<PAGE>
Rule 497(b)
Registration No. 333-92261
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CharlesSchwab
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SCHWAB TRUSTS
SCHWAB TEN TRUST, 2000 SERIES A
The Trust is a unit investment trust designated Schwab Ten Trust, 2000 Series
A. The Sponsors are Charles Schwab & Co., Inc. and Reich & Tang Distributors,
Inc. The Trust consists of a fixed portfolio of the Dow Jones Industrial
Average's ten highest dividend yielding stocks. The Trust will terminate
approximately one year after the Initial Date of Deposit. The minimum purchase
is 100 Units for individual purchasers, and 25 Units for purchases by
custodial accounts or Individual Retirement Accounts, self-employed retirement
plans (formerly Keogh Plans), pension funds and other tax-deferred retirement
plans.
This Prospectus consists of two parts. Part A contains the Summary of
Essential Information including descriptive material relating to the Trust and
the Statement of Financial Condition of the Trust. Part B contains general
information about the Trust. Part A may not be distributed unless accompanied
by Part B. Please read and retain both parts of this Prospectus for future
reference.
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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 PART A DATED JANUARY 19, 2000
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INVESTMENT OBJECTIVE. The Trust seeks to maximize total return through a
combination of capital appreciation and current dividend income. There is no
guarantee that the investment objective of the Trust will be achieved.
STRATEGY OF PORTFOLIO SELECTION. The Trust seeks to achieve its investment
objective by attempting to outperform the Dow Jones Industrial Average (DJIA).
The Trust will attempt to outperform the DJIA by creating a portfolio that
follows the investment strategy of investing in the ten common stocks in the
DJIA which have the highest dividend yield.
DESCRIPTION OF PORTFOLIO. The Portfolio contains 10 issues of common stock of
domestic companies. 100% of the issues are represented by the Sponsors'
contracts to purchase. All of the stocks are listed on the New York Stock
Exchange. Based upon the principal business of each issuer and current market
values, the following industries are represented in the Portfolio: Auto
Manufacturing, 10.01%; Banking and Finance, 9.99%; Chemicals, 10.00%; Consumer
Products, 9.98%; Machinery, 10.00%; Manufacturing, 10.00%; Oil, 9.97%; Paper,
10.02%; Photography, 10.03%; and Telephone, 10.00%.
RISK CONSIDERATIONS. Unitholders can lose money by investing in this Trust. The
value of the units and the Securities can each decline in value. An investment
in units of the Trust should be made with an understanding of the following
risks:
. For common stocks, the risk that the financial condition of the issuers
of the Securities may become impaired or that the general condition of
the stock market may worsen (both of which may contribute directly to a
decrease in the value of the Securities and thus in the value of the
units).
. Since the Portfolio of the Trust is fixed and "not managed," in general
the Sponsors can only sell securities under certain extraordinary
circumstances, 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.
. When cash or a letter of credit is deposited with instructions to
purchase securities in order to create additional units, an increase in
the price of a particular security between the time of deposit and the
time that securities are purchased will cause the units to be comprised
of less of that security and more of the remaining securities. In
addition, brokerage fees incurred in purchasing the Securities will be an
expense of the Trust.
. A decline in the value of the Securities during the initial offering
period may require additional Securities to be sold in order to reimburse
the Sponsors for organization costs. This would result in a decline in
the value of the units.
. There is no assurance that any dividends will be declared or paid in the
future on the Securities.
PUBLIC OFFERING PRICE. The Public Offering Price per 100 units of the Trust is
calculated by:
. dividing the aggregate value of the underlying securities held in the
Trust by the number of units outstanding; and
. multiplying the result by 100.
In addition, during the initial offering period, an amount sufficient to
reimburse the Sponsor for the payment of all or a portion of the estimated
organization costs of the Trust will be added to the Public Offering Price per
100 units. The price of a single unit, or any multiple thereof, is calculated
by dividing the Public Offering Price
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per 100 units by 100 and multiplying by the number of units. The Public
Offering Price per Unit will vary on a daily basis in accordance with
fluctuations in the aggregate value of the underlying Securities and each
investor's purchase price will be computed as of the date the units are
purchased.
DEFERRED SALES CHARGE. The deferred sales charge will be deducted as follows:
. For every Unitholder, ten monthly charges of $0.80 per 100 units ($8.00
total) will be deducted from the Principal Account in ten monthly
installments commencing on April 18, 2000 and on the first business day
of each month thereafter through January 1, 2001. In addition:
. For Unitholders bearing the deferred sales charge of $12.50 per 100
units, two semi-annual charges of $2.25 per 100 units ($4.50 total)
will be deducted from the Income Account on June 30, 2000 and
December 31, 2000; or
. For Unitholders bearing the deferred sales charge of $10.00 per 100
units, two semi-annual charges of $1.00 per 100 units ($2.00 total)
will be deducted from the Income Account on June 30, 2000 and
December 31, 2000.
See "Public Offering--Discounts" in Part B for a description of reduced
deferred sales charges for certain investors. The deferred method of payment
keeps more of the Unitholder's money invested over a longer period of time.
ESTIMATED NET ANNUAL DISTRIBUTIONS. The estimated net annual distributions to
unitholders per 100 units (based on the most recent quarterly or semi-annual
ordinary dividend declared with respect to the Securities and based on the
payment of the maximum deferred sales charge, which includes a deduction of
$4.50 per 100 units from the Income Account) was $24.50. This estimate will
vary with changes in the Trust's fees and expenses, actual dividends received,
and with the sale of Securities. In addition, because the issuers of common
stock are not obligated to pay dividends, there is no assurance that the
estimated net annual dividend distributions will be realized in the future.
DISTRIBUTIONS. The Trust will distribute dividends received, less expenses,
semi-annually. The first dividend distribution will be made on June 30, 2000 to
all Unitholders of record on June 15, 2000 and thereafter distributions will be
made on the last business day of every December and June. The final
distribution will be made within a reasonable period of time after the Trust
terminates.
MARKET FOR UNITS. Unitholders may sell their units to the Sponsors or the
Trustee at any time, without fee or penalty. The Sponsors intend to repurchase
units from Unitholders throughout the life of the Trust at prices based upon
the market value of the underlying Securities. However, the Sponsors are 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.
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TERMINATION. The Trust will terminate in approximately thirteen months. At that
time investors may choose one of the following three options with respect to
their terminating distribution:
. receive the distribution in-kind;
. receive cash upon the liquidation of their pro rata share of the
Securities; or
. reinvest in a subsequent series of the Schwab Ten Trust (if one if
offered) at a reduced deferred sales charge.
Because the Sponsor can start selling the Securities on February 22, 2001 ,
Unitholders who purchase Units after February 21, 2000 will have no assurance
of realizing long-term capital gains (see "Tax Status" in Part B). Unitholders
should consult their own tax advisers in this regard.
ROLLOVER OPTION. Unitholders may elect to roll over their terminating
distributions into the next available New Trust at a reduced deferred sales
charge. Rollover Unitholders must make this election on or prior to the
Rollover Notification Date. Upon making this election, a Unitholder's Units
will be redeemed and the proceeds will be reinvested in units of the next
available New Trust. See "Trust Administration--Trust Termination" in Part B
for details to make this election.
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, subject only to
any remaining deductions of the Deferred Sales Charge. See "Reinvestment Plan"
in Part B for details on how to enroll in the Reinvestment Plan.
UNDERWRITING. Charles Schwab & Co., Inc., 101 Montgomery Street, San Francisco,
California 94104, will act as Underwriter for all of the Units of the Schwab
Ten Trust, 2000 Series A. Units of the Trust shall be distributed exclusively
by the Underwriter to its customers.
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FEE TABLE
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This Fee Table is intended to help you to understand the costs and expenses
that you will bear directly or indirectly. See "Public Offering" and "Trust
Expenses and Charges." Although each Series has a term of only one year, and
is a unit investment trust rather than a mutual fund, this information is
presented to permit a comparison of fees, assuming the principal amount and
distributions are rolled over each year into a new Series subject only to the
deferred sales charge and trust expenses.
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<TABLE>
<CAPTION>
Maximum Deferred Sales Charge Reduced Deferred Sales Charge+
----------------------------- ------------------------------
Unitholder Transaction As a % of Amounts As a % of Amounts
Expenses Initial per Initial per
(fees paid directly from Offering Price 100 Units Offering Price 100 Units
your investment) -------------- --------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Deferred Sale Charge
per Year.............. 1.25%* $12.50 1.00%** $10.00
----- ------ ----- ------
Maximum Sales Charge
Imposed Per Year
Reinvested Dividends.. 1.25%*** $12.50 1.00%*** $10.00
===== ====== ===== ======
Estimated Organization
Costs................. .100% $ 1.00 .100% $ 1.00
===== ====== ===== ======
<CAPTION>
Estimated Annual Fund
Operating Expenses Amounts Amount
(expenses that are As of % of per As of % of per
deducted from Trust Net Assets 100 Units Net Assets 100 Units
assets) ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Trustee's Fee.......... .086% $ .86 .086% $ .86
Other Operating
Expenses.............. .045% .45 .045% .45
Portfolio Supervision,
Bookkeeping and
Administrative Fees.. .025% .25 .025% .25
----- ------ ----- ------
Total................. .131% $ 1.31 .131% $ 1.31
===== ====== ===== ======
</TABLE>
Examples
<TABLE>
<CAPTION>
Cumulative Expenses Paid for Period:
Maximum Deferred Sales Charge Example: ------------------------------------
1 year 3 years
---------- -----------
<S> <C> <C>
An investor would pay the following
expenses on a $10,000 investment assuming
the Trust operating expense ratio of
.131% and a 5% annual return on the
investment throughout the periods........ $148 $409
<CAPTION>
Cumulative Expenses Paid for Period:
Reduced Deferred Sales Charge Example: ------------------------------------
1 year 3 years
------ -------
<S> <C> <C>
An investor would pay the following
expenses on a $10,000 investment assuming
the Trust operating expense ratio of
.131% and a 5% annual return on the
investment throughout the periods........ $123 $342
</TABLE>
The Examples assume reinvestment of all dividends and distributions and
utilize a 5% annual rate of return. For purposes of the Examples, the deferred
sales charge imposed on reinvestment of dividends is not reflected until the
year following payment of the dividend; the cumulative expenses would be
higher if sales charges on reinvested dividends were reflected in the year of
reinvestment. The Examples should not be considered a representation of past
or future expenses or annual rate of return; the actual expenses and annual
rate of return may be more or less than those assumed for purposes of the
Examples.
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*The actual fee is a total of $12.50 per 100 Units, irrespective of purchase
or redemption price, deducted in installments over the life of the Trust,
commencing April 18, 2000. If the Unit price exceeds $10 per Unit, the
deferred sales charge will be less than 1.25%; if the Unit price is less than
$10 per Unit, the deferred sales charge will exceed 1.25%.
**The actual fee is a total of $10.00 per 100 Units, irrespective of purchase
or redemption price, deducted in installments over the life of the Trust,
commencing April 18, 2000. If the Unit price exceeds $10 per Unit, the
deferred sales charge will be less than 1.00%; if the Unit price is less than
$10 per Unit, the deferred sales charge will exceed 1.00%.
***Reinvested dividends will be subject only to the deferred sales charge
remaining at the time of reinvestment (see "Reinvestment Plan" in this Part
A).
+See "Public Offering--Discounts" in Part B for a description of which
investors will be eligible for this reduced deferred sales charge, as well as
the circumstances under which a further reduction to $8.00 per 100 Units (.80%
of the Initial Offering Price) may be applicable.
A-5
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SUMMARY OF ESSENTIAL INFORMATION AS OF JANUARY 18, 2000:*
<TABLE>
<S> <C>
INITIAL DATE OF DEPOSIT: January 19, 2000
AGGREGATE VALUE OF
SECURITIES................... $ 149,316
NUMBER OF UNITS............... 14,932
FRACTIONAL UNDIVIDED INTEREST
IN TRUST SECURITIES.......... 1/14,932
PUBLIC OFFERING PRICE PER 100 UNITS
Net Assets of the Trust...... $ 149,166
Divided By 14,932 Units
(times 100)................. $ 999.00
Plus Estimated Organization
Costs**..................... $ 1.00
Public Offering Price per 100 Units***+.. $ 1,000.00
SPONSORS' REPURCHASE PRICE AND
REDEMPTION PRICE PER 100
UNITS++...................... $ 987.50
EVALUATION TIME: 4:00 p.m. New York Time
(or earlier close of the New York Stock
Exchange).
MINIMUM INCOME OR PRINCIPAL DISTRIBUTION:
$1.00 per 100 Units.
LIQUIDATION PERIOD: A 40 day period
beginning on the first business day
following the Termination Date.
MINIMUM VALUE OF TRUST: The Trust may be
terminated if the value of the Trust is
less than 40% of the aggregate value of
the Securities at the completion of the
Deposit Period.
TERMINATION DATE: February 21, 2001 or the
disposition of the last Security in the
Trust.
MANDATORY TERMINATION DATE: The last day
of the Liquidation Period.
</TABLE>
<TABLE>
<S> <C>
TRUSTEE: The Chase Manhattan Bank.
TRUSTEE'S FEE: $.86 per 100 Units
outstanding
OTHER FEES AND EXPENSES: $.20 per 100 Units
outstanding.
SPONSORS: Charles Schwab & Co., Inc. and
Reich & Tang Distributors, Inc.
AGENT FOR SPONSORS: Reich & Tang
Distributors, Inc.
SPONSORS' PORTFOLIO SUPERVISORY, BOOKKEEPING
AND ADMINISTRATIVE FEE: Maximum of $.25 per
100 Units outstanding (see "Trust Expenses
and Charges" in Part B).
RECORD DATES: June 15 and December 15.
DISTRIBUTION DATES: June 30 and December 31.
ROLLOVER NOTIFICATION DATE****: February 13,
2001 or another date as determined by the
Sponsors.
MONTHLY DEFERRED SALES CHARGE PAYMENT DATES:
April 18, 2000 and the first business day
of each month thereafter through January 1,
2001
SEMI-ANNUAL DEFERRED SALES CHARGE PAYMENT
DATES: June 30, 2000, and December 31,
2000.
</TABLE>
<TABLE>
<S> <C>
CUSIP NUMBERS: Cash: 808523500 Schwab Fee-Based Schwab
Reinvestment: Accounts: Account/Strategic
808523518 Cash: 808523484 Ten Investors:
Reinvestment: Cash: 808523468
808523492 Reinvestment:
808523476
</TABLE>
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*The business day prior to the Initial Date of Deposit. The Initial Date of
Deposit is the date on which the Trust Agreement was signed and the deposit of
Securities with the Trustee made.
**This amount per 100 Units will be invested in Securities during, and sold
at the end of, the initial offering period, to reimburse the Sponsors for the
payment of all or a portion of the estimated costs incurred in organizing the
Trust. See "Risk Considerations" for a discussion of the impact of a decrease
in value of the Securities purchased with the Public Offering Price proceeds
intended to be used to reimburse the Sponsors.
***A maximum Deferred Sales Charge of $12.50 per 100 Units (1.25% of the
Initial Public Offering Price) will be paid through deductions subsequent to
the Initial Date of Deposit as described under "Deferred Sales Charge." On a
repurchase or redemption of Units before the last Deferred Sales Charge Payment
Date,
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any remaining Deferred Sales Charge payments will be deducted from the
proceeds. Units purchased pursuant to the Reinvestment Plan are subject to that
portion of the Deferred Sales Charge remaining at the time of reinvestment.
****The date by which a Rollover Unitholder must elect to reinvest its
terminating distribution in an available series of the Schwab Ten Trust, if
offered (see "Trust Administration--Trust Termination").
+On the Initial Date of Deposit there will be no cash in the Income or
Principal Accounts. Anyone purchasing Units after such date will have included
in the Public Offering Price a pro rata share of any cash in such Accounts.
++This figure reflects deduction of the maximum Deferred Sales Charge of
$12.50 per 100 Units; the actual amount deducted upon redemption of Units will
depend upon the Deferred Sales Charge applicable to the redeeming Unitholder.
Any redemptions of 25,000 Units or more may, upon request by a redeeming
Unitholder, be made in kind. The Trustee will forward the distributed
securities, less any deferred sales charge remaining, to the Unitholder's
broker-dealer account at The Depository Trust Company in book-entry form. As of
the close of the initial offering period, the Sponsors' Repurchase Price and
Redemption Price per 100 Units for the Trust will be reduced to reflect the
payment of the organization costs to the Sponsors.
A-7
<PAGE>
SCHWAB TEN TRUST,
2000 SERIES A
STATEMENT OF FINANCIAL CONDITION AS OF JANUARY 18, 2000
ASSETS
<TABLE>
<S> <C>
Investment in Securities -- Sponsors' Contracts to Purchase
Underlying Securities Backed by Letter of Credit (cost $149,316)
(Note 1)........................................................... $149,316
--------
Total................................................................. $149,316
========
LIABILITIES AND INTEREST OF UNITHOLDERS
Reimbursement to Sponsors for Organization Costs (Note 2)............. $ 150
--------
Interest of Unitholders -- Units of Fractional
Undivided Interest Outstanding (2000 Series A: 14,932 Units)........ 149,316
Less: Reimbursement to Sponsors for Organization Costs (Note 2)..... (150)
--------
149,166
--------
Total................................................................. $149,316
========
Net Asset Value per Unit (3).......................................... $ 9.99
========
</TABLE>
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Notes to Statement of Financial Condition:
The preparation of financial statements in accordance with generally
accepted accounting principles requires Trust management to make estimates and
assumptions that affect the reported amounts and disclosures. Actual results
could differ from those estimates.
(1) Schwab Ten Trust, 2000 Series A (the "Trust") is a unit investment trust
created under the laws of the State of New York and registered under the
Investment Company Act of 1940. The objective of the Trust, jointly sponsored
by Charles Schwab & Co., Inc. and Reich & Tang Distributors, Inc. (the
"Sponsors") is to maximize total return through capital appreciation and
current dividend income. An irrevocable letter of credit issued by BankBoston,
N.A. in an amount of $200,000 has been deposited with the Trustee for the
benefit of the Trust to cover the purchases of Securities. Aggregate cost to
the Trust of the Securities listed in the Portfolio of Investments is
determined by the Trustee on the basis set forth under "Public Offering --
Offering Price" as of 4:00 p.m. on January 18, 2000. The Trust will terminate
on February 21, 2001 or can be terminated earlier under certain circumstances
as further described in the Prospectus.
(2) A portion of the Public Offering Price consists of securities in an
amount sufficient to reimburse the Sponsor for the per Unit portion of all or a
part of the costs of establishing the Trust. These costs have been estimated at
$1.00 per 100 Units for the Trust. A payment will be made as of the close of
the initial public offering period to an account maintained by the Trustee from
which the obligation of the investors to the Sponsors will be satisfied. To the
extent that actual organization costs are less than the estimated amount, only
the actual organization costs included in the Public Offering Price will be
reimbursed to the Sponsors and deducted from the assets of the Trust.
(3) The maximum Deferred Sales Charge of $12.50 per 100 Units (1.25% of the
Initial Public Offering Price) will be paid by monthly and semi-annual charges
subsequent to the Initial Date of Deposit. If Units are redeemed prior to the
last Deferred Sales Charge Payment Date, the remaining amount of the deferred
sales charge applicable to such Units will be payable at the time of
redemption. Based on projected total assets of $20,000,000, the estimated
maximum total deferred sales charge would be $250,000. To the extent that
Unitholders pay a reduced deferred sales charge or the Trust is larger or
smaller, the estimate may vary.
A-8
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SCHWAB TEN TRUST,
2000 SERIES A
PORTFOLIO OF INVESTMENTS
AS OF JANUARY 18, 2000
<TABLE>
<CAPTION>
Market
Value of
Stocks as a
Number Percentage Current Market Cost of
Portfolio of Ticker of the Dividend Value Per Securities to
No. Shares Name of Issuer(1) Symbol Trust(2) Yield (3) Share the Trust(4)
- --------- ------ ----------------- ------ ----------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Common Stocks:
1. 299 Caterpillar Inc. CAT 10.00% 2.60% $ 49.9375 $ 14,931
2. 226 E.I. du Pont de Nemours and Company DD 10.00 2.12 66.0625 14,930
3. 250 Eastman Kodak Company EK 10.03 2.94 59.8750 14,969
4. 176 Exxon Mobil Corporation XOM 9.97 2.08 84.5625 14,883
5. 180 General Motors Corporation GM 10.01 2.41 83.0625 14,951
6. 286 International Paper Company IP 10.02 1.91 52.3125 14,961
7. 121 J.P. Morgan & Company JPM 9.99 3.24 123.3125 14,921
8. 153 Minnesota Mining & Manufacturing Co. MMM 10.00 2.29 97.6250 14,937
9. 648 Philip Morris Companies, Inc. MO 9.98 8.35 23.0000 14,904
10. 363 SBC Communications Inc. SBC 10.00 2.37 41.1250 14,929
------ --------
Total Investment in Securities 100.00% $149,316
====== ========
</TABLE>
FOOTNOTES TO PORTFOLIO OF INVESTMENTS
(1) Contracts to purchase the Securities were entered into on January 18, 2000.
All such contracts are expected to be settled on or about the First
Settlement Date of the Trust which is expected to be January 24, 2000.
(2) Based on the cost of the Securities to the Trust.
(3) Current Dividend Yield for each security was calculated by annualizing the
last quarterly or semi-annual ordinary dividend declared on the security
and dividing the result by its market value as of the close of trading on
January 18, 2000.
(4) Evaluation of Securities by the Trustee was made on the basis of closing
sales prices at the Evaluation Time on January 18, 2000. The Sponsors'
Purchase Price was $149,448. The Sponsors' Loss on the Initial Date of
Deposit is $132.
The accompanying notes form an integral part of the Financial Statements.
A-9
<PAGE>
REPORT OF INDEPENDENT AUDITORS
THE UNITHOLDERS, SPONSORS AND TRUSTEE
SCHWAB TEN TRUST, 2000 SERIES A
We have audited the accompanying Statement of Financial Condition of Schwab
Ten Trust, 2000 Series A, including the Portfolio of Investments, as of January
18, 2000. This financial statement is the responsibility of the Trust's
management. Our responsibility is to express an opinion on this financial
statement based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statement
is free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statement. Our
procedures included confirmation with The Chase Manhattan Bank, Trustee, of an
irrevocable letter of credit deposited for the purchase of securities, as shown
in the financial statement as of January 18, 2000. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents fairly,
in all material respects, the financial position of Schwab Ten Trust, 2000
Series A, at January 18, 2000, in conformity with accounting principles
generally accepted in the United States.
ERNST & YOUNG LLP
New York, New York
January 19, 2000
A-10
<PAGE>
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CharlesSchwab
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SCHWAB TRUSTS
SCHWAB TEN TRUST, 2000 SERIES A
PROSPECTUS PART B
PART B OF THIS PROSPECTUS MAY NOT BE
DISTRIBUTED UNLESS ACCOMPANIED BY
PART A
THE TRUST
ORGANIZATION. Schwab Ten Trust consists of a "unit investment trust"
designated as set forth in Part A. The Trust was created under the laws of the
State of New York pursuant to a Trust Indenture and Agreement (the "Trust
Agreement"), dated the Initial Date of Deposit, among Charles Schwab & Co.,
Inc. and Reich & Tang Distributors, Inc., as Sponsors, and The Chase Manhattan
Bank, as Trustee.
On the Initial Date of Deposit, the Sponsors deposited with the Trustee
common stock, including funds and delivery statements relating to contracts for
the purchase of certain such securities (collectively, the "Securities") with
an aggregate value as set forth in Part A and cash or an irrevocable letter of
credit issued by a major commercial bank in the amount required for such
purchases. Thereafter the Trustee, in exchange for the Securities so deposited,
has registered on the registration books of the Trust evidence of the Sponsors'
ownership of all Units of the Trust. The Sponsors have a limited right to
substitute other securities in the Trust portfolio in the event of a failed
contract. See "The Trust--Substitution of Securities." The Sponsors may also,
in certain circumstances, direct the Trustee to dispose of certain Securities
if the Sponsors believe that, because of market or credit conditions, or for
certain other reasons, retention of the Security would be detrimental to
Unitholders. See "Trust Administration--Portfolio Supervision."
As of the Initial Date of Deposit, a "Unit" represents an undivided
fractional interest in the Securities and cash of the Trust as is set forth in
the "Summary of Essential Information." As additional Units are issued by the
Trust as a result of the deposit of Additional Securities, as described below,
the aggregate value of the Securities in the Trust will be increased and the
fractional undivided interest in the Trust represented by each Unit will be
decreased. To the extent that any Units are redeemed by the Trustee, the
fractional undivided interest or pro rata share in such Trust represented by
each unredeemed Unit will increase, although the actual interest in such Trust
represented by such fraction will remain unchanged. Units will remain
outstanding until redeemed upon tender to the Trustee by Unitholders, which may
include the Sponsors, or until the termination of the Trust Agreement.
DEPOSIT OF ADDITIONAL SECURITIES. With the deposit of the Securities in the
Trust on the Initial Date of Deposit, the Sponsors established a proportionate
relationship among the initial aggregate value of specified Securities in the
Trust. During the 90 days subsequent to the Initial Date of Deposit (the
"Deposit Period"), the Sponsors may deposit additional Securities in the Trust
that are substantially similar to the Securities already deposited in the Trust
("Additional Securities"), contracts to purchase Additional Securities or cash
(or a bank letter of credit in lieu of cash) with instructions to purchase
Additional Securities, in order to
B-1
<PAGE>
create additional Units, maintaining to the extent practicable the original
proportionate relationship of the number of shares of each Security in the
Trust portfolio on the Initial Date of Deposit. These additional Units, which
will result in an increase in the number of Units outstanding, will each
represent, to the extent practicable, an undivided interest in the same number
and type of securities of identical issuers as are represented by Units issued
on the Initial Date of Deposit. It may not be possible to maintain the exact
original proportionate relationship among the Securities deposited on the
Initial Date of Deposit because of, among other reasons, purchase requirements,
changes in prices, or unavailability of Securities. The composition of the
Trust portfolio may change slightly based on certain adjustments made to
reflect the disposition of Securities and/or the receipt of a stock dividend, a
stock split or other distribution with respect to such Securities, including
Securities received in exchange for shares or the reinvestment of the proceeds
distributed to Unitholders. Deposits of Additional Securities in the Trust
subsequent to the Deposit Period must replicate exactly the existing
proportionate relationship among the number of shares of Securities in the
Trust portfolio. Substitute Securities may be acquired under specified
conditions when Securities originally deposited in the Trust are unavailable
(see "The Trust--Substitution of Securities" below).
OBJECTIVE. The objective of the Trust is to maximize total return through
capital appreciation and current dividend income. The Trust seeks to achieve
its objective by attempting to outperform the Dow Jones Industrial Average
("DJIA") by creating a portfolio that follows the investment strategy of
investing in the ten (10) common stocks which, out of the thirty (30) common
stocks comprising the DJIA, have the highest dividend yield (the "Strategic
Ten"), determined as of two business days prior to the Initial Date of Deposit.
The Strategic Ten strategy is commonly referred to as the "dogs of the Dow."
The Trust's portfolio will be comprised of these ten (10) stocks. The Trust's
assets will be allocated in approximately equal amounts among the Strategic
Ten. For the actual percentage of each stock in the portfolio, see "Portfolio"
in Part A. (Also see "The Trust--The Securities" herein.)
The name "Dow Jones Industrial Average" is the property of Dow Jones &
Company, Inc., which is not affiliated with the Sponsors and has not
participated in any way in the creation of the Trust or the selection of the
stocks included in the Trust and has not reviewed or approved any information
included in this prospectus. Dow Jones & Company, Inc. has not granted to the
Trust or the Sponsors a license to use the Dow Jones Industrial Average.
As used herein, the term "highest dividend yield" means the yield for each
Security calculated by annualizing the last quarterly or semi-annual ordinary
dividend declared on that Security and dividing the result by the market value
of that Security as of two business days prior to the Initial Date of Deposit.
This rate is historical, and there is no assurance that any dividends will be
declared or paid in the future on the Securities in the Trust. As used herein,
the term "Securities" means the common stocks initially deposited in the Trust
and described in "Portfolio" in Part A and any additional common stocks
acquired and held by the Trust pursuant to the provisions of the Indenture.
Investing in stocks comprising the DJIA with the highest dividend yields may
be effective in achieving the Trust's investment objective because regular
dividends are common for established companies and dividends have accounted for
a substantial portion of the total return on thirty common stocks comprising
the DJIA. There can be no assurance that the dividend rates will be maintained.
Reduction or elimination of a dividend could adversely affect the stock price
as well. Purchasing a portfolio of these stocks as opposed to one or two stocks
can achieve a more diversified holding. There is only one investment decision
instead of ten. An investment in the Trust can be cost-efficient, avoiding the
odd-lot costs of buying small quantities of securities directly. An investment
in a number of companies with high dividends relative to their stock prices is
designed
B-2
<PAGE>
to increase the Trust's potential for higher returns. The Trust's return will
consist of a combination of capital appreciation and current dividend income.
The Trust will terminate in approximately one year, at which time investors may
choose to either receive the distributions in kind, in cash or reinvest in a
subsequent series of the Schwab Ten Trust (if available) at a reduced deferred
sales charge. Further, the Securities may appreciate or depreciate in value,
dependent upon the full range of economic and market influences affecting
corporate profitability, the financial condition of issuers and the prices of
equity securities in general and the Securities in particular.
Investors should note that the Trust's selection criteria were applied to
the Securities two business days prior to the Initial Date of Deposit. Since
the Sponsors may deposit additional Securities in connection with the sale of
additional Units, the yields on these Securities may change subsequent to the
Initial Date of Deposit. Therefore, there is no guarantee that the objective of
the Trust will be achieved.
THE SECURITIES. Each of the Securities has been taken from the Dow Jones
Industrial Average ("DJIA"). The DJIA comprises 30 common stocks chosen by the
editors of The Wall Street Journal as representative of the broad market and of
American industry. The companies are major factors in their industries and
their stocks are widely held by individuals and institutional investors.
Changes in the components of the DJIA are made entirely by the editors of The
Wall Street Journal without consultation with the companies, the stock exchange
or any official agency. For the sake of continuity, changes are made rarely.
Most substitutions have been the result of mergers, but from time to time,
changes may be made to achieve a better representation. The components of the
DJIA may be changed at any time for any reason. Any changes in the components
of the DJIA after the date of this Prospectus will not cause a change in the
identity of the common stocks included in the Trust's portfolio, including any
Additional Securities deposited in the Trust. The Trust is not considered to be
"concentrated" in a particular category or industry.
The first DJIA, consisting of 12 stocks, was published in The Wall Street
Journal in 1896. The list grew to 20 stocks in 1916 and to 30 stocks on October
1, 1928. For two periods of 17 consecutive years each, there were no changes to
the list: March 1939-July 1956 and June 1959-August 1976. The DJIA last changed
on November 1, 1999.
<TABLE>
<CAPTION>
Stocks Currently Comprising the DJIA
------------------------------------
<S> <C>
AT&T Corporation Intel Corporation
Allied Signal International Business Machines Corporation
Aluminum Company of
America International Paper Company
American Express Company Johnson & Johnson
Boeing Company J.P. Morgan & Company, Inc.
Caterpillar Inc. McDonald's Corporation
Citigroup Inc. Merck & Company, Inc.
Coca-Cola Company Microsoft Corporation
E.I. du Pont de Nemours
and Company Minnesota Mining & Manufacturing Company
Eastman Kodak Company Phillip Morris Companies, Inc.
Exxon Mobil Corporation Proctor & Gamble Company
General Electric Company SBC Communications Inc.
General Motors Corpora-
tion United Technologies Corporation
Hewlett-Packard Company Wal-Mart Stores, Inc.
Home Depot Inc. Walt Disney Company
</TABLE>
B-3
<PAGE>
The yield for each Security was calculated by annualizing the last quarterly
or semi-annual ordinary dividend distributed and dividing the result by the
market value of the Security as of two business days prior to the Initial Date
of Deposit. This formula (an objective determination) served as the basis for
the Sponsors' selection of the Strategic Ten. The companies represented in the
Trust are some of the most well-known and highly capitalized companies in
America. The Securities were selected irrespective of any research
recommendation by the Sponsors. Investing in the stocks of the DJIA may be
effective as well as conservative because regular dividends are common for
established companies and dividends have accounted for a substantial portion of
the total return on stocks of the group of stocks comprising the DJIA.
The following sets forth the total return for previous series of Schwab Ten
Trusts offered and terminated. These total returns reflect the maximum sales
charges (1.25%) and actual expenses, but do not include commissions or taxes.
<TABLE>
<CAPTION>
Date Date Total
Name of Trust Offered Terminated Return
- ------------- -------- ---------- ------
<S> <C> <C> <C>
1997 Series A........................................ 11-04-97 12-10-98 7.16%
1998 Series A........................................ 03-03-98 04-13-99 7.22%
1998 Series B........................................ 07-07-98 08-17-99 23.03%
</TABLE>
Although the Schwab Ten Trust was not available until 1997, during the last
25 years, the strategy of investing in approximately equal values of the ten
highest yielding stocks each year generally would have yielded a higher total
return than an investment in all 30 stocks which make up the DJIA. The
following table shows the hypothetical performance of investing approximately
equal amounts in the Strategic Ten at the beginning of each year and rolling
over the proceeds. The total returns do not reflect sales charges, brokerage
and transaction costs, commissions or taxes and, therefore, will be different
from actual investment results. In addition, the time period presented for the
DJIA and Strategic Ten reflect a calendar year and may differ from actual Trust
Offerings. These results represent past performance of the Strategic Ten and
should not be considered indicative of future results of the Trust. The Trust's
annual total return may not exceed the DJIA in any one year; however,
historically, long term cumulative total returns from these strategies have
outperformed the cumulative returns of the DJIA. The Strategic Ten
underperformed the DJIA in certain years. Also, investors in the Trust may not
realize as high a total return as on a direct investment in the Strategic Ten
since the Trust has sales charges and expenses and may not be fully invested at
all times. Unit prices fluctuate with the value of the underlying stocks, and
there is no assurance that dividends on these stocks will be paid or that the
Units will appreciate in value.
B-4
<PAGE>
The following table compares the actual performance of the DJIA and
approximately equal values of the Strategic Ten Strategy in each of the past 25
years, as of December 31 in each of these years:
COMPARISON OF TOTAL RETURNS(/1/)
<TABLE>
<CAPTION>
Strategic Ten
Dow Jones Net of Sales
Industrial Charges and
Year Ended Average (DJIA) Strategic Ten(/2/) Expenses(/3/)
---------- -------------- ------------------ -------------
<S> <C> <C> <C>
1975 44.4% 55.9% 54.42%
1976 22.7 34.8 33.57
1977 -12.7 0.9 -0.33
1978 2.7 -0.1 -1.33
1979 10.5 12.4 11.17
1980 21.5 27.2 25.97
1981 -3.4 5.0 3.77
1982 25.8 23.6 22.37
1983 25.7 38.7 37.47
1984 1.1 7.6 6.37
1985 32.8 29.5 28.27
1986 26.9 32.1 30.87
1987 6.0 6.1 4.87
1988 16.0 22.9 21.67
1989 31.7 26.5 25.27
1990 -0.4 -7.6 -8.83
1991 23.9 39.3 38.07
1992 7.4 7.9 6.67
1993 16.8 27.3 26.07
1994 4.9 4.1 2.87
1995 36.4 36.7 35.47
1996 28.9 27.9 26.67
1997 24.7 21.6 20.37
1998 17.9 10.8 9.57
1999 27.0 3.6 2.37
</TABLE>
- ---------------------
(1) Total Return represents the sum of Appreciation and Actual Dividend Yield.
(i) Appreciation for the Strategic Ten and the DJIA is calculated by
subtracting the opening market value of these Strategic Ten or DJIA stocks,
respectively, as of the first trading day on the New York Stock Exchange in
a given year from the market value of those stocks as of the last trading
day in that year, and dividing the result by the market value of the stocks
as of the first trading day in that year. (ii) Actual Dividend Yield for
the Strategic Ten is calculated by adding the total dividends received on
the stocks in the year and dividing the result by the market value of the
stocks as of the first trading day in that year. Actual Dividend Yield for
the DJIA is calculated by taking the total dividends credited to the DJIA
and dividing the result by the opening value of the DJIA as of the first
trading day in that year. Total return does not take into consideration any
sales charges, commissions, expenses or taxes.
(2) The Strategic Ten in any given year were selected by ranking the dividend
yields for each of the stocks in the DJIA as of the beginning of that year,
based upon an annualization of the last quarterly or semi-annual regular
dividend distribution (which would have been declared in the preceding
year) divided by that stock's market value on the first trading day on the
New York Stock Exchange in that year.
These results represent past performance and should not be considered
indicative of future results of the Trust. Unit prices may fluctuate with
the value of the underlying stocks, and there is no assurance that
dividends on these stocks will be paid or that the Units will appreciate in
value.
(3) Total return is net of sales charges (1.25% for the first year and 1.00%
thereafter) and estimated annual expenses of .231%.
B-5
<PAGE>
The contracts to purchase Securities deposited initially in the Trust are
expected to settle in three business days, in the ordinary manner for such
Securities. Settlement of the contracts for Securities is thus expected to take
place prior to the settlement of purchase of Units on the Initial Date of
Deposit.
SUBSTITUTION OF SECURITIES. In the event of a failure to deliver any
Security that has been purchased for the Trust under a contract ("Failed
Securities"), the Sponsors are authorized under the Trust Agreement to direct
the Trustee to acquire other securities ("Substitute Securities") to make up
the original corpus of the Trust.
The Substitute Securities must be purchased within 20 days after the
delivery of the notice of the failed contract. Where the Sponsors purchase
Substitute Securities in order to replace Failed Securities, the purchase price
may not exceed the purchase price of the Failed Securities and the Substitute
Securities must be substantially similar to the Securities originally
contracted for and not delivered. Such selection may include or be limited to
Securities previously included in the portfolio of the Trust. No assurance can
be given that the Trust will retain its present size and composition for any
length of time.
Whenever a Substitute Security has been acquired for the Trust, the Trustee
shall, within five days thereafter, notify all Unitholders of the acquisition
of the Substitute Security and the Trustee shall, on the next Distribution Date
which is more than 30 days thereafter, make a pro rata distribution of the
amount, if any, by which the cost to the Trust of the Failed Security exceeded
the cost of the Substitute Security.
In the event no substitution is made, the proceeds of the sale of Securities
will be distributed to Unitholders as set forth under "Rights of Unitholders--
Distributions." In addition, if the right of substitution shall not be utilized
to acquire Substitute Securities in the event of a failed contract, the
Sponsors will cause to be refunded the sales charge attributable to such Failed
Securities to all Unitholders, and distribute the principal and dividends, if
any, attributable to such Failed Securities on the next Distribution Date.
RISK CONSIDERATIONS
FIXED PORTFOLIO. The value of the Units will fluctuate depending on all of
the factors that have an impact on the economy and the equity markets. These
factors similarly impact the ability of an issuer to distribute dividends.
Unlike a managed investment company in which there may be frequent changes in
the portfolio of securities based upon economic, financial and market analyses,
securities of a unit investment trust, such as the Trust, are not subject to
such frequent changes based upon continuous analysis. All the Securities in the
Trust are liquidated or distributed during the Liquidation Period. Since the
Trust will not sell Securities in response to ordinary market fluctuation, but
only at the Trust's termination or upon the occurrence of certain events (see
"Trust Administration--Portfolio Supervision") the amount realized upon the
sale of the Securities may not be the highest price attained by an individual
Security during the life of the Trust.
Some of the Securities in the Trust may also be owned by other clients of
the Sponsors and their affiliates. However, because these clients may have
differing investment objectives, the Sponsors may sell certain Securities from
those accounts in instances where a sale by the Trust would be impermissible,
such as to maximize return by taking advantage of market fluctuations.
Investors should consult with their own financial advisers prior to investing
in the Trust to determine its suitability. (See "Trust Administration--
Portfolio Supervision" below.)
ADDITIONAL SECURITIES. Investors should be aware that in connection with the
creation of additional Units subsequent to the Initial Date of Deposit, the
Sponsors will deposit Additional Securities, contracts to purchase Additional
Securities or cash (or letter of credit in lieu of cash) with instructions to
purchase Additional Securities, in each instance maintaining the original
proportionate relationship, subject to
B-6
<PAGE>
adjustment under certain circumstances, of the numbers of shares of each
Security in the Trust. To the extent the price of a Security increases or
decreases between the time cash is deposited with instructions to purchase the
Security and the time the cash is used to purchase the Security, Units may
represent less or more of that Security and more or less of the other
Securities in the Trust. 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 additional Units will not be
fully covered by the deposit of a bank letter of credit. In the event that the
Sponsors do not deliver cash in consideration for the additional Units
delivered, the Trust may be unable to satisfy its contracts to purchase the
Additional Securities 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 Sponsors to deliver cash to the Trust, or
any delays in the Trust receiving such cash, would have significant adverse
consequences for the Trust.
COMMON STOCK. Since the Trust contains 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.
Additional risks include those 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
B-7
<PAGE>
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.
YEAR 2000 ISSUE. Many existing computer programs use only two digits to
identify a year in the date field and were designed and developed without
considering the impact of the upcoming change in the century. Therefore, for
example, the year "2000" would be incorrectly identified as the year "1900". If
not corrected, many computer applications could fail or create erroneous
results by or at the Year 2000, requiring substantial resources to remedy. The
Sponsors and Trustee believe that the "Year 2000" problem is material to their
business and operations and could have a material adverse effect on each of the
Sponsors' and the Trustee's results of operations and, in turn, cash available
for distribution by the Trustee. Although the Sponsors and the Trustee are
addressing the problem with respect to their business operations, there can be
no assurance that the "Year 2000" problem will be properly or timely resolved.
The "Year 2000" problem may also adversely affect issuers of the Securities
contained in the Trust to varying degrees based upon various factors. The
Sponsors are unable to predict what effect, if any, the "Year 2000" program
will have on such issuers.
LEGISLATION. At any time after the Initial Date of Deposit, legislation may
be enacted affecting 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 or tobacco industries, 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 Sponsors 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 Sponsors 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 Sponsors for the Trust organization costs, the
Trustee will sell additional Securities to allow the Trust to fully reimburse
the Sponsors. 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 Sponsors will remain fixed and will never exceed $1.00
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.
GENERALLY. There is no assurance that any dividends will be declared or paid
in the future on the Securities. Investors should be aware that there is no
assurance that the Trust's objective will be achieved.
B-8
<PAGE>
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.
The sales charge consists of a Deferred Sales Charge of $12.50 per 100 Units
(1.25% of the Initial Public Offering Price). The Deferred Sales Charge will be
paid through ten monthly deductions from the Principal Account of the Trust of
$.80 on each of the Monthly Deferred Sales Charge Payment Dates as set forth in
the Summary of Essential Information in Part A (the "Monthly Charge") and two
semi-annual deductions from distributions from the Income Account of $2.25 each
on June 30, 2000 and on December 31, 2000 (the "Semi-Annual Charge"). If the
amount of the distribution from the Income Account is insufficient to pay the
Semi-Annual Charge, any unpaid amount shall be further deferred and deducted
from proceeds due to Unitholders upon termination. If the amount available in
the Principal Account of the Trust is insufficient to pay the Monthly Charge,
the Trustee shall sell Securities selected by the Sponsors sufficient to pay
such amounts. If the Public Offering Price paid by an investor exceeds $10.00
per Unit, the Deferred Sales Charge will be less than 1.25%; if the Public
Offering Price paid by an investor is less than $10.00 per Unit, the Deferred
Sales Charge will exceed 1.25%. To the extent the entire Deferred Sales Charge
has not been so deducted at the time of repurchase or redemption of the Units,
any unpaid amount will be deducted from the proceeds or in calculating an in
kind distribution. However, any remaining Deferred Sales Charge will be
refunded by the Sponsors when Units of any Schwab Ten Trust held at the time of
the death (including the death of a single joint tenant with rights of
survivorship) or disability (as defined in the Internal Revenue Code of 1986)
of a Holder are repurchased or redeemed. The Sponsors may require receipt of
satisfactory proof of the death or disability before releasing the portion of
the proceeds representing the amount waived. Units purchased pursuant to the
Reinvestment Plan are subject only to any remaining Deferred Sales Charge
deductions (see "Reinvestment Plan").
DISCOUNTS. Employees (and their immediate families) of Charles Schwab & Co.,
Inc., and Reich & Tang Distributors, Inc. (and their affiliates) and of the
special counsel to the Sponsors may, pursuant to employee benefit arrangements,
purchase Units of the Trust at a price equal to the aggregate value of the
underlying securities in the Trust during the initial offering period, divided
by the number of Units outstanding plus a reduced Deferred Sales Charge of
$10.00 per 100 Units (1.00% of the Initial Public Offering Price). Such
arrangements result in less selling effort and selling expenses than sales to
employee groups of other companies. Resales or transfers of Units purchased
under the employee benefit arrangements may only be made through the Sponsors'
secondary market, so long as it is being maintained, and not through other
broker-dealers. Units may be purchased in the primary or secondary market at
the Public Offering Price plus a reduced Deferred Sales Charge of $10.00 per
100 Units by investors who purchase Units through registered investment
advisers, certified financial planners and registered broker-dealers who have
agreements with Charles Schwab & Co., Inc. ("Schwab Financial Advisor"), or by
investors in either (i) any unit investment trust with an
B-9
<PAGE>
investment strategy based upon the Strategic Ten that have purchased their
investment within a two year period prior to the date of this Prospectus who
can purchase Units of the Trust in an amount not greater in value than the
amount of said investment made during this two year period or (ii) a
terminating series of the Schwab Ten Trust who can purchase Units of the Trust
in an amount not greater than twice the value of their investment in the
terminating Schwab Ten Trust ("Strategic Ten Investors"). Such Strategic Ten
Investors who purchase Units of the Trust through a Schwab Financial Advisor
may purchase Units in the primary or secondary market at the Public Offering
Price plus a Deferred Sales Charge of $8.00 per 100 Units (.80% of the Initial
Public Offering Price), if available in the secondary market. The reduced
Deferred Sales Charge of $10.00 per 100 Units will be paid through Monthly
Charges of $.80 and the two Semi-Annual Charges of $1.00 each. The reduced
Deferred Sales Charge of $8.00 per 100 Units will only be subject to the
monthly charge described above.
DISTRIBUTION OF UNITS. During the initial offering period and thereafter to
the extent additional Units continue to be offered by means of this Prospectus,
Units will be distributed by the Sponsors at the Public Offering Price. The
initial offering period is thirty days after each deposit of Securities in the
Trust and the Sponsors may extend the initial offering period for successive
thirty-day periods. The Sponsors intend to qualify the Units for sale in
substantially all States.
SPONSORS' PROFITS. The Sponsors will receive a combined gross underwriting
commission equal to up to $12.50 per 100 Units or 1.25% of the Initial Public
Offering Price per 100 Units (equivalent to 1.266% of the net amount invested
in the Securities). Additionally, the Sponsors may realize a profit on the
deposit of the Securities in the Trust representing the difference between the
cost of the Securities to the Sponsors and the cost of the Securities to the
Trust. (See "Portfolio of Investments.") All or a portion of the Securities
initially deposited in the Trust may have been acquired through the Sponsors.
During the initial offering period and thereafter to the extent additional
Units continue to be offered by means of this Prospectus, the Sponsors may also
realize profits or sustain losses as a result of fluctuations after the Initial
Date of Deposit in the aggregate value of the Securities and hence in the
Public Offering Price received by the Sponsors for the Units. Cash, if any,
made available to the Sponsors prior to settlement date for the purchase of
Units may be used in the Sponsors' business subject to the limitations of 17
CFR 240.15c3-3 under the Securities Exchange Act of 1934 and may be of benefit
to the Sponsors.
Both upon acquisition of Securities and termination of the Trust, the
Trustee may utilize the services of the Sponsors for the purchase or sale of
all or a portion of the Securities in the Trust. The Sponsors may receive
brokerage commissions from the Trust in connection with such purchases and
sales in accordance with applicable law.
In maintaining a market for the Units (see "Sponsors Repurchase") the
Sponsors will realize profits or sustain losses in the amount of any difference
between the price at which they buy Units and the price at which they resell
such Units.
RIGHTS OF UNITHOLDERS
BOOK-ENTRY UNITS. Ownership of Units of the Trust will not be evidenced by
certificates. All evidence of ownership of the Units will be recorded in book-
entry form at The Depository Trust Company ("DTC") through an investor's
brokerage account. Units held through DTC will be deposited by the Sponsors
B-10
<PAGE>
with DTC in the Sponsors' DTC account and registered in the nominee name CEDE &
COMPANY. Individual purchases of beneficial ownership interest in the Trust
will be made in book-entry form through DTC. Ownership and transfer of Units
will be evidenced and accomplished directly and indirectly only by book-entries
made by DTC and its participants. DTC will record ownership and transfer of the
Units among DTC participants and forward all notices and credit all payments
received in respect of the Units held by the DTC participants. Beneficial
owners of Units will receive written confirmation of their purchase and sale
from Charles Schwab & Co., Inc. Transfers, and the requirements therefor, will
be governed by the applicable procedures of DTC and the Unitholder's agreement
with the DTC participant in whose name the Unitholder's Units are registered on
the transfer records of DTC.
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 Distribution 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 second 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.
Distributions of amounts necessary to pay the Deferred Sales Charge will be
made from the Principal Account to the extent of the Monthly Charge of $.80 per
100 Units for all Unitholders and from distributions made from the Income
Account to the extent of the Semi-Annual Charge of either $2.25 or $1.00 per
100 Units for those Unitholders paying Deferred Sales Charges of $12.50 and
$10.00, respectively, per 100 Units, to an account maintained by the Trustee
for purposes of satisfying investors' sales charge obligations.
The dividend distribution per 100 Units, if any, cannot be anticipated and
may be paid as Securities are redeemed, exchanged or sold, or as expenses of
the Trust fluctuate. No distribution need be made from the Income Account or
the Principal Account unless the balance therein is an amount sufficient to
distribute $1.00 per 100 Units.
RECORDS. The Trustee shall furnish Unitholders in connection with each
distribution a statement of the amount being distributed from the Income and
Principal Account, respectively, 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
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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 the
Deferred Sales Charge, 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 Securities disposed of and the net
proceeds received therefrom, deductions for payment of disposition of any
Securities and the net proceeds received therefrom, deductions for the Deferred
Sales Charge, 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, Units held, a current list of Securities in the portfolio and a
copy of the Trust Agreement.
LIQUIDITY
SPONSORS REPURCHASE. Unitholders who wish to dispose of their Units should
inquire of the Sponsors as to current market prices prior to making a tender
for redemption. The aggregate value of the Securities will be determined by the
Trustee on a daily basis and computed on the basis set forth under "Trustee
Redemption." The Sponsors do not guarantee the enforceability, marketability or
price of any Securities in the Portfolio or of the Units. The Sponsors may
discontinue the repurchase of redemption requests 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
Charles Schwab & Co., Inc., except for redemption requests received after 4
P.M., New York Time when Units will be deemed to have been repurchased on the
next business day. In the event a market is not maintained for the Units, a
Unitholder may be able to dispose of Units only by tendering them to the
Trustee for redemption.
Units purchased by the Sponsors in the secondary market may be reoffered for
sale by the Sponsors at a price based on the aggregate value of the Securities
in the Trust subject to the remaining Deferred Sales Charge plus a pro rata
portion of amounts, if any, in the Income and Principal Accounts. Any Units
that are purchased by the Sponsors in the secondary market also may be redeemed
by the Sponsors if they determine such redemption to be in their best interest.
The Sponsors may, under certain circumstances, as a service to Unitholders,
elect to purchase any Units tendered to the Trustee for redemption (see
"Trustee Redemption"). Factors which the Sponsors will consider in making a
determination will include the number of Units of all Trusts which they have in
inventory, their
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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 Sponsors may elect
to purchase such Units. Such purchase shall be made by payment to the
Unitholder's brokerage account not later than the close of business on the
redemption date of an amount equal to the Redemption Price on the date of
tender less any unpaid Deferred Sales Charge.
TRUSTEE REDEMPTION. At any time prior to the Evaluation Time on the business
day preceding the commencement of the Liquidation Period (approximately one
year from the Date of Deposit), or on the date of any earlier termination of
the Trust, Units may also be tendered to the Trustee for redemption upon
payment of any relevant tax by contacting Charles Schwab & Co., Inc. In certain
instances, additional documents may be required, such as a trust instrument,
certificate of corporate authority, certificate of death or appointment as
executor, administrator or guardian. At the present time there are no specific
taxes related to the redemption of Units. No redemption fee will be charged by
the Sponsors or the Trustee. Units redeemed by the Trustee will be canceled.
Within three business days following a tender for redemption, the Unitholder
will be entitled to receive an amount for each Unit tendered equal to the
Redemption Price per Unit computed as of the Evaluation Time set forth under
"Summary of Essential Information" in Part A on the date of tender less any
unpaid Deferred Sales Charge applicable to the redeeming Unitholder. 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.
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 (during the initial offering period a
portion of the cash on hand includes an amount sufficient to pay the per Unit
portion of all or a part of the costs incurred in organizing and offering the
Trust, see "Trust Expenses and Charges"), (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 a Record Date 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 organization costs to the Sponsors.
Therefore, the amount of the Redemption Price per 100 Units received by a
Unitholder will include the portion representing organization costs only when
such Units are tendered for redemption prior to the close of the initial
offering period. 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.
In connection with each redemption the Sponsors will direct the Trustee to
redeem Units in accordance with the procedures set forth in either (a) or (b)
below.
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(a) A Unitholder will receive his redemption proceeds in cash. Amounts
paid on redemption allocable to the Unitholder's interest in the Income
Account shall be withdrawn from the Income Account, or, if the balance
therein is insufficient, from the Principal Account. All other amounts paid
on redemption shall be withdrawn from the Principal Account. The Trustee is
empowered to sell Securities in order to make funds available for
redemptions. Such sales, if required, could result in a sale of Securities
by the Trustee at a loss. To the extent Securities are sold, the size and
diversity of the Trust will be reduced. The Securities to be sold will be
selected by the Trustee in order to maintain, to the extent practicable,
the proportionate relationship among the number of shares of each stock.
Provision is made in the Indenture under which the Sponsors may, but need
not, specify minimum amounts in which blocks of Securities are to be sold
in order to obtain the best price for the Trust. While these minimum
amounts may vary from time to time in accordance with market conditions,
the Sponsors believe that the minimum amounts which would be specified
would be approximately 100 shares for readily marketable Securities.
Any Unitholder tendering 25,000 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
Unitholder's broker-dealer account 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 Income
and Principal Accounts equal to the balance of the Redemption Price to which
the tendering Unitholder is entitled. A Unitholder who elects to receive In
Kind Distributions may incur brokerage or other transaction costs in converting
the Securities so distributed into cash subsequent to their receipt of the
Securities from the Trust. If funds in the Principal Account are insufficient
to cover the required cash distribution to the tendering Unitholder, the
Trustee may sell Securities in the manner described above.
The Trustee is irrevocably authorized in its discretion, if the Sponsors do
not elect to purchase a Unit tendered for redemption or if the Sponsors tender
a Unit for redemption, in lieu of redeeming such Unit, to sell such Unit in the
over-the-counter market for the account of the tendering Unitholder at prices
which will return to the Unitholder an amount in cash, net after deducting
brokerage commissions, transfer taxes and other charges, equal to or in excess
of the Redemption Price for such Unit. The Trustee will pay the net proceeds of
any such sale to the Unitholder on the day he would otherwise be entitled to
receive payment of the Redemption Price.
(b) The Trustee will redeem Units in kind by an in kind distribution to
The Chase Manhattan Bank as the Distribution Agent. A Unitholder will be
able to receive in kind an amount per Unit equal to the Redemption Price
per Unit as determined as of the day of tender. In Kind Distributions to
Unitholders will take the form of whole shares of Securities. Cash will be
distributed by the Distribution Agent in lieu of fractional shares. The
whole shares, fractional shares and cash distributed to the Distribution
Agent will aggregate an amount equal to the Redemption Price per Unit.
Distributions in kind on redemption of Units shall be held by the
Distribution Agent, whom each Unitholder shall be deemed to have designated as
his agent upon purchase of a Unit, for the account, and for disposition in
accordance with the instructions of, the tendering Unitholder as follows:
(i) The Distribution Agent shall sell the In Kind Distribution as of the
close of business on the date of tender or as soon thereafter as possible
and remit to the Unitholder not later than three business days
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thereafter the net proceeds of sale, after deducting brokerage commissions
and transfer taxes, if any, on the sale unless the tendering Unitholder
requests a distribution of the Securities as set forth in paragraph (ii)
below. The Distribution Agent may sell the Securities through the Sponsors,
and the Sponsors may charge brokerage commissions on those sales.
(ii) If the tendering Unitholder requests distribution in kind and
tenders in excess of 25,000 Units, the Distribution Agent shall sell any
portion of the In Kind Distribution represented by fractional interests in
shares in accordance with the foregoing and distribute the net cash
proceeds plus any other distributable cash to the tendering Unitholder
together with book-entry credit to the account of the Unitholder's bank or
broker-dealer at DTC representing whole shares of each of the Securities
comprising the In Kind Distribution.
The 25,000 Unit threshold will not apply to redemptions in kind at the
termination of the Trust.
The portion of the Redemption Price which represents the Unitholder's
interest in the Income Account shall be withdrawn from the Income Account to
the extent available. The balance paid on any redemption, including dividends
receivable on stocks trading ex-dividend, if any, shall be drawn from the
Principal Account to the extent that funds are available for such purpose. To
the extent Securities are distributed in kind to the Distribution Agent, the
size of the Trust will be reduced. Sales by the Distribution Agent may be
required at a time when Securities would not otherwise be sold and might result
in lower prices than might otherwise be realized. The Redemption Price received
by a tendering Unitholder may be more or less than the purchase price
originally paid by such Unitholder, depending on the value of the Securities in
the Portfolio at the time of redemption.
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 Securities
is not reasonably practicable, or for such other periods as the Securities and
Exchange Commission may by order permit. The Trustee and the Sponsors are not
liable to any person or in any way for any loss or damage which may result from
any such suspension or postponement.
A Unitholder who wishes to dispose of his Units should inquire of his broker
in order to determine if there is a current secondary market price in excess of
the Redemption Price.
TRUST ADMINISTRATION
PORTFOLIO SUPERVISION. The Trust is a unit investment trust and is not a
managed fund. Traditional methods of investment management for a managed fund
typically involve frequent changes in a portfolio of securities on the basis of
economic, financial and market analyses. The Portfolio of the Trust, however,
will not be managed and therefore the adverse financial condition of an issuer
will not necessarily require the sale of its Securities from the portfolio.
Although the portfolio of the Trust is regularly reviewed, because of the
formula employed in selecting the Strategic Ten, it is unlikely that the Trust
will sell any of the Securities other than to satisfy redemptions of Units, or
to cease buying Additional Securities in connection with the issuance of
additional Units. However, the Trust Agreement provides that the Sponsors may
direct the disposition of Securities upon the occurrence of certain events
including: (1) default in payment of amounts due on any of the Securities; (2)
institution of certain legal proceedings; (3) default under certain documents
materially and adversely affecting future declaration or payment of amounts due
or expected; (4) determination
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of the Sponsors that the tax treatment of the Trust as a grantor trust would
otherwise be jeopardized; or (5) decline in price as a direct result of serious
adverse credit factors affecting the issuer of a Security which, in the opinion
of the Sponsors, would make the retention of the Security detrimental to the
Trust or the Unitholders. Furthermore, the Trust will likely continue to hold a
Security and purchase additional shares notwithstanding its ceasing to be
included among the Strategic Ten or even its deletion from the DJIA.
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 Sponsors fail to give immediate
instructions to sell or hold that Security, the Trustee, within 30 days of
that failure by the Sponsors, shall sell the Security.
(b) It is the responsibility of the Sponsors to instruct the Trustee to
reject any offer made by an issuer of any of the Securities to issue new
securities in exchange and substitution for any Security pursuant to a
recapitalization or reorganization. If any exchange or substitution is
effected notwithstanding such rejection, any securities or other property
received shall be promptly sold unless the Sponsors direct that it be
retained.
(c) Any property received by the Trustee after the Initial Date of
Deposit as a distribution on any of the Securities in a form other than
cash or additional shares of the Securities shall be promptly sold unless
the Sponsors direct that it be retained by the Trustee. The proceeds of any
disposition shall be credited to the Income or Principal Account of the
Trust.
(d) The Sponsors are authorized to increase the size and number of Units
of the Trust by the deposit of Additional Securities, contracts to purchase
Additional Securities or cash or a letter of credit with instructions to
purchase Additional Securities in exchange for the corresponding number of
additional Units from time to time subsequent to the Initial Date of
Deposit, provided that the original proportionate relationship among the
number of shares of each Security established on the Initial Date of
Deposit is maintained to the extent practicable. The Sponsors may specify
the minimum numbers in which Additional Securities will be deposited or
purchased. If a deposit is not sufficient to acquire minimum amounts of
each Security, Additional Securities may be acquired in the order of the
Security most under-represented immediately before the deposit when
compared to the original proportionate relationship. If Securities of an
issue originally deposited are unavailable at the time of the subsequent
deposit, the Sponsors may (i) deposit cash or a letter of credit with
instructions to purchase the Security when it becomes available, or (ii)
deposit (or instruct the Trustee to purchase) either Securities of one or
more other issues originally deposited or a Substitute Security.
TRUST AGREEMENT AND AMENDMENT. The Trust Agreement may be amended by the
Trustee and the Sponsors without the consent of any of the Unitholders: (1) to
cure any ambiguity or to correct or supplement any provision which may be
defective or inconsistent; (2) to change any provision thereof as may be
required by the Securities and Exchange Commission or any successor
governmental agency; or (3) to make such other provisions in regard to matters
arising thereunder as shall not adversely affect the interests of the
Unitholders.
The Trust Agreement may also be amended in any respect, or performance of
any of the provisions thereof may be waived, with the consent of investors
holding 66 2/3% of the Units then outstanding for the purpose of modifying the
rights of Unitholders; provided that no such amendment or waiver shall reduce
any Unitholder's interest in the Trust without his consent or reduce the
percentage of Units required to consent to any such amendment or waiver without
the consent of the holders of all Units. The Trust Agreement may not be
amended, without the consent of the holders of all Units in the Trust then
outstanding, to increase the
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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
commencement of 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 Sponsors, terminate the Trust.
The Trust may also be terminated at any time with the consent of investors
holding 100% of the Units then outstanding. When directed by the Sponsors, the
Trustee shall utilize the services of the Sponsors for the sale of all or a
portion of the Securities in the Trust, and in so doing, the Sponsors will
determine the manner, timing and execution of the sales of the underlying
Securities. Any brokerage commissions received by the Sponsors from the Trust
in connection with such sales will be in accordance with applicable law. In the
event of termination, written notice thereof will be sent by the Trustee to all
Unitholders who are holding their Units in a Schwab brokerage account at that
time. 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 such
Unitholders at least 30 days prior to the commencement of the Liquidation
Period) (see "Summary of Essential Information" in Part A for the date of the
commencement of the Liquidation Period):
1. A Unitholder whose interest in the Trust would entitle him to receive
at least one share of each underlying Security will have his Units redeemed
on or about the commencement of the Liquidation Period by distribution of
the Unitholder's pro rata share of the net asset value of the Trust on such
date distributed in kind to the extent represented by whole shares of
underlying Securities and the balance in cash within three business days
following the commencement of the Liquidation Period. Unitholders
subsequently selling such distributed Securities will incur brokerage costs
when disposing of such Securities. Unitholders should consult their own tax
adviser in this regard;
2. To receive in cash such Unitholder's pro rata share of the net asset
value of the Trust derived from the sale by the Sponsors as the agents of
the Trustee of the underlying Securities during the Liquidation Period. The
Unitholder's pro rata share of its net assets of the Trust will be
distributed to such Unitholder within three days of the settlement of the
trade of the last Security to be sold; and/or
3. To invest such Unitholder's pro rata share of the net assets of the
Trust derived from the sale by the Sponsors as agents of the Trustee of the
underlying Securities in units of a subsequent series of the Schwab Ten
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 by the Rollover Notification Date set forth in the "Summary of
Essential Information" for the Trust in Part A. In the event that the
Sponsors determine that such a redemption and subsequent investment in a
New Series by a Rollover Unitholder may be effected under applicable law in
a manner that will not result in the recognition of either gain or loss for
U.S. federal income tax purposes with respect to any Securities that are
included in the portfolio of the New Series ("Duplicated Securities"),
Unitholders will be notified at least 30 days prior to the commencement of
the Liquidation Period of the procedures and process necessary to
facilitate such tax treatment. The Units of a New Series will be purchased
by the Unitholder within three business days of the settlement of the trade
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for the last of the Unitholder's Securities to be sold. Such purchaser will
be entitled to a reduced deferred sales charge upon the purchase of units
of the New Series. It is expected that the terms of the New Series will be
substantially the same as the terms of the Trust described in this
Prospectus, and that similar options with respect to the termination of
such New Series will be available. The availability of this option does not
constitute a solicitation of an offer to purchase Units of a New Series or
any other security. A Unitholder's election to participate in this option
will be treated as an indication of interest only. At any time prior to the
purchase by the Unitholder of units of a New Series such Unitholder may
change his investment strategy and receive, in cash, the proceeds of the
sale of the Securities. An election of this option will not prevent the
Unitholder from recognizing taxable gain or loss (except in the case of a
loss, if and to the extent the New Series is treated as substantially
identical to the Trust) as a result of the liquidation, even though no cash
will be distributed to pay any taxes. Unitholders should consult their own
tax 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). In addition,
Unitholders who have transferred their Units from a Schwab brokerage account
will not be eligible for the rollover (option number 3) and will be deemed to
have elected to receive the termination distribution in cash (option number 2),
unless they affirmatively notify the Trustee by the Rollover Notification Date
that they elect to receive an in-kind distribution (option number 1).
The Sponsors have agreed that to the extent they effect the sales of
underlying securities for the Trustee in the case of the second and third
options such sales will be free of brokerage commissions. The Sponsors, on
behalf of the Trustee, will sell, unless prevented by unusual and unforeseen
circumstances, such as, among other reasons, a suspension in trading of a
Security, the close of a stock exchange, outbreak of hostilities and collapse
of the economy, all of the Securities by the last business day of the
Liquidation Period. The Redemption Price Per Unit upon the settlement of the
last sale of Securities during the Liquidation Period will be distributed to
Unitholders in redemption of such Unitholders' interest in the Trust.
Depending on the amount of proceeds to be invested in Units of the New
Series and the amount of other orders for Units in the New Series, the Sponsors
may purchase a large amount of securities for the New Series in a short period
of time. The Sponsors' buying of securities may tend to raise the market prices
of these securities. The actual market impact of the Sponsors' purchases,
however, is currently unpredictable because the actual amount of securities to
be purchased and the supply and price of those securities is unknown. A similar
problem may occur in connection with the sale of Securities during the
Liquidation Period; depending on the number of sales required, the prices of
and demand for Securities, such sales may tend to depress the market prices and
thus reduce the proceeds of such sales. The Sponsors believe that the sale of
underlying Securities during 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 seven days if, in the Sponsors' judgment,
such sales are in the best interest of Unitholders. The Sponsors, in
implementing such sales of securities on behalf of the Trustee, will seek to
maximize the sales proceeds and will act in the best interests of the
Unitholders. There can be no assurance, however, that any adverse price
consequences of heavy trading will be mitigated.
Section 17(a) of the Investment Company Act of 1940 generally prohibits
principal transactions between registered investment companies and their
affiliates. Pursuant to an exemptive order issued by the Securities and
Exchange Commission, each terminating Schwab Ten Trust can sell Duplicated
Securities directly to a New Series. The exemption will enable the Trust to
eliminate commission costs on these transactions. The price for those
securities transferred will be the closing sale price on the sale date on the
national securities exchange where the securities are principally traded, as
certified and confirmed by the Trustee.
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The Sponsors may for any reason, in their sole discretion, decide not to
sponsor any subsequent series of the Trust, without penalty or incurring
liability to any Unitholder. If the Sponsors so decide, the Sponsors will
notify the Trustee of that decision, and the Trustee will notify the
Unitholders before the commencement of the Liquidation Period. All Unitholders
will then elect either option 1 or option 2.
By electing to reinvest in the New Series, the Unitholder indicates his
interest in having his terminating distribution from the Trust invested only in
the New Series created following termination of the Trust; the Sponsors expect,
however, that a similar reinvestment program will be offered with respect to
all subsequent series of the Trust, thus giving Unitholders a yearly
opportunity to elect to "rollover" their terminating distributions into a New
Series. The availability of the reinvestment 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 reinvestment program will be
treated as an indication of interest only. The Sponsors intend to coordinate
the date of deposit of a future series so that the terminating trust will
terminate contemporaneously with the creation of a New Series. The Sponsors
reserve the right to modify, suspend or terminate the reinvestment privilege at
any time.
THE SPONSORS. Charles Schwab & Co., Inc. ("Schwab") was established in 1971
and is one of America's largest discount brokers. The firm provides low-cost
securities brokerage and related financial services to over 3.3 million active
customer accounts and has over 200 branch offices. Schwab also offers
convenient access to financial information services and provides products and
services that help investors make investment decisions. Schwab is a wholly
owned subsidiary of The Charles Schwab Corporation. Charles R. Schwab is the
founder, Chairman, Chief Executive Officer and a director of The Charles Schwab
Corporation and, as of March 18, 1999, the beneficial owner of approximately
18.6% of the outstanding shares of that corporation. Mr. Schwab may be deemed
to be a controlling person of Schwab.
Reich & Tang Distributors, Inc. a Delaware corporation, is engaged in the
brokerage business and is a member of the National Association of Securities
Dealers, Inc. Reich & Tang is also a registered investment advisor. Reich &
Tang maintains its principal business offices at 600 Fifth Avenue, New York,
New York 10020. The sole shareholder of Reich & Tang, Reich & Tang Asset
Management, Inc. ("RTAM Inc."), is wholly owned by NEIC Holdings, Inc. which,
effective December 29, 1997, was wholly owned by NEIC Operating Partnership,
L.P. ("NEICOP"). Subsequently, on March 31, 1998, NEICOP changed its name to
Nvest Companies, L.P. ("Nvest"). The general partners of Nvest are Nvest
Corporation and Nvest L.P. As of March 31, 1998, Metropolitan Life Insurance
Company ("MetLife") owned approximately 47% of the partnership interests of
Nvest. Nvest, with a principal place of business at 399 Boylston Street,
Boston, MA 02116, is a holding company of firms engaged in the securities and
investment advisory business. These affiliates in the aggregate are investment
advisors or managers to over 80 registered investment companies. Reich & Tang
is successor Sponsor to Bear Stearns 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) and Equity Securities Trust, Series 1, Signature Series,
Gabelli Communications Income Trust (and Subsequent Series).
On October 12, 1999, Reich & Tang announced that it had reached an agreement
to transfer its unit investment trust business to ING Mutual Funds Management
Co. LLC ("ING"). The transaction is expected to close within 30 days of the
date of this Prospectus. Upon closing of the transaction, substantially all of
the unit
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<PAGE>
trust personnel of Reich & Tang will become employees of ING and ING will
assume the ongoing business operations of Reich & Tang's unit investment trust
business. Upon closing, Reich & Tang will resign as sponsor of the Trust and
ING expects to be appointed by the Trustee as the successor sponsor assuming
all the sponsor's obligations and duties under the Indenture. ING is a wholly
owned indirect subsidiary of ING Group. ING Group, among the leading global
financial services organizations, is engaged in asset management, banking and
insurance activities in 60 countries worldwide with over 82,000 employees.
The information included herein is only for the purpose of informing
investors as to the financial responsibility of the Sponsors and their ability
to carry out their contractual obligations. The Sponsors will be under no
liability to Unitholders for taking any action, or refraining from taking any
action, in good faith pursuant to the Trust Agreement, or for errors in
judgment except in cases of their own willful misfeasance, bad faith, gross
negligence or reckless disregard of their obligations and duties.
The Sponsors may each resign at any time by delivering to the Trustee an
instrument of resignation executed by the individual Sponsor. If at any time
either of the Sponsors 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 4 New York Plaza, New York,
New York 10004. The Trustee is subject to supervision by the Superintendent of
Banks of the State of New York, the Federal Deposit Insurance Corporation and
the Board of Governors of the Federal Reserve System.
The Trustee shall not be liable or responsible in any way for taking any
action, or for refraining from taking any action, in good faith pursuant to the
Trust Agreement, or for errors in judgment; or for any disposition of any
moneys, Securities or Units in accordance with the Trust Agreement, except in
cases of its own willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations and duties; provided, however, that the Trustee
shall not in any event be liable or responsible for any evaluation made by any
independent evaluation service employed by it. In addition, the Trustee shall
not be liable for any taxes or other governmental charges imposed upon or in
respect of the Securities or the Trust which it may be required to pay under
current or future law of the United States or any other taxing authority having
jurisdiction. The Trustee shall not be liable for depreciation or loss incurred
by reason of the sale by the Trustee of any of the Securities pursuant to the
Trust Agreement.
For further information relating to the responsibilities of the Trustee
under the Trust Agreement, reference is made to the material set forth under
"Rights of Unitholders."
The Trustee may resign by executing an instrument in writing and filing the
same with the Sponsors, and mailing a copy of a notice of resignation to all
Unitholders. In such an event the Sponsors are obligated to appoint a successor
Trustee as soon as possible. In addition, if the Trustee becomes incapable of
acting or becomes bankrupt or its affairs are taken over by public authorities,
the Sponsors may remove the Trustee and appoint a successor as provided in the
Trust Agreement. Notice of such removal and appointment shall be mailed to each
Unitholder by the Sponsors. If upon resignation of the Trustee no successor has
been appointed
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<PAGE>
and has accepted the appointment within thirty days after notification, the
retiring Trustee may apply to a court of competent jurisdiction for the
appointment of a successor. The resignation or removal of the Trustee becomes
effective only when the successor Trustee accepts its appointment as such or
when a court of competent jurisdiction appoints a successor Trustee. Upon
execution of a written acceptance of such appointment by such successor
Trustee, all the rights, powers, duties and obligations of the original Trustee
shall vest in the successor.
Any corporation into which the Trustee may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which the Trustee shall be a party, shall be the successor Trustee. The Trustee
must always be a banking corporation organized under the laws of the United
States or any State and have at all times an aggregate capital, surplus and
undivided profits of not less than $2,500,000.
EVALUATION OF THE TRUST. The value of the Securities in the Trust portfolio
is determined in good faith by the Trustee on the basis set forth under "Public
Offering-Offering Price." The Sponsors and the Unitholders may rely on any
evaluation furnished by the Trustee and shall have no responsibility for the
accuracy thereof. Determinations by the Trustee under the Trust Agreement shall
be made in good faith upon the basis of the best information available to it,
provided, however, that the Trustee shall be under no liability to the Sponsors
or Unitholders for errors in judgment, except in cases of its own willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations and duties. The Trustee, the Sponsors and the Unitholders may rely
on any evaluation furnished to the Trustee by an independent evaluation service
and shall have no responsibility for the accuracy thereof.
TRUST EXPENSES AND CHARGES
Investors will reimburse the Sponsors on a per 100 Units basis, for all or a
portion of the estimated costs incurred in organizing the Trust (collectively,
the "organization costs"), including the cost of the initial preparation and
execution of the Trust Agreement, registration of the Trust and the Units under
the Investment Company Act of 1940 and the Securities Act of 1933 and State
registration fees, the initial fees and expenses of the Trustee, legal expenses
and other actual out-of-pocket expenses. The estimated organization costs will
be paid to the Sponsors from the assets of the Trust as of the close of the
initial offering period (which may be between 30 and 90 days). To the extent
that actual organization costs are less than the estimated amount, only the
actual organization costs will be deducted from the assets of the Trust. To the
extent that actual organization costs are greater than the estimated amount,
only the estimated organization costs included in the Public Offering Price
will be reimbursed to the Sponsors. All advertising and selling expenses, as
well as any organizational costs not paid by the Trust, will be borne by the
Sponsors at no cost to the Trust.
The Sponsors will receive for portfolio supervisory, bookkeeping and
administrative services to the Trust an Annual Fee in the amount set forth
under "Summary of Essential Information" in Part A. The Sponsors' fee may
exceed the actual cost of providing portfolio supervisory, bookkeeping and
administrative services for the Trust, but at no time will the total amount
received for portfolio supervisory, bookkeeping and administrative services
rendered to all series of the Schwab Trusts in any calendar year exceed the
aggregate cost to the Sponsors of supplying such services in such year. (See
"Portfolio Supervision.")
The Trustee will receive, for its ordinary recurring services to the Trust,
an annual fee in the amount set forth under "Summary of Essential Information"
in Part A. For a discussion of the services performed by the Trustee pursuant
to its obligations under the Trust Agreement, see "Trust Administration" and
"Rights of Unitholders."
B-21
<PAGE>
The Trustee's fees applicable to a Trust are payable as of each Record Date
from the Income Account of the Trust to the extent funds are available and then
from the Principal Account. Both the Sponsors' and Trustee's fees may be
increased without approval of the Unitholders by amounts not exceeding
proportionate increases in consumer prices for services as measured by the
United States Department of Labor's Consumer Price Index entitled "All Services
Less Rent."
The following additional charges are or may be incurred by the Trust: all
expenses (including counsel fees) of the Trustee incurred and advances made in
connection with its activities under the Trust Agreement, including the
expenses and costs of any action undertaken by the Trustee to protect the Trust
and the rights and interests of the Unitholders; fees of the Trustee for any
extraordinary services performed under the Trust Agreement; indemnification of
the Trustee for any loss or liability accruing to it without gross negligence,
bad faith or willful misconduct on its part, arising out of or in connection
with its acceptance or administration of the Trust; indemnification of the
Sponsors for any losses, liabilities and expenses incurred in acting as
sponsors of the Trust without gross negligence, bad faith or willful misconduct
on its part; and all taxes and other governmental charges imposed upon the
Securities or any part of the Trust (no such taxes or charges are being levied,
made or, to the knowledge of the Sponsors, contemplated). The above expenses,
including the Trustee's fees, when paid by or owing to the Trustee are secured
by a first lien on the Trust to which such expenses are charged. In addition,
the Trustee is empowered to sell the Securities in order to make funds
available to pay all expenses.
Unless the Sponsors otherwise direct, the accounts of the Trust shall be
audited not less than annually by independent auditors selected by the
Sponsors. The expenses of the audit shall be an expense of the Trust. So long
as the Sponsors maintain a secondary market, the Sponsors will bear any audit
expense which exceeds $.50 cents per 100 Units. Unitholders covered by the
audit during the year may receive a copy of the audited financial statements
upon request.
REINVESTMENT PLAN
Income and principal distributions on Units (other than the final
distribution in connection with the termination of the Trust) may be reinvested
by participating in the Trust's reinvestment plan. Under the plan, the Units
acquired for participants will be either Units already held in inventory by the
Sponsors or new Units created by the Sponsors' deposit of Additional Securities
as described in "The Trust-Organization" in this Part B. Units acquired by
reinvestment will be subject to any remaining deductions of the Deferred Sales
Charge. In order to enable a Unitholder to participate in the reinvestment plan
with respect to a particular distribution on their Units, written notification
must be received by the Trustee within 10 days prior to the Record Date for
such distribution. Each subsequent distribution of income or principal on the
participant's Units will be automatically applied by the Trustee to purchase
additional Units of the Trust. The Sponsors reserve the right to demand, modify
or terminate the reinvestment plan at any time without prior notice.
TAX STATUS
The following is a general discussion of certain of the Federal income tax
consequences of the purchase, ownership and disposition of the Units by U.S.
citizens and residents and corporations organized in the United States. The
summary is limited to investors who hold the Units as "capital assets"
(generally, property held for investment) within the meaning of Section 1221 of
the Internal Revenue Code and does not address the tax consequences of Units
held by dealers, financial institutions or insurance companies.
In rendering the opinion set forth below, Battle Fowler LLP has examined the
Agreement, the final form of Prospectus dated the date hereof and the documents
referred to therein, among others, and has relied on the
B-22
<PAGE>
validity of said documents and the accuracy and completeness of the facts set
forth therein. In the opinion of Battle Fowler LLP, special counsel for the
Sponsors, under existing law:
1. The Trust will be classified as a grantor trust for Federal income
tax purposes and not as a partnership or association taxable as a
corporation. Classification of the Trust as a grantor trust will cause the
Trust not to be subject to Federal income tax, and will cause the
Unitholders of the Trust to be treated for Federal income tax purposes as
the owners of a pro rata portion of the assets of the Trust. All income
received by the Trust will be treated as income of the Unitholders in the
manner set forth below.
2. The Trust is not subject to the New York Franchise Tax on Business
Corporations or the New York City General Corporation Tax. For a Unitholder
who is a New York resident, however, a pro rata portion of all or part of
the income of the Trust will be treated as income of the Unitholder under
the income tax laws of the State and City of New York. Similar treatment
may apply in other states.
3. During the 90-day period subsequent to the initial issuance date, the
Sponsors reserve the right to deposit Additional Securities that are
substantially similar to those establishing the Trust. This retained right
falls within the guidelines promulgated by the IRS and should not affect
the taxable status of the Trust.
A taxable event will generally occur with respect to each Unitholder when
the Trust disposes of a Security (whether by sale, exchange or redemption) or
upon the sale, exchange or redemption of Units by the Unitholder. The price a
Unitholder pays for its Units, including sales charges, is allocated among its
pro rata portion of each Security held by the Trust (in proportion to the fair
market values thereof on the date the Unitholder purchases its Units) in order
to determine its initial cost for its pro rata portion of each Security held by
the Trust.
A Unitholder will be considered to have received all of the dividends paid
on its pro rata portion of each Security when such dividends are received or
amounts are converted by the Trust, even if the Holder does not actually
receive such distributions but rather reinvests its dividend distributions
pursuant to the Reinvestment Plan. For Federal income tax purposes, a
Unitholder's pro rata portion of dividends paid with respect to a Security held
by a Trust is taxable as ordinary income to the extent of the issuing
corporation's current and accumulated earnings and profits. A Unitholder's pro
rata portion of dividends paid on a Security that exceed current and
accumulated earnings and profits will first reduce a Unitholder's tax basis in
the Security, and to the extent that such dividends exceed a Unitholder's tax
basis in the Security will generally be treated as capital gain.
A Unitholder's portion of gain, if any, upon the sale, exchange or
redemption of Units or the disposition of Securities held by the Trust will
generally be considered a capital gain and will be long-term if the Unitholder
has held its Units (and the Trust has held the Securities) for more than one
year. Capital gains are generally taxed at the same rates applicable to
ordinary income, but non-corporate Unitholders who realize long-term capital
gains may be subject to a reduced tax rate of 20%, rather than the "regular"
maximum tax rate of 39.6%. Tax rates may increase prior to the time when
Unitholders may realize gains from the sale, exchange or redemption of the
Units or Securities.
A Unitholder's portion of loss, if any, upon the sale or redemption of Units
or the disposition of Securities held by the Trust will generally be considered
a capital loss and will be long-term if the Unitholder has held its Units (and
the Trust has held the Securities) for more than one year. Capital losses are
deductible to the extent of capital gains; in addition, up to $3,000 of capital
losses ($1,500 in the case of married individuals filing separately) recognized
by non-corporate Unitholders may be deducted against ordinary income.
An individual Unitholder that itemizes its deductions may also deduct its
pro rata share of the fees and expenses of the Trust, but only to the extent
that such amounts, together with the Unitholder's other
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<PAGE>
miscellaneous deductions, exceed 2% of its adjusted gross income. The deduction
of fees and expenses may also be limited by Section 68 of the Code, which
reduces the amount of itemized deductions that are allowed for individuals with
incomes in excess of certain thresholds.
A corporation that owns Units will generally be entitled to a 70% dividends
received deduction with respect to its pro rata portion of dividends received
by the Trust from a domestic corporation or from a qualifying foreign
corporation in the same manner as if such corporate unitholder directly owned
the Securities paying such dividends. That deduction is available to
corporations (other than "S" corporations and certain other corporations that
are not eligible for such deduction) and is not available for purposes of
special taxes such as the accumulated earnings tax and the personal holding
company tax. However, a corporation owning Units should be aware that Sections
246 and 246A of the Code impose additional limitations on the eligibility of
dividends for the 70% dividends received deduction. These limitations include a
requirement that stock (and therefore Units) must generally be held at least 46
days (as determined under Section 246(c) of the Code) during the 90-day period
beginning on the date that is 45 days before the date on which the stock
becomes "ex-dividend." Moreover, the allowable percentage of the deduction will
be reduced if a corporate Unitholder owns stock (or Units) the financing of
which is directly attributable to indebtedness incurred by such corporation.
The dividends-received deduction is currently 70%. Congress from time to time
considers proposals to reduce this percentage.
After the end of each calendar year, the Trustee will furnish to each
Unitholder an annual statement containing information relating to the dividends
received by the Trust on the Securities, the gross proceeds received by the
Trust from the disposition of any Security, and the fees and expenses paid by
the Trust. The Trustee will also furnish annual information returns to each
Unitholder and to the Internal Revenue Service.
As discussed in the section "Termination", each Unitholder may have three
options in receiving its termination distributions, which are (i) to receive
its pro rata share of the underlying Securities in kind, (ii) to receive cash
upon liquidation of its pro rata share of the underlying Securities, or (iii)
to invest the amount of cash it would receive upon the liquidation of its pro
rata share of the underlying Securities in units of a future series of the
Trust (if one is offered). A Unitholder that chooses option (i), should be
treated as merely exchanging its undivided pro rata ownership of Securities
held by the Trust for sole ownership of a proportionate share of Securities,
and therefore the transaction should be tax free to the extent the Securities
are received. Alternatively, the transaction may be treated as an exchange that
would qualify for nonrecognition treatment to the extent the Unitholder is
exchanging his undivided interest in all of the Trust's Securities for his
proportionate number of shares of the underlying Securities. In either
instance, the transaction should result in a non-taxable event for the
Unitholder to the extent Securities are received. However, there is no specific
authority addressing the income tax consequences of an in-kind distribution
from a grantor trust.
Entities that generally qualify for an exemption from Federal income tax,
such as many pension trusts, are nevertheless taxed under Section 511 of the
Code on unrelated business taxable income. Unrelated business taxable income is
income from a trade or business regularly carried on by the tax-exempt entity
that is unrelated to the entity's exempt purpose. Unrelated business taxable
income generally does not include dividend or interest income or gain from the
sale of investment property, unless such income is derived from property that
is debt-financed or is dealer property. A tax-exempt entity's dividend income
from the Trust and gain from the sale of Units in the Trust or the Trust's sale
of Securities is not expected to constitute unrelated business taxable income
to such tax-exempt entity unless the acquisition of the Unit itself is debt-
financed or constitutes dealer property in the hands of the tax-exempt entity.
Prospective 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.
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<PAGE>
RETIREMENT PLANS. Units of the Trust may be well suited for purchase by
Individual Retirement Accounts ("IRAs"), Keogh plans, pension funds and other
qualified retirement plans. Generally, capital gains and income received in
each of the foregoing plans are exempt from Federal taxation. Except with
respect to certain IRAs known as Roth IRAs, distributions from such plans are
generally treated as ordinary income but may be eligible for tax-deferred
rollover treatment and, in very limited cases, special 10 year averaging.
Holders of Units in IRAs, Keogh plans and other tax-deferred retirement plans
should consult their plan custodian as to the appropriate disposition of
distributions. Investors considering participation in any such plan should
review specific tax laws related thereto and should consult their attorneys or
tax advisers with respect to the establishment and maintenance of any such
plan. Such plans are offered by brokerage firms, including Charles Schwab &
Co., Inc., and other financial institutions. Fees and charges with respect to
such plans may vary.
Before investing in the Trust, the trustee or investment manager of an
employee benefit plan (e.g., a pension or profit sharing retirement plan)
should consider among other things (a) whether the investment is prudent under
the Employee Retirement Income Security Act of 1974, as amended ("ERISA" ),
taking into account the needs of the plan and all of the facts and
circumstances of the investment in the Trust; (b) whether the investment
satisfies the diversification requirement of Section 404(a)(1)(C) of ERISA; and
(c) whether the assets of the Trust are deemed "plan assets" under ERISA and
the Department of Labor regulations regarding the definition of "plan assets."
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 Sponsors. Carter,
Ledyard & Milburn, Two Wall Street, New York, New York 10005 have acted as
counsel for the Trustee.
INDEPENDENT AUDITORS. The Statement of Financial Condition, including the
Portfolio of Investments, is included herein in reliance upon the report of
Ernst & Young LLP, independent auditors, and upon the authority of said firm as
experts in accounting and auditing.
PERFORMANCE INFORMATION. Total returns, average annualized returns or
cumulative returns for various periods of the Strategic Ten, the related index
and this Trust may be included from time to time in advertisements, sales
literature and reports to current or prospective investors. Total return shows
changes in Unit price during the period plus any dividends and capital gains
received, divided by the public offering price as of the date of calculation.
Average annualized returns show the average return for stated periods of longer
than a year. From time to time, the Trust may compare the cost of purchasing
Trust shares to the cost of purchasing the individual securities which
constitute the Strategic Ten. In addition, the Trust may compare its deferred
sales charge to the sales charges assessed on unitholders by other unit
investment trusts. Sales material may also include an illustration of the
cumulative results of like annual investments in the Strategic Ten during an
accumulation period and like annual withdrawals during a distribution period.
Figures for actual portfolios will reflect all applicable expenses and, unless
otherwise stated, the maximum deferred sales charge. No provision is made for
any income taxes payable. Similar figures may be given for this Trust applying
the Strategic Ten investment strategy to other indexes. Returns may also be
shown on a combined basis. Trust performance may be compared to performance on
a total return basis of the Dow Jones Industrial Average, the S&P 500 Composite
Price Stock Index, or the average performance of mutual funds investing in a
diversified portfolio of U.S. stocks generally or growth stocks, 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.
B-25
<PAGE>
No person is authorized to give any information or to make any
representations with respect to this Trust not contained in Parts A and B of
this Prospectus. The Trust is registered as a unit investment trust under the
Investment Company Act of 1940. Such registration does not imply that the Trust
or any of its Units have been guaranteed, sponsored, recommended or approved by
the United States or any state or any agency or officer thereof.
---------------
This Prospectus does not constitute an offer to sell, or a solicitation of
an offer to buy, securities in any state to any person to whom it is not lawful
to make such offer in such state.
Table of Contents
<TABLE>
<CAPTION>
Title Page
- ----- ----
<S> <C>
PART A
Fee Table.................................................................. A-5
Summary of Essential Information........................................... A-6
Statement of Financial Condition........................................... A-8
Portfolio of Investments................................................... A-9
Report of Independent Auditors............................................. A-10
PART B
The Trust.................................................................. B-1
Risk Considerations........................................................ B-6
Public Offering............................................................ B-9
Rights of Unitholders...................................................... B-10
Liquidity.................................................................. B-12
Trust Administration....................................................... B-15
Trust Expenses and Charges................................................. B-21
Reinvestment Plan.......................................................... B-22
Tax Status................................................................. B-22
Other Matters.............................................................. B-25
</TABLE>
TF 7306
---------------------
Schwab Ten Trust/TM/
---------------------
SCHWAB TEN TRUST,
2000 SERIES A
(A UNIT INVESTMENT TRUST)
PROSPECTUS
DATED: JANUARY 19, 2000
SPONSORS:
CHARLES SCHWAB & CO., INC.
101 Montgomery Street
San Francisco, California 94104
800-435-4000
REICH & TANG DISTRIBUTORS, INC.
600 Fifth Avenue
New York, New York 10020
800-237-7020
TRUSTEE:
THE CHASE MANHATTAN BANK
4 New York Plaza
New York, New York 10004
This Prospectus does not contain all of the information with respect to the
Trust set forth in its registration statements filed with the Securities and
Exchange Commission, Washington, D.C. under the Securities Act of 1933 (file
no. 333-92261) and the Investment Company Act of 1940 (file no. 811-8293), and
to which reference is hereby made. Copies may be reviewed at the Commission or
on the Internet, or obtained from the Commission at prescribed rates by:
. calling 1-800-SEC-0330
. visiting the SEC Internet address: http://www.sec.gov
. writing: Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549-6009
