrues on a constant yield basis. The Trust
expects that more than 20% of the holders will be accrual basis taxpayers, in
which case original issue discount on any short-term U.S. Treasury security
(i.e., any U.S. Treasury security with a maturity of one year or less from the
date it is purchased) held by the Trust also will be required to be included in
income by the holders as it is accrued. Unless a holder elects to accrue the
original issue discount on a short-term U.S. Treasury security according to a
constant yield method based on daily compounding, that original issue discount
will be accrued on a straight-line basis.

EXTENSION OF THE EXCHANGE DATE. Holders should not be required to
include any amounts in income upon the Trust's receipt of additional U.S.
Treasury securities as a result of an extension of the Exchange Date under the
Contract and should not be required to include any original issue discount in
respect of such U.S. Treasury securities. See "Investment Objective and Policies
- -The Contract".

Although there is no direct authority for the treatment of the cash
distribution paid on the Securities on the extended Exchange Date, it is likely
that such distribution should not be considered income to a holder upon receipt,
but instead should be considered to reduce a holder's basis with respect to such
holder's pro rata portion of the Contract held by the Trust, by analogy to the
treatment of rebates or option premiums. If this treatment is respected, receipt
of the cash distribution on the extended Exchange Date will increase the amount
of gain (or decrease the amount of loss) recognized by a holder on a sale or
other disposition of the Contract (including a disposition pursuant to cash
settlement of such Contract) or on a subsequent sale or other disposition the
Class A Common Stock delivered pursuant to such Contract. Because there can be
no assurance that the Internal Revenue Service will agree with this
characterization of the cash distribution paid on the extended Exchange Date,
holders are urged to consult their tax advisors concerning the tax consequences
of receiving such payment.

TAX BASIS OF THE U.S. TREASURY SECURITIES AND THE CONTRACT. A holder's
initial tax basis in the Contract and the U.S. Treasury securities,
respectively, will equal its pro rata portion of the amounts paid for them by
the Trust. It is currently anticipated that ____% and ____% of the net

<PAGE>

proceeds of the offering will be used by the Trust to purchase the U.S. Treasury
securities and as payment for the Contract, respectively. A holder's tax basis
in the U.S. Treasury securities will be increased by the amounts of original
issue discount included in income in respect of U.S. Treasury securities and
decreased by each amount of cash received in respect of U.S. Treasury
securities.

TREATMENT OF THE CONTRACT. Each holder will be treated as having
entered into a pro rata portion of the Contract and, at the Exchange Date, as
having received a pro rata portion of the Class A Common Stock, cash or
Marketable Securities or combination of Class A Common Stock, Marketable
Securities and cash delivered to the Trust.

DISTRIBUTION OF THE CLASS A COMMON STOCK. The delivery of Class A
Common Stock to the Trust pursuant to the Contract and the Trust's distribution
of Class A Common Stock to the holders will not be taxable to the holders. Each
holder's basis in its Class A Common Stock will be equal to its basis in its pro
rata portion of the Contract which is settled in Class A Common Stock less the
portion of that basis allocable to any fractional shares of Class A Common Stock
for which cash is received. A holder will recognize short-term capital gain or
loss upon receipt by the Trust of cash in lieu of fractional shares of Class A
Common Stock equal to the difference between the holder's allocable portion of
the amount of cash received and the holder's basis in those fractional shares.
The holding period for the Class A Common Stock will begin on the day after it
is acquired by the Trust.

DISTRIBUTION OF CASH. If the Trust receives cash upon settlement of the
Contract, a holder will recognize capital gain or loss equal to the difference
between the holder's allocable portion of the amount of cash received and the
holder's basis in the Contract settled for cash. Any gain or loss will be
capital gain or loss which is taxable to holders as described below under
"--Sale of Securities".

SALE OF SECURITIES. A holder who sells Securities will be treated as
having sold its pro rata portions of the U.S. Treasury securities and the
Contract underlying the Securities. As a result, the holder will recognize
capital gain or loss equal to the difference between the amount realized and the
holder's aggregate tax bases in its pro rata portions of the U.S. Treasury
securities and the Contract. Any gain or loss will be long-term capital gain or
loss if the holder has held the Securities for more than one year. Long-term
capital gain of an individual holder will be subject to a maximum tax rate of
20%.

ALTERNATIVE CHARACTERIZATIONS. Sullivan & Cromwell believes the
Contract should be treated for federal income tax purposes as a prepaid forward
contract for the purchase of a variable number of shares of Class A Common
Stock.

The Internal Revenue Service could conceivably seek to treat the
Contract differently. The Internal Revenue Service might, for example, seek to
treat the cash paid to the Seller pursuant to the Contract as loans to the
Seller in exchange for contingent debt obligations of the Seller. If the
Internal Revenue Service were to prevail in making such an assertion, a holder
might be required to include original issue discount in income over the life of
the Securities at a market rate of interest for the Seller, taking account of
all the relevant facts and circumstances. In addition, a holder would be
required to include interest (rather than capital gain) in income on the
Exchange Date in an amount equal to the excess, if any, of the value of the
Class A Common Stock received on the Exchange Date (or the proceeds from cash
settlement of the Contract) over the aggregate of the basis of the Contract and
any interest on the Contract previously included in income (or

<PAGE>

might be entitled to an ordinary deduction to the extent of interest previously
included in income and not ultimately received) and any gain or loss
attributable to the sale of the Contract could be treated as ordinary income or
loss. The Internal Revenue Service could also conceivably take the view that a
holder should include in income the amount of cash actually received each year
on the Securities.

BACKUP WITHHOLDING AND INFORMATION REPORTING. The payments of
principal and original issue discount on the U.S. Treasury securities,
and the proceeds received from cash settlement of the Contract or the sale of
Securities, may be subject to U.S. backup withholding tax at the rate of 31% if
the holder of those Securities fails to supply an accurate taxpayer
identification number or otherwise to comply with applicable U.S. information
reporting or certification requirements. Any amounts so withheld will be allowed
as a credit against that holder's U.S. federal income tax liability and may
entitle that holder to a refund, provided that the required information is
furnished to the Internal Revenue Service.

After the end of each calendar year, the Trust will furnish to each
record holder of Securities an annual statement containing information relating
to the payments on the U.S. Treasury securities received by the Trust. The Trust
will also furnish annual information returns to each record holder of the
Securities and to the Internal Revenue Service.

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Trust has agreed to sell the Securities to the Underwriter, and the Underwriter
has agreed to purchase the Securities from the Trust. Under the terms and
conditions of the Underwriting Agreement, the Underwriter is committed to take
and pay for all of the Securities offered hereby, if any are taken.

Securities sold by Goldman Sachs to the public will initially be
offered at the initial public offering price set forth on the cover of this
prospectus. Any Securities sold by Goldman Sachs to securities dealers may be
sold at a discount of up to $__ per Security from the initial public offering
price. Any such securities dealers may resell any Securities purchased from
Goldman Sachs to certain other brokers or dealers at a discount of up to $__ per
Security from the initial public offering price. If all the Securities are not
sold at the initial public offering price, Goldman Sachs may change the initial
public offering price and the other selling terms. The sales load of $__ per
Security is equal to ___% of the initial public offering price. Investors must
pay for any Securities purchased in the initial public offering on or before
February __, 1999.

In connection with the offering, Goldman Sachs may purchase and sell
Securities in the open market. These transactions may include short sales,
stabilizing transactions and purchases to cover positions created by short
sales. Short sales involve the sale by the Underwriter of a greater number of
Securities than it is required to purchase in the offering. Stabilizing
transactions consist of certain bids or purchases made for the purpose of
preventing or retarding a decline in the market price of the Securities while
the offering is in progress.

These activities by Goldman Sachs may stabilize, maintain or otherwise
affect the market price of the Securities. As a result, the price of the
Securities may be higher than the price that otherwise might exist in the open
market. If these activities are commenced, they may be discontinued by Goldman
Sachs at any time. These transactions may be effected on the NYSE, in the
over-the-counter market or otherwise.

In light of the fact that proceeds from the sale of the Securities will
be used by the Trust to purchase the Contract from the Seller, the Underwriting
Agreement provides that the Seller will pay to the Underwriter the Underwriter's
Compensation of $____ per Security.

<PAGE>

The Trust has granted the Underwriter an option exercisable for 30
calendar days after the date of this prospectus to purchase up to an aggregate
of _______ additional Securities solely to cover over-allotments, if any. If the
Underwriter exercises its over-allotment option, it will receive the
Underwriter's Compensation referred to above for each Security so purchased.

The Company, Leonard A. Lauder and the Seller (and the trustees of the
Seller, not in their individual capacities but solely as trustees of the Seller)
have agreed that, during the period beginning from the date of this prospectus
and continuing to and including the date 90 days after the date of this
prospectus, they will not offer, sell, contract to sell or otherwise dispose of
any Class A Common Stock or other securities that are substantially similar to
the Class A Common Stock, including but not limited to any securities that are
convertible or exchangeable for, or that represent the right to receive, Class A
Common Stock or any such substantially similar securities (other than
dispositions among Lauder Family Members, as such term is defined in the Company
Prospectus, or pursuant to employee stock option plans and employment agreements
in each case existing on, or upon the conversion or exchange of convertible or
exchangeable securities outstanding as of, the date of this prospectus) and
except as otherwise provided in the Underwriting Agreement, without the prior
written consent of Goldman Sachs.

The Securities will be a new issue of securities with no established
trading market. Application has been made to list the Securities on the NYSE
under the symbol "ECJ". Goldman Sachs has advised the Company that it intends to
make a market in the Securities, but it is not obligated to do so and may
discontinue market making at any time without notice. No assurance can be given
as to the liquidity of the trading market for the Securities.

Goldman Sachs has informed the Trust that it does not expect sales to any
accounts over which it exercises discretionary authority to exceed 5% of the
total Securities offered by this prospectus.

The Underwriter and certain of its affiliates have provided, are
currently providing, and expect to provide in the future, commercial and
investment banking services to the Company and certain Lauder Family Members (as
defined in the Company Prospectus) for which the Underwriter or its affiliates
have received and will receive fees and commissions.

The Company and the Seller have agreed to indemnify the Underwriter
against certain liabilities, including certain liabilities under the Securities
Act of 1933.

Goldman Sachs has subscribed for one Security at a purchase price of
$100.00. Goldman Sachs will surrender this Security upon the closing of the
offering made by this prospectus. No Securities will be sold to the public until
the Securities subscribed for have been purchased and the purchase price of the
Securities paid in full to the Trust.

VALIDITY OF SECURITIES

The validity of the Securities will be passed upon for the Trust by
Sullivan & Cromwell, New York, New York, and for the Underwriter by Fried,
Frank, Harris, Shriver & Jacobson (a partnership including professional
corporations), New York, New York.

EXPERTS

The financial statement included in this prospectus has been audited by
PricewaterhouseCoopers LLP, independent accountants, as stated in their opinion
appearing herein, and has been so included in reliance upon that opinion given
upon the authority of that firm as experts in accounting and auditing.

<PAGE>

FURTHER INFORMATION

The Trust has filed with the Securities and Exchange Commission,
Washington, D.C. 20549, a Registration Statement under the Securities Act of
1933, as amended, with respect to the Securities offered hereby. More
information concerning the Securities and the Trust may be found in the
Registration Statement of which this prospectus constitutes a part. The
Registration Statement may be inspected without charge at the Commission's
office in Washington, D.C., and copies of all or any part of the Registration
Statement may be obtained from that office after payment of the fees prescribed
by the Commission. The Registration Statement is also available on the
Commission's website (http://www.sec.gov). The Securities will be listed on the
NYSE and information concerning the Trust and the Securities may also be
inspected at the offices of the NYSE, 20 Broad Street, New York, New York 10005.

<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Trustees and Securityholders of
Estee Lauder Automatic Common Exchange Security Trust II:

In our opinion, the accompanying statement of assets and liabilities presents
fairly, in all material respects, the financial position of Estee Lauder
Automatic Common Exchange Security Trust II (the "Trust") as of February 1,
1999, in conformity with generally accepted accounting principles. This
financial statement is the responsibility of the Trust's management; our
responsibility is to express an opinion on this financial statement based on our
audit. We conducted our audit of this financial statement in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the statement of assets and
liabilities is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statement, assessing the accounting principles used and significant estimates
made by the Trust's management and evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.

/s/ PricewaterhouseCoopers LLP

New York, New York
February 1, 1999

<PAGE>

ESTEE LAUDER AUTOMATIC COMMON EXCHANGE SECURITY TRUST II
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 1, 1999

ASSETS

<S> <C>

Cash...............................................................$ 100
----------
Total assets.......................................................$ 100
==========

LIABILITIES

...................................................................$ 0
----------
NET ASSETS

Balance applicable to 1 Security outstanding.......................$ 100
----------
Net asset value per Security.......................................$ 100
==========

<FN>
- ---------------------------

(1) Estee Lauder Automatic Common Exchange Security Trust II (the "Trust") was
established on June 17, 1998 and has had no operations to date other than
matters relating to its organization and registration as a non-diversified,
closed-end management investment company under the Investment Company Act
of 1940, as amended. Costs incurred in connection with the Trust's
organization will be paid by the Seller referred to below.

(2) The Trust proposes to sell Trust Automatic Common Exchange Securities
(the "Securities") to the public pursuant to a Registration Statement on
Form N-2 under the Securities Act of 1933, as amended, and the Investment
Company Act of 1940, as amended.

The Trust is a newly organized, finite-term trust established to purchase
and hold a portfolio of stripped U.S. treasury securities and a forward
purchase contract with an existing stockholder of The Estee Lauder
Companies, Inc. (the "Seller") relating to the Class A Common Stock of The
Estee Lauder Companies, Inc. The Trust will be internally managed and will
not have an investment adviser. The Trust's administration, which will be
overseen by the trustees, will be carried out by The Chase Manhattan Bank
as administrator of the Trust. The Chase Manhattan Bank will also serve as
custodian for the Trust, and its affiliate, ChaseMellon Shareholder
Services, L.L.C., will serve as paying agent, registrar and transfer agent
with respect to the Securities. Ongoing fees and anticipated expenses for
the term of the Trust will be paid for by the Seller.

(3) The Trust issued one Security on January 28, 1999 to Goldman, Sachs & Co.
in consideration for purchase price of $100.

The Trust Agreement provides that before the offering, the Trust will
split the outstanding Security as of the date that the price and
underwriting discount of the Securities being offered to the public is
determined, but before the sale of the Securities to Goldman Sachs. The
initial Security will be split into the smallest whole number of Securities
that would result in the per Security amount recorded as shareholders'
equity after effecting the split not exceeding the public offering price
per Security.
</FN>
</TABLE>

<PAGE>

GLOSSARY

"Administration Agreement" means the Administration Agreement, dated as
of February __, 1999, between the Trust and The Chase Manhattan Bank, as
Administrator.

"Administrator" means The Chase Manhattan Bank (or its successor) in
its capacity as Administrator under the Administration Agreement.

"Appreciation Threshold Price" means $_______, subject to adjustment as
described under "-The Contract-Dilution Adjustments".

"Average Market Price" per share of Class A Common Stock on any date
means the average Closing Price per share of Class A Common Stock for the
Calculation Period of the 20 Trading Days immediately prior to but not including
such date; provided that if no Closing Price for the Class A Common Stock is
determined for one or more (but not all) of such Trading Days, such Trading Days
shall be disregarded in the calculation of the Average Market Price (but no
additional Trading Days will be added to the Calculation Period). If no Closing
Price for the Class A Common Stock may be determined for any of such Trading
Days, the Average Market Price shall be the Closing Price for the Class A Common
Stock for the most recent Trading Day prior to such 20 Trading Days for which a
Closing Price for the Class A Common Stock may be determined pursuant to the
definition of "Closing Price". Notwithstanding the foregoing, for purposes of
determining the payment required upon cash settlement of a Contract in
connection with a Rollover Offering, "Average Market Price" means the Closing
Price per share of Class A Common Stock on the Trading Day immediately prior to
the date that the Rollover Offering is priced (the "Pricing Date") or, if the
Rollover Offering is priced after 4:00 P.M., New York City time, on the Pricing
Date, the Closing Price per share on the Pricing Date.

"Beneficial Owner" means an actual purchaser of a Security, which will
not receive written confirmation from DTC of its purchases of Securities but
which is expected to receive written confirmations providing details of the
transactions, as well as periodic statements of its holdings, from the Direct or
Indirect Participants through which the Beneficial Owner purchased Securities.

"Calculation Period" means any period of Trading Days for which an
average security price must be determined pursuant to the Contract.

"Cash Delivery Obligations" means, at any time, (A) if no
Reorganization Event has occurred, zero, and (B) from and after any
Reorganization Event, the Transaction Value of any Consideration other than
Marketable Securities included in the Merger Consideration in such
Reorganization Event, multiplied by the maximum number of shares of Class A
Common Stock covered by the Contract at the time of the Reorganization Event;
provided that if the Reorganization Event is a Cash Merger, the Seller's Cash
Delivery Obligation will be zero after the Seller delivers the Accelerated
Portion as required under the Contract.

"Class A Common Stock" means the Class A Common Stock, par value $0.01
per share, of the Company.

"Closing Price" of any common equity security (including the Class A
Common Stock or any Marketable Securities) on any date of determination means
the closing sale price (or, if no closing sale price is reported, the last
reported sale price) of such common equity security as reported on the NYSE
Consolidated Tape on such date of determination or, if such common equity
security is not listed for trading on the NYSE on such date, as reported in the
composite transactions for the principal United States national or regional
securities exchange on which such common equity security is so listed, or if
such common equity security is not so listed on a United States national or
regional securities exchange on such date, as reported by the NASDAQ National
Market or, if such common equity security is not so reported on such date, the
last quoted bid price for such common equity security in the over-the-counter
market as reported by the National Quotation Bureau or any similar

<PAGE>

organization; provided that if any event that results in an adjustment to the
number of shares of Class A Common Stock deliverable under the Contract, as
described under "-The Contract-Dilution Adjustments", occurs during any
Calculation Period, the Closing Price as determined pursuant to the foregoing
for each Trading Day in the Calculation Period occurring prior to the date on
which such adjustment is effected will be appropriately adjusted to reflect the
occurrence of such event.

"Code" means the Internal Revenue Code of 1986, as amended.

"Collateral Agent" means The Chase Manhattan Bank (or its successor) in
its capacity as Collateral Agent under the Collateral Agreements.

"Collateral Agreement" means the Collateral Agreements, dated as of
February __, 1999, between the Seller and The Chase Manhattan Bank, as
Collateral Agent, securing the Seller's obligations under the Contract.

"Collateral Event of Default" under the Collateral Agreement means, at
any time, (A) if no U.S. Government obligations are pledged as substitute
collateral at or before that time, failure of the collateral to include at least
the maximum number of shares of Class A Common Stock covered by the Contract at
that time (or, if a Reorganization Event or Spin-Off Distribution has occurred
at or before that time, failure of the collateral to include the maximum number
of shares of any Marketable Securities required to be pledged as described under
"Investment Objective and Policies-The Contract-Collateral Arrangements;
Acceleration Upon Default By the Seller" above); (B) if any U.S. Government
obligations are pledged as substitute collateral for shares of Class A Common
Stock (or shares of Marketable Securities deliverable pursuant to the Contract)
at that time, failure of those U.S. Government obligations to have a market
value at that time of at least 105% of the market price per share of Class A
Common Stock (or shares of Marketable Securities, as the case may be) times the
difference between (x) the maximum number of shares of Class A Common Stock (or
shares of those Marketable Securities) covered by the Contract at that time and
(y) the number of shares of Class A Common Stock (or shares of Marketable
Securities) pledged as collateral at that time; and (C) at any time after a
Reorganization Event in which consideration other than Marketable Securities has
been delivered, failure of any U.S. Government obligations pledged as collateral
for Cash Delivery Obligations to have a market value at that time of at least
105% of those Cash Delivery Obligations, if that failure is not cured within one
business day after notice of that failure is delivered to the Seller.

"Company" means The Estee Lauder Companies Inc., a Delaware
corporation.

"Company Prospectus" means the prospectus of the Company, dated
February __, 1999 (attached as pages A-1 through A-__ hereof), which describes
the Company and the Class A Common Stock.

"Company Successor" means a surviving entity or subsequent surviving
entity of the Company.

"Contract" means the forward purchase contracts between the Seller and
the Trust relating to the Class A Common Stock.

"Custodian" means The Chase Manhattan Bank (or its successor) in its
capacity as Custodian under the Custodian Agreement.

"Custodian Agreement" means the Custodian Agreement, dated as of
February __, 1999, between the Trust and The Chase Manhattan Bank, as Custodian.

"Direct Participants" means Participants of DTC, including brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations, that are direct Participants of DTC.

"DTC" means The Depository Trust Company.

<PAGE>

"Excess Purchase Payment" means the excess, if any, of (i) the cash and
the value (as determined by a nationally recognized independent investment
banking firm retained for this purpose by the Administrator, whose determination
shall be final) of all other consideration paid by the Company with respect to
one share of Class A Common Stock acquired in a tender offer or exchange offer
by the Company, over (ii) the Then-Current Market Price per share of Class A
Common Stock.

"Exchange Date" means February __, 2002, subject to extension and
acceleration by the Seller under the Contract.

"Exchange Rate" means the rate of exchange of Class A Common Stock for
Securities on the Exchange Date, and will be determined as follows (adjusted in
certain events):

(i) If the Average Market Price is less than the Appreciation Threshold
Price but equal to or greater than the Initial Price, the Exchange
Rate will be a fraction (rounded upward or downward to the nearest
1/10,000th or, if there is not a nearest 1/10,000th, to the next
lower 1/10,000th) equal to the Initial Price divided by the Average
Market Price.

(ii) If the Average Market Price is equal to or greater than the
Appreciation Threshold Price, the Exchange Rate will be 0.____ shares
of Class A Common Stock.

(iii)If the Average Market Price is less than the Initial Price, the
Exchange Rate will be one share of Class A Common Stock.

"holders" means the registered holders of the Securities.

"Indirect Participants" means Participants of DTC, such as securities
brokers and dealers, banks and trust companies, that clear through or maintain a
custodial relationship with a Direct Participant, either directly or indirectly.

"Initial Price" means $_______, subject to adjustment as described
under "-The Contract-Dilution Adjustments".

"Insufficiency Determination" means a determination by the Collateral
Agent that the collateral pledged by any Seller fails to meet the requirements
described under "Investment Objective and Policies-The Contract-Collateral
Arrangements; Acceleration Upon Default By the Seller".

"Investment Company Act" means the Investment Company Act of 1940, as
amended.

"majority of the Trust's outstanding Securities" means the lesser of
(i) 67% of the Securities represented at a meeting at which more than 50% of the
outstanding Securities are represented, and (ii) more than 50% of the
outstanding Securities.

"Managing Trustee" means the Trustee designated to serve as Managing
Trustee.

"Marketable Securities" means any common equity securities (whether
voting or non-voting) listed on a U.S. national or regional securities exchange
or reported by the NASDAQ National Market.

"NYSE" means the New York Stock Exchange, Inc.

"Participants" means participants of DTC.

"Paying Agent" means ChaseMellon Shareholder Services, L.L.C. (or its
successor) in its capacity as transfer agent, registrar and paying agent under
the Paying Agent Agreement.

<PAGE>

"Paying Agent Agreement" means the Paying Agent Agreement, dated as of
February __, 1999, between the Trust and ChaseMellon Shareholder Services,
L.L.C., as transfer agent, registrar and paying agent.

"Permitted Dividend" means any quarterly cash dividend in respect of
the Class A Common Stock, other than a quarterly cash dividend that exceeds the
immediately preceding quarterly cash dividend, and then only to the extent that
the per share amount of such dividend results in an annualized dividend yield on
the Class A Common Stock in excess of [12.5]%.

"Pricing Date" means the date that a Rollover Offering is priced.

"Reorganization Event" means (A) any consolidation or merger of the
Company, or any Company Successor, with or into another entity (other than a
merger or consolidation in which the Company is the continuing corporation and
in which the Class A Common Stock outstanding immediately prior to the merger or
consolidation is not exchanged for cash, securities or other property of the
Company or another corporation), (B) any sale, transfer, lease or conveyance to
another corporation of the property of the Company or any Company Successor as
an entirety or substantially as an entirety, (C) any statutory exchange of
securities of the Company or any Company Successor with another corporation
(other than in connection with a merger or acquisition) or (D) any liquidation,
dissolution or winding up of the Company or any Company Successor.

"Rollover Offering" means a reoffering or refinancing of Securities
effected not earlier than February __, 2002, by means of a completed public
offering or offerings, or another similar offering (which may include one or
more exchange offers), by or on behalf of the Seller.

"SEC" means the Securities and Exchange Commission.

"Securities" means the Trust's $_____ Trust Automatic Common Exchange
Securities.

"Seller" means The Estee Lauder 1994 Trust.

"Spin-Off Distribution" means a distribution by the Company to holders
of Class A Common Stock of Marketable Securities issued by an issuer other than
the Company.

"Then-Current Market Price" of the Class A Common Stock, for the
purpose of applying any adjustment described in "Investment Objective and
Policies-The Contract-Dilution Adjustments", means the average Closing Price per
share of Class A Common Stock for the Calculation Period of five Trading Days
immediately prior to the time such adjustment is effected (or, in the case of an
adjustment effected at the opening of business on the business day after a
record date, immediately prior to the earlier of the time such adjustment is
effected and the related ex-date); provided that if no Closing Price for the
Class A Common Stock is determined for one or more (but not all) of such Trading
Days, such Trading Days will be disregarded in the calculation of the
Then-Current Market Price (but no additional Trading Days will be added to the
Calculation Period). If no Closing Price for the Class A Common Stock may be
determined for any of such Trading Days, the Then-Current Market Price shall be
the Closing Price for the Class A Common Stock for the most recent Trading Day
prior to such five Trading Days for which a Closing Price for the Class A Common
Stock may be determined pursuant to the definition of "Closing Price". The
"ex-date" with respect to any dividend, distribution or issuance shall mean the
first date on which the shares of Class A Common Stock trade regular way on
their principal market without the right to receive such dividend, distribution
or issuance.

"Trading Day" in respect of any common equity security means a day on
which such common equity security (A) is not suspended from trading on any
United States national or regional securities exchange or association or
over-the-counter market at the close of business and (B) has traded at

<PAGE>

least once on the United States national or regional securities exchange or
association or over-the-counter market that is the primary market for the
trading of that security.

"Transaction Value" means, with respect to any Reorganization Event,
the sum of: (i) for any cash received in such Reorganization Event, the amount
of such cash received per share of Class A Common Stock; (ii) for any property
other than cash or Marketable Securities received in such Reorganization Event,
an amount equal to the market value on the date such Reorganization Event is
consummated of such property received per share of Class A Common Stock (as
determined by a nationally recognized independent investment banking firm
retained for this purpose by the Administrator, whose determination shall be
final); and (iii) for any Marketable Securities received in such Reorganization
Event, an amount equal to the average Closing Price per share of these
Marketable Securities for the Calculation Period of 20 Trading Days immediately
prior to the Exchange Date (or, in the case of a Cash Merger, for the 20 Trading
Days immediately before the date the Reorganization Event is consummated)
multiplied by the number of such Marketable Securities received for each share
of Class A Common Stock; provided that if no Closing Price for such Marketable
Securities may be determined for one or more (but not all) of such Trading Days,
such Trading Days shall be disregarded in the calculation of such average
Closing Price (but no additional Trading Days shall be added to the Calculation
Period). If no Closing Price for the Marketable Securities may be determined for
any of such Trading Days, the calculation in the preceding clause (iii) will be
based on the Closing Price for the Marketable Securities for the most recent
Trading Day prior to such 20 Trading Days for which a Closing Price for the
Marketable Securities may be determined pursuant to the definition of "Closing
Price".

"Trust" means Estee Lauder Automatic Common Exchange Security Trust II.

"Trust Agreement" means the trust agreement dated as of June 17, 1998
pursuant to which the Trust was formed, as amended and restated as of February
__, 1999.

"Trustees" means the three trustees who will internally manage the
Trust.

"Underwriter" means Goldman, Sachs & Co., the Underwriter of the
Securities.

"Underwriter's Compensation" means the compensation of $__ per Security
payable to the Underwriter by the Seller pursuant to the Underwriting Agreement.

"United States Holder" means a beneficial owner of Securities who or
that is (i) a citizen or resident of the United States, (ii) a domestic
corporation or (iii) otherwise covered by United States federal income taxation
on a net income basis in respect of Securities.

"Value" means (i) in respect of cash, the amount of such cash; (ii) in
respect of any property other than cash or Marketable Securities, an amount
equal to the market value on the date the Reorganization Event is consummated
(as determined by a nationally recognized independent investment banking firm
retained for this purpose by the Administrator); and (iii) in respect of any
share of Marketable Securities, an amount equal to the average Closing Price per
share of those Marketable Securities for the 20 Trading Days immediately before
the date the Reorganization Event is consummated

============================================================== ============================================================

NO DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED TO
GIVE ANY INFORMATION OR TO REPRESENT ANYTHING NOT CONTAINED
IN THIS PROSPECTUS. YOU MUST NOT RELY ON ANY UNAUTHORIZED
INFORMATION OR REPRESENTATIONS. THIS PROSPECTUS IS AN OFFER ________ SHARES
TO SELL ONLY THE SECURITIES OFFERED HEREBY, BUT ONLY UNDER
CIRCUMSTANCES AND IN JURISDICTIONS WHERE IT IS LAWFUL TO DO
SO. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS CURRENT ESTEE LAUDER
ONLY AS OF ITS DATE. AUTOMATIC
COMMON EXCHANGE
SECURITY TRUST

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

TABLE OF CONTENTS $____ TRUST AUTOMATIC COMMON
EXCHANGE SECURITIES
(TRACES(TM)/(Sm))
PAGE
----
Prospectus Summary................................... 2 __________________
The Trust............................................ 9
Use of Proceeds...................................... 12
Investment Objective and Policies................... 12 PROSPECTUS
Description of Securities........................... 25
Risk Factors........................................ 28 __________________
Certain Federal Income Tax Considerations........... 30
Underwriting........................................ 33
Validity of Securities.............................. 34
Experts............................................. 34
Further Information................................. 35
Report of Independent Accountants................... 36
Statement of Assets and Liabilities................. 37
Glossary............................................ 38
Appendix A: Prospectus of The Estee Lauder
Companies, Inc................................. A-1

--------------------------- GOLDMAN, SACHS & CO.

THROUGH AND INCLUDING ____________, 1999 (THE 25TH DAY
AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EFFECTING
TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT PARTICIPATING
IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO A DEALER'S OBLIGATION TO DELIVER A
PROSPECTUS WHEN ACTING AS AN UNDERWRITER AND WITH RESPECT TO
AN UNSOLD ALLOTMENT OR SUBSCRIPTION.
============================================================== ============================================================

</TABLE>

<PAGE>

PART C

OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS

(a) Financial Statements
Part A - Report of Independent Accountants.
Statement of Assets and Liabilities.
Part B - None.
(b) Exhibits
2.a.(i) Trust Agreement**
2.a.(ii) Form of Amended and Restated Trust Agreement*
2.d Form of Specimen Certificate of $____Trust Automatic
Common Exchange Security (included in Exhibit 2.a.(ii))*
2.h Form of Underwriting Agreement*
2.j Form of Custodian Agreement*
2.k.(i) Form of Administration Agreement*
2.k.(ii) Form of Paying Agent Agreement*
2.k.(iii) Form of Purchase Contract*
2.k.(iv) Form of Collateral Agreement*
2.k.(v) Form of Fund Expense and Indemnity Agreement*
2.k(vi) Form of Fund Indemnity Agreement*
2.l Opinion and Consent of Counsel to the Trust*
2.n.(i) Tax Opinion and Consent of Counsel to the Trust*
2.n.(ii) Consent of Independent Public Accountants
2.n.(iii) Consents to Being Named as Trustee
2.p Subscription Agreement
2.r Financial Data Schedule*

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

* To be filed by amendment.
** Previously filed.

ITEM 25. MARKETING ARRANGEMENTS

See the Form of Underwriting Agreement to be filed as Exhibit 2.h to
this Registration Statement.

C-1

<PAGE>

ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

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

Registration fees................................................... $
New York Stock Exchange listing fee.................................
Printing (other than certificates)..................................
Fees and expenses of qualification under state securities laws
(excluding fees of counsel).......................................
Accounting fees and expenses........................................
Legal fees and expenses.............................................
NASD fees...........................................................
Miscellaneous.......................................................
Total............................................................... $
=======

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

Before June 17, 1998 the Trust had no existence. As of the effective
date, the Trust will have entered into a Subscription Agreement for one Security
with Goldman, Sachs & Co. and an Underwriting Agreement with respect to
_________ Securities with Goldman, Sachs & Co.

ITEM 28. NUMBER OF HOLDERS OF SECURITIES

NUMBER OF
TITLE OF CLASS RECORD HOLDERS
- -------------- ---------------
$____ Trust Automatic Common Exchange Securities............. 1

ITEM 29. INDEMNIFICATION

The Underwriting Agreement, to be filed as Exhibit 2.h to this
Registration Statement, provides for indemnification of the Underwriter against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act").

The Amended and Restated Trust Agreement filed as Exhibit 2.a.(ii) to
this Registration Statement provides for indemnification to each Trustee against
any claim or liability incurred in acting as Trustee of the Trust, except in the
case of willful misfeasance, bad faith, gross negligence or reckless disregard
of the Trustee's duties. The Custodian Agreement, Administration Agreement and
Paying Agent Agreement filed as Exhibits 2.j, 2.k.(i) and 2.k.(ii) to this
Registration Statement provide for indemnification to the Custodian,
Administrator and Paying Agent against any loss or expense incurred in the
performance of their obligations under the respective agreements, unless such
loss or expense is due to willful misfeasance, bad faith, gross negligence or
reckless disregard of their obligations. The Fund Indemnity Agreement filed as
Exhibit 2.k.(vi) to this Registration Statement provides that the Seller will
indemnify the Trust for certain indemnification expenses incurred under the
Trust Agreement, the Custodian Agreement, the Administration Agreement and the
Paying Agent Agreement.

Insofar as indemnification for liability arising under the Securities
Act may be permitted to trustees, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. If a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a trustee, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
trustee, officer or controlling person in connection with the securities being
registered, the registrant

C-2

<PAGE>

will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.

ITEM 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

Not Applicable.

ITEM 31. LOCATION OF ACCOUNTS AND RECORDS

The Trust's accounts, books and other documents are currently located
at the offices of the Registrant, c/o Goldman, Sachs & Co., 85 Broad Street, New
York, New York 10004 and at the offices of The Chase Manhattan Bank, 450 West
33rd Street, New York, New York 10001, the Registrant's Administrator.

ITEM 32. MANAGEMENT SERVICES

Not applicable.

ITEM 33. UNDERTAKINGS

(a) The Registrant hereby undertakes to suspend offering of the
Securities until it amends its prospectus if (1) subsequent to the effective
date of its Registration Statement, the net asset value falls more than 10
percent from its net asset value as of the effective date of the Registration
Statement or (2) the net asset value increases to an amount greater than its net
proceeds as stated in the prospectus.

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

C-3

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this amendment to
be signed on its behalf by the undersigned, thereto duly authorized, in the City
of New York, State of New York, on the 3rd day of February, 1999.

ESTEE LAUDER AUTOMATIC COMMON
EXCHANGE SECURITY TRUST II

By: /s/ Paul S. Efron
-----------------------------------
Paul S. Efron
Trustee

Pursuant to the requirements of the Securities Act of 1933, this
amendment has been signed below by the following person, in the capacities and
on the date indicated.

NAME TITLE DATE
---- ----- ----

/s/ Paul S. Efron Principal Executive Officer, Febuary 3,
- -------------------------- Principal Financial Officer, 1999
Paul S. Efron Principal Accounting Officer and
Trustee

<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
====== =========== ==========

2.a.(i) Trust Agreement
2.a.(ii) Form of Amended and Restated Trust Agreement*
2.d Form of Specimen Certificate of $____ Trust Automatic
Common Exchange Security (included in Exhibit 2.a.(ii))*
2.h Form of Underwriting Agreement*
2.j Form of Custodian Agreement*
2.k.(i) Form of Administration Agreement*
2.k.(ii) Form of Paying Agent Agreement*
2.k.(iii) Form of Purchase Contract*
2.k.(iv) Form of Collateral Agreement*
2.k.(v) Form of Fund Expense and Indemnity Agreement*
2.k.(vi) Form of Fund Indemnity Agreement*
2.l Opinion and Consent of Counsel to the Trust*
2.n.(i) Tax Opinion and Consent of Counsel to the Trust*
2.n.(ii) Consent of Independent Public Accountants
2.n.(iii) Consents to Being Named as Trustee
2.p Subscription Agreement
2.r Financial Data Schedule*

<FN>
- ---------------------------

* To be filed by amendment.
</FN>
</TABLE>

Exhibit 2.n.(ii)

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in this registration statement on Form N-2
(Securities Act File No. 333-57125 and Investment Company Act File No. 811-8827)
of our report dated February 1, 1999, on our audit of the statement of assets
and liabilities of Estee Lauder Automatic Common Exchange Security Trust II. We
also consent to the reference to our firm under the caption "Experts."

/s/ PricewaterhouseCoopers LLP

New York, New York
February 1, 1999

Exhibit 2.n.(iii)

CONSENT TO BEING NAMED AS TRUSTEE

The undersigned hereby consents to being named in the Registration
Statement on Form N-2 of Estee Lauder Automatic Common Exchange Security Trust
II (the "Trust") and any amendments thereto, as a person about to become a
trustee of the Trust.

Dated: February 3, 1999

/s/ Donald J. Puglisi
------------------------------
Donald J. Puglisi

<PAGE>

CONSENT TO BEING NAMED AS TRUSTEE

Dated: February 3, 1999

/s/ William R. Latham III
------------------------------
William R. Latham III

<PAGE>

CONSENT TO BEING NAMED AS TRUSTEE

Dated: February 3, 1999

/s/ James B. O'Neill
------------------------------
James B. O'Neill

SUBSCRIPTION AGREEMENT

THIS SUBSCRIPTION AGREEMENT is entered into as of the 27th day of
January 1999, between Paul S. Efron (the "Trustee"), not in his individual
capacity, but solely as trustee of Estee Lauder Automatic Common Exchange
Security Trust II, a trust organized and existing under the laws of New York
(the "Trust"), and Goldman, Sachs & Co. or one of its affiliates (the
"Purchaser").

THE PARTIES HEREBY AGREE AS FOLLOWS:

1. PURCHASE AND SALE OF THE SECURITY

1.1 SALE AND ISSUANCE OF UNITS. Subject to the terms and conditions of
this Agreement, the Trustee agrees to sell to the Purchaser, and the Purchaser
agrees to purchase from the Trustee, one Trust Automatic Common Exchange
Security, representing an undivided beneficial interest in the Trust (the
"Security") at an aggregate purchase price of $100.

1.2 CLOSING. The purchase and sale of the Security shall take place at
the offices of Sullivan & Cromwell, 125 Broad Street, New York, New York at 9:30
a.m., on January 28, 1999, or at such other time (the "Closing Date") and place
as the Trustee and the Purchaser mutually agree upon. At or after the Closing,
the Trustee shall deliver to the Purchaser a certificate representing the
Security, registered in the name of the Purchaser or its nominee. Payment for
the Security shall be made on the Closing Date by the Purchaser by bank wire
transfers or by delivery of certified or official bank checks, in either case in
immediately available funds, of an amount equal to the purchase price of the
Security purchased by the Purchaser.

2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER. The
Purchaser hereby represents and warrants to, and covenants for the benefit of,
the Trust that:

2.1 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made by the
Trustee with the Purchaser in reliance upon the Purchaser's representation to
the Trustee, which by the Purchaser's execution of this Agreement the Purchaser
hereby confirms, that the Security is being acquired for investment for the
Purchaser's own account, and not as a nominee or agent and not with a view to
the resale

<PAGE>

or distribution by the Purchaser of the Security, and that the Purchaser has no
present intention of selling, granting any participation in, or otherwise
distributing the Security, in either case in violation of any securities
registration requirement under applicable law, but subject nevertheless, to any
requirement of law that the disposition of its property shall at all times be
within its control. By executing this Agreement, the Purchaser further
represents that the Purchaser does not have any contract, undertaking, agreement
or arrangement with any person to sell, transfer or grant participation to such
person or to any third person, with respect to the Security.

2.2 INVESTMENT EXPERIENCE. The Purchaser acknowledges that it can bear
the economic risk of the investment for an indefinite period of time and has
such knowledge and experience in financial and business matters (and
particularly in the business in which the Trust operates) as to be capable of
evaluating the merits and risks of the investment in the Security. The Purchaser
is an "accredited investor" as defined in Rule 501(a) of Regulation D under the
Securities Act of 1933, as amended (the "Act").

2.3 RESTRICTED SECURITIES. The Purchaser understands that the Security
is characterized as a "restricted security" under the United States securities
laws inasmuch as it is being acquired from the Trustee in a transaction not
involving a public offering and that under such laws and applicable regulations
such Security may be resold without registration under the Act only in certain
circumstances. In this connection, the Purchaser represents that it understands
the resale limitations imposed by the Act and is generally familiar with the
existing resale limitations imposed by Rule 144.

2.4 FURTHER LIMITATIONS ON DISPOSITION. The Purchaser further agrees
not to make any disposition directly or indirectly of all or any portion of the
Security unless and until:

(a) There is then in effect a registration statement under the Act
covering such proposed disposition and such disposition is made in accordance
with such registration statement;

(b) The Purchaser shall have furnished the Trustee with an opinion of
counsel, reasonably satisfactory

-2-
<PAGE>

to the Trustee, that such disposition will not require registration of such
Securities under the Act; or

(c) Notwithstanding the provisions of subsections (a) and (b) above, no
such registration statement or opinion of counsel shall be necessary for a
transfer by the Purchaser to any affiliate of the Purchaser, if the transferee
agrees in writing to be subject to the terms hereof to the same extent as if it
were the original Purchaser hereunder.

2.5 LEGENDS. It is understood that the certificate evidencing the
Security may bear either or both of the following legends:

(a) "These securities have not been registered under the
Securities Act of 1933. They may not be sold, offered for sale, pledged
or hypothecated in the absence of a registration statement in effect
with respect to the securities under such Act or an opinion of counsel
reasonably satisfactory to the Trustee of Estee Lauder Automatic Common
Exchange Security Trust that such registration is not required."

(b) Any legend required by the laws of any other applicable
jurisdiction.

The Purchaser and the Trustee agree that the legend contained in the
paragraph (a) above shall be removed at a holder's request when they are no
longer necessary to ensure compliance with federal securities laws.

2.6 AMENDMENT TO TRUST AGREEMENT; SPLIT OF THE SECURITIES. The
Purchaser consents to (a) the execution and delivery by the Trustee and Goldman,
Sachs & Co., as sponsor of the Trust, of an Amended and Restated Trust Agreement
in the form attached hereto and (b) the split of the Purchaser's Security.
Subsequent to the determination of the public offering price per Security and
related underwriting discount for the Securities to be sold to the Underwriters
(as defined in the aforementioned Amended and Restated Trust Agreement) but
prior to the sale of the Securities to the Underwriters, the Security purchased
hereby shall be split into a greater number of Securities so that immediately
following such split the value of each Security held by the Purchaser will equal
the aforesaid public offering price less the related underwriting discount.

-3-

<PAGE>

2.7 COUNTERPARTS. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.

-4-

<PAGE>

IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.

TRUSTEE

/s/ Paul S. Efron
-------------------------------
Paul S. Efron
as Trustee

GOLDMAN, SACHS & CO.

By: /s/ Goldman, Sachs & Co.
----------------------------
Goldman, Sachs & Co.
as Purchaser