<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 3, 2000
REGISTRATION NO. 333-94591
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
------------------------
A. EXACT NAME OF TRUST:
NATIONAL EQUITY TRUST
OTC GROWTH TRUST SERIES 5
B. NAME OF DEPOSITOR:
PRUDENTIAL SECURITIES INCORPORATED
------------------------
C. COMPLETE ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICE:
ONE SEAPORT PLAZA
199 WATER STREET
NEW YORK, NEW YORK 10292
------------------------
D. NAME AND COMPLETE ADDRESS OF AGENT FOR SERVICE:
LEE B. SPENCER, JR., ESQ. Copy to:
PRUDENTIAL SECURITIES INCORPORATED KENNETH W. ORCE, ESQ.
ONE SEAPORT PLAZA CAHILL GORDON & REINDEL
199 WATER STREET 80 PINE STREET
NEW YORK, NEW YORK 10292 NEW YORK, NEW YORK 10005
E. TITLE AND AMOUNT OF SECURITIES BEING REGISTERED:
AN INDEFINITE NUMBER OF UNITS OF
NATIONAL EQUITY TRUST OTC GROWTH TRUST SERIES 5
PURSUANT TO RULE 24F-2 PROMULGATED UNDER
THE INVESTMENT COMPANY ACT OF 1940 AS AMENDED.
F. PROPOSED MAXIMUM AGGREGATE OFFERING PRICE TO THE PUBLIC OF THE SECURITIES
BEING REGISTERED:
INDEFINITE
G. AMOUNT OF FILING FEE:
N/A
------------------------
H. APPROXIMATE DATE OF PROPOSED SALE TO PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE
OF THE REGISTRATION STATEMENT.
/x/ Check box if it is proposed that this filing will become effective on
February 3, 2000 immediately upon filing pursuant to Rule 487.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
NATIONAL EQUITY TRUST OTC GROWTH TRUST SERIES 5
CROSS-REFERENCE SHEET
PURSUANT TO RULE 404 OF REGULATION C
UNDER THE SECURITIES ACT OF 1933
(FORM N-8B-2 ITEMS REQUIRED BY INSTRUCTION AS
TO THE PROSPECTUS IN FORM S-6)
FORM N-8B-2 FORM S-6
ITEM NUMBER HEADING IN PROSPECTUS
------------------------------------- -------------------------------------
I. ORGANIZATION AND GENERAL INFORMATION
1. (a) Name of Trust.................... Prospectus front cover
(b) Title of securities issued....... Prospectus front cover
2. Name and address of each depositor... Sponsor, Prospectus back cover
3. Name and address of trustee.......... Trustee
4. Name and address of each principal
underwriter........................ Sponsor
5. State of organization of trust....... The Trust
6. Execution and termination of trust
agreement.......................... Summary of Essential Information; The
Trust; Amendment and Termination of
the Indenture--Termination
7. Changes of Name...................... *
8. Fiscal year.......................... *
9. Litigation........................... *
II. GENERAL DESCRIPTION OF THE TRUST AND SECURITIES OF THE TRUST
10. (a) Registered or bearer
securities..................... *
(b) Cumulative or distributive
securities..................... *
(c) Redemption....................... Rights of Unit Holders--Redemption
(d) Conversion, transfer, etc........ Rights of Unit Holders--Redemption
(e) Periodic payment plan............ *
(f) Voting rights.................... *
(g) Notice to certificateholders..... The Trust; Rights of Unit
Holders--Reports and Records;
Sponsor--Responsibility; Sponsor--
Resignation; Trustee--Resignation;
Amendment and Termination of the
Indenture
(h) Consents required................ The Trust; Amendment and Termination
of the Indenture
(i) Other provisions................. Tax Status
- ------------------
* Inapplicable, answer negative or not required.
i
<PAGE>
11. Type of securities comprising
units.............................. Prospectus front cover; Objective;
Security Selection; The Trust
12. Certain information regarding
periodic payment certificates...... *
13. (a) Load, fees, expenses, etc........ Summary of Essential Information;
Public Offering of Units--Public
Offering Price; Public Offering of
Units--Profit of Sponsor; Public
Offering of Units--Volume Discount;
Public Offering of Units--Employee
Discount; Exchange Option;
Reinvestment Program; Expenses and
Charges
(b) Certain information regarding
periodic payment certificates.. *
(c) Certain percentages.............. Summary of Essential Information;
Public Offering of Units--Public
Offering Price; Public Offering of
Units--Profit of Sponsor; Public
Offering of Units--Volume Discount;
Public Offering of Units--Employee
Discount; Exchange Option
(d) Price differentials.............. Public Offering of Units--Employee
Discount
(e) Certain other fees, etc. payable
by holders..................... Rights of Unit Holders--Certificates
(f) Certain other profits receivable
by depositor, principal
underwriter, trustee or
affiliated persons............. Rights of Unit
Holders--Redemption--Purchase by
the Sponsor of Units Tendered for
Redemption
(g) Ratio of annual charges to
income......................... *
14. Issuance of trust's securities....... The Trust; Rights of Unit
Holders--Certificates
15. Receipt and handling of payments from
purchasers......................... *
16. Acquisition and disposition of
underlying
securities......................... The Trust--Trust Formation; The
Trusts--Securities Selection;
Rights of Unit Holders--Redemption;
Sponsor--Responsibility
17. Withdrawal or redemption............. Rights of Unit Holders--Redemption
18. (a) Receipt, custody and disposition
of income.......................... Rights of Unit
Holders--Distributions; Rights of
Unit Holders--Reports and Records
(b) Reinvestment of distributions.... Reinvestment Program
(c) Reserves or special funds........ Expenses and Charges; Rights of Unit
Holders--Distributions
(d) Schedule of distributions........ *
19. Records, accounts and reports........ Rights of Unit
Holders--Distributions; Rights of
Unit Holders--Reports and Records
20. Certain miscellaneous provisions of
trust agreement.................... Sponsor--Limitations on Liability;
- ------------------
* Inapplicable, answer negative or not required.
ii
<PAGE>
(a) Amendment........................ Sponsor--Resignation;
(b) Termination...................... Trustee--Limitations on Liability;
(c) and (d) Trustee, removal and
successor...................... Trustee--Resignation;
(e) and (f) Depositor, removal and
successor...................... Amendment and Termination of the
Indenture
21. Loans to security holders............ *
22. Limitation on liability.............. The Trust; Sponsor--Limitations on
Liability; Trustee--Limitations on
Liability; Evaluator--Limitations
on Liability
23. Bonding arrangements................. Additional Information--Item A
24. Other material provisions of trust
agreement.......................... *
III. ORGANIZATION, PERSONNEL AND AFFILIATED PERSONS OF DEPOSITOR
25. Organization of depositor............ Sponsor
26. Fees received by depositor........... *
27. Business of depositor................ Sponsor
28. Certain information as to officials
and affiliated persons of
depositor.......................... Contents of Registration
Statement--Part II
29. Companies controlling depositor...... Sponsor
30. Persons controlling depositor........ *
31. Payments by depositor for certain
services rendered to trust......... *
32. Payments by depositor for certain
other services rendered to trust... *
33. Remuneration of employees of
depositor for certain services
rendered to trust.................. *
34. Remuneration of other persons for
certain services rendered to
trust.............................. *
35. Distribution of trust's securities in
states............................. Public Offering of Units--Public
Distribution
36. Suspension of sales of trust's
securities......................... *
37. Revocation of authority to
distribute......................... *
38. (a) Method of distribution........... Public Offering of Units
(b) Underwriting agreements.......... Public Offering of Units
(c) Selling agreements............... Public Offering of Units
39. (a) Organization of principal
underwriter.................... Sponsor
(b) N.A.S.D. membership of principal
underwriter.................... Sponsor
40. Certain fees received by principal
underwriter........................ *
41. (a) Business of principal
underwriter........................ Sponsor
- ------------------
* Inapplicable, answer negative or not required.
iii
<PAGE>
(b) Branch offices of principal
underwriter.................... Sponsor
(c) Salesmen of principal
underwriter.................... *
42. Ownership of trust's securities by
certain persons.................... *
43. Certain brokerage commissions
received by principal
underwriter........................ *
44. (a) Method of valuation.............. Summary of Essential Information;
Public Offering of Units--Public
Offering Price; Public Offering of
Units--Public Distribution; Public
Offering of Units--Secondary
Markets
(b) Schedule as to offering price.... *
(c) Variation in offering price to
certain persons................ Public Offering of Units--Public
Distribution; Public Offering of
Units--Volume Discount; Public
Offering of Units--Employee
Discount; Exchange Option
45. Suspension of redemption rights...... *
46. (a) Redemption Valuation............. Summary of Essential Information;
Rights of Unit
Holders--Redemption--Computation of
Redemption Price per Unit
(b) Schedule as to redemption
price.......................... *
47. Maintenance of position in underlying
securities......................... Public Offering of Unit--Secondary
Market; Rights of Unit
Holders--Redemption--Computation of
Redemption Price per Unit; Rights
of Unit
Holders--Redemption--Purchase by
the Sponsor of Units Tendered for
Redemption
IV. INFORMATION CONCERNING THE TRUSTEE OR CUSTODIAN
48. Organization and regulation of
trustee............................ Trustee
49. Fees and expenses of trustee......... Expenses and Charges
50. Trustee's lien....................... Expenses and Charges--Other Charges
V. INFORMATION CONCERNING INSURANCE OF HOLDERS OF SECURITIES
51. Insurance of holders of trust's
securities......................... *
VI. POLICY OF REGISTRANT
52. (a) Provisions of trust agreement
with respect to selection or
elimination of underlying
securities..................... Prospectus front cover; The
Trust--Trust Formation; The
Trust--Objectives and Securities
Selection; Sponsor--Responsibility
(b) Transactions involving
elimination of underlying
securities..................... *
- ------------------
* Inapplicable, answer negative or not required.
iv
<PAGE>
(c) Policy regarding substitution or
elimination of underlying
securities..................... Sponsor--Responsibility
(d) Fundamental policy not otherwise
covered........................ *
53. Tax status of trust.................. Prospectus front cover; Tax Status
VII. FINANCIAL AND STATISTICAL INFORMATION
54. Trust's securities during last ten
years.............................. *
55.
56. Certain information regarding
periodic payment certificates...... *
57.
58.
59. Financial statements
(Instruction 1(c) to Form S-6)..... Statement of Financial Condition
- ------------------
* Inapplicable, answer negative or not required.
v
<PAGE>
NATIONAL EQUITY TRUST
OTC GROWTH TRUST SERIES 5
[LOGO] OTC
STRATEGY
- --------------------------------------------------------------------------------
The objective of the Trust is capital appreciation. The Trust will invest in a
fixed portfolio consisting of the common stocks selected by the Sponsor using an
objective stock selection screening process on February 1, 2000.
- --------------------------------------------------------------------------------
SPONSOR: [LOGO] Prudential
Securities
PLEASE READ AND RETAIN Prospectus dated February 3, 2000
THIS PROSPECTUS FOR FUTURE REFERENCE.
- --------------------------------------------------------------------------------
The Securities and Exchange Commission has not approved or disapproved these
securities, or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
- --------------------------------------------------------------------------------
<PAGE>
NATIONAL EQUITY TRUST
OTC GROWTH TRUST SERIES 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Risk Factors................................................................................................................ A-1
Fee Table................................................................................................................... A-4
Summary of Essential Information............................................................................................ A-5
Independent Auditors' Report................................................................................................ A-10
Statement of Financial Condition............................................................................................ A-11
Schedule of Portfolio Securities............................................................................................ A-12
The Trust................................................................................................................... B-1
Objective................................................................................................................. B-1
Security Selection........................................................................................................ B-1
Summary Description of the Portfolio...................................................................................... B-1
Risk Factors................................................................................................................ B-2
Unit Creation............................................................................................................... B-3
Tax Status of the Trust..................................................................................................... B-4
Retirement Plans............................................................................................................ B-6
Public Offering of Units.................................................................................................... B-6
Public Offering Price..................................................................................................... B-6
Sales Charge.............................................................................................................. B-6
Public Distribution....................................................................................................... B-7
Secondary Market.......................................................................................................... B-7
Profit of Sponsor......................................................................................................... B-7
Volume Discount........................................................................................................... B-8
Employee Discount......................................................................................................... B-8
Rights of Unit Holders...................................................................................................... B-8
Ownership of Units........................................................................................................ B-8
Certain Limitations....................................................................................................... B-8
Distribution.............................................................................................................. B-9
Tender of Units for Redemption............................................................................................ B-9
Purchase by the Sponsor of Units Tendered for Redemption.................................................................. B-10
Computation of Redemption Price per Unit.................................................................................. B-10
Exchange Option............................................................................................................. B-11
Federal Income Tax Consequences........................................................................................... B-12
Reinvestment Program........................................................................................................ B-12
Expenses and Charges........................................................................................................ B-13
Organization Costs........................................................................................................ B-13
Trust Fees and Expenses................................................................................................... B-13
Other Charges............................................................................................................. B-13
Administration of the Trust................................................................................................. B-14
Reports and Records.................................................................................................... B-14
Amendment................................................................................................................... B-14
Termination................................................................................................................. B-15
Termination Options....................................................................................................... B-15
Resignation, Removal and Liability.......................................................................................... B-17
Trustee..................................................................................................................... B-17
Limitations on Liability.................................................................................................. B-17
Responsibility............................................................................................................ B-17
Resignation............................................................................................................... B-18
Sponsor..................................................................................................................... B-18
Limitations on Liability.................................................................................................. B-18
Responsibility............................................................................................................ B-18
Resignation............................................................................................................... B-19
Legal Opinions.............................................................................................................. B-19
Independent Auditors........................................................................................................ B-19
</TABLE>
<PAGE>
OBJECTIVE--The objective of the National Equity Trust, OTC Growth Trust
Series 5 (the Trust) is capital appreciation. The Trust seeks to achieve its
objective through an investment for approximately one year in a portfolio of the
Strategy Stocks selected by the Sponsor through the application of an objective
stock selection process on February 1, 2000.
o Capital appreciation: an increase in the value per Unit of the Securities
in the Portfolio of the Trust at the termination of the Trust when compared to
the value per Unit of the Securities in the Portfolio of the Trust at the
commencement of the Trust.
Dividend income is not an objective of the Trust.
STRATEGY--The Trust Portfolio consists of common stock issued by the 10
companies whose common stocks are selected by the Sponsor through the
application of an objective stock selection process (the "Securities" or
"Security" or "Strategy Stocks", as the context requires).
The Securities were selected irrespective of any buy or sell recommendation
by the Sponsor. The Sponsor may have a sell recommendation on one or more of the
stocks in the Trust.
SECURITIES SELECTION. The Portfolio of the Trust consists of the common
stocks selected by the Sponsor through the application of the following
objective stock selection process* on February 1, 2000 (the "Selection Date"):
A. Begin with the stocks comprising the Nasdaq 100 Index1;
B. Select the 20 companies in the Nasdaq 100 Index2 with the largest
market capitalization;
C. Rank the 20 companies based on annual sales from the previous 12 months
as most recently reported by each company; and then
D. Take the 10 companies with the highest dollar amount of annual sales as
of the Selection Date (Strategy Stocks will be approximately equally dollar
weighted in the Trust).
The Portfolio, as of the initial Date of Deposit, contains 10 issues of
Securities, all of which are traded on the Nasdaq Stock Market, Inc., in the
following industry groups:
o Computers (Networking): 10.03%
o Broadcasting: 9.99%
o Computers (Hardware): 20.06%
o Communication Equipment: 9.95%
o Retail: General Merchandise: 9.98%
o Semiconductors: 9.99%
o Telephone: Long Distance: 9.98%
o Computers (Software/Services): 20.02%
The percentages were computed on the basis of the aggregate net asset value
of the Securities in the Trust on the initial Date of Deposit and are subject to
change. The Trust is concentrated in Securities issued by issuers in the
technology industry.
RISK FACTORS--There can be no assurance that the Trust's objective can be
realized.
o You may lose money by buying Units in the Trust.
o The price of a Security may fall.
o Stocks of foreign issuers may be subject to additional risks.
The factors affecting the value of the Securities are those factors that
have an impact upon the value of equity securities in general and particularly
those factors that affect the economic and financial condition of each issuer of
a Security in particular. You should note that the above criteria were applied
to the Securities selected for inclusion in the Trust Portfolio as of the
Selection Date. After that date:
o one or more of the Strategy Stocks may not be included in the Nasdaq 100
Index; or
o a Security may not qualify as a Strategy Stock if the above screening
process were applied at a later date.
Since the Trust Portfolio consists of common stock, an investment in Units
of the Trust should be made with an understanding of the risks inherent in any
investment in common stocks. The risks of investing in common stock include
risks associated with the rights to receive payments from the issuer which are
generally inferior to rights of creditors of, or holders of debt obligations or
preferred stocks issued by, the issuer. Holders of common stock have a right to
receive dividends only when and 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. Common stock does not represent an obligation of the issuer and therefore
does not offer any assurance of income or provide the degree of protection of
capital of debt securities. Common stock has neither a fixed principal amount
nor a maturity and has values which are subject to market fluctuations for as
long as the common stock remains outstanding. These factors similarly impact on
the ability of an issuer to pay dividends.
- ------------------
1 The Nasdaq 100 Index is composed of 100 of the largest non-financial domestic
and international issues listed on the Nasdaq
Stock Market, Inc. ("Nasdaq"). The Nasdaq lists nearly 5,400 companies.
2 The "Nasdaq 100"(R), "Nasdaq 100 Index"(R), and Nasdaq(R) are trade or service
marks of The Nasdaq Stock Market, Inc.
The Trust is not sponsored, endorsed or promoted by or affiliated with The
Nasdaq Stock Market, Inc. and The Nasdaq Stock
Market, Inc. makes no representation, express or implied, to the Trust or
Unitholders regarding the advisability of investing in unit
investment trusts generally or in the Trust specifically.
* Patent pending.
- ------------------
A-1
<PAGE>
The Trust is not a "managed" registered investment company and Securities
will not be sold by the Trustee as a result of ordinary market fluctuations. The
value of the common stock in the Trust may be expected to fluctuate over the
life of the Trust to values higher or lower than those prevailing on the Date of
Deposit.
o The value of a Unit may be subject to greater volatility than an
investment in a more diversified portfolio since the Trust Portfolio contains
only 10 stocks.
o The Securities are concentrated in the technology industry.
o The value of the Units will fluctuate depending on the value of the
Securities.
o The value of the Securities will fluctuate based on all the factors that
have an impact on the economy and the equity markets.
The Securities intended to be used to reimburse the Sponsor for the Trust's
organization costs may decrease in value during the initial offering period. To
the extent the proceeds from the sale of these Securities are insufficient to
repay the Sponsor for the organization costs, the Trustee will sell additional
Securities to allow the full reimbursement of the Sponsor. The net asset value
per Unit will be reduced by the amount of Securities sold.
Technology Industry--Additional Risks
The portfolio of the Trust is concentrated in issuers within the technology
industry. A portfolio concentrated in a single industry may present more risk
than a portfolio broadly diversified over several industries. The Trust, and
therefore Unitholders, may be particularly susceptible to a negative impact
resulting from adverse market conditions or other factors affecting technology
issuers because any negative impact on the technology industry will not be
diversified among issuers within other unrelated industries. Accordingly, an
investment in Units should be made with an understanding of the characteristics
of the technology industry and the risks which such an investment may entail.
The Trust contains common stock of companies involved in the development,
design, manufacture and sale of:
o computers,
o computer related equipment,
o computer networks,
o communications systems,
o telecommunications products,
o electronic products, and
o other related products, systems and services.
The market for technology products and services, especially those
specifically related to the Internet, is characterized by:
o rapidly changing technology,
o rapid product obsolescence,
o cyclical market patterns,
o evolving industry standards and
o frequent new product introductions.
The success of the issuers of the Securities depends in subtantial part on
the timely and successful introduction of new products. An unexpected change in
one or more of the technologies affecting an issuer's products or in the market
for products based on a particular technology could have a material adverse
affect on an issuer's operating results. Furthermore, we cannot assure that the
issuers of the Securities will be able to respond timely to compete in the
rapidly developing marketplace.
The Trust's Securities in the past have experienced, and, in the future are
likely to experience, substantial price volatility and speculative trading.
Accordingly, upon redemption of Units or termination of the Trust a Unitholder
may receive an amount less than the Unitholder's initial investment.
Based on trading history, factors such as announcements of new products or
development of new technologies and general conditions of the industry have
caused and are likely to cause the market price of technology common stocks to
fluctuate substantially. In addition, technology company stocks have experienced
extreme price and volume fluctuations that often have been unrelated to the
operating performance of such companies. This market volatility may adversely
affect the market price of the Securities and therefore the Units.
Foreign Issuers: The Portfolio contains a Security which is an American
Depositary Receipt for a security issued by a non-United States issuer. Holding
securities of a non-United States company may involve investment risks that are
different from those involved in holding securities of domestic issuers,
including:
o future political and economic developments,
o the possible imposition of withholding taxes and exchange controls or
other foreign governmental restrictions which might adversely affect the payment
of distributions on Securities in the Portfolio,
o less publicly available information about a foreign issuer, and
o foreign issuers may not generally be subject to uniform accounting,
auditing and financial reporting standards, practices and requirements
comparable to those applicable to domestic issuers.
Foreign securities markets, while growing in volume, have, for the most
part, substantially less volume than U.S. markets, and securities of many
foreign companies are less liquid and their prices more volatile than securities
of comparable domestic companies. Brokerage commissions and other transaction
costs on foreign Securities exchanges are generally higher than in the United
States and there is generally less government supervision and regulation of
exchanges, brokers and issuers in foreign countries than there is in the United
States. Global and regional perceptions of foreign markets and currency exchange
rate fluctuations should also be considered since they may adversely affect the
value of the foreign securities.
ADDITIONAL RISK FACTORS--SPECIAL CONSIDERATIONS--An investment in Units of
the Trust
A-2
<PAGE>
should be made with an understanding of the following risks:
YEAR 2000 PROBLEM--Like other investment companies, financial and business
organizations and individuals around the world, the Trust could be adversely
affected if the computer systems used by the Sponsor or Trustee do not properly
process and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000 Problem." The Sponsor
and Trustee are taking steps that they believe are reasonably designed to
address the Year 2000 Problem with respect to computer systems that they use. At
this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the Trust.
The Year 2000 Problem is expected to affect business entities, which may
include issuers of the Trust's Securities, to a varying extent and based upon a
number of factors, including, but not limited to, industry sector and level of
technological sophistication. The Sponsor is unable to predict what impact, if
any, the Year 2000 Problem will have on issuers of the Securities contained in
the Trust.
A-3
<PAGE>
FEE TABLE
This Fee Table is intended to help you to understand the costs and expenses that
you will bear directly or indirectly. See Part B--"Public Offering of Units" and
"Expenses and Charges."
<TABLE>
<CAPTION>
AMOUNT PER
1,000
UNIT HOLDER TRANSACTION EXPENSES UNITS
- -------------------------------------------------- ----------
<S> <C> <C>
Maximum Initial Sales Charge Imposed on Purchase
(as a percentage of offering price)............. 1.00 %(a) $10.00
Deferred Sales Charge per Year (as a percentage of
original purchase price)........................ 1.75 %(b) 17.50
------ ------
Total................................... 2.75 % $27.50
------ ------
------ ------
Maximum Sales Charge Imposed Per Year on
Reinvested Dividends............................ $17.50(c)
------
------
ESTIMATED ORGANIZATIONAL COSTS AND EXPENSES(d).... $ 2.50
------
------
ESTIMATED ANNUAL TRUST OPERATING EXPENSES (as a
percentage of average net assets)
Trustee's Fee................................... 0.090% $ 0.90
Other Operating Expenses (including Portfolio
Supervision, Bookkeeping and Administrative
Fees)........................................... 0.036% $ 0.36
------ ------
Total(e)................................ 0.126% $ 1.26
------ ------
------ ------
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE
CUMULATIVE EXPENSES
PAID FOR PERIOD:
---------------------------------------------
1 YEAR 3 YEARS(F)
------------------- -------------------
<S> <C> <C>
An investor would pay the following expenses on a
$1,000 investment, assuming the Trust's
operating expense ratio and organization cost of
0.376% and a 5% annual return on the
investment throughout the periods............... $31 $77
</TABLE>
The Example assumes a redemption and reinvestment of all dividends and
distributions and utilizes a 5% annual rate of return. For purposes of the
Example, an annual reinvestment of the 5% annual return is assumed. THE EXAMPLE
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 EXAMPLE.
- ------------------
(a) The maximum Initial Sales Charge is actually the difference between 2.75%
and the Deferred Sales Charge ($17.50 per 1,000 Units) and would exceed 1%
if the Public Offering Price exceeds $1,000 per 1,000 Units.
(b) The actual fee is $1.75 per month per 1,000 Units, irrespective of purchase
or redemption price, deducted in each of the last 10 months of each one-year
Portfolio. If a Holder sells, exchanges or redeems Units before all of these
deductions have been made, the balance of the Deferred Sales Charge will be
deducted from the Unit proceeds. If the Unit price exceeds $1 per Unit, the
Deferred Sales Charge will be less than 1.75%; if the Unit price is less
than $1 per Unit, the Deferred Sales Charge will exceed 1.75%.
(c) Reinvested dividends will be subject only to the Deferred Sales Charge
remaining at the time of reinvestment (see "Reinvestment Program" in Part
B).
(d) Investors will bear all or a portion of the costs incurred in organizing the
Trust including the costs of the preparation, printing and execution of the
Indenture, Registration Statement and other documents relating to the Trust,
federal and state registration fees and costs, the initial fees and expenses
of the Trustee, legal and auditing expenses and other out of pocket
expenses. Estimated organization costs are included in the Public Offering
Price and will be reimbursed to the Sponsor at the close of the initial
offering period.
(e) The estimates do not include the cost borne by Unitholders of purchasing and
selling Securities.
(f) Although each Trust has a term of only approximately one year and is a unit
investment trust rather than a mutual fund, this information is presented to
permit a comparison of fees and expenses, assuming the principal amount and
distributions are rolled over each year into a New Series subject only to
the Deferred Sales Charge.
A-4
<PAGE>
SUMMARY OF ESSENTIAL INFORMATION
NATIONAL EQUITY TRUST
OTC GROWTH TRUST SERIES 5
AS OF FEBRUARY 2, 2000*
AGGREGATE VALUE OF SECURITIES..................... $247,499.44
NUMBER OF UNITS................................... 250,000
FRACTIONAL UNDIVIDED INTEREST IN THE TRUST
REPRESENTED BY EACH UNIT........................ 1/250,000th
Value of Securities in the Trust (per 1,000
Units)....................................... $ 987.50
Plus value of Securities for organization costs
(per 1,000 Units)**.......................... $ 2.50
-----------
Total value of Securities (per 1,000
Units)***.................................... $ 990.00
Plus maximum sales charge of 2.75% of Public
Offering Price (2.778% of net amount invested
in Securities)****........................... $ 27.50
Less Deferred Sales Charge per 1,000 Units...... (17.50)
-----------
Public Offering Price per 1,000 Units*****...... $ 1,000.00
Plus the amount per 1,000 Units in the Income
Account...................................... $ 0.00
-----------
Total per 1,000 Units................... $ 1,000.00
-----------
-----------
REDEMPTION AND SPONSOR'S SECONDARY MARKET REPURCHASE PRICE PER 1,000 UNITS******
(based on the value of the underlying Securities
less the Deferred Sales Charge per 1,000
Units).......................................... $ 972.50
MINIMUM PRINCIPAL DISTRIBUTION: No distribution
need be made from the Principal Account if the
balance therein is less than $1.00 per 1,000
Units.
TRUSTEE'S FEE AND ESTIMATED EXPENSES: $1.01 per
1,000 Units+
SPONSOR'S PORTFOLIO SUPERVISION FEE+: Maximum of
$0.25 per 1,000 Units.
EVALUATION TIME: 4:00 P.M. New York Time
TERMINATION DATE: March 8, 2001++
SPONSOR'S LOSS ON DEPOSIT: $1,349.88
MINIMUM VALUE OF TRUST: The Indenture may be
terminated if the value of the Trust is less
than 40% of the value of the Securities
calculated after the last deposit of Securities.
DEFERRED SALES CHARGE DEDUCTION DATES: The 1st day of each month
commencing May 1, 2000.
MINIMUM PURCHASE: $250.00.
- ------------------
* The Date of Deposit. The Date of Deposit is the date on which the Trust
Indenture and Agreement was signed and the initial deposit of Securities
with the Trustee was made.
** $2.50 per 1,000 Units will be distributed to the Sponsor to reimburse
the Sponsor for the payment of the organization costs. The Securities
are subject to the sales charge.
*** After deduction of the Deferred Sales Charge then payable (zero on the
date of this Summary of Essential Information).
**** The sales charge consists of an Initial Sales Charge and a Deferred Sales
Charge. The Initial Sales Charge is computed by deducting the Deferred
Sales Charge ($17.50 per 1,000 Units) from the aggregate sales charge (a
maximum of 2.75% of the Public Offering Price); thus on the date of this
Summary of Essential Information, the maximum Initial Sales Charge is $10
per 1,000 Units or 1% of the Public Offering Price. The Initial Sales
Charge is deducted from the purchase price at the time of purchase and is
reduced on a graduated basis on purchases of $50,000 or more (see Part
B--"Public Offering of Units--Volume Discount"). The Deferred Sales
Charge is paid through reduction of the net asset value of the Trust by
$1.75 per 1,000 Units on each Deferred Sales Charge Deduction Date. On a
repurchase or redemption of Units before the last Deferred Sales Charge
Deduction Date, any remaining Deferred Sales Charge payments will be
deducted from the proceeds. Units purchased pursuant to the Reinvestment
Program are subject to that portion of the Deferred Sales Charge
remaining at the time of reinvestment (see Part B--"Reinvestment
Program").
***** This price is computed as of the Date of Deposit and may vary from this
price on the date of this Prospectus or any subsequent date.
****** This price is computed as of the Date of Deposit and may vary from this
price on the date of this Prospectus or any subsequent date. Reflects
deductions for remaining Deferred Sales Charge payments ($17.50 per 1,000
Units initially).
(Footnotes continued on next page)
A-5
<PAGE>
(Footnotes continued from previous page)
The redemption and repurchase price will be further reduced to reflect
the Trust's costs of liquidating Securities to meet the redemption
currently estimated at $1.42 per 1,000 Units.
+ See: "Expenses and Charges" herein. The fee accrues daily and is payable
quarterly. Estimated dividends from the Securities, based on the last
dividends actually paid, are not expected by the Sponsor to be
sufficient to pay the estimated expenses of the Trust. The Trust will
sell Securities to pay Trust expenses if the expenses exceed Trust
dividend income. In addition, brokerage fees borne by the Trust in
connection with the purchase of Securities by the Trustee with cash
deposited in the Trust are currently estimated at $1.42 per 1,000 Units.
++ The Trust may be terminated before the Termination Date. See Part
B--"Termination." The sale of Securities will occur during the
Liquidation Period, the 10 business day period commencing on the
Termination Date.
A-6
<PAGE>
HYPOTHETICAL STRATEGY STOCK PERFORMANCE INFORMATION
The following table shows the actual performance of the S&P 500 Index* and the
Nasdaq 100 Index and the hypothetical performance of the Strategy Stocks in each
of the past 10 years as of the date indicated for each of such years. The table
shows the historical application of the strategy.
COMPARISON OF TOTAL RETURNS(1)
(FIGURES FOR THE STRATEGY STOCKS REFLECT SALES CHARGES AND TRUST EXPENSES)
YEAR ENDED S&P 500 NASDAQ STRATEGY
12/31/ INDEX(2) 100(3) STOCKS(4)
- ---------- ------- --------- ---------
1990 -3.10% -10.41% -5.75%
1991 30.47 64.99 44.61
1992 7.62 8.86 17.63
1993 10.08 10.57 2.78
1994 1.32 1.50 9.06
1995 37.58 42.54 38.47
1996 22.96 42.54 30.09
1997 33.36 20.63 55.37
1998 28.34 85.31 117.33
1999 20.89 101.95 102.46
- ------------------
(1) Total Return represents the sum of the percentage change in index value or
in market value of the Strategy Stocks between the first trading day of a
period (stocks are selected as of the last business day of the previous
period) and the last trading day of a period and the total dividends paid on
each group of stocks during the period divided by the opening index value or
market value of the Strategy Stocks as of the first trading day of a period.
Total return does not take into consideration any commissions or taxes. For
the Strategy Stocks the table assumes an initial sales charge of 1% and a
deferred sales charge of 1.75% in the first year and 1.75% each year
thereafter and an annual expense of $4.50 per $1,000. If the performance
information had been calculated on a date other than December 31, the
performance information may have been different.
(2) An index of 500 stocks compiled by Standard & Poor's Corporation.
(3) An index of 100 stocks that are the largest non-financial issues listed on
the Nasdaq Stock Market, Inc.
The total return figures shown above are not guarantees of future
performance and should not be used as a predictor of returns to be expected
in connection with the Portfolio. As indicated in the above table, the
stocks in the Strategy Stocks underperformed the S&P 500 Index or the Nasdaq
100 Index in certain years and there can be no assurance that the Portfolio
of the Trust will outperform the S&P 500 Index or the Nasdaq 100 Index over
the life of the Trust.
(4) Securities selection methodology--(assumes application of the methodology on
December 31 of each year).
A. Begin with the stocks comprising the Nasdaq 100 Index; then
B. Select the 20 companies in the Nasdaq 100 Index with the largest
market capitalization; then
C. Rank the 20 companies based on annual sales from the previous
12 months as reported by each company; then
D. Take the 10 companies with the highest dollar amount of annual
sales as of the Selection Date (Strategy Stocks will be approximately
equally dollar weighted in the Trust).
The Securities selection methodology for the Trust was applied on
February 1, 2000.
- ------------------
* The McGraw-Hill Companies, Inc. has not participated in any way in the
creation of the Trust. The Trust is not sponsored, endorsed, sold or promoted
by Standard & Poor's.
A-7
<PAGE>
The chart below shows past performance of the S&P 500 Index and the
Nasdaq 100 Index and the hypothetical performance of the Strategy Stocks
(but not the Trust) and should not be considered indicative of future
results. From January 1990 through December 1999 the average annual total
return for the S&P 500 Index was 18.17% and 32.40% for the Nasdaq 100 Index
and the average annual total return for the Strategy Stocks was 36.30%. The
chart reflects a hypothetical assumption that $10,000 was invested on
January 1, 1990 and the investment strategy followed for 10 years. For the
S&P 500 Index and the Nasdaq 100 Index the chart assumes that all dividends
during a year are reinvested at the end of that year and does not reflect
sales charges, commissions, expenses or taxes. For the Strategy Stocks the
chart assumes an initial sales charge rate of 1% and a deferred rate of
1.75% in the first year and 1.75% in each of the subsequent years and an
estimated annual expense rate of $45.00 per $10,000 invested (the chart
assumes that dividends and appreciation are reinvested at the beginning of
the following year). There can be no assurance that the Trust will
outperform the S&P 500 Index or the Nasdaq 100 Index over its approximately
one-year life or over consecutive rollover periods, if available.
VALUE OF $10,000 INVESTED ON
JANUARY 1, 1990
---------------------------------
YEAR ENDED S&P 500 NASDAQ STRATEGY
12/31/ INDEX 100 STOCKS
- ---------- ------- --------- ---------
1990 $ 9,690 $ 8,959 $ 9,425
1991 12,643 14,781 13,629
1992 13,606 16,091 16,032
1993 14,977 17,792 16,477
1994 15,175 18,059 17,970
1995 20,878 25,741 24,883
1996 25,671 36,691 32,371
1997 34,235 44,261 50,294
1998 43,938 82,019 109,305
1999 53,116 165,638 221,298
Past performance of any series may not be indicative of results of future
series. This performance may also be compared for various periods with an
investment in short-term U.S. Treasury securities; however, the investor
should bear in mind that Treasury securities are fixed income obligations,
having the highest credit characteristics, while equity securities involve
greater risk because they have no maturities, and income thereon is subject
to the financial condition of, and declaration by, the issuers.
A-8
<PAGE>
SPECIAL CHARACTERISTICS OF THE TRUST
The original proportionate relationship between the number of shares of
each Security in the Trust will be adjusted to reflect the occurrence of a stock
dividend, a stock split, merger, reorganization or a similar event which affects
the capital structure of the issuer of a Security in the Trust but which does
not affect the Trust's percentage ownership of the common stock equity of such
issuer at the time of such event and adjust the proportionate relationship
accordingly for all future subsequent deposits. If the Trust receives the
securities of another issuer as the result of a merger or reorganization of, or
a spin-off, or split-up by the issuer of a Security included in the original
Portfolio, the Trust may under certain circumstances hold those securities as if
they were one of the Securities initially deposited and adjust the proportionate
relationship accordingly for all future subsequent deposits.
The sale of additional Units and the sale of Units in the secondary market
may continue even though the Securities would no longer be chosen for deposit
into the Trust if the selection process were to be made at that later time.
Because the expenses of the Trust are expected to exceed the dividend
income received by the Trust, the Trust is not expected to distribute income to
Unit Holders. If, however, there is sufficient income it will be distributed
quarterly to investors.
PUBLIC OFFERING PRICE: The Public Offering Price of the Units of the Trust
during the initial offering period is based on the value of the underlying
Securities in the Trust's Portfolio divided by the number of Units outstanding
in the Trust, plus the applicable sales charge. A proportionate share of
amounts, if any, in the Income Account is also added to the Public Offering
Price. (See Part B--"Public Offering of Units--Public Offering Price.") The
Initial Sales Charge will vary with changes in the aggregate sales charge.
Units purchased pursuant to the Reinvestment Program are subject only to
remaining deductions of the Deferred Sales Charge (see "Reinvestment Program").
Unitholders investing the proceeds of distribution from a previous terminating
Series of National Equity Trust, upon purchase of Units of the Trust, will be
subject only to the Deferred Sales Charge on those Units. Any investor may
acquire Units by an in-kind deposit of securities which replicates
proportionately the portfolio of the Trust and cash, if any, in the Trust. You
are obligated to pay any remaining Deferred Sales Charge if you exchange, redeem
or sell Units to the Sponsor before the last Deferred Sales Charge Deduction
Date.
SECONDARY MARKET--The Sponsor, although not obligated to do so, presently
intends to maintain a secondary market for the Units in the Trust as more fully
described under Part B--"Public Offering of Units--Secondary Market." If this
market is not maintained, a Unit Holder will be able to dispose of his Units
only by tendering his Units to the Trustee for redemption. (See Part B--"Rights
of Unit Holders--Redemption--Computation of Redemption Price per Unit.") The
Sponsor's Repurchase Price, like the Redemption Price, will reflect the
deduction from the value of the underlying Securities of any unpaid amount of
the Deferred Sales Charge. To the extent the entire Deferred Sales Charge has
not been deducted or paid at the time of redemption of the Units, the remainder
will be deducted from the proceeds of redemption or in calculating an in-kind
redemption.
TRUST TERMINATION--The Trust will terminate on the Termination Date unless
terminated earlier. A Unit Holder's Units will be redeemed in-kind on the
Termination Date by distribution of the Unit Holder's pro rata share of the
Securities and any cash in the Portfolio of the Trust on that date to the
Distribution Agent who will act as agent for that Unit Holder.
SECURITIES DISPOSITION OPTIONS ON TERMINATION--You must notify the Trustee
before the Termination Date of the Trust of the option(s) that you choose. You
may elect one or more of the following four options.
o Receipt of Securities "in-kind"
o Receipt of the cash value of the Unit
o Receipt of units in a new trust for the cash proceeds of your Units of
this Trust (you may realize a tax gain or loss from the sale of
Securities)
o Receipt of units in a new trust through an in-kind exchange (you may
benefit from the tax deferred rollover feature).
Please see the Termination Options section for additional information about
each option and for information about how the Trust will terminate.
A-9
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE UNIT HOLDERS, SPONSOR AND TRUSTEE
OF THE NATIONAL EQUITY TRUST OTC GROWTH TRUST SERIES 5
We have audited the accompanying Statement of Financial Condition,
including Schedule of Portfolio Securities, of the National Equity Trust OTC
Growth Trust Series 5 as of February 2, 2000. This financial statement is the
responsibility of the Trustee. Our responsibility is to express an opinion on
this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. Our procedures included
confirmation of the irrevocable letter of credit for the purchase of securities,
as shown in the Statement of Financial Condition and Schedule of Portfolio
Securities as of February 2, 2000, by correspondence with The Bank of New York,
the Trustee. An audit also includes assessing the accounting principles used and
significant estimates made by the Trustee, 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 the National Equity Trust
OTC Growth Trust Series 5 as of February 2, 2000, in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
February 2, 2000
A-10
<PAGE>
STATEMENT OF FINANCIAL CONDITION
NATIONAL EQUITY TRUST
OTC GROWTH TRUST SERIES 5
AS OF DATE OF DEPOSIT, FEBRUARY 2, 2000
TRUST PROPERTY
<TABLE>
<S> <C>
Sponsor's Contracts to Purchase underlying Securities backed
by an irrevocable letter of credit(a)(e).................. $247,499.44
-----------
Total.................................................. $247,499.44
-----------
-----------
LIABILITIES AND INTEREST OF UNIT HOLDERS
Liabilities--
Payment of deferred portion of sales charge(b)......... $ 4,375.00
Reimbursement to Sponsor for organization costs(e)..... 625.00
-----------
Subtotal............................................... 5,000.00
-----------
Interest of Holders--
Units of fractional undivided interest outstanding:
Cost to investors(c).............................. 250,000.00
Less: Gross underwriting commission(d)............ (6,875.56)
Less: Organization costs(e)....................... (625.00)
-----------
Net amount applicable to investors.......................... 242,499.44
-----------
Total........................................ $247,499.44
-----------
-----------
</TABLE>
- ------------------
(a) The aggregate value of the Securities represented by Contracts to
Purchase listed under "Schedule of Portfolio Securities" included herein and
their cost to the Trust are the same. An irrevocable letter of credit drawn on
Standard Chartered Bank in the amount of $20 million dollars has been deposited
with the Trustee for the purchase of Securities pursuant to contracts to
purchase such Securities.
(b) Represents the aggregate amount of mandatory distributions of $1.75 per
1,000 Units per month payable on the 1st day of each month from May 1, 2000
through February 1, 2001. Distributions will be made to an account maintained by
the Trustee from which the Holders' Deferred Sales Charge obligation to the
Sponsor will be satisfied. If Units are redeemed before February 1, 2001, the
remaining portion of the distribution applicable to those Units will be
transferred to that account on the redemption date.
(c) The aggregate Public Offering Price is computed on the basis set forth
under "Public Offering of Units--Public Offering Price."
(d) The aggregate maximum sales charge of 2.75% of the Public Offering
Price per Unit is computed on the basis set forth under "Public Offering of
Units--Public Offering Price."
(e) A portion of the Public Offering Price consists of Securities in an
amount sufficient to pay for all or a portion of the costs incurred in
establishing the Trust. The Sponsor will be reimbursed for the organization
costs at the close of the initial offering period.
A-11
<PAGE>
SCHEDULE OF PORTFOLIO SECURITIES
NATIONAL EQUITY TRUST
OTC GROWTH TRUST SERIES 5
ON DATE OF DEPOSIT, FEBRUARY 2, 2000
<TABLE>
<CAPTION>
% OF
AGGREGATE PRICE COST OF
NUMBER MARKET PER STOCKS
PORTFOLIO OF VALUE SHARE TO TO
NO. NAME OF ISSUER SHARES OF TRUST TRUST TRUST(1)
- --------- ------------------------------------------ ------ --------- --------- -----------
<S> <C> <C> <C> <C> <C>
1. COSTCO Wholesale Group 458 9.98% $ 53.9375 $ 24,703.37
2. Cisco Systems Inc. 218 10.03% $113.8750 $ 24,824.75
3. Comcast Corp Class A Special 495 9.99% $ 49.9375 $ 24,719.06
4. Dell Computer Corp. 650 10.01% $ 38.1250 $ 24,781.25
5. Ericcson L M Telephone Co. ADR's 306 9.95% $ 80.4375 $ 24,613.88
6. Intel Corp. 247 9.99% $100.0625 $ 24,715.44
7. MCI Worldcom Inc. 549 9.98% $ 45.0000 $ 24,705.00
8. Microsoft Corp. 245 9.97% $100.8125 $ 24,699.06
9. Oracle Corp 458 10.05% $ 54.3125 $ 24,875.13
10. Sun Microsystems Inc. 306 10.05% $ 81.2500 $ 24,862.50
-----------
$247,499.44
-----------
-----------
</TABLE>
- ------------------
(1) The Securities were acquired by the Sponsor on February 2, 2000. All
Securities are represented entirely by contracts to purchase. Valuation of
Securities by the Trustee was made on the basis of the closing prices of the
Securities at the Evaluation Time on February 2, 2000. The aggregate
purchase price to the Sponsor for the Securities deposited in the Trust is
$248,849.32.
The Sponsor may have acted as an underwriter, manager or co-manager of a
public offering of the Securities in the Trust during the last three years.
Affiliates of the Sponsor may serve as specialists in the Securities in this
Trust on one or more stock exchanges and may have a long or short position in
any of these stocks or in options on any of these stocks, and may be on the
opposite side of public orders executed in the over the counter market. An
officer, director or employee of the Sponsor may be an officer or director of
one or more of the issuers of the Securities in the Trust. The Sponsor may trade
for its own account as an odd-lot dealer, market maker, block positioner and/or
arbitrageur in any of the Securities or related options. The Sponsor, its
affiliates, directors, elected officers, employees and employee benefits
programs may have either a long or short position in any Security or related
option.
A-12
<PAGE>
PROSPECTUS--PART B:
- --------------------------------------------------------------------------------
Note that Part B of this Prospectus may not be distributed unless accompanied by
Part A.
- --------------------------------------------------------------------------------
NATIONAL EQUITY TRUST
OTC GROWTH TRUST SERIES 5
INTRODUCTION
Prudential Securities Incorporated (the "Sponsor") and The Bank of New York
(the "Trustee") signed a Trust Indenture and Agreement and a related Reference
Trust Agreement that created this series of the National Equity Trust OTC Growth
Trust under the laws of the State of New York. The Sponsor, Prudential
Securities Incorporated, is a wholly-owned, indirect subsidiary of The
Prudential Insurance Company of America.
THE TRUST
OBJECTIVE
The objective of the Trust is capital appreciation. The Trust seeks to
achieve its objective through an investment in a portfolio of the Strategy
Stocks.
o Capital appreciation: an increase in the value per Unit of the Securities
in the Portfolio of the Trust at the termination of the Trust when
compared to the value per Unit of the Securities in the Portfolio of the
Trust at the commencement of the Trust.
SECURITY SELECTION
Securities selection methodology:
o Begin with stocks comprising the Nasdaq 100 Index; then
o Select the 20 companies of the Nasdaq 100 Index with the largest market
capitalization; then
o Rank the 20 companies based on annual sales from the previous 12 months
as reported by each company; then
o Take the 10 companies with the highest dollar amount of annual sales as
of the Selection Date (Strategy Stocks will be approximately equally
dollar weighted in the Trust).
SUMMARY DESCRIPTION OF THE PORTFOLIO
On the Date of Deposit, the Sponsor deposited the Strategy Stocks with the
Trustee. The Trust may also contain contracts and funds for the purchase of the
Securities and/or cash (or a letter of credit instead of cash) with instructions
to the Trustee to purchase Securities (see "Schedule of Portfolio Securities" in
Part A). The Trustee then immediately delivered to the Sponsor the units (the
"Units") comprising the entire ownership of the Trust as of the Date of Deposit.
The Sponsor, through this Prospectus, is offering the Units to the public.
The Trust consists of:
(1) the Securities listed under "Schedule of Portfolio Securities" as may
continue to be held from time to time in the Trust and
(2) any additional Securities and/or cash that the Trust acquires and holds
pursuant to the provisions of the Indenture and
(3) uninvested cash realized from the disposition of Securities.
Because the Trust may sell certain Securities or reduce their percentage
under certain circumstances, and because the Trust may acquire additional
Securities, the Trust is not expected to retain for any length of time its
present size and exact composition. See: "Sponsor--Responsibility."
The Trust is not a "managed" registered investment company and Securities
will not be sold by the Trustee as a result of ordinary market fluctuations.
Therefore, neither the Trustee nor the Sponsor has the authority to manage the
Trust's assets in an attempt to take advantage of various market conditions to
increase the Trust's net asset value. Further, the Sponsor may direct the
disposition by the Trustee of Securities only upon the occurrence of certain
events. (See "Sponsor--Responsibility.")
There is no assurance that the Trust will declare or pay any dividends in
the future on the Securities initially deposited or to be deposited subsequently
in the Trust. Neither the Sponsor nor the Trustee will be liable in any way for
any default, failure or defect in the Securities. Dividend income is not an
objective of the Trust.
B-1
<PAGE>
RISK FACTORS
MARKET RISKS
There can be no assurance that the objective of the Trust will be met
because the Securities may rise or fall in value, or pay dividends, depending on
the full range of economic and market influences affecting:
o the financial condition of issuers
o the prices of equity securities in general, and
o the stocks that this Trust buys in particular.
If you invest in Units of the Trust, you should understand the risks
inherent in an investment in common stock. The risks of investing in common
stock include:
o the risk that the financial condition of one or more of the issuers of
the Securities may worsen;
o the risk that the issuer may reduce or eliminate a dividend;
o the risk that the general condition of the stock market may weaken; and
o the risk that the value of Units will decline as the market value of the
Securities decreases.
The Sponsor can not predict the direction or scope of any of these factors.
See the risks described in Part A of the Prospectus as well as those set forth
below.
FLUCTUATING SECURITY VALUE
Common stocks are susceptible to general stock market movements and to
volatile and unpredictable increases and decreases in value as market confidence
in and perceptions of the issuers change from time to time. Investors base these
perceptions upon such factors as:
o expectations regarding domestic and foreign economic, monetary and fiscal
policies,
o inflation and interest rates,
o currency exchange rates, economic expansion or contraction, and
o global or regional political, economic and banking conditions.
The Sponsor cannot predict the direction or scope of any of these factors.
Additionally, stock markets have recently been at historically high levels and
we cannot give any assurance that these levels will continue. Therefore we can
give no assurance that the Trust will achieve its objective over its one-year
life. We can likewise give no assurance that future portfolios selected using
the same methodology as the Trust during consecutive one-year periods will meet
their objectives. The Trust is not designed to be a complete equity investment
program.
PAYMENT RISKS
There are certain payment risks involved in owning common stocks. Risks
include those arising from the fact that holders of common and preferred stocks
have rights to receive payments from the issuers of those stocks. These rights
are generally inferior to those of creditors of, or holders of debt obligations
issued by, such issuers. Furthermore, the rights of holders of common stocks are
inferior to the rights of holders of preferred stocks. Holders of common stocks
of the type held in the Portfolio have a right to receive dividends only when,
as and if, and in the amounts, declared by the issuer's board of directors.
Holders of common stocks such as those in the Portfolio also have a right 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 have the right to receive
dividends at a fixed rate when and as declared by the issuer's board of
directors. This rate is normally on a cumulative basis. Holders of preferred
stocks do not ordinarily participate in other amounts available for distribution
by the issuing corporation. Issuing corporations must pay cumulative preferred
stock dividends before common stock dividends.
Any cumulative preferred stock dividend omitted is added to future
dividends payable to the holders of such cumulative preferred stock. Preferred
stocks also have rights on liquidation which are senior to those of common
stocks. For these reasons, preferred stocks entail less risk than common stocks.
However, neither preferred nor common stocks represent an obligation or
liability of the issuer. Therefore, they do not offer any assurance of income or
provide the degree of protection of capital of debt securities.
The issuance of debt securities, as compared with both preferred and common
stock, will create prior claims for payment of principal and interest in the
case of debt securities. The issuance of preferred stock, as compared with
common stock, will create prior claims for payment of dividends and liquidation
preferences in the case of preferred stock. These prior claims could adversely
affect (l) the ability and inclination of the issuer to declare or pay dividends
on its common stock or (2) the rights of holders of
B-2
<PAGE>
common stock with respect to assets of the issuer upon liquidation or
bankruptcy. Further, common stocks lack a fixed principal amount and a maturity
date but have values which are subject to market fluctuations for as long as the
common stocks remain outstanding. Common stocks are thus unlike debt securities
which typically have a stated principal amount payable at maturity; the amount
payable will be subject to market fluctuations before the payment is made.
Common stocks also differ from preferred stocks which typically have a
liquidation preference and which may have stated optional or mandatory
redemption provisions. Additionally, market timing and volume trading will also
affect the underlying value of Securities, including the Sponsor's buying of
additional Securities and the Trust's selling of Securities during the
Liquidation Period.
The value of the Units will fluctuate depending on all the factors that
have an impact on the economy and the equity markets. These factors similarly
impact on the ability of an issuer to distribute dividends. There is no
assurance that any dividends will be declared or paid in the future on the
Securities. The Sponsor may direct the Trustee to dispose of Securities only
upon the occurrence of certain events. (See "Sponsor--Responsibility"). However,
the Trustee will not dispose of Securities solely as a result of normal
fluctuations in market value.
The Sponsor may deposit additional Securities and may continue to sell
Units of the Trust even though one or more of the Securities no longer remains
among the Strategy Stocks on the date of sale or the date of deposit of the
additional Securities and even if the Security is no longer in the Nasdaq 100
Index or the Sponsor has a sell recommendation on the Security.
DEFERRED SALES CHARGE
It is anticipated that Securities generally will not be sold to pay the
Deferred Sales Charge until after the last Deferred Sales Charge Deduction Date.
Unit holders will be at risk with respect to changes in the market value of
Securities between the accrual of each monthly deferred sales charge and the
actual sale of Securities to satisfy the payment of the Deferred Sales Charge.
EARLY TERMINATION
The Trust has a mandatory termination date set forth under Part A--"Summary
of Essential Information," but may be terminated earlier if certain events occur
(see "Termination"), including a reduction in the value of the Trust below the
value set forth under Part A--"Summary of Essential Information."
LITIGATION
The Sponsor does not know of any pending litigation as of the initial date
of deposit that might reasonably be expected to have a material adverse effect
on the Portfolio, although pending litigation may have a material adverse effect
on the value of Securities in the Portfolio. In addition, at any time after the
initial date of deposit, litigation may be initiated on a variety of grounds, or
legislation may be enacted, affecting the Securities in the Portfolio or the
issuers of the Securities. Changing approaches to regulation, particularly with
respect to the environment or with respect to the petroleum or tobacco industry,
may have a negative impact on certain companies represented in the Portfolio.
Future litigation, legislation, regulation or deregulation may have a material
adverse effect on the Portfolio and may impair the ability of the issuers of the
Securities to achieve their business goals.
UNIT CREATION
DEPOSIT OF SECURITIES
On the date that the Trust was created, the Sponsor deposited with the
Trustee certain Securities and contracts and funds (represented by irrevocable
letter(s) of credit issued by major commercial bank(s)) for the purchase of the
Securities. The Securities were deposited at prices equal to their market value
as determined by the Trustee. The Sponsor may also deposit cash or a letter of
credit and instruct the Trustee to purchase Securities. The Sponsor created the
Trust simultaneously with the deposit of the Securities with the Trustee and the
execution of the Indenture and the Reference Trust Agreement. The Trustee then
immediately recorded the Sponsor as owner of the Units comprising the entire
ownership of the Trust.
Through this Prospectus, the Sponsor is offering the Units, including
Additional Units, as defined below, for sale to the public. The holders of Units
(the "Unit Holders" the "Unitholders" or the "Unit Holder," as the context
requires) will have the right to have their Units redeemed at a price based on
the market value of the Securities if they cannot be sold in the secondary
market which the Sponsor, although not obligated to, proposes to maintain. A
secondary market for Units is a market where Units are bought and sold after
their original issue. In addition, the Sponsor may offer for sale, through this
Prospectus, Units which the Sponsor may have repurchased in the secondary market
or upon the tender by a Unit Holder of Units for redemption. The Trustee has not
participated in the selection of Securities for the Trust. The Sponsor or the
Trustee will not be liable in way for any default, failure or defect in any
Securities.
With the deposit of the Securities in the Trust on the Initial Date of
Deposit, the Sponsor established a proportionate relationship between the number
of shares of each Security in the Portfolio. You may find the original
proportionate relationships on the Initial Date of Deposit in the "Schedule of
Portfolio Securities." The original proportionate relationships are subject to
adjustment under certain limited circumstances. See: "Sponsor--Responsibility."
Under the Indenture and Agreement, the
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Sponsor can deposit additional Securities and contracts to purchase additional
Securities together with a letter of credit and/or cash or a letter of credit
instead of cash. The Sponsor may then give instructions to the Trustee to
purchase additional Securities in order to create additional Units. Any such
additional deposits made in the 90 day period following the creation of the
Trust will consist of securities of the same issuers as those already in the
Trust. These deposits will be in amounts which maintain, to the extent
practicable, the original proportionate relationship between the number of
shares of each Security and any cash in the Portfolio. It may not be possible to
maintain the exact original proportionate relationship because of price changes
or other reasons.
Since the Sponsor deposits cash or a letter of credit in lieu of cash and
gives instructions to the Trustee to purchase additional Securities to create
Additional Units, Units, including previously issued Units, may represent more
or less of that Security and more or less of other Securities in the Portfolio
of the Trust. This is because the price of a Security fluctuates between the
time the cash is deposited and the time the cash is used to purchase the
Security.
The Trustee may hold any cash deposited with instructions to purchase
Securities in an interest bearing account. Any interest earned on such cash will
be the property of the Trust. Unit Holders will receive, as a distribution on
the earlier of (1) the first Distribution Date or (2) 90 days after the Initial
Date of Deposit:
o any cash deposited with instruction to purchase Securities that is not
used to purchase Securities, and
o any interest not used to pay Trust expenses.
This Prospectus may be used to continuously offer additional Units for sale
to the public. After the 90 day period following the Initial Date of Deposit any
deposit of additional Securities and cash must replicate the portfolio exactly
as it was immediately before that deposit.
The Sponsor may acquire large volumes of additional Securities for deposit
into the Trust over a short period of time. These acquisitions may tend to raise
the market prices of these Securities. To minimize the risk of price
fluctuations when purchasing Securities, the Trust may purchase Securities at
the closing price as of the Evaluation Time. To do so, the Trust may enter into
trades with unaffiliated broker/dealers for the purchase of large quantities of
shares. These trades will be entered into at an increased commission cost which
the Trust will bear. See "Summary of Essential Information." The Sponsor cannot
currently predict the actual market impact of the Sponsor's purchases of
additional Securities because it does not know the actual volume of Securities
to be purchased and the supply and price of the Securities.
Units will be sold by the Sponsor to investors at the Public Offering Price
next computed after receipt of the investor's order to purchase Units, if Units
are available to fill orders on the day that that price is set. If Units are not
available or are insufficient to fill the order, the Sponsor will reject the
investor's order. The number of Units available may be insufficient to meet
demand. This may be because of the Sponsor's inability to or decision not to
purchase and deposit underlying Securities in amounts sufficient to maintain the
proportionate numbers of shares of each Security as required to create
additional Units. The Sponsor may, if unable to accept orders on any given day,
offer to execute the order as soon as enough Units can be created. You will be
deemed to have placed a new order for that number of Units each day until that
order is accepted. The Sponsor will execute your order, when Units are
available, at the Public Offering Price next calculated after the Sponsor
accepts your continuing order. You will, of course, be able to revoke your
purchase offer at any time prior to acceptance by the Sponsor. The Sponsor will
execute orders to purchase in the order it determines that they are received.
The Sponsor will first fill orders received first. However, the Sponsor will
accept indications of interest before the effectiveness of the registration of
the offering of Trust Units which become orders upon effectiveness according to
the order in which the Sponsor receives the indications of interest.
On the Initial Date of Deposit, each Unit represented the fractional
undivided interest in the Securities and net income of the Trust set forth under
"Summary of Essential Information." Thereafter, if you redeem any Units, the
amount of Securities in the Trust will decline and the fractional undivided
interest represented by each remaining Unit in the balance of the Trust will
increase. However, if the Trust issues Additional Units, the aggregate value of
the Securities in the Trust will increase by amounts allocable to such
Additional Units and the fractional undivided interest in the Trust will fall.
Units will remain outstanding until you or any Unit Holder, including the
Sponsor, redeem them upon tender to the Trustee, or until the termination of the
Trust on the terms specified in the Indenture and Agreement.
All of the Securities are publicly traded. The contracts to purchase
Securities deposited initially in the Trust are expected to settle in the
ordinary manner for such Securities. Settlement of the contracts for Securities
is thus expected to take place prior to the settlement of Units purchased on the
date of this Prospectus. The Sponsor will receive the purchase price of the
Units before it pays for the Securities and will benefit from the use of the
cash during this period.
TAX STATUS OF THE TRUST
In the opinion of Cahill Gordon & Reindel, special counsel for the Sponsor,
under existing Federal income tax law:
The Trust is not an association taxable as a corporation for Federal income
tax purposes. Income received by the Trust will be treated as income of the Unit
Holders in the manner set forth below.
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Under the grantor trust rules of Sections 671-678 of the Internal Revenue
Code of 1986, as amended, each Unit Holder will be considered to be the owner of
a pro rata portion of each asset in the Trust. The total tax cost of each Unit
purchased solely for cash will equal the cost of Units, including the Initial
Sales Charge. A Unit Holder should determine the tax cost for each asset
represented by the Unit Holder's Units purchased solely for cash by allocating
the total cost for such Units, including the Initial Sales Charge, among the
assets in the Trust represented by the Units in proportion to the relative fair
market values thereof on the date the Unit Holder purchases such Units.
The proceeds actually received by a Unit Holder upon termination of the
Trust or redemption of Units will be net of the Deferred Sales Charge and the
charge for organizational expenses. The relevant tax reporting forms sent to
Unit Holders will also reflect the actual amounts paid to them after deduction
for the Deferred Sales Charge and the charge for organizational expenses.
Accordingly, you should not increase the total cost for your Units by the amount
of the Deferred Sales Charge and the charge for organizational expenses.
You as a Unit Holder will be considered to have received all of the
dividends paid on your pro rata portion of each Security when the Trust receives
such dividends including the portion of such dividend used to pay ongoing
expenses. In the case of a corporate Unit Holder, such dividends will qualify
for the 70% dividends received deduction for corporations to the same extent as
if the corporate Unit Holder held the dividend paying stock directly. You as an
individual Unit Holder who itemizes deductions will be entitled to an itemized
deduction for your pro rata share of fees and expenses paid by the Trust as if
you paid such fees and expenses directly. You are entitled to this deduction
only to the extent that this amount together with your other miscellaneous
deductions exceed 2% of your adjusted gross income. A corporate Unit Holder will
not be subject to this 2% floor.
Under the position taken by the Internal Revenue Service in Revenue Ruling
90-7, a distribution by the Trustee to you or to your agent of your pro rata
share of the Securities in kind upon redemption or termination of the Trust will
not be a taxable event to you. Your basis for Securities so distributed will be
equal to your basis for the same Securities, previously represented by your
Units, before such distribution. The holding period for such Securities will
include the period during which you held the Units. You will have a taxable gain
or loss, which will be a capital gain or loss except in the case of a dealer,
when you dispose of such Securities in a taxable transfer.
Under the income tax laws of the State and City of New York, the Trust is
not an association taxable as a corporation. These tax laws will treat the
income of the Trust as the income of the Unit Holders.
You will not be taxed upon the receipt in-kind from the Terminating Trust
and the deposit in the New Trust of the Duplicated Stocks. Your basis in such
Duplicated Stocks will be your basis in such Duplicated Stocks prior to the
distribution from the Terminating Trust. The holding period of such Duplicated
Stocks will include the period during which you held the Units. To the extent
the Distribution Agent sells Securities received in-kind on your behalf, you
will have a taxable gain or loss, which will be a capital gain or loss except in
the case of a dealer. Your basis in non-Duplicated Stocks will equal the
purchase price paid by the Distribution Agent.
If the proceeds that the Distribution Agent or the Trustee receives upon
the sale of an underlying Security exceed your adjusted tax cost allocable to
the Security disposed of, you will realize a taxable gain to the extent of such
excess. Conversely, if the proceeds that the Distribution Agent or the Trustee
receives upon the sale of an underlying Security are less than your adjusted tax
cost allocable to the Security disposed of, you will realize a loss for tax
purposes to the extent of such difference. However, upon reinvestment of
proceeds in a New Series in connection with an exchange or non In-Kind Rollover,
the Internal Revenue Service may seek to disallow such loss to the extent that
(l) the underlying securities in each trust are substantially identical and
(2) the purchase of units of the New Series takes place less than thirty-one
days after the sale of the underlying Security. Under the Federal Tax Code,
capital gain of individuals, estates and trusts from Securities held for more
than one year is subject to a maximum nominal tax rate of 20%. Such capital gain
may, however, result in a disallowance of itemized deductions and/or affect a
personal exemption phase-out. The maximum lower capital gain rate of 20% will be
unavailable to you with respect to those Securities which you have held for less
than a year and a day at the time of sale. This includes sales occasioned by
mandatory or early termination of the Trust or exchange or rollover of Units.
From time to time Congress considers proposals to reduce the rate of the
dividends-received deduction. This type of legislation, if enacted into law,
would reduce the after-tax return to investors who can take advantage of the
deduction.
Foreign Unit Holders (including nonresident alien individuals, foreign
corporations, and foreign partnerships) not engaged in a U.S. trade or business
generally will be subject to a 30% withholding tax (or lower applicable treaty
rate) on dividend distributions.
You should consult your tax advisor with respect to the application of the
above general information to your own personal situation.
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RETIREMENT PLANS
Units of the Trust may be suited for purchase by Individual Retirement
Accounts and pension plans or profit sharing and other qualified retirement
plans. If you are considering participation in any such plan you should review
specific tax laws and pending legislation relating to the plan and should
consult attorneys or tax advisors with respect to the establishment and
maintenance of any such plan.
PUBLIC OFFERING OF UNITS
PUBLIC OFFERING PRICE
The Public Offering Price of the Units is calculated on each business day
by the following formula: the aggregate market value of the Portfolio Securities
and other Trust assets, as determined by the Trustee, next computed after
receipt of a purchase order is reduced by Trust liabilities and then divided by
the number of Units outstanding. The sales charge shown in the table in the
Volume Discount section is added to the net asset value per Unit. The Units
outstanding may be split to create greater or fewer units (a reverse split). The
Sponsor will add to the Public Offering Price commissions and any other
transactional costs, if any, in connection with the deposit of additional
Securities or contracts to purchase additional Securities for the creation of
Additional Units. After the Initial Date of Deposit, the Sponsor will add to the
Public Offering Price a proportionate share of amounts in the Income Account and
Principal Account and amounts receivable in respect of stocks trading
ex-dividend, other than money required to be distributed to Unit Holders on a
Distribution Date and money required to redeem tendered Units. In the event a
stock is trading ex-dividend at the time of deposit of additional Securities,
the Sponsor will add to the Public Offering Price an amount equal to the
dividend that would be received if such stock were to receive a dividend. The
Public Offering Price per Unit is calculated to five decimal places and rounded
up or down to three decimal places. The Public Offering Price on any particular
date will vary from the Public Offering Price on the Initial Date of Deposit,
set forth in the "Summary of Essential Information," in accordance with:
o fluctuations in the aggregate market value of the Securities
o the amount of available cash on hand in the Trust
o the amount of Trust fees, expenses and liabilities.
A portion of the Public Offering Price also consists of cash or securities
in an amount sufficient to pay for all or a portion of the costs incurred in
establishing the Trust. These costs include:
o the cost of the preparation of documents relating to the Trust
o federal and state registration fees
o the initial fees and expenses of the Trustee
o legal expenses
o any other out-of-pocket expenses.
The Sponsor will receive the estimated organization costs as of the close
of the initial offering period.
As more fully described in the Indenture, the Trustee determines the
aggregate market value of the Securities based on the closing price of the
Securities on the day it makes the valuation as described under "Rights of Unit
Holders--Computation of Redemption Price per Unit." If there are no such
reported prices, the Trustee takes into account the same factors referred to
under "Rights of Unit Holders--Computation of Redemption Price per Unit."
Determinations are effective for transactions effected after the last preceding
determination.
SALES CHARGE
The sales charge consists of an Initial Sales Charge and a Deferred Sales
Charge. To compute the Initial Sales Charge, deduct the Deferred Sales Charge of
$17.50 per 1,000 Units from the total sales charge. The Initial Sales Charge
that a Unit Holder pays may be more or less than the Initial Sales Charge on the
Initial Date of Deposit because of the fluctuation of the value of the
Securities from that on the Initial Date of Deposit. The Deferred Sales Charge
will initially be $17.50 per 1,000 Units but will decline each month by one
tenth. The Deferred Sales Charge will be paid through monthly payments of $1.75
per 1,000 Units per month commencing on the first Deferred Sales Charge Payment
Date shown on the Summary of Essential Information. If the Unit price exceeds
$1.00 per Unit, the Deferred Sales Charge will be less than 1.75%; if the Unit
price is less than $1 per Unit, the Deferred Sales Charge will exceed 1.75%. To
the extent that the entire Deferred Sales Charge relating to your Units has not
been paid at the time of repurchase, redemption or exchange of the Units, any
unpaid amount will be deducted from the sale, redemption or exchange proceeds or
in calculating an in kind distribution.
For purchases of Units with a value of $50,000 or more, we will reduce the
Initial Sales Charge on a graduated basis as shown below under "Volume
Discount." Units purchased pursuant to the Reinvestment Program are subject only
to any remaining
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Deferred Sales Charge payments; see "Reinvestment Program." Unit Holders
investing the proceeds of distribution from a previous terminating Series of
National Equity Trust OTC Growth Trust, upon purchase of Units of the Trust,
will be subject only to the Deferred Sales Charge on such Units. If you acquire
Units of the Trust pursuant to an exchange of units of a different unit
investment trust you will not have to pay an initial sales charge at the time of
the exchange. However, these Units acquired will be subject to the Deferred
Sales Charge.
PUBLIC DISTRIBUTION
During the initial public offering period (i) for Units issued on the Date
of Deposit and (ii) for additional Units issued after that date in respect of
additional deposits of Securities, Units will be distributed to the public by
the Sponsor and through dealers at the Public Offering Price, calculated on each
business day. The initial offering period is 90 days unless all Units are sold
beforehand in which case the initial public offering period will terminate. The
initial public offering period may be extended by the Sponsor so long as
additional deposits are being made or Units remain unsold. Upon termination of
the initial offering period, in each case, unsold Units or Units acquired by the
Sponsor in the secondary market referred to below may be offered to the public
by this Prospectus at the then current Public Offering Price calculated daily.
The Sponsor directly and through dealers will distribute to the public, at
the Public Offering Price determined as provided above, Units issued on the
Initial Date of Deposit and Additional Units issued in respect of additional
deposits of Securities. The Sponsor will sell Units to dealers at prices which
reflect the concession listed in the Volume Discount section. They may offer to
the public unsold Units or Units acquired by the Sponsor in the secondary market
referred to below, by this Prospectus at the then current Public Offering Price
determined as provided above.
The Sponsor intends to qualify Units in states selected by the Sponsor for
sale by the Sponsor and through dealers who are members of the National
Association of Securities Dealers, Inc. The Sponsor reserves the right to
reject, in whole or in part, any order for the purchase of Units.
In addition, sales of Units may be made pursuant to distribution
arrangements with certain banks. These banks are subject to regulation by the
Office of the Comptroller of the Currency and are acting as agents for their
customers. A portion of the sales charge that these customers pay is retained by
or remitted to these banks in an amount equal to the amount customarily received
by an agent for acting in that capacity in connection with the purchase of
Units. The Glass-Steagall Act prohibits banks from underwriting certain
securities, including Units of the Trust. This Act, however, does permit certain
agency transactions. Banking regulators have not indicated that these particular
agency transactions are impermissible under this Act. In certain states, any
bank making Units available must register as a broker-dealer in that State.
SECONDARY MARKET
While not obligated to do so, the Sponsor presently intends to maintain a
secondary market for Units. If the Sponsor maintains the market it will offer to
repurchase Units from Unit Holders at the Sponsor's Repurchase Price. The
Sponsor computes the Repurchase Price in the same manner as the Redemption Price
is calculated. The Sponsor, of course, does not in any way guarantee the
enforceability, marketability or price of any Securities in the Portfolio or of
the Units.
In addition, after the initial offering period, the Sponsor's Repurchase
Price will be reduced to reflect the estimated costs of liquidating the
Securities to meet redemption requests. The only sales charge incurred when a
Unit Holder sells Units back to the Sponsor is the payment of the unpaid portion
of the Deferred Sales Charge. The Sponsor may reoffer to the public any Units
repurchased by the Sponsor at the Sponsor's Repurchase Price. The reoffering
price will be the then current Public Offering Price. The Sponsor will bear any
profit or loss resulting from the resale of these Units.
The Sponsor may temporarily or permanently discontinue the repurchase of
Units of this series at the Sponsor's Repurchase Price if the supply of Units
exceeds demand or for any other business reason. In such event, although under
no obligation to do so, the Sponsor may, as a service to you, offer to
repurchase Units at the "Redemption Price." You may redeem your Units through
the Trustee.
The Sponsor may, of course, redeem any Units that it has purchased in the
secondary market to the extent that it determines that it is undesirable to
continue to hold these Units in its inventory. Factors which the Sponsor will
consider in making this determination will include the number of units of all
series of unit trusts which it has in its inventory, the saleability of these
units and its estimate of the time required to sell these units and general
market conditions.
PROFIT OF SPONSOR
The Sponsor receives a sales charge on Units sold to the public and to
dealers. The Sponsor may have also realized a profit or sustained a loss on the
deposit of the Securities in the Trust. This profit or loss represents the
difference between the cost of the Securities to the Sponsor and the cost of the
Securities to the Trust. For a description of this profit or loss and the amount
of such difference on the Initial Date of Deposit see "Schedule of Portfolio
Securities." The Sponsor may realize a similar profit or loss in connection with
each additional deposit of Securities. In addition, the Sponsor may have acted
as a broker in transactions relating to the purchase of Securities for deposit
in the Trust. During the initial public offering period the Sponsor may realize
additional profit
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or sustain a loss due to daily fluctuations in the prices of the Securities in
the Trust and thus in the Public Offering Price of Units the Sponsor receives.
If the Sponsor receives cash from the Unit Holders before the settlement date
for the purchase of Units or before the payment for Securities upon their
delivery, the Sponsor may use the cash in the Sponsor's business and may benefit
from the use of the cash.
The Sponsor may also realize profits or sustain losses while maintaining a
secondary market in the Units. These profits or losses are the amount of any
difference between the prices at which the Sponsor buys Units and the prices,
including a sales charge, at which the Sponsor resells such Units or the prices
at which the Sponsor redeems such Units, as the case may be.
VOLUME DISCOUNT
Although under no obligation to do so, the Sponsor intends to permit volume
purchasers of Units to purchase Units at a reduced sales charge. The Sponsor may
at any time change the amount by which the sales charge is reduced. The Sponsor
may also discontinue the discount altogether.
The sales charge for the Trust in the primary market will be reduced
pursuant to the following graduated scale for sales to any person of Units with
a value of $50,000 or more. The sales charge in the secondary market, which will
decline as shown on the following graduated scale, consists of an Initial Sales
Charge and the remaining portions of the Deferred Sales Charge.
<TABLE>
<CAPTION>
PRIMARY MARKET DEALER CONCESSION SECONDARY MARKET
------------------------------------------------ ----------------- -----------------------------
PERCENT OF PERCENT OF DEFERRED PERCENT OF PERCENT OF PERCENT OF
PUBLIC OFFERING NET AMOUNT SALES CHARGE PUBLIC OFFERING PUBLIC OFFERING NET AMOUNT
PURCHASES PRICE INVESTED PER 1,000 UNITS PRICE PRICE INVESTED
- --------------------- --------------- ---------- --------------- ----------------- --------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Less than $50,000.... 2.75% 2.778% $ 17.50 2.10% 1.00% 1.010%
$50,000-$99,999...... 2.50% 2.519% 17.50 1.90% 0.75% 0.756%
$100,000-$249,999.... 2.00% 2.005% 17.50 1.40% 0.50% 0.503%
$250,000 or more..... * * 17.50 1.20% 0.25% 0.251%
</TABLE>
- ------------------
* Deferred Sales Charge only.
The reduced sales charges as shown on the chart above will apply to all
purchases of Units in any fifteen-day period which qualify for the volume
discount by the same person, partnership or corporation, other than a dealer, in
the amounts stated herein, and for this purpose, purchases of Units of this
Trust will be aggregated with concurrent purchases of units of any other trust
that may be offered by the Sponsor.
Units held in the name of your spouse or in the name of your child under
the age 21 or in the name of an entity controlled by you are deemed for the
purposes hereof to be acquired in your name. The reduced sales charges are also
applicable to a trustee or other fiduciary, including a partnership or
corporation purchasing Units for a single trust estate or single fiduciary
account.
EMPLOYEE DISCOUNT
The Sponsor intends, at the discretion of the Sponsor, to permit employees
of Prudential Securities Incorporated and its subsidiaries and affiliates to
purchase Units of the Trust at a price equal to the net asset value of the
Securities in the Trust divided by the number of Units outstanding plus a
reduced sales charge equal to the Deferred Sales Charge per Unit, subject to a
limit of 5% of the Units.
RIGHTS OF UNIT HOLDERS
OWNERSHIP OF UNITS
You are required to hold your Units in uncertificated form. The Trustee
will credit your account with the number of Units you hold. Units are
transferable only on the records of the Trustee upon presentation of evidence
satisfactory to the Trustee for each transfer. Any sums payable for taxes or
other governmental charges imposed upon these transactions must be paid by you
and you must comply with the formalities necessary to redeem Units.
CERTAIN LIMITATIONS
The death or incapacity of any Unit Holder will not operate to terminate
the Trust. Your death or incapacity will not entitle your legal representatives
or heirs to claim an accounting or to take any other action or proceeding in any
court for a partition or winding up of the Trust.
VOTING OF THE PORTFOLIO SECURITIES
No Unit Holder shall have the right to vote except with respect to removal
of the Trustee or amendment and termination of the Trust as prescribed in the
Indenture. Unit Holders have no right to control the operation or administration
of the Trust in any manner.
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DISTRIBUTION
Whenever regulatory or tax purposes require or wherever the Sponsor
directs, the Trustee may make special distributions on special distribution
dates to Unit Holders of record on special record dates that the Trustee
declares. Distributions for the account of beneficial owners of Units registered
in "street name" that the Sponsor holds will be made to the investment account
of such beneficial owners maintained with the Sponsor.
The Trustee credits dividends payable to the Trust as a holder of record of
its Securities to an Income Account, as of the date on which the Trust is
entitled to receive those dividends. The Trustee credits to a Principal Account
other receipts, including (1) return of investment and gain and (2) amounts
received upon the sale, pursuant to the Indenture and Agreement, of rights to
purchase other Securities distributed in respect of the Securities in the
Portfolio. The Trustee will hold proceeds it receives from the disposition of
any of the Securities which are not used for redemption of Units in the
Principal Account until it distributes those proceeds on the distribution date
following receipt of them. The Trustee does not need to make a distribution from
the Principal Account if the balance therein is less than $1.00 per 1,000 Units
outstanding. Funds the Trustee holds in the various accounts created under the
Indenture are non-interest bearing to Unit Holders. The Trustee receives the
benefit of holding such funds which are interest bearing to it.
The Trustee will deduct from the Income Account and, to the extent funds
are not sufficient therein, from the Principal Account, amounts necessary to pay
the expenses of the Trust. (See "Expenses and Charges.") It is anticipated that
Trust income will be less than Trust expenses and that Securities will be sold
to pay Trust expenses. The Trustee may also withdraw from these accounts, from
time to time, the amounts, if any, as it deems necessary to establish a reserve
for any taxes or other governmental charges payable out of the Trust. Amounts so
withdrawn shall not be considered a part of a Trust's assets for purposes of
determining the amount of distributions until such time as the Trustee shall
return all or any part of those amounts to the appropriate account. In addition,
the Trustee may withdraw from the Income Account and the Principal Account those
amounts as may be necessary to cover redemption of Units by the Trustee. (See
"Rights of Unit Holders.")
It is anticipated that the deferred sales charge will reduce the Principal
Account and that amounts in the Principal Account will be sufficient to cover
the cost of the deferred sales charge. Distributions of amounts necessary to pay
the deferred portion of the sales charge will be made to an account maintained
by the Trustee for purposes of satisfying Unit Holders' deferred sales charge
obligations. Although the Sponsor has the right to collect the deferred sales
charge monthly, in order to keep Unit Holders as fully invested as possible, it
is anticipated that no Securities will be sold to pay the deferred sales charge
to the Sponsor until after the Termination Date set forth in the Summary of
Essential Information.
The Trustee will follow a policy that it will place Securities acquisition
or disposition transactions with a broker or dealer only if it expects to obtain
favorable prices and executions of orders. In connection with the brokerage
transactions, the Sponsor may act as broker and receive commissions if the
Trustee expects to obtain the most favorable prices and execution. In placing
Securities transactions, the Trustee will not consider the furnishing of
statistical and research information to it by any of the securities dealers
through which the Trustee executes transactions.
TENDER OF UNITS FOR REDEMPTION
Units may be tendered to the Trustee for redemption at its unit investment
trust office at 101 Barclay Street, New York, New York 10286, upon delivery of a
request for redemption and payment of any relevant tax. No redemption fee will
be charged by the Sponsor or the Trustee. Units redeemed by the Trustee will be
cancelled.
You must have your signature guaranteed by an officer of a national bank or
trust company or by a member firm of either the New York, Midwest or Pacific
Stock Exchanges. In certain instances the Trustee may require additional
documents such as, but not limited to, trust instruments, certificates of death,
appointments as executor or administrator or certificates of corporate
authority.
Within seven calendar days following such tender, or if the seventh
calendar day is not a business day, on the first business day prior thereto, you
will be entitled to receive in kind an amount for each Unit tendered equal to
the Redemption Price per Unit computed as of the Evaluation Time set forth in
the "Summary of Essential Information" in Part A on the date of tender (see
"Rights of Unit Holders--Computation of Redemption Price per Unit"). The "date
of tender" is deemed to be the day on which Units are received by the Trustee.
For Units received after the Evaluation Time, the date of tender is the next day
on which the New York Stock Exchange is open for trading, and these Units will
be deemed to have been tendered to the Trustee on that day for redemption at the
Redemption Price computed on that day.
The Trustee will redeem Units in kind. You will be able (except during a
period described below), not later than the seventh calendar day following the
tender of Units (or if the seventh calendar day is not a business day on the
first business day prior thereto), 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 (the "In Kind Distribution") will take the form of whole shares of
Securities. Cash will be distributed instead of fractional shares. The cash and
the whole shares will aggregate an amount equal to the Redemption Price per
Unit.
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Distributions in kind on redemption of Units shall be held by The Bank of
New York, as Distribution Agent, whom you shall be deemed to have designated as
your agent upon purchase of a Unit, for the account of, and for disposition in
accordance with the instructions of, the Unit Holder as follows:
o 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 you no later than seven days thereafter the net proceeds of
sale, after deducting brokerage commissions and transfer taxes, if any,
on the sale unless you request a distribution of the Securities as set
forth in the paragraph below. The Distribution Agent may sell the
Securities through the Sponsor, and the Sponsor may charge brokerage
commissions on those sales.
o If you request distribution in kind and tender Units with a value in
excess of $250,000, the Trustee 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
distributable cash to you together with certificates representing whole
shares of each of the Securities comprising the In Kind Distribution. (In
a case in which you request a distribution in kind, the Trustee may,
instead of distributing Securities in kind to you, offer the Sponsor the
opportunity to acquire the tendered Units in exchange for the number of
shares of each Security and cash which you are otherwise entitled to
receive from the Trust. The federal income tax consequences to you would
be identical in either case.)
Any amounts paid on redemption representing income received will be
withdrawn from the Income Account to the extent funds are available. In
addition, in implementing the redemption procedures described above, the Trustee
and the Distribution Agent shall make any adjustments necessary to reflect
differences between the Redemption Price of the Units and the value of the In
Kind Distribution in whole shares as of the date of tender. To the extent that
Units are redeemed, the size of the Trust will be reduced.
The right of redemption may be suspended and payment of the Redemption
Price per Unit postponed for more than seven calendar days following a tender of
Units for redemption for any period during which the New York Stock Exchange is
closed, other than for weekend or holiday closing, 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 a 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. Neither the Trustee nor
the Sponsor is liable to any person or in any way for any loss or damage that
may result from any such suspension or postponement.
PURCHASE BY THE SPONSOR OF UNITS TENDERED FOR REDEMPTION
The Indenture requires that the Trustee notify the Sponsor of any tender of
Units for redemption. So long as the Sponsor is maintaining a secondary market
for Units, the Sponsor, before the close of business on the day of tender, may
purchase any Units tendered to the Trustee for redemption by making payment for
the Units in an amount not less than the Redemption Price and not later than the
day on which the Units would otherwise have been redeemed by the Trustee, i.e.,
you will receive the Redemption Price from the Sponsor within 7 days of the date
of tender (see "Public Offering of Units--Secondary Market"). Units held by the
Sponsor may be tendered to the Trustee for redemption as any other Units. The
offering price of any Units resold by the Sponsor will be the Public Offering
Price determined in the manner provided in this Prospectus (see "Public Offering
of Units--Public Offering Price"). Any profit resulting from the resale of such
Units will belong to the Sponsor, which likewise will bear any loss resulting
from a reduction in the offering or redemption price after its acquisition of
those Units (see "Public Offering of Units--Profit of Sponsor").
COMPUTATION OF REDEMPTION PRICE PER UNIT
The Redemption Price per Unit of the Trust is determined by the Trustee as
of the Evaluation Time on the date any such determination is made. The Trust
Evaluation per Unit is determined as of the Evaluation Time stated under
"Summary of Essential Information." The Redemption Price per Unit is your pro
rata share, determined by the Trustee, of:
o the aggregate value of the Securities in the Trust,
o cash on hand in the Trust including dividends receivable on stocks
trading ex-dividend as of the date of computation and
o any other assets of the Trust, less
o amounts representing taxes and governmental charges payable out of the
Trust,
o liabilities of the Trust,
o the accrued but unpaid expenses of the Trust and accrued Deferred Sales
Charges and the Deferred Sales Charge balance, and
o cash held for distribution to Unit Holders of record as of the date prior
to the evaluation.
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The Trustee shall determine the aggregate value of the Securities in good
faith in the following manner:
o the evaluation is generally based on the closing prices as of the
Evaluation Time in the over the counter market or, if unavailable, based
on the bid prices of that time (unless the Trustee deems these prices
inappropriate as a basis for valuation).
If the current closing or bid price is unavailable, the Trustee shall use
any of the following methods which the Trustee deems appropriate to value
Securities:
o on the basis of current bid prices for comparable securities,
o by appraising the value of the Securities on the bid side of the market
or by such other appraisal deemed appropriate by the Trustee,
o on the basis of the last trade price of the Security or
o by any combination of the above, each as of the Evaluation Time.
EXCHANGE OPTION
You may elect to exchange any or all of your Units of this Series of the
National Equity Trust for units of one or more of any other Series in the
Prudential Securities Incorporated family of unit investment trusts or for any
units of any additional trusts that may from time to time be made available by
the Sponsor (the "Exchange Trusts").
This exchange is implemented by a sale of Units and a purchase of the units
of an Exchange Trust. You may acquire these units at prices based on a reduced
sales charge per unit. The purpose of such reduced sales charge is to permit the
Sponsor to pass on to the Holder who wishes to exchange units the cost savings
resulting from such exchange. The cost savings result from reductions in time
and expense related to advice, financial planning and operational expense
required for the Exchange Option.
Each Exchange Trust has different investment objectives. You should read
the Prospectus for the applicable Exchange Trust carefully to determine the
investment objective before exercise of this option.
This option will be available provided that (1) the Sponsor maintains a
secondary market in units of the applicable Exchange Trust and (2) units of the
applicable Exchange Trust are available for sale and are lawfully qualified for
sale in the jurisdiction in which the Unit Holder is a resident. While the
Sponsor presently intends to maintain a secondary market for the units of
Exchange Trusts, there is no obligation on its part to do so. Therefore, we do
not promise that a market for units will in fact exist on any given date in
which you wish to sell or exchange Units. Thus, we do not promise that the
Exchange Option will be available to any Unit Holder. The Sponsor reserves the
right to modify, suspend or terminate this option. The Sponsor will give sixty
days notice before the date of the termination of or a material amendment to the
Exchange Option. However, the Sponsor will not have to give notice in certain
circumstances approved by the Securities and Exchange Commission. In the event
the Exchange Option is not available to you at the time you wish to exercise
such option, we will immediately notify you and we will not take any action with
respect to your tendered Units without further instruction from you.
To exercise the Exchange Option, a Unit Holder should notify the Sponsor of
his desire to exchange his Units for one or more units of the Exchange Trusts.
Upon the exchange of Units of the Trust, any Deferred Sales Charge balance will
be deducted from the exchange proceeds. If units of the applicable outstanding
series of the Exchange Trust are at that time available for sale, the Unit
Holder may select the series or group of series for which he desires his Units
to be exchanged. The Unit Holder will be provided with a current prospectus or
prospectuses relating to each series in which he indicates interest.
Units of the Exchange Trust trading in the secondary market maintained by
the Sponsor, if so maintained, will be sold to the Unit Holder at a price equal
to the aggregate bid side evaluation per unit of the securities in that
portfolio and the applicable sales charge of $15 per unit of the Exchange Trust
for a trust with a 1 unit minimum purchase. The reduced sales charge for units
of any Exchange Trust acquired during the initial offering period for such units
will result in a price for such units equal to the offering side evaluation per
unit of the securities in the Exchange Trust's portfolio plus accrued interest,
if any, plus a reduced sales charge of $25 per Exchange Trust unit.
You may make exchanges in whole units only. We will return any excess
proceeds from the surrender of your Units. Alternatively, you may make up any
difference between (1) the amount representing the Units being submitted for
exchange (2) and the amount representing the units being acquired up to the next
highest number of whole units.
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Unit Holders of any registered unit investment trust, other than Prudential
Securities Incorporated sponsored trusts, which was initially offered at a
minimum applicable sales charge of 3.0% of the public offering price exclusive
of any applicable sales charge discounts, may elect to apply the cash proceeds
of sale or redemption of those units directly to acquire units of any Exchange
Trust trading in the secondary market at the reduced sales charge of $20 per
Unit, subject to the terms and conditions applicable to the Exchange Option.
Units of any Exchange Trust acquired during the initial offering period for such
units may be sold at a price equal to the ask side evaluation per unit of the
securities in the Portfolio plus a reduced sales charge of $25 per unit. To
exercise this option, you should notify your retail broker. You will be given a
prospectus of each series in which you indicate interest, units of which are
available. The Sponsor reserves the right to modify, suspend or terminate the
option at any time without further notice, including the right to increase the
reduced sales charge applicable to this option (but not in excess of $5 more per
unit than the corresponding fee then charged for a unit of an Exchange Trust
which is being exchanged).
For example, assume that a Unit Holder, who has three units of a Trust with
a 4.25% sales charge and a current price of $1,000 per unit, sells his units and
exchanges the proceeds for units of a series of an Exchange Trust with a current
price of $950 per unit and an ordinary sales charge of 4.25%. The proceeds from
the Unit Holder's units will aggregate $3,300. Since only whole units of an
Exchange Trust may be purchased under the Exchange Option, the Holder would be
able to acquire four units in the Exchange Trust for a total cost of $3,860
($3,800 for units and $60 for the $15 per unit sales charge) by adding an extra
$560 in cash. Were the Unit Holder to acquire the same number of units at the
same time in the regular secondary market maintained by the Sponsor, the price
would be $3,968.68 [$3,800 for the units and $168.68 for the 4.25% sales charge
(4.439% of the net amount invested)].
FEDERAL INCOME TAX CONSEQUENCES
An exchange of Units pursuant to the Exchange Option will constitute a
"taxable event" under the Code. You will recognize a gain or loss at the time of
exchange. However, if you exchange Units for units of any series of the Exchange
Trusts which are grantor trusts for U.S. federal income tax purposes, the
Internal Revenue Service may seek to disallow any loss incurred upon such
exchange to the extent that (1) the underlying securities in each Trust are
substantially identical and (2) the purchase of the units of an Exchange Trust
takes place less than thirty-one days after the sale of the Units. You are
advised to consult your own tax advisor as to the tax consequences of exchanging
Units in your particular case.
REINVESTMENT PROGRAM
You may elect to automatically reinvest the distributions with respect to
your Units in additional Units of the Trust, subject only to any remaining
portions of the Deferred Sales Charge. Reinvestment Units are not subject to the
Initial Sales Charge. A Unit Holder holding Units in "street name" may
participate in the Trust's reinvestment program by contacting his broker, dealer
or financial institution. You may participate in the Trust's reinvestment
program by filing with the Trustee a written notice of election. The Trustee
must receive your completed notice of election to participate in the Program at
least ten days before the Record Date applicable to any distribution in order
for the Program to be in effect as to that distribution. You may modify or
revoke elections on similar notice.
The Trustee will use such distributions, to the extent reinvested in the
Trust, at the direction of the Sponsor in one or both of the following manners:
(1) The Trustee may use the distributions to purchase Units of this
Series of the Trust in the Sponsor's inventory. The purchase price payable
by the Trustee for each of such Units will be equal to the applicable Trust
evaluation per Unit on or as soon as possible after the close of business
on the Distribution Date. The Trustee will issue or credit the Units
purchased to the accounts of Unit Holders participating in the Program.
(2) If there are no Units in the Sponsor's inventory, the Sponsor may
purchase additional Securities for deposit into the Trust as described
above in Part B. The Sponsor will deposit the additional Securities with
any necessary cash with the Trustee in exchange for new Units. The Trustee
may then use the distributions to purchase the new Units from the Sponsor.
The price for such new Units will be the applicable Trust evaluation per
Unit on or as soon as possible after the close of business on the
Distribution Date. See "Public Offering of Units-Public Offering Price."
The Units purchased by the Trustee will be issued or credited to the
accounts of Unit Holders who participate in the Program. The Sponsor may
terminate the Program if it does not have sufficient Units in its inventory or
if it is no longer practical to create additional Units. The cost of
administrating the reinvestment program will be borne by the Trust and thus will
be borne indirectly by all Unit Holders.
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EXPENSES AND CHARGES
ORGANIZATION COSTS
You and the other unit holders will bear all or a portion of the
organization costs and charges incurred in connection with the establishment of
the Trust. These costs and charges will include:
o the cost of the preparation, printing and execution of the Indenture,
Registration Statement and other documents relating to the Trust
o Federal and State registration fees and costs
o the initial fees and expenses of the Trustee
o legal and auditing expenses.
The Sponsor will pay advertising and selling expenses at no cost to the
Trust.
TRUST FEES AND EXPENSES
The Trust fees and expenses are estimated in Part A. If the actual expenses
exceed the estimate, the actual amount will be charged to the Trust. The
Sponsor's fee (the "Supervisory Fee"), earned for portfolio supervisory
services, is based upon the largest number of Units outstanding during the life
of the Trust. The Sponsor's fee as set forth in "Summary of Essential
Information" may exceed the actual costs of providing portfolio supervisory
services for this Trust. At no time will the total amount the Sponsor receives
for portfolio supervisory services rendered to all series of the National Equity
Trust in any calendar year exceed the aggregate cost to it of supplying such
services in such year.
Under the Indenture and Agreement, for its services as Trustee and
evaluator, the Trustee receives an annual fee in the amount set forth in
"Summary of Essential Information." The Trustee's fee and the Trust expenses
accrue monthly and are payable quarterly on or before each Distribution Date
from the Income Account, to the extent funds are available, and thereafter from
the Principal Account. Such Trustee's fee may be increased without approval of
the Unit Holders in proportion to increases under the classification "All
Services Less Rent" in the Consumer Price Index published by the United States
Department of Labor but such fee will not be increased in excess of increases in
the Trustee's costs. In addition to the Trustee's fee, the Trustee receives
income to the extent that it holds funds on deposit in various accounts which
are non-interest bearing to Unit Holders created under the Indenture.
OTHER CHARGES
The Trust does or may incur the following additional charges as more fully
described in the Indenture and Agreement:
o fees of the Trustee for extraordinary services
o expenses of the Trustee, including legal and auditing expenses, and of
counsel that the Sponsor designated
o various governmental charges
o expenses and costs of any action the Trustee takes to protect the Trust
and the rights and interests of the Unit Holders
o indemnification of the Trustee for any loss, liability or expenses it
incurred in the administration of the Trust without negligence, bad
faith, willful malfeasance or willful misconduct on its part or reckless
disregard of its obligations and duties
o indemnification of the Sponsor for any losses, liabilities and expenses
incurred in acting as Sponsor or Depositor under the Agreement without
gross negligence, bad faith, willful malfeasance or willful misconduct or
reckless disregard of its obligations and duties
o expenditures incurred in contacting Unit Holders upon termination of the
Trust, and
o to the extent then lawful, expenses (including legal, auditing and
printing expenses) of maintaining registration or qualification of the
Units and/or the Trust under Federal or State securities laws so long as
the Sponsor is maintaining a market for the Units.
PAYMENT
The fees and expenses set forth herein are payable out of the Trust. When
the Trustee pays them or when they are owed to the Trustee, they are secured by
a lien on the Trust. Dividends on the Securities are not expected to be
sufficient to pay the estimated expenses of the Trust. If the balances in the
Income and Principal Account are insufficient to provide for amounts payable by
the Trust, the Trustee has the power to sell Securities to pay those amounts. To
the extent that the Trustee sells Securities, the size of
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the Trust will decline and the proportions of the Securities may change. Such
sales might be required at a time when Securities would not otherwise be sold.
These sales might result in lower prices than might otherwise be realized.
Moreover, due to the minimum lot size in which Securities may be required to be
sold, the proceeds of such sales may exceed the amount necessary for the payment
of such fees and expenses.
ADMINISTRATION OF THE TRUST
REPORTS AND RECORDS
With each distribution, the Trustee will furnish to the Unit Holders a
statement of the amount of dividends and other receipts, if any, distributed,
expressed in each case as a dollar amount per Unit.
Within a reasonable time after the end of each calendar year, the Trustee
will furnish to each person who was a Unit Holder of record at any time during
the calendar year a statement setting forth:
1. As to the Income Account:
o dividends and other cash amounts received
o deductions for payment of applicable taxes and for fees and expenses
of the Trust and for redemptions of Units
o 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 Unit outstanding on the last
business day of such calendar year;
2. As to the Principal Account:
o the dates of disposition and identity of any Securities and the net
proceeds received therefrom
o deductions for payments of applicable taxes, for fees and expenses
of the Trust, for portions of the Deferred Sales Charge and amounts
necessary to redeem Units, and
o 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 Unit outstanding on the last
business day of such calendar year;
3. And the following information:
o a list of the Securities held as of the last business day of the
calendar year;
o the number of Units outstanding as of the last business day of such
calendar year;
o the Redemption Price Unit based on the last Evaluation made during
such calendar year; and
o the amounts actually distributed during such calendar year from the
Income and Principal Accounts, separately stated, expressed both as
total dollar amounts and as dollar amounts per Unit outstanding on
the Record Dates for such distributions.
The accounts of the Trust may be audited not less frequently than annually
by independent certified public accountants designated by the Sponsor, and the
report of such accountants will be furnished by the Trustee to Unit Holders upon
request.
The Trustee shall keep available for inspection by Unit Holders 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 Unit
Holders, a current list of Securities in the Portfolio and a copy of the
Indenture.
AMENDMENT
The Trustee and the Sponsor or their respective successors may amend the
Indenture and Agreement frrom time to time without the consent of any of the
Unit Holders
o to cure any ambiguity or to correct or supplement any provision contained
therein which may be defective or inconsistent with any other provision
contained therein;
o to change any provision thereof as the Securities and Exchange Commission
or any successor governmental agency exercising similar authority may
require;
o to make such other provision in regard to matters or questions arising
thereunder as shall not adversely affect the interest of the Unit
Holders.
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<PAGE>
The parties to the Indenture and Agreement may also amend that document
from time to time or they may waive the performance of any of the provisions of
the Indenture and Agreement for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of the Indenture and
Agreement or of modifying in any manner the rights of the Unit Holders, if the
express written consent of Holders of Units evidencing 51% of the Units at the
time outstanding under the Indenture and Agreement is obtained. No party,
however, may amend the Indenture and Agreement, or waive any provision thereof,
so as to (1) increase the number of Units issuable in respect of the Trust above
the aggregate number specified in Part 2 of the Agreement or such lesser amount
as may be outstanding at any time during the term of the Indenture except as the
result of the deposit of additional Securities, as therein provided, or reduce
the relative interest in the Trust of any Unit Holder without his consent,
(2) permit the deposit or acquisition thereunder of securities or other property
either in addition to or in substitution for any of the Securities except in the
manner permitted by the Trust Indenture as in effect on the date of the first
deposit of Securities or permit the Trustee to vary the investment of Unit
Holders or to empower the Trustee to engage in business or to engage in
investment activities not specifically authorized in the Indenture as originally
adopted or (3) adversely affect the characterization of the Trust as a grantor
trust for federal income tax purposes. In the event of any amendment requiring
the consent of Unit Holders, the Trustee is obligated to promptly notify all
Unit Holders of the substance of this amendment.
TERMINATION
The Trust may be terminated at any time by the consent of the holders of
51% of the Units or by the Trustee upon the direction of the Sponsor when the
aggregate net value of all Trust assets is less than 40% of the Securities
deposited in the Trust on the Date of Deposit and subsequent thereto. However,
in no event may the Trust continue beyond the Termination Date set forth under
"Summary of Essential Information" in Part A. In the event of termination,
written notice thereof will be sent by the Trustee to all Unit Holders.
TERMINATION OPTIONS
The Trust will terminate on the Termination Date set forth in the Summary
of Essential Information, approximately one year after the Date of Deposit
(unless terminated earlier as set forth above). A Unit Holder's Units will be
redeemed in kind on the Termination Date by distribution of the Unit Holder's
pro rata share of the Securities and any cash in the Portfolio of the Trust on
that date to the Distribution Agent who will act as agent for that Unit Holder.
SECURITIES DISPOSITION OPTIONS--A Unit Holder who so elects by notifying
the Trustee prior to the Termination Date of the Trust will have the Securities
received on the Termination Date disposed of on behalf of a Unit Holder by the
Distribution Agent in accordance with one or more of the following four options
as elected by a Unit Holder:
1. to have such underlying Securities distributed in kind no later
than the business day next following the Termination Date. Unit Holders
will incur brokerage costs when selling those Securities;
2. to receive the Unit Holder's pro rata share of the cash received
by the Distribution Agent (less expenses) upon the sale by the Distribution
Agent of the underlying Securities attributable to Unit Holders electing
this option over a period not to exceed 10 business days commencing on the
Termination Date. Amounts received by the Distribution Agent over such 10
business day period representing the proceeds of the underlying Securities
sold will be held by The Bank of New York in accounts which are
non-interest bearing to Unit Holders and which are available for use by The
Bank of New York pursuant to normal banking procedures and will be
distributed to Unit Holders within 5 business days after the settlement of
the trade for the last Security to be sold;
3. to invest the proceeds from the sale of the underlying Securities
attributable to Unit Holders electing this option, as received by the
Distribution Agent upon the sale of those underlying Securities over a
period not to exceed 10 business days commencing on the Termination Date,
in units of a subsequent series of National Equity Trust as designated by
the Sponsor (the "New Series") if the New Series is offered at such time.
The units of a New Series will be purchased by the Unit Holder upon the
settlement of the trade for the last Security to be sold. Such purchaser
will be entitled to a reduced sales load 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 in a subsequent series of the Trust
will occur in each New Series of the Trust approximately one year after
that New Series' creation. 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 Unit Holder's election to participate in this option
will be treated as an indication of interest only. At any time before to
the purchase by the Unit Holder of units of a New Series, the Unit Holder
may change his investment strategy and receive, in cash, the proceeds of
the sale of the Securities; and
4. Termination Option--In-Kind Exchange
Unitholders desiring to exchange their interests in Units of a
terminating series of National Equity Trust OTC Growth Trust ("Terminating
Trust") for units of the Trust ("New Trust") may do so by so advising their
account executive. Such
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exchange will be effected by an in-kind redemption from the Terminating
Trust and subsequent in-kind deposit with the Trustee of the New Trust, as
follows:
The number and types of securities constituting a unit of the New
Trust will be deposited on behalf of a Unitholder in connection with the
creation of a unit by the Trustee. Certain of the stocks contained in
the Terminating Trust are likely to be included in the portfolio of the
New Trust ("Duplicated Stocks"). A Unitholder in the Terminating Trust
electing to receive his interest in the Terminating Trust in-kind and
desiring to purchase units in the New Trust by an in-kind contribution
to the New Trust would direct that The Bank of New York act as agent
(the "Agent") for a Unitholder to carry out the transactions necessary
to consummate the in-kind deposit. The Agent would be authorized to
receive the Unitholder's in-kind distribution from the Terminating Trust
and to assemble and deposit, on the Unitholder's behalf, the package of
stocks needed to make up a unit in the New Trust. Such assembly and
deposit would include an in-kind contribution to the New Trust of an
appropriate amount of the Unitholder's interest in Duplicated Stocks.
Securities distributed in-kind from the Terminating Trust not required
to make up a unit in the New Trust would be sold by the Agent with the
cash proceeds of each sale utilized by the Agent to purchase the stocks,
other than the Duplicated Stocks, necessary to constitute a unit of the
New Trust. The proceeds of those sales will be reduced and the cost of
those purchases will be increased by any applicable brokerage
commissions. If additional cash is needed to purchase stocks, that cash
would be paid to the Agent by the Unitholder. Any cash not used to make
up a unit in the New Trust would be distributed to the Unitholder.
Fractional interests received from the Terminating Trust will be sold by
the Agent with the cash proceeds of that sale used to purchase
securities for deposit in the New Trust or, if not so utilized,
distributed to the Unitholder. Upon receipt of the in-kind deposit, the
Trustee will issue the appropriate number of units in the New Trust to
the Unitholder on whose behalf the Agent acted. Units acquired pursuant
to an in-kind deposit into a New Trust by a Unitholder of a Terminating
Trust will not be subject to an Initial Sales Charge but only subject to
a Deferred Sales Charge.
The ability to purchase units of the New Trust by the deposit of
securities in-kind will also be offered to persons who were not
Unitholders in a prior Trust and any such person may contribute whole
shares in-kind to a New Trust. Such person will be required to pay the
Initial Sales Charge to the Sponsor in connection with the in-kind
purchase of units, which units will be subject to a Deferred Sales
Charge.
The receipt in-kind from the Terminating Trust and the deposit in
the New Trust of the Duplicated Stocks will not be a taxable event to a
Unitholder. (See Part B--"Tax Status of the Trust.")
Unit Holders who do not elect as set forth above will have their Units
redeemed on the Termination Date and be deemed to have elected to receive the
cash proceeds from the sale of the Unit Holder's pro rata share of the
underlying Securities (option 2).
Under each option a Unit Holder will receive the Redemption Price per Unit
(net asset value) determined as of the Evaluation Time on the Termination Date.
The Distribution Agent will sell the underlying Securities in the case of the
second and third option over a period not to exceed 10 business days commencing
on the Termination Date. The proceeds of any such sales will be reduced by any
applicable brokerage commissions. The sale arrangement is one in which The Bank
of New York will be selling the Securities as agent for the Unit Holder and is
separate from the Trust which terminates on the Termination Date. The proceeds
of those sales may be more or less than the value of the Securities on the
Termination Date. The Sponsor, on behalf of the Distribution Agent if the
Sponsor effects those sales, or the Distribution Agent if the Sponsor does not,
will, unless prevented by unusual or 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, sell on each
business day during the 10 business day period at least a number of shares of
each Security which then remains in the Portfolio equal to the number of those
shares in the Portfolio at the beginning of that day multiplied by a fraction
the numerator of which is one and the denominator of which is the number of days
remaining in the 10 business day sales period. The proceeds of sale will not be
distributed by the Distribution Agent until the settlement of the trade upon the
sale of the last Security during the 10 business day period.
Depending on the amount of proceeds to be invested in units of the new
series and the number of other orders for units in the new series, the Sponsor
may purchase a large amount of securities for the new series in a short period
of time. The Sponsor's buying of securities may tend to raise the market prices
of these securities. The actual market impact of the Sponsor's purchases,
however, is currently unpredictable because the actual amount of securities to
be purchased and the supply and price of those securities is unknown. A similar
problem may occur in connection with the sale of Securities during the 10
business day period commencing on the Termination Date; 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 to be credited to Unit
Holders. The Sponsor believes that the sale of underlying Securities over a 10
business day period as described above is in the best interest of Unit Holders
and may mitigate the negative market price consequences stemming from the
trading of large amounts of Securities. The Sponsor, in implementing such sales
of Securities on behalf of the Distribution Agent, will seek to maximize the
sales proceeds and will act in the best interest of the Unit Holder. The
proceeds of the sale of the Securities will be in an amount equal to amounts
realized upon
B-16
<PAGE>
the sale of the Securities over the 10 business day period. There can be no
assurance, however, that any adverse price consequences of heavy trading will be
mitigated.
It should also be noted that Unit Holders will realize taxable capital
gains or losses on the liquidation of the Securities representing their Units,
but, due to the procedures for investing in the New Series, no cash would be
distributed at that time to pay any taxes.
The Sponsor may for any reason, in its sole discretion, decide not to
sponsor any subsequent series of the Trust, without penalty or incurring
liability to any Unit Holder. The Sponsor may offer a subsequent trust but not
within a short time period subsequent to the termination of the Trust and,
consequently, such trust may not accommodate a "rollover" from the Trust. If the
Sponsor so decides, the Sponsor will notify the Trustee of that decision, and
the Trustee will notify the Unit Holders before the Termination Date. All Unit
Holders will then elect either option 1 or option 2. There can be no assurance
that any rollover or exchange from one series to another will achieve the
desired tax result. The Sponsor is not a tax advisor and each Unit Holder should
consult his, her or its tax advisor with regard to any gains or losses on the
stock in the Trust and the tax treatment thereof.
By electing to reinvest in the new series, the Unit Holder indicates his
interest in having his termination distribution from the Trust invested only in
the new series created next following termination of the Trust; the Sponsor
expects, however, that a similar reinvestment program will be offered with
respect to all subsequent series of the Trust, thus giving Unit Holders a yearly
opportunity to elect to "rollover" their termination 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 Unit Holder's election to participate in the reinvestment program will be
treated as an indication of interest only. The Sponsor intends to coordinate the
date of deposit of a future series so that the terminating trust will terminate
within a few weeks of the creation of a New Trust.
The Sponsor reserves the right to modify, suspend or terminate the
reinvestment privilege at any time.
RESIGNATION, REMOVAL AND LIABILITY
TRUSTEE
The Trustee is The Bank of New York. It is a New York bank with its
principal executive office located at 101 Barclay Street, New York, New York
10286. The Trustee is organized under the laws of the State of New York, is a
member of the New York Clearing House Association and is subject to supervision
and examination 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. Unit Holders should direct inquiries regarding distributions,
address changes and other matters related to the administration of the Trust to
the Trustee at Unit Investment Trust Division, P.O. Box 974, Wall Street
Station, New York, New York 10268-0974.
LIMITATIONS ON LIABILITY
The Trustee shall not be liable or responsible in any way for:
o depreciation or loss incurred by reason of the disposition of any moneys
or Securities; or
o in respect of any evaluation or for any action taken in good faith
reliance on prima facie properly executed documents.
The Trustee, however, shall be liable for willful misfeasance, bad faith or
negligence in the performance of its duties. The Trustee shall also be liable by
reason of its reckless disregard of its obligations and duties under the
Indenture and Agreement. The Trustee shall not be personally liable for any
taxes or other governmental charges imposed upon the Trust which the Trustee may
be required to pay under current or future laws of the United States or any
other taxing authority having jurisdiction.
RESPONSIBILITY
The Trustee shall not be liable for any default, failure or defect in any
Security or for any depreciation or loss by reason of any sale of Securities or
by reason of the failure of the Sponsor to give directions to the Trustee.
The Trustee may sell Securities designated by the Sponsor, or if not so
directed, in its own discretion, for the purpose of redeeming Units tendered for
redemption.
Amounts received by the Trust upon the sale of any Security under the
conditions set forth below will be deposited in the Principal Account when
received and to the extent not used for the redemption of Units will be
distributable by the Trustee to Unit Holders of record on the record date next
prior to a distribution date as declared by the Trustee.
For information relating to the responsibilities of the Trustee under the
Indenture, reference is also made to the material set forth under "Rights of
Unit Holders" and "Sponsor-Resignation."
B-17
<PAGE>
RESIGNATION
By executing an instrument in writing and filing the same with the Sponsor,
the Trustee and any successor may resign. In such an event the Sponsor is
obligated to appoint a successor trustee as soon as possible. If the Trustee
becomes incapable of acting or becomes bankrupt or its affairs are taken over by
public authorities, the Sponsor may remove the Trustee and appoint a successor
as provided in the Indenture. The Sponsor may also remove the Trustee for any
reason, either with or without cause. Such resignation or removal shall become
effective upon the acceptance of appointment by the successor trustee. If upon
resignation of a trustee no successor has been appointed and has accepted the
appointment within thirty days after notification, the retiring trustee may
apply to a court of competent jurisdiction for the appointment of a successor.
The resignation or removal of a trustee becomes effective only when the
successor trustee accepts its appointment as such or when a court of competent
jurisdiction appoints a successor trustee. A successor trustee has the same
rights and duties as the original trustee except to the extent, if any, that the
Indenture is modified as permitted by its terms.
SPONSOR
Prudential Securities Incorporated ("Prudential Securities") is a Delaware
corporation and is engaged in the underwriting, securities and commodities
brokerage business and is a member of the New York Stock Exchange, Inc., other
major securities exchanges and commodity exchanges and the National Association
of Securities Dealers, Inc. Prudential Securities, a wholly-owned subsidiary of
Prudential Securities Group Inc. and an indirect wholly-owned subsidiary of The
Prudential Insurance Company of America, is engaged in the investment advisory
business. Prudential Securities has acted as principal underwriter and managing
underwriter of other investment companies. In addition to participating as a
member of various selling groups or as an agent of other investment companies,
Prudential Securities executes orders on behalf of investment companies for the
purchase and sale of securities of such companies and sells securities to such
companies in its capacity as a broker or dealer in securities.
Prudential Securities is distributor for series of Prudential Government
Securities Trust, The Blackrock Government Income Trust, Command Government
Fund, Command Money Fund, Command Tax-Free Fund, Global Utility Fund, Inc.,
Nicholas-Applegate Fund, Inc., Prudential Allocation Fund, Prudential California
Municipal Fund, Prudential Distressed Securities Fund, Inc., Prudential
Diversified Bond Fund, Inc., Prudential Dryden Fund, Prudential Emerging Growth
Fund, Inc., Prudential Equity Fund, Inc., Prudential Equity Income Fund,
Prudential Europe Growth Fund, Inc., Prudential Global Genesis Fund, Inc., The
Global Government Plus Fund, Inc., Prudential Global Limited Maturity Fund,
Inc., Prudential Global Natural Resources Fund, Inc., The Global Total Return
Fund, Inc., Prudential Government Income Fund, Prudential High Yield Fund, Inc.,
Prudential Institutional Liquidity Portfolio, Inc., Prudential Intermediate
Global Income Fund, Inc., Prudential Jennison Series Fund, Inc., Prudential
MoneyMart Assets, Inc., Prudential Mortgage Income Fund, Inc., Prudential
MultiSector Fund, Inc., Prudential Municipal Bond Fund, Prudential Municipal
Series Fund, Prudential National Municipals Fund, Inc., Prudential Pacific
Growth Fund, Inc., Prudential Small Companies Fund, Inc., Prudential Special
Money Market Fund, Inc., Prudential Structured Maturity Fund, Inc., Prudential
Tax-Free Money Fund, Inc., Prudential Utility Fund, Inc., and Prudential World
Fund, Inc.
LIMITATIONS ON LIABILITY
The Sponsor is liable for the performance of its obligations arising from
its responsibilities under the Indenture. The Sponsor shall be under no
liability to the Trust or to Unit Holders for taking any action or for
refraining from any action in good faith or for errors in judgment. Likewise,
the Sponsor shall not be liable or responsible in any way for any default,
failure or defect in any Security or for depreciation or loss incurred by reason
of the disposition of any Security. The Sponsor will, however, be liable for
(1) its own willful misfeasance, (2) willful misconduct, (3) bad faith, (4)
gross negligence or (5) reckless disregard of its duties and obligations under
the Agreement.
RESPONSIBILITY
The Trust is not a managed registered investment company. Securities will
not be sold by the Trustee to take advantage of ordinary market fluctuations.
Although the Sponsor and Trustee do not presently intend to dispose of
Securities, the Indenture permits the Sponsor to direct the Trustee to dispose
of any Security upon the happening of certain events, including, without
limitation, default under certain documents or other occurrences, including
legal actions which might adversely affect future declaration and payment of
dividends, institution of certain legal proceedings, and a decline in market
price to such an extent, or such other adverse market or credit factor, as in
the opinion of the Sponsor would make retention of a Security detrimental to the
Trust and to the interests of the Unit Holders or if required to pay the
Deferred Sales Charge. The Sponsor may instruct the Trustee to tender a Security
for cash or sell the Security on the open market when in its opinion it is in
the best interest of the Unit Holders to do so in the event of a public tender
offer or merger or acquisition announcement.
B-18
<PAGE>
The Sponsor and/or an affiliate thereof intend to continuously monitor
developments affecting the Securities in the Trust in order to determine whether
the Trustee should be directed to dispose of any such Securities.
It is the responsibility of the Sponsor to instruct the Trustee to reject
any offer made by an issuer of any of the Securities to issue new securities in
exchange and substitution for any Security pursuant to a recapitalization or
reorganization, except that the Sponsor may instruct the Trustee to accept such
an offer or to take any other action with respect thereto as the Sponsor may
deem proper if the issuer failed to declare or pay or the Sponsor anticipates
such issuer will fail to pay or declare anticipated dividends with respect
thereto. If the Trust receives the securities of another issuer as the result of
a merger or reorganization of, or a spin-off, or split-up by the issuer of a
Security included in the original Portfolio, the Trust may under certain
circumstances hold those securities as if they were one of the Securities
initially deposited and adjust the proportionate relationship accordingly for
all future subsequent deposits.
Any securities so received in exchange or substitution will be held by the
Trustee subject to the terms and conditions of the Indenture to the same extent
as Securities originally deposited thereunder. Within five days after the
deposit of securities in exchange or substitution for any of the underlying
Securities, the Trustee is required to give notice thereof to each Unit Holder,
identifying the Securities eliminated and the Securities substituted therefor.
Except as otherwise set forth in the Prospectus, the acquisition by the Trust of
any securities other than the Securities initially deposited is prohibited.
The proceeds resulting from the disposition of any Security in the Trust
will be distributed as set forth under "Rights of Unit Holders--Distribution" to
the extent such proceeds are not utilized for the purpose of redeeming Units or
paying Trust expenses.
RESIGNATION
If at any time the Sponsor shall resign under the Indenture or shall fail
to perform or be incapable of performing its duties thereunder or shall become
bankrupt or its affairs are taken over by public authorities, the Indenture
directs the Trustee to either (1) appoint a successor Sponsor or Sponsors at
rates of compensation deemed reasonable by the Trustee not exceeding amounts
prescribed by the Securities and Exchange Commission, (2) act as Sponsor itself
without terminating the Trust or (3) terminate the Trust. The Trustee will
promptly notify Unit Holders of any such action.
LEGAL OPINIONS
Certain legal matters in connection with the Units offered hereby have been
passed upon by Cahill Gordon & Reindel, 80 Pine Street, New York, New York
10005, as special counsel for the Sponsor.
INDEPENDENT AUDITORS
The financial statement included in this Prospectus has been audited by
Deloitte & Touche LLP, certified public accountants, as stated in their report
appearing herein, and is included in reliance upon such report given upon the
authority of that firm as experts in accounting and auditing.
B-19
<PAGE>
- --------------------------------------------------------------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO REPRESENT TO YOU OR PROVIDE TO YOU INFORMATION
THAT IS DIFFERENT. 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.
- --------------------------------------------------------------------------------
------------------------------------------------------
NATIONAL EQUITY TRUST
OTC GROWTH TRUST SERIES 5
[LOGO] OTC
STRATEGY
------------------------------------------------------
SPONSOR
PRUDENTIAL SECURITIES INCORPORATED
ONE SEAPORT PLAZA
199 WATER STREET
NEW YORK, NEW YORK 10292
TRUSTEE
THE BANK OF NEW YORK
101 BARCLAY STREET
NEW YORK, NEW YORK 10286
This Prospectus does not contain complete
information about the investment company filed
with the Securities and Exchange Commission in
Washington, D.C. under the:
o Securities Act of 1933 (file no. 333-94591)
and
o Investment Company Act of 1940 (file
no. 811-5046).
TO OBTAIN COPIES AT PRESCRIBED RATES--
WRITE: Public Reference Section of the
Commission
450 Fifth Street, N.W., Washington, D.C.
20549-6009
CALL: 1-800-SEC-0330.
VISIT: http://www.sec.gov.
- --------------------------------------------------------------------------------
UTS323 01/00
<PAGE>
PART II.
ADDITIONAL INFORMATION NOT REQUIRED IN PROSPECTUS
CONTENTS OF REGISTRATION STATEMENT
ITEM A-BONDING ARRANGEMENTS
The employees of Prudential Securities Incorporated are covered under
Broker's Blanket Policies, Standard Form No. 14 in the aggregate amount of
$62,500,000.
ITEM B-CONTENTS OF REGISTRATION STATEMENT
This Registration Statement on Form S-6 comprises the following papers and
documents:
The cross-reference sheet.
The Prospectus.
Signatures.
Written consents of the following persons:
Cahill Gordon & Reindel (included in Exhibit 5).
*Deloitte & Touche LLP.
The following Exhibits:
***Ex- 3.(i) -- Certificate of Incorporation of Prudential Securities
Incorporated dated March 29, 1993.
*****Ex- 3.(ii) -- Revised By-Laws of Prudential Securities Incorporated as
amended through September 28, 1998.
*Ex- 4.a -- Trust Indenture and Agreement and Distribution Agency
Agreement dated February 2, 2000.
*Ex- 4.b -- Reference Trust Agreement dated February 2, 2000.
*Ex- 5 -- Opinion of counsel as to the legality of the securities
being registered.
****Ex-24 -- Powers of Attorney executed by a majority of the Board of
Directors of Prudential Securities Incorporated.
**Ex-99.1 -- Information as to Officers and Directors of Prudential
Securities Incorporated is incorporated by reference to
Schedules A and D of Form BD filed by Prudential Securities
Incorporated, pursuant to Rules 15b1-1 and 15b3-1 under the
Securities Exchange Act of 1934 (1934 Act File No. 8-27154).
**Ex-99.2 -- Affiliations of Sponsor with other investment companies.
**Ex-99.3 -- Broker's Blanket Policies, Standard Form No. 14 in the
aggregate amount of $62,500,000.
- ------------------
* Filed herewith.
** Incorporated by reference to exhibit of same designation filed with the
Securities and Exchange Commission as an exhibit to the Registration
Statement under the Securities Act of 1933 of Prudential Unit Trusts,
Insured Tax-Exempt Series 1, Registration No. 2-89263.
*** Incorporated by reference to exhibit of same designation filed with the
Securities and Exchange Commission as an exhibit to the Registration
Statement under the Securities Act of 1933 of Government Securities
Equity Trust Series 5, Registration No. 33-57992.
**** Incorporated by reference to exhibits of same designation filed with the
Securities and Exchange Commission as an exhibit to the Registration
Statement under the Securities Act of 1933 of National Municipal Trust
Series 172, Registration No. 33-54681, National Equity Trust, Top Ten
Portfolio Series 3, Registration No. 333-15919, and National Equity
Trust, Low Five Portfolio Series 17, Registration No. 333-44543.
***** Incorporated by reference to exhibit of same designation filed with the
Securities and Exchange Commission as an exhibit to the Registration
Statement under the Securities Act of 1933 of National Municipal Trust
Series 186, Registration No. 33-54697 and National Equity Trust, S&P 500
Strategy Trust Series 2, Registration No. 333-39521.
II-1
<PAGE>
SIGNATURES
The registrant, National Equity Trust, OTC Growth Trust Series 5 hereby
identifies National Equity Trust OTC Growth Trust for purposes of the
representations required by rule 487 and represents the following:
(1) That portfolio securities deposited in the series as to the
securities of which this Registration Statement is being filed do not
differ materially in type or quality from those deposited in such previous
series;
(2) That, except to the extent necessary to identify the specific
portfolio securities deposited in, and to provide essential financial
information for, the series with respect to the securities of which this
Registration Statement is being filed, this Registration Statement does not
contain disclosures that differ in any material respect from those
contained in the registration statements for such previous series as to
which the effective dates were determined by the Commission or the staff;
and
(3) That it has complied with rule 460 under the Securities Act of
1933.
Pursuant to the requirements of the Securities Act of 1933, the registrant,
National Equity Trust, OTC Growth Trust Series 5, has duly caused this
Registration Statement to be signed on its behalf by the undersigned thereunto
duly authorized, in the City of New York, and State of New York on February 2,
2000.
NATIONAL EQUITY TRUST
OTC GROWTH TRUST SERIES 5
(Registrant)
By PRUDENTIAL SECURITIES INCORPORATED
(Depositor)
By: /s/ RICHARD R. HOFFMANN
-----------------------------------
Richard R. Hoffmann
First Vice President
By the following persons,* who constitute a majority of the
Board of Directors of Prudential Securities Incorporated
A. Laurence Norton, Jr.
Leland B. Paton
Martin Pfinsgraff
Vincent T. Pica II
James D. Price
Hardwick Simmons
Lee B. Spencer, Jr.
By: /s/ RICHARD R. HOFFMANN
----------------------------------
Richard R. Hoffmann
First Vice President
Unit Investment Trust Department,
As Authorized Signatory for Prudential Securities
Incorporated and Attorney-in-Fact for the persons listed
above
- ------------------
* Pursuant to Powers of Attorney previously filed.
II-2
<PAGE>
CONSENT OF COUNSEL
The consent of Cahill Gordon & Reindel to the use of its name in the
Prospectus included in this Registration Statement is contained in its opinion
filed as Exhibit 5 to this Registration Statement.
II-3
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the use in this Amendment No. 1 to Registration Statement No.
333-94591 on Form S-6 of our report dated February 2, 2000, appearing in the
Prospectus, which is part of this Registration Statement for the National Equity
Trust OTC Growth Trust Series 5. We consent to the reference to our Firm as
experts under the heading "Independent Auditors" in the Prospectus which is a
part of this Registration Statement.
DELOITTE & TOUCHE LLP
New York, New York
February 2, 2000
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT INDEX PAGE
- ---------------- --------------------------------------------------------------------------------------------- -----
<C> <C> <S> <C>
***Ex- 3.(i) -- Certificate of Incorporation of Prudential Securities Incorporated dated
March 29, 1993.
*****Ex- 3.(ii) -- Revised By-Laws of Prudential Securities Incorporated as amended through September 28,
1998.
*Ex- 4.a -- Trust Indenture and Agreement and Distribution Agency Agreement dated February 2, 2000.
*Ex- 4.b -- Reference Trust Agreement dated February 2, 2000.
*Ex- 5 -- Opinion of counsel as to the legality of the securities being registered.
****Ex-24 -- Powers of Attorney executed by a majority of the Board of Directors of Prudential
Securities Incorporated.
**Ex-99.1 -- Information as to Officers and Directors of Prudential Securities Incorporated is
incorporated by reference to Schedules A and D of Form BD filed by Prudential
Securities Incorporated, pursuant to Rules 15b1-1 and 15b3-1 under the Securities
Exchange Act of 1934 (1934 Act File No. 8-27154).
**Ex-99.2 -- Affiliations of Sponsor with other investment companies.
**Ex-99.3 -- Broker's Blanket Policies, Standard Form No. 14 in the aggregate amount of $62,500,000.
</TABLE>
- ------------------
<TABLE>
<C> <S>
* Filed herewith.
** Incorporated by reference to exhibit of same designation filed with the Securities and Exchange
Commission as an exhibit to the Registration Statement under the Securities Act of 1933 of Prudential
Unit Trusts, Insured Tax-Exempt Series 1, Registration No. 2-89263.
*** Incorporated by reference to exhibit of same designation filed with the Securities and Exchange
Commission as an exhibit to the Registration Statement under the Securities Act of 1933 of Government
Securities Equity Trust Series 5, Registration No. 33-57992.
**** Incorporated by reference to exhibits of same designation filed with the Securities and Exchange
Commission as an exhibit to the Registration Statement under the Securities Act of 1933 of National
Municipal Trust Series 172, Registration No. 33-54681, National Equity Trust, Top Ten Portfolio
Series 3, Registration No. 333-15919, and National Equity Trust, Low Five Portfolio Series 17,
Registration No. 333-44543.
***** Incorporated by reference to exhibit of same designation filed with the Securities and Exchange
Commission as an exhibit to the Registration Statement under the Securities Act of 1933 of National
Municipal Trust Series 186, Registration No. 33-54697 and National Equity Trust, S&P 500 Strategy Trust
Series 2, Registration No. 333-39521.
</TABLE>
<PAGE>
================================================================================
NATIONAL EQUITY TRUST
for all series formed on or subsequent to the effective date specified
below to which this Trust Indenture and Agreement is applicable
--------------------
TRUST INDENTURE AND AGREEMENT
Among
PRUDENTIAL SECURITIES INCORPORATED
As Depositor
BANK OF NEW YORK
As Trustee
--------------------
Dated: February 2, 2000
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
Section 1.01. Definitions..........................................5
ARTICLE II
DEPOSIT OF SECURITIES; ACCEPTANCE OF TRUST
Section 2.01. Deposit of Securities................................8
Section 2.02. Acceptance of Trust..................................9
Section 2.03. Issue of Units.......................................9
Section 2.04. Uncertificated Units................................10
Section 2.05. Deposit of Additional Securities....................10
Section 2.06. Register of Units...................................12
ARTICLE III
ADMINISTRATION OF TRUST
Section 3.01. Initial Cost........................................12
Section 3.02. Income Account......................................13
Section 3.03. Principal Account...................................14
Section 3.04. Reserve Account.....................................14
Section 3.05. Distribution........................................14
Section 3.06. Distribution Statements.............................17
Section 3.07. Replacement Securities..............................19
Section 3.08. Sale of Securities..................................20
Section 3.09. Notice and Sale by Trustee..........................21
Section 3.10. Refunding Securities................................21
Section 3.11. Notice of Actions...................................22
Section 3.12. Extraordinary Distributions.........................22
Section 3.13. Extraordinary Event - Security Retention and Voting.23
Section 3.14. Deferred Sales Charge...............................23
ARTICLE IV
EVALUATION OF SECURITIES
Section 4.01. Evaluation of Securities............................24
Section 4.02. Tax Reports.........................................25
-i-
<PAGE>
Page
----
Section 4.03. Liability of the Trustee............................25
ARTICLE V
TRUST EVALUATION, REDEMPTION,
TRANSFER OF UNITS
Section 5.01. Trust Evaluation....................................25
Section 5.02. Redemptions by Trustee; Purchases by Depositor......26
Section 5.03. Redemption Upon Termination.........................29
Section 5.04. Transfer of Units...................................30
ARTICLE VI
TRUSTEE
Section 6.01. General Definition of Trustee's Liabilities, Rights
and Duties..........................................31
Section 6.02. Books, Records and Reports..........................35
Section 6.03. Indenture and List of Securities on File............36
Section 6.04. Compensation of Trustee.............................36
Section 6.05. Removal and Resignation of Trustee; Successor.......37
Section 6.06. Qualification of Trustee............................39
Section 6.07. Trustee's Response to Inquiries.....................39
Section 6.08. Waiver of Liens.....................................40
ARTICLE VII
RIGHTS OF UNIT HOLDERS
Section 7.01. Beneficiaries of Trust..............................40
Section 7.02. Rights, Terms and Conditions........................40
ARTICLE VIII
DEPOSITOR
Section 8.01. Liabilities; Power of Attorney......................41
Section 8.02. Discharge...........................................42
Section 8.03. Successors..........................................43
Section 8.04. Resignation.........................................43
Section 8.05. Additional Depositors...............................44
Section 8.06. Exclusions from Liability...........................44
Section 8.07. Compensation........................................45
-ii-
<PAGE>
Page
----
ARTICLE IX
ADDITIONAL COVENANTS; MISCELLANEOUS PROVISIONS
Section 9.01. Amendments without the Consent of Unit Holders......45
Section 9.02. Notice of Amendment.................................46
Section 9.03. Termination.........................................46
Section 9.04. Construction........................................48
Section 9.05. Written Notice......................................48
Section 9.06. Severability........................................49
Section 9.07. Dissolution of Depositor Not To Terminate...........49
Section 9.08. Name................................................49
EXECUTION...................................................................
ACKNOWLEDGMENTS.............................................................
--------------------
This Table of Contents does not constitute part of the Indenture.
-iii-
<PAGE>
TRUST INDENTURE AND AGREEMENT dated February 2, 2000, between
PRUDENTIAL SECURITIES INCORPORATED, as Depositor, and THE BANK OF NEW YORK, as
Trustee.
WITNESSETH that:
WHEREAS, the Depositor and the Trustee are entering into this Trust
Indenture and Agreement for the purpose of establishing certain of the terms,
covenants and conditions of the National Equity Trust series and each subsequent
Series which may be established from time to time hereafter, incorporating by
reference the terms hereof; and
WHEREAS, for the National Equity Trust, and each Series of the
National Equity Trust, to which this Trust Indenture and Agreement is
applicable, the Depositor and the Trustee shall execute a separate Reference
Trust Agreement incorporating by reference this Trust Indenture and Agreement
and effecting any amendment, supplement or variation from or to such
incorporation by reference with respect to the related series, and specifying
for that series: (i) the Securities deposited in trust and the number of Units
delivered by the Trustee in exchange for the Securities pursuant to Section
2.03; (ii) the initial fractional undivided interest represented by each Unit in
each Trust; (iii) the first Settlement Date; (iv) the first Computation Day; (v)
the first and subsequent Distribution Date(s); (vi) the first and subsequent
Record Date(s); (vii) the name of the Depositor; (viii) the Termination Date and
(ix) any other change or addition contemplated or permitted by this Trust
Indenture and Agreement; and
WHEREAS, the Depositor will acquire and, concurrently with the
execution and delivery of the appropriate Reference Trust Agreement, will
deposit in trust with the Trustee the Securities to be listed in the Schedule
thereto, all to be held by the Trustee in trust upon the terms and conditions
hereinafter set forth as amended, supplemented or varied by such Reference Trust
Agreement, for the use and benefit of all registered holders of units of
fractional undivided interest in the Trust to which such Reference Trust
Agreement relates; and
WHEREAS, concurrently with the receipt of the aforesaid deposit, the
Trustee will record on its books the ownership by the Depositor thereof of units
of fractional undivided interest in such Securities and in the Income Account
and the Principal Account maintained under this Indenture in the manner
hereinafter provided (which units of fractional undivided interest so recorded
respectively will represent in the aggregate
<PAGE>
- 5 -
100% of the beneficial interest established hereby in such Securities, Income
Account and Principal Account) and if the Sponsor so directs, will execute in
the name of the Depositor thereof a certificate or certificates representing the
aggregate number of Units specified in such Reference Trust Agreement and
deliver same to such Depositor.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, the Depositor and the Trustee agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions: Whenever used in this Indenture, the
following words and phrases, unless the context clearly indicates otherwise,
shall have the following meanings:
(1) "Additional Securities" shall mean such Securities (as defined
herein) as are listed in Supplementary Schedules of the Reference Trust
Agreement and which have been deposited to effect an increase over the
number of Units initially specified in Part II of the Reference Trust
Agreement.
(2) "Additional Units" shall mean such Units (as defined herein) as
are issued in respect of Additional Securities.
(3) "Basic Agreement" shall mean this Trust Indenture and Agreement
dated as indicated on the cover page hereof as originally executed, or if
amended as hereinafter provided, as so amended, exclusive of the terms
contained in any related Reference Trust Agreement.
(4) "Business Day" shall mean any day other than a Saturday or
Sunday or other day on which the New York Stock Exchange is closed for
trading, a legal holiday in the City of New York, or a day on which
banking institutions are authorized by law to close.
(5) "Computation Day" shall have the meaning assigned to it in Part
II of the Reference Trust Agreement.
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(6) "Contract Securities" shall mean Securities which are to be
acquired by the Trust pursuant to contracts, including (i) Securities
listed in the Schedule to the Reference Trust Agreement and (ii)
Securities which the Depositor has contracted to purchase for the Trust
pursuant to Sections 2.05 and 3.07.
(7) "Deferred Sales Charge' shall mean any deferred sales charge
payable in accordance with the provisions of Section 3.14 hereof, as set
forth in the prospectus for a Trust.
(8) "Depositor" of the Trust shall have the meaning assigned to it
in Part II of the Reference Trust Agreement.
(9) "Distribution Agency Agreement" shall mean the Distribution
Agency Agreement dated the date of this Indenture among the Trustee, the
Depositor and the Distribution Agent.
(10) "Distribution Agent" shall mean the Distribution Agent
appointed in the Distribution Agency Agreement, or its successor as
appointed pursuant to the Distribution Agency Agreement.
(11) "Distribution Date" shall have the meaning assigned to it in
Part II of the Reference Trust Agreement.
(12) "Evaluation Time" shall mean the close of trading on the New
York Stock Exchange, presently 4:00 p.m. or such other time as is
designated as the Evaluation Time in the prospectus for a Trust.
(13) "Indenture" shall mean the Basic Agreement, as further amended,
supplemented or varied by the Reference Trust Agreement.
(14) "Prospectus" shall mean the prospectus relating to a Trust in
the form first used to confirm sales of Units of such Trust.
(15) "Record Date" shall have the meaning assigned to it in Part II
of the Reference Trust Agreement.
(16) "Reference Trust Agreement" shall mean a supplement to the
Basic Agreement, the purpose of which shall be to amend, supplement and/or
vary certain of the terms con-
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tained in the Basic Agreement. The Reference Trust Agreement, together
with the Basic Agreement to the extent that such Reference Trust Agreement
incorporates it by reference, defines all the terms, rights and duties
relevant to the series of National Equity Trust series, to which such
Reference Trust Agreement relates.
(17) "Replacement Security" shall mean a Security purchased by the
Trustee pursuant to Section 3.07 hereof.
(18) "Securities" shall mean such common stock and other securities
(including for all purposes hereof "when-issued" and/or "regular way"
contracts, if any, for the purchase thereof evidenced by the purchasing
broker's confirmation of, or list of its confirmations of, such contracts
and a certified check or checks and/or an irrevocable letter or letters of
credit in the amount required for such purchase) as are (i) deposited in
irrevocable trust and listed in the Schedule or Supplementary Schedules to
the Reference Trust Agreement and (ii) received in exchange or
substitution for any Securities pursuant to Section 3.07 hereof or
pursuant to Section 3.13 hereof or acquired pursuant to Section 2.05
hereof, as may from time to time be acquired and continue to be held as a
part of the Trust to which such Reference Trust Agreement relates.
(19) "Special Security" shall have the meaning assigned to it in
Section 3.07 hereof.
(20) "Termination Date" shall mean the date set forth in Part II of
the Reference Trust Agreement.
(21) "Trust" shall mean the trust created by this Indenture in
conjunction with a Reference Trust Agreement, which shall be denominated
as indicated in Part II of the Reference Trust Agreement relating to such
Trust, and which shall consist of the Securities held pursuant and subject
to this Indenture together with all dividends thereon, received but
undistributed, any undistributed cash realized from the sale, redemption
or liquidation thereof, such amounts as may be on deposit in the Reserve
Account hereinafter established and all other property and rights to which
Unit Holders may be entitled under the provisions of this Indenture.
(22) "Trustee" shall mean The Bank of New York, or any successor
trustee as hereinafter provided.
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(23) "Unit" shall mean the fractional undivided interest in and
ownership for the Trust which shall be initially equal to the fraction
specified for the Trust in Part II of the Reference Trust Agreement, the
denominator of which fraction shall be decreased by the number of any such
Units redeemed as provided in Sections 5.02 and 5.03 and increased by the
number of any Additional Units as provided in Section 2.06 or revised as
provided in Section 2.03.
(24) "Unit Holder" shall mean the registered holder of any Unit as
recorded on the registration books of the Trustee, his legal
representatives and heirs and the successors of any corporation,
partnership or other legal entity which is a registered holder of any Unit
and as such shall be deemed a beneficiary of the Trust created by this
Indenture to the extent of his pro rata share thereof.
(25) The words "herein," "hereby," "herewith," "hereof,"
"hereinafter," "hereunder," "hereinabove," "hereafter," "heretofore" and
similar words or phrases of reference and association shall refer to this
Indenture in its entirety.
(26) Words importing the singular number shall include the plural
number in each case and vice versa and words importing persons shall
include corporations and associations, as well as natural persons.
ARTICLE II
DEPOSIT OF SECURITIES; ACCEPTANCE OF TRUST
Section 2.01. Deposit of Securities: The Depositor, concurrently
with the execution and delivery of the applicable Reference Trust Agreement, has
deposited with the Trustee in trust the Securities listed in the Schedule or
Schedules attached to the Reference Trust Agreement in bearer form or duly
endorsed in blank or accompanied by all necessary instruments of assignment and
transfer in proper form to be held, administered and applied by the Trustee as
herein provided and/or cash (or a letter of credit in lieu of cash) with written
instructions to the Trustee to purchase one or more of such Securities which
cash (or cash in an amount equal to the face amount of the letter of credit), to
the extent not used by the Trustee to purchase such Securities within the 90-day
period following the
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first deposit of Securities in the Trust, shall be distributed to Unit Holders
on the Distribution Date next following such 90-day period or such earlier date
as the Depositor and the Trustee determine. In the event that the purchase of
Securities represented by "when-issued" and/or "regular way" contracts shall not
be consummated in accordance with said contracts, the Trustee shall credit to
the Principal Account pursuant to Section 3.03 hereof the cash or cash
equivalents (including such portion of any letter of credit applicable to such
contracts) deposited by the Depositor for the purpose of such purchase. Such
monies, unless invested in substitute Securities in accordance with Section 3.07
hereof, shall be distributed to Unit Holders pursuant to Section 3.05 hereof on
the second Distribution Date following the failure of consummation of such
purchase or such earlier date as the Depositor and the Trustee determine. The
Depositor shall deliver the Securities listed on said Schedule or Schedules to
the Trustee which were not actually delivered concurrently with the execution
and delivery of the Reference Trust Agreement within 90 days after said
execution and delivery or, if Section 3.07 applies, within such shorter period
as is specified in Section 3.07.
The Trustee is irrevocably authorized hereby to effect registration
of transfer of the Securities in fully registered form in the name of the
Trustee or its nominee.
Section 2.02. Acceptance of Trust: The Trustee hereby accepts the
Trust created by this Indenture for the use and benefit of the Unit Holders in
the Trust, subject to the terms and conditions of this Indenture.
Section 2.03. Issue of Units: By executing the Reference Trust
Agreement and receipt for deposited property, the Trustee will thereby
acknowledge receipt of the deposit relating to the Trust to which such Reference
Trust Agreement relates, referred to in Section 2.01, and simultaneously with
the receipt of said deposit, will record on its books for the account of the
Depositor the aggregate number of Units of the Trust in exchange therefor as
specified in Part II of the Reference Trust Agreement. The number of Units may
be increased through a split of the Units or decreased through a reverse split
thereof, as directed by the Depositor, which revised number of Units shall be
recorded by the Trustee on its books.
The Trusts created by this Indenture are separate and distinct
trusts for all purposes and the assets of one such trust may not be commingled
with the assets of any other, nor shall the expenses of any such trust be
charged against the
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other. The Units representing the ownership of a fractional undivided interest
in one Trust shall not be exchangeable for Units representing the ownership of
an undivided fractional interest in any other except as set forth in the
applicable Prospectus.
Section 2.04. Uncertificated Units: All Units shall be held in
uncertificated form, unless and as the Trustee may deem it appropriate to issue
certificates or if so directed by the Depositor. The Trustee may deem and treat
the person in whose name any Unit is registered upon the books of the Trustee as
the owner thereof for all purposes and the Trustee shall not be affected by any
notice to the contrary.
Section 2.05. Deposit of Additional Securities: From time to time
and in the discretion of the Depositor, the Depositor may make deposits of
Additional Securities duly endorsed in blank or accompanied by all necessary
instruments of assignment and transfer in proper form (or contracts to purchase
Additional Securities and cash or an irrevocable letter of credit in an amount
necessary to consummate the purchase of any Additional Securities pursuant to
such contracts ("Additional Contract Securities")) and/or cash (or a letter of
credit in lieu of cash) with instructions to the Trustee to purchase one or more
Additional Securities (which cash (or cash in an amount equal to the face amount
of the letter of credit), to the extent not used by the Trustee to purchase such
Additional Securities within the 90-day period following the first deposit of
Securities in the Trust, shall be distributed to Unit Holders on the
Distribution Date next following such 90-day period or such earlier date as the
Depositor and the Trustee determine) and Cash (as defined below), if Cash is an
asset of the Trust immediately prior to the supplemental deposit, provided that
each deposit during the 90-day period following the first deposit of Securities
in the Trust shall replicate, to the extent practicable as hereinafter provided,
the Securities (including Contract Securities) and shall exactly replicate Cash
(other than Cash to be distributed solely to persons other than persons
receiving the distribution as holders of Additional Units created by the
deposit) held in the Trust immediately prior to each such deposit; and, provided
further that each deposit of Additional Securities and Cash, if any, subsequent
to such 90-day period shall exactly replicate the Securities (including Contract
Securities) and Cash (other than Cash to be distributed solely to persons other
than persons receiving the distribution as holders of additional Units created
by the deposit) held in the Trust immediately prior to each such deposit. For
purposes of this paragraph, Cash means cash on
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hand in the Trust and/or cash receivable by the Trust as of the date of the
supplemental deposit reduced by payables and accrued expenses.
Accordingly, (a) for a deposit subsequent to the 90-day period
following the first deposit of Securities:
1. Any Additional Securities included in a deposit shall be
identical to Securities held in the Trust immediately prior to the deposit and
in amounts such that (i) the number of shares of Additional Securities of a
particular issue included in a deposit divided by (ii) the aggregate of the
number of shares of all Additional Securities included in the deposit results in
a fraction which is the same as the fraction resulting from division of (iii)
the aggregate number of shares of the Securities of the same issue held in the
Trust immediately prior to the deposit divided by (iv) the aggregate number of
shares of all Securities held in the Trust immediately prior to the deposit;
2. Any deposit of Additional Securities shall be accompanied by Cash
in an amount bearing the same ratio to the aggregate number of shares of all
Additional Securities in the deposit as the Cash held in the Trust immediately
prior to the deposit bears to the aggregate number of shares of all Securities
held in the Trust immediately prior to the deposit, exclusive of Cash held in
the Trust and designated for distribution solely to persons other than persons
receiving the distribution as holders of Additional Units created by the
deposit; and (b) for a deposit during the 90-day period following the first
deposit of Securities in the Trust, the rules stated in subparagraphs (a)(1) and
(a)(2) of this Section shall apply except that any Additional Securities
(including Additional Contract Securities) need be only substantially similar
(rather than identical to) Securities held in the Trust immediately prior to the
deposit and need meet the proportionality requirements only to the extent
practicable. Without limiting the generality of the phrase "to the extent
practicable", if the Depositor specifies a minimum number of shares of a
Security with respect to a particular trust to be included in a deposit and such
minimum requirement cannot be met or if a Security identical to a Security held
in the Trust is not readily obtainable, substitution of other substantially
similar Securities (including Securities of an issue originally deposited) in
order to meet the foregoing proportionality requirements shall be considered as
a meeting of such requirements "to the extent practicable". Each deposit of
Additional Securities shall be listed in a Supplementary Schedule to the
Reference Trust Agreement stating the date
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of such deposit and the number of Additional Units being issued therefor. The
Trustee shall acknowledge in such Supplementary Schedule receipt of the deposit,
and simultaneously with the receipt of said deposit, reflect the aggregate
number of Additional Units specified in such Supplementary Schedule by recording
such Additional Units on its books. Such Additional Securities shall be held,
administered and applied by the Trustee in the same manner as herein provided
for the Securities. The execution by the Depositor in connection with the
deposit of Additional Securities of a Supplementary Schedule to the Reference
Trust Agreement shall constitute the approval by the Depositor as satisfactory
in form and substance of the contracts to be entered into or assumed by the
Trustee with regard to any Additional Securities listed on such Supplementary
Schedule and authorization to the Trustee on behalf of the Trust to enter into
or assume such contracts and otherwise to carry out the terms and provisions
thereof or to take other appropriate action in order to complete the deposit of
the Additional Securities covered thereby into the Trust. The parties hereto
agree that a Supplementary Schedule to the Reference Trust Agreement may be
delivered by telecopier and that such delivery shall have the same force and
effect as the delivery of an original executed document.
Section 2.06. Register of Units: A register shall be kept by the
Trustee containing the names and addresses of the Unit Holders and the number of
Units owned by each Unit Holder, and in which all issues, exchanges, transfers
and cancellations of Units shall be recorded.
ARTICLE III
ADMINISTRATION OF TRUST
Section 3.01. Initial Cost: The costs of organizing the Trust and
sale of the Trust Units shall, to the extent of the expenses reimbursable to the
Depositor provided below, be borne by the Unit Holders, provided, however, that,
to the extent all of such costs are not borne by Unit Holders, the amount of
such costs not borne by Unit Holders shall be borne by the Depositor and,
provided further, however, that the liability on the part of the Depositor under
this section shall not include any fees or other expenses incurred in connection
with the administration of the Trust subsequent to the deposit referred to in
Section 2.01. Upon notification from the Depositor that the primary offering
period is concluded, the Trustee
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shall withdraw from the Account or Accounts specified in the Prospectus or, if
no Account is therein specified, from the Principal Account, and pay to the
Depositor the Depositor's reimbursable expenses of organizing the Trust and sale
of the Trust Units in an amount certified to the Trustee by the Depositor. If
the balance of the Principal Account is insufficient to make such withdrawal,
the Trustee shall, as directed by the Depositor, sell Securities identified by
the Depositor, or distribute to the Depositor Securities having a value, as
determined under Section 4.01 as of the date of distribution, sufficient for
such reimbursement. The reimbursement provided for in this section shall be for
the account of the Unitholders of record at the conclusion of the primary
offering period and shall not be reflected in the computation of the Unit Value
prior thereto. As used herein, the Depositor's reimbursable expenses of
organizing the Trust and sale of the Trust Units shall include the cost of the
initial preparation and typesetting of the registration statement, prospectuses
(including preliminary prospectuses), the indenture, and other documents
relating to the Trust, SEC and state blue sky registration fees, the cost of the
initial valuation of the portfolio and audit of the Trust, the initial fees and
expenses of the Trustee, and legal and other out-of-pocket expenses related
thereto, but not including the expenses incurred in the printing of preliminary
prospectuses and prospectuses, expenses incurred in the preparation and printing
of brochures and other advertising materials and any other selling expenses. Any
cash which the Depositor has identified as to be used for reimbursement of
expenses pursuant to this Section shall be reserved by the Trustee for such
purpose and shall not be subject to distribution or, unless the Depositor
otherwise directs, used for payment of redemptions in excess of the per-Unit
amount allocable to Units tendered for redemption. As directed by the Depositor,
the Trustee will advance funds to the Trust in an amount necessary to reimburse
the Depositor pursuant to this Section and shall recover such advance from the
sale or sales of Securities at such time as the Depositor shall direct, but in
no event later than the termination of the Trust. Repayment of any such advance
shall be secured by a lien on the assets of the Trust prior to the interest of
the Unit Holders as provided in Section 6.04.
Section 3.02. Income Account: The Trustee shall collect the
dividends or other like cash distributions on the Securities in the Trust as
such are paid, and credit such amounts, as collected, to a separate account to
be known as the "Income Account."
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Section 3.03. Principal Account: The Securities in the Trust and all
cash, other than amounts credited to the Income Account, received by the Trustee
in respect of the Securities in the Trust shall be credited to a separate
account for the Trust to be known as the "Principal Account."
Section 3.04. Reserve Account: From time to time the Trustee shall
withdraw from the cash on deposit in the Principal Account such amounts as it,
in its sole discretion, shall deem requisite to establish a reserve for any
applicable taxes or other governmental charges that may be payable out of the
Trust. Such amounts so withdrawn shall be credited to a separate account which
shall be known as the "Reserve Account." The Trustee shall not be required to
distribute to the Unit Holders any of the amounts in the Reserve Account;
provided, however, that if the Trustee shall, in its sole discretion, determine
that such amounts are no longer necessary for payment of any applicable taxes or
other governmental charges, then it shall promptly deposit such amounts in the
account from which previously withdrawn, or, if such Trust has been terminated
or is in the process of termination, the Trustee shall distribute to each Unit
Holder such holder's interest in the Reserve Account in accordance with Section
9.04 hereof.
Section 3.05. Distribution: As of each Computation Day or Record Day
for the Trust, the Trustee shall:
(a) deduct from the Income Account, or, to the extent funds are not
available in such Account, from the Principal Account, and pay to itself
individually the amounts that it is at the time entitled to receive
pursuant to Section 6.04 or this Section 3.05;
(b) deduct from the Income Account, or, to the extent funds are not
available in such Account, from the Principal Account, an amount equal to
the unpaid fees and expenses, if any, including registration charges, Blue
Sky fees, printing costs, attorneys' fees, auditing costs and other
miscellaneous out-of-pocket expenses, as certified by the Depositor,
incurred in keeping the registration of the Units and the Trust on a
current basis, provided, however, that no portion of such amount shall be
deducted or paid unless the payment thereof from the Trust is at that time
lawful; and
(c) deduct from the Income Account or, to the extent funds are not
available in such account, from the Principal Account the estimated amount
that the Depositor is en-
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titled to receive pursuant to Section 8.07 and hold such amount without
interest until such time as it is payable to the Depositor as set forth
below. The Trustee shall distribute to the Depositor from the amount so
held pursuant to the immediately preceding sentence the amounts that the
Depositor is entitled to receive pursuant to Section 8.07 on account of
its services theretofore performed and expenses theretofore incurred. With
respect to Trusts having monthly, quarterly or semiannual Distribution
Dates, the Trustee shall deduct from the Income Account one-twelfth,
one-quarter or one-half, as the case may be, of the estimated annual
amount that the Depositor is entitled to receive and shall distribute such
amounts to the Depositor on the monthly, quarterly or semiannual
Distribution Dates, as the case may be. In the event of the appointment of
a successor depositor pursuant to Section 6.01(f)(1), the Trustee shall
deduct from the Income Account, or, to the extent that funds are not
available in such Account, from the Principal Account, and pay to such
successor depositor the amounts, if any, that it is at the time lawful for
it to receive under said Section 6.01(f)(1).
All amounts (i) permitted to be withdrawn from the Principal Account
under this Indenture in order to satisfy obligations which, pursuant to the
terms hereof, are first to be paid out of the Income Account to the extent funds
are available, or (ii) permitted to be withdrawn from the Principal Account
pursuant to Section 5.02 hereof, may be made only from the balance in the
Principal Account after excluding capital amounts being held for distribution to
Unit Holders of record on the Record Date for a prior Distribution Date pursuant
to the second following paragraph. The Principal Account shall be reimbursed for
any such amounts described in clause (i) of the preceding sentence when
sufficient funds are next available in the Income Account after giving effect to
the payment from the Income Account of all amounts otherwise required to be
deducted therefrom at that time.
On each Distribution Date or within a reasonable period of time
thereafter, the Trustee shall distribute by mail to each Unit Holder of record
at the close of business on the preceding Record Date at his address appearing
on the registration books of the Trustee such holder's pro rata share of the
balance of the Income Account, plus such holder's pro rata share of the
distributable cash balance of the Principal Account, each computed as of the
preceding Record Date after deduction of all amounts specified in paragraphs
(a), (b) and (c)
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of this Section 3.05; provided, however, that funds credited to the Principal
Account in the event of the failure of consummation of a contract to purchase
Securities pursuant to Section 2.01 hereof, funds representing the proceeds of
the sale of Securities pursuant to Section 3.08 hereof, and funds representing
the proceeds of the sale of Securities under Section 5.02, 5.03, 6.04 or this
Section 3.05 in excess of the amounts needed for the purposes of said Sections
shall not be distributed until the second following Distribution Date or at such
earlier date as shall be determined by the Trustee or directed by the Depositor.
The Trustee shall make a special distribution of the cash balance in the Income
and Principal accounts available for such distribution to Unit Holders of record
on such dates as the Depositor shall direct. The Trustee shall not be required
to make a distribution from the Principal Account unless the cash balance on
deposit therein available for distribution shall be sufficient to distribute at
least $1.00 per 1,000 Units.
The amounts to be so distributed to each Unit Holder of the Trust of
record as of each Record Date shall be that pro rata share of the cash balance
as of such Record Date of the Income and Principal Accounts of the Trust, as
shall be represented by a notation on the registration or other record books of
the Trustee.
In the computation of each such share, fractions of less than one
cent shall be omitted. After any such distribution provided for above, any cash
balance remaining in the Income Account or the Principal Account shall be held
in the same manner as other amounts subsequently deposited in each of such
Accounts, respectively.
The Depositor may direct the Trustee to invest the proceeds of any
sale of Securities not required for the redemption of Units in eligible money
market instruments selected by the Depositor which will include only negotiable
certificates of deposit or time deposits of domestic banks which are members of
the Federal Deposit Insurance Corporation and which have, together with their
branches or subsidiaries, more than $2 billion in total assets, except that
certificates of deposit or time deposits of smaller domestic banks may be held
provided the deposit does not exceed the insurance coverage on the instrument
(which currently is $100,000), and provided further that the Trust's aggregate
holding of certificates of deposit or time deposits issued by the Trustee may
not exceed the insurance coverage of such obligations and U.S. Treasury notes or
bills (which shall be held until the maturity thereof) each of
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which matures prior to the earlier of the next following Distribution Date or 90
days after receipt, the principal thereof and interest thereon (to the extent
such interest is not used to pay Trust expenses) to be distributed on the
earlier of the 90th day after receipt or the next following Distribution Date.
For the purposes of distribution as herein provided, the holders of
record on the registration books of the Trustee at the close of business on each
Record Date shall be conclusively entitled to such distribution, and no
liability shall attach to the Trustee by reason of payment to any such
registered Unit Holder of record. Nothing herein shall be construed to prevent
the payment of amounts from the Income Account and the Principal Account to
individual Unit Holders by means of one check, draft or other proper instrument,
provided that the appropriate statement of such distribution shall be furnished
therein as provided in Section 3.06 hereof.
On each Deferred Sales Charge payment date set forth in the
prospectus for a Trust, the Trustee shall pay the account created pursuant to
Section 3.14 the amount of the Deferred Sales Charge payable on each such date
as stated in the prospectus for a Trust. Such amount shall be withdrawn from the
Principal Account from the amounts therein designated for such purpose or
otherwise deducted from such account.
Section 3.06. Distribution Statements: With each distribution from
the Income or Principal Accounts of the Trust, the Trustee shall furnish Unit
Holders a statement of the amount being distributed from each such account,
expressed in each case as a dollar amount per Unit.
Within a reasonable period of time after the last Business Day of
each calendar year or fiscal year, the Trustee shall furnish to each person who
at any time during such calendar year or fiscal year was a Unit Holder a
statement setting forth, with respect to such calendar year or fiscal year:
(A) as to the Income Account of the Trust:
(1) the amount of dividends received on the Securities,
(2) the amounts paid from the Income Account for redemptions
pursuant to Section 5.02,
(3) the deductions from the Income Account for payment of
applicable taxes or other governmental
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charges, if any, compensation of the Depositor, fees and expenses of
the Trustee, transfers to the Reserve Account, any expenses paid by
the Trust pursuant to Section 3.05 hereof and any Deferred Sales
Charge paid,
(4) the amount distributed from the Income Account,
identifying separately amounts distributed as dividends and as other
income,
(5) any other amount credited to or deducted from the Income
Account, and
(6) the balance remaining after such distributions and
deductions, expressed both as a total dollar amount and as a dollar
amount per Unit outstanding on the last Business Day of such
calendar or fiscal year;
(B) as to the Principal Account of the Trust:
(1) the dates of the sale, liquidation or redemption of any of
the Securities, the identity of such Securities and the net proceeds
received therefrom, excluding any portion thereof credited to the
Income Account,
(2) the amount paid from the Principal Account for redemption
pursuant to Section 5.02,
(3) the deductions for payment of applicable taxes and other
governmental charges, if any, fees and expenses of the Trustee,
transfers to the Reserve Account, any expenses paid by the Trust
under Section 3.05 hereof and any Deferred Sales Charge paid,
(4) the amount distributed from the Principal Account for such
period, pursuant to Section 3.05 hereof,
(5) any other amount credited to or deducted from the
Principal Account, and
(6) the balance remaining after such distributions and
deductions, expressed both as a total dollar amount and as a dollar
amount per Unit outstanding on the last Business Day of such
calendar or fiscal year; and
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(C) the following information:
(1) a list of the Securities held in the Trust as of the last
Business Day of such calendar or fiscal year,
(2) the number of Units outstanding on the last Business Day
of such calendar or fiscal year,
(3) the Unit Value (as defined in Section 5.01) based on the
last evaluation of such Trust made during such calendar or fiscal
year, and
(4) the amounts actually distributed during such calendar or
fiscal year from the Income and Principal Accounts of the Trust,
separately stated, expressed both as total dollar amounts and as
dollar amounts per Unit outstanding on the Record Date for such
distributions.
Section 3.07. Replacement Securities: In the event that any Contract
Security is not delivered due to any occurrence, act or event beyond the control
of the Depositor and of the Trustee (such a Contract Security being herein
called a 'Special Security'), the Depositor may instruct the Trustee to purchase
Replacement Securities which have been selected by the Depositor having a cost
not in excess of the cost of the Special Securities not so delivered. To be
eligible for inclusion in the Trust, the Replacement Securities which the
Depositor selects must: (i) be of the same type as that replaced (e.g., both
will be common stock or preferred stock); (ii) in the Depositor's judgment,
closely resemble the Special Security as respects the investment characteristics
which led the Depositor to select the Special Security for inclusion in the
Trust; and (iii) be purchased within twenty days after delivery of notice of the
failed contract to the Trustee or to the Depositor, whichever occurs first. Any
Replacement Securities received by the Trustee shall be deposited hereunder and
shall be subject to the terms and conditions of this Indenture to the same
extent as other Securities deposited hereunder. No such deposit of Replacement
Securities shall be made after the earlier of (i) 90 days after the date of
execution and delivery of the applicable Reference Trust Agreement or (ii) the
first Distribution Date to occur after the date of execution and delivery of the
applicable Reference Trust Agreement.
Whenever a Replacement Security is acquired by the Depositor
pursuant to the provisions of this Section 3.07, the
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Trustee shall, within five days thereafter, mail to all Unit Holders notices of
such acquisition, including an identification of the Special Security and the
Replacement Security acquired. The purchase price of a Replacement Security
shall be paid out of the funds in the principal account attributable to the
Special Security which it replaces. The Trustee shall not be liable or
responsible in any way for depreciation or loss incurred by reason of any
purchase made pursuant to any such instructions from the Depositor and in the
absence of such instructions the Trustee shall have no duty to purchase any
Replacement Securities under this Indenture. The Depositor shall not be liable
for any failure to instruct the Trustee to purchase any Replacement Security or
for errors of judgment in selecting any Replacement Security.
Section 3.08. Sale of Securities: In order to maintain the sound
investment character of the Trust, the Depositor may direct the Trustee to sell
or liquidate Securities at such price and time and in such manner as shall be
determined by the Depositor, provided that the Depositor has determined that any
one or more of the following conditions exist:
(a) that there has been a failure by the issuer of such Securities
to declare or pay an anticipated dividend thereon;
(b) that any action or proceeding has been instituted in law or
equity seeking to restrain or enjoin the payment of dividends on any such
Securities, or that there exists any other legal question or impediment
affecting such Securities or the payment of dividends on the same;
(c) that there has occurred any breach of covenant or warranty in
any resolution, ordinance, trust, indenture or other agreement or
document, which would adversely affect either immediately or contingently
the payment of dividends on such Securities;
(d) that the price of any such Securities has declined to such an
extent, or such other market or credit factor exists, that in the opinion
of the Depositor the retention of such Securities would be detrimental to
the Trust and to the interest of the Unit Holders;
(e) that there has been a default in the payment of principal or par
or stated value of, premium, if any, or income on any other outstanding
securities of the issuer or the guarantor of such securities which might
materially
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and adversely, either immediately or contingently, affect the declaration
or payment of dividends on the Securities; and
(f) that the tax treatment of the Trust as a grantor trust would
otherwise be jeopardized.
In order to pay the Deferred Sales Charge, the Trustee shall sell or
liquidate such an amount of Securities and at such time and from time to time
and in such manner as the Depositor shall direct such that the proceeds of such
sale or liquidation shall be sufficient to pay the amount required to be paid to
the Depositor pursuant to the Deferred Sales Charge program as set forth in the
prospectus for a Trust.
Upon receipt of such direction from the Depositor, upon which the
Trustee shall rely, the Trustee shall proceed to sell the specified Securities
in accordance with such direction. The Trustee shall not be liable or
responsible in any way for depreciation or loss incurred by reason of any sale
made pursuant to any such direction or by reason of the failure of the Depositor
to give any such direction, and in the absence of such direction the Trustee
shall have no duty to sell any Securities under this Section 3.08. The Depositor
shall not be liable for errors of judgment in directing or failing to direct the
Trustee pursuant to this Section 3.08.
Section 3.09. Notice and Sale by Trustee: If at any time there has
been a failure by the issuer of any of the Securities to pay a dividend that is
due and payable, the Trustee shall notify the Depositor thereof. If within
thirty days after such notification the Trustee has not received any instruction
from the Depositor to sell or to hold or to take any other action in connection
with such Security, the Trustee shall sell such Security forthwith, and the
Trustee shall not be liable or responsible in any way for depreciation or loss
incurred by reason of such sale or by reason of any action or inaction in
accordance with such written instructions of the Depositor. The Trustee shall
promptly notify the Depositor of such action in writing and shall set forth
therein the Security sold and the proceeds received therefrom.
Section 3.10. Refunding Securities: Except as otherwise provided in
Section 3.13, in the event that an offer by the issuer of any of the Securities
or any other party shall be made to issue new Securities, the Trustee shall
reject such offer. However, should any exchange or substitution be effected
notwithstanding such rejection or without an initial offer, any
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Securities, cash and/or property received in exchange shall be deposited
hereunder and shall be promptly sold, if securities or property, by the Trustee.
The cash then remaining shall be distributed to Unit Holders on the next
Distribution Date in the manner set forth in Section 3.05 regarding
distributions from the Principal Account.
Section 3.11. Notice of Actions: Except as otherwise provided in
Section 3.13, in the event that the Trustee shall have been notified at any time
of any action to be taken or proposed to be taken by holders of any Securities
held by the Trust (including, but not limited to, the making of any demand,
direction, request, giving of any notice, consent or waiver or the voting with
respect to election of directors or any amendment or supplement to any corporate
resolution, agreement or other instrument under or pursuant to which such
Securities have been issued) the Trustee shall promptly notify the Depositor and
shall thereupon take such action or refrain from taking any action as the
Depositor shall in writing direct; provided, however, that if the Depositor
shall not within five business days of the giving of such notice to the
Depositor direct the Trustee to take or refrain from taking any action, the
Trustee shall take such action as it, in its sole discretion, shall deem
advisable. Neither the Depositor nor the Trustee shall be liable to any person
for any action or failure to take action with respect to this Section.
Section 3.12. Extraordinary Distributions: Except as otherwise
provided in Section 3.13, any property received by the Trustee after the initial
date of Deposit in a form other than cash or additional shares of the Securities
listed on Schedule A or of a Replacement Security, shall be either (i) dealt
with under the Distribution Agency Agreement as though such property were an
asset of the Trust other than cash remaining on hand at the termination of the
Trust or (ii) sold, and the proceeds of sale credited to the Principal Account
of the Trust, all as the Depositor may direct. In no event shall the Trustee
hold as part of the Trust, except temporarily pending sale or distribution as
described in the preceding sentence, any property other than cash (including a
letter of credit) and the Securities described on Schedule A or a Replacement
Security.
The Securities and cash represented by a Unit shall be uniform so
that each Unit shall at all times represent property identical to that
represented by every other Unit. Securities identical to those represented by a
Unit and received as the result of a stock dividend or stock split may be
retained
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in the Trust and the number of shares of such a Security represented by a Unit
adjusted accordingly. All other non-cash distributions in respect of any
Securities held in the Trust shall be sold or distributed to Unit Holders
through the Distribution Agent, as referred to above.
Section 3.13. Extraordinary Event - Security Retention and Voting.
In the event the Trustee is notified of any action to be taken or proposed to be
taken by holders of the securities held by the Trust in connection with any
proposed merger, reorganization, spin-off, split-off or split-up by the issuer
of stock or securities held in the Trust, the Trustee shall take such action or
refrain from taking any action, as appropriate, so as to insure that the
securities are voted as closely as possible in the same manner and in the same
general proportion as are the securities held by owners other than the Trust. If
stock or securities are received by the Trustee, with or without cash, as a
result of any merger, reorganization, spin-off, split-off or split-up by the
issuer of stock or securities held in the Trust, the Trustee at the direction of
the Depositor may retain such stock or securities in the Trust. Neither the
Depositor nor the Trustee shall be liable to any person for any action or
failure to take action with respect to this section.
Section 3.14. Deferred Sales Charge. If the Prospectus for a Trust
specifies a Deferred Sales Charge, the Trustee shall, on the dates specified in
and as permitted by the Prospectus, withdraw from the Income Account if such
account is designated in the Prospectus as the source of the payments of the
Deferred Sales Charge, or to the extent funds are not available in that account
or if such account is not so designated, from the Principal Account, an amount
per Unit specified in the Prospectus and credit such amount to a special,
non-Trust account maintained at the Trustee out of which the Deferred Sales
Charge will be distributed to the Depositor. If the Income Account is not
designated as the source of the Deferred Sales Charge payment or if the balances
in the Income and Principal Accounts are insufficient to make any such
withdrawal, the Trustee, shall, as directed by the Depositor, either advance
funds in an amount equal to the proposed withdrawal and be entitled to
reimbursement of such advance upon the deposit of additional monies in the
Income Account or the Principal Account, sell Securities and credit the proceeds
thereof to such special Depositor's account or credit Securities in kind to such
special Depositor's Account. Such directions shall identify the Securities, if
any, to be sold or distributed in kind and shall contain, if the Trustee is
directed
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by the Depositor to sell a Security, instructions as to execution of such sales.
If a Unit Holder redeems Units prior to full payment of the Deferred Sales
Charge, the Trustee shall, if so provided in the Prospectus, on the Redemption
Date, withhold from the Redemption Price payment to such Unit Holder an amount
equal to the unpaid portion of the Deferred Sales Charge as such amount is
certified by the Depositor to the Trustee prior to the Redemption Date, upon
which certification the Trustee shall be entitled to rely, and distribute such
amount to such special Depositor's account or, if the Depositor shall purchase
such Unit pursuant to the terms of Section 5.02 hereof, the Depositor shall pay
the Redemption Price for such Unit less the unpaid portion of the Deferred Sales
Charge. The Depositor may at any time instruct the Trustee to distribute to the
Depositor cash or Securities previously credited to the special Depositor's
account.
ARTICLE IV
EVALUATION OF SECURITIES
Section 4.01. Evaluation of Securities: The Trustee shall determine
separately and promptly furnish to the Depositor upon request the value of each
issue of the Securities in the Trust (determined as set forth below) as of the
Evaluation Time on each of the days on which the Trustee shall make the Trust
Evaluation required by Section 5.01. In making the evaluations the Trustee shall
determine the value of each issue of the Securities in the Trust by the
following methods: If the Securities are listed on one or more national
securities exchanges, such valuation shall be based on the closing price on such
exchange which is the principal market thereof, deemed to be the New York Stock
Exchange if the Securities are listed thereon (unless the Trustee deems such
price inappropriate as a basis for valuation). If the Securities are not so
listed, or, if so listed and the principal market therefor is other than such
exchange or there is no closing price on such exchange, such valuation shall be
based on the closing price in the over-the-counter market (unless the Trustee
deems such price inappropriate as a basis for valuation) or if there is no such
closing price, by any of the following methods which the Trustee deems
appropriate: (i) on the basis of current bid prices of such Securities as
obtained from investment dealers or brokers (including the Depositor) who
customarily deal in securities comparable to those held by the Trust, or (ii) if
bid prices are not available for any of such Securities, on the ba-
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sis of bid prices for comparable securities, or (iii) by appraisal of the value
of the Securities on the bid side of the market or by such other appraisal as is
deemed appropriate, or (iv) by any combination of the above. The Trustee shall
also make an evaluation of the Securities deposited in the Trust as of the time
said Securities are deposited under this Indenture. Such evaluation shall be
made on the same basis as set forth above. The Trustee's determination of the
closing prices of the Securities on the date of deposit shall be included in the
Schedules attached to the Reference Trust Agreement.
Section 4.02. Tax Reports: For the purpose of permitting Unit
Holders to satisfy any reporting requirements of applicable Federal or State tax
law, the Trustee shall transmit to any Unit Holder upon written request any
determinations made by the Trustee pursuant to Section 4.01.
Section 4.03. Liability of the Trustee: The Depositor and Unit
Holders may rely on any evaluation furnished by the Trustee and shall have no
responsibility for the accuracy thereof. The determinations made by the Trustee
hereunder shall be made in good faith upon the basis of the best information
available to it. The Trustee shall be under no liability to the Depositor or
Unit Holders for errors in judgment, provided, however, that this provision
shall not protect the Trustee against any liability to which it would otherwise
be subject by reason of willful misfeasance, bad faith or negligence in the
performance of its duties or by reason of its reckless disregard of its
obligations and duties hereunder. The Trustee shall not be liable or responsible
for depreciation or losses incurred by reason of the purchase, sale or retention
of any Securities.
ARTICLE V
TRUST EVALUATION, REDEMPTION,
TRANSFER OF UNITS
Section 5.01. Trust Evaluation: The Trustee shall make an evaluation
of the Trust as of the Evaluation Time (i) on the last Business Day of each of
the months of June and December, (ii) on the day on which any Unit of the Trust
is tendered for redemption (unless tender is made after the Evaluation Time on
such day, in which case tender shall be deemed to have been made on the next day
subsequent thereto on which the New York Stock Exchange is open for trading),
and
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(iii) on any other day desired by the Trustee or requested by the Depositor.
Such evaluations shall take into account and itemize separately (a)(1) the cash
on hand in the Trust (other than monies on deposit in the Reserve Account, funds
deposited on the date hereof by the Depositor for the purchase of Securities and
not theretofore credited to the Principal Account pursuant to Section 3.03 and
funds in the Principal Account with respect to which contracts for the purchase
of the Replacement Securities have been entered into pursuant to Section 3.07
hereof), including dividends receivable on stocks trading ex dividend, (a)(2)
the value of each issue of the Securities in the Trust as determined by the
Trustee pursuant to Section 4.01, and (a)(3) all other assets of the Trust. For
each such evaluation there shall be deducted from the sum of the above (b)(1)
amounts representing any applicable taxes or other governmental charges payable
out of the Trust and for which no deductions shall have previously been made for
the purpose of addition to the Reserve Account, (b)(2) amounts representing
accrued fees of the Trustee and expenses of the Trust including but not limited
to unpaid fees of the Trustee and expenses of the Trust (including legal and
auditing expenses), accrued fees and expenses of the Depositor and its
respective successors, if any, and (b)(3) cash held for distribution to Unit
Holders of record as of a date on or prior to the evaluation then being made.
The value of the pro rata share of each Unit of the Trust determined on the
basis of any such evaluation shall be referred to herein as the "Unit Value."
The sum of (a)(1) and (a)(3) reduced by the sum of (b)(1) and (b)(2)
and (b)(3) shall be referred to herein as the "Unit Cash Value."
The Trustee shall promptly advise the Depositor of each
determination of Unit Value made by it as above provided, and, in addition, upon
each evaluation by the Trustee under Section 4.01 other than those involved in
such calculations of Unit Value, the Trustee shall promptly furnish to the
Depositor, for purposes of assisting it in maintaining a market in the Units,
with such information regarding the Principal, Income and Reserve Accounts as
the Depositor may reasonably request.
Section 5.02. Redemptions by Trustee; Purchases by Depositor: On any
Business Day on which any Unit or Units are tendered for redemption (the "Tender
Day") by a Unit Holder or his duly authorized attorney to the Trustee at its
corporate trust office in the City of New York, such Units shall be redeemed by
the Trustee on that Tender Day. Units in uncertifi-
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cated form shall be tendered by means of an appropriate request for redemption
in form approved by the Trustee. Unit Holders must sign exactly as their name
appears on the register with the signature guaranteed by an officer of a
national bank or trust company, or by a member firm of either the New York,
Midwest, or Pacific Coast Stock Exchanges, or in such other manner as may be
acceptable to the Trustee. The Trustee may also require additional documents
such as, but not limited to, trust instruments, certificates of death,
appointments as executor or administrator or certificates of corporate
authority. Subject to payment by such Unit Holder of any tax or other
governmental charges which may be imposed thereon, such redemption is to be made
by distribution to the Distribution Agent on behalf of the redeeming Unit Holder
on the Tender Day and subsequent distribution to such Unit Holder by the
Distribution Agent no later than the next Business Day following the Tender Day
(such next Business Day being hereinafter the "Redemption Date") of (i) the Unit
Holder's pro rata portion as of the Tender Day of the Securities in the Trust,
in whole shares, as designated by the Sponsor and (ii) cash equal to the Unit
Cash Value multiplied by the number of Units being redeemed (herein called the
"Redemption Distribution"). In addition, the Trustee shall distribute to the
Distribution Agent no later than the seventh calendar day after the Tender Day
(or if such is not a Business Day, then the first Business Day prior thereto),
for distribution to a redeeming Unit Holder on such day, cash equal to the value
of any fractional shares included in such Unit Holder's pro rata portion of the
Securities as of the Tender Day.
The Depositor shall maintain with the Trustee a current list of
Securities held in the Trust designated to be sold for the purpose of satisfying
amounts for the payment of cash equivalent to the value of fractional shares;
provided that if the Depositor shall for any reason fail to maintain such a
list, the Trustee, in its sole discretion, may designate a current list of
Securities for such purposes. The net proceeds of any sales of Securities from
such list shall be credited to the Principal Account of the Trust and paid
therefrom, to the extent necessary in accordance with this Section and otherwise
distributed pursuant to this Indenture. The Trustee shall not be liable or
responsible in any way for depreciation or loss incurred by reason of any sale
or sales made in accordance with this Section 5.02.
The portion of the Redemption Distribution which represents the Unit
Holder'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 receiv-
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able on stocks trading ex dividend, if any, shall be withdrawn from the
Principal Account to the extent that funds are available for such purpose. If
such available balance shall be insufficient, the Trustee shall advance funds
sufficient to pay such amount to the Unit Holder and shall be entitled to
reimbursement of such advance upon the deposit of additional monies in the
Income Account or Principal Account, whichever happens first. Should any amounts
so advanced with respect to declared but unreceived dividends prove
uncollectable because of default in payment of such dividends, the Trustee shall
have the right immediately to liquidate Securities in amount sufficient to
reimburse itself for such advances, without interest. In the event that funds
are withdrawn from the Principal Account for payment of any portion of the
Redemption Distribution representing dividends receivable on stocks trading ex
dividend, the Principal Account shall be reimbursed when sufficient funds are
next available in the Income Account for such funds so applied.
Unit Holders requesting a cash distribution shall receive such
distribution in accordance with Section 1.01(b) of the Distribution Agency
Agreement.
The Trustee may in its discretion, and shall when so directed by the
Depositor, suspend the right of redemption or postpone the date of payment of
the Redemption Distribution for more than seven calendar days following the day
on which tender for redemption is made (1) for any period during which the New
York Stock Exchange is closed other than customary weekend and holiday closings
or during which trading on the New York Stock Exchange is restricted; (2) for
any period during which an emergency exists as a result of which disposal by the
Trust of the Securities is not reasonably practicable or it is not reasonably
practicable fairly to determine in accordance herewith the value of the
Securities; or (3) for such other period as the Securities and Exchange
Commission may by order permit. The Trustee shall not be liable to any person or
in any way for any loss or damage which may result from any such suspension or
postponement.
Not later than the close of business on the day any Unit is tendered
for redemption by a Unit Holder other than the Depositor, the Trustee shall
notify the Depositor of such tender. The Depositor shall have the right to
purchase such Unit by notifying the Trustee of its election to make such
purchase no later than the close of business on the Tender Day. Such purchase
shall be made by payment for such Unit by the Depositor to the Unit Holder not
later than the close of business on the Redemption Date of an amount not less
than the Redemption
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Distribution which would otherwise be payable by the Trustee to such Unit
Holder.
Any Unit so purchased by the Depositor may at the option of the
Depositor be tendered to the Trustee for redemption at the corporate trust
office of the Trustee in the manner provided in the first paragraph of this
Section 5.02.
The Trustee shall not be liable or responsible in any way for
depreciation or loss incurred by reason of any sale or redemption of Securities
made pursuant to this Section 5.02.
Section 5.03. Redemption Upon Termination: Should the Trust
terminate on the Termination Date specified in the Reference Trust Agreement
(the "Termination Date"), Securities will be distributed to the Distribution
Agent as agent for the Unit Holders as provided in Section 9.03(b)(i). A Unit
Holder may notify the Distribution Agent in writing at least 3 days prior to the
Evaluation Time on the Termination Date as to whether such Unit Holder desires:
1) to receive his pro rata share of the Securities in-kind; 2) to receive the
cash proceeds from the sale of his pro rata share of underlying Securities; or
3) to participate in the reinvestment program by investing his interest in the
Trust including the proceeds from the sale of his pro rata share of underlying
securities in units of a new trust. Unit Holders who do not notify the
Distribution Agent of their election will receive cash from the sale of their
pro rata share of underlying securities (Option 2). Unit Holders who elect
Options 2 or 3 will have their securities sold and distributed or invested
pursuant to Section 1.02(b) of the Distribution Agency Agreement. Unit Holders
may elect to roll over Securities on a roll over date or Termination Date
pursuant to Section 1.02(c) of the Distribution Agency Agreement.
A Unit Holder choosing in-kind distribution will receive such
distribution on the first business day following the Termination Date subject to
payment by such Unit Holder of any tax or governmental charges which may be
imposed thereon. This distribution shall consist of such Unit Holder's pro rata
portion of each of the Securities in whole shares based on the number of Units
owned as of the Termination Date plus the Unit Holder's pro rata share of the
balances in the Income and Principal Accounts distributed to the Distribution
Agent as provided in Section 9.03 hereof (herein called the "Termination
Distribution"). In addition, the Distribution Agent shall distribute no later
than the seventh calendar day after the Termination Date (or if such is not a
Business Day, then the first
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Business Day prior thereto), cash equal to the value of any fractional shares
included in such Unit Holder's pro rata portion of the Securities as of the
Termination Date.
The Depositor shall provide the Distribution Agent with a list of
Securities held in the Trust designated to be sold for the purpose of satisfying
amounts for the payment of cash equal to the value of fractional shares;
provided that if the Depositor shall for any reason fail to provide such a list,
the Distribution Agent, in its sole discretion, may designate a list of
Securities for such purposes. The excess proceeds of any sales of Securities
from such list shall be credited to the cash account to be distributed pro rata
at the time of the settlement of the last sale pursuant to Section 1.02(b) of
the Distribution Agency Agreement.
Notwithstanding the option to reinvest the proceeds in the next
National Equity Trust series to be offered after the Termination Date (the "New
Series"), the Depositor may, in its sole discretion at any time, decide not to
offer any Series of the Trust in the future. If the Depositor so decides, the
Depositor shall notify the Trustee of that decision, and the Trustee shall
notify Unit Holders before the Termination Date. Moreover, the Trustee may in
its discretion, and shall when so directed by the Depositor in writing, postpone
the Termination Date (1) for any period during which the New York Stock Exchange
is closed other than customary weekend and holiday closings; (2) for any period
during which (as determined by the Securities and Exchange Commission by rule,
regulation or order) (i) trading on the New York Stock Exchange is restricted or
(ii) an emergency exists as a result of which disposal by the Trust of the
Securities is not reasonably practicable or it is not reasonably practicable
fairly to determine in accordance herewith the value of the Securities for the
purposes of any Trust Evaluation; or (3) for such other periods as the
Securities and Exchange Commission may by order permit.
Section 5.04. Transfer of Units: Units may be transferred by the
registered Unit Holder thereof by presentation of transfer instructions, at the
principal office of the Trustee accompanied by such documents executed by the
registered Unit Holder or his authorized attorney as the Trustee deems necessary
to evidence the authority of the person making such transfer. The Trustee may
deem and treat the person in whose name any Unit shall be registered upon the
books of the Trustee as the owner of such Unit for all purposes hereunder and
the Trustee shall not be affected by any notice to the contrary. The transfer
books maintained by the Trustee for the
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purposes of this Section 5.04 shall be closed in connection with the termination
of the Trust pursuant to Section 9.03 hereof.
A sum sufficient to cover any tax or other governmental charge that
may be imposed in connection with any such transfer shall be paid to the
Trustee. A Unit Holder may be required to pay $2 (or such other amount as may be
specified by the Trustee and approved by the Depositor) on any such transfer.
The Trustee may also adopt other reasonable rules and regulations
for the transfer, tender and redemption of Units.
ARTICLE VI
TRUSTEE Section 6.01. General Definition of Trustee's Liabilities,
Rights and Duties: In addition to and notwithstanding the other duties, rights,
privileges and liabilities of the Trustee as otherwise set forth, the
liabilities of the Trustee are further defined as follows:
(a) all monies deposited with or received by the Trustee hereunder
shall be held by it without interest in trust as part of the Trust until
required to be disbursed in accordance with the provisions of this
Indenture and such monies will be segregated by separate recordation on
the trust ledger of the Trustee so long as such practice preserves a valid
preference under applicable law, or if such preference is not so preserved
the Trustee shall handle such monies in such other manner as shall
constitute the segregation and holding thereof in trust within the meaning
of the Investment Company Act of 1940;
(b) the Trustee shall be under no liability for any action taken in
good faith on any appraisal, paper, order, list, demand, request, consent,
affidavit, notice, opinion, direction, evaluation, endorsement,
assignment, resolution, draft or other document whether or not of the same
kind prima facie properly executed, or for the disposition of monies,
Securities or Units pursuant to this Indenture, or in respect of any
evaluation which it is required to make or is required or permitted to
have made by others under this Indenture or otherwise, except by reason of
its
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own wilful misfeasance, bad faith or negligence in the performance of its
duties or by reason of its reckless disregard of its obligations and
duties hereunder. The parties hereto may construe any of the provisions of
this Indenture, insofar as the same may appear to be ambiguous or
inconsistent with any other provisions hereof which construction shall be
binding upon the Unit Holders and the parties hereto. The Trustee shall be
under no liability for any construction of any such provisions hereof;
(c) the Trustee shall not be responsible for or in respect of the
recitals herein, the validity or sufficiency of this Indenture or for the
due execution hereof by the Depositor or for the form, character,
genuineness, sufficiency, value or validity of any Securities, or for or
in respect of the validity or sufficiency of the Certificates of the due
execution thereof by the Depositor, and the Trustee shall in no event
assume or incur any liability, duty or obligation to any Unit Holder or
the Depositor other than as expressly provided for herein. The Trustee
shall not be responsible for or in respect of the validity of any
signatures by or on behalf of the Depositor;
(d) the Trustee shall be under no obligation to appear in, prosecute
or defend any action which in its opinion may involve it in expense or
liability, unless as often as required by the Trustee, it shall be
furnished with reasonable security and indemnity against such expense or
liability, and any pecuniary cost to the Trustee from such action shall be
deductible from and a charge against the Income and Principal Accounts of
the Trust. Subject to the foregoing, the Trustee shall in its discretion
undertake such action as it may deem necessary at any and all times to
protect the Trust and the rights and interest of the Unit Holders pursuant
to the terms of this Indenture, provided, however, that the expenses and
costs of such actions, undertakings or proceedings shall be reimbursable
to the Trustee from the Income and Principal Accounts, and the payment of
such costs and expenses shall be secured by a lien on the Trust prior to
the interests of the Unit Holders;
(e) the Trustee may employ agents, attorneys, accountants and
auditors and shall not be answerable for the default or misconduct of any
such agents, attorneys, accountants or auditors if such agents, attorneys,
accountants or auditors shall have been selected with reasonable
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care; provided, however, that if the Trustee chooses to employ the
Depository Trust Company in connection with the storage and handling of,
and the furnishing of administrative services in connection with the
Securities, the Trustee will be answerable for any default or misconduct
of the Depository Trust Company and its employees and agents as fully and
to the same extent as if such default or misconduct had been committed or
occasioned by the Trustee. The Trustee shall be fully protected in respect
of any action under this Indenture taken, or suffered, in good faith by
the Trustee, in accordance with the opinion of its counsel. The accounts
of the Trust shall be audited not less frequently than annually by
independent certified public accountants designated from time to time by
the Depositor, and the reports of such accountants shall be furnished by
the Trustee to Unit Holders upon request. The fees and expenses charged by
such agents, attorneys, accountants or auditors shall constitute an
expense of the Trust reimbursable from the Interest and Principal Accounts
as set forth in Section 6.04 hereof;
(f) if the Depositor shall resign pursuant to Section 8.04 hereof or
shall fail to undertake or perform any of the duties which by the terms of
this Indenture are required by it to be undertaken or performed or if the
Depositor shall be dissolved or become incapable of acting or shall be
adjudged a bankrupt or insolvent, or a receiver of the property of the
Depositor shall be appointed or any public officer shall take charge or
control of the Depositor or its property or affairs for the purpose of
rehabilitation, conservation or liquidation, then in any such case, the
Trustee may: (1) appoint a successor depositor meeting the qualifications
set forth in Section 8.03 who shall act hereunder in all respects in place
of the Depositor which successor shall be satisfactory to the Trustee, and
which may be compensated at rates deemed by the Trustee to be reasonable
under the circumstances, by deduction from the Income Account of the Trust
or, to the extent funds are not available in such Account, from the
Principal Account of the Trust but no such deduction shall be made
exceeding such reasonable amount as the Securities and Exchange Commission
may prescribe in accordance with Section 26(a)(2)(C) of the Investment
Company Act of 1940, or (2) terminate this Indenture and the trust created
hereby and liquidate the Trust in the manner provided in Section 9.03 or
(3) act as Depositor itself without terminating the Trust;
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(g) if the value of the Trust as shown by any Trust Evaluation shall
be less than 40% of the value of the Securities in the Trust determined as
of the date on which the most recent deposit of Securities occurred, the
Trustee may in its discretion, and shall if so directed by the Depositor,
terminate this Indenture and the trust created hereby and liquidate the
Trust all in the manner provided in Section 9.03;
(h) the Trustee is authorized and empowered, at the request and
direction of the Depositor, to execute and file on behalf of the Trust any
and all documents, in connection with consents to service of process,
required to be filed under the securities laws of the various States in
order to permit the sale of Units of the Trust in such States by the
Depositor;
(i) in no event shall the Trustee be liable for any taxes or other
governmental charges imposed upon or in respect of the Securities or upon
the dividends thereon or upon it as Trustee hereunder or upon or in
respect of the Trust which it may be required to pay under any present or
future law of the United States of America or of any other taxing
authority having jurisdiction in the premises. For all such taxes and
charges and for any expenses, including counsel fees, which the Trustee
may sustain or incur with respect to such taxes or charges, the Trustee
shall be reimbursed and indemnified out of the Reserve Account and/or the
Income and Principal Accounts of the Trust, and the payment of such
amounts so paid by the Trustee shall be secured by a lien on the Trust
prior to the interests of the Unit Holders.
The Depositor shall, upon request by the Trustee, provide the
Trustee with a current list of Securities designated to be sold for the
purpose of payment of expenses hereunder, provided that if the Depositor
shall for any reason fail to provide such a list, the Trustee, in its sole
discretion, may designate a current list of Securities for such purposes.
The net proceeds of any such sales of Securities from such list
representing principal shall be credited to the Principal Account.
(j) the trustee except by reason of its own negligence, bad faith or
wilful misconduct shall not be liable for any action taken, omitted or
suffered to be taken by it in good faith and believed by it to be
authorized or
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within the discretion or rights or powers conferred upon it by this
Indenture;
(k) so long as shall be required by Section 26(a)(2)(C) of the
Investment Company Act of 1940, no payment to the Depositor or to any
principal underwriter (as defined in such Act) for the Trust or to any
affiliated person (as so defined) or agent of the Depositor or such
underwriter shall be allowed the Trustee as an expense except for payment
not in excess of such reasonable amounts as compensation for performing
bookkeeping and other administrative services of a character normally
performed by the Trustee itself;
(l) the Trustee in its individual or any other capacity may become
an owner or pledgee of, or be an underwriter or dealer in respect of,
common stock and other securities issued by the same issuer (or an
affiliate of such issuer) of any of the Securities at any time held as
part of the Trust and may deal with such common stock or other securities
in any manner with the same rights and powers as if it were not the
Trustee hereunder; and
(m) the Trust may include a letter or letters of credit for the
purchase of Securities or Contract Securities issued by the Trustee in its
individual capacity for the account of the Depositor and the Trustee may
otherwise deal with the Depositor and the Trust with the same rights and
powers as if it were not the Trustee hereunder.
Section 6.02. Books, Records and Reports: The Trustee shall keep
proper books of record and account of all the transactions under this Indenture
and keep a register described in Section 2.06 at its unit investment trust
office, and such books, records and register shall be open to inspection by any
Unit Holder at all reasonable times during the usual business hours.
The Trustee shall make such annual or other reports as may from time
to time be required under any applicable state or federal statute or rule or
regulation thereunder and such other tax and cost basis reports requested by the
Depositor and the Trustee shall, upon the request of a Unit Holder, provide such
Unit Holder and such Unit Holder's designated representative with the cost basis
of the Securities backing the Unit Holder's Units and a calculation of the gain
or loss on such Securities in the case of Unit Holders of record on the
Termination Date.
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Section 6.03. Indenture and List of Securities on File: The Trustee
shall keep a certified copy or duplicate original of this Indenture (including
the Reference Trust Agreement) on file at its unit investment trust office
available for inspection at all reasonable times during the usual business hours
by any Unit Holder, together with a current list of the Securities.
Section 6.04. Compensation of Trustee: For services performed under
this Indenture the Trustee shall be paid an annual fee in an amount set forth in
Part II of the Reference Trust Agreement. Such compensation shall be payable
quarterly in an amount equal to one-fourth of the estimated annual compensation
of the Trustee and shall be computed on the basis of the greatest amount of
Units in the Trust at any time during the period with respect to which such
compensation is being computed. The Trustee may from time to time adjust its
compensation as set forth above; provided, however, that total adjustment upward
does not, at the time of such adjustment, exceed the percentage of the total
increase, after the date hereof, in consumer prices for services as measured by
the United States Department of Labor Consumer Price Index entitled "All
Services Less Rent" or, if such Index is no longer published, in a similar index
as determined by the Trustee and Depositor. Further provided, however, that the
right of the Trustee to increase its fees shall not be cumulative and, if not
exercised by the Trustee for any calendar year, shall be deemed waived for such
calendar year. No exercise of its right to such increase shall be effective
unless made by the Trustee by means of notification to the Depositor within 60
days following the publication of the annual consumer price information referred
to above. The consent or concurrence of any Unit Holder shall not be required
for any such adjustment or increase. Such compensation shall be deemed to
provide only for the usual normal and proper functions undertaken as Trustee
pursuant to this Indenture and, in addition, the Trustee may charge, to the
extent then lawful, the Income and Principal Accounts of the Trust for any and
all expenses including legal, auditing and printing expenses of maintaining
registration or qualification of the Units and/or the Trust under Federal or
state securities laws subsequent to initial registration so long as the
Depositor is maintaining a market for the Units and including the fees of
counsel which may be retained by the Trustee in connection with its activities
hereunder, and disbursements incurred hereunder and additional compensation for
any extraordinary services performed by the Trustee hereunder. In addition to
the foregoing compensation, as part of the Trustee's compensation for ordinary
services performed under this
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Indenture, the Trustee shall be entitled to the benefits to the Trustee that may
result from reasonable cash balances in the Income Account and the Principal
Account. The Trustee shall be indemnified and held harmless against any loss or
liability accruing to it without negligence, bad faith or wilful misconduct on
its part, arising out of or in connection with the acceptance or administration
of this Trust, including the costs and expenses (including counsel fees) of
defending itself against any claim of liability in the premises and including
any loss, liability or expense incurred in acting pursuant to directions to the
Trustee given by the Depositor from time to time in accordance with the
provisions of this Indenture or in undertaking actions from time to time which
the Trustee deems necessary in its discretion to protect the Trust and the
rights and interests of Unit Holders pursuant to the provisions of this
Indenture. If the cash balances in the Income and Principal Accounts shall be
insufficient to provide for amounts payable pursuant to this Section 6.04 the
Trustee shall have the power to sell (i) Securities from the current list of
Securities designated to be sold pursuant to Section 5.02 hereof, or (ii) if no
such Securities have been so designated, such Securities as the Trustee may see
fit to sell in its own discretion, and to apply the proceeds of any such sale in
payment of the amounts payable pursuant to this Section 6.04. The Trustee shall
promptly notify the Depositor of such action in writing and shall set forth
therein the Securities sold and the proceeds received therefrom. The Trustee
shall not be liable or responsible in any way for depreciation or loss incurred
by reason of any sale of Securities made pursuant to this Section 6.04. Any
monies payable to the Trustee pursuant to this Section shall be secured by lien
on the Trust prior to the interests of the Unit Holders.
Section 6.05. Removal and Resignation of Trustee; Successor: The
following provisions shall provide for the removal and resignation of the
Trustee and the appointment of any successor trustee:
(a) the Trustee or any trustee or trustees hereafter appointed may
resign and be discharged of the trusts created by this Indenture, by
executing an instrument in writing resigning as Trustee of the Trust and
filing the same with the Depositor and mailing a copy of a notice of
resignation to all Unit Holders then of record, not less than sixty days
before the date specified in such instrument when, subject to Section
6.05(e), such resignation is to take effect. Upon receiving such notice of
resignation, the Depositor shall promptly appoint a successor
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trustee as hereinafter provided, by written instrument, in duplicate, one
copy of which shall be delivered to the resigning Trustee and one copy to
the successor trustee. If at any time the Trustee shall become incapable
of acting, or shall have an order of relief entered with respect to it, or
a receiver of the Trustee or of its property shall be appointed, or any
public officer shall take charge or control of the Trustee or of its
property or affairs for the purposes of rehabilitation, conservation or
liquidation, or, upon the determination of the Depositor to remove the
Trustee for any reason, either with or without cause, including but not
limited to a determination by the Depositor that the Trustee has
materially failed to perform its duties under this Indenture and the
interest of Unit Holders has been substantially impaired as a result then
in any such case the Depositor may remove the Trustee and appoint a
successor trustee by written instrument, in duplicate, one copy of which
shall be delivered to the Trustee so removed and one copy to the successor
trustee; provided that a notice of such removal and appointment of a
successor trustee shall be mailed by the Depositor to each Unit Holder
then of record;
(b) any successor trustee appointed hereunder shall execute,
acknowledge and deliver to the Depositor and to the retiring Trustee an
instrument accepting such appointment hereunder, and such successor
trustee without any further act, deed or conveyance shall become vested
with all the rights, powers, duties and obligations of its predecessor
hereunder with the like effect as if originally named Trustee herein and
shall be bound by all the terms and conditions of this Indenture. Upon the
request of such successor trustee, the retiring Trustee shall, upon
payment of any amounts due the retiring Trustee, or provision therefor to
the satisfaction of such retiring Trustee, execute and deliver an
instrument acknowledged by it transferring to such successor trustee all
the rights and powers of the retiring Trustee; and the retiring Trustee
shall transfer, deliver and pay over to the successor trustee all
Securities and monies at the time held by it hereunder, together with all
necessary instruments of transfer and assignment or other documents
properly executed necessary to effect such transfer and such of the
records or copies thereof maintained by the retiring Trustee in the
administration hereof as may be requested by the successor trustee, and
shall thereupon be discharged from all duties and responsibilities under
this Indenture. The retiring Trustee shall, nevertheless, retain a lien
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upon all Securities and monies at the time held by it hereunder to secure
any amounts then due the retiring Trustee;
(c) in case at any time the Trustee shall resign and no successor
trustee shall have been appointed or, if appointed, shall not have
accepted appointment within thirty days after notice of resignation has
been received by the Depositor, the retiring Trustee may forthwith apply
to a court of competent jurisdiction for the appointment of a successor
trustee. Such court may thereupon, after such notice, if any, as it may
deem proper and prescribe, appoint a successor trustee;
(d) any corporation into which any Trustee hereunder may be merged
or with which it may be consolidated, or any corporation resulting from
any merger or consolidation to which any Trustee hereunder shall be a
party, or any corporation succeeding to all or substantially all of the
business of the Trustee shall be the successor trustee under this
Indenture without the execution or filing of any paper, instrument or
further act to be done on the part of the parties hereto; anything herein
or in any agreement relating to such merger or consolidation, by which any
such trustee may seek to retain certain powers, rights and privileges
theretofore obtaining for any period of time following such merger or
consolidation, to the contrary notwithstanding; and
(e) any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to this Section shall become effective only
upon acceptance of appointment by the successor trustee as provided in
subsection (b) hereof.
Section 6.06. Qualification of Trustee: The Trustee shall be a
corporation organized and doing business under the laws of the United States or
any state thereof which is authorized under such laws to exercise corporate
trust powers and having at all times an aggregate capital, surplus, and
undivided profits of not less than $5,O0O,000.
Section 6.07. Trustee's Response to Inquiries: The Trustee shall
deliver to the Depositor a copy of any written response to any non-routine
question or request at least one day before sending the response.
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Section 6.08. Waiver of Liens: No lien, encumbrance or priority in
favor of the Trustee against the assets of the Trust will affect such assets or
their proceeds after such assets or proceeds have been distributed or paid to
Unit Holders or to the Distribution Agent on their behalf pursuant to the terms
of the Indenture and upon any such distribution any lien, encumbrance or
priority previously attaching to such assets or their proceeds shall without any
further action on the part of the Trustee be automatically thereupon released
and relinquished by the Trustee.
ARTICLE VII
RIGHTS OF UNIT HOLDERS
Section 7.01. Beneficiaries of Trust: By the purchase and acceptance
or other lawful delivery and acceptance of a Unit of the Trust the Unit Holder
shall be deemed to be a beneficiary of such Trust and vested with all rights,
title and interest in the Trust to the extent of the Unit or Units owned,
subject to the terms and conditions of this Indenture.
Section 7.02. Rights, Terms and Conditions: In addition to the other
rights and powers set forth in the other provisions and conditions of this
Indenture the Unit Holders shall have the following rights and powers and shall
be subject to the following terms and conditions:
(a) a Unit Holder may at any time on any Business Day redeem his
Units in accordance with Section 5.02;
(b) the death or incapacity of any Unit Holder shall not operate to
terminate this Indenture or the Trust, nor entitle his legal
representatives or heirs to claim an accounting or to take any action or
proceeding in any court for a partition or winding up of the Trust, nor
otherwise affect the rights, obligations and liabilities of the parties
hereto or any of them. Each Unit Holder expressly waives any right he may
have under any rule of law, or the provisions of any statute, or
otherwise, to require the Trustee at any time to account, in any manner
other than as expressly provided in this Indenture, in respect of the
Securities or monies from time to time received, held and applied by the
Trustee hereunder; and
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(c) no Unit Holder shall have any right to vote or in any manner
otherwise control the operation and management of the Trust, or the
obligations of the parties hereto, nor shall anything herein set forth be
construed so as to constitute the Unit Holders from time to time as
partners or members of any association; nor shall any Unit Holder ever be
under any liability to any third persons by reason of any action taken by
the parties to this Indenture, or any other cause whatsoever.
ARTICLE VIII
DEPOSITOR
Section 8.01. Liabilities; Power of Attorney: The Depositor, or the
Depositors if there be more than one, shall be severally liable in accordance
herewith for the obligations imposed upon and undertaken by the Depositor
hereunder, provided, however, that, without in any way affecting or diminishing
such several liability, each Depositor of the Trust shall indemnify the other
Depositors thereof and hold such other Depositors harmless from and against any
and all costs, expenses and liabilities (including attorneys' fees) which such
other Depositors may suffer or incur as a result of or by reason of any act or
failure to act hereunder on the part of the indemnifying Depositor. At all times
prior to the termination of the Trust and while the Depositors thereof shall
continue to act jointly hereunder, there shall be maintained on file with the
Trustee a power of attorney executed in favor of one Depositor by the other
Depositors constituting and appointing the non-executing Depositor the true and
lawful agent and attorney-in-fact of the executing Depositors to execute and
deliver for and on behalf of the executing Depositors any and all notices,
opinions, certificates, lists, demands, directions, instruments, or other
documents provided or permitted to be executed or delivered by the Depositors
hereunder in connection with the Trust or to take any other action in respect
hereof. Such power of attorney shall continue in effect as to the executing
Depositors until written notice of revocation thereof has been given by such
executing Depositors to the Trustee. Prior to receipt of such notice of
revocation the Trustee shall be entitled to rely conclusively upon such power of
attorney as authorizing the non-executing Depositor to give any notice, opinion,
certificate, list, demand, direction, instrument or other document provided for
or permitted hereunder or to take
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any other action in respect hereof on behalf of the executing Depositors as to
which such power of attorney is in effect.
Section 8.02. Discharge: If there be more than one Depositor, the
following provisions shall provide for the discharge of a Depositor and the
liability of the Depositors in the event of the discharge of a Depositor:
(a) in the event that any Depositor shall fail to undertake or
perform any of the duties which by the terms of this Agreement are
required by it to be undertaken or performed and such failure shall
continue for 30 days after notice to the Depositors from the Trustee or if
any Depositor shall become incapable of acting or shall have an order of
relief entered with respect to it, or a receiver of the property of any
Depositor shall be appointed or any public officer shall take charge or
control of any Depositor or its property or affairs for the purpose of
rehabilitation, conservation or liquidation, then such Depositor shall
forthwith be and shall be deemed to be discharged forever as a Depositor
hereunder and thereupon the remaining Depositors shall act hereunder
without the necessity of any other or further action on its part or on the
part of the Trustee;
(b) in the event that the power of attorney referred to in Section
8.01 shall be revoked by written notice given by an executing Depositor
and it shall not be replaced within one business day by another power of
attorney conforming with the requirements of said Section 8.01, the
Depositors of the Trust shall be deemed to have been unable to reach
agreement with respect to action to be taken jointly by them hereunder in
connection with the Trust and thereupon the Depositor which has revoked
the power of attorney executed by it shall be discharged hereunder upon
the expiration of such one-day period and thereupon the other Depositors
shall act thereunder without the necessity of any other or further action
on their part or on the part of the Trustee; and
(c) notwithstanding the discharge of a Depositor of the Trust in
accordance with this Section 8.02, such Depositor shall continue to be
fully liable in accordance with the provisions hereof in respect of action
taken or refrained from under this Agreement by the Depositors before the
date of such discharge or by the undischarged Depositors before or after
the date of such discharge, as
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fully and to the same extent as if no discharge has occurred.
Section 8.03. Successors: The covenants, provisions and agreements
herein contained shall in every case be binding upon any successor or successors
to any Depositor and shall be binding upon the General Partners of any Depositor
which may be a partnership and upon the capital interest of the limited partners
of any Depositor which may be a partnership. In the event of the death,
resignation or withdrawal of any partner of any Depositor which may be a
partnership, the partner so dying, resigning or withdrawing shall be relieved of
all further liability hereunder if at the time of such death, resignation or
withdrawal such Depositor maintains a net worth (determined in accordance with
generally accepted accounting principles) of at least $1,000,000. In the event
of an assignment by any Depositor to a successor corporation or partnership as
permitted by the next following sentence, such Depositor and, if such Depositor
is a partnership, its partners shall be relieved of all further liability under
this Indenture. Any Depositor may transfer all or substantially all of its
assets to a corporation or partnership which carries on the business of such
Depositor, if at the time of such transfer such successor duly assumes all the
obligations of such Depositor under this Indenture.
Section 8.04. Resignation: If at any time any Depositor of the Trust
shall desire to resign its position as such a Depositor hereunder and if at such
time the other Depositors of the Trust each maintains a net worth (determined in
accordance with generally accepted accounting principles) of at least $1,000,000
and is agreeable to such resignation, the Depositor desiring to resign may
resign by delivering to the Trustee an instrument executed by such resigning
Depositor and consented to by the remaining Depositors and upon such delivery,
the resigning Depositor shall be discharged and shall no longer be liable in any
manner hereunder except as to acts or omissions occurring prior to such delivery
and the remaining Depositors shall thereupon perform all duties and be entitled
to all rights under the Agreement; provided, however, that concurrently with or
subsequent to such resignation the remaining Depositors and the Trustee may
appoint a new Depositor to act with the remaining Depositors and to assume the
duties of the resigning Depositor by an instrument executed by the remaining
Depositors, the Trustee and the new Depositor or proceed as provided in Section
6.01(f). Such new Depositor shall not be under any liability hereunder for
occurrences or omissions prior to the effective time of execution of such
instrument.
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Section 8.05. Additional Depositors: The Depositor may at any time
appoint one or more corporations or partnerships to act as new Depositor, in
addition to those currently serving, by an instrument executed by such
Depositor, the Trustee, and such corporations or partnerships; provided,
however, that at the time of such execution each new Depositor maintains a net
worth (determined in accordance with generally accepted accounting principles)
of at least $1,000,000. Upon such execution, a new Depositor shall be deemed to
be a depositor for all purposes under this Indenture, and the covenants,
provisions and agreements herein contained shall in every case be binding upon
such new Depositor and shall be binding upon the General Partner of any such new
Depositor which may be a partnership and upon the capital interest of the
limited partners of any such new Depositor which may be a partnership, but such
new Depositor shall not be liable hereunder for occurrences or omissions prior
to the effective time of execution of such instrument.
Section 8.06. Exclusions from Liability: The following provisions
provide for certain exclusions from the liability of the Depositor:
(a) no Depositor shall be under any liability to any other
Depositor, the Trust or the Unit Holders thereof, for any action taken or
for refraining from the taking of any action in good faith pursuant to
this Agreement, or for errors in judgment or liable or responsible in any
way for depreciation or loss incurred by reason of the acquisition or sale
of any Securities; provided, however, that this provision shall not
protect the Depositor against any liability to which it would otherwise be
subject by reason of willful misfeasance, bad faith or gross negligence in
the performance of its duties or by reason of its reckless disregard of
its obligations and duties hereunder. The Depositor may rely in good faith
on any paper, order, notice, list, affidavit, receipt, evaluation,
opinion, endorsement, assignment, draft or any other document of any kind
prima facie properly executed and submitted to them, or any of them, by
any other Depositor, the Trustee, counsel to an issuer of a Security, or
any other person. The Depositor shall in no event be deemed to have
assumed or incurred any liability, duty, or obligation to any Unit Holder
or the Trustee other than as expressly provided for herein;
(b) the Depositor shall not be under any obligation to appear in,
prosecute or defend any legal action which
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in its opinion may involve it in any expense or liability; provided,
however, that the Depositor may in its discretion undertake any such
action which it may deem necessary or desirable in respect of this
Indenture and the rights and duties of the parties hereto and the
interests of the Unit Holders hereunder; and
(c) none of the provisions of this Indenture shall be deemed to
protect or purport to protect the Depositor against any liability to the
Trust or to the Unit Holders thereof or to each other (if there is more
than one Depositor) to which the Depositor would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence in the
performance of the duties of the Depositor, or by reason of the
Depositor's reckless disregard of the obligations and duties of the
Depositor under this Indenture.
Section 8.07. Compensation: The Depositor shall receive at the times
set forth in Section 3.05 as compensation for performing portfolio supervisory
services, such amounts, and for such periods, as are specified in the Reference
Trust Agreement. The computation of such compensation shall be made on the basis
of the greatest number of Units in the Trust at any time during which such
compensation is being computed. At no time, however, will the total amount
received by the Depositor for services rendered to all series of the National
Equity Trust in any calendar year exceed the aggregate cost to it of supplying
such services in such year except to the extent permitted by law. Such rate may
be increased from time to time, without the consent or approval of any Unit
Holder or the Trustee, by amounts not exceeding the proportionate increase
during the period from the date of such Reference Trust Agreement to the date of
any such increase, in consumer prices as published either under the
classification "All Services Less Rent" in the Consumer Price Index published by
the United States Department of Labor or, if such Index is no longer published,
a similar index.
ARTICLE IX
ADDITIONAL COVENANTS; MISCELLANEOUS PROVISIONS
Section 9.01. Amendments without the Consent of Unit Holders: This
Indenture may be amended from time to time by the parties hereto or their
respective successors, without the
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consent of any of the Unit Holders (a) to cure any ambiguity or to correct or
supplement any provisions contained herein which may be defective or
inconsistent with any other provisions contained herein; (b) to change any
provision hereof as may be required by the Securities and Exchange Commission or
any successor governmental agency exercising similar authority; or (c) to make
such other provision in regard to matters or questions arising hereunder as
shall not adversely affect the interest of the Unit Holders; provided, that the
Indenture may also be amended from time to time by the parties hereto (or the
performance of any of the provisions of this Indenture may be waived) with the
consent of Unit Holders evidencing 51% of the Units at the time outstanding
under the Indenture for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the Unit Holders; provided, further,
however, that this Indenture (including any Reference Trust Agreement) may not
be amended (nor may any provision thereof be waived) so as to (1) increase the
number of Units issuable in respect of the Trust above the aggregate number
specified in Part II of the Reference Trust Agreement or such lesser amount as
may be outstanding at any time during the term of this Indenture, except as the
result of the deposit of Additional Securities, as herein provided, or as
otherwise provided herein, or reduce the relative interest in the Trust of any
Unit Holder without his consent, (2) permit the deposit or acquisition hereunder
of securities or other property either in addition to or in substitution for any
of the Securities except in the manner permitted by the Trust Indenture as in
effect on the date of the first deposit of Securities under a particular
Indenture or permit the Trustee to engage in business or investment activities
not specifically authorized in this Indenture as originally executed or (3)
adversely affect the characterization of the Trust as a grantor trust for
federal income tax purposes.
Section 9.02. Notice of Amendment: Promptly after the execution of
any amendment the Trustee shall furnish written notification of the substance of
such amendment to all Unit Holders then of record at their addresses appearing
on the registration books of the Trustee.
Section 9.03. Termination: This Indenture and the Trust created
hereby shall terminate upon the redemption, sale or other disposition, as the
case may be, of the last Security held in the Trust hereunder unless sooner
terminated as hereinbefore specified and may be terminated at any time by the
written consent of the Holders of Fifty One percent of the Units of
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the Trust then outstanding; provided, that in no event shall this Trust continue
beyond the Termination Date as set forth in Part II of the Reference Trust
Agreement. Written notice of any termination shall be given by the Trustee to
each Unit Holder of record at his address appearing on the registration books of
the Trustee.
(a) Within a reasonable period of time after termination of the
Trust the Trustee shall liquidate such Securities as it shall deem necessary for
payment of Trust expenses and shall:
(i) deduct from the Income Account of the Trust or, to the
extent that funds are not available in such account, from the
Principal Account of the Trust and pay to itself individually an
amount equal to the sum of (1) its accrued compensation for its
ordinary recurring services in connection with the Trust, (2) any
compensation due it for its extraordinary services and (3) any
costs, expenses or indemnities in connection with the Trust as
provided herein;
(ii) deduct from the Income Account or, to the extent that
funds are not available in such Account, from the Principal Account
and pay accrued and unpaid fees to the Depositor pursuant to Section
3.05;
(iii) deduct from the Income Account of the Trust or, to the
extent that funds are not available in such Account, from the
Principal Account of the Trust, any amounts which may be required to
be deposited in the Reserve Account of the Trust to provide for
payment of any applicable taxes or other governmental charges and
any other amounts which may be required to meet expenses incurred
under this Indenture in connection with the Trust;
(b) (i) If the Trust shall terminate on the Termination Date
provided in the Reference Trust Agreement, the Trustee shall distribute the
remaining Securities in the Principal Account plus the cash balances in the
Principal and Income Accounts to the Distribution Agent for distribution in
accordance with the Distribution Agency Agreement.
(ii) If the Trust shall terminate on a date other than the
Termination Date, the Trustee shall fully liquidate the remaining Securities in
the Principal Account and shall distribute to each Unit Holder such Unit
Holder's pro rata in-
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terest in the balance of the Income Account and Principal Account of the Trust.
The amounts to be so distributed to each Unit Holder shall be that
pro rata share of the balance of the total Income and Principal Accounts of the
Trust as shall be represented by the Units therein held by such Unit Holder.
(c) Together with such distribution to each Unit Holder as provided
for in (b) of this Section, the Trustee shall furnish to each such Unit Holder a
final distribution statement as of the date of computation of the amount
distributable to Unit Holders, setting forth the information in substantially
the form and manner provided for in Section 3.06 hereof, except that, with
respect to distribution made pursuant to such Paragraph b(i) of this Section,
such statement shall show the Securities delivered to the Distribution Agent.
(d) The Trustee shall distribute to each Unit Holder any dividends,
which on the Termination Date were declared, but not received, net of any and
all expenses not previously deducted, within a reasonable time of their receipt.
The Trustee shall be under no liability with respect to monies held
by it in the Income, Reserve and Principal Accounts upon termination except to
hold the same in trust without interest until disposed of in accordance with the
terms of this Indenture.
Section 9.04. Construction: This Indenture is executed and delivered
in the State of New York and all laws or rules of construction of such State
shall govern the rights of the parties hereto and the Unit Holders and the
interpretation of the provisions hereof. Headings and titles herein are for
convenience only and should not influence such interpretation.
Section 9.05. Written Notice: Any notice, demand, direction or
instruction to be given to the Depositor hereunder shall be in writing and shall
be duly given if mailed or delivered to the Depositor c/o Prudential Securities
Incorporated at One Seaport Plaza, New York, New York 10292 or at such other
address as shall be specified by the Depositor to the other parties hereto in
writing. Any notice to be given to the Unit Holders shall be duly given if
mailed or delivered to each Unit Holder at the address of such holder appearing
on the registration books of the Trustee. Any notice, demand, direction or
instruction to be given to the Trustee hereunder shall be in writing and shall
be given if mailed or delivered to the Trus-
<PAGE>
-49-
tee at its office at 101 Barclay Street, New York, New York 10286, or such other
address as shall reasonably be specified by the Trustee in writing to the other
parties hereto.
Section 9.06. Severability: If any one or more of the covenants,
agreements, provisions or terms of this Indenture shall be held contrary to any
express provision of law or contrary to policy of express law, though not
expressly prohibited, or against public policy, or shall for any reason
whatsoever be held invalid, then such covenants, agreements, provisions or terms
shall be deemed severable from the remaining covenants, agreements, provisions
or terms of this Indenture and shall in no way affect the validity or
enforceability of the other provisions of this Indenture or the rights of the
holders thereof.
Section 9.07. Dissolution of Depositor Not To Terminate: The
dissolution of one or all of the Depositors (if more than one) from or for any
cause whatsoever shall not operate to terminate this Indenture insofar as the
duties and obligations of the Trustee are concerned.
Section 9.08. Name: Depositor reserves the right to use the name
"National Equity Trust," with a distinguishing series number or name, without
the consent of the Trustee.
IN WITNESS WHEREOF, Prudential Securities Incorporated has caused
this Trust Indenture and Agreement to be executed by one of its authorized
officers and its corporate seal to be hereto affixed and attested by its
Secretary or Assistant Secretary and The Bank of New York has caused this Trust
Indenture and Agreement to be executed by one of its Vice Presidents or
Assistant Vice Presidents and its corporate seal to be hereto affixed and
attested by one of its Assistant Secretaries all as of the day, month and year
first above written.
<PAGE>
PRUDENTIAL SECURITIES INCORPORATED,
Depositor
By: /s/ Kenneth Swankie
-------------------------------------
Senior Vice President
Manager - Unit Investment Trust Department
(SEAL)
ATTEST:
By: /s/ Kathleen Maguire
----------------
Assistant Secretary
<PAGE>
BANK OF NEW YORK,
Trustee
By: /s/ Thomas Centrone
-----------------------------
Vice President
(SEAL)
ATTEST:
By: /s/ Brian Arrons
--------------
Assistant Vice President
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
I, Rudolf Retmann, a Notary Public in and for the said County in
the State aforesaid, do hereby certify that Thomas Centrone and Brian Arrons
personally known to me to be the same persons whose names are subscribed to the
foregoing instrument and personally known to me to be a Vice President and
Assistant Vice President, respectively, of Bank of New York, a corporation,
appeared before me this day in person, and acknowledged that they signed, sealed
with the corporate seal of Bank of New York, and delivered the said instrument
as their free and voluntary act as such Vice President and Assistant Vice
President, respectively, and as the free and voluntary act of said Bank of New
York for the uses and purposes therein set forth.
GIVEN, under my hand and notarial seal this 2nd day of February,
2000.
/s/ Rudolf Retmann
---------------------
Notary Public
(SEAL)
<PAGE>
<PAGE>
DISTRIBUTION AGENCY AGREEMENT
This Distribution Agency Agreement ("Agreement") dated as of
February 2, 2000, among Prudential Securities Incorporated, as the Depositor
(the "Depositor") , The Bank of New York, as Trustee (the "Trustee") pursuant to
the Trust Indenture and Agreement dated February , 2000 (the "Indenture"),
relating to National Equity Trust and The Bank of New York, as Distribution
Agent (the "Agent"), sets forth procedures for the distribution of proceeds of
redemptions of Units from the Trust to the Unit Holders. This Agreement shall
apply to each series of National Equity Trust for which the Depositor and the
Trustee, or their respective successors and assigns, are acting as Depositor and
Trustee (each, a "Trust"). All capitalized terms used but not defined herein
that are defined in the Indenture are used herein as defined therein.
WITNESSETH THAT:
In consideration of the premises and of the mutual agreements herein
contained, the Depositor, the Trustee and the Agent agree as follows:
ARTICLE I
DISTRIBUTIONS BETWEEN TRUSTEE AND AGENT
SECTION 1.01. Redemption of Units.
(a) In Kind Redemption: Units tendered as set forth in Section 5.02
of the Indenture for redemption shall be redeemed on the Tender Day. Subject to
payment by a tendering Unit Holder of any tax or other governmental charges
which may be imposed thereon, such redemption shall be made by the distribution
by the Trustee to the Agent on the Tender Day of the Redemption Distribution
which shall then be distributed to the tendering Unit Holder on the Redemption
Date plus cash equal to the value of fractional shares, in accordance with
Section 5.02 of the Indenture, provided, however, that the right of a Unit
Holder to receive a distribution in kind shall be conditioned on such Unit
Holder tendering Units with a value of in excess of $250,000 or such other
amount as shall be specified in the prospectus for a Trust.
(b) Cash Redemption of Units: Unit Holders may redeem Units and
request payment of the Redemption Distribution in cash. Such request shall be in
writing and submitted to the Trustee at the time the Units are tendered for
redemption. Failure to so request shall result in distribution in cash as set
forth in this paragraph (b). Units tendered for redemption
<PAGE>
-2-
with such a request for cash shall be tendered and redeemed in the manner and at
the times set forth in (a) above for in kind redemptions, except that on the
Tender Date related to such tender by a Unit Holder or as soon thereafter as
possible, the Agent shall sell the Securities which comprise the Redemption
Distribution, using its best reasonable efforts to secure the best price
obtainable for such Securities and shall distribute to the Unit Holder, subject
to payment by the Unit Holder of any tax or governmental charges that may be
imposed thereon or any brokerage commission charged on the sale, for each Unit
tendered (i) an amount in cash equal to the proceeds from the sale of the
Securities which comprise the Redemption Distribution; (ii) an amount in cash
equal to the Unit Cash value (determined as of the Evaluation Time on the date
of tender) and (iii) cash equal to the value of any fractional shares included
in the Unit Holder's pro rata portion of the Securities as of the Tender Day
distributed to the Agent by the Trustee. Such cash distribution shall be made
within seven calendar days of the Tender Day. Neither the Agent nor the
Depositor shall be liable or responsible in any way for depreciation or loss
incurred by reason of any sale or sales made in accordance with this Section
1.01(b).
With respect to either (a) or (b) above, if the Unit Cash Value is an amount
less than zero, the Agent shall remit to the Trustee (or the Trustee shall, in
the case of (x) or (y) below, withhold from distribution to the redeeming Unit
Holder) for each redeemed Unit the negative amount, obtained from the following
sources in the following order until such amount has been remitted to the
Trustee in full:
(x) amounts due the Unit Holder of such redeemed Units from the
sale of fractional shares of Securities otherwise part of the
Redemption Distribution;
(y) amounts otherwise due to the Unit Holder of such redeemed
Units in the form of an Income Distribution;
(z) proceeds from the sale of other shares of Securities otherwise
part of the Redemption Distribution.
SECTION 1.02. Distribution of Securities, Liquidation, and
Investment in New Trust Upon Termination: (a) Securities to be distributed in
kind as set forth in Section 5.03 of the Indenture shall be distributed on the
first Business Day following the Termination Date in accordance with the
provisions of such Section.
(b) Each Unit Holder who elects either to receive cash or to invest
in a subsequent trust shall have his Termination Distribution held by the Agent
on his behalf for disposition in accordance with this Section 1.02(b).
On each Business Day during the 10 Business-Day period following the
Termination Date (the "Special Distribution Period"), the Securities subject to
disposition under this
<PAGE>
-3-
Section 1.02(b) shall be sold by the Depositor as sub-agent for the Agent, using
its best reasonable efforts to secure the best price obtainable for the
Securities or by such other sub-agent as shall be designated by the Depositor or
absent such designation such other sub-agent as the Agent shall determine. The
Depositor, as such sub-agent, will open a customer account for the Agent and
will sell, on each Business Day, at least an amount of the then unsold
Securities (based on the number of shares of underlying Securities of each
issuer) multiplied by a fraction the numerator of which is one and the
denominator of which is the number of days remaining in the 10 day period.
Neither the Agent nor the Depositor shall be liable for or responsible in any
way for depreciation or loss incurred by reason of any sale or sales made in
accordance with this Section 1.02(b). Upon the Sale of the last security the
Depositor as such sub-agent for the Agent shall deduct from the proceeds of
these sales (the "Sales Proceeds") and pay any tax or governmental charges and
commissions in connection with the sale. The Agent shall hold each day's
proceeds in an account which is non-interest bearing to Unit Holders and is
available for use by the Agent pursuant to normal banking procedures.
Upon the settlement of the last sale of securities, the Distribution
Agent shall distribute to Unit Holders electing distribution in cash the Sales
Proceeds plus their pro rata share of the cash balances in the Principal and
Income Accounts or on behalf of Unit Holders electing reinvestment, shall apply
the Sales Proceeds plus their pro rata share of the cash balances in the
Principal and Income Accounts towards the purchase of Units of the next National
Equity Trust (the "New Series"), if any.
The Agent shall, as soon as reasonably possible after the Sales
Proceeds are so applied to the purchase of New Series units, distribute to each
Unit Holder all Units so purchased and held on his behalf and provide a report
to each Unit Holder showing the total number of New Series units credited to him
and the sales charge included in the price for New Series units.
(c) The provisions of this subsection (c) shall apply to
distributions from such series of the National Equity Trust as the Depositor
shall specify to the Trustee and Agent prior to the Termination Date of such
series. As directed by the Depositor, the Trustee shall notify Unit Holders of
the availability of any election provided under this sub-section.
A Unit Holder who holds at least the minimum Unit holding specified
by the Depositor and Agent may, by notice to the Agent given in the manner and
received by the time specified in Section 5.03 of the Indenture, elect to invest
in a subsequent trust ("New Trust") through an in-kind deposit into the New
Trust and to have his Termination Distribution held by the Agent on his behalf
and the following actions taken on his behalf.
1. The Agent shall determine the number of whole and fractional
shares of each issue of Securities included in the Unit
Holders' Termination Distribution from the terminating series
of the trust ("Old Trust").
<PAGE>
-4-
2. The Agent shall estimate the aggregate number of Units of the
New Trust ("New Trust Units") which can be created by dividing
the value (determined as provided in the Trust Indenture) of
the Securities identified in paragraph 1 and cash included in
the electing Unit Holders' Termination Distribution,
subtracting from such amount estimated transaction costs, and
dividing such number by the then net asset value of the New
Trust Unit (increased by any applicable sales charge).
3. The Agent shall determine the number of shares of each issue
of Securities which is common to both the Old Trust and New
Trust ("Common Securities") required to create the number of
Units estimated in paragraph 2. The Agent shall segregate from
the Securities identified in paragraph 1 (to the extent
included therein) such number of shares of Common Securities,
to the extent of whole shares and shall transfer such whole
shares to separate account for the electing Unit Holders.
4. The balance of the Securities identified in paragraph 1 shall
be sold, on behalf of the electing Unit Holders, by the
Depositor as sub-agent for the Agent, or by such other
sub-agent as shall be designated by the Depositor or absent
such designation, such other sub-agent as the Agent shall
determine (any such sub-agent, the "Sub-Agent") on the
Business Day following the Termination Date of the Old Trust,
or such other period as the Depositor shall select ("Sale
Date"), such Sub-Agent using its best reasonable efforts to
secure the best price obtainable for the Securities. The Agent
shall deduct from the Sale Proceeds and pay any tax or
governmental charges and commissions in connection with the
sales. The net proceeds shall be transferred to a separate
account for the electing Unit Holders.
5. On the Sale Date, the Sub-Agent, on behalf of the electing
Unit Holders, shall purchase Securities required to constitute
the New Trust Units which are not Common Securities ("New
Trust Securities") and any additional shares of Common
Securities necessary to constitute the New Trust Units. If the
available Sales Proceeds and other cash amounts included in
the Termination Distribution shall be insufficient to purchase
the number of shares of New Trust Securities and any
additional shares of Common Securities required to create the
number of New Trust Units estimated by the Agent as provided
in paragraph 2, such estimated number of New Trust Units shall
be reduced and the excess shares of Common Securities and New
Trust Securities shall be promptly sold by the Sub-Agent on
behalf of the Unit Holders.
<PAGE>
-5-
6. Following the execution of contracts for all sales and
purchases, the Common Securities and the New Trust Securities,
or contracts to purchase such New Trust Securities, and cash,
if any, required to be deposited in connection with the
issuance of the New Trust Units, shall be deposited by the
Agent on behalf of the electing Unit Holders in the New Trust.
The Agent shall cause to be credited to each such Unit Holder
the New Trust Units attributable to such Unit Holder's
Termination Distribution. Fractional Units shall be promptly
sold or redeemed in accordance with the Indenture, provided,
however, that no deferred sales charge shall be deducted from
the proceeds of such sale or redemption.
7. Within a reasonable time thereafter, the Agent shall (i)
distribute to the Depositor the sales charge, if any, payable
to the Depositor (as certified to the Agent by the Depositor,
on which certification the Agent shall rely) in connection
with the issuance of New Trust Units to the Unit Holders, (ii)
distribute, in accordance with this Agreement, to each Unit
Holder such Unit Holder's pro rata share of any cash not
applied to the purchase of New Trust Securities and (iii) mail
to each Unit Holder a report showing the number of New Trust
Units credited to the Unit Holder and the sales charge, if
any, paid to the Depositor to acquire the New Trust Units.
8. The Agent shall have no liability to any person for any loss
or depreciation resulting from any estimate made pursuant to
this subsection 1.02(c) so long as such estimate was made in
good faith on the basis of information reasonably available to
the Agent. Neither the Depositor, the Trustee, the Agent nor
any Sub-Agent shall be liable for or responsible in any way
for depreciation or loss incurred by reason of any estimate,
sale or sales, or purchase or purchases, including, without
limitation, sales or redemptions of fractional Units, made in
accordance with this subsection 1.02(c).
ARTICLE II
DISTRIBUTION BETWEEN AGENT AND UNIT HOLDERS
SECTION 2.01. Cash Distributions: (a) Upon receipt of any cash
distributed from the Principal and Income Accounts or as a result of the sale of
Securities as provided in Section 1.01 and 1.02 hereof, the Agent shall deposit
such cash in an account entitled Bank of New York, as Agent pursuant to the
Distribution Agency Agreement dated Febru-
<PAGE>
-6-
ary , 2000 or other similar title (the "Agency Account"). All distributions to
be made pursuant to this Agreement shall be made from such account.
(b) Cash to be distributed to the Trustee for its own account as
provided in Section 1.01 hereof shall be distributed by means of interaccount
transfer or by such other method as the Trustee and Agent may approve.
(c) Cash to be distributed to Unit Holders shall be distributed by
the Agent to such Holders in the manner generally used by the Trustee for cash
Income Distributions made to Unit Holders.
SECTION 2.02. Extraordinary Distributions: If the Trustee should at
any time receive Securities or other property that it is required to dispose of
pursuant to the Indenture, such disposition shall be made in the same manner as
provided in Section 1.01(b) hereof for the conversion of Securities to cash;
provided, however, that if such other property received is not readily
marketable, the Agent shall consult with the Depositor concerning the method of
disposition of such other property most likely to maximize cash yield and
efficiency of time and convenience. The Depositor's determination of such method
of disposition shall be final and binding and the Agent shall be entitled to
rely in good faith upon such determination. Cash received upon such a
disposition shall be distributed by the Agent to the Unit Holders in the
pro-rata portions and the addresses provided by the Trustee.
SECTION 2.03. Statements and Reports: Any statement or report
required by Section 3.06 of the Indenture to be distributed to Unit Holders may
be distributed by the Agent as provided in said Section 3.06. After the sale of
the last Security as set forth in Section 1.02(b) herein the Agent shall
distribute to a Unit Holder upon the request of such Unit Holder or upon the
request of the Depositor a statement which shall set forth the Securities
received by the Distribution Agent from the Trustee and the proceeds of the sale
of such Securities.
ARTICLE III
MISCELLANEOUS
SECTION 3.01. Fees and Expenses: The Agent shall receive no fee for
its services hereunder; provided, however, that the Trustee may pay the Agent a
fee equal to the costs of the Agent's services hereunder, which costs shall be
allowed the Trustee as a cost of its services as Trustee, but the Trustee shall
not be entitled to be reimbursed by the Trust for any such fee paid to the Agent
to the extent the Trustee would thereby receive a fee greater than the Trustee's
fee set forth in the Indenture. Out-of-pocket expenses incurred by the Agent
<PAGE>
-7-
(e.g., mailing costs) shall be reimbursed by the Trustee and shall be treated as
expenses of the Trust under the Indenture. The Agent shall be indemnified and
held harmless against any loss or liability accruing to it without negligence,
bad faith or wilful misconduct on its part, arising out of or in connection with
the acceptance or administration of this Agreement, including the costs and
expenses (including counsel fees) of defending itself against any claim of
liability in the premises.
SECTION 3.02. General Matters Relating to Agent: (a) All moneys
deposited with or received by the Agent hereunder shall be held by it without
interest until required to be disbursed in accordance with the provisions of
this Agreement.
(b) The Agent shall be under no liability for any action taken in
good faith in reliance on any appraisal, paper, order, list, demand, request,
consent, affidavit, notice, opinion, direction, evaluation, endorsement,
assignment, resolution, draft or other document provided by the Trustee or the
Depositor, whether or not of the same kind, prima facie properly executed, or
for the disposition of moneys or Securities pursuant to this Agreement; or in
respect of any evaluation which it is required to make or is required or
permitted to have made by others under this Agreement or otherwise, except by
reason of its own wilful misfeasance, bad faith or negligence in the performance
of its duties or by reason of its reckless disregard of its obligations and
duties hereunder. The Agent may construe any of the provisions of this
Agreement, insofar as the same may appear to be ambiguous or inconsistent with
any other provisions hereof which construction shall be binding upon the Unit
Holders and the parties hereto. The Agent shall be under no liability for any
construction of any such provisions hereof.
The Agent may employ sub-agents, attorneys, accountants and auditors
and shall not be answerable for the default or misconduct of any such agents,
attorneys, accountants or auditors if such sub-agents, attorneys, accountants or
auditors shall have been selected with reasonable care; provided, however, that
if the Agent chooses to employ the Depository Trust Company in connection with
the storage and handling of, and the furnishing of administrative services in
connection with, the Securities, the Agent will be answerable for any default or
misconduct of the Depository Trust Company and its employees and agents as fully
and to the same extent as if such default for misconduct had been committed or
occasioned by the Agent. The Agent shall be fully protected in respect of any
action under this Agreement taken, or suffered, in good faith by the Agent, in
accordance with an option of its counsel. The fees and expenses charged by such
sub-agents, attorneys, accountants or auditors shall constitute an expense
reimbursable to Agent pursuant to Section 3.01. The Agent shall have a lien on
the funds and property held by it under this Agreement prior to the interest of
Unit Holders for any and all amounts owed to the Agent hereunder.
<PAGE>
-8-
SECTION 3.03. Resignation, Discharge or Removal of Agent;
Successors: (a) The Agent may resign and be discharged from the duties created
by this Agreement by executing a written resignation as such Agent, and filing
the same with the Trustee and the Depositor. Upon receiving such notice of
resignation, the Depositor shall use its best efforts promptly to appoint a
successor Agent in the manner and meeting the qualifications hereinafter
provided. In case at any time the Agent shall not meet the requirements set
forth in Section 3.04 hereof, or shall become incapable of acting, or shall be
adjudged a bankrupt or insolvent, or a receiver of such Agent or of its property
shall be appointed, or any public officer shall take charge or control of such
Agent or of any of its property or affairs for the purposes of rehabilitation,
conservation or liquidation or upon the determination of the Depositor to remove
the Trustee for any reason, either with or without cause, including but not
limited to a determination by the Depositor that the Trustee has materially
failed to perform its duties under this Indenture and the interest of Unit
Holders has been substantially impaired as a result, the Depositor may remove
such Agent and appoint a successor Agent by written instrument or instruments
delivered to the Trustee, the Agent so removed and the successor.
(b) In case at any time the Agent shall resign and no successor
Agent shall have been appointed within thirty days after notice of resignation
has been received by the Depositor, the Depositor shall serve as Agent until a
qualified successor Agent is appointed.
SECTION 3.04. Qualification of Agent: The Agent and any successor
Agent shall be a banking or trust corporation meeting the requirements of the
Investment Company Act of 1940 for trustees, organized and doing business under
the laws of the United States or any state thereof, having at all times an
aggregate capital, surplus, and undivided profits of not less than $5,000,000.
SECTION 3.05. Procedure Upon Termination: This Agreement and the
duties created hereby shall terminate upon the disposition of the last Security
and the proceeds of such Security held under the Indenture and this Distribution
Agency Agreement.
SECTION 3.06. Amendment and Waiver: This Agreement may be amended
from time to time by the Depositor, the Trustee and the Agent (a) to cure any
ambiguity or to correct or supplement any provision contained herein which may
be defective or inconsistent with any other provision contained herein; or (b)
to make such other provisions in regard to matters or questions arising
hereunder as shall not materially adversely affect the interests of the Unit
Holders.
SECTION 3.07. New York Law to Govern: The internal laws of the State
of New York shall govern the rights of the parties hereto and the interpretation
of the provisions hereof.
<PAGE>
-9-
SECTION 3.08. Notices: Any notice, demand, direction or instruction
to be given to the Depositor hereunder shall be in writing and shall be duly
given if mailed or delivered to Prudential Securities Incorporated, One Seaport
Plaza, New York, New York 10292, or at such other address as shall be specified
by the Depositor to the other parties hereto in writing. Any notice, demand,
direction, or instruction to be given to the Trustee or Agent shall be in
writing and shall be duly given if mailed or delivered to its office at 101
Barclay Street, New York, New York 10286, or such other address as shall be
specified to the other parties hereto by the Trustee or Agent, as the case may
be, in writing.
SECTION 3.09. Severability: If any one or more of the covenants,
agreements, provisions or terms of this Agreement shall be for any reason
whatsoever held invalid, then such covenants, agreements, provisions or terms
shall be deemed severable from the remaining covenants, agreements, provisions
or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement.
SECTION 3.10. Separate and Distinct Series: Each Trust established
as a Series of the National Equity Trust shall, for all financial and
administrative purposes, be considered separate and distinct from every other
Trust, and the assets of one Trust shall not be commingled with the assets of
another Trust nor shall the expenses of any one Trust be charged against any
other Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first written above.
<PAGE>
-10-
PRUDENTIAL SECURITIES INCORPORATED,
Depositor
By: /s/ Kenneth Swankie
------------------------------------------
Senior Vice President
Manager - Unit Investment Trust Department
(SEAL)
ATTEST:
By: /s/ Kathleen Maguire
-----------------------
Assistant Secretary
<PAGE>
BANK OF NEW YORK,
Distribution Agent
By: /s/ Thomas Centrone
---------------------------
Vice President
(SEAL)
ATTEST:
By: /s/ Brian Arrons
------------------------
Assistant Vice President
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
I, Rudolf Retmann, a Notary Public in and for the said County in
the State aforesaid, do hereby certify that Thomas Centrone and Brian Arrons
personally known to me to be the same persons whose names are subscribed to the
foregoing instrument and personally known to me to be a Vice President and
Assistant Vice President, respectively, of Bank of New York, a corporation,
appeared before me this day in person, and acknowledged that they signed, sealed
with the corporate seal of Bank of New York, and delivered the said instrument
as their free and voluntary act as such Vice President and Assistant Vice
President, respectively, and as the free and voluntary act of said Bank of New
York for the uses and purposes therein set forth.
GIVEN, under my hand and notarial seal this 2nd day of February,
2000.
/s/ Rudolf Retmann
---------------------
Notary Public
(SEAL)
<PAGE>
BANK OF NEW YORK,
Trustee
By: /s/ Thomas Centrone
---------------------
Vice President
(SEAL)
ATTEST:
By: /s/ Brian Arrons
----------------------
Assistant Vice President
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
I, Rudolf Retmann, a Notary Public in and for the said County in
the State aforesaid, do hereby certify that Thomas Centrone and Brian Arrons
personally known to me to be the same persons whose names are subscribed to the
foregoing instrument and personally known to me to be a Vice President and
Assistant Vice President, respectively, of Bank of New York, a corporation,
appeared before me this day in person, and acknowledged that they signed, sealed
with the corporate seal of Bank of New York, and delivered the said instrument
as their free and voluntary act as such Assistant Vice President and Assistant
Vice President, respectively, and as the free and voluntary act of said Bank of
New York for the uses and purposes therein set forth.
GIVEN, under my hand and notarial seal this 2nd day of February,
2000.
/s/ Rudolf Retmann
-------------------
Notary Public
(SEAL)
<PAGE>
Exhibit 4.b
Executed in 6 Parts
Counterpart No. ( )
NATIONAL EQUITY TRUST
OTC GROWTH TRUST SERIES 5
REFERENCE TRUST AGREEMENT
This Reference Trust Agreement dated February 2, 2000 among
Prudential Securities Incorporated, as Depositor and The Bank of New York, as
Trustee, sets forth certain provisions in full and incorporates other provisions
by reference to the document entitled "National Equity Trust, Trust Indenture
and Agreement" (the "Basic Agreement") dated February 2, 2000. Such provisions
as are set forth in full herein and such provisions as are incorporated by
reference constitute a single instrument (the "Indenture").
WITNESSETH THAT:
In consideration of the premises and of the mutual agreements herein
contained, the Depositor and the Trustee agree as follows:
Part I.
STANDARD TERMS AND CONDITIONS OF TRUST
Subject to the provisions of Part II hereof, all the provisions
contained in the Basic Agreement are herein incorporated by reference in their
entirety and shall be deemed to be a part of this instrument as fully and to the
same extent as though said provisions had been set forth in full in this
instrument.
<PAGE>
-2-
Part II.
SPECIAL TERMS AND CONDITIONS OF TRUST
The following special terms and conditions are hereby agreed to:
A. The Trust is denominated National Equity Trust, OTC Growth Trust
Series 5.
B. The Units of the Trust shall be subject to a deferred sales
charge.
C. The publicly traded stocks listed in Schedule A hereto are those
which, subject to the terms of this Indenture, have been or are to be
deposited in Trust under this Indenture as of the date hereof.
D. The term "Depositor" shall mean Prudential Securities
Incorporated.
E. The aggregate number of Units referred to in Sections 2.03 and
9.01 of the Basic Agreement is 250,000 as of the date hereof.
F. A Unit of the Trust is hereby declared initially equal to
1/250,000th of the Trust.
G. The term "First Settlement Date" shall mean February 8, 2000.
H. The terms "Computation Day" and "Record Date" shall be on such
dates as the Sponsor shall direct.
I. The term "Distribution Date" shall be on such dates as the
Sponsor shall direct.
J. The term "Termination Date" shall mean March 8, 2001.
K. The Trustee's Annual Fee shall be $ .90 (per 1,000 Units) for
49,999,999 and below units outstanding $.84 (per 1000 Units) on the next
50,000,000 Units, $.78 (per 1000 Units) on the next 100,000,000 Units and
$.66 (per 1000 Units) on Units in excess of 200,000,000 Units. In
calculating the Trustee's annual fee, the fee applicable to the number of
units outstanding shall apply to all units outstanding.
<PAGE>
-3-
L. The Depositor's Portfolio supervisory service fee shall be $.25
per 1,000 Units.
[Signatures and acknowledgments on separate pages]
<PAGE>
-4-
The Schedule of Portfolio Securities in Part A of the prospectus included
in this Registration Statement for National Equity Trust, OTC Growth Trust
Series 5 is hereby incorporated by reference herein as Schedule A hereto.
<PAGE>
[Letterhead of Cahill Gordon & Reindel]
February 2, 2000
Prudential Securities Incorporated
One Seaport Plaza
New York, New York 10292
Re: National Equity Trust,
OTC Growth Trust Series 5
Gentlemen:
We have acted as special counsel for you as Depositor of the
National Equity Trust, OTC Growth Trust Series 5 (the "Trust"), in connection
with the issuance under the Trust Indenture and Agreement, dated February 2,
2000, and related Reference Trust Agreement, dated February 2, 2000 (such Trust
Indenture and Agreement and Reference Trust Agreement collectively referred to
as the "Indenture"), between you, as Depositor and The Bank of New York, as
Trustee, of units of fractional undivided interest in said Trust (the "Units")
comprising the Units of National Equity Trust, OTC Growth Trust Series 5. In
rendering our opinion expressed below, we have relied in part upon the opinions
and representations of your officers and upon opinions of counsel to Prudential
Securities Incorporated.
<PAGE>
-2-
Based upon the foregoing, we advise you that, in our opinion, when
the Indenture has been duly executed and delivered on behalf of the Depositor
and the Trustee and when the Receipt for Units evidencing the Units has been
duly executed and delivered by the Trustee to the Depositor in accordance with
the Indenture, the Units will be legally issued, fully paid and nonassessable by
the Trust, and will constitute valid and binding obligations of the Trust and
the Depositor in accordance with their terms, except that enforceability of
certain provisions thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors generally
and by general equitable principles.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (File No. 333-94591) relating to the Units referred to
above and to the use of our name and to the reference to our firm in said
Registration Statement and the related Prospectus. Our consent to such reference
does not constitute a consent under Section 7 of the Securities Act, as in
consenting to such reference we have not certified any part of the Registration
Statement and do not otherwise come within the categories of persons whose
consent is required under said Section 7 or under the rules and regulations of
the Commission thereunder.
Very truly yours,
Cahill Gordon & Reindel
