As filed with the Securities and Exchange Commission on September 23, 1998
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-6
For Registration Under the Securities Act
of 1933 of Securities of Unit Investment
Trusts Registered on Form N-8B-2
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A. EXACT NAME OF TRUST:
Equity Securities Trust, Municipal Symphony Series 1
B. NAME OF DEPOSITOR:
Reich & Tang Distributors, Inc.
C. COMPLETE ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES:
Reich & Tang Distributors, Inc.
600 Fifth Avenue
New York, New York 10020
D. NAME AND COMPLETE ADDRESS OF AGENT FOR SERVICE:
COPY OF COMMENTS TO:
PETER J. DEMARCO MICHAEL R. ROSELLA, Esq.
Reich & Tang Distributors, Inc. Battle Fowler LLP
600 Fifth Avenue 75 East 55th Street
New York, New York 10020 New York, New York 10022
(212) 856-6858
E. TITLE AND AMOUNT OF SECURITIES BEING REGISTERED:
An indefinite number of Units of Equity Securities Trust, Municipal
Symphony Series 1 is being registered under the Securities Act of 1933
pursuant to Section 24(f) of the Investment Company Act of 1940, as
amended, and Rule 24f-2 thereunder.
F. PROPOSED MAXIMUM AGGREGATE OFFERING PRICE TO THE PUBLIC OF THE
SECURITIES BEING REGISTERED:
Indefinite
G. AMOUNT OF FILING FEE:
No Filing Fee Required
H. APPROPRIATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after the effective date of the Registration
Statement.
/ / Check if it is proposed that this filing will become effective
immediately upon filing pursuant to Rule 487.
The registrant hereby amends the registration statement on such date or dates as
may be necessary to delay its effective date until the registrant shall file a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
===============================================================================
758903.1
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these Securities has been filed with the
Securities and Exchange Commission. These Securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or solicitation
of an offer to buy nor shall there be any sale of these Securities in any State
in which such offer, solicitation or sale would be unlawful prior to the
registration or qualification under the Securities Laws of any state.
SUBJECT TO COMPLETION, DATED SEPTEMBER __, 1998
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EQUITY SECURITIES TRUST
MUNICIPAL SYMPHONY SERIES 1
The Trust is a unit investment trust designated Equity Securities Trust,
Municipal Symphony Series 1 (the "Trust"). The Sponsor is Reich & Tang
Distributors, Inc. The Trust consists of a fixed, diversified portfolio of
publicly traded common stock of closed-end investment companies, the portfolios
of which are concentrated in tax exempt municipal bonds (the "Municipal Funds").
The Municipal Funds and their weightings in the Trust portfolio will be selected
based upon the recommendations of the portfolio consultant, Riccardi Group LLC.
The Trust seeks to provide interest income which is generally exempt from
regular Federal income tax under existing law and to preserve capital. The
possibility of capital growth is secondary to the objective of current income.
The Sponsor cannot assure that the Trust will achieve these objectives. The
minimum purchase is 100 Units.
This Prospectus consists of two parts. Part A contains the Summary of
Essential Information including summary material relating to the Trust, the
Portfolio and the Statement of Financial Condition of the Trust. Part B contains
more detailed 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 is 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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The Securities and Exchange Commission has not approved or disapproved
these securities or passed upon the adequacy of this Prospectus.
Any representation to the contrary is a criminal offense.
PROSPECTUS DATED OCTOBER __, 1998
A-1
740923.3
<PAGE>
<TABLE>
<S> <C>
SUMMARY OF ESSENTIAL INFORMATION AS OF _________ __, 1998:*
DATE OF DEPOSIT: _________ __, 1998 MINIMUM VALUE OF TRUST: The Trust may be
AGGREGATE VALUE OF terminated if the value of the Trust is less than 40% of
SECURITIES.................................. $_______ the aggregate value of the Securities at the completion
AGGREGATE VALUE OF SECURITIES of the Deposit Period.
PER 100 UNITS............................... $_______ MANDATORY TERMINATION DATE: The earlier of
NUMBER OF UNITS................................ $_______ _______ __, 2005 or the disposition of the last Security
FRACTIONAL UNDIVIDED INTEREST IN in the Trust.
TRUST....................................... 1/______ CUSIP NUMBERS: Cash: _________
PUBLIC OFFERING PRICE PER 100 UNITS Reinvestment: _________
Aggregate Value of Securities in TRUSTEE: The Chase Manhattan Bank
Trust.................................... $_______ TRUSTEE'S FEE: $.__ per 100 Units outstanding
Divided By _____ Units (times 100).......... $_______ OTHER FEES AND EXPENSES: $__ per 100 Units
Plus Sales Charge of 40% of Public outstanding
Offering Price........................... $_______ SPONSOR: Reich & Tang Distributors, Inc.
Plus the Amount of Securities for SPONSOR'S SUPERVISORY FEE: Maximum of $.25
Organization Costs**..................... $_______ per 100 Units outstanding (see "Trust Expenses and
Public Offering Price+...................... $1,000.00 Charges" in Part B).
SPONSOR'S REPURCHASE PRICE AND PORTFOLIO CONSULTANT: Riccardi Group LLC
REDEMPTION PRICE PER EXPECTED SETTLEMENT DATE***: ____ __, 1998
100 UNITS++................................. $_______ RECORD DATES: First of each month
EVALUATION TIME: 4:00 p.m. New York Time. DISTRIBUTION DATES: Fifteenth of each month
MINIMUM INCOME OR PRINCIPAL
DISTRIBUTION: $1.00 per 100 Units
</TABLE>
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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.
** This amount per 100 Units will be invested in Securities during, and sold
at the end of, the initial offering period, to reimburse the Sponsor for the
payment of all or a portion of the estimated costs incurred in organizing the
Trust . Organizational costs include the 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. These
Securities will be purchased maintaining the same proportionate relationship
among all of the Securities contained in the Trust. The reimbursement to the
Sponsor for the organization costs will be paid from the assets of the Trust as
of the close of the initial offering period. To the extent the actual
organization costs are less than the estimated amount, only the actual
organization costs will be reimbursed to the Sponsor. 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 Sponsor and deducted from the assets of the Trust. See"Risk Considerations"
for a discussion of the impact of a decrease in value of the Securities
purchased with the Public Offering Price proceeds intended to be used to
reimburse the Sponsor.
*** The business day on which contracts to purchase securities in the Trust are
expected to settle.
+ 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.
++ As of the close of the initial offering period, the Sponsor's Repurchase
Price and Redemption Price per 100 Units for the Trust will be reduced to
reflect the payment of the organization costs to the Sponsor. 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 bank or
broker-dealer account at The Depository Trust Company in book-entry form.
A-2
740923.3
<PAGE>
OBJECTIVE. The Trust seeks to provide interest income which is generally exempt
from regular Federal income tax under existing law and to preserve capital. The
possibility of capital growth is secondary to the objective of current income.
There is no guarantee that the objectives of the Trust will be achieved.
PORTFOLIO SELECTION. The Trust seeks to achieve its objectives by investing in a
portfolio of the common stock of __ closed-end investment companies, the
portfolios of which are concentrated in tax exempt municipal bonds (the
"Municipal Funds"). Each Municipal Fund has been recommended by the Portfolio
Consultant as likely to maintain consistent dividend distributions exempt from
federal income tax. Out of the universe of Municipal Funds and an equal number
of state specific Municipal Funds, the selection process narrows the field to
those funds that meet the criteria of stable performance, good underlying
characteristics, and tax-exempt income. As used herein, the term "Securities"
means the common stocks of the Municipal Funds initially deposited in the Trust
(as described on the "Portfolio" page) and contracts and funds for the purchase
of such Municipal Funds, and any additional securities acquired and held by the
Trust pursuant to the provisions of the Indenture.
DESCRIPTION OF PORTFOLIO. The Portfolio contains issues of common stock of which
100% are of _______ issuers. 100% of the issues are represented by the Sponsor's
contracts to purchase. ____% of the Portfolio is listed on the New York Stock
Exchange.
RISK CONSIDERATIONS. Unitholders can lose money by investing in this Trust. The
value of the Units, the Securities and the bonds held by the Municipal Funds
included in the portfolio can each decline in value. An investment in Units of
the Trust should be made with an understanding of the following risks:
o The Municipal Funds which comprise the Securities invest in municipal
bonds. Municipal bonds are long-term fixed rate debt obligations that decline in
value with increases in interest rates, an issuer's worsening financial
condition or a drop in bond ratings.
o The Municipal Funds will receive early returns of principal when bonds
are called or sold before they mature. The funds may not be able to reinvest the
money they receive at as high a yield or as long a maturity.
o The Securities are shares of common stock which are subject to the risk
that the financial condition of the issuers may become impaired or that the
general condition of the stock market may worsen.
o The Securities are shares of closed-end funds which frequently trade at a
discount from their net asset value in the secondary market. The amount of such
discount is subject to change from time to time in response to various factors.
o Since the portfolio of the Trust is fixed and "not managed", in general
the Sponsor can only sell Securities at the Trust's termination or in order to
meet redemptions. As a result, the price at which each Security is sold may not
be the highest price it attained during the life of the Trust.
o When cash or a letter of credit is deposited with instructions to
purchase securities in order to create additional units, an increase in the
price of a particular security between the time of deposit and the time that
securities are purchased will cause the Units to be comprised of less of that
security and more of the remaining securities. In addition, brokerage fees
incurred in purchasing the Securities will be an expense of the Trust.
A-3
740923.3
<PAGE>
o A decline in the value of the Securities during the initial offering
period may require additional Securities to be sold in order to reimburse the
Sponsor for organization costs. This would result in a decline in value of the
Units.
PUBLIC OFFERING PRICE. The Public Offering Price per 100 Units of the Trust
is calculated by:
o dividing the aggregate value of the underlying securities and cash held
in the Trust by the number of units outstanding
o adding a sales charge of 4.50% (4.712% of the net amount invested)
o multiplying the result by 100.
In addition, during the initial offering period, an amount sufficient to
reimburse the Sponsor for the payment of all or a portion of the estimated
organization costs of the Trust will be added to the Public Offering Price per
100 Units. The price of a single Unit, or any multiple thereof, is calculated by
dividing the Public Offering Price per 100 Units by 100 and multiplying by the
number of Units. During the initial offering period orders involving at least
$50,000 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.
ESTIMATED NET ANNUAL DISTRIBUTIONS. The estimated net annual distributions to
Unitholders per 100 units (based on the most recent quarterly or semi-annual
ordinary dividend distributed with respect to the Securities) as of
_______________, 1998 was $____. 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. Distributions of dividends received, less expenses, will be made
by the Trust monthly. The first dividend distribution will be made on _____ 15,
1998 to all Unitholders of record on _____ 1, 1998 and thereafter distributions
will be made on the 15th day of every month. The final distribution will be made
within a reasonable period of time after the termination of the Trust.
MARKET FOR UNITS. Units may be sold at any time to the Sponsor or the Trustee
without fee or penalty. The Sponsor intends to repurchase Units from Unitholders
throughout the life of the Trust at prices based upon the market value of the
underlying Securities. The Sponsor is not obligated to maintain a market and may
stop doing so without prior notice for any business reason. If a market is not
maintained a Unitholder will be able to redeem his Units with the Trustee at the
same price. 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.
TERMINATION. The Trust will terminate in approximately seven years. At that time
investors may choose one of the following three options with respect to their
terminating distribution:
o receive the distribution in-kind if they own at least 2,500 Units
o receive cash upon the liquidation of their pro rata share of the
Securities
o reinvest in a subsequent series of the Equity Securities Trust (if one is
offered) at a reduced sales charge.
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 ___%. See "Reinvestment Plan" in Part B for details on how to enroll
in the Reinvestment Plan.
A-4
740923.3
<PAGE>
[UNDERWRITING. Reich & Tang Distributors, Inc., 600 Fifth Avenue, New York, New
York 10020, will act as Underwriter for all of the Units of the Trust. The
Underwriter will distribute Units through various broker-dealers, banks and/or
other eligible participants.]
A-5
740923.3
<PAGE>
EQUITY SECURITIES TRUST
MUNICIPAL SYMPHONY SERIES 1
STATEMENT OF FINANCIAL CONDITION AS OF OPENING OF BUSINESS, _____ __, 1998
ASSETS
<TABLE>
<S> <C>
Investment in Securities--Sponsor's Contracts to Purchase
Underlying Securities Backed by Letter of Credit (cost $______)(Note 1)........................... $
Total.................................................................................... $
====================
LIABILITIES AND INTEREST OF UNITHOLDERS
Reimbursement to Sponsor for Organization Costs (Note 2)................................................ $
Interest of Unitholders - Units of Fractional
Undivided Interest Outstanding (Units)............................................................
Less: Reimbursement to Sponsor for Organization Costs (Note 2)...................................
Total................................................................................................... $
====================
Net Asset Value per Unit................................................................................ $
==================
</TABLE>
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Notes to Statement:
(1) 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
Trust, sponsored by Reich & Tang Distributors, Inc. (the "Sponsor"), seeks to
preserve capital and to provide interest income which is generally exempt from
regular Federal income tax under existing law. The possibility of capital growth
is secondary to the objective of current income. On ______ __, 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 the
_________ in an amount of $______ 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
Sponsor. 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 _______ __, 1998. The Trust will
terminate on ________ __, 2005, or earlier under certain circumstances as
further described in the Prospectus.
(2) A portion of the Public Offering Price consists of an amount sufficient
to reimburse the Sponsor for all or a portion of the costs of establishing the
Trust. These costs have been estimated at $.___ per 100 Units. 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
Sponsor 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. 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 Sponsor and
deducted from the assets of the Trust.
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures. Actual results
could differ from those estimates.
A-6
740923.3
<PAGE>
EQUITY SECURITIES TRUST
MUNICIPAL SYMPHONY SERIES 1
PORTFOLIO
AS OF OPENING OF BUSINESS, ________ __, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Market Value of
Stocks as a
Portfolio Number of Ticker Percentage Market Value Per Cost of Securities
No. Shares Name of Issuer (1) Symbol of the Trust(2) Share to the Trust(3)
----- -------- ------------------- ------ --------------- ------ ---------------
--------- --------
--------% $-------
</TABLE>
FOOTNOTES TO PORTFOLIO
(1) Contracts to purchase the Securities were entered into on ________ __,
1998. All such contracts are expected to be settled on or about the First
Settlement Date of the Trust which is expected to be ________ __, 1998.
(2) Based on the cost of the Securities to the Trust.
(3) 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 Sponsor's Purchase Price is $______. The Sponsor's loss on the
Initial Date of Deposit is $____.
A-7
740923.3
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustee and Unitholders,
Equity Securities Trust, Municipal Symphony Series 1
In our opinion, the accompanying Statement of Financial Condition,
including the Portfolio, presents fairly, in all material respects, the
financial position of Equity Securities Trust, Municipal Symphony Series 1 (the
"Trust") at opening of business, ________ __, 1998, in conformity with generally
accepted accounting principles. This financial statement is the responsibility
of the Trust's management; our responsibility is to express an opinion on this
financial statement based on our audit. We conducted our audit of this financial
statement in accordance with generally accepted auditing standards which require
that we plan and perform the audit to obtain reasonable assurance about whether
the 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, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit, which included confirmation
of the contracts for the securities at opening of business, ________ __, 1998,
by correspondence with the Sponsor, provides a reasonable basis for the opinion
expressed above.
PricewaterhouseCoopers LLP
Boston, MA
________ __, 1998
A-8
740923.3
<PAGE>
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EQUITY SECURITIES TRUST
MUNICIPAL SYMPHONY SERIES 1
PROSPECTUS PART B
PART B OF THIS PROSPECTUS MAY NOT BE
DISTRIBUTED UNLESS ACCOMPANIED BY
PART A
THE TRUST
ORGANIZATION. Equity Securities Trust, Municipal Symphony Series 1 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,
between Reich & Tang Distributors, Inc., as Sponsor, and The Chase Manhattan
Bank, as Trustee.
On the Initial Date of Deposit, the Sponsor deposited with the Trustee
securities including common stock and 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 Sponsor's ownership of all Units of the Trust. The Sponsor has 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 Sponsor
may also, in certain circumstances, direct the Trustee to dispose of certain
Securities if the Sponsor believes 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 Sponsor, or until the termination of the Trust Agreement.
740923.3
B-1
<PAGE>
DEPOSIT OF ADDITIONAL SECURITIES. With the deposit of the Securities in the
Trust on the Initial Date of Deposit, the Sponsor 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 Sponsor 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 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, unavailability of Securities or the fact that the Trust is prohibited
from acquiring more than 3% of the outstanding voting stock of any Municipal
Fund. 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 seek to provide interest income
which, in the opinions of bond counsel to the respective issuers, is, with
certain exceptions, currently exempt from regular federal income tax under
existing law and to preserve capital. The possibility of capital growth will be
secondary to the objective of current income. The Trust seeks to achieve its
objectives by investing in a portfolio of the common stock of ___ closed-end tax
exempt municipal bond funds, each of which has been recommended as likely to
maintain consistent dividend distributions exempt from federal income tax (see
"The Trust--The Securities" below). As used herein, the term "Securities" means
the stocks initially deposited in the Trust and described in "Portfolio" in Part
A and any additional stocks acquired and held by the Trust pursuant to the
provisions of the Indenture. All of the Securities in the Trust are listed on
the New York Stock Exchange, the American Stock Exchange or the National
Association of Securities Dealers Automated Quotations ("NASDAQ") National
Quotation Market System.
The Trust will terminate in approximately seven years, at which time
investors may choose to either receive the distributions in kind (if they own at
least 1,000 Units), in cash or reinvest in a subsequent series of Equity
Securities Trust (if offered) at a reduced sales charge. Since the Sponsor 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. 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 (including non-U.S.
issuers) and the prices of equity securities in general and the Securities in
particular. Therefore, there is no guarantee that the objectives of the Trust
will be achieved.
THE SECURITIES. Each of the Securities in the Portfolio of the Trust is a
closed-end municipal bond mutual fund (the "Municipal Funds") that is likely to
maintain consistent dividend distributions exempt from federal income taxes.
Additionally, each fund is analyzed by the Portfolio Consultant based on the
underlying characteristics of its individual holdings. Individual bond research
is vital to the success of any municipal bond fund. Careful attention has been
paid to the individual municipal bond investments that each municipal fund has
under management in order to reduce the Trust's exposure to early bond calls and
under-performing securities that would have the effect of diluting the Trust's
current income. Each security within a potential fund purchase is evaluated by
the Portfolio Consultant for its credit quality, call risk probability and
portfolio manager's experience and track record in various economic and interest
rate cycles.
740923.3
B-2
<PAGE>
Out of the universe of national closed-end municipal bond funds and state
specific closed-end municipal bond funds, the selection process narrows the
field to a group of 25 to 30 funds that meet the criteria of stable performance,
good underlying characteristics, and tax-exempt income. By deploying an
investment strategy that will require the Trust to invest in a series of funds,
investors will be diversified across a wide spectrum of bond issues, thereby
reducing the exposure to any single issuer of municipal debt or any single
portfolio manager.
The Trustee has not participated and will not participate in the selection
of Securities for the Trust, and neither the Sponsor, the Portfolio Consultant
nor the Trustee will be liable in any way for any default, failure or defect in
any Securities.
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 Sponsor is authorized under the Trust Agreement to direct the
Trustee to acquire other securities ("Substitute Securities") to make up the
original corpus of the Trust.
The Substitute Securities must be purchased within 20 days after the
delivery of the notice of the failed contract. Where the Sponsor purchases
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 plus accrued interest, if
any.
In the event no reinvestment is made, the proceeds of the sale of
Securities will be distributed to Unitholders as set forth under "Rights of
Unitholders--Distributions." In addition, if the right of substitution shall not
be utilized to acquire Substitute Securities in the event of a failed contract,
the 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
CLOSED-END FUNDS. Shares of closed-end Municipal Funds frequently trade at
a discount from net asset value. This characteristic is a risk separate and
distinct from the risk that the fund's net asset value will decrease. However, a
fund's articles of incorporation may contain certain anti-takeover provisions
that may have the effect of inhibiting the fund's possible conversion to
open-end status and limiting the ability of other persons to acquire control of
the fund. In certain circumstances, these provisions might also inhibit the
ability of stockholders (including the Trust) to sell their shares at a premium
over prevailing market prices. Shares of many Municipal Funds are thinly traded,
and therefore may be more volatile and subject to greater price fluctuations
because of the Sponsor's buying and selling securities than shares with greater
liquidity. Investors should be aware that there can be no assurance that the
value of the Securities in the Trust's Portfolio will increase or that the
issuers of those Securities will pay dividends on outstanding shares. Any
distributions of income to Unitholders will generally depend on the declaration
of dividends by the issuers of the underlying stocks, and the declaration of
dividends depends on several factors including the financial condition of the
issuers of those stocks and general economic conditions.
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, the amount realized upon the sale of the
Securities may not be the highest price attained by an individual Security
during the life
740923.3
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of the Trust. Some of the Securities in the Trust may also be owned by other
clients of the Sponsor and their affiliates. However, because these clients may
have differing investment objectives, the Sponsor 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
Sponsor 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. Subject to regulatory approval, 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. The Securities purchased with the portion
of the Public Offering Price intended to be used to reimburse the Sponsor for
the Trust's organization costs, may decrease in value during the initial
offering period. To the extent the proceeds from the sale of these Securities
are insufficient to repay the Sponsor for the Trust's organization costs, the
Trustee will sell additional Securities to allow the Trust to fully reimburse
the Sponsor. In that event, the net asset value per Unit will be reduced by the
amount of Securities sold. This will also result in an increase in the cost per
Unit of the reimbursement to the Sponsor. When Securities are sold to reimburse
the Sponsor for organization costs, the Trustee will generally sell such
Securities to the extent which will maintain the same proportionate relationship
between the Securities contained in the Trust as existed prior to such sale. In
addition, brokerage fees (if any) incurred in purchasing Securities with cash
deposited with instructions to purchase the Securities will be an expense of the
Trust. Price fluctuations between the time of deposit and the time the
Securities are purchased, and payment of brokerage fees, will affect the value
of every Unitholder's Units and the Income per Unit received by the Trust. In
particular, Unitholders who purchase Units during the initial offering period
would experience a dilution of their investment as a result of any brokerage
fees paid by the Trust during subsequent deposits of Additional Securities
purchased with cash deposited. In order to minimize these effects, the Trust
will try to purchase Securities as near as possible to the Evaluation Time or at
prices as close as possible to the prices used to evaluate Trust Units at the
Evaluation Time. In addition, subsequent deposits to create such additional
Units will not be covered by the deposit of a bank letter of credit. In the
event that the Sponsor does not deliver cash in consideration for the additional
Units delivered, the Trust may be unable to satisfy its contracts to purchase
the Additional Securities without the Trustee selling underlying Securities.
Therefore, to the extent that the subsequent deposits are not covered by a bank
letter of credit, the failure of the Sponsor to deliver cash to the Trust, or
any delays in the Trust receiving such cash, would have significant adverse
consequences for the Trust.
COMMON STOCK. Since the Trust contains primarily 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
740923.3
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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.
MUNICIPAL BONDS. Private Activity Bonds. The portfolios of the Municipal
Funds may contain other bonds which are "private activity bonds" (often called
Industrial Revenue Bonds ("IRBs") if issued prior to 1987) which would be
primarily of two types: (1) bonds for a publicly owned facility which a private
entity may have a right to use or manage to some degree, such as an airport,
seaport facility or water system and (2) facilities deemed owned or beneficially
owned by a private entity but which were financed with tax-exempt bonds of a
public issuer, such as a manufacturing facility or a pollution control facility.
In the case of the first type, bonds are generally payable from a designated
source of revenues derived from the facility and may further receive the benefit
of the legal or moral obligation of one or more political subdivisions or taxing
jurisdictions. In most cases of project financing of the first type, receipts or
revenues of the issuer are derived from the project or the operator or from the
unexpended proceeds of the bonds. Such revenues include user fees, service
charges, rental and lease payments, and mortgage and other loan payments.
The second type of issue will generally finance projects which are owned by
or for the benefit of, and are operated by, corporate entities. Ordinarily, such
private activity bonds are not general obligations of governmental entities and
are not backed by the taxing power of such entities, and are solely dependent
upon the creditworthiness of the corporate user of the project or corporate
guarantor.
The private activity bonds in the funds have generally been issued under
bond resolutions, agreements or trust indentures pursuant to which the revenues
and receipts payable under the issuer's arrangements with the users or the
corporate operator of a particular project have been assigned and pledged to the
holders of the private activity bonds. In certain cases a mortgage on the
underlying project has been assigned to the holders of the private activity
bonds or a trustee as additional security. In addition, private activity bonds
are frequently directly guaranteed by the corporate operator of the project or
by another affiliated company.
Litigation. Litigation challenging the validity under state constitutions
of present systems of financing public education has been initiated in a number
of states. Decisions in some states have been reached holding such school
financing in violation of state constitutions. In addition, legislation to
effect changes in public school financing has been introduced in a number of
states. The Sponsor is unable to predict the outcome of the pending litigation
and legislation in this area and what effect, if any, resulting change in the
sources of funds, including proceeds from property taxes applied to the support
of public schools, may have on the school bonds in the Municipal Funds.
Legal Proceedings Involving the Funds. The Sponsor has not been notified or
made aware of any litigation pending with respect to any bonds which might
reasonably be expected to have a material effect on the Municipal Funds other
than that which is discussed herein. Such litigation as, for example, suits
challenging the issuance of pollution control revenue bonds under recently
enacted environmental protection statutes may affect the validity of such bonds
or the tax-free nature of the interest thereon. At any time after the date of
this Prospectus, litigation may be instituted on a variety of grounds with
respect to the bonds in the Municipal Funds. The Sponsor is unable to predict
whether any such litigation may be instituted or, if instituted, whether it will
have a material adverse effect on a State Trust.
Other Factors. The bonds in the Municipal Funds, despite their optional
redemption provisions which generally do not take effect until 10 years after
the original issuance dates of such bonds (often referred to as "ten year call
protection"), do contain provisions which require the issuer to redeem such
obligations at par from unused proceeds of the issue within a stated period. In
recent periods of declining interest rates there have been increased redemptions
of bonds, particularly housing bonds, pursuant to such redemption provisions. In
addition, the bonds in the Municipal Funds are also subject to mandatory
redemption in whole or in part at par at any time that voluntary or involuntary
prepayments of principal on the underlying collateral are made to the trustee
for such bonds or that the collateral is sold by the bond issuer. Prepayments of
740923.3
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principal tend to be greater in periods of declining interest rates; it is
possible that such prepayments could be sufficient to cause a bond to be
redeemed substantially prior to its stated maturity date, earliest call date or
sinking fund redemption date.
The bonds may also be subject to other calls, which may be permitted or
required by events which cannot be predicted (such as destruction, condemnation,
or termination of a contract).
In 1976 the federal bankruptcy laws were amended so that an authorized
municipal debtor could more easily seek federal court protection to assist in
reorganizing its debts so long as certain requirements were met. Historically,
very few financially troubled municipalities have sought court assistance for
reorganizing their debts; notwithstanding, the Sponsor is unable to predict to
what extent financially troubled municipalities may seek court assistance in
reorganizing their debts in the future and, therefore, what effect, if any, the
applicable federal bankruptcy law provisions will have on the Municipal Funds.
The Municipal Funds may also include "moral obligation" bonds. Under
statutes applicable to such bonds, if an issuer is unable to meet its
obligations, the repayment of such bonds becomes a moral commitment but not a
legal obligation of the state or municipality in question.
Certain of the bonds in the Municipal Funds are subject to redemption prior
to their stated maturity dates pursuant to sinking fund or call provisions. A
sinking fund is a reserve fund appropriated specifically toward the retirement
of a debt. A callable bond is one which is subject to redemption or refunding
prior to maturity at the option of the issuer. A refunding is a method by which
a bond is redeemed at or before maturity from the proceeds of a new issue of
bonds. In general, call provisions are more likely to be exercised when the
offering side evaluation of a bond is at a premium over par than when it is at a
discount from par. Shareholders of the funds (including the Trust), will realize
a gain or loss on the early redemption of such bonds, depending upon whether the
price of such bonds is at a discount from or at a premium over par at the time
the Trust purchases its shares.
Discount and Zero Coupon Bonds. The Municipal Fund's portfolios may contain
original issue discount bonds. The original issue discount, which is the
difference between the initial purchase price of the bonds and the face value,
is deemed to accrue on a daily basis and the accrued portion will be treated as
tax-exempt interest income for regular federal income tax purposes. Upon sale or
redemption, any gain realized that is in excess of the earned portion of
original issue discount will be taxable as capital gain. See "Tax Status." The
current value of an original issue discount bond reflects the present value of
its face amount at maturity. The market value tends to increase more slowly in
early years and in greater increments as the bonds approach maturity. Of these
original issue discount bonds, a portion of the aggregate principal amount of
the bonds in each municipal fund may be zero coupon bonds. Zero coupon bonds do
not provide for the payment of any current interest and provide for payment at
maturity at face value unless sooner sold or redeemed. The market value of zero
coupon bonds is subject to greater fluctuations than coupon bonds in response to
changes in interest rates. Zero coupon bonds generally are subject to redemption
at compound accredited value based on par value at maturity. Because the issuer
is not obligated to make current interest payments, zero coupon bonds may be
less likely to be redeemed than coupon bonds issued at a similar interest rate.
The Municipal Fund's portfolios may also contain bonds that were purchased
at deep "market" discount from par value at maturity. This is because the coupon
interest rates on the discount bonds at the time they were purchased and
deposited in the Municipal Funds were lower than the current market interest
rates for newly issued bonds of comparable rating and type. At the time of
issuance the discount bonds were for the most part issued at then current coupon
interest rates. The current returns (coupon interest income as a percentage of
market price) of discount bonds will be lower than the current returns of
comparably rated bonds of similar type newly issued at current interest rates
because discount bonds tend to increase in market value as they approach
maturity and the full principal amount becomes payable. A discount bond held to
maturity will have a larger portion of its total return in the form of capital
gain and less in the form of tax-exempt interest income than a comparable bond
newly issued at current market rates. Gain on the disposition of a bond
purchased at a market discount generally will be treated as ordinary income,
rather than capital gain, to the extent of accrued market discount. Discount
bonds with a longer term to maturity tend to have a higher current yield and a
lower current market value than otherwise comparable bonds with a shorter term
to maturity. If interest rates rise, the value of the bonds will decrease; and
if interest rates decline, the value of the bonds will increase. The discount
does not necessarily indicate a lack of market confidence in the issuer.
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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 Sponsor
and Trustee believe that the "Year 2000" problem is material to their business
and operations and could have a material adverse effect on the Sponsor's and the
Trustee's results of operations and, in turn, cash available for distribution by
the Trustee. Although the Sponsor 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 Sponsor is 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 reduce the rate would
adversely affect the after-tax return to investors that can take advantage of
the deduction. The House and Senate have passed and the President has stated
that he will sign, legislation that would reduce to more than 12 months (from
more than 18 months) the holding period required for non-corporate investors to
be eligible for the reduced tax rate of 20% for capital gains. 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.
ORGANIZATION COSTS. The Securities purchased with the portion of the Public
Offering Price intended to be used to reimburse the Sponsor for the Trust's
organization costs will be purchased in the same proportionate relationship as
all the Securities contained in the Trust. Securities will be sold to reimburse
the Sponsor for the Trust's organization costs at the completion of the initial
offering period, which is expected to be 90 days from the Initial Date of
Deposit (a significantly shorter time period than the life of the Trust). During
the initial offering period, there may be a decrease in the value of the Trust
Securities. To the extent the proceeds from the sale of these Securities are
insufficient to repay the Sponsor for the Trust organization costs, the Trustee
will sell additional Securities to allow the Trust to fully reimburse the
Sponsor. In that event, the net asset value per Unit will be reduced by the
amount of additional Securities sold. Although the dollar amount of the
reimbursement due to the Sponsor will remain fixed and will never exceed $___
per 100 Units, this will also result in a greater effective cost per Unit to
Unitholders for the reimbursement to the Sponsor. When Securities are sold to
reimburse the Sponsor for organization costs, the Trustee will sell such
Securities to an extent which will maintain the same proportionate relationship
among the Securities contained in the Trust as existed prior to such sale.
PUBLIC OFFERING
OFFERING PRICE. In calculating the Public Offering Price, the aggregate
value of the Securities is determined in good faith by the Trustee on each
"Business Day" as defined in the Indenture in the following manner: because the
Securities are listed on a national securities exchange, this evaluation is
based on the closing sale prices on that exchange as of the Evaluation Time
(unless the Trustee deems these prices inappropriate as a basis for valuation).
If the Trustee deems these prices inappropriate as a basis for evaluation, then
the Trustee may utilize, at the Trust's expense, an independent evaluation
service or services to ascertain the values of the Securities. The independent
evaluation service shall use any of the following methods, or a combination
thereof, which it deems appropriate: (a) on the basis of current bid prices for
comparable securities, (b) by appraising the value of the Securities on the bid
side of the market or by such other appraisal deemed appropriate by the Trustee
or (c) by any combination of the above, each as of the Evaluation Time.
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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 amount of the volume discount
and the approximate reduced sales charge on the Public Offering Price applicable
to such purchases are as follows:
NUMBER OF UNITS APPROXIMATE REDUCED SALES CHARGE
--------------- --------------------------------
5,000 but less than 10,000 4.25%
10,000 but less than 25,000 4.00%
25,000 but less than 50,000 3.50%
50,000 but less than 100,000 3.00%
For transactions of at least 100,000 Units or more, the Sponsor intends to
negotiate the applicable sales charge and such charge will be disclosed to any
such purchaser. The Sponsor reserves the right to change the discounts from time
to time.
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 Equity Securities 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, subject to a
reduced sales charge of ____%. 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 within 60 days of their liquidation of units in the Prior
Series (see "Trust Termination").
Employees (and their immediate families) of Reich & Tang Distributors, Inc.
(and its affiliates), the Portfolio Consultant and of the special counsel to the
Sponsor, may, pursuant to employee benefit arrangements, purchase Units of the
Trust at a price equal to the aggregate value of the underlying securities in
the Trust during the initial offering period, divided by the number of Units
outstanding at no sales charge. 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 Sponsor's secondary market, so long as it is being
maintained.
Investors in any open-end management investment company or unit investment
trust that have purchased their investment within a five-year period prior to
the date of this Prospectus can purchase Units of the Trust in an amount not
greater in value than the amount of said investment made during this five-year
period at a reduced sales charge of ____% of the public offering price.
Units may be purchased in the primary or secondary market (including
purchases by Rollover Unitholders) at the Public Offering Price (for purchases
which do not qualify for a volume discount) less the concession the Sponsor
typically allows to brokers and dealers for purchases (see "Public
Offering--Distribution of Units") by (1) investors who purchase Units through
registered investment advisers, certified financial planners and registered
broker-dealers who in each case either charge periodic fees for financial
planning, investment advisory or asset management service, or provide such
services in connection with the establishment of an investment account for which
a comprehensive "wrap fee" charge is imposed, (2) bank trust departments
investing funds over which they exercise exclusive discretionary investment
authority and that are held in a fiduciary, agency, custodial or similar
capacity, (3) any person who, for at least 90 days, has been an officer,
director or bona fide employee of any firm offering Units for sale to investors
or their immediate family members (as described above) and (4) officers and
directors of bank holding companies that make Units available directly or
through subsidiaries or bank affiliates. Notwithstanding anything to the
contrary in this Prospectus, such investors, bank trust departments, firm
employees and bank holding company officers and directors who purchase Units
through this program will not receive the volume discount.
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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 Sponsor and dealers at the Public Offering
Price. The initial offering period is thirty days after each deposit of
Securities in the Trust and the Sponsor may extend the initial offering period
for successive thirty day periods. Certain banks and thrifts will make Units of
the Trust available to their customers on an agency basis. A portion of the
sales charge paid by their customers is retained by or remitted to the banks.
Under the Glass-Steagall Act, banks are prohibited from underwriting Units;
however, the Glass-Steagall Act does permit certain agency transactions and the
banking regulators have indicated that these particular agency transactions are
permitted under such Act. In addition, state securities laws on this issue may
differ from the interpretations of federal law expressed herein and banks and
financial institutions may be required to register as dealers pursuant to state
law.
The Sponsor intends to qualify the Units for sale in substantially all
States through dealers who are members of the National Association of Securities
Dealers, Inc. Units may be sold to dealers at prices which represent a
concession of up to 4.0% per Unit, subject to the Sponsor's right to change the
dealers' concession from time to time. Such Units may then be distributed to the
public by the dealers at the Public Offering Price then in effect. The Sponsor
reserves the right to reject, in whole or in part, any order for the purchase of
Units. The Sponsor reserves the right to change the discounts from time to time.
Broker-dealers of the Trust, banks and/or others are eligible to
participate in a program in which such firms receive from the Sponsor a nominal
award for each of their registered representatives who have sold a minimum
number of units of unit investment trusts created by the Sponsor during a
specified time period. In addition, at various times the Sponsor may implement
other programs under which the sales forces of brokers, dealers, banks and/or
others may be eligible to win other nominal awards for certain sales efforts or
under which the Sponsor will allow to any such brokers, dealers, banks and/or
others that sponsor sales contests or recognition programs conforming to
criteria established by the Sponsor, or participate in sales programs sponsored
by the Sponsor, an amount not exceeding the total applicable sales charges on
the sales generated by such person at the public offering price during such
programs. Also, the Sponsor in its discretion may from time to time pursuant to
objective criteria established by the Sponsor pay fees to qualifying brokers,
dealers, banks and/or others for certain services or activities which are
primarily intended to result in sales of Units of the Trust. Such payments are
made by the Sponsor out of their own assets and not out of the assets of the
Trust. These programs will not change the price Unitholders pay for their Units
or the amount that the Trust will receive from the Units sold.
SPONSOR'S PROFITS. The Sponsor will receive a combined gross underwriting
commission equal to up to 4.50% of the Public Offering Price per 100 Units
(equivalent to 4.712% of the net amount invested in the Securities).
Additionally, the Sponsor may realize a profit on the deposit of the Securities
in the Trust representing the difference between the cost of the Securities to
the Sponsor and the cost of the Securities to the Trust (See "Portfolio"). The
Sponsor 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 initially deposited in
the Trust may have been acquired through the Sponsor.
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 Sponsor for the Units. Cash, if any,
made available to the Sponsor prior to settlement date for the purchase of Units
may be used in the Sponsor's 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 Sponsor.
Both upon acquisition of Securities and termination of the Trust, the
Trustee may utilize the services of the Sponsor for the purchase or sale of all
or a portion of the Securities in the Trust. The Sponsor 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 "Sponsor Repurchase") the
Sponsor 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.
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RIGHTS OF UNITHOLDERS
OWNERSHIP OF UNITS. Ownership of Units of the Trust will not be evidenced
by certificates. All evidence of ownership of the Units will be recorded in
book-entry form at the Depository Trust Company ("DTC") through an investor's
brokerage account. Units held through DTC will be deposited by the Sponsor with
DTC in the Sponsor's DTC account and registered in the nominee name CEDE &
COMPANY. Individual purchases of beneficial ownership interest in the Trust may
be made in book-entry form through DTC. Ownership and transfer of Units will be
evidenced and accomplished directly and indirectly 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 the
broker-dealer or bank from whom their purchase was made. Units are transferable
by making a written request property accompanied by a written instrument or
instruments of transfer which should be sent registered or certified mail for
the protection of the Unit Holder. Holders must sign such written request
exactly as their names appear on the records of the Trust. Such signatures must
be guaranteed by a commercial bank or trust company, savings and loan
association or by a member firm of a national securities exchange.
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 until 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
740923.3
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<PAGE>
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.
TAX STATUS
This is a general discussion of some of the Federal income tax consequences
of ownership of Units in the Trust. It applies only to investors who hold their
Units as capital assets. It does not discuss special rules that apply to
investors subject to special treatment, such as securities dealers, financial
institutions and insurance companies.
OPINION OF COUNSEL. In the opinion of Battle Fowler LLP:
1. The IRS will classify the Trust as a grantor trust for Federal income
tax purposes. The Trust will not owe Federal income tax. Each Unitholder
will be treated as the owner of a pro rata portion of the assets of the
Trust. The income received by the Trust will be treated as income of the
Unitholders.
2. The Trust will not be subject to the New York Franchise Tax on Business
Corporations or the New York City General Corporation Tax. However,
Unitholders who are New York residents must treat their pro rata portion of
the income of the Trust as their income under New York State and City
income tax laws. Residents of other states may have to do the same thing in
their states.
3. The Sponsor has the right to create additional Units for 90 days after
the original issuance date by depositing Additional Securities in the
Trust. The Additional Securities must be substantially similar to the
securities initially deposited in the Trust. The IRS will treat the Trust
as a grantor trust even though the Sponsor has this power.
Battle Fowler LLP is special counsel to the Sponsor. Its opinion is based on
existing law. Battle Fowler LLP has relied on the validity of the Trust
Agreement and the Prospectus and on the accuracy and completeness of the facts
they contain.
TAXATION OF UNITHOLDERS. The IRS will tax each Unitholder the same way it
would if the Unitholder owned directly its pro rata share of the securities held
by the Trust. Each Unitholder will determine its tax cost for its share of the
securities held by the Trust by allocating its cost of the Units (including
sales charges) among its share of the securities held by the Trust in proportion
to the fair market values of those securities on the date the Unitholder
purchases its Units. See "Fractional Undivided Interest in Trust" in the
"Summary of Essential Information" in order to determine a Unitholder's share of
each security on the date of Deposit, and see "Cost of Securities to Trust"
under "Portfolio" in order to determine the fair market value of each security
on that date.
The Trust will own shares of regulated investment companies (referred to
herein as the "Municipal Funds") that own municipal bonds. The interest on the
Municipal Bonds is exempt from regular Federal income tax but may be subject to
the alternative minimum tax. The Municipal Funds can distribute exempt-interest
dividends to the Trust. The IRS will treat each Unitholder as receiving its
share of the exempt-interest dividends, ordinary dividends and capital gain
dividends on the shares of the Municipal Funds held by Trust, when the Trust
receives those items, unless the Unitholder has an accounting method that
requires an earlier accrual. The Unitholders will not have to pay regular
Federal income tax on the exempt-interest dividends but may have to pay
alternative minimum tax on them. Similarly, a Unitholder may treat its share of
capital gains dividends received by the Trust as capital gains dividends
received by it.
Each Unitholder will generally have to calculate its gain or loss when the
Trust sells, exchanges or redeems shares in a Municipal Funds or when the
Unitholder sells, exchanges or redeems Units. Any gain will generally be a
capital gain and will be long-term if the Unitholder has held its Units for more
than one year and the Trust has held the shares in the Municipal Funds for more
than one year. A Unitholder's share of capital gains dividends received by the
Trust from the Municipal
740923.3
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<PAGE>
Funds will also be long-term capital gain, regardless of the period of time for
which the Unitholder has held its Units or the period of time for which the
Trust has held the shares in the Municipal Funds. Capital gains are generally
taxed at the same rates applicable to ordinary income, although non-corporate
Unitholders may be subject to a reduced tax rate of 20% on long-term capital
gains. Tax rates may increase before the Trust sells shares in the Municipal
Funds or the Unitholders sell Units.
Any loss on the sale or redemption of Units or share in the Municipal Funds
will generally be a capital loss, and will be long-term for Unitholders who have
held their Units for more than one year if the Trust has also held the shares in
the Municipal Funds for more than one year and short-term capital gain or loss
if the Trust has held the shares, or the Unitholder has held the Units for one
year or less. Capital losses are deductible to the extent of capital gains; in
addition, Unitholders that are not corporations may deduct up to $3,000 of
capital losses (married individuals filing separately may only deduct $1,500)
against ordinary income. However, if the Trust buys shares and sells them at a
loss within six months (or if the Unitholder buys Units and sells them at a loss
within six months), the loss cannot be deducted if (and to the extent that) the
Trust received any exempt-interest dividends on the shares. Any remaining loss
will be treated as long-term, rather than short-term capital loss if (and to the
extent that) the Trust received any capital gains dividends with respect to
those shares.
Unitholders will also not be able to deduct losses resulting from the sale
of shares or the sale of Units if (and to the extent that) the Unitholder
purchases other shares or other Units within 30 days before or after the sale.
This rule could also apply to a transaction in which a Unitholder sell Units or
the Trust sells shares of a Municipal Funds, and the Unitholder purchases shares
of that same Municipal Fund directly within the 60 days period. If this
disallowance rule applies, the basis of the newly purchased Units and shares
will be adjusted to reflect the disallowed loss.
Unitholders that are not corporations cannot deduct their shares of fees
and expenses of the Trust because the fees and expenses relate to tax-exempt
income. In addition, Unitholders cannot deduct interest on money they borrow to
buy or carry Units. The Internal Revenue Service may treat Units as purchased
with borrowed funds even if the borrowed funds cannot be traced directly to the
purchase of Units.
The Trustee will give each Unitholder an annual statement showing the
dividends, exempt-interest dividends and capital gains dividends received by the
Trust, the gross proceeds received by the Trust from the disposition of any
shares in the Municipal Funds, and any other income and fees and expenses of the
Trust. The Trustee will also give an annual information return to each
Unitholder and send copies of those returns to the Internal Revenue Service.
Each Unitholder may have three choices when the Trust ends. First, a
Unitholder who owns at least 2,500 units may have the Trust distribute its share
of the shares of the Municipal Funds in kind (plus cash in lieu of fractional
shares). Second, a Unitholder can have the Trust sell its share of the shares of
the Municipal Funds and distribute the cash. Third, a Unitholder can reinvest
the cash it would have received in units of a future series of the Trust (if one
is offered). A Unitholder who asks the Trust to distribute its share of the
shares of the Municipal Funds (plus cash for fractional shares) should not be
taxed when the shares of the Municipal Funds are distributed to it, although the
cash should be taxable. However, there is no specific authority covering this
issue.
TAXATION OF THE MUNICIPAL FUNDS. The Municipal Funds intend to qualify to
be treated as regulated investment companies for Federal income tax purposes. If
they qualify, the Municipal Funds will not be subject to Federal income tax on
the income they distribute to their shareholders, including the Trust.
When the Bonds owned by the Municipal Funds were issued, bond counsel
issued opinions that the interest on their Bonds is not subject to regular
Federal income tax (except in the limited circumstances referred to below).
Payments that a Municipal Funds receives on a bank letter of credit, guarantee
or insurance policy because the Bond issuer has defaulted will be treated as
payments on the Bond, namely as payments of principal or interest that are not
subject to regular Federal income tax. The Sponsor and Battle Fowler LLP have
not made, and will not make, any review of the basis for these opinions. The tax
exempt status of the interest depends on compliance by the issuer and others
with ongoing requirements, and the opinions of bond counsel assume that these
requirements will be met. However, no one can guarantee that the issuers (and
other users) will comply with these requirements.
In order to qualify as a regulated investment company, a Municipal Funds
must distribute each year at least 90% of its net exempt interest income and net
investment income (including, generally, taxable interest, dividends, net
short-term capital
740923.3
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<PAGE>
gains, and certain other income, less certain expenses. A Municipal Fund that
does not qualify as a regulated investment company will be taxed on its taxable
income and capital gains; and all distributions to its shareholders, including
distributions of net exempt interest income and net long-term capital gains,
will be taxable as ordinary income.
The Municipal Funds may have to accrue and distribute income not yet
received if they invest in Bonds issued at a discount. The Municipal Funds may
be required to sell Bonds that they otherwise would have continued to hold in
order to generate sufficient cash to make this distribution.
The Municipal Funds intend to distribute enough of their income to avoid
the 4% excise tax imposed on regulated investment companies that do not
distribute at least 98% of their taxable income.
TAXATION OF THE TRUST AS A SHAREHOLDER OF THE MUNICIPAL FUNDS. The
Municipal Funds expect to be able to pay "exempt-interest dividends" to their
shareholders, including the Trust, to the extent of their exempt interest income
(less applicable expenses). Unitholders will not have to pay regular Federal
income tax on exempt-interest dividends. However, they may have to pay Federal
alternative minimum tax.
The interest on some private activity bonds is a preference item included
in alternative minimum taxable income. Each year the Municipal Funds will give
to shareholders, including the Trust, a report showing the percentage of fund
income that is a preference item. The Trust will give the same information to
Unitholders. In addition, alternative minimum taxable income of a Unitholder
that is a corporation is increased by part of the excess of its "adjusted
current earnings" (an alternative measure of income that includes interest on
all tax exempt securities) over the amount otherwise determined to be
alternative minimum taxable income. Therefore, the exempt-interest dividends may
cause a Unitholder to have to pay the Federal alternative minimum tax or may
increase the amount of that tax payable by a Unitholder already subject to
Federal alternative minimum tax.
The Municipal Funds may own Bonds originally issued at a discount. In
general, original issue discount is the difference between the price at which a
Bond was issued and its stated redemption price at maturity. Original issue
discount on tax-exempt Bonds accrues as tax-exempt interest over the life of the
Bond. A Municipal Fund's adjusted tax basis for a Bond issued with original
issue discount will include original issue discount accrued during the period it
held the Bond. A Municipal Fund can also pay a premium when it buys a Bond, even
a Bond issued with original issue discount. A Municipal Fund would be required
to amortize the premium over the term of the Bond, and reduce its basis for the
Bond even though it does not get any deduction for the amortization. Therefore,
sometimes a Municipal Fund may have a taxable gain when it sells a Bond for an
amount equal to or less than its original tax basis.
A Unitholder will generally have a taxable gain or loss when it sell Units,
when the Trust sells shares of the Municipal Funds, and when the Municipal Funds
sell Bonds and distribute capital gains dividends. The gain or loss will
generally be capital gain or capital loss if the Units are capital assets for
the Unitholders. Unitholders will also generally have ordinary income if the
Municipal Funds sell or redeem Bonds that were acquired at a market discount, or
sell Bonds at a short term capital gain, and distribute ordinary dividends. In
general, the IRS will treat Bonds as market discount Bonds when the cost of the
Bond, plus any original issue discount that has not yet accrued, is less than
the amount due to be paid at the maturity of the Bond. The IRS taxes all or a
portion of the gain on the sale of a market discount Bond as ordinary income
when the Bond is sold, redeemed or paid. The portion of the gain taxed by the
IRS as ordinary income is equal to the portion of the market discount that has
accrued since the seller purchased the Bond.
Some of the Bonds held by the Municipal Funds will lose their tax exempt
status while they are owned by a "substantial user" of the facilities being
financed with the proceeds of those Bonds, or by persons related to a
substantial user. A "substantial user" is a person whose gross revenue derived
with respect to the facilities financed by the Bonds is more than 5% of the
total revenue derived by all users of those facilities, or who occupies more
than 5% of the usable area of the facilities or for whom the facilities or a
part thereof were specifically constructed, reconstructed or acquired. "Related
persons" are certain related individuals, affiliated corporations, partners and
partnerships. This rule would not change the tax exempt status of interest on
Bonds held by other persons. These rules will apply to Unitholders who receive
exempt- interest dividends attributable to interest on Bonds that financed
facilities for which the Unitholders or related persons are "substantial users".
740923.3
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<PAGE>
Individuals must take exempt-interest dividends into consideration in
computing the portion, if any, of social security benefits that will be included
in their gross income and subject to Federal income tax.
Corporate Unitholders that are subject to the 0.12% environmental tax on
their alternative minimum taxable income in excess of $2,000,000 must take
account of the exempt-interest dividends in calculating that tax.
Any distributions made by the Municipal Funds that do not qualify as
exempt-interest dividends or capital gains dividends will be taxable to
Unitholders as ordinary income, and will not qualify for the corporate
dividends-received deduction.
If the Municipal Funds declare dividends in October, November or December
that are payable to shareholders of record on a date during those months,
Unitholders must take the dividends into account for tax purposes in the current
year, if the dividend is paid either in the current year, or in January or
February of the following year.
Ordinary, exempt-interest and capital gain dividends will be taxable as
described above whether received in cash or reinvested in additional Units under
the Reinvestment Plan. A Shareholder whose distributions are reinvested in
additional Units under the Reinvestment Plan will be treated as having received
the amount of cash allocated to the Unitholder for the purchase of those Units.
BACKUP WITHHOLDING. The Trust generally must withhold and pay over to the
U.S. Treasury 31% of the taxable dividends and other distributions paid to any
individual Unitholder who either does not supply its taxpayer identification
number, has not reported all of its dividends and interest income, or does not
certify to the Trust that he or she is not subject to withholding. The social
security number of an individual is its taxpayer identification number.
Entities that generally qualify for an exemption from Federal income tax,
such as many pension trusts, are nevertheless taxed under Section 511 of the
Code on "unrelated business taxable income." Unrelated business taxable income
is income from a trade or business regularly carried on by the tax-exempt entity
that is unrelated to the entity's exempt purpose. Unrelated business taxable
income generally does not include dividend or interest income or gain from the
sale of investment property, unless such income is derived from property that is
debt-financed or is dealer property. A tax-exempt entity's dividend income from
the Trust and gain from the sale of Units in the Trust or the Trust's sale of
Securities is not expected to constitute unrelated business taxable income to
such tax-exempt entity unless the acquisition of the Unit itself is
debt-financed or constitutes dealer property in the hands of the tax-exempt
entity.
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, including the fact that the Trust is intended to generate tax
exempt income; (b) whether the investment satisfies the diversification
requirement of Section 404(a)(1)(C) of ERISA; and (c) whether the assets of the
Trust are deemed "plan assets" under ERISA and the Department of Labor
regulations regarding the definition of "plan assets."
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.
POSSIBLE CHANGES IN THE LAW. From time to time proposals are introduced in
Congress and state legislatures that could have an adverse impact on the
tax-exempt status of the Bonds. We cannot predict whether any legislation like
this will be enacted.
STATE AND LOCAL TAXES. Unitholders may have to pay state and local tax on
their share of exempt-interest dividends, ordinary dividends and capital gain
dividends paid by the Municipal Funds.
740923.3
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<PAGE>
LIQUIDITY
SPONSOR REPURCHASE. Unitholders who wish to dispose of their Units should
inquire of the Sponsor 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 Sponsor does not guarantee the enforceability, marketability or
price of any Securities in the Portfolio or of the Units. The Sponsor 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 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 Sponsor in the secondary market may be reoffered for
sale by the Sponsor at a price based on the aggregate value of the Securities in
the Trust plus a 4.50% sales charge (or 4.712% 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 Sponsor in the secondary market also may be redeemed by the
Sponsor if it determines such redemption to be in its best interest.
The Sponsor 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 Sponsor 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 redemption date (three calendar days after tender), the Sponsor 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
seven years from the Initial Date of Deposit), Units may also be tendered to the
Trustee for redemption upon payment of any relevant tax by contacting the
Sponsor, broker, dealer or financial institution 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 Sponsor 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 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 Sponsor 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 Sponsor believes 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.
Because the Securities are listed on a national securities exchange, the Trustee
may
740923.3
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<PAGE>
determine the value of the Securities in the Trust 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 bank or broker-dealer at The Depository Trust Company. An In Kind
Distribution will be reduced by customary transfer and registration charges. The
tendering Unitholder will receive his pro rata number of whole shares of each of
the Securities comprising the Trust portfolio and cash from the 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 Sponsor
does not elect to purchase a Unit tendered for redemption or if the Sponsor
tenders 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 Sponsor 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 bank
or broker in order to determine if there is a current secondary market price in
excess of the Redemption Price.
TRUST ADMINISTRATION
PORTFOLIO SUPERVISION. The Trust is a unit investment trust and is not a
managed fund. Traditional methods of investment management for a managed fund
typically involve frequent changes in a portfolio of securities on the basis of
economic, financial and market analyses. The Portfolio of the Trust, however,
will not be managed and therefore the adverse financial condition of an issuer
will not necessarily require the sale of its Securities from the portfolio. 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 Sponsor 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 Sponsor 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 Sponsor, would
make the retention of the Security detrimental to the Trust or the Unitholders.
In addition, the Trust Agreement provides as follows:
(a) If a default in the payment of amounts due on any Security occurs
pursuant to provision (1) above and if the Sponsor fails to give immediate
instructions to sell or hold that Security, the Trustee, within 30 days of
that failure by the Sponsor, shall sell the Security.
740923.3
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<PAGE>
(b) It is the responsibility of the Sponsor to instruct the Trustee to
reject any offer made by an issuer of any of the Securities to issue new
securities in exchange and substitution for any Security pursuant to a
recapitalization or reorganization. If any exchange or substitution is
effected notwithstanding such rejection, any securities or other property
received shall be promptly sold unless the Sponsor directs that it be
retained.
(c) Any property received by the Trustee after the Initial Date of Deposit
as a distribution on any of the Securities in a form other than cash or
additional shares of the Securities, shall be promptly sold unless the
Sponsor directs 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 Sponsor is 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 Sponsor 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 Sponsor 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 Sponsor without the consent of Unitholders: (1) to cure any
ambiguity or to correct or supplement any provision which may be defective or
inconsistent; (2) to change any provision thereof as may be required by the
Securities and Exchange Commission or any successor governmental agency; or (3)
to make such other provisions in regard to matters arising thereunder as shall
not adversely affect the interests of the Unitholders.
The Trust Agreement may also be amended in any respect, or performance of
any of the provisions thereof may be waived, with the consent of investors
holding 66 2/3% of the Units then outstanding for the purpose of modifying the
rights of Unitholders; provided that no such amendment or waiver shall reduce
any Unitholder's interest in the Trust without his consent or reduce the
percentage of Units required to consent to any such amendment or waiver without
the consent of the holders of all Units. The Trust Agreement may not be amended,
without the consent of the holders of all Units in the Trust then outstanding,
to increase the number of Units issuable or to permit the acquisition of any
Securities in addition to or in substitution for those initially deposited in
such Trust, except in accordance with the provisions of the Trust Agreement. The
Trustee shall promptly notify Unitholders, in writing, of the substance of any
such amendment.
TRUST TERMINATION. The Trust Agreement provides that the Trust shall
terminate as of the Evaluation Time on the business day preceding the
Liquidation Period or upon the earlier maturity, redemption or other
disposition, as the case may be, of the last of the Securities held in such
Trust and in no event is it to continue beyond the Mandatory Termination Date.
If the value of the Trust shall be less than the minimum amount set forth under
"Summary of Essential Information" in Part A, the Trustee may, in its
discretion, and shall, when so directed by the Sponsor, 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 Sponsor for the sale of all or a portion of the Securities in the Trust,
and in so doing, the Sponsor will determine the manner, timing and execution of
the sales of the underlying Securities. Any brokerage commissions received by
the Sponsor 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) (see Part A--"Summary of Essential
Information" for the date of 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 commencement of the Liquidation
Period by
740923.3
B-17
<PAGE>
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 Sponsor as the agent
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; or
3. to invest such Unitholder's pro rata share of the net assets of
the Trust derived from the sale by the Sponsor as agent of the Trustee of
the underlying Securities during the Liquidation Period, in units of a
subsequent series of Equity Securities Trust (the "New Series"), provided
one is offered. It is expected that a special redemption and liquidation
will be made of all Units of this Trust held by a Unitholder (a "Rollover
Unitholder") who affirmatively notifies the Trustee 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 Sponsor has 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 such sales will be free of brokerage
commissions. The Sponsor, 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 Sponsor
may purchase a large amount of securities for the New Series in a short period
of time. The Sponsor's buying of securities may tend to raise the market prices
of these securities. The actual market impact of the Sponsor's purchases,
however, is currently unpredictable because the actual amount of securities to
be purchased and the supply and price of those securities is unknown. A similar
problem may occur in connection with the sale of Securities during the
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 Sponsor believes that the sale of
underlying Securities over the Liquidation Period as 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 Sponsor, 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.
740923.3
B-18
<PAGE>
The Sponsor may for any reason, in its sole discretion, decide not to
sponsor any subsequent series of the Trust, without penalty or incurring
liability to any Unitholder. If the Sponsor so decides, the Sponsor 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 Sponsor expects,
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 roll 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 Sponsor intends 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 Sponsor reserves the right to modify, suspend or terminate
the rollover privilege at any time.
THE SPONSOR. The Sponsor, 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
the Sponsor, 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 Boyston
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 Sponsor for numerous series of unit investment trusts, including
New York Municipal Trust, Series 1 (and Subsequent Series), Municipal Securities
Trust, Series 1 (and Subsequent Series), 1st Discount Series (and Subsequent
Series), Multi-State Series 1 (and Subsequent Series), Mortgage Securities
Trust, Series 1 (and Subsequent Series), Insured Municipal Securities Trust,
Series 1 (and Subsequent Series) and 5th Discount Series (and Subsequent
Series), 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 $297.6 billion at
December 31, 1996. It is the second largest life insurance company in the United
States in terms of total assets. MetLife provides a wide range of insurance and
investment products and services to individuals and groups and is the leader
among United States life insurance companies in terms of total life insurance in
force, which exceeded $1.6 trillion at December 31, 1996 for MetLife and its
insurance affiliates. MetLife and its affiliates provide insurance or other
financial services to approximately 36 million people worldwide.
The information included herein is only for the purpose of informing
investors as to the financial responsibility of the Sponsor and its ability to
carry out its contractual obligations. The Sponsor 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 Sponsor may resign at any time by delivering to the Trustee an
instrument of resignation executed by the Sponsor. If at any time the Sponsor
shall resign or fail to perform any of its duties under the Trust Agreement or
becomes incapable of acting or becomes bankrupt or its affairs are taken over by
public authorities, then the Trustee may either (a) appoint a successor Sponsor;
(b) terminate the Trust Agreement and liquidate the Trust; or (c) continue to
act as Trustee without terminating the Trust Agreement. Any successor Sponsor
appointed by the Trustee shall be satisfactory to the Trustee and, at the time
of appointment, shall have a net worth of at least $1,000,000.
THE TRUSTEE. The Trustee is The Chase Manhattan Bank with its principal
executive office located at 270 Park Avenue, New York, New York 10017 (800)
428-8890 and its unit investment trust office at 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.
740923.3
B-19
<PAGE>
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 Sponsor, and mailing a copy of a notice of resignation to all
Unitholders. In such an event the Sponsor is 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 Sponsor may remove the Trustee and appoint a successor as provided in the
Trust Agreement. Notice of such removal and appointment shall be mailed to each
Unitholder by the Sponsor. 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.
THE PORTFOLIO CONSULTANT. The Portfolio Consultant is Riccardi Group LLC, a
Delaware limited liability company with offices at 161 Maiden Lane, New York,
New York 10038. Cynthia M. Brown, an officer and director of the Portfolio
Consultant, will be primarily responsible for selecting which Municipal Funds to
recommend to the Sponsor. Ms. Brown is a former Senior Vice President and
portfolio manager at Massachusetts Financial Services ("MFS"). She was
responsible for a number of portfolios totalling over $2 billion which were
comprised of primarily non-rated as well as investment grade tax-exempt
securities.
The Portfolio Consultant is not a Sponsor of the Trust. The Portfolio
Consultant has been retained by the Sponsor, at its expense. The Portfolio
Consultant's only responsibility with respect to the Trust, in addition to its
role in Portfolio selection, is to monitor the Securities of the Portfolio and
make recommendations to the Sponsor regarding the disposition of the Securities
held by the Trust. The responsibility of monitoring the Securities of the
Portfolio means that if the Portfolio Consultant's views materially change
regarding the appropriateness of an investment in any Security then held in the
Trust based upon the investment objectives, guidelines, terms, parameters,
policies and restrictions supplied to the Portfolio Consultant by the Sponsor,
the Portfolio Consultant will notify the Sponsor of such change to the extent
consistent with applicable legal requirements. The Sponsor is not obligated to
adhere to the recommendations of the Portfolio Consultant regarding the
disposition of Securities. The Sponsor has the sole authority to direct the
Trust to dispose of Securities under the Trust Agreement. The Portfolio
Consultant has no other responsibilities or obligations to the Trust or the
Unitholders.
The Portfolio Consultant may resign or may be removed by the Sponsor at any
time on sixty days' prior notice. The Sponsor shall use its best efforts to
appoint a satisfactory successor. Such resignation or removal shall become
effective upon the acceptance of appointment by the successor Portfolio
Consultant. If upon resignation of the Portfolio Consultant no successor has
accepted appointment within sixty days after notice of resignation, the Sponsor
has agreed to perform this function.
740923.3
B-20
<PAGE>
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 Sponsor 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 Sponsor
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 Sponsor 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 Sponsor on a per 100 Units basis, for all or a
portion of the estimated costs incurred in organizing the Trust--including the
cost of the initial preparation, printing and execution of the registration
statement and the indenture, Federal and State registration fees, the initial
fees and expenses of the Trustee, legal expenses and any other 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. To the extent that
actual organization costs are less than the estimated amount, only the actual
organization costs will be deducted form 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 Sponsor. Any balance of the costs incurred in establishing the
Trust, as well as advertising and selling costs, will be paid by the Sponsor at
no cost to the Trust.
The Sponsor 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 Sponsor's 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 Sponsor
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 fees may be increased without approval of the
Unitholders by amounts not exceeding proportionate increases in consumer prices
for services as measured by the United States Department of Labor's Consumer
Price Index entitled "All Services Less Rent."
The following additional charges are or may be incurred by the Trust: all
expenses (including counsel fees) of the Trustee incurred and advances made in
connection with its activities under the Trust Agreement, including the expenses
and costs of any action undertaken by the Trustee to protect the Trust and the
rights and interests of the Unitholders; fees of the Trustee for any
extraordinary services performed under the Trust Agreement; indemnification of
the Trustee for any loss or liability accruing to it without gross negligence,
bad faith or willful misconduct on its part, arising out of or in connection
with its acceptance or administration of the Trust; indemnification of the
Sponsor 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 Sponsor, 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 Sponsor otherwise directs, the accounts of the Trust shall be
audited not less than annually by independent public accountants selected by the
Sponsor. The expenses of the audit shall be an expense of the Trust. So long as
the Sponsor maintains a secondary market, the Sponsor 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.
740923.3
B-21
<PAGE>
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
Sponsor or new Units created by the Sponsor's 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 [ ]%. Investors should
inform their broker, dealer or financial institution when purchasing their Units
if they wish to participate in the reinvestment plan. Thereafter, Unitholders
should contact their broker, dealer or financial institution 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 Day 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 Sponsor reserves 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.
EXCHANGE PRIVILEGE AND CONVERSION OFFER
Unitholders will be able to elect to exchange any or all of their Units of
this Trust for Units of one or more of any available series of Equity Securities
Trust, Insured Municipal Securities Trust, Municipal Securities Trust, New York
Municipal Trust or Mortgage Securities Trust (the "Exchange Trusts") subject to
a reduced sales charge as set forth in the prospectus of the Exchange Trust (the
"Exchange Privilege"). Unit owners of any registered unit investment trust for
which there is no active secondary market in the units of such trust (a
"Redemption Trust") will be able to elect to redeem such units and apply the
proceeds of the redemption to the purchase of available Units of one or more
series of an Exchange Trust (the "Conversion Trusts") at the Public Offering
Price for units of the Conversion Trust subject to a reduced sales charge as set
forth in the prospectus of the Conversion Trust (the "Conversion Offer"). Under
the Exchange Privilege, the Sponsor's repurchase price during the initial
offering period of the Units being surrendered will be based on the market value
of the Securities in the Trust portfolio or on the aggregate offer price of the
Bonds in the other Trust Portfolios; and, after the initial offering period has
been completed, will be based on the aggregate bid price of the securities in
the particular Trust portfolio. Under the Conversion Offer, units of the
Redemption Trust must be tendered to the trustee of such trust for redemption at
the redemption price determined as set forth in the relevant Redemption Trust's
prospectus. Units in an Exchange or Conversion Trust will be sold to the
Unitholder at a price based on the aggregate offer price of the securities in
the Exchange or Conversion Trust portfolio (or for units of Equity Securities
Trust, based on the market value of the underlying securities in the trust
portfolio) during the initial public offering period of the Exchange or
Conversion Trust; and after the initial public offering period has been
completed, based on the aggregate bid price of the securities in the Exchange or
Conversion Trust Portfolio if its initial offering has been completed plus
accrued interest (or for units of Equity Securities Trust, based on the market
value of the underlying securities in the trust portfolio) and a reduced sales
charge.
Except for Unitholders who wish to exercise the Exchange Privilege or
Conversion Offer within the first five months of their purchase of Units of the
Exchange or Redemption Trust, any purchaser who purchases Units under the
Exchange Privilege or Conversion Offer will pay a lower sales charge than that
which would be paid for the Units by a new investor. For Unitholders who wish to
exercise the Exchange Privilege or Conversion Offer within the first five months
of their purchase of Units of the Exchange or Redemption Trust, the sales charge
applicable to the purchase of units of an Exchange or Conversion Trust shall be
the greater of (i) the reduced sales charge or (ii) an amount which when coupled
with the sales charge paid by the Unitholder upon his original purchase of Units
of the Exchange or Redemption Trust would equal the sales charge applicable in
the direct purchase of units of an Exchange or Conversion Trust.
In order to exercise the Exchange Privilege the Sponsor must be maintaining
a secondary market in the units of the available Exchange Trust. The Conversion
Offer is limited only to unit owners of any Redemption Trust. Exercise of the
Exchange Privilege and the Conversion Offer by Unitholders is subject to the
following additional conditions (i) at the time of the Unitholder's election to
participate in the Exchange Privilege or the Conversion Offer, there must be
units of the Exchange or Conversion Trust available for sale, either under the
initial primary distribution or in the Sponsor's secondary market, (iii)
exchanges will be effected in whole units only, (iv) Units of the Mortgage
Securities Trust may only be acquired in blocks of 1,000 Units and (v) Units of
the Equity Securities Trust may only be acquired in blocks of 100 Units.
740923.3
B-22
<PAGE>
Unitholders will not be permitted to advance any funds in excess of their
redemption in order to complete the exchange. Any excess proceeds received from
a Unitholder for exchange, or from units being redeemed for conversion, will be
remitted to such Unitholder.
The Sponsor reserves the right to suspend, modify or terminate the Exchange
Privilege and/or the Conversion Offer. The Sponsor will provide Unitholders of
the Trust with 60 days' prior written notice of any termination or material
amendment to the Exchange Privilege or the Conversion Offer, provided that, no
notice need be given if (i) the only material effect of an amendment is to
reduce or eliminate the sales charge payable at the time of the exchange, to add
one or more series of the Trust eligible for the Exchange Privilege or the
Conversion Offer, to add any new unit investment trust sponsored by Reich & Tang
or a sponsor controlled by or under common control with Reich & Tang, or to
delete a series which has been terminated from eligibility for the Exchange
Privilege or the Conversion Offer, (ii) there is a suspension of the redemption
of units of an Exchange or Conversion Trust under Section 22(e) of the
Investment Company Act of 1940, or (iii) an Exchange Trust temporarily delays or
ceases the sale of its units because it is unable to invest amounts effectively
in accordance with its investment objectives, policies and restrictions. During
the 60-day notice period prior to the termination or material amendment of the
Exchange Privilege described above, the Sponsor will continue to maintain a
secondary market in the units of all Exchange Trusts that could be acquired by
the affected Unitholders. Unitholders may, during this 60-day period, exercise
the Exchange Privilege in accordance with its terms then in effect.
To exercise the Exchange Privilege, a Unitholder should notify the Sponsor
of his desire to exercise his Exchange Privilege. To exercise the Conversion
Offer, a unit owner of a Redemption Trust should notify his retail broker of his
desire to redeem his Redemption Trust Units and use the proceeds from the
redemption to purchase Units of one or more of the Conversion Trusts. If Units
of a designated, outstanding series of an Exchange or Conversion Trust are at
the time available for sale and such Units may lawfully be sold in the state in
which the Unitholder is a resident, the Unitholder will be provided with a
current prospectus or prospectuses relating to each Exchange or Conversion Trust
in which he indicates an interest. He may then select the Trust or Trusts into
which he desires to invest the proceeds from his sale of Units. The exchange
transaction will operate in a manner essentially identical to a secondary market
transaction except that units may be purchased at a reduced sales charge. The
conversion transaction will be handled entirely through the unit owner's retail
broker. The retail broker must tender the units to the trustee of the Redemption
Trust for redemption and then apply the proceeds to the redemption toward the
purchase of units of a Conversion Trust at a price based on the aggregate offer
or bid side evaluation per Unit of the Conversion Trust, depending on which
price is applicable, plus accrued interest and the applicable sales charge. The
certificates must be surrendered to the broker at the time the redemption order
is placed and the broker must specify to the Sponsor that the purchase of
Conversion Trust Units is being made pursuant to the Conversion Offer. The unit
owner's broker will be entitled to retain a portion of the sales charge.
TAX CONSEQUENCES OF THE EXCHANGE PRIVILEGE AND THE CONVERSION OFFER. A
surrender of Units pursuant to the Exchange Privilege or the Conversion Offer
will constitute a "taxable event" to the Unitholder under the Internal Revenue
Code. The Unitholder will realize a tax gain or loss that will be of a long- or
short-term capital or ordinary income nature depending on the length of time the
units have been held and other factors. (See "Tax Status".) A Unitholder's tax
basis in the Units acquired pursuant to the Exchange Privilege or Conversion
Offer will be equal to the purchase price of such Units. Investors should
consult their own tax advisors as to the tax consequences to them of exchanging
or redeeming units and participating in the Exchange Privilege or Conversion
Offer.
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 ACCOUNTANTS. The Statement of Financial Condition, including
the Portfolio, is included herein in reliance upon the report of
PricewaterhouseCoopers LLP, independent accountants, and upon the authority of
said firm as experts in accounting and auditing.
740923.3
B-23
<PAGE>
PERFORMANCE INFORMATION. Total returns, average annualized returns or
cumulative returns for various periods of the Municipal Funds 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 reinvestment of dividends and capital gains, divided by
the maximum public offering price as of the date of calculation. Average
annualized returns show the average return for stated periods of longer than a
year. 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. 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.
740923.3
B-24
<PAGE>
<TABLE>
<S> <C>
No person is authorized to give any information or to ----------------------------------------------------
make any representations not contained in Parts A and B of EQUITY SECURITIES TRUST
this Prospectus; and any information or representation not ----------------------------------------------------
contained herein must not be relied upon as having been
authorized by the Trust, the Trustee or the Sponsor. The EQUITY SECURITIES TRUST
Trust is registered as a unit investment trust under the MUNICIPAL SYMPHONY SERIES 1
Investment Company Act of 1940. Such registration does not
imply that the Trust or any of its Units have been (A UNIT INVESTMENT TRUST)
guaranteed, sponsored, recommended or approved by the
United States or any state or any agency or officer PROSPECTUS
thereof.
DATED: ________ __, 1998
------------------
This Prospectus does not constitute an offer to sell, SPONSOR:
or a solicitation of an offer to buy, securities in any
state to any person to whom it is not lawful to make such REICH & TANG DISTRIBUTORS, INC.
offer in such state. 600 Fifth Avenue
New York, New York 10020
212-830-5400
Table of Contents
Title Page PORTFOLIO CONSULTANT:
PART A RICCARDI GROUP LLC
Summary of Essential Information.................... A-2 161 Maiden Lane
Statement of Financial Condition.................... A-6 New York, New York 10038
Portfolio........................................... A-7
Report of Independent Accountants................... A-8
PART B TRUSTEE:
The Trust........................................... B-1
Risk Considerations................................. B-3 THE CHASE MANHATTAN BANK
Public Offering..................................... B-7 4 New York Plaza
Rights of Unitholders............................... B-10 New York, New York 10004
Tax Status.......................................... B-11
Liquidity........................................... B-15
Trust Administration................................ B-16
Trust Expenses and Charges.......................... B-21
Reinvestment Plan................................... B-22
Exchange Privilege and Conversion Offer............. B-22
Other Matters....................................... B-23
</TABLE>
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 hereby made.
740923.3
<PAGE>
PART II -- ADDITIONAL INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM A -- BONDING ARRANGEMENTS
The employees of Reich & Tang Distributors, Inc. are covered under Brokers'
Blanket Policy, Standard Form 14, in the amount of $11,000,000 (plus
$196,000,000 excess coverage under Brokers' Blanket Policies, Standard Form 14
and Form B Consolidated). This policy has an aggregate annual coverage of $15
million.
ITEM B -- CONTENTS OF REGISTRATION STATEMENT
This Registration Statement on Form S-6 comprises the following papers and
documents:
The facing sheet on Form S-6.
The Cross-Reference Sheet (incorporated by reference to the
Cross-Reference Sheet to the Registration Statement of Equity
Securities Trust, Series 12, 1997 Triple Strategy Trust II).
The Prospectus consisting of pages.
Undertakings.
Signatures.
Written consents of the following persons:
Battle Fowler LLP (included in Exhibit 3.1)
Price Waterhouse LLP
Portfolio Consultant
The following exhibits:
*99.1.1 -- Reference Trust Agreement including certain amendments to
the Trust Indenture and Agreement referred to under Exhibit
99.1.1.1 below.
99.1.1.1 -- Form of Trust Indenture and Agreement (filed as Exhibit
1.1.1 to Amendment No. 1 to Form S-6 Registration Statement
No. 33-62627 of Equity Securities Trust, Series 6, Signature
Series, Gabelli Entertainment and Media Trust on November 16,
1995 and incorporate herein by reference).
99.1.3.5 -- Certificate of Incorporation of Reich & Tang Distributors,
Inc. (filed as Exhibit 99.1.3.5 to Form S-6 Registration
Statement No. 333-44301 on January 15, 1998 and incorporated
herein by reference).
99.1.3.6 -- By-Laws of Reich & Tang Distributors, Inc. (filed as Exhibit
99.1.3.6 to Form S-6 Registration
Statement No. 333-44301 on January 15, 1998 and incorporated
herein by reference).
99.1.4 -- Form of Agreement Among Underwriters (filed as Exhibit 1.4
to Amendment No. 1 to Form S-6 Registration Statement No.
33-62627 of Equity Securities Trust, Series 6, Signature
Series, Gabelli Entertainment and Media Trust on November 16,
1995 and incorporated herein by reference).
*99.3.1 -- Opinion of Battle Fowler LLP as to the legality of the
securities being registered, including their consent to the
filing thereof and to the use of their name under the headings
"Tax Status" and "Legal Opinions" in the Prospectus, and to
the filing of their opinion regarding tax status of the Trust.
99.6.0 -- Power of Attorney of Reich & Tang Distributors, Inc., the
Depositor, by its officers and a majority of its Directors
(filed as Exhibit 99.6.0 to Form S-6 Registration Statement
No. 333-44301 on January 15, 1998 and incorporated herein by
reference).
*99.27 -- Financial Data Schedule (for EDGAR filing only).
- --------
* To be filed by amendment.
758903.1
<PAGE>
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Equity Securities Trust, Municipal Symphony Series 1, has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, hereunto duly authorized, in the City of New York and State of New
York on the 23rd day of September, 1998.
EQUITY SECURITIES TRUST, MUNICIPAL
SYMPHONY SERIES 1
(Registrant)
REICH & TANG DISTRIBUTORS, INC.
(Depositor)
By /s/ PETER J. DEMARCO
----------------------------------------
Peter J. DeMarco
(Authorized Signator)
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons, who
constitute the principal officers and a majority of the directors of Reich &
Tang Distributors, Inc., the Depositor, in the capacities and on the dates
indicated.
Name Title
---- -----
RICHARD E. SMITH, III President and Director
PETER S. VOSS Director
G. NEAL RYLAND Director
STEVEN W. DUFF Director
September 23, 1998
ROBERT F. HOERLE Managing Director
PETER J. DEMARCO Executive Vice President
By /s/ PETER J. DEMARCO
RICHARD I. WEINER Vice President --------------------
Peter J. DeMarco
BERNADETTE N. FINN Vice President Attorney-In-Fact*
LORRAINE C. HYSLER Secretary
RICHARD DE SANCTIS Treasurer
EDWARD N. WADSWORTH Executive Officer
- --------
* Executed copies of Powers of Attorney were filed as Exhibit 99.6.0 to Form
S-6 to Registration Statement No. 333-44301 on January 15, 1998.
II-2
758903.1
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
registration statement on Form S-6 (the "Registration Statement") of our report
dated October , 1998, relating to the Statement of Financial Condition,
including the Portfolio, of Equity Securities Trust, Municipal Symphony Series 1
which appears in such Prospectus. We also consent to the reference to us under
the heading "Independent Accountants" in such Prospectus.
PRICEWATERHOUSE COOPERS LLP
160 Federal Street
Boston, MA 02110
October , 1998
II-3
758903.1
<PAGE>
CONSENT OF PORTFOLIO CONSULTANT
The Sponsor, Trustee and Unitholders
Equity Securities Trust, Municipal Symphony Series 1
We hereby consent to the use of the name "Riccardi Group LLC" included
herein and to the reference to our Firm in the Prospectus.
RICCARDI GROUP LLC
New York, New York
October , 1998
II-4
758903.1
