As filed with the Securities and Exchange Commission on October 28, 1999
Registration No. 333-64071
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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POST-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-6
For Registration Under the Securities Act
of 1933 of Securities of Unit Investment
Trusts Registered on Form N-8B-2
---------------------
A. EXACT NAME OF TRUST:
Equity Securities Trust, Series 20, Municipal Symphony Series
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
It is proposed that this filing become effective (check appropriate box)
/X/ immediately upon filing pursuant to paragraph (b) of Rule 485
/ / on ( date ) pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)
/ / on ( date ) pursuant to paragraph (a) of Rule 485
================================================================================
The Registrant filed a Rule 24f-2 Notice for its fiscal year ended
June 30, 1999 on or about September 28, 1999.
<PAGE>
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INSERT LOGO
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EQUITY SECURITIES TRUST, SERIES 20
MUNICIPAL SYMPHONY SERIES
The Trust is a unit investment trust designated Equity Securities Trust, Series
20, Municipal Symphony Series (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 have been
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 a secondary objective 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 as of June 30, 1999 (the "Evaluation Date"), a summary of certain
specific information regarding the Trust and audited financial statements of the
Trust, including the related portfolio, as of the Evaluation Date. 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 28, 1999
872427.1
<PAGE>
THE TRUST
OBJECTIVES. 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 a secondary objective 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 24 closed-end investment companies, the
portfolios of which are concentrated in municipal bonds (the "Municipal Funds").
Each Municipal Fund has been recommended by the Portfolio Consultant as able in
their view to maintain consistent dividend distributions exempt from regular
Federal income tax. The interest on the municipal bonds held by the Municipal
Funds may, however, be subject to the alternative minimum 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 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 24 issues of common stock of
which 100% are of domestic issuers. 100% of the issues are represented by the
Sponsor's contracts to purchase. 100% of the Portfolio is listed on the New York
Stock Exchange. Sixteen of the Municipal Funds (representing approximately 61.5%
of the Portfolio on the initial date of deposit) are concentrated in high yield
bonds (under SEC guidelines high yield bonds are considered bonds rated in the
rating categories Baa or lower by Moody's Investors Service, Inc. and BBB or
lower by Standard & Poor's Rating Group). Based upon the composition of the
portfolio of the other Municipal Funds there may be a concentration in high
yield bonds in the Trust from time to time. A trust or fund is considered to be
"concentrated" in a particular category when the securities in that category
constitute 25% or more of the aggregate offering prices of the securities in its
portfolio.
RISK CONSIDERATIONS. 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. The longer the maturity of a municipal bond
the greater the risk of a decline in value with increases in interest rates.
- --------
* For changes in the Trust Portfolio from July 1, 1999 to September 15, 1999
see Schedule A or pages A-8 through A-12.
A-2
872427.1
<PAGE>
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 Changes in the Federal tax law could adversely affect the municipal
bond market and the value of the Trust's portfolio.
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 Unitholders will not only bear Trust expenses, but will also be
paying a pro rata share of the expenses of the Municipal Funds.
o The high yield bonds held by the Municipal Funds will generally be
rated in lower rating categories (Baa or lower by Moody's and BBB or lower by
Standard & Poor's), or in comparable non-rated municipal securities. While these
lower rated securities offer a higher return potential than higher rated
securities, they also involve greater price volatility and greater risk of loss
of income and principal.
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.
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.
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 $100,000
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.
A-3
872427.1
<PAGE>
DISTRIBUTIONS. Distributions of dividends received, less expenses, will be made
by the Trust on the last business 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 six 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 without a sales
charge. See "Reinvestment Plan" in Part B for details on how to enroll in the
Reinvestment Plan.
A-4
872427.1
<PAGE>
UNDERWRITING. The names and addresses of the Underwriters of the Units of the
Trust are as follows:
<TABLE>
<CAPTION>
Name Address
--------------------- ------------------------
<S> <C>
Reich & Tang Distributors, Inc..................... 600 Fifth Avenue New York, New York 10020
McLaughlin, Piven, Vogel Securities, Inc. 30 Wall Street, New York, New York 10005
Interstate/Johnson Lane Corporation................ 201 North Tryon Street, Charlotte, North Carolina 28202
Fahnstock & Company Inc............................ 125 Broad Street, New York, New York 10004
Gibraltar Securities Co............................ 25 Hanover Road, Florham Park, New Jersey 07932
Gruntal & Co., LLC................................. One Liberty Plaza, New York, New York 10006
Nori, Hennion, Walsh, Inc.......................... 3799 Route 46, Hilltop Plaza, Parsippany, New Jersey 07054
Raymond James & Associates, Inc.................... 880 Carillon Parkway, St. Petersburg, Florida 33716
M.L. Stern & Co. Inc............................... 8350 Wilshire Boulevard, Beverly Hills, California 90211
Advest, Inc........................................ 90 State House Square, Hartford, Connecticut 06103
Bear, Stearns & Co. Inc............................ 245 Park Avenue, New York, New York 10167
Donald & Co. Securities, Inc....................... 2536 Country Side Boulevard, Clearwater, Florida 34623
Dougherty Summit Securities LLC.................... 90 South 7th Street, Ste. 4400, Minneapolis, Minnesota 55402
McDonald & Company Securities, Inc................. 800 Superior Avenue, Cleveland, Ohio 44114
Miller, Johnson & Kuehn, Inc....................... 5500 Wayzata Boulevard, Ste. 800, Minneapolis, Minnesota 55116
Primevest Financial Services, Inc...................... 400 First Street South, St. Cloud, Minnesota 56301
Southwest Securities Inc........................... 1201 Elm Street, Dallas, Texas 75270
Tucker Anthony Inc................................. One Beacon Street, Boston, Massachusetts 02108
</TABLE>
A-5
872427.1
<PAGE>
<TABLE>
<CAPTION>
SUMMARY OF ESSENTIAL INFORMATION AS OF JUNE 30, 1999:
<S> <C>
INITIAL DATE OF DEPOSIT: November 12, 1998 LIQUIDATION PERIOD: Beginning seven days
AGGREGATE VALUE OF SECURITIES.......................... $143,028,541 prior to the Mandatory Termination Date.
NUMBER OF UNITS........................................ 16,598,934 MANDATORY TERMINATION DATE: The
earlier of November 12, 2005 or the disposition
FRACTIONAL UNDIVIDED INTEREST IN of the last Security in the Trust.
TRUST............................................... 1/16,598,934 CUSIP NUMBERS: Cash: 294762414
PUBLIC OFFERING PRICE PER 100 UNITS Reinvestment: 294762422
Aggregate Value of Securities in Trust.............. $143,028,541 TRUSTEE: The Chase Manhattan Bank
Divided By 16,598,934 Units (times 100)............. $ 861.67 TRUSTEE'S FEE: $.80 per 100 Units outstanding
Plus Sales Charge of 4.50% of Public OTHER FEES AND EXPENSES: $.07 per 100
Offering Price.................................. $ 40.60 Units outstanding
Public Offering Price+.............................. $ 902.27 SPONSOR: Reich & Tang Distributors, Inc.
SPONSOR'S REPURCHASE PRICE AND SPONSOR'S SUPERVISORY FEE: Maximum of
REDEMPTION PRICE PER $.30 per 100 Units outstanding (see "Trust
100 UNITS++......................................... $ 861.67 Expenses and Charges" in Part B).
EVALUATION TIME: 4:00 p.m. New York Time. PORTFOLIO CONSULTANT: Riccardi Group
MINIMUM INCOME OR PRINCIPAL LLC
DISTRIBUTION: $1.00 per 100 Units RECORD DATES: Fifteenth day of each month
MINIMUM VALUE OF TRUST: The Trust may be DISTRIBUTION DATES: Last business day of
terminated if the value of the Trust is less than 40% of the each month
aggregate value of the Securities at the completion of the
Deposit Period.
------------------
</TABLE>
+ On the Initial Date of Deposit there was 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 was reduced
to reflect the payment of organization costs to the Sponsor. Therefore, the
amount of the Repurchase Price and Redemption Price per 100 Units received
by a Unitholder included the portion representing organization costs only if
such Units were tendered for redemption prior to the close of the initial
offering period. 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-6
872427.1
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL AND STATISTICAL INFORMATION
Selected data for each Unit outstanding for the periods listed below:
<S> <C> <C> <C> <C>
Distributions of
Units Net Asset Value* Distributions of Income During Principal During the
Period Ended Outstanding Per 100 Units the Period (per 100 Units) Period (Per 100 Units)
- --------------- -------------- ---------------- ------------------------------ -----------------------
June 30, 1999 16,598,934 $861.67 $34.55 $0.39
</TABLE>
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* Net Asset Value per Unit is calculated by dividing net assets as
disclosed in the "Statement of Net Assets" by the number of Units
outstanding as of the date of the Statement of Net Assets. See Note
5 of Notes to Financial Statements for a description of the components
of Net Assets
A-7
872427.1
<PAGE>
Schedule A
Changes in the Trust Portfolio:
On July 12, 1999, 4,889 shares ($32,756.30) of Colonial Municipal Income Trust
held by the Trust (Portfolio No. 3) were sold.
On July 12, 1999, 3,627 shares ($33,595.09) of Morgan Stanley Dean Witter
Municipal Income Opportunities Trust held by the Trust (Portfolio No. 8) were
sold.
On August 6, 1999, 1,446 shares ($14,025.73) of Apex Municipal Fund Inc. held by
the Trust (Portfolio No. 1) were sold.
On August 6, 1999, 3,286 shares ($21,399.36) of Colonial Municipal Income Trust
held by the Trust (Portfolio No. 3) were sold.
On August 6, 1999, 994 shares ($8,895.27) of Dreyfus Strategic Municipals, Inc.
held by the Trust (Portfolio No. 5) were sold.
On August 6, 1999, 2,820 shares ($22,065.76) of MFS Municipal Income Trust held
by the Trust (Portfolio No. 7) were sold.
On August 6, 1999, 1,815 shares ($14,428.76) of Morgan Stanley Dean Witter
Municipal Income Opportunities Trust II held by the Trust (Portfolio No. 9) were
sold.
On August 6, 1999, 2,239 shares ($21,017.90) of Morgan Stanley Dean Witter
Municipal Income Opportunities Trust held by the Trust (Portfolio No. 8) were
sold.
On August 6, 1999, 681 shares ($9,414.51) of Morgan Stanley Dean Witter Quality
Municipal Investment Trust held by the Trust (Portfolio No. 11) were sold.
On August 6, 1999, 2,403 shares ($35,172.73) of Nuveen Performance Plus
Municipal Fund Inc. held by the Trust (Portfolio No. 14) were sold.
On August 6, 1999, 1,846 shares ($28,865.86) of Nuveen Quality Income Municipal
Fund Inc. held by the Trust (Portfolio No. 16) were sold.
On August 6, 1999, 612 shares ($9,187.34) of Nuveen Premier Municipal Income
Fund Inc. held by the Trust (Portfolio No. 15) were sold.
On August 6, 1999, 1,909 shares ($19,829.07) of Putnam High Yield Municipal
Trust held by the Trust (Portfolio No. 17) were sold.
On August 6, 1999, 1,054 shares ($14,626.94) of Putnam Investment Grade
Municipal Trust II held by the Trust (Portfolio No. 19) were sold.
A-8
872427.1
<PAGE>
On August 6, 1999, 994 shares ($13,617.34) of Putnam Tax Free Health Care Fund
held by the Trust (Portfolio No. 22) were sold.
On August 6, 1999, 1,008 shares ($13,935.13) of Putnam Municipal Opportunities
Trust held by the Trust (Portfolio No. 21) were sold.
On August 6, 1999, 2,149 shares ($16,009.51) of Colonial High Income Municipal
Trust held by the Trust (Portfolio No. 2) were sold.
On August 6, 1999, 3,411 shares ($28,821.98) of Dreyfus Strategic Municipal Bond
Fund, Inc. held by the Trust (Portfolio No. 4) were sold.
On August 6, 1999, 1,996 shares ($23,976.14) of Kemper Municipal Income Trust
held by the Trust (Portfolio No. 6) were sold.
On August 6, 1999, 1,554 shares ($13,713.59) of Municipal High Income Fund Inc.
held by the Trust (Portfolio No. 12) were sold.
On August 6, 1999, 1,933 shares ($29,863.85) of Nuveen Municipal Market
Opportunity Fund, Inc. held by the Trust (Portfolio No. 13) were sold.
On August 6, 1999, 1,766 shares ($25,297.10) of Putnam Investment Grade
Municipal Trust held by the Trust (Portfolio No. 18) were sold.
On August 6, 1999, 2,465 shares ($27,761.13) of Putnam Managed Municipal Income
Trust held by the Trust (Portfolio No. 20) were sold.
On August 6, 1999, 1,919 shares ($18,014.00) of Van Kampen Municipal Income
Trust held by the Trust (Portfolio No. 23) were sold.
On August 6, 1999, 1,513 shares ($23,280.51) of Van Kampen Trust Investment
Grade Municipals held by the Trust (Portfolio No. 24) were sold.
On August 10, 1999, 1,318 shares ($18,962.09) of Morgan Stanley Dean Witter
Quality Municipal Income Trust held by the Trust (Portfolio No. 10) were sold.
On July 1, 1999, 338 shares ($3,396.90) of Ampex Municipal Fund held by the
Trust (Portfolio No. 1) were purchased.
On July 1, 1999, 767 shares ($5,407.35) of Colonial Municipal Income Trust held
by the Trust (Portfolio No. 3) were purchased.
On July 1, 1999, 232 shares ($2,157.60) of Dreyfus Strategic Municipals, Inc.
held by the Trust (Portfolio No. 5) were purchased.
On July 1, 1999, 658 shares ($5,379.15) of MFS Municipal Income Trust held by
the Trust (Portfolio No. 7) were purchased.
A-9
872427.1
<PAGE>
On July 1, 1999 424 shares ($3,466.20) of Morgan Stanley Dean Witter Municipal
Income Opportunities Trust II held by the Trust (Portfolio No. 9) were
purchased.
On July 1, 1999, 523 shares ($4,929.28) of Morgan Stanley Dean Witter Municipal
Income Opportunities Trust held by the Trust (Portfolio No. 8) were purchased.
On July 1, 1999, 159 shares ($2,253.83) of Morgan Stanley Dean Witter Quality
Municipal Investment Trust held by the Trust (Portfolio No. 11) were purchased.
On July 1, 1999, 308 shares ($4,481.40) of Morgan Stanley Dean Witter Quality
Municipal Income Trust held by the Trust (Portfolio No. 10) were purchased.
On July 1, 1999, 561 shares ($8,302.80) of Nuveen Performance Plus Municipal
Fund, Inc. held by the Trust (Portfolio No. 14) were purchased.
On July 1, 1999, 431 shares ($6,702.05) of Nuveen Quality Income Municipal Fund,
Inc. held by the Trust (Portfolio No. 16) were purchased.
On July 1, 1999, 143 shares ($2,152.15) of Nuveen Premier Municipal Income Fund,
Inc. held by the Trust (Portfolio No. 15) were purchased.
On July 1, 1999, 446 shares ($4,928.30) of Putnam High Yield Municipal Trust
held by the Trust (Portfolio No. 17) were purchased.
On July 1, 1999, 246 shares ($3,594.68) of Putnam Investment Grade Municipal
Trust II held by the Trust (Portfolio No. 19) were purchased.
On July 1, 1999, 232 shares ($3,317.60) of Putnam Tax Free Health Care Fund held
by the Trust (Portfolio No. 22) were purchased.
On July 1, 1999, 235 shares ($3,389.88) of Putnam Municipal Opportunities Trust
held by the Trust (Portfolio No. 21) were purchased.
On July 1, 1999, 502 shares ($4,009.73) of Colonial High Income Municipal Trust
held by the Trust (Portfolio No. 2) were purchased.
On July 1, 1999, 796 shares ($6,955.05) of Dreyfus Strategic Municipal Bond
Fund, Inc. held by the Trust (Portfolio No. 5) were purchased.
On July 1, 1999, 466 shares ($5,731.80) of Kemper Municipal Income Trust held by
the Trust (Portfolio No. 6) were purchased.
On July 1, 1999, 363 shares ($3,285.15) of Municipal High Income Fund, Inc. held
by the Trust (Portfolio No. 12) were purchased.
On July 1, 1999, 451 shares ($7,125.80) of Nuveen Municipal Market Opportunity
Fund, Inc. held by the Trust (Portfolio No. 13) were purchased.
A-10
872427.1
<PAGE>
On July 1, 1999, 412 shares ($5,891.60) of Putnam Investment Grade Municipal
Trust held by the Trust (Portfolio No. 18) were purchased.
On July 1, 1999, 576 shares ($6,544.80) of Putnam Managed Municipal Income Trust
held by the Trust (Portfolio No. 20) were purchased.
On July 1, 1999, 448 shares ($4,306.40) of Van Kampen Municipal Income Trust
held by the Trust (Portfolio No. 23) were purchased.
On July 1, 1999, 353 shares ($5,489.15) of Van Kampen Trust for Investment Grade
Municipals held by the Trust (Portfolio No. 24) were purchased.
On September 1, 1999, 355 shares ($3,479.00) of Apex Municipal Fund Inc. held by
the Trust (Portfolio No. 1) were purchased.
On September 1, 1999, 807 shares ($5,285.85) of Colonial Municipal Income Trust
held by the Trust (Portfolio No. 3) were purchased.
On September 1, 1999, 244 shares ($2,070.95) of Dreyfus Strategic Municipals,
Inc. held by the Trust (Portfolio No. 5) were purchased.
On September 1, 1999, 693 shares ($5,362.09) of MFS Municipal Income Trust held
by the Trust (Portfolio No. 7) were purchased.
On September 1, 1999, 446 shares ($3,534.55) Morgan Stanley Dean Witter
Municipal Income Opportunities Trust II held by the Trust (Portfolio No. 9) were
purchased.
On September 1, 1999, 550 shares ($5,046.25) of Morgan Stanley Dean Witter
Municipal Income Opportunities Trust held by the Trust (Portfolio No. 8) were
purchased.
On September 1, 1999, 167 shares ($2,262.85) of Morgan Stanley Dean Witter
Quality Municipal Investment Trust held by the Trust (Portfolio No. 11) were
purchased.
On September 1, 1999, 324 shares ($4,552.20) of Morgan Stanley Dean Witter
Quality Municipal Income Trust held by the Trust (Portfolio No. 10) were
purchased.
On September 1, 1999, 590 shares ($8,215.75) of Nuveen Performance Plus
Municipal Fund Inc. held by the Trust (Portfolio No. 14) were purchased.
On September 1, 1999, 454 shares ($6,889.45) of Nuveen Quality Income Municipal
Fund Inc. held by the Trust (Portfolio No. 16) were purchased.
On September 1, 1999, 150 shares ($2,182.50) of Nuveen Premier Municipal Income
Fund Inc. held by the Trust (Portfolio No. 15) were purchased.
On September 1, 1999, 469 shares ($4,801.39) of Putnam High Yield Municipal
Trust held by the Trust (Portfolio No. 17) were purchased.
A-11
872427.1
<PAGE>
On September 1, 1999, 259 shares ($3,558.01) of Putnam Investment Grade
Municipal Trust II held by the Trust (Portfolio No. 19) were purchased.
On September 1, 1999, 244 shares ($3,168.95) of Putnam Tax Free Health Care Fund
held by the Trust (Portfolio No. 22) were purchased.
On September 1, 1999, 248 shares ($3,298.40) of Putnam Municipal Opportunities
Trust held by the Trust (Portfolio No. 21) were purchased.
On September 1, 1999, 528 shares ($3,788.40) of Colonial High Income Municipal
Trust held by the Trust (Portfolio No. 2) were purchased.
On September 1, 1999, 838 shares ($6,955.40) of Dreyfus Strategic Municipal Bond
Fund, Inc. held by the Trust (Portfolio No. 5) were purchased.
On September 1, 1999, 490 shares ($5,996.38) of Kemper Municipal Income Trust
held by the Trust (Portfolio No. 6) were purchased.
On September 1, 1999, 382 shares ($3,385.48) of Municipal High Income Fund held
by the Trust (Portfolio No. 12) were purchased.
On September 1, 1999, 475 shares ($7,208.13) of Nuveen Municipal Market
Opportunity Fund held by the Trust (Portfolio No. 13) were purchased.
On September 1, 1999, 434 shares ($5,989.20) of Putnam Investment Grade
Municipal Trust held by the Trust (Portfolio No. 18) were purchased.
On September 1, 1999, 606 shares ($6,658.43) of Putnam Managed Municipal Income
Trust held by the Trust (Portfolio No. 20) were purchased.
On September 1, 1999, 471 shares ($4,350.86) of Van Kampen Municipal Income
Trust held by the Trust (Portfolio No. 23) were purchased.
On September 1, 1999, 372 shares ($5,598.60) of Van Kampen Trust for Investment
Grade Municipals held by the Trust (Portfolio No. 24) were purchased.
7,744 Units were redeemed from the Trust.
A-12
872427.1
<PAGE>
Report of Independent Accountants
To the Sponsor, Trustee and Certificateholders of
Equity Securities Trust, Series 20, Municipal Symphony Series
In our opinion, the accompanying statement of net assets, including the
portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Equity Securities Trust, Series 20,
Municipal Symphony Series (the "Trust") at June 30, 1999, and the results of its
operations, the changes in its net assets and the financial highlights for the
period November 12, 1998 (commencement of operations) through June 30, 1999, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, 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 securities at June 30,
1999 by correspondence with the Trustee, provides a reasonable basis for the
opinion expressed above.
/s/ PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
Boston, MA
September 15, 1999
<PAGE>
<TABLE>
<CAPTION>
Equity Securities Trust, Series 20, Municipal Symphony Series
Portfolio
June 30, 1999
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio Percentage of Cost of Market
No. Shares Name of Issuer Trust (1) Securities (2) Value (3)
--- ------ -------------- --------- -------------- ---------
<S> <C> <C> <C> <C> <C>
1 432,525 Apex Municipal Fund Inc. 3.10% $4,666,928 $4,433,381
2 642,588 Colonial High Income Municipal Trust 3.56 5,539,034 5,100,542
3 828,245 Colonial Municipal Income Trust 3.90 6,283,678 5,590,654
4 1,020,021 Dreyfus Strategic Municipal Bond Fund, Inc. 6.23 9,573,425 8,925,184
5 297,371 Dreyfus Strategic Municipals, Inc. 1.91 2,936,699 2,732,096
6 596,824 Kemper Municipal Income Trust 5.13 7,567,900 7,348,395
7 843,247 MFS Municipal Income Trust 4.86 7,159,784 6,956,788
8 632,773 Morgan Stanley Dean Witter 4.12 6,132,684 5,892,699
Municipal Income Opportunities
9 542,755 Morgan Stanley Dean Witter 3.06 4,684,594 4,375,962
Municipal Income Opportunities II
10 394,066 Morgan Stanley Dean Witter 4.04 6,324,669 5,787,844
Quality Municipal Income Trust
11 203,791 Morgan Stanley Dean Witter 2.01 2,998,754 2,878,548
Quality Municipal Investment Trust
12 464,774 Municipal High Income Fund 2.88 4,749,190 4,124,869
13 578,100 Nuveen Municipal Market Opportunity Fund, Inc. 6.33 9,434,483 9,068,944
14 718,480 Nuveen Performance Plus Municipal Fund, Inc. 7.50 11,071,579 10,732,295
15 182,995 Nuveen Premier Municipal Income Fund, Inc. 1.93 3,129,175 2,767,799
16 552,109 Nuveen Quality Income Municipal Fund, Inc. 6.00 9,191,336 8,592,196
17 570,826 Putnam High Yield Municipal Trust 4.38 6,450,631 6,279,086
18 528,552 Putnam Investment Grade Municipal Trust 5.19 7,928,185 7,432,762
19 314,700 Putnam Investment Grade Municipal Trust II 3.20 4,733,057 4,582,819
20 737,192 Putnam Managed Municipal Income Trust 5.86 8,884,936 8,385,559
21 301,519 Putnam Municipal Opportunities Trust 3.03 4,457,138 4,334,336
22 297,371 Putnam Tax Free Health Care Fund 3.00 4,576,215 4,293,294
23 573,936 Van Kampen Municipal Income Trust 3.86 6,150,336 5,524,134
24 452,284 Van Kampen Trust for Investment Grade 4.92 7,270,366 7,038,670
Municipals
------- ------------ ------------
Total Investment in Securities 100.00% $151,894,776 $143,178,856
======= ============ ============
</TABLE>
See accompanying footnotes to portfolio and notes to financial statements.
<PAGE>
Equity Securities Trust, Series 20, Municipal Symphony Series
Footnotes to Portfolio
- -------------------------------------------------------------------------------
1. Based on the market value of the securities in the Trust.
2. See "Tax Status" in Part B of this Prospectus for a statement of the
Federal tax consequences to a Certificateholder upon the sale or
redemption of a security.
3. At June 30, 1999, the net unrealized depreciation of all the securities
was comprised of the following:
Gross unrealized appreciation $ -
Gross unrealized depreciation (8,715,920)
-------------
Net unrealized depreciation $ (8,715,920)
=============
The accompanying notes form an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
Equity Securities Trust, Series 20, Municipal Symphony Series
Statement of Net Assets
June 30, 1999
- --------------------------------------------------------------------------------
<S> <C>
Investments in Securities,
at Market Value (Cost $151,894,776) $ 143,178,856
-------------
Other Assets
Dividends Receivable 413,350
-------------
Total Other Assets 413,350
-------------
Liabilities 150,315
Advance from Trustee -------------
Total Liabilities 150,315
-------------
Excess of Other Assets over Total Liabilities 263,035
-------------
Net Assets (16,598,934 Units of Fractional Undivided
Interest Outstanding, $8.64 per Unit) $ 143,441,891
=============
</TABLE>
The accompanying notes form an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
Equity Securities Trust, Series 20, Municipal Symphony Series
Statement of Operations
- --------------------------------------------------------------------------------
For the Period From
November 12, 1998
(Date of Deposit) to
June 30, 1999
<S> <C>
Investment Income
Dividends $ 3,789,565
----------
Expenses
Trustee's Fees 40,703
Sponsor's Advisory Fee 1,651
----------
Total Expenses 42,354
----------
Net Investment Income 3,747,211
----------
Realized and Unrealized (Loss)
Realized (Loss) on (231,055)
Investments
Unrealized (Depreciation)
on Investments (8,715,920)
----------
Net (Loss) on Investments (8,946,975)
----------
Net Decrease
in Net Assets
Resulting From Operations $ (5,199,764)
===========
</TABLE>
The accompanying notes form an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
Equity Securities Trust, Series 20, Municipal Symphony Series
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
For the Period From
November 12, 1998
(Date of Deposit) to
June 30, 1999
<S> <C>
Operations
Net Investment Income $ 3,747,211
Realized (Loss)
on Investments (231,055)
Unrealized (Depreciation)
on Investments (8,715,920)
------------
Net Decrease in
Net Assets Resulting
From Operations (5,199,764)
------------
Distributions to Certificateholders
Investment Income 3,585,559
Principal 22,129
Redemptions
Interest 564
Principal 1,409,883
-----------
Total Distributions
and Redemptions 5,018,135
-----------
Total (Decrease) (10,217,899)
Value of Additional Units Acquired During
the Offering Period to Certificateholders 153,510,284
Net Assets
Beginning of Period (Date of Deposit) 149,506
-----------
End of Period (Including Undistributed
Net Investment Income of $161,088) $ 143,441,891
==============
</TABLE>
The accompanying notes form an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
Equity Securities Trust, Series 20, Municipal Symphony Series
Financial Highlights
- --------------------------------------------------------------------------------------------------
Selected data for a unit of the Trust outstanding:*
For the Period From
November 12, 1998
(Date of Deposit) to
June 30, 1999
<S> <C>
Net Asset Value, Beginning of Period** (Date of Deposit) $ 9.54
-------------
Dividend Income .46
Expenses (.01)
-------------
Net Investment Income .45
-------------
Net Gain or Loss on Investments(1) (.92)
-------------
Total from Investment Operations (.47)
-------------
Less Distributions
to Certificateholders
Income .43
-------------
Total Distributions .43
-------------
Net Asset Value, End of Period** $ 8.64
=============
(1) Net gain or loss on investments is a result of changes in outstanding units since
November 12, 1998 and the dates of net gain and loss on investments.
- ----------
* Unless otherwise stated, based upon average units outstanding during
the period of 8,307,305 ([16,598,934 + 15,676]/2) for 1999.
** Based upon actual units outstanding
</TABLE>
The accompanying notes form an integral part of the financial statements.
<PAGE>
Equity Securities Trust, Series 20, Municipal Symphony Series
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. Organization
Equity Securities Trust, Series 20, Municipal Symphony Series, (the
"Trust") was organized on November 12, 1998 by Reich & Tang
Distributors, Inc. under the laws of the State of New York by a Trust
Indenture and Agreement, and is registered under the Investment Company
Act of 1940. The objective of the Trust is to provide interest income
which is generally exempt from regular Federal income tax under
existing law and to preserve capital.
2. Summary of Significant Accounting Policies
The following is a summary of significant accounting policies
consistently followed by the Trust in preparation of its financial
statements. The policies are in conformity with generally accepted
accounting principles ("GAAP"). The preparation of financial statements
in accordance with GAAP requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the
financial statements. Actual amounts could differ from those estimates.
Dividend income is recognized as of the ex-dividend date.
Security Valuation
Investments are carried at market value which is determined by Kenny
S&P Evaluation Services, a business unit of J.J. Kenny Company, Inc., a
subsidiary of The McGraw-Hill Companies, Inc. The market value of the
portfolio is based upon the bid prices for the stocks at the end of the
year, which approximates the fair value of the security at that date,
except that the market value on the date of deposit represents the cost
to the Trust based on the offering prices for investments at that date.
The difference between cost and market value is reflected as unrealized
appreciation (depreciation) of investments. Securities transactions are
recorded on the trade date. Realized gains (losses) from securities
transactions are determined on the basis of average cost of the
securities sold.
<PAGE>
Equity Securities Trust, Series 20, Municipal Symphony Series
Notes to Financial Statements
- --------------------------------------------------------------------------------
3. Income Taxes
No provision for federal income taxes has been made in the accompanying
financial statements because the Trust intends to continue to qualify
for the tax treatment applicable to Grantor Trusts under the Internal
Revenue Code. Under existing law, if the Trust so qualifies, it will
not be subject to federal income tax on net income and capital gains
that are distributed to unitholders.
4. Trust Administration
The Chase Manhattan Bank (the "Trustee") has custody of assets and
responsibility for the accounting records and financial statements of
the Trust and is responsible for establishing and maintaining a system
of internal control related thereto. The Trustee is also responsible
for all estimates of expenses and accruals reflected in the Trust's
financial statements.
The Trust Indenture and Agreement provides for dividend distributions
once a month.
The Trust Indenture and Agreement further requires that proceeds
received from the disposition of securities, other than those
securities sold in connection with the redemption of units, be
distributed to Certificateholders.
The Trust Indenture and Agreement also requires the Trust to redeem
units tendered. For the period ended June 30, 1999, 174,879 units were
redeemed.
The Trust pays an annual fee for trustee services rendered by the
Trustee of $.80 per 100 units outstanding. A maximum fee of $.30 per
100 units outstanding is paid to the Sponsor. For the period ended June
30, 1999, the "Trustee's Fees" are comprised of Trustee fees of
$39,851, and other expenses of $852. The other expenses include
professional, printing and miscellaneous fees.
<PAGE>
<TABLE>
<CAPTION>
Equity Securities Trust, Series 20, Municipal Symphony Series
Notes to Financial Statements
- --------------------------------------------------------------------------------
<S> <C> <C>
5. Net Assets
At June 30, 1999, the net assets of the Trust represented the interest
of Certificateholders as follows:
Original cost to Certificateholders $ 149,506
Less Initial Gross Underwriting Commission 19,500
------------
130,006
Cost of Additional Units Acquired During
the Offering Period to Certificateholders 153,510,284
Accumulated Cost of Securities Sold (1,745,514)
Net Unrealized Depreciation (8,715,920)
Undistributed Net Investment Income 161,088
Undistributed Proceeds From Investments 101,947
------------
Total $ 143,441,891
============
The original cost to Certificateholders, less the initial gross
underwriting commission, represents the aggregate initial public
offering price net of the applicable sales charge on 15,676 units of
fractional undivided interest of the Trust as of the date of deposit.
An additional 16,758,137 units of fractional undivided interest were
issued during the offering period.
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
[INSERT LOGO]
- --------------------------------------------------------------------------------
EQUITY SECURITIES TRUST, SERIES 20
MUNICIPAL SYMPHONY SERIES
PROSPECTUS PART B
PART B OF THIS PROSPECTUS MAY NOT BE
DISTRIBUTED UNLESS ACCOMPANIED BY
PART A
THE TRUST
ORGANIZATION. Equity Securities Trust, Series 20, Municipal Symphony
Series 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.
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
882313.1
B-1
<PAGE>
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).
OBJECTIVES. 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
a secondary objective to the objective of current income. The Trust seeks to
achieve its objectives by investing in a portfolio of the common stock of 24
closed-end tax exempt municipal bond funds, each of which has been recommended
based upon the review of the Portfolio Consultant as able in their view 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 six years, at which time
investors may choose to either receive the distributions in kind (if they own at
least 2,500 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 fund (the "Municipal Funds") that is able in the
view of the Portfolio Consultant to maintain consistent dividend distributions
exempt from regular federal income taxes. 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
bond fund is evaluated by the Portfolio Consultant for its credit quality and
call risk probability. In addition, all potential investments are evaluated
based upon the portfolio manager's experience in various economic and interest
rate cycles.
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 20 to 30 funds that meet the criteria of tax-exempt
income, stable performance, and are consistent with the Trust's objectives. By
employing an investment strategy that will require the Trust to invest in a
series of funds, investors will be diversified across a wide
882313.1
B-2
<PAGE>
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 substitution is made, the proceeds of the sale of
Securities will be distributed to Unitholders as set forth under "Rights of
Unitholders--Distributions." In addition, if the right of substitution shall not
be utilized to acquire Substitute Securities in the event of a failed contract,
the Sponsor will cause to be refunded the sales charge attributable to such
Failed Securities to all Unitholders, and distribute the principal and
dividends, if any, attributable to such Failed Securities on the next
Distribution Date.
RISK CONSIDERATIONS
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. In addition, many of
the Municipal Funds are leveraged. Municipal funds that are leveraged raise
additional funds by selling short-term, adjustable rate preferred shares with
low yields and investing the proceeds in longer-term bonds which tend to have
higher yields. The leverage
882313.1
B-3
<PAGE>
provides extra yield because the investment provides a higher return than the
cost of the preferred security. However, interest rate risk is also increased.
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, and
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 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.
LOWER GRADE SECURITIES. The Municipal Funds which the Trust has in its
portfolio may invest in lower grade securities. There are certain risks
associated with the Municipal Funds' investments in lower grade securities that
you should be aware of because they could cause the value of the Municipal Funds
to decrease. This, in turn, could cause the value of your Units to decrease.
These risks are outlined below.
882313.1
B-4
<PAGE>
Lower grade securities are regarded as being predominately speculative
as to the issuer's ability to make payments of principal and interest.
Investment in such securities involves substantial risk. Lower grade securities
are commonly referred to as "junk bonds." Issuers of lower grade securities may
be highly leveraged and may not have available to them more traditional methods
of financing. Therefore, the risks associated with acquiring the securities of
such issuers generally are greater than is the case with higher-rated
securities. For example, during an economic downturn or a sustained period of
rising interest rates, issuers of lower grade securities may be more likely to
experience financial stress, especially if such issuers are highly leveraged.
During periods of economic downturn, such issuers may not have sufficient
revenues to meet their interest payment obligations. The issuer's ability to
service its debt obligations also may be adversely affected by specific issuer
developments, the issuer's inability to meet specific projected business
forecasts or the unavailability of additional financing. Therefore, there can be
no assurance that in the future there will not exist a higher default rate
relative to the rates currently existing in the market for lower grade
securities. The risk of loss due to default by the issuer is significantly
greater for the holders of lower grade securities because such securities may be
unsecured and may be subordinate to other creditors of the issuer. Generally,
the lower grade securities in which the Municipal Funds may invest do not
include instruments which, at the time of investment, are in default or the
issuers of which are in bankruptcy. However, there can be no assurance that such
events will not occur after a Municipal Fund purchases a particular security, in
which case the Municipal Fund and the Trust may experience losses and incur
costs.
Lower grade securities frequently have call or redemption features that
would permit an issuer to repurchase the security from one of the Municipal
Funds which holds it. If a call were exercised by the issuer during a period of
declining interest rates, the particular Municipal Fund is likely to have to
replace such called security with a lower yielding security, thus decreasing the
net investment income to the Municipal Fund and the Trust and dividends to
Unitholders.
Lower grade securities tend to be more volatile than higher-rated
fixed-income securities, so that adverse economic events may have a greater
impact on the prices of lower grade securities than on higher-rated fixed-income
securities. Factors adversely affecting the market value of such securities are
likely to adversely affect a Municipal Fund's net asset value which, in turn,
may adversely affect the value of your Units. Recently, demand for lower grade
securities has increased significantly and the difference between the yields
paid by lower grade securities and investment grade bonds (i.e., the "spread")
has narrowed. To the extent this differential increases, the value of lower
grade securities in a Municipal Fund's portfolio could be adversely affected
along with the value of your Units.
Like higher-rated fixed-income securities, lower grade securities
generally are purchased and sold through dealers who make a market in such
securities for their own accounts. However, there are fewer dealers in the lower
grade securities market, which market may be less liquid than the market for
higher-rated fixed-income securities, even under normal economic conditions.
Also, there may be significant disparities in the prices quoted for lower grade
securities by various dealers. As a result, during periods of high demand in the
lower grade securities market, it may be difficult to acquire lower grade
securities appropriate for investment by the Municipal Funds. Adverse economic
conditions and investor perceptions thereof (whether or not based on economic
reality) may impair liquidity in the lower grade securities market and may cause
the prices a Municipal Fund receives for its lower grade securities to be
reduced. In addition, a Municipal Fund may experience difficulty in liquidating
a portion of its portfolio when necessary to meet a Municipal Fund's liquidity
needs or in response to a specific economic event such as deterioration in the
creditworthiness of the issuers. Under such conditions, judgment may play a
greater role in valuing certain of a Municipal Fund's portfolio instruments than
in the case of instruments trading in a more liquid market. In addition, a
Municipal Fund may incur additional expense to the extent that it is required to
seek recovery upon a default on a portfolio holding or to participate in the
restructuring of the obligation.
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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 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
882313.1
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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 Municipal Fund.
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
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
882313.1
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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.
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
882313.1
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rate would adversely affect the after-tax return to investors that can take
advantage of the deduction. 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 $1.30 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.
VOLUME AND OTHER DISCOUNTS. Units are available at a volume discount
from the Public Offering Price during the initial public offering based upon the
number of Units purchased. This volume discount will result in a reduction of
the sales charge applicable to such purchases. The approximate reduced sales
charge on the Public Offering Price applicable to such purchases are as follows:
882313.1
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NUMBER OF UNITS APPROXIMATE REDUCED SALES CHARGE
- --------------- --------------------------------
10,000 but less than 25,000 4.25%
25,000 but less than 50,000 4.00%
50,000 but less than 75,000 3.50%
75,000 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 3.50%. 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 without a sales charge and at a price equal to the aggregate value
of the underlying securities in the Trust, divided by the number of Units
outstanding. Such arrangements result in less selling effort and selling
expenses than sales to employee groups of other companies. Resales or transfers
of Units purchased under the employee benefit arrangements may only be made
through the Sponsor's secondary market, so long as it is being maintained, and
not through other broker-dealers.
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 3.50% of the public offering
price.
Units may be purchased in the 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
882313.1
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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.
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 presently maintains and intends to continue 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.
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 AND UNDERWRITERS' PROFITS. The Sponsor and the Underwriters
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
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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.
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.
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The amount of any dividend distributions 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 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.
882313.1
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<PAGE>
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 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 (or the Unitholder) 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 (or the
Unitholder) 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.
882313.1
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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 the Bonds is not subject to regular Federal
income tax (except in the limited circumstances described 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 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
882313.1
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<PAGE>
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".
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.
882313.1
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<PAGE>
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.
882313.1
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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,
882313.1
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<PAGE>
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.
As of the close of the initial offering period the Redemption Price per 100
Units will be reduced to reflect the payment of the per 100 Unit organization
costs to the Sponsor. Because the Securities are listed on a national securities
exchange, the Trustee may 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.
882313.1
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<PAGE>
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.
(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
882313.1
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<PAGE>
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 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
882313.1
B-21
<PAGE>
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 adviser 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.
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.
882313.1
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<PAGE>
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 Boylston
Street, Boston, MA 02116, is a holding company of firms engaged in the
securities and investment advisory business. These affiliates in the aggregate
are investment advisors or managers to over 80 registered investment companies.
Reich & Tang is 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), Schwab Trusts and
McLaughlin, Piven, Vogel Family of Trusts.
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.
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.
882313.1
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<PAGE>
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 340 Sunset Drive, Fort
Lauderdale, Florida 33301. 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 totaling 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.
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
882313.1
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<PAGE>
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
882313.1
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<PAGE>
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.
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 not be subject to a sales charge. 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
882313.1
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<PAGE>
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. 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"
882313.1
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<PAGE>
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 financial statements for the year ended
June 30, 1999 included in Part A of this Prospectus have been examined by
PricewaterhouseCoopers LLP, independent accountants. The financial statements
have been so included in reliance on their report given upon the authority of
said firm as experts in accounting and auditing.
PERFORMANCE INFORMATION. Total returns, average annualized returns or
cumulative returns for various periods of the 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.
882313.1
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<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, SERIES 20
Trust is registered as a unit investment trust under the MUNICIPAL SYMPHONY SERIES
Investment Company Act of 1940. Such registration does not
imply that the Trust or any of its Units have been guaranteed, (A UNIT INVESTMENT TRUST)
sponsored, recommended or approved by the United States or
any state or any agency or officer thereof. PROSPECTUS
------------------ DATED: OCTOBER 28, 1999
This Prospectus does not constitute an offer to sell, or a
solicitation of an offer to buy, securities in any state to any SPONSOR:
person to whom it is not lawful to make such offer in such
state. REICH & TANG DISTRIBUTORS, INC.
600 Fifth Avenue
Table of Contents New York, New York 10020
212-830-5400
Title Page
- ----- ----
PART A TRUSTEE:
Summary of Essential Information.................................. A-6
Financial and Statistical Information................................A-7 THE CHASE MANHATTAN BANK
Audit and Financial Information................................... F-1 4 New York Plaza
New York, New York 10004
</TABLE>
PART B
The Trust.......................................................... B-1
Risk Considerations................................................ B-3
Public Offering.................................................... B-9
Rights of Unitholders............................................. B-12
Tax Status........................................................ B-13
Liquidity......................................................... B-18
Trust Administration.............................................. B-20
Trust Expenses and Charges........................................ B-25
Reinvestment Plan................................................. B-26
Exchange Privilege and Conversion Offer........................... B-26
Other Matters..................................................... B-28
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.
882313.1
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<PAGE>
PART II -- ADDITIONAL INFORMATION NOT REQUIRED IN PROSPECTUS
CONTENTS OF REGISTRATION STATEMENT
This Post-Effective Amendment to the 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.
Signatures.
Written consents of the following persons:
Battle Fowler LLP (included in Exhibit 3.1)
PricewaterhouseCoopers 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 (filed as Exhibit 99.1.1 to Amendment No. 2 to Form S-6
Registration Statement No. 333-64071 on November 12, 1998 and
incorporated herein by reference).
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
incorporated 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 (filed as Exhibit 99.3.1
to Amendment No. 2 to Form S-6 Registration Statement No.
333-64071 on November 12, 1998 and incorporated herein by
reference).
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).
872855.1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Equity Securities Trust, Series 20, Municipal Symphony Series,
certifies that it has met all of the requirements for effectiveness of this
Post- Effective Amendment to the Registration Statement pursuant to Rule 485(b)
under the Securities Act of 1933. The registrant has duly caused this
Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, hereunto duly authorized, in the City of New York and
State of New York on the 21st day of October, 1999.
EQUITY SECURITIES TRUST, SERIES 20, MUNICIPAL
SYMPHONY SERIES
(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
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons, who constitute the principal officers and a majority of
the directors of Reich & Tang Distributors, Inc., the Depositor, in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C>
RICHARD E. SMITH, III President and Director
PETER S. VOSS Director
G. NEAL RYLAND Director
STEVEN W. DUFF Director October 21, 1999
PETER J. DEMARCO Executive Vice President By /s/ PETER J. DEMARCO
------------------------
RICHARD I. WEINER Vice President Peter J. DeMarco
Attorney-In-Fact*
BERNADETTE N. FINN Vice President
LORRAINE C. HYSLER Secretary
RICHARD DE SANCTIS Treasurer
EDWARD N. WADSWORTH Executive Officer
</TABLE>
- --------
* 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
872855.1
<PAGE>
CONSENT OF PORTFOLIO CONSULTANT
The Sponsor, Trustee and Unitholders
Equity Securities Trust, Series 20, Municipal Symphony Series
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
Fort Lauderdale, Florida
October 28, 1999
II-3
872855.1
<PAGE>
Consent of Independent Accountants
We hereby consent to the use in the Prospectus constituting part of this
Post-Effective Amendment to the registration statement on Form S-6 of our report
dated September 15, 1999 of the Equity Securities Trust, Series 20, Municipal
Symphony Series, which appear in such Prospectus. We also consent to the
reference to us under the heading "Independent Accountants" in the Prospectus.
PricewaterhouseCoopers LLP
Boston, MA
October 26, 1999
885194.1
