Rule 497(b) Registration No. 333-60915
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MCLAUGHLIN, PIVEN, VOGEL FAMILY OF TRUSTS
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THE PINNACLE TRUST
The Trust is a unit investment trust designated McLaughlin, Piven, Vogel Family
of Trusts, The Pinnacle Trust (the "Trust"). The Sponsors are McLaughlin, Piven,
Vogel Securities, Inc. and Reich & Tang Distributors, Inc. The objective of the
Trust is to maximize total return through a combination of capital appreciation
and current dividend income. The Sponsors can not give any assurance that the
Trust's objective will be achieved. The Trust seeks to achieve its objective by
attempting to outperform the Dow Jones Industrial Average ("DJIA") by creating a
portfolio that combines the following three investment strategies: (1) investing
in the DJIA's ten highest dividend yielding common stocks ("Top Ten"), (2)
investing in the five lowest priced stocks of the Top Ten ("Focus Five") and (3)
investing in a single stock which is the second-lowest priced of the Focus Five
("Penultimate Pick"); each determined as of two business days prior to the
Initial Date of Deposit. The name "Dow Jones Industrial Average" is the property
of Dow Jones & Company, Inc., which is not affiliated with the Sponsors and has
not participated in any way in the creation of the Trust or in the selection of
the stocks included in the Trust and has not reviewed or approved any
information included in this Prospectus. Dow Jones & Company, Inc. has not
granted to the Trust or the Sponsors a license to use the Dow Jones Industrial
Average. The value of the Units of the Trust will fluctuate with fluctuations in
the value of the underlying Securities in the Trust. Therefore, Unitholders who
sell their Units may receive more or less than their original purchase price
upon sale. No assurance can be given that dividends will be paid or that the
Units will appreciate in value. The Trust will terminate approximately fifteen
months after the Initial Date of Deposit. Minimum Purchase: 100 Units. The
minimum purchase is 100 Units for individual purchasers, and 25 Units for
purchases by custodial accounts or Individual Retirement Accounts, self-employed
retirement plans (formerly Keogh Plans), pension funds and other tax-deferred
retirement plans.
This Prospectus consists of two parts. Part A contains the Summary of Essential
Information including descriptive material relating to the Trust and the
Statement of Financial Condition of the Trust. Part B contains general
information about the Trust. Part A may not be distributed unless accompanied by
Part B. Please read and retain both parts of this Prospectus for future
reference. The Securities and Exchange Commission ("SEC") maintains a website
that contains reports, proxy and information statements and other information
regarding the Trust which are filed electronically with the SEC. The SEC's
Internet address is http:www.sec.gov. Offering materials for the sale of these
Units available through the Internet are not being offered directly or
indirectly to residents of a particular state nor is an offer of these units
through the Internet specifically directed to any person in a state by, or on
behalf of, the issuer.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC
OR ANY STATE SECURITIES COMMISSION NOR HAS THE SEC OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
PROSPECTUS PART A DATED SEPTEMBER 23, 1998
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SUMMARY OF ESSENTIAL INFORMATION AS OF SEPTEMBER 22, 1998:*
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INITIAL DATE OF DEPOSIT: September 23, 1998 MINIMUM VALUE OF TRUST: The Trust may be terminated if the
AGGREGATE VALUE OF SECURITIES.................. $150,024 value of the Trust is less than 40% of the aggregate
NUMBER OF UNITS................................ 15,567 value of the Securities at the completion of the Deposit
FRACTIONAL UNDIVIDED INTEREST IN Period.
TRUST....................................... 1/15,567 CUSIP NUMBERS: Cash: 581774114 Reinvestment: 581774106
PUBLIC OFFERING PRICE PER 100 UNITS TRUSTEE: The Chase Manhattan Bank
Aggregate Value of Securities in Trust...... $150,024 TRUSTEE'S FEE: $.86 per 100 Units outstanding
Plus Estimated Organization Costs**......... $208 OTHER FEES AND EXPENSES: $.15 per100 Units outstanding
Divided By 15,567 Units (times 100)......... $965.05 SPONSORS: McLaughlin, Piven, Vogel Securities, Inc. and
Plus Sales Charge of 3.495% of Public Reich & Tang Distributors, Inc.
Offering Price........................... $34.95 AGENT FOR SPONSORS: Reich & Tang Distributors, Inc.
Public Offering Price +.....................$1,000.00 SPONSORS' PORTFOLIO SUPERVISORY, BOOKKEEPING AND
SPONSOR'S REPURCHASE PRICE ADMINISTRATIVE FEE: Maximum of $.25 per 100 Units
AND REDEMPTION PRICE PER outstanding (see "Trust Expenses and Charges" in Part
100 UNITS++................................. $965.05 B).
EVALUATION TIME: 4:00 p.m. New York Time. EXPECTED SETTLEMENT DATE o: September 28, 1998
MINIMUM INCOME OR PRINCIPAL RECORD DATES: December 15 and June 15
DISTRIBUTION: $1.00 per 100 Units DISTRIBUTION DATES: December 31 and June 30
LIQUIDATION PERIOD: Beginning 5 days prior to the REINVESTMENT SALES CHARGE: 1.00%
Mandatory Termination Date.
ROLLOVER NOTIFICATION DATE***: December 1,
1999 or another date as determined by the Sponsors.
MANDATORY TERMINATION DATE: The earlier of
December 30, 1999 or the disposition of the last Security
in the Trust.
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* The business day prior to the Initial Date of Deposit. The Initial Date
of Deposit is the date on which the Trust Agreement was signed and the deposit
of Securities with the Trustee made.
** Investors will reimburse the Sponsors, for all or a portion of the costs
incurred in organizing and offering the Trust (collectively, the "organization
costs")--including costs of preparing the registration statement, the trust
indenture and other closing documents, registering units with the SEC and the
states and the initial audit of the Trust portfolio. The estimated organization
costs will be paid to the Sponsors from the assets of the Trust as of the close
of the initial public offering period. To the extent that actual organization
costs are less than the estimated amount, only the actual organization costs
will be deducted from the assets of the Trust. To the extent that actual
organization costs are greater than the estimated amount, only the estimated
organization costs included in the Public Offering Price will be reimbursed to
the Sponsors.
*** If a Unitholder ("Rollover Unitholder") so specifies prior to the
Rollover Notification Date, the Rollover Unitholder's terminating distribution
will be reinvested as received in an available series of the Pinnacle Trusts if
offered (see "Trust Administration--Trust Termination").
+ Except for the amount representing the estimated organization costs, on
the Initial Date of Deposit there will be no cash in the Income or Principal
Accounts. Anyone purchasing Units after such date will have included in the
Public Offering Price a pro rata share of any cash in such Accounts.
++ Any redemptions of over 2,500 Units may, upon request by a redeeming
Unitholder, be made in kind. The Trustee will forward the distributed securities
to the Unitholder's McLaughlin, Piven, Vogel broker-dealer account at The
Depository Trust Company in book-entry form. As of the close of the initial
offering period, the Sponsors' Repurchase Price and Redemption Price per 100
Units for the Trust will be reduced to reflect its estimated organization cost
per 100 Units. See "Liquidity--Trustee Redemption" in Part B.
o The business day on which all contracts to purchase securities in the
Trust are expected to settle.
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OBJECTIVE. The objective of the Trust is to maximize total return through
capital appreciation and current dividend income. The Trust seeks to achieve its
objective by attempting to outperform the Dow Jones Industrial Average ("DJIA")
(which is not affiliated with the Sponsors) by creating a portfolio that
combines the following three investment strategies: (1) investing in the DJIA's
ten (10) common stocks having the highest dividend yield (the "Top Ten"), (2)
investing in the DJIA's five (5) common stocks having the lowest per share stock
price of the Top Ten (the "Focus Five") and (3) investing in a single stock
which is the DJIA's second-lowest priced of the Focus Five (the "Penultimate
Pick"); each determined as of two business days prior to the Initial Date of
Deposit. The combination of the three investment strategies is hereinafter
referred to as the "Triple Strategy". The Trust's portfolio will be comprised of
ten (10) stocks. Approximately 20% of the Trust's assets will be allocated to
the Top Ten, approximately 60% will be allocated to the Focus Five and
approximately 20% will be allocated to the Penultimate Pick. Within these three
categories, stocks will be purchased in approximately equal dollar amounts. Due
to the fact that all of the Focus Five are also represented in the Top Ten, and
that the Penultimate Pick appears in both the Focus Five and Top Ten, overlap
will result in a difference in the actual weighting of the stocks in the
portfolio as well as the actual weighting of the three strategies relative to
each other in the portfolio on the Initial Date of Deposit. For the actual
percentage of each stock in the portfolio, see "Portfolio" herein. (Also, see
"The Trust--Objective" and "The Trust--The Securities" in Part B.) As used
herein, the term "highest dividend yield" means the yield for each Security
calculated by annualizing the last quarterly or semi-annual ordinary dividend
distributed on that Security and dividing the result by the market value of that
Security as of two business days prior to the Initial Date of Deposit. This rate
is historical, and there is no assurance that any dividends will be declared or
paid in the future on the Securities in the Trust. The Trust's annual total
return may not exceed the DJIA in any one year; however, historically, long term
cumulative returns from these strategies has outperformed the DJIA. As used
herein, the term "Securities" means the common stocks initially deposited in the
Trust and described in "Portfolio" in Part A and any additional common stocks
acquired and held by the Trust pursuant to the provisions of the Indenture.
Further, the Securities and therefore the Units may appreciate or depreciate in
value, dependent upon the full range of economic and market influences affecting
corporate profitability, the financial condition of issuers and the price of
equity securities in general and the Securities in particular. Therefore, there
is no guarantee that the objective of the Trust will be achieved.
PORTFOLIO. The Portfolio contains 10 issues of common stock. 100% of the issues
are represented by the Sponsors' contracts to purchase. Based upon the principal
business of each issuer and current market values, the following industries are
represented in the Portfolio*: Auto Manufacturing, 14.02%; Banking and
Financial, 2.05%; Chemical, 15.85%; Consumer Products, 14.00%; Machinery,
34.01%; Manufacturing, 2.04%; Oil, 4.01%; and Paper, 14.02%. The Focus Five
stocks are Caterpillar Inc., General Motors Corp., International Paper Co.,
Philip Morris Companies, Inc. and Union Carbide Corp. and the Penultimate Pick
is Caterpillar Inc., a company with a significant concentration in the machinery
industry.
PUBLIC OFFERING PRICE. The Public Offering Price per 100 Units of the Trust is
equal to the aggregate value of the underlying Securities (the price at which
they could be directly purchased by the public assuming they were available) in
the Trust divided by the number of Units outstanding times 100 plus a sales
charge of 3.495% of the Public Offering Price per 100 Units or 3.621% of the net
amount invested in Securities per 100 Units. In addition, during the initial
offering period, the Public Offering Price will include cash in an amount
sufficient to reimburse the Sponsors for the payment of all or a portion of the
estimated organization costs of the Trust. The price of a single Unit, or any
multiple thereof, is calculated by dividing the Public Offering Price per 100
Units by 100 and multiplying by the number of Units. Any cash held by the Trust
will be added to the Public Offering Price. For additional information regarding
the Public Offering Price, repurchase and redemption of Units and other
essential information regarding the Trust, see the "Summary of Essential
Information." During the initial offering period orders involving at least
25,000 Units will be entitled to a volume discount from the Public Offering
Price. The Public Offering Price per Unit may vary on a daily basis in
accordance with fluctuations in the aggregate value of the underlying Securities
and the price to be paid by each investor will be computed as of the date the
Units are purchased. (See "Public Offering" in Part B.)
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* A trust is considered to be "concentrated" in a particular category or
industry when the securities in that category or that industry constitute
25% or more of the total assets of the portfolio.
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ESTIMATED NET ANNUAL DISTRIBUTIONS. The estimated net annual distributions to
Unitholders (based on the most recent quarterly or semi-annual ordinary dividend
distributed with respect to the Securities) as of two business days prior to the
Initial Date of Deposit per 100 Units was $26.35. This estimate will vary with
changes in the Trust's fees and expenses, actual dividends received, and with
the sale of Securities. In addition, because the issuers of common stock are not
obligated to pay dividends, there is no assurance that the estimated net annual
dividend distributions will be realized in the future.
DISTRIBUTIONS. Dividend distributions, if any, will be made semi-annually on the
Distribution Dates to all Unitholders of record on the Record Date. For the
specific dates representing the Distribution Dates and Record Dates, see
"Summary of Essential Information" in Part A. The final distribution will be
made within a reasonable period of time after the termination of the Trust. (See
"Rights of Unitholders--Distributions" in Part B.) Unitholders may elect to
automatically reinvest distributions (other than the final distribution in
connection with the termination of the Trust), into additional Units of the
Trust, which are subject to a reduced sales charge. See "Reinvestment Plan" in
Part B.
MARKET FOR UNITS. The Sponsors, although not obligated to do so, intend to
maintain a secondary market for the Units and to continuously offer to
repurchase the Units of the Trust both during and after the initial public
offering period. The secondary market repurchase price will be based on the
market value of the Securities in the Trust portfolio and will be the same as
the redemption price. (See "Liquidity--Sponsors Repurchase" for a description of
how the secondary market repurchase price will be determined.) If a market is
not maintained a Unitholder will be able to redeem his Units with the Trustee
(see "Liquidity--Trustee Redemption" in Part B). As a result, the existence of a
liquid trading market for these Securities may depend on whether dealers will
make a market in these Securities. There can be no assurance of the making or
the maintenance of a market for any of the Securities contained in the portfolio
of the Trust or of the liquidity of the Securities in any markets made. The
price at which the Securities may be sold to meet redemptions and the value of
the Units will be adversely affected if trading markets for the Securities are
limited or absent.
UNITS. Evidence of ownership of the Units are recorded in book-entry form at the
Depository Trust Company ("DTC") through the account of McLaughlin, Piven, Vogel
Securities, Inc. Any transfer of Units by Unitholders from their McLaughlin
Piven Vogel brokerage account will result in the automatic redemption of those
Units. (See "Liquidity-Automatic Redemption" in Part B.)
TERMINATION. During the 5-day period prior to the Mandatory Termination Date
(the "Liquidation Period"), Securities will begin to be sold in connection with
the termination of the Trust and all Securities will be sold or distributed by
the Mandatory Termination Date. The Trustee may utilize the services of the
Sponsors for the sale of all or a portion of the Securities in the Trust. Any
brokerage commissions received by the Sponsor from the Trust in connection with
such sales will be in accordance with applicable law. The Sponsors will
determine the manner, timing and execution of the sales of the underlying
Securities. The Sponsors will attempt to sell the Securities during the
Liquidation Period without, in its judgment, materially adversely affecting the
market price of the Securities. All of the Securities will be disposed of by the
end of the Liquidation Period. The Sponsors do not anticipate that the period
will be longer than 5 days, and it could be as short as one day, depending on
the liquidity of the Securities being sold.
Unitholders may elect one of the three options in receiving their terminating
distributions: (1) to receive their pro rata share of the underlying Securities
in-kind, if they own at least 2,500 units, (2) to receive cash upon the
liquidation of their pro rata share of the underlying Securities or (3) to
invest the amount of cash they would have received upon the liquidation of their
pro rata share of the underlying Securities in units of a future series of
Pinnacle Trusts (if one is offered) at a reduced sales charge (see "Rollover
Option"). See "Trust Administration-- Trust Termination" in Part B for a
description of how to select a termination distribution option. Unitholders who
have not chosen to receive distributions-in-kind will be at risk to the extent
that the Securities are not sold; for this reason the Sponsor will be inclined
to sell the Securities during the Liquidation Period without materially
adversely affecting the price of the Securities.
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ROLLOVER OPTION. Unitholders may elect to rollover their terminating
distributions into the next available series of Pinnacle Trusts at a reduced
sales charge. Rollover Unitholders must make this election on or prior to the
Rollover Notification Date. Upon making this election, a Unitholder's Units will
be redeemed and the proceeds will be reinvested in units of the next available
series of Pinnacle Trusts. An election to rollover terminating distributions
will generally be a taxable event. See "Trust Administration--Trust Termination"
in Part B for details to make this election.
RISK CONSIDERATIONS. An investment in Units of the Trust should be made with an
understanding of the risks inherent in an investment in any of the Securities
including, for common stocks, the risk that the financial condition of the
issuers of the Securities may become impaired or that the general condition of
the stock market may worsen (both of which may contribute directly to a decrease
in the value of the Securities and thus in the value of the Units). Further, the
nature of the combination of the three investment strategies in the portfolio
causes the Trust to be concentrated in the Penultimate Pick. The Penultimate
Pick is a company deriving a substantial portion of its income from the
machinery industry. Investors should consider the greater risk of the Trust's
concentration and the effect on their investment versus a more diversified
portfolio and should compare returns available on less concentrated portfolios
before making an investment decision. The portfolio of the Trust is fixed and
not "managed" by the Sponsors. Since the Trust will not sell Securities in
response to ordinary market fluctuation, but only (except for certain
extraordinary circumstances) at the Trust's termination or to meet redemptions,
the amount realized upon the sale of the Securities may not be the highest price
attained by an individual Security during the life of the Trust. In connection
with the deposit of Additional Securities subsequent to the Initial Date of
Deposit, if cash (or a letter of credit in lieu of cash) is deposited with
instructions to purchase Securities, to the extent the price of a Security
increases or decreases between the deposit and the time the Security is
purchased, Units may represent more or less of that Security and more or less of
the other Securities in the Trust. In addition, brokerage fees incurred in
purchasing Securities with cash deposited with instructions to purchase the
Securities will be an expense of the Trust. Price fluctuations during the period
from the time of deposit to the time the Securities are purchased, and payment
of brokerage fees, will affect the value of every Unitholder's Units and the
income per Unit received by the Trust.
The Sponsors cannot give any assurance that the business and investment
objectives of the issuers of the Securities will correspond with or in any way
meet the limited term objective of the Trust. (See "Risk Considerations" in Part
B of this Prospectus.)
REINVESTMENT PLAN. Unitholders may elect to automatically reinvest their
distributions, if any (other than the final distribution in connection with the
termination of the Trust) into additional units of the Trust at a reduced sales
charge of 1.00%. See "Reinvestment Plan" in Part B for details on how to enroll
in the Reinvestment Plan.
UNDERWRITING. McLaughlin, Piven, Vogel Securities, Inc., 30 Wall Street, New
York, New York 10005, will act as Underwriter for all of the Units of
McLaughlin, Piven, Vogel Family of Trusts, The Pinnacle Trust. (See "Public
Offering--Distribution of Units" in Part B).
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MCLAUGHLIN, PIVEN, VOGEL
FAMILY OF TRUSTS
THE PINNACLE TRUST
STATEMENT OF FINANCIAL CONDITION AS OF SEPTEMBER 22, 1998
ASSETS
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Investment in Securities--Sponsor's Contracts to Purchase
Underlying Securities Backed by Letter of Credit (cost $150,024) (Note 1).......... $ 150,024
Cash..................................................................................... 208
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Total.................................................................................... $ 150,232
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LIABILITIES AND INTEREST OF UNITHOLDERS
Reimbursement to Sponsors for Organization Costs (Note 2)................................ $ 208
Interest of Unitholders - Units of Fractional
Undivided Interest Outstanding (Pinnacle Trust: 15,567 Units)...................... 150,024
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Total.................................................................................... $ 150,232
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Net Asset Value per Unit................................................................. $ 9.64
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Notes to Statement of Financial Condition:
The preparation of financial statements in accordance with generally
accepted accounting principles requires Trust management to make estimates and
assumptions that affect the reported amounts and disclosures. Actual results
could differ from those estimates.
(1) McLaughlin, Piven, Vogel Family of Trusts, The Pinnacle Trust (the
"Trust") is a unit investment trust created under the laws of the State of New
York and registered under the Investment Company Act of 1940. The objective of
the Trust, jointly sponsored by McLaughlin, Piven, Vogel Securities, Inc. and
Reich & Tang Distributors, Inc. (the "Sponsors"), is to maximize total return
through capital appreciation and current dividend income. On September 23, 1998,
the "Date of Deposit", Portfolio Deposits were received by The Chase Manhattan
Bank, the Trust's Trustee, in the form of executed securities transactions, in
exchange for units of the Trust. An irrevocable letter of credit issued by
BankBoston in an amount of $400,000 has been deposited with the Trustee for the
benefit of the Trust to cover the purchases of such Securities as well as any
outstanding purchases of previously-sponsored unit investment trusts of the
Sponsors. Aggregate cost to the Trust of the Securities listed in the Portfolio
is determined by the Trustee on the basis set forth under "Public Offering--
Offering Price" as of 4:00 p.m. on September 22, 1998. The Trust will terminate
on December 30, 1999 or earlier under certain circumstances as further described
in the Prospectus.
(2) A portion of the Public Offering Price consists of cash in an amount
sufficient to reimburse the Sponsors for the per Unit portion of all or part of
the costs of establishing the Trust. These costs have been estimated at $1.34
per 100 Units for the Trust. A payment will be made as of the close of the
initial public offering period to an account maintained by the Trustee from
which the obligation of the investors to the Sponsors will be satisfied. To the
extent that actual organization costs are less than the estimated amount, only
the actual organization costs will be deducted from the assets of the Trust.
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MCLAUGHLIN, PIVEN, VOGEL
FAMILY OF TRUSTS
THE PINNACLE TRUST
PORTFOLIO
AS OF SEPTEMBER 22, 1998
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Market
Value of
Stocks as a Market Cost of
Percentage Current Value Securities
Portfolio Number of Ticker of the Dividend Per to the
No. Shares Name of Issuer Symbol Trust Yield(3) Share Trust (4)
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1 1215 Caterpillar Inc. CAT 34.01% 2.85% $42.0000 $51,030
2 37 Chevron Corporation CHV 2.00 3.01 81.0625 2,999
3 52 E.I. du Pont de DD 2.00 2.43 57.5625 2,993
Nemours & Company
4 45 Exxon Corporation XON 2.01 2.44 67.0625 3,018
5 369 General Motors Corp. GM 14.02 3.50 57.0000 21,033
6 474 International Paper Co. IP 14.02 2.25 44.3750 21,034
7 35 J.P. Morgan & JPM 2.05 4.31 88.0625 3,082
Company
8 43 Minnesota Mining & MMM 2.04 3.09 71.0000 3,053
Manufacturing Co.
9 438 Philip Morris MO 14.00 3.33 47.9375 20,997
Companies, Inc.
10 514 Union Carbide Corp. UK 13.85 2.22 40.4375 20,785
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Total Investment in Securities 100% $ 150,024
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FOOTNOTES TO PORTFOLIO
(1) Contracts to purchase the Securities were entered into on September 22,
1998. All such contracts are expected to be settled on or about the First
Settlement Date of the Trust which is expected to be September 28, 1998.
(2) Based on the cost of the Securities to the Trust.
(3) Current Dividend Yield for each security was calculated by annualizing the
last quarterly or semi-annual ordinary dividend received on the security
and dividing the result by its market value as of the close of trading on
September 22, 1998. (4) Evaluation of Securities by the Trustee was made on
the basis of closing sales prices at the Evaluation Time on the day prior
to the Initial Date of Deposit. The Sponsors' Purchase Price is $150,310.
The Sponsors' Loss on the Initial Date of Deposit is $286.
(4) Evaluation of Securities by the Trustee was made on the basis of closing
sales prices at the Evaluation Time on the day prior to the Initial Date of
Deposit. The Sponsors' Purchase Price is $150,310. The Sponsors' Loss on
the Initial Date of Deposit is $286.
The accompanying notes form an integral part of the Financial Statements.
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REPORT OF INDEPENDENT AUDITORS
THE UNITHOLDERS, SPONSORS AND TRUSTEE
MCLAUGHLIN, PIVEN, VOGEL FAMILY OF TRUSTS,
THE PINNACLE TRUST
We have audited the accompanying statement of Financial Condition of
McLaughlin, Piven, Vogel Family of Trusts, The Pinnacle Trust, including the
Portfolio, as of September 22, 1998. This financial statement is the
responsibility of the Trust's management. Our responsibility is to express an
opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. Our procedures included
confirmation with The Chase Manhattan Bank, Trustee, of an irrevocable letter of
credit deposited for the purchase of securities, as shown in the financial
statement as of September 22, 1998. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents fairly,
in all material respects, the financial position of McLaughlin, Piven, Vogel
Family of Trusts, The Pinnacle Trust, at September 22, 1998, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
New York, New York
September 22, 1998
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THREE "DOW BEATING" STRATEGIES
THE TRUST
Investing in the stock market has proven year after year to be a good way
to beat inflation. The Dow Jones Industrial Average (DJIA)* is a leading stock
market indicator that provides the data for this fact. This average is a
sampling of thirty stocks that represent some of the largest and strongest
companies in the world. Their long record of steady earnings, financial
resources and economic power have earned them the investor confidence that has
given them the nickname "blue chip" stocks.
THE TRUST'S CONCEPT
The Trust's concept is a simple one: To create a portfolio which combines
these three "winning" strategies. The diversification of the Top Ten stocks
combined with a concentration of the higher yielding Penultimate Pick and the
Focus Five stocks gives the Trust the opportunity to produce above average
returns. The portfolio is held for approximately 15 months and then it is
liquidated. (For more information see "Options at termination" below.)
THE STRATEGY
Now you have the opportunity to invest in three strategies simultaneously
that have been proven to "beat" the DJIA without having to spend the time,
effort and money to buy each stock individually. The Pinnacle Trust is a unit
investment trust portfolio designed to take advantage of three winning
strategies. Historically, these three strategies have each individually beaten
the returns of the DJIA over the past twenty-five years. The first strategy is
to pick the Top Ten highest yielding stocks of the thirty stocks that are
contained in the DJIA. The second strategy is to choose the five lowest priced
stocks of the Top Ten. These are called the Focus Five. The last strategy is to
choose the second lowest priced stock of the Focus Five. This is the Penultimate
Pick. These three strategies are then combined to produce a portfolio of ten
stocks with the weighting among the strategies selected by the Sponsors. Each
stock's concentration will reflect the individual weightings of the three
strategies. All four Charts below show the effect these strategies may have on
your investment. Charts A and B reflect hypothetical returns which do not
include sales charges, expenses, commissions, or taxes. Charts C and D, however,
reflect the same hypothetical returns net of sales charges and trust expenses.
For example, if you had invested $10,000 in 1973 in the DJIA, your investment
would be worth approximately $213,856 today. But if, hypothetically, you had
invested the same $10,000 applying the Triple Strategy, your investment would be
worth approximately $1,527,400 ($766,621 net of sales charges and expenses)
today. These hypothetical returns do not reflect the effect of market
fluctuations if a stock in the portfolio of one of the strategies was sold at
any point in time. There can be no assurance that these results will be achieved
as past performance is no guarantee of future results.
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* The DJIA is the property of Dow Jones & Company, Inc. and the company is
not affiliated with the Sponsors and has not participated in any way in the
creation of the trust or in the portfolio and has not approved any
information included herein.
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[insert chart A] [insert chart B]
[insert chart C] [insert chart D]
The charts assume that all dividends during the one year are reinvested at the
end of that year. The performance of the Hypothetical Triple Strategy Trust in
Charts C and D are net of sales charges (3.495% for the first year, and 2.995%
for each subsequent year) and estimated expenses of .260%. For a complete
explanation to calculate the hypothetical performance of the Triple Strategy,
see "Comparison of Total Returns" in Part B. There can be no assurance that the
Trust will outperform the DJIA over its 15-month life or over consecutive roll
over periods, if available. The strategy outperformed the DJIA in 18 out of the
past 25 years (14 years if trust sales charges and expenses were deducted from
the Hypothetical Triple Strategy Trust performance). (Of course, that
also means the strategy underperformed the DJIA in seven of those years (11
years if trust sales charges and expenses were deducted from the Hypothetical
Triple Strategy Trust performance)).
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TRIPLE STRATEGY TRUST INVESTING
- -------------------------------
Time Invested vs. Investment Timing - This Trust is based on the theory that you
are rolling over your portfolio each year. The Trust may not exceed the DJIA in
any one year; however, historically, long term cumulative returns from this
philosophy beat the DJIA. It's not the timing of the purchase that counts, it's
the length of time that you are invested.
Contrarian Reasoning - Buy what others are selling.
Dividends Count - Dividends contribute greatly to your total return.
Layered Strategies Work - Look at the charts and notice how the DJIA has been
beaten by these three strategies. It is our opinion that if one strategy works
well then three strategies may work better.
FEATURES
- --------
o Convenience - Ownership of ten blue chip stocks with the ease of a single
purchase.
o Liquidity - You may sell your units on any business day at the then current
net asset value. However, since market values fluctuate, your units may be
worth more or less than your original investment.
o Low minimum investment - May be as low as $1,000. ---------------------- o
Options at termination - You may receive cash, stock-in-kind (unitholders
owning 2,500 units or more) or roll your proceeds into the new Triple
Strategy Trust, if available, at a reduced sales charge. Unitholders may be
subject to tax liability at Trust Termination.
o No management fees - This is an unmanaged portfolio and therefore no
additional management fees are ------------------ charged.
Risk Considerations - An investment in Units of the Trust should be made with an
understanding of the risks associated with investments in common stocks, which
include the risk that the financial condition of the issuers may become impaired
or that the general condition of the stock market may worsen. In addition,
because the Trust may be considered to be "concentrated" in stocks of companies
deriving a substantial portion of their income from a singular industry, and
that the combination of the three investment strategies causes the Trust to be
"concentrated" in the Penultimate Pick, investors should consider the greater
risk of such concentrations and the effect on their investment versus a more
diversified portfolio and compare those returns before making an investment
decision.
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- --------------------------------------------------------------------------------
MCLAUGHLIN, PIVEN, VOGEL FAMILY OF TRUSTS
- --------------------------------------------------------------------------------
THE PINNACLE TRUST
PROSPECTUS PART B
PART B OF THIS PROSPECTUS MAY NOT BE
DISTRIBUTED UNLESS ACCOMPANIED BY
PART A
THE TRUST
ORGANIZATION. McLaughlin, Piven, Vogel Family of Trusts, The Pinnacle Trust
consists of a "unit investment trust" designated as set forth in Part A. The
Trust was created under the laws of the State of New York pursuant to a Trust
Indenture and Agreement (the "Trust Agreement"), dated the Initial Date of
Deposit, among McLaughlin, Piven, Vogel Securities, Inc. and Reich & Tang
Distributors, Inc., as Sponsors, and The Chase Manhattan Bank, as Trustee.
On the Initial Date of Deposit, the Sponsors deposited with the Trustee
common stock, including funds and delivery statements relating to contracts for
the purchase of certain such securities (collectively, the "Securities") with an
aggregate value as set forth in Part A and cash or an irrevocable letter of
credit issued by a major commercial bank in the amount required for such
purchases. Thereafter the Trustee, in exchange for the Securities so deposited,
has registered on the registration books of the Trust evidence of the Sponsors'
ownership of all Units of the Trust. The Sponsors have a limited right to
substitute other securities in the Trust portfolio in the event of a failed
contract. See "The Trust--Substitution of Securities." The Sponsors may also, in
certain circumstances, direct the Trustee to dispose of certain Securities if
the Sponsors believe that, because of market or credit conditions, or for
certain other reasons, retention of the Security would be detrimental to
Unitholders. See "Trust Administration Portfolio--Supervision."
As of the Initial Date of Deposit, a "Unit" represents an undivided
interest or pro rata share in the Securities and cash of the Trust in the ratio
of one hundred Units for the indicated amount of the aggregate market value of
the Securities initially deposited in the Trust as is set forth in the "Summary
of Essential Information." As additional Units are issued by the Trust as a
result of the deposit of Additional Securities, as described below, the
aggregate value of the Securities in the Trust will be increased and the
fractional undivided interest in the Trust represented by each Unit will be
decreased. To the extent that any Units are redeemed by the Trustee, the
fractional undivided interest or pro rata share in such Trust represented by
each unredeemed Unit will increase, although the actual interest in such Trust
represented by such fraction will remain unchanged. Units will remain
outstanding until redeemed upon tender to the Trustee by Unitholders, which may
include the Sponsors, or until the termination of the Trust Agreement.
DEPOSIT OF ADDITIONAL SECURITIES. With the deposit of the Securities in the
Trust on the Initial Date of Deposit, the Sponsors established a proportionate
relationship among the initial aggregate value of specified Securities in the
Trust. During the 90 days subsequent to the Initial Date of Deposit (the
"Deposit Period"), the Sponsors may deposit additional Securities in the Trust
that are substantially similar to the Securities already deposited in the Trust
("Additional Securities"), contracts to purchase Additional Securities or cash
with instructions to purchase Additional Securities, in order to create
additional Units, maintaining to the extent
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practicable the original proportionate relationship of the number of shares of
each Security in the Trust portfolio on the Initial Date of Deposit. These
additional Units, which will result in an increase in the number of Units
outstanding, will each represent, to the extent practicable, an undivided
interest in the same number and type of securities of identical issuers as are
represented by Units issued on the Initial Date of Deposit. It may not be
possible to maintain the exact original proportionate relationship among the
Securities deposited on the Initial Date of Deposit because of, among other
reasons, purchase requirements, changes in prices, or unavailability of
Securities. The composition of the Trust portfolio may change slightly based on
certain adjustments made to reflect the disposition of Securities and/or the
receipt of a stock dividend, a stock split or other distribution with respect to
such Securities, including Securities received in exchange for shares or the
reinvestment of the proceeds distributed to Unitholders. Deposits of Additional
Securities in the Trust subsequent to the Deposit Period must replicate exactly
the existing proportionate relationship among the number of shares of Securities
in the Trust portfolio. Substitute Securities may be acquired under specified
conditions when Securities originally deposited in the Trust are unavailable
(see "The Trust--Substitution of Securities" below).
OBJECTIVE. The objective of the Trust is to maximize total return through
capital appreciation and current dividend income. The Trust seeks to achieve its
objective by attempting to outperform the Dow Jones Industrial Average ("DJIA")
(which is not affiliated with the Sponsors) by creating a portfolio that
combines the following three investment strategies: (1) investing in the DJIA's
ten (10) common stocks having the highest dividend yield (the "Top Ten"), (2)
investing in the DJIA's five (5) common stocks having the lowest per share stock
price of the Top Ten (the "Focus Five") and (3) investing in a single stock
which is the DJIA's second- lowest priced of the Focus Five (the "Penultimate
Pick"); each determined as of two business days prior to the Initial Date of
Deposit. The combination of the three investment strategies is hereinafter
referred to as the "Triple Strategy". The Trust's portfolio will be comprised of
ten (10) stocks. Approximately 20% of the Trust's assets will be comprised of
the Top Ten, approximately 60% will be comprised of the Focus Five and
approximately 20% will be comprised of the Penultimate Pick. Within these three
categories, stocks will be purchased in approximately equal dollar amounts. Due
to the fact that all of the Focus Five are also represented in the Top Ten, and
that the Penultimate Pick appears in both the Focus Five and Top Ten, overlap
will result in a difference in the actual weighting of the stocks in the
portfolio as well as the actual weighting of the three strategies relative to
each other in the portfolio on the Initial Date of Deposit. For the actual
percentage of each stock in the portfolio, see "Portfolio" in Part A. (Also see
"The Trust--Objective" and "The Trust--The Securities" in Part B.) As used
herein, the term "highest dividend yield" means the yield for each Security
calculated by annualizing the last quarterly or semi-annual ordinary dividend
distributed on that Security and dividing the result by the market value of that
Security as of two business days prior to the Initial Date of Deposit. This rate
is historical, and there is no assurance that any dividends will be declared or
paid in the future on the Securities in the Trust. As used herein, the term
"Securities" means the common stocks initially deposited in the Trust and
described in "Portfolio" in Part A and any additional common stocks acquired and
held by the Trust pursuant to the provisions of the Indenture.
Investing in DJIA stocks with the highest dividend yields may be effective
in achieving the Trust's investment objective because regular dividends are
common for established companies and dividends have accounted for a substantial
portion of the total return on DJIA stocks as a group. There can be no assurance
that the dividend rates will be maintained. Reduction or elimination of a
dividend could adversely affect the stock price as well. Purchasing a portfolio
of these stocks as opposed to one or two stocks can achieve a more diversified
holding. There is only one investment decision instead of ten. An investment in
the Trust can be cost-efficient, avoiding the odd-lot costs of buying small
quantities of securities directly. An investment in a number of companies with
high dividends relative to their stock prices is designed to increase the
Trust's potential for higher returns. The Trust's return will consist of a
combination of capital appreciation and current dividend income. The Trust will
terminate in approximately fifteen months, at which time investors may choose to
either
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receive the distributions in kind (if they own at least 2,500 Units), in cash or
reinvest in a subsequent series of Pinnacle Trusts (if available) at a reduced
sales charge. Further, the Securities may appreciate or depreciate in value,
dependent upon the full range of economic and market influences affecting
corporate profitability, the financial condition of issuers and the prices of
equity securities in general and the Securities in particular. Investors should
note that the Trust's selection criteria was applied to the Securities two
business days prior to the Initial Date of Deposit. Since the Sponsors may
deposit additional Securities in connection with the sale of additional Units,
the yields on these Securities may change subsequent to the Initial Date of
Deposit. Therefore, there is no guarantee that the objective of the Trust will
be achieved.
THE SECURITIES. Each of the Securities has been taken from the Dow Jones
Industrial Average ("DJIA"). The DJIA comprises 30 common stocks chosen by the
editors of The Wall Street Journal as representative of the broad market and of
American industry. The companies are major factors in their industries and their
stocks are widely held by individuals and institutional investors. Changes in
the components of the DJIA are made entirely by the editors of The Wall Street
Journal without consultation with the companies, the stock exchange or any
official agency. For the sake of continuity, changes are made rarely. Most
substitutions have been the result of mergers, but from time to time, changes
may be made to achieve a better representation. The components of the DJIA may
be changed at any time for any reason. Any changes in the components of the DJIA
after the date of this Prospectus will not cause a change in the identity of the
common stocks included in the Trust's portfolio, including any Additional
Securities deposited in the Trust.
The first DJIA, consisting of 12 stocks, was published in The Wall Street
Journal in 1896. The list grew to 20 stocks in 1916 and to 30 stocks on October
1, 1928. For two periods of 17 consecutive years each, there were no changes to
the list: March 1939 - July 1956 and June 1959 - August 1976. The DJIA last
changed on March 17, 1997.
Stocks Currently Comprising the DJIA
AT&T Corporation International Business Machines Corporation
Allied Signal International Paper Company
Aluminum Company of America Johnson & Johnson
American Express Company J.P. Morgan & Company
Boeing Company McDonald's Corporation
Caterpillar Inc. Merck & Company, Inc.
Chevron Corporation Minnesota Mining & Manufacturing Company
Coca-Cola Company Philip Morris Companies, Inc.
E.I. du Pont de Nemours & Company Proctor & Gamble Company
Eastman Kodak Company Sears, Roebuck & Company
Exxon Corporation Travelers Corp. Inc.
General Electric Company Union Carbide Corporation
General Motors Corporation United Technologies Corporation
Goodyear Tire & Rubber Company Wal-Mart Stores, Inc.
Hewlett-Packard Co. Walt Disney Company
The yield for each Security was calculated by annualizing the last
quarterly or semi-annual ordinary dividend distributed and dividing the result
by the market value of the Security as of two business days prior to the Initial
Date of Deposit. This formula (an objective determination) served as the basis
for the Sponsors' selection of the Top Ten. The companies represented in the
Trust are some of the most well-known and highly capitalized companies in
America. The Securities were selected irrespective of any research
recommendation by the
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Sponsors. Investing in the stocks of the DJIA may be effective as well as
conservative because regular dividends are common for established companies and
dividends have accounted for a substantial portion of the total return on stocks
comprising the DJIA.
Although the McLaughlin, Piven, Vogel Family of Trusts, The Pinnacle Trust
was not available until this year, during the last 25 years, the strategy of
investing in approximately equal values of the ten highest yielding stocks each
year generally would have yielded a higher total return than an investment in
all 30 stocks which make up the DJIA. The following table shows the hypothetical
performance of investing approximately equal amounts in each of the Top Ten,
Focus Five, Penultimate Pick and the combined Triple Strategy at the beginning
of each year and rolling over the proceeds. The total returns do not reflect
sales charges, commissions or taxes. These results represent past performance of
the Top Ten, Focus Five, Penultimate Pick and Triple Strategy, and should not be
considered indicative of future results of the Trust. The Trust's annual total
return may not exceed the DJIA in any one year; however, historically, long term
cumulative total returns from these strategies has outperformed the cumulative
returns of the DJIA. The Top Ten, Focus Five, Penultimate Pick and Triple
Strategy each underperformed the DJIA in certain years. Also, investors in the
Trust may not realize as high a total return as on a direct investment in each
of the Top Ten, Focus Five, Penultimate Pick or Triple Strategy since the Trust
has sales charges and expenses and may not be fully invested at all times. Unit
prices fluctuate with the value of the underlying stocks, and there is no
assurance that dividends on these stocks will be paid or that the Units will
appreciate in value.
The following table compares the actual performance of the DJIA and
approximately equal values of each of the Top Ten, Focus Five, Penultimate Pick
or Hypothetical Triple Strategy Trust in each of the past 25 years, as of
December 31 in each of these years:
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<TABLE>
<CAPTION>
COMPARISON OF TOTAL RETURNS(1)
For Calendar Years ending 12/31/97
(Unless indicated, Total Returns do not include sales charges, commissions, taxes or other expenses)
<S> <C> <C> <C> <C> <C> <C>
HYPOTHETICAL
TRIPLE
DOW JONES HYPOTHETICAL STRATEGY TRUST
CALENDAR INDUSTRIAL FOCUS PENULTIMATE TRIPLE - NET OF SALES
YEAR AVERAGE TOP TEN FIVE OF PICK OF STRATEGY CHARGES &
ENDED (DJIA) OF DJIA (2) DJIA (2) DJIA (2) TRUST EXPENSES (3)(4)
--------- ----------- ----------- -------- ----------- ------------ --------------
1973 -13.10% 3.90% 19.60% 73.40% 27.22% 23.47%
1974 -23.10 -1.30 -3.80 -41.70 -10.88 -14.13
1975 44.40 55.90 70.10 157.20 84.68 81.43
1976 22.70 34.80 40.80 55.10 42.46 39.21
1977 -12.70 0.90 4.50 4.30 3.74 0.49
1978 2.70 -0.10 1.70 1.00 1.20 -2.05
1979 10.50 12.40 9.90 -10.10 6.40 3.15
1980 21.50 27.20 40.50 50.60 39.86 36.61
1981 -3.40 5.00 0.00 27.30 6.46 3.21
1982 25.80 23.60 37.40 95.30 46.22 42.97
1983 25.70 38.70 36.10 36.10 36.62 33.37
1984 1.10 7.60 12.60 -2.80 8.52 5.27
1985 32.80 29.50 37.80 26.40 33.86 30.61
1986 26.90 32.10 27.90 29.60 29.08 25.83
1987 6.00 6.10 11.10 3.30 8.54 5.29
1988 16.00 22.90 18.40 19.50 19.52 16.27
1989 31.70 26.50 10.50 12.90 14.18 10.93
1990 -0.40 -7.60 -15.20 -17.40 -14.12 -17.37
1991 23.90 39.30 61.90 185.60 82.12 78.87
1992 7.40 7.90 23.10 69.10 29.26 26.01
1993 16.80 27.30 34.30 39.10 33.86 30.61
1994 4.90 4.10 8.60 -37.40 -1.50 -4.75
1995 36.40 36.70 30.50 21.70 29.98 26.73
1996 28.90 27.90 26.00 28.10 26.80 23.55
1997 24.70 21.60 20.00 49.90 26.30 23.05
</TABLE>
- --------------- ----------------
(1) Total return does not take into consideration any sales charges,
commissions, expenses or taxes EXCEPT for total returns cited for the
Hypothetical Triple Strategy Trust. The Total Return represents the sum of
Appreciation and Actual Dividend Yield. (i) Appreciation for the Top Ten,
Focus Five and Penultimate Pick is calculated by subtracting the market
value of these stocks as of the first trading day on the New York Stock
Exchange in a given calendar year from the market value of those stocks as
of the last trading day in that calendar year, and dividing the result by
the market value of the stocks as of the first trading day in that calendar
year. Appreciation for the DJIA is calculated by subtracting the opening
value of the DJIA as of the first trading day in each calendar year from the
closing value of the DJIA as of the last trading day in that calendar year,
and dividing the result by the opening value of the DJIA as of the first
trading day in that calendar year. (ii) Actual Dividend Yield for the Top
Ten, Focus Five and Penultimate Pick is calculated by adding the total
dividends received on the stocks in the calendar year and dividing the
result by the market value of the stocks as of the first trading day in that
calendar year. Actual Dividend Yield for the DJIA is calculated by taking
the total dividends credited to the DJIA and dividing the result by the
opening value of the DJIA as of the first trading day in that calendar year.
(2) The Top Ten, Focus Five and Penultimate Pick in any given calendar year
were selected by ranking the dividend yields for each of the stocks in the
DJIA as of the beginning of that calendar year, based upon an annualization
of the last quarterly or semi-annual regular dividend distribution (which
would have been declared in the preceding calendar year) divided by that
stock's market value on the first trading day on the New York Stock
Exchange in that calendar year.
(3) The Total Return Performance for the Hypothetical Triple Strategy Trust is
calculated by combining the Total Return, as calculated in footnote (1)
above, of the three investment strategies, the Top Ten, Focus Five and
Penultimate Pick, in any given calendar year based upon the same weighted
average which this Trust will be employing: 20% comprised of the Top Ten,
60% of the Focus Five and 20% of the Penultimate Pick. Within these three
categories, stocks will be purchased in approximately equal dollar amounts.
Footnote (2) above describes the selection process of each strategy.
(4) Total Return for Hypothetical Triple Strategy Trust is net of sales charges
(3.495% for the first year, 2.995% for each subsequent year) and estimated
expenses of .260%.
These results represent past performance and should not be considered
indicative of future results of this Trust. Unit prices may fluctuate with
the value of the underlying stocks, and there is no assurance that
dividends on these stock will be paid or that the Units will appreciate in
value. Trust performance will differ from the Hypothetical Triple Strategy
Trust because (i) of commissions, (ii) the portfolio is established and
liquidated at different times during the year, (iii) stocks may be
purchased and sold at prices different from those used in determining unit
price, (iv) the Trust may not be fully invested at all times, and (v)
stocks may not be weighted equally. The Triple Strategy Trust may have been
concentrated in different industries than this Trust.
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The contracts to purchase Securities deposited initially in the Trust are
expected to settle in three business days, in the ordinary manner for such
Securities. Settlement of the contracts for Securities is thus expected to take
place prior to the settlement of purchase of Units on the Initial Date of
Deposit.
SUBSTITUTION OF SECURITIES. In the event of a failure to deliver any
Security that has been purchased for the Trust under a contract ("Failed
Securities"), the Sponsors are authorized under the Trust Agreement to direct
the Trustee to acquire other securities ("Substitute Securities") to make up the
original corpus of the Trust.
The Substitute Securities must be purchased within 20 days after delivery
of the notice of the failed contract. Where the Sponsors purchase Substitute
Securities in order to replace Failed Securities, the purchase price may not
exceed the purchase price of the Failed Securities and the Substitute Securities
must be substantially similar to the Securities originally contracted for and
not delivered.
Whenever a Substitute Security has been acquired for the Trust, the Trustee
shall, within five days thereafter, notify all Unitholders of the Trust of the
acquisition of the Substitute Security and the Trustee shall, on the next
Distribution Date which is more than 30 days thereafter, make a pro rata
distribution of the amount, if any, by which the cost to the Trust of the Failed
Security exceeded the cost of the Substitute Security.
In the event no substitution is made, the proceeds of the sale of
Securities will be distributed to Unitholders as set forth under "Rights of
Unitholders--Distributions." In addition, if the right of substitution shall not
be utilized to acquire Substitute Securities in the event of a failed contract,
the Sponsor will cause to be refunded the sales charge attributable to such
Failed Securities to all Unitholders, and distribute the principal and
dividends, if any, attributable to such Failed Securities on the next
Distribution Date.
RISK CONSIDERATIONS
FIXED PORTFOLIO. The value of the Units will fluctuate depending on all of
the factors that have an impact on the economy and the equity markets. These
factors similarly impact the ability of an issuer to distribute dividends.
Unlike a managed investment company in which there may be frequent changes in
the portfolio of securities based upon economic, financial and market analyses,
securities of a unit investment trust, such as the Trust, are not subject to
such frequent changes based upon continuous analysis. All the Securities in the
Trust are liquidated or distributed during the Liquidation Period. Since the
Trust will not sell Securities in response to ordinary market fluctuation, but
only at the Trust's termination or upon the occurrence of certain events, the
amount realized upon the sale of the Securities may not be the highest price
attained by an individual Security during the life of the Trust. Some of the
Securities in the Trust may also be owned by other clients of the Sponsors and
their affiliates. However, because these clients may have differing investment
objectives, the Sponsors may sell certain Securities from those accounts in
instances where a sale by the Trust would be impermissible, such as to maximize
return by taking advantage of market fluctuations. Investors should consult with
their own financial advisers prior to investing in the Trust to determine its
suitability. (See "Trust Administration--Portfolio Supervision" below.)
ADDITIONAL SECURITIES. Investors should be aware that in connection with
the creation of additional Units subsequent to the Initial Date of Deposit, the
Sponsors may deposit Additional Securities, contracts to purchase Additional
Securities or cash with instructions to purchase Additional Securities, in each
instance maintaining the original proportionate relationship, subject to
adjustment under certain circumstances, of the numbers of shares of each
Security in the Trust. To the extent the price of a Security increases or
decreases between the time cash is deposited with instructions to purchase the
Security and the time the cash is used to purchase the Security, Units may
represent less or more of that Security and more or less of the other Securities
in the Trust. Brokerage fees (if any) incurred in purchasing Securities with
cash deposited with instructions to purchase the Securities will be an expense
of the Trust. Price fluctuations between the time of deposit and the time the
Securities are purchased, and payment of brokerage fees, will affect the value
of every Unitholder's Units and
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the Income per Unit received by the Trust. In particular, Unitholders who
purchase Units during the initial offering period would experience a dilution of
their investment as a result of any brokerage fees paid by the Trust during
subsequent deposits of Additional Securities purchased with cash deposited. In
order to minimize these effects, the Trust will try to purchase Securities as
near as possible to the Evaluation Time or at prices as close as possible to the
prices used to evaluate Trust Units at the Evaluation Time. In addition,
subsequent deposits to create such additional Units will not be covered by the
deposit of a bank letter of credit. In the event that the Sponsors do not
deliver cash in consideration for the additional Units delivered, the Trust may
be unable to satisfy its contracts to purchase the Additional Securities. The
failure of the Sponsors to deliver cash to the Trust, or any delays in the Trust
receiving such cash, may have significant adverse consequences for the Trust.
COMMON STOCK. Since the Trust contains common stocks of domestic issuers,
an investment in Units of the Trust should be made with an understanding of the
risks inherent in any investment in common stocks including the risk that the
financial condition of the issuers of the Securities may become impaired or that
the general condition of the stock market may worsen (both of which may
contribute directly to a decrease in the value of the Securities and thus in the
value of the Units). Additional risks include risks associated with the right to
receive payments from the issuer which is generally inferior to the rights of
creditors of, or holders of debt obligations or preferred stock issued by the
issuer. Holders of common stocks have a right to receive dividends only when,
if, and in the amounts declared by the issuer's board of directors and to
participate in amounts available for distribution by the issuer only after all
other claims on the issuer have been paid or provided for. By contrast, holders
of preferred stocks usually have the right to receive dividends at a fixed rate
when and as declared by the issuer's board of directors, normally on a
cumulative basis. Dividends on cumulative preferred stock must be paid before
any dividends are paid on common stock and any cumulative preferred stock
dividend which has been omitted is added to future dividends payable to the
holders of such cumulative preferred stock. Preferred stocks are also usually
entitled to rights on liquidation which are senior to those of common stocks.
For these reasons, preferred stocks generally entail less risk than common
stocks.
Moreover, common stocks do not represent an obligation of the issuer and
therefore do not offer any assurance of income or provide the degree of
protection of debt securities. The issuance of debt securities or even preferred
stock by an issuer will create prior claims for payment of principal, interest
and dividends which could adversely affect the ability and inclination of the
issuer to declare or pay dividends on its common stock or the economic interest
of holders of common stock with respect to assets of the issuer upon liquidation
or bankruptcy. Further, unlike debt securities which typically have a stated
principal amount payable at maturity (which value will be subject to market
fluctuations prior thereto), common stocks have neither fixed principal amount
nor a maturity and have values which are subject to market fluctuations for as
long as the common stocks remain outstanding. Common stocks are especially
susceptible to general stock market movements and to volatile increases and
decreases in value as market confidence in and perceptions of the issuers
change. These perceptions are based on unpredictable factors including
expectations regarding government, economic, monetary and fiscal policies,
inflation and interest rates, economic expansion or contraction, and global or
regional political, economic or banking crises. The value of the common stocks
in the Trust thus may be expected to fluctuate over the life of the Trust to
values higher or lower than those prevailing on the Initial Date of Deposit.
PENULTIMATE PICK. The Trust may be considered to be "concentrated" in
common stock of a particular issuer. Information regarding such company is
available by inspecting or copying certain reports, proxies and informational
statements and other information filed by such company in accordance with the
Securities Exchange Act of 1934 at the public reference facilities maintained at
the Securities and Exchange Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Copies can be obtained from the Public Reference Section
of the Securities and Exchange Commission at the same address at prescribed
rates.
MACHINERY COMPANIES. The Trust may be considered to be concentrated in the
common stock of a company engaged in the machinery industry and, as a result,
the value of the Units of the Trust may be susceptible to various factors
affecting this industry. The diversified machinery industry includes producers
of agricultural equipment, construction equipment, mining equipment, papermaking
machinery, machine tools, and
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an assortment of diverse products of specialty machinery and equipment. Factors
affecting the machinery industry, include, but are not limited to, (1) products
of companies in the machinery industry which may be subject to rapid
obsolescence; (2) cyclical business whose performance is highly sensitive to the
economic health of the U.S. and world economies; (3) various environmental laws
and regulations which can be expensive to comply with and result in significant
liability if not complied with; (4) changes in legislation which could adversely
affect a company; (5) competition on a global scale, which subjects companies
within this industry to added risks of foreign markets, particularly risks
associated with foreign economic crises and political unrest; and (6) intense
competition within the industry both domestically and in foreign markets which
can lead to intense bidding for contracts which, in turn, could result in a
winning bid which leaves little or no profit margin. In addition, the demand for
diversified machinery generally fluctuates with the performance of the diverse
industries relying on the equipment these manufacturers provide. Therefore, the
machinery industry is susceptible to the fluctuations and risks inherent in
agriculture, housing, mining and manufacturing industries.
The Sponsors believe that the information summarized above for the
machinery companies describes some of the more significant aspects relating to
the risks associated with investing in the Trust which may have a
"concentration" in this industry. The sources of such information are obtained
from research reports as well as other publicly available documents. While the
Sponsors have not independently verified this information, they have no reason
to believe that such information is not correct in all material respects.
YEAR 2000 ISSUE. Many existing computer programs use only two digits to
identify a year in the date field and were designed and developed without
considering the impact of the upcoming change in the century. Therefore, for
example, the year "2000" would be incorrectly identified as the year "1900". If
not corrected, many computer applications could fail or create erroneous results
by or at the Year 2000, requiring substantial resources to remedy. The Sponsors
and Trustee believe that the "Year 2000" problem is material to their business
and operations and have a material adverse effect on the Sponsors' and the
Trustee's results of operations and, in turn, cash available for distribution by
the Trustee. Although the Sponsors and the Trustee are addressing the problem
with respect to their business operations, there can be no assurance that the
"Year 2000" problem will be properly or timely resolved. The "Year 2000" problem
may also adversely affect issuers of the Securities contained in the Trust to
varying degrees based upon various factors. The Sponsors are unable to predict
what effect, if any, the "Year 2000" problem will have on such issuers.
LEGISLATION. From time to time Congress considers proposals to reduce the
rate of the dividends-received deduction which is available to certain
corporations. Enactment into law of a proposal to change the rate would
adversely affect the after-tax return to investors that can take advantage of
the deduction. Investors are urged to consult their own tax advisers. Further,
at any time after the Initial Date of Deposit, legislation may be enacted, with
respect to the Securities in the Trust or the issuers of the Securities.
Changing approaches to regulation, particularly with respect to the environment
or with respect to the petroleum industry, may have a negative impact on certain
companies represented in the Trust. There can be no assurance that future
legislation, regulation or deregulation will not have a material adverse effect
on the Trust or will not impair the ability of the issuers of the Securities to
achieve their business goals.
LEGAL PROCEEDINGS AND LITIGATION. At any time after the Initial Date of
Deposit, legal proceedings may be initiated on various grounds, or legislation
may be enacted, with respect to the Securities in the Trust or to matters
involving the business of the issuer of the Securities. There can be no
assurance that future legal proceedings or legislation will not have a material
adverse impact on the Trust or will not impair the ability of the issuers of the
Securities to achieve their business and investment goals.
GENERALLY. There is no assurance that any dividends will be declared or
paid in the future on the Securities. Investors should be aware that there is no
assurance that the Trust's objective will be achieved.
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PUBLIC OFFERING
OFFERING PRICE. In calculating the Public Offering Price, the aggregate
value of the Securities and any cash held to purchase Securities is divided by
the number of Units outstanding. In addition, during the initial offering period
a portion of the Public Offering Price per 100 Units also consists of cash in an
amount sufficient to pay the per 100 Units portion of all or a part of the cost
incurred in organizing and offering the Trust. See "Trust Expenses and Charges."
The aggregate value of the Securities is determined in good faith by the Trustee
on each "Business Day" as defined in the Indenture in the following manner:
because the Securities are listed on a national securities exchange, this
evaluation is based on the last sale price on that exchange as of the Evaluation
Time (unless the Trustee deems these prices inappropriate as a basis for
valuation). If the Trustee deems these prices inappropriate as a basis for
evaluation, then the Trustee may utilize, at the Trust's expense, an independent
evaluation service or services to ascertain the values of the Securities. The
independent evaluation service shall use any of the following methods, or a
combination thereof, which it deems appropriate: (a) on the basis of current bid
prices for comparable securities, (b) by appraising the value of the Securities
on the bid side of the market or by such other appraisal deemed appropriate by
the Trustee or (c) by any combination of the above, each as of the Evaluation
Time.
VOLUME AND OTHER DISCOUNTS. Units are available at a volume discount from
the Public Offering Price during the initial public offering based upon the
number of Units purchased. This volume discount will result in a reduction of
the sales charge applicable to such purchases. The approximate reduced sales
charge on the Public Offering Price applicable to such purchases are as follows:
NUMBER OF UNITS APPROXIMATE REDUCED SALES CHARGE
--------------- --------------------------------
25,000 but less than 50,000 3.245%
50,000 but less than 100,000 2.995%
100,000 or more 2.745%
For transactions of at least 100,000 Units or more, the Sponsors intends to
negotiate the applicable sales charge and such charge will be disclosed to any
such purchaser.
These discounts will apply to all purchases of Units by the same purchaser
during the initial public offering period. Units purchased by the same
purchasers in separate transactions during the initial public offering period
will be aggregated for purposes of determining if such purchaser is entitled to
a discount provided that such purchaser must own at least the required number of
Units at the time such determination is made. Units held in the name of the
spouse of the purchaser or in the name of a child of the purchaser under 21
years of age are deemed for the purposes hereof to be registered in the name of
the purchaser. The discount is also applicable to a trustee or other fiduciary
purchasing securities for a single trust estate or single fiduciary account.
The holders of units of prior series of Pinnacle Trusts (the "Prior
Series") may "rollover" into this Trust by exchanging units of the Prior Series
for Units of the Trust at their relative net asset values plus the applicable
sales charge. Unitholders maintaining an account at McLaughlin, Piven, Vogel
Securities, Inc. exercising this option, may purchase such Units subject to a
reduced sales charge of 2.995%. An exchange of a Prior Series for Units of the
Trust will generally be a taxable event. The rollover option described herein
will also be available to investors in the Prior Series who elect to purchase
Units of the Trust (see "Trust Termination").
Unitholders with a brokerage account at McLaughlin, Piven, Vogel
Securities, Inc. will receive one commission-free trade to buy equity securities
any time following the first settlement date of the Trust (see "Summary of
Essential Information" in Part A). Unitholders executing a commission-free trade
to buy equity securities will be charged a $14.50 processing fee.
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Employees (and their immediate families) of McLaughlin, Piven, Vogel
Securities, Inc. and Reich & Tang Distributors, Inc. (and their affiliates) and
of the special counsel to the Sponsors, may, pursuant to employee benefit
arrangements, purchase Units of the Trust without a Sales charge at a price
equal to the aggregate value of the underlying securities in the Trust, divided
by the number of Units outstanding. Such arrangements result in less selling
effort and selling expenses than sales to employee groups of other companies.
Resales or transfers of Units purchased under the employee benefit arrangements
may only be made through the Sponsors' secondary market, so long as it is being
maintained.
DISTRIBUTION OF UNITS. During the initial offering period and thereafter to
the extent additional Units continue to be offered by means of this Prospectus,
Units will be distributed by the Sponsors and dealers at the Public Offering
Price. The initial offering period is thirty days after each deposit of
Securities in the Trust and the Sponsors may extend the initial offering period
for successive thirty day periods. The Sponsors intend to qualify the Units for
sale in certain states.
SPONSORS' PROFITS. The Sponsors will receive a combined gross underwriting
commission equal to up to 3.495% of the Public Offering Price per 100 Units
(equivalent to 3.621% of the net amount invested in the Securities).
Additionally, the Sponsors may realize a profit on the deposit of the Securities
in the Trust representing the difference between the cost of the Securities to
the Sponsors and the cost of the Securities to the Trust (See "Portfolio"). The
Sponsors may realize profits or sustain losses with respect to Securities
deposited in the Trust which were acquired from underwriting syndicates of which
they were a member. All or a portion of the Securities deposited in the Trust
may have been acquired through the Sponsors.
During the initial offering period and thereafter to the extent additional
Units continue to be offered by means of this Prospectus, the Underwriter may
also realize profits or sustain losses as a result of fluctuations after the
Initial Date of Deposit in the aggregate value of the Securities and hence in
the Public Offering Price received by the Sponsors for the Units. Cash, if any,
made available to the Sponsors prior to settlement date for the purchase of
Units may be used in the Sponsors' business subject to the limitations of 17 CFR
240.15c3-3 under the Securities Exchange Act of 1934 and may be of benefit to
the Sponsors.
Both upon acquisition of Securities and termination of the Trust, the
Trustee may utilize the services of the Sponsors for the purchase or sale of all
or a portion of the Securities in the Trust. The Sponsors may receive brokerage
commissions from the Trust in connection with such purchases and sales in
accordance with applicable law.
In maintaining a market for the Units (see "Sponsors Repurchase") the
Sponsors will realize profits or sustain losses in the amount of any difference
between the price at which it buys Units and the price at which it resells such
Units.
RIGHTS OF UNITHOLDERS
BOOK-ENTRY UNITS. Ownership of Units of the Trust will not be evidenced by
certificates. All evidence of ownership of the Units will be recorded in
book-entry form at The Depository Trust Company ("DTC") through an investor's
McLaughlin, Piven, Vogel brokerage account. Units held through DTC will be
deposited by the Sponsors with DTC in the McLaughlin, Piven, Vogel DTC account
and registered in the nominee name CEDE & CO. Individual purchases of beneficial
ownership interest in the Trust will be made in book-entry form through DTC.
Ownership and transfer of Units will be evidenced and accomplished directly and
indirectly only by book-entries made by DTC and its participants. DTC will
record ownership and transfer of the Units among DTC participants and forward
all notices and credit all payments received in respect of the Units held by the
DTC participants. Beneficial owners of Units will receive written confirmation
of their purchases and sale from their McLaughlin, Piven, Vogel representative.
Transfer, and the requirements therefor, will be governed by the applicable
procedures of DTC and the Unitholder's agreement with the DTC participant in
whose name the Unitholder's Units are registered on the transfer records of DTC.
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DISTRIBUTIONS. Dividends received by the Trust are credited by the Trustee
to an Income Account for the Trust. Other receipts, including the proceeds of
Securities disposed of, are credited to a Principal Account for the Trust.
Distributions to each Unitholder from the Income Account are computed as of
the close of business on each Record Date for the following payment date and
consist of an amount substantially equal to such Unitholder's pro rata share of
the income credited to the Income Account, less expenses. Distributions from the
Principal Account of the Trust (other than amounts representing failed
contracts, as previously discussed) will be computed as of each Record Date, and
will be made to the Unitholders of the Trust on or shortly after the
Distribution Date. Proceeds representing principal received from the disposition
of any of the Securities between a Record Date and a Distribution Date which are
not used for redemptions of Units will be held in the Principal Account and not
distributed until the next Distribution Date. Persons who purchase Units between
a Record Date and a Distribution Date will receive their first distribution on
the Distribution Date after such purchase.
As of each Record Date, the Trustee will deduct from the Income Account of
the Trust, and, to the extent funds are not sufficient therein, from the
Principal Account of the Trust, amounts necessary to pay the expenses of the
Trust (as determined on the basis set forth under "Trust Expenses and Charges").
The Trustee also may withdraw from said accounts such amounts, if any, as it
deems necessary to establish a reserve for any applicable taxes or other
governmental charges that may be payable out of the Trust. Amounts so withdrawn
shall not be considered a part of such Trust's assets until such time as the
Trustee shall return all or any part of such amounts to the appropriate
accounts. In addition, the Trustee may withdraw from the Income and Principal
Accounts such amounts as may be necessary to cover redemptions of Units by the
Trustee.
The dividend distribution per 100 Units, if any, cannot be anticipated and
may be paid as Securities are redeemed, exchanged or sold, or as expenses of the
Trust fluctuate. No distribution need be made from the Income Account or the
Principal Account unless the balance therein is an amount sufficient to
distribute $1.00 per 100 Units.
RECORDS. The Trustee shall furnish Unitholders in connection with each
distribution a statement of the amount of dividends and interest, if any, and
the amount of other receipts, if any, which are being distributed, expressed in
each case as a dollar amount per 100 Units. Within a reasonable time after the
end of each calendar year, the Trustee will furnish to each person who at any
time during the calendar year was a Unitholder of record, a statement showing
(a) as to the Income Account: dividends, interest and other cash amounts
received, amounts paid for purchases of Substitute Securities and redemptions of
Units, if any, deductions for applicable taxes and fees and expenses of the
Trust, and the balance remaining after such distributions and deductions,
expressed both as a total dollar amount and as a dollar amount representing the
pro rata share of each 100 Units outstanding on the last business day of such
calendar year; (b) as to the Principal Account: the dates of disposition of any
Securities and the net proceeds received therefrom, deductions for payments of
applicable taxes and fees and expenses of the Trust, amounts paid for purchases
of Substitute Securities and redemptions of Units, if any, and the balance
remaining after such distributions and deductions, expressed both as a total
dollar amount and as a dollar amount representing the pro rata share of each 100
Units outstanding on the last business day of such calendar year; (c) a list of
the Securities held, a list of Securities purchased, sold or otherwise disposed
of during the calendar year and the number of Units outstanding on the last
business day of such calendar year; (d) the Redemption Price per 100 Units based
upon the last computation thereof made during such calendar year; and (e)
amounts actually distributed to Unitholders during such calendar year from the
Income and Principal Accounts, separately stated, of the Trust, expressed both
as total dollar amounts and as dollar amounts representing the pro rata share of
each 100 Units outstanding on the last business day of such calendar year.
The Trustee shall keep available for inspection by Unitholders at all
reasonable times during usual business hours, books of record and account of its
transactions as Trustee, including records of the names and addresses of
Unitholders, a current list of Securities in the portfolio and a copy of the
Trust Agreement.
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TAX STATUS
The following is a general discussion of certain of the Federal income tax
consequences of the purchase, ownership and disposition of the Units. The
summary is limited to investors who hold the Units as "capital assets"
(generally, property held for investment) within the meaning of Section 1221 of
the Internal Revenue Code of 1986, as amended (the "Code"). Unitholders should
consult their tax advisers in determining the Federal, state, local and any
other tax consequences of the purchase, ownership and disposition of Units.
In rendering the opinion set forth below, Battle Fowler LLP has examined
the Agreement, the final form of Prospectus dated the date hereof (the
"Prospectus") and the documents referred to therein, among others, and has
relied on the validity of said documents and the accuracy and completeness of
the facts set forth therein. In the Opinion of Battle Fowler LLP, special
counsel for the Sponsors, under existing law:
1. The Trust will be classified as a grantor trust for Federal income
tax purposes and not as a partnership or association taxable as a
corporation. Classification of the Trust as a grantor trust will cause the
Trust not to be subject to Federal income tax, and will cause the
Unitholders of the Trust to be treated for Federal income tax purposes as
the owners of a pro rata portion of the assets of the Trust. All income
received by the Trust will be treated as income of the Unitholders in the
manner set forth below.
2. The Trust is not subject to the New York Franchise Tax on Business
Corporations or the New York City General Corporation Tax. For a Unitholder
who is a New York resident, however, a pro rata portion of all or part of
the income of the Trust will be treated as income of the Unitholder under
the income tax laws of the State and City of New York. Similar treatment
may apply in other states.
3. During the 90-day period subsequent to the initial issuance date,
the Sponsors reserve the right to deposit Additional Securities that are
substantially similar to those deposited in initially establishing the
Trust. This retained right falls within the guidelines promulgated by the
Internal Revenue Service ("IRS") and should not affect the taxable status
of the Trust.
A taxable event will generally occur with respect to each Unitholder when
the Trust disposes of a Security (whether by sale, exchange or redemption) or
upon the sale, exchange or redemption of Units by such Unitholder. The price a
Unitholder pays for its Units, including sales charges, is allocated among its
pro rata portion of each Security held by the Trust (in proportion to the fair
market values thereof on the date the Unitholder purchases its Units) in order
to determine its initial cost for its pro rata portion of each Security held by
the Trust.
For Federal income tax purposes, a Unitholder's pro rata portion of
dividends paid with respect to a Security held by a Trust is taxable as ordinary
income to the extent of such corporation's current or accumulated "earnings and
profits" as defined by Section 316 of the Code. A Unitholder's pro rata portion
of dividends paid on such Security that exceed such current and accumulated
earnings and profits will first reduce a Unitholder's tax basis in such
Security, and to the extent that such dividends exceed a Unitholder's tax basis
in such Security will generally be treated as capital gain.
A Unitholder's portion of gain, if any, upon the sale, exchange or
redemption of Units or the disposition of Securities held by the Trust will
generally be considered a capital gain and will be long-term if the Unitholder
has held its Units for more than one year. Capital gains realized by
corporations are generally taxed at the same rates applicable to ordinary
income, although non-corporate taxpayers who realize long-term capital gains
with respect to Units held for more than one year may be subject to a reduced
tax rate of 20% on such gains, rather than the "regular" maximum tax rate of
39.6%. Tax rates may increase prior to the time when Unitholders may realize
gains from the sale, exchange or redemption of the Units or Securities.
A Unitholder's portion of loss, if any, upon the sale or redemption of
Units or the disposition of Securities held by the Trust will generally be
considered a capital loss and will be long-term if the Unitholder has held its
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Units for more than one year. Capital losses are deductible to the extent of
capital gains; in addition, up to $3,000 of capital losses ($1,500 for married
individuals filing separately) recognized by non-corporate Unitholders may be
deducted against ordinary income.
Under Section 67 of the Code and the accompanying Regulations, a Unitholder
who itemizes its deductions may also deduct its pro rata share of the fees and
expenses of the Trust, but only to the extent that such amounts, together with
the Unitholder's other miscellaneous deductions, exceed 2% of its adjusted gross
income. The deduction of fees and expenses may also be limited by Section 68 of
the Code, which reduces the amount of itemized deductions that are allowed for
individuals with incomes in excess of certain thresholds.
After the end of each calendar year, the Trustee will furnish to each
Unitholder an annual statement containing information relating to the dividends
received by the Trust on the Securities, the gross proceeds received by the
Trust from the disposition of any Security, and the fees and expenses paid by
the Trust. The Trustee will also furnish annual information returns to each
Unitholder and to the Internal Revenue Service.
A corporation that owns Units will generally be entitled to a 70% dividends
received deduction with respect to its pro rata portion of dividends taxable as
ordinary income received by the Trust from a domestic corporation under Section
243 of the Code or from a qualifying foreign corporation under Section 245 of
the Code in the same manner as if such corporation directly owned the Securities
paying such dividends. However, a corporation owning Units should be aware that
Sections 246 and 246A of the Code impose additional limitations on the
eligibility of dividends for the 70% dividends received deduction. These
limitations include a requirement that stock (and therefore Units) must
generally be held at least 46 days (as determined under Section 246(c) of the
Code) during the 90-day period beginning on the date that is 45 days before the
date on which the stock becomes "ex-dividend." Moreover, the allowable
percentage of the deduction will be reduced from 70% if a corporate Unitholder
owns certain stock (or Units) the financing of which is directly attributable to
indebtedness incurred by such corporation.
As discussed in the section "Termination", each Unitholder may have three
options in receiving his termination distributions, namely (i) to receive its
pro rata share of the underlying Securities in kind, (ii) to receive cash upon
liquidation of its pro rata share of the underlying Securities, or (iii) to
invest the amount of cash it would receive upon the liquidation of its pro rata
share of the underlying Securities in units of a future series of the Trust (if
one is offered). There are special tax consequences should a Unitholder choose
option (i), the exchange of the Unitholder's Units for a pro rata portion of
each of the Securities held by the Trust plus cash. Treasury Regulations provide
that gain or loss is recognized when there is a conversion of property into
property that is materially different in kind or extent. In this instance, the
Unitholder may be considered the owner of an undivided interest in all of the
Trust's assets. By accepting the proportionate number of Securities of the
Trust, in partial exchange for its Units, the Unitholder should be treated as
merely exchanging its undivided pro rata ownership of Securities held by the
Trust into sole ownership of a proportionate share of Securities. As such, there
should be no material difference in the Unitholder's ownership, and therefore
the transaction should be tax free to the extent the Securities are received.
Alternatively, the transaction may be treated as an exchange that would qualify
for nonrecognition treatment to the extent the Unitholder is exchanging its
undivided interest in all of the Trust's Securities for its proportionate number
of shares of the underlying Securities. In either instance, the transaction
should result in a non-taxable event for the Unitholder to the extent Securities
are received. However, there is no specific authority addressing the income tax
consequences of an in-kind distribution from a grantor trust.
Entities that generally qualify for an exemption from Federal income tax,
such as many pension trusts, are nevertheless taxed under Section 511 of the
Code on "unrelated business taxable income." Unrelated business taxable income
is income from a trade or business regularly carried on by the tax-exempt entity
that is unrelated to the entity's exempt purpose. Unrelated business taxable
income generally does not include dividend or interest income or gain from the
sale of investment property, unless such income is derived from property that is
debt-financed or is dealer property. A tax-exempt entity's dividend income from
the Trust and gain from the sale of
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Units in the Trust or the Trust's sale of Securities is not expected to
constitute unrelated business taxable income to such tax-exempt entity unless
the acquisition of the Unit itself is debt-financed or constitutes dealer
property in the hands of the tax-exempt entity.
Prospective tax-exempt investors are urged to consult their own tax
advisers concerning the Federal, state, local and any other tax consequences of
the purchase, ownership and disposition of Units prior to investing in the
trust.
RETIREMENT PLANS. This Trust may be well suited for purchase by Individual
Retirement Accounts ("IRAs"), Keogh plans, pension funds and other qualified
retirement plans. Generally, capital gains and income received in each of the
foregoing plans are exempt from Federal taxation. Except with respect to certain
IRAs known as Roth IRAs, distributions from such plans are generally treated as
ordinary income but may, in some cases, be eligible for special 5 or 10 year
averaging or tax-deferred rollover treatment. Five year averaging will not apply
to distributions after December 31, 1999. Ten year averaging has been preserved
in very limited circumstances. Holders of Units in IRAs, Keogh plans and other
tax-deferred retirement plans should consult their plan custodian as to the
appropriate disposition of distributions. Investors considering participation in
any such plan should review specific tax laws related thereto and should consult
their attorneys or tax advisors with respect to the establishment and
maintenance of any such plan. Such plans are offered by McLauglin, Piven, Vogel
Securities, Inc. Fees and charges with respect to such plans may vary.
Before investing in the Trust, the trustee or investment manager of an
employee benefit plan (e.g., a pension or profit sharing retirement plan) should
consider among other things (a) whether the investment is prudent under the
Employee Retirement Income Security Act of 1974 ("ERISA"), taking into account
the needs of the plan and all of the facts and circumstances of the investment
in the Trust; (b) whether the investment satisfies the diversification
requirement of Section 404(a)(1)(C) of ERISA; and (c) whether the assets of the
Trust are deemed "plan assets" under ERISA and the Department of Labor regarding
the definition of "plan assets."
LIQUIDITY
SPONSORS REPURCHASE. Unitholders who wish to dispose of their Units should
inquire of the Sponsors as to current market prices prior to making a tender for
redemption. The aggregate value of the Securities will be determined by the
Trustee on a daily basis and computed on the basis set forth under "Trustee
Redemption." The Sponsors do not guarantee the enforceability, marketability or
price of any Securities in the Portfolio or of the Units. The Sponsors may
discontinue the repurchase of Units if the supply of Units exceeds demand, or
for other business reasons. The date of repurchase is deemed to be the date on
which redemption requests are received in proper form, by McLaughlin, Piven,
Vogel Securities, Inc., 30 Wall Street, New York, New York 10005 or Reich & Tang
Distributors Inc., 600 Fifth Avenue, New York, New York 10020. Redemption
requests received after 4 P.M., New York Time, will be deemed to have been
repurchased on the next business day. In the event a market is not maintained
for the Units, a Unitholder may be able to dispose of Units only by tendering
them to the Trustee for redemption.
Units purchased by the Sponsors in the secondary market may be reoffered
for sale by the Sponsors at a price based on the aggregate value of the
Securities in the Trust plus a 3.495% sales charge (or 3.621% of the net amount
invested) plus a pro rata portion of amounts, if any, in the Income Account. Any
Units that are purchased by the Sponsors in the secondary market also may be
redeemed by the Sponsors if they determine such redemption to be in its best
interest.
The Sponsors may, under certain circumstances, as a service to Unitholders,
elect to purchase any Units tendered to the Trustee for redemption (see "Trustee
Redemption"). Factors which the Sponsors will consider in making a determination
will include the number of Units of all Trusts which it has in inventory, its
estimate of the salability and the time required to sell such Units and general
market conditions. For example, if in order to meet redemptions of Units the
Trustee must dispose of Securities, and if such disposition cannot be made by
the
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redemption date (three calendar days after tender), the Sponsors may elect to
purchase such Units. Such purchase shall be made by payment to the Unitholder
not later than the close of business on the redemption date of an amount equal
to the Redemption Price on the date of tender.
TRUSTEE REDEMPTION. At any time prior to the Evaluation Time on the
business day preceding the commencement of the Liquidation Period (approximately
fifteen months from the Date of Deposit), Units may also be tendered to the
Trustee for redemption upon payment of any relevant tax by contacting the
Sponsors holding such Units in street name. In certain instances, additional
documents may be required, such as trust instrument, certificate of corporate
authority, certificate of death or appointment as executor, administrator or
guardian. At the present time there are no specific taxes related to the
redemption of Units. No redemption fee will be charged by the Sponsors or the
Trustee. Units redeemed by the Trustee will be canceled.
Within three business days following a tender for redemption, the
Unitholder will be entitled to receive an amount for each Unit tendered equal to
the Redemption Price per Unit computed as of the Evaluation Time set forth under
"Summary of Essential Information" in Part A on the date of tender. The "date of
tender" is deemed to be the date on which Units are received by the Trustee,
except that with respect to Units received after the close of trading on the New
York Stock Exchange (4:00 p.m. Eastern Time), the date of tender is the next day
on which such Exchange is open for trading, and such Units will be deemed to
have been tendered to the Trustee on such day for redemption at the Redemption
Price computed on that day.
A Unitholder will receive his redemption proceeds in cash and amounts paid
on redemption shall be withdrawn from the Income Account, or, if the balance
therein is insufficient, from the Principal Account. All other amounts paid on
redemption shall be withdrawn from the Principal Account. The Trustee is
empowered to sell Securities in order to make funds available for redemptions.
Such sales, if required, could result in a sale of Securities by the Trustee at
a loss. To the extent Securities are sold, the size and diversity of the Trust
will be reduced. The Securities to be sold will be selected by the Trustee in
order to maintain, to the extent practicable, the proportionate relationship
among the number of shares of each Stock. Provision is made in the Indenture
under which the Sponsors may, but need not, specify minimum amounts in which
blocks of Securities are to be sold in order to obtain the best price for the
Trust. While these minimum amounts may vary from time to time in accordance with
market conditions, the Sponsors believe that the minimum amounts which would be
specified would be approximately 100 shares for readily marketable Securities.
The Redemption Price per Unit is the pro rata share of the Unit in the
Trust determined by the Trustee on the basis of (i) the cash on hand in the
Trust or moneys in the process of being collected, (ii) the value of the
Securities in the Trust as determined by the Trustee, less (a) amounts
representing taxes or other governmental charges payable out of the Trust, (b)
the accrued expenses of the Trust and (c) cash allocated for the distribution to
Unitholders of record as of the business day prior to the evaluation being made.
As of the close of the initial public offering period the Redemption Price per
100 Units will be reduced to reflect the payment of the per 100 Unit
organization costs to the Sponsors. The Trustee may determine the value of the
Securities in the Trust in the following manner: because the Securities are
listed on a national securities exchange, this evaluation is based on the
closing sale prices on that exchange. Unless the Trustee deems these prices
inappropriate as a basis for evaluation or if there is no such closing purchase
price, then the Trustee may utilize, at the Trust's expense, an independent
evaluation service or services to ascertain the values of the Securities. The
independent evaluation service shall use any of the following methods, or a
combination thereof, which it deems appropriate: (a) on the basis of current bid
prices for comparable securities, (b) by appraising the value of the Securities
on the bid side of the market or (c) by any combination of the above.
Any Unitholder tendering 2,500 Units or more of the Trust for redemption
may request by written notice submitted at the time of tender from the Trustee
in lieu of a cash redemption a distribution of shares of Securities and cash in
an amount and value equal to the Redemption Price Per Unit as determined as of
the evaluation next following tender. To the extent possible, in kind
distributions ("In Kind Distributions") shall be made by the Trustee through the
distribution of each of the Securities in book-entry form to the account of the
Unitholder's
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broker-dealer at DTC. An In Kind Distribution will be reduced by customary
transfer and registration charges. The tendering Unitholder will receive his pro
rata number of whole shares of each of the Securities comprising the Trust
portfolio and cash from the Principal Accounts equal to the balance of the
Redemption Price to which the tendering Unitholder is entitled. If funds in the
Principal Account are insufficient to cover the required cash distribution to
the tendering Unitholder, the Trustee may sell Securities in the manner
described above.
The Trustee is irrevocably authorized in its discretion, if the Sponsors do
not elect to purchase a Unit tendered for redemption or if the Sponsors tender a
Unit for redemption, in lieu of redeeming such Unit, to sell such Unit in the
over-the-counter market for the account of the tendering Unitholder at prices
which will return to the Unitholder an amount in cash, net after deducting
brokerage commissions, transfer taxes and other charges, equal to or in excess
of the Redemption Price for such Unit. The Trustee will pay the net proceeds of
any such sale to the Unitholder on the day he would otherwise be entitled to
receive payment of the Redemption Price.
The Trustee reserves the right to suspend the right of redemption and to
postpone the date of payment of the Redemption Price per Unit for any period
during which the New York Stock Exchange is closed, other than customary weekend
and holiday closings, or trading on that Exchange is restricted or during which
(as determined by the Securities and Exchange Commission) an emergency exists as
a result of which disposal or evaluation of the Bonds is not reasonably
practicable, or for such other periods as the Securities and Exchange Commission
may by order permit. The Trustee and the Sponsors are not liable to any person
or in any way for any loss or damage which may result from any such suspension
or postponement.
A Unitholder who wishes to dispose of his Units should inquire of his
broker in order to determine if there is a current secondary market price in
excess of the Redemption Price.
AUTOMATIC REDEMPTION. In the event a transfer of Units from a Unitholder's
McLaughlin Piven Vogel brokerage account results in the automatic redemption of
those Units, Unitholders will receive an amount equal to the Redemption Price
per Unit computed as of the Evaluation Time set forth under "Summary of
Essential Information: in Part A on the date of transfer. Automatic redemption
proceeds will be paid within three business days following the tender of a
notification of transfer.
TRUST ADMINISTRATION
PORTFOLIO SUPERVISION. The Trust is a unit investment trust and is not a
managed fund. Traditional methods of investment management for a managed fund
typically involve frequent changes in a portfolio of securities on the basis of
economic, financial and market analyses. The Portfolio of the Trust, however,
will not be managed and therefore the adverse financial condition of an issuer
will not necessarily require the sale of its Securities from the portfolio.
Although the portfolio of the Trust is regularly reviewed, because of the
formula employed in selecting the Top Ten, Focus Five and Penultimate Pick, it
is unlikely that the Trust will sell any of the Securities other than to satisfy
redemptions of Units, or to cease buying Additional Securities in connection
with the issuance of additional Units. However, the Trust Agreement provides
that the Sponsors may direct the disposition of Securities upon the occurrence
of certain events including: (1) default in payment of amounts due on any of the
Securities; (2) institution of certain legal proceedings; (3) default under
certain documents materially and adversely affecting future declaration or
payment of amounts due or expected; (4) determination of the Sponsors that the
tax treatment of the Trust as a grantor trust would otherwise be jeopardized; or
(5) decline in price as a direct result of serious adverse credit factors
affecting the issuer of a Security which, in the opinion of the Sponsors, would
make the retention of the Security detrimental to the Trust or the Unitholders.
Furthermore, the Trust will likely continue to hold a Security and purchase
additional shares notwithstanding its ceasing to be included among the Top Ten,
Focus Five and Penultimate Pick, or even its deletion from the DJIA.
In addition, the Trust Agreement provides as follows:
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(a) If a default in the payment of amounts due on any Security occurs
pursuant to provision (1) above and if the Sponsors fail to give immediate
instructions to sell or hold that Security, the Trustee, within 30 days of
that failure by the Sponsors, shall sell the Security.
(b) It is the responsibility of the Sponsors to instruct the Trustee
to reject any offer made by an issuer of any of the Securities to issue new
securities in exchange and substitution for any Security pursuant to a
recapitalization or reorganization, if any exchange or substitution is
effected notwithstanding such rejection, any securities or other property
received shall be promptly sold unless the Sponsors direct that it be
retained.
(c) Any property received by the Trustee after the Initial Date of
Deposit as a distribution on any of the Securities in a form other than
cash or additional shares of the Securities, which shall be retained, or
shall be promptly sold unless the Sponsors direct that it be retained by
the Trustee. The proceeds of any disposition shall be credited to the
Income or Principal Account of the Trust.
(d) The Sponsors are authorized to increase the size and number of
Units of the Trust by the deposit of Additional Securities, contracts to
purchase Additional Securities or cash or a letter of credit with
instructions to purchase Additional Securities in exchange for the
corresponding number of additional Units from time to time subsequent to
the Initial Date of Deposit, provided that the original proportionate
relationship among the number of shares of each Security established on the
Initial Date of Deposit is maintained to the extent practicable. The
Sponsors may specify the minimum numbers in which Additional Securities
will be deposited or purchased. If a deposit is not sufficient to acquire
minimum amounts of each Security, Additional Securities may be acquired in
the order of the Security most under-represented immediately before the
deposit when compared to the original proportionate relationship. If
Securities of an issue originally deposited are unavailable at the time of
the subsequent deposit, the Sponsors may (i) deposit cash or a letter of
credit with instructions to purchase the Security when it becomes
available, or (ii) deposit (or instruct the Trustee to purchase) either
Securities of one or more other issues originally deposited or a Substitute
Security.
TRUST AGREEMENT AND AMENDMENT. The Trust Agreement may be amended by the
Trustee and the Sponsors without the consent of any of the Unitholders: (1) to
cure any ambiguity or to correct or supplement any provision which may be
defective or inconsistent; (2) to change any provision thereof as may be
required by the Securities and Exchange Commission or any successor governmental
agency; or (3) to make such other provisions in regard to matters arising
thereunder as shall not adversely affect the interests of the Unitholders.
The Trust Agreement may also be amended in any respect, or performance of
any of the provisions thereof may be waived, with the consent of investors
holding 66 2/3% of the Units then outstanding for the purpose of modifying the
rights of Unitholders; provided that no such amendment or waiver shall reduce
any Unitholder's interest in the Trust without his consent or reduce the
percentage of Units required to consent to any such amendment or waiver without
the consent of the holders of all Units. The Trust Agreement may not be amended,
without the consent of the holders of all Units in the Trust then outstanding,
to increase the number of Units issuable or to permit the acquisition of any
Securities in addition to or in substitution for those initially deposited in
such Trust, except in accordance with the provisions of the Trust Agreement. The
Trustee shall promptly notify Unitholders, in writing, of the substance of any
such amendment.
TRUST TERMINATION. The Trust Agreement provides that the Trust shall
terminate upon the maturity, redemption or other disposition, as the case may
be, of the last of the Securities held in such Trust but in no event is it to
continue beyond the Mandatory Termination Date. If the value of the Trust shall
be less than the minimum amount set forth under "Summary of Essential
Information" in Part A, the Trustee may, in its discretion, and shall, when so
directed by the Sponsors, terminate the Trust. The Trust may also be terminated
at any time with the consent of the investors holding 100% of the Units then
outstanding. The Trustee may utilize the services of the Sponsors for the sale
of all or a portion of the Securities in the Trust, and in so doing, the
Sponsors will determine the manner, timing and execution of the sales of the
underlying Securities. Any brokerage commissions
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received by the Sponsors from the Trust in connection with such sales will be in
accordance with applicable law. In the event of termination, written notice
thereof will be sent by the Trustee to all Unitholders. Such notice will provide
Unitholders with the following three options by which to receive their pro rata
share of the net asset value of the Trust and requires their election of one of
the three options by notifying the Trustee by returning a properly completed
election request (to be supplied to Unitholders of at least 2,500 Units prior to
the commencement of the Liquidation Period):
1. A Unitholder who owns at least 2,500 units and whose interest in
the Trust would entitle it to receive at least one share of each underlying
Security will have its Units redeemed on the business day preceding the
commencement of the Liquidation Period by distribution of the Unitholder's
pro rata share of the net asset value of the Trust on such date distributed
in kind to the extent represented by whole shares of underlying Securities
and the balance in cash within three business days next following the
commencement of the Liquidation Period. Unitholders subsequently selling
such distributed Securities will incur brokerage costs when disposing of
such Securities. Unitholders should consult their own tax adviser in this
regard;
2. to receive in cash such Unitholder's pro rata share of the net
asset value of the Trust derived from the sale by the Sponsors as the
agents of the Trustee of the underlying Securities during the Liquidation
Period. The Unitholder's pro rata share of its net assets of the Trust will
be distributed to such Unitholder within three days of the settlement of
the trade of the last Security to be sold; and/or
3. to invest such Unitholder's pro rata share of the net assets of the
Trust derived from the sale by the Sponsors as agents of the Trustee of the
underlying Securities during the Liquidation Period, in units of a
subsequent series of The Pinnacle Trusts (the "New Series") provided one is
offered. It is expected that a special redemption and liquidation will be
made of all Units of this Trust held by a Unitholder (a "Rollover
Unitholder") who affirmatively notifies the Trustee on or prior to the
Rollover Notification Date set forth in the "Summary of Essential
Information" for the Trust in Part A. The Units of a New Series will be
purchased by the Unitholder within three business days of the settlement of
the trade for the last Security to be sold. Such purchaser will be entitled
to a reduced sales charge upon the purchase of units of the New Series. It
is expected that the terms of the New Series will be substantially the same
as the terms of the Trust described in this Prospectus, and that similar
options with respect to the termination of such New Series will be
available. The availability of this option does not constitute a
solicitation of an offer to purchase Units of a New Series or any other
security. A Unitholder's election to participate in this option will be
treated as an indication of interest only. At any time prior to the
purchase by the Unitholder of units of a New Series such Unitholder may
change his investment strategy and receive, in cash, the proceeds of the
sale of the Securities. An election of this option will not prevent the
Unitholder from recognizing taxable gain or loss (except in the case of a
loss, if and to the extent the New Series is treated as substantially
identical to the Trust) as a result of the liquidation, even though no cash
will be distributed to pay any taxes. Unitholders should consult their own
tax advisers in this regard.
Unitholders who do not make any election will be deemed to have elected to
receive the termination distribution in cash (option number 2).
The Sponsors have agreed that to the extent they effect the sales of
underlying securities for the Trustee in the case of the second and third
options during the Liquidation Period free of brokerage commissions. The
Sponsors, on behalf of the Trustee, will sell, unless prevented by unusual and
unforeseen circumstances, such as, among other reasons, a suspension in trading
of a Security, the close of a stock exchange, outbreak of hostilities and
collapse of the economy, by the last business day of the Liquidation Period. The
Redemption Price Per 100 Units upon the settlement of the last sale of
Securities during the Liquidation Period will be distributed to Unitholders in
redemption of such Unitholders' interest in the Trust.
Depending on the amount of proceeds to be invested in Units of the New
Series and the amount of other orders for Units in the New Series, the Sponsors
may purchase a large amount of securities for the New Series
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in a short period of time. The Sponsors' buying of securities may tend to raise
the market prices of these securities. The actual market impact of the Sponsors'
purchases, however, is currently unpredictable because the actual amount of
securities to be purchased and the supply and price of those securities is
unknown. A similar problem may occur in connection with the sale of Securities
during the Liquidation Period; depending on the number of sales required, the
prices of and demand for Securities, such sales may tend to depress the market
prices and thus reduce the proceeds of such sales. The Sponsors believe that the
sale of underlying Securities over the Liquidation Period described above is in
the best interest of a Unitholder and may mitigate the negative market price
consequences stemming from the trading of large amounts of Securities. The
Securities may be sold in fewer than five days if, in the Sponsor's judgment,
such sales are in the best interest of Unitholders. The Sponsors, in
implementing such sales of securities on behalf of the Trustee, will seek to
maximize the sales proceeds and will act in the best interests of the
Unitholders. There can be no assurance, however, that any adverse price
consequences of heavy trading will be mitigated.
Section 17(a) of the Investment Company Act of 1940 generally prohibits
principal transactions between registered investment companies and their
affiliates. Pursuant to an exemptive order issued by the SEC, each terminating
Pinnacle Trust can sell Duplicated Securities directly to a New Series. The
exemption will enable the Trust to eliminate commission costs on these
transactions. The price for those securities transferred will be the closing
sale price on the sale date on the national securities exchange where the
securities are principally traded, as certified and confirmed by the Trustee.
The Sponsors may for any reason, in their sole discretion, decide not to
sponsor any subsequent series of the Trust, without penalty or incurring
liability to any Unitholder. If the Sponsors so decide, the Sponsors will notify
the Trustee of that decision, and the Trustee will notify the Unitholders. All
Unitholders will then elect either option 1, if eligible, or option 2.
By electing to "rollover" into the New Series, the Unitholder indicates his
interest in having his terminating distribution from the Trust invested only in
the New Series created following termination of the Trust; the Sponsors expect,
however, that a similar rollover program will be offered with respect to all
subsequent series of the Trust, thus giving Unitholders an opportunity to elect
to "rollover" their terminating distributions into a New Series. The
availability of the rollover privilege does not constitute a solicitation of
offers to purchase units of a New Series or any other security. A Unitholder's
election to participate in the rollover program will be treated as an indication
of interest only. The Sponsors intend to coordinate the date of deposit of a
future series so that the terminating trust will terminate contemporaneously
with the creation of a New Series. The Sponsors reserve the right to modify,
suspend or terminate the rollover privilege at any time.
THE SPONSORS. McLaughlin, Piven, Vogel Securities, Inc. ("MPV") is a New
York corporation engaged in the underwriting and securities brokerage business,
and in the investment advisory business. It is a member of the National
Association of Securities Dealers, Inc. MPV maintains its principal business
offices at 30 Wall Street, New York, New York 10005. The majority shareholder of
MPV is James J. McLaughlin. Mr. McLaughlin may be deemed to be a controlling
person of MPV.
Reich & Tang Distributors, Inc., a Delaware corporation, is engaged in the
brokerage business and is a member of the National Association of Securities
Dealers, Inc. Reich & Tang is also a registered investment advisor. Reich & Tang
maintains its principal business offices at 600 Fifth Avenue, New York, New York
10020. The sole shareholder of Reich & Tang, Reich & Tang Asset Management, Inc.
("RTAM Inc.") is wholly owned by NEIC Holdings, Inc. which, effective December
29, 1997, was wholly owned by NEIC Operating Partnership, L.P. ("NEICOP").
Subsequently, on March 31, 1998, NEICOP changed its name to Nvest Companies,
L.P. ("Nvest"). The general partners of Nvest are Nvest Corporation and Nvest
L.P. As of March 31, 1998, Metropolitan Life Insurance Company ("MetLife") owned
approximately 47% of the partnership interests of Nvest. Nvest, with a principal
place of business at 399 Boylston Street, Boston, MA 02116, is a holding company
of firms engaged in the securities and investment advisory business. These
affiliates in the aggregate are investment advisors or managers to over 80
registered investment companies. Reich & Tang is
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Sponsor (and Co-Sponsor, as the case may be) for numerous series of unit
investment trusts, including New York Municipal Trust, Series 1 (and Subsequent
Series), Municipal Securities Trust, Series 1 (and Subsequent Series), 1st
Discount Series (and Subsequent Series), Multi-State Series 1 (and Subsequent
Series), Mortgage Securities Trust, Series 1 (and Subsequent Series), Insured
Municipal Securities Trust, Series 1 (and Subsequent Series), 5th Discount
Series (and Subsequent Series), Equity Securities Trust, Series 1, Signature
Series, Gabelli Communications Income Trust (and Subsequent Series) and Schwab
Trusts.
MetLife is a mutual life insurance company with assets of $298 billion at
December 31, 1996. It is the second largest life insurance company in the United
States in terms of total assets. MetLife provides a wide range of insurance and
investment products and services to individuals and groups and is the leader
among United States life insurance companies in terms of total life insurance in
force, which totaled $1.6 trillion at December 31, 1996 for MetLife and its
insurance affiliates. MetLife and its affiliates provide insurance or other
financial services to approximately 36 million people worldwide.
The information included herein is only for the purpose of informing
investors as to the financial responsibility of the Sponsors and their ability
to carry out its contractual obligations. The Sponsors will be under no
liability to Unitholders for taking any action, or refraining from taking any
action, in good faith pursuant to the Trust Agreement, or for errors in judgment
except in cases of its own willful misfeasance, bad faith, gross negligence or
reckless disregard of its obligations and duties.
The Sponsors may each resign at any time by delivering to the Trustee an
instrument of resignation executed by the Sponsors. If at any time either of the
Sponsors shall resign or fail to perform any of their duties under the Trust
Agreement or becomes incapable of acting or becomes bankrupt or their affairs
are taken over by public authorities, then the Trustee may either (a) appoint a
successor sponsor; (b) terminate the Trust Agreement and liquidate the Trust; or
(c) continue to act as Trustee without terminating the Trust Agreement. Any
successor sponsor appointed by the Trustee shall be satisfactory to the Trustee
and, at the time of appointment, shall have a net worth of at least $1,000,000.
THE TRUSTEE. The Trustee is The Chase Manhattan Bank with its principal
executive office located at 270 Park Avenue, New York, New York 10017 (800)
428-8890 and its unit investment trust office at Four New York Plaza, New York,
New York 10004. The Trustee is subject to supervision by the Superintendent of
Banks of the State of New York, the Federal Deposit Insurance Corporation and
the Board of Governors of the Federal Reserve System.
The Trustee shall not be liable or responsible in any way for taking any
action, or for refraining from taking any action, in good faith pursuant to the
Trust Agreement, or for errors in judgment; or for any disposition of any
moneys, Securities or Units in accordance with the Trust Agreement, except in
cases of its own willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations and duties; provided, however, that the Trustee
shall not in any event be liable or responsible for any evaluation made by any
independent evaluation service employed by it. In addition, the Trustee shall
not be liable for any taxes or other governmental charges imposed upon or in
respect of the Securities or the Trust which it may be required to pay under
current or future law of the United States or any other taxing authority having
jurisdiction. The Trustee shall not be liable for depreciation or loss incurred
by reason of the sale by the Trustee of any of the Securities pursuant to the
Trust Agreement.
For further information relating to the responsibilities of the Trustee
under the Trust Agreement, reference is made to the material set forth under
"Rights of Unitholders."
The Trustee may resign by executing an instrument in writing and filing the
same with the Sponsors, and mailing a copy of a notice of resignation to all
Unitholders. In such an event the Sponsors are obligated to appoint a successor
Trustee as soon as possible. In addition, if the Trustee becomes incapable of
acting or becomes bankrupt or its affairs are taken over by public authorities,
the Sponsors may remove the Trustee and appoint a
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successor as provided in the Trust Agreement. Notice of such removal and
appointment shall be mailed to each Unitholder by the Sponsors. If upon
resignation of the Trustee no successor has been appointed and has accepted the
appointment within thirty days after notification, the retiring Trustee may
apply to a court of competent jurisdiction for the appointment of a successor.
The resignation or removal of the Trustee becomes effective only when the
successor Trustee accepts its appointment as such or when a court of competent
jurisdiction appoints a successor Trustee. Upon execution of a written
acceptance of such appointment by such successor Trustee, all the rights,
powers, duties and obligations of the original Trustee shall vest in the
successor.
Any corporation into which the Trustee may be merged or with which it may
be consolidated, or any corporation resulting from any merger or consolidation
to which the Trustee shall be a party, shall be the successor Trustee. The
Trustee must always be a banking corporation organized under the laws of the
United States or any State and have at all times an aggregate capital, surplus
and undivided profits of not less than $2,500,000.
EVALUATION OF THE TRUST. The value of the Securities in the Trust portfolio
is determined in good faith by the Trustee on the basis set forth under "Public
Offering--Offering Price." The Sponsors and the Unitholders may rely on any
evaluation furnished by the Trustee and shall have no responsibility for the
accuracy thereof. Determinations by the Trustee under the Trust Agreement shall
be made in good faith upon the basis of the best information available to it,
provided, however, that the Trustee shall be under no liability to the Sponsors
or Unitholders for errors in judgment, except in cases of its own willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations and duties. The Trustee, the Sponsors and the Unitholders may rely
on any evaluation furnished to the Trustee by an independent evaluation service
and shall have no responsibility for the accuracy thereof.
TRUST EXPENSES AND CHARGES
Investors will reimburse the Sponsors for all or a portion of the estimated
costs incurred in organizing and offering the Trust (collectively, the
"organization costs")--including the cost of the initial preparation and
execution of the Trust Agreement, registration of the Trust and the Units under
the Investment Company Act of 1940 and the Securities Act of 1933 and state
registration fees, the initial fees and expenses of the Trustee, legal expenses
and other actual out-of-pocket costs. The estimated organization costs will be
paid from the assets of the Trust as of the close of the initial public offering
period (which may be between 30 and 90 days). To the extent that actual
organization costs are less than the estimated amount, only the actual
organization costs will be deducted from the assets of the Trust. To the extent
that actual organization costs are greater than the estimated amount, only the
estimated organization costs included in the Public Offering Price will be
reimbursed to the Sponsors. All advertising and selling expenses, as well as any
or organizational costs not paid by the Trust, will be borne by the Sponsors at
no cost to the Trust.
The Sponsors will receive for portfolio supervisory services to the Trust
an Annual Fee in the amount set forth under "Summary of Essential Information"
in Part A. The Sponsors' fee may exceed the actual cost of providing portfolio
supervisory services for the Trust, but at no time will the total amount
received for portfolio supervisory services rendered to all series of the Equity
Securities Trust in any calendar year exceed the aggregate cost to the Sponsors
of supplying such services in such year. (See "Portfolio Supervision.")
The Trustee will receive, for its ordinary recurring services to the Trust,
an annual fee in the amount set forth under "Summary of Essential Information"
in Part A. For a discussion of the services performed by the Trustee pursuant to
its obligations under the Trust Agreement, see "Trust Administration" and
"Rights of Unitholders."
The Trustee's fees applicable to a Trust are payable as of each Record Date
from the Income Account of the Trust to the extent funds are available and then
from the Principal Account. Both the Sponsors' and the Trustee's fees may be
increased without approval of the Unitholders by amounts not exceeding
proportionate increases in consumer prices for services as measured by the
United States Department of Labor's Consumer Price Index entitled "All Services
Less Rent."
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The following additional charges are or may be incurred by the Trust: all
expenses (including counsel fees) of the Trustee incurred and advances made in
connection with its activities under the Trust Agreement, including the expenses
and costs of any action undertaken by the Trustee to protect the Trust and the
rights and interests of the Unitholders; fees of the Trustee for any
extraordinary services performed under the Trust Agreement; indemnification of
the Trustee for any loss or liability accruing to it without gross negligence,
bad faith or willful misconduct on its part, arising out of or in connection
with its acceptance or administration of the Trust; indemnification of the
Sponsors for any losses, liabilities and expenses incurred in acting as sponsors
of the Trust without gross negligence, bad faith or willful misconduct on its
part; and all taxes and other governmental charges imposed upon the Securities
or any part of the Trust (no such taxes or charges are being levied, made or, to
the knowledge of the Sponsors, contemplated). The above expenses, including the
Trustee's fees, when paid by or owing to the Trustee are secured by a first lien
on the Trust to which such expenses are charged. In addition, the Trustee is
empowered to sell the Securities in order to make funds available to pay all
expenses.
Unless the Sponsors otherwise direct, the accounts of the Trust shall be
audited not less than annually by independent public accountants selected by the
Sponsors. The expenses of the audit shall be an expense of the Trust. So long as
the Sponsors maintain a secondary market, the Sponsors will bear any audit
expense which exceeds $.50 Cents per 100 Units. Unitholders covered by the audit
during the year may receive a copy of the audited financial statements upon
request.
REINVESTMENT PLAN
Income and principal distributions on Units (other than the final
distribution in connection with the termination of the Trust) may be reinvested
by participating in the Trust's Reinvestment Plan. Under the plan, the Units
acquired for participants will be either Units already held in inventory by the
Sponsors or new Units created by the Sponsors' deposit of Additional Securities
as described in "The Trust-Organization" in this Part B. Units acquired by
reinvestment will be subject to a reduced sales charge of 1.00%. Investors
should inform their broker when purchasing their Units if they wish to
participate in the Reinvestment Plan. Thereafter, Unitholders should contact
their broker if they wish to modify or terminate their election to participate
in the Reinvestment Plan. In order to enable a Unitholder to participate in the
Reinvestment Plan, with respect to a particular distribution on their Units,
such notice must be made at least three business days prior to the Record Date
for such distribution. Each subsequent distribution of income or principal on
the participant's Units will be automatically applied by the Trustee to purchase
additional Units of the Trust. The Sponsors reserve the right to demand, modify
or terminate the Reinvestment Plan at any time without prior notice. The
Reinvestment Plan for the Trust may not be available in all states.
OTHER MATTERS
LEGAL OPINIONS. The legality of the Units offered hereby and certain
matters relating to federal tax law have been passed upon by Battle Fowler LLP,
75 East 55th Street, New York, New York 10022 as counsel for the Sponsor.
Carter, Ledyard & Milburn, Two Wall Street, New York, New York 10005 have acted
as counsel for the Trustee.
INDEPENDENT AUDITORS. The Statement of Financial Condition, including the
Portfolio, is included herein in reliance upon the report of Ernst & Young LLP,
independent auditors, and upon the authority of said firm as experts in
accounting and auditing.
PERFORMANCE INFORMATION. Total returns, average annualized returns or
cumulative returns for various periods of the Top Ten, the Focus Five and the
Penultimate Pick, the related index and this Trust may be included from time to
time in advertisements, sales literature and reports to current or prospective
investors. Total return shows changes in Unit price during the period plus any
dividends and capital gains, divided by the original public offering price as of
the date of calculation. Average annualized returns show the average return for
stated periods of longer than a year. Sales material may also include an
illustration of the cumulative results of like
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annual investments in the Top Ten, the Focus Five and the Penultimate Pick
during an accumulation period and like annual withdrawals during a distribution
period. Figures for actual portfolios will reflect all applicable expenses and,
unless otherwise stated, the maximum sales charge. No provision is made for any
income taxes payable. Similar figures may be given for this Trust applying the
Top Ten, Focus Five and Penultimate Pick investment strategies to other indexes.
Returns may also be shown on a combined basis. Trust performance may be compared
to performance on a total return basis of the Dow Jones Industrial Average, the
S&P 500 Composite Price Stock Index, or performance data from Lipper Analytical
Services, Inc. and Morningstar Publications, Inc. or from publications such as
Money, The New York Times, U.S. News and World Report, Business Week, Forbes or
Fortune. As with other performance data, performance comparisons should not be
considered representative of a Trust's relative performance for any future
period.
Pending the approval of the SEC or the National Association of Securities
Dealers Regulation, the Sponsors may also include the performance of
hypothetical portfolios to which the Sponsors have applied the same investment
objectives and selection strategies as described in "The Trust--The Securities"
and which the Sponsors intend to apply to the selection of securities for the
Trust. This performance information is intended to illustrate the Trust's
strategies and should not be interpreted as indicative of the future performance
of the Trust.
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No person is authorized to give any information or to make MCLAUGHLIN, PIVEN, VOGEL
any representations not contained in Parts A and B of this FAMILY OF TRUSTS,
Prospectus; and any information or representation not contained THE PINNACLE TRUST
herein must not be relied upon as having been authorized by the
Trust, the Trustee or the Sponsors. The Trust is registered as a (A UNIT INVESTMENT TRUST)
unit investment trust under the Investment Company Act of 1940.
Such registration does not imply that the Trust or any of its PROSPECTUS
Units have been guaranteed, sponsored, recommended or approved by
the United States or any state or any agency or officer thereof. DATED: SEPTEMBER 23, 1998
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SPONSORS:
This Prospectus does not constitute an offer to sell, or a
solicitation of an offer to buy, securities in any state to any McLAUGHLIN, PIVEN, VOGEL
person to whom it is not lawful to make such offer in such state. SECURITIES, INC.
30 Wall Street
Table of Contents New York, New York 10005
212-248-0750
Title Page
REICH & TANG DISTRIBUTORS, INC.
PART A 600 Fifth Avenue
Summary of Essential Information...........................A-2 New York, New York 10020
Statement of Financial Condition...........................A-6 212-830-5400
Portfolio..................................................A-7
Report of Independent Auditors.............................A-8
PART B TRUSTEE:
The Trust................................................ B-1
Risk Considerations...................................... B-6 THE CHASE MANHATTAN BANK
Public Offering.......................................... B-9 4 New York Plaza
Rights of Unitholders.....................................B-10 New York, New York 10004
Tax Status................................................B-12
Liquidity.................................................B-14
Trust Administration......................................B-16
Trust Expenses and Charges................................B-21
Reinvestment Plan.........................................B-22
Other Matters.............................................B-22
Parts A and B of this Prospectus do not contain all of the
information set forth in the registration statement and exhibits
relating thereto, filed with the Securities and Exchange
Commission, Washington, D.C., under the Securities Act of 1933,
and the Investment Company Act of 1940, and to which reference is
made.
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759246.1
