As filed with the Securities and Exchange Commission on May 24, 1999
Registration No.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-6
For Registration Under the Securities Act
of 1933 of Securities of Unit Investment
Trusts Registered on Form N-8B-2
---------------------
A. EXACT NAME OF TRUST:
Equity Securities Trust, Series 23, Municipal Symphony Series II
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
<TABLE>
<CAPTION>
D. NAME AND COMPLETE ADDRESS OF AGENT FOR SERVICE:
COPY OF COMMENTS TO:
<S> <C> <C>
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
</TABLE>
E. TITLE AND AMOUNT OF SECURITIES BEING REGISTERED:
An indefinite number of Units of Equity Securities Trust, Series 23,
Municipal Symphony Series II is being registered under the Securities
Act of 1933 pursuant to Section 24(f) of the Investment Company Act
of 1940, as amended, and Rule 24f-2 thereunder.
F. PROPOSED MAXIMUM AGGREGATE OFFERING PRICE TO THE PUBLIC OF THE
SECURITIES BEING REGISTERED:
Indefinite
G. AMOUNT OF FILING FEE:
No Filing Fee Required
H. APPROPRIATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after the effective date of the Registration
Statement.
The registrant hereby amends the registration statement on such date or dates as
may be necessary to delay its effective date until the registrant shall file a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
835711.1
<PAGE>
Subject to Completion Dated May 24, 1999
- --------------------------------------------------------------------------------
E S T
- --------------------------------------------------------------------------------
EQUITY SECURITIES TRUST
SERIES 23
MUNICIPAL SYMPHONY SERIES II
California Portfolio
New York Portfolio
The final prospectus for Equity Securities Trust, Series 20,
Municipal Symphony Series is hereby incorporated by reference and used as a
preliminary prospectus for Equity Securities Trust, Series 23, Municipal
Symphony Series II. Except as indicated below, the narrative information and
structure of the final prospectus which includes the new Trust will be
substantially the same as that of the previous prospectus. Information with
respect to this Trust, including pricing, the size and composition of the Trust
portfolio, the number of units of the Trust, dates and summary information
regarding the characteristics of securities to be deposited in the Trust is not
now available and will be different from that shown since each trust has a
unique portfolio. Accordingly, the information contained herein with regard to
the previous Trust should be considered as being included for informational
purposes only. Investors should contact account executives of the underwriters
who will be informed of the expected effective date of this Trust and who will
be supplied with complete information with respect to such Trust on the day of
and immediately prior to the effectiveness of the registration statement
relating to units of the Trust.
The Trust consists of two separate unit investment trusts designated
as the California Portfolio and the New York Portfolio. Each of the two
portfolios will consist of closed-end funds which are concentrated in bonds
issued by the state for which the portfolio is designated.
(continued)
================================================================================
================================================================================
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 PART A DATED JUNE , 1999
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
835711.1
<PAGE>
As a result, the final prospectus will include the following
disclosure concerning California and New York risk factors in the "Risk
Considerations" section in Part B:
California Portfolio
California Economy. Pressures on the State's budget in the late
1980's and early 1990's were caused by a combination of external
economic conditions (including a recession which began in 1990) and
growth of the largest General Fund Programs -- K-14 education,
health, welfare and corrections -- at rates faster than the revenue
base. During this period, expenditures exceeded revenues in four out
of six years up to 1992-93, and the State accumulated and sustained a
budget deficit approaching $2.8 billion at its peak at June 30, 1993.
Between the 1991-92 and 1994-95 Fiscal Years, each budget required
multibillion dollar actions to bring projected revenues and
expenditures into balance, including significant cuts in health and
welfare program expenditures; transfers of program responsibilities
and funding from the State to local governments; transfer of about
$3.6 billion in annual local property tax revenues from other local
governments to local school districts, thereby reducing state funding
for schools under Proposition 98; and revenue increases (particularly
in the 1991-92 Fiscal Year budget), most of which were for a short
duration.
Despite these budget actions, the effects of the recession led to
large, unanticipated budget deficits. By the 1993-94 Fiscal Year,
the accumulated deficit was so large that it was impractical to
budget to retire it in one year, so a two-year program was
implemented, using the issuance of revenue anticipation warrants to
carry a portion of the deficit over the end of the fiscal year. When
the economy failed to recover sufficiently in 1993-94, a second
two-year plan was implemented in 1994-95, again using cross-fiscal
year revenue anticipation warrants to partly finance the deficit into
the 1995-96 fiscal year.
Another consequence of the accumulated budget deficits, together with
other factors such as disbursement of funds to local school districts
"borrowed" from future fiscal years and hence not shown in the annual
budget, was to significantly reduce the State's cash resources
available to pay its ongoing obligations. When the Legislature and
the Governor failed to adopt a budget for the 1992-93 Fiscal Year by
July 1, 1992, which would have allowed the State to carry out its
normal annual cash flow borrowing to replenish its cash reserves, the
State Controller issued registered warrants to pay a variety of
obligations representing prior years' or continuing appropriations,
and mandates from court orders. Available funds were used to make
constitutionally-mandated payments, such as debt service on bonds and
warrants. Between July 1 and September 4, 1992, when the budget was
adopted, the State Controller issued a total of approximately $3.8
billion of registered warrants.
For several fiscal years during the recession, the State was forced
to rely on external debt markets to meet its cash needs, as a
succession of notes and revenue anticipation warrants, often needed
to pay previously maturing notes or warrants, were issued in the
period from June 1992 to July 1994. These borrowings were used also
in part to spread out the repayment of the accumulated budget deficit
over the end of a fiscal year, as noted earlier. The last and largest
of these borrowings was $4.0 billion of revenue anticipation warrants
which were issued in July, 1994 and matured on April 25, 1996.
1995-96 through 1997-98 Fiscal Years
------------------------------------
The State's financial condition improved markedly during the 1995-96,
1996-97 and 1997-98 fiscal years, with a combination of better than
expected revenues, slowdown in growth of social welfare programs, and
continued spending restraint based on the actions taken in earlier
years. The State's cash position also improved, and no external
deficit borrowing has occurred over the end of these three fiscal
years.
The economy grew strongly during these fiscal years, and as a result,
the General Fund took in substantially greater tax revenues (around
$2.2 billion in 1995-96, $1.6 billion in 1996-97 and $2.4 billion in
1997-98) than were initially planned when the budgets were enacted.
These additional funds were largely directed to school spending as
mandated by Proposition 98, and to make up shortfalls from reduced
federal health and welfare aid in 1995-96 and 1996-97. The
accumulated budget deficit from the recession years was finally
eliminated.
1998-99 Fiscal Year Budget
--------------------------
When the Governor released his proposed 1998-99 Fiscal Year Budget on
January 9, 1998, he projected General Fund revenues for the 1998-99
Fiscal Year of $55.4 billion, and proposed expenditures in the same
amount. By the time the Governor released the May Revision to the
1998-99 Budget ("May Revision") on May 14, 1998, the Administration
projected that revenues for the 1997-98 and 1998-99 Fiscal Years
combined would be more than $4.2 billion higher than was projected in
January. The Governor proposed that most of this increased revenue be
dedicated to fund a 75 percent cut in the Vehicle License Fee
("VLF").
835711.1
2
<PAGE>
The Legislature passed the 1998-99 Budget Bill on August 11, 1998,
and the Governor signed it on August 21, 1998. Some 33 companion
bills necessary to implement the budget were also signed. In signing
the Budget Bill, the Governor used his line-item veto power to reduce
expenditures by $1.360 billion from the General Fund, and $160
million from special funds. Of this total, the Governor indicated
that about $250 million of vetoed funds were "set aside" to fund
programs for education. Vetoed items included education funds, salary
increases and many individual resources and capital projects.
The 1998-99 Budget Act was based on projected General Fund revenues
and transfers of $57.0 billion (after giving effect to various tax
reductions enacted in 1997 and 1998), a 4.2 percent increase from the
then revised 1997-98 figures. Special Fund revenues were estimated at
$14.3 billion. The revenue projections were based on the May
Revision. Economic problems overseas since that time may affect the
May Revision projections. See "Economic Assumptions" below.
After giving effect to the Governor's vetoes, the Budget Act provided
authority for expenditures of $57.3 billion from the General Fund (a
7.3 percent increase from 1997-98), $14.7 billion from Special Funds,
and $3.4 billion from bond funds. The Budget Act projected a balance
in the SFEU at June 30, 1999 (but without including the "set aside"
veto amount) of $1.255 billion, a little more than 2 percent of
General Fund revenues. The Budget Act assumed the State will carry
out its normal intra-year cash flow borrowing in the amount of $1.7
billion of revenue anticipation notes, which were issued on October
1, 1998.
Revenues and expenditures for 1998-99 as updated in the 1999-00
Governor's Budget are $56.3 billion and $58.3 billion, respectively.
As a result, the projected balance in the SFEU at June 30, 1999 has
been reduced to $617 million.
The most significant feature of the 1998-99 budget was agreement on a
total of $1.4 billion tax cuts. The central element is a bill which
provides for a phased-in reduction of the VLF. Since the VLF is
currently transferred to cities and counties, the bill provides for
the General Fund to replace the lost revenues. Started on January 1,
1999, the VLF has been reduced by 25 percent, at a cost to the
General Fund of approximately $500 million in the 1998-99 Fiscal Year
and about $1 billion annual thereafter.
In addition to the cut in VLF, the 1998-99 budget includes both
temporary and permanent increase in the personal income tax dependent
credit ($612 million General Fund cost in 1998-99, but less in future
years), a nonrefundable renters tax credit ($133 million), and
various targeted business tax credits ($106 million).
Other significant elements of the revised 1998-99 Budget are as
follows:
1. Proposition 98 funding for K-12 schools is increased by $2.2
billion in General Fund moneys over the latest revised 1997-98
levels, over $1 billion higher than the minimum Proposition 98
guarantee. Of the 1998-99 funds, major new programs include money for
instructional and library materials, deferred maintenance, support
for increasing the school year to 180 days and reduction of class
sizes in Grade 9. Overall, per-pupil spending for K-12 schools under
Proposition 98 is increased to $5,752, which is $478 over the 1997-98
level. The Budget also includes $250 million as repayment of prior
years' loans to schools, as part of the settlement of the CTA v.
Gould lawsuit.
2. Funding for higher education increased substantially above the
actual 1997-98 level. General Fund support was increased by $339
million (15.6 percent) for the University of California and $271
million (14.5 percent) for the California State University system. In
addition, Community Colleges increased by $183 million (9.0 percent).
3. The Budget includes increased funding for health, welfare and
social services programs. A 4.9 percent grant increase was included
in the basic welfare grants, the first increase in those grants in 9
years. Future increases will depend on sufficient General Fund
revenue to trigger the phased cuts in VLF described above.
4. Funding for the judiciary and criminal justice programs increased
by about 15 percent over 1997-98, primarily to reflect increased
state support for local trial courts and rising prison population.
5. Various other highlights of the revised Budget included new
funding for resources projects, dedication of $240 million of General
Fund moneys for capital outlay projects, funding of a state employee
salary increase, funding of 2,000 new Department of Transportation
positions to accelerate transportation construction projects, and
funding of the Infrastructure and Economic Development Bank ($50
million).
835711.1
3
<PAGE>
6. The State of California received approximately $167 million of
federal reimbursements to offset costs related to the incarceration
of undocumented alien felons for federal fiscal year 1997. The state
anticipates receiving approximately $173 million in federal
reimbursements for federal fiscal year 1998.
The revised 1998-99 budget as reported in the 1999-00 Governor's
Budget, also reflects the latest estimated costs or savings as
provided in various pieces of legislation passed and signed after the
1998 Budget Act. Major budget items include costs for the
All-American Canal, state's share of purchase of Headwaters Forest,
and additional funds for state prisons and juvenile facilities. The
revised budget reflects a $433 million reduction in the State's
obligation to contribute to STRS in 1998-99.
Proposed 1999-00 Budget
-----------------------
On January 8, 1999, Governor Davis released his proposed budget for
Fiscal Year 1999-2000 (the "Governor's Budget"). The Governor's
Budget generally reported that General Fund revenues for FY 1998-99
and FY 1999-00 would be lower than earlier projections (primarily
due to the overseas economic downturn), while some caseloads would be
higher than earlier projections. The Governor's Budget was designed
to meet ongoing caseloads and basic inflation adjustments, and
included certain new programs.
The Governor's Budget projects General Fund revenues and transfers in
1999-00 of $60.3 billion. This includes anticipated initial payments
from the tobacco litigation settlement of about $560 million, and
receipt of one-time revenue from sale of assets. The Governor also
assumes receipt of about $400 million of federal aid for certain
health and welfare programs and reimbursement for costs for
incarceration of undocumented felons, above the amount presently
received by California from the federal government. The Governor's
Budget notes that more accurate revenue estimates will be available
in May and June before adoption of the budget. Among other things,
the amount of realized capital gains for 1998 is still unknown, given
the large fluctuations in the stock market last year. The Governor
has not proposed any tax cuts or increases.
The Governor's Budget proposes General Fund expenditures of $60.5
billion. The Governor's Budget gives highest priority to education,
with Proposition 98 funding increasing by almost 5 percent. The
Governor proposed certain new education initiatives focused on
improving reading skills, teacher quality and school accountability.
The Governor proposed modest increase in funding for higher
education, and an 8 percent increase in SSP payments (a State-funded
welfare program), while assuming decreases in Medi-Cal and CalWORKs
grant costs due to lowering caseloads. The Governor also proposes to
reduce expenditures by deferring certain previously budgeted
expenditures totaling about $170 million.
Based on the proposed revenues and expenditures, the Governor's
Budget projects the June 30, 2000 balance in the SFEU would drop to
about $415 million.
On February 16, 1999, the Legislative Analyst released a report on
the 1999-00 Governor's Budget (the "LAO Report"). The LAO Report was
based in part on actual revenues received in December, 1998 and
January 1999, which had not been available when the Governor's Budget
was prepared. These revenues were higher than had been predicted in
the Governor's Budget, apparently reflecting stronger than expected
economic activity in the nation and the State. The LAO report
projected that General Fund revenues in 1998-99 could be as much as
$750 million higher than predicted in the Governor's Budget, and
1999-00 revenues could be $550 million above the Governor's Budget.
The Governor's Budget includes a proposal to implement changes in law
to make "midcourse corrections" in the State's budget if ongoing
revenues fall short of projections during a fiscal year or
expenditures increase significantly. The proposals include two
components: restoring authority for the Director of Finance to reduce
expenditures in certain circumstances, and an automatic "trigger"
mechanism which would produce spending cuts if certain conditions
were met. These proposals will require legislative action.
Future Budgets
--------------
It cannot be predicted what actions will be taken in the future by
the State Legislature and the Governor to deal with changing State
revenues and expenditures. The State budget will be affected by
national and state economic conditions and other factors.
THE FOREGOING DISCUSSION IS BASED ON OFFICIAL STATEMENTS AND OTHER
INFORMATION PROVIDED BY THE STATE OF CALIFORNIA. THE STATE HAS
INDICATED THAT ITS DISCUSSION OF BUDGETARY INFORMATION IS BASED ON
ESTIMATES AND PROJECTIONS OF REVENUES AND EXPENDITURES FOR THE
CURRENT FISCAL YEAR AND MUST NOT BE CONSTRUED AS STATEMENTS OF FACT;
THE ESTIMATES AND PROJECTIONS ARE BASED UPON VARIOUS
835711.1
4
<PAGE>
ASSUMPTIONS WHICH MAY BE AFFECTED BY NUMEROUS FACTORS, INCLUDING
FUTURE ECONOMIC CONDITIONS IN THE STATE AND THE NATION, AND THERE CAN
BE NO ASSURANCE THAT THE ESTIMATES WILL BE ACHIEVED.
Voter Initiative
----------------
"Proposition 218" or the "Right to Vote on Taxes Act" (the
"Proposition") was approved by the California electorate at the
November, 1996 general election. Officially titled "Voter Approval
For Local Government Taxes, Limitation on Fees, Assessments and
Charges Initiative Constitutional Amendment," the Act was approved by
a majority of the voters voting at the election and adds Articles
XIIIC and XIIID to the California Constitution.
The Proposition, among other things, requires local governments to
follow certain procedures in imposing or increasing any fee or charge
as defined. "Fee" or "charge" is defined to mean "any levy other than
an ad valorem tax, a special tax or an assessment imposed by an
agency upon a parcel or upon a person as an incident of property
ownership, including user fees or charges for a property related
service."
The procedure required by the Proposition to impose or increase any
fee or charge include a public hearing upon the proposed fee or
charge and the opportunity to present written protests by the owners
of the parcels subject to the proposed fee or charge. If written
protests against the proposed fee or charge are presented by a
majority of owners of the identified parcels, the local government
shall not impose the fee or charge.
The Proposition further provides as follows:
"Except for fees or charges for sewer, water, and refuse
collection services, no property related fee or charge
shall be imposed or increased unless and until such fee or
charge is submitted and approved by a majority vote of the
property owners of the property subject to the fee or
charge or, at the option of the agency, by a two-thirds
vote of the electorate residing in the affected area."
Additionally, the Proposition provides, with respect to standby
charges, as follows:
"No fee or charge may be imposed for a service unless that
service is actually used by, or immediately available to,
the owner of the property in question. Fees or charges
based on potential or future use of a service are not
permitted. Standby charges, whether characterized as
charges or assessments, shall be classified as assessments
and shall not be imposed without compliance with Section 4
of this Article."
The Proposition provides that beginning July 1, 1997, all fees or
charges shall comply with the Proposition's requirements.
The Proposition is silent with respect to future increases of
pre-existing fees or charges which are pledged to payment of
indebtedness or obligations previously incurred by the local
government. Presumably, the Proposition cannot preempt outstanding
contractual obligations protected by the contract impairment clause
of the federal constitution. However, with respect to any given
situation or case, litigation may be the method which will settle any
question concerning the authority of a local government to increase
fees or charges outside of the strictures of the Proposition in order
to meet contractual obligations.
Proposition 218 also contains a new provision subjecting "matters of
reducing or repealing any local tax, assessments and charges" to the
initiative power. This means that no city or local agency revenue
source is safe from reduction or repeal pursuant to the initiative
process.
Litigation concerning various elements of the Proposition may
ultimately ensue and clarifying legislation may be enacted.
Future Initiatives
------------------
Articles XIIIA, XIIIB, XIIIC and XIIID were each adopted as measures
that qualified for the ballot pursuant to the State's initiative
process. From time to time, other initiative measures could be
adopted which could affect revenues of the State or public agencies
within the State.
State Appropriations Limit
--------------------------
The State is subject to an annual appropriations limit imposed by
Article XIIIB of the State Constitution (the "Appropriations Limit"),
and is prohibited from spending "appropriations subject to
limitation" in excess of the Appropriations Limit. Article XIIIB,
originally adopted in 1979, was modified substantially by
Propositions 98
835711.1
5
<PAGE>
and 111 in 1988 and 1990, respectively. "Appropriations subject to
limitation" are authorizations to spend "proceeds of taxes," which
consist of tax revenues and certain other funds, including proceeds
from regulatory licenses, user charges or the other fees to the
extent that such proceeds exceed the reasonable cost of providing the
regulation, product or service. The Appropriations Limit is based on
the limit for the prior year, adjusted annually for certain changes,
and is tested over consecutive two-year periods. Any excess of the
aggregate proceeds of taxes received over such two-year period above
the combined Appropriation Limits for those two years is divided
equally between transfers to K-12 districts and refunds to taxpayers.
Exempted from the Appropriations Limit are debt Service costs of
certain bonds, court or federally mandated costs, and, pursuant to
Proposition 111, qualified capital outlay projects and appropriations
or revenues derived from any increase in gasoline taxes and motor
vehicle weight fees above January 1, 1990 levels. Some recent
initiatives were structured to create new tax revenues dedicated to
specific uses and expressly exempted from the Article XIIIB limits.
The Appropriations Limit may also be exceeded in cases of emergency
arising from civil disturbance or natural disaster declared by the
Governor and approved by two-thirds of the Legislature. If not so
declared and approved, the Appropriations Limit for the next three
years must be reduced by the amount of the excess.
Article XIIIB, as amended by Proposition 98 on November 8, 1988, also
establishes a minimum level of state funding for school and community
college districts and requires that excess revenues up to a certain
limit be transferred to schools and community college districts
instead of returned to the taxpayers. Determination of the minimum
level of funding is based on several tests set forth in Proposition
98. During fiscal year 1991-1992 revenues were smaller than expected,
thus reducing the payment owed to schools in 1991-1992 under
alternate "test" provisions. In response to the changing revenue
situation, and to fully fund the Proposition 98 guarantee in the
1991-1992 and 1992-1993 fiscal years without exceeding it, the
Legislature enacted legislation to reduce 1991-92 appropriations.
The amount budgeted to schools, but which exceeded the reduced
appropriation, was treated as a non-Proposition 98 short-term loan in
1991-92. As part of the 1992-93 Budget, $1.083 billion of the amount
budgeted to K-12 schools was designated to "repay" the prior year
loan, thereby reducing cash outlays in 1992-93 by that amount. To
maintain per-average daily attendance ("ADA") funding, the 1992-93
Budget included loans to schools and to community colleges, to be
repaid from future Proposition 98 entitlements. The 1993-94 Budget
also provided new loans to K-12 schools and community colleges to
maintain ADA funding. These loans have been combined with the 1992-93
fiscal year loans into one loan of $1.760 billion, to be repaid from
future years' Proposition 98 entitlements, and conditioned upon
maintaining current funding levels per pupil at K-12 schools.
A Sacramento County Superior Court in California Teachers'
Association, et al. v Gould, et al., ruled that the 1992-93 loans to
K-12 schools and community colleges violate Proposition 98. As part
of the negotiations leading to the 1995-96 Budget Act, an oral
agreement was reached to settle this case. The parties reached a
conditional final settlement of the case in April, 1996. The
settlement required adoption of legislation satisfactory to the
parties to implement its terms.
The settlement provided, among other things, that both the State and
K-12 schools share in the repayment of prior years' emergency loans
to schools. Of the total $1.76 billion in loans, the State was
obligated to repay $935 million by forgiveness of the amount owed,
while schools were required to repay $825 million. The State's share
of the repayment is reflected as expenditures above the current
Proposition 98 base circulation. The schools' share of the repayment
counts as appropriations toward satisfying the Proposition 98
guarantee, or from "below" the current base. Repayments are spread
over the eight-year period beginning 1994-95 through 2002-03.
Because of the complexities of Article XIIIB, the ambiguities and
possible inconsistencies in its terms, the applicability of its
exceptions and exemptions and the impossibility of predicting future
appropriations, the Sponsor cannot predict the impact of this or
related legislation on the bonds in the Trust Portfolio. Other
Constitutional amendments affecting state and local taxes and
appropriations have been proposed from time to time. If any such
initiatives are adopted, the state could be pressured to provide
additional financial assistance to local governments or appropriate
revenues as mandated by such initiatives. Propositions such as
Proposition 98 and others that may be adopted in the future, may
place increasing pressure on the State's budget over future years,
potentially reducing resources available for other State programs,
especially to the extent that the Article XIIIB spending limit would
restrain the State's ability to fund other such programs by raising
taxes.
State Indebtedness
------------------
As of August 1, 1998, the State had over $15.9 billion aggregate
amount of its general obligation bonds outstanding. General
obligation bond authorizations in an aggregate amount of
approximately $4.8 billion remained unissued as of August 1, 1998. As
of April 1, 1998 the State Finance Committee had authorized the
issuance of approximately $2.6 billion of general obligation
commercial paper notes, but as of that date only $1.3 billion
aggregate principal amount of which was issued and outstanding. The
State also builds and acquires capital
835711.1
6
<PAGE>
facilities through the use of lease purchase borrowing. As of April
1, 1998, the State had approximately $6.5 billion of outstanding
General Fund-supported Lease-Purchase Debt.
In addition to the general obligation bonds, State agencies and
authorities had approximately $22.49 billion aggregate principal
amount of revenue bonds and notes outstanding as of April 1, 1998.
Revenue bonds represent both obligations payable from State
revenue-producing enterprises and projects, which are not payable
from the General Fund, and conduit obligations payable only from
revenues paid by private users of facilities financed by such revenue
bonds. Such enterprises and projects include transportation projects,
various public works and exposition projects, educational facilities
(including the California State University and University of
California systems), housing, health facilities and pollution control
facilities.
Litigation
----------
The State is a party to numerous legal proceedings. In addition, the
State is involved in certain other legal proceedings that, if decided
against the State, might require the State to make significant future
expenditures or impair future revenue sources. Examples of such cases
include challenges to certain vehicle license fees and challenges to
the State's use of Public Employee Retirement System funds to offset
future State and local pension contributions. Other cases which could
significantly impact revenue or expenditures involve challenges of
payments of wages under the Fair Labor Standards Act, the method of
determining gross insurance premiums involving health insurance,
property tax challenges, and challenges of transfer of moneys from
State Treasury special fund accounts to the State's General Fund
pursuant to its Budget Acts for certain fiscal years. Because of the
prospective nature of these proceedings, it is not presently possible
to predict the outcome of such litigation or estimate the potential
impact on the ability of the State to pay debt service on its
obligation.
Ratings
-------
During 1996, the ratings of California's general obligation bonds
were upgraded by the following rating agencies. Standard & Poor's
Ratings Group upgraded its rating of such debt to A+; the same rating
has been assigned to such debt by Fitch Investors Service. Moody's
Investors Service has assigned such debt an A1 rating. Any
explanation of the significance of such ratings may be obtained only
from the rating agency furnishing such ratings. There is no assurance
that such ratings will continue for any given period of time or that
they will not be revised downward or withdrawn entirely if, in the
judgment of the particular rating agency, circumstances so warrant.
Local Governments
-----------------
The primary units of local government in California are the counties,
ranging in population from 1,200 in Alpine County to over 9,600,000
in Los Angeles County. Counties are responsible for the provision of
many basic services, including indigent health care, welfare, jails
and public safety in unincorporated areas. There are also about 470
incorporated cities, and thousands of other special districts formed
for education, utility and other services. The fiscal condition of
local governments has been constrained since the enactment of
"Proposition 13" in 1978, which reduced and limited the future growth
of property taxes, and limited the ability of local governments to
impose "special taxes" (those devoted to a specific purpose) without
two-thirds voter approval. Counties, in particular, have had fewer
options to raise revenues than many other local government entities,
and have been required to maintain many services.
In the aftermath of Proposition 13, the State provided aid to local
governments from the General Fund to make up some of the loss of
property tax moneys, including taking over the principal
responsibility for funding K-12 schools and community colleges.
During the recession, the Legislature eliminated most of the
remaining components of post-Proposition 13 aid to local government
entities other than K-14 education districts by requiring cities and
counties to transfer some of their property tax revenues to school
districts. However, the Legislature also provided additional funding
sources (such as sales taxes) and reduced certain mandates for local
services. Since then the State has also provided additional funding
to counties and cities through such programs as health and welfare
realignment, welfare reform, trial court restructuring, the COPs
program supporting local public safety departments, and various other
measures. In his 1999-00 Budget Proposal, the Governor has proposed a
review and "accounting" of state -- local fiscal relationships, with
the goal of ultimately restoring local government finances to an
equivalent fiscal condition to the period prior to the 1991-93
recession -- induced tax shifts. Litigation has been brought
challenging the legality of the property tax shifts from counties to
schools.
Historically, funding for the State's trial court system was divided
between the State and the counties. However, Chapter 850, Statutes of
1997, implemented a restructuring of the State's trial court funding
system. Funding for the courts, with the exception of costs for
facilities, local judicial benefits, and revenue collection, was
consolidated at the State level. The county contribution for both
their general fund and fine and penalty amounts
835711.1
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is capped at the 1994-95 level and becomes part of the Trial Court
Trust Fund, which supports all trial court operations. The State
assumed responsibility future growth in trial court funding. The
consolidation of funding is intended to streamline the operation of
the courts, provide a dedicated revenue source, and relieve fiscal
pressure on the counties. Beginning in 1998-99, the county general
fund contribution for court operations is reduced by $300 million,
and cities will retain $62 million in fine and penalty revenue
previously remitted to the State; the General Fund reimbursed the
$362 million revenue loss to the Trial Court Trust Fund. The 1999-00
Governor's Budget would further reduce the county general fund
contribution by an additional $48 million to reduce by 50 percent the
contributions of the next 18 smallest counties and reduce by 5
percent the general fund contribution of the remaining 21 counties.
The entire statewide welfare system has been changed in response to
the change in federal welfare law enacted in 1996. Under the CalWORKs
program, counties are given flexibility to develop their own plans,
consistent with the state law, to implement the program and to
administer many of its elements, and their costs for administrative
and supportive services are capped at the 1996-97 levels. Counties
are also given financial incentives if, at the individual county
level or statewide, the CalWORKs program produces savings associated
with specified standards. Counties will still be required to provide
"general assistance" aid to certain persons who cannot obtain welfare
from other programs.
The Sponsor believes the information summarized above describes some
of the more significant aspects relating to the California Portfolio.
The sources of such information are Preliminary Official Statements
and Official Statements relating to the State's general obligation
bonds and the State's revenue anticipation notes, or obligations of
other issuers located in the State of California, or other publicly
available documents. Although the Sponsor has not independently
verified this information, it has no reason to believe that such
information is not correct in all material respects.
New York Portfolio
The information set forth below is derived from the official
statements and/or preliminary drafts of official statements prepared
in connection with the issuance of New York State and New York City
municipal bonds. The Sponsor has not independently verified this
information.
Economic Trends. Over the long term, the State of New York (the
"State") and the City of New York (the "City") face serious potential
economic problems. The City accounts for approximately 41% of the
State's population and personal income, and the City's financial
health affects the State in numerous ways. The State historically has
been one of the wealthiest states in the nation. For decades,
however, the State has grown more slowly than the nation as a whole,
gradually eroding its relative economic affluence. Statewide, urban
centers have experienced significant changes involving migration of
the more affluent to the suburbs and an influx of generally less
affluent residents. Regionally, the older Northeast cities have
suffered because of the relative success that the South and the West
have had in attracting people and business. The City has also had to
face greater competition as other major cities have developed
financial and business capabilities which make them less dependent on
the specialized services traditionally available almost exclusively
in the City.
The State has for many years had a very high State and local tax
burden relative to other states. The State and its localities have
used these taxes to develop and maintain their transportation
networks, public schools and colleges, public health systems, other
social services and recreational facilities. Despite these benefits,
the burden of State and local taxation, in combination with the many
other causes of regional economic dislocation, has contributed to the
decisions of some businesses and individuals to relocate outside, or
not locate within, the State.
Notwithstanding the numerous initiatives that the State and its
localities may take to encourage economic growth and achieve balanced
budgets, reductions in Federal spending could materially and
adversely affect the financial condition and budget projections of
the State and its localities.
New York City. The City, with a population of approximately 7.4
million, is an international center of business and culture. Its
non-manufacturing economy is broadly based, with the banking and
securities, life insurance, communications, publishing, fashion
design, retailing and construction industries accounting for a
significant portion of the City's total employment earnings.
Additionally, the City is the nation's leading tourist destination.
Manufacturing activity in the City is conducted primarily in apparel
and printing.
For each of the 1981 through 1998 fiscal years, the City had an
operating surplus, before discretionary transfers, and achieved
balanced operating results as reported in accordance with then
applicable generally accepted accounting principles ("GAAP"), after
discretionary transfers. The City has been required to close
substantial gaps between forecast revenues and forecast expenditures
in order to maintain balanced operating results. There can be no
assurance that the City will continue to maintain balanced operating
results as required by State law
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without tax or other revenue increases or reductions in City services
or entitlement programs, which could adversely affect the City's
economic base.
As required by law, the City prepares a four-year annual financial
plan, which is reviewed and revised on a quarterly basis and which
includes the City's capital, revenue and expense projections and
outlines proposed gap- closing programs for years with projected
budget gaps. The City's current financial plan projects a surplus in
the 1999 fiscal year, before discretionary transfers, and budget gaps
for each of the 2000, 2001 and 2002 fiscal years. This pattern of
current year surplus operating results and projected subsequent year
budget gaps has been consistent through the entire period since 1982,
during which the City has achieved surplus operating results, before
discretionary transfers, for each fiscal year.
The City depends on aid from the State of New York (the "State") both
to enable the City to balance its budget and to meet its cash
requirements. There can be no assurance that there will not be
reductions in State aid to the City from amounts currently projected;
that State budgets will be adopted by the April 1 statutory deadline,
or interim appropriations enacted; or that any such reductions or
delays will not have adverse effects on the City's cash flow or
expenditures. In addition, the Federal budget negotiation process
could result in a reduction in or a delay in the receipt of Federal
grants which could have additional adverse effects on the City's cash
flow or revenues.
The Mayor is responsible for preparing the City's financial plan,
including the City's current financial plan for the 1999 through 2002
fiscal years (the "1999-2002 Financial Plan" or "Financial Plan").
The City's projections set forth in the Financial Plan are based on
various assumptions and contingencies which are uncertain and which
may not materialize. Such assumptions and contingencies include the
condition of the regional and local economies, the provision of State
and Federal aid and the impact on City revenues and expenditures of
any future Federal or State policies affecting the City.
Implementation of the Financial Plan is dependent upon the City's
ability to market its securities successfully. The City's financing
program for fiscal years 1999 through 2002 contemplates the issuance
of $5.2 billion of general obligation bonds and $5.4 billion of bonds
to be issued by the New York City Transitional Finance Authority (the
"Finance Authority") to finance City capital projects. The Finance
Authority was created as part of the City's effort to assist in
keeping the City's indebtedness within the forecast level of the
constitutional restrictions on the amount of debt the City is
authorized to incur. In addition, the City issues revenue and tax
anticipation notes to finance its seasonal working capital
requirements. The success of projected public sales of City bonds and
notes, New York City Municipal Water Finance Authority ("Water
Authority") bonds and Finance Authority bonds will be subject to
prevailing market conditions. The City's planned capital and
operating expenditures are dependent upon the sale of its general
obligation bonds and notes, and the Water Authority and Finance
Authority bonds. Future developments concerning the City and public
discussion of such developments, as well as prevailing market
conditions, may affect the market for outstanding City general
obligation bonds and notes.
For the 1998 fiscal year, the City had a operating surplus, before
discretionary and other transfers, and achieved balanced operating
results, after discretionary and other transfers, in accordance with
GAAP. The 1998 fiscal year is the eighteenth year that the City has
achieved an operating surplus, before discretionary and other
transfers, and balanced operating results, after discretionary and
other transfers.
On November 18, 1998, the City released the Financial Plan for the
1999 through 2002 fiscal years, which relates to the City and certain
entities which receive funds from the City. The Financial Plan is a
modification to the financial plan submitted to the Control Board on
June 26, 1998 (the "June Financial Plan"). The Financial Plan
projects revenues and expenditures for the 1999 fiscal year balanced
in accordance with GAAP, and projects gaps of $2.2 billion and $2.4
billion for the 2000 through 2002 fiscal years, respectively, after
implementation of a gap closing program to reduce agency expenditures
by $200 million in the 1999 fiscal year and approximately $80 million
in each of fiscal years 2000 through 2002.
Charges since the June Financial Plan include: (i) an increase in
projected tax revenues of $288 million and $8 million in fiscal years
1999 and 2000, respectively, and a decrease in projected tax revenues
of $23 million and $66 million in fiscal years 2001 and 2002,
respectively; (ii) an increase in planned expenditures for health
insurance of approximately $60 million in each of fiscal years 1999
through 2002; (iii) a decrease in projected pension expenditures due
to higher than planned increases in the value of the assets of the
retirement systems of $67 million, $171 million, $264 million and
$372 million in the fiscal years 1999 through 2002, respectively;
(iv) other agency spending increases of $76 million, $101 million,
$78 million, and $70 million in fiscal years 1999 through 2002,
respectively; and (v) an increase in agency expenditures of $227
million, $295 million, $295 million and $294 million in fiscal years
1999 through 2002, respectively, due to a reduction in the agency gap
closing program.
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The 1999-2002 Financial Plan includes a proposed discretionary
transfer in the 1999 fiscal year of $465 million to pay debt service
due in fiscal year 2000. In addition, the Financial Plan reflects
enacted and proposed tax reduction programs totaling $429 million,
$604 million and $606 million in fiscal years 2000 through 2002,
respectively, including the elimination of the city sales tax on all
clothing as of December 1, 1999, the extension of current tax
reductions for owners of cooperative and condominium apartments
starting in fiscal year 2000 and a personal income tax credit for
child care and for resident holders of Subchapter S corporations
starting in fiscal year 2000, which are subject to State legislative
approval, and reduction of the commercial rent tax commencing in
fiscal year 2000.
The Financial Plan assumes (i) approval by the Governor and the State
Legislature of the extension of the 14% personal income tax
surcharge, which is scheduled to expire on December 31, 1999, and
which is projected to provide revenue of $183 million, $524 million
and $544 million in the 2000, 2001 and 2002 fiscal years,
respectively; and (ii) collection of the projected rent payments for
the City's airports, totaling $6 million, $365 million, $155 million
and $185 million in the 1999 through 2002 fiscal years, respectively,
a substantial portion of which may depend on the successful
completion of negotiations with The Port Authority of New York and
New Jersey (the "Port Authority") or the enforcement of the city's
rights under the existing leases through pending legal actions. The
Financial Plan provides no additional wage increases for City
employees after their contracts expire in fiscal years 2000 and 2001.
In addition, the economic and financial condition of the City may be
affected by various financial, social, economic and political factors
which could have a material effect on the City.
In January, the mayor is expected to publish a Modification (the
"January Modification") to the Financial Plan for the City's 1999
through 2003 fiscal years and a preliminary budget for the City's
fiscal year 2000. The January Modification will include changes since
the Financial Plan and the City's program to address the currently
forecast $2.2 billion gap in fiscal year 2000. As in prior years, the
City's gap-closing program could include a program to substantially
reduce projected agency spending and City proposals for increased
Federal and State aid and other non-tax revenues.
The 1998 modification of the City's financial plan and the 1999-2002
Financial Plan include a proposed discretionary transfer in the 1998
fiscal year of approximately $2.0 billion to pay debt service due in
the 1999 fiscal year, and a proposed discretionary transfer in the
1999 fiscal year of $416 million to pay debt service due in fiscal
year 2000, included in the Budget Stabilization Accounts for the 1998
and 1999 fiscal years, respectively. In addition, the Financial Plan
reflects proposed tax reduction programs totaling $237 million, $537
million, $657 million and $666 million in fiscal years 1999 through
2002, respectively, including the elimination of the City sales tax
on all clothing as of December 1, 1999, a City-funded acceleration of
the State funded personal income tax reduction for the 1999 through
2001 fiscal years, the extension of current tax reductions for owners
of cooperative and condominium apartments starting in fiscal year
2000 and a personal income tax credit for child care and for resident
holders of Subchapter S corporations, which are subject to State
legislative approval, and reduction of the commercial rent tax
commencing in fiscal year 2000.
On June 5, 1998, the City Council adopted a budget which re-allocated
expenditures from those provided in the Executive Budget in the
amount of $409 million. The re-allocated expenditures, which include
$116 million from the Budget Stabilization Account, $82 million from
debt service, $45 million from pension contributions, $54 million
from social services spending and $112 million from other spending,
were re-allocated to uses set forth in the City Council's adopted
budget. Such uses include a revised tax reduction program at a
revenue cost in the 1999 fiscal year of $45 million, additional
expenditures for various programs of $199 million and provision of
$165 million to retire high interest debt. The revised tax reduction
program in the City Council's adopted budget assumes the expiration
of the 12.5% personal income tax surcharge, rather than the
implementation of the personal income tax reduction program proposed
in the Executive Budget. The changes reflected in the City Council's
adopted budget would increase the gaps forecast between revenues and
expenditures in the future years of the Financial Plan.
On June 5, 1998, in accordance with the City Charter, the Mayor
certified to the City Council revised estimates of the City's
revenues (other than property tax) for fiscal year 1999. Consistent
with this certification, the property tax levy was estimated by the
Mayor to require an increase to realize sufficient revenue from this
source to produce a balanced budget within generally accepted
accounting principles. On June 8, 1998, the City Council adopted a
property tax levy that was $237.7 million lower than the levy
estimated to be required by the Mayor. The City Council, however,
maintained that the revenue to be derived from the levy it adopted
would be sufficient to achieve a balanced budget because the property
tax reserve for uncollectibles could be reduced. Property tax bills
for fiscal year 1999 are expected to be mailed in the near future by
the City's Department of Finance at the rates adopted by the City
Council for fiscal year 1998, subject to later adjustment.
On July 10, 1995, Standard & Poor's revised its rating of City bonds
downward to BBB+. On February 3, 1998, Standard & Poor's placed its
BBB+ rating of City bonds on CreditWatch with positive implications.
Moody's
835711.1
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rating of City bonds was revised in February 1998 to A3 from Baa1.
Moody's, Standard & Poor's and Fitch currently rate the City's
outstanding general obligation bonds A3, BBB+ and A-, respectively.
New York State and its Authorities. The State Financial Plan for the
1998-1999 fiscal year projects balance on a cash basis for the
1998-1999 fiscal year, as modified on July 30, 1998, with a closing
balance in the General Fund of $1.67 billion. The State Financial
Plan contains projections of a potential imbalance in the 1999-2000
fiscal year of $1.3 billion, assuming implementation of unspecified
efficiency actions, the receipt of funds from the tobacco settlement
and the application of certain reserves established in the 1998-1999
State Financial Plan. The Executive Budget submitted in February 1998
contained projections at that time of a potential imbalance in the
2000-2001 fiscal year of $3.72 billion, assuming implementation of
unspecified efficiency initiatives and other actions in the 2000-2001
fiscal year.
The 1999-2002 Financial Plan is based on numerous assumptions,
including the condition of the City's and the region's economy and a
modest employment recovery and the concomitant receipt of
economically sensitive tax revenues in the amounts projected. The
1999-2002 Financial Plan is subject to various other uncertainties
and contingencies relating to, among other factors, the extent, if
any, to which wage increases for City employees exceed the annual
wage costs assumed for the 1999 through 2002 fiscal years;
continuation of projected interest earnings assumptions for pension
fund assets and current assumptions with respect to wages for City
employees affecting the City's required pension fund contributions;
the willingness and ability of the State to provide the aid
contemplated by the Financial Plan and to take various other actions
to assist the City; the ability of State agencies to maintain
balanced budgets; the willingness of the Federal government to
provide the amount of Federal aid contemplated in the Financial Plan;
the impact on City revenues and expenditures of Federal and State
welfare reform and any future legislation affecting Medicare or other
entitlement programs; adoption of the City's budgets by the City
Council in substantially the forms submitted by the Mayor; the
ability of the City to implement cost reduction initiatives, and the
success with which the City controls expenditures; the impact of
conditions in the real estate market on real estate tax revenues; the
City's ability to market its securities successfully in the public
credit markets; and unanticipated expenditures that may be incurred
as a result of the need to maintain the City's infrastructure.
Certain of these assumptions have been questioned by the City
Comptroller and other public officials.
The Legislature passed a State budget for the 1998-1999 fiscal year
on April 18, 1998, and on April 26, 1998 the Governor vetoed certain
of the increased spending in the State budget passed by the
Legislature. The Legislature did not override any of the Governor's
vetoes. The State Financial Plan for the 1998-1999 fiscal year, as
modified on July 30, 1998, projects balance on a cash basis for the
1998-1999 fiscal year, with a closing balance in the General Fund of
$1.67 billion. The State Financial Plan contains projections of a
potential imbalance in the 1999-2000 fiscal year of $1.3 billion,
assuming implementation of $600 million of unspecified efficiency
actions, the receipt of $250 million in funds from the tobacco
settlement and the application of certain reserves established in the
1998-1999 State Financial Plan. The Executive Budget submitted in
February 1998 contained projections at that time of a potential
imbalance in the 2000-2001 fiscal year of $3.72 billion, assuming
implementation of $800 million of unspecified efficiency initiatives
in the 2000-2001 fiscal year and $250 million in funds from the
tobacco settlement. The State Financial Plan for the 1998-1999 fiscal
year includes multi-year tax reductions and significant increases in
spending which will affect the 2000-2001 fiscal year. The various
elements of the State and local tax and assessments reductions
enacted during the last several fiscal years will reduce projected
revenues by more than $4 billion in the 2002-2003 fiscal year as
measured from the current 1998-1999 base.
On July 23, 1998, the New York State Comptroller issued a report
which noted that a significant cause for concern is the budget gaps
in the 1999-2000 and 2000-2001 fiscal years, which the State
Comptroller projected at $1.8 billion and $5.5 billion, respectively,
after excluding the uncertain receipt by State of $250 million of
funds from the tobacco settlement assumed for each of such fiscal
years, as well as the unspecified actions assumed in the State's
projections. The State Comptroller also stated that if the securities
industry or economy slows, the size of the gaps would increase.
Standard & Poor's rates the State's general obligation bonds A, and
Moody's rates the State's general obligation bonds A2. On August 28,
1997, Standard & Poor's revised its rating on the State's general
obligation bonds from A- to A.
Litigation. The court actions in which the State is a defendant
generally involve State programs and miscellaneous tort, real
property, and contract claims. While the ultimate outcome and fiscal
impact, if any, on the State of those proceedings and claims are not
currently predictable, adverse determinations in certain of them
might have a material adverse effect upon the State's ability to
carry out the 1999-2002 Financial Plan. The City has estimated that
its potential future liability on account of outstanding claims
against it as of June 30, 1998 amounted to approximately $3.5
billion.
835711.1
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In addition, the final prospectus will include the following
disclosure concerning the tax impact upon residents of California and New York
in the "Tax Status" section in Part B:
California Taxes
When the Bonds owned by the Mutual Funds included in the California
Portfolio were issued, bond counsel issued opinions that interest on the Bonds
is exempt from California personal income taxes.
In the opinion of Brown & Wood LLP, special counsel to the Sponsor
for California tax matters, under existing California law applicable
to individuals who are California residents and in reliance, among
other things, on the aforementioned opinion of Battle Fowler LLP that
the IRS will classify the Trust as a grantor trust for federal income
tax purposes, the Trust will not be treated for California personal
income tax purposes as an association taxable as a corporation, and
the income of the Trust will therefore be treated as the income of
the Unitholders in the same manner as if the Unitholders held the
securities of the Trust directly. Each Unitholder will recognize gain
or loss upon the sale or other disposition of the securities held by
the Trust or upon the Unitholder's sale or other disposition of a
Unit. The amount of gain or loss for California income tax purposes
will generally be determined pursuant to the Internal Revenue Code of
1986, as amended, certain provisions of which are incorporated by
reference under California law.
New York Taxes
When the Bonds owned by the Mutual Funds included in the New York
Portfolio were issued, bond counsel issued opinions that interest on the Bonds
is exempt from New York State and City personal income taxes, except where such
interest is subject to Federal income taxes, as is described in "Taxation of the
Trust as a Shareholder of the Mutual Funds."
In the opinion of Battle Fowler LLP, counsel for the Sponsor, under
existing law:
Under the income tax laws of the State and City of New York, the
Trust is not an association taxable as a corporation and income
received by the Trust will be treated as the income of the Unitholder
in the same manner as for Federal income tax purposes. Accordingly,
each Unitholder will be considered to have received the interest on
its pro rata portion of each Bond when interest on the Bond is
received by the Trust or on earlier accrual, depending on the
Unitholder's method of accounting, and depending on the existence of
any original issue discount. A noncorporate Unitholder who is a New
York State (and City) resident will be subject to New York State (and
City) personal income taxes on any gain or market discount income
recognized when it disposes of all or part of its pro rata portion of
a Bond. A noncorporate Unitholder who is not a New York State
resident will not be subject to New York State or City personal
income taxes on any such income on gain unless the Units are
attributable to a business, trade, profession or occupation carried
on in New York. A New York State (and City) resident should determine
its tax basis for its pro rata portion of each Bond for New York
State (and City) income tax purposes in the same manner as for
Federal income tax purposes. Interest income on, as well as any
income or gain recognized on the disposition of, a Unitholder's pro
rata portion of the Bonds is generally not excludable from income in
computing New York State and City franchise taxes on corporations or
financial institutions.
835711.1
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PART II -- ADDITIONAL INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM A -- BONDING ARRANGEMENTS
The employees of Reich & Tang Distributors, Inc. are covered under
Brokers' Blanket Policy, Standard Form 14, in the amount of $11,000,000 (plus
$196,000,000 excess coverage under Brokers' Blanket Policies, Standard Form 14
and Form B Consolidated). This policy has an aggregate annual coverage of $15
million.
ITEM B -- CONTENTS OF REGISTRATION STATEMENT
This Registration Statement on Form S-6 comprises the following papers and
documents:
The facing sheet on Form S-6.
The Cross-Reference Sheet (incorporated by reference to the
Cross-Reference Sheet to the Registration Statement of Equity
Securities Trust, Series 12, 1997 Triple Strategy Trust II).
The Prospectus consisting of pages.
Undertakings.
Signatures.
Listed below are the names and registration numbers of each previous
series of Equity Securities Trust, the final prospectus of which,
properly supplemented, might be used as preliminary prospectuses for
Equity Securities Trust, Series 23. These final prospectuses are
incorporated herein by reference:
Equity Securities Trust, Series 20,
Municipal Symphony Series
(Registration No. 333-64071)
Written consents of the following persons:
Battle Fowler LLP (included in Exhibit 3.1)
PricewaterhouseCoopers LLP
The following exhibits:
*99.1.1 -- Reference Trust Agreement including certain amendments
to the Trust Indenture and Agreement referred to under
Exhibit 99.1.1.1 below.
99.1.1.1 -- Form of Trust Indenture and Agreement (filed as Exhibit
1.1.1 to Amendment No. 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.
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).
- --------
* To be filed by amendment.
835711.1
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UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the
Securities Exchange Act of 1934, the undersigned registrant hereby undertakes to
file with the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Equity Securities Trust, Series 23, Municipal Symphony Series II has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, hereunto duly authorized, in the City of New York and State of New
York on the 24th day of May, 1999.
EQUITY SECURITIES TRUST, SERIES 23, MUNICIPAL
SYMPHONY SERIES II
(Registrant)
REICH & TANG DISTRIBUTORS, INC.
(Depositor)
By /s/ PETER J. DEMARCO
------------------------------------------
Peter J. DeMarco
(Authorized Signator)
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons, who
constitute the principal officers and a majority of the directors of Reich &
Tang Distributors, Inc., the Depositor, in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
RICHARD E. SMITH, III President and Director
PETER S. VOSS Director
G. NEAL RYLAND Director
STEVEN W. DUFF Director May 24, 1999
PETER J. DEMARCO Executive Vice President
RICHARD I. WEINER Vice President
BERNADETTE N. FINN Vice President By: /s/ PETER J. DEMARCO
LORRAINE C. HYSLER Secretary --------------------
RICHARD DE SANCTIS Treasurer Peter J. DeMarco
EDWARD N. WADSWORTH Executive Officer Attorney-In-Fact*
- --------
* 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.
</TABLE>
835711.1
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<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of
this registration statement on Form S-6 (the "Registration Statement") of our
report dated , 1999, relating to the Statement of Financial Condition,
including the Portfolio, of Equity Securities Trust, Series 23, Municipal
Symphony Series II which appears in such Prospectus. We also consent to the
reference to us under the heading "Independent Accountants" in such Prospectus.
PRICEWATERHOUSECOOPERS LLP
160 Federal Street
Boston, MA 02110
, 1999
835711.1
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<PAGE>
CONSENT OF PORTFOLIO CONSULTANT
The Sponsor, Trustee and Unitholders
Equity Securities Trust, Series 23, Municipal Symphony Series II
We hereby consent to the use of our name "Riccardi Group LLC" included
herein and to the reference to our firm in the Prospectus.
RICCARDI GROUP LLC
New York, New York
, 1999
835711.1
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